REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION


STANDARDS FOR RESIDENTIAL WATER HEATERS, DIRECT HEATING


EQUIPMENT, AND POOL HEATERS


TABLE OF CONTENTS


1.0 INTRODUCTION ...................................................................................................... RIA-1


2.0 METHODOLOGY ..................................................................................................... RIA-1


LIST OF TABLES 

Table RIA.1 Non-Regulatory Alternatives to Standards ....................................................... RIA-1


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REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION


STANDARDS FOR RESIDENTIAL WATER HEATERS, DIRECT HEATING


EQUIPMENT, AND POOL HEATERS


1.0 INTRODUCTION 

Under the Process Rule (Procedures for Consideration of New or Revised Energy 

Conservation Standards for Consumer Products, 61 FR at 36974 (July 15, 1996)), the 

Department of Energy (DOE) is committed to continually explore non-regulatory alternatives to 

standards. DOE will prepare a draft regulatory impact analysis pursuant to E.O. 12866, 

“Regulatory Planning and Review,” which will be subject to review under the Executive Order 

by the Office of Management and Budget’s Office of Information and Regulatory Affairs. 58 FR 

at 51735. DOE has identified six major alternatives to standards as representing feasible policy 

options to achieve customer product energy efficiency. It will evaluate each alternative in terms 

of its ability to achieve significant energy savings at a reasonable cost, and will compare the 

effectiveness of each one to the effectiveness of the proposed standards rule. 

The non-regulatory means of achieving energy savings that DOE proposes to analyze are 

listed in Table RIA.1. The technical support document (TSD) in support of DOE’s notice of 

proposed rulemaking will include a complete quantitative analysis of each alternative, the 

methodology for which is discussed briefly below. 

Table RIA.1 Non-Regulatory Alternatives to Standards 

No new regulatory action 

Consumer tax credits 

Manufacturer tax credits 

Performance Standards 

Rebates 

Voluntary energy efficiency targets 

Early replacement 

Bulk government purchases 

2.0 METHODOLOGY 

DOE will use the National Impact Analysis (NIA) Spreadsheet Models for each of the 

three appliance products to calculate the national energy savings and the net present value (NPV) 

corresponding to each alternative to the proposed standards. The NIA Spreadsheet Model for 

each of the three appliance products is discussed in Chapter 10 of the TSD. To compare each 

alternative quantitatively to the proposed conservation standards, DOE will need to quantify the 

effect of each alternative on the purchase and use of energy-efficient residential water heaters, 

direct heating equipment, and pool heaters. Once it has quantified each alternative, DOE will 

make the appropriate revisions to the inputs in the NIA Spreadsheet Models. Key inputs that 

DOE may revise in these models are: 

• Energy prices and escalation factors; 

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•	 Implicit market discount rates for trading off purchase price against operating 

expense when choosing equipment efficiency; 

•	 Consumer purchase price, operating cost, and income elasticities; 

•	 Consumer price-versus-efficiency relationships; and 

•	 Equipment stock data (purchase of new equipment or turnover rates for inventories). 

The key measures of the impact of each alternative will be: 

•	 Energy use (in exajoules, or 1018 joules): Cumulative energy use of the equipment 

from the effective date of the new standard to the year 2043 or 2045. DOE will report 

electricity consumption as primary energy. 

•	 National energy savings: Cumulative national energy use from the base case 

projection minus the alternative policy case projection. 

•	 Net present value: The value of future operating cost savings from equipment bought 

in the period from the effective date of the new standard (2013 for direct heating 

equipment and pool heaters, and 2015 for water heaters) to the year 2043 or 2045. 

DOE will calculate the NPV as the difference between the present value of equipment 

and operating expenditures (including energy) in the base case, and the present value 

of expenditures in each alternative policy case. DOE will discount future operating 

and equipment expenditures to 2007 using a seven-percent and three-percent real 

discount rate. It will calculate operating expenses (including energy costs) for the life 

of the equipment. 

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