CS-Rfk7S^ yTX) - «?^-o YT 

# D Department of Energy Washington, DC 20585 

### May 29, 1998
PUBLIC WORKSHOP FOR CENTRAL AIR CONDITIONER ENERGY EFFICIENCY STANDARDS RULEMAKING 

### On May 29, 1998, the Department ofEnergy gave notice ofa public workshop regarding energy conservation standards for central air conditioners. The workshop will be held on June 30, 1998, at the U.S. Department ofEnergy, 1000 Independence Avenue, SW., Washington, DC. 20585- 0121 in Room 1E-245 from 9:00 a.m. to 4:00 p.m. The Department is convening this workshop to discuss the proposed analytical framework and tools for evaluating possible revisions to the standards for central air conditioners. Background for this discussion is contained in the FrameworkDocument, which is enclosed. 

### In September 1995, the Department announced a formal effort to consider further improvements to the process used to develop appliance efficiency standards. On July 15, 1996, the Department published a Final Rule (61 FR 36974), known as the Process Rule, outlining the procedural improvements identified by the interested parties. There was a previous Advance Notice of Proposed Rulemaking (ANOPR) which included central air conditioners, but, following the Process Rule, this rulemaking will start at the beginning ofthe process. The enclosed Framework Documentdiscusses the way the general steps given in the Process Rule will be tailored to this specific rulemaking. Although the framework document reflects improvements and steps contained inthe Process Rule, the rulemaking process isa dynamic one. As new data, models or tools become available, and ifthey enhance the development ofstandards, they will be incorporated into the rulemaking. The Framework Documentcovers the entire process, but since we arejust beginning the rulemaking, the pre-ANOPR steps, described below, will be the focus ofthe workshop. These steps are shown in the pre-ANOPR section ofFigure 1 ofthe Framework Document,which graphically depicts the steps needed to conduct the rulemaking. The Framework Documentis organized such that the material inside the boxes isspecific to central air conditioners

- the rest is generic material common to the framework documents ofall appliances. Issues to be discussed include: Engineering analysis: * Method to derive cost
- efficiency relationship * data that will be needed * how and by whom it will be collected * issues ofvalidation and confidentiality; Identification ofBaseline and "Max Tech"; Life-Cycle Cost Analysis including method ofdetermining retail prices; and Preliminary Energy Savings and National Benefit Analyses.

Printed with soy ink on recycted paper 

### €"E-¥57j)

### -Cf~AILfo Department of Energy Washington, DC 20585 May 29,1998
PUBLIC WORKSHOP FOR CENTRALAIR CONDITIONER ENERGY EFFICIENCY STANDARDS RULEMAKING 

# ])

On May 29, 1998, the Department ofEnergy gave notice ofa public workshop regarding energy conservation standards for central air conditioners. The workshop will be held on June 30, 1998, at the

## u.s. Department ofEnergy, 1000 Independence Avenue, SW., Washington, DC. 20585- 0121 in Room lE-245 from 9:00 a.m. to 4:00 p.m. The Department is convening this workshop to discuss the propos_ed analytical framework and tools for evaluating possible revisions to the standards for central. air conditioners. Background for this discussion"is contained in the 

### FrameworkDocument, which is enclosed. In September 1995, the Department announced a formal effort to consider further improvements to the process used to develop appliance efficiency standards. On July 15, 1996, the Department published a Final Rule (61 FR 36974), known asthe ProcessRule,"outiining the procedural improvements identified by the interested parties. There was a previous Advance Notice of Proposed Rulemaking (ANOPR) which included central air conditioners, but, following the Process Rule, this rulemaking will start at the beginning ofthe process. The enclosed 

### Framework Document discusses the way the general steps given inthe Process Rule will be tailored to this specific rulemaking. Although the framework document retlects improvements and steps contained in the Process Rule, the rulemaking process is a dynamic one. As new data, modeJs or tools become available, and ifthey enhance the development ofstandards, they will be incorporated into the rulemaking. " The

### FrameworkDocument covers the entire process, but since we arejust beginning the rulemaking, the pre-ANOPR steps, described below, will be the focus ofthe workshop. These' steps are shown in the pre-ANOPR section ofFigure 1 ofthe

### FrameworkDocument, which" graphically depicts the steps needed to conduct the rulemaking. The

### FrameworkDocument is organized such that the material inside the boxes is specific to central air conditioners

- the rest is generic material common to the framework"documents ofall appliances. Issues to be discussed include: Engineering analysis: • Method to derive cost
- efficiency relationship • data that will be needed • how and by whom it will be collected • issues ofvalidation and confidentiality; Identification ofBaseline and "Max Tech"; Life-Cycle Cost Analysis including method ofdetermining retail prices; and Preliminary Energy Savings and National Benefit Analyses. 

# "'"® Printed with soy ink on recycled paper 

### €"E-¥57j)

### -Cf~AILfo Department of Energy Washington, DC 20585 May 29,1998
PUBLIC WORKSHOP FOR CENTRALAIR CONDITIONER ENERGY EFFICIENCY STANDARDS RULEMAKING 

# ])

On May 29, 1998, the Department ofEnergy gave notice ofa public workshop regarding energy conservation standards for central air conditioners. The workshop will be held on June 30, 1998, at the

## u.s. Department ofEnergy, 1000 Independence Avenue, SW., Washington, DC. 20585- 0121 in Room lE-245 from 9:00 a.m. to 4:00 p.m. The Department is convening this workshop to discuss the propos_ed analytical framework and tools for evaluating possible revisions to the standards for central. air conditioners. Background for this discussion"is contained in the 

### FrameworkDocument, which is enclosed. In September 1995, the Department announced a formal effort to consider further improvements to the process used to develop appliance efficiency standards. On July 15, 1996, the Department published a Final Rule (61 FR 36974), known asthe ProcessRule,"outiining the procedural improvements identified by the interested parties. There was a previous Advance Notice of Proposed Rulemaking (ANOPR) which included central air conditioners, but, following the Process Rule, this rulemaking will start at the beginning ofthe process. The enclosed 

### Framework Document discusses the way the general steps given inthe Process Rule will be tailored to this specific rulemaking. Although the framework document retlects improvements and steps contained in the Process Rule, the rulemaking process is a dynamic one. As new data, modeJs or tools become available, and ifthey enhance the development ofstandards, they will be incorporated into the rulemaking. " The

### FrameworkDocument covers the entire process, but since we arejust beginning the rulemaking, the pre-ANOPR steps, described below, will be the focus ofthe workshop. These' steps are shown in the pre-ANOPR section ofFigure 1 ofthe

### FrameworkDocument, which" graphically depicts the steps needed to conduct the rulemaking. The

### FrameworkDocument is organized such that the material inside the boxes is specific to central air conditioners

- the rest is generic material common to the framework"documents ofall appliances. Issues to be discussed include: Engineering analysis: • Method to derive cost
- efficiency relationship • data that will be needed • how and by whom it will be collected • issues ofvalidation and confidentiality; Identification ofBaseline and "Max Tech"; Life-Cycle Cost Analysis including method ofdetermining retail prices; and Preliminary Energy Savings and National Benefit Analyses. 

# "'"® Printed with soy ink on recycled paperCopies ofthe draft Framework Documentare also available on the Office ofCodes and Standards web site. The web site address is as follows: http.//vww.eren.doegov/buildings/codes_standards/indexhtm. Ifyou have any questions, please contact Edward Pollock at (202) 586-5778. Ifyou plan to attend the workshop, please notify Ms. Brenda Edwards-Jones, U.S. Department ofEnergy, Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy, Mail Station EE-43, 1000 Independence Avenue, SW, Washington, DC 20585-0121, (202) 586-2945, email Brenda. Edwards-Jones@ee. doe. gov. Sincerely, 

# Ci.t ** / q/I \Michael J. McCabe, Director Office ofCodes and Standards Building Technology, State and

Community Programs Energy Efficiency and Renewable Energy Enclosure

\ Copies ofthe draft FrameworkDocument are also available on the Office ofCodes and Standards web site. The web site address is as follows: http://www.eren.doe.gov/bui/dings/codes_standardslindex.htm. Ifyou have any questions, please contact Edward Pollock at (202) 586-5778. Ifyou plan to attend the workshop, please notify Ms. Brenda Edwards-Jones, U.S. Department ofEnergy, Office of Energy Efficiency and Renewable Energy, U.S. Department ofEnergy, Mail Station EE-43, 1000 Independence Avenue, SW, Washington, DC 20585-0121, (202) 586-2945, email Brenda.Edwards-Jones@ee.doe.gov.

Enclosure Michael 1. McCabe, Director Office ofCodes and Standards Building Technology, State and

Community Programs Energy Efficiency and Renewable Energy

\ Copies ofthe draft FrameworkDocument are also available on the Office ofCodes and Standards web site. The web site address is as follows: http://www.eren.doe.gov/bui/dings/codes_standardslindex.htm. Ifyou have any questions, please contact Edward Pollock at (202) 586-5778. Ifyou plan to attend the workshop, please notify Ms. Brenda Edwards-Jones, U.S. Department ofEnergy, Office of Energy Efficiency and Renewable Energy, U.S. Department ofEnergy, Mail Station EE-43, 1000 Independence Avenue, SW, Washington, DC 20585-0121, (202) 586-2945, email Brenda.Edwards-Jones@ee.doe.gov.

Enclosure Michael 1. McCabe, Director Office ofCodes and Standards Building Technology, State and

Community Programs Energy Efficiency and Renewable Energy

## Central Air Conditioner and Heat Pump Rulemaking Framework

U.S. Department ofEnergy Office of Codes and Standards 1000 Independence Ave., SW Washington, DC Date: June 30, 1998 

## Central Air Conditioner and HeatPump Rulemaking Framework



## u.s. Department ofEnergy Office ofCodes and Standards 1000 Independence Ave., SW Washington, DC Date: June 30, 1998 

## Central Air Conditioner and HeatPump Rulemaking Framework



## u.s. Department ofEnergy Office ofCodes and Standards 1000 Independence Ave., SW Washington, DC Date: June 30, 1998

# E-MA/.5TD-I 

# 9- 4 X


### CentralAir Conditioner and Heat Pump Rulemaking Framework

Introduction ............................................................... 1 1.0 Preliminary Market and Technology Assessment .............................. 3 1.1 Market Assessment
......... .... ........... ...... .............. 3 1.2 Technology Assessment
........... .. .................... ....... 3 1.3 Preliminary Baseline Shipments Forecast
................................. 4 2.0 Screening Analysis ..................................................... 5 2.1 Product Classes
.................................................... 5 2.2 Baseline Units
..................................................... 5 2.3 Design Options
.................................................... 6 3.0 Engineering Analysis .................................................... 7 3.1 Efficiency Level Approach
.................................. 7 3.2 Design Option Approach

............. ............................... 8 3.3 Reverse Engineering Approach
...................................... 10 3.4 Outside Regulatory Changes affecting the Engineering Analysis .............. 11 4.0 Manufacturing Costs ................................................... 11 4.1 Characterizing Uncertainty
.......................................... 12 4.2 Variability in Costs between Manufacturers
............................ 12 4.3 Costing Approach/ Engineering Analysis
............................ ..... 13 4.4 Proprietary Design
................................................ 13 5.0 Life-Cycle Cost and Payback Analysis .................................... 14 

### 6.0 Prices ................................................................ 17 6.1 Retail Prices: Life-Cycle Cost Analysis
................................. 17 6.2 Manufacturer Prices: Industry Cashflow
.......... ..... ...... ......... 18 7.0 Shipm ents ............................................................ 18 8.0 Preliminary National Benefits Analysis ..................................... 19 8.1 Inputs to Forecasts
..................... ......................... 19 8.2 Calculation ofEnergy Savings
..................................... . 20 8.3 Consumer Net Present Value and Payback
.............................. 20 8.4 Employment Impacts
............................................... 21 9.0 Revised Pre-ANOPR Analysis ................. ........................ 21 10.0 Consumer Impacts .................................................... 21 

### i -----------------

----



### Central Air Conditioner and HeatPump Rulemaking Framework

Introduction ............................................................... 1 1.0 Preliminary Market and Technology Assessment •••••••••••••••••••••••••••••• 3 1.1 Market Assessment . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 3 1.2 Technology Assessment
............................................. 3 1.3 Preliminary Baseline Shipments Forecast
................................. 4 2.0 Screening Analysis ..........................................**~** ........... 5 2.1 Product Classes
.................................................... 5 2.2 Baseline Units
..................................................... 5 2.3 Design Options
.................................................... 6 3.0 Engineering Analysis .................................................... 7 3.1 Efficiency Level Approach
........................................... 7 3.2 Design Option Approach
............. ; ..........'
...... : .............. 8· 3.3 Reverse Engineering Approach
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.4 Outside Regulatory Changes affecting the Engineering Analysis
.............. 11 4.0 Manufacturing Costs ..................................................**~** 11 4.1 Characterizing Uncertainty
.......................................... 12 4.2 Variability in Costs between Manufacturers
.............................. 12 4.3 Costing Approach! Engineering Analysis,
................................ 13 4.4 Proprietary Design
............. , .................................. 13 5.0 Life-Cycle Cost and PaybackAnalysis •.....•..••.••••..••..••.•••••••••••• 14 6.0 Prices ................................................................ 17 6.1 Retail Prices: Life-Cycle Cost Analysis
................................. 17 6.2 Manufacturer Prices: Industry Cashflow
................ ,................ 18 

### 7.0 Shipments ............................................................ 18 8.0 Preliminary National Benefits Analysis •••••••••....•.•••••.•...•••••••••••• 19 8.1 Inputs to Forecasts
................................................ 19 8.2 Calculation ofEnergy Savings
................. ; ...................... 20 8.3 Consumer Net Present Value and Payback
.............................. 20 8.4 Employment Impacts
............................................... 21 

### 9.0 Revised Pre-ANOPR Analysis ....................'
....................... . 21 10.0 Consumer Impacts ....................................' ................. 21 -----------------

----



### Central Air Conditioner and HeatPump Rulemaking Framework

Introduction ............................................................... 1 1.0 Preliminary Market and Technology Assessment •••••••••••••••••••••••••••••• 3 1.1 Market Assessment . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 3 1.2 Technology Assessment
............................................. 3 1.3 Preliminary Baseline Shipments Forecast
................................. 4 2.0 Screening Analysis ..........................................**~** ........... 5 2.1 Product Classes
.................................................... 5 2.2 Baseline Units
..................................................... 5 2.3 Design Options
.................................................... 6 3.0 Engineering Analysis .................................................... 7 3.1 Efficiency Level Approach
........................................... 7 3.2 Design Option Approach
............. ; ..........'
...... : .............. 8· 3.3 Reverse Engineering Approach
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.4 Outside Regulatory Changes affecting the Engineering Analysis
.............. 11 4.0 Manufacturing Costs ..................................................**~** 11 4.1 Characterizing Uncertainty
.......................................... 12 4.2 Variability in Costs between Manufacturers
.............................. 12 4.3 Costing Approach! Engineering Analysis,
................................ 13 4.4 Proprietary Design
............. , .................................. 13 5.0 Life-Cycle Cost and PaybackAnalysis •.....•..••.••••..••..••.•••••••••••• 14 6.0 Prices ................................................................ 17 6.1 Retail Prices: Life-Cycle Cost Analysis
................................. 17 6.2 Manufacturer Prices: Industry Cashflow
................ ,................ 18 

### 7.0 Shipments ............................................................ 18 8.0 Preliminary National Benefits Analysis •••••••••....•.•••••.•...•••••••••••• 19 8.1 Inputs to Forecasts
................................................ 19 8.2 Calculation ofEnergy Savings
................. ; ...................... 20 8.3 Consumer Net Present Value and Payback
.............................. 20 8.4 Employment Impacts
............................................... 21 

### 9.0 Revised Pre-ANOPR Analysis ....................'
....................... . 21 10.0 Consumer Impacts ....................................' ................. 21

## E*-gf/s 

# n )-qgL-v 

# Thl)

10.1 Consumer Sub-group Analysis
............ ................ 21 10.1.1 Variations inEnergy Prices
.............................. 22 10.1.2 Variations in Energy Use
................................. 22 10.1.3 First Cost Increase
.............................. .............. 22 10.2 Consumer Participation
............... ............................ 23 11.0 Industry Cash Flow

. ......................................... 24 12.0 Manufacturersub-group analysis ........... ......................... 24 

### 12.1 Manufacturer Sub-groups

........................................ 24 12.2 Competitive Impacts Assessment
..................................... 26 12.3 Cumulative Regulatory Burden
...................................... 26 13.0 Utility Impacts ...................................................... 27 14.0 Environmental Analysis ................................................ 27

*ii 

# D

10.1 Consumer Sub-group Analysis
................... ; ................... 21

1

0.1.1 Variations in Energy Prices
...................................... 22 10.1.2 Variations in Energy Use
........................................ 22 10.1.3 First Cost Increase
............................................. 22 10.2 Consumer Participation
............................................ 23 11.0 Industry Cash Flow ................................................... 24 12.0 Manufacturer sub-group analysis •••••••••••.•••••••••••••••••.•••••••••••• 24 12.1 Manufacturer Sub-groups
................ ; ......................... 24 12.2 Competitive Impacts Assessment
...................................... 26 12.3 Cumulative Regulatory Burden
...................................... 26 13.0 Utility Impacts'**_~** ...................................... e .•••••••••••••• • 27 14.0 Environmental Analysis ................................................ 27

ii 

# D

10.1 Consumer Sub-group Analysis
................... ; ................... 21

1

0.1.1 Variations in Energy Prices
...................................... 22 10.1.2 Variations in Energy Use
........................................ 22 10.1.3 First Cost Increase
............................................. 22 10.2 Consumer Participation
............................................ 23 11.0 Industry Cash Flow ................................................... 24 12.0 Manufacturer sub-group analysis •••••••••••.•••••••••••••••••.•••••••••••• 24 12.1 Manufacturer Sub-groups
................ ; ......................... 24 12.2 Competitive Impacts Assessment
...................................... 26 12.3 Cumulative Regulatory Burden
...................................... 26 13.0 Utility Impacts'**_~** ...................................... e .•••••••••••••• • 27 14.0 Environmental Analysis ................................................ 27

ii

## CentralAir Conditioner and Heat Pump Rulemaking Framework Introduction This document describes the analytical framework for appliance standards rulemaking. The emphasis is on describing the major components ofthe methodology and identifying the relationships among the various sections. A diagram ofthe generic analytical framework, which was derived for the clothes washer rulemaking, is shown in Figure 1. This document will primarily emphasize those components ofthe methodology necessary for issuing an Advance Notice ofProposed Rulemaking (ANOPR). Currently, the Advisory Committee on Appliance Energy Efficiency Standards isconsidering cross-cutting issues which may affect the analysis anticipated in upcoming rulemakings. The Department plans to consider any recommendation from the Advisory Committee to the greatest extent possible inthe ongoing rulemakings.

This document also describes the application of the analytical framework to the central air conditioner and heat pump rule. Following a generic description ofeach component ofa typical rulemaking, acomment box has been addedto discuss elements ofthe central airconditioner rule. References to central air conditioners include a discussion of key issues, the Department of Energy's (DOE) perspectives on these issues, and requests for additional stakeholder input. As described in this document, manufacturers will be asked to provide performance and costing information inorder that an engineering analysis can be conducted. Data collection isdependent on how the engineering analysis is conducted. The Department has yet to select the engineering analysis method and is seeking input from stakeholders as to what approach 

### should be taken. The following three methods are currently under consideration by the Department: 1)the efficiency level approach, 2) the design option approach, and 3) reverse engineering. All three approaches are discussed ingreater detail later inthis document. One or more of the above approaches could be used. Whatever analysis methods are used, the Department will keep with its policies and ensure that provisions are made to maintain the confidentiality ofall submitted information. Upon completion ofthe engineering analysis, the Department will use the data to perform consumer life-cycle cost analysis, select trial standards levels, and calculate preliminary national benefits ofthese levels. These analyses will complete the analytical steps that precede the Advance Notice of Proposed Rulemaking (ANOPR).

1 ----------_._----_.

--



## Central Air Conditioner and Heat Pump Rulemaking Framework Introduction This document describes the analytical framework for appliance standards rulemaking. the emphasis is on describing the major components ofthe methodology and identifying the relationships among the various sections. A diagram ofthe generic analytical framework, which was derived for the clothes washer rulemaking, is shown in Figure 1. This document will primarily emphasize those components ofthe methodology necessary for issuing an Advance Notice ofProposed Rulemaking (ANOPR). Currently, the Advisory Committee on Appliance Energy Efficiency Standards is considering cross-cutting issues which may affect the analysis anticipated in upcoming rulemakings. The Department plans to consider any recommendation from the Advisory Committee to the greatest extent possible in the ongoing rulemakings.

This document also describes the application of the analytical framework to the central air conditioner and heat pump rule. Following a generic description ofeach component ofa typical rulemaking, a commentbox hasbeen added to discuss elements ofthe central air conditionerrule. References to central air conditioners include a discussion ofkey issues, the Department of Energy's (DOE) perspectives on these issues, and requests for additional stakeholder input. As described in this documerit, manufacturers will be asked to provide performance and costing information in orderthat an engineering analysis can be conducted. Data collection is dependent on how the engineering analysis is conducted. The Department has yet to select the engineering analysis method and is seeking input from stakeholders as to what approach should be taken. The following three methods are currently under consideration by the Department: I) the efficiency level approach, 2) the design option approach, and 3) reverse engineering. All three approaches are discussed in greater detail later in this document. One or more of the above approaches could be used. Whatever analysis methods are used, the Department will keep with its policies and ensure that provisions are made to maintain the confidentiality ofall submitted information. Upon completion ofthe engineering analysis, the Department will use the data to perform consumer life-cycle cost analysis, select trial standards levels, and calculate preliminary national benefits of theselevels. These analyseswill completethe analytical steps that precede the Advance Notice of Proposed Rulemaking (ANOPR).

1 

## Central Air Conditioner and Heat Pump Rulemaking Framework Introduction This document describes the analytical framework for appliance standards rulemaking. the emphasis is on describing the major components ofthe methodology and identifying the relationships among the various sections. A diagram ofthe generic analytical framework, which was derived for the clothes washer rulemaking, is shown in Figure 1. This document will primarily emphasize those components ofthe methodology necessary for issuing an Advance Notice ofProposed Rulemaking (ANOPR). Currently, the Advisory Committee on Appliance Energy Efficiency Standards is considering cross-cutting issues which may affect the analysis anticipated in upcoming rulemakings. The Department plans to consider any recommendation from the Advisory Committee to the greatest extent possible in the ongoing rulemakings.

This document also describes the application of the analytical framework to the central air conditioner and heat pump rule. Following a generic description ofeach component ofa typical rulemaking, a commentbox hasbeen added to discuss elements ofthe central air conditionerrule. References to central air conditioners include a discussion ofkey issues, the Department of Energy's (DOE) perspectives on these issues, and requests for additional stakeholder input. As described in this documerit, manufacturers will be asked to provide perfonnance and costing infonnation in orderthat an engineering analysis can be conducted. Data collection is dependent on how the engineering analysis is conducted. The Department has yet to select the engineering analysis method and is seeking input from stakeholders as to what approach should be taken. The following three methods are currently under consideration by the Department: I) the efficiency level approach, 2) the design option approach, and 3) reverse engineering. All three approaches are discussed in greater detail later in this document. One or more of the above approaches could be used. Whatever analysis methods are used, the Department will keep with its policies and ensure that provisions are made to maintain the confidentiality ofall submitted infonnation. Upon completion ofthe engineering analysis, the Department will use the data to perfonn consumer life-cycle cost analysis, select trial standards levels, and calculate preliminary national benefits of theselevels. These analyseswill completethe analytical steps that precede the Advance Notice of Proposed Rulemaking (ANOPR).

1

## -EE- wm/srw^- c 

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2

### 1.0 PreliminaryMarket and Technology Assessment 1.1 Market Assessment Prior to initiating a detailed impact analysis, the Department will develop information on the present and past industry structure and market characteristics ofthe product(s) concerned. This activity will consist ofboth quantitative and qualitative efforts to assess the industry and products based on publicly available information. Issuesto be addressed include the following: manufacturer market share and characteristics; trends in the number offirms; the financial situation ofmanufacturers; existing non-regulatory efficiency improvement initiatives; and trends in product characteristics and retail markets. The information collected will serve as resource material to be used throughout the rulemaking. For instance, historical product shipments and prices will be used to help predict future prices and shipments. Market structure data will be particularly useful to conducting the competitive impacts analysis.

The Department has initiated a market assessment ofthe central air conditioner and heat pump industry. Once completed, collected information will be distributed for comment. The Department plans to conduct interviews with manufacturers following the June 30, 1998 framework workshop. These interviews will be useful in developing an industry profile by providing insights and information to help structure future analysis. While this effort involves the entire industry, the Department isinterested indeveloping profiles ofindividual manufacturers to gain a better understanding ofthe potential impacts ofstandards on both individual firms and particular categories offirms. Interview participants will be requested to identify all confidential information provided in writing and orally. Approximately two weeks following the interview, an interview summary will be provided to give participants the opportunity to confirm the accuracy and protect the confidentiality ofall collected information. All the information transmitted will be considered, when appropriate, in the Department's decision-making process. However, confidential information will not be made available for the public record. Are there elements not mentioned in the above market characterizationwhich should be incorporated intothisdocument? Whatarethe relevant product markets? Whichmanufacturers aresubject topotentialstandards?



### 1.2 Technology Assessment Information relative to existing and past technology options and prototype designs will typically be used as input to determine what technologies manufacturers utilize to attain higher energy efficiency levels. In consultation with interested parties, the Department intends to develop a list 3 

### 1.0 Preliminary Market and Technology Assessment 1.1 Market Assessment Priorto initiating a detailed impact analysis, the Department will develop information on the present and past industry structure and market characteristics ofthe product(s) concerned. This activity will consist ofboth quantitative and qualitative efforts to assess the industry and products based on publicly available information. Issues to be addressed include the following: manufacturer market share and**characteristics~** trends in the number of**firms~** the financial situation of**manufacturers~** existing non-regulatory efficiency improvement**initiatives~** and trends in product characteristics and retail markets. The information collected will serve as resource material to be used throughout the rulemaking. For instance, historical product shipments and prices will be used to help predict future prices and shipments. Market structure data will be particularly useful to conducting the competitive impacts analysis.

The Department has initiated a market assessment ofthe central air conditioner and heat pump industry. Once completed, collected information will be distributed for comment. The Department plans to conduct interviews with manufacturers following the June 30, 1998 framework workshop. These interviews will be useful in developing an industry profile by providing insights and information to help structure future analysis. While this effort involves the entire industry, the Department is interested in developing profiles ofindividual manufacturers to gain a better understanding ofthe potential impacts ofstandards on both individual firms and particular categories offirms.
. Interview participants will be requested to identify all confidential information provided in writing and orally. Approximately two weeks following the interview, an interview summary will be provided to give participants the opportunity to confirm the accuracy and protect the confidentiality ofall collected information. All the information transmitted will be considered, when appropriate, in the Department's decision-making process. However, confidential information will not be made available for the public record. Are there elements not mentioned in the above market characterization which should be incorporatedinto thisdocument? Whatare the relevantproductmarkets? Which manufacturers are subject topotentialstandards?

1.2 Technology Assessment
. Information relative to existing and past technology options and prototype designs will typically be used as input to determine what technologies manufacturers utilize to attain higher energy efficiency levels. In consultation with interested parties, the Department intends to develop a list 3 

### 1.0 Preliminary Market and Technology Assessment 1.1 Market Assessment Priorto initiating a detailed impact analysis, the Department will develop information on the present and past industry structure and market characteristics ofthe product(s) concerned. This activity will consist ofboth quantitative and qualitative efforts to assess the industry and products based on publicly available information. Issues to be addressed include the following: manufacturer market share and**characteristics~** trends in the number of**firms~** the financial situation of**manufacturers~** existing non-regulatory efficiency improvement**initiatives~** and trends in product characteristics and retail markets. The information collected will serve as resource material to be used throughout the rulemaking. For instance, historical product shipments and prices will be used to help predict future prices and shipments. Market structure data will be particularly useful to conducting the competitive impacts analysis.

The Department has initiated a market assessment ofthe central air conditioner and heat pump industry. Once completed, collected information will be distributed for comment. The Department plans to conduct interviews with manufacturers following the June 30, 1998 framework workshop. These interviews will be useful in developing an industry profile by providing insights and information to help structure future analysis. While this effort involves the entire industry, the Department is interested in developing profiles ofindividual manufacturers to gain a better understanding ofthe potential impacts ofstandards on both individual firms and particular categories offirms.
. Interview participants will be requested to identify all confidential information provided in writing and orally. Approximately two weeks following the interview, an interview summary will be provided to give participants the opportunity to confirm the accuracy and protect the confidentiality ofall collected information. All the information transmitted will be considered, when appropriate, in the Department's decision-making process. However, confidential information will not be made available for the public record. Are there elements not mentioned in the above market characterization which should be incorporatedinto thisdocument? Whatare the relevantproductmarkets? Which manufacturers are subject topotentialstandards?

1.2 Technology Assessment
. Information relative to existing and past technology options and prototype designs will typically be used as input to determine what technologies manufacturers utilize to attain higher energy efficiency levels. In consultation with interested parties, the Department intends to develop a list 3

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oftechnologies than can and should be considered. Initially, the technologies will encompass all those considered to be technologically feasible and will serve to establish the maximum technologically feasible design.

TheDepartment has initiated atechnology assessment for central airconditioners andheat pumps. The initial list of technologies will be based upon the design options provided in a previous ANOPR (September 8, 1993) for central air conditioners and heat pumps. Are there specific technologies that should or should not be considered for central air conditioners andheatpumps (e.g., microchannelheat exchangers or electrohydrodynamic enhancementof heatexchangers)?

1.3 Preliminary Baseline Shipments Forecast 

### The Department intends to develop a base case forecast ofproduct shipments in absence ofnew standards. This forecast will require an assessment ofthe impacts ofpast and existing nonregulatory efforts by manufacturers, utilities and other interested parties. DOE intends to seek information on the actual impacts ofsuch initiatives to date, but may also consider information presented regarding the possible impacts that any existing initiatives might have in the future. Such information could include a demonstration ofthe steps manufacturers, distribution channels, utilities or others will take to realize such voluntary efficiency improvements. The baseline shipments forecast will be used as input to three subsequent analyses: theNational Benefits Analysis (Section 8.0); the Consumer Life-Cycle Analysis (Section 5.0); and the Consumer Sub-Group Analysis (Section 10.0). To perform the National Benefits Analysis, a forecast ofshipment weighted product efficiency improvements ofnew products sold is needed to the year 2030. To assess the average impact onthe affected consumer population and the distribution ofthese impacts on consumer sub-groups, a forecast ofproduct shipments by efficiency level isneeded for the year a new standard would come into effect.

The Department will begin to prepare a strawman baseline shipment forecast for central air conditioners and heat pumps. This forecast, to the extent possible, will include a distribution of shipments by efficiency level. Historical product shipments and discussions with parties involved in market-based initiatives for increasing the sales of high efficiency models will guide the shipments forecast. Whatexistingmarket-basedinitiativesshould DOEconsider? What otherapproaches couldbe used toestablishthe base-caseshipmentforecast? Whatinformationsources show pastshipment databy efficiency level?

4 oftechriologies than can and should be considered. Initially, the technologies will encompass all those considered to be technologically feasible and will serve to establish the maximum technologically feasible design.

TheDepartment has initiated atechnology assessmentforcentral airconditionersand heatpumps. The initial list of technologies will be based upon the design options provided in a previous ANOPR (September 8, 1993) for central air conditioners and heat pumps. Are there specific technologies that should or should not be consideredfor central air conditioners and heat pumps (e.g., microchannel heat exchangers or electrohydrodynamic enhancement of heat exchangers)?

1.3 Preliminary Baseline Shipments Forecast The Department intends to develop a base case forecast .ofproduct shipments in absence ofnew standards. This forecast will require an assessment ofthe impacts ofpast and existing nonregulatory efforts by manufacturers, utilities and other interested parties. DOE intends to seek information on the actual impacts ofsuch initiatives to date, but may also consider information presented regarding the possible impacts that any existing initiatives might have in the future. Such information could include a demonstration ofthe steps manufacturers, distribution channels, utilities or others will take to realize such voluntary efficiency improvements. The baseline shipments forecast will be used as input to three subsequent analyses: the National Benefits Analysis (Section 8.0); the Consumer**Life-Cy~le** Analysis (Section 5.0); and the Consumer Sub-Group Analysis (Section 10.0). To perform the National Benefits Analysis, a forecast ofshipment weighted product efficiency improvements ofnew products sold is needed to the year 2030. To assess the average impact on the affected consumer population and the
. distribution ofthese impacts on consumer sub-groups, a forecast ofproduct shipments by efficiency level is needed for the year a new standard would come into effect.

The Department will begin to prepare a strawman baseline shipment forecast for central air conditioners and heat pumps. This forecast, to the extent possible, will include a distribution of shipments by efficiency level. Historical product shipments and discussions with parties involved in market-based initiatives for increasing the sales of high efficiency models will guide the shipments forecast. What existingmarket-basedinitiativesshouldDOEconsider? What otherapproaches couldbe used to establish the base-caseshipmentforecast? What informationsourcesshowpastshipment data by effiCiency level?

4 oftechriologies than can and should be considered. Initially, the technologies will encompass all those considered to be technologically feasible and will serve to establish the maximum technologically feasible design.

TheDepartment has initiated atechnology assessmentforcentral airconditionersand heatpumps. The initial list of technologies will be based upon the design options provided in a previous ANOPR (September 8, 1993) for central air conditioners and heat pumps. Are there specific technologies that should or should not be consideredfor central air conditioners and heat pumps (e.g., microchannel heat exchangers or electrohydrodynamic enhancement of heat exchangers)?

1.3 Preliminary Baseline Shipments Forecast The Department intends to develop a base case forecast .ofproduct shipments in absence ofnew standards. This forecast will require an assessment ofthe impacts ofpast and existing nonregulatory efforts by manufacturers, utilities and other interested parties. DOE intends to seek information on the actual impacts ofsuch initiatives to date, but may also consider information presented regarding the possible impacts that any existing initiatives might have in the future. Such information could include a demonstration ofthe steps manufacturers, distribution channels, utilities or others will take to realize such voluntary efficiency improvements. The baseline shipments forecast will be used as input to three subsequent analyses: the National Benefits Analysis (Section 8.0); the Consumer**Life-Cy~le** Analysis (Section 5.0); and the Consumer Sub-Group Analysis (Section 10.0). To perform the National Benefits Analysis, a forecast ofshipment weighted product efficiency improvements ofnew products sold is needed to the year 2030. To assess the average impact on the affected consumer population and the
. distribution ofthese impacts on consumer sub-groups, a forecast ofproduct shipments by efficiency level is needed for the year a new standard would come into effect.

The Department will begin to prepare a strawman baseline shipment forecast for central air conditioners and heat pumps. This forecast, to the extent possible, will include a distribution of shipments by efficiency level. Historical product shipments and discussions with parties involved in market-based initiatives for increasing the sales of high efficiency models will guide the shipments forecast. What existingmarket-basedinitiativesshouldDOEconsider? What otherapproaches couldbe used to establish the base-caseshipmentforecast? What informationsourcesshowpastshipment data by effiCiency level?

4

### 2.0 Screening Analysis The screening analysis consists ofthree tasks: selecting product classes; selecting baseline units; and reviewing and selecting design options for further analysis. 2.1 ProductClasses Product types are separated into classes based on the type ofenergy used, and capacity or performance-related features that provide utility to the consumer and affect efficiency. Different energy-efficiency standards will apply to different product classes. In general, classes are defined using information obtained in discussions with manufacturers, trade associations, and other interested parties.

As prescribed by the National Appliance Energy Conservation Act (NAECA), central air conditioners and heat pumps are categorized into split and single package systems. Systems incorporating some type ofcapacity or performance related feature are currently lumped into the above classes. Therearesome system typeswhichmight incorporate acapacityor performancerelatedfeature thatwarrants the creationof additional classes. Forexample, shouldtheDepartment consider creatingadditional classesbasedonthe coolingorheatingcapacityofthe system? With regard to splitsystems,shouldductlesssystems (i.e., "mini-split"highvelocity systems) be brokenout intoaseparate class?Dotheperformancebenefitsofferedbysuch uniquesystemsas "throughthe-wallcondensingunits", "limitedtemperaturerangeheat pumps", or "combinationspaceconditioning/water-heatingsystems" warrant creating separate classesfor them? Please commentasto whether the Department should pursueestablishing additionalclasses.



### 2.2 Baseline Units Defining a baseline unit isthe starting point for analyzing energy efficiency improvements. For each product class, the baseline unit generally represents a model with the minimum allowable energy efficiency specified by the National Energy Conservation Act (NAECA). Other than efficiency, features incorporated inthe baseline unit are representative ofthe "low-end" unit within the class.

5 

### 2.0 Screening Analysis The screening analysis consists ofthree tasks: selecting product**classes~** selecting baseline**units~** and reviewing and selecting design·options for further analysis. 2.1 Product Classes Product types are separated into classes based on the type ofenergy used, and capacity or performance-related features that provide utility to the consumer and affect efficiency. Different energy-efficiency standards will apply to different product classes. In general, classes are defined using information obtained in discussions with manufacturers, trade associations, and other interested parties.

As prescribed by the National Appliance Energy Conservation Act (NAECA), central air conditioners and heat pumps are categorized into split and single package systems. Systems incorporating some type ofcapacity or performance related feature are currently lumped into the above classes. There are some system typeswhichmightincorporatea capacityorperformance relatedfeature thatwa"ants the creation of additionalclasses. For example, shouldthe Department consider creatingadditionalclassesbasedon the coolingorheatingcapacityof the system? With regard to sp!it systems, shouldductless systems (i.e., "mini-split" high velocity systems) be broken out intoa separate class? Dotheperformance benefitsofferedbysuch unique systemsas "thraughthe-wall condensing units", "limitedtemperature range heatpumps", or "combination spaceconditioninglwater-heating systems" warrant creating separate classesfor them? Please comment as to whether the Department shouldpursue establishingadditional classes.

2.2 Baseline Units Defining abaseline unit is the starting point for analyzing energy efficiency improvements. For each product class, the baseline unit generally represents a model with the minimum allowable energy efficiency specified by the National Energy Conservation Act (NAECA). Other than efficiency, features incorporated in the baseline unit are representative ofthe "low-end" unit within the class.

5 

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2.0 Screening Analysis The screening analysis consists ofthree tasks: selecting product**classes~** selecting baseline**units~** and reviewing and selecting design·options for further analysis. 2.1 Product Classes Product types are separated into classes based on the type ofenergy used, and capacity or performance-related features that provide utility to the consumer and affect efficiency. Different energy-efficiency standards will apply to different product classes. In general, classes are defined using information obtained in discussions with manufacturers, trade associations, and other interested parties.

As prescribed by the National Appliance Energy Conservation Act (NAECA), central air conditioners and heat pumps are categorized into split and single package systems. Systems incorporating some type ofcapacity or performance related feature are currently lumped into the above classes. There are some system typeswhichmightincorporatea capacityorperformance relatedfeature thatwa"ants the creation of additionalclasses. For example, shouldthe Department consider creatingadditionalclassesbasedon the coolingorheatingcapacityof the system? With regard to sp!it systems, shouldductless systems (i.e., "mini-split" high velocity systems) be broken out intoa separate class? Dotheperformance benefitsofferedbysuch unique systemsas "thraughthe-wall condensing units", "limitedtemperature range heatpumps", or "combination spaceconditioninglwater-heating systems" warrant creating separate classesfor them? Please comment as to whether the Department shouldpursue establishingadditional classes.

2.2 Baseline Units Defining abaseline unit is the starting point for analyzing energy efficiency improvements. For each product class, the baseline unit generally represents a model with the minimum allowable energy efficiency specified by the National Energy Conservation Act (NAECA). Other than efficiency, features incorporated in the baseline unit are representative ofthe "low-end" unit within the class.

5 

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### One of the mostvital statistics requiredforestablishing thebaseline model is itsefficiency. Current minimum efficiency standards for split and single package system central air conditioners and central air conditioning heat pumps are 10.0 and 9.7 SEER, respectively. The current minimums for theheating performance ofsplit and singlepackage central air conditioning heat pump systems are 6.8 and 6.6HSPF, respectively. The Department will likelyuse theabove minimum efficiency standards asthebaseline efficiency for each ofthe above classes. Ifadditional classes are created, theDepartment will apply the appropriate existing standard as thebaseline efficiency forthat class. Ifmore detailed approaches are selected for conductingthe engineering analysis, such asthe design option or reverse engineering approaches, manufacturers willbe requested to supply details onthe technologies they utilize in their baseline or minimum efficiency models. This information will assisttheDepartment in establishing what technologies canbe employed to increase theefficiency ofthe equipment. Are theaboveapproaches suitableforestablishing baselinemodels? If not, why not?

2.3 Design Options An initial list ofdesign options will be developed from the technologies identified inthe technology assessment. Following the development ofthis initial list ofdesign options, the Department, inconsultation with interested parties, will review each design option to determine if it is practicable to manufacture, install and service; would adversely impact product utility or product availability; or would have adverse impacts on health and safety. Design options not eliminated inthe screening process will be considered further inthe engineering analysis.

Compiling a list ofdesign options will provide abetter understanding as to what technologies can be utilized by manufacturers to improve equipment efficiency. Knowing the technologies which are available to manufacturers to increase efficiency will also help the Department determine maximum technologically feasible efficiency levels. The Department notes that fuel-driven technologies, such as gas-fired engine driven heat pumps, absorption heat pumps, and Stirling refrigeration cycles, will not be considered as design options for central air conditioners and heat pumps. As specified by NAECA, one ofthe criteria for defining a central air conditioner and heat pump isthat it be "powered by single phase electric current". Thus, the above fuel-driven technologies are precluded from consideration.



### 3.0 Engineering Analysis
6

Oneof themostvital statisticsrequiredforestablishingthebaselinemodel isits efficiency. Current minimum efficiency standards for split and single package system central air conditioners and central air conditioning heat pumps are 10.0 and 9.7 SEER, respectively. The current minimums for the heating performance ofsplit and singlepackage central airconditioningheatpump systems are 6.8 and 6.6 HSPF, respectively. TheDepartmentwill likelyusethe above minimum efficiency standards as thebaseline efficiency for each ofthe above classes. Ifadditional classes are created, theDepartmentwill applythe appropriateexisting standard as thebaseline efficiencyforthatclass. lfmoredetailed approachesare selectedforconductingthe engineering analysis, suchasthedesign option orreverseengineering approaches, manufacturerswillberequestedto supply details onthe technologies they utilize in their baseline or minimum efficiency models. This information will assist theDepartmentin establishing whattechnologies canbe employedto increasethe efficiency ofthe equipment. 

### Are the above approaches suitable for establishing baseline models? 

### If not, why not?

2.3 Design Options An initial list ofdesign options will be developed from the technologies identified in the technology assessment. Following the development ofthis initial list ofdesign options, the Department, in consultation with interested parties, will review each design option to determine if it is practicable to manufacture, install and service; would adversely impact product utility or product availability; or would have adverse impacts on health and safety. Design options not eliminated in the screening process will be considered further in the engineering analysis.

Compiling alist ofdesign options will provide abetterunderstanding as to what technologies can be utilized by manufacturers to improve equipment efficiency. Knowing the technologies which are available to manufacturers to increase efficiency will also help the Department determine maximum technologically feasible efficiency levels. The Department notes that fuel-driven technologies, such as gas-fired engine driven heat pumps, absorption heat pumps, and Stirling refrigeration cycles, will not be considered as design options for central air conditioners and heat pumps. As specified by NAECA, one ofthe criteria for defining a central air conditioner and heat pump is that it be "powered by single phase electric current". Thus, the above fuel-driven technologies are precluded from consideration.



### 3.0 Engineering Analysis 6

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Oneof themostvital statisticsrequiredforestablishingthebaselinemodel isits efficiency. Current minimum efficiency standards for split and single package system central air conditioners and central air conditioning heat pumps are 10.0 and 9.7 SEER, respectively. The current minimums for the heating performance ofsplit and singlepackage central airconditioningheatpump systems are 6.8 and 6.6 HSPF, respectively. TheDepartmentwill likelyusethe above minimum efficiency standards as thebaseline efficiency for each ofthe above classes. Ifadditional classes are created, theDepartmentwill applythe appropriateexisting standard as thebaseline efficiencyforthatclass. lfmoredetailed approachesare selectedforconductingthe engineering analysis, suchasthedesign option orreverseengineering approaches, manufacturerswillberequestedto supply details onthe technologies they utilize in their baseline or minimum efficiency models. This information will assist theDepartmentin establishing whattechnologies canbe employedto increasethe efficiency ofthe equipment. 

### Are the above approaches suitable for establishing baseline models? 

### If not, why not?

2.3 Design Options An initial list ofdesign options will be developed from the technologies identified in the technology assessment. Following the development ofthis initial list ofdesign options, the Department, in consultation with interested parties, will review each design option to determine if it is practicable to manufacture, install and service; would adversely impact product utility or product availability; or would have adverse impacts on health and safety. Design options not eliminated in the screening process will be considered further in the engineering analysis.

Compiling alist ofdesign options will provide abetterunderstanding as to what technologies can be utilized by manufacturers to improve equipment efficiency. Knowing the technologies which are available to manufacturers to increase efficiency will also help the Department determine maximum technologically feasible efficiency levels. The Department notes that fuel-driven technologies, such as gas-fired engine driven heat pumps, absorption heat pumps, and Stirling refrigeration cycles, will not be considered as design options for central air conditioners and heat pumps. As specified by NAECA, one ofthe criteria for defining a central air conditioner and heat pump is that it be "powered by single phase electric current". Thus, the above fuel-driven technologies are precluded from consideration.



### 3.0 Engineering Analysis 6

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The purpose ofthe engineering analysis isto estimate the energy savings potential from increased equipment efficiency levels. The design options not eliminated in the previous screening analysis can be used to help establish the potential energy savings. The Department, in consultation with stakeholders, will use the most appropriate means available to determine energy consumption, including an overall system approach or possibly engineering modeling. Ranges and uncertainties inperformance will be established. The energy savings measures developed inthe engineering analysis will be combined with end-user costs inthe life-cycle cost analysis. The engineering analysis involves estimating the efficiency increases possible based on the baseline units described inSection 2.2. A representative baseline unit will be established for each product class that isidentified. A cost-efficiency relationship will be developed to show the manufacturer cost ofachieving increased efficiency. The efficiency levels corresponding to various design option combinations will be determined from manufacturer data submittals and from DOE engineering calculations. Cost estimates will be obtained from detailed incremental cost data disaggregated into labor, purchased parts and material, shipping/packaging and investment. These costs will be used both for the engineering analysis and the manufacturer impact analysis. Section 4.0 contains amore detailed discussion ofapproaches to estimating manufacturing costs. As stated earlier, data collection ishighly dependent on the type ofapproach selected for conducting the engineering analysis. Currently, the Department is considering three approaches: 1)

the efficiency level approach, 2)the design option approach, and 3)reverse engineering. Regardless ofthe approach used, strategies for analyzing uncertainty and variability in the cost and efficiency data will need to be developed. Each ofthe approaches are discussed inmore detail below.

TheDepartment seeksinputfromstakeholdersastowhatapproach orapproaches should beused to conductthe engineeringanalysis.Although only threeapproaches arediscussed here,it isnot meant to exclude any additionalapproachesstakeholders may suggest for conducting the engineeringanalysis.

3.1 Efficiency Level Approach The efficiency level approach establishes the relationship between manufacturer cost and increased efficiency at predetermined efficiency levels. It has the distinct advantage ofbeing simple and straight forward. Manufacturers typically provide incremental manufacturer cost data for incremental increases in efficiency. Cost-efficiency curves can be easily constructed to clearly identify at what point manufacturers are incurring significant cost impacts to raise efficiency. Additionally, the efficiency level approach allows manufacturers the ability to supply detailed cost data without revealing their unique and proprietary design strategies for achieving increased efficiency levels.
7

The purpose ofthe engineering analysis is to estimate the energy savings potential from increased equipment efficiency levels. The design options not eliminated in the previous screening analysis can be used to help establish the potential energy savings. The Department, in consultation with stakeholders, will use the most appropriate means available to detennine energy consumption, including an overall system approach orpossibly engineering modeling. Ranges and uncertainties in perfonnance will be established. The energy savings measures developed in the engineering analysis will be combined with end-user costs in the life-cycle cost analysis. The engineering analysis involves estimating the efficiency increases possible based on the baseline units described in Section 2.2. A representative baseline unit will be established for each product class that is identified. A cost-efficiency relationship will be developed to show the manufacturer cost ofachieving increased efficiency. The efficiency levels corresponding to various design option combinations will be detennined from manufacturer data submittals and from DOE engineering calculations. Cost estimates will be obtained from detailed incremental cost data disaggregated into labor, purchased parts and material, shipping/packaging and investment. These costs will be used both for the engineering analysis and the manufacturer impact analysis. Section 4.0 contains a more detailed discussion ofapproaches to estimating manufacturing costs. As stated earlier, data collection is highly dependent on the type ofapproach selected for conducting the engineering analysis. Currently, the Department is considering three approaches: I) the efficiency level approach, 2) the design option approach, and 3) reverse engineering. Regardless ofthe approach used, strategies for analyzing uncertainty and variability in the cost and efficiency data will need to be developed. Each ofthe approaches are discussed in more detail below.

The Departmentseeksinputfromstakeholdersastowhatapproachorapproachesshouldbe used to conductthe engineeringanalysis. Althoughonlythree approachesarediscussedhere, itisnot meant to exclude any additional approaches stakeholders may suggestjor conducting the engineering analysis.

3.1 Efficiency Level Approach The efficiency level approach establishes the relationship between manufacturer cost and increased efficiency at predetennined efficiency levels. It has the distinct advantage ofbeing simple and straight forward. Manufacturers typically provide incremental manufacturer cost data for incremental increases in efficiency. Cost-efficiency curves can be easily constructed to clearly identify at what point manufacturers are incurring significant cost impacts to raise efficiency. Additionally, the efficiency level approach allows manufacturers the ability to supply detailed cost data without revealing their unique and proprietary design strategies for achieving increased efficiency levels.
7 The purpose ofthe engineering analysis is to estimate the energy savings potential from increased equipment efficiency levels. The design options not eliminated in the previous screening analysis can be used to help establish the potential energy savings. The Department, in consultation with stakeholders, will use the most appropriate means available to detennine energy consumption, including an overall system approach orpossibly engineering modeling. Ranges and uncertainties in perfonnance will be established. The energy savings measures developed in the engineering analysis will be combined with end-user costs in the life-cycle cost analysis. The engineering analysis involves estimating the efficiency increases possible based on the baseline units described in Section 2.2. A representative baseline unit will be established for each product class that is identified. A cost-efficiency relationship will be developed to show the manufacturer cost ofachieving increased efficiency. The efficiency levels corresponding to various design option combinations will be detennined from manufacturer data submittals and from DOE engineering calculations. Cost estimates will be obtained from detailed incremental cost data disaggregated into labor, purchased parts and material, shipping/packaging and investment. These costs will be used both for the engineering analysis and the manufacturer impact analysis. Section 4.0 contains a more detailed discussion ofapproaches to estimating manufacturing costs. As stated earlier, data collection is highly dependent on the type ofapproach selected for conducting the engineering analysis. Currently, the Department is considering three approaches: I) the efficiency level approach, 2) the design option approach, and 3) reverse engineering. Regardless ofthe approach used, strategies for analyzing uncertainty and variability in the cost and efficiency data will need to be developed. Each ofthe approaches are discussed in more detail below.

The Departmentseeksinputfromstakeholdersastowhatapproachorapproachesshouldbe used to conductthe engineeringanalysis. Althoughonlythree approachesarediscussedhere, itisnot meant to exclude any additional approaches stakeholders may suggestjor conducting the engineering analysis.

3.1 Efficiency Level Approach The efficiency level approach establishes the relationship between manufacturer cost and increased efficiency at predetennined efficiency levels. It has the distinct advantage ofbeing simple and straight forward. Manufacturers typically provide incremental manufacturer cost data for incremental increases in efficiency. Cost-efficiency curves can be easily constructed to clearly identify at what point manufacturers are incurring significant cost impacts to raise efficiency. Additionally, the efficiency level approach allows manufacturers the ability to supply detailed cost data without revealing their unique and proprietary design strategies for achieving increased efficiency levels.
7

### Butthe simplicity ofthe efficiency level approach is also its primary drawback. Namely, since technological details are not provided, it is extremely difficult to verify whether the costs being provided are truly representative ofthe specific efficiency level. In addition, prototypical designs become difficult to evaluate and maximum technologically feasible designs are then difficult to ascertain. As a result, some other type ofanalysis would likely be needed in order to verify the accuracy ofthe data supplied through the efficiency level approach.

Ifthe efficiency level approach is selected for conducting the engineering analysis, predetermined efficiency levels will be selected by theDepartment based on consultations with stakeholders. In the case ofcentral airconditioners, predetermined efficiency levels willbe based uponthe seasonal energy efficiency ratio (SEER). Selection ofpredetermined levels forcentral airconditioning heat pumps is more difficult as the equipment israted with both cooling (SEER) and heating (HSPF) efficiencies. The Departmentseeks input from stakeholdersas to how the efficiency level approachcan be appliedto heatpumps to ensure that both cooling andheating performance are taken into account. 

### As discussed above,theefficiency level approach requires verification ofthe datasubmitted. Other approaches, such as the design option and reverse engineering methods, can be conducted in parallel with the efficiency level approach to ensure the accuracy ofits data. The Departmentseeks input on what methods couldbe utilizedto verify the data providedby manufacturersusingthe efficiency levelapproach. 

### Based ontheDepartment's pastexperiences usingthe efficiency level approach for otherproducts, submitted cost datamay have anumber ofassociated problems. Forexample, since manufacturers mayhaveproprietary approaches to meeting a particular efficiency level, theremaybeawide range ofcosts provided. Data may also exhibit various abnormalities. Forexample, insetting voluntary efficiency levels for commercial air conditioning equipment as part of ASHRAE's review and update of Standard 90.1 for new commercial buildings, submitted cost data had several peculiarities. This mayhavebeen dueto designs whichmanufacturers produced fora niche market to gain a market advantage. The Department has conducted the engineering analysis for clothes washers using the efficiency level approach. The methods used for conducting the analysis and reporting manufacturercosts will be presented at the Workshop as a means to solicit comments as to whether this approach isappropriatefor use in the central airconditioner and heat pump analysis.
3.2 Design Option Approach Under the design option approach, individual or combinations ofdesign options are identified for 8 But the simplicity ofthe efficiency level approach is also its primary drawback. Namely, since technological details are not provided, it is extremely difficult to verify whether the costs being provided are truly representative ofthe specific efficiency level. Inaddition, prototypical designs become difficult to evaluate and maximum technologically feasible designs are then difficult to ascertain. As a result, some other type ofanalysis would likely be needed in order to verify the accuracy ofthe data supplied through the efficiency level approach.

Ifthe efficiency level approach is selected for conducting the engineering analysis, predetermined efficiency levels will be selected by the Department based on consultations with stakeholders. In thecase ofcentral airconditioners, predetenninedefficiencylevelswill bebased uponthe seasonal energyefficiencyratio (SEER). Selection ofpredetenninedlevelsfor central airconditioningheat pumps is more difficult as the equipment is rated with both cooling (SEER) and heating (HSPF) efficiencies. The Department seeks input from stakeholders as to haw the efficiency level approach can be applied to heatpumps to ensure that both cooling andheatingperformance are taken into account. Asdiscussed above, theefficiencylevel approachrequiresverificationof thedata submitted. Other approaches, such as the design option and reverse engineering methods, can be conducted in parallel with the efficiency level approach to ensure the accuracy ofits data. The Department seeks input on what methods couldbe utilized to verify the dataprovidedby manufacturers using the efficiency levelapproach. Based ontheDepartment'spast experiences using the efficiencylevel approachfor otherproducts, submitted cost datamay have anumberofassociated problems. Forexample, since manufacturers mayhaveproprietaryapproachesto meeting aparticularefficiencylevel, theremaybeawiderange ofcosts provided. Data may also exhibit various abnonnalities. For example, in settingvoluntary efficiency levels for commercial air conditioning equipment as part ofASHRAE's review and update of Standard 90.1 for new commercial buildings, submitted cost data had several peculiarities. This mayhavebeendueto designswhichmanufacturers producedfor anichemarket to gain a market advantage. The Department has conducted the engineering analys.is for clothes washers using the efficiency level approach. The methods used for conducting the analysis and reporting manufacturercosts will be presented at theWorkshop as a means to solicit comments as to whetherthis approach is appropriatefor use in the central airconditioner and heat pump analysis.

3.2 Design Option Approach Under the design option approach, individual or combinations ofdesign options are identified for8 But the simplicity ofthe efficiency level approach is also its primary drawback. Namely, since technological details are not provided, it is extremely difficult to verify whether the costs being provided are truly representative ofthe specific efficiency level. Inaddition, prototypical designs become difficult to evaluate and maximum technologically feasible designs are then difficult to ascertain. As a result, some other type ofanalysis would likely be needed in order to verify the accuracy ofthe data supplied through the efficiency level approach.

Ifthe efficiency level approach is selected for conducting the engineering analysis, predetermined efficiency levels will be selected by the Department based on consultations with stakeholders. In thecase ofcentral airconditioners, predetenninedefficiencylevelswill bebased uponthe seasonal energyefficiencyratio (SEER). Selection ofpredetenninedlevelsfor central airconditioningheat pumps is more difficult as the equipment is rated with both cooling (SEER) and heating (HSPF) efficiencies. The Department seeks input from stakeholders as to haw the efficiency level approach can be applied to heatpumps to ensure that both cooling andheatingperformance are taken into account. Asdiscussed above, theefficiencylevel approachrequiresverificationof thedata submitted. Other approaches, such as the design option and reverse engineering methods, can be conducted in parallel with the efficiency level approach to ensure the accuracy ofits data. The Department seeks input on what methods couldbe utilized to verify the dataprovidedby manufacturers using the efficiency levelapproach. Based ontheDepartment'spast experiences using the efficiencylevel approachfor otherproducts, submitted cost datamay have anumberofassociated problems. Forexample, since manufacturers mayhaveproprietaryapproachesto meeting aparticularefficiencylevel, theremaybeawiderange ofcosts provided. Data may also exhibit various abnonnalities. For example, in settingvoluntary efficiency levels for commercial air conditioning equipment as part ofASHRAE's review and update of Standard 90.1 for new commercial buildings, submitted cost data had several peculiarities. This mayhavebeendueto designswhichmanufacturers producedfor anichemarket to gain a market advantage. The Department has conducted the engineering analys.is for clothes washers using the efficiency level approach. The methods used for conducting the analysis and reporting manufacturercosts will be presented at theWorkshop as a means to solicit comments as to whetherthis approach is appropriatefor use in the central airconditioner and heat pump analysis.

3.2 Design Option Approach Under the design option approach, individual or combinations ofdesign options are identified for8

# EK -77/1/sfT -_ 9 

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# LD) increasing efficiency. Design option efficiency increases can either be based on manufacturer or component supplier estimates or through the use ofengineering computer simulation models. The incremental manufacturing costs ofadding design options to abaseline model are then established. Individual or combinations ofdesign options are added to thebaseline model in ascending order ofcost-effectiveness. Typically, the payback period is used to establish a design option's costeffectiveness and isdetermined by the ratio ofthe change in total consumer cost to the change in operating cost. The primary advantage ofthe design option approach is its ability to analyze individual technologies. The approach istransparent inthat the impact ofany single technology on cost and efficiency is explicit. An additional advantage isits ability to incorporate designs that have been demonstrated to perform in prototypes but have yet to be utilized in equipment currently available on the market. Thus, maximum technologically feasible designs are more easily established then inthe efficiency level approach. Although individual technologies can be assessed, the design option approach can tend to be complex. Individual technologies may be combined in ways not typically utilized by manufacturers, especially ifprototypical technologies are being analyzed, thus, making it difficult to assess a design's impact on system cost and efficiency. In order to determine a technology's impact on system efficiency, computer simulation models are typically employed. But since computer simulation models exhibit at least some level ofinaccuracy, a great deal oftime and effort must be expended to validate the model's results at a variety ofoperating conditions. Simulation models demand detailed input that may require manufacturers and component suppliers to reveal proprietary design strategies. Also, equipment performance data at specified test conditions must be supplied inorder tovalidate the model's performance. Another drawback to the design option approach is its imperfect compatibility with the manufacturing impact analysis. The Department recognizes that the manufacturer cost information derived in a component-based analysis does not reflect the variability inbaseline units, design strategies and cost structures that can exist between manufacturers. Therefore, for the manufacturing impact analysis, the Department may need to derive additional manufacturing cost estimates, using other approaches developed inconsultation with interested parties.

9 increasing efficiency. Design option efficiency increases can eitherbe based on manufacturer or component supplier estimates or through the use ofengineering computer simulation models. The incremental manufacturing costs ofadding design options to abaseline model are then established. Individual or combinations ofdesign options are added to the baseline model in ascending order ofcost-effectiveness. Typically, the payback period is used to establish a design option's costeffectiveness and is detennined by the ratio ofthe change in total consumer cost to the change in operating cost. The primary advantage ofthe design option approach is its ability to analyze individual technologies. The approach is transparent in that the impact ofany single technology on cost and efficiency is explicit. An additional advantage is its ability to incorporate designs that have been demonstrated to perform in prototypes but have yet to be utilized in equipment currently available on the market. Thus, maximum technologically feasible designs are more easilyestablished then in the efficiency level approach. Although individual technologies can be assessed, the design option approach can tend to be complex. Individual technologies may be combined in ways not typically utilized by manufacturers, especially ifprototypical technologies are being analyzed, thus, making it difficult to assess a design's impact on system cost and efficiency. In order to detennine atechnology'S impact on system efficiency, computer**simulatio~** models are typically employed. But since computer simulation models exhibit at least some level ofinaccuracy, a great deal oftime and effort must be expended to validate the model's results at a variety ofoperating conditions. Simulation models demand detailed input that may require manufacturers and component suppliers to reveal proprietary design strategies. Also, equipment performance data at specified test conditions must be supplied in order to validate the model's performance. Another drawback to the design option approach is its imperfect compatibility with the manufacturing impact analysis. The Department recognizes that the manufacturer cost information derived in a component-based analysis does not reflect the variability in baSeline units, design strategies and cost structures that can exist between manufacturers. Therefore, for the manufacturing impact analysis, the Department may need to derive additional manufacturing cost estimates, using other approaches developed in consultation with interested parties.

9 increasing efficiency. Design option efficiency increases can eitherbe based on manufacturer or component supplier estimates or through the use ofengineering computer simulation models. The incremental manufacturing costs ofadding design options to abaseline model are then established. Individual or combinations ofdesign options are added to the baseline model in ascending order ofcost-effectiveness. Typically, the payback period is used to establish a design option's costeffectiveness and is detennined by the ratio ofthe change in total consumer cost to the change in operating cost. The primary advantage ofthe design option approach is its ability to analyze individual technologies. The approach is transparent in that the impact ofany single technology on cost and efficiency is explicit. An additional advantage is its ability to incorporate designs that have been demonstrated to perform in prototypes but have yet to be utilized in equipment currently available on the market. Thus, maximum technologically feasible designs are more easilyestablished then in the efficiency level approach. Although individual technologies can be assessed, the design option approach can tend to be complex. Individual technologies may be combined in ways not typically utilized by manufacturers, especially ifprototypical technologies are being analyzed, thus, making it difficult to assess a design's impact on system cost and efficiency. In order to detennine atechnology'S impact on system efficiency, computer**simulatio~** models are typically employed. But since computer simulation models exhibit at least some level ofinaccuracy, a great deal oftime and effort must be expended to validate the model's results at a variety ofoperating conditions. Simulation models demand detailed input that may require manufacturers and component suppliers to reveal proprietary design strategies. Also, equipment performance data at specified test conditions must be supplied in order to validate the model's performance. Another drawback to the design option approach is its imperfect compatibility with the manufacturing impact analysis. The Department recognizes that the manufacturer cost information derived in a component-based analysis does not reflect the variability in baSeline units, design strategies and cost structures that can exist between manufacturers. Therefore, for the manufacturing impact analysis, the Department may need to derive additional manufacturing cost estimates, using other approaches developed in consultation with interested parties.

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If the design option approach is used for the engineering analysis, methods will have to be established for determining efficiency increases. As stated above, this can be done either directly through stakeholder input or through the use ofcomputer simulation models. There are at least two public domain computer models for central air conditioner and heat pumps, one from Oak RidgeNational Laboratory and the other fromtheNational InstituteofStandards and Technology, which could be used to determine equipment efficiency. TheDepartment seeks inputfromstakeholdersastohow efficiency impactscouldbedetermined underthe design option approach. Ifcomputer simulationmodels are to be used, is there a specific modelwhich shouldbe usedby theDepartment?

3.3 Reverse Engineering Approach 

### The use ofa component-based engineering analysis or reverse engineering approach provides useful information including the identification ofpotential technological paths manufacturers could use to achieve increased product energy efficiency. Under this type ofanalysis, actual equipment on the market are physically analyzed, i.e., dismantled, component-by-component to determine what technologies and designs manufacturers employ to increase efficiency. Independent costing methods or manufacturer and component supplier data can then be used to estimate the costs ofthe components. This approach has the distinct advantage ofusing "real" market equipment to establish the technologies inwhich manufacturers utilize to reach higher efficiencies. 

### The primary disadvantage ofreverse engineering is the time and effort required to analyze "real" equipment. Several models from a diverse range ofmanufacturers may have to be assessed in order to ensure that an accurate representation oftechnological paths for increasing efficiency are identified. In addition, since only "real" equipment isbeing analyzed, prototypical designs may not be captured by the analysis, thus, making it difficult to establish maximum technologically feasible designs. Another potential problem isthat proprietary manufacturer design strategies may be revealed.

Ifthereverse engineering approach isused, several different central air conditioner andheat pump models will need to be identified in order to ensure that all representative technologies for increasing efficiency are identified. The Departmentseeks input from stakeholdersasto whetherreverse engineeringisa practical approachfor conductingthe engineering analysis.Ifso, howmany differentairconditioner and heat pumps modelswillneed to be analyzed?

10 Ifthe design option approach is used for the engineering analysis, methods will have to be established for determining efficiency increases. As stated above, this can be done either directly through stakeholder input orthrough the use ofcomputer simulation models. There are at least two public domain computer models for central air conditioner and heat pumps, one from Oak RidgeNational Laboratoryand the otherfromtheNationalInstituteofStandards and Technology, which could be used to determine equipment efficiency. The Departmentseeksinput from stakeholdersastohowefficiency impactscouldbedetermined under the design option approach. 

### If computer simulation models are to be used, is there a specific modelwhich shouldbe usedby the Department?

3.3 Reverse Engineering Approach The use ofa component-based engineering analysis or reverse engineering approach provides useful infonnation including the identification ofpotential technological paths manufacturers could use to achieve increased product energy efficiency. Under this type ofanalysis, actual equipment on the market are physically analyzed, i.e., dismantled, component-by-component to determine what technologies and designs manufacturers employ to increase efficiency. Independent costing methods or manufacturer and component supplier data can then be used to estimate the costs ofthe components. This approach has the distinct advantage ofusing "real" market equipment to establish the technologies in which manufacturers utilize to reach higher efficiencies. The primary disadvantage ofreverse engineering is.the time and effort required to analyze "real" equipment. Several models from a diverse range ofmanufacturers may have to be assessed in order to ensure that an accurate representation oftechnological paths for increasing efficiency are

. identified. In addition, since only "real" equipment is being**analy~ed,** prototypical designs may

not be captured by the analysis, thus, making it difficult to establish maximum technologically feasible designs. Another potential problem is that proprietary manufacturer design strategies may be revealed.

Ifthe reverse engineering approach is used, several different central airconditionerand heatpump models will need to be identified in order to ensure that all representative technologies for increasing efficiency are identified. The Department seeks input from stakeholders as to whether reverse engineering isapractical approach for conductingthe engineeringanalysis. 

### If so, howmanydifferentairconditionerand heatpumpsmodelswillneedto be analyzed?

10 Ifthe design option approach is used for the engineering analysis, methods will have to be established for determining efficiency increases. As stated above, this can be done either directly through stakeholder input orthrough the use ofcomputer simulation models. There are at least two public domain computer models for central air conditioner and heat pumps, one from Oak RidgeNational Laboratoryand the otherfromtheNationalInstituteofStandards and Technology, which could be used to determine equipment efficiency. The Departmentseeksinput from stakeholdersastohowefficiency impactscouldbedetermined under the design option approach. 

### If computer simulation models are to be used, is there a specific modelwhich shouldbe usedby the Department?

3.3 Reverse Engineering Approach The use ofa component-based engineering analysis or reverse engineering approach provides useful infonnation including the identification ofpotential technological paths manufacturers could use to achieve increased product energy efficiency. Under this type ofanalysis, actual equipment on the market are physically analyzed, i.e., dismantled, component-by-component to determine what technologies and designs manufacturers employ to increase efficiency. Independent costing methods or manufacturer and component supplier data can then be used to estimate the costs ofthe components. This approach has the distinct advantage ofusing "real" market equipment to establish the technologies in which manufacturers utilize to reach higher efficiencies. The primary disadvantage ofreverse engineering is.the time and effort required to analyze "real" equipment. Several models from a diverse range ofmanufacturers may have to be assessed in order to ensure that an accurate representation oftechnological paths for increasing efficiency are

. identified. In addition, since only "real" equipment is being**analy~ed,** prototypical designs may

not be captured by the analysis, thus, making it difficult to establish maximum technologically feasible designs. Another potential problem is that proprietary manufacturer design strategies may be revealed.

Ifthe reverse engineering approach is used, several different central airconditionerand heatpump models will need to be identified in order to ensure that all representative technologies for increasing efficiency are identified. The Department seeks input from stakeholders as to whether reverse engineering isapractical approach for conductingthe engineeringanalysis. 

### If so, howmanydifferentairconditionerand heatpumpsmodelswillneedto be analyzed?

10

### 3.4 Outside Regulatory Changes affecting the Engineering Analysis In conducting an engineering analysis, there sometimes occur regulatory changes outside ofthe NAECA efficiency standards process that can impact the manufacture ofthe product. Some of these changes can also affect the efficiency ofthe product as well. The Department will attempt to identify all "outside" issuesthat can impact the engineering analysis.

The central air conditioning and heat pump industry is currently facing the impending phase-out ofHCFC-22, the refrigerant used in almost allthe equipment currently being installed intheU.S. The phase-out ofHCFC-22 beginsintheyear 2010 and the industry hasresponded by conducting in-depth analyses ofvarious HCFC-22 alternatives. The most notable effort to date has been the Air-Conditioning & Refrigeration Institute's Alternative Refrigeration Evaluation Program (AREP). Under AREP, several HCFC-22 alternatives were identified and their impact on equipment capacity, efficiency, and longevity, to just name a few, were established. As a result ofall the analyses conducted to date, two primary candidates have emerged from the field of alternatives; R-410A and R-407C. Both refrigerants have their advantages and disadvantages. Although R-410A shows promise ofbeing able to significantly raise equipment efficiencies, its high volumetric capacity would require systems to be redesigned to handle the significantly higher discharge pressures. R-407C isa virtual drop-in replacement, but exhibits an efficiency degradation of5-10% relative toHCFC-22. Thus, it is still uncertain asto what impact the phase-out ofHCFC-22 will have on the.industry. Namely, how will equipment manufacturer costs be affected by the phase-out ofHCFC-22. The Departmentseeks input from stakeholdersasto how the impending phase-outof HCFC-22 shouldbe handledinthe engineeringanalysis. IsHCFC-22's phase-outdatestillfarenoughin the future to base the analysisonthe continueduse ofHCFC-22?Ifnot, howwill itselimination impactmanufacturercostsandequipmentefficiency? Are there any additional "outside" issues that stakeholders are aware ofthat should be considered bytheDepartmentinitsanalysisof central airconditioner andheat pumpstandards?



### 4.0 Manufacturing Costs In addition to being used in conjunction with the engineering analysis, manufacturing costs are needed for the manufacturer impact analysis and are used as one means ofdetermining retail prices.

11 3.4 Outside Regulatory Changes affecting the EngineeringAnalysis In conducting an engineering analysis, there**sometime~** occur regulatory changes outside ofthe NAECA efficiency standards process that can impact the manufacture ofthe product. Some of these changes can also affect the efficiency ofthe product as well. The Department will attempt to identify all "outside" issues that can impact the engineering analysis.

The central air conditioning and heat pump industry is currently facing the impending phase-out ofHCFC-22, the refrigerant used in almost all the equipment currently being installed in theU.S. The phase-out ofHCFC-22 begins intheyear2010 and the industry has respondedby conducting in-depth analyses ofvarious HCFC-22 alternatives. The most notable effort to date has been the Air-Conditioning & Refrigeration Institute's Alternative Refrigeration Evaluation Program (AREP). Under AREP, several HCFC-22 alternatives were identified and their impact on equipment capacity, efficiency, and longevity, tojust name afew, were established
.. As aresult ofall the analyses conducted to date, two primary candidates have emerged from the field of alternatives; R-410A and R-407C. Both refrigerants have their advantages and disadvantages. Although R-41OA shows promise ofbeing able to significantly raise equipment efficiencies, its high volumetric capacity would require systems to be redesigned to handle the significantly higher discharge pressures. R-407C is avirtual drop-in replacement, but exhibits an efficiency degradation of5-10% relative to HCFC-22. Thus, itis still uncertain as to what impact the phase-out ofHCFC-22 will have on the.industry. Namely, how will equipment manufacturer costs be affected by the phase-out ofHCFC-22. The Department seeks input from stakeholders asto how the impendingphase-out of HCFC-22 shouldbe handledin the engineeringanalysis. IsHCFC-22'sphase-outdate still far enoughin the future to base the analysison the continueduse of HCFC-22? ljnot, howwillitselimination impact manufacturer costsandequipment effiCiency? Are there any additional "outside" issues that stakeholders are aware ofthat should he consideredbytheDepartmentin itsanalYSisof centralairconditionerandheatpumpstandards?



### 4.0 Manufacturing Costs In addition to being used in conjunction with the engineering analysis, manufacturing costs are needed for the manufacturer**i~pact** analysis and are used as one means ofdetermining retail prices.

11 3.4 Outside Regulatory Changes affecting the EngineeringAnalysis In conducting an engineering analysis, there**sometime~** occur regulatory changes outside ofthe NAECA efficiency standards process that can impact the manufacture ofthe product. Some of these changes can also affect the efficiency ofthe product as well. The Department will attempt to identify all "outside" issues that can impact the engineering analysis.

The central air conditioning and heat pump industry is currently facing the impending phase-out ofHCFC-22, the refrigerant used in almost all the equipment currently being installed in theU.S. The phase-out ofHCFC-22 begins intheyear2010 and the industry has respondedby conducting in-depth analyses ofvarious HCFC-22 alternatives. The most notable effort to date has been the Air-Conditioning & Refrigeration Institute's Alternative Refrigeration Evaluation Program (AREP). Under AREP, several HCFC-22 alternatives were identified and their impact on equipment capacity, efficiency, and longevity, tojust name afew, were established
.. As aresult ofall the analyses conducted to date, two primary candidates have emerged from the field of alternatives; R-410A and R-407C. Both refrigerants have their advantages and disadvantages. Although R-41OA shows promise ofbeing able to significantly raise equipment efficiencies, its high volumetric capacity would require systems to be redesigned to handle the significantly higher discharge pressures. R-407C is avirtual drop-in replacement, but exhibits an efficiency degradation of5-10% relative to HCFC-22. Thus, itis still uncertain as to what impact the phase-out ofHCFC-22 will have on the.industry. Namely, how will equipment manufacturer costs be affected by the phase-out ofHCFC-22. The Department seeks input from stakeholders asto how the impendingphase-out of HCFC-22 shouldbe handledin the engineeringanalysis. IsHCFC-22'sphase-outdate still far enoughin the future to base the analysison the continueduse of HCFC-22? ljnot, howwillitselimination impact manufacturer costsandequipment effiCiency? Are there any additional "outside" issues that stakeholders are aware ofthat should he consideredbytheDepartmentin itsanalYSisof centralairconditionerandheatpumpstandards?



### 4.0 Manufacturing Costs In addition to being used in conjunction with the engineering analysis, manufacturing costs are needed for the manufacturer**i~pact** analysis and are used as one means ofdetermining retail prices.

11

### The Department intends to collect cost information from manufacturers. The data collection period is scheduled to occur after the June 30, 1998 framework workshop. The Department prefers that individual manufacturer data sets be submitted to athird party for statistical treatment and subsequent analysis. The Department recognizes that cost data collected using the design option approach may need to be supplemented for the manufacturer impact analysis in order to account for different design strategies. Is the datacollectiontime frameacceptable? Can individual manufacturerssubmitdata?

4.1 Characterizing Uncertainty Consistent with the process rule, DOE intends on placing a range around the average manufacturing cost ofincorporating various design options or achieving various efficiency levels. This range ofcost will be used both inthe industry cashflow analysis and could be utilized to generating retail prices for the consumer life-cycle cost analysis.

The Department isproposing that the data collection method incorporate cost estimatesboundby arange. For example, manufacturers could provide their best point estimate and a rangedescribing the lowest and highest values they consider likely (for each design option or efficiency level). Similar approaches were used recently for the design-option approach (water heaters) and the efficiency-level approach (clothes washers). The individual manufacturer submittals would be aggregated using a spreadsheet tool and reported back to DOE as percentile values. The entire cost distribution would then be used inthe calculation oflife-cycle costs. The Departmentisseekingcommenton thisapproach to collectingmanufacturingcosts.

4.2 Variability in Costs between Manufacturers The Department iscommitted to assessing the differential impacts ofstandards on different manufacturers. The detailed sub-group manufacturing impact analysis will entail calculating cashflows separately for each class ofmanufacturer defined. Ifappropriate, GRIM analysis will be performed for each firm.

12 

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The Department intends to collect cost infonnation from manufacturers. The data collection period is scheduled to occur after the June 30, 1998 framework workshop. The Department prefers that individual manufacturerdata sets be submitted to athird party for statistical treatment and subsequent analysis. The Department recognizes that cost data collected using the design option approach may need to be supplemented for the manufacturer impact analysis in order to account for different design strategies. 

### Is the data collection timeframe acceptable? Can individualmanufacturers submitdata?

4.1 Characterizing Uncertainty Consistent with the process rule, DOE intends on placing arange around the average manufacturing cost ofincorporating various design options or achieving various efficiency levels. This range ofcost will be used both in the industry cashflow analysis and could be utilized to generating retail prices for the consumer life-cycle cost analysis.

The Departmentis proposing thatthe datacollectionmethod incorporate cost estimatesboundby arange. Forexample, manufacturers could providetheirbestpointestimateand arange describing the lowest and highest values they consider likely (for each design option or efficiency level). Similar approaches were used recently for the design-option approach (water heaters) and the efficiency-level approach (clothes washers). The individual manufacturer submittals would be aggregated using a spreadsheet tool and reported back to DOE as percentile values. The entire cost distribution would then be used in the calculation oflife-cycle costs. 

### The Department is seeking comment on this approach to collectingmanufacturing costs.

4.2 Variability in Costs between Manufacturers The Department is committed to assessingthe differential impacts ofstandards on different manufacturers. The detailed sub-group manufacturing impact analysis will entail calculating cashflows separately for each class ofmanufacturer defined. Ifappropriate, GRIM analysis will be perfonned for each finn.

12 

# .:0

The Department intends to collect cost infonnation from manufacturers. The data collection period is scheduled to occur after the June 30, 1998 framework workshop. The Department prefers that individual manufacturerdata sets be submitted to athird party for statistical treatment and subsequent analysis. The Department recognizes that cost data collected using the design option approach may need to be supplemented for the manufacturer impact analysis in order to account for different design strategies. 

### Is the data collection timeframe acceptable? Can individualmanufacturers submitdata?

4.1 Characterizing Uncertainty Consistent with the process rule, DOE intends on placing arange around the average manufacturing cost ofincorporating various design options or achieving various efficiency levels. This range ofcost will be used both in the industry cashflow analysis and could be utilized to generating retail prices for the consumer life-cycle cost analysis.

The Departmentis proposing thatthe datacollectionmethod incorporate cost estimatesboundby arange. Forexample, manufacturers could providetheirbestpointestimateand arange describing the lowest and highest values they consider likely (for each design option or efficiency level). Similar approaches were used recently for the design-option approach (water heaters) and the efficiency-level approach (clothes washers). The individual manufacturer submittals would be aggregated using a spreadsheet tool and reported back to DOE as percentile values. The entire cost distribution would then be used in the calculation oflife-cycle costs. 

### The Department is seeking comment on this approach to collectingmanufacturing costs.

4.2 Variability in Costs between Manufacturers The Department is committed to assessingthe differential impacts ofstandards on different manufacturers. The detailed sub-group manufacturing impact analysis will entail calculating cashflows separately for each class ofmanufacturer defined. Ifappropriate, GRIM analysis will be perfonned for each finn.

12

### Manufacturing costs submitted toDOE for other appliance standard analyses have demonstrated large variability. The Department prefers using'disaggregated cost data from all manufacturers. Iftheefficiency-level approach isused the same disaggregated company specific cost information developed for the engineering analysis can be used to perform GRIM analysis for each manufacturer or manufacturer subgroup. The method to be used in assessing manufacturer impacts will be the subject of an analysis workshop to be help after publication ofthe ANOPR.

4.3 Costing Approach/ Engineering Analysis Methodologies used to generate manufacturing costs depend on the type ofengineering analysis approach that isselected. As discussed inthe Engineering Analysis (Section 3.0), three possible methods include: the efficiency levelapproach,reporting relative costs ofachieving energy efficiency improvements; the designoptionapproach,reporting the incremental costs ofadding design options to a baseline model; and the reverseengineeringorcost-assessment approach 

### which requires a "bottoms-up" manufacturing cost assessment based on a detailed bill of materials. The Department will select an approach based on public input on which ofthe approaches should be used during a rulemaking.

The Department will base its costing approach on what approach or approaches are selected for the engineering analysis. TheDepartment seeks input from stakeholdersastowhatapproachfor determiningcostsshould be used



### 4.4 ProprietaryDesign The Department will consider in its analysis all design options that are commercially available or present ina working prototype, including proprietary designs. Proprietary designs will be fully considered in theDepartment's engineering and economic analyses.

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Manufacturing costs submitted to DOE for other appliance standard analyses have demonstrated large variability. The Department prefers using'disaggregated cost data from all manufacturers. If

the efficiency-level approach is used the same disaggregated company specific costinformation developed for the engineering analysis can be used to perform GRIM analysis for each manufacturer or manufacturer subgroup. The method' to be used in assessing manufacturer impacts will be the subject of an analysis workshop to be help after publication ofthe ANOPR.

4.3 Costing Approach!Engineering Analysis Methodologies used to generate manufacturing costs depend on the type ofengineering analysis approach that is selected. As discussed in the Engineering Analysis (Section 3.0), three possible methods include: the efficiency levelapproach, reporting relative costs ofachieving energy efficiency improvements; the design option.approach, reporting the incremental costs ofadding design options to abaseline model; and the reverse engineering orcost-assessmentapproach which requires a "bottoms-up" manufacturing cost assessment based on a detailed bill of materials. The Department will select an approach based on public input on which ofthe approaches should be used during a rulemaking.

The Department will base its costing approach on what approach or approaches are selected for the engineering analysis. The Departmentseeks inputfrom stakeholdersas towhatapproach for determining costs should be used

4.4 Proprietary Design The Department will consider in its analysis all design options that are commercially available or present in a working prototype, including proprietary designs. Proprietary designs will be fully considered in the Department's engineering and economic analyses.

r

13**-~----------~-----------~**

Manufacturing costs submitted to DOE for other appliance standard analyses have demonstrated large variability. The Department prefers using'disaggregated cost data from all manufacturers. If

the efficiency-level approach is used the same disaggregated company specific costinformation developed for the engineering analysis can be used to perform GRIM analysis for each manufacturer or manufacturer subgroup. The method' to be used in assessing manufacturer impacts will be the subject of an analysis workshop to be help after publication ofthe ANOPR.

4.3 Costing Approach!Engineering Analysis Methodologies used to generate manufacturing costs depend on the type ofengineering analysis approach that is selected. As discussed in the Engineering Analysis (Section 3.0), three possible methods include: the efficiency levelapproach, reporting relative costs ofachieving energy efficiency improvements; the design option.approach, reporting the incremental costs ofadding design options to abaseline model; and the reverse engineering orcost-assessmentapproach which requires a "bottoms-up" manufacturing cost assessment based on a detailed bill of materials. The Department will select an approach based on public input on which ofthe approaches should be used during a rulemaking.

The Department will base its costing approach on what approach or approaches are selected for the engineering analysis. The Departmentseeks inputfrom stakeholdersas towhatapproach for determining costs should be used

4.4 Proprietary Design The Department will consider in its analysis all design options that are commercially available or present in a working prototype, including proprietary designs. Proprietary designs will be fully considered in the Department's engineering and economic analyses.

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13

### Because the Department is obliged to determine maximum technologically feasible designs, the Department will need to estimate the costs ofproducing prototypical designs identified in the Technology Assessment. However, only those prototypical designs which have passed the screening process (as discussed in Section 2.3) willbe considered. The Department is especially sensitive to manufacturer concerns regarding proprietary designs and will ensure that provisions are made to maintain the confidentiality ofany proprietary data submitted bymanufacturers. This information will provide inputtothe competitive impacts assessment and othereconomic analyses.
Are there proprietary designswhichtheDepartment shouldconsiderfor centralair conditioners andheatpumps? If so, what type ofapproachesshould be used to acquirethe cost data necessary for evaluatingthesedesigns?



### 5.0 Life-Cycle Cost and Payback Analysis The effect ofstandards on individual consumers includes a change in operating expense (usually decreased) and a change inpurchase price (usually increased). The net effect is analyzed by calculating the life-cycle cost using the engineering performance data for energy consumption and equipment retail prices which can be derived in a number ofways (see Section 6.0). Inputs to the LCC calculation include the installed consumer cost (purchase price plus installation cost), operating expenses (energy and maintenance costs), lifetime ofthe appliance and a discount rate. In the ANOPR stage, the consumer life-cycle cost analysis will be conducted using typical values for appliance price and life, fuel costs, energy usage and discount rates. Design options which have payback periods that exceed the average life ofthe product or which cause life-cycle cost increases will not be considered further. The detailed impact calculation, conducted after the ANOPR, will have a comprehensive assessment ofimpacts on subgroups ofconsumers as described in Section 10.0.

14 

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Because the Department is obliged to determine maximum technologically feasible designs, the Department will need to estimate the costs ofproducing prototypical designs identified in the Technology Assessment. However, only those prototypical designs which have passed the screening process (as discussed in Section 2.3) will be considered. The Department is especially sensitive to manufacturer concerns regarding proprietary designs and will ensure that provisions are made to maintain the confidentiality ofany proprietary data submittedby manufacturers. This informationwill provideinputtothecompetitiveimpactsassessmentand othereconomicanalyses.
Are thereproprietarydesignswhich the Departmentshouldconsider for centralairconditioners and heatpumps? 

### Ifso, what type ofapproaches should be used to acquire the cost data necessary for evaluating these designs?



### 5.0 Life-Cycle Cost and PaybackAnalysis The effect ofstandards on individual consumers includes a change in operating expense (usually decreased) and a change in purchase price (usually increased). The net effect is analyzed by calculating the life-cycle cost using the engineering performance data for energy consumption and equipment retail prices which can be derived in a number ofways (see Section 6.0). Inputs to the LCC calculation include the installed consumer cost (purchase price plus installation cost), operating expenses (energy and maintenance costs), lifetime ofthe appliance and a discount rate. In the ANOPR stage, the consumer life-cycle cost analysis will be conducted using typical values for appliance price and life, fuel costs, energy usage and discount rates. Design options' which have payback periods that exceed the average life ofthe product or which cause life-cycle cost increases will not be considered further. The detailed impact calculation, conducted after the ANOPR, will have a comprehensive assessment ofimpacts on subgroups ofconsumers as described in Section 10.0.

14 

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Because the Department is obliged to determine maximum technologically feasible designs, the Department will need to estimate the costs ofproducing prototypical designs identified in the Technology Assessment. However, only those prototypical designs which have passed the screening process (as discussed in Section 2.3) will be considered. The Department is especially sensitive to manufacturer concerns regarding proprietary designs and will ensure that provisions are made to maintain the confidentiality ofany proprietary data submittedby manufacturers. This informationwill provideinputtothecompetitiveimpactsassessmentand othereconomicanalyses.
Are thereproprietarydesignswhich the Departmentshouldconsider for centralairconditioners and heatpumps? 

### Ifso, what type ofapproaches should be used to acquire the cost data necessary for evaluating these designs?



### 5.0 Life-Cycle Cost and PaybackAnalysis The effect ofstandards on individual consumers includes a change in operating expense (usually decreased) and a change in purchase price (usually increased). The net effect is analyzed by calculating the life-cycle cost using the engineering performance data for energy consumption and equipment retail prices which can be derived in a number ofways (see Section 6.0). Inputs to the LCC calculation include the installed consumer cost (purchase price plus installation cost), operating expenses (energy and maintenance costs), lifetime ofthe appliance and a discount rate. In the ANOPR stage, the consumer life-cycle cost analysis will be conducted using typical values for appliance price and life, fuel costs, energy usage and discount rates. Design options' which have payback periods that exceed the average life ofthe product or which cause life-cycle cost increases will not be considered further. The detailed impact calculation, conducted after the ANOPR, will have a comprehensive assessment ofimpacts on subgroups ofconsumers as described in Section 10.0.

14

### During theANOPR stage, the Department is considering analyzingtheregional impacts ofclimate and energy price on consumer life-cycle cost. Because central air conditioning and heat pump operating cost is so dependent on climatic conditions and energy price, theDepartment believes it isimportant to analyze their affect on LCC at this stage ofthe analysis. Dostakeholdersbelieve thatregionalvariations inclimateand energy priceshouldbe analyzed atthisstage(ANOPR) oftheanalysisoratalaterstage(NOPR)? In orderto conduct such an analysis, the Department is considering usingthe Energy Information Administration's (EIA) Residential Energy Consumption Survey (RECS). RECS provides a representative sample ofhouseholds fromthrough outtheU.S.Forthose RECS households using either acentral air conditioner orheat pump, RECS provides both the equipment's end-use energy consumption and its age. (Climatic conditions in addition to consumer behavior are taken into account because they are inherent to the equipment's energy consumption.) Knowing the age of the equipment, an estimate ofthe equipment's efficiency can be made from historical shipmentweighted efficiency values. Reductions inenergy consumption from new replacement equipment can be approximated by multiplying the existing energy use by the ratio ofthe existing-to-new equipment efficiency. RECS data also provides household energy prices allowing for the calculation ofthe operating cost ofthe existing and new replacement equipment. With this approach, regional comparisons can be made on the operating cost, and in turn life-cycle cost, between different efficiency levels ofnew equipment. TheDepartment seeksinputfromstakeholdersastowhethertheaboveapproach based ontheuse of RECS household dataisreasonable forestimatingthe impactsof energy priceandclimateon life-cycle cost.
In the ANOPR stage, uncertainty analysis will be conducted on several ofthe typical values described. During the post-ANOPR consumer analysis (Section 10.0), the Department will evaluate additional parameters including variations ininstallation costs. Based on the results ofthe life-cycle cost analysis, DOE will select candidate standard levels for analysis. The range ofcandidate standard levels will typically include: (a) the most energy efficient combination ofdesign options or most energy efficient level; (b) the combination of design options or efficiency level with the lowest life-cycle cost; and © a combination ofdesign options or efficiency level with a payback period ofnot more than three years. Additionally, candidate standard levels that incorporate noteworthy technologies or fill inlarge gaps between efficiency levels ofother candidate standards levels may be selected.

15

DuringtheANOPRstage, theDepartmentis considering analyzingtheregional impacts of climate and energy price on consumer life-cycle cost. Because central air conditioning and heat pump operating cost is so dependent on climatic conditions and energy price, the Department believes it is important to analyze their affect on LCC at this stage ofthe analysis. 

### Dostakeholder:sbelieve thatregionalvariations in climate and

### energypriceshouldbe analyzed at this stage (ANOPR) of the analysis orata laterstage-(NOPR)? In orderto conduct such an analysis, theDepartmentis consideringusingtheEnergyInfonnation Administration's (EIA) Residential Energy Consumption Survey (RECS). RECS provides a representativesample ofhouseholdsfromthrough outtheU.S. Forthose RECS householdsusing either a central air conditioner orheatpump, RECS providesboththeequipment'send-useenergy consumption and its age. (Climatic conditions in addition to consumer behavior are taken into account because they are inherent to the equipment's energy consumption.) Knowing the age of the equipment, an estimate ofthe equipment's efficiency can be made from historical shipmentweighted efficiency values. Reductions in energy consumption from new replacement equipment can be approximated by multiplying the existing energy use by the ratio ofthe existing-to-new equipment efficiency. RECS data also provides household energy prices allowing for the calculation ofthe operating cost ofthe existing and**ne~** replacement equipment. With this approach, regional comparisons can be made on the operating cost, and in tum life-cycle cost, between different efficiency levels ofnew equipment. 

### TheDepartmentseeksinput from stakeholdersas towhetherthe aboveapproach basedon the use of RECShouseholddata is reasonablefor estimating the impacts of energyprice andclimate on life-cycle cost.

In the ANOPR stage, uncertainty analysis will be conducted on several ofthe typical values described. During the post-ANOPR consumer analysis (Section 10.0), the Department will evaluate additional parameters including variations in installation costs. Based on the results ofthe life-cycle cost analysis, DOE will select candidate standard levels for analysis. The range ofcandidate standard levels will typically include: (a) the most energy efficient combination ofdesign options or most energy efficient level; (b) the combination of design options or efficiency level with the lowest life-cycle cost; and (0 a combination ofdesign options or efficiency level with a payback period ofnot more than three years. Additionally, candidate standard levels that incorporate noteworthy technologies orfill in large gaps between efficiency levels ofother candidate standards levels may be selected.

15

DuringtheANOPRstage, theDepartmentis considering analyzingtheregional impacts of climate and energy price on consumer life-cycle cost. Because central air conditioning and heat pump operating cost is so dependent on climatic conditions and energy price, the Department believes it is important to analyze their affect on LCC at this stage ofthe analysis. 

### Dostakeholder:sbelieve thatregionalvariations in climate and

### energypriceshouldbe analyzed at this stage (ANOPR) of the analysis orata laterstage-(NOPR)? In orderto conduct such an analysis, theDepartmentis consideringusingtheEnergyInfonnation Administration's (EIA) Residential Energy Consumption Survey (RECS). RECS provides a representativesample ofhouseholdsfromthrough outtheU.S. Forthose RECS householdsusing either a central air conditioner orheatpump, RECS providesboththeequipment'send-useenergy consumption and its age. (Climatic conditions in addition to consumer behavior are taken into account because they are inherent to the equipment's energy consumption.) Knowing the age of the equipment, an estimate ofthe equipment's efficiency can be made from historical shipmentweighted efficiency values. Reductions in energy consumption from new replacement equipment can be approximated by multiplying the existing energy use by the ratio ofthe existing-to-new equipment efficiency. RECS data also provides household energy prices allowing for the calculation ofthe operating cost ofthe existing and**ne~** replacement equipment. With this approach, regional comparisons can be made on the operating cost, and in tum life-cycle cost, between different efficiency levels ofnew equipment. 

### TheDepartmentseeksinput from stakeholdersas towhetherthe aboveapproach basedon the use of RECShouseholddata is reasonablefor estimating the impacts of energyprice andclimate on life-cycle cost.

In the ANOPR stage, uncertainty analysis will be conducted on several ofthe typical values described. During the post-ANOPR consumer analysis (Section 10.0), the Department will evaluate additional parameters including variations in installation costs. Based on the results ofthe life-cycle cost analysis, DOE will select candidate standard levels for analysis. The range ofcandidate standard levels will typically include: (a) the most energy efficient combination ofdesign options or most energy efficient level; (b) the combination of design options or efficiency level with the lowest life-cycle cost; and (0 a combination ofdesign options or efficiency level with a payback period ofnot more than three years. Additionally, candidate standard levels that incorporate noteworthy technologies orfill in large gaps between efficiency levels ofother candidate standards levels may be selected.

15

### For central air conditioners and heat pumps it will be necessary to determine input values for several variables. The following discusses some ofthe variables in turn. Retail Prices: The determination ofprices isdescribed in Section 6.0. Annual Energy Use: Currently, the DOE test procedure calculates cooling and heating energy consumption based on' 1000 and 2080 hours ofoperation, respectively. Although this procedure seems to be widely accepted for establishing energy consumption, compared to RECS estimates, it seems to overestimate equipment energy use. Iftest-procedure-based energy use values are indeed too high, the operating and life-cycle cost savings due to more efficient equipment would be overstated. As described above, basing operating and life-cycle cost on RECS household data would provide a more accurate measure ofthe savings possible from more efficient equipment in addition to demonstrating the variability inlife-cycle costs due to climatic conditions and energy price. Energy Prices: As discussed above, theDepartment is considering using RECS household datato establish energy price. IfRECS isused, projections offuture energy prices for the life-cycle cost analysis will use high and low projections ofnational average electricity prices to residential customers. The present Energy Information Administration (EIA) Annual Energy Outlook will be used as the default source ofprojections for this uncertainty analysis. The Appliance Standards Advisory Committee (Advisory Committee) is currently investigating alternative methods of forecasting future energy prices for recommendation to the Department including methods for determining the marginal energy rates. Lifetime: Several sources indicate that the approximate average life ofcentral air conditioning and heat pump equipment is 15 years. The Department will likely use this as a mean value with uncertainty based on stakeholder input. What isareasonablerangeof valuesforequipmentlifetime?Shouldthesame rangebe usedfor allproductclasses? 

### Discount Rate: The calculation ofconsumer life-cycle costs requires the use ofan appropriate discount rate. The discount rate used in such calculations is intended to approximate the time-value of money ofthose who would bear the additional product prices resulting from a proposed standard and who would also, presumably, benefit from the resulting savings inenergy expenses. Consequently, the most appropriate discount rate depends on the characteristics ofthe individual consumers, businesses, or other persons affected by a proposed standard. Currently the Department anticipates performing separate analyses using discount rates of 2%, 6% and 15%. The Department will consider anyinformation that provides evidence ofconsumer actual financing costs related to central air conditioners and heat pumps. Maintenance. Service, and Installation Costs: The Department will consider expected changes to maintenance, service, and installation costs for central air conditioners and heat pumps if applicable. 16 

# ]J

For central air conditioners and heat pumps it will be necessary to determine input values for several variables. The following discusses some ofthe variables in tum. Retail Prices: The determination ofprices is described in Section 6.0. Annual Energy Use: Currently, the DOE test procedure calculates cooling and heating energy consumption based on' 1000 and 2080 hours ofoperation, respectively. Although this procedure seems to be widely accepted for establishing energy consumption, compared toRECS estimates, it seems to overestimate equipment energy use. Iftest-procedure-based energy use values are indeed too high, the operating and life-cycle cost savings due to more efficient equipment would be overstated. Asdescribed above, basing operating and life-cycle cost on RECS household data would provide a more accurate measure ofthe savings possible from more efficient equipment in addition to demonstrating the variability in life-cycle costs due to climatic conditions and energy pnce. Energy Prices: As discussed above, theDepartmentis considering using RECS household datato establish energy price. IfRECS is used, projections offuture energy prices for the life-cycle cost analysis will use high and low projections ofnational average electricity prices to residential customers. The present Energy Information Administration (EIA) Annual Energy Outlook will be used as the default source ofprojections for this uncertainty analysis. The Appliance Standards Advisory Committee (Advisory Committee) is currently investigating alternative methods of forecasting future energy prices for recommendation to the Department including methods for determining the marginal energy rates. Lifetime: Several sources indicatethat the approximate average life ofcentral airconditioning and heat pump equipment is 15 years. The Department will likely use this as a mean value with uncertainty based on stakeholder input. What isa reasonable range of values for equipmentlifetime? Shouldthe same range be used for allproduct classes? Discount Rate: The calculation ofconsumer life-cycle costs requires the use ofan appropriate discount rate. The discount rate used in such calculations is intended to approximate the time-value ofmoney ofthose who would bear the additional product prices resulting from a proposed standard and who would also, presumably, benefit from the resulting savings in energy expenses. Consequently, the most appropriate discount rate depends on the characteristics ofthe individual consumers, businesses, orotherpersons affectedby aproposed standard. Currently the Department anticipates performing separate analyses using discount rates of 2%, 6%**an~** 15%. TheDepartmentwill consideranyinformationthatprovides evidence ofconsumeractual financing costs related to central air conditioners and heat pumps. Maintenance. Service. and Installation Costs: The Department will consider expected changes to maintenance, service, and installation costs for central air conditioners and heat pumps if a licable. 16 

# ]J

For central air conditioners and heat pumps it will be necessary to determine input values for several variables. The following discusses some ofthe variables in tum. Retail Prices: The determination ofprices is described in Section 6.0. Annual Energy Use: Currently, the DOE test procedure calculates cooling and heating energy consumption based on' 1000 and 2080 hours ofoperation, respectively. Although this procedure seems to be widely accepted for establishing energy consumption, compared toRECS estimates, it seems to overestimate equipment energy use. Iftest-procedure-based energy use values are indeed too high, the operating and life-cycle cost savings due to more efficient equipment would be overstated. Asdescribed above, basing operating and life-cycle cost on RECS household data would provide a more accurate measure ofthe savings possible from more efficient equipment in addition to demonstrating the variability in life-cycle costs due to climatic conditions and energy pnce. Energy Prices: As discussed above, theDepartmentis considering using RECS household datato establish energy price. IfRECS is used, projections offuture energy prices for the life-cycle cost analysis will use high and low projections ofnational average electricity prices to residential customers. The present Energy Information Administration (EIA) Annual Energy Outlook will be used as the default source ofprojections for this uncertainty analysis. The Appliance Standards Advisory Committee (Advisory Committee) is currently investigating alternative methods of forecasting future energy prices for recommendation to the Department including methods for determining the marginal energy rates. Lifetime: Several sources indicatethat the approximate average life ofcentral airconditioning and heat pump equipment is 15 years. The Department will likely use this as a mean value with uncertainty based on stakeholder input. What isa reasonable range of values for equipmentlifetime? Shouldthe same range be used for allproduct classes? Discount Rate: The calculation ofconsumer life-cycle costs requires the use ofan appropriate discount rate. The discount rate used in such calculations is intended to approximate the time-value ofmoney ofthose who would bear the additional product prices resulting from a proposed standard and who would also, presumably, benefit from the resulting savings in energy expenses. Consequently, the most appropriate discount rate depends on the characteristics ofthe individual consumers, businesses, orotherpersons affectedby aproposed standard. Currently the Department anticipates performing separate analyses using discount rates of 2%, 6%**an~** 15%. TheDepartmentwill consideranyinformationthatprovides evidence ofconsumeractual financing costs related to central air conditioners and heat pumps. Maintenance. Service. and Installation Costs: The Department will consider expected changes to maintenance, service, and installation costs for central air conditioners and heat pumps if a licable. 16

### The Department has prepared spreadsheet models for calculating LCC considering uncertaintyand ranges in inputvariables for otherappliances (clothes washers and water heaters). Although these models arespecific to the appliance, its general structurecan be applied to centralairconditioners and heatpumps. Thus, past models will be presented at the Workshop to demonstrate basic concepts pertainingto the LCCanalysis. 

### 6.0 Prices How manufacturing costs and associated margins, associated with standards, are passed-through from manufacturers to consumers has an impact on both consumers and manufacturers. Consumer and manufacturer economics are linked and inversely related. For this reason, retail prices used for the life-cycle cost analysis need to be reconciled with manufacturer prices. 6.1 Retail Prices: Life-Cycle Cost Analysis At the pre-ANOPR stage, a consumer life-cycle cost curve, based on average retail prices, is used to perform an initial selection ofpotential standards levels. Retail prices are needed for a base case, absent new standards, and for all efficiency levels to be considered. Several approaches are possible to obtain these retail prices. Potential approaches include: 1)conducting a survey of existing prices on the market; 2)surveying manufacturers and other market experts to predict consumer willingness to pay higher prices; 3) applying various mark-ups over variable manufacturing costs. The Department believes that there isvalue inusing various assumptions about cost pass-through that will be reflected in price forecast approaches. The output ofthis analysis can be a table describing retail prices for each possible efficiency level which assumes that each level represents a new minimum efficiency standard. Consistent with the process rule, and building on the estimates generated by the various approaches, new retail prices would be described within a range ofuncertainty.

The Department isconsidering using all the approaches described above to generate estimates of future prices and conduct uncertainty analysis ofthe range generated. The market assessment document described inSection 1.1 will include anymarket pricing information currently available. The Department is considering utilizing mark-up approaches to price determination. Ifthese approaches are used, they will be submitted to stakeholders for review. Is theproposedprocess forgeneratingretail pricessound? Wouldinterested partiesbe willing toprovideestimatesofthe future prices? 

### A presentation on estimating future prices will be made at the workshop.

17 The Department has prepared spreadsheet models for calculating LCC considering uncertainty and ranges in inputvariables for otherappliances (clothes washers and water heaters). Although these models are specific to the appliance, its general structure can be applied to central airconditioners and heatpumps. Thus, pastmodels will be presented at the Workshop to demonstrate basic concepts pertaining to theLCC analysis. 

### 6.0 Prices How manufacturing costs and associated margins, associated with standards, are passed-through
. from manufacturers to consumers has an impact on both consumers and manufacturers. Consumer and manufacturer economics are linked and inversely related. Forthis reason, retail prices used for the life-cycle cost analysis need to be reconciled with manufacturer prices. 6.1 Retail Prices: Life-Cycle Cost Analysis
. At the pre-ANOPR stage, a consumer life-cycle cost curve, based on average retail prices, is used to perform an initial selection ofpotential standards levels. Retail prices are needed for a base case, absent new standards, and for all efficiency levels to be considered. Several approaches are possible to obtain these retail prices. Potential approaches include: 1) conducting a survey of existing prices on the market; 2) surveying manufacturers and other market experts to predict consumer willingness to pay higher prices; 3) applying various mark-ups over variable manufacturing costs. The Department believes that there is value in using various assumptions about cost pass-through that will be reflected in price forecast approaches. The output ofthis analysis can be atable describing retail prices for each possible efficiency level which assumes that each level represents a new minimum efficiency standard. Consistent with the process rule, and building on the estimates generated by the various approaches, new retail prices would be described within a range ofuncertainty.

The Department is considering using all the approaches described above to generate estimates of future prices and conduct uncertainty analysis ofthe range generated. The market assessment document described in Section 1.1 will include anymarket pricing information currently available. The Department is considering utilizing mark-up approaches to price determination. Ifthese approaches are used, they will be submitted to stakeholders for review. Is theproposed process for generating retailpricessound? Wouldinterested parties be willing toprovide estimates of thefutureprices? A presentation on estimating future prices will be made at the workshop.

17 The Department has prepared spreadsheet models for calculating LCC considering uncertainty and ranges in inputvariables for otherappliances (clothes washers and water heaters). Although these models are specific to the appliance, its general structure can be applied to central airconditioners and heatpumps. Thus, pastmodels will be presented at the Workshop to demonstrate basic concepts pertaining to theLCC analysis. 

### 6.0 Prices How manufacturing costs and associated margins, associated with standards, are passed-through
. from manufacturers to consumers has an impact on both consumers and manufacturers. Consumer and manufacturer economics are linked and inversely related. Forthis reason, retail prices used for the life-cycle cost analysis need to be reconciled with manufacturer prices. 6.1 Retail Prices: Life-Cycle Cost Analysis
. At the pre-ANOPR stage, a consumer life-cycle cost curve, based on average retail prices, is used to perform an initial selection ofpotential standards levels. Retail prices are needed for a base case, absent new standards, and for all efficiency levels to be considered. Several approaches are possible to obtain these retail prices. Potential approaches include: 1) conducting a survey of existing prices on the market; 2) surveying manufacturers and other market experts to predict consumer willingness to pay higher prices; 3) applying various mark-ups over variable manufacturing costs. The Department believes that there is value in using various assumptions about cost pass-through that will be reflected in price forecast approaches. The output ofthis analysis can be atable describing retail prices for each possible efficiency level which assumes that each level represents a new minimum efficiency standard. Consistent with the process rule, and building on the estimates generated by the various approaches, new retail prices would be described within a range ofuncertainty.

The Department is considering using all the approaches described above to generate estimates of future prices and conduct uncertainty analysis ofthe range generated. The market assessment document described in Section 1.1 will include anymarket pricing information currently available. The Department is considering utilizing mark-up approaches to price determination. Ifthese approaches are used, they will be submitted to stakeholders for review. Is theproposed process for generating retailpricessound? Wouldinterested parties be willing toprovide estimates of thefutureprices? A presentation on estimating future prices will be made at the workshop.

17

### 6.2 ManufacturerPrices: Industry Cashflow DOE can use an average distributor mark-up to relate the retail prices generated for the life-cycle cost analysis and manufacturer prices required to conduct the industry cashflow analysis. Distributor mark-ups are reported inthe market assessment document from Section 1.1. The same relative range ofuncertainty generated for retail prices can be used for manufacturer prices since the mark-up is assumed constant.

Are therealternateapproaches? Wouldmanufacturers be willingto provide estimatesoffuture manufacturer prices? 

### A presentation on estimating future prices will be made atthe workshop. 

### 7.0 Shipments As described in Section 1.3, the Department intends to develop a base case forecast ofproduct shipments inthe absence ofnew standards. This initial forecast may incorporate the impacts of past and existing non-regulatory efforts by manufacturers, utilities and others. For all candidate standards levels, shipment forecasts are required inorder to calculate the national benefits.of standards (energy savings and consumer life-cycle costs) and to calculate the future cashflows ofmanufacturers. DOE isconsidering the use ofthree approaches to conduct these forecasts including: 1)an approach to derive shipments based on the key market drivers for the particular product; 2) larger models to consider additional variables (i.e. retirement functions, price elasticities, etc.), and, 3)applying the expertjudgment of rulemaking participants, and observing historical trends, new forecasts will be generated. Because models cannot adequately simulate short-term effects, DOE will likely place considerable weight on expert forecasts for short term shipments estimates. Shipment forecasts previously developed will be combined through scenario analysis and a range ofuncertainty will be carried forward into both national benefits and cashflow analysis.

18 6.2 Manufacturer Prices: Industry Cashflow DOE can use an average distributor'mark-up to relate the retail prices generated for the life-cycle cost analysis and manufacturer prices required to conduct the industry cashflow analysis. Distributormark-ups are reported in the market assessment documentfrom Section 1.1. The same relative range ofuncertainty generated for retail prices can be used for manufacturerprices since the mark-up is assumed constant.

Are there altemateapproaches? Wouldmanufacturersbe willingtoprovide estimatesoffuture manufacturerprices? Apresentation on estimating future prices will be made atthe workshop.


### 7.0 Shipments As described in Section 1.3, the Department intends to develop abase case forecast ofproduct shipments in the absence ofnew standards. This initial forecast may incorporate the impacts of past and existing non-regulatory efforts by manufacturers, utilities and others.

, 

## . For all candidate standards levels, shipment forecasts are required in orderto calculate the national benefits.ofstandards (energy savings and consumer life-cycle costs) and to calculate the future cashflows ofmanufacturers. DOE is considering the use ofthree approaches to conduct these forecasts including: 1) an approach to derive shipments based on the key market drivers for the particular**product~** 2) larger models to consider additional variables (i.e. retirement functions, price elasticities, etc.), and, 3) applying the expertjudgment of rulemaking participants, and observing historical trends, new forecasts will be generated. Because models cannot adequately simulate short-term effects, DOE will likely place considerable weight on expert forecasts for short term shipments estimates. Shipment forecasts previously developed will be combined through scenario analysis and a range ofuncertainty will be carried forward into both national benefits and cashflow analysis.

18 6.2 Manufacturer Prices: Industry Cashflow DOE can use an average distributor'mark-up to relate the retail prices generated for the life-cycle cost analysis and manufacturer prices required to conduct the industry cashflow analysis. Distributormark-ups are reported in the market assessment documentfrom Section 1.1. The same relative range ofuncertainty generated for retail prices can be used for manufacturerprices since the mark-up is assumed constant.

Are there altemateapproaches? Wouldmanufacturersbe willingtoprovide estimatesoffuture manufacturerprices? Apresentation on estimating future prices will be made atthe workshop.


### 7.0 Shipments As described in Section 1.3, the Department intends to develop abase case forecast ofproduct shipments in the absence ofnew standards. This initial forecast may incorporate the impacts of past and existing non-regulatory efforts by manufacturers, utilities and others.

, 

## . For all candidate standards levels, shipment forecasts are required in orderto calculate the national benefits.ofstandards (energy savings and consumer life-cycle costs) and to calculate the future cashflows ofmanufacturers. DOE is considering the use ofthree approaches to conduct these forecasts including: 1) an approach to derive shipments based on the key market drivers for the particular**product~** 2) larger models to consider additional variables (i.e. retirement functions, price elasticities, etc.), and, 3) applying the expertjudgment of rulemaking participants, and observing historical trends, new forecasts will be generated. Because models cannot adequately simulate short-term effects, DOE will likely place considerable weight on expert forecasts for short term shipments estimates. Shipment forecasts previously developed will be combined through scenario analysis and a range ofuncertainty will be carried forward into both national benefits and cashflow analysis.

18

### The appliance standards analysis currently being conducted for clothes washers serves as an example of what methods can be employed to forecast base case shipments for central air conditioners and heat pumps. Ofthe proposed forecasts forbase case clothes washer shipments, several arebased on auto regressive fitsto time series data. Although time series modelstend to give accurate estimates ofhistorical shipments, they cannot explicitly account for changes inthe number ofhouseholds, changes in the percent ofhouseholds owning the appliance, fluctuations inretail price, or changes inoperating expense. Thus, forecasts are highly suspect. A simpler method, termed theaccountingmodel,based on the accounting ofnew housing starts and historical appliance saturations, has also been proposed. Primary drawbacks ofthis method include: 1)saturations ofunits innew and stock households mustbe forecasted, 2) housing starts must alsobe forecasted, althoughtheAnnualEnergyOutlook(AEO)does providereadily available forecasts, and 3) retired units must be based upon assumptions regarding lifetimes. But this simpler method has the distinct advantage of separately accounting for units installed in new construction and existing households. More importantly, appliance saturations can be expressed as a function ofconsumer price and operating cost to capture their impact on future shipments. In expressing saturations inthis manner, consumer price and operating cost elasticities can be developed to calibrate appliance forecasts to historical shipments. Since the accountingmodel can account for changes in consumer price and operating cost, the Department is considering the use ofthis approach to conduct base case shipments forecasts for central air conditioners and heat pumps. Are therealternateapproachesto forecastingshipments?



### 8.0 Preliminary National Benefits Analysis In Section 6.0, the life-cycle cost and energy savings for individual consumers is estimated. In this section, a preliminary assessment ofthe aggregate impacts atthe national level is conducted. Measures ofimpact to be reported include the average consumer payback, the net present value oftotal consumer life-cycle costs, national energy savings and national employment. 8.1 Inputs to Forecasts Analyzing impacts ofFederal energy-efficiency standards requires a comparison ofprojected U.S. residential energy consumption with and without standards. The cases without standards are referred to as base case projections. The forecasts contain projections ofunit energy consumption ofnew appliances, annual appliance shipments and the price ofpurchased appliances. The derivations ofthe base case forecast are described inSection 1.3 and standards case forecasts are discussed inSection 7.0. Approaches to determining retail prices are described in Section 6.0. The base case shipments forecast developed under Section 1.3 may incorporate the likely effects 19**~-----------~--** -- -- - 

# EE-7?m)5Tb -9&,-'l-Lf-D

The appliance standards analysis currently being conducted for clothes washers serves as an example of what methods can be employed to forecast base case shipments for central air conditioners and heat pumps. Ofthe proposed forecasts for base case clothes washer shipments, several are based on auto regressive fits to time series data. Although time series models tend to give accurate estimates ofhistorical shipments, they cannot explicitly account for changes in the number ofhouseholds, changes in the percent ofhouseholds owning the appliance, fluctuations in retail price, or changes in operating expense. Thus, forecasts are highly suspect. A simpler method, tenned the accountingmodel, based on the accounting ofnew housing starts and historical appliance saturations, has also been proposed. 

### Primary drawbacks ofthis method include: 1) saturations ofunits in new and stockhouseholds mustbe forecasted, 2) housing starts must alsobeforecasted, althoughtheAnnualEnergyOutlook(AEO)doesprovidereadilyavailable forecasts, and 3) retired units must be based upon assumptions regarding lifetimes. But this simpler method has the distinct advantage ofseparately accounting for units installed in new construction and existing households. More importantly, appliance saturations can be expressed as a function ofconsumer price and operating cost to capture their impact on future shipments. In expressing saturations in this manner, consumer price and operating cost elasticities can be developed to calibrate appliance forecasts to historical shipments. Since the accounting model can account for changes in consumer price and operating cost, the Department is considering the use ofthis approach to conduct base case shipments forecasts for central air conditioners and heat pumps. Are there alternate approaches toforecasting shipments?



### 8.0 Preliminary National Benefits Analysis In Section 6.0, the life:'cycle cost and energy savings for individual consumers is estimated. In this section, a preliminary assessment ofthe aggregate impacts at the national level is conducted. Measures ofimpact to be reported include the average consumerpayback, the net present value oftotal consumer life-cycle costs, national energy savings and national employment. 8.1 Inputs to Forecasts Analyzing impacts ofFederal energy-efficiency standards requires a comparison ofprojected U.S. residential energy consumption with and without standards. The cases without standards are referred to as base case projections. The forecasts contain projections ofunit energy consumption ofnew appliances, annual appliance shipments and the price ofpurchased appliances. The derivations ofthe base case forecast are described in Section 1.3 and standards case forecasts are discussed in Section 7.0. Approaches to detennining retail prices are described in Section 6.0. The base case shipments forecast developed under Section 1.3 may incorporate the likely effects19**~-----------~--** -- -- - 

# EE-7?m)5Tb -9&,-'l-Lf-D

The appliance standards analysis currently being conducted for clothes washers serves as an example of what methods can be employed to forecast base case shipments for central air conditioners and heat pumps. Ofthe proposed forecasts for base case clothes washer shipments, several are based on auto regressive fits to time series data. Although time series models tend to give accurate estimates ofhistorical shipments, they cannot explicitly account for changes in the number ofhouseholds, changes in the percent ofhouseholds owning the appliance, fluctuations in retail price, or changes in operating expense. Thus, forecasts are highly suspect. A simpler method, tenned the accountingmodel, based on the accounting ofnew housing starts and historical appliance saturations, has also been proposed. 

### Primary drawbacks ofthis method include: 1) saturations ofunits in new and stockhouseholds mustbe forecasted, 2) housing starts must alsobeforecasted, althoughtheAnnualEnergyOutlook(AEO)doesprovidereadilyavailable forecasts, and 3) retired units must be based upon assumptions regarding lifetimes. But this simpler method has the distinct advantage ofseparately accounting for units installed in new construction and existing households. More importantly, appliance saturations can be expressed as a function ofconsumer price and operating cost to capture their impact on future shipments. In expressing saturations in this manner, consumer price and operating cost elasticities can be developed to calibrate appliance forecasts to historical shipments. Since the accounting model can account for changes in consumer price and operating cost, the Department is considering the use ofthis approach to conduct base case shipments forecasts for central air conditioners and heat pumps. Are there alternate approaches toforecasting shipments?



### 8.0 Preliminary National Benefits Analysis In Section 6.0, the life:'cycle cost and energy savings for individual consumers is estimated. In this section, a preliminary assessment ofthe aggregate impacts at the national level is conducted. Measures ofimpact to be reported include the average consumerpayback, the net present value oftotal consumer life-cycle costs, national energy savings and national employment. 8.1 Inputs to Forecasts Analyzing impacts ofFederal energy-efficiency standards requires a comparison ofprojected U.S. residential energy consumption with and without standards. The cases without standards are referred to as base case projections. The forecasts contain projections ofunit energy consumption ofnew appliances, annual appliance shipments and the price ofpurchased appliances. The derivations ofthe base case forecast are described in Section 1.3 and standards case forecasts are discussed in Section 7.0. Approaches to detennining retail prices are described in Section 6.0. The base case shipments forecast developed under Section 1.3 may incorporate the likely effects19

### ofmarket forces and ofany non-regulatory initiatives. 8.2 Calculation ofEnergy Savings The Department intends to calculate national energy consumption for each year beginning with the expected effective date ofthe standards. Aggregate energy consumption will be calculated for the base case and each candidate standards level. This calculation may be done by one or more alternative approaches, including: 1)the use ofa simple spreadsheet; 2)the use ofdetailed enduse energy models such as theLawrence Berkeley National Laboratory's Residential Energy Model (REM) or the Energy Information Administration's National Energy Modeling System (NEMS); and 3) by multiplying shipment forecasts by unit energy savings.

For residential products, forecasting ofnational impacts hastraditionally been performed usingthe LBNL Residential Energy Model (REM). In response to comments by some stakeholders who asked for a simpler, more transparent model, LBNL has developed the National Energy Savings (NES) spreadsheets. NESis expected toprovide acredible stand-alone forecast of national energy savings and net present value, without relying upon REM. REM will continue to be available as an independent check onNES, to ensure that theresults ofboth models are consistent. REM will also be available to provide analysis ofinteractions, for example between central air conditioners and room air conditioners. Accounting for these interactions will provide a refinement to the energy savings and net present value results from NES. Unless this more comprehensive analysis from REM provides significantly different results than NES analysis ofa single end use, theNES results will stand as the analytical basis for the rulemaking, and REM will remain in the background. However, if interactions between end uses are important, then REM will quantify the effects. Doyou agreewith the use of these tools? 

### The Department has prepared spreadsheet models for other appliances to forecast energy savings and to demonstrate how the growth in efficiency can be accounted for over time. Although these models arespecific to the appliance, its general structurecan be applied to central air conditioners and heat pumps. Thus, past spreadsheet models will be presented at the Workshop to demonstrate basic concepts pertaining to the calculation of national energy savings.
8.3 Consumer Net Present Value and Payback The national net present value ofthe candidate standards levels is calculated as the difference in LCC, base case minus standards case. The calculation isperformed as in Section 5.0, except that a shipment weighted LCC iscalculated using the shipment and energy efficiency distribution forecasts from Section 7.0.

20 ofmarket forces and ofany non-regulatory initiatives. 8.2 Calculation ofEnergy Savings The Department intends to calculate national energy consumption for each year beginning with the expected effective date ofthe standards. Aggregate energy consumption will be calculated for the base case and each candidate standards level. This calculation may be done by one or more alternative approaches, including: 1) the use ofa simple spreadsheet; 2) the use ofdetailed enduse energy models such as the Lawrence Berkeley National Laboratory's Residential Energy Model (REM) orthe Energy Information Administration's National Energy Modeling System (NEMS); and 3) by multiplying shipment forecasts by unit energy savings.

Forresidential products, forecasting of nationalimpactshastraditionallybeenperformedusingthe LBNL Residential Energy Model (REM). In response to comments by some stakeholders who asked for a simpler, more transparent model, LBNL has developed the National Energy Savings (NBS) spreadsheets. NES is expectedto provideacredible stand-aloneforecast ofnational energy savings and net present value, without relying upon REM. REM will continue to be available as an independent check on NES, to ensure thatthe results of bothmodels are consistent. REM will also be available to provide analysis ofinteractions, for example between central air conditioners and room air conditioners. Accounting for these interactions will provide a refinement to the energy savings and net present value results from NES. Unless this more comprehensive analysis from REM provides significantly different results than NES analysis ofa single end use, the NES results will stand as the analytical basis for the rulemaking, and REM will remain in the background. However, if interactions between end uses are important, then REM will quantify the effects. Doyou agree with the lise of these tools? The Department has prepared spreadsheet models for other appliances to forecast energy savings and to demonstrate how the growth in efficiency can be accounted for 'over time. Although these models are specific to the appliance, its general structurecan be applied to central-airconditioners and heat pumps. Thus, pastspreadsheet models will be presented at the Workshop to demonstrate basic concepts pertaining to the calculation ofnational energy savings.

8.3 ConsumerNet Present Value and Payback The national net present value ofthe candidate standards levels is calculated as the difference in Lee, base case minus standards case. The calculation is performed as in Section 5.0, except that a shipment weighted Lee is calculated using the**shipm~nt** and energy efficiency distribution forecasts from Section 7.0.

20 ofmarket forces and ofany non-regulatory initiatives. 8.2 Calculation ofEnergy Savings The Department intends to calculate national energy consumption for each year beginning with the expected effective date ofthe standards. Aggregate energy consumption will be calculated for the base case and each candidate standards level. This calculation may be done by one or more alternative approaches, including: 1) the use ofa simple spreadsheet; 2) the use ofdetailed enduse energy models such as the Lawrence Berkeley National Laboratory's Residential Energy Model (REM) orthe Energy Information Administration's National Energy Modeling System (NEMS); and 3) by multiplying shipment forecasts by unit energy savings.

Forresidential products, forecasting of nationalimpactshastraditionallybeenperformedusingthe LBNL Residential Energy Model (REM). In response to comments by some stakeholders who asked for a simpler, more transparent model, LBNL has developed the National Energy Savings (NBS) spreadsheets. NES is expectedto provideacredible stand-aloneforecast ofnational energy savings and net present value, without relying upon REM. REM will continue to be available as an independent check on NES, to ensure thatthe results of bothmodels are consistent. REM will also be available to provide analysis ofinteractions, for example between central air conditioners and room air conditioners. Accounting for these interactions will provide a refinement to the energy savings and net present value results from NES. Unless this more comprehensive analysis from REM provides significantly different results than NES analysis ofa single end use, the NES results will stand as the analytical basis for the rulemaking, and REM will remain in the background. However, if interactions between end uses are important, then REM will quantify the effects. Doyou agree with the lise of these tools? The Department has prepared spreadsheet models for other appliances to forecast energy savings and to demonstrate how the growth in efficiency can be accounted for 'over time. Although these models are specific to the appliance, its general structurecan be applied to central-airconditioners and heat pumps. Thus, pastspreadsheet models will be presented at the Workshop to demonstrate basic concepts pertaining to the calculation ofnational energy savings.

8.3 ConsumerNet Present Value and Payback The national net present value ofthe candidate standards levels is calculated as the difference in Lee, base case minus standards case. The calculation is performed as in Section 5.0, except that a shipment weighted Lee is calculated using the**shipm~nt** and energy efficiency distribution forecasts from Section 7.0.

20

### 8.4 Employment Impacts Two impacts on employment are possible from standards, direct impacts and indirect impacts. Direct employment impacts would result ifstandards lead to a change inthe number ofemployees at manufacturing plants and related supply and service firms. The July 1996 Process Rule includes employment impacts among the factors to be considered in selecting a proposed standard. The Department will estimate the direct and indirect impacts on employment for appliance manufacturers, relevant service industries, energy suppliers, and the economy in general. Additionally, the Process Rule states a presumption against any proposed standard level that would cause significant plant closures or losses ofdomestic employment. Direct impacts are estimated inthe manufacturer sub-group analysis described in Section 12.0. Indirect impacts may result from both expenditures shifting among goods (substitution effect), and income changing, which will lead to a change inoverall expenditure levels (income effect). The Indirect Employment Impacts analysis the Department can conduct would estimate national job creation or elimination from possible standards, resulting from reallocation ofthe associated consumer expenditures for purchasing and operating appliances. The Department ofEnergy's Office ofBuilding Technologies and State Programs has developed a spreadsheet model (IMBUILD) that could be used to analyze indirect employment impacts. It is an economic analysis system that focuses on those sectors most relevant to buildings and characterizes the interconnections among 35 sectors as national input-output structural matrices. The IMBUILD output includes employment, industry output, and wage income. Changes in expenditures due to appliance standards can be introduced to IMBUILD asperturbations on the existing economic flows and the resulting net national impact onjobs by sector canbe estimated.

Do the above methods seem adequate for estimating both direct and indirect employment impacts? If not, areyou aware ofany othermethodsor models which can be usedto assess employment impacts?



### 9.0 Revised Pre-ANOPR Analysis Based on consideration ofthe comments received for the ANOPR, any necessary changes to the pre-ANOPR analysis or the candidate standards levels will be made. Ifmajor changes are required at this stage, interested parties will be given an opportunity to review the revised analysis. 

### 10.0 Consumer Impacts 10.1 Consumer Sub-group Analysis The Department can evaluate variations in regional energy prices, variations inenergy use and 21 8.4 Employment Impacts Two impacts on employment are possible from standards, direct impacts and indirect impacts. Direct employment impacts would result ifstandards lead to a change in the number ofemployees at manufacturing plants and related supply and service finns. The July 1996 Process Rule includes employment impacts among the factors to be considered in selecting a proposed standard. The Department 

### will estimate the direct and indirect impacts on employment for appliance manufacturers, relevant service industries, energy suppliers, and the economy in general
.. Additionally, the Process Rule states apresumption against any proposed standard level that would cause significant plant closures or losses ofdomestic employment. Direct impacts are estimated in the manufacturer sub-group analysis described in Section 12.0. Indirect impacts may result from both expenditures shifting among goods (substitution effect), and income changing, which will lead to a change in overall expenditure levels (income effect). The Indirect Employment Impacts analysis the Department can conduct would estimate national job creation or elimination from possible standards, resulting from reallocation ofthe associated consumer expenditures for purchasing and operating appliances. The Department ofEnergy's Office ofBuilding Technologies and State Programs has developed a spreadsheet model. (ThffiUILD) that could be used to analyze indirect employment impacts. It is an economic analysis system thatfocuses on those sectors most relevant to buildings and characterizes the interconnections among 35 sectors as national input-output structural matrices. The ThffiUILD output includes employment, industry output, and wage income. Changes in expenditures due to appliance standards can be introduced to ThffiUILD as perturbations on the existing economic flows and the resulting net national impact onjobs by sector can be estimated.

Do the above methods seem adequatefor estimating both direct and indirect employment impacts? 

### Ifnot, are you aware of any other methods or models which can be used to assess employment impacts?'
.


### 9.0 Revised Pre-ANOPR Analysis Based on consideration ofthe comments received for the ANOPR,any necessary changes to the pre-ANOPR analysis or the candidate standards levels will be made. Ifmajor changes are required at this stage, interested parties will be given an opportunity to review the revised analysis.


### 10.0 Consumer Impacts 10.1 Consumer Sub-group Analysis The Department can evaluate variations in regional energy prices, variations in energy use and 21 8.4 Employment Impacts Two impacts on employment are possible from standards, direct impacts and indirect impacts. Direct employment impacts would result ifstandards lead to a change in the number ofemployees at manufacturing plants and related supply and service finns. The July 1996 Process Rule includes employment impacts among the factors to be considered in selecting a proposed standard. The Department 

### will estimate the direct and indirect impacts on employment for appliance manufacturers, relevant service industries, energy suppliers, and the economy in general
.. Additionally, the Process Rule states apresumption against any proposed standard level that would cause significant plant closures or losses ofdomestic employment. Direct impacts are estimated in the manufacturer sub-group analysis described in Section 12.0. Indirect impacts may result from both expenditures shifting among goods (substitution effect), and income changing, which will lead to a change in overall expenditure levels (income effect). The Indirect Employment Impacts analysis the Department can conduct would estimate national job creation or elimination from possible standards, resulting from reallocation ofthe associated consumer expenditures for purchasing and operating appliances. The Department ofEnergy's Office ofBuilding Technologies and State Programs has developed a spreadsheet model. (ThffiUILD) that could be used to analyze indirect employment impacts. It is an economic analysis system thatfocuses on those sectors most relevant to buildings and characterizes the interconnections among 35 sectors as national input-output structural matrices. The ThffiUILD output includes employment, industry output, and wage income. Changes in expenditures due to appliance standards can be introduced to ThffiUILD as perturbations on the existing economic flows and the resulting net national impact onjobs by sector can be estimated.

Do the above methods seem adequatefor estimating both direct and indirect employment impacts? 

### Ifnot, are you aware of any other methods or models which can be used to assess employment impacts?'
.


### 9.0 Revised Pre-ANOPR Analysis Based on consideration ofthe comments received for the ANOPR,any necessary changes to the pre-ANOPR analysis or the candidate standards levels will be made. Ifmajor changes are required at this stage, interested parties will be given an opportunity to review the revised analysis.


### 10.0 Consumer Impacts 10.1 Consumer Sub-group Analysis The Department can evaluate variations in regional energy prices, variations in energy use and 21

### variations in installation costs that might affect the net present value ofa standard to consumer sub-populations. To the extent possible, DOE will obtain estimates ofthe variability in each input variable and consider this variability in its calculation ofconsumer impacts. The variability in each input variable and likely sources ofinformation will be discussed with stakeholders. 10.1.1 Variations in Energy Prices Energy prices vary regionally across the country. In the pre-ANOPR LCC analysis, the Department is considering analyzing variations in energy price through the use ofEIA's RECS. This analysis can consider the fraction ofconsumers facing a particular service price. The range invalues ofchange oflife-cycle costs for the distribution ofhouseholds also can be calculated. The analysis can be structured to answer questions such as: How many households arebetter-off with standards and by how much? How many households are not better offand by how much?

ShouldtheDepartmentconsideradditional analysesforassessingthe impactofenergyprice variations?Ifso, areyou aware of datasources otherthanRECS thattheDepartment should consider for.this analysis?

10.1.2 Variations in Energy Use 

### Variations in energy use for a particular appliance can depend on factors such as climate, type of household, people inhousehold, etc. Annual energy use can be estimated by a calculation based on an accepted test procedure or itcan be measured directly in the field. As described earlier, the Department isconsidering analyzing variations inenergy use in the pre-ANOPR LCC analysis by analyzing EIA's RECS household energy data. Climatic and consumer behavior are inherent to the energy use data. The Department can perform sensitivity analyses to consider how differences in energy use will affect sub-groups ofconsumers.

Shouldthe Department consideradditionalanalyses for assessingthe impact ofenergy use variations? If so, areyou aware ofany data outside ofRECS which reflect variations in consumer usagehabits.



### 10.1.3 First Cost Increases For consumers, one measure ofeconomic impact isthe first cost ofthe product. Increased first costs to consumers resulting from standards can affect different consumers in different ways. The impact ofstandards on lower income persons is important because this group is the least able to endure economic disadvantages. For lower income consumers, increases in first costs for a particular product can have the effect ofprecluding the purchase ofa new model ofthat product. As a result, some consumers may retain products past their useful life or purchase older, used appliances. These older products are generally less efficient to begin with, and over time, their 22 variations in installation costs that might affect the net present value ofa standard to consumer sub-populations. To the extent possible, DOE will obtain estimates ofthe variability in each input variable and consider this variability in its calculation ofconsumer impacts. The variability in each input variable and likely sources ofinfonnation will be discussed with stakeholders. 10.1.1 Variations in Energy Prices Energy prices vary regionally across the country. Inthe pre-ANOPR LeC analysis, the Department is considering analyzing variations in energy price through the use ofEIA'sRECS. This analysis can considerthe fraction ofconsumers facing a particular service price. The range in values ofchange oflife-cycle costs for the distribution ofhouseholds also can be calculated. The analysis can be structured to answer questions such as: How many households are better-off with standards and by how much? How many households are not better off'and by how much?
.

Should the Department consider additional analyses for assessing the impact of energyprice variations? 

### If so, areyou aware of data sources other than RECS that the Department should consider for. thisanalysiS?

10.1.2 Variations in Energy Use Variations in energy use for aparticular appliance can depend on factors such as climate, type of household, people in household, etc. Annual energy use can be estimated by a calculation based on an accepted test procedure or it can be measured directly in the field. As described earlier, the Department is considering analyzing variations in energy use in the pre-ANOPR LCC analysis by

. analyzing EIA's RECS household energy data. Climatic and consumer behavior are inherent to the energy use data. The Department can perfonn sensitivity analyses to consider how differences in energy use will affect sub-groups ofconsumers.

Should the Department consider additional analysesfor assessing the impact ofenergy use variations? 

### Ifso, are you aware ofany data outside of RECS which reflect variations in consumer usage habits.

10.1.3 First Cost Increases

. . For consumers, one measure ofeconomic impact is the first cost ofthe product. Increased first costs to consumers resulting from standards can affect different consumers in different ways. The impact ofstandards on lower income persons is important because this group is the least able to endure economic disadvantages. For lower income consumers, increases in first costs for a particular product can have the effect ofprecluding the purchase ofanew model ofthat product. As a result, some consumers may retain products past their useful life or purchase older, used appliances. These older products are generally less efficient to beginwith, and over time, their 22 variations in installation costs that might affect the net present value ofa standard to consumer sub-populations. To the extent possible, DOE will obtain estimates ofthe variability in each input variable and consider this variability in its calculation ofconsumer impacts. The variability in each input variable and likely sources ofinfonnation will be discussed with stakeholders. 10.1.1 Variations in Energy Prices Energy prices vary regionally across the country. Inthe pre-ANOPR LeC analysis, the Department is considering analyzing variations in energy price through the use ofEIA'sRECS. This analysis can considerthe fraction ofconsumers facing a particular service price. The range in values ofchange oflife-cycle costs for the distribution ofhouseholds also can be calculated. The analysis can be structured to answer questions such as: How many households are better-off with standards and by how much? How many households are not better off'and by how much?
.

Should the Department consider additional analyses for assessing the impact of energyprice variations? 

### If so, areyou aware of data sources other than RECS that the Department should consider for. thisanalysiS?

10.1.2 Variations in Energy Use Variations in energy use for aparticular appliance can depend on factors such as climate, type of household, people in household, etc. Annual energy use can be estimated by a calculation based on an accepted test procedure or it can be measured directly in the field. As described earlier, the Department is considering analyzing variations in energy use in the pre-ANOPR LCC analysis by

. analyzing EIA's RECS household energy data. Climatic and consumer behavior are inherent to the energy use data. The Department can perfonn sensitivity analyses to consider how differences in energy use will affect sub-groups ofconsumers.

Should the Department consider additional analysesfor assessing the impact ofenergy use variations? 

### Ifso, are you aware ofany data outside of RECS which reflect variations in consumer usage habits.

10.1.3 First Cost Increases

. . For consumers, one measure ofeconomic impact is the first cost ofthe product. Increased first costs to consumers resulting from standards can affect different consumers in different ways. The impact ofstandards on lower income persons is important because this group is the least able to endure economic disadvantages. For lower income consumers, increases in first costs for a particular product can have the effect ofprecluding the purchase ofanew model ofthat product. As a result, some consumers may retain products past their useful life or purchase older, used appliances. These older products are generally less efficient to beginwith, and over time, their 22

### efficiency may deteriorate ifthey are retained beyond their useful life. Increases infirst cost can also have the effect ofprecluding the purchase and use ofa product altogether

- a potentially large loss ofutility. The Department will be sensitive to first cost increases to avoid negative impacts to identifiable population groups such as low-income households. Additionally, theDepartment will assessthe likely impacts offirst cost increases on product sales and fuel switching.

What are the potential impacts ofa large first cost increase on consumers (affordability, financing,etc.). Can yousuggestmethodsanddatatheDepartment could use inconductingits analysis? What methods mighttheDepartmentuse to assessthe likely impacts offirstcost increaseson productsalesand fuel switching?

10.2 Consumer Participation 

### For all products generally, consumer input is important for several related but separate analytical tasks. First, consumer preferences should be understood prior to determining product classes in order to preserve product utility. Second, assessing the impact ofchanges infirst cost may require direct consumer participation from affected consumer sub-groups (particularly low-income). Finally, consumer input isuseful to ensure that life-cycle costs are accurately estimated for relevant subgroups ofconsumers. To assess consumer impacts the Department will usually use a process consisting ofa combination oflife-cycle cost modeling and direct consumer input. The Department will seek to inform and involve consumers and consumer representatives inthe process ofdeveloping standards. This will include notification ofconsumer representatives during the rulemaking process and where appropriate, seeking direct consumer input. The advisory committee sub-group on consumer issues has provided suggestions concerning appropriate means ofobtaining consumer input. These include: 1)using focus groups, 2) conducting surveys, 3) conducting demonstration projects, 4) conducting marketing analysis and, 5)researching existing literature from voluntary programs. In seeking this information, the advisory committee sub-group emphasized the need forDOE to obtain information from all relevant consumer categories and instatistically significant sample sizes.

What level of directcustomerinputisappropriate forthe thisrulemaking? Which issuesareof most concern?

23 efficiency may deteriorate ifthey are retained beyond their useful life. Increases in first cost can also have the effect ofprecluding the purchase and use ofaproduct altogether - a potentially large loss ofutility. The Department will be sensitive to first cost increases to avoid negative impacts to identifiable population groups such as low-income households. Additionally, the Department will assess the likely impacts offirst cost increases on product sales and fuel switching.

What are the potential impacts ofa largefirst cost increase on consumers (ajfordability, financing, etc.). Canyousuggestmethods anddata the Departmentcoulduse in conducting its analysis? What methods might the Department use to assess the likely impacts of first cost increases on product sales andfuelswitching?

10.2 ConsumerParticipation For all products generally, consumer input is important for several related but separate analytical tasks. First, consumer preferences should be understood priorto determining product classes in order to preserve product utility. Second, assessing the impact ofchanges in first cost may require direct consumer participation from affected consumer sub-groups (particularly low-income). Finally, consumer input is useful to ensure that life-cycle costs are accurately estimated for relevant subgroups ofconsumers. To assess consumer impacts the Department will usually use a process consisting ofa combination oflife-cycle cost modeling and direct consumer input. The Department will seek to inform and involve consumers and consumer representatives in the
. process ofdeveloping standards. This will include notification ofconsumer representatives during the rulemaking process and where appropriate, seeking direct consumer input. The advisory committee sub-group on consumer issues has provided suggestions concerning appropriate means ofobtaining consumer input. These include: 1) using focus groups, 2) conducting surveys, 3) conducting**demo~stration** projects, 4) conducting marketing analysis and, 5) researching existing literature from voluntary programs. In seeking this information, the advisory committee sub-group emphasized the need for DOE to obtain information from all relevant consumer categories and in statistically significant sample sizes.

What level of direct customer input isappropriate for the this rulemaking? Which issuesare of most concern?

23 efficiency may deteriorate ifthey are retained beyond their useful life. Increases in first cost can also have the effect ofprecluding the purchase and use ofaproduct altogether - a potentially large loss ofutility. The Department will be sensitive to first cost increases to avoid negative impacts to identifiable population groups such as low-income households. Additionally, the Department will assess the likely impacts offirst cost increases on product sales and fuel switching.

What are the potential impacts ofa largefirst cost increase on consumers (ajfordability, financing, etc.). Canyousuggestmethods anddata the Departmentcoulduse in conducting its analysis? What methods might the Department use to assess the likely impacts of first cost increases on product sales andfuelswitching?

10.2 ConsumerParticipation For all products generally, consumer input is important for several related but separate analytical tasks. First, consumer preferences should be understood priorto determining product classes in order to preserve product utility. Second, assessing the impact ofchanges in first cost may require direct consumer participation from affected consumer sub-groups (particularly low-income). Finally, consumer input is useful to ensure that life-cycle costs are accurately estimated for relevant subgroups ofconsumers. To assess consumer impacts the Department will usually use a process consisting ofa combination oflife-cycle cost modeling and direct consumer input. The Department will seek to inform and involve consumers and consumer representatives in the
. process ofdeveloping standards. This will include notification ofconsumer representatives during the rulemaking process and where appropriate, seeking direct consumer input. The advisory committee sub-group on consumer issues has provided suggestions concerning appropriate means ofobtaining consumer input. These include: 1) using focus groups, 2) conducting surveys, 3) conducting**demo~stration** projects, 4) conducting marketing analysis and, 5) researching existing literature from voluntary programs. In seeking this information, the advisory committee sub-group emphasized the need for DOE to obtain information from all relevant consumer categories and in statistically significant sample sizes.

What level of direct customer input isappropriate for the this rulemaking? Which issuesare of most concern?

23

### 11.0 Industry Cash Flow The policies outlined in the process rule required substantial revisions to the analytical framework to be used in performing manufacturer impact analysis. The Department held a public workshop on March 11 and 12, 1997, to describe and obtain comment on a new generic methodology to be used in performing future manufacturing impact analyses. Inthe fiture, manufacturer impact analyses will be conducted in three phases. Phase 1consists oftwo activities, namely, preparation ofan Market Characterization as described section 1.1. The second phase has as its focus the larger industry. In this phase, the Government Regulatory Impact Model (GRIM) will be used to perform an industry cash flow analysis. Phase 3 involves repeating the process described in Phase 2--the industry cash-flow analysis--but on different sub-groups ofmanufacturers. Phase 3 also entails calculating additional impacts on competition, employment, and manufacturing capacity. While the general framework will serve as a guide, the Department intends to tailor the methodology for each rule on the basis ofstakeholder comments. In phase 2 the Industry Cash-Flow analysis will use average manufacturing costs (with uncertainty)as described under Section 4.0, shipments forecasts as derived under Section 7.0 and price forecasts from Section 6.4. Financial information, also required as an input to GRIM, will be developed based on publicly available data and confidentially submitted manufacturer information. The GRIM analysis uses a number offactors -- annual expected revenues; manufacturer costs such as costs ofsales, selling and general administration costs; taxes; and capital expenditures related to depreciation, new standards, and maintenance -- to arrive at a series ofannual cash flows beginning from before implementation ofstandards and continuing explicitly for several years after implementation. The measure ofindustry net present values are calculated by discounting the annual cash flows from the period before implementation ofstandards to some future point in time.

For discussion purposes, the Department will prepare a list ofdefault financial values to be used in the GRIM industry analysis. These will be calculated by studying publicly available financial statements ofcentral air conditioners and heat pump manufacturers.



### 12.0 Manufacturer sub-group analysis 12.1 Manufacturer Sub-groups Using industry "average" cost values is not adequate for assessing the variation in impacts among sub-groups ofmanufacturers. Smaller manufacturers, niche players or manufacturers exhibiting a 24 

### 11.0 Industry Cash Flow The policies outlined in the process rule required substantial revisions to the analytical framework to be used in performing manufacturer impact analysis. The Department held a public workshop on March 11 and 12, 1997, to describe and obtain comment on a new generic methodology to be used in performing future manufacturing impact analyses. 

### In the future, manufacturer impact analyses will be conducted in three phases. Phase 1consists oftwo activities, namely, preparation ofan Market Characterization as described section 1.1. The second phase has as its focus the larger industry. In this phase, the Government Regulatory Impact Model (GRIM) will be used to perfonn an industry cash flow analysis. Phase 3 involves repeating the process described in Phase 2--the industry cash-flow analysis--but on different sub-groups ofmanufacturers. Phase 3 also entails calculating additional impacts on competition, employment, and manufacturing capacity. While the general framework will serve as a guide, the Department intends to tailor the methodology for each rule on the basis ofstakeholder comments. In phase 2the Industry Cash-Flow analysis will use average manufacturing costs (with uncertainty)as described under Section 4.0, shipments forecasts as derived under Section 7.0 and price forecasts from Section 6.4. Financial infonnation, also required as an input to GRIM, will be developed based on publicly available data and confidentially submitted manufacturer infonnation. The GRIM analysis uses a number offactors

-- annual expected revenues; manufacturer costs such as costs ofsales, selling and general administration costs; taxes; and capital expenditures related to depreciation, new standards, and maintenance

-- to arrive at a series ofannual cash flows beginning from before implementation ofstandards and continuing explicitly for several years after implementation. The measure ofindustry net present values are calculated by discounting the annual cash flows from the period before implementation ofstandards to some

.future point in time.

For discussion purposes, the Department will prepare alist ofdefault financial values to be used in the GRIM industry analysis. These will be calculated by studying publicly available financial statements ofcentral air conditioners and heat pump manufacturers.



### 12.0 Manufacturer sub-group analysis 12.1 Manufacturer Sub-groups Using industry "average" cost values is not adequate for assessing the variation in impacts among sub-groups ofmanufacturers. Smaller manufacturers, niche players or manufacturers exhibiting a 24 

### 11.0 Industry Cash Flow The policies outlined in the process rule required substantial revisions to the analytical framework to be used in performing manufacturer impact analysis. The Department held a public workshop on March 11 and 12, 1997, to describe and obtain comment on a new generic methodology to be used in performing future manufacturing impact analyses. 

### In the future, manufacturer impact analyses will be conducted in three phases. Phase 1consists oftwo activities, namely, preparation ofan Market Characterization as described section 1.1. The second phase has as its focus the larger industry. In this phase, the Government Regulatory Impact Model (GRIM) will be used to perfonn an industry cash flow analysis. Phase 3 involves repeating the process described in Phase 2--the industry cash-flow analysis--but on different sub-groups ofmanufacturers. Phase 3 also entails calculating additional impacts on competition, employment, and manufacturing capacity. While the general framework will serve as a guide, the Department intends to tailor the methodology for each rule on the basis ofstakeholder comments. In phase 2the Industry Cash-Flow analysis will use average manufacturing costs (with uncertainty)as described under Section 4.0, shipments forecasts as derived under Section 7.0 and price forecasts from Section 6.4. Financial infonnation, also required as an input to GRIM, will be developed based on publicly available data and confidentially submitted manufacturer infonnation. The GRIM analysis uses a number offactors

-- annual expected revenues; manufacturer costs such as costs ofsales, selling and general administration costs; taxes; and capital expenditures related to depreciation, new standards, and maintenance

-- to arrive at a series ofannual cash flows beginning from before implementation ofstandards and continuing explicitly for several years after implementation. The measure ofindustry net present values are calculated by discounting the annual cash flows from the period before implementation ofstandards to some

.future point in time.

For discussion purposes, the Department will prepare alist ofdefault financial values to be used in the GRIM industry analysis. These will be calculated by studying publicly available financial statements ofcentral air conditioners and heat pump manufacturers.



### 12.0 Manufacturer sub-group analysis 12.1 Manufacturer Sub-groups Using industry "average" cost values is not adequate for assessing the variation in impacts among sub-groups ofmanufacturers. Smaller manufacturers, niche players or manufacturers exhibiting a 24

### cost structure largely different from industry averages could be more negatively impacted. Ideally, the Department would consider the impact on every firm individually. In highly concentrated industries this maybe possible. In industries having numerous participants, theDepartment will use the results ofthe industry characterization to group manufacturers exhibiting similar characteristics. The financial analysis ofthe "prototypical" firm performed in the Phase 2 Industry Analysis can serve as a benchmark against which manufacturer sub-groups can be analyzed. The manufacturing cost data collected for the engineering analysis will beused to the extent practical in the sub-group impact analysis. To be useful, however, this data should be disaggregated to reflect the variability in costs between relevant sub-groups offirms. The Department will conduct detailed interviews with as many manufacturers as ispossible to gain insight into the potential impacts ofstandards. During these interviews, the Department will solicit the information necessary to evaluate cashflows and to assess competitive, employment and capacity impacts. The interview process has a key role inthe manufacturer impact analyses, since it provides an opportunity for interested parties to privately express their views on important issues. A key characteristic ofthe interview process isthat it is designed to allow confidential information to be considered in the rulemaking decision. The initial industry characterization will collect information from relevant industry and market publications, industry trade organizations, company financial reports, and product literature. This information will aid inthe development ofdetailed and focused questionnaires, as needed, to perform all phases ofthe manufacturer impact analyses. It is the intention ofthe Department that the contents ofquestionnaires and the list ofinterview participants be publicly vetted prior to initiating the interview process. The Phase 3 (sub-group analysis) questionnaire will solicit information on the possible impacts of potential efficiency levels on manufacturing costs, product prices, and sales. Evaluation ofthe possible impacts on direct employment, capital assets, and industry competitiveness will also draw heavily on the information gathered during the interviews. The questionnaires will solicit both qualitative and quantitative information. Supporting information will be requested whenever applicable. Interviews will be scheduled well inadvance in order to provide every opportunity for key individuals to be available for comment. Although a written response to the questionnaire is acceptable, an interactive interview process ispreferred because it helps clarify responses and provides the opportunity for additional issues to be identified. Interview participants will be requested to identify all confidential information provided inwriting or orally. Approximately two weeks following the interview, an interview summary will be provided to give participants the opportunity to confirm the accuracy and protect the confidentiality ofall collected information. All the information transmitted will be considered, 25 cost structure largely different from industry averages could be more negatively impacted. Ideally, the Department would considerthe impact on every finn individually. In highly concentrated industries this may be possible. In industries having numerous participants, the Department will use the results ofthe industry characterization to group manufacturers exhibiting similar characteristics. The financial analysis ofthe "prototypical" firm performed in the Phase 2Industry Analysis can serve as abenchmark against which manufacturer sub-groups can be analyzed. The manufacturing cost data collected for the engineering analysis will be used to the extent practical in the sub-group impact analysis. To be useful, however, this data should be
. disaggregated to reflect the variability in costs between relevant sub-groups offirms. The Department will conduct detailed interviews with as many manufacturers as is·possible to gain insight into the potential impacts ofstandards. During these interviews, the Department will solicit the information·necessary to evaluate cashflows and to assess competitive, employment and capacity impacts. The interview process has a key role in the manufacturer impact analyses, since it provides an opportunity for interested parties to privately express their views on important issues. Akey characteristic ofthe interview process is that ·ifis designed to allow confidential information to be considered in the rulemaking decision. The initial industry characterization will collect information from relevant industry and market publications, industry trade organizations, company financial reports, and product literature. This information will aid in the development ofdetailed and focused questionnaires, as needed, to perform all phases ofthe manufacturer impact analyses. It is the intention ofthe Department that the contents ofquestionnaires and the list ofinterview participants be publicly vetted priorto iriitiating the interview process. . Tl)e Phase 3 (sub-group analysis) questionnaire will solicit information on the possible impacts of potential efficiency levels on manufacturing costs, product prices, and sales. Evaluation ofthe possible impacts on direct employment, capital assets, and industry competitiveness will also draw heavily on the information gathered during the interviews. The questionnaires will solicit both qualitative and quantitative information. Supporting information will be requested whenever applicable. Interviews will be scheduled well in advance in order to provide every opportunity for key individuals to be available for comment. Although awritten response to the questionnaire is acceptable, an interactive interview process is preferred because it helps clarify responses and provides the opportunity for additional issues to be identified. Interview participants will be requested to identify all confidential information provided in writing or orally. Approximately two weeks following the interview, an interview summary will be provided to give participants the opportunity to confirm the accuracy and protect the

.confidentiality ofall collected information. All the information transmitted will be considered, 25 cost structure largely different from industry averages could be more negatively impacted. Ideally, the Department would considerthe impact on every finn individually. In highly concentrated industries this may be possible. In industries having numerous participants, the Department will use the results ofthe industry characterization to group manufacturers exhibiting similar characteristics. The financial analysis ofthe "prototypical" firm performed in the Phase 2Industry Analysis can serve as abenchmark against which manufacturer sub-groups can be analyzed. The manufacturing cost data collected for the engineering analysis will be used to the extent practical in the sub-group impact analysis. To be useful, however, this data should be
. disaggregated to reflect the variability in costs between relevant sub-groups offirms. The Department will conduct detailed interviews with as many manufacturers as is·possible to gain insight into the potential impacts ofstandards. During these interviews, the Department will solicit the information·necessary to evaluate cashflows and to assess competitive, employment and capacity impacts. The interview process has a key role in the manufacturer impact analyses, since it provides an opportunity for interested parties to privately express their views on important issues. Akey characteristic ofthe interview process is that ·ifis designed to allow confidential information to be considered in the rulemaking decision. The initial industry characterization will collect information from relevant industry and market publications, industry trade organizations, company financial reports, and product literature. This information will aid in the development ofdetailed and focused questionnaires, as needed, to perform all phases ofthe manufacturer impact analyses. It is the intention ofthe Department that the contents ofquestionnaires and the list ofinterview participants be publicly vetted priorto iriitiating the interview process. . Tl)e Phase 3 (sub-group analysis) questionnaire will solicit information on the possible impacts of potential efficiency levels on manufacturing costs, product prices, and sales. Evaluation ofthe possible impacts on direct employment, capital assets, and industry competitiveness will also draw heavily on the information gathered during the interviews. The questionnaires will solicit both qualitative and quantitative information. Supporting information will be requested whenever applicable. Interviews will be scheduled well in advance in order to provide every opportunity for key individuals to be available for comment. Although awritten response to the questionnaire is acceptable, an interactive interview process is preferred because it helps clarify responses and provides the opportunity for additional issues to be identified. Interview participants will be requested to identify all confidential information provided in writing or orally. Approximately two weeks following the interview, an interview summary will be provided to give participants the opportunity to confirm the accuracy and protect the

.confidentiality ofall collected information. All the information transmitted will be considered, 25

### when appropriate, inDOE's decision-making process. However, confidential information will not be made available inthe public record. Participants will also be asked to identify all information they wish included in the public record but that they do not want to have associated with their interview. This information will be incorporated into the public record but reported without attribution. DOE will collate the completed interview questionnaires and prepare a summary ofthe major issues and outcomes. The Department will seek comment on the outcome ofthe interview process

Whichmanufacturers shouldbe actively-solicited?Isthereany valuein groupingmanufacturers into sub-groupsor shouldindividualGRIManalysisbe conductedforeach? Moregenerally, whatwouldawell executedsub-groupanalysisentail?

12.2 Competitive Impacts Assessment 

### Legislation directs the Department to consider any lessening ofcompetition that is likely to result from standards. It further directs the Attorney General to gauge the impacts, ifany, ofany lessening ofcompetition. DOE will make a determined effort to gather and report firm-specific financial information and impacts. The competitive analysis will focus on assessing the impacts to smaller, yet significant, manufacturers. The assessment will be based on manufacturing cost data and on information collected from interviews with manufacturers, consistent with Phase 3ofthe manufacturer impact analyses. DOJ has offered to help indrafting questions to be used in the manufacturer interviews. These questions will pertain to the assessment ofthe likeliness of increases inmarket concentration levels and other market conditions that could lead to anticompetitive pricing behavior. The manufacturer interviews will focus on gathering information that would help inassessing asymmetrical cost increases to some manufacturers, increased proportion offixed costs potentially increasing business risks, and potential barriers to market entry (proprietary technologies, etc.)

The Department will be consulting with the Department ofJustice prior to initiating the detailed manufacturer impact analysis.

12.3 Cumulative Regulatory Burden The Department will recognize and seek to mitigate the overlapping effects on manufacturers of new or revised DOE standards and other regulatory actions affecting the same products.

26 when appropriate, in DOE's**decision~making** process. However, confidential infonnation will not be made available in the public record. Participants will also be asked to identify all infonnation they wish included in the public record but that they do not want to have associated with their interview. This irifonnation will be incorporated into the public record but reported without attribution. DOE will collate the completed interview questionnaires and prepare a summary.ofthe major issues and outcomes. The Department will seek comment on the outcome ofthe interview process



### Whichmanufacturersshouldbeactively-solicited? Is there anyvalue ingrouping manufacturers into sub-groups or should individual GRIManalysis be conductedfor each? More generally. whatwoulda well executedsub-group analysis entail?

12.2 Competitive Impacts Assessment
. Legislation directs the Department to consider any lessening ofcompetition that is likely to result from standards. It further directs the Attorney General to gauge the impacts, ifany, ofany lessening ofcompetition. DOE will make a determined effort to gather and report finn-specific financial infonnation and impacts. The competitive analysis will focus on assessing the impacts to smaller, yet significant, manufacturers. The assessment will be based on manufacturing cost data and on infonnation collected from interviews with manufacturers, consistent with Phase 3 ofthe manufacturer impact analyses. DOJ has offered to help in drafting questions to be used in the manufacturer interviews. These questions will pertain to the assessment ofthe likeliness of increases in market concentration levels and other market conditions that could lead to anticompetitive pricing behavior. The manufacturer interviews will focus on gathering infonnation that would help in assessing asymmetrical cost increases to some manufacturers, increased proportion offixed costs potentially increasing business risks, and potential barriers to market entry (proprietary technologies, etc.)

The Department will be consulting with the Department ofJustice priorto initiating the detailed manufacturer impact analysis.

12.3 Cumulative Regllliatory Burden The Department will recognize and seek to mitigate the overlapping effects on manufacturers of new or revised DOE standards and other regulatory actions affecting the same products.

26 when appropriate, in DOE's**decision~making** process. However, confidential infonnation will not be made available in the public record. Participants will also be asked to identify all infonnation they wish included in the public record but that they do not want to have associated with their interview. This irifonnation will be incorporated into the public record but reported without attribution. DOE will collate the completed interview questionnaires and prepare a summary.ofthe major issues and outcomes. The Department will seek comment on the outcome ofthe interview process



### Whichmanufacturersshouldbeactively-solicited? Is there anyvalue ingrouping manufacturers into sub-groups or should individual GRIManalysis be conductedfor each? More generally. whatwoulda well executedsub-group analysis entail?

12.2 Competitive Impacts Assessment
. Legislation directs the Department to consider any lessening ofcompetition that is likely to result from standards. It further directs the Attorney General to gauge the impacts, ifany, ofany lessening ofcompetition. DOE will make a determined effort to gather and report finn-specific financial infonnation and impacts. The competitive analysis will focus on assessing the impacts to smaller, yet significant, manufacturers. The assessment will be based on manufacturing cost data and on infonnation collected from interviews with manufacturers, consistent with Phase 3 ofthe manufacturer impact analyses. DOJ has offered to help in drafting questions to be used in the manufacturer interviews. These questions will pertain to the assessment ofthe likeliness of increases in market concentration levels and other market conditions that could lead to anticompetitive pricing behavior. The manufacturer interviews will focus on gathering infonnation that would help in assessing asymmetrical cost increases to some manufacturers, increased proportion offixed costs potentially increasing business risks, and potential barriers to market entry (proprietary technologies, etc.)

The Department will be consulting with the Department ofJustice priorto initiating the detailed manufacturer impact analysis.

12.3 Cumulative Regllliatory Burden The Department will recognize and seek to mitigate the overlapping effects on manufacturers of new or revised DOE standards and other regulatory actions affecting the same products.

26

### Areyouawareof anyregulationsthatwouldcauseacumulativeburdenwith thisrulemaking? 

### 13.0 Utility Impacts To perform the Utility Impacts Analysis, which would include an analysis ofboth the electric and gas utility industries, the Department isconsidering using the Energy Information Administration's (EIA) National Energy Modeling System (NEMS). NEMS is a large multisectoral partial equilibrium model ofthe U.S. energy sector that has been developed over several years by the Energy Information Administration (EIA) primarily forthe purpose ofpreparing the Annual Energy Outlook(AEO). NEMS produces awidely recognized baseline forecast for the U.S. through 2020 and isavailable in the public domain. Outputs ofthe utility analysis can parallel results that appear inthe latest AEO, with some additions. Typical output includes forecasts ofsales and price. The entire utility analysis can be conducted as a policy deviation from the latest AEO, and the assumptions in place there can serve as the basic set ofassumptions applied. For example, the operating characteristics (energy conversion efficiency, emissions rates, etc.) offuture electricity generating plants can be exactly those used in the latest AEO. It should be noted that forecasting for the electric utility industry is seriously complicated bythe implications ofindustry restructuring, which is only partially implemented inthe latest AEO version. Exploration ofthe consequences ofa wider restructuring pattern can be explored through an appropriate scenario.

IsNEMS appropriatefor conductingthe UtilityImpact Analysis? Ifnot,are you awareofother methodsforconductingthe analysis?



### 14.0 Environmental Analysis The standards' analysis tracks three types ofenergy-related emissions: sulfur dioxide (SO2), nitrous oxides (NOx) and carbon dioxide (CO2). To perform theEnvironmental Analysis, the Department isconsidering using EIA's National Energy Modeling System (NEMS). As described inthe previous section, NEMS isalso being considered for the Utility Impact Analysis. Outputs ofthe environmental analysis will mostly parallel results that appear inthe latest AEO, with some additions. The entire environmental analysis can be conducted as a policy deviation from the latest AEO, and the assumptions in place there can be the basic set ofassumptions applied. For example, the operating characteristics (energy conversion efficiency, emissions rates, etc.) of future electricity generating plant can be exactly those used in the latest AEO. Carbon emissions are tracked inNEMS by a quite detailed carbon module which should give good results because ofits broad coverage ofall sectors and inclusion ofinteractive effects. NEMS also includes a module for SO 2 

### allowance trading and delivers a forecast of SO 2 

### allowance 27 Areyou aware of anyregulations thatwouldcause a cumulative burden with this rulemaking? 

### 13.0 Utility Impacts To perform the Utility Impacts Analysis, which would include an analysis ofboth the electric and gas utility industries, the Department is considering using the Energy Information Administration's (EIA) National Energy Modeling System (NEMS). NEMS is a large multisectoral partial equilibrium model ofthe U.S. energy sector that has been developed over several years by the Energy Information Administration (EIA) primarily for the purpose ofpreparing the AnnualEnergy Outlook (AEO). NEMS produces awidely recognized baseline forecast for the U.S. through 2020 and is available in the public domain. Outputs ofthe utility analysis can parallel results that appear in the latest AEO, with some additions. Typical output includes forecasts ofsales and price. The entire utility analysis can be conducted as apolicy deviation from the latest AEO, and the assumptions in place there can serve as the basic set ofassumptions applied. For example, the operating characteristics (energy conversion efficiency, emissions rates, etc.) offuture electricity generating plants can be exactly those used in the latest AEO. It should be noted that forecasting for the electric utility industry is seriously complicated by the implications ofindustry restructuring, which is only partially implemented in the latest 

### ABo

. version. Exploration ofthe consequences ofawider restructuring pattern can be explored through 

## an appropriate scenario.

IsNEMSappropriate for conducting the UtilityImpactAnalysis? lfnot, areyouaware of other methods for conducting the analYSis?



### 14.0 Environmental Analysis The standards' analysis tracks three types ofenergy-related emissions: sulfur dioxide (S02), nitrous oxides (NOx) and carbon dioxide (C02), To perform the Environmental Analysis, the Department is considering using EIA's National Energy Modeling System (NEMS). As described in the previous section, NEMS is also being considered for the Utility Impact Analysis. Outputs ofthe environmental analysis will mostly parallel results that appear in the latest AEO, with some additions. The entire environmental analysis can be conducted as a policy deviation from the latest AEO, and the assumptions in place there can be the basic set ofassumptions applied. For example, the operating characteristics (energy conversion efficiency, emissions rates, etc.) of future electricity generating phmt can be exactly those used in the latest AEO. Carbon emissions are tracked in NEMS by a quite detailed carbon module which should give good results because ofits broad coverage ofall sectors and inclusion ofinteractive effects. NEMS also includes a module for S02 allowance trading and delivers a forecast ofS02 allowance 27 Areyou aware of anyregulations thatwouldcause a cumulative burden with this rulemaking? 

### 13.0 Utility Impacts To perform the Utility Impacts Analysis, which would include an analysis ofboth the electric and gas utility industries, the Department is considering using the Energy Information Administration's (EIA) National Energy Modeling System (NEMS). NEMS is a large multisectoral partial equilibrium model ofthe U.S. energy sector that has been developed over several years by the Energy Information Administration (EIA) primarily for the purpose ofpreparing the AnnualEnergy Outlook (AEO). NEMS produces awidely recognized baseline forecast for the U.S. through 2020 and is available in the public domain. Outputs ofthe utility analysis can parallel results that appear in the latest AEO, with some additions. Typical output includes forecasts ofsales and price. The entire utility analysis can be conducted as apolicy deviation from the latest AEO, and the assumptions in place there can serve as the basic set ofassumptions applied. For example, the operating characteristics (energy conversion efficiency, emissions rates, etc.) offuture electricity generating plants can be exactly those used in the latest AEO. It should be noted that forecasting for the electric utility industry is seriously complicated by the implications ofindustry restructuring, which is only partially implemented in the latest 

### ABo

. version. Exploration ofthe consequences ofawider restructuring pattern can be explored through 

## an appropriate scenario.

IsNEMSappropriate for conducting the UtilityImpactAnalysis? lfnot, areyouaware of other methods for conducting the analYSis?



### 14.0 Environmental Analysis The standards' analysis tracks three types ofenergy-related emissions: sulfur dioxide (S02), nitrous oxides (NOx) and carbon dioxide (C02), To perform the Environmental Analysis, the Department is considering using EIA's National Energy Modeling System (NEMS). As described in the previous section, NEMS is also being considered for the Utility Impact Analysis. Outputs ofthe environmental analysis will mostly parallel results that appear in the latest AEO, with some additions. The entire environmental analysis can be conducted as a policy deviation from the latest AEO, and the assumptions in place there can be the basic set ofassumptions applied. For example, the operating characteristics (energy conversion efficiency, emissions rates, etc.) of future electricity generating phmt can be exactly those used in the latest AEO. Carbon emissions are tracked in NEMS by a quite detailed carbon module which should give good results because ofits broad coverage ofall sectors and inclusion ofinteractive effects. NEMS also includes a module for S02 allowance trading and delivers a forecast ofS02 allowance 27

### prices. It is important to note, however, that accurate simulation ofSO 2

### trading tends to imply that physical emissions effects will be zero. This fact has caused considerable confusion in the past, and, inprior appliance standards analyses, a simple'emission reduction has been reported with the caveat that emissions trading implies that this reduction will unlikely be realized. However, there is an SO2 benefit from conservation in the form ofalower allowance price, and if big enough to be calculable byNEMS, this value can be reported. NEMS also has an algorithm for estimating NOx emissions from power generation, but alone this is somewhat inadequate because it does not estimate in-house emissions. A separate in-homeNOx emissions estimation capability, based on simple emissions factors derived from general literature, may need to be developed. The results for the environmental analysis can be inthe form ofa complete NEMS run. In general, NEMS outputs become the tables ofan AEO, and these should provide a good idea ofthe range ofresults available. Reported in a NEMS run are NOx and Carbon emissions inthe power sector and a resulting SO2 trading price.

IsNEMSappropriate forconductingtheEnvironmental Analysis? Ifnot, are youawareof other methods forconductingtheanalysis? Are thereanyotherenvironmentalfactors theDepartment shouldconsider? Ifso, how?

28 

### prices. It is important to note, however, that accurate simulation ofSOz 

### trading tends to imply that physical emissions effects will be zero. This fact has caused considerable confusion in the past, and, in prior appliance standards analyses, a simple'emission reduction has been reported with the caveat that emissions trading implies that this reduction will 

### unlikely be realized. However, there is an SOz 

### benefit from conservation in the form ofa lower allowance price, and if 

### big enough to be calculable by NEMS, this value can be reported. NEMS also has an algorithm for estimating NOx emissions from power generation, but alone this is somewhat inadequate because it does not estimate in-house emissions. A separate in-home NOx 

### emissions estimation capability, based on simple emissions factors derived from general literature, may need to be developed. The results for the environmental analysis can be in the form ofa complete NEMS run. In

### general, NEMS outputs become the tables ofan AEO" and these should provide agood idea ofthe range

, ofresults available. Reported in aNEMS run are NOx and Carbon emissions in the power sector

and a resulting SOz 

### trading price. J



### IsNEMSappropriate/orconductingtheEnvironmentalAnalysis? 

### If not, areyouaware

## 0/ other methods/orconductingthe analysis?Are there anyotherenvironmental/actorstheDepartment shouldconsider? 

### If so, how?

28 

### prices. It is important to note, however, that accurate simulation ofSOz 

### trading tends to imply that physical emissions effects will be zero. This fact has caused considerable confusion in the past, and, in prior appliance standards analyses, a simple'emission reduction has been reported with the caveat that emissions trading implies that this reduction will 

### unlikely be realized. However, there is an SOz 

### benefit from conservation in the form ofa lower allowance price, and if 

### big enough to be calculable by NEMS, this value can be reported. NEMS also has an algorithm for estimating NOx emissions from power generation, but alone this is somewhat inadequate because it does not estimate in-house emissions. A separate in-home NOx 

### emissions estimation capability, based on simple emissions factors derived from general literature, may need to be developed. The results for the environmental analysis can be in the form ofa complete NEMS run. In

### general, NEMS outputs become the tables ofan AEO" and these should provide agood idea ofthe range

, ofresults available. Reported in aNEMS run are NOx and Carbon emissions in the power sector

and a resulting SOz 

### trading price. J



### IsNEMSappropriate/orconductingtheEnvironmentalAnalysis? 

### If not, areyouaware

## 0/ other methods/orconductingthe analysis?Are there anyotherenvironmental/actorstheDepartment shouldconsider? 

### If so, how?

28