CHAPTER 2. ANALYTICAL FRAMEWORK

TABLE OF CONTENTS

2.1 INTRODUCTION ........................................................................................................... 2­1

2.2 BACKGROUND ............................................................................................................. 2­4

2.3 MARKET AND TECHNOLOGY ASSESSMENT........................................................ 2­4

2.3.1 Market Assessment .............................................................................................. 2­4

2.3.2 Technology Assessment....................................................................................... 2­4

2.3.3 Product Classes.................................................................................................... 2­5

2.4 SCREENING ANALYSIS .............................................................................................. 2­5

2.5 ENGINEERING ANALYSIS.......................................................................................... 2­5

2.5.1 Representative Product Classes ........................................................................... 2­5

2.5.2 Selected Baseline Lamps ..................................................................................... 2­5

2.5.3 Identified Lamps and Ballast Designs ................................................................. 2­6

2.5.4 Developed Candidate Standard Level.................................................................. 2­6

2.6 ENERGY USE CHARACTERIZATION ....................................................................... 2­6

2.7 PRODUCT PRICE DETERMINATION ........................................................................ 2­7

2.8 LIFE­CYCLE COST AND PAYBACK PERIOD ANALYSIS ..................................... 2­7

2.9 NATIONAL IMPACT ANALYSIS................................................................................ 2­8

2.9.1 National Energy Savings Analysis....................................................................... 2­8

2.9.2 Net Present Value Analysis ................................................................................. 2­8

2.9.3 Efficiency Scenarios and Trends ......................................................................... 2­9

2.10 LIFE­CYCLE COST SUB­GROUP ANALYSIS......................................................... 2­10

2.11 MANUFACTURER IMPACT ANALYSIS.................................................................. 2­10

2.12 UTILITY IMPACT ANALYSIS................................................................................... 2­10

2.13 ENVIRONMENTAL ASSESSMENT .......................................................................... 2­11

2.14 EMPLOYMENT IMPACT ANALYSIS....................................................................... 2­11

2.15 REGULATORY IMPACT ANALYSIS ....................................................................... 2­12

2.16 DEPARTMENT OF JUSTICE REVIEW ..................................................................... 2­12

LIST OF FIGURES

Figure 2.1.1 Flow Diagram of Analyses for the GSFL and IRL Rulemaking Process............... 2­2

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CHAPTER 2. ANALYTICAL FRAMEWORK

2.1 INTRODUCTION

Sections 6295(o)(2)(A) and (3) of Title 42 United States Code (42 U.S.C. 6295(o)(2)(A)

and (3)) require that energy conservation standards set by the U.S. Department of Energy (DOE)

be technologically feasible and economically justified, and achieve the maximum improvement

in energy efficiency. This chapter provides a description of the general analytical framework

that DOE uses in developing such standards, and in particular, standards for general service

fluorescent lamps (GSFL) and incandescent reflector lamps (IRL). The analytical framework is

a description of the methodology, the analytical tools, and relationships among the various

analyses that are part of this rulemaking. For example, the methodology that addresses the

statutory requirement for economic justification includes analyses of life­cycle cost (LCC);

economic impact on manufacturers and users; national benefits; impacts, if any, on utility

companies; and impacts, if any, from lessening competition among manufacturers. DOE will

also solicit the views of the Department of Justice (DOJ) on any lessening of competition that is

likely to result from the imposition of a proposed standard.

Figure 2.1.1 summarizes the analytical components of the standards­setting process. The

focus of this figure is the center column, identified as “Analyses.” The columns labeled “Key

Inputs” and “Key Outputs” show how the analyses fit into the rulemaking process, and how the

analyses relate to each other. Key inputs are the types of data and information that the analyses

require. Some key inputs exist in public databases; DOE collects other inputs from stakeholders

or persons with special knowledge. Key outputs are analytical results that feed directly into the

standards­setting process. Dotted lines connecting analyses show types of information that feed

from one analysis to another. While Figure 2.1.1 summarizes the inputs, outputs and analyses of

a typical standards rulemaking, individual inputs and outputs may vary by rulemaking. For

example, as discussed in Chapter 5 and Chapter 7, this rulemaking combines the results of the

engineering analysis and the product price determination to derive typical inputs for the LCC and

NIA rather than estimating costs in the engineering analysis and marking them up to derive enduser prices.

The analyses performed in the Advance Notice of Proposed Rulemaking (ANOPR) stage

and reported in this technical support document (TSD) include:

• A market and technology assessment to characterize the relevant fluorescent and

incandescent lamp markets; to identify technology options and to develop initial

product classes.

• A screening analysis to review each technology option and determine if it is

technologically feasible; practical to manufacture, install, and service; would

adversely affect lamp utility or lamp availability; or would have adverse impacts

on health and safety.

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•

•

Utility Impact

Analysis

Notice of Proposed Rulemaking (NOPR)

Final Rule

Approaches Key Inputs Analyses Key Outputs

Market and Technology

Assessment

Screening Analysis

Engineering Analysis

Product Price

Determination Life­Cycle Cost and

Payback Period

Analyses

National Impact

Analysis

Energy Use

Revise ANOPR

Analyses

Life­Cycle Cost

Sub­Group Analysis

Manufacturer Impact

Analysis

Shipments

Analysis

Employment Impact

Analysis

Revise Analyses

• Product Classes

• Technology Options

• Industry Cash Flow

• Sub­Group Cash­Flow

• Direct Employment Impacts

• Competitive Impacts

• Cumulative Regulatory Burden

• Product Designs

• Life­Cycle Costs

• Payback Periods

• National Energy Savings

• Net Present Values

• National Employment Impacts

• Revised Results

• Characterize Industry

• Market Segmentation

• Non­Regulatory Programs

Framework Document

• Efficiency­Level Approach

• Design Option Approach

• Energy Prices

Installation Costs

Maintenance & Repair Costs

• Accounting Approach

• Backcast and Forecast

• Market Saturation

• Stakeholder Comments

• Demographics

• Manufacturer Interviews

• GRIM Analysis

• Emission Rates

• National Energy Savings

• Stakeholder Comments

• Identify Firms/Products

• Historical Shipments

•Retail Price Collection and

Analysis

• Manufacturer Prices

• Average Costs

• Manufacturer Financial Data

Design Options

Product Classes

Retail

Prices

Design Energy/ Use

Advance Notice of Proposed Rulemaking (ANOPR)

• Efficiency/Performance

• Commercial Products

Candidate

Standard

Levels

• Analysis of Energy Use

Data

Environmental

Assessment

Regulatory Impact

Analysis

Technology Options

• Emission Estimates

• Utility Load Factors

• National Energy Savings

• Non­Regulatory

Alternatives

• NEMS­BT

• ImSET

• NEMS­BT

• Design Options

• Energy Price Forecasts

• Site­to­Source Factors

• Energy­Efficiency Levels

Direct Employment

Impacts

• National Energy Savings

• National Product Costs

• National Operating Costs

• Utility Impacts

• Analysis of Market Data

• Analysis of Product Data

• Life­Cycle Costs

• Payback Periods

• Installation

Costs

• Maint Costs

• Repair Costs

• UEC

• Energy Prices

Annual Energy Use (UEC)

Preliminary

Manufacturer Impact

Analysis

• Manufacturer Prices

• Average Costs

• Conversion Capital Expenditures

• Direct Employment Impacts

• National Energy Savings

• Net Present Values

• Trial Standard Levels (TSLs)

TSLs

• Product Prototypes

Energy­Efficiency

Levels

• Department of Justice Review

Product Designs

Figure 2.1.1 Flow Diagram of Analyses for the GSFL and IRL Rulemaking Process

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• An engineering analysis to study the appropriate lamp and lamp­and­ballast

designs used as substitutes for the baseline lamps, to select candidate standard

levels and to determine lamp­and­ballast system power ratings.

• An energy use analysis to determine the annual energy consumption of

fluorescent and incandescent reflector lamps.

• A product price determination to develop average end­user prices for the lamp

designs and lamps­and­ballast designs used in the analyses.

• A life­cycle cost (LCC) and payback period (PBP) analysis to calculate, at the

customer level, the cost­effectiveness of the candidate standard levels.

• A national impact analysis (NIA) to assess the aggregate impacts at the national

level of the net present value (NPV) and national energy savings (NES) of the

standard levels.

• A preliminary manufacturer impact analysis (MIA) to provide initial discussion

on any potential impacts of energy conservation standards on lamp manufacturers.

The analyses to be performed in the subsequent Notice of Proposed Rulemaking (NOPR)

stage include those listed below. In addition, DOE re­analyzes the work done in the ANOPR

stage.

• A LCC sub­group analysis to evaluate variations in residential and commercial

building characteristics (e.g., energy prices, equipment use behavior, installation

costs) that might cause a standard to impact particular customer sub­populations,

such as specific building owners or other customers that purchase and use the

general service fluorescent lamps and incandescent reflector lamps.

• A MIA to estimate the financial impact of standards on manufacturers and to

calculate impacts on competition, employment, and manufacturing capacity.

• A utility impact analysis to estimate the effects of proposed standards on electric

utilities.

• An environmental assessment to provide estimates of changes in emissions of

pollutants from electricity generation (i.e., carbon dioxide (CO2), oxides of

nitrogen (NOx), and sulfur dioxide (SO2).

• An employment impact analysis to assess the aggregate impacts on national

employment.

• A regulatory impact analysis to present major alternatives to proposed standards

that could achieve substantially the same regulatory goal at a lower cost.

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2.2 BACKGROUND

As described in Chapter 1, the Process Rule outlined procedural improvements to the

standards rulemaking process which included a review of the following elements used in the

rulemaking process: (1) economic models, (2) analytical tools, (3) methodologies, (4) nonregulatory approaches, and (5) prioritization of future rules. See appendix A to subpart C of

Title 10 Code of Federal Regulations, Part 430 (10 CFR Part 430).

DOE developed this analytical framework for the fluorescent and incandescent reflector

lamps rulemaking under the Process Rule. DOE documented this analytical framework in the

Rulemaking Framework for General Service Fluorescent Lamps, Incandescent Reflector Lamps, 

and General Service Incandescent Lamps (hereafter, “Framework Document”), and presented

the analytical approach to stakeholders during a public meeting held on June 15, 2006 (hereafter

“Public Meeting”). This document is available at

http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/lamps_framework.pd

f. The following sections provide a general description of the different analytical components of

the rulemaking framework.

2.3 MARKET AND TECHNOLOGY ASSESSMENT

The market and technology assessment characterizes the relevant product markets and

existing technology options, including prototype designs, and outlines product classes.

2.3.1 Market Assessment

When initiating a standards rulemaking, DOE develops information on the industry

structure and market characteristics of the product(s) concerned. This activity consists of both

quantitative and qualitative efforts to assess the industry based on publicly available information.

As such, DOE addresses: (1) industry structure and manufacturer market shares, (2) existing

regulatory and non­regulatory efficiency improvement initiatives, and (3) trends in product

characteristics and retail markets. This information serves as resource material throughout the

rulemaking.

DOE has used and will use the most reliable and accurate data available at the time of

each analysis in this rulemaking. DOE welcomes and will consider any submissions of

additional data.

2.3.2 Technology Assessment

DOE typically uses information relating to existing technology options to develop more

efficacious fluorescent and incandescent reflector lamp designs. DOE prepared a list of

technologies for consideration which could improve the efficacy of GSFL and IRL. To develop

this list, DOE reviewed manufacturer catalogs, recent trade publications and technical journals,

as well as consulted with technical experts.

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2.3.3 Product Classes

DOE divides covered products into classes by: (a) the type of energy used; and (b)

capacity of the product or any other performance­related feature that justifies different standard

levels, such as features affecting consumer utility. (42 U.S.C. 6295(q)) For this rulemaking on

lamps, DOE has analyzed GSFL and IRL separately, where appropriate. In general, DOE

defined classes using information obtained from manufacturers, trade association, and other

interested parties.

2.4 SCREENING ANALYSIS

The screening analysis examines the technology options from the technology assessment

as to whether they: (1) are technologically feasible; (2) are practical to manufacture, install, and

service; (3) have an adverse impact on product utility or availability; and (4) have adverse

impacts on health and safety. As described above, DOE develops an initial list of technology

options from the technologies identified in the technology assessment. Then DOE, in

consultation with interested parties, reviews the list to determine if these technologies are

practicable to manufacture, install, and service, would adversely affect product utility or

availability, or would have adverse impacts on health and safety. DOE did not consider those

technology options that fail one or more of the screening criteria in the analysis. In the

engineering analysis, DOE considers design options that remain after the screening process.

2.5 ENGINEERING ANALYSIS

In the engineering analysis, DOE selects representative product classes to analyze. It

then selects baseline lamps from these representative product classes, and develops lamp designs

that represent more efficacious versions of the baseline lamps. DOE then uses these lamp

designs to develop candidate standard levels (CSLs). While DOE establishes CSLs based on

lamp designs, it also is developing lamp­and­ballast designs for the LCC and NIA. DOE is

considering lamp­and­ballast designs for the GSFL LCC and NIA because fluorescent lamps are

a component of a system, and their performance is related to the ballast on which it operates. In

addition to selecting lamp­and­ballast systems, the engineering analysis develops system power

ratings which DOE uses to develop energy consumption in Chapter 6).

2.5.1 Representative Product Classes

DOE reviewed covered lamps and the associated product classes. In the case where a

product had multiple product classes, DOE identified and selected certain product classes as

“representative” product classes where DOE would concentrate its analytical effort. DOE chose

these representative product classes primarily because of their high market volumes.

2.5.2 Selected Baseline Lamps

DOE selected baseline lamps from the representative product classes on which it

conducted the engineering analysis (and subsequent analyses). These baseline lamps were

selected to represent the characteristics of lamps in a given product class. Typically, a baseline

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lamp is one that just meets existing mandatory energy conservation standards or one that

represents the typical lamp sold. Specific characteristics such as correlated color temperature

(CCT), operating life, and light output were all selected to characterize the most common lamps

purchased by consumers today. For all the representative product classes, DOE selected multiple

baseline lamps, to ensure consideration of different high­volume lamps and their associated

consumer economics.

2.5.3 Identified Lamps and Ballast Designs

DOE selected a series of more­efficacious lamps for each of the baseline lamps

considered within each representative product class. DOE considered technologies not

eliminated in the screening analysis. DOE considered these technologies either explicitly as

design options or implicitly as design options incorporated into commercially available lamps at

the efficiency levels evaluated. These selections were made such that potential substitutions

maintained light output above a maximum 10 percent decrease from the baseline lamp’s light

output and that the substitute lamp had performance characteristics similar to those of the

baseline lamp. In identifying the more­efficacious substitutes, DOE utilized a database of

commercially available lamps. For GSFL, DOE considered commercially available lamps under

two different substitute scenarios: (1) lower­wattage lamps that operated on existing ballasts and

whose system light output never dropped below 10 percent of the baseline system and (2) moreefficacious lamps that have the same rated wattage, and, therefore, must be associated with a

ballast replacement in order to save energy and maintain light output. For IRL, DOE used some

commercially available lamps, but also developed “model” lamps which incorporate design

options that may not be commercially available for certain lamp types and wattages but which

use commercially available technologies. For example, DOE developed efficacy estimates for

reduced­wattage IRL with an HIR coating.

2.5.4 Developed Candidate Standard Level

Having identified the more­efficacious substitutes for each of the baseline lamps (or lampand­ballast systems), DOE developed CSLs based on the consideration of several factors

including: (1) the design options associated with the specific lamps being studied (e.g., grades of

phosphor for fluorescent lamps, the use of infrared coatings for IRL, etc.); (2) the ability of

1 lamps across wattages to comply with the standard level of a given product class; and (3) the

maximum technologically feasible level.

2.6 ENERGY USE CHARACTERIZATION

The energy­use characterization provides estimates of annual energy use for the two

categories of lamps which DOE uses in the LCC and PBP analyses and the NIA. To develop

annual energy use estimates, DOE multiplied annual usage (in hours per year) by the system

power estimates (in watts). DOE developed the system power estimates in the engineering

analysis. To derive annual energy usage, DOE used data published in the U.S. Lighting Market

Characterization: Volume I (LMC), the Residential Energy Consumption Survey (RECS), the

1 Efficacy levels span multiple lamps of different wattages. In selecting CSLs, DOE considered whether these

multiple lamps can meet the efficacy levels.

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Commercial Building Energy Survey (CBECS) and the Manufacturer Energy Consumption

Survey (MECS).

2.7 PRODUCT PRICE DETERMINATION

This chapter focuses on the methodology followed by DOE in developing end­user

product prices for lamps and ballasts used in the rulemaking analysis. DOE based the product

price determination for lamps and ballasts on marked­down manufacturer price schedules,

developing low, mid and high end­user retail prices.

2.8 LIFE­CYCLE COST AND PAYBACK PERIOD ANALYSIS

The effects of new energy conservation standards on equipment result in changes in

operating expenses (usually decreased) and changes in customer price (usually increased). DOE

analyzed the net effect of new standards on consumers by evaluating the net LCC using the

efficacies and system power ratings derived in the engineering analysis and the cost trends

derived from the product price determination. Inputs to the LCC calculation include the installed

cost to the customer (customer price plus installation cost), operating expenses (energy expenses

and maintenance costs), the lifetime of the appliance, and a discount rate.

DOE reviewed EIA’s energy price data for GSFL and IRL to establish electricity prices.

DOE relied on regional average electricity price data for the residential and commercial sectors.

DOE used projections of these electricity prices for residential and commercial customers to

estimate future electricity prices in its LCC analysis. DOE used EIA’s Annual Energy Outlook

(AEO) as the default source of projections for future electricity prices.

DOE developed discount rates by estimating the cost of capital to companies that

purchase lamps covered under this rulemaking. For residential consumers of GSFL and IRL,

DOE derived the discount rates from estimates of the interest or “finance cost” to purchase

residential products. By applying the financial theory, the finance cost of raising funds to

purchase residential products can be interpreted as: (1) the financial cost of any debt incurred to

purchase residential products, principally interest charges on debt, or (2) the opportunity cost of

any equity used to purchase residential products, principally interest earnings on household

equity. Household equity is represented by holdings in assets such as stocks and bonds, as well

as the return on homeowner equity. DOE obtained much of the data required to determine the

cost of debt and equity from the Federal Reserve Board’s triennial Survey of Consumer 

Finances.

For commercial and industrial consumers of GSFL and IRL, DOE used the same

approach it relied on for developing discount rates for other commercial equipment. DOE derives

discount rates for commercial consumers by estimating the cost of capital of companies that

purchase commercial equipment. The cost of capital is commonly used to estimate the present

value of cash flows to be derived from a typical company project or investment. Most

companies use both debt and equity capital to fund investments, so the cost of capital is the

weighted­average cost of equity and debt financing. This corporate finance approach is referred

to as the weighted­average cost of capital (WACC).

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2.9 NATIONAL IMPACT ANALYSIS

The national impact analysis assesses the NPV of total customer LCC and NES. DOE

determined both the NPV and NES for the performance levels considered for the product classes

analyzed. To make the analysis more accessible and transparent to all stakeholders, DOE

prepared an NES Spreadsheet Model in Microsoft Excel to forecast energy savings and the

national economic costs and savings resulting from new standards. The NES Spreadsheet Model

does not use probability distributions for inputs or outputs. To assess the impact of input

uncertainty on the NES and NPV results, DOE can conduct sensitivity analyses for future

analyses by running scenarios on input variables that are of interest to stakeholders. DOE

conducted an assessment of the aggregate economic impacts at the national level for this

ANOPR.

2.9.1 National Energy Savings Analysis

The inputs DOE uses to determine the NES are: (1) annual energy consumption per unit;

(2) shipments; (3) equipment stock; (4) national energy consumption; and (5) site­to source

conversion factors. DOE calculates the national energy consumption by multiplying the number

2 of units, or stock, of equipment (by vintage) by the unit energy consumption (also by vintage).

DOE calculates national annual energy savings from the difference between national energy

consumption in the base case (without new energy conservation standards) and in each standards

case (with new energy conservation standards). The analysis includes estimates of energy

savings by fuel type used for generating electricity. DOE estimates energy consumption and

savings based on site energy, and converts the electricity consumption and savings to source

energy. Cumulative energy savings are the sum of the annual NES, which DOE determines over

specified time periods.

The installed stock of equipment is dependent on annual shipments and the lifetime of the

equipment. DOE conducts shipments projections under the base case and standards cases for a

variety of possible equipment efficiency scenarios and equipment efficiency trends. DOE

determined that shipment projections under the standards cases were lower than those from the

base case projection because of higher installed costs in the standards case with the use of moreefficient equipment. Higher installed costs caused some customers to forego equipment

purchases. As a result, DOE uses the standard case shipments projection and, in turn, the

resulting stock of equipment under the standards case, to determine the NES. Calculating the

NES in this way avoids the inclusion of savings resulting from displaced shipments.

2.9.2 Net Present Value Analysis

The inputs DOE uses to determine the NPV are: (1) total annual installed cost; (2) total

annual operating cost savings; (3) discount factor; (4) present value of costs; and (5) present

value of savings. DOE calculates net savings each year as the difference between total operating

cost savings and increases in total installed costs (including equipment price and installation

cost). DOE calculates savings over the life of the equipment, accounting for differences in

yearly energy rates. DOE calculates NPV as the difference between the present value of

2 Vintage represents the age of the equipment.

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operating cost savings and the present value of increased total installed costs. DOE discounts

future costs and savings to the present with a discount factor.

DOE calculates increases in total installed costs as the product of the difference in the

total installed cost between the base case and standards case and the annual shipments in the

standards case. Because costs of the more­efficient equipment bought in the standards case are

higher than those of equipment bought in the base case, price increases appear as negative values

in the NPV.

DOE expresses operating cost savings as decreases in operating costs associated with the

lower energy consumption of equipment bought in the standards case compared to the base

efficiency case. Total operating cost savings are the product of savings per unit and the number

of units of each vintage surviving in a particular year.

2.9.3 Efficiency Scenarios and Trends

Several of the inputs for the determination of NES (e.g., the annual energy consumption

per unit) and NPV (e.g., the total annual installed cost and the total annual operating cost

savings) are dependent upon the efficiency of the equipment. Thus, DOE develops base case and

standards case efficiency trends. The efficiency trends specify the annual historical and

forecasted shipment­weighted average equipment efficiencies.

For GSFL, DOE is developing two shipment scenarios: “roll­up” and “shift.” The “rollup” scenario represents the standards case assuming all product efficacies in the base case which

do not meet the standard would “roll­up” to meet the new standard level. Those that were above

the standard level are considered unaffected and continue to purchase the same base­case lamp or

lamp system. The “roll­up” scenario characterizes consumers primarily driven by the first­cost

of the lamp, and they are restricted to replacing their base­case lamp with an equal wattage lamp

when possible. The “shift” scenario models the standards case assuming all base­case consumer

GSFL purchases are affected by the standard (whether or not their base­case efficacy meets the

standard). In this scenario, any consumer may purchase a reduced wattage lamp. The shift

scenario characterizes consumers primarily concerned with system energy consumption.

For IRL, DOE considers one main shipment scenario and two sensitivity shipment

scenarios. In the main shipment scenario, DOE assumes that any consumer who purchases

regulated IRL in the base case will purchase equivalent lumen output regulated IRL in the

standards case. In the first sensitivity scenario, called the “65 Watt BR lamp substitution”

scenario, DOE assumes that the increasing price of IRL at higher standard levels will cause some

additional IRL consumers to switch to unregulated 65 Watt BR30 lamps. In the second

sensitivity scenario, called the “10­percent lumen increase” scenario, DOE assumes that a

portion of residential consumers of IRL will buy a more efficacious lamp at the same or higher

wattage, and therefore higher lumen output as in the base case

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2.10 LIFE­CYCLE COST SUB­GROUP ANALYSIS

The LCC sub­group analysis will evaluate consumer impacts by identifying consumer

subgroups and accounting for variations in key inputs to the LCC analysis. A consumer

subgroup comprises a subset of the population that is likely, for one reason or another, to be

impacted disproportionately by new or revised energy conservation standards. The purpose of a

subgroup analysis is to determine the extent of this disproportional impact. During the NOPR

stage, DOE intends to evaluate the impacts of particular sub­groups of customers in part by

analyzing the LCC for these particular customers.

DOE intends to evaluate variations in regional electricity prices, usage profiles and in

installation costs that might affect the NPV of an energy­efficiency standard to customer subgroups. To the extent possible, DOE will get estimates of the variability of each input parameter

and consider this variability in its calculation of customer impacts. DOE intends to perform

sensitivity analyses to consider how differences in energy use will affect various sub­groups of

customers.

2.11 MANUFACTURER IMPACT ANALYSIS

The MIA focuses on the manufacturers of GSFL and IRL. DOE intends to conduct a

separate MIA for each of the lamp types covered under this rulemaking. Potential impacts would

include financial effects, both quantitative and qualitative, that might result from new energy

conservation standards, and consequently lead to changes in the manufacturing practices for

these lamps. DOE will identify these potential impacts through interviews with manufacturers

and other experts.

DOE intends to conduct each MIA in three phases, and will further tailor the analytical

framework for each MIA based on stakeholder comments. Phase One consists of two activities:

prepare an industry characterization, and identify issues. Phase Two addresses the broader

industry where DOE would use the Government Regulatory Impact Model (GRIM) to perform

an industry cash flow analysis. Phase Three involves interviewing manufacturers. The interview

guide for use in Phase Three is developed in Phase Two. At the beginning of Phase Three, DOE

will interview manufacturers and adjust the industry cash flow analysis as appropriate.

Thereafter, Phase Three will entail additional cash flow analyses of the different sub­groups that

could be affected by the rulemaking. Furthermore, Phase Three will examine any additional

impacts on competition, manufacturing capacity, direct employment, and the cumulative burden

of other regulations impacting manufacturers.

2.12 UTILITY IMPACT ANALYSIS

The utility impact analysis will include an analysis of the impact of higher energy

conservation standards on the electric and the gas utility industries. DOE is considering adapting

the National Energy Modeling System (NEMS) produced by the EIA for this analysis. NEMS

(EIA 2005) is a large multi­sectoral partial­equilibrium model of the U.S. energy sector that has

been developed over the past decade by the EIA, primarily for the purpose of preparing DOE’s

AEO. In prior rulemakings, a variant of NEMS (currently termed NEMS­BT, BT referring to the

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DOE’s Building Technologies Program) was developed to better address the specific impacts of

an equipment efficiency standard.

The NEMS produces a widely recognized baseline energy forecast for the United States

through the year 2030, and is available in the public domain. The typical NEMS outputs include

forecasts of electricity sales, price, and avoided electric generating capacity. DOE plans on

conducting the utility impact analysis as a scenario departing from the latest AEO reference case.

In other words, the energy savings impacts from amended energy conservation standards will be

modeled using NEMS­BT to generate forecasts that deviate from the AEO reference case.

2.13 ENVIRONMENTAL ASSESSMENT

The primary environmental effects of energy conservation standards for GSFL and IRL

are likely to be reduced emissions resulting from reduced electrical energy consumption. The

environmental impact analysis will track the impact of possible standards on three energy­related

emissions: CO2, NOx, and SO2. DOE intends to base these calculations on the NEMS­BT

modeling work proposed for the utility impact analysis. This approach has the advantage of

examining the marginal impact of standards for general service fluorescent lamps and

incandescent reflector lamps on the utility generation mix and the subsequent environmental

emissions.

CO2 emissions are tracked in NEMS­BT by a detailed module that produces robust results

because of its broad coverage of all sectors and inclusion of interactive effects. NEMS­BT also

includes a module for SO2­allowance trading and delivers a forecast of SO2­allowance prices. It

is important to note, however, that simulation of SO2 trading tends to imply that physical

emissions effects will be zero. However, there is an SO2 benefit from conservation in the form

of a lower allowance price and, if big enough to be calculable by NEMS, this value can be

reported. NEMS­BT also has an algorithm for estimating NOx emissions from power

generation.

2.14 EMPLOYMENT IMPACT ANALYSIS

The imposition of standards can impact employment both directly and indirectly. Direct

employment impacts are changes in the number of employees at the factories that produce the

covered lamp types, along with the affiliated distribution and service companies, resulting from

the imposition of new standards. DOE will evaluate direct employment impacts in the MIA.

Indirect employment impacts may result from expenditures shifting between goods (the

substitution effect) and changes in income and overall expenditure levels (the income effect) that

occur due to the imposition of standards. The combined direct and indirect employment impacts

will be investigated in the employment impact analysis using the Pacific Northwest National

Laboratory’s “Impact of Sector Energy Technologies” (ImSET) model. The ImSET model was

developed for DOE’s Office of Planning, Budget, and Analysis, and estimates the employment

and income effects of energy­saving technologies in buildings, industry, and transportation. In

comparison with simple economic multiplier approaches, ImSET allows for more complete and

automated analysis of the economic impacts of energy conservation investments.

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2.15 REGULATORY IMPACT ANALYSIS

In the NOPR stage, DOE will prepare a regulatory impact analysis (RIA) pursuant to

Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735, October 4, 1993,

which is subject to review under the Executive Order by the Office of Information and

Regulatory Affairs at the Office of Management and Budget. The RIA will address the potential

for non­regulatory approaches to supplant or augment energy conservation standards to improve

the energy efficiency of GSFL and IRL on the market.

DOE recognizes that voluntary or other non­regulatory efforts by manufacturers, utilities

and other interested parties can result in substantial improvements to energy efficiency or

reductions in energy consumption. DOE intends to consider the likely effects of non­regulatory

initiatives on lamp energy use, consumer utility, and LCCs. DOE will base its assessment on the

actual impacts of any such initiatives to date, but also will consider information presented

regarding the impacts that any existing initiative might have in the future.

2.16 DEPARTMENT OF JUSTICE REVIEW

Section 325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act (EPCA) states

that, before the Secretary of Energy may prescribe a new or amended energy conservation

standard, the Secretary shall ask the U.S. Attorney General to make a determination of “the

impact of any lessening of competition...that is likely to result from the imposition of the

standard.” (42 U.S.C. 6295) Pursuant to this requirement, DOE will solicit the views of the DOJ

on any lessening of competition that is likely to result from the imposition of a proposed standard

and will give the views provided full consideration in assessing economic justification of a

proposed standard. In addition, DOE may consult with DOJ at earlier stages in the standards

development process to seek to obtain preliminary views on competitive impacts.

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