CHAPTER 17. REGULATORY IMPACT ANALYSIS 

TABLE OF CONTENTS 

17.1 INTRODUCTION ......................................................................................................... 17-1 

17.2 NON-REGULATORY POLICIES................................................................................ 17-2 

17.2.1 Methodology.................................................................................................................. 17-2 

17.2.2 Policy Assumptions ....................................................................................................... 17-3 

17.2.3 Policy Interactions ......................................................................................................... 17-4 

17.3 NON-REGULATORY POLICY ASSUMPTIONS ...................................................... 17-4 

17.3.1 No New Regulatory Action ........................................................................................... 17-4 

17.3.2 Financial Incentives Policies.......................................................................................... 17-4 

17.3.2.1 Consumer Rebates .......................................................................................17-6 

17.3.2.2 Consumer Tax Credits ............................................................................... 17-11 

17.3.2.3 Manufacturer Tax Credits.......................................................................... 17-14 

17.3.3 Voluntary Energy Efficiency Targets .......................................................................... 17-15 

17.3.4 Early Replacement....................................................................................................... 17-15 

17.3.5 Bulk Government Purchases........................................................................................ 17-18 

17.4 NON-REGULATORY POLICY IMPACTS............................................................... 17-19 

17.5 RESULTS SUMMARY FOR NON-REGULATORY ALTERNATIVES................. 17-20 

LIST OF TABLES 

Table 17.1.1 Policy Alternatives to National Standards ......................................................... 17-1 

Table 17.2.1 Trial Standard Levels for Conventional Cooking Products............................... 17-3 

Table 17.3.1 Benefit/Cost Ratios for Gas Cooktop and Gas Standard Oven Amended 

Standards and Rebate Policy Cases ................................................................... 17-7 

Table 17.3.2 Oregon Tax Credits Claimed for Residential Dishwashers from 1998 

to2006 and their Attribution for 2006.............................................................. 17-13 

Table 17.3.3 Annual Increased Market Shares of Conventional Cooking Products at 

Target Efficiency Levels from Consumer Tax Credits.................................... 17-14 

Table 17.5.1 Non-Regulatory Alternatives for Conventional Cooking Products with 

Target Levels at TSL 1 .................................................................................... 17-21 

LIST OF FIGURES 

Figure 17.3.1 Market Penetration Curve for Gas Cooktops Not Needing Electric Outlets ..... 17-8 

Figure 17.3.2 Market Penetration Curve for Gas Cooktops Needing Electric Outlets ............ 17-9 

Figure 17.3.3 Market Penetration Curve for Gas Standard Ovens Not Needing Electric 

Outlets.............................................................................................................. 17-10 

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EERE-2006-STD-0127 COMMENT 64.2
Figure 17.3.4 Market Penetration Curve for Gas Standard Ovens Needing Electric 

Outlets.............................................................................................................. 17-11 

Figure 17.3.5 Early Replacement Shipments Projections for Conventional Cooking 

Figure 17.4.1 Penetration Rate of Units Meeting the Target Level for Conventional 

Products............................................................................................................ 17-18 

Cooking Products............................................................................................. 17-20 

17-ii 

EERE-2006-STD-0127 COMMENT 64.2
CHAPTER 17. REGULATORY IMPACT ANALYSIS 

17.1 INTRODUCTION 

The Department of Energy (DOE) has determined that energy conservation standards for 

conventional cooking products and microwave ovens constitute an “economically significant 

regulatory action” under Executive Order (E.O.) 12866 “Regulatory Planning and Review.” 58 

FR 51735 (October 4, 1993). Therefore, DOE’s amended energy conservation standards require 

a regulatory impact analysis (RIA), which involves an evaluation of non-regulatory alternatives 

to the standards. This document evaluates several possible alternatives to the amended 

standards, and compares the costs and benefits of each to the amended standards. As described 

in section 17.2.2 of this report, the amended standards for conventional cooking products are 

those in trial standard level (TSL) 1. Since TSL 1 affects only gas cooktops and gas standard 

ovens, this regulatory impact analysis covers only these product classes. There are no amended 

standards for microwave ovens. 

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

Conservation Standards for Consumer Products, 61 FR 36974 (July 15, 1996); 10 CFR Part 430, 

Subpart C, Appendix A), DOE is committed to continually explore non-regulatory alternatives to 

standards. This RIA, which DOE has prepared pursuant to E.O. 12866, is subject to review 

under the Executive Order by the Office of Management and Budget (OMB)’s Office of 

Information and Regulatory Affairs (OIRA). 58 FR 51735. 

DOE identified six major non-regulatory alternatives to standards as representing feasible 

policy options to achieve consumer product energy efficiency for the appliance products that are 

the subject of this rulemaking. These are listed in Table 17.1.1. DOE evaluated each alternative 

in terms of its ability to achieve significant energy savings at a reasonable cost, and compared 

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

Table 17.1.1 Policy Alternatives to National Standards 

No New Regulatory Action 

Consumer Rebates 

Consumer Tax Credits 

Manufacturer Tax Credits 

Voluntary Energy Efficiency Targets 

Early Replacement 

Bulk Government Purchases 

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EERE-2006-STD-0127 COMMENT 64.2
17.2 NON-REGULATORY POLICIES 

17.2.1 Methodology 

This section describes the approach DOE used to analyze non-regulatory policies for 

conventional cooking products. 

To calculate the national energy savings and the net present value (NPV) corresponding 

to each policy alternative, DOE used its national impact analysis (NIA) spreadsheet models. 

(See Chapter 11 of the technical support document (TSD) for a description of the NIA 

spreadsheet models.) To compare each alternative to the amended standards, DOE quantified the 

effect of each alternative on the purchase of conventional cooking products meeting the target 

levels, which are defined as the efficiency levels in the amended standards. Once it had made the 

quantitative assumptions for each alternative policy, DOE made the appropriate revisions to the 

inputs in the NIA spreadsheet models. The main model inputs that DOE revised were market 

shares of equipment at target efficiencies, shipment-weighted average annual energy 

consumption, and equipment replacement rates. The shipments for any given year are comprised 

of a distribution of efficiency levels. DOE assumed that standards would affect 100 percent of 

the shipments, while the non-regulatory policies would affect a smaller percentage of the 

shipments. In each policy case, DOE made particular assumptions about the percentage of 

shipments impacted by the policy under analysis. DOE then calculated the shipment-weighted 

average energy consumption and costs using these market shares. 

A shift in the market share of higher efficiency units may increase the average installed 

cost of energy-consuming equipment. Operating costs will generally decrease due to a decline in 

energy consumption. Therefore, DOE calculated an NPV for non-regulatory alternatives in the 

same way as it did for the amended standards. In some scenarios, total installed cost increases 

are partially mitigated by government rebates or tax credits. However, DOE assumed that credits 

and rebates would be paid for by consumers in another form (such as additional taxes), and 

therefore did not include them as a consumer benefit for the purposes of calculating the national 

NPV. DOE did not consider administrative costs for any of the non-regulatory policies in its 

analysis. Inclusion of such costs would decrease their NPVs by a small amount. 

The key measures of the impact of each alternative are: 

• National energy savings in quadrillion Btus (quads): Cumulative national primary energy 

savings for equipment bought in the period from the effective date of the policy case 

(2012) to the year 2042. 

• Net present value: The value of net monetary savings from equipment bought in the 

period from the effective date of the policy case (2012) to the year 2042. DOE calculated 

the NPV as the difference between the present value of equipment and operating 

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

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EERE-2006-STD-0127 COMMENT 64.2
each alternative policy case. DOE calculated operating expenses (including energy) for 

the life of the equipment. 

17.2.2 Policy Assumptions 

The impacts of non-regulatory policies are by nature uncertain, since they depend on 

program implementation and marketing efforts and the subsequent consumer behavior response. 

The projected impacts depend on the assumptions regarding the consumer participation rate, and 

are therefore subject to more uncertainty than the impacts of mandatory standards, which DOE 

assumes will have full compliance. To increase the robustness of the analysis, DOE conducted a 

literature review on each non-regulatory policy and consulted with key experts to gather 

information on similar incentive programs that have already been implemented in the U.S. By 

studying field experience with sample programs of each type, DOE sought to make credible 

assumptions of their potential market impacts. Section 17.3 below reports the conclusions from 

this research as they apply to the policy modeling assumptions and includes the corresponding 

literature citations. 

Each of the policy alternatives that DOE considered to the amended standards would 

improve the average efficiency of new conventional cooking products relative to their base cases 

(no new regulatory action). The analysis considered that each alternative policy would induce 

residential or commercial consumers to purchase units at the same efficiency levels as required 

by the amended standards, or the target levels. In contrast to the amended standards, however, 

their market penetration rate in the alternative policy cases may not be 100 percent. 

The amended standards for conventional cooking products are those in TSL 1, as shown 

in Table 17.2.1. 

Table 17.2.1 Trial Standard Level 1 for Conventional Cooking Products 

Product Class 

Amended Energy Conservation 

Standards 

Gas cooktop/conventional burners No constant burning pilot lights 

Electric cooktop/low or high wattage open (coil) elements No standard 

Electric cooktop/smooth elements No standard 

Gas oven/standard oven with or without a catalytic line No constant burning pilot lights 

Gas oven/self-clean oven No change to existing standard 

Electric oven/standard oven with or without a catalytic line No standard 

Electric oven/self-clean oven No standard 

DOE assumed that the non-regulatory policy impacts would last from the effective date 

for amended standards for conventional cooking—2012—through the end of the analysis period, 

2042. 

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EERE-2006-STD-0127 COMMENT 64.2
17.2.3 Policy Interactions 

DOE calculated the impacts of each regulatory policy separately from those of the other 

policies. In actual practice, certain policies are often most effective when implemented in 

combination to provide incentives, such as early replacement with consumer rebates, or early 

replacement with bulk government purchases. DOE attempted to make conservative 

assumptions to avoid double-counting policy impacts. Therefore, the policy impacts reported 

below are not additive; the combined impact of several or all of the policies may not be inferred 

from adding the results together. 

Section 17.3 presents graphs showing market penetration or shipment-weighted 

efficiency parameters for each of the non-regulatory policy cases for conventional cooking 

products. 

17.3 NON-REGULATORY POLICY ASSUMPTIONS 

17.3.1 No New Regulatory Action 

The case in which no new regulatory action is taken with regard to conventional cooking 

product efficiency constitutes the base case scenario described in Chapter 11 on the national 

impact analysis. This case defines the basis of comparison for all other scenarios. By definition, 

no new regulatory action yields zero energy savings and an NPV of zero dollars. 

17.3.2 Financial Incentives Policies 

DOE considered scenarios in which the Federal government would provide two types of 

financial incentives: rebates and tax credits. The government could provide consumers with a 

rebate for purchasing an energy efficient appliance meeting the target level for each product. 

Tax credits could be offered to consumers who purchased target-level conventional cooking 

products. The government could also provide tax credits to manufacturers to offset costs 

associated with producing such equipment. 

DOE’s evaluation of consumer rebates used a comprehensive study of the potential for 

energy efficiency in California performed by Xenergy, Inc., which summarized experience with 

various utility rebate programs.1

 This analysis method is based on curves that estimate the 

market penetration of a technology based on its benefit/cost (B/C) ratio. DOE consulted with 

experts and reviewed several other methods of estimating market penetration of efficient 

technologies due to consumer rebate programs that were developed since the referenced Xenergy 

report was published.2,3,4,5

 However, these methods were based either on other economic 

parameters (payback period) or on expert surveys predicting penetration of a new technology 

over time. Therefore, DOE decided to use the penetration curve method based on B/C ratio, 

which incorporates lifetime operating cost savings, and was calibrated with utility rebate 

program participation results. 

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EERE-2006-STD-0127 COMMENT 64.2
Xenergy’s information diffusion model estimates market impacts induced by financial 

incentives for energy efficient appliances. The basic premise of this model is that information 

diffusion drives technology adoption. The model is formulated to characterize the influences of 

both internal and external sources of information on consumer behavior by superimposing two 

components in the equation, each capturing the effect of one of two different types of 

information source. The effects of these two types of information diffusion mechanisms are 

different. Internal sources of information influence consumers to purchase new products due 

mainly to word-of-mouth from early adopters, while external information sources influence 

consumers to change their adoption decisions as a result of marketing efforts and information 

coming from outside the consumer group. (Appendix 17A of the TSD contains further details on 

modeling these influences.) 

Xenergy’s model combined these two information diffusion mechanisms and generated a 

set of measure “implementation curves” or penetration curves, which Xenergy calibrated using 

evaluation data from utility rebate programs. Consumer response to rebate incentives appears to 

be a combination of the two information source types. The penetration curves illustrate the 

increased penetration (i.e., increased market share) of efficient equipment as a result of consumer 

response to B/C ratio changes induced by a specific rebate program. The penetration curves are 

used to depict various diffusion patterns based on perceived barriers to consumer purchase of 

high-efficiency equipment. There are penetration curves for varying levels of market barriers, 

from “no barriers” to “extremely high barriers.” These curves provide a means to study the 

impact of changing the B/C ratio, by reducing the initial equipment cost through financial 

incentives, on the consumer participation rate. 

DOE based its estimates of the impacts of consumer tax credits on actual program 

experience with State tax credits in Oregon. DOE studied State tax credits in Montana as well. 

DOE also attempted to determine residential consumer participation due to the Federal appliance 

tax credits, which were mandated by the Energy Policy Act of 2005 (EPACT 2005). For the 

manufacturer tax credits policy, DOE attempted to investigate manufacturer participation due to 

the efficient equipment tax credits from EPACT 2005. Both the Federal consumer and 

manufacturer credits were in effect in 2006 and 2007. Unfortunately, the Internal Revenue 

Service (IRS) had not yet published data on taxpayer response to either of these tax credits. 

DOE also incorporated previous research that had differentiated the impact of tax credits 

into the “direct price effect,” which arises from the incremental equipment cost savings, and the 

“announcement effect,” which is independent of the credit amount.6,7 The announcement effect 

derives from the credibility that a particular technology receives from its inclusion in an 

incentive program, as well as changes in product marketing strategy, and the resulting 

modifications in markups and pricing. DOE assumed that the direct price effect and the 

announcement effect would apply to the consumer tax credit policy as well as the consumer 

rebate policy, and that half of the increases in market penetration associated with either policy 

would be due to the direct price effect and half to the announcement effect. 

17-5 

EERE-2006-STD-0127 COMMENT 64.2
17.3.2.1 Consumer Rebates 

DOE modeled the impact of the consumer rebate policy by determining the increase in 

market penetration of target-level equipment relative to its market penetration in the base case. 

For conventional cooking products, DOE estimated the impact of increasing the B/C ratio 

via a rebate that paid a portion of the incremental installed cost between a unit meeting the 

baseline efficiency levela and a unit meeting the target efficiency level. DOE based the rebate 

amount on a large sample of utility rebate programs for another residential product, dishwashers, 

throughout the nation. Since there have been no rebate programs for conventional cooking 

products, DOE chose dishwashers as an analogous product whose market has some similarities 

to the cooking product market. Both are kitchen appliances, and for both products the 

incremental costs from a baseline efficiency unit to a unit meeting a higher efficiency level are 

small. DOE gathered data on rebate programs for residential dishwashers offered by 88 agencies 

throughout the country. (See Appendix 17A for a listing of these rebate programs.) The simple 

average of the rebate amounts in these programs, $37, was higher than the incremental installed 

cost between dishwashers that just met current energy efficiency standards and dishwashers that 

met the efficiency criteriab

 for the rebate levels. (DOE estimated the dishwasher incremental 

cost as $22.8) Therefore, DOE assumed that a rebate program for conventional cooking products 

would provide a rebate amounting to 100 percent of the incremental equipment cost between the 

baseline unit and the target level unit for new gas cooktops and gas standard ovens not needing 

an electric outlet installed to use electronic ignition. For units used in a household where an 

electric outlet would need to be installed, DOE assumed that the rebate amount would be 50 

percent of the total incremental cost, including equipment and outlet installation costs. DOE 

assumed the rebates would remain in effect until they had transformed the markets so that the 

shift in market share of efficient units seen in the first year of the programs would be maintained 

throughout the forecast period (2012–2042). 

For conventional cooking products, DOE first calculated the B/C ratio for the baseline 

unit without a rebate. It then calculated another B/C ratio for the unit meeting the target level, 

with a rebate, relative to the baseline unit. Because of the incremental cost reductions due to the 

rebates, the B/C ratios for the rebate policy unit were larger. Table 17.3.1 shows the benefits as 

lifetime operating cost savings, incremental installed costs without rebates and with rebates, and 

B/C ratios without rebates and with rebates. 

a

 The base case is a market-weighted average of units at several efficiency levels. 

b

 ENERGY STAR/ Consortium for Energy Efficiency (CEE) specifications 

17-6 

EERE-2006-STD-0127 COMMENT 64.2
Table 17.3.1 Benefit/Cost Ratios for Gas Cooktop and Gas Standard Oven Amended 

Standards and Rebate Policy Cases 

Gas 

Cooktops, 

No Outlet 

Gas 

Cooktops, 

With Outlet 

Gas Standard 

Ovens, 

No Outlet 

Gas Standard 

Ovens, 

With Outlet 

Benefit 

(Lifetime Operating Cost Savings) $ 261 $261 $101 $101 

Incremental Installed Cost (Increased 

Installed Cost) $18 $135 $22 $139 

B/C Ratio with No Rebate 14.8 1.9 4.6 0.7 

Rebate Amount $18 $68 $22 $70 

Adjusted Incremental Installed Cost 

(Increased Installed Cost after Rebate) $0 $68 $0 $70 

B/C Ratio for Rebate Policy Case Inf. 3.9 Inf. 1.5 

Inf. means that B/C ratio is infinite because the incremental cost is zero. 

DOE then used the B/C ratios with the penetration curves shown in Figures 17.3.1, 

17.3.2, 17.3.3, and 17.3.4 to estimate the increased percentage of consumers who would 

purchase the units that meet the policy target levels if given a rebate incentive. For conventional 

cooking products, DOE chose different curves depending on whether the appliance would need 

an electric outlet installed. For gas cooktops or gas standard ovens purchased for households 

where an electric outlet would be needed to use a unit meeting the target level, DOE selected the 

“high barriers” curve due to the high cost of the outlet installation. For these households DOE 

assumed that the electric utility would rebate half of the incremental cost, including the appliance 

incremental purchase price and the electric outlet installation. For gas cooktops or gas standard 

ovens in households where an electric outlet would already be available, DOE selected the "no 

barriers" curve, since the incremental cost between the baseline and the TSL is small, and there 

are few product utility issues for consumers. For these households DOE assumed that the 

electric utility would rebate the entire incremental installed equipment cost. 

Figures 17.3.1, 17.3.2, 17.3.3, and 17.3.4 show the increase in penetration rates of targetlevel units as a function of their higher B/C ratios. Using the method discussed above, DOE 

estimated that, for conventional cooking products, the market share of equipment meeting the 

policy target due to a rebate policy would increase by 6.4 percent above the base case market 

share for gas cooktops not needing outlets, by 8.9 percent for gas cooktops needing outlets, by 

18.1 percent for gas standard ovens not needing outlets, and by 0.9 percent for gas standard 

ovens needing outlets. The weighted-average market share increase for all gas cooktops and 

ovens would be 7.8 percent. 

To calculate the impacts of this policy, DOE adjusted the market shares of conventional 

cooking products at the target efficiencies in its NIA model to represent the policy case 

scenarios. 

17-7 

EERE-2006-STD-0127 COMMENT 64.2
0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

80% 

90% 

100% 

0 2 4 6 8 10 12 14 

Participant Benefit-Cost Ratio 

Maximum Penetration Rate

No Barriers 

Curve 

Penetration Rate = 93.6% 

at B/C ratio of 14.8 

Penetration Rate = 100% 

Change o at infinite B/C ratio f 

Penetration 

Rate = 6.4% 

Figure 17.3.1 Market Penetration Curve for Gas Cooktops Not Needing Electric Outlets 

Note that the portion of the penetration curve displayed on the graph does not display the 

100 percent penetration that would result from an “infinite” B/C ratio where the rebate covers the 

entire incremental measure cost. 

17-8 

EERE-2006-STD-0127 COMMENT 64.2
0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

80% 

90% 

100% 

0 2 4 6 8 10 12 14 

Participant Benefit-Cost Ratio 

Maximum Penetration Rate

High Barriers 

Curve 

Penetration Rate = 2.2% 

at B/C ratio of 1.9 

Penetration Rate = 11% 

at B/C ratio of 3.9 Change of 

Penetration 

Rate = 8.9% 

Figure 17.3.2 Market Penetration Curve for Gas Cooktops Needing Electric Outlets 

17-9 

EERE-2006-STD-0127 COMMENT 64.2
0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

80% 

90% 

100% 

0 2 4 6 8 10 12 14 

Participant Benefit-Cost Ratio 

Maximum Penetration Rate

No Barriers 

Curve 

Penetration Rate = 81.9% 

at B/C ratio of 4.6 

Penetration Rate = 100% 

at infinite B/C ratio 

Change of 

Penetration 

Rate =18.1% 

Figure 17.3.3 Market Penetration Curve for Gas Standard Ovens Not Needing Electric 

Outlets 

Note that the portion of the penetration curve displayed on the graph does not display the 

100 percent penetration that would result from an “infinite” B/C ratio where the rebate covers the 

entire incremental measure cost. 

17-10 

EERE-2006-STD-0127 COMMENT 64.2
0% 

10% 

20% 

30% 

40% 

50% 

60% 

70% 

80% 

90% 

100% 

0 2 4 6 8 10 12 14 

Participant Benefit-Cost Ratio 

Maximum Penetration Rate

High Barriers 

Curve 

Penetration Rate = 0.2% 

at B/C ratio of 0.7 

Penetration Rate = 1% 

at B/C ratio of 1.4 

Change of Penetration 

Rate = 0.9% 

Figure 17.3.4 Market Penetration Curve for Gas Standard Ovens Needing Electric 

Outlets 

17.3.2.2 Consumer Tax Credits 

To analyze this policy, DOE studied taxpayer participation in tax credit programs for 

energy efficient appliances, which were available at both the Federal and the State levels. DOE 

analyzed a consumer tax credit program whose credit amounts would be similar to the 

percentage of equipment costs covered by existing State tax credits. For conventional cooking 

products, DOE assumed that, for customers needing an electric outlet installed to use the targetlevel unit, the tax credit would also cover a portion of the installation costs. 

EPACT 2005 included Federal tax credits for consumers who installed efficient air 

conditioners or heat pumps, gas or oil furnaces, furnace fans, and gas, oil, or electric heat pump 

water heaters in new or existing homes.9

 While these credits were available during tax years 

2006 and 2007, as mentioned above, the IRS had not published data on the numbers of taxpayers 

taking these credits. Appendix 17A gives details of the equipment covered and the Federal tax 

credit amounts for residential appliances. 

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EERE-2006-STD-0127 COMMENT 64.2
The States of Oregon and Montana have had consumer tax credits for efficient appliances 

for several years.c

 DOE based most of its estimates on Oregon's experience with this policy. 

Oregon’s Residential Energy Tax Credit (RETC) was created in 1977. The Oregon legislature 

expanded the RETC program in 1997 to include home appliances and participation in the 

program increased significantly after they became eligible.d In response to changes in the 

appliance market, the RETC program updates its lists of eligible model numbers monthly, and 

makes occasional adjustments to the maximum tax credit dollar amount for each appliance. 

Oregon offers tax credits on residential refrigerators, clothes washers, and dishwashers.10 The 

tax credit is either an amount noted on the list of qualifying appliancese

 or 25 percent of the 

purchase price of the appliance, whichever is less. 

Montana has had an Energy Conservation Installation Credit for residential energy 

conservation measures since 1998.11 The tax credit covers a variety of residential energy and 

water efficiency installations, including Energy Star heating/cooling equipment, water heaters, 

low-flow showerheads and faucets, and light fixtures and controls. The amount of the credit 

increased in 2002 from 5 percent of equipment costs (up to $150) to 25 percent (up to $500). 

DOE obtained data from the Montana Department of Revenue (DER) on the numbers of tax 

credits claimed from 1998 through 2006.12 However the DER did not have data disaggregated 

by appliance, so the number of tax credits claimed for large household appliances could not be 

distinguished from those for plumbing products. DOE analyzed the available data and noted that 

the number of tax credits claimed increased steadily from 1998 through 2006, which contributed 

to its assumptions for this policy scenario. 

Because tax credits have not been available for conventional cooking products, DOE 

analyzed Oregon residential tax credit data for an analogous product—dishwashers—to inform 

the tax credit analysis for cooking products. DOE analyzed the Oregon residential tax credit data 

for residential clothes washers to inform the analysis of the tax credit policy for commercial 

clothes washers. 

Because tax credits have not been available for conventional cooking products, DOE 

analyzed Oregon's residential tax credit data for an analogous product—dishwashers. The 

percentage of total annual dishwasher shipments comprised by tax credit claims declined in 2005 

and 2006, which ODOE attributed to changes in the listings of eligible models. Observing that 

clothes washer tax credits claimed generally rose each year between 1998 and 2006, and also that 

Montana's tax credit claims increased annually during the same period (see below), DOE 

assumed that the tax credit program for this policy would be designed for increasing annual 

participation and adjusted the dishwasher percentages for the years 2004 through 2006 to provide 

a steady trend line. For 2006, the estimated percentage of total shipments comprised by tax 

The District of Columbia (Washington D.C.) passed legislation entitled the “Residential Energy Conservation Tax 

Credit Act Of 2005” for consumer tax credits, but did not appropriate the necessary funding and so the credits did 

not go into effect. d The program added fuel cells in 1999 and high-efficiency heat pump systems, furnaces, and boilers in 2002. e These lists change frequently, and generally require units that exceed ENERGY STAR specifications -- for 

example units that meet Consortium for Energy Efficiency (CEE) specifications. 

17-12 

c 

EERE-2006-STD-0127 COMMENT 64.2
credit claims was 14 percent. DOE did not find data comparing Oregon and Washington’s 

efficient dishwasher sales. To estimate the portions of these tax credit claims that were likely 

due to utility rebates and to market impacts, DOE reviewed a report by Itron on utility rebate 

programs in California, which compared the percentage of free riders in residential clothes 

washer and dishwasher rebate programs in 2005.13 Itron found that the market penetration rate 

of Energy Star dishwashers was much higher than that of Energy Star clothes washers and the 

percentage of free riders was greater for dishwasher programs than for clothes washer programs. 

Also, DOE estimated that the incremental cost from the baseline was much smaller for 

dishwashers than for clothes washers.f

 Thus DOE estimated that market impacts (part of which 

are due to free riders) were responsible for a higher percentage of dishwasher tax credit claims 

than for residential clothes washer credit claims. DOE estimated that 49 percent of Oregon's 

dishwasher tax credits claimed, or 6.9 percent of total dishwasher shipments, were due to market 

impacts. It estimated that utility rebates were responsible for 32 percent of tax credits claimed, 

or 4.5 percent of total shipments. DOE attributed the remaining 20 percent of tax credits 

claimed, or 2.8 percent of total shipments, to tax credits. DOE then took 20 percent of the 

number of Oregon dishwasher tax credits claimed for the years 1998–2005 to estimate the impact 

attributable to tax credits for those years. 

Table 17.3.2 shows the number of Oregon residential tax credits claimed for dishwashers 

as percentages of total annual shipments these claims represent for the years 1998–2006. It also 

shows the percentages of total shipments attributed to the tax credits themselves, to utility 

rebates, and to other market influences/free riders for 2006, and the percentage attributed to tax 

credits for 1998–2005. 

Table 17.3.2 Oregon Tax Credits Claimed for Residential Dishwashers from 1998 to2006 

and their Attribution for 2006 

1998 1999 2000 2001 2002 2003 2004 2005 2006 

Tax Credits Claimed 4% 7% 9% 10% 12% 14% 12% 7.5% 7.6% 

Tax Credits Claimed, Adjusted 4% 7% 9% 10% 12% 14% 14% 14% 14% 

Due to Tax Credits 0.7% 1.4% 1.8% 2.0% 2.4% 2.8% 2.8% 2.8% 2.8% 

Due to Rebates NA NA NA NA NA NA NA NA 4.5% 

Due to Market NA NA NA NA NA NA NA NA 6.9% 

DOE estimated that, due to consumer tax credits, the market share of target-efficiency 

conventional cooking products would increase over the base case level by the percentages 

experienced by dishwashers for the first nine years of the tax credit program. As shown in Table 

17.3.3, their market share would increase from 2012 to 2017g

 and would remain at the 2017 

level, 2.8 percent, for the remainder of the forecast period. 

f

 Similarly, conventional cooking product models meeting the target level have a high market share and a small 

incremental cost for those units not needing electric outlets. 

g

 The market share attributable to tax credits from the Oregon dishwasher data analysis was constant from the sixth 

through the ninth year of the tax credit program. 

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EERE-2006-STD-0127 COMMENT 64.2
Table 17.3.3 Annual Increased Market Shares of Conventional Cooking Products at 

Target Efficiency Levels from Consumer Tax Credits 

Year of Program Conventional Cooking Products 

2012 0.7% 

2013 1.4% 

2014 1.8% 

2015 2.0% 

2016 2.4% 

2017 2.8% 

2018 2.8% 

2019 2.8% 

2020 2.8% 

2021–2042 2.8% 

17.3.2.3 Manufacturer Tax Credits 

EPACT 2005 provides Energy Efficient Appliance Credits to manufacturers for 

production of high-efficiency refrigerators, clothes washers, and dishwashers at the Federal level 

through the IRS.14 Manufacturers receive these credits only for the increase in production of 

qualifying appliances over a three-year rolling baseline. Each manufacturer is limited to a 

certain amount for all credits under this provision. The credits were available for models 

produced in 2006 and 2007. Legislation pending in Congress would extend the manufacturer tax 

credits in modified form through 2010.15 Appendix 17A gives details of the equipment covered 

and the Federal tax credit amounts for appliance manufacturers. 

DOE assumed that a manufacturer tax credit program would effectively result in a lower 

price to the consumer by an amount equivalent to that provided by consumer tax credits as 

described above. Because these tax credits would go directly to manufacturers, DOE assumed 

that manufacturers would pass on the reduced costs to consumers, causing the direct price effect. 

However, DOE assumed that the announcement effect would not occur because the program 

would not be visible to consumers. Since the direct price effect is approximately equivalent to 

the announcement effect,6 DOE estimated that half of the consumers assumed to take advantage 

of consumer tax credits would purchase more-efficient products due to a manufacturer tax credit 

program. DOE thus applied 50 percent to the market penetrations attributed to Oregon’s 

consumer tax credits in the year 2006 for dishwashers and clothes washers and used the resulting 

market penetrations to represent the impact of manufacturer tax credits for all years of the 

analysis period. DOE assumed the impact of this policy would be to permanently transform the 

market so that the market share increase seen in the first year of the program would be 

maintained throughout the forecast period. For conventional cooking products, DOE assumed 

that the manufacturer tax credit would only affect the equipment price and therefore would not 

provide enough of an incentive to consumers needing an electric outlet, due to the high price of 

its installation. Thus, DOE applied the market share percentage increase to only the 44.5 percent 

of conventional cooking product shipments going to households that would not need to install an 

electric outlet. 

17-14 

EERE-2006-STD-0127 COMMENT 64.2
DOE estimated that the market share of efficient conventional cooking products would 

annually increase due to manufacturer tax credits by 0.6 percent over the base case at the TSL. 

17.3.3 Voluntary Energy Efficiency Targets 

DOE assumed that voluntary targets would be achieved through manufacturer 

participation in a gradual phaseout of production of units below their respective TSLs. DOE 

assumed that this would be achieved by a program similar to the Energy Star endorsement 

labeling program conducted by the Environmental Protection Agency (EPA) and DOE. The 

Energy Star program sets minimum energy efficiency specifications for various products. 

Energy Star encourages consumer adoption of these products through marketing to promote 

consumer label recognition, adoption of the specifications by various efficiency incentive 

programs, and manufacturer production and promotion of Energy Star-compliant appliances. 

Energy Star prepares projections of market penetration of compliant appliances, and estimates 

the percentage of the sales of those compliant appliances that are attributed to the Energy Star 

program. 

Several reports have analyzed the impacts of Energy Star programs for specific products, 

which are generally based on a combination of information dissemination and utility or agency 

rebates. These studies base their analysis on the Energy Star statewide data on percentages of 

shipments by appliance that meet the Energy Star specifications. These analyses have generally 

concluded that the market penetration of Energy Star-qualifying appliances is higher in regions 

or States where such promotional programs have been active.13,16,17,18 

But DOE did not analyze the potential impacts of voluntary energy efficiency targets for 

conventional cooking products because over 85 percent of the gas range market in the base case 

already meets TSL 1. The Energy Star program typically targets products where a maximum of 

approximately 25 percent of the existing market meets the target efficiency level.19 Since the 

market for gas ranges is well above the 25 percent threshold, DOE did not consider this policy 

for conventional cooking products. 

17.3.4 Early Replacement 

Early replacement refers to the replacement of conventional cooking products before the 

ends of their useful lives. The purpose of this policy is to replace old, inefficient equipment with 

higher-efficiency units. The economic feasibility of early replacement depends on the vintage of 

the unit being replaced, the cost for the new equipment, and the energy cost savings. 

There has been limited experience with early replacement programs for appliances in the 

U.S. However, DOE studied several reports to inform its analysis of this policy. One report 

detailed the Connecticut Appliance Retirement Program (ARP) conducted in 2004.20 Another 

was an electric energy efficiency potentials study performed for the State of Vermont in 2006.21 

17-15 

EERE-2006-STD-0127 COMMENT 64.2
DOE had also performed an earlier study on Federal potential for early retirement of appliances 

under EPACT 1992. 

The Connecticut ARP was conducted from June through December 2004 by Nexus 

Market Research, Inc. and RLW Analytics, Inc. for Northeast Utilities–Connecticut Light and 

Power and the United Illuminating Company’s State programs. The ARP intended to assist 

utility customers in Connecticut to overcome barriers to recycling room air conditioners (RACs), 

secondary refrigerators, and freezers. The program picked up used appliances at customers’ 

homes or at turn-in events, paid participants to retire their units, and educated customers about 

the costs of running older appliances. In addition, the program paid incentives to consumers to 

replace their RACs with Energy Star-qualified units. DOE considered the RAC program to most 

closely resemble the early replacement policy scenario, since these consumers were replacing 

primary units rather than retiring second units. Nexus’ report on ARP results estimated the 

number of RACs retired by program participants, the percentage of those replaced with an 

Energy Star model, and the number of RACs replaced by non-participants during the program 

duration, using program data and surveys. According to their analysis, about seven percent of all 

RACs retired during the program were retired through the ARP, and 63 percent of those were 

replaced with an Energy Star model. This meant that the program directly resulted in early 

replacement with a more efficient unit of about four percent of the total eligible RAC population. 

DOE assumed that this type of program most likely eliminates second ownership of the RAC, 

thus shortening its useful service life. 

In 2006, GDS Associates, Inc. conducted an electricity and peak demand potentials study 

for energy efficiency and fuel conversion measures for the State of Vermont. GDS developed a 

special “early retirement” scenario with all residential appliances replaced during the four-year 

period from 2006 to 2009, and analyzed similar early replacements in the commercial sector. 

They estimated achievable market penetrations assuming that consumers would receive a 

financial incentive equal to 50 percent of the incremental cost of the measure in most programs. 

GDS assumed an 80 percent penetration limit for the program. It estimated a maximum 

achievable annual program participant level of two percent of applicable single-family or 

multifamily homes in 2005. 

DOE also reviewed a study it conducted in the 1990s, under EPACT 1992, which 

analyzed the feasibility of a Federal program to promote early replacement of appliances.22 This 

study identified policy options for early replacement that included a direct national early 

replacement program, replacement of Federally owned appliances, promotion through equipment 

manufacturers, consumer incentives, incentives to utilities, and building regulations.h 

h

 The analysis concluded that, while cost-effective opportunities for early replacement exist, a widespread Federal 

early replacement program was not economically justified. Because premature retirement means that a unit may be 

replaced by an appliance less efficient than the eventual replacement would probably have been, energy savings 

would be smaller than anticipated. Early replacement programs could increase sales volatility in the long run by 

encouraging a temporary increase in production followed by a lull in demand. Early replacement could be 

economical in localities with high energy cost conditions or environmental constraints, when replacement appliances 

are much more efficient than existing stock, or when a major technology breakthrough has recently occurred, 

creating the need for a ready market. 

17-16 

EERE-2006-STD-0127 COMMENT 64.2
For this analysis, DOE considered a program that targets the units in the stock that have 

efficiency levels lower than the policy target efficiency level and encourages their early 

replacement with products at the target level. The program affects a portion of units in the stock 

in 2012 that would be replaced at the end of their useful or service life (at the “natural” 

replacement rate) without the effects of this policy, under which they would be replaced sooner. 

Shipments in 2012 and beyond are not affected by this program and remain at base case 

efficiency levels. 

Based on their average service lives, 5 percent of conventional cooking products are 

replaced annually; these are their natural replacement rates. For this policy study, DOE 

assumed that an additional percentage of conventional cooking products in the existing stock in 

2012, the first year of the analysis period, would be replaced by models meeting the target levels. 

For each product, DOE modeled this policy by replacing four percent per year of the units in the 

stock in addition to those being replaced at the end of their service lives (using the estimated 

percentage from the Connecticut study since it was based on actual program experience). DOE 

assumed that these early replacement programs would last as long as it took to completely 

replace all of the eligible conventional cooking products that were in the stock in the year that 

the program began (2012). After the 2012 stock had been completely replaced, there would be 

no additional impacts from this policy. 

The policy would create a jump in shipments of equipment meeting target efficiency 

levels relative to the base case in the early years of the program as shown in Figures 17.3.5. As a 

result, more high efficiency units meeting the policy targets would be quickly brought into the 

equipment stock, leading to an immediate gain in the market share of efficient units compared to 

the base case. However, unlike the other policy cases discussed, the efficient unit market share 

would drop back down to the levels in the base case as the eligible market is depleted. 

17-17 

EERE-2006-STD-0127 COMMENT 64.2
2.0 

Shipments (millions) 

1.6 

1.2 

0.8 

Early Replacement Scenario 0.4 

Base Case Shipments 

0.0 

2005 2010 2015 2020 2025 2030 2035 2040 2045 

Year 

Figure 17.3.5 Early Replacement Shipments Projections for Conventional 

Cooking Products 

17.3.5 Bulk Government Purchases 

DOE assumed that a bulk government purchase policy would encourage Federal, State, 

and local governments to purchase equipment meeting the target efficiency levels. Aggregating 

public sector demand could provide a market signal to manufacturers and vendors that some of 

their largest customers sought suppliers with products that met an efficiency target at favorable 

prices. This program also could induce “market pull” impacts through manufacturers and 

vendors achieving economies of scale for high-efficiency products. 

While there have been several bulk government purchasing initiatives at the Federal, 

State, and municipal levels, most of these programs have not tracked data on number of 

purchases or degree of compliance with procurement specifications. In many cases, procurement 

programs are decentralized, being part of larger State or regional initiatives. At the Federal level, 

the Federal Energy Management Program (FEMP) has performed studies of savings potential for 

its procurement specifications for appliances and other equipment on which DOE based its 

assumptions for this policy. Yet FEMP does not track purchasing data, due to the complexity of 

the purchasing systems, number of vendors, etc. There is evidence of increasing interest and 

activity in “green purchasing" on the State, county, and municipal levels. While many of these 

programs target office equipment, the existence of a growing infrastructure for efficient 

17-18 

EERE-2006-STD-0127 COMMENT 64.2
purchasing specifications indicates that such impacts that DOE attributed to bulk government 

purchasing programs are feasible.23,24 

But DOE did not analyze the potential impacts of bulk government purchases for 

conventional cooking products because over 85 percent of the gas range market already meets 

TSL 1. FEMP procurement specifications typically promote products in the top 25 percent of the 

existing market in terms of efficiency. Since most of the gas ranges sold in the base case would 

already comply with such specifications, DOE did not consider this program for conventional 

cooking products.25 

17.4 NON-REGULATORY POLICY IMPACTS 

Figure 17.4.1 shows the market share (penetration rate) impacts for each of the nonregulatory policy cases for conventional cooking products. 

Figure 17.4.1 shows the market share impacts for each of the non-regulatory policy cases 

for conventional cooking products. Note that in Figure 17.4.1, the market share of products 

meeting the target level is forecasted to increase over time in the base case (i.e., the case without 

standards or non-regulatory programs). Relative to the base case, each of the policy cases 

increases the market share of products meeting the target level. Consumer rebates is the most 

effective policy case to increase the market share of products meeting the target level while early 

replacements are the least effective. As a reminder, the amended standards (not shown in Figure 

17.4.1) would result in a 100 percent penetration of products meeting the target level. 

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EERE-2006-STD-0127 COMMENT 64.2
100% 

98% 

96% 

94% 

92% 

90% 

84% 

86% 

88% 

Percent Units Meeting Target Level

Rebate 

Consumer Tax Credit 

Manfr Tax Credit 

Early Replace 

Base Case 

82% 

2005 2010 2015 2020 2025 

Year 

2030 2035 2040 2045 

Figure 17.4.1 Penetration Rate of Units Meeting the Target Level for 

Conventional Cooking Products 

17.5 RESULTS SUMMARY FOR NON-REGULATORY ALTERNATIVES 

Table 17.5.1 shows the national energy savings and NPV resulting from the various nonregulatory alternative policy cases, when the efficiency target levels are equal to the amended 

standard levels for each product. The cases in which no regulatory action is taken with regard to 

conventional cooking products constitute the base case (or "No Action") scenarios, in which 

energy savings and NPV are zero by definition. For comparison, the tables include the impacts 

of the amended energy conservation standards. The NPV amounts shown in Table 17.5.1 are 

based on two discount rates (seven percent and three percent real). 

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EERE-2006-STD-0127 COMMENT 64.2
Table 17.5.1 Non-Regulatory Alternatives for Conventional Cooking Products with 

Target Levels at TSL 1 

Policy Alternatives 

Primary 

Energy 

Savings 

(quads) 

Net Present Value* 

(billion 2006$) 

7% discount rate 3% discount rate 

No New Regulatory Action 0.0 0.0 0.0 

Consumer Rebates 0.12 0.21 0.60 

Consumer Tax Credits 0.05 0.08 0.27 

Manufacturer Tax Credits 0.01 0.02 0.06 

Early Replacement 0.01 0.07 0.12 

Amended Standards At TSL 1 0.14 0.25 0.71 

* Net present value (NPV) is the value of a time series of costs and savings. DOE determined the NPV from 2012 

to 2042 in billions of 2006$. 

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EERE-2006-STD-0127 COMMENT 64.2
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