Vol. 79 Tuesday, 

No. 189 September 30, 2014 

Part IV 

Department of Energy 

10 CFR Part 431 

Energy Conservation Program: Energy Conservation Standards for Small, 

Large, and Very Large Air-Cooled Commercial Package Air Conditioning 

and Heating Equipment; Proposed Rule 

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58948 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

DEPARTMENT OF ENERGY 

10 CFR Part 431 

[Docket Number EERE–2013–BT–STD– 

0007] 

RIN 1904–AC95 

Energy Conservation Program: Energy 

Conservation Standards for Small, 

Large, and Very Large Air-Cooled 

Commercial Package Air Conditioning 

and Heating Equipment 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Notice of proposed rulemaking 

(NOPR) and public meeting. 

SUMMARY: The Energy Policy and 

Conservation Act of 1975 (EPCA), as 

amended, prescribes energy 

conservation standards for various 

consumer products and certain 

commercial and industrial equipment, 

including small, large, and very large 

air-cooled commercial package air 

conditioning and heating equipment. 

EPCA also requires the U.S. Department 

of Energy (DOE) to determine whether 

more-stringent, amended standards 

would be technologically feasible and 

economically justified, and would save 

a significant amount of energy. In this 

document, DOE proposes to amend the 

energy conservation standards for small, 

large, and very large air-cooled 

commercial package air conditioning 

and heating equipment. This document 

also announces a public meeting to 

receive comment on these proposed 

standards and associated analyses and 

results. 

DATES: DOE will hold a public meeting 

on Thursday, November 6, 2014, from 9 

a.m. to 4 p.m., in Washington, DC. The 

meeting will also be broadcast as a 

webinar. See section VII Public 

Participation for webinar registration 

information, participant instructions, 

and information about the capabilities 

available to webinar participants. 

DOE will accept comments, data, and 

information regarding this notice of 

proposed rulemaking (NOPR) before and 

after the public meeting, but no later 

than December 1, 2014. See section VII 

Public Participation for details. 

ADDRESSES: The public meeting will be 

held at the U.S. Department of Energy, 

Forrestal Building, Room 4A–104, 1000 

Independence Avenue SW., 

Washington, DC 20585. To attend, 

please notify Ms. Brenda Edwards at 

(202) 586–2945. Please note that foreign 

nationals visiting DOE Headquarters are 

subject to advance security screening 

procedures. Any foreign national 

wishing to participate in the meeting 

should advise DOE as soon as possible 

by contacting Ms. Edwards to initiate 

the necessary procedures. Please also 

note that those wishing to bring laptops 

into the Forrestal Building will be 

required to obtain a property pass. 

Visitors should avoid bringing laptops, 

or allow an extra 45 minutes. Persons 

can attend the public meeting via 

webinar. For more information, refer to 

the Public Participation section VII. 

Any comments submitted must 

identify the NOPR for Energy 

Conservation Standards for small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment, and provide docket number 

EE–2013–BT–STD–0007 and/or 

regulatory information number (RIN) 

number 1904–AC95. Comments may be 

submitted using any of the following 

methods: 

1. Federal eRulemaking Portal: 

www.regulations.gov. Follow the 

instructions for submitting comments. 

2. Email: CommPkgACHP2013

STD0007@ee.doe.gov. Include the 

docket number and/or RIN in the 

subject line of the message. 

3. Mail: Ms. Brenda Edwards, U.S. 

Department of Energy, Building 

Technologies Program, Mailstop EE–5B, 

1000 Independence Avenue SW., 

Washington, DC 20585–0121. If 

possible, please submit all items on a 

CD. It is not necessary to include 

printed copies. 

4. Hand Delivery/Courier: Ms. Brenda 

Edwards, U.S. Department of Energy, 

Building Technologies Program, 950 

L’Enfant Plaza SW., Suite 600, 

Washington, DC 20024. Telephone: 

(202) 586–2945. If possible, please 

submit all items on a CD, in which case 

it is not necessary to include printed 

copies. 

Written comments regarding the 

burden-hour estimates or other aspects 

of the collection-of-information 

requirements contained in this proposed 

rule may be submitted to Office of 

Energy Efficiency and Renewable 

Energy through the methods listed 

above and by email to Chad_S_

Whiteman@omb.eop.gov. 

For detailed instructions on 

submitting comments and additional 

information on the rulemaking process, 

see section VII of this document (Public 

Participation). 

Docket: The docket, which includes 

Federal Register notices, public meeting 

attendee lists and transcripts, 

comments, and other supporting 

documents/materials, is available for 

review at regulations.gov. All 

documents in the docket are listed in 

the regulations.gov index. However, 

some documents listed in the index, 

such as those containing information 

that is exempt from public disclosure, 

may not be publicly available. 

A link to the docket Web page can be 

found at: http://www.regulations.gov/#

!docketDetail;D=EERE-2013-BT-STD0007. This Web page will contain a link 

to the docket for this notice on the 

regulations.gov site. The regulations.gov 

Web page will contain simple 

instructions on how to access all 

documents, including public comments, 

in the docket. See section VII for further 

information on how to submit 

comments through 

www.regulations.gov. 

For further information on how to 

submit a comment, review other public 

comments and the docket, or participate 

in the public meeting, contact Ms. 

Brenda Edwards at (202) 586–2945 or by 

email: Brenda.Edwards@ee.doe.gov. 

FOR FURTHER INFORMATION CONTACT: Mr. 

John Cymbalsky, U.S. Department of 

Energy, Office of Energy Efficiency and 

Renewable Energy, Building 

Technologies Program, EE–5B, 1000 

Independence Avenue SW., 

Washington, DC 20585–0121. 

Telephone: (202)–287–1692. Email: 

John.Cymbalsky@ee.doe.gov. 

Mr. Michael Kido, U.S. Department of 

Energy, Office of the General Counsel, 

Mailstop GC–71, 1000 Independence 

Avenue SW., Washington, DC 20585– 

0121. Telephone: (202) 586–8145. 

Email: Michael.Kido@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Summary of the Proposed Rule 

A. Benefits and Costs to Customers 

B. Impact on Manufacturers 

C. National Benefits 

II. Introduction 

A. Authority 

B. Background 

1. Current Standards 

2. History of Standards Rulemaking for 

Small, Large, and Very Large Air-Cooled 

Commercial Package Air Conditioning 

and Heating Equipment 

III. General Discussion 

A. Energy Efficiency Descriptor 

B. Technological Feasibility 

1. General 

2. Maximum Technologically Feasible 

Levels 

C. Energy Savings 

1. Determination of Savings 

2. Significance of Savings 

D. Economic Justification 

1. Specific Criteria 

a. Economic Impact on Manufacturers and 

Consumers 

b. Life-Cycle Cost 

c. Energy Savings 

d. Lessening of Utility or Performance of 

Products 

e. Impact of Any Lessening of Competition 

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Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 58949 

1For editorial reasons, upon codification in the 

U.S. Code, Part B was redesignated Part A. 

f. Need for National Energy Conservation 

g. Other Factors 

2. Rebuttable Presumption 

IV. Methodology and Discussion of Related 

Comments 

A. Market and Technology Assessment 

1. General 

2. Scope of Coverage and Equipment 

Classes 

3. Technology Options 

B. Screening Analysis 

C. Engineering Analysis 

1. Methodology 

2. Baseline Efficiency Levels 

3. Incremental Efficiency Levels 

4. Equipment Testing, Reverse Engineering, 

Energy Modeling, and Cost-Efficiency 

Results 

D. Markups Analysis 

E. Energy Use Analysis 

1. Energy Use Simulations 

2. Generalized Building Sample 

F. Life-Cycle Cost and Payback Period 

Analysis 

1. Equipment Costs 

2. Installation Costs 

3. Unit Energy Consumption 

4. Electricity Prices and Electricity Price 

Trends 

5. Maintenance Costs 

6. Repair Costs 

7. Lifetime 

8. Discount Rate 

9. Base Case Market Efficiency Distribution 

10. Compliance Date 

11. Payback Period Inputs 

12. Rebuttable-Presumption Payback 

Period 

G. Shipments Analysis 

1. Shipments by Market Segment 

2. Shipment Market Shares by Efficiency 

Level 

H. National Impact Analysis 

1. Efficiency Trends 

2. National Energy Savings 

3. Net Present Value of Customer Benefit 

a. Total Annual Installed Cost 

b. Total Annual Operating Cost Savings 

I. Customer Subgroup Analysis 

J. Manufacturer Impact Analysis 

1. Overview 

2. Government Regulatory Impact Model 

a. Government Regulatory Impact Model 

Key Inputs 

b. Government Regulatory Impact Model 

Scenarios 

c. Manufacturer Interviews 

K. Emissions Analysis 

L. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

1. Social Cost of Carbon 

2. Valuation of Other Emissions 

Reductions 

M. Utility Impact Analysis 

N. Employment Impact Analysis 

V. Analytical Results 

A. Trial Standard Levels 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Individual 

Customers 

a. Life-Cycle Cost and Payback Period 

b. Customer Subgroup Analysis 

c. Rebuttable Presumption Payback 

2. Economic Impacts on Manufacturers 

a. Industry Cash-Flow Analysis Results 

b. Impacts on Direct Employment 

c. Impacts on Manufacturing Capacity 

d. Cumulative Regulatory Burden 

3. National Impact Analysis 

a. Significance of Energy Savings 

b. Net Present Value of Customer Costs and 

Benefits 

c. Indirect Impacts on Employment 

4. Impact on Utility or Performance 

5. Impact of Any Lessening of Competition 

6. Need of the Nation to Conserve Energy 

7. Summary of National Economic Impacts 

8. Other Factors 

C. Proposed Standards 

1. Benefits and Burdens of Trial Standard 

Levels Considered for Small, Large, and 

Very Large Air-Cooled Commercial 

Package Air Conditioning and Heating 

Equipment 

2. Summary of Benefits and Costs 

(Annualized) of the Proposed Standards 

VI. Procedural Issues and Regulatory Review 

A. Review Under Executive Orders 12866 

and 13563 

B. Review Under the Regulatory Flexibility 

Act 

1. Description and Estimated Number of 

Small Entities Regulated 

2. Description and Estimate of Compliance 

Requirements 

3. Duplication, Overlap, and Conflict with 

Other Rules and Regulations 

4. Significant Alternatives to the Rule 

C. Review Under the Paperwork Reduction 

Act 

D. Review Under the National 

Environmental Policy Act of 1969 

E. Review Under Executive Order 13132 

F. Review Under Executive Order 12988 

G. Review Under the Unfunded Mandates 

Reform Act of 1995 

H. Review Under the Treasury and General 

Government Appropriations Act, 1999 

I. Review Under Executive Order 12630 

J. Review Under the Treasury and General 

Government Appropriations Act, 2001 

K. Review Under Executive Order 13211 

L. Review Under the Information Quality 

Bulletin for Peer Review 

VII. Public Participation 

A. Attendance at the Public Meeting 

B. Procedure for Submitting Prepared 

General Statements For Distribution 

C. Conduct of the Public Meeting 

D. Submission of Comments 

E. Issues on Which DOE Seeks Comment 

VIII. Approval of the Office of the Secretary 

I. Summary of the Proposed Rule 

Title III, Part B1 of the Energy Policy 

and Conservation Act of 1975 (EPCA or 

the Act), Public Law 94–163 (42 U.S.C. 

6291–6309, as codified), established the 

Energy Conservation Program for 

Consumer Products Other Than 

Automobiles. Pursuant to EPCA, any 

new or amended energy conservation 

standard that DOE prescribes for certain 

equipment, such as small, large, and 

very large air-cooled commercial 

package air conditioning and heating 

equipment (also known as commercial 

unitary air conditioners and heat 

pumps), shall be designed to achieve the 

maximum improvement in energy 

efficiency that is technologically 

feasible and economically justified. (42 

U.S.C. 6313(a)(6)(A)(ii)(II)). 

Furthermore, the new or amended 

standard must result in a significant 

conservation of energy. (42 U.S.C. 

6313(a)(6)(A)(ii)(II)). In accordance with 

these and other statutory provisions 

discussed in this notice, including 

EPCA’s requirement that DOE review its 

standards for this equipment every six 

years, DOE proposes amended energy 

conservation standards for small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment (also referred to in this 

notice as small, large, and very large aircooled commercial unitary air 

conditioners and commercial unitary 

heat pumps). The proposed standards, 

which are collectively characterized as 

Trial Standard Level 3 (TSL 3), 

prescribe the minimum allowable 

efficiency level based on an integrated 

energy efficiency ratio (IEER) and, for 

air-cooled commercial unitary heat 

pumps, coefficient of performance 

(COP). These proposed levels are shown 

in Table I.1. These proposed standards, 

if adopted, would apply to all 

equipment listed in Table I.1 and 

manufactured in and intended for 

distribution and sale in the U.S., or 

imported into, the U.S. on or after the 

date three years after the publication of 

the final rule for this equipment. 

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2The payback period measures the amount of 

time it takes for savings in operating costs to equal 

the incremental cost increase. 3 DOE did not analyze LCC impacts for small, 

large, and very large air-cooled CUHP because 

energy modeling was performed only for CUAC 

equipment. The reasons for this approach are 

discussed in section IV.C.4. 

4All monetary values in this document are 

expressed in 2013 dollars and, where appropriate, 

are discounted to 2014 unless explicitly stated 

otherwise. 

5A quad is equal to 1015 British thermal units 

(Btu). 

6The base case assumptions are described in 

section IV.H. 

7 DOE calculated emissions reductions relative to 

the Annual Energy Outlook 2013 (AEO 2013) 

Reference case, which generally represents current 

legislation and environmental regulations for which 

implementing regulations were available as of 

TABLE I.1—PROPOSED ENERGY CONSERVATION STANDARDS FOR SMALL, LARGE, AND VERY LARGE COMMERCIAL

PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT

Equipment type Heating type Proposed energy 

conservation standard 

Small Commercial Packaged Air Conditioners (AC) 

and Heat Pump (HP) (Air-Cooled)—≥65,000 Btu/h 

and <135,000 Btu/h Cooling Capacity.

AC Electric Resistance Heating or No Heating ...............

All Other Types of Heating ........................................

14.8 IEER. 

14.6 IEER. 

HP Electric Resistance Heating or No Heating ...............

All Other Types of Heating ........................................

14.1 IEER, 3.5 COP. 

13.9 IEER, 3.4 COP. 

Large Commercial Packaged AC and HP (AirCooled)—≥135,000 Btu/h and <240,000 Btu/h 

Cooling Capacity.

AC Electric Resistance Heating or No Heating ...............

All Other Types of Heating ........................................

14.2 IEER. 

14.0 IEER. 

HP Electric Resistance Heating or No Heating ...............

All Other Types of Heating ........................................

13.4 IEER, 3.3 COP. 

13.2 IEER, 3.3 COP. 

Very Large Commercial Packaged AC and HP (AirCooled)—≥240,000 Btu/h and <760,000 Btu/h 

Cooling Capacity.

AC Electric Resistance Heating or No Heating ...............

All Other Types of Heating ........................................

13.5 IEER. 

13.3 IEER. 

HP Electric Resistance Heating or No Heating ...............

All Other Types of Heating ........................................

12.5 IEER, 3.2 COP. 

12.3 IEER, 3.2 COP. 

A. Benefits and Costs to Customers 

Table I.2 presents DOE’s evaluation of 

the economic impacts of the proposed 

standards on customers of small, large, 

and very large air-cooled commercial 

unitary air conditioners (CUAC), as 

measured by the average life-cycle cost 

(LCC) savings and the median payback 

period.2 The average LCC savings are 

positive for all CUAC equipment 

classes, and the PBP is less than the 

average lifetime of the equipment, 

which is estimated to be 18.4 years. 

These classes account for approximately 

90 percent of total shipments of small, 

large, and very large air-cooled CUAC 

and commercial unitary heat pumps 

(CUHP).3

TABLE I.2—IMPACTS OF PROPOSED STANDARDS ON CUSTOMERS OF SMALL, LARGE, AND VERY LARGE COMMERCIAL

PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT

Equipment class 

Average LCC 

savings 

(2013$) 

Median 

payback 

period 

(years) 

Small Commercial Packaged Air Conditioners—≥65,000 Btu/h and <135,000 Btu/h Cooling Capacity ................ 4,779 3.9 

Large Commercial Packaged Air Conditioners—≥135,000 Btu/h and <240,000 Btu/h Cooling Capacity ............. 3,469 6.6 

Very Large Commercial Packaged Air Conditioners—≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ..... 16,477 2.5 

DOE’s analysis of the impacts of the 

proposed standards on consumers is 

described in section IV.F of this 

proposed rulemaking. 

B. Impact on Manufacturers 

The industry net present value (INPV) 

is the sum of the discounted cash flows 

to the industry from the base year (2014) 

through the end of the analysis period 

(2048). Using a real discount rate of 6.2 

percent, DOE estimates that the industry 

net present value for manufacturers is 

$1,261 million.4 Under the proposed 

standards, DOE expects that INPV will 

be reduced by 7.02 to 24.71 percent, 

which is a reduction of approximately 

$88.55 to $311.58 million. Based on 

comments from manufacturers of 

covered equipment, the industry is 

currently going through an extended 

period of consolidation. It is possible 

that the proposed standards would 

contribute to continued consolidation. 

DOE’s analysis of the impacts of the 

proposed standards on manufacturers is 

described in section IV.J of this 

proposed rulemaking. 

C. National Benefits and Costs 

DOE’s analyses indicate that the 

proposed standards would save a 

significant amount of energy. The 

lifetime savings for small, large, and 

very large air-cooled CUAC and CUHP 

purchased in the 30-year period that 

begins in the year of compliance with 

amended standards (2019–2048), in 

comparison to the base case without 

amended standards, amount to 11.7 

quadrillion Btu of energy (quads).5 This 

is a savings of 29 percent relative to the 

energy use of this equipment in the base 

case.6

The cumulative net present value 

(NPV) of total customer costs and 

savings of the proposed standards for 

small, large, and very large air-cooled 

CUAC and CUHP ranges from $16.5 

billion to $50.8 billion for 7-percent and 

3-percent discount rates, respectively. 

This NPV expresses the estimated total 

value of future operating-cost savings 

minus the estimated increased product 

costs for products purchased in 2019– 

2048. 

In addition, the proposed standards 

would have significant environmental 

benefits.7 The energy savings described 

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Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 58951 

December 31, 2012. Emissions factors based on the 

Annual Energy Outlook 2014 (AEO 2014), which 

became available too late for incorporation into this 

analysis, indicate that a significant decrease in the 

cumulative emission reductions of carbon dioxide, 

methane, nitrous oxide, sulfur dioxide, nitrogen 

oxides and mercury from the proposed standards 

can be expected if the projections of power plant 

utilization assumed in AEO 2014 are realized. For 

example, the estimated amount of cumulative 

emission reductions of CO2 are expected to 

decrease by 36% from DOE’s current estimate (from 

1,085 Mt to 697Mt) based on the projections in AEO 

2014 relative to AEO 2013. The monetized benefits 

from GHG reductions would likely decrease by a 

comparable amount. DOE plans to use emissions 

factors based on the most recent AEO available for 

the next phase of this rulemaking, which may or 

may not be AEO 2014, depending on the timing of 

the issuance of the next rulemaking document. 

8A metric ton is equivalent to 1.1 short tons. 

Results for NOX and Hg are presented in short tons. 9The reductions are measured over the period in 

which equipment purchased in 2019–2048 continue 

to operate. 10These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a 36% decrease in 

cumulative emissions reductions for CO2 thus 

decreasing the estimate of 64 Mt of CO2 reductions 

through the year 2030 to 41 Mt. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

11Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866. Interagency Working Group on Social 

Cost of Carbon, United States Government. May 

2013; revised November 2013. http://

www.whitehouse.gov/sites/default/files/omb/assets/

inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf. 

12These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. The monetized 

benefits from GHG reductions would likely 

decrease by a comparable amount. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

above are estimated to result in 

cumulative emission reductions of 1,085 

million metric tons (Mt) 8 of carbon 

dioxide (CO2), 3,072 thousand tons of 

methane (CH4), 15.5 thousand tons of 

nitrous oxide (N2O), 2,934 thousand 

tons of sulfur dioxide (SO2), 1,021 

thousand tons of nitrogen oxides (NOX) 

and 3.57 tons of mercury (Hg).9 The 

estimated CO2 emissions reductions 

through 2030 amount to 64 Mt.10 These 

projections are expected to change in 

light of recently available data from the 

estimated from the Annual Energy 

Outlook (AEO) 2014 data, which suggest 

a drop in potential emissions reductions 

over a similar period of time. 

The value of the CO2 reductions is 

calculated using a range of values per 

metric ton of CO2 (otherwise known as 

the Social Cost of Carbon, or SCC) 

developed by an interagency process.11

The derivation of the SCC values is 

discussed in section IV.L. Using 

discount rates appropriate for each set 

of SCC values (see Table I.3), DOE 

estimates the present monetary value of 

the CO2 emissions reduction to be 

between $6.1 billion and $95.9 billion, 

with a value of $30.9 billion using the 

central SCC case represented by $40.5/t 

in 2015. Additionally, DOE estimates 

the present monetary value of the NOX

emissions reduction to be $343 million 

and $1,060 million at 7-percent and 3- 

percent discount rates, respectively. 

Table I.3 summarizes the national 

economic costs and benefits expected to 

result from the proposed standards for 

small, large, and very large air-cooled 

CUAC and CUHP. 

TABLE I.3—SUMMARY OF NATIONAL ECONOMIC BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION

STANDARDS FOR SMALL, LARGE, AND VERY LARGE COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT * 

Category Present value 

billion 2013$ 

Discount rate 

(%) 

Benefits 

Operating Cost Savings ................................................................................................................................... 20.6 7 

59.7 3 

CO2 Reduction Monetized Value ($12.0/t case) ** .......................................................................................... 6.1 5 

CO2 Reduction Monetized Value ($40.5/t case) ** .......................................................................................... 30.9 3 

CO2 Reduction Monetized Value ($62.4/t case) ** .......................................................................................... 49.9 2.5 

CO2 Reduction Monetized Value ($119/t case) ** ........................................................................................... 95.9 3 

NOX Reduction Monetized Value (at $2,684/ton) ** ........................................................................................ 0.3 7 

1.1 3 

Total Benefits † ................................................................................................................................................ 51.9 7 

91.6 3 

Costs 

Incremental Installed Costs ............................................................................................................................. 4.1 7 

8.8 3 

Total Net Benefits 

Including Emissions Reduction Monetized Value † ......................................................................................... 47.8 7 

82.8 3 

* This table presents the costs and benefits associated with small, large, and very large air-cooled CUAC and CUHP shipped in 2019–2048. 

These results include benefits to customers which accrue after 2048 from the products purchased in 2019–2048. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX is the average of the low and high values found in the literature.12

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to average SCC with 3-percent discount rate. 

The benefits and costs of today’s 

proposed standards, for products sold in 

2019–2048, can also be expressed in 

terms of annualized values. The 

annualized monetary values are the sum 

of (1) the annualized national economic 

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58952 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

13 DOE used a two-step calculation process to 

convert the time-series of costs and benefits into 

annualized values. First, DOE calculated a present 

value in 2013, the year used for discounting the 

NPV of total customer costs and savings, for the 

time-series of costs and benefits using discount 

rates of three and seven percent for all costs and 

benefits except for the value of CO2 reductions. For 

the latter, DOE used a range of discount rates, as 

shown in Table I.4. From the present value, DOE 

then calculated the fixed annual payment over a 30- 

year period (2019 through 2048) that yields the 

same present value. The fixed annual payment is 

the annualized value. Although DOE calculated 

annualized values, this does not imply that the 

time-series of cost and benefits from which the 

annualized values were determined is a steady 

stream of payments. 

14These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. The monetized 

benefits from GHG reductions would likely 

decrease by a comparable amount. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

15These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. In the next phase of 

this rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

16These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. In the next phase of 

this rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

17These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. In the next phase of 

this rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

value of the benefits from consumer 

operation of products that meet the 

proposed standards; consisting 

primarily of operating cost savings from 

using less energy, minus increases in 

equipment purchase and installation 

costs, which is another way of 

representing customer NPV, and (2) the 

annualized monetary value of the 

benefits of CO2 and NOX emission 

reductions.13

Although combining the values of 

operating savings and CO2 emission 

reductions provides a useful 

perspective, two issues should be 

considered. First, the national operating 

savings are domestic U.S. consumer 

monetary savings that occur as a result 

of market transactions while the value 

of CO2 reductions is based on a global 

value. Second, the assessments of 

operating cost savings and CO2 savings 

are performed with different methods 

that use different time frames for 

analysis. The national operating cost 

savings is measured for the lifetime of 

small, large, and very large air-cooled 

CUAC and CUHP shipped in 2019– 

2048. The SCC values, on the other 

hand, reflect the present value of some 

future climate-related impacts resulting 

from the emission of one ton of carbon 

dioxide in each year. These impacts 

continue well beyond 2100. 

Estimates of annualized benefits and 

costs of the proposed standards are 

shown in Table I.4. The results under 

the primary estimate are as follows. 

Using a 7-percent discount rate for 

benefits and costs other than CO2

reduction, for which DOE used a 3- 

percent discount rate along with the 

average SCC series that uses a 3-percent 

discount rate, the cost of the standards 

proposed in today’s rule is $430 million 

per year in increased equipment costs, 

while the benefits are $2,177 million per 

year in reduced equipment operating 

costs, $1,774 million in CO2

reductions,14 and $36 million in 

reduced NOX emissions. In this case, the 

net benefit amounts to $3,558 million 

per year.15 Using a 3-percent discount 

rate for all benefits and costs and the 

average SCC series, the cost of the 

standards proposed in today’s rule is 

$507 million per year in increased 

equipment costs, while the benefits are 

$3,426 million per year in reduced 

operating costs, $1,774 million in CO2

reductions,16 and $61 million in 

reduced NOX emissions. In this case, the 

net benefit amounts to $4,755 million 

per year.17

TABLE I.4—ANNUALIZED BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION STANDARDS FOR SMALL, LARGE, 

AND VERY LARGE COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT * 

Discount rate Primary estimate Low net benefits 

estimate 

High net benefits 

estimate 

million 2013$/year 

Benefits 

Operating Cost Savings ......................... 7% ................................ 2,177 ............................ 1,984 ............................ 2,407 

3% ................................ 3,426 ............................ 3,127 ............................ 3,781 

CO2 Reduction Monetized Value ($12.0/

t case) **.

5% ................................ 484 ............................... 467 ............................... 505 

CO2 Reduction Monetized Value ($40.5/

t case) **.

3% ................................ 1,774 ............................ 1,714 ............................ 1,846 

CO2 Reduction Monetized Value ($62.4/

t case) **.

2.5% ............................. 2,632 ............................ 2,543 ............................ 2,737 

CO2 Reduction Monetized Value ($119/t 

case) **.

3% ................................ 5,504 ............................ 5,317 ............................ 5,727 

NOX Reduction Monetized Value (at 

$2,684/ton) **.

7% ................................

3% ................................

36.18 ............................

60.89 ............................

34.75 ............................

58.85 ............................

37.90 

63.40 

Total Benefits † ................................ 7% plus CO2 range ..... 2,698 to 7,718 ............. 2,486 to 7,336 ............. 2,950 to 8,172 

7% ................................ 3,988 ............................ 3,733 ............................ 4,291 

3% plus CO2 range ..... 3,972 to 8,991 ............. 3,653 to 8,503 ............. 4,349 to 9,572 

3% ................................ 5,262 ............................ 4,900 ............................ 5,691 

Costs 

Incremental Product Costs ..................... 7% ................................ 430 ............................... 350 ............................... 485 

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18These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. The monetized 

benefits from GHG reductions would likely 

decrease by a comparable amount. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

19For editorial reasons, upon codification in the 

U.S. Code, Part C was re-designated Part A–1. 

20All references to EPCA in this document refer 

to the statute as amended through the American 

Energy Manufacturing Technical Corrections Act of 

2012, Public Law 112–210 (Dec. 18, 2012). 

TABLE I.4—ANNUALIZED BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION STANDARDS FOR SMALL, LARGE, 

AND VERY LARGE COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT *—Continued 

Discount rate Primary estimate Low net benefits 

estimate 

High net benefits 

estimate 

3% ................................ 507 ............................... 433 ............................... 550 

Net Benefits 

Total † .............................................. 7% plus CO2 range ..... 2,268 to 7,288 ............. 2,135 to 6,986 ............. 2,465 to 7,687 

7% ................................ 3,558 ............................ 3,383 ............................ 3,806 

3% ................................ 4,755 ............................ 4,468 ............................ 5,140 

3% plus CO2 range ..... 3,465 to 8,484 ............. 3,220 to 8,071 ............. 3,799 to 9,021 

* This table presents the annualized costs and benefits associated with small, large, and very large air-cooled CUAC and CUHP shipped in 

2019¥2048. These results include benefits to customers which accrue after 2048 from the products purchased in 2019–2048. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation 

for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO2013 Reference case, Low 

Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product costs reflect no change for projected 

product price trends in the Primary Estimate, an increasing trend for projected product prices in the Low Benefits Estimate, and a decreasing 

trend for projected product prices in the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor. 

The value for NOX is the average of the low and high values used in DOE’s analysis.18

† Total Benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average SCC with 3-percent discount 

rate. In the rows labeled ‘‘7% plus CO2 range’’ and ‘‘3% plus CO2 range,’’ the operating cost and NOX benefits are calculated using the labeled 

discount rate, and those values are added to the full range of CO2 values. 

DOE’s analysis of the national impacts 

of the proposed standards is described 

in sections IV.H, IV.K and IV.L of this 

proposed rulemaking. 

DOE has tentatively concluded that 

the proposed standards represent the 

maximum improvement in energy 

efficiency that is technologically 

feasible and economically justified, and 

would result in the significant 

conservation of energy. DOE further 

notes that products achieving these 

standard levels are already 

commercially available for most of the 

equipment classes covered by this 

proposal. Based on the analyses 

described above, DOE has concluded 

that the benefits of the proposed 

standards to the Nation (energy savings, 

positive NPV of customer benefits, 

customer LCC savings, and emission 

reductions) would outweigh the 

burdens (loss of INPV for manufacturers 

and LCC increases for some customers). 

DOE also considered more-stringent 

energy efficiency levels as trial standard 

levels, and is considering them in this 

rulemaking. However, DOE has 

concluded that the potential burdens of 

the more-stringent energy efficiency 

levels would outweigh the projected 

benefits. Based on consideration of the 

public comments DOE receives in 

response to this notice and related 

information collected and analyzed 

during the course of this rulemaking 

effort, DOE may adopt energy efficiency 

levels presented in this NOPR that are 

either higher or lower than the proposed 

standards, or some combination of 

level(s) that incorporate the proposed 

standards in part. 

II. Introduction 

The following section briefly 

discusses the statutory authority 

underlying this proposal, as well as 

some of the relevant historical 

background related to the establishment 

of standards for small, large, and very 

large air-cooled CUAC and CUHP. 

A. Authority 

Title III, Part C19 of the Energy Policy 

and Conservation Act of 1975 (EPCA or 

the Act), Public Law 94–163 (42 U.S.C. 

6311–6317, as codified), was added by 

the National Energy Conservation Policy 

Act (Pub. L. 95–619 (Nov. 9, 1978). That 

law established the Energy Conservation 

Program for Certain Industrial 

Equipment, which includes provisions 

covering the commercial heating and 

air-conditioning equipment that is the 

subject of this notice.20 In general, this 

program addresses the energy efficiency 

of certain types of commercial and 

industrial equipment. Relevant 

provisions of the Act include definitions 

(42 U.S.C. 6311), energy conservation 

standards (42 U.S.C. 6313), test 

procedures (42 U.S.C. 6314), labelling 

provisions (42 U.S.C. 6315), and the 

authority to require information and 

reports from manufacturers (42 U.S.C. 

6316). 

Section 342(a) of EPCA concerns 

energy conservation standards for small, 

large, and very large, air-cooled CUAC 

and CUHP. (42 U.S.C. 6313(a)) This 

category of equipment has a rated 

capacity between 64,000 Btu/h and 

760,000 Btu/h. It is designed to heat and 

cool commercial buildings and is 

typically located on the building’s 

rooftop. Section 5(b) of the American 

Energy Manufacturing Technical 

Corrections Act of 2012 (Pub. L. No. 

112–210 (Dec. 18, 2012) (AEMTCA) 

amended Section 342(a)(6) of EPCA. 

Among other things, AEMTCA modified 

the manner in which DOE must amend 

the energy efficiency standards for 

certain types of commercial and 

industrial equipment. DOE is typically 

obligated either to adopt those standards 

developed by the American Society of 

Heating, Refrigerating, and AirConditioning Engineers (ASHRAE)—or 

to adopt levels more stringent than the 

ASHRAE levels if there is clear and 

convincing evidence in support of doing 

so (42 U.S.C. 6313(a)(6)(A)). AEMTCA 

added to this process a requirement that 

DOE initiate a rulemaking to consider 

amending the standards for any covered 

equipment as to which more than 6 

years has elapsed since the issuance of 

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21Subparagraph (A) and subparagraph (B) refer to 

42 U.S.C. 6313(a)(6). 

the most recent final rule establishing or 

amending a standard for the equipment 

as of the date of AEMTCA’s enactment, 

December 18, 2012. (42 U.S.C. 

6313(a)(6)(C)(vi)) Under this new 

framework, DOE must issue either a 

notice of determination that the current 

standards do not need to be amended or 

a notice of proposed rulemaking (NOPR) 

containing proposed standards by 

December 31, 2013. See 42 U.S.C. 

6313(a)(6)(C)(i) and (vi).21 Today’s 

NOPR satisfies the mandatory review 

process imposed by AEMTCA. 

Pursuant to EPCA, DOE’s energy 

conservation program for covered 

equipment consists essentially of four 

parts: (1) Testing; (2) labeling; (3) the 

establishment of Federal energy 

conservation standards; and (4) 

certification and enforcement 

procedures. Subject to certain criteria 

and conditions, DOE is required to 

develop test procedures to measure the 

energy efficiency, energy use, or 

estimated annual operating cost of 

covered equipment. (42 U.S.C. 6314) 

Manufacturers of covered equipment 

must use the prescribed DOE test 

procedure as the basis for certifying to 

DOE that their equipment comply with 

the applicable energy conservation 

standards adopted under EPCA and 

when making representations to the 

public regarding the energy use or 

efficiency of those equipment. (42 

U.S.C. 6314(d)) Similarly, DOE must use 

these test procedures to determine 

whether the equipment comply with 

standards adopted pursuant to EPCA. 

Id. The DOE test procedures for small, 

large, and very large air-cooled CUAC 

and CUHP currently appear at 10 CFR 

431.96. 

When setting standards for the 

equipment addressed by this proposed 

rulemaking, EPCA prescribes specific 

statutory criteria for DOE to consider. 

See generally 42 U.S.C. 6313(a)(6)(A)– 

(C). As indicated above, any amended 

standard for covered equipment must be 

designed to achieve the maximum 

improvement in energy efficiency that is 

technologically feasible and 

economically justified. Furthermore, 

DOE may not adopt any standard that 

would not result in the significant 

conservation of energy. Moreover, DOE 

may not prescribe a standard for certain 

equipment, if (1) no test procedure has 

been established for the equipment, or 

(2) if DOE determines by rule that the 

proposed standard is not 

technologically feasible or economically 

justified. In deciding whether a 

proposed standard is economically 

justified, DOE must determine whether 

the benefits of the standard exceed its 

burdens. DOE must make this 

determination after receiving comments 

on the proposed standard, and by 

considering, to the greatest extent 

practicable, the following seven factors: 

1. The economic impact of the 

standard on manufacturers and 

consumers of the equipment subject to 

the standard; 

2. The savings in operating costs 

throughout the estimated average life of 

the covered equipment in the type (or 

class) compared to any increase in the 

price, initial charges, or maintenance 

expenses for the covered equipment that 

are likely to result from the imposition 

of the standard; 

3. The total projected amount of 

energy, or as applicable, water, savings 

likely to result directly from the 

imposition of the standard; 

4. Any lessening of the utility or the 

performance of the covered equipment 

likely to result from the imposition of 

the standard; 

5. The impact of any lessening of 

competition, as determined in writing 

by the Attorney General, that is likely to 

result from the imposition of the 

standard; 

6. The need for national energy and 

water conservation; and 

7. Other factors the Secretary of 

Energy (Secretary) considers relevant. 

(42 U.S.C. 6313(a)(6)(B)) 

EPCA, as codified, also contains what 

is known as an ‘‘anti-backsliding’’ 

provision, which prevents the Secretary 

from prescribing any amended standard 

that either increases the maximum 

allowable energy use or decreases the 

minimum required energy efficiency of 

covered equipment. Also, the Secretary 

may not prescribe an amended or new 

standard if interested persons have 

established by a preponderance of the 

evidence that the standard is likely to 

result in the unavailability in the United 

States of any covered equipment type 

(or class) of performance characteristics 

(including reliability), features, sizes, 

capacities, and volumes that are 

substantially the same as those generally 

available in the United States. (42 U.S.C. 

6313(a)(6)(B)(iii)) 

Further, under EPCA’s provisions for 

consumer products, there is a rebuttable 

presumption that a standard is 

economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing equipment 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy savings 

during the first year that the consumer 

will receive as a result of the standard, 

as calculated under the applicable test 

procedure. For this rulemaking, DOE 

considered the criteria for rebuttable 

presumption as part of its analysis. 

Additionally, EPCA specifies 

requirements when promulgating a 

standard for a type or class of covered 

equipment that has two or more 

subcategories. DOE must specify a 

different standard level than that which 

applies generally to such type or class 

of equipment for any group of covered 

equipment that have the same function 

or intended use if DOE determines that 

equipment within such group (A) 

consume a different kind of energy from 

that consumed by other covered 

equipment within such type (or class); 

or (B) have a capacity or other 

performance-related feature which other 

equipment within such type (or class) 

do not have and such feature justifies a 

higher or lower standard. In 

determining whether a performancerelated feature justifies a different 

standard for a group of equipment, DOE 

must consider such factors as the utility 

to the consumer of the feature and other 

factors DOE deems appropriate. Any 

rule prescribing such a standard must 

include an explanation of the basis on 

which such higher or lower level was 

established. DOE considered these 

criteria for this rulemaking. 

Federal energy conservation 

requirements generally preempt State 

laws or regulations concerning energy 

conservation testing, labeling, and 

standards. DOE may, however, grant 

waivers of Federal preemption for 

particular State laws or regulations. 

DOE has also reviewed this regulation 

pursuant to Executive Order 13563, 

issued on January 18, 2011. (76 FR 3281, 

Jan. 21, 2011). EO 13563 is 

supplemental to and explicitly reaffirms 

the principles, structures, and 

definitions governing regulatory review 

established in Executive Order 12866. 

To the extent permitted by law, agencies 

are required by Executive Order 13563 

to: (1) Propose or adopt a regulation 

only upon a reasoned determination 

that its benefits justify its costs 

(recognizing that some benefits and 

costs are difficult to quantify); (2) tailor 

regulations to impose the least burden 

on society, consistent with obtaining 

regulatory objectives, taking into 

account, among other things, and to the 

extent practicable, the costs of 

cumulative regulations; (3) select, in 

choosing among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify 

performance objectives, rather than 

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specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and (5) identify and assess 

available alternatives to direct 

regulation, including providing 

economic incentives to encourage the 

desired behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. 

DOE emphasizes as well that 

Executive Order (EO) 13563 requires 

agencies to use the best available 

techniques to quantify anticipated 

present and future benefits and costs as 

accurately as possible. In its guidance, 

the Office of Information and Regulatory 

Affairs has emphasized that such 

techniques may include identifying 

changing future compliance costs that 

might result from technological 

innovation or anticipated behavioral 

changes. For the reasons stated in the 

preamble, DOE believes that this NOPR 

is consistent with these principles, 

including the requirement that, to the 

extent permitted by law, benefits justify 

costs and that net benefits are 

maximized. Consistent with EO 13563, 

and the range of impacts analyzed in 

this rulemaking, the energy efficiency 

standard proposed herein by DOE 

achieves maximum net benefits. 

B. Background 

1. Current Standards 

DOE most recently issued amended 

standards for small, large, and very 

large, air-cooled CUAC and CUHP on 

October 18, 2005, which codified both 

the amended standards for small and 

large equipment and the new standards 

for very large equipment set by the 

Energy Policy Act of 2005 (EPAct 2005), 

Public Law 109–58, 70 FR 60407 (Aug. 

8, 2005). The current standards are set 

forth in Table II.1. 

TABLE II.1—MINIMUM COOLING AND HEATING EFFICIENCY LEVELS FOR SMALL, LARGE, AND VERY LARGE COMMERCIAL

PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT

Equipment type Cooling capacity Sub-category Heating type Efficiency level Compliance 

date 

Small Commercial Packaged Air-Conditioning and Heating Equipment (AirCooled).≥65,000 Btu/h and 

<135,000 Btu/h.

AC Electric Resistance 

Heating or No Heating.

EER = 11.2 ........... 1/1/2010 

All Other Types of 

Heating.

EER = 11.0 ........... 1/1/2010 

HP Electric Resistance 

Heating or No Heating.

EER = 11.0 ...........

COP = 3.3 

1/1/2010 

All Other Types of 

Heating.

EER = 10.8 ...........

COP = 3.3 

1/1/2010 

Large Commercial Packaged Air-Conditioning and Heating Equipment (AirCooled).≥135,000 Btu/h and 

<240,000 Btu/h.

AC Electric Resistance 

Heating or No Heating.

EER = 11.0 ........... 1/1/2010 

All Other Types of 

Heating.

EER = 10.8 ........... 1/1/2010 

HP Electric Resistance 

Heating or No Heating.

EER = 10.6 ...........

COP = 3.2 

1/1/2010 

All Other Types of 

Heating.

EER = 10.4 ...........

COP = 3.2 

1/1/2010 

Very Large Commercial Packaged AirConditioning and Heating Equipment 

(Air-Cooled).

≥240,000 Btu/h and 

<760,000 Btu/h.

AC Electric Resistance 

Heating or No Heating.

EER = 10.0 ........... 1/1/2010 

All Other Types of 

Heating.

EER = 9.8 ............. 1/1/2010 

HP Electric Resistance 

Heating or No Heating.

EER = 9.5 .............

COP = 3.2 

1/1/2010 

All Other Types of 

Heating.

EER = 9.3 .............

COP = 3.2 

1/1/2010 

2. History of Standards Rulemaking for 

Small, Large, and Very Large Air-Cooled 

Commercial Package Air Conditioning 

and Heating Equipment 

On October 29, 1999, the American 

Society of Heating, Refrigerating, and 

Air-Conditioning Engineers (ASHRAE)/

Illuminating Engineering Society of 

North America (IESNA) adopted 

Standard 90.1–1999, ‘‘Energy Standard 

for Buildings Except Low-Rise 

Residential Building’’, which included 

amended efficiency levels for CUAC and 

CUHP. On June 12, 2001, the 

Department published a Framework 

Document that described a series of 

analytical approaches to evaluate energy 

conservation standards for air-cooled 

CUAC and CUHP with rated capacities 

between 65,000 Btu/h and 240,000 Btu/ 

h, and presented this analytical 

framework to stakeholders at a public 

workshop. On July 29, 2004, DOE issued 

an Advance Notice of Proposed 

Rulemaking (ANOPR) (hereafter referred 

to as the 2004 ANOPR) to solicit public 

comments on its preliminary analyses 

for this equipment. 69 FR 45460. 

Subsequently, Congress enacted EPAct 

2005, which, among other things, 

established amended standards for 

small and large CUAC and CUHP and 

new standards for very large air-cooled 

CUAC and CUHP. As a result, EPAct 

2005 displaced the rulemaking effort 

that DOE had already begun. DOE 

codified these new statutorilyprescribed standards on October 18, 

2005. 70 FR 60407. 

Section 5(b) of AEMTCA amended 

Section 342(a)(6) of EPCA by requiring 

DOE to initiate a rulemaking to consider 

amending the standards for any covered 

equipment as to which more than 6 

years has elapsed since the issuance of 

the most recent final rule establishing or 

amending a standard for the equipment 

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22ASHRAE. ASHRAE Addenda. 2008 

Supplement. http://www.ashrae.org/

File%20Library/docLib/Public/20090317_90_1_

2007_supplement.pdf. 

as of the date of AEMTCA’s enactment, 

December 18, 2012. (42 U.S.C. 

6313(a)(6)(C)(vi)) Accordingly, DOE 

must issue either a notice of 

determination that the current standards 

for small, large, and very large, air 

cooled CUAC and CUHP do not need to 

be amended or a notice of proposed 

rulemaking containing proposed 

standards. DOE has, based on available 

data, chosen the latter. 

On February 1, 2013, DOE published 

a request for information (RFI) and 

notice of document availability for 

small, large, and very large, air cooled 

CUAC and CUHP. 78 FR 7296. The 

notice sought to solicit information from 

the public to help DOE determine 

whether national standards more 

stringent than those that are currently in 

place would result in a significant 

amount of additional energy savings and 

whether those national standards would 

be technologically feasible and 

economically justified. Separately, DOE 

also sought information on the merits of 

adopting integrated energy efficiency 

ratio (IEER) as the energy efficiency 

descriptor for small, large, and very 

large air-cooled CUAC and CUHP (see 

section III.A for more details). 

DOE received a number of comments 

from interested parties in response to 

the RFI. These commenters are 

summarized in Table II.2. DOE 

considered these comments in the 

preparation of this NOPR. Relevant 

comments, and DOE’s responses, are 

provided in the appropriate sections of 

this proposed rulemaking. 

TABLE II.2—INTERESTED PARTIES PROVIDING WRITTEN COMMENT ON THE RFI 

Name Abbreviation Type 

AAON Inc ......................................................................................................... AAON ...................................................................... M 

Air-Conditioning, Heating and Refrigeration Institute ....................................... AHRI ........................................................................ IA 

Appliance Standards Awareness Project, American Council for an EnergyEfficient Economy, Natural Resources Defense Council.ASAP, ACEEE, NRDC (Joint Efficiency Advocates).EA 

EBM-Papst Inc ................................................................................................. EBM-Papst .............................................................. CS 

Edison Electric Institute .................................................................................... EEI ........................................................................... UR 

Ingersoll Rand .................................................................................................. Ingersoll Rand ......................................................... M 

Lennox International Inc ................................................................................... Lennox ..................................................................... M 

Lentz Engineering Associates .......................................................................... Lentz ........................................................................ I 

Modine Manufacturing Co ................................................................................ Modine ..................................................................... M 

New Buildings Institute ..................................................................................... NBI ..........................................................................

Northwest Energy Efficiency Alliance .............................................................. NEEA ....................................................................... EA 

Pacific Gas and Electric Company, Southern California Gas Company, San 

Diego Gas and Electric, Southern California Edison, Sacramento Municipal Utility District, National Grid.

PG&E, SCGC, SDG&E, SCE, SMUD, National 

Grid (Joint Utilities).

U 

Rheem Manufacturing Co ................................................................................ Rheem ..................................................................... M 

UTC Climate, Controls & Security ................................................................... Carrier ..................................................................... M 

Whole Building Systems .................................................................................. Whole Building Systems ......................................... I 

IR: Industry Representative; M: Manufacturer; EA: Efficiency/Environmental Advocate; 

CS: Component Supplier; I: Individual; U: Utility; UR: Utility Representative 

III. General Discussion 

A. Energy Efficiency Descriptor 

The current energy conservation 

standards for small, large, and very large 

air-cooled CUAC and CUHP are based 

on energy efficiency ratio (EER) for 

cooling efficiency and COP for CUHP 

heating efficiency. 10 CFR 431.97(b) 

Cooling Efficiency Metric 

In the RFI, DOE noted that it was 

considering whether to replace the 

existing efficiency descriptor, EER, with 

a new energy-efficiency descriptor, 

IEER. Unlike the EER metric, which 

only uses the efficiency of the 

equipment operating at full load, the 

IEER metric factors in the efficiency of 

operating at part-loads of 75 percent, 50 

percent, and 25 percent of capacity as 

well as the efficiency at full load. This 

is accomplished by weighting the fulland part-load efficiencies with the 

average amount of time operating at 

each loading point. The IEER metric 

incorporates part load efficiencies 

measured with outside temperatures 

appropriate for the load levels, i.e. at 

lower temperatures for lower load 

levels. 78 FR 7296, 7299 (Feb. 1, 2013). 

As part of a final rule published on May 

16, 2012, DOE amended the test 

procedure for this equipment to 

incorporate by reference the AirConditioning, Heating and Refrigeration 

Institute (AHRI) Standard 340/360– 

2007, ‘‘Performance Rating of 

Commercial and Industrial Unitary AirConditioning and Heat Pump 

Equipment’’ (AHRI Standard 340/360– 

2007). 77 FR 28928. DOE notes that 

AHRI Standard 340/360–2007 already 

includes methods and procedures for 

testing and rating equipment with the 

IEER metric. 

ASHRAE, through its Standard 90.1, 

includes requirements based on the 

part-load performance metric, IEER. 

These IEER requirements were first 

established in Addenda from the 2008 

Supplement to Standard 90.1–2007, and 

became effective on January 1, 2010.22

DOE may establish ‘‘energy 

conservation standards’’ that set either a 

single performance standard or a single 

design requirement—not both. (42 

U.S.C. 6311(18)) As such, DOE may 

prescribe an energy conservation 

standard based either on a single 

performance-based standard or design 

requirement. In the case of small, large, 

and very large air-cooled CUAC and 

CUHP, ASHRAE Standard 90.1–2010 

specifies two performance requirements: 

EER and IEER. In selecting a new 

performance-based energy conservation 

standard, the statute prescribes that a 

single standard be used—in this case, 

either an improved EER or a new 

standard using IEER. DOE did not 

consider altering its energy conservation 

standard to be based on a single design 

requirement because performance-based 

standards will provide manufacturers 

with more flexibility in developing 

equipment that meets the standard 

levels rather than requiring a specific 

design. DOE notes that a change in 

metrics (i.e., from EER to IEER) would 

necessitate an initial DOE determination 

that the new requirement would not 

result in backsliding when compared to 

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23ENERGY STAR. Re: EPA Proposed Draft Energy 

Star Specification for Light Commercial HVAC 

Equipment. http://www.energystar.gov/ia/partners/

prod_development/revisions/downloads/lhvac/

AHRI_Comments_D1.pdf. 

24Consortium for Energy Efficiency. CEE 

Commercial Unitary AC and HP Specification. 

http://www.cee1.org/files/CEE_CommHVAC_

UnitarySpec2012.pdf. 

25Air conditioning cooling capacity may be 

denoted in tons. An air conditioning ton is 

equivalent to 12,000 Btu/h of cooling capacity (or 

3.5 kilowatts of cooling capacity). 

26U.S. Department of Energy. Building 

Technologies Program. High Performance Rooftop 

Unit Challenge Fact Sheet. http://

apps1.eere.energy.gov/buildings/publications/pdfs/

alliances/techspec_rtus.pdf. 

27The document is available at: http://

www1.eere.energy.gov/buildings/appliance_

standards/product.aspx/productid/77. 28A joint comment was submitted by the Pacific 

Gas and Electric Company (PG&E), Southern 

California Gas Company (SCGC), San Diego Gas and 

Electric (SDG&E), Southern California Edison (SCE), 

Sacramento Municipal Utility District (SMUD), and 

National Grid, which are referred to as the Joint 

Utilities. 

29A Joint comment was submitted by the 

Appliance Standards Awareness Project (ASAP), 

American Council for an Energy-Efficient Economy 

(ACEEE), and Natural Resources Defense Council 

(NRDC), which are referred to as the Joint Efficiency 

Advocates. 

the current standards. See 42 U.S.C. 

6313(a)(6)(B)(iii)(I). 

As part of the RFI, DOE conducted a 

review of the market to see if part-load 

performance is currently being used and 

accepted for rating CUAC and CUHP. 

On January 2, 2009, the Environmental 

Protection Agency (EPA) issued a draft 

ENERGY STAR specification for Light 

Commercial Air Conditioners and Heat 

Pumps equipment, i.e., small and large 

air-cooled CUAC and CUHP, which 

proposed to adopt IEER as part of the 

minimum energy efficiency criteria.23

The Air-Conditioning, Heating and 

Refrigeration Institute (AHRI) supported 

this change. DOE also noted in the RFI 

that the Consortium for Energy 

Efficiency (CEE), an organization for 

energy efficiency advocates, has 

adopted IEER for its Tier 0, 1, and 2 

efficiencies for CUAC and CUHP, i.e., 

small, large, and very large air-, 

water-, and evaporatively-cooled air 

conditioners and air- and water-source 

heat pumps.24 78 FR 7296, 7299 (Feb. 1, 

2013). 

DOE also noted in the RFI that IEER 

has gained support through efforts such 

as DOE’s Commercial Building Energy 

Alliance (CBEA) technology transfer 

program, which sponsors the High 

Performance Rooftop Unit Challenge 

(RTU Challenge). This program provides 

a market mechanism that reduces 

barriers for manufacturers to procure 

greater than 18–IEER 10-ton 25

equipment and encourages the private 

sector to commit to adopt energyefficient equipment. A number of 

manufacturers are currently 

participating in the RTU Challenge, 

including Lennox, 7AC Technologies, 

Rheem, Carrier, and McQuay. Of these 

participants, both Carrier and McQuay 

have already begun producing AHRIcertified equipment meeting or 

exceeding 18 IEER. In conjunction with 

manufacturer support, fourteen CBEAmember private entities,26 such as 

Target Corp., Macy’s, Inc., McDonald’s 

Corp., and others, have also signaled 

their support and indicated their strong 

interest in potentially purchasing highefficiency rooftop units, a sign of their 

confidence in the RTU Challenge and its 

ability to use IEER to accurately portray 

the energy use of air-cooled CUAC and 

CUHP in the field. 78 FR 7296, 7299 

(Feb. 1, 2013). 

As part of the RFI, DOE conducted a 

market analysis to compare the two 

metrics based on publicly available 

ratings of existing equipment currently 

available in the market. DOE made a 

document available for comment that 

provided the methodology and results of 

the investigation of the relationship 

between IEER and EER for air-cooled 

CUAC and CUHP with cooling 

capacities between 65,000 Btu/hr and 

760,000 Btu/hr (i.e., 5 and 63 tons). In 

addition, DOE looked at the variance of 

heating efficiency (i.e., COP) with IEER 

and EER.27 In the RFI, DOE noted that 

if it decides to propose standards using 

the IEER metric, it would transition the 

existing Federal energy conservation 

standards that are based on the EER 

metric to the new IEER metric to 

determine baseline energy-efficiency 

levels to use in the analysis. DOE sought 

comments and data regarding its 

consideration of transitioning metrics 

and the analysis conducted on the 

currently available models. 78 FR 7296, 

7299 (Feb. 1, 2013). 

In response to the RFI, DOE received 

a number of comments from interested 

parties concerning which energy 

efficiency descriptor should be used for 

this equipment—i.e. EER or IEER. The 

Edison Electric Institute (EEI), New 

Buildings Institute (NBI), Northwest 

Energy Efficiency Alliance (NEEA), the 

Joint Utilities,28 and the Joint Efficiency 

Advocates 29 commented that DOE 

should adopt standards for small, large, 

and very large air-cooled CUAC and 

CUHP using both the EER and IEER 

metrics. (EEI, No. 9 at p. 4; NBI, No. 12 

at p. 2; NEEA, No. 15 at p. 1; Joint 

Utilities, No. 13 at p. 2; Joint Efficiency 

Advocates, No. 11 at p. 1) 

EEI, NEEA, and the Joint Utilities 

expressed concern that if DOE 

eliminated the EER metric, which 

measures peak load efficiency, 

manufacturers would design their 

equipment to improve their IEER 

ratings, which could negatively impact 

peak load efficiency. (EEI, No. 9 at p. 5; 

NEEA, No. 15 at pp. 1–2; Joint Utilities, 

No. 13 at p. 3) NEEA commented that 

using only one metric leads to a bias of 

energy savings depending on the 

climate zone, with EER favoring hot-dry 

climates and IEER favoring milder 

climates. NEEA stated that maximizing 

EER tends to involve heat exchanger 

improvements, while IEER 

improvement involves staging of 

compressors, and that shifting costs 

between these two designs degrades 

either IEER or EER. NEEA noted that, 

based on their review of the AHRI 

certification database, a correlation 

between high IEER and high EER does 

not necessarily exist. NEEA noted that 

equipment with a high EER and high 

IEER exists, but may just reflect 

premium equipment available on the 

market that maximize both metrics. 

(NEEA, No. 15 at p. 1) EEI and the Joint 

Utilities commented that both the EER 

and IEER metrics should be used to 

prevent higher peak demands on utility 

grids and higher energy bills for 

customers in hot-dry climates, and to 

prevent equipment from being 

manufactured that is less efficient than 

the current standards. (EEI, No. 9 at p. 

5; Joint Utilities, No. 13 at p. 3) NBI 

added that because the type of 

application and its emphasis on fullload versus part-load cannot be known 

beforehand, the cost-effectiveness of 

standards can only be assured by 

including both EER and IEER metrics. 

(NBI, No. 12 at pp. 1–2) 

The Joint Utilities commented that the 

IEER metric, unlike the EER metric, 

accounts for potentially significant partload energy savings from technologies 

such as inverter duty compressors, 

variable speed fans, and staged 

compressors. The Joint Utilities also 

indicated that continued growth and 

dependence on demand response 

programs is expected in California and 

New England, and that, during demand 

response events, controls may be used 

to restrict unit capacities and lower fan 

speeds. According to the Joint Utilities, 

if units have comparable EER values, 

the units with higher IEERs have the 

capability to use less energy when 

capacity is restricted and are more likely 

to have the capability of modifying 

compressor operation or reducing fan 

speed. (Joint Utilities, No. 13 at pp. 2– 

3) (Joint Utilities, No. 13 at p. 3) 

The Joint Utilities commented that 

there is no additional testing burden 

associated with implementing both the 

IEER and EER metrics as compared to 

using only IEER because the EER test is 

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part of the IEER metric. The Joint 

Utilities added that manufacturers have 

been reporting both EER and IEER 

values for AHRI certification since 2010. 

The Joint Utilities stated that, based on 

their review of the AHRI certification 

database, the nominal difference 

between the average IEER and EER 

values for each CUAC equipment class 

capacity range (i.e., small, large, and 

very large) varied from 1.38 and 1.87. 

The Joint Utilities stated that if 

standards are based only on IEER and 

the average performance difference in 

IEER and EER remains the same, then 

equipment meeting an IEER-only 

standard could have EERs as low as 8.86 

(which is approximately 10 percent to 

21 percent lower than the current EER 

standards for air-cooled CUAC). (Joint 

Utilities, No. 13 at pp. 3–4, 6) 

EEI, the Joint Utilities, and the Joint 

Efficiency Advocates commented that 

DOE has the authority to adopt two 

efficiency metrics. (EEI, No. 9 at p. 4; 

Joint Utilities, No. 13 at p. 3; Joint 

Efficiency Advocates, No. 11 at p. 1) EEI 

stated that if DOE must demonstrate that 

a standard measured using IEER is no 

less stringent than a standard measured 

using EER, then the two standards must 

have the same stringency. EEI stated 

that, as a result, using two different 

metrics does not contravene the 

requirement that DOE apply a single 

standard. (EEI, No. 9 at p. 4) EEI added 

that this two-metric approach is 

consistent with past precedent set in the 

direct final rule for residential split 

system air conditioners and packaged 

air conditioners (76 FR 37408 (June 27, 

2011); 76 FR 67037 (Oct. 31, 2011)), 

which will require SEER and EER 

standards for equipment sold in the 

‘‘Southwest’’ region of the United 

States. (EEI, No. 9 at p. 5) The Joint 

Utilities commented that, based on their 

understanding, DOE is considering 

using a multiple metric approach in 

other rulemakings (e.g., commercial and 

industrial fans and blowers) and, as 

such, DOE should be able to do the 

same for this rulemaking. (Joint 

Utilities, No. 13 at p. 3) 

According to the Joint Utilities, the 

intent of DOE’s requirement to adopt 

ASHRAE or more stringent standard 

levels is for the ASHRAE levels to serve 

as the standards baseline. The Joint 

Utilities stated that ASHRAE Standard 

90.1 has specified both IEER and EER 

metrics for this equipment since 2010 

and that industry supports and 

recognizes the need for a two metric 

approach for their standards. The Joint 

Utilities stated that both metrics should 

be used to align with the industry 

standards approach. (Joint Utilities, No. 

13 at p. 2) 

As discussed above, EPCA requires 

that DOE establish energy conservation 

standards using either a single 

performance standard or a single design 

requirement—but not both. See 42 

U.S.C. 6311(18). Consistent with this 

restriction, DOE is proposing an 

approach that would apply a single 

performance-based standard for 

manufacturers to follow. Although some 

commenters have suggested that DOE 

deviate from this requirement, none has 

suggested an approach that would 

sufficiently address the legal constraints 

that EPCA imposes on DOE’s ability to 

set multiple metrics for the equipment 

at issue in this proposal. Accordingly, 

DOE is declining to adopt a multiplemetric approach for CUAC and CUHP 

equipment. 

Modine Manufacturing Company 

(Modine) supported the use of the IEER 

metric to allow for the optimization of 

efficiency at part-load conditions. 

Modine stated that equipment designed 

to maximize EER at full-load conditions, 

which accounts for only 2 percent of 

cooling time, may be significantly less 

efficient at part-load conditions. Modine 

presented data showing that a unit that 

is optimized around EER had an EER of 

12.5, but the overall IEER is only 11.46, 

whereas a unit optimized around IEER 

had an EER of 10.3, but an IEER of 12.6. 

Modine also presented data showing 

that only a 2-point improvement in IEER 

for a 15-ton unit and a 20- to 30-ton unit 

would improve the efficiency by 18 

percent and 20 percent, respectively. 

(Modine, No. 5 at pp. 2, 7–9) The Joint 

Efficiency Advocates commented that if 

DOE concludes that they do not have 

the authority to adopt two metrics, DOE 

should replace EER with IEER to better 

reflect annual energy consumption and 

encourage the adoption of part-load 

technologies that can achieve significant 

energy savings in the field. (Joint 

Efficiency Advocates, No. 11 at pp. 1– 

2) Whole Building Systems also 

supported the use of the IEER metric to 

better reflect annual energy 

consumption. Whole Building Systems 

added that design engineers, contactors, 

and owners need an annual or seasonal 

part load performance metric to make 

more informed purchasing and lifecycle cost decisions. (Whole Building 

Systems, No. 4 at p. 1) 

AAON and AHRI both recognized the 

benefits of using the IEER metric for 

representation of the equipment’s 

overall cooling energy efficiency. 

However, AAON, AHRI, Carrier, Lennox 

and Ingersoll Rand noted the following 

concerns with relying solely on the IEER 

metric: 

• DOE’s definition of basic model 

will significantly increase the number of 

models that manufacturers are required 

to test and, in the collective view of 

AAON and AHRI, make the DOE test 

requirements impossible to achieve. 

(AAON, No. 8 at pp. 1–2; AHRI, No. 14 

at p. 4) 

• The rulemaking for the Alternative 

Efficiency Determination Method 

(AEDM) is still incomplete. The 

proposed requirement for the overall 

average of AEDM outputs is, in their 

view, far more stringent than the 

uncertainty of the AHRI Standard 340/ 

360–2007 test method and any 

combined manufacturing or component 

tolerances. (AAON, No. 8 at p. 2; AHRI, 

No. 14 at p. 4) 

• If the part-load IEER metric is used, 

then the sequence of operation of each 

subcomponent of the equipment has a 

great effect on the listed metric. This 

would result in many more basic 

models based on DOE’s current 

definition. (AAON, No. 8 at p. 2; AHRI, 

No. 14 at p. 4) 

• The uncertainty associated with 

modeling or testing (including 

assessment, compliance, and 

enforcement testing) equipment using 

the IEER metric is significantly greater 

than for the single EER test. AHRI 

Standard 340/360 currently has a 10 

percent uncertainty allowance on the 

IEER metric because of the higher 

variability in results due to the multiple 

tests required, compared to a 5-percent 

uncertainty allowance on the single test 

EER metric. (AAON, No. 8 at p. 2; AHRI, 

No. 14 at pp. 4–5; Carrier, No. 7 at p. 

1; Lennox, No. 6 at p. 1; Ingersoll Rand, 

No. 10 at p. 1) 

AAON, AHRI, and Ingersoll Rand 

indicated that they would support 

replacing EER with IEER only if DOE 

resolves pending issues related to the 

AEDM, the basic model definition and 

the uncertainty in measurement testing. 

AAON and AHRI stated that DOE 

should implement the testing and rating 

requirements, including the uncertainty 

tolerances, referenced in AHRI Standard 

340/360 in their entirety. AHRI added 

that the sampling plan in 10 CFR 429.43 

will have to be revised and adjusted 

accordingly. (AAON, No. 8 at p. 3; 

AHRI, No. 14 at pp. 1, 4–5; Ingersoll 

Rand, No. 10 at pp. 1–2) Carrier also 

commented that DOE should limit the 

basic model definition to the base 

refrigeration system to avoid the 

requirement that equipment be tested 

with factory options, which may 

negatively impact cooling or heating 

rating point efficiency, but provide 

efficiency benefits when considered 

from a whole building perspective (e.g., 

economizers and energy recovery 

ventilators). (Carrier, No. 7 at p. 1) 

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30ASHRAE periodically updates specifications in 

its Standard 90.1 through a public review process. 

The latest of these proposed changes is contained 

in Draft Addendum CL, which was made available 

for public review in October 2012. ‘‘CL’’ refers to 

the revision number. 

Rheem supported the use of one 

efficiency metric, but not multiple 

metrics. Rheem stated that if IEER is 

going to replace EER, a technical review 

must be conducted to highlight the 

advantage to the consumer versus the 

confusion in the market place and 

burden on the OEM. Rheem stated that 

other aspects of the energy conservation 

standards for this equipment are in 

transition and must be finalized before 

a constructive evaluation can be made 

of the benefits of a part-load efficiency 

metric. (Rheem, No. 17 at pp. 1–2) 

Lennox commented that it has 

captured most of the achievable EER 

efficiency improvements with currently 

available technology, and that there are 

diminishing returns in requiring 

increasingly stringent EER levels. 

(Lennox, No. 6 at p. 3) However, Lennox 

supported the continued use of the EER 

metric due to the IEER test uncertainty 

issue discussed above. (Lennox, No. 6 at 

p. 1) Lennox commented that using the 

IEER metric now would require 

resolving the following issues: (1) 

Setting a baseline IEER for various 

equipment classes, (2) the ability to use 

the AEDMs, and (3) implementation and 

vetting of testing protocols. (Lennox, 

No. 6 at p. 2) 

The Joint Utilities commented that if 

DOE is not willing to adopt standards 

using both metrics, DOE should use the 

current EER metric instead of IEER to 

provide a better approximation of 

heating, ventilation, and airconditioning (HVAC) performance 

during peak loading conditions. 

According to the Joint Utilities, in 

California and New England, 

commercial air conditioning accounts 

for a disproportionately high fraction of 

seasonal peak demand as compared to 

commercial HVAC energy consumption 

as a fraction of annual energy 

consumption. (Joint Utilities, No. 13 at 

p. 4) The Joint Utilities also commented 

that a substantial fraction of U.S. cities 

have peak temperatures above 95 

degrees Fahrenheit (°F) in the summer, 

and summer peak temperature has been 

increasing over time. The Joint Utilities 

stated that peak electricity demands 

have large effects on energy 

procurement and energy pricing, and 

that shifts in energy pricing rate 

structures, such as in California, will 

further increase electricity prices during 

peak conditions. The Joint Utilities 

stated that using an IEER-only metric 

would under-represent the condition 

that has the largest effect on peak energy 

demand and energy pricing. The Joint 

Utilities stated that an improved IEER 

metric that is representative of annual 

energy cost would place a heavier 

weighting on the 95 °F full-load test 

point, but absent that change the Joint 

Utilities would support retaining EER 

metric. (Joint Utilities, No. 13 at p. 4) 

DOE notes that the issues related to 

the basic model definition and AEDM 

were addressed separately in DOE’s 

Commercial Certification Working 

Group. DOE published a final rule on 

December 31, 2013, which incorporated 

requirements for the testing and 

tolerances for validation and 

verification of an AEDM, and also 

amended the basic model definition for 

small, large, and very large air-cooled 

CUAC and CUHP. 78 FR 79579. EPCA 

requires that test procedures be 

reasonably designed to produce test 

results that measure the energy 

efficiency of covered equipment during 

a representative average use cycle or 

period of use. (42 U.S.C. 6314(a)(2)) As 

discussed above, the IEER metric 

weights the efficiency of operating at 

different partial loads and full load 

based on usage patterns, which 

collectively provide a more 

representative measure of annual energy 

use than the EER metric. A 

manufacturer that was involved in the 

development of the IEER metric 

indicated that the usage pattern weights 

for the IEER metric were developed by 

analyzing equipment usage patterns of 

several buildings across the 17 ASHRAE 

Standard 90.1–2010 (appendix B) 

climate zones. (Docket ID: EERE–2013– 

BT–STD–0007–0018, Carrier, at p. 1) 

These usage patterns and climate zones 

were based on a comprehensive analysis 

performed by industry in assessing the 

manner in which CUAC and CUHP 

equipment operate in the field, both in 

terms of actual usage and the climatic 

conditions in which they are used. The 

weighting factors accounted for the 

hours of operation where mechanical 

cooling was active. Id. As a result, the 

IEER metric, as a whole, provides a 

more accurate representation of the 

annual energy use for this equipment 

than the EER metric, which only 

considers full load energy use. For these 

reasons, DOE is proposing energy 

conservation standards in this NOPR 

based on the IEER metric. DOE 

recognizes the issues regarding the 

uncertainty of IEER test measurements 

and welcomes additional data regarding 

the measurement uncertainties to 

develop appropriate sampling plans. 

Because the weighting factors for the 

IEER metric are representative of field 

use and because DOE is unaware of any 

data indicating that changes to these 

weighting factors are warranted, DOE is 

not considering changing the weighting 

factors for the loading conditions 

specified in AHRI Standard 340/360– 

2007 for the IEER metric, as commented 

by the Joint Utilities. With regards to the 

Joint Utilities comment that an 

improved IEER metric that is 

representative of annual energy cost 

would place a heavier weighting on the 

full-load test point, DOE welcomes 

comment and data on whether the test 

procedure for air-cooled CUAC and 

CUHP should be amended to revise the 

weightings for the IEER metric to place 

a higher weighting value on the fullload efficiency. 

Issue 2: DOE requests comment on 

whether the test procedure for aircooled CUAC and CUHP should be 

amended to revise the weightings for the 

IEER metric to place a higher weighting 

value on the full-load efficiency. DOE 

also requests data to determine 

appropriate weighting factors for the 

full-load test condition and part-load 

test conditions (75 percent, 50 percent, 

and 25 percent of capacity). 

With regards to the Joint Utilities 

comment that DOE should use the 

current EER metric instead of IEER to 

provide a better approximation of HVAC 

performance during peak loading 

conditions, DOE notes that, as discussed 

above, EPCA does not include 

provisions for dual metrics for this 

equipment. See 42 U.S.C. 6311(18). DOE 

also notes that because the IEER metric 

includes measurements at full load 

capacity, the metric already accounts for 

EER. Further, ASHRAE Standard 90.1 

includes requirements for both EER and 

IEER. As a result, although DOE is 

considering energy conservation 

standards based on the IEER metric, 

utilities would still be able to evaluate 

EER ratings of equipment. 

In response to the RFI, AHRI 

commented that the draft of addendum 

CL 30 to ASHRAE Standard 90.1–2010 

(Draft Addendum CL) would amend the 

minimum IEER levels, but did not 

amend the minimum EER levels because 

the ASHRAE Standard 90.1 committee 

was unable to justify raising the full 

load efficiency standard. (AHRI, No. 14 

at pp. 1–2) AHRI and Ingersoll Rand 

commented that full load efficiencies 

are approaching their thermodynamic 

limits, and that further improvements 

will be both very minimal and very 

costly. (AHRI, No. 14 at p. 2; Ingersoll 

Rand, No. 10 at p. 1) AHRI added that 

while energy efficiency gains in the 

1970s were achieved at relatively low 

cost, the efficiency improvements 

realized recently resulted in significant 

increase in equipment cost. AHRI stated 

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31COP is defined as the ratio of the produced 

heating effect to its net work input. 

that the industry is entering a phase 

where efficiency of equipment is 

becoming closer to the Carnot efficiency 

(i.e., the thermodynamic limit) and full 

load efficiency gains in the future will 

be minimal but very costly. (AHRI, No. 

14 at p. 2) AHRI noted that the ASHRAE 

Standard 90.1 committee has recognized 

the increasing full load minimum 

efficiency standards for CUAC and 

CUHP has reached a point of 

diminishing returns in terms of energy 

savings, and instead focused efforts on 

other areas to reduce the energy 

consumption of this equipment, 

including the following design 

requirements: 

• Mandatory use of economizers on 

equipment ≥54,000 Btu/h of cooling 

capacity in all climate zones at the 

exception of zones 1a and 1b, 

• Modulation of economizer outdoor 

and return air dampers to provide up to 

100 percent of the design supply air 

quantity as outdoor air for cooling, 

• More stringent damper leakage 

requirements 

• Additional requirements for supply 

air temperature reset and static pressure 

reset on variable air volume systems, 

• Integrated economizer control and 

direct expansion (i.e., the evaporator is 

in direct contact with the air stream) 

unit capacity staging requirements 

which necessitate two speed fans and 

two stages of mechanical cooling for 

constant volume systems or three or 

more stages for variable air volume 

systems, and 

• Fan controls for both constant air 

volume and variable air volume units 

including extending the indoor fan part 

load power requirements down to 1⁄4

horsepower. (AHRI, No. 14 at pp. 2–3) 

AHRI stated that although these 

requirements significantly reduce the 

energy consumption of CUAC, most of 

the energy savings resulting from their 

implementation is not captured by the 

test procedure and cannot be translated 

in an EER improvement. AHRI stated 

that DOE should consider other factors 

beyond EER and/or COP when 

conducting its analysis and that by 

appropriately modeling this equipment, 

DOE will conclude that increasing the 

EER and COP is not a cost-effective way 

of improving the CUAC/CUHP 

efficiency. (AHRI, No. 14 at p. 3) 

As discussed above, DOE determined 

that the IEER metric provides a more 

accurate representation of the annual 

energy use for this equipment than the 

EER metric, and is proposing standards 

based on IEER. DOE recognizes that 

raising the stringency of EER may not be 

a cost-effective way of improving the 

efficiency of this equipment. DOE 

reached this tentative conclusion based 

on the preliminary determination by the 

ASHRAE Standard 90.1 committee for 

Draft Addendum CL that raising the full 

load efficiency standard would not be 

cost-effective. DOE also takes note of the 

comments from interested parties that 

manufacturers are already reaching the 

thermodynamic limits with respect to 

full load efficiency for CUAC and CUHP 

equipment, which is limiting the 

potential for further full load efficiency 

improvements for these HVAC 

equipment. For these reasons, DOE is 

not considering standards based on the 

EER metric. Based on energy modeling 

of design changes consistent with 

equipment available on the market (by 

analyzing the efficiency at each loading 

condition, including full-load EER), as 

discussed in sections IV.A through IV.C, 

DOE notes that the proposed IEER-based 

standard levels presented in section I 

would not result in an EER rating less 

than the current standard levels. DOE 

discusses the use of the COP metric in 

the following section. 

Heating Efficiency Metric 

The current energy conservation 

standards for small, large, and very large 

air-cooled CUHP heating efficiency are 

based on the COP metric.31 10 CFR 

431.97(b) 

In response to the RFI, Ingersoll Rand 

commented that a performance metric 

does not exist that simulates part load 

performance in heating. (Ingersoll Rand, 

No. 6 at p. 4) Modine commented that 

DOE could consider creating a new 

metric for CUHP, an integrated COP that 

is based on heating weather bin data, to 

provide a more representative measure 

of energy efficiency during the heating 

mode. (Modine, No. 5 at p. 2) 

DOE is not aware of any test 

procedures that have been developed 

that measure part load performance in 

heating mode for small, large, and very 

large air-cooled CUHP. In addition, DOE 

notes that Modine did not provide any 

data, nor is DOE aware of any data, 

regarding the annual usage for CUHP 

under part-load heating conditions to 

determine whether part-load heating 

hours are significant and would warrant 

the development of a part-load heating 

metric. As discussed in section IV.C.3, 

one manufacturer noted that CUHPs 

typically operate in full load heating 

mode and cycle the auxiliary heat on 

and off because heat pump capacity 

alone is inadequate to meet the building 

load. In addition, DOE is unaware of 

data regarding usage patterns for CUHP 

to determine appropriate test conditions 

under part-load heating conditions. 

Because DOE is unaware of any test 

procedures or usage data regarding partload performance in heating mode for 

CUHP that shows that part-load heating 

hours are significant, DOE is not 

considering amendments to the test 

procedure to measure part-load heating 

efficiency at this time. For this NOPR, 

DOE is proposing standards for the 

heating efficiency based on the COP 

metric. 

Regional Standards 

In response to the RFI, NEEA and NBI 

stated that DOE should consider 

regional standards for small, large, and 

very large air-cooled CUAC and CUHP. 

(NEEA, No. 15 at p. 2; NBI, No. 12 at 

p. 2) NEEA commented that AHRI 

Standard 340/360 tends to favor certain 

climate zones and exclude or decrease 

savings by only having one efficiency 

value to characterize the 8 climate zones 

in the United States. NEEA also stated 

that the test procedure tends to under 

value fan energy as external static 

pressure values are optimistically low. 

According to NEEA and NBI, the use of 

regional efficiency standards would 

increase energy savings and reflect the 

equipment selection options for design 

engineers in selecting equipment for 

varying climatic zones. NEEA added 

that regional standards would increase 

and bolster technological development 

of air conditioning equipment for 

varying climate zones. NBI stated that, 

in particular, DOE should investigate 

regional standards for ‘‘hot-dry’’ 

climates to recognize the significant 

research and field experience that 

allows packaged air conditioners to 

cost-effectively achieve higher 

efficiencies in these climates. NBI stated 

that DOE has developed regional 

standards for other residential HVAC 

equipment (10 CFR 430.32(c)(5). NBI 

commented that DOE should consider 

adopting CCE Tier 2 ratings for ‘‘hotdry’’ regional standards. (NEEA, No. 15 

at p. 2; NBI, No. 12 at p. 2) 

EPCA requires that any amended 

standard for small, large, and very large 

air-cooled CUAC and CUHP must be a 

uniform national standard. (42 U.S.C. 

6313(a)(6)(A)) EPCA does not provide 

DOE with the authority to set regional 

standards for CUAC and CUHP 

equipment. As a result, DOE is not 

considering regional standards for 

small, large, and very large air-cooled 

CUAC and CUHP. 

Issue 1: DOE requests comment on the 

use of IEER as the cooling efficiency 

metric and COP as the heating efficiency 

metric (for CUHP) for the proposed 

energy conservation standards, 

including additional data and input 

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Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 58961 

32 In the past DOE presented energy savings 

results for only the 30-year period that begins in the 

year of compliance. In the calculation of economic 

impacts, however, DOE considered operating cost 

savings measured over the entire lifetime of 

products purchased in the 30-year period. DOE has 

chosen to modify its presentation of national energy 

savings to be consistent with the approach used for 

its national economic analysis. 

33 ‘‘Review of Site (Point-of-Use) and Full-FuelCycle Measurement Approaches to DOE/EERE 

Building Appliance Energy-Efficiency Standards,’’ 

(Academy report) was completed in May 2009 and 

included five recommendations. A copy of the 

study can be downloaded at: http://www.nap.edu/ 

catalog.php?record_id=12670. 

regarding the uncertainty of IEER test 

measurements. 

B. Technological Feasibility 

1. General 

In each energy conservation standards 

rulemaking, DOE conducts a screening 

analysis based on information gathered 

on all current technology options and 

prototype designs that could improve 

the efficiency of the products or 

equipment that are the subject of the 

rulemaking. As the first step in such an 

analysis, DOE develops a list of 

technology options for consideration in 

consultation with manufacturers, design 

engineers, and other interested parties. 

DOE then determines which of those 

means for improving efficiency are 

technologically feasible. DOE considers 

technologies incorporated in 

commercially available equipment or in 

working prototypes to be 

technologically feasible. 10 CFR part 

430, subpart C, appendix A, section 

4(a)(4)(i). 

After DOE has determined that 

particular technology options are 

technologically feasible, it further 

evaluates each technology option in 

light of the following additional 

screening criteria: (1) Practicability to 

manufacture, install, and service; (2) 

adverse impacts on equipment utility or 

availability; and (3) adverse impacts on 

health or safety. 10 CFR part 430, 

subpart C, appendix A, section 

4(a)(4)(ii)–(iv). Section IV.B of this 

proposed rulemaking discusses the 

results of the screening analysis for 

small, large, and very large air-cooled 

CUAC and CUHP, particularly the 

designs DOE considered, those it 

screened out, and those that are the 

basis for the TSLs in this rulemaking. 

For further details on the screening 

analysis for this rulemaking, see chapter 

4 of the NOPR Technical Support 

Document (TSD). 

2. Maximum Technologically Feasible 

Levels 

When DOE proposes to adopt an 

amended standard for a type or class of 

covered equipment, it must determine 

the maximum improvement in energy 

efficiency or maximum reduction in 

energy use that is technologically 

feasible for such equipment. 

Accordingly, in the engineering 

analysis, DOE determined the maximum 

technologically feasible (‘‘max-tech’’) 

improvements in energy efficiency for 

small, large, and very large air-cooled 

CUAC and CUHP, using the design 

parameters for the most efficient 

equipment available on the market or in 

working prototypes. (See chapter 5 of 

the NOPR TSD.) The max-tech levels 

that DOE determined for this 

rulemaking are described in section 

IV.C.3 of this proposed rule. 

C. Energy Savings 

1. Determination of Savings 

For each TSL, DOE projected energy 

savings from the products that are the 

subject of this rulemaking purchased in 

the 30-year period that begins in the 

year of compliance with amended 

standards (2019–2048). The savings are 

measured over the entire lifetime of 

products purchased in the 30-year 

analysis period.32 DOE quantified the 

energy savings attributable to each TSL 

as the difference in energy consumption 

between each standards case and the 

base case. The base case represents a 

projection of energy consumption in the 

absence of amended mandatory 

efficiency standards, and it considers 

market forces and policies that affect 

demand for more efficient products. 

DOE used its national impact analysis 

(NIA) spreadsheet model to estimate 

energy savings from amended standards 

for the products that are the subject of 

this rulemaking. The NIA spreadsheet 

model (described in section IV.H of this 

proposed rule) calculates energy savings 

in site energy, which is the energy 

directly consumed by products at the 

locations where they are used. For 

electricity, DOE reports national energy 

savings in terms of the savings in the 

energy that is used to generate and 

transmit the site electricity. To calculate 

this quantity, DOE derives annual 

conversion factors from the model used 

to prepare the Energy Information 

Administration’s (EIA) most recent 

Annual Energy Outlook (AEO). 

DOE has begun to also estimate fullfuel-cycle energy savings, as discussed 

in DOE’s statement of policy and notice 

of policy amendment. 76 FR 51281 

(August 18, 2011), as amended at 77 FR 

49701 (August 17, 2012). The full-fuelcycle (FFC) metric includes the energy 

consumed in extracting, processing, and 

transporting primary fuels (i.e., coal, 

natural gas, petroleum fuels), and thus 

presents a more complete picture of the 

impacts of energy efficiency standards. 

DOE’s evaluation of FFC savings is 

driven in part by the National Academy 

of Science’s (NAS) report on FFC 

measurement approaches for DOE’s 

Appliance Standards Program.33 The 

NAS report discusses that the FFC 

metric was primarily intended for 

energy efficiency standards rulemakings 

where multiple fuels may be used by a 

particular product. In the case of this 

rulemaking, only a single fuel— 

electricity—is consumed by the 

equipment. DOE’s approach is based on 

the calculation of an FFC multiplier for 

each of the energy types used by 

covered equipment. Although the 

addition of FFC energy savings in the 

rulemakings is consistent with the 

recommendations, the methodology for 

estimating FFC does not project how 

fuel markets would respond to this 

particular standard rulemaking. The 

FFC methodology simply estimates how 

much additional energy, and in turn 

how many tons of emissions, may be 

displaced if the estimated quantity of 

energy was not consumed by the 

equipment covered in this rulemaking. 

It is also important to note that 

inclusion of FFC savings does not affect 

DOE’s choice of proposed standards. 

For more information on FFC energy 

savings, see section IV.H.2. 

2. Significance of Savings 

To adopt national standards more 

stringent than the amended ASHRAE/

IES Standard 90.1 for small, large, and 

very large air-cooled CUAC and CUHP, 

DOE must determine that such action 

would result in significant additional 

conservation of energy. (42 U.S.C. 

6313(a)(6)(A)(ii)) Although the term 

‘‘significant’’ is not defined in the Act, 

the U.S. Court of Appeals, in Natural 

Resources Defense Council v. 

Herrington, 768 F.2d 1355, 1373 (D.C. 

Cir. 1985), indicated that Congress 

intended ‘‘significant’’ energy savings in 

the context of EPCA to be savings that 

were not ‘‘genuinely trivial.’’ The energy 

savings for today’s proposed standards 

(presented in section V.B) are nontrivial, 

and, therefore, DOE considers them 

‘‘significant’’ within the meaning of 

section 325 of EPCA. 

D. Economic Justification 

1. Specific Criteria 

EPCA provides seven factors to be 

evaluated in determining whether a 

more stringent standard for small, large, 

and very large air-cooled CUAC and 

CUHP is economically justified. (42 

U.S.C. 6313(a)(6)(B)(ii)) The following 

sections discuss how DOE has 

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58962 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

addressed each of those seven factors in 

this rulemaking. 

a. Economic Impact on Manufacturers 

and Consumers 

In determining the impacts of a 

potential amended standard on 

manufacturers, DOE conducts a 

manufacturer impact analysis (MIA), as 

discussed in section IV.J. DOE first uses 

an annual cash-flow approach to 

determine the quantitative impacts. This 

step includes both a short-term 

assessment—based on the cost and 

capital requirements during the period 

between when a regulation is issued and 

when entities must comply with the 

regulation—and a long-term assessment 

over a 30-year period. The industrywide impacts analyzed include industry 

net present value (INPV), which values 

the industry on the basis of expected 

future cash flows; cash flows by year; 

changes in revenue and income; and 

other measures of impact, as 

appropriate. Second, DOE analyzes and 

reports the impacts on different types of 

manufacturers, including impacts on 

small manufacturers. Third, DOE 

considers the impact of standards on 

domestic manufacturer employment and 

manufacturing capacity, as well as the 

potential for standards to result in plant 

closures and loss of capital investment. 

Finally, DOE takes into account 

cumulative impacts of various DOE 

regulations and other regulatory 

requirements on manufacturers. 

For individual consumers, measures 

of economic impact include the changes 

in life-cycle cost (LCC) and payback 

period (PBP) associated with new or 

amended standards. These measures are 

discussed further in the following 

section. For consumers in the aggregate, 

DOE also calculates the national net 

present value of the economic impacts 

applicable to a particular rulemaking. 

DOE also evaluates the LCC impacts of 

potential standards on identifiable 

subgroups of consumers that may be 

affected disproportionately by a national 

standard. 

b. Savings in Operating Costs Compared 

to Increase in Price 

EPCA requires DOE to consider the 

savings in operating costs throughout 

the estimated average life of the covered 

product compared to any increase in the 

price of the covered product that are 

likely to result from the imposition of 

the standard. (42 U.S.C. 

6295(o)(2)(B)(i)(II)) DOE conducts this 

comparison in its LCC and PBP analysis. 

The LCC is the sum of the purchase 

price of a product (including its 

installation) and the operating expense 

(including energy, maintenance, and 

repair expenditures) discounted over 

the lifetime of the product. To account 

for uncertainty and variability in 

specific inputs, such as product lifetime 

and discount rate, DOE uses a 

distribution of values, with probabilities 

attached to each value. For its analysis, 

DOE assumes that consumers will 

purchase the covered products in the 

first year of compliance with amended 

standards. 

The LCC savings and the PBP for the 

considered efficiency levels are 

calculated relative to a base case that 

reflects projected market trends in the 

absence of amended standards. DOE 

identifies the percentage of consumers 

estimated to receive LCC savings or 

experience an LCC increase, in addition 

to the average LCC savings associated 

with a particular standard level. DOE’s 

LCC and PBP analysis is discussed in 

further detail in section IV.F. 

c. Energy Savings 

Although significant conservation of 

energy is a separate statutory 

requirement for adopting an energy 

conservation standard, EPCA requires 

DOE, in determining the economic 

justification of a standard, to consider 

the total projected energy savings that 

are expected to result directly from the 

standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(III)) As discussed in 

section IV.H, DOE uses the NIA 

spreadsheet to project national energy 

savings. 

d. Lessening of Utility or Performance of 

Products 

In establishing classes of products, 

and in evaluating design options and 

the impact of potential standard levels, 

DOE evaluates standards that would not 

lessen the utility or performance of the 

considered products. (42 U.S.C. 

6313(a)(6)(B)(ii)(IV)) Based on data 

available to DOE, the standards 

proposed in this document would not 

reduce the utility or performance of the 

products under consideration in this 

rulemaking. 

e. Impact of Any Lessening of 

Competition 

EPCA directs DOE to consider the 

impact of any lessening of competition, 

as determined in writing by the 

Attorney General, that is likely to result 

from a proposed standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(V)) It also directs the 

Attorney General to determine the 

impact, if any, of any lessening of 

competition likely to result from a 

proposed standard and to transmit such 

determination to the Secretary within 60 

days of the publication of a proposed 

rule, together with an analysis of the 

nature and extent of the impact. (42 

U.S.C. 6295(o)(2) (B)(ii)) DOE will 

transmit a copy of today’s proposed rule 

to the Attorney General with a request 

that the Department of Justice (DOJ) 

provide its determination on this issue. 

DOE will address the Attorney General’s 

determination in the final rule. 

f. Need for National Energy 

Conservation 

In evaluating the need for national 

energy conservation, DOE expects that 

the energy savings from the proposed 

standards are likely to provide 

improvements to the security and 

reliability of the nation’s energy system. 

Reductions in the demand for electricity 

also may result in reduced costs for 

maintaining the reliability of the 

nation’s electricity system. DOE 

conducts a utility impact analysis to 

estimate how standards may affect the 

nation’s needed power generation 

capacity. 

The proposed standards also are 

likely to result in environmental 

benefits in the form of reduced 

emissions of air pollutants and 

greenhouse gases associated with energy 

production. DOE reports the emissions 

impacts from the proposed standards, 

and from each TSL it considered, in 

section V.B.6 of this proposed 

rulemaking. DOE also reports estimates 

of the economic value of emissions 

reductions resulting from the 

considered TSLs, as discussed in 

section IV.L. 

g. Other Factors 

EPCA allows the Secretary of Energy, 

in determining whether a standard is 

economically justified, to consider any 

other factors that the Secretary deems to 

be relevant. (42 U.S.C. 

6313(a)(6)(B)(ii)(VII)) 

2. Rebuttable Presumption 

As set forth in 42 U.S.C. 

6295(o)(2)(B)(iii), EPCA creates a 

rebuttable presumption that an energy 

conservation standard is economically 

justified if the additional cost to the 

consumer of a product that meets the 

standard is less than three times the 

value of the first year’s energy savings 

resulting from the standard, as 

calculated under the applicable DOE 

test procedure. DOE’s LCC and PBP 

analyses generate values used to 

calculate the effects that proposed 

energy conservation standards would 

have on the payback period for 

consumers. These analyses include, but 

are not limited to, the 3-year payback 

period contemplated under the 

rebuttable-presumption test. In addition, 

DOE routinely conducts an economic 

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Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 58963 

34BT stands for DOE’s Building Technologies 

Program. 

35The EIA allows the use of the name ‘‘NEMS’’ 

to describe only an AEO version of the model 

without any modification to code or data. Because 

the present analysis entails some minor code 

modifications and runs the model under various 

policy scenarios that deviate from AEO 

assumptions, the name ‘‘NEMS–BT’’ refers to the 

model as used here. For more information on 

NEMS, refer to The National Energy Modeling 

System: An Overview, DOE/EIA–0581 (98) 

(Feb.1998), available at: http://tonto.eia.doe.gov/

FTPROOT/forecasting/058198.pdf. 

analysis that considers the full range of 

impacts to consumers, manufacturers, 

the nation, and the environment, as 

required under 42 U.S.C. 

6295(o)(2)(B)(i). The results of this 

analysis serve as the basis for DOE’s 

evaluation of the economic justification 

for a potential standard level (thereby 

supporting or rebutting the results of 

any preliminary determination of 

economic justification). The rebuttable 

presumption payback calculation is 

discussed in section IV.F.12 of this 

proposed rule. 

IV. Methodology and Discussion of 

Related Comments 

DOE used four analytical tools to 

estimate the impact of today’s proposed 

standards. The first tool is a spreadsheet 

that calculates LCCs and PBPs of 

potential new energy conservation 

standards. The second tool is a model 

that provides shipments forecasts, and 

the third tool is a spreadsheet that 

calculates national energy savings and 

net present value resulting from 

potential amended energy conservation 

standards. The fourth spreadsheet tool, 

the Government Regulatory Impact 

Model (GRIM), helped DOE to assess 

manufacturer impacts. 

Additionally, DOE estimated the 

impacts of energy conservation 

standards for small, large, and very large 

air-cooled commercial package air 

conditioning and heating equipment on 

utilities and the environment. DOE used 

a version of EIA’s National Energy 

Modeling System (NEMS) for the utility 

and environmental analyses. The NEMS 

model simulates the energy sector of the 

U.S. economy. EIA uses NEMS to 

prepare its Annual Energy Outlook 

(AEO), a widely known energy forecast 

for the United States. The version of 

NEMS used for appliance standards 

analysis is called NEMS–BT34 and is 

based on the AEO version with minor 

modifications.35 The NEMS–BT model 

offers a sophisticated picture of the 

effect of standards, because it accounts 

for the interactions between the various 

energy supply and demand sectors and 

the economy as a whole. 

As discussed below, specifically in 

section IV.D on the markups analysis 

and section IV.E on the energy use 

analysis, DOE utilized methods 

developed for the 2004 ANOPR to 

conduct these analyses. In the case of 

the markups analysis, DOE utilized the 

same distribution channels as the 2004 

ANOPR to characterize how small, 

large, and very large air-cooled CUAC 

equipment is distributed from the 

manufacturer to the end-user. In the 

case of the energy use analysis, building 

simulations performed for the 2004 

ANOPR laid the basis for estimating the 

annual energy consumption of small, 

large, and very large air-cooled CUAC 

equipment. However, DOE incorporated 

several modifications to the simulations 

themselves as well as detailed 

performance data from the Engineering 

Analysis to estimate the energy 

consumption of equipment at the 

specific energy efficient levels evaluated 

in today’s NOPR. DOE also notes that 

inputs to the LCC and PBP analysis, 

including the installation and 

maintenance costs, used the same data 

source as the 2004 ANOPR, but DOE 

updated the data to reflect the most 

recent version of the data source. 

A. Market and Technology Assessment 

1. General 

For the market and technology 

assessment, DOE develops information 

that provides an overall picture of the 

market for the equipment concerned, 

including the purpose of the equipment, 

the industry structure, and market 

characteristics. This activity includes 

both quantitative and qualitative 

assessments, based primarily on 

publicly available information. The 

subjects addressed in the market and 

technology assessment for this 

rulemaking include scope of coverage, 

equipment classes, types of equipment 

sold and offered for sale, and technology 

options that could improve the energy 

efficiency of the equipment under 

examination. Chapter 3 of the NOPR 

TSD contains additional discussion of 

the market and technology assessment. 

2. Scope of Coverage and Equipment 

Classes 

The proposed energy conservation 

standards in today’s NOPR cover small, 

large, and very large, air-cooled CUAC 

and CUHP under section 342(a) of 

EPCA. (42 U.S.C. 6313(a)) This category 

of equipment has a rated capacity 

between 65,000 Btu/h and 760,000 Btu/ 

h. It is designed to heat and cool 

commercial buildings. In the case of 

single-package units, which house all of 

the components (i.e., compressor, 

condenser and evaporator coils and 

fans, and associated operating and 

control devices) within a single cabinet, 

these units are typically located on the 

building’s rooftop. In the case of splitsystem units, the compressor and 

condenser coil and fan (or in the case of 

CUHP, the outdoor coil and fan) are 

housed in a cabinet typically located on 

the outside of the building, and the 

evaporator coil and fan (or in the case 

of CUHP, the indoor coil and fan) are 

housed in a cabinet typically located 

inside the building. 

When evaluating and establishing 

energy conservation standards, DOE 

divides covered equipment into 

equipment classes by the type of energy 

used or by capacity or other 

performance-related features that would 

justify a different standard. In 

determining whether a performancerelated feature would justify a different 

standard, DOE considers such factors as 

the utility to the consumer of the feature 

and other factors DOE determines are 

appropriate. 

The current equipment classes that 

EPAct 2005 established for small, large, 

and very large air-cooled CUAC and 

CUHP divide this equipment into 

twelve classes characterized by rated 

cooling capacity, equipment type (air 

conditioner versus heat pump), and 

heating type. Table IV.1 shows the 

current equipment class structure. 

TABLE IV.1—PROPOSED EQUIPMENT CLASSES

Equipment 

class Equipment type Cooling capacity Sub-category Heating type 

1 ................. Small Commercial Packaged Air-Conditioning 

and Heating Equipment (Air-Cooled).

≥65,000 Btu/h and <135,000 

Btu/h.

AC .................... Electric Resistance Heating or 

No Heating. 

2 ................. ......................................................................... ................................................. ........................... All Other Types of Heating. 

3 ................. ......................................................................... ................................................. HP .................... Electric Resistance Heating or 

No Heating. 

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58964 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

TABLE IV.1—PROPOSED EQUIPMENT CLASSES—Continued 

Equipment 

class Equipment type Cooling capacity Sub-category Heating type 

4 ................. ......................................................................... ................................................. ........................... All Other Types of Heating. 

5 ................. Large Commercial Packaged Air-Conditioning 

and Heating Equipment (Air-Cooled).

≥135,000 Btu/h and <240,000 

Btu/h.

AC ..................... Electric Resistance Heating or 

No Heating. 

6 ................. ......................................................................... ................................................. ........................... All Other Types of Heating. 

7 ................. ......................................................................... ................................................. HP .................... Electric Resistance Heating or 

No Heating. 

8 ................. ......................................................................... ................................................. ........................... All Other Types of Heating. 

9 ................. Very Large Commercial Packaged Air-Conditioning and Heating Equipment (AirCooled).≥240,000 Btu/h and <760,000 

Btu/h.

AC .................... Electric Resistance Heating or 

No Heating. 

10 ............... ......................................................................... ................................................. ........................... All Other Types of Heating. 

11 ............... ......................................................................... ................................................. HP .................... Electric Resistance Heating or 

No Heating. 

12 ............... ......................................................................... ................................................. ........................... All Other Types of Heating. 

AC = Air conditioner; HP = Heat pump. 

In the RFI, DOE stated that it planned 

to continue using these classes, which 

are also provided in Table 1 of 10 CFR 

431.97. DOE requested feedback on the 

current equipment classes and sought 

information regarding other equipment 

classes it should consider for inclusion 

in its analysis 78 FR 7296, 7300 (Feb. 1, 

2013). 

Modine, Carrier, and AAON 

supported the equipment class 

structures presented in the RFI. 

(Modine, No. 5 at p. 1; Carrier, No. 7 at 

p. 2; AAON, No. 8 at p. 3) AHRI 

disagreed with DOE’s determination 

that every equipment category for which 

there is a minimum energy conservation 

standard is an equipment class. AHRI 

stated that equipment classes should be 

delineated based on cooling capacity 

and on whether the unit is an air 

conditioner or a heat pump. AHRI 

commented that the same equipment 

class could have two different efficiency 

levels (e.g., one for equipment with 

electric resistance heat (or none) and the 

other for equipment with all other types 

of heating element). (AHRI, No. 14 at p. 

5) 

As discussed above, EPCA specifies 

the criteria for separation into different 

equipment classes: (1) Type of energy 

used, or (2) capacity or other 

performance-related features such as 

those that provide utility to the 

consumer or others the Secretary 

determines are appropriate that would 

justify the establishment of a separate 

energy conservation standard. DOE 

notes that considering two different 

efficiency levels for different equipment 

types, as asserted by AHRI, would create 

two separate equipment classes because 

a performance-related feature (e.g., type 

of heating) inherently affects the 

efficiency and warrants establishing a 

separate energy conservation standard. 

For these reasons, DOE is proposing 

energy conservation standards in this 

NOPR based on the existing equipment 

class structure provided in Table 1 of 10 

CFR 431.97, as shown in Table IV.1. 

United CoolAir Corporation (UCA) 

submitted a request for exemption for a 

specific type of air conditioning 

equipment (‘‘double-duct air-cooled air 

conditioner’’). See UCA, EERE–2013– 

BT–STD–0007–0020. These units are 

designed for indoor installation in 

constrained spaces using ducting to an 

outside wall for the supply and 

discharge of condenser air to the 

condensing unit. The sizing of these 

units is constrained both by the space 

available in the installation location and 

the available openings in the building 

through which the unit’s sections must 

be moved to reach the final installation 

location. These size constraints, coupled 

with the higher power required by the 

condenser fan to provide sufficient 

pressure to move the condenser air 

through the supply and return ducts, 

affect the energy efficiency of these 

types of systems. More conventional 

designs that use outdoor units or 

condenser sections of packaged 

commercial air conditioners do not 

require this more complex ductwork 

and can more easily move condenser air 

using direct-driven propeller fans. 

Currently, double-ducted air 

conditioners are tested and rated under 

the same test conditions as single-duct 

air conditioners, without any ducting 

connected to, or an external static 

pressure applied on, the condenser side. 

This would provide more favorable 

conditions for testing and rating 

equipment efficiency in terms of IEER 

than typically experienced in the field. 

UCA has asserted that the double-duct 

design provides customer utility in that 

it allows interior field installations in 

existing buildings in circumstances 

where spacing constraints make an 

outdoor unit impractical to use. Id. DOE 

recognizes that the design features 

associated with the described dual-duct 

designs may affect energy use while 

providing justifiable customer utility. 

However, DOE also questions how 

much of an efficiency impact, in terms 

of IEER, the dual-duct design may 

provide when tested under the current 

test conditions discussed above 

compared to single-duct air conditioners 

and welcomes additional data regarding 

the impact on the measured IEER. 

Issue 3: DOE requests comments on 

whether separate equipment classes 

should be considered for dual-duct airconditioners. DOE further requests 

detailed comments regarding the 

definition of such equipment, and any 

detailed information, such as test data, 

test conditions, key component design 

details, fan power consumption, as well 

as other relevant information that may 

help DOE evaluate potential alternative 

equipment class standard levels. 

3. Technology Options 

As part of the market and technology 

assessment, DOE uses information about 

existing and past technology options 

and prototype designs to help identify 

technologies that manufacturers could 

use to improve energy efficiency. 

Initially, these technologies encompass 

all those that DOE believes are 

technologically feasible. Chapter 3 of 

the NOPR TSD includes the detailed list 

and descriptions of all technology 

options identified for this equipment. 

In the RFI, DOE stated that it planned 

to consider the specific technology 

options presented in Table IV.2. 78 FR 

7296, 7300 (Feb. 1, 2013). 

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36The following are examples of the equipment 

literature DOE reviewed: 

(1) United Technologies Corporation. ‘‘Carrier 

50TC Cooling Only/Electric Heat, Packaged 

Rooftop, 3 to 15 Nominal Tons: Product Data.’’ 

Available online at: http:// 

www.docs.hvacpartners.com/idc/groups/public/ 

documents/techlit/50tc-19pd.pdf (Accessed on 

Sept. 12, 2013). 

(2) Lennox International Inc. ‘‘Lennox Packaged 

Electric/Electric LCH Energence® Rooftop Units: 

Product Specifications.’’ Available online at: 

http://tech.lennoxintl.com/C03e7o14l/3rEpIb5d/ 

ehb_lch_bbox_1306_210556_020.pdf (Accessed on 

Sept. 12, 2013). 

(3) Ingersoll Rand. ‘‘Trane Product Catalog: 

Packaged Rooftop Air Conditioners, VoyagerTM

Cooling and Gas/Electric, 121⁄2–25 Tons, 60Hz’’ 

Available online at: http://www.trane.com/CPS/ 

Uploads/UserFiles/DXUnitarySystems/ 

Light%20Rooftops/RT-PRC028-EN_08022013.pdf 

(Accessed on Sept. 12, 2013). 

TABLE IV.2—RFI TECHNOLOGY OPTIONS

Heat transfer improvements: 

• Electro-hydrodynamic enhancement. 

Alternative refrigerants. 

Condenser and evaporator fan and fan motor improvements: 

• Larger fan diameters. 

• More efficient fan blades (e.g., air foil centrifugal evaporator fans, backward-cured centrifugal evaporator fans, high efficiency propeller 

condenser fans). 

• High efficiency motors (e.g., copper rotor motor, high efficiency induction, permanent magnet, electronically commutated). 

Larger heat exchangers. 

Microchannel heat exchangers. 

Reduce air leakage paths within the unit. 

Low-pressure-loss filters. 

Compressor Improvements: 

• High efficiency compressors. 

• Multiple compressors. 

Thermostatic expansion valves. 

Electronic expansion valves. 

High-side solenoid valve or discharge line check-valve to minimize pressure equalization. 

Heat-pipes (for high latent loads). 

Sub-coolers. 

Reduced indoor fan belt loss: 

• Synchronous (toothed) belts. 

• Direct-drive fans. 

Demand-control ventilation strategy. 

The RFI sought comment from 

interested parties on these, as well as 

other options that DOE had not listed. 

Carrier commented that, in general, 

many of the technologies presented by 

DOE in the RFI are already used in 

equipment. (Carrier, No. 7 at p. 2) DOE 

agrees that many of the technologies are 

used in equipment currently available 

on the market. As a result, DOE 

continued to consider such technologies 

for improving the efficiency above the 

baseline level for this NOPR. DOE also 

notes that for the majority of the 

identified technology options, DOE 

considered designs in its analyses that 

are generally consistent with existing 

equipment on the market (e.g., heat 

exchanger sizes, fan and fan motor 

types, controls, air flow). 

The following sections discuss 

comments from interested parties on 

specific technology options. 

Heat Exchanger Size 

Increasing the heat transfer surface 

area of the heat exchangers can be 

achieved by increasing their width, 

height, or depth. These measures can 

improve heat transfer effectiveness, 

which can reduce the condensing 

temperature and increase the 

evaporating temperature needed to 

transfer the cooling (or heating) load. 

Such temperature adjustments reduce 

the compressor’s compression ratio and 

hence its required power input. Lennox 

indicated that evaporator coil area is 

already near the maximum for optimum 

efficiency and latent heat removal. 

Lennox stated that increasing the coil 

area leads to higher evaporating 

temperatures, lessening the ability of the 

coil to remove moisture from the air, 

which could lead to humidity control 

problems in hot humid regions. 

(Lennox, No. 6 at p. 2) Lennox also 

commented that adding coil rows 

increases costs proportional to the 

number of rows, but provides less than 

proportional efficiency gain. (Lennox, 

No. 6 at p. 2) 

DOE agrees with Lennox that 

increasing the evaporator size may lead 

to a decrease in latent heat removal. 

Based on a review of currently available 

equipment literature and DOE’s energy 

modeling analyses, DOE determined 

that, for a given capacity, the heat 

exchanger sizes varied significantly, 

with larger coil sizes generally 

correlating to higher IEER levels (see 

chapter 5 of the NOPR TSD for 

additional information).36 As part of the 

engineering analysis, the design options 

DOE considered for different IEER levels 

include the variation of evaporator coil 

size, and DOE’s analysis considered 

evaporator coil sizes consistent with 

equipment available on the market. 

Fans and Fan Motors 

As stated above, DOE proposed 

several improvements to the indoor and 

outdoor fan motors, including copper 

rotor motors, higher efficiency motors, 

and direct-drive fans, and synchronous 

belts. 

Manufacturing more efficient copper 

rotor motors requires using copper 

instead of aluminum for critical 

components of an induction motor’s 

rotor (e.g., conductor bars and end 

rings). By using copper in these motor 

components, the efficiency of the motor 

can improve significantly because the 

electrical conductivity of this material, 

relative to other materials commonly 

used in rotor construction (e.g. 

aluminum) is much higher (i.e., lower 

electrical resistance). With this higher 

level of conductivity, the electrical 

losses that might otherwise present 

themselves during operation in a given 

motor are significantly reduced. 

However, using a copper-cast rotor in an 

electric motor presents a variety of 

production challenges. For example, 

copper melts at higher temperatures 

than aluminum, so the casting process 

becomes more difficult (due to higher 

thermal stress on the die mold) and is 

likely to increase both production time 

and cost for manufacturing a motor. 

EBM-Papst Inc. (EBM-Papst) 

commented that copper rotor motors 

provide marginally increased efficiency 

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37See chapter 4 of the TSD for the July 2004 

ANOPR, available online at: http:// 

www.regulations.gov/#!documentDetail;D=EERE2006-STD-0103-0078. 

38United States Army. December 9, 2005. 

Maintenance of Mechanical and Electrical 

Equipment At Command, Control, 

over aluminum and aluminum alloy 

rotor motors. EBM-Papst noted that the 

torque characteristic of copper rotor 

motors is very stiff, so that copper rotor 

motors cannot control speed based on 

voltage and, as a result, variable speed 

copper rotor motors would require 

variable frequency drives. EBM-Papst 

also indicated that casting of copper 

requires very high temperatures and 

very specialized tools. (EBM-Papst, No. 

16, p. 1) 

DOE agrees with EBP-Papst that 

copper rotor motors are more difficult to 

manufacture than aluminum rotor 

motors due to the high temperatures 

required for casting. However, as part of 

the previous rulemaking for this 

equipment, DOE noted that in the case 

of motor rotors for similar horsepower 

motors, copper rotors can reduce the 

electric motor total energy losses by 

between 15 percent and 23 percent as 

compared to aluminum rotors.37 DOE 

also notes that, based on a review of 

equipment literature, equipment is 

available on the market that offers 

variable speed indoor fan motors using 

variable frequency drives. As a result, 

DOE considered copper rotor motors as 

a technology option. 

High-efficiency electric motors that 

drive evaporator and condenser fans can 

increase efficiency and reduce overall 

energy use in air-cooled CUAC and 

CUHP. EBM-Papst stated that highefficiency permanent magnet motors are 

available with ferrite magnets. EBMPapst indicated that external rotor 

permanent magnet motors with 

completely integrated drive electronics 

are available up to a 6 kilowatt (kW) (8 

horsepower) electrical input. EBM-Papst 

stated that versions with 7.5 kW and 12 

kW (10 horsepower and 15 horsepower), 

which DOE notes may be applicable for 

very large air-cooled CUAC and CUHP 

indoor fan motors, will become 

available in 2013 and 2014, 

respectively. In light of EBM-Papst’s 

information, DOE decided to consider 

higher efficiency permanent magnet 

motors as part of its list of technology 

options because they may reduce the 

energy consumption compared to 

motors currently used by manufacturers 

for CUAC and CUHP equipment. As 

discussed above, DOE’s analysis 

considered fan motors consistent with 

equipment available on the market. 

Direct-drive fans connect the fan 

blade/wheel directly to the motor shaft, 

thereby eliminating drive belt energy 

loss. EBM-Papst also commented that 

direct-drive fans prevent friction power 

losses that can be found in fans with 

mechanical transmission components 

even when these components are 

perfectly aligned with properlytightened high-quality belts. (EBMPapst, No. 16 at p. 2) DOE notes that 

certain air-cooled CUAC and CUHP 

currently available on the market 

already incorporate direct-drive fans in 

higher efficiency equipment. As a result, 

DOE proposes to keep direct-drive fans 

on the list of technologies. 

Another option to improve efficiency 

would be to increase the diameter of the 

outdoor fan, which reduces the 

discharge velocity of the air leaving the 

condenser fan. The energy associated 

with the discharge velocity is dissipated 

and cannot be recovered, hence, a lower 

discharge velocity reduces this loss and 

reduces fan power input. Regarding 

increasing the outdoor fan diameter, 

EBM-Papst commented that fan 

efficiency varies significantly with the 

fan’s duty point. EBM-Papst noted that 

many fans are selected with the 

operating point very far to the right of 

the point of peak efficiency (i.e., fans are 

designed for higher flow rates and are 

sized smaller than is optimal for 

efficiency) and that such selections 

yield lower first cost and smaller 

equipment size. EBM-Papst stated that 

fan selections that match the duty point 

closer with the fan’s peak efficiency are 

usually larger. Moreover, EBM-Papst 

commented that despite the potential 

increase in operational fan efficiency, a 

larger fan—while operating at lower 

rotational speed—can require a slightly 

higher motor torque, which results in 

the need for a larger motor frame size. 

(EBM-Papst, No. 16, p. 2) (Larger framesized motors provide higher horsepower 

and torque levels.) Lennox also 

commented that fan efficiency increases 

with fan diameter, but that cabinet size 

and shipping dimensions constrain the 

ability of manufacturers to increase fan 

diameters much beyond the current 

sizes. (Lennox, No. 6 at p. 2) 

With respect to these comments, DOE 

recognizes that fan efficiency can play a 

role in improving CUAC/CUHP 

efficiency. DOE also realizes that fan 

diameter size is limited by cabinet sizes 

and shipping dimensions. DOE has 

incorporated fan diameter and motor 

sizes consistent with existing equipment 

available on the market to ensure that 

components are appropriately sized. 

EBM-Papst suggested that DOE 

consider that company’s HyBlade® axial 

fan and AxiTop diffuser for axial fans as 

technology options for improving 

condenser fan efficiency. (EBM-Papst, 

No. 16 at p. 3) EBM-Papst stated that the 

HyBlade® axial fan uses a blade with a 

metal core for structural strength and 

motor heat dissipation, while using 

injection molded blade surfaces for 

advanced geometries that allow for 

optimized aerodynamic shape, resulting 

in increased efficiency compared to 

conventional fan blades. (EBM-Papst, 

No. 16 Appendix 4 at p. 2) According 

to EBM-Papst, the Axitop diffuser 

reduces discharge losses due to 

stripping and back-flow of air and, as a 

result, boosts the pressure increase of 

the fan. This increases the efficiency of 

the fan and allows the fan speed to be 

reduced (i.e., fan motors may run at 

lower power) while producing the same 

air volume, resulting in a decrease in 

energy use of the overall system. EBMPapst noted that in one customer 

application (at constant air volume), 

energy consumption was reduced by 27 

percent using this technology. (EBMPapst, No. 16 Appendix 3 at pp. 1–2) 

DOE notes that both of these 

technologies are patented by EBMPapst. DOE does not intend to consider 

energy conservation standards that 

would necessitate the use of any 

proprietary designs or patented 

technologies, which could allow a 

single manufacturer to monopolize the 

market. As a result, DOE is not 

considering EBM-Papst’s HyBlade®

axial fan and AxiTop diffuser as 

technology options in this NOPR. 

However, DOE notes that the proposed 

energy conservation standards would 

not prohibit the use of these 

technologies. 

EBM-Papst made several comments 

regarding indoor fan energy use and 

available design options to improve 

their efficiency—which, by extension, 

would improve overall CUAC/CUHP 

efficiency. EBM-Papst commented that 

unnecessary electrical consumption by 

indoor fans impacts the energy 

efficiency doubly, because of the 

additional heat load on the conditioned 

space. DOE recognizes that the heat load 

caused by the indoor motor may result 

in added energy consumption to cool 

the air heated by the motor. DOE notes 

that the energy modeling tool used in 

the engineering analyses is already 

designed to account for the heat load 

caused by the indoor fan motor as part 

of the overall system performance. 

An airfoil centrifugal fan is a type of 

fan that has blades shaped like air foils 

that are inclined such that the blade 

trailing edge is angled away from the 

rotation direction. The best airfoil fans 

can operate at efficiencies near 90 

percent.38 Utilizing this type of fan for 

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Communications, Computers, Intelligence, 

Surveillance, and Reconnaissance (C4isr) Facilities, 

HQUSACE/OCE Army Technical Manuals [Online 

Report]. DOE documented this report in the 

rulemaking docket as docket ID EERE–2013–BT– 

STD–0007–0019. 

indoor fan applications can improve the 

efficiency of the CUAC/CUHP system. 

Regarding specific indoor fan types, 

EBM-Papst stated that airfoil centrifugal 

fans are known for low sound. 

Additionally, EBM-Papst stated that the 

efficiency benefits of airfoil impellers 

over backward curved impellers (which 

have the tips of its blades inclined away 

from the direction of the airflow, 

enabling it to move air at higher 

pressures) should be examined closely. 

(EBM-Papst, No. 16 at p. 2) Although 

EBM-Papst did not provide details 

regarding the low sound feature, DOE 

recognizes that the airfoil centrifugal fan 

has less friction losses during operation, 

which produces less noise, and also 

results in lower power consumption. 

DOE acknowledges that 

manufacturers may offer features that 

are beneficial to consumers, like low 

sound fans, but do not impact 

efficiency. A number of manufacturers 

indicated that airfoil centrifugal fans 

and backward curved centrifugal fans 

(i.e., similar to airfoil fans, but they have 

simpler blades and cannot attain 

comparable efficiencies) may improve 

IEER due to lower fan power 

consumption. As a result, DOE proposes 

to include these fan types on the list of 

technology options. As discussed above, 

DOE considered technology options and 

designs that are generally consistent 

with existing equipment on the market. 

Additionally, as part of the reverse 

engineering analysis (see section 

IV.C.1), DOE considered fan curves and 

test data to account for the performance 

of the fans as part of the air-cooled 

CUAC and CUHP. 

EBM-Papst also provided the 

following comments on other fan and 

fan motor efficiency improving 

technologies: 

• Lower air-speed results in lower fan 

energy losses and EBM-Papst 

recommended imposing an upper limit 

for air speed inside of the commercial 

package equipment, referenced to air 

inlet area, the air outlet area, and/or air 

filter area. Air-speed of less than 2.5 

meters/second would be ideal. 

• Optimize the air path in the unit to 

minimize airflow impedance. 

• Optimize the fan selection in terms 

of fan diameter, and fan type (axial, 

centrifugal forward curved, centrifugal 

backward curved, cross flow, mixed 

flow) so that the fan duty point of its 

peak efficiency is: (1) Close to the actual 

fan duty point required by the 

commercial package equipment, and (2) 

that the chosen fan type enhances the 

air path in the unit. 

• Fine-tune the fan design (blade 

angle, number of blades, impeller 

width) so that the fan’s operational 

efficiency in the unit matches the fan 

peak efficiency exactly. 

• Some electronic motor speed 

controllers can cause structure-borne 

noise. A better controller potentially 

avoids the need for sound attenuation, 

which in turn, frees up the air path for 

increased air-side efficiency. 

• Improve the combination of fans 

with motors and speed controllers. A 

regulation harmonized with EN 

13053:2006+A1 would limit the 

maximum permitted electrical power 

consumption of the motorized fan. 

Equation (6) in EN 13053 determines a 

reference power input based on fan 

static pressure and on airflow. The 

resulting product is compared against a 

table which categorizes the equipment 

in class P1 (best) through class P7 

(worst). (EBM-Papst, No. 16 at p. 3) 

DOE agrees that reducing the air 

speed can reduce fan power 

consumption and included variable or 

staged air flow as a technology option. 

DOE also recognizes that optimizing fan 

type and fan design may decrease the 

fan power consumption and thus 

improve the efficiency of the air-cooled 

CUAC and CUHP. As a result, DOE is 

including these designs on the list of 

technology options. DOE also agrees 

that appropriately matching the fan with 

the fan motor improves efficiency. 

However, DOE proposes to evaluate aircooled CUAC and CUHP as a whole and 

does not propose to set separate 

performance requirements for the fan 

assembly. With regards to EBM-Papst’s 

comments concerning optimizing air 

paths and better motor controllers, 

DOE’s analyses considered air flow 

paths and control systems consistent 

with existing equipment available on 

the market. 

Electronic Expansion Valves 

Expansion valves are refrigerant 

metering devices that control the 

amount of refrigerant flowing to the 

evaporator coil, decreasing the 

temperature and pressure of the 

refrigerant, which creates the driving 

force to move heat out of the 

conditioned space and into the 

evaporator. Electronic expansion valves 

use an electronic control system and 

sensors that measure suction line 

temperature and pressure to maintain 

more precise control of superheat over 

a wide range of operating conditions 

and, as a result, may increase energy 

efficiency under varying load conditions 

when paired with modulating systems. 

Lennox stated that electronic 

expansion valves are very costly and not 

economically justified because they 

provide little full load benefit. (Lennox, 

No. 6 at p. 2) As explained in section 

III.A, DOE proposes to transition to 

IEER, a part load efficiency metric, and 

electronic expansion valves are 

beneficial for partial loads because they 

can precisely control the expansion 

process which leads to lower power 

consumption, and therefore, a higher 

IEER. DOE recognizes that that 

electronic expansion valves may be 

more expensive that other expansion 

devices, like capillary tubes or 

thermostatic expansion valves, but DOE 

already considers the costs of design 

options separately as part of the 

engineering analyses, which means that 

these devices may be screened out once 

costs are factored into the analysis. As 

a result, DOE is continuing to consider 

electronic expansion valves as a 

technology option for purposes of its 

engineering analysis. 

Part-Load Technology Options 

Variable-capacity or multiple-tandem 

compressors provide the ability to 

modulate the cooling capacity, allowing 

equipment to better match the cooling 

load than single speed compressors that 

can only operate by cycling on and off. 

The effectiveness of the heat exchangers 

is greater during operation with reduced 

mass flow at part load, thus reducing 

the condensing temperature and 

increasing the evaporating temperature 

required to transfer the load—this in 

turn reduces the compressor’s operating 

pressure ratio and its power input. As 

a result, using variable capacity or 

multiple-tandem compressors may 

improve the overall system efficiency by 

matching part-load operating conditions 

(and reducing energy consumption) 

more closely than units using single 

speed compressors. Variable speed fans/ 

motors can also improve CUAC and 

CUHP efficiency by varying fan speed to 

reduce air flow rate at part load. If the 

indoor/outdoor heat exchangers of a 

unit are served by a variable-capacity 

compressor or by a tandem compressor 

set, less air flow is needed to transfer 

the load. Overall system efficiency can 

be improved by reducing the indoor or 

outdoor air flow and reducing indoor/

outdoor fan power. 

DOE’s consideration of a shift to an 

IEER-based standard generated a 

number of comments. Ingersoll Rand 

commented that moving to an IEER 

metric will require manufacturers to 

optimize around part load performance, 

likely in the form of improved heat 

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transfer and airflow. (Ingersoll Rand, 

No. 10 at p. 3) Whole Building Systems, 

LLC, commented that DOE should 

include variable-capacity compressors, 

along with variable speed condenser 

and evaporator fans. It noted that these 

technologies are already being adopted 

by manufacturers. (Whole Building 

Systems, No. 4 at p. 1) Carrier added 

that compressor staging (multiple or 

variable capacity-compressors) and 

indoor and outdoor fan speed control 

would increase IEER efficiency, but 

would not impact EER. (Carrier, No. 7 

at p. 2) 

DOE agrees with Whole Building 

Systems, Carrier, and Ingersoll Rand 

that variable-capacity compressors, 

compressor staging, and variable speed 

fans improve IEER because they provide 

the ability to modulate the cooling 

capacity and reduce the overall system 

power consumption under part-load 

conditions. Based on DOE’s review of 

manufacturer equipment literature, 

these design elements are already being 

used in equipment currently available 

on the market. Accordingly, DOE 

included these design elements in the 

list of technology options considered for 

this NOPR. 

Modine commented that DOE should 

also consider the intelligent interactive 

modulation head pressure control, a 

technology option developed by 

Airedale International Air Conditioning 

(Airedale) to improve off peak load 

efficiencies. (Modine, No. 5 at pp. 1–2) 

DOE notes that Modine did not provide 

any details regarding this technology or 

the associated efficiency improvement. 

DOE also notes that Airedale was 

acquired by Modine in 2005. DOE does 

not consider proprietary technologies as 

part of its analyses and, as a result, did 

not consider the intelligent interactive 

modulation head pressure control 

developed by Airedale as a separate 

technology option. However, DOE 

recognizes that different equipment 

manufacturers may take different 

approaches for part-load operation 

control strategies. 

Technology Options That Do Not Impact 

IEER 

DOE laid out a number of technology 

options for comment that have no 

impact on IEER but that could have an 

overall impact on energy usage that 

would not be fully captured by the use 

of this proposed metric. Demand-control 

ventilation strategies monitor the indoor 

space occupancy and conditions (e.g., 

using CO2 sensors) to deliver the 

required ventilation as needed (based on 

building air quality requirements). In 

contrast, conventional systems that do 

not employ these strategies may provide 

fixed amounts of ventilated air based on 

assumed conditions. By comparison, 

demand-control ventilation strategies 

would more accurately control the 

amount of outdoor air required for 

ventilation that needs to be conditioned 

by the equipment. 

Lennox and Ingersoll Rand 

commented that demand-control 

ventilation strategy does not benefit 

either EER or IEER ratings. (Lennox, No. 

6 at p. 3; Ingersoll Rand, No. 10 at p. 3) 

Carrier also commented that many units 

on the market have capabilities for 

demand management, and with the 

development of smart meters and the 

smart grid, there are more effective ways 

to control peak power for this class of 

equipment than the technology options 

identified by DOE. Carrier stated that 

these features are not captured in EER 

or IEER metrics. (Carrier, No. 7 at p. 2) 

Lentz Engineering Associates, Inc. 

commented that DOE should consider a 

technology option where the primary 

function of the air handling systems is 

to efficiently process or manage 

ventilation and where the primary 

heating and cooling plants rely on 

recovered energy instead of expending 

new energy assets. Lentz Engineering 

stated that this can result in energy use 

reductions in HVAC systems on the 

order of 85 to 90 percent. (Lentz, No. 3 

at p. 1) 

DOE also considered the 

implementation of a high-side solenoid 

valve. A high-side solenoid valve (i.e., a 

solenoid valve located in the highpressure-refrigerant line) and a 

discharge line check valve (i.e., a check 

valve located in the compressor 

discharge line) can be installed in a 

refrigeration system to minimize 

pressure equalization between the highpressure and low-pressure sides. 

Lennox commented that these valves do 

not benefit either EER or IEER ratings, 

but no further details were provided in 

their comments. (Lennox, No. 6 at p. 3) 

Another option could also be used. 

Heat pipes are used in hot humid 

climates to increase dehumidification. 

Refrigerant inside the heat pipe precools incoming supply air by absorbing 

the heat from it. The evaporator cools 

the supply air further, and is able to 

extract more water vapor than a 

conventional evaporator would. After 

the refrigerant in the tubes changes into 

a vapor, it flows to the condensing 

section at the other end of the system, 

releasing its heat and flowing back to 

the evaporator end of the pipe to begin 

the cycle again. Lennox also commented 

that heat-pipes for high latent loads do 

not benefit either EER or IEER ratings. 

(Lennox, No. 6 at p. 3) 

In addition to the items describe 

above, AAON noted several other 

technologies that DOE did not initially 

consider that can improve efficiency. 

These technologies include capacity 

modulation (i.e., modulate system 

capacity output for part load conditions 

by various means to reduce overall 

energy consumption), economizers (i.e., 

an automatic system that enables a 

cooling system to supply outdoor air to 

reduce or eliminate the need for 

mechanical cooling during mild or cold 

weather), heat recovery (i.e., a process 

that preconditions outdoor air entering 

the equipment through direct or indirect 

thermal and/or moisture exchange with 

the exhaust air) and energy efficient 

control sequences (e.g., single zone 

variable-air-volume) are outside the 

scope of AHRI Standard 340/360–2007 

and beyond the lab facilities capabilities 

to test. AAON added that although 

energy can be saved annually by using 

any one of these options, the full load 

EER ratings would be decreased due to 

the higher pressure drop incurred with 

many of these features. AAON stated 

that rating system modifications exist to 

account for the energy savings of some 

of these technologies, such as those 

contained in AHRI Guideline V for 

energy recovery systems. (AAON, No. 8 

at p. 3) 

DOE recognizes that technologies 

such as demand-control strategies, 

economizers, energy recovery, high-side 

solenoid valves or discharge line checkvalves and heat pipes may result in 

annual building energy savings. 

However, DOE is not aware of any data 

showing that these technologies 

improve IEER based on the current DOE 

test procedure. As a result, DOE is not 

proposing to include these technologies 

in its analyses. However, DOE notes that 

the IEER metric for this equipment 

already accounts for both capacity 

modulation and energy efficient control 

sequences. In addition, based on a 

review of equipment literature, DOE 

notes that both capacity modulation and 

energy efficient control sequences are 

used to improve part-load performance 

for this equipment. As a result, DOE 

included these technology options as 

part of the analyses. 

Based on manufacturer comments and 

DOE’s review of equipment literature, 

DOE is declining to include low 

pressure drop filters and air leakage 

paths within the unit from the list of 

technology options. Comments from 

several manufacturers during 

manufacturer interviews and public 

meetings held as part of the Commercial 

HVAC, Water Heating, and Refrigeration 

Certification Working Group 

(Commercial Certification Working 

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39ASHRAE Standard 52.2–2007, ‘‘Method of 

Testing General Ventilation Air-Cleaning Devices 

for Removal Efficiency by Particle Size,’’ establishes 

the MERV rating, which is the standard comparison 

of the efficiency of an air filter, ranging from 1 (least 

efficient) to 16 (most efficient), and measures a 

filter’s ability to remove particles from 0.3 to 10 

microns in size. 

Group), indicated that most 

manufacturers test their systems 

without filters installed or use 

disposable filters that produce minimal 

pressure drops when used. 

Additionally, the filter type used in a 

system is a feature specified by the 

customer based on the needs of the 

installation. For example, a unit 

installed in a hospital will require filters 

with a high Minimum Efficiency 

Reporting Value (MERV) rating,39 which 

may cause an increase in pressure drop 

depending on the density of the filter 

material and an accompanying increase 

in fan power and energy use of the unit. 

DOE proposes to remove air leakage 

paths from the list of technology options 

because several manufacturers indicated 

during interviews that air leakage paths 

are already eliminated during design of 

air-cooled CUAC and CUHP. 

Based on these assertions and 

supplemental follow-up work 

performed, DOE considered the 

following technology options listed in 

Table IV.3 in formulating its proposed 

standards: 

TABLE IV.3—PROPOSED TECHNOLOGY OPTIONS

Heat transfer improvements: 

• Electro-hydrodynamic enhancement. 

Alternative refrigerants. 

Condenser and evaporator fan and fan motor improvements: 

• Larger fan diameters. 

• More efficient fan blades (e.g., air foil centrifugal evaporator fans, backward-cured centrifugal evaporator fans, high efficiency propeller 

condenser fans). 

• High efficiency motors (e.g., copper rotor motor, high efficiency induction, permanent magnet, electronically commutated). 

• Variable speed fans/motors. 

Larger heat exchangers. 

Microchannel heat exchangers. 

Compressor Improvements: 

• High efficiency compressors. 

• Multiple compressor staging. 

• Multiple-tandem or variable-capacity compressors. 

Thermostatic expansion valves. 

Electronic expansion valves. 

Subcoolers. 

Reduced indoor fan belt loss: 

• Synchronous (toothed) belts. 

• Direct-drive fans. 

Issue 4: DOE requests comment and 

data regarding additional design options 

or variants of the considered design 

options that can increase the range of 

considered efficiency improvements, 

including design options that may not 

yet be found on the market. 

B. Screening Analysis 

After DOE identified the technologies 

that might improve the energy efficiency 

of electric motors, DOE conducted a 

screening analysis. The purpose of the 

screening analysis is to determine 

which options to consider further and 

which to screen out. DOE consulted 

with industry, technical experts, and 

other interested parties in developing a 

list of design options. DOE then applied 

the following set of screening criteria to 

determine which design options are 

unsuitable for further consideration in 

the rulemaking: 

• Technological Feasibility: DOE will 

consider only those technologies 

incorporated in commercial equipment 

or in working prototypes to be 

technologically feasible. 

• Practicability to Manufacture, 

Install, and Service: If mass production 

of a technology in commercial 

equipment and reliable installation and 

servicing of the technology could be 

achieved on the scale necessary to serve 

the relevant market at the time of the 

effective date of the standard, then DOE 

will consider that technology 

practicable to manufacture, install, and 

service. 

• Adverse Impacts on Equipment 

Utility or Equipment Availability: DOE 

will not further consider a technology if 

DOE determines it will have a 

significant adverse impact on the utility 

of the equipment to significant 

subgroups of customers. DOE will also 

not further consider a technology that 

will result in the unavailability of any 

covered equipment type with 

performance characteristics (including 

reliability), features, sizes, capacities, 

and volumes that are substantially the 

same as equipment generally available 

in the United States at the time. 

• Adverse Impacts on Health or 

Safety: DOE will not further consider a 

technology if DOE determines that the 

technology will have significant adverse 

impacts on health or safety. 

Technologies that pass through the 

screening analysis are referred to as 

‘‘design options’’ in the engineering 

analysis. Details of the screening 

analysis are in chapter 4 of the NOPR 

TSD. In view of the above factors, DOE 

screened out the following design 

options. 

Electro-Hydrodynamic Enhanced Heat 

Transfer 

Electro-hydrodynamic enhancement 

of heat transfer increases the net heat 

transfer coefficient by applying a highvoltage electrostatic potential field 

across a heat transfer fluid to destabilize 

the thermal boundary layer and incite 

fluid mixing. The improved heat 

transfer of the evaporator and condenser 

coils may improve a given system’s 

overall efficiency. DOE notes, however, 

that this technology is still in the 

research stage. In response to the RFI, 

Lennox commented that locating an 

electrode between each of the hundreds/ 

thousands of heat exchanger fins (which 

would be the likely method for applying 

this option) has not been adequately 

demonstrated for commercial 

deployment. (Lennox, No. 6 at p. 2) 

Although the technique has been 

shown to improve heat transfer in 

laboratory testing, DOE is not aware of 

any commercially available equipment 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

58970 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

40On July 9, 2014, EPA proposed to list certain 

hydrocarbons and R–32 for residential selfcontained A/C appliances as acceptable subject to 

use conditions to address safety concerns (See 79 

FR 38811). EPA is also evaluating new refrigerants 

for other A/C applications, including commercial 

A/C. Additional information regarding EPA’s SNAP 

Program is available online at: http://www.epa.gov/ 

ozone/snap/. 

or working prototypes that use electrohydrodynamic heat transfer. As a result, 

DOE does not believe at this time that 

this option meets the screening criterion 

of technological feasibility. In addition, 

DOE agrees with Lennox that this 

technology has not been adequately 

demonstrated for commercial 

deployment and, as a result, does not 

meet the criterion of practicability to 

install and service on a scale necessary 

to serve the relevant market at the time 

of the compliance date of a new 

standard. For these reasons, DOE did 

not consider electro-hydrodynamic heat 

transfer further in the NOPR analyses. 

Alternative Refrigerants 

DOE considered ammonia, carbon 

dioxide, and various hydrocarbons 

(such as propane and isobutane) as 

alternative refrigerants to those that are 

currently in use, such as R–410A. In 

response to the February 2013 RFI, 

Lennox stated that virtually all 

equipment is designed with R–410A as 

the refrigerant, and that because of the 

lengthy qualification process to develop 

a new refrigerant and the components 

that would need to be redesigned to use 

it, it is not reasonable to expect a new 

refrigerant in the timeframe for new 

energy conservation standards. (Lennox, 

No. 6 at p. 2) DOE notes that safety 

concerns need to be taken into 

consideration when using ammonia and 

hydrocarbons in air-conditioning 

systems. EPA created the Significant 

New Alternatives Policy (SNAP) 

Program to evaluate alternatives to 

ozone-depleting substances. Substitutes 

are reviewed on the basis of ozone 

depletion potential, global warming 

potential, toxicity, flammability, and 

exposure potential. DOE notes that 

ammonia (in vapor compression cycles), 

carbon dioxide, and hydrocarbons have 

been approved or are being considered 

under SNAP for certain uses, but these 

or other low GWP alternatives are not 

yet listed as acceptable substitutes for 

this equipment.40 DOE is also not aware 

of any other more efficient refrigerant 

options that are SNAP-approved. 

Because these alternative refrigerants 

have not yet been approved for this 

equipment, DOE did not consider 

alternate refrigerants for further 

analysis. 

Sub-Coolers 

A sub-cooler is a device located 

between the condenser coil outlet and 

the expansion device inlet used to 

further cool the refrigerant exiting the 

condenser in order to achieve a higher 

cooling/heating capacity for a unit. In 

response to the RFI, Lennox added that 

sub-coolers do not provide a benefit at 

comfort air conditioning operating 

conditions. (Lennox, No. 6 at p. 3) DOE 

notes that air-cooled CUAC and CUHP 

units typically sub-cool the refrigerant 

in the condensing coil (by further 

decreasing the temperature of the 

refrigerant). DOE also notes that 

additional mechanical sub-cooling from 

smaller, secondary vapor-compression 

circuits has not been incorporated in 

commercial equipment or in working 

prototypes. As a result, DOE does not 

believe sub-cooling meets the criterion 

of technological feasibility and did not 

consider it for further analysis. 

Based on the screening analysis, DOE 

considered the design options listed in 

Table IV.4. 

TABLE IV.4—DESIGN OPTIONS RETAINED FOR ENGINEERING ANALYSIS

Condenser and evaporator fan and fan motor improvements: 

• Larger fan diameters. 

• More efficient fan blades (e.g., air foil centrifugal evaporator fans, backward-cured centrifugal evaporator fans, high efficiency propeller 

condenser fans). 

• High efficiency motors (e.g., copper rotor motor, high efficiency induction, permanent magnet, electronically commutated). 

• Variable speed fans/motors. 

Larger heat exchangers. 

Microchannel heat exchangers. 

Compressor Improvements: 

• High efficiency compressors. 

• Multiple compressor staging. 

• Multiple- or variable-capacity compressors. 

Thermostatic expansion valves. 

Electronic expansion valves. 

Reduced indoor fan belt loss: 

• Synchronous (toothed) belts. 

• Direct-drive fans. 

C. Engineering Analysis 

The engineering analysis estimates 

the cost-efficiency relationship of 

equipment at different levels of 

increased energy efficiency. This 

relationship serves as the basis for the 

cost-benefit calculations for commercial 

customers, manufacturers, and the 

Nation. In determining the costefficiency relationship, DOE estimates 

the increase in manufacturer cost 

associated with increasing the efficiency 

of equipment above the baseline up to 

the maximum technologically feasible 

(‘‘max-tech’’) efficiency level for each 

equipment class. 

1. Methodology 

DOE has identified three basic 

methods for generating manufacturing 

costs: (1) The design-option approach, 

which provides the incremental costs of 

adding design options to a baseline 

model that will improve its efficiency 

(i.e., lower its energy use); (2) the 

efficiency-level approach, which 

provides the incremental costs of 

moving to higher energy efficiency 

levels, without regard to the particular 

design option(s) used to achieve such 

increases; and (3) the reverseengineering (or cost-assessment) 

approach, which provides ‘‘bottom-up’’ 

manufacturing cost assessments for 

achieving various levels of increased 

efficiency, based on teardown analyses 

(or physical teardowns) providing 

detailed data on costs for parts and 

material, labor, shipping/packaging, and 

investment for models that operate at 

particular efficiency levels. A 

supplementary method called a catalog 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 58971 

41ASHRAE Standard 189.1 provides minimum 

requirements for the siting, design, construction, 

and plan for operation of high-performance green 

buildings. Available online at: https:// 

www.ashrae.org/resources-publications/bookstore/ 

standard-189-1. 

teardown uses published manufacturer 

catalogs and supplementary component 

data to estimate the major physical 

differences between a piece of 

equipment that has been physically 

disassembled and another piece of 

similar equipment for which catalog 

data are available to determine the cost 

of the latter equipment. 

In the RFI, DOE stated that in order 

to create the cost-efficiency relationship, 

it anticipated having to structure its 

engineering analysis using the reverseengineering approach, including 

physical and catalog teardowns. DOE 

requested comments on using a reverse 

engineering approach supplemented 

with catalog teardowns and comments 

on what the appropriate representative 

capacities would be for each equipment 

class. 78 FR 7300. 

AAON commented that it is 

inappropriate and unethical for DOE to 

use proprietary information and trade 

secrets provided during manufacturer 

interviews to reverse engineer 

equipment supplemented by the catalog 

teardowns. AAON stated that disclosing 

trade secrets in a public forum, 

accessible worldwide, undermines U.S. 

manufacturing and damages the free 

enterprise system. (AAON, No. 8 at p. 4) 

DOE notes that it does not publicly 

disclose proprietary information 

obtained from individual 

manufacturers. Instead, as part of the 

manufacturer interviews, DOE 

aggregates all manufacturer responses to 

prevent disclosing of proprietary 

information and trade secrets. 

AAON commented that DOE’s 

methodology is flawed because all 

models are weighted equally. AAON 

indicated that models with higher 

efficiency and cost are sold in much 

lower quantities than models with lower 

efficiency and cost. AAON added that 

models with higher efficiency and cost 

may not be economically justified and 

are only sold to consumers that want the 

highest efficiency regardless of 

economic justification. (AAON, No. 8 at 

p. 3) DOE intends to conduct a full 

analysis to determine the economic 

justification of higher efficiency levels, 

including developing incremental 

manufacturing costs for higher 

efficiency equipment based on energy 

modeling, reverse engineering analyses, 

and catalog teardowns. Although 

manufacturers may currently sell higher 

efficiency models at lower quantities, 

DOE’s analysis considers the 

incremental manufacturing costs if 

energy conservation standards are set at 

a particular efficiency level and assumes 

that market share will shift to the new 

standard level. 

Carrier commented that reverse 

engineering of a few selected samples 

will not provide an accurate picture of 

manufacturing costs, which depend on 

volume, tooling approach (dedicated 

versus flexible) and assembly processes 

and procedures for which reverse 

engineering will not provide insight. 

Carrier recommended that DOE should 

work with AHRI and industry to obtain 

costs using a blind survey, with each 

manufacturer providing estimates for 

the cost increases related to the 

proposed standards. (Carrier, No. 7 at p. 

3) DOE notes that it supplemented its 

reverse engineering analyses with 

manufacturer interviews and solicited 

feedback on the volume, tooling, and 

processes used to manufacture 

equipment and the manufacturing costs 

required to meet each efficiency level 

for each equipment class. As a result, 

DOE believes that the manufacturing 

cost-efficiency results from the 

engineering analyses are sufficiently 

representative of the manufacturing 

processes used for this equipment. 

Ingersoll Rand commented that DOE 

should analyze the following categories 

to adequately represent variation in 

equipment types: (1) 7.5-ton cooling and 

heat pump, (2) 15-ton cooling and heat 

pump, (3) 40-ton cooling only. (Ingersoll 

Rand, No. 10 at p. 3) Lennox added that 

DOE should select equipment from 

manufacturers that have equipment 

with baseline and higher efficiency in 

the same platform. (Lennox, No. 6 at p. 

3) 

For this NOPR, DOE conducted the 

engineering analyses using the reverseengineering approach and analyzed 

three specific capacities to represent 

each of the three cooling capacity 

categories (i.e., small, large, and very 

large). Based on a review of 

manufacturer equipment offerings and 

information obtained from manufacturer 

interviews, DOE selected representative 

capacities of 90,000 Btu/h (7.5 tons) for 

the ≥65,000 to <135,000 Btu/h capacity 

range, 180,000 Btu/h (15 tons) for the 

≥135,000 to <240,000 Btu/h capacity 

range, and 360,000 Btu/h (30 tons) for 

the ≥240,000 to <760,000 Btu/h capacity 

range. DOE noted in the 2004 ANOPR 

that 7.5 tons and 15 tons represent 

volume shipment points in their 

respective capacity range. 69 FR 45469. 

These capacities are near the center of 

their respective equipment class 

capacity ranges. Additionally, DOE 

interviewed several equipment 

manufacturers as part of the current 

rulemaking and found that the majority 

of manufacturers interviewed agreed 

that the 7.5-ton, 15-ton, and 30-ton 

capacities adequately represent the 

three equipment class capacity ranges. 

Where feasible, DOE selected models 

for reverse engineering with low and 

high efficiencies from a given 

manufacturer that are built on the same 

platform. DOE also supplemented the 

teardown analysis by conducting catalog 

teardowns for equipment spanning the 

full range of capacities and efficiencies 

from all manufacturers selling 

equipment in the United States. 

2. Baseline Efficiency Levels 

The baseline model is used as a 

reference point for each equipment class 

in the engineering analysis and the lifecycle cost and payback-period analyses. 

Typically, DOE would consider 

equipment that just meets the minimum 

energy conservation standard as 

baseline equipment. However, as 

discussed in section III.A, DOE is 

proposing to replace the current cooling 

performance energy efficiency 

descriptor, EER, with IEER, and a single 

EER level can correspond to a range of 

IEERs. As a result, DOE must establish 

a baseline IEER for each equipment 

class. As part of the RFI, DOE requested 

comment on approaches that it should 

consider when determining a baseline 

IEER as well as an appropriate baseline 

IEER for each equipment class. 78 FR 

7300–7301 (Feb. 1, 2013). 

Modine commented that DOE should 

continue to use ASHRAE Standard 90.1 

and ASHRAE Standard 189.1, 

‘‘Standard for the Design of HighPerformance Green Buildings,’’ 

(ASHRAE Standard 189.1) 41 for 

establishing baseline IEER levels 

because current technology makes it 

readily possible to achieve the ASHRAE 

Standard 189.1 minimum IEER 

standards. (Modine, No. 5 at p. 2) The 

IEER levels specified in ASHRAE 

Standard 189.1 are 0.2 to 1.1 IEER 

higher than the ASHRAE Standard 90.1 

levels. 

As discussed in section II.A, DOE is 

typically obligated either to adopt those 

standards developed by ASHRAE or to 

adopt levels more stringent than the 

ASHRAE levels if there is clear and 

convincing evidence in support of doing 

so. (42 U.S.C. 6313(a)(6)(A)) DOE notes 

that ASHRAE Standard 90.1–2010 

specifies minimum efficiency 

requirements using both the EER and 

IEER metrics. As discussed in the RFI, 

DOE evaluated the relationship between 

EER and IEER by considering models 

that are rated at the current DOE 

standard levels based on the EER metric 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

58972 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

42The Draft Addendum CL was the latest 

available version at the time DOE conducted the 

analyses for today’s NOPR. DOE notes that 

ASHRAE has more recently finalized Addendum 

CL, with minor modifications to the IEER levels for 

large air-cooled CUAC and CUHP (i.e., cooling 

capacity of >=135,000 Btu/h and <240,000 Btu/h). 

43The CEE Commercial Unitary Air Conditioner 

and Heat Pump Specification can be found online 

at: http://library.cee1.org/content/cee-commercialunitary-ac-and-hp-specification-0. DOE notes that 

the CEE Tier 2 levels represent an 18-percent to 23- 

percent increase in IEER over the proposed baseline 

levels. 

for each equipment class (as presented 

in section II.B.1). DOE then analyzed the 

distribution of corresponding rated IEER 

values for each equipment class. DOE 

notes that the lowest IEER values 

associated with the current DOE 

standards for EER generally correspond 

with the ASHRAE Standard 90.1–2010 

minimum efficiency requirements. 78 

FR 7296, 7299 (Feb. 1, 2013); EERE– 

2013–BT–STD–0007–0001. Based on 

this evaluation, because DOE is 

considering energy conservation 

standards based on the IEER metric, 

DOE proposes to use the ASHRAE 

Standard 90.1–2010 minimum IEER 

requirements to characterize the 

baseline cooling efficiency for each 

equipment class. DOE also notes that 

equipment is available on the market 

that is at or near the ASHRAE Standard 

90.1–2010 minimum IEER requirements. 

As a result, DOE is not considering 

higher IEER levels for the baseline. 

For CUHP, DOE is considering 

heating efficiency standards based on 

the COP metric. As discussed in section 

II.B.1, EPAct 2005 established minimum 

COP levels for small, large, and very 

large air-cooled CUHP, which DOE 

codified in a final rule on October 18, 

2005. 70 FR 60407. DOE proposes to use 

these current COP standard levels to 

characterize the baseline heating 

efficiency for each equipment class. 

The baseline efficiency levels for each 

equipment class are presented below in 

Table IV.5. 

TABLE IV.5—BASELINE EFFICIENCY LEVELS

Equipment type Heating type Baseline efficiency 

level 

Small Commercial Packaged AC and HP (AirCooled)—≥65,000 Btu/h and <135,000 Btu/h Cooling Capacity.AC Electric Resistance Heating or No Heating ...............

All Other Types of Heating ........................................

11.4 IEER. 

11.2 IEER. 

HP Electric Resistance Heating or No Heating ............... 11.2 IEER, 

3.3 COP. 

All Other Types of Heating ........................................ 11.0 IEER, 

3.3 COP. 

Large Commercial Packaged AC and HP (AirCooled)—≥135,000 Btu/h and <240,000 Btu/h 

Cooling Capacity.

AC Electric Resistance Heating or No Heating ...............

All Other Types of Heating ........................................

11.2 IEER. 

11.0 IEER. 

HP Electric Resistance Heating or No Heating ............... 10.7 IEER, 

3.2 COP. 

All Other Types of Heating ........................................ 10.5 IEER, 

3.2 COP. 

Very Large Commercial Packaged AC and HP (AirCooled)—≥240,000 Btu/h and <760,000 Btu/h 

Cooling Capacity.

AC Electric Resistance Heating or No Heating ...............

All Other Types of Heating ........................................

10.1 IEER. 

9.9 IEER. 

HP Electric Resistance Heating or No Heating ............... 9.6 IEER, 

3.2 COP. 

All Other Types of Heating ........................................ 9.4 IEER, 

3.2 COP. 

3. Incremental Efficiency Levels 

For each equipment class, DOE 

analyzes several efficiency levels and 

determines the incremental cost at each 

of these levels. For this NOPR, DOE 

developed efficiency levels based on a 

review of industry standards and 

available equipment. For efficiency 

level 1, DOE used the IEER levels 

specified in Draft Addendum CL.42 For 

the higher efficiency levels, DOE 

initially determined the levels for CUAC 

equipment classes with electric 

resistance heating or no heating based 

on the range of efficiency levels 

associated with equipment listed in the 

AHRI certification database and the 

California Energy Commission’s (CEC) 

database. DOE evaluated the full range 

of capacities for the small, large, and 

very large equipment classes with a 

specific focus on 7.5-ton, 15-ton, and 

30-ton as the representative cooling 

capacities. DOE chose efficiency levels 

for CUAC with all other types of heating 

equal to the efficiency levels for 

equipment with electric resistance 

heating or no heating, minus the 

differences in the IEER specifications for 

these pairs of equipment classes 

prescribed in the Draft Addendum CL. 

DOE believes these decreases in IEER 

appropriately reflect the additional 

power required for furnace pressure 

drop. 

Similarly, for the CUHP equipment 

classes, DOE developed cooling mode 

efficiency levels equal to the CUAC 

efficiency levels minus the difference in 

IEER specifications for these two 

equipment types prescribed in the Draft 

Addendum CL. DOE believes that these 

decreases in IEER are representative of 

the efficiency differences that occur due 

to losses from the reversing valve and 

coil circuitry required in heat pumps for 

both heating and cooling operation. 

As part of the RFI, DOE requested 

information on the max-tech efficiency 

levels achievable in the market. 78 FR 

7301. The Joint Efficiency Advocates 

commented that, based on models in the 

AHRI certification database, the 

maximum-available IEER levels are 25 

to 82 percent higher than the ASHRAE 

Standard 90.1–2010 levels depending 

on equipment category. The Joint 

Efficiency Advocates stated that the 

maximum-available efficiency levels 

may not represent the maximum 

technologically feasible levels since 

there may be technology options that 

can improve efficiency that have not 

been employed in the most-efficient 

models currently available. (Joint 

Efficiency Advocates, No. 11 at p. 2) 

AAON commented that the max-tech 

efficiency levels can be assumed to be 

slightly above the current CEE Tier 2 

levels.43 (AAON, No. 8 at p. 4) 

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Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 58973 

DOE notes that its maximum-available 

efficiency levels rely on the 

performance of recently introduced 

models. DOE evaluated available 

equipment literature and energy use 

information on these maximumavailable efficiency models and 

conducted energy modeling to 

determine the feasibility of achieving 

these efficiency levels. For the ≥65,000 

Btu/h and <135,000 Btu/h capacity 

CUAC with electric resistance heating or 

no heating equipment classes, DOE 

noted, based on its review of the AHRI 

certification and CEC equipment 

databases, that the maximum-available 

unit was rated at 20.9 IEER. However, 

sufficient information allowing 

correlation of incremental efficiency 

gains with specific design options and 

incremental manufacturing costs was 

not available to properly evaluate this 

unit. DOE also notes that a different 

manufacturer currently offers a 7.5-ton 

model rated at 19.9 IEER and a 10-ton 

model rated at 20.8 IEER. DOE notes 

that there is also uncertainty regarding 

the way the design differences 

contribute to the added efficiency of the 

10-ton model, making it difficult to 

accurately estimate the incremental cost 

associated with this efficiency gain. As 

a result, DOE is proposing to use 19.9 

IEER as the maximum-available 

efficiency level representative of this 

equipment class. DOE is not aware of 

data showing that energy efficiency can 

be increased beyond these levels. As a 

result, DOE is proposing to use the 

maximum-available efficiency levels as 

the max-tech levels for the NOPR 

analyses. 

For the CUHP equipment classes, 

DOE is proposing heating efficiency 

levels based on a variation of COP with 

IEER. In the 2004 ANOPR, DOE 

proposed to address the energy 

efficiency of air-cooled CUHP by 

developing functions relating COP to 

EER. 69 FR 45468. DOE also noted that 

this method was also used by industry 

to establish minimum performance 

requirements for ASHRAE Standard 

90.1–1999. Id. AHRI supplied the 

ASHRAE Standard 90.1–1999 

committee with curves relating the COP 

as a function of EER. Using this 

information, the committee then set the 

minimum COP levels to the COP 

corresponding to the selected minimum 

EER level. Id. DOE stated in the 

February 2013 RFI that since this 

method was generally accepted by 

industry and interested parties involved 

in the development of ASHRAE 

Standard 90.1–1999, it was considering 

a similar approach for this rulemaking. 

DOE indicated that if it transitions to 

IEER as the cooling mode energy 

efficiency descriptor, DOE may establish 

minimum COP levels based on the 

variation of COP with IEER. As part of 

the RFI, DOE requested information on 

issues related to using IEER as the 

cooling performance metric when 

developing a correlation between COP 

and IEER. 78 FR 7301. 

AAON, Carrier, Ingersoll Rand, and 

Lennox commented that there is no 

direct correlation between the part-load 

metric, IEER, and the full load metric, 

COP. (AAON, No. 8 at p. 4; Carrier, No. 

7 at p. 4; Ingersoll Rand, No. 6 at p. 4; 

Lennox, No. 6 at p. 3) Lennox indicated 

that in commercial applications, 

CUHP’s typically operate in full load 

heating mode and cycle the auxiliary 

heat on and off because heat pump 

capacity alone is inadequate to meet the 

building load. Lennox stated that a 

higher IEER does not translate to a 

higher COP because design techniques 

that improve part load IEER 

performance do not improve COP. 

(Lennox, No. 6 at p. 3) Carrier noted 

that, based on information from the 

AHRI certification database, units with 

the same COP have significantly 

different IEER values. Carrier added that 

heating efficiency is much less a factor 

for overall energy usage than cooling 

efficiency because commercial 

equipment operates for many more 

hours in cooling mode than heating 

mode, indicating that internal building 

loads lead to high cooling loads and 

cooling energy use and significantly less 

heating energy use. Carrier stated that a 

separate analysis should be used for 

developing heating COP levels and that 

this process be completed through a 

consensus process working with AHRI 

and the manufacturers. (Carrier, No. 7 at 

pp. 3–4) 

To determine COP efficiency levels, 

DOE evaluated AHRI and CEC data for 

small, large, and very large air-cooled 

CUHP units with electric resistance heat 

or no heat to analyze the relationship 

between COP and both IEER and EER. 

DOE’s review of data showed that the 

correlations between COP and IEER 

using linear regressions are no less 

strong than the correlations between 

COP and EER for each cooling capacity 

range. Details of this evaluation can be 

found in chapter 5 of the NOPR TSD. 

Based on this evaluation, DOE is 

proposing to use the functions relating 

COP to IEER based on AHRI and CEC 

data to establish COP efficiency levels. 

For each CUHP equipment class, DOE 

selected COP levels corresponding to 

each incremental IEER level. 

The efficiency levels for each 

equipment class that DOE considered 

for the NOPR analyses are presented in 

Table IV.6. 

TABLE IV.6—INCREMENTAL EFFICIENCY LEVELS

Efficiency levels 

Equipment type Heating type Baseline EL1 EL2 EL3 EL4 

(Max-Tech) 

Small Commercial Packaged AC and HP (AirCooled)—≥65,000 Btu/

h and <135,000 Btu/h 

Cooling Capacity.

AC Electric Resistance Heating or No Heating.11.4 IEER .... 12.9 IEER .... 14 IEER ....... 14.8 IEER .... 19.9 IEER. 

All Other Types of Heating.11.2 IEER .... 12.7 IEER .... 13.8 IEER .... 14.6 IEER .... 19.7 IEER. 

HP Electric Resistance Heating or No Heating.11.2 IEER, ...

3.3 COP .......

12.2 IEER, ...

3.3 COP .......

13.3 IEER, ...

3.4 COP .......

14.1 IEER, ...

3.5 COP .......

19.2 IEER, 

3.7 COP. 

All Other Types of Heating.11.0 IEER, ...

3.3 COP .......

12 IEER, ......

3.3 COP .......

13.1 IEER, ...

3.4 COP .......

13.9 IEER, ...

3.4 COP .......

19.0 IEER, 

3.6 COP. 

Large Commercial Packaged AC and HP (AirCooled)—≥135,000 

Btu/h and <240,000 

Btu/h Cooling Capacity.

AC Electric Resistance Heating or No Heating.11.2 IEER .... 12.2 IEER .... 13.2 IEER .... 14.2 IEER .... 18.4 IEER. 

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TABLE IV.6—INCREMENTAL EFFICIENCY LEVELS—Continued 

All Other Types of Heating.11.0 IEER .... 12.0 IEER .... 13.0 IEER .... 14.0 IEER .... 18.2 IEER. 

HP Electric Resistance Heating or No Heating.10.7 IEER, ...

3.2 COP .......

11.4 IEER, ...

3.2 COP .......

12.4 IEER, ...

3.3 COP .......

13.4 IEER, ...

3.3 COP .......

17.6 IEER, 

3.3 COP. 

All Other Types of Heating.10.5 IEER, ...

3.2 COP .......

11.2 IEER, ...

3.2 COP .......

12.2 IEER, ...

3.3 COP .......

13.2 IEER, ...

3.3 COP .......

17.4 IEER, 

3.3 COP. 

Very Large Commercial 

Packaged AC and HP 

(Air-Cooled)—≥240,000 

Btu/h and <760,000 

Btu/h Cooling Capacity.

AC Electric Resistance Heating or No Heating.10.1 IEER .... 11.6 IEER .... 12.5 IEER .... 13.5 IEER .... 15.5 IEER. 

All Other Types of Heating.9.9 IEER ...... 11.4 IEER .... 12.3 IEER .... 13.3 IEER .... 15.3 IEER. 

HP Electric Resistance Heating or No Heating.9.6 IEER, .....

3.2 COP .......

10.6 IEER, ...

3.2 COP .......

11.5 IEER, ...

3.2 COP .......

12.5 IEER, ...

3.2 COP .......

14.5 IEER, 

3.2 COP. 

All Other Types of Heating.9.4 IEER, .....

3.2 COP .......

10.4 IEER, ...

3.2 COP .......

11.3 IEER, ...

3.2 COP .......

12.3 IEER, ...

3.2 COP .......

14.3 IEER, 

3.2 COP. 

Issue 5: DOE seeks comment on the 

incremental and max-tech efficiency 

levels identified for the analyses, 

including whether the efficiency levels 

identified by DOE can be achieved using 

the technologies screened-in during the 

screening analysis (see section IV.B), 

and whether higher efficiencies are 

achievable using technologies that were 

screened-in during the screening 

analysis. Also, DOE seeks comment on 

the approach of extrapolating the 

efficiency levels from the small, large, 

and very large CUAC with electric 

resistance heating or no heating 

equipment classes to the remaining 

equipment classes using the IEER 

differentials in ASHRAE Standard 90.1– 

2010 draft addendum CL. In addition, 

input and data on the approach for 

determining the COP levels for the heat 

pump equipment classes using the 

relationship between IEER and COP. 

4. Equipment Testing, Reverse 

Engineering, Energy Modeling, and 

Cost-Efficiency Results 

As discussed above, for the 

engineering analysis, DOE specifically 

analyzed representative capacities of 7.5 

tons, 15 tons, and 30 tons to develop 

incremental cost-efficiency 

relationships. DOE selected four 7.5-ton, 

two 15-ton, and one 30-ton air-cooled 

CUAC models. The models were 

selected to develop a representative 

sample of the market at different 

efficiency levels. DOE based the 

selection of units for testing and reverse 

engineering on the efficiency data 

available in the AHRI certification 

database and the CEC equipment 

database. DOE also selected one 7.5-ton 

CUHP model to evaluate the design 

differences between CUAC units and 

CUHP units. Details of the key features 

of the tested units are presented in 

chapter 5 of the NOPR TSD. 

Because DOE is considering adopting 

energy conservation standards based on 

the IEER metric, DOE conducted testing 

on each unit according to the IEER test 

method specified in AHRI Standard 

340/360–2007. DOE then conducted 

physical teardowns on each test unit to 

develop a manufacturing cost model 

and to evaluate key design features (e.g., 

heat exchangers, compressors, fan/fan 

motors, control strategies, etc.). Because 

DOE was only able to conduct testing 

and physical teardowns on a limited 

sample of equipment, DOE 

supplemented these data by conducting 

catalog teardowns on 346 models 

spanning the full range of capacities 

from all manufacturers selling 

equipment in the United States. DOE 

based the catalog teardowns on 

information provided in equipment 

literature and experience from the 

physical teardowns. 

For air-cooled CUAC, DOE conducted 

energy modeling using the modeling 

tools developed by the Center for 

Environmental Energy Engineering from 

the University of Maryland at College 

Park. The tools include a detailed heat 

exchanger modeling program and a 

refrigeration cycle modeling program. 

The refrigeration cycle modeling 

program can integrate the heat 

exchanger and compressor models to 

perform a refrigeration cycle model. If a 

CUAC/CUHP unit was tested, system 

control power (i.e., control circuit 

power and any auxiliary loads), indoor 

and outdoor fan power were obtained 

from actual laboratory testing. If a unit 

was not tested, fan power energy usage 

was estimated from manufacturer 

specification sheets at the rated air flow 

rates and static pressures. The system 

control power is estimated from other 

tested units with similar capacities and 

system configurations. 

Applying the key design features 

identified during physical equipment 

teardowns, DOE used the energy 

modeling tool to generate detailed 

performance data (e.g. capacity and 

EER) and validated them against the 

results obtained from laboratory testing 

at each IEER capacity level (25, 50, 75, 

and 100 percent), or with the published 

performance data. With the validated 

energy models, DOE expanded the 

modeling tasks with various system 

design options and identified the key 

design features (consistent with 

equipment available on the market) 

required for 7.5-ton, 15-ton, and 30-ton 

air-cooled CUAC units with electric 

resistance heating or no heating to 

achieve each efficiency level. Details of 

the design features for each efficiency 

level are presented in chapter 5 of the 

NOPR TSD. DOE also generated energy 

use profiles for air-cooled CUAC, which 

included wattage inputs for key 

components (i.e., compressor, indoor 

and outdoor fan motors, and controls) at 

each operating load level measured for 

the IEER test method, for each efficiency 

level to serve as inputs for the energy 

use analysis (discussed in section IV.E). 

DOE then used these design features 

developed by the energy modeling to 

determine the incremental 

manufacturing costs for each efficiency 

level for 7.5-ton, 15-ton and 30-ton aircooled CUAC units. 

Issue 6: DOE requests comments, 

information, and data that would inform 

adjustment of energy modeling input 

and/or results that would allow more 

accurate representation of the energy 

use impacts of design options using the 

modeling tools developed by the Center 

for Environmental Energy Engineering 

from the University of Maryland at 

College Park. 

DOE did not, however, conduct 

similar modeling for CUHP units. DOE 

notes that CUHP shipments represent a 

very small portion of industry 

shipments compared to CUAC 

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Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 58975 

shipments (9 percent versus 91 percent). 

In addition, because CUHP represent a 

small portion of shipments, DOE noted, 

based on equipment teardowns and 

review of equipment literature, that 

manufacturers use the same basic 

design/platform for equivalent CUAC 

and CUHP models. DOE observed that 

equivalent CUAC and CUHP models 

used the same package size, core heat 

exchangers (the same face area and 

depth, but different circuiting), and 

indoor/outdoor fan systems (along with 

other elements), but used additional 

components to allow for heat pump 

operation (e.g., reversing valves, 

refrigerant accumulators, refrigerant 

circuiting). As a result, DOE believes 

that the proposed approach of adjusting 

between the cooling efficiencies of 

CUAC and CUHP to reflect the drop in 

efficiency resulting from the CUHP 

design (as discussed above in section 

IV.C.3) is consistent with the market. 

For these same reasons, DOE believes 

that it is appropriate to set heating 

efficiencies for CUHP based on the 

relationship between cooling efficiency 

and heating efficiency rather than 

conduct a full separate analysis of 

heating efficiency. For these reasons, 

DOE focused energy modeling solely on 

CUAC equipment. Although not 

considered in the engineering and LCC 

and PBP analyses, DOE did analyze 

CUHP equipment in the NIA. From this 

analysis, DOE believes the energy 

modeling conducted for CUAC 

equipment provides a good estimate of 

CUHP cooling performance and 

provides the necessary information to 

estimate the magnitude of the national 

energy savings from increases in CUHP 

equipment efficiency. 

Based on the analyses discussed 

above, DOE developed the costefficiency results shown in Table IV.7 

through Table IV.9 for each cooling 

capacity range. DOE notes that the 

incremental manufacturing production 

and shipping costs would be equivalent 

for each of the equipment classes within 

a given cooling capacity range (i.e., 

CUAC units with electric resistance 

heating or no heat, CUAC units with all 

other types of heating, CUHP units with 

electric resistance heating or no heat, 

CUHP units with all other types of 

heating). Details of the cost-efficiency 

analysis, including descriptions of the 

technologies DOE analyzed for each 

efficiency level to develop incremental 

costs, are presented in chapter 5 of the 

NOPR TSD. 

TABLE IV.7—SMALL AIR-COOLED

CUAC AND CUHP COST-EFFICIENCY RELATIONSHIPS

Efficiency 

level 

Incremental 

manufacturing 

production cost 

Incremental 

shipping cost 

Baseline .......................... ..........................

EL1 ....... $115.93 ..........................

EL2 ....... 583.47 ..........................

EL3 ....... 788.88 ..........................

EL4 

(MaxTech) 1,277.04 $102.86 

TABLE IV.8—LARGE AIR-COOLED

CUAC AND CUHP COST-EFFICIENCY RELATIONSHIPS

Efficiency 

level 

Incremental 

manufacturing 

production cost 

Incremental 

shipping cost 

Baseline .......................... ..........................

EL1 ....... $419.16 ..........................

EL2 ....... 792.76 $192.86 

EL3 ....... 1,236.98 192.86 

EL4 

(MaxTech) 1,554.26 192.86 

TABLE IV.9—VERY LARGE AIRCOOLED CUAC AND CUHP COSTEFFICIENCY RELATIONSHIPS

Efficiency 

level 

Incremental 

manufacturing 

production cost 

Incremental 

shipping cost 

Baseline .......................... ..........................

EL1 ....... $542.65 ..........................

EL2 ....... 1,296.41 ..........................

EL3 ....... 1,834.67 ..........................

EL4 

(MaxTech) 2,753.32 $444.00 

Issue 7: DOE requests input and data 

on the estimated incremental 

manufacturing costs, including the 

extrapolation of incremental costs for 

equipment classes not fully analyzed, in 

particular for heat pump equipment 

classes. 

D. Markups Analysis 

The markups analysis develops 

appropriate markups in the distribution 

chain to convert the estimates of 

manufacturer selling price derived in 

the engineering analysis to customer 

prices. (‘‘Customer’’ refers to purchasers 

of the equipment being regulated.) DOE 

calculates overall baseline and 

incremental markups based on the 

equipment markups at each step in the 

distribution chain. The incremental 

markup relates the change in the 

manufacturer sales price of higher 

efficiency models (the incremental cost 

increase) to the change in the customer 

price. 

In its 2004 ANOPR, DOE used three 

types of distribution channels to 

describe how the equipment passes 

from the manufacturer to the customer. 

See, e.g. 69 FR 45460, 45476 (describing 

distribution channels used as part of 

DOE’s prior CUAC/CUHP standards 

rulemaking effort). In the new 

construction market, the manufacturer 

sells the equipment to a wholesaler. The 

wholesaler sells the equipment to a 

mechanical contractor, who sells it to a 

general contractor, who in turn sells the 

equipment to the customer or end user 

as part of the building. In the 

replacement market, the manufacturer 

sells to a wholesaler, who sells to a 

mechanical contractor, who in turn sells 

the equipment to the customer or end 

user. In the third distribution channel, 

used in both the new construction and 

replacement markets, the manufacturer 

sells the equipment directly to the 

customer through a national account. 

In the RFI, DOE requested input from 

stakeholders on whether the 

distribution channels described above 

remain relevant for small and large 

CUAC/CUHP and whether they are also 

relevant for very large air-cooled 

equipment. Carrier stated that the 

distribution channels outlined in the 

NOPR are relevant for all products, 

including very large air-cooled 

equipment. (Carrier, No. 7 at p. 4) It 

added that, for very large air-cooled 

equipment, there is an additional 

channel that consists of factory 

employees selling directly to end 

customers and mechanical contractors. 

Ingersoll Rand stated that the selling 

process, as described, is still relevant for 

these product classes. (Ingersoll Rand, 

No. 10 at p. 4) Modine stated that there 

are distribution paths in addition to 

those listed in the RFI, namely, 

manufacturer to distributor to 

mechanical contractor to end user, 

manufacturer to mechanical contractor 

to general contractor to end user, and 

manufacturer to mechanical contractor 

to end user. (Modine, No. 5 at p. 3) 

For today’s NOPR, DOE used the three 

distribution channels described 

previously, which were used in the 

2004 ANOPR. Although it was not listed 

in the RFI, DOE did include a channel 

of manufacturer to distributor to 

mechanical contractor to end user (for 

replacement applications). As for the 

channels without a distributor cited by 

Modine, DOE was not able to determine 

whether these channels account for a 

meaningful share of shipments. Modine 

provide no supporting data indicating 

that these non-distributor channels 

accounted for a significant share of 

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44U.S. Census Bureau, 2007 Economic Census, 

Construction Industry Series and Wholesale Trade 

Subject Series. http://www.census.gov/econ/

census07/. 

45American Society of Heating, Refrigerating and 

Air-Conditioning Engineers, Inc. ANSI/ASHRAE 

Standard 62–1999 Ventilation for Acceptable 

Indoor Air Quality, 1999. Atlanta, Georgia. 

shipments. Because other parties 

commented that the three distribution 

channels described in the RFI are still 

relevant, DOE retained the channels 

included in the RFI but decline to 

include the non-distributor channels 

suggested by Modine for the NOPR 

analysis. 

For the 2004 ANOPR, based on 

information that equipment 

manufacturers provided, commercial 

customers were estimated to purchase 

50 percent of the covered equipment 

through small mechanical contractors, 

32.5 percent through large mechanical 

contractors, and the remaining 17.5 

percent through national accounts. 

According to the Air Conditioning 

Contractors of America’s financial 

analysis of the heating, ventilation, airconditioning, and refrigeration (HVACR) 

contracting industry, markups used by 

small contractors tend to be larger than 

those used by large contractors. See 69 

FR 45476. 

In the RFI, DOE requested input on 

the percentage of equipment being 

distributed through the various types of 

distribution channels and whether the 

share of equipment shipped through 

each channel varies based on equipment 

capacity. Ingersoll Rand stated that, 

while the percentages differ among the 

equipment capacities, the relative levels 

are as suggested by DOE. (Ingersoll 

Rand, No. 10 at p. 4) Based on this 

feedback, for this NOPR, DOE is 

continuing to use the same percentages 

that were used in its ANOPR analysis. 

DOE had also previously utilized 

several sources in preparation of its 

ANOPR to help develop markups for the 

parties involved in the distribution of 

the equipment, including: (1) The Airconditioning & Refrigeration 

Wholesalers Association’s 1998 

wholesaler profit survey report to 

develop wholesaler markups; (2) the Air 

Conditioning Contractors of America’s 

(ACCA) financial analysis for the 

HVACR contracting industry to develop 

mechanical contractor markups; and (3) 

U.S. Census Bureau economic data for 

the commercial and institutional 

building construction industry to 

develop general contractor markups. 

Carrier recommended that DOE 

conduct a blind survey through AHRI to 

determine the markups for all parties in 

the channel. As an alternative to this 

approach, DOE utilized updated 

versions of the sources mentioned 

previously, namely: (1) The Heating, Air 

Conditioning & Refrigeration 

Distributors International 2010 Profit 

Report to develop wholesaler markups; 

(2) the Air Conditioning Contractors of 

America’s (ACCA) 2005 Financial 

Analysis for the HVACR Contracting 

Industry to develop mechanical 

contractor markups; and (3) U.S. Census 

Bureau economic data for the 

commercial and institutional building 

construction industry to develop general 

contractor markups.44 By following this 

alternative approach, DOE obtained 

updated data that enabled it to develop 

a more accurate picture of the markups 

currently being used by the various 

parties involved in the distribution 

channel. 

Chapter 6 of the NOPR TSD provides 

further detail on the estimation of 

markups. 

E. Energy Use Analysis 

The energy use analysis provides 

estimates of the annual energy 

consumption of small, large, and very 

large air-cooled CUAC equipment at the 

considered efficiency levels. DOE uses 

these values in the LCC and PBP 

analyses and in the NIA. DOE did not 

analyze CUHP equipment because the 

energy modeling discussed in section 

IV.C.4 was performed only for CUAC 

equipment. 

DOE developed energy consumption 

estimates only for the CUAC equipment 

classes that have electric resistance 

heating or no heating. For equipment 

classes with all other types of heating, 

the incremental change in IEER for each 

efficiency level is identical to that for 

the equipment classes with electric 

resistance heating or no heating. 

Therefore, DOE estimated that the 

energy savings for any efficiency level 

relative to the baseline would be 

identical for both sets of equipment 

classes. In turn, the energy savings 

estimates for the efficiency levels 

associated with the equipment classes 

that have electric resistance heating or 

no heating (see Table IV.1) were used by 

DOE in the LCC and PBP analysis and 

the NIA to represent both sets of 

equipment classes. 

The energy use analysis for this NOPR 

consists of two related parts. In the first 

part, DOE calculated energy savings for 

small, large, and very large air-cooled 

CUAC at the considered efficiency 

levels based on modifications to the 

energy use simulations conducted for 

the 2004 ANOPR. These building 

simulation data are based on the 1995 

Commercial Building Energy 

Consumption Survey (CBECS). Because 

the simulation data reflect the building 

stock in 1995 that uses air-cooled CUAC 

equipment, in the second part, DOE 

developed a ‘‘generalized building 

sample’’ to represent the current 

installation conditions for the 

equipment covered in this rulemaking. 

This part involved making adjustments 

to update the building simulation data 

to reflect the building stock that uses 

air-cooled CUAC equipment in 2011. 

1. Energy Use Simulations 

The simulation database from the 

2004 ANOPR includes hourly profiles 

for more than 1,000 commercial 

buildings, which were based on 

building characteristics from the 1995 

CBECS for the subset of buildings that 

uses air-cooled CUAC equipment. Each 

building was assigned to a specific 

location along with a typical 

meteorological year (TMY) hourly 

weather file (referred to as TMY2) to 

represent local weather. The 

simulations capture variability in 

cooling loads due to factors such as 

building activity, schedule, occupancy, 

local weather, and shell characteristics. 

DOE received comments on the RFI 

regarding how best to model equipment 

performance. AAON stated that full 

building and equipment modeling are 

required to get a credible estimate for a 

given building, equipment set, and 

control sequence. (AAON, No. 8 at 

p. 6) Carrier noted that EER alone 

cannot be used to determine energy use 

at part-load conditions, as it is a 

measure of full-load efficiency and is 

tied more closely to the peak kilowatt 

(kW). (Carrier, No. 7 at p. 4) DOE’s 

simulation modeling approach is based 

on full building and equipment 

modeling, and takes into account 

equipment performance at part-load 

conditions to establish the annual 

energy use. 

For the NOPR, DOE modified the 

energy use simulations conducted for 

the 2004 ANOPR to improve the 

modeling of equipment performance. 

The modifications that DOE performed 

included changes to the ventilation rates 

and economizer usage assumptions, the 

default part-load performance curve, 

and the minimum saturated condensing 

temperature limit. 

Although ventilation rates and 

economizer usage do not affect 

equipment performance per se, they do 

impact how often the equipment needs 

to operate, whether at full or part load. 

The building simulations for the 2004 

ANOPR used ventilation rates based on 

ASHRAE Standard 62–1999.45 Because 

a report prepared by the National 

Institute for Standards and Testing 

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46Persily, A. and J. Gorfain. 2004. ‘‘Analysis of 

Ventilation Data from the U.S. Environmental 

Protection Agency Building Assessment Survey and 

Evaluation (BASE) Study’’. NISTIR 7145. 

47CBECS 2012 is currently in development but 

will not be available in time for this rulemaking. 

(NIST) on field measurements indicated 

that these ventilation rates were too 

high,46 DOE reduced the rates as part of 

the modified energy use simulations. In 

the case of economizer usage, the 

building simulations for the 2004 

ANOPR assumed all economizers 

operated without fault. Various field 

studies have demonstrated that 

economizer usage is far from perfect, so 

in the modified simulations DOE 

assigned a 30-percent probability to 

each building modeled that the 

economizer would be non-operational. 

With regard to changes made to how the 

equipment was modeled, DOE 

developed a modified part-load 

performance curve for the directexpansion condenser unit model so that 

the overall performance would be more 

representative of a multi-compressor 

system. In addition, DOE lowered a 

parameter representing the minimum 

saturated condensing temperature 

allowed for the refrigerant. Both of these 

parameters affect the system 

performance under part-load and offdesign conditions. A more detailed 

description of the simulation model 

modifications can be found in appendix 

7–A of the NOPR TSD. 

DOE used a two-step process to 

represent the performance of equipment 

at baseline and higher efficiency levels. 

First, DOE calculated the hourly cooling 

loads and hourly fan operation for each 

building from the compressor and fan 

energy consumption results that were 

generated from the modified building 

simulations based on CUAC equipment 

at efficiency of 11 EER. It was estimated 

that these simulated cooling loads had 

to be met by the CUAC equipment for 

every hour of the year that the 

equipment operates. Then DOE coupled 

the hourly cooling loads and fan 

operation with equipment performance 

data, developed from laboratory and 

modeled IEER testing conducted 

according to AHRI Standard 340/360– 

2007, to generate the hourly energy 

consumption of baseline and more 

efficient CUAC equipment. 

DOE received additional comments 

on the RFI regarding how to scale 

equipment energy use as a function of 

capacity for a given cooling load. Carrier 

stated that capacity is highly dependent 

on differences in product design for 

performance at full- and part-load 

conditions, control strategies, air 

distribution method, and applications. 

(Carrier, No. 7 at p. 5) AAON stated that 

full modeling is required to determine 

how equipment energy use scales as a 

function of capacity. (AAON, No. 8 at p. 

6) 

DOE’s use of the laboratory and 

modeled IEER test data allowed it to 

specifically address how capacity and 

control strategies vary with outdoor 

temperature and building load. The 

laboratory and modeled IEER test data 

were used to calculate the compressor 

efficiency (COP) and capacity at varying 

outdoor temperatures (see section IV.4 

of this NOPR for further discussion.) 

The IEER rating test consists of 

measuring the net capacity, compressor 

power, condenser fan power, indoor fan 

power, and control power at three to 

five different rating conditions. The 

number of rated conditions the 

equipment is tested at is determined by 

the capabilities of and the control 

strategies used by the equipment. The 

net capacity and COP of the 

compressor(s) as a linear function of 

outdoor temperature was calculated 

from those test results. If the indoor or 

outdoor fan was variable speed, its 

power consumption was also calculated 

as a linear function of outdoor 

temperature. The power for controls is 

a constant, but may vary by staging. 

The COP and capacity of the 

equipment for each hour of the year was 

calculated based on the outdoor 

temperature for the simulated buildings. 

The cooling capacity was calculated 

such that it met the simulated building 

cooling load for each hour. For multistage equipment, the staging for each 

hour was selected to ensure the 

equipment could meet the simulated 

building cooling load. When the cooling 

capacity exceeded the simulated 

building cooling load, the efficiency was 

adjusted for cyclic performance using 

the degradation coefficient and load 

factor as calculated according to section 

6.2, Part-Load Rating, of AHRI 340/360, 

using the above described IEER rating 

test data. The analysis accounted for the 

fact that the building cooling load 

includes the heat generated by the fan. 

The total amount of cooling the 

compressor must provide varies as the 

fan efficiency improves with different 

efficiency levels. 

The hourly fan run time was set equal 

to the indoor fan run time of the 

simulated building for each hour of the 

year. Energy use was calculated 

separately for the compressor, 

condenser fan, indoor fan, and controls 

for each hour of the year for the 

simulated building. Compressor and 

condenser fan energy were summed to 

reflect cooling energy use. Indoor fan 

and control energy were combined into 

a single category to represent indoor fan 

energy use. 

The calculations provided the annual 

hourly cooling and fan energy use 

profiles for each building. The 

incremental energy savings between the 

baseline equipment and the equipment 

at higher efficiency levels was 

calculated for every hour for each of the 

1,033 simulated buildings. 

The RFI requested comment on 

whether the building simulations 

developed for small and large airconditioning equipment are applicable 

to very large equipment (i.e., equipment 

with capacities between 240,000 Btu/h 

and 760,000 Btu/h). AAON stated that 

the simulation model should be 

applicable regardless of equipment size. 

(AAON, No. 8 at p. 6) Carrier stated that 

building models appropriate to the 

equipment size should be used. It noted 

that special equipment models will be 

needed to properly model the part-load 

intensive equipment and changes in 

IEER. It suggested that DOE should work 

with the AHRI Unitary Large Equipment 

Section to define the modeling approach 

and obtain the equipment models for 

the various IEER and EER levels as 

considerable work has already been 

done. (Carrier, No. 7 at p. 5) 

As described above, DOE used the 

simulations to obtain hourly building 

cooling loads, fan operating hours, and 

associated outdoor temperatures and 

applied the IEER rating test data to 

determine the hourly performance of the 

equipment. Because DOE relied on the 

IEER rating test data to come up with 

the hourly performance of the 

equipment, it believes that this method 

provides a good representation of very 

large equipment performance as well as 

small and large equipment performance. 

Therefore, additional building 

simulation modeling for very large units 

does not appear necessary. 

Issue 8: DOE requests comments, 

information, and data that could be used 

to modify the proposed method for 

using laboratory and modeled IEER test 

data, which were developed in 

accordance to AHRI Standard 340/360– 

2007, to calculate the performance of 

CUAC equipment at part-load 

conditions. 

2. Generalized Building Sample 

The NOPR analysis used a 

‘‘generalized building sample’’ (GBS) to 

represent the installation conditions for 

the equipment covered in this 

rulemaking. The GBS was developed 

based on data from the 2003 CBECS 47

and from the Commercial Demand 

Module of the National Energy 

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58978 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

Modeling System version distributed 

with AEO2013. 

Only floor space cooled by the 

covered equipment is included in the 

sample. Conceptually, the main 

difference between the GBS and the 

sample of specific commercial buildings 

compiled in CBECS is that the GBS 

aggregates all building floor space 

associated with a particular set of 

building characteristics into a single 

category. The set of characteristics that 

is used to define a category includes all 

building features that are expected to 

influence either (1) the cooling load and 

energy use or (2) the energy costs. The 

set of building characteristics, and the 

specific values these characteristics can 

take, are listed in Table IV.10. 

TABLE IV.10—LIST OF CHARACTERISTICS AND THE ASSOCIATED VALUES USED TO DEFINE THE GENERALIZED BUILDING

SAMPLE

Characteristic Number of 

values Range of values 

Region ...................................... 10 9 census divisions with Pacific sub-divided into north and south. 

Building Activity ......................... 7 assembly, education, food service, small office, large office, mercantile, warehouse. 

Size (based on annual energy 

consumption).

3 small: <100,000 kWh. 

medium: 100,000 to 1,000,000 kWh. 

large: >1,000,000 kWh. 

Vintage ...................................... 3 category 1: before 1950. 

category 2: 1950–1979. 

category 3: 1980 and later. 

The region in which the building is 

located affects both the cooling loads 

(through the weather) and the cost of 

electricity. The building activity affects 

building schedules and occupancy, 

which in turn influence the demand for 

cooling. The building activity categories 

are the same as those used in the NEMS 

commercial building energy demand 

module, limited to those building types 

that use the equipment covered in this 

rule. The building size influences the 

cost of electricity, because larger 

facilities tend to have lower marginal 

prices. The building vintage may 

influence shell characteristics that can 

affect the cooling loads. The 

combination of 10 regions, 7 building 

types, 3 sizes, and 3 vintages leads to a 

set of 630 independent categories in the 

GBS. 

The amount of floor space allocated to 

each category for buildings built in or 

before 2003 was taken from the 2003 

CBECS. To update the building floor 

space to 2013, the commercial building 

data included with the 2013 version of 

NEMS were used. This dataset includes 

a historical component, starting in 2004, 

and provides both existing floor space 

and new floor space additions by year, 

census division, and building activity. 

The floor space additions between 2004 

and 2013 were added to the floor space 

in vintage category 3. 

Load profiles for each of the 630 

generalized buildings were developed 

from the simulation data just described. 

For each equipment class, a subset of 

the 1,033 buildings was used to develop 

the cooling energy use profiles. The 

subset included all buildings with a 

capacity requirement equal to or greater 

than 90 percent of the capacity of the 

particular representative unit. For each 

GBS type, a weighted average energy 

use profile, along with energy savings 

from the considered efficiency levels, 

was compiled from the simulated 

building subset. The average was taken 

over all buildings in the subset that have 

the same region, building type, size, and 

vintage category as the GBS category. 

This average was weighted by the 

number of units required to meet each 

building’s cooling load. For some of the 

GBS categories, no simulation data were 

available. In these cases, the weightedaverage energy use profile for the same 

building type and a nearby region or 

vintage were used. 

Updating the sample to 2013 required 

some additional adjustments to the 

energy use data. The 1,033 building 

simulations used TMY2 weather data. 

The TMY2 weather data files were 

updated to TMY3 in 2008. A 

comparison of the two datasets showed 

that total annual cooling degree-days 

(CDD) increased by 5 percent at all 

locations used in this analysis. This is 

accounted for by increasing the energy 

use (for all efficiency levels) by 5 

percent at all locations. 

Changes to building shell 

characteristics and internal loads in 

recent construction can lead to a change 

in the energy required to meet a given 

cooling load. The NEMS commercial 

demand module accounts for these 

trends by adjusting the cooling energy 

use with a factor that is a function of 

region and building activity. In the GBS, 

these same factors were used to adjust 

the cooling energy use for floor space 

constructed after 1999. 

Issue 9: DOE requests comments on 

the use of a ‘‘generalized building 

sample’’ to characterize the energy 

consumption of CUAC equipment in the 

commercial building stock. Specifically, 

whether there are any data or 

information that could improve the 

method for translating the results from 

the 1,033 simulated buildings to the 

generalized building sample. 

F. Life-Cycle Cost and Payback Period 

Analysis 

The purpose of the LCC and PBP 

analysis is to analyze the effects of 

potential amended energy conservation 

standards on customers of small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment by determining how a 

potential amended standard affects their 

operating expenses (usually decreased) 

and their total installed costs (usually 

increased). 

The LCC is the total customer expense 

over the life of the equipment, 

consisting of equipment and installation 

costs plus operating costs over the 

lifetime of the equipment (expenses for 

energy use, maintenance, and repair). 

DOE discounts future operating costs to 

the time of purchase using customer 

discount rates. The PBP is the estimated 

amount of time (in years) it takes 

customers to recover the increased total 

installed cost (including equipment and 

installation costs) of a more efficient 

type of equipment through lower 

operating costs. DOE calculates the PBP 

by dividing the change in total installed 

cost (normally higher) due to a standard 

by the change in annual operating cost 

(normally lower) that results from the 

standard. 

For any given efficiency level, DOE 

measures the PBP and the change in 

LCC relative to an estimate of the basecase efficiency level. The base-case 

estimate reflects the market in the 

absence of amended energy 

conservation standards, including the 

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48The Monte Carlo process statistically captures 

input variability and distribution without testing all 

possible input combinations. Therefore, while some 

atypical situations may not be captured in the 

analysis, DOE believes the analysis captures an 

adequate range of situations in which small, large, 

and very large air-cooled commercial package air 

conditioning and heating equipment operate. 

49The PPP index for heat pumps covered too 

short a time period to provide a useful picture of 

pricing trends for this equipment. 

50http://www.rsmeansonline.com; Accessed 

March 27, 2013. 

51Coughlin, K., C. Bolduc, R. Van Buskirk, G. 

Rosenquist and J. E. McMahon. Tariff-based 

Continued 

market for equipment that exceeds the 

current energy conservation standards. 

The RFI described how DOE would 

analyze the potential for variability and 

uncertainty by performing the LCC and 

PBP calculations on a representative 

sample of individual commercial 

buildings. The approach utilizes the 

sample of buildings developed for the 

energy use analysis and the 

corresponding simulations results. 

Within a given building, one or more 

air-conditioning units may serve the 

building’s space-conditioning needs, 

depending on the cooling load 

requirements of the building. As a 

result, DOE would express the LCC and 

PBP results as the number of units 

experiencing economic impacts of 

different magnitudes. DOE models both 

the uncertainty and the variability in the 

inputs to the LCC and PBP analysis 

using Monte Carlo simulation and 

probability distributions.48 As a result, 

the LCC and PBP results are displayed 

as distributions of impacts compared to 

the base case conditions. 

The RFI requested comment from 

stakeholders on the overall method for 

conducting the LCC and PBP analysis. 

Carrier stated that DOE should use the 

procedures as developed by the 

ASHRAE 90.1 committee and PNNL for 

evaluating changes to the ASHRAE 90.1 

standard. (Carrier, No. 7 at p. 5) The 

procedures referred to by Carrier, while 

potentially appropriate in other 

circumstances, such as in the 

development of building codes for new 

construction, are not ideal in the context 

of analyzing the potential impacts that 

would be likely to result from the 

imposition of new energy conservation 

standards. DOE’s LCC and PBP analysis, 

rather than focusing solely on the 

impacts on new buildings (as would 

Carrier’s suggested approach would do), 

seeks to evaluate the impacts of 

potential standards for small, large, and 

very large air-cooled commercial 

package air conditioning and heating 

equipment for all affected customers. 

Such an evaluation requires a broader 

framework than the more narrow 

approach suggested by Carrier. 

DOE conducted an LCC and PBP 

analysis for the CUAC equipment 

classes. As mentioned in section IV.E, 

the energy savings estimates for the 

efficiency levels associated with the 

equipment classes that have electric 

resistance heating or no heating were 

used in the LCC and PBP analysis to 

represent the equipment classes with all 

other types of heating. DOE did not 

perform an LCC and PBP analysis for 

the CUHP equipment for the reasons 

discussed in section IV.C.4. 

Inputs to the LCC and PBP analysis 

are categorized as: (1) Inputs for 

establishing the total installed cost and 

(2) inputs for calculating the operating 

expense. The following sections contain 

brief discussions of comments on the 

inputs and key assumptions of DOE’s 

LCC and PBP analysis and explain how 

DOE took these comments into 

consideration. 

1. Equipment Costs 

In the LCC and PBP analysis, the 

equipment costs faced by small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment purchasers are derived from 

the MSPs estimated in the engineering 

analysis and the overall markups 

estimated in the markups analysis. 

To develop an equipment price trend 

for the NOPR, DOE derived an inflationadjusted index of the producer price 

index (PPI) for ‘‘unitary airconditioners, except air source heat 

pumps’’ from 1978 to 2013.49 Although 

the PPI index shows a long-term 

declining trend, data for the last decade 

have shown a flat-to-slightly rising 

trend. Given the uncertainty as to which 

of the trends will prevail in coming 

years, DOE chose to apply a constant 

price trend (2013 levels) for the NOPR. 

For the NIA, DOE also analyzed the 

sensitivity of results to alternative price 

forecasts. 

2. Installation Costs 

In the RFI, DOE discussed developing 

installation costs for the current 

rulemaking using the most recent RS 

Means data available. AAON agreed that 

it is appropriate to use RS Means. 

(AAON, No. 8 at p. 6) 

For today’s NOPR, DOE derived 

installation costs for CUAC equipment 

from current RS Means data.50 Based on 

these data, DOE tentatively concluded 

that data for 7.5-ton, 15-ton, and 30-ton 

rooftop air conditioners would be 

sufficiently representative of the 

installation costs for the ≥65,000 Btu/h 

to <135,000 Btu/h, ≥135,000 Btu/h to 

<240,000 Btu/h, and ≥240,000 Btu/h to 

<760,000 Btu/h air-conditioning 

equipment classes, respectively. 

Because labor rates vary significantly in 

each region of the country, DOE used RS 

Means data to identify how installation 

costs vary among regions and 

incorporated these costs into the 

analysis. 

For the 2004 ANOPR, DOE varied 

installation cost as a function of 

equipment weight. Because weight 

tends to increase with equipment 

efficiency, installation cost increased 

with equipment efficiency. 69 FR 45481. 

In the RFI, DOE envisioned using a 

similar approach for this rulemaking. 

Carrier recommended that RS Means 

Mechanical Cost Data be used to 

estimate installed cost based on unit 

tonnage rather than unit weight. 

(Carrier, No. 7 at p. 5) 

For this NOPR, DOE is using a 

specific cost from RS Means for each of 

the tonnage classes listed previously. 

Within a given capacity (equipment 

class), DOE chose to vary installation 

costs in direct proportion to the 

physical weight of the equipment. The 

weight of the equipment in each class 

and efficiency level was determined 

through the engineering analysis. 

3. Unit Energy Consumption 

The calculation of annual per-unit 

energy consumption at each considered 

efficiency level is described in section 

IV.E. 

4. Electricity Prices and Electricity Price 

Trends 

For the 2004 ANOPR, DOE 

determined electricity prices based on 

tariffs from a representative sample of 

electric utilities. 69 FR 45481–45482. 

This approach calculates energy 

expenses based on actual electricity 

prices that customers are paying. The 

RFI discussed retaining the tariff-based 

approach and plans to update electricity 

prices based on recent or current tariffs. 

Carrier agreed with the tariff-based 

approach and that the most recent price 

data should be used. (Carrier, No. 7 at 

p. 6) Similarly, the Joint Efficiency 

Advocates asserted that the tariff-based 

approach was appropriate for capturing 

actual electricity prices paid by 

customers. (Joint Efficiency Advocates, 

No. 11 at p. 2) 

For this NOPR, the tariff data used for 

the ANOPR were used to develop 

marginal and average prices for each 

member of the GBS, which were then 

scaled to approximate 2013 prices. The 

approach uses tariff data that have been 

processed into commercial building 

marginal and average electricity 

prices.51

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58980 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

Analysis of Commercial Building Electricity Prices. 

2008. Lawrence Berkeley National Laboratory: 

Berkeley, CA. Report No. LBNL–55551. 

52Edison Electric Institute. EEI Typical Bills and 

Average Rates Report (bi-annual, 2007–2012). 

Washington, DC. 

53http://www.rsmeansonline.com; Accessed 

March 26, 2013. 

The CBECS 1992 and CBECS 1995 

surveys provide monthly electricity 

consumption and demand for a large 

sample of buildings. DOE used these 

values to help develop usage patterns 

associated with various building types. 

Using these monthly values in 

conjunction with the tariff data, DOE 

calculated monthly electricity bills for 

each building. The average price of 

electricity is defined as the total 

electricity bill divided by total 

electricity consumption. Two marginal 

prices are defined, one for electricity 

demand (in $/kW) and one for 

electricity consumption (in $/kWh). 

These marginal prices are calculated by 

applying a 5 percent decrement to the 

CBECS demand or consumption data 

and recalculating the electricity bill. 

Using the prices derived from the 

above method, an average price and a 

marginal price were assigned to each 

building in the GBS. For each member 

of the GBS, these prices were calculated 

as the average, weighted by floor space 

and survey sample weight, of all 

buildings in the CBECS 1992 and 1995 

data meeting the set of characteristics 

defining the generalized building (i.e., 

region, vintage, building activity, and 

building energy consumption). As most 

tariffs are seasonal, average and 

marginal prices are calculated 

separately for summer (May–September) 

and winter. 

The average summer or winter 

electricity price multiplied by the 

baseline summer or winter electricity 

consumption for equipment of a given 

capacity defines the baseline LCC. For 

each efficiency level, the operating cost 

savings are calculated by multiplying 

the electricity consumption savings 

(relative to the baseline) by the marginal 

consumption price and the electricity 

demand reduction by the marginal 

demand price. The consumer’s 

electricity bill is only affected by the 

electricity demand reduction that is 

coincident with the building’s monthly 

peak load. Air-conditioning loads are 

strongly, but not perfectly, peakcoincident. Divergences between the 

building peak and the air-conditioning 

peak were accounted for by multiplying 

the electricity demand reduction by a 

random factor drawn from a triangular 

distribution centered at 0.9 +/¥ 0.1. 

The tariff-based prices were updated 

to 2013 using the commercial electricity 

price index published in the AEO 

(editions 2009 through 2012). An 

examination of data published by the 

Edison Electric Institute 52 indicates that 

the rate of increase of marginal and 

average prices is not significantly 

different, so the same factor was used 

for both pricing estimates. DOE 

projected future electricity prices using 

trends in average commercial electricity 

price from AEO 2013. 

For further discussion of electricity 

prices, see chapter 8 of the NOPR TSD. 

5. Maintenance Costs 

Maintenance costs are costs 

associated with general maintenance of 

the equipment (e.g., checking and 

maintaining refrigerant charge levels 

and cleaning heat-exchanger coils). For 

the 2004 ANOPR, DOE developed 

maintenance costs from RS Means data, 

and DOE estimated that maintenance 

costs do not vary with equipment 

efficiency. 69 FR 45485. The RFI 

discussed developing maintenance costs 

for the current rulemaking using the 

most recent RS Means data available, 

and using the same assumption that 

maintenance costs do not vary with 

equipment efficiency. AAON stated that 

it is appropriate to use RS Means. 

(AAON, No. 8 at p. 6) 

Carrier stated that RS Means might 

serve as a reasonable guide to assist in 

developing maintenance costs, but it 

expects that maintenance costs vary 

with efficiency due to the higher 

replacement cost of new, more complex 

components, and the technology 

required to achieve the higher efficiency 

levels. (Carrier, No. 7 at p. 6) Repair or 

replacement of components that have 

failed is considered a repair cost. DOE 

is not aware of information on why 

general maintenance would be higher as 

a result of the technology used to 

achieve higher efficiency levels. Thus, 

DOE retained the assumption that 

maintenance costs do not vary with 

equipment efficiency. 

For this NOPR, DOE derived 

annualized maintenance costs for 

commercial air conditioners from RS 

Means data.53 These data provided 

estimates of person-hours, labor rates, 

and materials required to maintain 

commercial air-conditioning equipment. 

The estimated annualized maintenance 

cost is $298 for a commercial unitary air 

conditioner rated between 36,000 Btu/h 

and 288,000 Btu/h, and $408 for a unit 

rated between 288,000 Btu/h and 

600,000 Btu/h. 

6. Repair Costs 

Repair costs are associated with 

repairing or replacing components that 

have failed. For the 2004 ANOPR, DOE 

estimated that repair costs vary as 

function of equipment price. 69 FR 

45485. In the RFI, DOE requested 

comment as to whether repair costs vary 

as a function of equipment price, as well 

as any data or information on 

developing repair costs. AAON stated 

that it is appropriate to estimate repair 

costs as a function of equipment costs. 

(AAON, No. 8 at p. 7) Carrier stated that 

while it does not see repair costs 

increasing as a direct result of higher 

equipment prices, the higher material 

and component costs necessary to 

achieve higher efficiency levels (which 

result in higher equipment prices) may 

also drive higher repair costs. (Carrier, 

No. 7 at p. 6) 

For this NOPR, DOE assumed that any 

routine or minor repairs are included in 

the annualized maintenance costs. As a 

result, repair costs are not explicitly 

modeled in the LCC and PBP analysis. 

Instead, DOE incorporated a one-time 

cost for major repair (compressor 

replacement) as a primary input to the 

repair/replace customer choice model in 

the shipments analysis, which models 

the decision between repairing a broken 

unit and replacing it (see section IV.G). 

In the repair/replace customer choice 

model, DOE used repair costs that vary 

in direct proportion with the price of 

the equipment, which approximates the 

relationship between repair costs and 

efficiency described by Carrier. 

Issue 10: DOE requests comments on 

whether using RS Means cost data to 

develop maintenance, repair, and 

installation costs for CUAC and CUHP 

equipment is appropriate, and if not, 

what data should be used. 

7. Lifetime 

Equipment lifetime is the age at 

which the equipment is retired from 

service. For the 2004 ANOPR, DOE 

based equipment lifetime on a 

retirement function, which was based 

on the use of a Weibull probability 

distribution, with a resulting median 

lifetime of 15 years. 69 FR 45486. In the 

RFI, DOE sought comment on how it 

characterized equipment lifetime. DOE 

also requested any data or information 

regarding the accuracy of its 15-year 

lifetime and whether equipment lifetime 

varies based on equipment class. 

The Joint Efficiency Advocates 

encouraged DOE to reevaluate the 

estimated lifetime of commercial aircooled air conditioners and heat pumps 

for this rulemaking. They noted that 

ASHRAE maintains a public database 

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54See http://xp20.ashrae.org/publicdatabase/

system_service_life.asp?c_region=0&state=NA&

building_function=NA&c_size=0&c_age=0&c_ height=0&c_class=0&c_location=0&selected_

system_type=1&c_equipment_type=NA 

that provides information on the service 

life of HVAC equipment. Although the 

ASHRAE database does not currently 

contain a separate category for 

commercial package air conditioners 

and heat pumps, it does contain 

information on ‘‘other cooling 

equipment.’’ In this category, there are 

data on 365 units that were in service 

at the time of the data collection. Of 

these 365 units, the median equipment 

age was 20 years. (Joint Efficiency 

Advocates, No. 11 at p. 3) NEEA also 

encouraged DOE to review actual 

equipment lifetime for determining the 

life-cycle cost of equipment. (NEEA, No. 

15 at p. 2) AAON stated that equipment 

lifetime should not be impacted by 

equipment class. (AAON, No. 8 at p. 7) 

DOE reviewed the ASHRAE database 

and determined that the data support an 

increase in lifetime relative to what DOE 

used for the ANOPR. In the category 

‘‘Packaged DX unit, rooftop’’ (which 

corresponds to CUAC), of the 215 units 

in service, the mean age is 15.6 years 

and the median is 16 years.54 The five 

units that had been replaced had a 

median age of 22 years. These data 

strongly suggest that the median lifetime 

of 15 years used in the ANOPR is too 

short. For this NOPR, DOE updated its 

CUAC lifetime to a median of 18.7 years 

and a mean of 18.4 years. 

The category ‘‘heat pump, air-to-air’’ 

(which corresponds to CUHP) in the 

ASHRAE database has 1,296 units (and 

only one that had been retired) with a 

median age of 14 years. These data 

suggest that the 15-year lifetime used in 

the 2004 ANOPR remains reasonable. 

For the NOPR, DOE used a slightly 

updated CUHP lifetime with a median 

of 15.4 years and a mean of 15.2 years. 

DOE used the same lifetime 

distribution for each set of CUAC and 

CUHP equipment classes. 

Issue 11: DOE requests comments, 

information and data on the equipment 

lifetimes developed for CUAC and 

CUHP equipment; specifically, any 

information that would indicate 

whether the retirement functions 

yielding median lifetimes of 18.7 years 

and 15.4 years for CUAC and CUHP 

equipment, respectively, are reasonable. 

8. Discount Rate 

The discount rate is the rate at which 

future expenditures are discounted to 

estimate their present value. The cost of 

capital commonly is 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 

weighted-average cost to the firm of 

equity and debt financing. DOE uses the 

capital asset pricing model (CAPM) to 

calculate the equity capital component, 

and financial data sources to calculate 

the cost of debt financing. 

For the 2004 ANOPR, DOE derived 

the discount rates by estimating the cost 

of capital of companies that purchase 

air-cooled air-conditioning equipment. 

69 FR 45486–45487. For the current 

rulemaking, DOE updated its data 

sources for calculating this cost. More 

details regarding DOE’s estimates of 

customer discount rates are provided in 

chapter 8 of the NOPR TSD. 

9. Base Case Market Efficiency 

Distribution 

For the LCC analysis, DOE analyzes 

the considered efficiency levels relative 

to a base case (i.e., the case without 

amended energy efficiency standards). 

This analysis requires an estimate of the 

distribution of product efficiencies in 

the base case (i.e., what consumers 

would have purchased in the 

compliance year in the absence of 

amended standards). DOE refers to this 

distribution of product energy 

efficiencies as the base case efficiency 

distribution. 

The RFI requested data on current 

small, large, and very large air-cooled 

commercial package air conditioning 

and heating equipment efficiency 

market shares (of shipments) by 

equipment class, and also similar 

historical data. DOE also requested 

information on expected trends in 

efficiency over the next five years. 

Carrier stated that these data is not 

readily available for the industry as a 

whole, but a joint industry, AHRI and 

DOE working group should be able to 

develop an estimate based on a 

collection of individual manufacturer’s 

data. (Carrier, No. 7 at p. 6) 

Given the statutory deadlines 

described earlier, the formation of a 

working group as suggested by Carrier 

was not feasible. The only available data 

showing air-cooled commercial package 

air conditioning and heating equipment 

efficiency market shares are from 1999– 

2001 and may not be representative of 

current market shares or the shares 

expected in the near future. Rather than 

rely solely on these older data, for this 

NOPR, DOE used a consumer choice 

model to estimate efficiency market 

shares in the expected compliance year 

(assumed to be 2019, as discussed 

below). The consumer choice model 

considers customer sensitivity to total 

installation cost and annual operating 

cost. DOE used the efficiency market 

share data for 1999–2001 to develop the 

parameters of the consumer choice 

model in the shipments analysis, as 

discussed in section IV.G.1. Using the 

parameters, the model estimates the 

shipments at each IEER level based on 

the installed cost and operating cost at 

each efficiency level. Table IV.11 

presents the estimated base case 

efficiency market shares for each aircooled CUAC equipment class. 

TABLE IV.11—BASE CASE EFFICIENCY MARKET SHARES IN 2019 FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED

COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT

Small commercial packaged AC (Air-Cooled)— 

≥65,000 Btu/h and <135,000 Btu/h cooling capacity 

Large commercial packaged AC (AirCooled)—≥135,000 Btu/h and <240,000 Btu/h 

cooling capacity 

Very large commercial packaged AC (AirCooled)—≥240,000 Btu/h and <760,000 Btu/h 

cooling capacity 

IEER Market share 

(%) IEER Market share (%) IEER Market share (%) 

11.4 61 11.2 78 10.1 63 

12.9 39 12.2 20 11.6 24 

14.0 0 13.2 2 12.5 7 

14.8 1 14.2 0 13.5 4 

19.9 0 18.4 0 15.5 1 

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55RS Means Facilities Maintenance & Repair Cost 

Data 2013. http://www.rsmeansonline.com. 

Issue 12: DOE requests comments, 

information and data on the base case 

efficiency distributions of CUAC 

equipment. Given that historical market 

share efficiency data from 1999–2001 

were used to inform a consumer choice 

model in the shipments analysis to 

develop estimated base case efficiency 

distributions in the compliance year 

(2019), DOE seeks more recent historical 

market share efficiency data would be 

useful for validating the estimated base 

case efficiency distributions. 

10. Compliance Date 

DOE calculated the LCC and PBP for 

all customers as if each were to 

purchase new equipment in the year 

that compliance with amended 

standards is required. EPCA directs DOE 

to publish a final rule amending the 

standard for the products covered by 

this NOPR not later than 2 years after a 

notice of proposed rulemaking is issued. 

(42 U.S.C. 6313(a)(6)(C)(iii)) At the time 

of preparation of the NOPR analysis, the 

expected issuance date was December 

2013, leading to a final rule publication 

in December 2015. EPCA also states that 

amended standards prescribed under 

this subsection shall apply to products 

manufactured after a date that is the 

later of—(I) the date that is 3 years after 

publication of the final rule establishing 

a new standard; or (II) the date that is 

6 years after the effective date of the 

current standard for a covered product. 

(42 U.S.C. 6313(a)(6)(C)(iv)) The date 

under clause (I), currently projected to 

be December 2018, is later than the date 

under clause (II). For purposes of its 

analysis, DOE used 2019 as the first year 

of compliance with amended standards. 

11. Payback Period Inputs 

The payback period is the amount of 

time it takes the consumer to recover the 

additional installed cost of more 

efficient equipment, compared to 

baseline equipment, through energy cost 

savings. Payback periods are expressed 

in years. Payback periods that exceed 

the life of the product mean that the 

increased total installed cost is not 

recovered in reduced operating 

expenses. 

The inputs to the PBP calculation are 

the total installed cost of the product to 

the customer for each efficiency level 

and the average annual operating 

expenditures for each efficiency level. 

The PBP calculation uses the same 

inputs as the LCC analysis, except that 

discount rates are not needed. 

12. Rebuttable-Presumption Payback 

Period 

EPCA establishes a rebuttable 

presumption that a standard is 

economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy (and, as 

applicable, water) savings during the 

first year that the consumer will receive 

as a result of the standard, as calculated 

under the test procedure in place for 

that standard. For each considered 

efficiency level, DOE determines the 

value of the first year’s energy savings 

by calculating the quantity of those 

savings in accordance with the 

applicable DOE test procedure, and 

multiplying that amount by the average 

energy price forecast for the year in 

which compliance with the amended 

standards would be required. 

G. Shipments Analysis 

DOE uses projections of product 

shipments to calculate the national 

impacts of standards on energy use, 

NPV, and future manufacturer cash 

flows. DOE develops shipment 

projections based on historical data and 

an analysis of key market drivers for 

each product. Historical shipments data 

are used to build up an equipment stock 

and also to calibrate the shipments 

model. 

The RFI requested comment on DOE’s 

approach in developing the shipments 

model and forecasts. Carrier 

recommended forming a working group 

with AHRI to discuss shipment forecast 

modeling techniques for this 

rulemaking. (Carrier, No. 7 at p. 7) As 

indicated earlier, this option was not 

feasible in light of the statutory time 

constraints. Instead, DOE developed a 

shipments model that includes three 

market segments: (1) Existing buildings 

replacing broken equipment, (2) new 

commercial buildings acquiring 

equipment, and (3) existing buildings 

acquiring new equipment for the first 

time. 

1. Shipments by Market Segment 

For existing buildings replacing 

broken equipment, the shipments model 

uses a stock accounting framework. 

Given the equipment entering the stock 

in each year and a retirement function 

based on the lifetime distribution 

developed in the LCC analysis, the 

model predicts how many units reach 

the end of their lifetime in each year. 

DOE typically refers to new shipments 

intended to replace retired units as 

‘‘replacement’’ shipments. Such 

shipments are usually the largest part of 

total shipments. 

For CUAC and CUHP, end of lifetime 

is generally associated with compressor 

failure. Installing a new compressor, 

while possible, is costly. This fact leads 

customers to typically replace the entire 

CUAC/CUHP unit rather than simply 

replace the compressor. A new unit is 

more expensive than compressor 

replacement, but it may be more energyefficient than the existing unit, which 

means it would have lower operating 

costs. If standards significantly increase 

the cost of new equipment, one would 

expect that the repair option would 

become more attractive. 

For the small and large CUAC and 

CUHP equipment classes, DOE modeled 

the repair vs. replacement decision, as 

described below. If the unit is repaired 

(i.e., with a new compressor), its life is 

extended by another lifetime, based on 

the retirement function. If a unit 

encounters a second failure within the 

analysis period, the model assumes that 

the customer replaces the unit with a 

new one. For the very large CUAC and 

CUHP equipment classes, DOE assumed 

that all customers repair the unit at the 

first failure because the total installed 

cost of a new unit is very high relative 

to the cost of repair. If a unit encounters 

a second failure within the analysis 

period, DOE assumed that the customer 

replaces the unit with a new one, as 

further repair of very old equipment is 

not likely to occur. 

To model the repair vs. replacement 

decision, DOE developed a consumer 

choice model that estimates customer 

sensitivity to total installation cost. A 

sensitivity parameter was calculated 

using efficiency market share data for 

years 1999–2001, along with estimates 

of equipment prices and installation 

costs by efficiency level (the data 

sources are described below). DOE 

applied this sensitivity to the difference 

between the total installed cost of a new 

unit and the repair cost of the existing 

unit. 

The replacement cost at each 

efficiency level is the total installed cost 

derived in the LCC analysis. For repair 

cost, DOE developed its own estimates 

of the material costs for compressors. 

(DOE examined RS Means material costs 

for compressors and concluded that 

they were inaccurate for all size classes, 

as several of the estimates exceeded the 

costs for an entire new unit.) For labor 

and non-compressor material costs, DOE 

used data in RS Means Facilities 

Maintenance & Repair Cost Data, 

2013.55 Within each equipment class, 

DOE used repair costs that increase in 

direct proportion with the price of the 

equipment and with IEER level. 

DOE recognizes that the decision to 

repair or replace equipment is not solely 

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56U.S.Census Bureau. Current Industrial Reports 

for Refrigeration, Air Conditioning, and Warm Air 

Heating Equipment, MA333M. Note that the current 

industrial reports were discontinued in 2010, so 

more recent data are not available. 

a function of the difference between the 

total installed cost of a new unit and the 

repair cost of the existing unit. The 

difference in operating costs may also 

play a role, as may general economic 

conditions and other factors. DOE did 

not have sufficient information to 

incorporate these factors explicitly into 

its model, so it developed an alternative 

approach that assumes that the factors 

influencing the repair or replace 

decision will be similar in the future as 

they were in the past. DOE estimated an 

historical average repair rate by 

minimizing the difference between 

actual historical shipments and modelpredicted shipments in a ‘‘no-repairs’’ 

scenario. DOE developed a time series 

for historical shipments using data 

provided by AHRI in 2001 for the small 

and large CUAC and CUHP equipment 

classes for the years 1980 to 2001, 

combined with Census data on 

manufacturer shipments 56 as the basis 

for shipments in earlier and later years, 

and for very large CUAC and CUHP. 

Chapter 9 of the NOPR TSD discusses in 

more detail the AHRI and Census data 

and its use by DOE. 

The repair/replace model is a binary 

choice model with two parameters, 

‘‘alpha’’ and ‘‘gamma.’’ ‘‘Alpha’’ 

represents customer sensitivity to the 

efficiency-weighted average cost 

difference between total installed cost of 

replacement and repair costs. DOE 

assumed that the ‘‘alpha’’ is equal to the 

parameter used in the customer choice 

model to represent customer sensitivity 

to total installed cost. (The customer 

choice model is described in section 

IV.G.1.) ‘‘Gamma’’ is a scenario 

parameter that limits the number of 

repairs and can be thought of as 

representing ‘‘unknown replacements.’’ 

Since ‘‘alpha’’ is assumed to be known, 

DOE estimated ‘‘gamma’’ by minimizing 

the difference between the historical 

average repair rate and the repair 

probability predicted by the repair/

replace model. This approach ensures 

that the estimated repair rate in each 

forecast year in the base case is close to 

the historical average rate. In the 

standards cases, which have higher 

installed costs, the repair rate is higher. 

Chapter 9 of the NOPR TSD describes 

the repair/replace decision model in 

more detail. 

For existing buildings acquiring new 

equipment for the first time, DOE first 

estimated saturation values (percentages 

of total floor space served by different 

cooling capacities or types of 

equipment) for the stock. CBECS 

provides overall CUAC and CUHP 

saturation values. To derive percentages 

of floor space served by different 

cooling capacities or types of 

equipment, DOE used shipments data 

from the Census. DOE derived the 

approximate historical floor space 

saturations for each of the CUAC and 

CUHP equipment classes by multiplying 

the CUAC and CUHP saturation values 

from CBECS by the shipment shares 

from the Census. DOE used a logistic 

regression procedure to fit the CBECS 

historical stock saturations to produce a 

smooth time series of saturation 

estimates for the analysis period. 

Shipments for existing buildings 

acquiring new equipment for the first 

time in each future year are estimated 

by multiplying the difference in 

projected stock saturation values 

between the future year and the 

previous year with the estimated floor 

space without CUAC and CUHP 

equipment in the previous year. In other 

words, the shipments account for the 

incremental increase in stock saturation. 

For new commercial buildings 

acquiring equipment, shipments are 

estimated by multiplying new 

construction floor space in each future 

year by saturation values (percentages of 

new floor space served by different 

cooling capacities or types of 

equipment). The shipments model relies 

on AEO 2013 for forecasts of new 

construction floor space. It assumes that 

the saturation value in new commercial 

buildings is the same as the stockaverage saturation for each year. 

Issue 13: DOE requests comments, 

information and data on the methods 

and key assumptions used to model the 

repair vs. replacement decision, which 

is based on estimates of the cost of 

repair vs. the cost of new equipment. 

Field data for repair costs and how they 

vary with equipment first cost and age 

would allow DOE to refine its 

shipments forecasting by more precisely 

modeling the repair vs. replace decision 

sensitivity to the difference in repair 

and replacement equipment costs. 

Issue 14: DOE requests comments, 

information and data regarding the 

lifetime of repaired equipment. DOE’s 

analysis considered major repair 

consisting of replacement of the 

compressor and miscellaneous materials 

associated with the compressor; DOE 

estimated that repaired equipment 

would last as long as new replacement 

equipment. Information is requested to 

determine whether this estimate is 

reasonable. 

Issue 15: DOE requests comments, 

information, and data on the repair of 

CUACs and CUHPs in the ≥240,000 Btu/ 

h and <760,000 Btu/h equipment 

classes. For this equipment, the 

shipments analysis estimated that any 

equipment experiencing their first 

failure would be repaired rather than 

replaced. Information is requested to 

determine whether this estimate is 

reasonable. 

2. Shipment Market Shares by 

Efficiency Level 

The approach described in the 

preceding section provides total 

shipments in each equipment class for 

each year. To estimate the market shares 

of the considered efficiency levels in 

future shipments, DOE developed a 

customer choice model. The model was 

calibrated by estimating values for two 

parameters, representing customer 

sensitivity to total installation cost and 

annual operating cost. To calibrate the 

model, DOE used EER market share data 

for small and large CUAC equipment 

classes provided by AHRI for the 

previous rulemaking. These market 

shares are for 1999–2001. DOE used the 

equipment prices by EER level from the 

2004 ANOPR to assign equipment prices 

to each EER bin, along with the 

installation costs and maintenance costs 

developed for this NOPR. DOE derived 

unit energy consumption (UEC) values 

for each of the EER bins using the UEC 

to EER relationships presented in the 

2004 ANOPR TSD, and then applied 

historic electricity prices to calculate 

annual energy costs. 

To estimate values for the parameters, 

DOE used a non-linear regression 

approach that minimized the sum of the 

squared difference between historical 

market shares and the predicted values 

at each efficiency level for the small and 

large CUAC equipment classes. Starting 

in 2013, application of the parameters, 

along with data on the installed cost and 

operating cost at each efficiency level 

under consideration, determines the 

market shares of each efficiency level. 

The same parameters were used to 

estimate market shares for each 

equipment class. The details of this 

approach can be found in chapter 9 of 

the NOPR TSD. 

H. National Impact Analysis 

The NIA assesses the national energy 

savings (NES) and the national NPV of 

total customer costs and savings that 

would be expected to result from 

amended standards at specific efficiency 

levels. 

To make the analysis more accessible 

and transparent to all interested parties, 

DOE used an MS Excel spreadsheet 

model to calculate the energy savings 

and the national customer costs and 

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57 DOE understands that MS Excel is the most 

widely used spreadsheet calculation tool in the 

United States and there is general familiarity with 

its basic features. Thus, DOE’s use of MS Excel as 

the basis for the spreadsheet models provides 

interested parties with access to the models within 

a familiar context. In addition, the TSD and other 

documentation that DOE provides during the 

rulemaking help explain the models and how to use 

them, and interested parties can review DOE’s 

analyses by changing various input quantities 

within the spreadsheet. 

58A heating efficiency of 2.9 COP corresponds to 

the existing minimum heating efficiency standard 

for CUHP, a value which the Department believes 

is representative of the heat pump stock 

characterized by CBECS. 

savings from each TSL.57 The NIA 

calculations are based on the annual 

energy consumption and total installed 

cost data from the energy use analysis 

and the LCC analysis. DOE forecasted 

the lifetime energy savings, energy cost 

savings, equipment costs, and NPV of 

customer benefits for each equipment 

class for equipment sold from 2019 

through 2048. 

DOE evaluated the impacts of 

potential new and amended standards 

for small, large, and very large aircooled commercial package air 

conditioning and heating equipment by 

comparing base-case projections with 

standards-case projections. The basecase projections characterize energy use 

and customer costs for each equipment 

class in the absence of new and 

amended energy conservation 

standards. DOE compared these 

projections with those characterizing 

the market for each equipment class if 

DOE were to adopt amended standards 

at specific energy efficiency levels (i.e., 

the standards cases) for that class. 

TABLE IV.12—INPUTS FOR THE NATIONAL IMPACT ANALYSIS

Input Description 

Shipments ....................................... Annual shipments from shipments model. 

Compliance date of standard .......... January 1, 2019. 

Base case efficiencies .................... Estimated by customer choice model. 

Standards case efficiencies ............ Estimated by customer choice model. 

Annual energy consumption per 

unit.

Calculated for each efficiency level and equipment class based on inputs from the energy use analysis. 

Total installed cost per unit ............. Calculated equipment prices by efficiency level using manufacturer selling prices and weighted-average 

overall markup values. Installation costs vary in direct proportion to the weight of the equipment. 

Electricity expense per unit ............. Annual energy use for each equipment class is multiplied by the corresponding average energy price. 

Escalation of electricity prices ........ AEO 2013 forecasts (to 2040) and extrapolation beyond 2040. 

Electricity site-to-primary energy 

conversion.

A time series conversion factor; includes electric generation, transmission, and distribution losses. 

Discount rates ................................. 3% and 7% real. 

Present year .................................... 2013. 

1. Efficiency Trends 

A key component of DOE’s estimates 

of NES and NPV are the equipment 

energy efficiencies forecasted over time 

for the base case and for each of the 

standards cases. For the 2004 ANOPR, 

DOE used a combination of historical 

commercial and residential equipment 

efficiency data to forecast efficiencies 

for the base case. To estimate the impact 

that standards would have in the year 

compliance becomes required, DOE 

used a ‘‘roll-up’’ scenario, which 

assumes that 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 equipment 

shipments at efficiencies above the 

standard level under consideration are 

not affected. 69 FR 45489–45490. 

The Joint Efficiency Advocates 

encouraged DOE to consider a ‘‘shift’’ 

scenario (one in which efficiencies 

above the standard level under 

consideration are affected in a standards 

case) for the national impact analysis. 

(Joint Efficiency Advocates, No. 11 at p. 

3) DOE did not have sufficient data on 

current efficiency market shares or 

information on market behavior to be 

able to develop a ‘‘shift’’ scenario. 

The RFI requested information on 

expected trends in efficiency over the 

long run, but DOE did not receive 

comments. For this NOPR, DOE used 

the customer choice model in the 

shipments analysis to estimate 

efficiency market shares in each year of 

the shipments projection period. For 

each standards case, the efficiency 

levels that are below the standard are 

removed from the possible choices 

available to customers. The base case 

shows a slight increasing trend for small 

CUAC, but the shares are fairly constant 

for large and very large CUAC. The 

estimated efficiency trends in the base 

case and standards cases are described 

in chapter 9 of the NOPR TSD. 

2. National Energy Savings 

For each year in the forecast period, 

DOE calculates the national energy 

savings for each standard level by 

multiplying the shipments of small, 

large, and very large air-cooled CUAC 

and CUHP by the per-unit annual 

energy savings. Cumulative energy 

savings are the sum of the annual energy 

savings over the lifetime of all 

equipment shipped during 2019–2048. 

For small, large, and very large aircooled CUAC, the per-unit annual 

energy savings for each considered 

efficiency level come from the energy 

use analysis, which estimated energy 

consumption for 2019. For later years, 

DOE adjusted the per-unit annual site 

energy use to account for changes in 

climate based on projections in AEO 

2013. 

For small, large, and very large aircooled CUHP, DOE did not conduct an 

energy use analysis. Because the 

cooling-side performance of CUHP is 

nearly identical to that of CUAC, DOE 

used the energy consumption estimates 

developed for CUACs to characterize the 

cooling-side performance of CUHP of 

the same size. To characterize the 

heating-side performance, DOE 

analyzed CBECS 2003 data to develop a 

national-average annual energy use per 

square foot for buildings that use 

CUHPs. DOE assumed that the average 

COP of the CUHP was 2.9.58 DOE 

converted the energy use per square foot 

value to annual energy use per ton using 

a ton per square foot relationship 

derived from the energy use analysis for 

CUAC. This value is different for each 

equipment class. Because equipment 

energy use is a function of efficiency, 

DOE assumed that the annual heating 

energy consumption of a unit scales 

proportionally with its heating COP 

efficiency level. Finally, to determine 

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59http://www.ahridirectory.org/ahridirectory/

pages/homeM.aspx. 

the COPs of units with given IEERs, 

DOE correlated COP to IEER based on 

the AHRI Certified Equipment 

Database.59 Thus, for any given cooling 

efficiency of a CUHP unit, DOE was able 

to establish the corresponding heating 

efficiency, and, in turn, the associated 

annual heating energy consumption. 

For CUAC and CUHP, DOE did not 

adjust its estimate of energy savings to 

account for a rebound effect. A direct 

rebound effect occurs when an increase 

in efficiency is accompanied by more 

intensive use of the equipment. DOE is 

not aware of any evidence to support 

the notion that commercial customers 

would run more efficient equipment 

longer or more frequently. The 

operation of CUAC and CUHP is 

generally matched to the indoor comfort 

needs of the building, regardless of the 

equipment efficiency. 

Issue 16: DOE requests comments on 

its decision to not include a rebound 

effect for more-efficient CUAC and 

CUHP. 

DOE calculates the total annual site 

energy savings for a given standards 

case by subtracting total energy use in 

the standards case from total energy use 

in the base case. Part of the reduction in 

a standards case is due to decreasing 

shipments resulting from customers 

choosing to repair than replace broken 

equipment. The NES calculation also 

includes the estimated energy use of 

units that are repaired rather than 

replaced. The units repaired in each 

year are from a number of different 

vintages (year built). For each vintage, 

DOE estimated an average efficiency 

based on an estimated historical trend, 

and estimated the average energy use by 

scaling the energy use for baseline units 

in 2013 according to the estimated 

efficiency in each year. The average 

energy use of units that are repaired in 

each year is weighted by the number of 

units in each vintage. 

DOE converted the site electricity 

consumption and savings to primary 

energy (power sector energy 

consumption) using annual conversion 

factors derived from the AEO 2013 

version of the NEMS. Cumulative 

energy savings are the sum of the NES 

for each year in which equipment 

shipped during 2019–2048 continue to 

operate. 

DOE has historically presented NES 

in terms of primary energy savings. In 

response to the recommendations of a 

committee on ‘‘Point-of-Use and FullFuel-Cycle Measurement Approaches to 

Energy Efficiency Standards’’ appointed 

by the National Academy of Science, 

DOE announced its intention to use fullfuel-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). While DOE stated in that notice 

that it intended to use the Greenhouse 

Gases, Regulated Emissions, and Energy 

Use in Transportation (GREET) model to 

conduct the analysis, it also said it 

would review alternative methods, 

including the use of EIA’s National 

Energy Modeling System (NEMS). After 

evaluating both models and the 

approaches discussed in the August 18, 

2011 notice, DOE published a statement 

of amended policy in the Federal 

Register in which DOE explained its 

determination that NEMS is a more 

appropriate tool for this specific use. 77 

FR 49701 (August 17, 2012). Therefore, 

DOE is using NEMS to conduct FFC 

analyses. The approach used for this 

NOPR, and the FFC multipliers that 

were applied, are described in appendix 

10–A of the NOPR TSD. 

3. Net Present Value of Customer 

Benefit 

The inputs for determining the NPV 

of the total costs and benefits 

experienced by customers of the 

considered equipment are: (1) Total 

annual installed cost; (2) total annual 

savings in operating costs; and (3) a 

discount factor. DOE calculates the 

lifetime net savings for equipment 

shipped each year as the difference 

between the base case and each 

standards case in total lifetime savings 

in lifetime operating costs and total 

lifetime increases in installed costs. 

DOE calculates lifetime operating cost 

savings over the life of each small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment shipped during the forecast 

period. 

a. Total Annual Installed Cost 

The total installed cost includes both 

the equipment price and the installation 

cost. For each equipment class, DOE 

calculated equipment prices by 

efficiency level using manufacturer 

selling prices and weighted-average 

overall markup values (weights based 

on shares of the distribution channels 

used). Installation costs vary in direct 

proportion to the weight of the 

equipment. Because DOE calculated the 

total installed cost as a function of 

equipment efficiency, it was able to 

determine annual total installed costs 

based on the annual shipment-weighted 

efficiency levels determined in the 

shipments model. 

For small, large, and very large aircooled CUHPs, to estimate the cost at 

higher efficiency levels, DOE applied 

the same incremental equipment costs 

that were developed for the comparable 

CUAC efficiency levels for each 

equipment class (see section IV.C.4). 

As noted in section IV.F.1, DOE 

assumed no change in small, large, and 

very large air-cooled CUAC and CUHP 

prices over the analysis period. 

However, DOE conducted sensitivity 

analyses using alternative price trends: 

one in which prices decline after 2013, 

and one in which prices rise. These 

price trends, and the NPV results from 

the associated sensitivity cases, are 

described in appendix 10–B of the 

NOPR TSD. 

The NPV calculation includes the 

repair cost of units that are repaired 

rather than replaced. The approach used 

to estimate such costs is described in 

section IV.G. 

b. Total Annual Operating Cost Savings 

DOE calculates the total annual 

operating cost savings for a given 

standards case relative to operating 

costs in the base case. Part of the 

operating cost savings in a standards 

case is due to a decrease in shipments 

resulting from customers choosing to 

repair than replace broken equipment. 

The NPV calculation includes the 

estimated operating costs of units that 

are repaired rather than replaced. These 

costs were estimated based on the 

average energy use of such units and the 

average electricity price in each year. 

The per-unit energy savings were 

derived as described in section IV.H.2. 

To calculate future electricity prices, 

DOE applied the projected trend in 

national-average commercial electricity 

price from the AEO 2013 Reference 

case, which extends to 2040, to the 

tariff-based prices derived in the LCC 

and PBP analysis. DOE used the trend 

from 2030 to 2040 to extrapolate beyond 

2040. In addition, DOE analyzed 

scenarios that used the trends in the 

AEO 2013 Low Economic Growth and 

High Economic Growth cases. These 

cases have higher and lower energy 

price trends compared to the Reference 

case. These price trends, and the NPV 

results from the associated cases, are 

described in appendix 10–C of the 

NOPR TSD. 

DOE estimated that annual 

maintenance costs (including minor 

repairs) do not vary with efficiency 

within each equipment class, so they do 

not figure into the annual operating cost 

savings for a given standards case. In 

addition, as noted previously, DOE 

included major repair costs in its 

shipments model rather than developing 

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58986 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

60OMB Circular A–4, section E (Sept. 17, 2003). 

Available at: http://www.whitehouse.gov/omb/

circulars_a004_a-4. 

61U.S. Securities and Exchange Commission. 

Annual 10–K Reports. Various Years. http://sec.gov. 

62U.S. Census Bureau, Annual Survey of 

Manufacturers: General Statistics: Statistics for 

Industry Groups and Industries. http://

factfinder2.census.gov/faces/nav/jsf/pages/

searchresults.xhtml?refresh=t. 

63Hoovers Inc. Company Profiles. Various 

Companies. http://www.hoovers.com. 

annualized repair costs. As a result, 

repair costs do not factor directly into 

the determination of total operating cost 

savings for shipments. 

In calculating the NPV, DOE 

multiplies the net savings in future 

years by a discount factor to determine 

their present value. DOE estimates the 

NPV 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.60 The discount rates 

for the determination of NPV are in 

contrast to the discount rates used in the 

LCC analysis, which are designed to 

reflect a consumer’s perspective. The 7- 

percent real value is an estimate of the 

average before-tax rate of return to 

private capital in the U.S. economy. The 

3-percent real value represents the 

‘‘social rate of time preference,’’ which 

is the rate at which society discounts 

future consumption flows to their 

present value. 

I. Customer Subgroup Analysis 

In analyzing the potential impacts of 

new or amended standards, DOE 

evaluates impacts on identifiable groups 

(i.e., subgroups) of customers that may 

be disproportionately affected by a 

national standard. For the NOPR, DOE 

evaluated impacts on a small business 

subgroup using the LCC spreadsheet 

model. The customer subgroup analysis 

is discussed in detail in chapter 11 of 

the NOPR TSD. 

J. Manufacturer Impact Analysis 

1. Overview 

DOE performed an MIA to determine 

the financial impact of amended energy 

conservation standards on 

manufacturers of CUAC and to estimate 

the potential impact of such standards 

on employment and manufacturing 

capacity. The MIA has both quantitative 

and qualitative aspects. The quantitative 

part of the MIA primarily relies on the 

Government Regulatory Impact Model 

(GRIM), an industry cash-flow model 

with inputs specific to this rulemaking. 

The key GRIM inputs are data on the 

industry cost structure, equipment 

costs, shipments, and assumptions 

about markups and conversion 

expenditures. The key output is the 

industry net present value (INPV). 

Different sets of assumptions (markup 

scenarios) will produce different results. 

The qualitative part of the MIA 

addresses factors such as product 

characteristics, impacts on particular 

subgroups of firms, and important 

market and product trends. The 

complete MIA is outlined in chapter 12 

of the NOPR TSD. 

DOE conducted the MIA for this 

rulemaking in three phases. In Phase 1 

of the MIA, DOE prepared a profile of 

the CUAC and CUHP industry that 

includes a top-down manufacturer cost 

analysis of manufacturers used to derive 

preliminary financial inputs for the 

GRIM (e.g., sales, general, and 

administration (SG&A) expenses; 

research and development (R&D) 

expenses; and tax rates). DOE used 

public sources of information, including 

company SEC 10–K filings,61 corporate 

annual reports, the U.S. Census 

Bureau’s Economic Census,62 and 

Hoover’s reports.63

In Phase 2 of the MIA, DOE prepared 

an industry cash-flow analysis to 

quantify the potential impacts of an 

amended energy conservation standard. 

In general, energy conservation 

standards can affect manufacturer cash 

flow in three distinct ways: (1) Create a 

need for increased investment; (2) raise 

production costs per unit; and (3) alter 

revenue due to higher per-unit prices 

and possible changes in sales volumes. 

In Phase 3 of the MIA, DOE 

conducted structured, detailed 

interviews with a representative crosssection of manufacturers. During these 

interviews, DOE discussed engineering, 

manufacturing, procurement, and 

financial topics to validate assumptions 

used in the GRIM and to identify key 

issues or concerns. See section IV.J.2 for 

a description of the key issues 

manufacturers raised during the 

interviews. 

Additionally, in Phase 3, DOE 

evaluated subgroups of manufacturers 

that may be disproportionately 

impacted by new standards or that may 

not be accurately represented by the 

average cost assumptions used to 

develop the industry cash-flow analysis. 

For example, small manufacturers, 

niche players, or manufacturers 

exhibiting a cost structure that largely 

differs from the industry average could 

be more negatively affected. DOE 

identified one subgroup (i.e., small 

manufacturers) for a separate impact 

analysis. 

DOE applied the small business size 

standards published by the Small 

Business Administration (SBA) to 

determine whether a company is 

considered a small business. 65 FR 

30836, 30848 (May 15, 2000), as 

amended at 65 FR 53533, 53544 (Sept. 

5, 2000) and codified at 13 CFR part 

121. To be categorized as a small 

business under North American 

Industry Classification System (NAICS) 

code 333415, ‘‘Air-Conditioning and 

Warm Air Heating Equipment and 

Commercial and Industrial Refrigeration 

Equipment Manufacturing,’’ a CUAC 

and CUHP manufacturer and its 

affiliates may employ a maximum of 

750 employees. The 750-employee 

threshold includes all employees in a 

business’s parent company and any 

other subsidiaries. Based on this 

classification, DOE identified at least 

two manufacturers that qualify as small 

businesses. The small manufacturer 

subgroup is discussed in section VI.B of 

this notice and in chapter 12 of the 

NOPR TSD. 

2. Government Regulatory Impact Model 

DOE uses the GRIM to quantify the 

changes in cash flow due to new 

standards that result in a higher or 

lower industry value. The GRIM 

analysis uses a standard, annual cashflow analysis that incorporates 

manufacturer costs, markups, 

shipments, and industry financial 

information as inputs. The GRIM 

models changes in costs, distribution of 

shipments, investments, and 

manufacturer margins that could result 

from an amended energy conservation 

standard. The GRIM spreadsheet uses 

the inputs to arrive at a series of annual 

cash flows, beginning in 2014 (the base 

year of the analysis) and continuing to 

2048. DOE calculated INPVs by 

summing the stream of annual 

discounted cash flows during this 

period. For CUAC and CUHP 

manufacturers, DOE used a real 

discount rate of 6.2 percent, which was 

derived from industry financials and 

then modified according to feedback 

received during manufacturer 

interviews. 

The GRIM calculates cash flows using 

standard accounting principles and 

compares changes in INPV between a 

base case and each standards case. The 

difference in INPV between the base 

case and a standards case represents the 

financial impact of the amended energy 

conservation standard on 

manufacturers. As discussed previously, 

DOE collected this information on the 

critical GRIM inputs from a number of 

sources, including publicly-available 

data and interviews with a number of 

manufacturers (described in the next 

section). The GRIM results are shown in 

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section V.B.2. Additional details about 

the GRIM, the discount rate, and other 

financial parameters can be found in 

chapter 12 of the NOPR TSD. 

a. Government Regulatory Impact Model 

Key Inputs 

Manufacturer Production Costs 

Manufacturing higher-efficiency 

equipment is typically more expensive 

than manufacturing baseline equipment 

due to the use of more complex 

components, which are typically more 

costly than baseline components. The 

changes in the manufacturer production 

costs (MPCs) of the analyzed equipment 

can affect the revenues, gross margins, 

and cash flow of the industry, making 

these equipment cost data key GRIM 

inputs for DOE’s analysis. 

In the MIA, DOE used the MPCs for 

each considered efficiency level 

calculated in the engineering analysis, 

as described in section IV.C.3 and 

further detailed in chapter 5 of the 

NOPR TSD. In addition, DOE used 

information from its teardown analysis, 

described in chapter 5 of the TSD, to 

disaggregate the MPCs into material, 

labor, and overhead costs. To calculate 

the MPCs for equipment above the 

baseline, DOE added the incremental 

material, labor, and overhead costs from 

the engineering cost-efficiency curves to 

the baseline MPCs. These cost 

breakdowns and product markups were 

validated and revised with 

manufacturers during manufacturer 

interviews. 

Shipments Forecasts 

The GRIM estimates manufacturer 

revenues based on total unit shipment 

forecasts and the distribution of these 

values by efficiency level. Changes in 

sales volumes and efficiency mix over 

time can significantly affect 

manufacturer finances. For this analysis, 

the GRIM uses the NIA’s annual 

shipment forecasts derived from the 

shipments analysis from 2014 (the base 

year) to 2048 (the end year of the 

analysis period). The NIA shipments 

forecasts are, in part, based on a 

consumer choice model that estimates 

customer sensitivity to total installed 

cost as well as operating costs. See 

section IV.G. above and chapter 9 of the 

NOPR TSD for additional details. 

Product and Capital Conversion Costs 

An amended energy conservation 

standard would cause manufacturers to 

incur one-time conversion costs to bring 

their production facilities and product 

designs into compliance. DOE evaluated 

the level of conversion-related 

expenditures that would be needed to 

comply with each considered efficiency 

level in each equipment class. For the 

MIA, DOE classified these conversion 

costs into two major groups: (1) Capital 

conversion costs; and (2) product 

conversion costs. Capital conversion 

costs are one-time investments in 

property, plant, and equipment 

necessary to adapt or change existing 

production facilities such that new 

compliant equipment designs can be 

fabricated and assembled. Product 

conversion costs are one-time 

investments in research, development, 

testing, marketing, and other noncapitalized costs necessary to make 

product designs comply with the 

amended energy conservation standard. 

These expenditures are made between 

the announcement year of the standard 

and the effective date of the standard. 

To evaluate the level of capital 

conversion expenditures manufacturers 

would likely incur to comply with 

amended energy conservation 

standards, DOE used manufacturer 

interviews to gather data on the 

anticipated level of capital investment 

that would be required at each 

efficiency level. DOE supplemented 

manufacturer comments with estimates 

of capital expenditure requirements 

derived from the product teardown 

analysis and engineering analysis 

described in chapter 5 of the TSD. 

DOE assessed the product conversion 

costs at each considered efficiency level 

by integrating data from quantitative 

and qualitative sources. DOE considered 

market-share-weighted feedback 

regarding the potential costs of each 

efficiency level from multiple 

manufacturers to estimate product 

conversion costs and validated those 

numbers against engineering estimates 

of redesign efforts. Additionally, DOE 

incorporated estimates of the 

incremental Certification, Compliance & 

Enforcement (CC&E) testing costs that 

would result from the proposed test 

procedure change. This results in 

product conversion costs which occur 

even at the baseline because 

manufacturers would need to re-rate all 

existing basic models. 

The testing costs that occur at 

baseline total $12.7M for the industry. 

This value is based the 6,366 product 

listings found in the AHRI database at 

the time of analysis. DOE assumed that 

the 29 brands in the industry would 

each need to run 2 validation tests for 

each of the 12 equipment classes, 

resulting in 696 physical tests at an 

average cost of $10,000 per test, which 

includes the cost of the test units. 

Additionally, the industry would likely 

use AEDMs to determine the IEER rating 

of all remaining basic models. While 

simulation times ranged from 6 to 24 

hours of engineering time, depending on 

the size and complexity of the 

equipment being modeled, DOE 

estimated the average AEDM calculation 

required 13.8 hrs of engineering time to 

complete. The cost of physically testing 

696 units totaled $6.96M and the cost of 

using AEDMs to determine the rating of 

the 6,366 product listings would total 

$5.76M. 

Issue 17: DOE requests comments, 

information, and data that would inform 

adjustment of the DOE’s estimate of 

$12.7M in conversion costs that occurs 

in the base case. 

In general, DOE assumes that all 

conversion-related investments occur 

between the year of publication of the 

final rule and the year by which 

manufacturers must comply with the 

new standard. The conversion cost 

figures used in the GRIM can be found 

in section V.B.2.a of this notice. For 

additional information on the estimated 

product and capital conversion costs, 

see chapter 12 of the NOPR TSD. 

b. Government Regulatory Impact Model 

Scenarios 

Markup Scenarios 

As discussed above, MSPs include 

direct manufacturing production costs 

(i.e., labor, materials, and overhead 

estimated in DOE’s MPCs) and all nonproduction costs (i.e., SG&A, R&D, and 

interest), along with profit. To calculate 

the MSPs in the GRIM, DOE applied 

non-production cost markups to the 

MPCs estimated in the engineering 

analysis for each equipment class and 

efficiency level. Modifying these 

markups in the standards case yields 

different sets of impacts on 

manufacturers. For the MIA, DOE 

modeled two standards-case markup 

scenarios to represent the uncertainty 

regarding the potential impacts on 

prices and profitability for 

manufacturers following the 

implementation of amended energy 

conservation standards: (1) A 

preservation of gross margin percentage 

markup scenario; and (2) a preservation 

of per unit operating profit markup 

scenario. These scenarios lead to 

different markups values that, when 

applied to the inputted MPCs, result in 

varying revenue and cash flow impacts. 

Under the preservation of gross 

margin percentage scenario, DOE 

applied a single uniform ‘‘gross margin 

percentage’’ markup across all efficiency 

levels, which assumes that 

manufacturers would be able to 

maintain the same amount of profit as 

a percentage of revenues at all efficiency 

levels within an equipment class. As 

production costs increase with 

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58988 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

efficiency, this scenario implies that the 

absolute dollar markup will increase as 

well. Based on publicly-available 

financial information for manufacturers 

of small, large, and very large air-cooled 

CUAC and CUHP as well as comments 

from manufacturer interviews, DOE 

assumed the average non-production 

cost markup—which includes SG&A 

expenses, R&D expenses, interest, and 

profit—to be the following for each 

CUAC and CUHP equipment class: 

TABLE IV.13—BASE CASE MARKUPS

Equipment Markup 

Small Commercial Packaged Air-Conditioners (Air-Cooled)—≥65,000 Btu/h and <135,000 Btu/h ........................................................ 1.3 

Small Commercial Packaged Heat Pumps (Air-Cooled)—≥65,000 Btu/h and <135,000 Btu/h ............................................................. 1.3 

Large Commercial Packaged Air-Conditioners (Air-Cooled)—≥135,000 Btu/h and <240,000 Btu/h ..................................................... 1.34 

Large Commercial Packaged Heat Pumps (Air-Cooled)—≥135,000 Btu/h and <240,000 Btu/h ........................................................... 1.34 

Very Large Commercial Packaged Air-Conditioners (Air-Cooled)—≥240,000 Btu/h and <760,000 Btu/h ............................................. 1.41 

Very Large Commercial Packaged Heat Pumps (Air-Cooled)—≥240,000 Btu/h and <760,000 Btu/h .................................................. 1.41 

Because this markup scenario 

assumes that manufacturers would be 

able to maintain their gross margin 

percentage markups as production costs 

increase in response to an amended 

energy conservation standard, it 

represents a high bound to industry 

profitability. 

In the preservation of per unit 

operating profit scenario, manufacturer 

markups are set so that operating profit 

one year after the compliance date of the 

amended energy conservation standard 

is the same as in the base case on a per 

unit basis. Under this scenario, as the 

costs of production increase under a 

standards case, manufacturers are 

generally required to reduce their 

markups to a level that maintains basecase operating profit per unit. The 

implicit assumption behind this markup 

scenario is that the industry can only 

maintain its operating profit in absolute 

dollars per unit after compliance with 

the new standard is required. Therefore, 

operating margin in percentage terms is 

reduced between the base case and 

standards case. DOE adjusted the 

manufacturer markups in the GRIM at 

each TSL to yield approximately the 

same earnings before interest and taxes 

in the standards case as in the base case. 

This markup scenario represents a low 

bound to industry profitability under an 

amended energy conservation standard. 

c. Manufacturer Interviews 

DOE interviewed manufacturers 

representing approximately 97 percent 

of the market by revenue. The 

information gathered during these 

interviews enabled DOE to tailor the 

GRIM to reflect the unique financial 

characteristics of the small, large, and 

very large air-cooled CUAC and CUHP 

industry. In interviews, DOE asked 

manufacturers to describe their major 

concerns with potential rulemaking 

involving CUAC and CUHP equipment. 

The following sections highlight 

manufacturers’ statements that helped 

shape DOEs understanding of potential 

impacts of an amended standard on the 

industry. Manufacturers raised a range 

of general issues for DOE to consider, 

including CC&E, repair and replacement 

rates, and alignment with ASHRAE 

standards. Below, DOE summarizes 

these issues, which were informally 

raised in manufacturer interviews, in 

order to obtain public comment and 

related data. 

Certification, Compliance, and 

Enforcement 

Nearly all manufacturers expressed 

concern over certification, compliance, 

and enforcement (CC&E) costs. In 

particular, confusion over the definition 

of ‘‘basic model,’’ ‘‘equipment class,’’ 

and the still-pending implementation of 

alternative efficiency determination 

methods (AEDMs) has made it difficult 

for some manufacturers to anticipate 

their total testing needs and total testing 

costs. These issues, depending on how 

they are addressed by DOE, will impact 

the number of models to require testing. 

Additionally, manufacturers noted 

that the replacement of the current EER 

standard with the proposed IEER 

standard would introduce additional 

testing complications. IEER testing 

necessitates four data points, at 25%, 

50%, 75%, and 100% capacity, which 

introduces additional cumulative 

uncertainty. Accordingly, manufacturers 

expressed the need for additional 

increases in the testing tolerance. 

Manufacturers noted that the confidence 

limits currently required by the CC&E 

regulations at 10 CFR 429.43 are more 

stringent than current laboratory 

capabilities as well as current industry 

standard practice. 

Repair and Replacement Rates 

During interviews, most 

manufacturers expressed concerns that 

an increase in standards may make 

customers more likely to repair an old 

unit rather than replace it with a new 

one. Manufacturers noted that more 

efficient units tend to be larger, and 

customers may need to make significant 

alterations to roofs in existing buildings 

in order to accommodate larger 

equipment. The high cost of 

redesigning, reconstructing, or possibly 

replacing a roof to hold a new unit 

could deter customers from purchasing 

one. According to manufacturers, 

another reason an amended standard 

may lead to a drop in shipments is the 

price sensitivity of end users. More 

efficient units tend to be more 

expensive. The lower cost of fixing an 

old unit, versus purchasing a new unit, 

may be a more attractive option for 

some customers. Furthermore, 

manufacturers indicated that there 

could be a reduction in energy savings 

from a higher standard due to the 

increase in the number of older, less 

efficient units that are repaired rather 

than replaced with newer, more 

efficient units. Manufacturers expressed 

concern over a potential contraction in 

market size resulting from amended 

standards. 

Alignment With ASHRAE Standards 

Several manufacturers suggested 

during interviews that DOE standards 

should be aligned with other industry 

standards set by ASHRAE and AHRI. A 

few standards, such as ASHRAE 37, 

ASHRAE 41, and AHRI 340/360 are 

currently being revised, and 

manufacturers believe that a 

coordination of standards between DOE 

and industry organizations would be a 

practical way to reduce the amount of 

time they need to spend on redesigning 

products and meeting multiple 

regulations. 

K. Emissions Analysis 

In the emissions analysis, DOE 

estimated the reduction in power sector 

emissions of carbon dioxide (CO2), 

nitrogen oxides (NOX), sulfur dioxide 

(SO2), and mercury (Hg) from potential 

energy conservation standards for small, 

large, and very large air-cooled 

commercial package air conditioning 

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Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 58989 

64Emissions factors based on the Annual Energy 

Outlook 2014 (AEO 2014), which became available 

too late for incorporation into this analysis, indicate 

that a significant decrease in the cumulative 

emission reductions of carbon dioxide, methane, 

nitrous oxide, sulfur dioxide, nitrogen oxides and 

mercury from the proposed standards can be 

expected if the projections of power plant 

utilization assumed in AEO 2014 are realized. For 

example, the estimated amount of cumulative 

emission reductions of CO2 are expected to 

decrease by 36% from DOE’s current estimate (from 

1,085 Mt to 697Mt) based on the projections in AEO 

2014 relative to AEO 2013. The monetized benefits 

from GHG reductions would likely decrease by a 

comparable amount. DOE plans to use emissions 

factors based on the most recent AEO available for 

the next phase of this rulemaking, which may or 

may not be AEO 2014, depending on the timing of 

the issuance of the next rulemaking document. 

65Forster, P., V. Ramaswamy, P. Artaxo, T. 

Berntsen, R. Betts, D.W. Fahey, J. Haywood, J. Lean, 

D.C. Lowe, G. Myhre, J. Nganga, R. Prinn, G. Raga, 

M. Schulz and R. Van Dorland. 2007: Changes in 

Atmospheric Constituents and in Radiative Forcing. 

In Climate Change 2007: The Physical Science 

Basis. Contribution of Working Group I to the 

Fourth Assessment Report of the Intergovernmental 

Panel on Climate Change. S. Solomon, D. Qin, M. 

Manning, Z. Chen, M. Marquis, K.B. Averyt, 

M.Tignor and H.L. Miller, Editors. 2007. Cambridge 

University Press, Cambridge, United Kingdom and 

New York, NY, USA. p. 212. 

and heating equipment. In addition, 

DOE estimates 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 51282 (Aug. 

18, 2011)), the FFC analysis includes 

impacts on emissions of methane (CH4) 

and nitrous oxide (N2O), both of which 

are recognized as greenhouse gases. 

DOE conducted the emissions 

analysis using emissions factors that 

were derived from data in the Energy 

Information Agency’s (EIA’s) Annual 

Energy Outlook 2013 (AEO 2013), 

supplemented by data from other 

sources.64 DOE developed separate 

emissions factors for power sector 

emissions and upstream emissions. The 

method that DOE used to derive 

emissions factors is described in chapter 

13 of the NOPR TSD. 

For CH4 and N2O, DOE calculated 

emissions reduction in tons and also in 

terms of units of carbon dioxide 

equivalent (CO2eq). Gases are converted 

to CO2eq by multiplying by the gas’ 

global warming potential (GWP) over a 

100-year time horizon. Based on the 

Fourth Assessment Report of the 

Intergovernmental Panel on Climate 

Change,65 DOE used GWP values of 25 

for CH4 and 298 for N2O. 

EIA prepares the Annual Energy 

Outlook using the National Energy 

Modeling System (NEMS). Each annual 

version of NEMS incorporates the 

projected impacts of existing air quality 

regulations on emissions. AEO 2013 

generally represents current legislation 

and environmental regulations, 

including recent government actions, for 

which implementing regulations were 

available as of December 31, 2012. 

SO2 emissions from affected electric 

generating units (EGUs) are subject to 

nationwide and regional emissions capand-trade programs. Title IV of the 

Clean Air Act sets an annual emissions 

cap on SO2 for affected EGUs in the 48 

contiguous States and the District of 

Columbia (D.C.). SO2 emissions from 28 

eastern states and D.C. were also limited 

under the Clean Air Interstate Rule 

(CAIR; 70 FR 25162 (May 12, 2005)), 

which created an allowance-based 

trading program that operates along 

with the Title IV program. CAIR was 

remanded to the U.S. Environmental 

Protection Agency (EPA) by the U.S. 

Court of Appeals for the District of 

Columbia Circuit but it remained in 

effect. 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). On July 6, 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. See EME Homer City 

Generation, LP v. EPA, No. 11–1302, 

2012 WL 3570721 at *24 (D.C. Cir. Aug. 

21, 2012). The court ordered EPA to 

continue administering CAIR. The AEO 

2013 emissions factors used for this 

NOPR assumes that CAIR remains a 

binding regulation through 2040. 

The attainment of emissions caps is 

typically flexible among EGUs and is 

enforced through the use of emissions 

allowances and tradable permits. Under 

existing EPA regulations, any excess 

SO2 emissions allowances resulting 

from the lower electricity demand 

caused by the adoption of an efficiency 

standard could be used to permit 

offsetting increases in SO2 emissions by 

any regulated EGU. In past rulemakings, 

DOE recognized that there was 

uncertainty about the effects of 

efficiency standards on SO2 emissions 

covered by the existing cap-and-trade 

system, but it concluded that negligible 

reductions in power sector SO2

emissions would occur as a result of 

standards. 

Beginning in 2015, however, SO2

emissions will fall as a result of the 

Mercury and Air Toxics Standards 

(MATS) for power plants, which were 

announced by EPA on December 21, 

2011. 77 FR 9304 (Feb. 16, 2012). In the 

final MATS rule, EPA established a 

standard for hydrogen chloride as a 

surrogate for acid gas hazardous air 

pollutants (HAP), and also established a 

standard for SO2 (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, SO2 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 2013 

assumes that, in order to continue 

operating, coal plants must have either 

flue gas desulfurization or dry sorbent 

injection systems installed by 2015. 

Both technologies, which are used to 

reduce acid gas emissions, also reduce 

SO2 emissions. Under the MATS, NEMS 

shows a reduction in SO2 emissions 

when electricity demand decreases (e.g., 

as a result of energy efficiency 

standards). Emissions will be far below 

the cap established by CAIR, so it is 

unlikely that excess SO2 emissions 

allowances resulting from the lower 

electricity demand would be needed or 

used to permit offsetting increases in 

SO2 emissions by any regulated EGU. 

Therefore, DOE believes that efficiency 

standards will reduce SO2 emissions in 

2015 and beyond. 

CAIR established a cap on NOX

emissions in 28 eastern States and the 

District of Columbia. Energy 

conservation standards are expected to 

have little effect on NOX emissions in 

those States covered by CAIR because 

excess NOX emissions allowances 

resulting from the lower electricity 

demand could be used to permit 

offsetting increases in NOX emissions. 

However, standards would be expected 

to reduce NOX emissions in the States 

not affected by the caps, so DOE 

estimated NOX emissions reductions 

from the standards considered in this 

NOPR for these States. 

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 Hg emissions. DOE 

estimated mercury emissions reduction 

using emissions factors based on AEO 

2013, which incorporates the MATS. 

L. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

As part of the development of this 

proposed rule, DOE considered the 

estimated monetary benefits from the 

reduced emissions of CO2 and NOX that 

are expected to result from each of the 

TSLs considered. In order to make this 

calculation similar to the calculation of 

the NPV of consumer benefit, DOE 

considered the reduced emissions 

expected to result over the lifetime of 

equipment shipped in the forecast 

period for each TSL. This section 

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58990 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

66Social Cost of Carbon for Regulatory Impact 

Analysis Under Executive Order 12866. Interagency 

Working Group on Social Cost of Carbon, United 

States Government, February 2010. http://

www.whitehouse.gov/sites/default/files/omb/

inforeg/for-agencies/Social-Cost-of-Carbon-forRIA.pdf. 

summarizes the basis for the monetary 

values used for each of these emissions 

and presents the values considered in 

this rulemaking. 

For this NOPR, DOE is relying on a set 

of values for the social cost of carbon 

(SCC) that was developed by an 

interagency process. A summary of the 

basis for these values is provided below, 

and a more detailed description of the 

methodologies used is provided as an 

appendix to chapter 14 of the NOPR 

TSD. 

1. Social Cost of Carbon 

The SCC is an estimate of the 

monetized damages associated with an 

incremental increase in carbon 

emissions in a given year. It is intended 

to include (but is not limited to) changes 

in net agricultural productivity, human 

health, property damages from 

increased flood risk, and the value of 

ecosystem services. Estimates of the 

SCC are provided in dollars per metric 

ton of carbon dioxide. A domestic SCC 

value is meant to reflect the value of 

damages in the United States resulting 

from a unit change in carbon dioxide 

emissions, while a global SCC value is 

meant to reflect the value of damages 

worldwide. 

Under section 1(b)(6) of Executive 

Order 12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

agencies must, to the extent permitted 

by law, assess both the costs and the 

benefits of the intended regulation and, 

recognizing that some costs and benefits 

are difficult to quantify, propose or 

adopt a regulation only upon a reasoned 

determination that the benefits of the 

intended regulation justify its costs. The 

purpose of the SCC estimates presented 

here is to allow agencies to incorporate 

the monetized social benefits of 

reducing CO2 emissions into costbenefit analyses of regulatory actions. 

The estimates are presented with an 

acknowledgement of the many 

uncertainties involved and with a clear 

understanding that they should be 

updated over time to reflect increasing 

knowledge of the science and 

economics of climate impacts. 

As part of the interagency process that 

developed the SCC estimates, technical 

experts from numerous agencies met on 

a regular basis to consider public 

comments, explore the technical 

literature in relevant fields, and discuss 

key model inputs and assumptions. The 

main objective of this process was to 

develop a range of SCC values using a 

defensible set of input assumptions 

grounded in the existing scientific and 

economic literatures. In this way, key 

uncertainties and model differences 

transparently and consistently inform 

the range of SCC estimates used in the 

rulemaking process. 

a. Monetizing Carbon Dioxide Emissions 

When attempting to assess the 

incremental economic impacts of carbon 

dioxide emissions, the analyst faces a 

number of challenges. A recent report 

from the National Research Council 

points out that any assessment will 

suffer from uncertainty, speculation, 

and lack of information about: (1) 

Future emissions of greenhouse gases; 

(2) the effects of past and future 

emissions on the climate system; (3) the 

impact of changes in climate on the 

physical and biological environment; 

and (4) the translation of these 

environmental impacts into economic 

damages. As a result, any effort to 

quantify and monetize the harms 

associated with climate change will 

raise questions of science, economics, 

and ethics and should be viewed as 

provisional. 

Despite the limits of both 

quantification and monetization, SCC 

estimates can be useful in estimating the 

social benefits of reducing carbon 

dioxide emissions. The agency can 

estimate the benefits from reduced 

emissions in any future year by 

multiplying the change in emissions in 

that year by the SCC value appropriate 

for that year. The net present value of 

the benefits can then be calculated by 

multiplying the future benefits by an 

appropriate discount factor and 

summing across all affected years. 

It is important to emphasize that the 

interagency process is committed to 

updating these estimates as the science 

and economic understanding of climate 

change and its impacts on society 

improves over time. In the meantime, 

the interagency group will continue to 

explore the issues raised by this analysis 

and consider public comments as part of 

the ongoing interagency process. 

b. Development of Social Cost of Carbon 

Values 

In 2009, an interagency process was 

initiated to offer a preliminary 

assessment of how best to quantify the 

benefits from reducing carbon dioxide 

emissions. To ensure consistency in 

how benefits are evaluated across 

agencies, the Administration sought to 

develop a transparent and defensible 

method, specifically designed for the 

rulemaking process, to quantify avoided 

climate change damages from reduced 

CO2 emissions. The interagency group 

did not undertake any original analysis. 

Instead, it combined SCC estimates from 

the existing literature to use as interim 

values until a more comprehensive 

analysis could be conducted. The 

outcome of the preliminary assessment 

by the interagency group was a set of 

five interim values: Global SCC 

estimates for 2007 (in 2006$) of $55, 

$33, $19, $10, and $5 per metric ton of 

CO2. These interim values represented 

the first sustained interagency effort 

within the U.S. government to develop 

an SCC for use in regulatory analysis. 

The results of this preliminary effort 

were presented in several proposed and 

final rules. 

c. Current Approach and Key 

Assumptions 

After the release of the interim values, 

the interagency group reconvened on a 

regular basis to generate improved SCC 

estimates. Specifically, the group 

considered public comments and 

further explored the technical literature 

in relevant fields. The interagency group 

relied on three integrated assessment 

models commonly used to estimate the 

SCC: The FUND, DICE, and PAGE 

models. These models are frequently 

cited in the peer-reviewed literature and 

were used in the last assessment of the 

Intergovernmental Panel on Climate 

Change (IPCC). Each model was given 

equal weight in the SCC values that 

were developed. 

Each model takes a slightly different 

approach to model how changes in 

emissions result in changes in economic 

damages. A key objective of the 

interagency process was to enable a 

consistent exploration of the three 

models while respecting the different 

approaches to quantifying damages 

taken by the key modelers in the field. 

An extensive review of the literature 

was conducted to select three sets of 

input parameters for these models: 

climate sensitivity, socio-economic and 

emissions trajectories, and discount 

rates. A probability distribution for 

climate sensitivity was specified as an 

input into all three models. In addition, 

the interagency group used a range of 

scenarios for the socio-economic 

parameters and a range of values for the 

discount rate. All other model features 

were left unchanged, relying on the 

model developers’ best estimates and 

judgments. 

In 2010, the interagency group 

selected four sets of SCC values for use 

in regulatory analyses.66 Three sets of 

values are based on the average SCC 

from three integrated assessment 

models, at discount rates of 2.5 percent, 

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67Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866. Interagency Working Group on Social 

Cost of Carbon, United States Government, May 

2013; revised November 2013. http://

www.whitehouse.gov/sites/default/files/omb/assets/

inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf. 

3 percent, and 5 percent. The fourth set, 

which represents the 95th-percentile 

SCC estimate across all three models at 

a 3-percent discount rate, is included to 

represent higher-than-expected impacts 

from climate change further out in the 

tails of the SCC distribution. The 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 preference is 

given to consideration of the global 

benefits of reducing CO2 emissions. 

Table IV.14 presents the values in the 

2010 interagency group report, which is 

reproduced in appendix 14–A of the 

NOPR TSD. 

TABLE IV.14—ANNUAL SCC VALUES FROM 2010 INTERAGENCY REPORT, 2010–2050 

[In 2007 dollars per metric ton CO2] 

Year 

Discount rate % 

5 3 2.5 3 

Average Average Average 95th percentile 

2010 ......................................................................................... 4.7 21.4 35.1 64.9 

2015 ......................................................................................... 5.7 23.8 38.4 72.8 

2020 ......................................................................................... 6.8 26.3 41.7 80.7 

2025 ......................................................................................... 8.2 29.6 45.9 90.4 

2030 ......................................................................................... 9.7 32.8 50.0 100.0 

2035 ......................................................................................... 11.2 36.0 54.2 109.7 

2040 ......................................................................................... 12.7 39.2 58.4 119.3 

2045 ......................................................................................... 14.2 42.1 61.7 127.8 

2050 ......................................................................................... 15.7 44.9 65.0 136.2 

The SCC values used for this NOPR 

were generated using the most recent 

versions of the three integrated 

assessment models that have been 

published in the peer-reviewed 

literature.67 Table IV.15 shows the 

updated sets of SCC estimates from the 

2013 interagency update in five-year 

increments from 2010 to 2050. 

Appendix 14–B of the NOPR TSD 

provides the full set of values and a 

discussion of the revisions made in 

2013. The central value that emerges is 

the average SCC across models at 3- 

percent discount rate. However, for 

purposes of capturing the uncertainties 

involved in regulatory impact analysis, 

the interagency group emphasizes the 

importance of including all four sets of 

SCC values. 

TABLE IV.15—ANNUAL SCC VALUES FROM 2013 INTERAGENCY UPDATE, 2010–2050 

[In 2007 dollars per metric ton CO2] 

Year 

Discount rate % 

5 3 2.5 3 

Average Average Average 95th percentile 

2010 ......................................................................................... 11 32 51 89 

2015 ......................................................................................... 11 37 57 109 

2020 ......................................................................................... 12 43 64 128 

2025 ......................................................................................... 14 47 69 143 

2030 ......................................................................................... 16 52 75 159 

2035 ......................................................................................... 19 56 80 175 

2040 ......................................................................................... 21 61 86 191 

2045 ......................................................................................... 24 66 92 206 

2050 ......................................................................................... 26 71 97 220 

It is important to recognize that a 

number of key uncertainties remain, and 

that current SCC estimates should be 

treated as provisional and revisable 

since they will evolve with improved 

scientific and economic understanding. 

The interagency group also recognizes 

that the existing models are imperfect 

and incomplete. The National Research 

Council report mentioned above points 

out that there is tension between the 

goal of producing quantified estimates 

of the economic damages from an 

incremental ton of carbon and the limits 

of existing efforts to model these effects. 

There are a number of analytic 

challenges that are being addressed by 

the research community, including 

research programs housed in many of 

the Federal agencies participating in the 

interagency process to estimate the SCC. 

The interagency group intends to 

periodically review and reconsider 

those estimates to reflect increasing 

knowledge of the science and 

economics of climate impacts, as well as 

improvements in modeling. 

In summary, in considering the 

potential global benefits resulting from 

reduced CO2 emissions resulting from 

this proposed rule, DOE used the values 

from the 2013 interagency report, 

adjusted to 2013$ using the Gross 

Domestic Product price deflator. For 

each of the four SCC cases specified, the 

values used for emissions in 2015 were 

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58992 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

68U.S. Office of Management and Budget, Office 

of Information and Regulatory Affairs, 2006 Report 

to Congress on the Costs and Benefits of Federal 

Regulations and Unfunded Mandates on State, 

Local, and Tribal Entities, Washington, DC. 

69For more information on NEMS, refer to the 

U.S. Department of Energy, Energy Information 

Administration documentation. A useful summary 

is National Energy Modeling System: An Overview 

2003, DOE/EIA–0581 (2003) (March, 2003). 

70 DOE/EIA approves use of the name NEMS to 

describe only an official version of the model 

without any modification to code or data. Because 

this analysis entails some minor code modifications 

and the model is run under various policy scenarios 

that are variations on DOE/EIA assumptions, DOE 

refers to it by the name ‘‘NEMS–BT’’ (‘‘BT’’ is DOE’s 

Building Technologies Program, under whose aegis 

this work has been performed). 

$12.0, $40.5, $62.4, and $119 per metric 

ton avoided (values expressed in 

2013$). DOE derived values after 2050 

using the relevant growth rates for the 

2040–2050 period in the interagency 

update. 

DOE multiplied the CO2 emissions 

reduction estimated for each year by the 

SCC value for that year in each of the 

four cases. To calculate a present value 

of the stream of monetary values, DOE 

discounted the values in each of the 

four cases using the specific discount 

rate that had been used to obtain the 

SCC values in each case. 

DOE solicits comment on the 

application of the new SCC values used 

to determine the social benefits of CO2

emissions reductions over the 

rulemaking analysis period. In 

particular, the agency solicits comment 

on its derivation of SCC values after 

2050, where the agency applied the 

average annual growth rate of the SCC 

estimates in 2040–2050 associated with 

each of the four sets of values. 

Issue 18: DOE solicits comment on the 

application of the new SCC values used 

to determine the social benefits of CO2

emissions reductions over the 

rulemaking analysis period. In 

particular, the agency solicits comment 

on its derivation of SCC values after 

2050, where the agency applied the 

average annual growth rate of the SCC 

estimates in 2040–2050 associated with 

each of the four sets of values. 

2. Valuation of Other Emissions 

Reductions 

As noted above, DOE has taken into 

account how new or amended energy 

conservation standards would reduce 

NOX emissions in those 22 states not 

affected by the CAIR. DOE estimated the 

monetized value of NOX emissions 

reductions resulting from each of the 

TSLs considered for this NOPR based on 

estimates found in the relevant 

scientific literature. Estimates of 

monetary value for reducing NOX from 

stationary sources range from $476 to 

$4,893 per ton in 2013$.68 DOE 

calculated monetary benefits using a 

medium value for NOX emissions of 

$2,684 per short ton (in 20123), and real 

discount rates of 3-percent and 7- 

percent. 

DOE is evaluating appropriate 

monetization of avoided SO2 and Hg 

emissions in energy conservation 

standards rulemakings. It has not 

included monetization in the current 

analysis. 

M. Utility Impact Analysis 

The utility impact analysis estimates 

several effects on the power generation 

industry that would result from the 

adoption of new or amended energy 

conservation standards. In the utility 

impact analysis, DOE analyzes the 

changes in installed electricity capacity 

and generation that would result for 

each trial standard level. The utility 

impact analysis uses a variant of 

NEMS,69 which is a public domain, 

multi-sectored, partial equilibrium 

model of the U.S. energy sector. DOE 

uses a variant of this model, referred to 

as NEMS–BT,70 to account for selected 

utility impacts of new or amended 

energy conservation standards. DOE’s 

analysis consists of a comparison 

between model results for the most 

recent AEO Reference Case and for cases 

in which energy use is decremented to 

reflect the impact of potential standards. 

The energy savings inputs associated 

with each TSL come from the NIA. 

Chapter 15 of the NOPR TSD describes 

the utility impact analysis in further 

detail. 

N. Employment Impact Analysis 

Employment impacts from new or 

amended energy conservation standards 

include direct and indirect impacts. 

Direct employment impacts are any 

changes in the number of employees of 

manufacturers of the equipment subject 

to standards; the MIA addresses those 

impacts. Indirect employment impacts 

are changes in national employment 

that occur due to the shift in 

expenditures and capital investment 

caused by the purchase and operation of 

more efficient equipment. Indirect 

employment impacts from standards 

consist of the jobs created or eliminated 

in the national economy, other than in 

the manufacturing sector being 

regulated, due to: (1) Reduced spending 

by end users on energy; (2) reduced 

spending on new energy supply by the 

utility industry; (3) increased consumer 

spending on the purchase of new 

equipment; and (4) the effects of those 

three factors throughout the economy. 

One method for assessing the possible 

effects on the demand for labor of such 

shifts in economic activity is to compare 

sector employment statistics developed 

by the Labor Department’s Bureau of 

Labor Statistics (BLS). BLS regularly 

publishes its estimates of the number of 

jobs per million dollars of economic 

activity in different sectors of the 

economy, as well as the jobs created 

elsewhere in the economy by this same 

economic activity. Data from BLS 

indicate that expenditures in the utility 

sector generally create fewer jobs (both 

directly and indirectly) than 

expenditures in other sectors of the 

economy. There are many reasons for 

these differences, including wage 

differences and the fact that the utility 

sector is more capital-intensive and less 

labor-intensive than other sectors. 

Energy conservation standards have the 

effect of reducing consumer utility bills. 

Because reduced consumer 

expenditures for energy likely lead to 

increased expenditures in other sectors 

of the economy, the general effect of 

efficiency standards is to shift economic 

activity from a less labor-intensive 

sector (i.e., the utility sector) to more 

labor-intensive sectors (e.g., the retail 

and service sectors). Thus, based on the 

BLS data alone, DOE believes net 

national employment may increase 

because of shifts in economic activity 

resulting from amended standards. 

For the standard levels considered in 

the NOPR, DOE estimated indirect 

national employment impacts using an 

input/output model of the U.S. economy 

called Impact of Sector Energy 

Technologies, Version 3.1.1 (ImSET). 

ImSET is a special-purpose version of 

the ‘‘U.S. Benchmark National InputOutput’’ (I–O) model, which was 

designed to estimate the national 

employment and income effects of 

energy-saving technologies. The ImSET 

software includes a computer-based I–O 

model having structural coefficients that 

characterize economic flows among the 

187 sectors. ImSET’s national economic 

I–O structure is based on a 2002 U.S. 

benchmark table, specially aggregated to 

the 187 sectors most relevant to 

industrial, commercial, and residential 

building energy use. DOE notes that 

ImSET is not a general equilibrium 

forecasting model, and understands the 

uncertainties involved in projecting 

employment impacts, especially 

changes in the later years of the 

analysis. Because ImSET does not 

incorporate price changes, the 

employment effects predicted by ImSET 

may over-estimate actual job impacts 

over the long run. For the NOPR, DOE 

used ImSET only to estimate short-term 

employment impacts. 

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For more details on the employment 

impact analysis, see chapter 16 of the 

NOPR TSD. 

V. Analytical Results 

A. Trial Standard Levels 

At the NOPR stage, DOE develops 

Trial Standard Levels (TSLs) for 

consideration. TSLs are formed by 

grouping different efficiency levels, 

which are potential standard levels for 

each equipment class. DOE analyzed the 

benefits and burdens of the TSLs 

developed for this proposed rule. DOE 

examined four TSLs for small, large, and 

very large air-cooled commercial 

package air conditioning and heating 

equipment. 

Table V.1 presents the TSLs analyzed 

and the corresponding efficiency level 

for each equipment class. The efficiency 

levels in each TSL can be characterized 

as follows: TSL 4 is comprised of the 

max-tech efficiency level, which is 

efficiency level 4 for each equipment 

class. TSL 3 is comprised of efficiency 

level 3 for each equipment class. TSL 2 

is comprised of efficiency level 2 for 

each equipment class, and TSL 1 is 

comprised of efficiency level 1 for each 

equipment class. 

TABLE V.1—SUMMARY OF TSLS FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL PACKAGE AIR

CONDITIONING AND HEATING EQUIPMENT

Equipment class TSL 1 TSL 2 TSL 3 TSL 4 

Efficiency level * 

Small Commercial Packaged Air Conditioners—≥65,000 Btu/h and 

<135,000 Btu/h Cooling Capacity ................................................................ 1 2 3 4 

Large Commercial Packaged Air Conditioners—≥135,000 Btu/h and 

<240,000 Btu/h Cooling Capacity ................................................................ 1 2 3 4 

Very Large Commercial Packaged Air Conditioners—≥240,000 Btu/h and 

<760,000 Btu/h Cooling Capacity ................................................................ 1 2 3 4 

Small Commercial Packaged Heat Pumps—≥65,000 Btu/h and <135,000 

Btu/h Cooling Capacity ................................................................................ 1 2 3 4 

Large Commercial Packaged Heat Pumps—≥135,000 Btu/h and <240,000 

Btu/h Cooling Capacity ................................................................................ 1 2 3 4 

Very Large Commercial Packaged Heat Pumps—≥240,000 Btu/h and 

<760,000 Btu/h Cooling Capacity ................................................................ 1 2 3 4 

* For the IEERs that correspond to efficiency levels 1 through 4, see Table IV.6. 

B. Economic Justification and Energy 

Savings 

As discussed in section II.A, EPCA 

provides seven factors to be evaluated in 

determining whether a more stringent 

standard for small, large, and very large 

air-cooled CUAC and CUHP is 

economically justified. (42 U.S.C. 

6313(a)(6)(B)(ii)) The following sections 

generally discuss how DOE is 

addressing each of those factors in this 

rulemaking. 

1. Economic Impacts on Individual 

Customers 

DOE analyzed the economic impacts 

on small, large, and very large air-cooled 

commercial package air conditioning 

and heating equipment customers by 

looking at the effects standards would 

have on the LCC and PBP. DOE also 

examined the impacts of potential 

standards on customer subgroups. These 

analyses are discussed below. 

a. Life-Cycle Cost and Payback Period 

To evaluate the net economic impact 

of standards on small, large, and very 

large air-cooled CUAC customers, DOE 

conducted LCC and PBP analyses for 

each TSL. In general, higher-efficiency 

equipment would affect customers in 

two ways: (1) Annual operating expense 

would decrease, and (2) purchase price 

would increase. Section IV.F of this 

notice discusses the inputs DOE used 

for calculating the LCC and PBP. As 

stated there, DOE did not do an LCC and 

PBP analysis for the CUHP equipment 

classes because energy modeling was 

performed only for CUAC equipment. 

For each representative unit, the key 

outputs of the LCC analysis are a mean 

LCC savings and a median PBP relative 

to the base case, as well as the fraction 

of customers for which the LCC will 

decrease (net benefit), increase (net 

cost), or exhibit no change (no impact) 

relative to the base-case product 

forecast. No impacts occur when the 

base-case efficiency equals or exceeds 

the efficiency at a given TSL. Table V.2 

through Table V.4 show the key results 

for each representative unit. 

TABLE V.2—SUMMARY LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS FOR SMALL COMMERCIAL PACKAGE AIR

CONDITIONERS

[7.5 ton, ≥65,000 Btu/h and <135,000 Btu/h Cooling Capacity] 

Trial standard level 1 2 3 4 

Efficiency Level ................................................................................................ 1 2 3 4 

IEER ................................................................................................................. 12.9 14.0 14.8 19.9 

Total Installed Cost .......................................................................................... $8,535 $9,923 $10,323 $12,166 

Mean LCC Savings ($) .................................................................................... $1,094 $937 $4,779 $6,771 

Customers with LCC Increase (Cost) (%) * ..................................................... 0% 27% 0% 0% 

Customers with LCC Decrease (Benefit) (%) * ................................................ 61% 72% 99% 100% 

Customers with No Change in LCC (%) * ....................................................... 39% 1% 0% 0% 

Median PBP (Years) ........................................................................................ 2.2 8.0 3.9 4.7 

* Rounding may cause some items to not total 100 percent. 

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TABLE V.3—SUMMARY LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS FOR LARGE COMMERCIAL PACKAGE AIR

CONDITIONERS

[15 ton, ≥135,000 Btu/h and <240,000 Btu/h] 

Trial standard level 1 2 3 4 

Efficiency Level ................................................................................................ 1 2 3 4 

IEER ................................................................................................................. 12.2 13.2 14.2 18.4 

Total Installed Cost .......................................................................................... $14,935 $16,858 $17,753 $18,975 

Mean LCC Savings ($) .................................................................................... $1,038 $2,214 $3,469 $7,508 

Customers with LCC Increase (Cost) (%) * ..................................................... 3% 8% 6% 2% 

Customers with LCC Decrease (Benefit) (%) * ................................................ 74% 90% 93% 98% 

Customers with No Change in LCC (%) * ....................................................... 22% 2% 0% 0% 

Median PBP (Years) ........................................................................................ 6.0 7.2 6.6 5.1 

* Rounding may cause some items to not total 100 percent. 

TABLE V.4—SUMMARY LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS FOR VERY LARGE COMMERCIAL PACKAGE AIR

CONDITIONERS

[30 ton, ≥240,000 Btu/h and <760,000 Btu/h] 

Trial standard level 1 2 3 4 

Efficiency Level ................................................................................................ 1 2 3 4 

IEER ................................................................................................................. 11.6 12.5 13.5 15.5 

Total Installed Cost .......................................................................................... $29,385 $31,738 $32,828 $36,200 

Mean LCC Savings ($) .................................................................................... $4,103 $4,801 $16,477 $19,842 

Customers with LCC Increase (Cost) (%) * ..................................................... 2% 12% 3% 5% 

Customers with LCC Decrease (Benefit) (%) * ................................................ 62% 76% 92% 94% 

Customers with No Change in LCC (%) * ....................................................... 36% 13% 6% 1% 

Median PBP (Years) ........................................................................................ 2.6 5.5 2.5 3.5 

* Rounding may cause some items to not total 100 percent. 

b. Customer Subgroup Analysis 

In the customer subgroup analysis, 

DOE estimated the impacts of the 

considered TSLs on small business 

customers. The LCC savings and 

payback periods for small business 

customers are similar to the impacts for 

all customers. Chapter 11 of the NOPR 

TSD presents detailed results of the 

customer subgroup analysis. 

c. Rebuttable Presumption Payback 

As discussed in section III.E.2, EPCA 

establishes a rebuttable presumption 

that an energy conservation standard is 

economically justified if the increased 

purchase cost for equipment that meets 

the standard is less than three times the 

value of the first-year energy savings 

resulting from the standard. DOE 

calculated a rebuttable-presumption 

PBP for each TSL to determine whether 

DOE could presume that a standard at 

that level is economically justified. 

DOE based the calculations on 

average usage profiles. As a result, DOE 

calculated a single rebuttablepresumption payback value, and not a 

distribution of PBPs, for each TSL. 

Table V.5 shows the rebuttablepresumption PBPs for the considered 

TSLs. The rebuttable presumption is 

fulfilled in those cases where the PBP is 

three years or less. However, DOE 

routinely conducts an economic 

analysis that considers the full range of 

impacts to the customer, manufacturer, 

Nation, and environment, as required by 

EPCA. The results of that 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 three-year PBP analysis). Section 

V.C addresses how DOE considered the 

range of impacts to select today’s 

proposed standards. 

TABLE V.5—REBUTTABLE-PRESUMPTION PAYBACK PERIODS (YEARS) FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED

COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT

Trial standard level 1 2 3 4 

Efficiency Level ................................................................................................ 1 2 3 4 

Small Commercial Packaged Air Conditioners—≥65,000 Btu/h and 

<135,000 Btu/h Cooling Capacity ................................................................ 2.2 8.0 3.9 4.7 

Large Commercial Packaged Air Conditioners—≥135,000 Btu/h and 

<240,000 Btu/h Cooling Capacity ................................................................ 6.0 7.2 6.6 5.1 

Very Large Commercial Packaged Air Conditioners—≥240,000 Btu/h and 

<760,000 Btu/h Cooling Capacity ................................................................ 2.6 5.5 2.5 3.5 

2. Economic Impacts on Manufacturers 

As noted above, DOE performed an 

MIA to estimate the impact of amended 

energy conservation standards on 

manufacturers of small, large, and very 

large air-cooled commercial package air 

conditioning and heating equipment. 

The following section describes the 

expected impacts on manufacturers at 

each considered TSL. Chapter 12 of the 

NOPR TSD explains the analysis in 

further detail. 

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a. Industry Cash-Flow Analysis Results 

Table V.6 and Table V.7 depict the 

financial impacts (represented by 

changes in INPV) of amended energy 

standards on manufacturers of small, 

large, and very large air-cooled 

commercial package air conditioning 

and heating equipment, as well as the 

conversion costs that DOE expects 

manufacturers would incur for all 

equipment classes at each TSL. To 

evaluate the range of cash flow impacts 

on the commercial packaged air 

conditioner and heat pump industry, 

DOE modeled two different mark-up 

scenarios using different assumptions 

that correspond to the range of 

anticipated market responses to 

amended energy conservation 

standards: (1) The preservation of gross 

margin percentage; and (2) the 

preservation of per unit operating profit. 

Each of these scenarios is discussed 

immediately below. 

To assess the lower (less severe) end 

of the range of potential impacts, DOE 

modeled a preservation of gross margin 

percentage markup scenario, in which a 

uniform ‘‘gross margin percentage’’ 

markup is applied across all potential 

efficiency levels. In this scenario, DOE 

assumed that a manufacturer’s absolute 

dollar markup would increase as 

production costs increase in the 

standards case. 

To assess the higher (more severe) end 

of the range of potential impacts, DOE 

modeled the preservation of per unit 

operating profit markup scenario, which 

assumes that manufacturers would not 

be able to greater operating profit on a 

per unit basis in the standards case. 

Rather, as manufacturers make the 

necessary investments required to 

convert their facilities to produce new 

standards-compliant products and incur 

higher costs of goods sold, their 

percentage markup decreases. Operating 

profit does not change in absolute 

dollars and decreases as a percentage of 

revenue. 

As noted in the MIA methodology 

discussion (see IV.J.2), in addition to 

markup scenarios, the MPC, shipments, 

and conversion cost assumptions also 

affect INPV results. Of particular note in 

this rulemaking is the decline in 

cumulative shipments as the TSL 

increases that is forecasted in the NIA 

shipments. This change in shipments is 

summarized in Table V.10. 

The set of results below shows 

potential INPV impacts for small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment manufacturers; Table V.6 

reflects the lower bound of impacts, and 

Table V.7 represents the upper bound. 

Each of the modeled scenarios results 

in a unique set of cash flows and 

corresponding industry values at each 

TSL. In the following discussion, the 

INPV results refer to the difference in 

industry value between the base case 

and each standards case that results 

from the sum of discounted cash flows 

from the base year 2014 through 2048, 

the end of the analysis period. 

To provide perspective on the shortrun cash flow impact, DOE includes in 

the discussion of the results below a 

comparison of free cash flow between 

the base case and the standards case at 

each TSL in the year before new 

standards would take effect. This figure 

provides an understanding of the 

magnitude of the required conversion 

costs relative to the cash flow generated 

by the industry in the base case. 

TABLE V.6—INDUSTRY VALUATION AND FINANCIAL IMPACTS—PRESERVATION OF GROSS MARGIN PERCENTAGE MARKUP

SCENARIO * 

Units Base case 

Trial standard level 

1 2 3 4 

INPV ................................................................ $M .............................. 1,260.91 1,249.47 1,208.04 1,172.36 1,142.78 

Change in INPV .............................................. $M .............................. .................... (11.45) (52.87) (88.55) (118.13) 

% ................................ .................... (0.91) (4.19) (7.02) (9.37) 

Product Conversion Costs .............................. $M .............................. 12.72 38.73 58.52 120.90 210.96 

Capital Conversion Costs ............................... $M .............................. .................... 14.94 39.23 105.54 113.31 

Total Conversion Costs .................................. $M .............................. 12.72 53.68 97.75 226.44 324.28 

Free Cash Flow (2018) ................................... $M .............................. 73.38 58.19 40.82 (9.32) (42.13) 

Free Cash Flow (2018) ................................... % Change .................. .................... (20.70) (44.37) (112.70) (157.42) 

TABLE V.7—INDUSTRY VALUATION AND FINANCIAL IMPACTS—PRESERVATION OF PER UNIT OPERATING PROFIT MARKUP

SCENARIO * 

Units Base case 

Trial standard level 

1 2 3 4 

INPV ................................................................ $M .............................. 1,260.91 1,187.02 1,015.61 949.34 822.75 

Change in INPV .............................................. $M .............................. .................... (73.89) (245.30) (311.58) (438.16) 

% ................................ .................... (5.86) (19.45) (24.71) (34.75) 

Product Conversion Costs .............................. $M .............................. 12.72 38.73 58.52 120.90 210.96 

Capital Conversion Costs ............................... $M .............................. - 14.94 39.23 105.54 113.31 

Total Conversion Costs .................................. $M .............................. 12.72 53.68 97.75 226.44 324.28 

Free Cash Flow (2018) ................................... $M .............................. 73.38 58.19 40.82 (9.32) (42.13) 

Free Cash Flow (2018) ................................... % Change .................. .................... (20.70) (44.37) (112.70) (157.42) 

* Values in parentheses are negative values. 

Base case conversion costs of $12.72 

million are attributed to CC&E costs 

associated with new product 

certification under the proposed test 

procedure. This amount consists of 

modeling and equipment testing costs 

incurred to recertify currently available 

products. 

TSL 1 represents EL 1 for all 

equipment classes. At TSL 1, DOE 

estimates impacts on INPV for 

commercial packaged air conditioning 

manufacturers to range from ¥5.86 

percent to ¥0.91 percent, or a change in 

INPV of ¥$73.89 million to ¥$11.45 

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71 ‘‘Annual Survey of Manufactures (ASM),’’ U.S. 

Census Bureau (2011) (Available at: http://

www.census.gov/manufacturing/asm/). 

million. At this potential standard level, 

industry free cash flow is estimated to 

decrease by approximately 20.70 

percent to $58.19, compared to the basecase value of $73.38 million in the year 

before the compliance date (2018). 

At TSL 1, the industry is likely to face 

a small contraction. Industry wide 

shipments drop by approximately 

5.04% in the standard year (2019), 

relative to the base case. In addition, 

manufacturers incur conversion costs 

totaling $53.68 million due to CC&E 

requirements, product redesigns for the 

Very Large equipment classes, and new 

tooling associated with their highest 

capacity equipment offerings. While 

impacts on the industry as a whole are 

relatively mild, small manufacturers 

may have greater difficulty with rerating their products to an IEER metric 

since they generally do not have the 

testing capacity or engineering resources 

of larger competitors. 

TSL 2 represents EL 2 across all 

equipment classes. At TSL 2, DOE 

estimates impacts on INPV for 

commercial packaged air conditioning 

manufacturers to range from ¥19.45 

percent to ¥4.19 percent, or a change in 

INPV of ¥$245.30 million to ¥$52.87 

million. At this potential standard level, 

industry free cash flow is estimated to 

decrease by approximately 44.37 

percent to $40.82 million, compared to 

the base-case value of $73.38 million in 

the year before the compliance date 

(2018). 

At TSL 2, industry-wide shipments 

drop by 28.32% in the standard year 

(2019) relative to the base case. 

Additionally, DOE anticipates 

conversion costs to increase to $97.75 

million for the industry as roughly 67% 

of equipment listed in the AHRI 

directory would need to be redesigned 

in order to meet the higher proposed 

efficiency levels. Given the industry’s 

existing trend of consolidation, DOE 

expects further consolidation at TSL 2. 

Manufacturers with limited market 

share may choose to sell off their small, 

large, and very large air-cooled 

commercial package air conditioning 

and heating equipment business to 

larger competitors. 

TSL 3 represents EL 3 for all 

equipment classes. At TSL 3, DOE 

estimates impacts on INPV for 

commercial packaged air conditioning 

manufacturers to range from ¥24.71 

percent to ¥7.02 percent, or a change in 

INPV of ¥$311.58 million to ¥$88.55 

million., Industry-wide shipments drop 

by 28.76% relative to the base case in 

the standards year. DOE anticipates 

large capital conversion costs at TSL 3, 

as redesigns necessitate additional 

investments in tooling for cabinets and 

heat exchangers to meet amended 

efficiency standards. Roughly 81% of 

equipment listings would require 

changes to meet the standard. 

Conversion costs total $226.44 million 

for the industry. A key indicator of 

impact on the industry is the industry 

free cash flow, which is estimated to 

decrease by approximately 112.70 

percent to ¥$9.32 relative to the base 

case value of $73.38 million in the year 

before the compliance date (2018). The 

negative free cash flow indicates that 

players in the industry would need to 

access cash reserves or borrow money 

from capital markets to cover 

conversion costs. Given expectation for 

a shrinking market and high conversion 

costs, some manufacturers indicated 

they would move production to lowercost foreign markets at this level. 

TSL 4 represents max tech across all 

equipment classes. At TSL 4, DOE 

estimates impacts on INPV for 

commercial packaged air conditioning 

manufacturers to range from ¥34.75 

percent to ¥9.37 percent, or a change in 

INPV of ¥$438.16 million to ¥$118.13 

million. At this potential standard level, 

industry free cash flow is estimated to 

decrease by approximately 157.42 

percent relative to the base-case value of 

$73.38 million in the year before the 

compliance date (2018). 

At max-tech, DOE estimates a 35.12% 

drop in shipments in the standards 

years, a maximum loss of over 34.75% 

of industry value over the analysis 

period, and conversion costs 

approaching $650 million for the 

industry. Only 2% of equipment listings 

could meet this trial standard level 

today. Manufacturers voiced concerns 

over the lack of product differentiation 

and the commoditization at upper TSLs. 

TSL 4 would leave no room for product 

differentiation based on efficiency. 

Furthermore, given the level of R&D and 

production line modifications necessary 

at this level, it is unclear whether the 

industry could make the necessary 

changes in the allotted conversion 

period. At TSL 4, most manufacturers 

would re-evaluate their role in the 

industry. Those that do remain would 

strongly consider all cost cutting 

measures, including relocation to 

foreign countries. 

Issue 19: DOE requests comment on 

the capital conversion costs and product 

conversion costs estimated for each 

TSL. In particular, DOE seeks comment 

on the conversion costs at max-tech, at 

TSL 4. 

b. Impacts on Direct Employment 

To quantitatively assess the impacts 

of energy conservation standards on 

direct employment in the small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment industry, DOE used the 

GRIM to estimate the domestic labor 

expenditures and number of employees 

in the base case and at each TSL from 

2015 through 2048. DOE used statistical 

data from the U.S. Census Bureau’s 2011 

Annual Survey of Manufacturers 

(ASM),71 the results of the engineering 

analysis, and interviews with 

manufacturers to determine the inputs 

necessary to calculate industry-wide 

labor expenditures and domestic 

employment levels. Labor expenditures 

related to manufacturing of the product 

are a function of the labor intensity of 

the product, the sales volume, and an 

assumption that wages remain fixed in 

real terms over time. The total labor 

expenditures in each year are calculated 

by multiplying the MPCs by the labor 

percentage of MPCs. 

The total labor expenditures in the 

GRIM were then converted to domestic 

production employment levels by 

dividing production labor expenditures 

by the annual payment per production 

worker (production worker hours times 

the labor rate found in the U.S. Census 

Bureau’s 2011 ASM). The estimates of 

production workers in this section cover 

workers, including line-supervisors who 

are directly involved in fabricating and 

assembling a product within the 

manufacturing facility. Workers 

performing services that are closely 

associated with production operations, 

such as materials handling tasks using 

forklifts, are also included as production 

labor. DOE’s estimates only account for 

production workers who manufacture 

the specific products covered by this 

rulemaking. The total direct 

employment impacts calculated in the 

GRIM are the changes in the number of 

production workers resulting from the 

amended energy conservation standards 

for small, large, and very large aircooled commercial package air 

conditioning and heating equipment, as 

compared to the base case. In general, 

more efficient equipment is larger, more 

complex, and more labor intensive to 

build. Per unit labor requirements and 

production time requirements increase 

with a higher energy conservation 

standard. As a result, the total labor 

calculations described in this paragraph 

are considered an upper bound to direct 

employment forecasts. 

On the other hand, the domestic 

HVAC industry has had a track record 

of consolidation over the past decade. 

See, e.g. Daikin Acquires Goodman, 

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Daikin Corporate News (Aug. 29, 2012); 

Ingersoll Rand to Acquire Trane Inc. for 

Approximately $10.1 Billion, Trane 

Press Release (Dec. 17, 2007); and JCI 

Buys Pennsylvania Firm, Grand Rapids 

Press, C6 (Aug. 26, 2005) (noting 

purchase of York International by 

Johnson Controls, Inc.). DOE recognizes 

the potential for industry consolidation 

and its concomitant impacts on 

employment levels, especially at higher 

TSLs. As shipments drop and 

conversion costs increase, some 

manufacturers may choose not to make 

the necessary investments to meet the 

amended standard for all equipment 

classes. Alternatively, they may choose 

to relocate production facilities where 

conversion costs and production costs 

are lower. To establish a lower bound to 

negative employment impacts, DOE 

estimated the maximum potential job 

loss due to manufacturers either leaving 

the industry or moving production to 

foreign locations as a result of an 

amended standard. These lower bound 

estimates were based on GRIM results, 

conversion cost estimates, and content 

from manufacturers interviews. The 

lower bound of employment is 

presented in Table V.8 below. 

DOE estimates that in the absence of 

amended energy conservation 

standards, there would be 1,085 

domestic production workers for small, 

large, and very large air-cooled 

commercial package air conditioning 

and heating equipment. DOE estimates 

that 50 percent of small, large, and very 

large air-cooled commercial package air 

conditioning and heating equipment 

sold in the United States are 

manufactured domestically. Table V.8 

shows the range of the impacts of 

potential amended energy conservation 

standards on U.S. production workers of 

small, large, and very large air-cooled 

commercial package air conditioning 

and heating equipment. 

TABLE V.8—POTENTIAL CHANGES IN THE TOTAL NUMBER OF SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL

PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT PRODUCTION WORKERS IN 2019 

Trial standard level * 

Base case 1 2 3 4 

Potential Changes in Domestic Production Workers in 

2019 (relative to a base case employment of 1,085).

........................ (181) to (10) .. (482) to (69) .. (543) to (27) .. (1,085) to 

(31). 

* Parentheses indicate negative values. 

DOE notes that the employment 

impacts discussed here are independent 

of the indirect employment impacts to 

the broader U.S. economy, which are 

documented in chapter 15 of the NOPR 

TSD. 

c. Impacts on Manufacturing Capacity 

According to the commercial 

packaged air conditioning 

manufacturers interviewed, amended 

energy conservation standards could 

lead to higher fabrication labor hours. 

However, manufacturers noted that 

industry shipments are down 40% from 

their peak in the 2007–2008 timeframe. 

Excess capacity in the industry today 

and any drop in shipments that result 

from higher prices could offset the 

additional production times. In the 

long-term, no manufacturers 

interviewed expected to have capacity 

constraints. 

Manufacturers did note concerns 

about engineering and testing capacity 

in the time period between the 

announcement year and the effective 

year of the proposed standard. 

Manufacturers worried about the level 

of technical resources required to 

redesign and test all products at higher 

TSLs. The engineering analysis shows 

increasingly complex components and 

control strategies are required as 

standard levels increase. Manufacturers 

noted in interviews that the industry 

would need to add electrical 

engineering and control systems 

engineering talent beyond current 

staffing to meet the redesign 

requirements of higher TSLs. Additional 

training might be needed for 

manufacturing engineers, laboratory 

technicians, and service personnel if 

variable speed components are broadly 

adopted. Furthermore, as standards 

increase, units tend to grow in size, 

requiring more lab resources and time to 

test. Some manufacturers were 

concerned that an amended standard 

would trigger the need for construction 

of new test lab facilities, which require 

significant lead time. 

Issue 20: DOE requests comments and 

data on capacity constraints at each 

TSL—including production capacity 

constraints, engineering resource 

constraints, and testing capacity 

constraints that are directly related to an 

amended standard for small, large, and 

very large CUAC and CUHP. In 

particular, DOE requests comment on 

whether the proposed effective date 

allows for a sufficient conversion period 

to make the equipment design and 

facility updates necessary to meet an 

amended standard. 

d. Impacts on Subgroups of 

Manufacturers 

Small manufacturers, niche 

equipment manufacturers, and 

manufacturers exhibiting a cost 

structure substantially different from the 

industry average could be affected 

disproportionately. Using average cost 

assumptions developed for an industry 

cash-flow estimate is inadequate to 

assess differential impacts among 

manufacturer subgroups. 

For the commercial packaged air 

conditioner and heat pump industry, 

DOE identified and evaluated the 

impact of amended energy conservation 

standards on one subgroup—small 

manufacturers. The SBA defines a 

‘‘small business’’ as having 750 

employees or less for NAICS 333415, 

‘‘Air-Conditioning and Warm Air 

Heating Equipment and Commercial 

and Industrial Refrigeration Equipment 

Manufacturing.’’ Based on this 

definition, DOE identified three 

manufacturers in the commercial 

packaged air conditioning industry that 

qualify as small businesses. For a 

discussion of the impacts on the small 

manufacturer subgroup, see the 

regulatory flexibility analysis in section 

VI.B of this notice and chapter 12 of the 

NOPR TSD. 

e. Cumulative Regulatory Burden 

While any one regulation may not 

impose a significant burden on 

manufacturers, the combined effects of 

recent or impending regulations may 

have serious consequences for some 

manufacturers, groups of manufacturers, 

or an entire industry. Assessing the 

impact of a single regulation may 

overlook this cumulative regulatory 

burden. In addition to energy 

conservation standards, other 

regulations can significantly affect 

manufacturers’ financial operations. 

Multiple regulations affecting the same 

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58998 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

72 ‘‘Montreal Protocol.’’ United Nations 

Environment Programme. Web. 26 Aug. 2010. 

http://ozone.unep.org/new_site/en/montreal_

protocol.php. 73See Arkema v. EPA, 618 F.3d 1 (D.C. Cir. 2010). 

manufacturer can strain profits and lead 

companies to abandon product lines or 

markets with lower expected future 

returns than competing products. For 

these reasons, DOE conducts an analysis 

of cumulative regulatory burden as part 

of its rulemakings pertaining to 

appliance efficiency. 

For the cumulative regulatory burden 

analysis, DOE looks at other regulations 

that could affect small, large, and very 

large air-cooled commercial package air 

conditioning and heating equipment 

manufacturers that will take effect 

approximately three years before or after 

the 2019 compliance date of amended 

energy conservation standards for these 

products. In interviews, manufacturers 

cited Federal regulations on equipment 

other than small, large, and very large 

air-cooled commercial package air 

conditioning and heating equipment 

that contribute to their cumulative 

regulatory burden. The compliance 

years and expected industry conversion 

costs of relevant amended energy 

conservation standards are indicated in 

the table below. Included in the table 

are Federal regulations that have 

compliance dates beyond the three year 

range of DOE’s analysis. Those 

regulations were cited multiple times by 

manufacturers in interviews and written 

comments, and are included here for 

reference. 

TABLE V.9—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION STANDARDS AFFECTING SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL PACKAGE AIR CONDITIONING AND

HEATING EQUIPMENT MANUFACTURERS

Federal energy conservation standards Approximate compliance date 

Estimated total industry conversion 

expense 

2007 Residential Furnaces & Boilers 72 FR 65136 (Nov. 19, 2007) ......................................................... 2015 * $88M (2006$) 

2011 Residential Furnaces 76 FR 37408 (June 27, 2011); 76 FR 67037 (Oct. 31, 2011) ........................ 2015 ** $2.5M (2009$) 

2011 Residential Central Air Conditioners and Heat Pumps 76 FR 37408 (June 27, 2011); 76 FR 

67037 (Oct. 31, 2011) .............................................................................................................................. 2015 ** $ 26.0M (2009$) 

2010 Gas Fired and Electric Storage Water Heaters 75 FR 20112 (April 16, 2010) ................................. 2015 $95.4M (2009$) 

Walk-in Coolers and Freezers ..................................................................................................................... 2017 $33.6.0M (2012$) 

Furnace Fans ............................................................................................................................................... 2019 $40.6M (2012$) 

Packaged Terminal Air Conditioners and Heat Pumps *** .......................................................................... TBD TBD 

Commercial and Industrial Fans and Blowers *** ........................................................................................ TBD TBD 

* Conversion expenses for manufacturers of oil-fired furnaces and gas- and oil-fired boilers associated with the November 2007 final rule for 

residential furnaces and boilers are excluded from this figure. The 2011 direct final rule for residential furnaces sets a higher standard and earlier 

compliance date for oil furnaces than the 2007 final rule. As a result, manufacturers will be required design to the 2011 direct final rule standard. 

The conversion costs associated with the 2011 direct final rule are listed separately in this table. EISA 2007 legislated higher standards and earlier compliance dates for residential boilers than were in the November 2007 final rule. As a result, gas-fired and oil-fired boiler manufacturers 

were required to design to the EISA 2007 standard beginning in 2012. The conversion costs listed for residential gas-fired and oil-fired boilers in 

the November 2007 residential furnaces and boilers final rule analysis are not included in this figure. 

** Estimated industry conversion expense and approximate compliance date reflect a court-ordered May 1, 2013 stay of the residential nonweatherized and mobile home gas furnaces standards set in the 2011 Energy Conservation Standards for Residential Furnaces and Residential 

Central Air Conditioners and Heat Pumps. 

*** The final rule for this energy conservation standard has not been published. The compliance date and analysis of conversion costs are estimates and have not been finalized at this time. 

In addition to Federal energy 

conservation standards, DOE identified 

other regulatory burdens that would 

affect manufacturers of small, large, and 

very large air-cooled commercial 

package air conditioning and heating 

equipment: 

DOE Certification, Compliance, and 

Enforcement (CC&E) Rule 

Any amended standard that DOE 

would also require accompanying CC&E 

requirements for manufacturers of 

small, large, and very large air-cooled 

commercial package air conditioning 

equipment to follow. DOE conducted a 

rulemaking to expand AEDM coverage 

to commercial HVAC, including the 

equipment covered by this rulemaking, 

and issued a final rule on December 31, 

2013. (78 FR 79579) An AEDM is a 

computer modeling or mathematical 

tool that predicts the performance of 

non-tested basic models. In the final 

rule, DOE is allowing manufacturers of 

small, large, and very large air-cooled 

commercial package air conditioning 

equipment to rate basic models using 

AEDMs, reducing the need for sample 

units and reducing burden on 

manufacturers. The final rule 

establishes revised verification 

tolerances for small, large, and very 

large air-cooled commercial package air 

conditioning equipment manufacturers. 

More information can be found at 

http://www1.eere.energy.gov/buildings/

appliance_standards/implement_cert_

and_enforce.html. 

EPA Phase-Out of 

Hydrochlorofluorocarbons (HCFCs) 

The U.S. is obligated under the 

Montreal Protocol to limit production 

and consumption of HCFCs through 

incremental reductions, culminating in 

a complete phase-out of HCFCs by 

2030.72 On December 15, 2009, EPA 

published the ‘‘2010 HCFC Allocation 

Rule,’’ which allocates production and 

consumption allowances for HCFC–22 

for each year between 2010 and 2014. 74 

FR 66412. The rule also prohibited the 

manufacture of new appliances using 

virgin HCFC–22, effective January 1, 

2010, with limited exceptions. On April 

3, 2013, EPA published the ‘‘2012–2014 

HCFC Allocation Proposed Rule,’’ 

which lifted the regulatory ban on the 

production and consumption of HCFC– 

22 (following a court decision 73 in 

August 2010 to vacate a portion of the 

‘‘2010 HCFC Allocation Rule’’) by 

establishing company-by-company 

HCFC–22 baselines and allocating 

allowances for 2012–2014. 78 FR 20004. 

On December 24, 2013, EPA published 

the ‘‘2015–2019 HCFC Allocation 

Proposed Rule,’’ which would provide 

HCFC allowances, including HCFC–22, 

through 2019. 78 FR 78072. Effective 

January 1, 2020, there will be no new 

production or import of virgin HCFC– 

22. 

Manufacturers of small, large, and 

very large air-cooled commercial 

package air conditioning equipment 

must comply with the allowances 

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established by the allocation rule as 

well as the prohibition on manufacture 

of new HFC–22 appliances that took 

effect January 1, 2010. As such, no 

covered manufacturers offer R–22 

products today. The MPCs used for the 

baseline and higher efficiency design 

options account for the move away from 

R–22 and the changes in production 

costs that resulted from the shift to HFC 

refrigerants. 

Issue 21: DOE requests comment on 

the identified regulations and their 

contribution to cumulative regulatory 

burden. Additionally, DOE requests 

feedback on product-specific regulations 

that take effect between 2016 and 2022 

that were not listed, including 

identification of the specific regulations 

and data quantifying the associated 

burdens. 

3. National Impact Analysis 

For small, large, and very large aircooled commercial package air 

conditioning and heating equipment, 

projections of shipments are an 

important part of the NIA. As discussed 

in section IV.G, DOE applied a repair/ 

replace decision model to estimate how 

many units coming to the end of their 

lifetime would be repaired rather than 

replaced with a new unit. Because the 

decision is very sensitive to the 

installed cost of new equipment, the 

impact of standards on shipments 

increases with the minimum efficiency 

required. Table V.10 presents the 

estimated cumulative shipments in 

2019–2048 in the base case and under 

each TSL. 

TABLE V.10—PROJECTED CUMULATIVE SHIPMENTS OF SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL

PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT IN 2019–2048 

Million units Percent reduction 

from base case (%) 

Base Case ........................................................................................................................................... 9.7 N/A 

TSL 1 ................................................................................................................................................... 9.2 4.8 

TSL 2 ................................................................................................................................................... 7.5 22.5 

TSL 3 ................................................................................................................................................... 7.5 22.8 

TSL 4 ................................................................................................................................................... 7.1 27.0 

a. Significance of Energy Savings 

For each TSL, DOE projected energy 

savings for small, large, and very large 

air-cooled commercial package air 

conditioning and heating equipment 

purchased in the 30-year period that 

begins in the year of anticipated 

compliance with amended standards 

(2019–2048). The savings are measured 

over the entire lifetime of equipment 

purchased in the 30-year period. DOE 

quantified the energy savings 

attributable to each TSL as the 

difference in energy consumption 

between each standards case and the 

base case. Table V.11 presents the 

estimated primary energy savings for 

each considered TSL, and Table V.12 

presents the estimated FFC energy 

savings for each TSL. The approach for 

estimating national energy savings is 

further described in section IV.H. 

TABLE V.11—CUMULATIVE PRIMARY ENERGY SAVINGS FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL

PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT TRIAL STANDARD LEVELS FOR UNITS SOLD IN 2019–2048 

Equipment class 

Trial standard level 

1 2 3 4 

quads 

Small Commercial Packaged Air Conditioners—≥65,000 Btu/h and <135,000 Btu/h Cooling Capacity ............................................................................................................................................ 1.2 4.3 5.4 8.3 

Large Commercial Packaged Air Conditioners—≥135,000 Btu/h and <240,000 Btu/h Cooling 

Capacity ....................................................................................................................................... 0.8 1.8 2.6 3.8 

Very Large Commercial Packaged Air Conditioners—≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ................................................................................................................................. 0.7 1.5 2.7 3.4 

Small Commercial Packaged Heat Pumps—≥65,000 Btu/h and <135,000 Btu/h Cooling Capacity .................................................................................................................................................. 0.1 0.5 0.7 1.0 

Large Commercial Packaged Heat Pumps—≥135,000 Btu/h and <240,000 Btu/h Cooling Capacity ............................................................................................................................................ 0.0 0.1 0.1 0.2 

Very Large Commercial Packaged Heat Pumps—≥240,000 Btu/h and <760,000 Btu/h Cooling 

Capacity ....................................................................................................................................... 0.0 0.1 0.1 0.2 

Total All Classes ....................................................................................................................... 2.9 8.3 11.7 16.8 

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74EPCA requires DOE to review its standards at 

least once every 6 years, and requires, for certain 

products, a 3-year period after any new standard is 

promulgated before compliance is required, except 

that in no case may any new standards be required 

within 6 years of the compliance date of the 

previous standards. While adding a 6-year review 

to the 3-year compliance period adds up to 9 years, 

DOE notes that it may undertake reviews at any 

time within the 6 year period and that the 3-year 

compliance date may yield to the 6-year backstop. 

A 9-year analysis period may not be appropriate 

given the variability that occurs in the timing of 

standards reviews and the fact that for some 

consumer products, the compliance period is 5 

years rather than 3 years. 

TABLE V.12—CUMULATIVE FULL-FUEL-CYCLE ENERGY SAVINGS FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED

COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT TRIAL STANDARD LEVELS FOR UNITS SOLD IN

2019–2048 

Equipment class 

Trial standard level 

1 2 3 4 

quads 

Small Commercial Packaged Air Conditioners—≥65,000 Btu/h and <135,000 Btu/h Cooling Capacity ............................................................................................................................................ 1.2 4.3 5.5 8.4 

Large Commercial Packaged Air Conditioners—≥135,000 Btu/h and <240,000 Btu/h Cooling 

Capacity ....................................................................................................................................... 0.8 1.8 2.6 3.8 

Very Large Commercial Packaged Air Conditioners—≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ................................................................................................................................. 0.8 1.6 2.7 3.5 

Small Commercial Packaged Heat Pumps—≥65,000 Btu/h and <135,000 Btu/h Cooling Capacity .................................................................................................................................................. 0.1 0.5 0.7 1.0 

Large Commercial Packaged Heat Pumps—≥135,000 Btu/h and <240,000 Btu/h Cooling Capacity ............................................................................................................................................ 0.0 0.1 0.1 0.2 

Very Large Commercial Packaged Heat Pumps—≥240,000 Btu/h and <760,000 Btu/h Cooling 

Capacity ....................................................................................................................................... 0.0 0.1 0.1 0.2 

Total All Classes ....................................................................................................................... 3.0 8.4 11.8 17.1 

For this rulemaking, DOE undertook a 

sensitivity analysis using nine rather 

than 30 years of equipment shipments. 

The choice of a nine-year period is a 

proxy for the timeline in EPCA for the 

review of certain energy conservation 

standards and potential revision of and 

compliance with such revised 

standards.74 This timeframe may not be 

statistically relevant with regard to the 

equipment lifetime, equipment 

manufacturing cycles or other factors 

specific to small, large, and very large 

air-cooled commercial package air 

conditioning and heating equipment. 

Thus, this information is presented for 

informational purposes only and is not 

indicative of any change in DOE’s 

analytical methodology. The NES 

results based on a 9-year analytical 

period are presented in Table V.13. The 

impacts are counted over the lifetime of 

small, large, and very large air-cooled 

commercial package air conditioning 

and heating equipment purchased in 

2019–2027. 

TABLE V.13—CUMULATIVE PRIMARY ENERGY SAVINGS FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL

PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT TRIAL STANDARD LEVELS FOR UNITS SOLD IN 2019–2027 

Equipment class 

Trial standard level 

1 2 3 4 

quads 

Small Commercial Packaged Air Conditioners—≥65,000 Btu/h and <135,000 Btu/h Cooling Capacity ............................................................................................................................................ 0.3 0.7 0.9 1.4 

Large Commercial Packaged Air Conditioners—≥135,000 Btu/h and <240,000 Btu/h Cooling 

Capacity ....................................................................................................................................... 0.2 0.4 0.5 0.7 

Very Large Commercial Packaged Air Conditioners—≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ................................................................................................................................. 0.1 0.2 0.3 0.3 

Small Commercial Packaged Heat Pumps—≥65,000 Btu/h and <135,000 Btu/h Cooling Capacity .................................................................................................................................................. 0.0 0.1 0.2 0.2 

Large Commercial Packaged Heat Pumps—≥135,000 Btu/h and <240,000 Btu/h Cooling Capacity ............................................................................................................................................ 0.0 0.0 0.0 0.0 

Very Large Commercial Packaged Heat Pumps—≥240,000 Btu/h and <760,000 Btu/h Cooling 

Capacity ....................................................................................................................................... 0.0 0.0 0.0 0.0 

Total All Classes ....................................................................................................................... 0.6 1.4 1.9 2.7 

Issue 22: For this rulemaking, DOE 

analyzed the effects of potential 

standards on equipment purchased over 

a 30-year period, and it undertook a 

sensitivity analysis using 9 years rather 

than 30 years of product shipments. The 

choice of a 30-year period of shipments 

is consistent with the DOE analysis for 

other products and commercial 

equipment. The choice of a 9-year 

period is a proxy for the timeline in 

EPCA for the review of certain energy 

conservation standards and potential 

revision of and compliance with such 

amended standards. DOE is seeking 

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75OMB Circular A–4, section E (Sept. 17, 2003). 

Available at: http://www.whitehouse.gov/omb/

circulars_a004_a-4. 

input on ways to refine the analytic 

timeline. 

b. Net Present Value of Customer Costs 

and Benefits 

DOE estimated the cumulative NPV of 

the total costs and savings for customers 

that would result from the TSLs 

considered for small, large, and very 

large air-cooled commercial package air 

conditioning and heating equipment. In 

accordance with OMB’s guidelines on 

regulatory analysis,75 DOE calculated 

the NPV using both a 7-percent and a 3- 

percent real discount rate. The 7-percent 

rate is an estimate of the average beforetax rate of return on private capital in 

the U.S. economy, and reflects the 

returns on real estate and small business 

capital as well as corporate capital. This 

discount rate approximates the 

opportunity cost of capital in the private 

sector (OMB analysis has found the 

average rate of return on capital to be 

near this rate). The 3-percent rate 

reflects the potential effects of standards 

on private consumption (e.g., through 

higher prices for equipment and 

reduced purchases of energy). This rate 

represents the rate at which society 

discounts future consumption flows to 

their present value. It can be 

approximated by the real rate of return 

on long-term government debt (i.e., 

yield on United States Treasury notes), 

which has averaged about 3 percent for 

the past 30 years. 

Table V.14 shows the customer NPV 

results for each TSL considered for 

small, large, and very large air-cooled 

commercial package air conditioning 

and heating equipment. In each case, 

the impacts cover the lifetime of 

equipment purchased in 2019–2048. 

TABLE V.14—NET PRESENT VALUE OF CUSTOMER BENEFITS FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT TRIAL STANDARD LEVELS FOR UNITS SOLD IN 2019– 

2048 

Equipment class Discount rate 

% 

Trial standard level 

1 2 3 4 

billion 2012$ 

Small Commercial Packaged Air Conditioners—≥65,000 

Btu/h and <135,000 Btu/h Cooling Capacity ................... 3 6.9 20.7 26.0 36.2 

Large Commercial Packaged Air Conditioners—≥135,000 

Btu/h and <240,000 Btu/h Cooling Capacity ................... ........................ 3.0 6.8 9.7 15.6 

Very Large Commercial Packaged Air Conditioners— 

≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ... ........................ 3.4 6.4 11.0 13.5 

Small Commercial Packaged Heat Pumps—≥65,000 Btu/h 

and <135,000 Btu/h Cooling Capacity ............................. ........................ 0.8 2.3 3.1 4.2 

Large Commercial Packaged Heat Pumps—≥135,000 Btu/

h and <240,000 Btu/h Cooling Capacity .......................... ........................ 0.2 0.3 0.5 0.8 

Very Large Commercial Packaged Heat Pumps— 

≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ... ........................ 0.2 0.3 0.6 0.7 

Total All Classes ........................................................... ........................ 14.4 36.9 50.8 71.0 

Small Commercial Packaged Air Conditioners—≥65,000 

Btu/h and <135,000 Btu/h Cooling Capacity ................... 7 2.5 7.1 9.0 11.8 

Large Commercial Packaged Air Conditioners—≥135,000 

Btu/h and <240,000 Btu/h Cooling Capacity ................... ........................ 0.9 2.0 2.9 4.8 

Very Large Commercial Packaged Air Conditioners— 

≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ... ........................ 1.0 1.8 3.3 3.9 

Small Commercial Packaged Heat Pumps—≥65,000 Btu/h 

and <135,000 Btu/h Cooling Capacity ............................. ........................ 0.3 0.8 1.1 1.5 

Large Commercial Packaged Heat Pumps—≥135,000 Btu/

h and <240,000 Btu/h Cooling Capacity .......................... ........................ 0.1 0.1 0.2 0.3 

Very Large Commercial Packaged Heat Pumps— 

≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ... ........................ 0.1 0.1 0.2 0.2 

Total All Classes ........................................................... ........................ 4.8 11.9 16.5 22.5 

The NPV results based on the aforementioned nine-year analytical period 

are presented in Table V.15. The 

impacts are counted over the lifetime of 

equipment purchased in 2019–2027. As 

mentioned previously, this information 

is presented for informational purposes 

only and is not indicative of any change 

in DOE’s analytical methodology or 

decision criteria. 

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59002 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

TABLE V.15—NET PRESENT VALUE OF CUSTOMER BENEFITS FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT TRIAL STANDARD LEVELS FOR UNITS SOLD IN 2019– 

2027 

Equipment class Discount rate 

% 

Trial standard level 

1 2 3 4 

billion 2013$ 

Small Commercial Packaged Air Conditioners—≥65,000 

Btu/h and <135,000 Btu/h Cooling Capacity ................... 3 2.1 5.0 6.3 8.2 

Large Commercial Packaged Air Conditioners—≥135,000 

Btu/h and <240,000 Btu/h Cooling Capacity ................... ........................ 0.9 1.7 2.4 3.7 

Very Large Commercial Packaged Air Conditioners— 

≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ... ........................ 0.4 0.8 1.4 1.7 

Small Commercial Packaged Heat Pumps—≥65,000 Btu/h 

and <135,000 Btu/h Cooling Capacity ............................. ........................ 0.2 0.6 0.9 1.0 

Large Commercial Packaged Heat Pumps—≥135,000 Btu/

h and <240,000 Btu/h Cooling Capacity .......................... ........................ 0.0 0.1 0.1 0.2 

Very Large Commercial Packaged Heat Pumps— 

≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ... ........................ 0.0 0.0 0.1 0.1 

Total All Classes ........................................................... ........................ 3.7 8.3 11.3 14.9 

Small Commercial Packaged Air Conditioners—≥65,000 

Btu/h and <135,000 Btu/h Cooling Capacity ................... 7 1.1 2.7 3.3 4.1 

Large Commercial Packaged Air Conditioners—≥135,000 

Btu/h and <240,000 Btu/h Cooling Capacity ................... ........................ 0.4 0.7 1.0 1.7 

Very Large Commercial Packaged Air Conditioners— 

≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ... ........................ 0.2 0.4 0.7 0.8 

Small Commercial Packaged Heat Pumps—≥65,000 Btu/h 

and <135,000 Btu/h Cooling Capacity ............................. ........................ 0.1 0.3 0.5 0.5 

Large Commercial Packaged Heat Pumps—≥135,000 Btu/

h and <240,000 Btu/h Cooling Capacity .......................... ........................ 0.0 0.0 0.1 0.1 

Very Large Commercial Packaged Heat Pumps— 

≥240,000 Btu/h and <760,000 Btu/h Cooling Capacity ... ........................ 0.0 0.0 0.0 0.0 

Total All Classes ........................................................... ........................ 1.8 4.1 5.6 7.3 

c. Indirect Impacts on Employment 

DOE expects energy conservation 

standards for small, large, and very large 

air-cooled commercial package air 

conditioning and heating equipment to 

reduce energy costs for equipment 

owners, and the resulting net savings to 

be redirected to other forms of economic 

activity. Those shifts in spending and 

economic activity could affect the 

demand for labor. As described in 

section IV.N, DOE used an input/output 

model of the U.S. economy to estimate 

indirect employment impacts of the 

TSLs that DOE considered in this 

rulemaking. DOE understands that there 

are uncertainties involved in projecting 

employment impacts, especially 

changes in the later years of the 

analysis. Therefore, DOE generated 

results for near-term time frames, where 

these uncertainties are reduced. 

The results suggest that the proposed 

standards are likely to have negligible 

impact on the net demand for labor in 

the economy. The net change in jobs is 

so small that it would be imperceptible 

in national labor statistics and might be 

offset by other, unanticipated effects on 

employment. Chapter 16 of the NOPR 

TSD presents detailed results. 

4. Impact on Utility or Performance 

DOE believes that the standards it is 

proposing today will not lessen the 

utility or performance of small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment. 

5. Impact of Any Lessening of 

Competition 

DOE considers any lessening of 

competition that is likely to result from 

amended standards. The Attorney 

General determines the impact, if any, 

of any lessening of competition likely to 

result from a proposed standard, and 

transmits such determination to the 

Secretary, together with an analysis of 

the nature and extent of such impact. 

To assist the Attorney General in 

making such determination, DOE will 

provide DOJ with copies of this NOPR 

and the TSD for review. DOE will 

consider DOJ’s comments on the 

proposed rule in preparing the final 

rule, and DOE will publish and respond 

to DOJ’s comments in that document. 

6. Need of the Nation to Conserve 

Energy 

Enhanced energy efficiency, where 

economically justified, improves the 

Nation’s energy security, strengthens the 

economy, and reduces the 

environmental impacts or costs of 

energy production. Reduced electricity 

demand due to energy conservation 

standards is also likely to reduce the 

cost of maintaining the reliability of the 

electricity system, particularly during 

peak-load periods. As a measure of this 

reduced demand, chapter 15 in the 

NOPR TSD presents the estimated 

reduction in generating capacity for the 

TSLs that DOE considered in this 

rulemaking. 

Energy savings from standards for 

small, large, and very large air-cooled 

commercial package air conditioning 

and heating equipment could also 

produce environmental benefits in the 

form of reduced emissions of air 

pollutants and greenhouse gases 

associated with electricity production. 

Table V.16 provides DOE’s estimate of 

cumulative emissions reductions 

projected to result from the TSLs 

considered in this rulemaking. For the 

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Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 59003 

76The upstream share of the total reduction for 

NOx is high because power sector emissions are 

capped in many States and because changes in the projected power plant mix cause NOx emissions to 

increase in some years under the standards case. 

proposed standards (TSL 3), the 

upstream emissions reduction accounts 

for 3 percent of total CO2 emissions, 48 

percent of total NOX emissions, and 0.3 

percent of total SO2 emissions.76 DOE 

reports annual emissions reductions for 

each TSL in chapter 13 of the NOPR 

TSD. 

TABLE V.16—CUMULATIVE EMISSIONS REDUCTION ESTIMATED FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED

COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT TRIAL STANDARD LEVELS * 

Trial Standard Level 

1 2 3 4 

Power Sector Emissions 

CO2 (million metric tons) ......................................................................... 262 745 1,049 1,514 

NOX (thousand tons) ............................................................................... 129 375 528 767 

SO2 (thousand tons) ................................................................................ 725 2,077 2,927 4,232 

Hg (tons) .................................................................................................. 0 .88 2 .52 3 .55 5 .13 

N2O (thousand tons) ................................................................................ 3 .73 10 .74 15 .13 21 .90 

CH4 (thousand tons) ................................................................................ 19 .2 54 .4 76 .7 110 .6 

Upstream Emissions 

CO4 (million metric tons) ......................................................................... 8 .98 25 .4 35 .8 51 .5 

NOX (thousand tons) ............................................................................... 124 350 492 710 

SO2 (thousand tons) ................................................................................ 1 .92 5 .44 7 .66 11 .04 

Hg (tons) .................................................................................................. 0 .00 0 .01 0 .02 0 .03 

N2 (thousand tons) ................................................................................... 0 .09 0 .25 0 .36 0 .52 

CH4 (thousand tons) ................................................................................ 753 2,127 2,996 4,317 

Total Emissions 

CO2 (million metric tons) ......................................................................... 271 770 1,085 1,565 

NOX (thousand tons) ............................................................................... 252 725 1,021 1,477 

SO2 (thousand tons) ................................................................................ 727 2,083 2,934 4,243 

Hg (tons) .................................................................................................. 0 .89 2 .53 3 .57 5 .16 

N2O (thousand tons) ................................................................................ 3 .82 10 .99 15 .48 22 .41 

N2O (thousand tons CO2eq) ** ................................................................ 1,138 3,275 4,614 6,679 

CH4 (thousand tons) ................................................................................ 772 2,181 3,072 4,427 

CH2 (million tons CO2eq) ** ..................................................................... 19 .3 54 .5 76 .8 110 .7 

* The reduction is measured over the period in which equipment purchased in 2019–2048 continue to operate. 

** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). 

These results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions 

factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, SO2, and Hg. For example, the estimated 

decrease for CO2 emissions reductions is 36%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document. 

As mentioned in section I, emissions 

factors based on the Annual Energy 

Outlook 2014 (AEO 2014), which 

became available too late for 

incorporation into this analysis, show a 

significant decrease in the cumulative 

emissions reductions from the proposed 

standards. For CO2, the emissions 

reduction at TSL 3, the proposed 

standards, is 697 Mt rather than 1,085 

Mt. 

As part of the analysis for this rule, 

DOE estimated monetary benefits likely 

to result from the reduced emissions of 

CO2 and NOX that DOE estimated for 

each of the TSLs considered. As 

discussed in section IV.L, DOE used the 

most recent values for the SCC 

developed by an interagency process. 

The four sets of SCC values resulting 

from that process (expressed in 2013$) 

are represented by $12.0/metric ton (the 

average value from a distribution that 

uses a 5-percent discount rate), $40.5/

metric ton (the average value from a 

distribution that uses a 3-percent 

discount rate), $62.4/metric ton (the 

average value from a distribution that 

uses a 2.5-percent discount rate), and 

$119/metric ton (the 95th-percentile 

value from a distribution that uses a 3- 

percent discount rate). These values 

correspond to the value of emission 

reductions in 2015; the values for later 

years are higher due to increasing 

damages as the projected magnitude of 

climate change increases. 

Table V.17 presents the global value 

of CO2 emissions reductions at each 

TSL. For each of the four cases, DOE 

calculated a present value of the stream 

of annual values using the same 

discount rate as was used in the studies 

upon which the dollar-per-ton values 

are based. DOE calculated domestic 

values as a range from 7 percent to 23 

percent of the global values, and these 

results are presented in chapter 14 of 

the NOPR TSD. 

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59004 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

77These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. The monetized 

benefits from GHG reductions would likely 

decrease by a comparable amount. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

TABLE V.17—ESTIMATES OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION UNDER SMALL, LARGE, AND VERY

LARGE AIR-COOLED COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT TRIAL STANDARD LEVELS

TSL 

SCC Case * 

5% discount rate, average * 3% discount rate, average * 2.5% discount rate, average * 3% discount rate, 95th 

percentile* 

Billion 2013$ 

Power Sector Emissions 

1 ....... 1.51 7.55 12.17 23.41 

2 ....... 4.21 21.21 34.25 65.80 

3 ....... 5.92 29.88 48.24 92.67 

4 ....... 8.50 42.99 69.45 133.36 

Upstream Emissions 

1 ....... 0.05 0.26 0.42 0.81 

2 ....... 0.15 0.73 1.18 2.26 

3 ....... 0.20 1.03 1.65 3.18 

4 ....... 0.29 1.47 2.38 4.57 

Total Emissions 

1 ....... 1.56 7.81 12.59 24.22 

2 ....... 4.35 21.94 35.43 68.06 

3 ....... 6.13 30.90 49.90 95.86 

4 ....... 8.79 44.47 71.83 137.93 

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4, and $119 per metric ton (2013$).77

DOE is well aware that scientific and 

economic knowledge about the 

contribution of CO2 and other 

greenhouse gas (GHG) emissions to 

changes in the future global climate and 

the potential resulting damages to the 

world economy continues to evolve 

rapidly. Thus, any value placed on 

reducing CO2 emissions in this 

rulemaking is subject to change. DOE, 

together with other Federal agencies, 

will continue to review various 

methodologies for estimating the 

monetary value of reductions in CO2

and other GHG emissions. This ongoing 

review will consider the comments on 

this subject that are part of the public 

record for this and other rulemakings, as 

well as other methodological 

assumptions and issues. However, 

consistent with DOE’s legal obligations, 

and taking into account the uncertainty 

involved with this particular issue, DOE 

has included in this proposed rule the 

most recent values and analyses 

resulting from the interagency process. 

DOE also estimated the cumulative 

monetary value of the economic benefits 

associated with NOX emissions 

reductions anticipated to result from 

amended standards for small, large, and 

very large air-cooled commercial 

package air conditioning and heating 

equipment. The dollar-per-ton values 

that DOE used are discussed in section 

IV.L. Table V.18 presents the 

cumulative present values for each TSL 

calculated using seven-percent and 

three-percent discount rates. 

TABLE V.18—ESTIMATES OF PRESENT VALUE OF NOX EMISSIONS REDUCTION UNDER SMALL, LARGE, AND VERY LARGE

AIR-COOLED COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT TRIAL STANDARD LEVELS 78

TSL 3% discount 

rate 

7% discount 

rate 

Million 2013$ 

Power Sector Emissions 

1 ............................................................................................................................................................................... 128 36.7 

2 ............................................................................................................................................................................... 369 105.5 

3 ............................................................................................................................................................................... 520 148 

4 ............................................................................................................................................................................... 753 215 

Upstream Emissions 

1 ............................................................................................................................................................................... 139 52.0 

2 ............................................................................................................................................................................... 384 138 

3 ............................................................................................................................................................................... 540 194 

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Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 59005 

78These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. In the next phase of 

this rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

79These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. The monetized 

benefits from GHG reductions would likely 

decrease by a comparable amount. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

TABLE V.18—ESTIMATES OF PRESENT VALUE OF NOX EMISSIONS REDUCTION UNDER SMALL, LARGE, AND VERY LARGE

AIR-COOLED COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT TRIAL STANDARD LEVELS 78— 

Continued 

TSL 3% discount 

rate 

7% discount 

rate 

4 ............................................................................................................................................................................... 773 275 

Total Emissions 

1 ............................................................................................................................................................................... 267 88.7 

2 ............................................................................................................................................................................... 753 243 

3 ............................................................................................................................................................................... 1060 343 

4 ............................................................................................................................................................................... 1527 490 

7. Summary of National Economic 

Impacts 

The NPV of the monetized benefits 

associated with emissions reductions 

can be viewed as a complement to the 

NPV of the customer savings calculated 

for each TSL considered in this 

rulemaking. Table V.19 presents the 

NPV values that result from adding the 

estimates of the potential economic 

benefits resulting from reduced CO2 and 

NOX emissions in each of four valuation 

scenarios to the NPV of customer 

savings calculated for each TSL 

considered in this rulemaking, at both a 

seven-percent and three-percent 

discount rate. The CO2 values used in 

the columns of each table correspond to 

the four sets of SCC values discussed 

above. 

TABLE V.19—NET PRESENT VALUE OF CUSTOMER SAVINGS COMBINED WITH PRESENT VALUE OF MONETIZED BENEFITS

FROM CO2 AND NOX EMISSIONS REDUCTIONS

TSL 

Customer NPV at 3% discount rate added with: 

SCC Case 

$12.0/metric 

ton CO2

*

SCC Case 

$40.5/metric 

ton CO2

*

SCC Case 

$62.4/metric 

ton CO2

*

SCC Case 

$119/metric 

ton CO2

*

Billion 2013$ 

1 ....................................................................................................................... 16.0 22.5 27.2 39.1 

2 ....................................................................................................................... 41.3 59.5 73.0 106.3 

3 ....................................................................................................................... 57.2 82.8 101.8 148.6 

4 ....................................................................................................................... 80.1 117.0 144.4 211.7 

TSL 

Customer NPV at 7% Discount Rate added with: 

SCC Case 

$12.0/metric 

ton CO2

*

SCC Case 

$40.5/metric 

ton CO2

*

SCC Case 

$62.4/metric 

ton CO2

*

SCC Case 

$119/metric 

ton CO2

*

Billion 2013$ 

1 ....................................................................................................................... 6.4 12.7 17.5 29.2 

2 ....................................................................................................................... 16.3 34.1 47.6 80.4 

3 ....................................................................................................................... 22.7 47.8 66.8 113.0 

4 ....................................................................................................................... 31.4 67.5 94.8 161.3 

* These label values represent the global SCC in 2015, in 2013$. For NOX emissions, each case uses the medium value, which corresponds 

to $2,684 per ton.79

Although adding the value of 

customer savings to the values of 

emission reductions provides a valuable 

perspective, two issues should be 

considered. First, the national operating 

cost savings are domestic U.S. customer 

monetary savings that occur as a result 

of market transactions, while the value 

of CO2 reductions is based on a global 

value. Second, the assessments of 

operating cost savings and the SCC are 

performed with different methods that 

use different time frames for analysis. 

The national operating cost savings is 

measured for the lifetime of equipment 

shipped in 2019–2048. The SCC values, 

on the other hand, reflect the present 

value of future climate-related impacts 

resulting from the emission of one 

metric ton of CO2 in each year. These 

impacts continue well beyond 2100. 

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59006 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

80These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. The monetized 

benefits from GHG reductions would likely 

decrease by a comparable amount. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

8. Other Factors 

The Secretary of Energy, in 

determining whether a standard is 

economically justified, may consider 

any other factors that the Secretary 

deems to be relevant. (42 U.S.C. 

6313(a)(6)(B)(ii)(VII)) No other factors 

were considered in this analysis. 

C. Proposed Standards 

To adopt national standards more 

stringent than the amended ASHRAE/

IES Standard 90.1 for small, large, and 

very large air-cooled CUAC and CUHP, 

DOE must determine that such action 

would result in significant additional 

conservation of energy and is 

technologically feasible and 

economically justified. (42 U.S.C. 

6313(a)(6)(A)(ii)). As discussed 

previously, EPCA provides seven factors 

to be evaluated in determining whether 

a more stringent standard for small, 

large, and very large air-cooled CUAC 

and CUHP is economically justified. (42 

U.S.C. 6313(a)(6)(B)(ii)). 

For this NOPR, DOE considered the 

impacts of standards at each TSL, 

beginning with the most energy-efficient 

level, to determine whether that level 

was economically justified. Where the 

most energy-efficient level was not 

justified, DOE then considered the next 

most efficient level and undertook the 

same evaluation until it reached the 

highest efficiency level that is 

technologically feasible, economically 

justified and saves a significant amount 

of energy. 

To aid the reader in understanding 

the benefits and/or burdens of each TSL, 

tables in this section summarize the 

quantitative analytical results for each 

TSL, based on the assumptions and 

methodology discussed herein. The 

efficiency levels contained in each TSL 

are described in section V.A. In addition 

to the quantitative results presented in 

the tables, DOE also considers other 

burdens and benefits that affect 

economic justification. These include 

the impacts on identifiable subgroups of 

customers who may be 

disproportionately affected by a national 

standard (see section V.B.1.b), and 

impacts on employment. DOE discusses 

the impacts on employment in small, 

large, and very large air-cooled 

commercial package air conditioning 

and heating equipment manufacturing 

in section V.B.2, and discusses the 

indirect employment impacts in section 

V.B.3.c. 

1. Benefits and Burdens of Trial 

Standard Levels Considered for Small, 

Large, and Very Large Air-Cooled 

Commercial Package Air Conditioning 

and Heating Equipment 

Table V.20 and Table V.21 summarize 

the quantitative impacts estimated for 

each TSL for small, large, and very large 

air-cooled commercial package air 

conditioning and heating equipment. 

TABLE V.20—SUMMARY OF ANALYTICAL RESULTS FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL

PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT: NATIONAL IMPACTS 80

Category TSL 1 TSL 2 TSL 3 TSL 4 

National FFC Energy Savings quads 

3.0 ............... 8.4 ............... 11.8 ............. 17.1 

NPV of Customer Benefits 2013$ billion 

3% discount rate ........................................................................................................ 14.4 ............. 36.9 ............. 50.8 ............. 71.0 

7% discount rate ........................................................................................................ 4.8 ............... 11.9 ............. 16.5 ............. 22.5 

Cumulative Emissions Reduction (Total FFC Emissions) 

CO2 million metric tons .............................................................................................. 271 .............. 770 .............. 1,085 ........... 1,565 

NOX thousand tons ................................................................................................... 252 .............. 725 .............. 1,021 ........... 1,477 

SO2 thousand tons .................................................................................................... 727 .............. 2,083 ........... 2,934 ........... 4,243 

Hg tons ...................................................................................................................... 0.89 ............. 2.53 ............. 3.57 ............. 5.16 

N2O thousand tons .................................................................................................... 3.82 ............. 10.99 ........... 15.48 ........... 22.41 

N2O thousand tons CO2eq * ...................................................................................... 1,138 ........... 3,275 ........... 4,614 ........... 6,679 

CH4 thousand tons .................................................................................................... 772 .............. 2,181 ........... 3,072 ........... 4,427 

CH4 million tons CO2eq* ........................................................................................... 19.3 ............. 54.5 ............. 76.8 ............. 110.7 

Value of Emissions Reduction (Total FFC Emissions) 

CO2 2013$ billion ** ................................................................................................... 1.56 to 24.2 4.35 to 68.1 6.13 to 95.9 8.79 to 138 

NOX—3% discount rate 2013$ million ...................................................................... 267 .............. 753 .............. 1060 ............ 1,527 

NOX—7% discount rate 2013$ million ...................................................................... 88.7 ............. 243 .............. 343 .............. 490 

* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). 

** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 59007 

81These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. The monetized 

benefits from GHG reductions would likely 

decrease by a comparable amount. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

TABLE V.21—SUMMARY OF ANALYTICAL RESULTS FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED COMMERCIAL

PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT: MANUFACTURER AND CONSUMER IMPACTS

Category TSL 1 TSL 2 TSL 3 TSL 4 

Manufacturer Impacts 

Change in Industry NPV ($ million) † ............................................... (73.89) to 

(11.45).

(245.30) to 

(52.87).

(311.58) to 

(88.55).

(438.16) to 

(118.13). 

Change in Industry NPV (%) † ......................................................... (5.86) to (0.91) (19.45) to (4.19) (24.71) to (7.02) (34.75) to (9.37). 

Customer Mean LCC Savings 2013$ 

Small Commercial Packaged Air Conditioners—≥65,000 Btu/h and 

<135,000 Btu/h Cooling Capacity.

1,094 ................ 937 ................... 4,779 ................ 6,711. 

Large Commercial Packaged Air Conditioners—≥135,000 Btu/h 

and <240,000 Btu/h Cooling Capacity.

1,038 ................ 2,214 ................ 3,469 ................ 7,508. 

Very Large Commercial Packaged Air Conditioners—≥240,000 

Btu/h and <760,000 Btu/h Cooling Capacity.

4,103 ................ 4,801 ................ 16,477 .............. 19,842. 

Weighted Average * .......................................................................... 1,257 ................ 1,472 ................ 5,150 ................ 7,675. 

Customer Median PBP years 

Small Commercial Packaged Air Conditioners—≥65,000 Btu/h and 

<135,000 Btu/h Cooling Capacity.

2.2 .................... 8.0 .................... 3.9 .................... 4.7. 

Large Commercial Packaged Air Conditioners—≥135,000 Btu/h 

and <240,000 Btu/h Cooling Capacity.

6.0 .................... 7.2 .................... 6.6 .................... 5.1. 

Very Large Commercial Packaged Air Conditioners—≥240,000 

Btu/h and <760,000 Btu/h Cooling Capacity.

2.6 .................... 5.5 .................... 2.5 .................... 3.5. 

Weighted Average * .......................................................................... 3.1 .................... 7.7 .................... 4.5 .................... 4.7. 

Small CUAC—≥65,000 Btu/h and <135,000 Btu/h: ** 

Customers with Net Cost % ...................................................... 0% .................... 27% .................. 0% .................... 0%. 

Customers with Net Benefit % .................................................. 61% .................. 72% .................. 99% .................. 100%. 

Customers with No Impact % ................................................... 39% .................. 1% .................... 0% .................... 0%. 

Large CUAC—≥135,000 Btu/h and <240,000 Btu/h: ** 

Customers with Net Cost % ...................................................... 3% .................... 8% .................... 6% .................... 2%. 

Customers with Net Benefit % .................................................. 74% .................. 90% .................. 93% .................. 98%. 

Customers with No Impact % ................................................... 22% .................. 2% .................... 0% .................... 0%. 

Very Large CUAC—≥240,000 Btu/h and <760,000 Btu/h: ** 

Customers with Net Cost (%) ................................................... 2% .................... 12% .................. 3% .................... 5%. 

Customers with Net Benefit (%) ............................................... 62% .................. 76% .................. 92% .................. 94%. 

Customers with No Impact (%) ................................................. 36% .................. 13% .................. 6% .................... 1%. 

Weighted Average: * 

Customers with Net Cost (%) ................................................... 1% .................... 22% .................. 2% .................... 1%. 

Customers with Net Benefit (%) ............................................... 64% .................. 77% .................. 97% .................. 99%. 

Customers with No Impact (%) ................................................. 35% .................. 2% .................... 0% .................... 0%. 

* Weighted by shares of each equipment class in total projected shipments in 2019. 

** Rounding may cause some items to not total 100 percent. 

† Values in parentheses are negative values. 

First, DOE considered TSL 4, the most 

efficient level (max tech), which would 

save an estimated total of 17.1 quads of 

energy, an amount DOE considers 

significant. TSL 4 has an estimated NPV 

of customer benefit of $22.5 billion 

using a 7 percent discount rate, and 

$70.1 billion using a 3 percent discount 

rate. 

The cumulative emissions reductions 

at TSL 4 are 11,565 million metric tons 

of CO2, 1,477 thousand tons of NOX, 

4,243 thousand tons of SO2, and 5.16 

tons of Hg. The estimated monetary 

value of the CO2 emissions reductions at 

TSL 4 ranges from $9 billion to $138 

billion.81

At TSL 4, the average LCC savings is 

$6,711 for small CUAC, $7,508 for large 

CUAC, and $19,842 for very large 

CUAC. The median PBP is 4.7 years for 

small CUAC, 5.1 years for large CUAC, 

and 3.5 years for very large CUAC. The 

share of customers experiencing a net 

LCC benefit is 100 percent for small 

CUAC, 98 percent for large CUAC, and 

94 percent for very large CUAC. 

At TSL 4, the projected change in 

INPV ranges from a decrease of $438.16 

million to decrease of $118.13 million. 

If the larger decrease is realized, TSL 4 

could result in a net loss of 34.75 

percent in INPV to manufacturers of 

covered small, large, and very large aircooled commercial package air 

conditioning and heating equipment. 

Conversion costs are expected to total 

$210.96 million. Only 2% of industry 

product listings meet this proposed 

standard today. At this level, DOE 

recognizes that manufacturers could 

face technical resource constraints. 

Manufacturers stated they would 

require additional engineering expertise 

and additional test laboratory capacity. 

It is unclear whether manufacturers 

could complete the hiring of the 

necessary technical expertise and 

construction of the necessary test 

facilities in time to allow for the 

redesign of all products to meet maxtech by 2019. Furthermore, DOE 

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82These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. The monetized 

benefits from GHG reductions would likely 

decrease by a comparable amount. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

83Large CUAC experiences relatively lower LCC 

savings and longer PBPs than either small and very 

large CUACs due to the design measures being 

utilized to achieve higher rated IEER in the 

Engineering Analysis. In the case of small and very 

large CUACs, increased efficiency at TSL 3 is 

attained in large part due to increased compressor 

staging, which results in significant improvements 

in part-load performance. In the case of large CUAC, 

increased efficiency is attained without increasing 

compressor staging, i.e., the baseline design has the 

same number of stages as the design at TSL 3. 

Although the other design measures for large CUAC 

increase the rated IEER of the product, part-load 

performance is not impacted significantly. Because 

CUAC equipment operates frequently in part-load, 

the TSL 3 design for large CUAC results in annual 

energy savings and operating cost savings that are 

lower relative to what is attained with the designs 

for the small and very large CUACs. 

recognizes that a standard set at maxtech could greatly limit product 

differentiation in the small, large, and 

very large air-cooled CUAC and CUHP 

market. By commoditizing a key 

differentiating feature, a standard set a 

max-tech would likely accelerate 

consolidation in the industry. 

In view of the foregoing, DOE 

concludes that, at TSL 4 for small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment, the benefits of energy 

savings, positive NPV of total customer 

benefits, customer LCC savings, 

emission reductions and the estimated 

monetary value of the emissions 

reductions would be outweighed by the 

large reduction in industry value at TSL 

4. Consequently, DOE has concluded 

that TSL 4 is not economically justified. 

Next, DOE considered TSL 3, which 

would save an estimated total of 11.8 

quads of energy, an amount DOE 

considers significant. TSL 3 has an 

estimated NPV of customer benefit of 

$16.5 billion using a 7 percent discount 

rate, and $50.8 billion using a 3 percent 

discount rate. 

The cumulative emissions reductions 

at TSL 3 are 1,085 million metric tons 

of CO2, 1,021 thousand tons of NOX, 

2,934 thousand tons of SO2, and 3.57 

tons of Hg. The estimated monetary 

value of the CO2 emissions reductions at 

TSL 4 ranges from $6 billion to $96 

billion.82

At TSL 3, the average LCC savings is 

$4,779 for small CUAC, $3,469 for large 

CUAC, and $16,477 for very large 

CUAC. The median PBP is 3.9 years for 

small CUAC, 6.6 years for large CUAC, 

and 2.5 years for very large CUAC.83

The share of customers experiencing a 

net LCC benefit is 99 percent for small 

CUAC, 93 percent for large CUAC, and 

92 percent for very large CUAC. 

At TSL 3, the projected change in 

INPV ranges from a decrease of $311.58 

million to decrease of $88.55 million. If 

the larger decrease is realized, TSL 3 

could result in a net loss of 24.71 

percent in INPV to manufacturers of 

covered small, large, and very large aircooled commercial package air 

conditioning and heating equipment. 

Conversion costs are expected to total 

$120.90 million. 19% of industry 

product listings meet this standard level 

today. 

After considering the analysis and 

weighing the benefits and the burdens, 

DOE has tentatively concluded that at 

TSL 3 for small, large, and very large 

air-cooled commercial package air 

conditioning and heating equipment, 

the benefits of energy savings, positive 

NPV of customer benefit, positive 

impacts on consumers (as indicated by 

positive average LCC savings, favorable 

PBPs, and the large percentage of 

customers who would experience LCC 

benefits), emission reductions, and the 

estimated monetary value of the 

emissions reductions would outweigh 

the potential reductions in INPV for 

manufacturers. The Secretary of Energy 

has concluded that TSL 3 would save a 

significant amount of energy and is 

technologically feasible and 

economically justified. 

Based on the above considerations, 

DOE today proposes to adopt the energy 

conservation standards for small, large, 

and very large air-cooled commercial 

package air conditioning and heating 

equipment at TSL 3. Table V.22 presents 

the proposed energy conservation 

standards for small, large, and very large 

air-cooled commercial package air 

conditioning and heating equipment. 

TABLE V.22—PROPOSED ENERGY CONSERVATION STANDARDS FOR SMALL, LARGE, AND VERY LARGE AIR-COOLED

COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT

Equipment type Heating type Proposed energy 

conservation 

standard 

Small Commercial Packaged AC and HP (Air-Cooled)—≥65,000 Btu/h 

and <135,000 Btu/h Cooling Capacity.

AC Electric Resistance Heating or No 

Heating.

14.8 IEER. 

All Other Types of Heating .............. 14.6 IEER. 

HP Electric Resistance Heating or No 

Heating.

14.1 IEER. 

All Other Types of Heating .............. 3.5 COP. 

Large Commercial Packaged AC and HP (Air-Cooled)—≥135,000 Btu/h 

and <240,000 Btu/h Cooling Capacity.

AC Electric Resistance Heating or No 

Heating.

13.9 IEER. 

All Other Types of Heating .............. 3.4 COP. 

HP Electric Resistance Heating or No 

Heating.

All Other Types of Heating ..............

14.2 IEER. 

Very Large Commercial Packaged AC and HP (Air-Cooled)—≥240,000 

Btu/h and <760,000 Btu/h Cooling Capacity.

AC Electric Resistance Heating or No 

Heating.

14.0 IEER. 

13.4 IEER 

All Other Types of Heating .............. 3.3 COP. 

HP Electric Resistance Heating or No 

Heating.

13.2 IEER. 

All Other Types of Heating .............. 3.3 COP. 

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84 DOE used a two-step calculation process to 

convert the time-series of costs and benefits into 

annualized values. First, DOE calculated a present 

value in 2013, the year used for discounting the 

NPV of total customer costs and savings, for the 

time-series of costs and benefits using discount 

rates of three and seven percent for all costs and 

benefits except for the value of CO2 reductions. For 

the latter, DOE used a range of discount rates. From 

the present value, DOE then calculated the fixed 

annual payment over a 30-year period (2019 

through 2048) that yields the same present value. 

The fixed annual payment is the annualized value. 

Although DOE calculated annualized values, this 

does not imply that the time-series of cost and 

benefits from which the annualized values were 

determined is a steady stream of payments. 

85These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. The monetized 

benefits from GHG reductions would likely 

decrease by a comparable amount. In the next phase 

of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on 

the timing of the issuance of the next rulemaking 

document. 

2. Summary of Benefits and Costs 

(Annualized) of the Proposed Standards 

The benefits and costs of today’s 

proposed standards, for equipment sold 

in 2019–2048, can also be expressed in 

terms of annualized values. The 

annualized monetary values are the sum 

of (1) the annualized national economic 

value of the benefits from consumer 

operation of equipment that meet the 

proposed standards (consisting 

primarily of operating cost savings from 

using less energy, minus increases in 

equipment purchase and installation 

costs, which is another way of 

representing consumer NPV), and (2) 

the annualized monetary value of the 

benefits of emission reductions, 

including CO2 emission reductions.84

Although combining the values of 

operating savings and CO2 emission 

reductions provides a useful 

perspective, two issues should be 

considered. First, the national operating 

savings are domestic U.S. customer 

monetary savings that occur as a result 

of market transactions while the value 

of CO2 reductions is based on a global 

value. Second, the assessments of 

operating cost savings and CO2 savings 

are performed with different methods 

that use different time frames for 

analysis. The national operating cost 

savings is measured for the lifetime of 

small, large, and very large air-cooled 

commercial package air conditioning 

and heating equipment shipped in 2019 

–2048. The SCC values, on the other 

hand, reflect the present value of some 

future climate-related impacts resulting 

from the emission of one ton of carbon 

dioxide in each year. These impacts 

continue well beyond 2100. 

Estimates of annualized benefits and 

costs of the proposed standards for 

small, large, and very large air-cooled 

commercial package air conditioning 

and heating equipment are shown in 

Table V.23. The results under the 

primary estimate are as follows. Using a 

7-percent discount rate for benefits and 

costs other than CO2 reduction, for 

which DOE used a 3-percent discount 

rate along with the average SCC series 

that uses a 3-percent discount rate, the 

cost of the standards proposed in this 

rule is $430 million per year in 

increased equipment costs; while the 

estimated benefits are $2,177 million 

per year in reduced equipment 

operating costs, $1,744 million in CO2

reductions, and $36.2 million in 

reduced NOX emissions. In this case, the 

net benefit would amount to $3,558 

million per year. Using a 3-percent 

discount rate for all benefits and costs 

and the average SCC series, the 

estimated cost of the standards 

proposed in this rule is $507 million per 

year in increased equipment costs; 

while the estimated benefits are $3,426 

million per year in reduced operating 

costs, $1,774 million in CO2 reductions, 

and $60.9 million in reduced NOX

emissions. In this case, the net benefit 

would amount to approximately $4,755 

million per year.85

TABLE V.23—ANNUALIZED BENEFITS AND COSTS OF PROPOSED STANDARDS FOR SMALL, LARGE, AND VERY LARGE AIRCOOLED COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT

Discount rate Primary estimate * Low net benefits 

estimate * 

High net benefits 

estimate * 

million 2013$/year 

Benefits 

Operating Cost Savings ..................................... 7% .................................. 2,177 ....................... 1,984 ....................... 2,407 

3% .................................. 3,426 ....................... 3,127 ....................... 3,781 

CO2 Reduction Monetized Value ($12.0/t 

case) **.

5% .................................. 484 .......................... 467 .......................... 505 

CO2 Reduction Monetized Value ($40.5/t 

case) **.

3% .................................. 1,774 ....................... 1,714 ....................... 1,846 

CO2 Reduction Monetized Value ($62.4/t 

case) **.

2.5% ............................... 2,632 ....................... 2,543 ....................... 2,737 

CO2 Reduction Monetized Value ($119/t 

case) **.

3% .................................. 5,504 ....................... 5,317 ....................... 5,727 

NOX Reduction Monetized Value (at $2,684/

ton) **.

7% .................................. 36.18 ....................... 34.75 ....................... 37.90 

3% .................................. 60.89 ....................... 58.85 ....................... 63.40 

Total Benefits † ................................................... 7% plus CO2 range ........ 2,698 to 7,718 ......... 2,486 to 7,336 ......... 2,950 to 8,172 

7% .................................. 3,988 ....................... 3,733 ....................... 4,291 

3% plus CO2 range ........ 3,972 to 8,991 ......... 3,653 to 8,503 ......... 4,349 to 9,572 

3% .................................. 5,262 ....................... 4,900 ....................... 5,691 

Costs 

Incremental Product Costs ................................. 7% .................................. 430 .......................... 350 .......................... 485 

3% .................................. 507 .......................... 433 .......................... 550 

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59010 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

86These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, SO2, and 

Hg. For example, the estimated decrease for CO2

emissions reductions is 36%. In the next phase of 

this rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

TABLE V.23—ANNUALIZED BENEFITS AND COSTS OF PROPOSED STANDARDS FOR SMALL, LARGE, AND VERY LARGE AIRCOOLED COMMERCIAL PACKAGE AIR CONDITIONING AND HEATING EQUIPMENT—Continued 

Discount rate Primary estimate * Low net benefits 

estimate * 

High net benefits 

estimate * 

Net Benefits 

Total † .......................................................... 7% plus CO2 range ........ 2,268 to 7,288 ......... 2,135 to 6,986 ......... 2,465 to 7,687 

7% .................................. 3,558 ....................... 3,383 ....................... 3,806 

3% .................................. 4,755 ....................... 4,468 ....................... 5,140 

3% plus CO2 range ........ 3,465 to 8,484 ......... 3,220 to 8,071 ......... 3,799 to 9,021 

* This table presents the annualized costs and benefits associated with small, large, and very large air-cooled CUAC and CUHP shipped in 

2019–2048. These results include benefits to customers which accrue after 2048 from the products purchased in 2019–2048. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation 

for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO2013 Reference case, Low 

Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product costs reflect no change for projected 

product price trends in the Primary Estimate, an increasing trend for projected product prices in the Low Benefits Estimate, and a decreasing 

trend for projected product prices in the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor. 

The value for NOX is the average of the low and high values used in DOE’s analysis.86

† Total Benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average SCC with 3-percent discount 

rate. In the rows labeled ‘‘7% plus CO2 range’’ and ‘‘3% plus CO2 range,’’ the operating cost and NOX benefits are calculated using the labeled 

discount rate, and those values are added to the full range of CO2 values. 

VI. Procedural Issues and Regulatory 

Review 

A. Review Under Executive Orders 

12866 and 13563 

Section 1(b)(1) of Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

requires each agency to identify the 

problem that it intends to address, 

including, where applicable, the failures 

of private markets or public institutions 

that warrant new agency action, as well 

as to assess the significance of that 

problem. The proposed standards 

address the following problems: 

(1) There is a lack of customer 

information in the commercial space 

conditioning market, and the high costs 

of gathering and analyzing relevant 

information leads some customers to 

miss opportunities to make costeffective investments in energy 

efficiency. 

(2) In some cases the benefits of more 

efficient equipment are not realized due 

to misaligned incentives between 

purchasers and users. An example of 

such a case is when the equipment 

purchase decision is made by a building 

contractor or building owner who does 

not pay the energy costs. 

(3) There are external benefits 

resulting from improved energy 

efficiency of CUAC and CUHP that are 

not captured by the users of such 

equipment. These benefits include 

externalities related to public health, 

environmental protection and national 

security that are not reflected in energy 

prices, such as reduced emissions of air 

pollutants and greenhouse gases that 

impact human health and global 

warming. 

The proposed standards address these 

issues by setting minimum levels of 

energy efficiency, which remove from 

the market equipment that might be 

purchased by poorly informed 

customers or by customers who would 

not be paying the costs of operating the 

equipment. In the process of so doing, 

DOE assembles, analyzes, and receives 

informed comment on a large quantity 

of information that indicates that most 

customers would be better off 

purchasing equipment that meets the 

standards rather than less-efficient 

equipment. In cases in which the user 

of the equipment is not able to make the 

purchase decision, the standards help to 

ameliorate the problem of misaligned 

incentives between purchasers and 

users. Finally, the standards account to 

some extent for externalities that are not 

represented in market transactions. 

In addition, DOE has determined that 

this regulatory action is an 

‘‘economically significant regulatory 

action’’ under section 3(f)(1) 

(‘‘significant regulatory action’’) of 

Executive Order 12866, as it has an 

annual effect on the economy of 100 

million or more. Accordingly, section 

6(a)(3) of the Executive Order requires 

that DOE prepare a regulatory impact 

analysis (RIA) on this rule and that the 

Office of Information and Regulatory 

Affairs (OIRA) in the Office of 

Management and Budget (OMB) review 

this rule. DOE presented to OIRA for 

review the draft rule and other 

documents prepared for this 

rulemaking, including the RIA, and has 

included these documents in the 

rulemaking record. The assessments 

prepared pursuant to Executive Order 

12866 can be found in the technical 

support document for this rulemaking. 

DOE has also reviewed this proposal 

pursuant to Executive Order 13563, 

issued on January 18, 2011. 76 FR 3281 

(Jan. 21, 2011). EO 13563 is 

supplemental to and explicitly reaffirms 

the principles, structures, and 

definitions governing regulatory review 

established in Executive Order 12866. 

To the extent permitted by law, agencies 

are required by Executive Order 13563 

to: (1) propose or adopt a regulation 

only upon a reasoned determination 

that its benefits justify its costs 

(recognizing that some benefits and 

costs are difficult to quantify); (2) tailor 

regulations to impose the least burden 

on society, consistent with obtaining 

regulatory objectives, taking into 

account, among other things, and to the 

extent practicable, the costs of 

cumulative regulations; (3) select, in 

choosing among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify 

performance objectives, rather than 

specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and (5) identify and assess 

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87See www.ahridirectory.org/ahriDirectory/

pages/home.aspx. 

88See http://www.energy.ca.gov/appliances/. 

available alternatives to direct 

regulation, including providing 

economic incentives to encourage the 

desired behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. 

DOE emphasizes as well that 

Executive Order 13563 requires agencies 

to use the best available techniques to 

quantify anticipated present and future 

benefits and costs as accurately as 

possible. In its guidance, the Office of 

Information and Regulatory Affairs has 

emphasized that such techniques may 

include identifying changing future 

compliance costs that might result from 

technological innovation or anticipated 

behavioral changes. (DOE also discusses 

cumulative regulatory burdens above in 

section V.B.2.e.) For the reasons stated 

in the preamble, DOE believes that this 

NOPR is consistent with these 

principles, including the requirement 

that, to the extent permitted by law, 

benefits justify costs and that net 

benefits are maximized. 

B. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires preparation 

of an initial regulatory flexibility 

analysis (IRFA) for any rule that by law 

must be proposed for public comment, 

unless the agency certifies that the rule, 

if promulgated, will not have a 

significant economic impact on a 

substantial number of small entities. As 

required by Executive Order 13272, 

‘‘Proper Consideration of Small Entities 

in Agency Rulemaking,’’ 67 FR 53461 

(August 16, 2002), DOE published 

procedures and policies on February 19, 

2003, to ensure that the potential 

impacts of its rules on small entities are 

properly considered during the 

rulemaking process. 68 FR 7990. DOE 

has made its procedures and policies 

available on the Office of the General 

Counsel’s Web site (http://energy.gov/

gc/office-general-counsel). DOE has 

prepared the following IRFA for the 

products that are the subject of this 

rulemaking. 

For manufacturers of small, large, and 

very large air-cooled CUAC and CUHP, 

the Small Business Administration 

(SBA) has set a size threshold, which 

defines those entities classified as 

‘‘small businesses’’ for the purposes of 

the statute. DOE used the SBA’s small 

business size standards to determine 

whether any small entities would be 

subject to the requirements of the rule. 

65 FR 30836, 30848 (May 15, 2000), as 

amended at 65 FR 53533, 53544 (Sept. 

5, 2000) and codified at 13 CFR part 

121. The size standards are listed by 

North American Industry Classification 

System (NAICS) code and industry 

description and are available at http:// 

www.sba.gov/category/navigationstructure/contracting/contractingofficials/small-business-size-standards. 

Manufacturing of small, large, and very 

large air-cooled CUAC and CUHP is 

classified under NAICS 333415, ‘‘AirConditioning and Warm Air Heating 

Equipment and Commercial and 

Industrial Refrigeration Equipment 

Manufacturing.’’ The SBA sets a 

threshold of 750 employees or less for 

an entity to be considered as a small 

business for this category. 

1. Description and Estimated Number of 

Small Entities Regulated 

To estimate the number of companies 

that could be small business 

manufacturers of equipment covered by 

this rulemaking, DOE conducted a 

market survey using available public 

information to identify potential small 

manufacturers. DOE’s research involved 

examining industry trade association 

membership directories (including 

AHRI), public databases (e.g., AHRI 

Directory,87 the California Energy 

Commission Appliance Efficiency 

Database 88), individual company Web 

sites, and market research tools (e.g., 

Hoovers reports) to create a list of 

companies that manufacture or sell 

products covered by this rulemaking. 

DOE also asked stakeholders and 

industry representatives if they were 

aware of any other small manufacturers 

during manufacturer interviews and at 

DOE public meetings. DOE reviewed 

publicly-available data and contacted 

select companies on its list, as 

necessary, to determine whether they 

met the SBA’s definition of a small 

business manufacturer of covered 

commercial packaged air conditioners. 

DOE screened out companies that do 

not offer products covered by this 

rulemaking, do not meet the definition 

of a ‘‘small business,’’ or are foreign 

owned and operated. 

DOE initially identified at least 13 

potential manufacturers of commercial 

packaged air conditioners sold in the 

U.S. DOE then determined that 10 were 

large manufacturers, manufacturers that 

are foreign owned and operated, or 

manufacturers that do not produce 

products covered by this rulemaking. 

DOE was able to determine that 3 

manufacturers meet the SBA’s 

definition of a ‘‘small business’’ and 

manufacture products covered by this 

rulemaking. 

Before issuing this NOPR, DOE spoke 

with two of the small business 

manufacturers of commercial packaged 

air conditioners. DOE also obtained 

information about small business 

impacts while interviewing large 

manufacturers. 

Based on DOE’s research, one small 

manufacturer focused exclusively on the 

design and specification of equipment— 

but had no production assets of its own. 

All production was outsourced. The 

other small manufacturers performed all 

design and specification work but also 

owned domestic production facilities 

and employed production workers. 

Issue 23: DOE requests additional 

information on the number of small 

businesses in the industry, the names of 

those small businesses, and their role in 

the market. 

2. Description and Estimate of 

Compliance Requirements 

The proposed standards for 

commercial packaged air conditioners 

could cause small manufacturers to be 

at a disadvantage relative to large 

manufacturers. One way in which small 

manufacturers could be at a 

disadvantage is that they may be 

disproportionately affected by product 

conversion costs. Product redesign, 

testing, and certification costs tend to be 

fixed and do not scale with sales 

volume. For each product model, small 

businesses must make investments in 

research and development to redesign 

their products, but because they have 

lower sales volumes, they must spread 

these costs across fewer units. 

Moreover, smaller manufacturers may 

experience higher testing costs relative 

to larger manufacturers as they may not 

possess their own test facility and 

therefore must outsource all testing at a 

higher per unit cost. In general, the 

small manufacturers had a number of 

equipment lines that was similar to that 

of larger competitors with similar 

market share. However, because small 

manufacturers have fewer engineers 

than large manufacturers, they may have 

greater difficulty bringing their portfolio 

of equipment in-line with an amended 

energy conservation standard within the 

allotted timeframe or may have to divert 

engineering resources from customer 

and new product initiatives for a longer 

period of time. 

Furthermore, smaller manufacturers 

may lack the purchasing power of larger 

manufacturers. For example, since 

motor suppliers give discounts to 

manufacturers based on the number of 

motors they purchase, larger 

manufacturers may have a purchasing 

and pricing advantage because their 

higher volume demands. This 

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purchasing power differential between 

high-volume and low-volume orders 

applies to other commercial packaged 

air conditioner components as well. 

In order to meet the proposed 

standard, manufacturers may have to 

seek outside capital to cover expenses 

related to testing and product design 

equipment. Smaller firms typically have 

a higher cost of borrowing due to higher 

risk on the part of investors, largely 

attributed to lower cash flows and lower 

per unit profitability. In these cases, 

small manufacturers may observe higher 

costs of debt than larger manufacturers. 

To estimate how small manufacturers 

would be potentially impacted, DOE 

compared required conversion costs at 

each TSL for a small manufacturer with 

on-site production and an average large 

manufacturer (see Table VI.1 and Table 

VI.2). In the following tables, TSL 3 

represents the proposed standard. 

TABLE VI.1—IMPACTS OF CONVERSION COSTS ON A SMALL MANUFACTURER

Capital conversion cost 

as a percentage of annual capital expenditures 

Product conversion cost 

as a percentage of annual R&D expense 

Total conversion cost as 

a percentage of annual 

revenue 

Total conversion cost as 

a percentage of annual 

EBIT 

TSL 1 ............................................... 122 526 14 159 

TSL 2 ............................................... 199 932 24 276 

TSL 3 ............................................... 407 1948 49 573 

TSL 4 ............................................... 430 3369 77 896 

TABLE VI.2—IMPACTS OF CONVERSION COSTS ON A LARGE MANUFACTURER

Capital conversion cost 

as a percentage of annual capital expenditures 

Product conversion cost 

as a percentage of annual R&D expense 

Total conversion cost as 

a percentage of annual 

revenue 

Total conversion cost as 

a percentage of annual 

EBIT 

TSL 1 ............................................... 42 213 5 62 

TSL 2 ............................................... 105 287 9 100 

TSL 3 ............................................... 279 536 19 216 

TSL 4 ............................................... 310 898 26 307 

At TSL 3, the level proposed in this 

NOPR, DOE estimates capital 

conversion costs of $2.32 million and 

product conversion costs of $7.04 

million for an average small 

manufacturer that owns production 

facilities, compared to capital 

conversion costs of $9.08 million and 

product conversion costs of $11.05 

million for an average large 

manufacturer. 

At these levels, the amended standard 

could contribute to the consolidation of 

the industry. As noted in section 

V.B.2.a, the GRIM free cash flow results 

indicated that some manufacturers may 

need to access the capital markets in 

order to fund conversion costs directly 

related to an amended standard. These 

conversion costs would continue to be 

borne by the identified small 

manufacturers in spite of any 

outsourcing of manufacturing activities 

because they must still incur the 

necessary product conversion costs to 

design, test, certify, and market 

equipment complying with any new 

standards that DOE may promulgate. 

Given that small manufacturers tend to 

have less access to capital and that the 

necessary conversion costs are high 

relative to the size of a small business, 

it is possible the small manufacturers 

will choose to leave the industry or 

choose to be purchased by or merged 

with larger market players. 

Since the proposed standard could 

cause small manufacturers to be at a 

disadvantage relative to large 

manufacturers, DOE cannot certify that 

the proposed standards would not have 

a significant impact on a significant 

number of small businesses, and 

consequently, DOE has prepared this 

IRFA analysis. 

Issue 24: DOE requests data on the 

cost of capital for small manufacturers 

to better quantify how small 

manufacturers might be disadvantaged 

relative to large competitors. 

Issue 25: DOE requests comment and 

data on the impact of the proposed 

standard on small business 

manufacturers, including any potential 

cumulative regulatory effects. 

3. Duplication, Overlap, and Conflict 

with Other Rules and Regulations 

DOE is not aware of any rules or 

regulations that duplicate, overlap, or 

conflict with the rule being considered 

today. 

4. Significant Alternatives to the Rule 

The discussion above analyzes 

impacts on small businesses that would 

result from DOE’s proposed rule. In 

addition to the other TSLs being 

considered, the proposed rulemaking 

TSD includes a regulatory impact 

analysis that discusses the following 

policy alternatives: (1) Consumer 

rebates; (2) consumer tax credits; (3) 

manufacturer tax credits; (4) voluntary 

energy efficiency targets; and (5) bulk 

government purchases. While these 

alternatives may mitigate to some 

varying extent the economic impacts on 

small entities compared to the 

standards, DOE determined that the 

energy savings of these alternatives are 

significantly smaller than those that 

would be expected to result from 

adoption of the proposed standard 

levels. Accordingly, DOE is declining to 

adopt any of these alternatives and is 

proposing the standards set forth in this 

rulemaking. (See chapter 17 of the 

NOPR TSD for further detail on the 

policy alternatives DOE considered.) 

Issue 26: DOE request input on 

regulatory alternatives to consider that 

would lessen the impact of the 

rulemaking on small business. 

C. Review Under the Paperwork 

Reduction Act 

Manufacturers of small, large, and 

very large air-cooled commercial 

package air conditioning and heating 

equipment must certify to DOE that 

their products comply with any 

applicable energy conservation 

standards. In certifying compliance, 

manufacturers must test their products 

according to the DOE test procedures for 

small, large, and very large air-cooled 

commercial package air conditioning 

and heating equipment, including any 

amendments adopted for those test 

procedures. DOE has established 

regulations for the certification and 

recordkeeping requirements for all 

covered consumer products and 

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commercial equipment, including small, 

large, and very large air-cooled 

commercial package air conditioning 

and heating equipment. 76 FR 12422 

(March 7, 2011). The collection-ofinformation requirement for the 

certification and recordkeeping is 

subject to review and approval by OMB 

under the Paperwork Reduction Act 

(PRA). This requirement has been 

approved by OMB under OMB control 

number 1910–1400. Public reporting 

burden for the certification is estimated 

to average 20 hours per response, 

including the time for reviewing 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing the collection of information. 

Notwithstanding any other provision 

of the law, no person is required to 

respond to, nor shall any person be 

subject to a penalty for failure to comply 

with, a collection of information subject 

to the requirements of the PRA, unless 

that collection of information displays a 

currently valid OMB Control Number. 

D. Review Under the National 

Environmental Policy Act of 1969 

Pursuant to the National 

Environmental Policy Act (NEPA) of 

1969, DOE has determined that the 

proposed rule fits within the category of 

actions included in Categorical 

Exclusion (CX) B5.1 and otherwise 

meets the requirements for application 

of a CX. See 10 CFR Part 1021, App. B, 

B5.1(b); 1021.410(b) and Appendix B, 

B(1)–(5). The proposed rule fits within 

the category of actions under CX B5.1 

because it is a rulemaking that 

establishes energy conservation 

standards for consumer products or 

industrial equipment, and for which 

none of the exceptions identified in CX 

B5.1(b) apply. Therefore, DOE has made 

a CX determination for this rulemaking, 

and DOE does not need to prepare an 

Environmental Assessment or 

Environmental Impact Statement for 

this proposed rule. DOE’s CX 

determination for this proposed rule is 

available at http://cxnepa.energy.gov/. 

E. Review Under Executive Order 13132 

Executive Order 13132, ‘‘Federalism’’ 

64 FR 43255 (Aug. 10, 1999), imposes 

certain requirements on Federal 

agencies formulating and implementing 

policies or regulations that preempt 

State law or that have Federalism 

implications. The Executive Order 

requires agencies to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the 

States and to carefully assess the 

necessity for such actions. The 

Executive Order also requires agencies 

to have an accountable process to 

ensure meaningful and timely input by 

State and local officials in the 

development of regulatory policies that 

have Federalism implications. On 

March 14, 2000, DOE published a 

statement of policy describing the 

intergovernmental consultation process 

it will follow in the development of 

such regulations. 65 FR 13735. EPCA 

governs and prescribes Federal 

preemption of State regulations as to 

energy conservation for the products 

that are the subject of this proposed 

rule. States can petition DOE for 

exemption from such preemption to the 

extent, and based on criteria, set forth in 

EPCA. (42 U.S.C. 6297) No further 

action is required by Executive Order 

13132. 

F. Review Under Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of 

Executive Order 12988, ‘‘Civil Justice 

Reform,’’ imposes on Federal agencies 

the general duty to adhere to the 

following requirements: (1) Eliminate 

drafting errors and ambiguity; (2) write 

regulations to minimize litigation; and 

(3) provide a clear legal standard for 

affected conduct rather than a general 

standard and promote simplification 

and burden reduction. 61 FR 4729 (Feb. 

7, 1996). Section 3(b) of Executive Order 

12988 specifically requires that 

Executive agencies make every 

reasonable effort to ensure that the 

regulation: (1) Clearly specifies the 

preemptive effect, if any; (2) clearly 

specifies any effect on existing Federal 

law or regulation; (3) provides a clear 

legal standard for affected conduct 

while promoting simplification and 

burden reduction; (4) specifies the 

retroactive effect, if any; (5) adequately 

defines key terms; and (6) addresses 

other important issues affecting clarity 

and general draftsmanship under any 

guidelines issued by the Attorney 

General. Section 3(c) of Executive Order 

12988 requires Executive agencies to 

review regulations in light of applicable 

standards in section 3(a) and section 

3(b) to determine whether they are met 

or it is unreasonable to meet one or 

more of them. DOE has completed the 

required review and determined that, to 

the extent permitted by law, this 

proposed rule meets the relevant 

standards of Executive Order 12988. 

G. Review Under the Unfunded 

Mandates Reform Act of 1995 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA) requires 

each Federal agency to assess the effects 

of Federal regulatory actions on State, 

local, and Tribal governments and the 

private sector. Public Law 104–4, sec. 

201 (codified at 2 U.S.C. 1531). For a 

proposed regulatory action likely to 

result in a rule that may cause the 

expenditure by State, local, and Tribal 

governments, in the aggregate, or by the 

private sector of $100 million or more 

in any one year (adjusted annually for 

inflation), section 202 of UMRA requires 

a Federal agency to publish a written 

statement that estimates the resulting 

costs, benefits, and other effects on the 

national economy. (2 U.S.C. 1532(a), (b)) 

The UMRA also requires a Federal 

agency to develop an effective process 

to permit timely input by elected 

officers of State, local, and Tribal 

governments on a proposed ‘‘significant 

intergovernmental mandate,’’ and 

requires an agency plan for giving notice 

and opportunity for timely input to 

potentially affected small governments 

before establishing any requirements 

that might significantly or uniquely 

affect small governments. On March 18, 

1997, DOE published a statement of 

policy on its process for 

intergovernmental consultation under 

UMRA. 62 FR 12820. DOE’s policy 

statement is also available at http:// 

energy.gov/gc/office-general-counsel. 

Although this proposed rule does not 

contain a Federal intergovernmental 

mandate, it may require expenditures of 

$100 million or more on the private 

sector. Specifically, the proposed rule 

will likely result in a final rule that 

could require expenditures of $100 

million or more. Such expenditures may 

include: (1) Investment in research and 

development and in capital 

expenditures by small, large, and very 

large air-cooled commercial package air 

conditioning and heating equipment 

manufacturers in the years between the 

final rule and the compliance date for 

the new standards, and (2) incremental 

additional expenditures by consumers 

to purchase higher-efficiency small, 

large, and very large air-cooled 

commercial package air conditioning 

and heating equipment, starting at the 

compliance date for the applicable 

standard. 

Section 202 of UMRA authorizes a 

Federal agency to respond to the content 

requirements of UMRA in any other 

statement or analysis that accompanies 

the proposed rule. 2 U.S.C. 1532(c). The 

content requirements of section 202(b) 

of UMRA relevant to a private sector 

mandate substantially overlap the 

economic analysis requirements that 

apply under section 325(o) of EPCA and 

Executive Order 12866. The 

SUPPLEMENTARY INFORMATION section of 

the NOPR and the ‘‘Regulatory Impact 

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59014 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

Analysis’’ section of the TSD for this 

proposed rule respond to those 

requirements. 

Under section 205 of UMRA, the 

Department is obligated to identify and 

consider a reasonable number of 

regulatory alternatives before 

promulgating a rule for which a written 

statement under section 202 is required. 

2 U.S.C. 1535(a). DOE is required to 

select from those alternatives the most 

cost-effective and least burdensome 

alternative that achieves the objectives 

of the proposed rule unless DOE 

publishes an explanation for doing 

otherwise, or the selection of such an 

alternative is inconsistent with law. 

This proposed rule would establish 

energy conservation standards for small, 

large, and very large air-cooled 

commercial package air conditioning 

and heating equipment that are 

designed to achieve the maximum 

improvement in energy efficiency that 

DOE has determined to be both 

technologically feasible and 

economically justified. A full discussion 

of the alternatives considered by DOE is 

presented in the ‘‘Regulatory Impact 

Analysis’’ section of the TSD for this 

proposed rule. 

H. Review Under the Treasury and 

General Government Appropriations 

Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any rule 

that may affect family well-being. This 

rule would not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

I. Review Under Executive Order 12630 

DOE has determined, under Executive 

Order 12630, ‘‘Governmental Actions 

and Interference with Constitutionally 

Protected Property Rights’’ 53 FR 8859 

(Mar. 18, 1988), that this regulation 

would not result in any takings that 

might require compensation under the 

Fifth Amendment to the U.S. 

Constitution. 

J. Review Under the Treasury and 

General Government Appropriations 

Act, 2001 

Section 515 of the Treasury and 

General Government Appropriations 

Act, 2001 (44 U.S.C. 3516, note) 

provides for Federal agencies to review 

most disseminations of information to 

the public under guidelines established 

by each agency pursuant to general 

guidelines issued by OMB. OMB’s 

guidelines were published at 67 FR 

8452 (Feb. 22, 2002), and DOE’s 

guidelines were published at 67 FR 

62446 (Oct. 7, 2002). DOE has reviewed 

this NOPR under the OMB and DOE 

guidelines and has concluded that it is 

consistent with applicable policies in 

those guidelines. 

K. Review Under Executive Order 13211 

Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use’’ 66 FR 28355 (May 

22, 2001), requires Federal agencies to 

prepare and submit to OIRA at OMB, a 

Statement of Energy Effects for any 

proposed significant energy action. A 

‘‘significant energy action’’ is defined as 

any action by an agency that 

promulgates or is expected to lead to 

promulgation of a final rule, and that: 

(1) Is a significant regulatory action 

under Executive Order 12866, or any 

successor order; and (2) is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy, or 

(3) is designated by the Administrator of 

OIRA as a significant energy action. For 

any proposed significant energy action, 

the agency must give a detailed 

statement of any adverse effects on 

energy supply, distribution, or use 

should the proposal be implemented, 

and of reasonable alternatives to the 

action and their expected benefits on 

energy supply, distribution, and use. 

DOE has tentatively concluded that 

this regulatory action, which sets forth 

proposed energy conservation standards 

for small, large, and very large aircooled commercial package air 

conditioning and heating equipment, is 

not a significant energy action because 

the proposed standards are not likely to 

have a significant adverse effect on the 

supply, distribution, or use of energy, 

nor has it been designated as such by 

the Administrator at OIRA. Accordingly, 

DOE has not prepared a Statement of 

Energy Effects on the proposed rule. 

L. Review Under the Information 

Quality Bulletin for Peer Review 

On December 16, 2004, OMB, in 

consultation with the Office of Science 

and Technology Policy (OSTP), issued 

its Final Information Quality Bulletin 

for Peer Review (the Bulletin). 70 FR 

2664 (Jan. 14, 2005). The Bulletin 

establishes that certain scientific 

information shall be peer reviewed by 

qualified specialists before it is 

disseminated by the Federal 

Government, including influential 

scientific information related to agency 

regulatory actions. The purpose of the 

bulletin is to enhance the quality and 

credibility of the Government’s 

scientific information. Under the 

Bulletin, the energy conservation 

standards rulemaking analyses are 

‘‘influential scientific information,’’ 

which the Bulletin defines as scientific 

information the agency reasonably can 

determine will have, or does have, a 

clear and substantial impact on 

important public policies or private 

sector decisions. 70 FR 2667. 

In response to OMB’s Bulletin, DOE 

conducted formal in-progress peer 

reviews of the energy conservation 

standards development process and 

analyses and has prepared a Peer 

Review Report pertaining to the energy 

conservation standards rulemaking 

analyses. Generation of this report 

involved a rigorous, formal, and 

documented evaluation using objective 

criteria and qualified and independent 

reviewers to make a judgment as to the 

technical/scientific/business merit, the 

actual or anticipated results, and the 

productivity and management 

effectiveness of programs and/or 

projects. The ‘‘Energy Conservation 

Standards Rulemaking Peer Review 

Report’’ dated February 2007 has been 

disseminated and is available at the 

following Web site: www.eere.energy.

gov/buildings/appliance_standards/

peer_review.html. 

VII. Public Participation 

A. Attendance at the Public Meeting 

The time, date, and location of the 

public meeting are listed in the DATES

and ADDRESSES sections at the beginning 

of this notice. If you plan to attend the 

public meeting, please notify Ms. 

Brenda Edwards at (202) 586–2945 or 

brenda.edwards@ee.doe.gov. As 

explained in the ADDRESSES section, 

foreign nationals visiting DOE 

Headquarters are subject to advance 

security screening procedures. 

In addition, you can attend the public 

meeting via webinar. Webinar 

registration information, participant 

instructions, and information about the 

capabilities available to webinar 

participants will be published on DOE’s 

Web site at: http://www.eere.energy.gov/ 

buildings/appliance_standards/

rulemaking.aspx/ruleid/59. Participants 

are responsible for ensuring their 

systems are compatible with the 

webinar software. 

B. Procedure for Submitting Prepared 

General Statements for Distribution 

Any person who has plans to present 

a prepared general statement may 

request that copies of his or her 

statement be made available at the 

public meeting. Such persons may 

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submit requests, along with an advance 

electronic copy of their statement in 

PDF (preferred), Microsoft Word or 

Excel, WordPerfect, or text (ASCII) file 

format, to the appropriate address 

shown in the ADDRESSES section at the 

beginning of this notice. The request 

and advance copy of statements must be 

received at least one week before the 

public meeting and may be emailed, 

hand-delivered, or sent by mail. DOE 

prefers to receive requests and advance 

copies via email. Please include a 

telephone number to enable DOE staff to 

make follow-up contact, if needed. 

C. Conduct of the Public Meeting 

DOE will designate a DOE official to 

preside at the public meeting and may 

also use a professional facilitator to aid 

discussion. The meeting will not be a 

judicial or evidentiary-type public 

hearing, but DOE will conduct it in 

accordance with section 336 of EPCA 

(42 U.S.C. 6306). A court reporter will 

be present to record the proceedings and 

prepare a transcript. DOE reserves the 

right to schedule the order of 

presentations and to establish the 

procedures governing the conduct of the 

public meeting. After the public 

meeting, interested parties may submit 

further comments on the proceedings as 

well as on any aspect of the rulemaking 

until the end of the comment period. 

The public meeting will be conducted 

in an informal, conference style. DOE 

will present summaries of comments 

received before the public meeting, 

allow time for prepared general 

statements by participants, and 

encourage all interested parties to share 

their views on issues affecting this 

rulemaking. Each participant will be 

allowed to make a general statement 

(within time limits determined by DOE), 

before the discussion of specific topics. 

DOE will allow, as time permits, other 

participants to comment briefly on any 

general statements. 

At the end of all prepared statements 

on a topic, DOE will permit participants 

to clarify their statements briefly and 

comment on statements made by others. 

Participants should be prepared to 

answer questions by DOE and by other 

participants concerning these issues. 

DOE representatives may also ask 

questions of participants concerning 

other matters relevant to this 

rulemaking. The official conducting the 

public meeting will accept additional 

comments or questions from those 

attending, as time permits. The 

presiding official will announce any 

further procedural rules or modification 

of the above procedures that may be 

needed for the proper conduct of the 

public meeting. 

A transcript of the public meeting will 

be included in the docket, which can be 

viewed as described in the Docket 

section at the beginning of this notice. 

In addition, any person may buy a copy 

of the transcript from the transcribing 

reporter. 

D. Submission of Comments 

DOE will accept comments, data, and 

information regarding this proposed 

rule before or after the public meeting, 

but no later than the date provided in 

the DATES section at the beginning of 

this proposed rule. Interested parties 

may submit comments, data, and other 

information using any of the methods 

described in the ADDRESSES section at 

the beginning of this notice. 

Submitting comments via 

www.regulations.gov. The 

regulations.gov Web page will require 

you to provide your name and contact 

information. Your contact information 

will be viewable to DOE Building 

Technologies staff only. Your contact 

information will not be publicly 

viewable except for your first and last 

names, organization name (if any), and 

submitter representative name (if any). 

If your comment is not processed 

properly because of technical 

difficulties, DOE will use this 

information to contact you. If DOE 

cannot read your comment due to 

technical difficulties and cannot contact 

you for clarification, DOE may not be 

able to consider your comment. 

However, your contact information 

will be publicly viewable if you include 

it in the comment itself or in any 

documents attached to your comment. 

Any information that you do not want 

to be publicly viewable should not be 

included in your comment, nor in any 

document attached to your comment. 

Otherwise, persons viewing comments 

will see only first and last names, 

organization names, correspondence 

containing comments, and any 

documents submitted with the 

comments. 

Do not submit to regulations.gov 

information for which disclosure is 

restricted by statute, such as trade 

secrets and commercial or financial 

information (hereinafter referred to as 

Confidential Business Information 

(CBI)). Comments submitted through 

regulations.gov cannot be claimed as 

CBI. Comments received through the 

Web site will waive any CBI claims for 

the information submitted. For 

information on submitting CBI, see the 

Confidential Business Information 

section below. 

DOE processes submissions made 

through regulations.gov before posting. 

Normally, comments will be posted 

within a few days of being submitted. 

However, if large volumes of comments 

are being processed simultaneously, 

your comment may not be viewable for 

up to several weeks. Please keep the 

comment tracking number that 

regulations.gov provides after you have 

successfully uploaded your comment. 

Submitting comments via email, hand 

delivery/courier, or mail. Comments and 

documents submitted via email, hand 

delivery, or mail also will be posted to 

regulations.gov. If you do not want your 

personal contact information to be 

publicly viewable, do not include it in 

your comment or any accompanying 

documents. Instead, provide your 

contact information in a cover letter. 

Include your first and last names, email 

address, telephone number, and 

optional mailing address. The cover 

letter will not be publicly viewable as 

long as it does not include any 

comments 

Include contact information each time 

you submit comments, data, documents, 

and other information to DOE. If you 

submit via mail or hand delivery/

courier, please provide all items on a 

CD, if feasible. It is not necessary to 

submit printed copies. No facsimiles 

(faxes) will be accepted. 

Comments, data, and other 

information submitted to DOE 

electronically should be provided in 

PDF (preferred), Microsoft Word or 

Excel, WordPerfect, or text (ASCII) file 

format. Provide documents that are not 

secured, that are written in English, and 

that are free of any defects or viruses. 

Documents should not contain special 

characters or any form of encryption 

and, if possible, they should carry the 

electronic signature of the author. 

Campaign form letters. Please submit 

campaign form letters by the originating 

organization in batches of between 50 to 

500 form letters per PDF or as one form 

letter with a list of supporters’ names 

compiled into one or more PDFs. This 

reduces comment processing and 

posting time. 

Confidential Business Information. 

According to 10 CFR 1004.11, any 

person submitting information that he 

or she believes to be confidential and 

exempt by law from public disclosure 

should submit via email, postal mail, or 

hand delivery/courier two well-marked 

copies: One copy of the document 

marked confidential including all the 

information believed to be confidential, 

and one copy of the document marked 

non-confidential with the information 

believed to be confidential deleted. 

Submit these documents via email or on 

a CD, if feasible. DOE will make its own 

determination about the confidential 

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59016 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

status of the information and treat it 

according to its determination. 

Factors of interest to DOE 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 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) when 

such information might lose its 

confidential character due to the 

passage of time; and (7) why disclosure 

of the information would be contrary to 

the public interest. 

It is DOE’s policy that all comments 

may be included in the public docket, 

without change and as received, 

including any personal information 

provided in the comments (except 

information deemed to be exempt from 

public disclosure). 

E. Issues on Which DOE Seeks Comment 

Although DOE welcomes comments 

on any aspect of this proposal, DOE is 

particularly interested in receiving 

comments and views of interested 

parties concerning the following issues: 

1. Use of the IEER as the cooling 

efficiency metric and COP as the heating 

efficiency metric (for CUHP) for the 

proposed energy conservation 

standards, including additional data and 

input regarding the uncertainty of IEER 

test measurements. (See section III.A of 

this notice for additional information.) 

2. Comment on whether the test 

procedure for air-cooled CUAC and 

CUHP should be amended to revise the 

weightings for the IEER metric to place 

a higher weighting value on the fullload efficiency. DOE also requests data 

to determine appropriate weighting 

factors for the full-load test condition 

and part-load test conditions (75 

percent, 50 percent, and 25 percent of 

capacity). (See section III.A of this 

notice for additional information.) 

3. DOE requests comments and 

detailed information regarding any 

design features, including dual-duct air 

conditioners, that DOE should consider 

for establishing separate equipment 

classes in this rulemaking. DOE requests 

that such information provide test data 

illustrating the additional challenges 

faced by models having such design 

features and a discussion of the 

customer utility aspects of the design 

feature. In particular, DOE requests 

detailed comments regarding the 

definition of such equipment classes, 

and any detailed information, such as 

test data, test conditions, key 

component design details, as well as 

other relevant information (e.g., fan 

power consumption) that may help DOE 

evaluate potential alternative equipment 

class standard levels. See section IV.A.2 

of this notice for additional 

information.) 

4. Comment and data regarding 

additional design options or variants of 

the considered design options that can 

increase the range of considered 

efficiency improvements, including 

design options that may not yet be 

found on the market. (See section IV.A.3 

of this notice for additional 

information.) 

5. The incremental and max-tech 

efficiency levels identified for the 

analyses, including whether the 

efficiency levels identified by DOE can 

be achieved using the technologies 

screened-in during the screening 

analysis (see section IV.B), and whether 

higher efficiencies are achievable using 

technologies that were screened-in 

during the screening analysis. Also, 

DOE seeks comment on the approach of 

extrapolating the efficiency levels from 

the small, large, and very large CUAC 

with electric resistance heating or no 

heating equipment classes to the 

remaining equipment classes using the 

IEER differentials in ASHRAE Standard 

90.1–2010 draft addendum CL. In 

addition, input and data on the 

approach for determining the COP 

levels for the heat pump equipment 

classes using the relationship between 

IEER and COP. (See section IV.C.3 of 

this for additional information.) 

6. Comments, information, and data 

that would inform adjustment of energy 

modeling input and/or results that 

would allow more accurate 

representation of the energy use impacts 

of design options using the modeling 

tools developed by the Center for 

Environmental Energy Engineering from 

the University of Maryland College 

Park. (See section IV.C.4 of this notice 

for additional information.) 

7. Input and data on the estimated 

incremental manufacturing costs, 

including the extrapolation of 

incremental costs for equipment classes 

not fully analyzed, in particular for heat 

pump equipment classes. (See section 

IV.C.4 of this notice for additional 

information.) 

8. Comments, information, and data 

that could be used to modify the 

proposed method for using laboratory 

and modeled IEER test data, which were 

developed in accordance to AHRI 

Standard 340/360–2007, to calculate the 

performance of CUAC equipment at 

part-load conditions. (See section IV.E.1 

of this notice for additional 

information.) 

9. Comments on the use of a 

‘‘generalized building sample’’ to 

characterize the energy consumption of 

CUAC equipment in the commercial 

building stock. Specifically, whether 

there are any data or information that 

could improve the method for 

translating the results from the 1,033 

simulated buildings to the generalized 

building sample. (See section IV.E.2 of 

this notice for additional information.) 

10. Whether using RS Means cost data 

to develop maintenance, repair, and 

installation costs for CUAC and CUHP 

equipment is appropriate, and if not, 

what data should be used. (See section 

IV.F.6 of this notice for additional 

information.) 

11. Comments, information and data 

on the equipment lifetimes developed 

for CUAC and CUHP equipment. 

Specifically, any information that would 

indicate whether the retirement 

functions yielding median lifetimes of 

18.7 years and 15.4 years for CUAC and 

CUHP equipment, respectively, are 

reasonable. (See section IV.F.7 of this 

notice for additional information.) 

12. Comments, information and data 

on the base case efficiency distributions 

of CUAC equipment. Given that 

historical market share efficiency data 

from 1999–2001 were used to inform a 

consumer choice model in the 

shipments analysis to develop estimated 

base case efficiency distributions in the 

compliance year (2019), DOE seeks 

more recent historical market share 

efficiency data would be useful for 

validating the estimated base case 

efficiency distributions. (See section 

IV.F.9 of this notice for additional 

information.) 

13. Comments, information and data 

on the methods used to develop the two 

consumer choice models in the 

shipments analysis—i.e. one model for 

estimating the selection of CUAC and 

CUHP equipment by efficiency level 

and another model for the repair vs. 

replacement decision. With regards to 

the repair vs. replacement decision, the 

model is based on estimates of the cost 

of repair vs. the cost of new equipment. 

Field data for repair costs and how they 

vary with equipment first cost and age 

would allow DOE to refine its 

shipments forecasting by more precisely 

modeling the repair vs. replace decision 

sensitivity to the difference in repair 

and replacement equipment costs. (See 

section IV.G of this notice for additional 

information.) 

14. Comments, information and data 

regarding the lifetime of repaired 

equipment. DOE’s analysis considered 

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major repair consisting of replacement 

of the compressor and miscellaneous 

materials associated with the 

compressor; DOE estimated that 

repaired equipment would last as long 

as new replacement equipment. 

Information is requested to determine 

whether this estimate is reasonable. (See 

section IV.G of this notice for additional 

information.) 

15. Comments, information, and data 

on the repair of CUACs and CUHPs in 

the ≥240,000 Btu/h and <760,000 Btu/h 

equipment classes. For this equipment, 

the shipments analysis estimated that 

any equipment experiencing their first 

failure would be repaired rather than 

replaced. Information is requested to 

determine whether this estimate is 

reasonable. (See section IV.G of this 

notice for additional information.) 

16. Comments on its decision to not 

include a rebound effect for moreefficient CUAC and CUHP. (See section 

IV.H of this notice for additional 

information.) 

17. Comments, information, and data 

that would inform adjustment of the 

DOE’s estimate of $12.7M in conversion 

costs that occur in the base case. (See 

section IV.J.2.a of this notice for 

additional information.) 

18. DOE solicits comment on the 

application of the new SCC values used 

to determine the social benefits of CO2

emissions reductions over the 

rulemaking analysis period. In 

particular, the agency solicits comment 

on its derivation of SCC values after 

2050, where the agency applied the 

average annual growth rate of the SCC 

estimates in 2040–2050 associated with 

each of the four sets of values. (See 

section IV.L of this notice for additional 

information.) Comments, information, 

and data on the capital conversion costs 

and product conversion costs estimated 

for each TSL. In particular, DOE seeks 

comment on the conversion costs at 

max-tech. (See section V.B.2.a of this 

notice for additional information.) 

19. Comments, information, and data 

on capacity constraints at each TSL— 

including production capacity 

constraints, engineering resource 

constraints, and testing capacity 

constraints that are directly related to an 

amended standard for small, large, and 

very large CUAC and CUHP. In 

particular, DOE requests comment on 

whether the proposed effective allows 

for a sufficient conversion period to 

make the equipment design and facility 

updates necessary to meet an amended 

standard. (See section V.B.2.c of this 

notice for additional information.) 

20. DOE requests comment on the 

identified regulations and their 

contribution to cumulative regulatory 

burden. Additionally, DOE requests 

feedback on product-specific regulations 

that take effect between 2016 and 2022 

that were not listed, including 

identification of the specific regulations 

and data quantifying the associated 

burdens. (See section V.B.2.e of this 

notice for additional information.) 

21. For this rulemaking, DOE 

analyzed the effects of potential 

standards on equipment purchased over 

a 30-year period, and it undertook a 

sensitivity analysis using 9 years rather 

than 30 years of product shipments. The 

choice of a 30-year period of shipments 

is consistent with the DOE analysis for 

other products and commercial 

equipment. The choice of a 9-year 

period is a proxy for the timeline in 

EPCA for the review of certain energy 

conservation standards and potential 

revision of and compliance with such 

amended standards. DOE is seeking 

input on ways to refine the analytic 

timeline. (See section V.B.3.a of this 

notice for additional information.) 

22. Comments, information, and data 

on the number of small businesses in 

the industry, the names of those small 

businesses, and their role in the market. 

(See section VI.B.1 of this notice for 

additional information.) 

23. DOE requests data on the cost of 

capital for small manufacturers to better 

quantify how small manufacturers 

might be disadvantaged relative to large 

competitors. (See section VI.B.2 of this 

notice for additional information.) 

24. DOE requests comment and data 

on the impact of the proposed standard 

on small business manufacturers, 

including any potential cumulative 

regulatory effects. 

25. DOE also seeks comment on 

whether there are features or attributes 

of the more energy-efficient CUAC and 

CUHP that manufacturers would 

produce to meet the standards in this 

proposed rule that might affect how 

they would be used by consumers. DOE 

requests comment specifically on how 

any such effects should be weighed in 

the choice of standards for the final rule. 

(See section IV.A.3 of this notice for 

additional information.) 

26. Input on regulatory alternatives to 

consider that would lessen the impact of 

the rulemaking on small business. 

VIII. Approval of the Office of the 

Secretary 

The Secretary of Energy has approved 

publication of this proposed rule. 

List of Subjects in 10 CFR Part 431 

Administrative practice and 

procedure, Confidential business 

information, Energy conservation, 

Household appliances, Imports, 

Intergovernmental relations, Reporting 

and recordkeeping requirements, and 

Small businesses. 

Issued in Washington, DC, on September 

18, 2014. 

David T. Danielson, 

Assistant Secretary, Energy Efficiency and 

Renewable Energy. 

For the reasons set forth in the 

preamble, DOE proposes to amend part 

431 of chapter II, subchapter D, of title 

10 of the Code of Federal Regulations, 

as set forth below: 

PART 431—ENERGY EFFICIENCY 

PROGRAM FOR CERTAIN 

COMMERCIAL AND INDUSTRIAL 

EQUIPMENT 

■ 1. The authority citation for part 431 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6317. 

■ 2. Section 431.97 is amended by: 

■ a. Revising paragraph (b) including 

Tables 1 through 3; 

■ b. Redesignating Tables 4 through 8 as 

Tables 5 through 9; 

■ c. Adding new Table 4; and 

■ c. Revising paragraph (c). 

The revision and additions read as 

follows: 

§ 431.97 Energy efficiency standards and 

their compliance dates. 

* * * * * 

(b) Each commercial air conditioner 

or heat pump (not including single 

package vertical air conditioners and 

single package vertical heat pumps, 

packaged terminal air conditioners and 

packaged terminal heat pumps, 

computer room air conditioners, and 

variable refrigerant flow systems) 

manufactured starting on the 

compliance date listed in the 

corresponding table must meet the 

applicable minimum energy efficiency 

standard level(s) set forth in Tables 1, 2, 

3, and 4 of this section. 

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59018 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

TABLE 1 TO § 431.97—MINIMUM COOLING EFFICIENCY STANDARDS FOR AIR-CONDITIONING AND HEATING EQUIPMENT

[Not including single package vertical air conditioners and single package vertical heat pumps, packaged terminal air conditioners and packaged 

terminal heat pumps, computer room air conditioners, and variable refrigerant flow multi-split air conditioners and heat pumps]

Equipment type Cooling capacity Subcategory Heating type Efficiency level 

Compliance date: 

products manufactured 

on and after . . . 

Small Commercial Packaged AirConditioning and Heating Equipment (Air-Cooled, 3 Phase).<65,000 Btu/h .... AC 

HP 

All .......................

All .......................

SEER = 13 .......................

SEER = 13 .......................

June 16, 2008. 

June 16, 2008. 

Small Commercial Packaged AirConditioning and Heating Equipment (Air-Cooled).≥65,000 Btu/h 

and <135,000 

Btu/h.

AC Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 11.2 ......................

EER = 11.0 ......................

January 1, 2010.1

January 1, 2010.1

HP Electric Resistance Heating 

or No Heating.

EER = 11.0 ...................... January 1, 2010.1

All Other Types 

of Heating.

EER = 10.8 ...................... January 1, 2010.1

Large Commercial Packaged AirConditioning and Heating Equipment (Air-Cooled).≥135,000 Btu/h 

and <240,000 

Btu/h.

AC Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 11.0 ......................

EER = 10.8 ......................

January 1, 2010.1

January 1, 2010.1

Heating Equipment (Air-Cooled) .... >240,000 Btu/h .. HP Electric Resistance Heating 

or No Heating.

EER = 10.6 ...................... January 1, 2010.1

All Other Types 

of Heating.

EER = 10.4 ...................... January 1, 2010.1

Very Large Commercial Packaged 

Air-Conditioning and Heating 

Equipment (Air-Cooled).

≥240,000 Btu/h 

and <760,000 

Btu/h.

AC Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 10.0 ......................

EER = 9.8 ........................

January 1, 2010.1

January 1, 2010.1

HP Electric Resistance Heating 

or No Heating.

EER = 9.5 ........................ January 1, 2010.1

All Other Types 

of Heating.

EER = 9.3 ........................ January 1, 2010.1

Small Commercial Packaged AirConditioning and Heating Equipment (Water-Cooled, Evaporatively-Cooled, and WaterSource).<17,000 Btu/h ....

≥17,000 Btu/h 

and <65,000 

Btu/h.

AC 

HP 

AC 

HP 

All .......................

All .......................

All .......................

All .......................

EER = 12.1 ......................

EER = 11.2 ......................

EER = 12.1 ......................

EER = 12.0 ......................

October 29, 2003. 

October 29, 2003. 

October 29, 2003. 

October 29, 2003. 

≥65,000 Btu/h 

and <135,000 

Btu/h.

AC Electric Resistance Heating 

or No Heating.

EER = 11.5 ...................... October 29, 2003.2

All Other Types 

of Heating.

EER = 11.3 ...................... October 29, 2003.2

HP All ....................... EER = 12.0 ...................... October 29, 2003.2

Large Commercial Packaged AirConditioning and Heating Equipment (Water-Cooled, Evaporatively-Cooled, and WaterSource).≥135,000 Btu/h 

and <240,000 

Btu/h.

AC 

HP 

All .......................

All .......................

EER = 11.0 ......................

EER = 11.0 ......................

October 29, 2004.3

October 29, 2004.3

Very Large Commercial Packaged 

Air-Conditioning and Heating 

Equipment (Water-Cooled, Evaporatively-Cooled, and WaterSource).

≥240,000 Btu/h 

and <760,000 

Btu/h.

AC Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 11.0 ......................

EER = 10.8 ......................

January 10, 2011.3

January 10, 2011.3

HP Electric Resistance Heating 

or No Heating.

EER = 11.0 ...................... January 10, 2011.3

All Other Types 

of Heating.

EER = 10.8 ...................... January 10, 2011.3

1And manufactured before [date 3 years after final rule Federal Register publication]. See Table 3 of this section for updated efficiency standards. 2And manufactured before June 1, 2013. See Table 3 of this section for updated efficiency standards. 

3And manufactured before June 1, 2014. See Table 3 of this section for updated efficiency standards. 

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TABLE 2 TO § 431.97—MINIMUM HEATING EFFICIENCY STANDARDS FOR AIR CONDITIONING AND HEATING EQUIPMENT

[Heat pumps] 

Equipment type Cooling capacity Efficiency level 

Compliance date: Products 

manufactured on and 

after . . . 

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled, 3 Phase).

<65,000 Btu/h .................... HSPF = 7.7 ....................... June 16, 2008. 

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled).

≥65,000 Btu/h and 

<135,000 Btu/h.

COP = 3.3 ......................... January 1, 2010.1

Large Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled).

≥135,000 Btu/h and 

<240,000 Btu/h.

COP = 3.2 ......................... January 1, 2010.1

Very Large Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled).

≥240,000 Btu/h and 

<760,000 Btu/h.

COP = 3.2 ......................... January 1, 2010.1

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Water-Source).

<135,000 Btu/h .................. COP = 4.2 ......................... October 29, 2003. 

1And manufactured before [date 3 years after final rule FEDERAL REGISTER publication]. See Table 4 of this section for updated heating efficiency standards. 

TABLE 3 TO § 431.97—UPDATES TO THE MINIMUM COOLING EFFICIENCY STANDARDS FOR AIR-CONDITIONING AND

HEATING EQUIPMENT

[Not including single package vertical air conditioners and single package vertical heat pumps, packaged terminal air conditioners and packaged 

terminal heat pumps, computer room air conditioners, and variable refrigerant flow multi-split air conditioners and heat pumps]

Equipment type Cooling capacity Sub-category Heating type Efficiency level 

Compliance date: 

Products manufactured on 

and after . . . 

Small Commercial Packaged AirConditioning and Heating Equipment (Air-Cooled).≥65,000 Btu/h 

and <135,000 

Btu/h.

AC .......... Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

IEER = 14.8 .....................

IEER = 14.6 .....................

[date 3 years after final 

rule Federal Register 

publication]. 

HP .......... Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

IEER = 14.1 .....................

IEER = 113.9 ...................

[date 3 years after final 

rule Federal Register 

publication]. 

Large Commercial Packaged AirConditioning and Heating Equipment (Air-Cooled).≥135,000 Btu/h 

and <240,000 

Btu/h.

AC .......... Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

IEER = 14.2 .....................

IEER = 14.0 .....................

[date 3 years after final 

rule Federal Register 

publication]. 

HP .......... Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

IEER = 13.4 .....................

IEER = 13.2 .....................

[date 3 years after final 

rule Federal Register 

publication]. 

Very Large Commercial Packaged 

Air-Conditioning and Heating 

Equipment (Air-Cooled).

≥240,000 Btu/h 

and <760,000 

Btu/h.

AC .......... Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

IEER = 13.5 .....................

IEER = 13.3 .....................

[date 3 years after final 

rule Federal Register 

publication] 

HP .......... Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

IEER = 12.5 .....................

IEER = 12.3 .....................

[date 3 years after final 

rule Federal Register 

publication] 

Small Commercial Packaged AirConditioning and Heating Equipment (Water-Cooled).≥65,000 Btu/h 

and <135,000 

Btu/h.

................ Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 12.1 ......................

EER = 11.9 ......................

June 1, 2013. 

June 1, 2013. 

Large Commercial Packaged AirConditioning and Heating Equipment (Water-Cooled).≥135,000 Btu/h 

and <240,000 

Btu/h.

................ Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 12.5 ......................

EER = 12.3 ......................

June 1, 2014. 

June 1, 2014. 

Very Large Commercial Packaged 

Air-Conditioning and Heating 

Equipment (Water-Cooled).

≥240,000 Btu/h 

and <760,000 

Btu/h.

................ Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 12.4 ......................

EER = 12.2 ......................

June 1, 2014. 

June 1, 2014. 

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59020 Federal Register / Vol. 79, No. 189 / Tuesday, September 30, 2014 / Proposed Rules 

TABLE 3 TO § 431.97—UPDATES TO THE MINIMUM COOLING EFFICIENCY STANDARDS FOR AIR-CONDITIONING AND

HEATING EQUIPMENT—Continued 

[Not including single package vertical air conditioners and single package vertical heat pumps, packaged terminal air conditioners and packaged 

terminal heat pumps, computer room air conditioners, and variable refrigerant flow multi-split air conditioners and heat pumps]

Equipment type Cooling capacity Sub-category Heating type Efficiency level 

Compliance date: 

Products manufactured on 

and after . . . 

Small Commercial Packaged AirConditioning and Heating Equipment (Evaporatively-Cooled).≥65,000 Btu/h 

and <135,000 

Btu/h.

................ Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 12.1 ......................

EER = 11.9 ......................

June 1, 2013. 

June 1, 2013. 

Large Commercial Packaged AirConditioning and Heating Equipment (Evaporatively-Cooled).≥135,000 Btu/h 

and <240,000 

Btu/h.

................ Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 12.0 ......................

EER = 11.8 ......................

June 1, 2014. 

June 1, 2014. 

Very Large Commercial Packaged 

Air-Conditioning and Heating 

Equipment (EvaporativelyCooled).

≥240,000 Btu/h 

and <760,000 

Btu/h.

................ Electric Resistance Heating 

or No Heating.

All Other Types 

of Heating.

EER = 11.9 ......................

EER = 11.7 ......................

June 1, 2014. 

June 1, 2014. 

TABLE 4 TO § 431.97—UPDATES TO THE MINIMUM HEATING EFFICIENCY STANDARDS FOR AIR-COOLED AIR CONDITIONING

AND HEATING EQUIPMENT

[Heat pumps] 

Equipment type Cooling capacity Heating type Efficiency 

level 1

Compliance date: Products 

manufactured on and after 

. . . 

Small Commercial Packaged Air-Conditioning and Heating Equipment (AirCooled).≥65,000 Btu/h and 

<135,000 Btu/h.

Electric Resistance Heating or 

No Heating.

All Other Types of Heating 

COP = 3.5 ...

COP = 3.4 ...

[date 3 years after final rule 

Federal Register publication]. 

Large Commercial Packaged Air-Conditioning and Heating Equipment (AirCooled).≥135,000 Btu/h and 

<240,000 Btu/h.

Resistance Heating or No 

Heating.

All Other Types of Heating 

COP = 3.3 ... [date 3 years after final rule 

Federal Register publication] 

Very Large Commercial Packaged AirConditioning and Heating Equipment 

(Air-Cooled).

≥240,000 Btu/h and 

<760,000 Btu/h.

Resistance Heating or No 

Heating.

All Other Types of Heating 

COP = 3.2 ... [date 3 years after final rule 

Federal Register publication] 

1For units tested by AHRI Standards, all COP values must be rated at 47 °F outdoor dry-bulb temperature for air-cooled equipment. 

(c) Each packaged terminal air 

conditioner (PTAC) and packaged 

terminal heat pump (PTHP) 

manufactured starting on January 1, 

1994, but before October 8, 2012 (for 

standard size PTACs and PTHPs) and 

before October 7, 2010 (for non-standard 

size PTACs and PTHPs) must meet the 

applicable minimum energy efficiency 

standard level(s) set forth in Table 5 of 

this section. Each standard size PTAC 

and PTHP manufactured starting on 

October 8, 2012, and each non-standard 

size PTAC and PTHP manufactured 

starting on October 7, 2010, must meet 

the applicable minimum energy 

efficiency standard level(s) set forth in 

Table 6 of this section. 

* * * * * 

[FR Doc. 2014–22894 Filed 9–29–14; 8:45 am] 

BILLING CODE 6450–01–P 

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