Regulatory Impact 

Analysis for Fossil 

Fuel Reduction Rule

Prepared for the U.S. Department of Energy 

Federal Energy Management Program

By Pacific Northwest National Laboratory

July 2014
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PNNL-23428

Regulatory Impact Analysis for Fossil Fuel 

Reduction Rule

MA Halverson

DB Belzer

July 2014

Prepared for 

U.S. Department of Energy

Federal Energy Management Program

under Contract DE-AC05-76RL01830

Pacific Northwest National Laboratory

Richland, Washington 99352
Summary

Section 433 of the Energy Independence and Security Act of 2007 (Pub. L. 110-140) (EISA) directed 

the U.S. Department of Energy (DOE) to establish fossil fuel-generated energy consumption limits for 

new Federal buildings and Federal buildings undergoing major renovation (42 U.S.C. 6834(a)(3)(D)(i)).1

 

The statute requires fossil fuel-generated energy2 consumption reductions starting at 55% in fiscal year 

(FY) 2010 and increasing to 100% in FY 2030 and beyond. These reduction targets are measured relative 

to “typical” building energy use, as measured by DOE’s Commercial Building Energy Consumption 

Survey (CBECS) and Residential Energy Consumption Survey (RECS). These targets only apply to new 

construction or major renovations with a total cost of $2.5 million (in 2007 dollars) or more and “public 

buildings” (as defined at 40 U.S.C. 3301) for which a prospectus to Congress is required under 40 U.S.C. 

3307. The proposed rule is estimated to save 1.9 million metric tons of carbon dioxide emissions in 

2030.

DOE has determined that the standards for Federal buildings outlined in the fossil fuel reduction rule 

constitute an “economically significant regulatory action” under Executive Order (E.O.) 12866, 

Regulatory Planning and Review. DOE has therefore committed to comparing regulatory alternatives to 

the rule by performing a Regulatory Impact Analysis (RIA). This RIA, which DOE has prepared 

pursuant to E.O. 12866, examines the economic impact of the Fossil Fuel-Reduction Rule on the 

construction cost and total life-cycle construction and operating costs of Federal construction. DOE notes 

that the $2.5 million construction cost threshold for this fossil fuel-reduction rule almost certainly rules 

out application of this rule to Federal low-rise residential buildings as does the “public building” requiring 

a prospectus threshold because the definition at 40 U.S.C. 3301 specifically excludes residential 

buildings. Thus, the remainder of this RIA will focus on Federal commercial and multifamily high-rise 

residential buildings. 

In addition to analyzing the impacts on Federal buildings of the provisions in the proposed rule, DOE 

also performed analyses for the impacts for two alternatives to the rule: (1) a “no-action” alternative that 

assumes this rule is not published, but that existing energy efficiency requirements for new Federal 

construction remain in effect; and, (2) a more stringent “zero fossil fuel” alternative that requires Federal 

buildings to go immediately to the level of performance required in the rule as of FY 2030, i.e., a 100% 

1 The proposed Fossil Fuel-Reduction Rule includes the following definition of a New Federal Building: “New 

Federal building means any new building (including a complete replacement of an existing building from the 

foundation up) to be constructed by, or for the use of, any Federal agency. Such term shall include buildings built for 

the purpose of being leased by a Federal agency, and privatized military housing.” The same document also includes 

the definition of Major Renovation: “Major renovation means changes to a building that provide significant 

opportunities for substantial improvement in energy efficiency. This may include, but is not limited to, replacement 

of the HVAC system, the lighting system, the building envelope, and other components of the building that have a 

major impact on energy usage. Major renovation also includes a renovation of any kind that provides significant 

opportunities for compliance with other applicable requirements in this part.” 2 Fossil fuel-generated energy consumption is the sum of fossil fuel used directly on site and the fossil fuel used to 

generate electricity that is used on site. For this rule, the fossil fuel used on site is the source fossil fuel energy, 

including transmission and distribution losses. The fossil fuel used to generate electricity on site is defined as 71% 

of the source energy (as generated at the power plant and including transmission and distribution losses). See the 

rule itself for a detailed discussion of these definitions. 

iii

 
reduction of a typical building’s fossil fuel-generated energy consumption, or zero fossil fuel usage. The 

outputs of these analyses are shown in Tables S-1 and S-2. 

Table S-1. Annualized Benefits and Costs to Federal Government for New and Existing 

Construction under the Fossil Fuel-Reduction Rule(a)

Discount Rate

Primary 

Estimate(b)

Low 

Estimate(b)

High 

Estimate(b)

Monetized

(2012 $million/year)

Benefits

Operating (Energy) Cost Savings 7% 349.2 336.1 468.9

3% 606.7 580.1 841.4

CO2 Reduction at $12.9/t(c) 5% 46.0 46.0 46.0

CO2 Reduction at $40.8/t(c) 3% 178.6 178.6 178.6

CO2 Reduction at $62.2/t(c) 2.50% 270.6 270.6 270.6

CO2 Reduction at $117.0/t(c) 3% 550.9 550.9 550.9

NOX Reduction at $2,639/t(c) 7% 2.9 2.9 2.9

3% 4.9 4.9 4.9

Total (Operating Cost Savings, 

CO2 Reduction and NOX

Reduction)(d)

7% plus CO2 range 398 to 903 385 to 890 518 to 1023

7% 530.7 517.6 650.4

3% 790.2 763.6 1024.9

3% plus CO2 range 658 to 1163 631 to 1136 892 to 1397

Costs

Incremental Purchase Price 

Increase

7% 479.4 572.6 386.3

3% 574.6 695.6 453.5

Net Benefits/Costs

Total (Operating Cost Savings, 

CO2 Reduction and NOX

Reduction, Minus Incremental 

Cost Increase to Buildings)

7% plus CO2 range -28 to 477 -188 to 317 132 to 636

7% 104.6 -55.0 264.2

3% 215.7 68.0 571.4

3% plus CO2 range 187 to 692 -65 to 440 439 to 944

(a) Incremental costs are calculated for buildings constructed or renovated in 2015-2044; total benefits extend through 2074. (b) The primary, low, and high estimates utilize forecasts of energy prices from the Annual Energy Outlook 2013 reference 

case (DOE 2012b). The low and high cases were based upon the percentage price deviations from the Annual Energy 

Outlook 2013 reference case as provided in the Low Economic Growth case and High Economic Growth case, 

respectively. 

(c) These values represent global values (in 2012$) of the social cost of CO2 (SCC) emissions in 2013 under several 

scenarios developed by the Interagency Working Group on Social Cost of Carbon (SCC) (OMB 2013). The values of 

$12.9, $40.8, and $62.2 per metric ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount 

rates, respectively. The value of $117.0 per ton represents the 95th percentile of the SCC distribution calculated using a 

3% discount rate. For NOx, values were extracted from OMB guidance (OMB 2006) and updated to 2012$. An average 

value ($2,639) of the low ($468) and high ($4,809) values was used.

(d) Total monetary benefits for both the 3% and 7% cases utilize the central estimate of social cost of NOx and CO2

emissions calculated at a 3% discount rate (averaged across three integrated assessment models (IAMs)), which is equal 

to $40.8/metric ton (in 2012$).

.

iv
Table S-2 Annualized Benefits and Costs to the Federal Government for New and Existing 

Construction under the “Zero Fossil Fuel” Alternative(a)

Discount Rate

Primary 

Estimate(b)

Low 

Estimate(b)

High 

Estimate(b)

Monetized 

(2012 $million/year)

Benefits

Operating (Energy) Cost Savings 7% 601.4 583.1 781.2

3% 1076.6 893.6 1259.6

CO2 Reduction at $12.9/t(c) 5% 68.6 68.6 68.6

CO2 Reduction at $40.8/t(c) 3% 257.9 257.9 257.9

CO2 Reduction at $62.2/t(c) 2.50% 388.0 388.0 388.0

CO2 Reduction at $117.0/t(c) 3% 793.2 793.2 793.2

NOX Reduction at $2,639/t(c) 7% 4.8 4.8 4.8

3% 7.1 7.1 7.1

Total (Operating Cost Savings, 

CO2 Reduction and NOX

Reduction)(d)

7% plus CO2 range 675 to 1399 657 to 1381 855 to 1579

7% 864.1 845.8 1043.8

3% 1341.6 1158.6 1524.7

3% plus CO2 range 1152 to 1877 969 to 1694 1335 to 2060

Costs

Incremental Purchase Price 

Increase

7% 1043.8 1167.0 920.6

3% 1021.6 1161.1 882.2

Net Benefits/Costs

Total (Operating Cost Savings, 

CO2 Reduction and NOX

Reduction, Minus Incremental 

Cost Increase to Buildings)

7% plus CO2 range -288 to 436 -510 to 214 -66 to 659

7% -99.0 -321.2 123.2

3% 320.0 -2.5 642.5

3% plus CO2 range 131 to 855 -192 to 533 453 to 1178

(a) Incremental costs are calculated for buildings constructed or renovated in 2014-2044; total benefits extend through 2074. (b) The primary, low, and high estimates utilize forecasts of energy prices from the Annual Energy Outlook 2013 reference 

case (DOE 2012b). The low and high cases were based upon the percentage price deviations from the Annual Energy 

Outlook 2013 reference case as provided in the Low Economic Growth case and High Economic Growth case, 

respectively. 

(c) These values represent global values (in 2012$) of the social cost of CO2 (SCC) emissions in 2012 under several 

scenarios developed by the Interagency Working Group on Social Cost of Carbon (SCC) (OMB 2013). The values of 

$12.9, $40.8, and $62.2 per metric ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount 

rates, respectively. The value of $117.0 per ton represents the 95th percentile of the SCC distribution calculated using a 

3% discount rate. For NOx, values were extracted from OMB guidance (OMB 2006) and updated to 2012$. An average 

value ($2,639) of the low ($468) and high ($4,809) values was used.

(d) Total monetary benefits for both the 3% and 7% cases utilize the central estimate of social cost of NOx and CO2

emissions calculated at a 3% discount rate (averaged across three integrated assessment models (IAMs)), which is equal 

to $40.8/metric ton (in 2012$).

DOE also considered non-regulatory policy alternatives (e.g., tax credits, rebates, labeling programs) 

to the rule, but was unable to identify any non-regulatory policy alternatives that would be viable for 

Federal buildings.

Based upon the primary estimates from Table S-1 and Table S-2, a summary of the annualized net 

benefits estimated for the regulatory policy options considered in this RIA are presented in Table S-3. To 

reiterate, future incremental costs include both measures to improve the energy efficiency of Federal 

facilities as well as incorporating renewable energy [solar photovoltaic (PV)] technologies when 

necessary. Future benefits incorporate both reductions in annual energy expenditures and monetized 

benefits of emissions reductions. The analysis shows that applying a 3% or 7% discount rate to future 

iii
costs and benefits of the proposed rule yields a net economic savings to the nation. For the “Zero Fossil 

Fuel” alternative, which would require installation of solar PV systems on many new Federal facilities in 

the near term, the net economic benefits are negative using the 7% discount rate, but positive using the 

3% discount rate assumption. 

Table S-3. Annualized Net Benefits of Regulatory Policy Options (primary estimate)

7% Discount Rate 

(2012 $millions/year)

3% Discount Rate 

(2012 $millions/year)

Proposed Rule 104.6 215.7

“Zero Fossil Fuel” Alternative -99.0 320.0

iv
Contents

Summary........................................................................................................................................... iii

1.0 Introduction .............................................................................................................................1.1

2.0 Regulatory Options..................................................................................................................2.1

3.0 Non-Regulatory Options..........................................................................................................3.1

4.0 Analysis Methodology.............................................................................................................4.1

4.1 Key Assumptions in Analysis Methodology...................................................................4.1

4.1.1 New Federal Commercial Building Construction Volume per Year ...................4.1

4.1.2 New Federal Commercial Construction Building Type Distribution...................4.2

4.1.3 New Federal Commercial Fraction over $2.5 Million in Cost or For Which a 

Prospectus to Congress is Required .....................................................................4.2

4.1.4 New Federal Construction Building Energy Usage .............................................4.3

4.1.5 Federal Commercial Renovation Volume per Year.............................................4.3

4.1.6 Federal Commercial Renovation Fraction over $2.5 million in Cost or for which 

a Prospectus to Congress is Required...................................................................4.4

4.1.7 Federal Commercial Major Renovation Fraction.................................................4.5

4.1.8 Federal Commercial Major Renovation Savings Fraction ...................................4.5

4.1.9 Typical Existing Federal Building Energy Usage ................................................4.5

4.1.10 Typical Existing Federal Building Electricity Fraction........................................4.6

4.2 Cost Estimates.................................................................................................................4.6

4.2.1 New Construction Baseline under 10 CFR Part 433 Energy Efficiency 

Performance Standards.........................................................................................4.6

4.2.2 New Construction under Proposed Rule ..............................................................4.6

4.2.3 New Construction under Zero Fossil Fuel Alternative.........................................4.7

4.2.4 Existing Buildings Baseline under 10 CFR Part 433 Energy Efficiency 

Performance Standards.........................................................................................4.8

4.2.5 Existing Buildings under Proposed Rule or Zero Fossil Fuel Alternative ...........4.8

5.0 Conclusion...............................................................................................................................5.1

6.0 References ..................................................................................................................................1

v
Tables

S-1. Annualized Benefits and Costs to Federal Government for New and Existing Construction 

under the Fossil Fuel-Reduction Rule(a)............................................................................................... iv

S-2 Annualized Benefits and Costs to the Federal Government for New and Existing 

Construction under the “Zero Fossil Fuel” Alternative(a) ....................................................................iii

S-3. Annualized Net Benefits of Regulatory Policy Options (primary estimate)....................................... iv

1 Construction Cost Increases under the Fossil Fuel-Reduction Rule and “Zero Fossil Fuel” 

Alternative .................................................................................................................................... 2.1

2 Annualized Benefits and Costs to Federal Government for New and Existing Construction 

under the Fossil Fuel-Reduction Rule................................................................................... 2.4

3 Annualized Benefits and Costs to the Federal Government for New and Existing 

Construction under the “Zero Fossil Fuel” Alternative ................................................................ 2.5

4 Annualized Net Benefits of Regulatory Policy Options............................................................... 5.1

vi
1.0 Introduction

Section 433 of the Energy Independence and Security Act of 2007 (Pub. L. 110-140) (EISA) directed 

the U.S. Department of Energy (DOE) to establish fossil fuel-generated energy consumption limits for 

new Federal buildings and Federal buildings undergoing major renovation (42 U.S.C. 6834(a)(3)(D)(i)).

1

The statute requires fossil fuel-generated energy2 consumption reductions starting at 55% in fiscal year 

(FY) 2010 and increasing to 100% in FY 2030 and beyond. These reduction targets are measured relative 

to “typical” building energy use, as measured by DOE’s Commercial Building Energy Consumption 

Survey (CBECS) and Residential Energy Consumption Survey (RECS). These targets only apply to new 

construction or major renovations with a total cost of $2.5 million (in 2007 dollars) or more and “public 

buildings” (as defined at 40 U.S.C. 3301) for which a prospectus to Congress is required under 40 U.S.C. 

3307. The proposed rule is estimated to save 1.9 million metric tons of carbon emissions in 2030. 

DOE has determined that the standards for Federal buildings outlined in the Fossil Fuel-Reduction 

Rule constitute an “economically significant regulatory action” under Executive Order (E.O.) 12866, 

Regulatory Planning and Review. DOE has therefore committed to comparing regulatory alternatives to 

the rule by performing a Regulatory Impact Analysis (RIA). This RIA, which DOE has prepared 

pursuant to E.O. 12866, examines the economic impact of the fossil fuel-reduction rule on the 

construction cost and total life-cycle construction and operating costs of Federal construction. DOE notes 

that the $2.5 million construction cost threshold for this Fossil Fuel-Reduction Rule almost certainly rules 

out application of this rule to Federal low-rise residential buildings as does the “public building” requiring 

a prospectus threshold because the definition at 40 U.S.C. 3301 specifically excludes residential 

buildings. Thus, the remainder of this RIA will focus on Federal commercial and multifamily high-rise 

residential buildings. DOE performed analyses for the impacts on Federal buildings for two alternatives

to the rule: (1) a “no-action” alternative that assumes this rule is not published, but that existing energy 

efficiency requirements for new Federal construction remain in effect; and, (2) a more stringent “zero 

fossil fuel” alternative that requires Federal buildings to go immediately to the level of performance 

required in the rule as of FY 2030, i.e., a 100% reduction of a typical building’s fossil fuel-generated 

energy consumption, or zero fossil fuel usage. Costs and benefits of each alternative to the rule are 

compared in this RIA. DOE also considered non-regulatory policy alternatives (e.g., tax credits, rebates,

labeling programs) to the rule, but was unable to identify any non-regulatory policy alternatives that 

would be viable for Federal buildings.

1 The proposed Fossil Fuel-Reduction Rule includes the following definition of a New Federal Building: “New 

Federal building means any new building (including a complete replacement of an existing building from the 

foundation up) to be constructed by, or for the use of, any Federal agency. Such term shall include buildings built for 

the purpose of being leased by a Federal agency, and privatized military housing.” The same document also includes 

the definition of Major Renovation: “Major renovation means changes to a building that provide significant 

opportunities for substantial improvement in energy efficiency. This may include, but is not limited to, replacement 

of the HVAC system, the lighting system, the building envelope, and other components of the building that have a 

major impact on energy usage. Major renovation also includes a renovation of any kind that provides significant 

opportunities for compliance with other applicable requirements in this part.” 2 Fossil fuel-generated energy consumption is the sum of fossil fuel used directly on site and the fossil fuel used to 

generate electricity that is used on site. For this rule, the fossil fuel used on site is the source fossil fuel energy, 

including transmission and distribution losses. The fossil fuel used to generate electricity on site is defined as 71% 

of the source energy (as generated at the power plant and including transmission and distribution losses). See the 

rule itself for a detailed discussion of these definitions. 

1.1

 
2.0 Regulatory Options

DOE considered several alternatives in developing the fossil fuel-reduction rule consistent with its 

statutory mandate to base the fossil fuel-generated energy consumption limits on the FY 2003 version of 

CBECS and RECS. Specifically, as the baseline for this analysis DOE considered a “no-action”

alternative of not issuing the rule, i.e., leaving new Federal construction subject to energy efficiency 

performance requirements found in 10 CFR Part 433, “Energy Efficiency Standards for New Federal 

Commercial and Multi-Family High-Rise Residential Buildings”, which requires that new Federal 

buildings be built with energy consumption of at least 30% below the levels established in 

ANSI/ASHRAE/IES Standard 90.1-2010, Energy Standard for Buildings Except Low-Rise Residential 

Buildings, if life-cycle cost-effective.1

 

DOE also considered a “zero fossil fuel” alternative of immediately requiring the lowest fossil fuelgenerated energy consumption limits specified in the rule of zero fossil fuel usage. The impact on 

construction costs over a 30-year period from 2015-2044 of adopting the rule, and going immediately to 

“zero fossil fuel usage” alternative, compared to the baseline “no-action” alternative is presented in Table 

1. The first costs of construction are greatly dependent on the assumed cost of solar photovoltaic (PV) 

power in the future2

. Columns labeled “High PV-Cost Scenario” (second and fourth columns in the table) 

assume only a modest decline in the cost of PV-generated electricity in the future in contrast to more 

significant cost reductions in the “Low PV-Cost Scenario” columns (third and fifth columns in the table). 

The specific key assumptions in the analysis are described in Section 4.1, while the origins of the cost 

estimates are described in Section 4.2.

Table 1. Construction Cost Increases under the Fossil Fuel-Reduction Rule and “Zero Fossil Fuel” 

Alternative (relative to baseline “no-action” alternative) 

Calendar 

Year

Fossil FuelReduction Rule -

High PV Cost 

Scenario

(2012 $million)

Fossil FuelReduction Rule -

Low PV Cost 

Scenario

(2012 $million)

“Zero Fossil Fuel” 

Alternative - High PV 

Cost Scenario

(2012 $million)

“Zero Fossil Fuel”

Alternative - Low PV 

Cost Scenario

(2012 $million)

2015 $30 $30 $1,194 $1,136

2016 $30 $30 $1,189 $1,103

2017 $30 $30 $1,183 $1,071

2018 $30 $30 $1,178 $1,040

2019 $30 $30 $1,173 $1,010

2020 $536 $447 $1,191 $1,005

2021 $534 $435 $1,186 $976

2022 $532 $424 $1,181 $949

2023 $530 $413 $1,175 $922

2024 $528 $402 $1,170 $896

1 10 CFR 433 currently requires that new Federal buildings be built with energy consumption at least 30% below the 

levels established in Standard 90.1-2007, if life-cycle cost-effective. 

2 Solar PV systems are assumed to be used to meet the targets of the Fossil Fuel-Reduction Rule once conservation 

measures alone can no longer meet the targets. Solar PV systems were chosen as commonly used on-site renewable 

energy systems. On-site renewable energy systems were chosen over use of renewable energy certificates (RECs) or 

power purchase agreements (PPAs) because REC and PPA usage is limited in the Fossil Fuel-Reduction Rule. 

2.1

 
Table 1. (continued)

Calendar

Year

Fossil FuelReduction Rule -

High PV Cost 

Scenario

(2012 $million)

Fossil FuelReduction Rule -

Low PV Cost 

Scenario

(2012 $million)

“Zero Fossil Fuel” 

Alternative - High PV 

Cost Scenario

(2012 $million)

“Zero Fossil Fuel” 

Alternative - Low PV 

Cost Scenario

(2012 $million)

2025 $841 $618 $1,165 $871

2026 $837 $601 $1,160 $847

2027 $834 $585 $1,155 $824

2028 $830 $569 $1,150 $801

2029 $827 $554 $1,145 $778

2030 $1,135 $736 $1,140 $757

2031 $1,130 $716 $1,140 $757

2032 $1,125 $696 $1,140 $757

2033 $1,120 $677 $1,140 $757

2034 $1,115 $658 $1,140 $757

2035 $1,110 $640 $1,140 $757

2036 $1,110 $640 $1,140 $757

2037 $1,110 $640 $1,140 $757

2038 $1,110 $640 $1,140 $757

2039 $1,110 $640 $1,140 $757

2040 $1,110 $640 $1,140 $757

2041 $1,110 $640 $1,140 $757

2042 $1,110 $640 $1,140 $757

2043 $1,110 $640 $1,140 $757

2044 $1,110 $640 $1,140 $757

PV = photovoltaic

As shown in Table 1, both the Fossil Fuel-Reduction Rule and the “zero fossil fuel” alternative would 

increase the cost of new construction and renovations to existing buildings relative to the “no-action” 

alternative. One item to note in Table 1 is the relatively low cost associated with the first 2 years of the 

analysis period under the Fossil Fuel-Reduction Rule. The estimated cost increase for these 2 years is 

associated entirely with existing buildings because the cost to design new buildings to the “no-action” 

alternative is higher than the cost estimated under the rule. This increase in cost is balanced by reducing 

the environmental impact of energy generation-related emissions. Therefore, the net present value of the 

estimated future stream of yearly benefits and costs to the Federal government (calculated using two 

different discount rates of 3% and 7%) is the difference between the increased purchase price and the 

decreased costs associated with annual energy use and emissions. 

The results of expressing the net present value as annualized benefits (over the period 2015-2044) for 

the Fossil Fuel-Reduction Rule and the “zero fossil fuel” alternative are presented in Table 2 and Table 3, 

respectively, for both new construction and existing buildings. The present value of incremental costs is 

computed over the 30-year period extending from 2015 through 2044. The present value of operating 

cost savings and environmental benefits is computed over a longer period, 2015-2074, to capture all of the 

benefits accruing to buildings built through the year 2044. Thus, for analytical purposes, the benefits 

2.2
were assumed to extend for a period of 30 years beyond the year of construction. However, the actual 

figures shown in Table 2 and Table 3 are expressed as annualized values over the 30-year period.3

Primary, low, and high estimates of the benefits and costs were developed to indicate the possible 

range of these metrics. The future energy prices used to compute operating cost savings for the primary 

estimate were taken from the Annual Energy Outlook 2013 reference case. The low estimate combines 

slightly lower energy prices as compared to the high economic growth scenario reference case in the AEO 

2013 case, along with the construction cost developed as part of the high-cost PV case (used for 

incremental construction cost). Alternatively, the high estimate combines higher energy prices relative to 

the low economic growth scenario reference case in the AEO 2013 case, along with the construction cost 

developed as part of the low-cost PV case. The average incremental construction cost based upon the 

high-cost PV case and the low-cost PV case was used as the primary estimate of incremental construction 

cost.

The net benefit in 2012 dollars to the Federal government using the primary estimate for PV system 

costs is $104.6 million/year using the 7% discount rate, while it is $215.7 million/year using the 3% 

discount rate for the Fossil Fuel-Reduction Rule (Table 2), while the corresponding values are -$99.0 

million/year using the 7% discount rate and $320.0 million per year using the 3% discount rate for the 

“zero fossil fuel” alternative to the rule (Table 3).

3 The purpose of extending the period out 60 years is to capture the life-cycle economic benefits of the buildings 

built in the last year of the analysis period (2044). This is the standard methodology used by DOE in its analysis of 

equipment energy-efficiency standards. 

2.3

 
Table 2. Annualized Benefits and Costs to Federal Government for New and Existing Construction 

under the Fossil Fuel-Reduction Rule(a)

Discount Rate

Primary 

Estimate(b)

Low 

Estimate(b)

High 

Estimate(b)

Monetized

(2012 $million/year)

Benefits

Operating (Energy) Cost Savings 7% 349.2 336.1 468.9

3% 606.7 580.1 841.4

CO2 Reduction at $12.9/t(c) 5% 46.0 46.0 46.0

CO2 Reduction at $40.8/t(c) 3% 178.6 178.6 178.6

CO2 Reduction at $62.2/t(c) 2.50% 270.6 270.6 270.6

CO2 Reduction at $117.0/t(c) 3% 550.9 550.9 550.9

NOX Reduction at $2,639/t(c) 7% 2.9 2.9 2.9

3% 4.9 4.9 4.9

Total (Operating Cost Savings, 

CO2 Reduction and NOX

Reduction)(d)

7% plus CO2 range 398 to 903 385 to 890 518 to 1023

7% 530.7 517.6 650.4

3% 790.2 763.6 1024.9

3% plus CO2 range 658 to 1163 631 to 1136 892 to 1397

Costs

Incremental Purchase Price 

Increase

7% 479.4 572.6 386.3

3% 574.6 695.6 453.5

Net Benefits/Costs

Total (Operating Cost Savings, 

CO2 Reduction and NOX

Reduction, Minus Incremental 

Cost Increase to Buildings)

7% plus CO2 range -28 to 477 -188 to 317 132 to 636

7% 104.6 -55.0 264.2

3% 215.7 68.0 571.4

3% plus CO2 range 187 to 692 -65 to 440 439 to 944

(a) Incremental costs are calculated for buildings constructed or renovated in 2015-2044; total benefits extend through 2074. (b) The primary, low, and high estimates utilize forecasts of energy prices from the Annual Energy Outlook 2013 reference 

case. The low and high cases were based upon the percentage price deviations from the Annual Energy Outlook 2013

(DOE 2012b) reference case as provided in the Low Economic Growth case and High Economic Growth case, 

respectively. 

(c) These values represent global values (in 2012$) of the social cost of CO2 (SCC) emissions in 2013 under several 

scenarios developed by the Interagency Working Group on Social Cost of Carbon (SCC) (OMB 2013). The values of 

$12.9, $40.8, and $62.2 per metric ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount 

rates, respectively. The value of $117.0 per ton represents the 95th percentile of the SCC distribution calculated using a 

3% discount rate. For NOx, values were extracted from OMB guidance (OMB 2006) and updated to 2012$. An average 

value ($2,639) of the low ($468) and high ($4,809) values was used.

(d) Total monetary benefits for both the 3% and 7% cases utilize the central estimate of social cost of NOx and CO2 

emissions calculated at a 3% discount rate (averaged across three integrated assessment models (IAMs)), which is equal 

to $40.8/metric ton (in 2012$).

2.4
Table 3. Annualized Benefits and Costs to the Federal Government for New and Existing Construction 

under the “Zero Fossil Fuel” Alternative(a)

Discount Rate

Primary 

Estimate(b)

Low 

Estimate(b)

High 

Estimate(b)

Monetized

(2012 $million/year)

Benefits

Operating (Energy) Cost Savings 7% 601.4 583.1 781.2

3% 1076.6 893.6 1259.6

CO2 Reduction at $12.9/t(c) 5% 68.6 68.6 68.6

CO2 Reduction at $40.8/t(c) 3% 257.9 257.9 257.9

CO2 Reduction at $62.2/t(c) 2.50% 388.0 388.0 388.0

CO2 Reduction at $117.0/t(c) 3% 793.2 793.2 793.2

NOX Reduction at $2,639/t(c) 7% 4.8 4.8 4.8

3% 7.1 7.1 7.1

Total (Operating Cost Savings, 

CO2 Reduction and NOX

Reduction)(d)

7% plus CO2 range 675 to 1399 657 to 1381 855 to 1579

7% 864.1 845.8 1043.8

3% 1341.6 1158.6 1524.7

3% plus CO2 range 1152 to 1877 969 to 1694 1335 to 2060

Costs

Incremental Purchase Price 

Increase

7% 1043.8 1167.0 920.6

3% 1021.6 1161.1 882.2

Net Benefits/Costs

Total (Operating Cost Savings, 

CO2 Reduction and NOX

Reduction, Minus Incremental 

Cost Increase to Buildings)

7% plus CO2 range -288 to 436 -510 to 214 -66 to 659

7% -99.0 -321.2 123.2

3% 320.0 -2.5 642.5

3% plus CO2 range 131 to 855 -192 to 533 453 to 1178

(a) Incremental costs are calculated for buildings constructed or renovated in 2014-2044; total benefits extend through 2074. (b) The primary, low, and high estimates utilize forecasts of energy prices from the Annual Energy Outlook 2013 reference 

case. The low and high cases were based upon the percentage price deviations from the Annual Energy Outlook 2013

reference case as provided in the Low Economic Growth case and High Economic Growth case, respectively. 

(c) These values represent global values (in 2012$) of the social cost of CO2 (SCC) emissions in 2012 under several 

scenarios developed by the Interagency Working Group on Social Cost of Carbon (SCC) (OMB 2013). The values of 

$12.9, $40.8, and $62.2 per metric ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount 

rates, respectively. The value of $117.0 per ton represents the 95th percentile of the SCC distribution calculated using a 

3% discount rate. For NOx, values were extracted from OMB guidance (OMB 2006) and updated to 2012$. An average 

value ($2,639) of the low ($468) and high ($4,809) values was used.

(d) Total monetary benefits for both the 3% and 7% cases utilize the central estimate of social cost of NOx and CO2

emissions calculated at a 3% discount rate (averaged across three integrated assessment models (IAMs)), which is equal 

to $40.8/metric ton (in 2012$).

2.5
3.0 Non-Regulatory Options

DOE also considered certain non-regulatory policy alternatives such as tax credits, rebates, and 

labeling programs, and was unable to identify any non-regulatory policy alternatives that would be viable 

for Federal buildings. 

Federal agencies constructing new Federal buildings are not subject to Federal or state taxes and thus 

a tax credit program is not expected to be a viable option. DOE acknowledges that the current Federal tax 

incentive program8 can be utilized by Federal agencies, but only to the extent that agencies can assign the 

tax incentives to private sector design firms who work on Federal buildings. The Fossil Fuel-Reduction 

Rule imposes much more efficient requirements on the design of new Federal buildings than are called for 

in the current Federal tax incentives and the issue is not that designers cannot envision buildings that meet 

those requirements, but simply that constructing a building that meets those requirements is costly. 

Without a way of directly subsidizing agencies for the added cost, no non-regulatory option is likely to be 

useful. Additionally, using a tax credit or incentive for Federal construction would simply be transferring 

money from one Federal source of funding to another, with no net benefit to the Federal government. 

DOE also considered rebates and decided that any Federal rebate alternative suffers from the same 

problem as tax incentives – a rebate merely transfers money from one Federal source of funding to 

another, with no net benefit to the Federal government. 

DOE also consider labeling programs as an alternative to the Fossil Fuel-Reduction Rule. However, 

Federal agencies are already encouraged to voluntarily participate in green building rating programs9 and 

are required to use the Energy Star Portfolio Manager software by other legislation and rules. In that 

sense, many Federal buildings are already part of a labeling program so adding another label for fossil 

fuel usage was not judged a viable alternative. 

8 See http://www1.eere.energy.gov/buildings/tax_commercial.html for detailed description of Federal tax incentives 

for commercial buildings. 

9 Such as the US Green Building Council (USGBC) Leadership in Energy and Environmental Design (LEED) 

program (www.usgbc.org/LEED) and the Green Building Initiative (GBI) Green Globes program (www.thegbi.org). 

3.1

 
4.0 Analysis Methodology

In DOE’s previous rulemaking activities associated with efficiency standards for appliances and 

manufactured housing, the Energy Information Administration’s (EIA) National Energy Modeling 

System (NEMS)

10 model has been used to generate estimates of the change in environmental emissions 

that, in turn, drive the monetary benefits shown in Tables 2 and 3 above. In these analyses, the use of 

NEMS is necessary because both appliance efficiency standards and the manufactured housing rule have 

dealt with only single (or at most several) end uses. Because different end use energy reductions have 

different implications for environmental emission reductions (primarily because of their differential 

impact on various types of electricity generation), NEMS has been judged the best available tool for 

evaluating these impacts. The Fossil Fuel-Reduction Rule differs from these previous rules in that it 

covers all end uses in future Federal building construction, including major renovations. Accordingly, a 

more straightforward approach that is deemed to provide a comparable degree of accuracy is to assume 

that percentage reductions in overall commercial building energy use can be translated into comparable 

reductions in environmental emissions associated with the entire commercial building sector.11 

This approach, which may be termed a proportional impacts approach, assumes that because the 

Fossil Fuel-Reduction Rule applies to all end uses, the overall impacts of the rule applied to Federal 

buildings is approximately proportional to an overall reduction in all commercial building energy 

consumption. The proportional reduction in energy use is applied to the carbon emissions shown in the 

Annual Energy Outlook (NEMS) table entitled, “Table 18. Carbon Dioxide Emissions by Sector and 

Source.” A comparable methodology is applied for NOx emissions. 

The actual calculations undertaken in this analysis are found in two linked spreadsheet workbooks 

available from Pacific Northwest National Laboratory: (1) “FF RIA Input_0430 v3.xlsx;” and (2)

“National Benefits_FF_Rule_0430 v7.xlsx.” Each spreadsheet includes brief how-to instructions in 

worksheets titled “Background.”12 

4.1 Key Assumptions in Analysis Methodology

The following assumptions were made in the Fossil Fuel-Reduction Rule RIA. 

4.1.1 New Federal Commercial Building Construction Volume per Year

Assumption: 42 million square feet per year of new commercial and high-rise multifamily residential 

building construction.

Basis: This assumption is based on the analysis of 3 years of Federal construction data 

purchased by PNNL as part of a commercial building construction dataset. The data is 

10 See http://www.eia.gov/oiaf/aeo/overview/ for more information on NEMS. 

11 The decision to use an alternative approach to NEMS should not be taken as a criticism of NEMS. While NEMs 

is no longer used to analyze individual rules by DOE, it is used to evaluate generic cases and the results of those 

analyses are collapsed into “rules of thumb” results. 

12 For copies of these spreadsheets, contact Mark Halverson at mark.halverson@pnnl.gov. 

4.1

 
described in “Weighting Factors for the Commercial Building Prototypes Used in the 

Development of ANSI/ASHRAE/IESNA Standard 90.1-2010”, (Jarnagin and 

Bandyopadhyay, 2010). Data from the years 2007, 2008, and 2009 were used. The total 

Federal construction volume plus the construction volume associated with projects 

greater than $2 million based on the assumption that 20% of the construction cost would 

be related to design of the building and not the actual cost of the building materials and 

components. The results of this evaluation are as follows:

Year Federal Construction 

Volume (million ft2)

Federal Construction Volume for Projects

Costing More than $2 million (million ft2)

2007 30.64 29.38

2008 43.71 42.29

2009 51.72 50.45

Average 42.02 40.71

4.1.2 New Federal Commercial Construction Building Type Distribution

Assumption: 63% office building, 15% warehouse, 4% hospital, 8% education and training, 9% 

barracks and dormitory. 

Basis: This assumption was originally derived from the Federal Real Property Council’s 

FY2008 and FY2009 Federal Real Property Reports (GSA 2008, GSA 2009). 

Subsequent analysis of the FY2010, FY2011, and FY2012 Federal Real Property 

Council’s reports (GSA 2010, GSA 2011, and GSA 2012) confirmed this distribution. 

The values assumed above were also used in the Environmental Assessment for Final 

Rule, 10 CFR 433, “Energy Efficiency Standards for New Federal Commercial and 

Multi-Family High-Rise Residential Buildings” (DOE 2011). 

4.1.3 New Federal Commercial Fraction over $2.5 Million in Cost or For Which 

a Prospectus to Congress is Required

The $2.5 million threshold is a key parameter in deciding if a building falls under EISA Section 433 

requirements. The threshold is more formally stated in the Fossil Fuel-Reduction Rule as follows:

Those Federal buildings covered by EISA 2007 include new Federal buildings, or major 

renovations to Federal buildings, that are also: (1) public buildings, as defined in 40 

U.S.C. 3301 for which a transmittal of a prospectus to Congress is required under 40 

U.S.C. 3307; or (2) Federal buildings for which the construction cost or major renovation 

cost is at least $2,500,000 (2007 dollars, adjusted for inflation).

The assumed fraction (of total new floor space) includes both buildings that exceed this $2.5 million 

cost threshold as well as “public buildings” that meet the requirement for a prospectus to Congress. The 

U.S. General Services Administration (GSA) maintains an annual cost threshold for their buildings that 

was approximately $2.5 million in 2007 when EISA was signed.13 The analysis in Section 4.1.1 uses a 

13 See http://www.gsa.gov/portal/content/101522 for current GSA cost thresholds. 

4.2

 
threshold of $2 million dollars for projects under the assumption that 20% of the project cost would be in 

design costs and other costs that are not included in the database of Federal project costs14. 

Assumption: 97% of the Federal building stock falls under this requirement. 

Basis: This value was chosen based on the analysis conducted for Section 4.1.1. The database 

shows that for the years 2007, 2008, and 2009, the fraction of Federal commercial 

construction projects greater than $2 million averages 0.97. 

4.1.4 New Federal Construction Building Energy Usage

Assumption: New Federal construction building energy usage is assumed to meet the energyefficiency performance standards currently found in 10 CFR Part 433. These standards 

call for the energy consumption by new Federal buildings to be at least 30% below the 

levels established by Standard 90.1-2010, if life-cycle cost-effective.15 

Basis: Data taken from DOE’s determination of energy savings for Standard 90.1-201016 were

used for the typical value of energy use intensity for buildings that meet this requirement. 

This data was also used in DOE’s Environmental Assessment for Final Rule, 10 CFR 

433, “Energy Efficiency Standards for New Federal Commercial and Multi-Family HighRise Residential Buildings” (DOE 2011). 

4.1.5 Federal Commercial Renovation Volume per Year

Assumption: 14.6 million square feet per year of commercial and multifamily high-rise residential 

building construction.

Basis: This assumption is based on the analysis of 3 years of Federal construction data 

purchased by PNNL as part of a commercial building construction dataset. The data is 

described in “Weighting Factors for the Commercial Building Prototypes Used in the 

Development of ANSI/ASHRAE/IESNA Standard 90.1-2010”, (Jarnagin and 

Bandyopadhyay, 2010). Data from the years 2007, 2008, and 2009 were used. The total 

Federal renovation cost plus the renovation cost associated with projects greater than 

$2.25 million based on the assumption that 10% of the construction cost would be related 

14 The 20% design cost estimate was derived from an analysis of “value put in place” (VPIP) data from the Census 

Bureau (http://www.census.gov/construction/c30/methodology.html), data from the F.W. Dodge group of McGrawHill Construction (http://construction.com/dodge/), and data from R.S. Means 

(www.rsmeans.reedconstructiondata.com). There is a wide range of design cost estimates for new construction and 

20% was chosen as a value in the middle of the range of estimates. 

15 The current 10 CFR Part 433 requires the use of ASHRAE Standard 90.1-2007 as a baseline for covered buildings 

for which design for construction began on or after August 10, 2012, but before July 9, 2014. (10 CFR 

433.5)However, on July 9, 2013, DOE published a final rule updating the baseline standard for 10 CFR Part 433 to 

Standard 90.1-2010 for covered buildings for which design for construction began on or after July 9, 2014. Because 

the analysis period for this RIA starts in 2015, the baseline will be Standard 90.1-2010. 

16 See http://www.energycodes.gov/status/determinations_com.stm for all material on DOE’s determination on 

Standard 90.1-2010. 

4.3

 
to design of the building and not the actual cost of the building materials and components

was used. Construction costs for renovations were converted to square footage by 

calculating the total cost of new Federal construction for the years 2007 to 2009, dividing 

that number by the total new construction square footage for the same years, and 

calculating a new Federal construction cost per square foot. This new Federal 

construction cost was then multiplied by 75% to generate a Federal renovation square 

foot cost17. The total cost of Federal renovations in each year was then divided by the 

Federal renovation square foot cost to give a Federal renovation square footage. 

One important note on this data source is that it only considers major renovations in the 

sense that multiple systems of a building are changed. A less extensive renovation (such 

as an equipment replacement or system upgrade) is not included in this data source even 

though the cost of the equipment or system may exceed the $2.5 million threshold for the 

proposed rule. DOE has no good source of information on the frequency or magnitude of 

less extensive renovations that may also be considered “major” renovations. 

The results of this evaluation are as follows:

Year Federal Construction 

Renovation Volume 

(million ft2)

Federal Construction Renovation Volume 

for Projects Costing More than $2.25

million (million ft2)

2007 9.5 8.3

2008 11.1 9.6

2009 23.2 20.4

Average 14.6 12.8

4.1.6 Federal Commercial Renovation Fraction over $2.5 million in Cost or for 

which a Prospectus to Congress is Required

This is a key parameter in deciding if a building falls under EISA Section 433 requirements. The 

threshold is more formally stated in the Fossil Fuel-Reduction Rule as follows:

Those Federal buildings covered by EISA 2007 include new Federal buildings, or major 

renovations to Federal buildings, that are also: (1) public buildings, as defined in 40 

U.S.C. 3301 for which a transmittal of a prospectus to Congress is required under 40 

U.S.C. 3307; or (2) Federal buildings for which the construction cost or major renovation 

cost is at least $2,500,000 (2007 dollars, adjusted for inflation).

The assumed fraction (of total new floor space) includes both buildings that exceed this $2.5 million 

cost threshold as well as “public buildings” that meet the requirement for a prospectus to Congress. GSA 

maintains an annual cost threshold of their own for their buildings that cost approximately $2.5 million in 

2007 when EISA was signed.18 The analysis for Section 4.1.5 used a threshold of $2.25 million under the 

17 The 75% estimate was based on analysis data from F.W. Dodge Division of McGraw-Hill Construction

((http://construction.com/dodge/). The data relate only to the total cost of “major alterations.

18 See http://www.gsa.gov/portal/content/101522?utm_source=PBS&utm_medium=printradio&utm_term=annualprospectusthreshold&utm_campaign=shortcuts for the GSA prospectus threshold. 

4.4

 
assumption that 10% of renovation project costs were design or other costs not included in the Federal 

construction cost data base. 

Assumption: 87% of Federal building stock falls under this requirement. 

Basis: This value was chosen based on the analysis conducted for Section 4.1.5. The database 

shows that for the years 2007, 2008, and 2009, the fraction of Federal commercial 

renovation projects greater than $2.25 million averages 0.87. 

4.1.7 Federal Commercial Major Renovation Fraction

Just because a renovation costs over $2.5 million does not mean it is a “major renovation” for the 

purpose of the Fossil Fuel-Reduction Rule. A renovation must also be a significant opportunity to meet 

the requirements of the rule. Replacing the carpeting, painting the walls, and moving some interior walls 

in a large Federal building may cost over $2.5 million, but that renovation would not be an opportunity to 

meet the Fossil Fuel-Reduction Rule. 

Assumption: 88% of Federal building stock falls under this requirement. 

Basis: This value was chosen based on the analysis conducted for Section 4.1.5. There is a large 

amount of uncertainty associated with this assumption. 

4.1.8 Federal Commercial Major Renovation Savings Fraction

The approximate savings for a “typical” renovation must be estimated to determine the total energy 

saved by major renovations. 

Assumption: 38% and 50% (depending on year). 

Basis: The most detailed studies DOE has on renovations are the Advanced Energy Retrofit 

Guide (AERG) for Office Buildings.

19 Of these, only the large office is really applicable 

to the Federal commercial building sector. The Advanced Energy Retrofit Guide large 

office result shows that savings of about 23% can be achieved by simply doing 

commissioning, 38% in a “standard” retrofit, and 50% in a “deep” retrofit. These values 

are used in the analysis, with all buildings being assumed to be able to achieve “standard” 

retrofits for the years 2015 to 2019 and “deep” retrofits thereafter.20 

4.1.9 Typical Existing Federal Building Energy Usage

This assumption is used for estimating the current total energy use by existing buildings. 

19 See http://apps1.eere.energy.gov/buildings/commercial_initiative/resource_database/detail.cfm?p=537 for 

documentation and links to the AERG for office buildings. 

20 Work supported by DOE’s Federal Energy Management Program (FEMP) indicates that “deep” retrofits are 

possible now, but it is not believed that they are particularly common at this time. See for example, the General 

Services Administration’s (GSA) deep retrofit challenge at http://www.gsa.gov/portal/content/129983. An arbitrary 

decision was made to assume that deep retrofits are common in 2020. 

4.5

 
Assumption: 113.9 kBtu/ft2 to 89.5 kBtu/ft2 depending on the year, with the estimated value held 

constant from 2015 on at the 2015 value21.

Basis: Table 4.1.3 of DOE’s Building Energy Databook, available at 

http://buildingsdatabook.eere.energy.gov/TableView.aspx?table=4.1.3. 

4.1.10 Typical Existing Federal Building Electricity Fraction

The typical existing Federal building electricity fraction value is needed to convert a site to source

energy, and to convert source energy to fossil fuel energy. 

Assumption: 0.494

Basis: Table 4.1.2 of DOE’s Building Energy Databook (DOE 2012a), available at 

http://buildingsdatabook.eere.energy.gov/TableView.aspx?table=4.1.2. 

4.2 Cost Estimates

Cost estimates were developed for the following five cases.

4.2.1 New Construction Baseline under 10 CFR Part 433 Energy Efficiency 

Performance Standards

New construction is assumed to be built to an energy consumption level of at least 30% below that 

established by Standard 90.1-2010 in accordance with the baseline standards update to 10 CFR 433 that is 

currently undergoing OMB review. Costs for this level of performance were taken from PNNL-19004

(Thornton et al. 2009), Technical Support Document: 50% Energy Saving Design Technology Packages 

for Medium Office Buildings.

22 

4.2.2 New Construction under Proposed Rule

New construction under the proposed rule was assumed to be built to the performance requirements 

of the Fossil Fuel-Reduction Rule. For the 55% and 65% fossil fuel-reduction targets, energy 

conservation was assumed to meet the requirements and the data from PNNL-19004 was extrapolated to 

the appropriate levels of savings to provide costs. Beyond 65% fossil fuel-reduction, on-site solar PV 

system use was assumed to provide the additional fossil fuel-reduction necessary23. PV system costs 

were estimated as follows.

21 This assumption is valid if one assumes that buildings that will undergo major renovations in the years 2015 to 

2030 will be buildings that have energy usage of typical Federal buildings in 2015. 

22 See http://www.pnl.gov/main/publications/external/technical_reports/PNNL-19004.pdf for this report. 

23 Solar PV systems are assumed to be used to meet the targets of the Fossil Fuel-Reduction Rule once conservation 

measures alone can no longer meet the targets. Solar PV systems were chosen as commonly used on-site renewable 

energy systems. On-site renewable energy systems were chosen over use of renewable energy certificates (RECs) or 

power purchase agreements (PPAs) because REC and PPA usage is limited in the Fossil Fuel-Reduction Rule. 

4.6

 
Assumption: Installed cost of $5,600 per kW (DC) in 2012. Low benefits case: cost decline of 10% 

by 2035. High benefits case: cost decline by 50% by 2035.

Basis: The modeling and reports produced by the EIA with regard to the commercial building 

module in NEMS form the basis of these assumptions. NEMS is used to generate the 

Annual Energy Outlook, published in the beginning of each calendar year. The PV costs 

in NEMS are based upon a report prepared by ICF International for EIA in August 2010, 

Photovoltaic (PV) Cost and Performance Characteristics for Residential and 

Commercial Applications. Using the estimates provided in this report together with the 

“learning” algorithm in the NEMS commercial module, the Annual Energy Outlook 2012 

Early Release Overview

24 reference case indicated an installed cost in 2009 dollars of 

$5,558/kW (kW expressed as DC) for commercial PV electricity generation25 (personal 

communication with Erin Boedecker of EIA, March 20, 2012). Converting to 2012

dollars, the 2012 cost is approximately $5,779/kW. This is a composite of costs for both 

crystalline and thin-film PV modules; the EIA cost estimates imply that a majority of 

installations in the commercial building sector employ the thin-film technology.

The ICF International report projected future costs and performance for PV systems. By 2035, costs 

were assumed to decline by roughly 40% (42% for thin-film and 35% for crystalline). System 

efficiencies (DC to AC power) were assumed to increase in the range of 10%. For the analysis here 

related to a “high-benefits” case, these two projections were combined to yield an effective cost decline of 

50% by 2035. A conservative (“low-benefits”) assumption is that there will be only a modest cost 

reduction from this point forward. In this case, a 10% improvement was assumed to occur over this 

period. In both cases, the cost reductions were assumed to occur along a declining exponential growth 

path, thus yielding absolute annual reductions that are higher in the early years of the projection period 

compared to years approaching 2035. Costs beyond 2035 were fixed at their 2035 projected values.

4.2.3 New Construction under Zero Fossil Fuel Alternative

For new construction under the “zero fossil fuel” alternative, energy conservation was assumed to 

immediately bring the design of buildings to 65% fossil fuel reduction and the remaining 35% fossil fuel 

reduction were to be provided by PV systems26. Costs for the energy conservation and PV systems were 

calculated in the same way as for the proposed rule.

24 See 2012 AEO Early Release at http://www.eia.gov/forecasts/aeo/er/. 25 Email from Erin Boedecker (DOE Energy Information Administration) to David Belzer (Pacific Northwest 

National Laboratory) regarding solar PV costs for commercial buildings. March 20, 2012.

26 Solar PV systems are assumed to be used to meet the targets of the Fossil Fuel-Reduction Rule once conservation 

measures alone can no longer meet the targets. Solar PV systems were chosen as commonly used on-site renewable 

energy systems. On-site renewable energy systems were chosen over use of renewable energy certificates (RECs) or 

power purchase agreements (PPAs) because REC and PPA usage is limited in the Fossil Fuel-Reduction Rule.

4.7

 
4.2.4 Existing Buildings Baseline under 10 CFR Part 433 Energy Efficiency 

Performance Standards

The current 10 CFR Part 433 energy performance standards are applicable only to new construction. 

Therefore, the baseline cost for existing buildings is $0 in all years. 

4.2.5 Existing Buildings under Proposed Rule or Zero Fossil Fuel Alternative

Existing building renovations under the proposed rule or the “zero fossil fuel” alternative are assumed 

to achieve levels of performance found in the Advanced Energy Retrofit Guide for Office Buildings.

27 

The costs to achieve these levels of performance are taken from the Advanced Energy Retrofit Guide for 

Office Buildings (PNNL and PECI 2011). 

27 See http://apps1.eere.energy.gov/buildings/commercial_initiative/resource_database/detail.cfm?p=537 for 

documentation and links to the Advanced Energy Retrofit Guide for Office Buildings. 

4.8

 
5.0 Conclusion

Based upon the primary estimates from Table 2 and Table 3, a summary of the annualized net 

benefits estimated for the regulatory policy options considered in this RIA are presented in Table 4. To 

reiterate, future incremental costs include both measures to improve the energy efficiency of Federal 

facilities as well as incorporating renewable energy (solar PV) technologies when necessary. Future 

benefits incorporate both reductions in annual energy expenditures and monetized benefits of emissions 

reductions. The analysis shows that applying a 3% or 7% discount rate to future costs and benefits of the 

proposed rule yields a net economic savings to the nation. For the “zero fossil fuel” alternative, which

would require installation of solar PV systems on many new Federal facilities in the near term, the net 

economic benefits are negative using the 7% discount rate, but positive using the 3% discount rate 

assumption. 

Table 4. Annualized Net Benefits of Regulatory Policy Options (primary and alternative estimates)

7% Discount Rate 

(2012 $millions/year)

3% Discount Rate 

(2012 $millions/year)

Proposed Rule (primary estimate) 104.6 215.7

“Zero Fossil Fuel” Alternative -99.0 320.0

5.1
6.0 References

10 CFR 433. 2011. “Energy Efficiency Standards for New Federal Commercial and Multi-Family HighRise Residential Buildings.” Title 10, Code of Federal Regulations, Part 433. U.S. Department of 

Energy, Washington, D.C.. Available at http://www.gpo.gov/fdsys/granule/CFR-2013-title10-vol3/CFR2013-title10-vol3-part433/content-detail.html. 

40 U.S.C. 3301. Definitions and Nonapplication. Title 40, United States Code, Section 3301. Available 

at http://www.gpo.gov/fdsys/granule/USCODE-2011-title40/USCODE-2011-title40-subtitleII-partAchap33-sec3301/content-detail.html. 

40 U.S.C. 3307. Congressional Approval of Proposed Projects. Title 40, United States Code, Section 

3307. Available at http://www.gpo.gov/fdsys/granule/USCODE-2011-title40/USCODE-2011-title40-

subtitleII-partA-chap33-sec3307/content-detail.html. 

42 U.S.C. 6834. Federal Building Energy Efficiency Standards. Title 42, United States Code, Section 

6834. Available at http://www.gpo.gov/fdsys/granule/USCODE-2008-title42/USCODE-2008-title42-

chap81-subchapII-sec6834/content-detail.html. 

ANSI/ASHRAE/IES Standard 90.1-2010. 2010. Energy Standard for Buildings Except Low-Rise 

Residential Buildings. American Society of Heating, Refrigerating and Air-Conditioning Engineers, 

Atlanta, Georgia. 

DOE. 2011. Environmental Assessment for Final Rule, 10 CFR 433, “Energy Efficiency Standards for 

New Federal Commercial and Multi-Family High-Rise Residential Buildings”. Available at 

http://www.regulations.gov/#!docketDetail;D=EERE-2011-BT-STD-0055. 

DOE. 2012a. 2012 Buildings Energy Databook. Accessed March 2012 at 

http://buildingsdatabook.eren.doe.gov/ (last updated March 2012). 

DOE 2012b. Annual Energy Outlook 2013. U.S. Energy Information Administration, Washington, D.C.

E.O. 12866. 1993. Regulatory Planning and Review. President William J. Clinton. 58 FR 51735, 

September 30. 

Executive Office of the President, “The President’s Climate Action Plan” 

http://www.whitehouse.gov/sites/default/files/image/president27sclimateactionplan.pdf.

GSA – U.S. General Services Administration. 2008. FY2008 Federal Real Property Report. Accessed 

March 2012 at http://www.gsa.gov/portal/category/21275 (last reviewed January 4, 2012). 

GSA – U.S. General Services Administration. 2009. FY2009 Federal Real Property Report. Accessed 

March 2012 at http://www.gsa.gov/portal/category/21275 (last reviewed January 4, 2012). 

GSA – U.S. General Services Administration. 2010. FY2010 Federal Real Property Report. Accessed 

June 2014 at http://www.gsa.gov/portal/category/21275

6.1
GSA – U.S. General Services Administration. 2011. FY2011 Federal Real Property Report. Accessed 

June 2014 2012 at http://www.gsa.gov/portal/category/21275. 

GSA – U.S. General Services Administration. 2012. FY2012 Federal Real Property Report. Accessed 

June 2014 at http://www.gsa.gov/portal/category/21275. 

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6.2