13-i 

CHAPTER 13. MANUFACTURER IMPACT ANALYSIS

13.1 INTRODUCTION ............................................................................................. 13-1

13.2 METHODOLOGY ............................................................................................ 13-1

13.2.1 Phase I: Industry Profile ............................................................................. 13-2

13.2.2 Phase II: Industry Cash-Flow Analysis and Interview Guide .................... 13-2

13.2.2.1 Industry Cash-Flow Analysis ....................................................... 13-2

13.2.2.2 Interview Guides ........................................................................... 13-3

13.2.3 Phase III: Subgroup Analysis ..................................................................... 13-3

13.2.3.1 Manufacturing Interviews ............................................................. 13-3

13.2.3.2 Revised Industry Cash-Flow Analysis.......................................... 13-4

13.2.3.3 Manufacturer Subgroup Analysis ................................................. 13-4

13.2.3.3.1 Small-Business Manufacturer Subgroup ....................... 13-4

13.2.3.3.1 Sign Ballast Manufacturer Subgroup ............................. 13-5

13.2.3.4 Manufacturing Capacity Impact ................................................... 13-5

13.2.3.5 Employment Impact...................................................................... 13-6

13.2.3.6 Cumulative Regulatory Burden .................................................... 13-6

13.3 MANUFACTURER IMPACT ANALYSIS KEY ISSUES .............................. 13-6

13.3.1 Component Shortage .................................................................................. 13-6

13.3.2 Market Erosion ........................................................................................... 13-7

13.3.3 Opportunity Cost of Investments ................................................................ 13-8

13.3.4 Maintaining Product Tiers .......................................................................... 13-8

13.3.5 Adequate Compliance Periods .................................................................... 13-9

13.4 GRIM INPUTS AND ASSUMPTIONS ............................................................ 13-9

13.4.1 Overview of the GRIM ............................................................................... 13-9

13.4.2 Sources for GRIM Inputs .......................................................................... 13-10

13.4.2.1 Corporate Annual Reports .......................................................... 13-10

13.4.2.2 Standard and Poor Credit Ratings............................................... 13-10

13.4.2.3 Shipment Model.......................................................................... 13-10

13.4.2.4 Engineering Analysis .................................................................. 13-10

13.4.2.5 Manufacturer Interviews ............................................................. 13-11

13.4.3 Financial Parameters ................................................................................. 13-11

13.4.4 Corporate Discount Rate ........................................................................... 13-12

13.4.5 Trial Standard Levels ................................................................................ 13-14

13.4.6 NIA Shipment Forecast ............................................................................ 13-15

13.4.7 Production Costs ....................................................................................... 13-17

13.4.8 Product and Capital Conversion Costs ..................................................... 13-19

13.4.9 Markup Scenarios ..................................................................................... 13-22

13.4.9.1 Preservation of Operating Profit Markup Scenario .................... 13-22

13.4.9.2 Two-Tier Markup Scenario ........................................................ 13-27

13.5 INDUSTRY FINANCIAL IMPACTS ............................................................ 13-31

13.5.1 Impacts on Industry Net Present Value .................................................... 13-32

13.5.2 Impacts on Annual Cash Flow .................................................................. 13-34

13.6 IMPACTS ON MANUFACTURER SUBGROUPS ....................................... 13-39

13.6.1 Impacts on Small Business Manufacturers ............................................... 13-39
13-ii

13.6.1.1 Description and Estimated Number of Small Entities Regulated13-39

13.6.1.2 Description and Estimate of Compliance Requirements ............ 13-41

13.6.2 Impacts on Sign Ballast Manufacturers .................................................... 13-44

13.7 OTHER IMPACTS .......................................................................................... 13-46

13.7.1 Employment .............................................................................................. 13-46

13.7.2 Production Capacity .................................................................................. 13-47

13.7.3 Cumulative Regulatory Burden ................................................................ 13-47

13.7.3.1 DOE Regulations for Other Products Produced by Fluorescent Lamp 

Ballast Manufacturers ................................................................... 13-48

13.7.3.2 Other Regulations That Could Impact Fluorescent Lamp Ballast 

Manufacturers ............................................................................... 13-51

State Energy Conservation Standards ...................................... 13-51

International Toxic Materials Regulations............................... 13-52

Anti-Arcing Protection Requirements ..................................... 13-52

Electromagnetic Interference (EMI) Requirements ................. 13-52

End-of-Life (EOL) Requirements ............................................ 13-53

13.8 CONCLUSION ................................................................................................ 13-53

LIST OF TABLES

Table 13.2.1 SBA and NAICS Classification of Small Businesses Potentially Affected by 

This Rulemaking ............................................................................................................ 13-5

Table 13.4.1 GRIM Financial Parameters Based on 2002–2007 Weighted Company 

Financial Data .............................................................................................................. 13-12

Table 13.4.2 GRIM Revised Fluorescent Lamp Ballast Industry Financial Parameters . 13-

12

Table 13.4.3 Cost of Equity Calculation ...................................................................... 13-13

Table 13.4.4 Cost of Debt Calculation......................................................................... 13-14

Table 13.4.5 Trial Standard Levels for Fluorescent Lamp Ballasts ............................ 13-14

Table 13.4.6 Total Base Case NIA Shipments Forecast in 2014 under the Existing and 

Emerging Technologies Scenarios ............................................................................... 13-16

Table 13.4.7 MPC Breakdown for Two Lamp Normal BF 4ft MBP IS & RS ............ 13-17

Table 13.4.8 MPC Breakdown for Two Lamp Normal BF 4ft MBP PS ..................... 13-17

Table 13.4.9 MPC Breakdown for Four Lamp Normal BF 4ft MBP IS & RS ........... 13-18

Table 13.4.10 MPC Breakdown for Four Lamp Normal BF 4ft MBP PS................... 13-18

Table 13.4.11 MPC Breakdown for Two Lamp Normal BF 8ft SP Slimline .............. 13-18

Table 13.4.12 MPC Breakdown for Two Lamp 8ft RDC HO IS & RS ...................... 13-18

Table 13.4.13 MPC Breakdown for Two Lamp Normal BF 4ft T5 MiniBP SO ........ 13-18

Table 13.4.14 MPC Breakdown for Two Lamp 4ft T5 MiniBP HO ........................... 13-18

Table 13.4.15 MPC Breakdown for Two Lamp 4ft MBP IS & RS Residential .......... 13-19

Table 13.4.16 MPC Breakdown for Four Lamp Sign Ballast...................................... 13-19

Table 13.4.17 Product and Capital Conversion Costs for Product Class 1 (4-foot MBP IS 

and RS Ballasts and 8-foot SP Slimline Ballasts) by TSL........................................... 13-21

Table 13.4.18 Product and Capital Conversion Costs for Product Class 2 (PS Ballasts) by 

TSL .............................................................................................................................. 13-22
13-iii

Table 13.4.19 Product and Capital Conversion Costs for Product Class 3 (8-foot HO IS 

and RS Ballasts) by TSL .............................................................................................. 13-22

Table 13.4.20 Product and Capital Conversion Costs for Product Class 5 (Sign Ballasts) 

by TSL ......................................................................................................................... 13-22

Table 13.4.21 Preservation of Operating Profit Markups for Two Lamp Normal BF 4ft 

MBP IS & RS (Roll-up Shipment Scenario) ............................................................... 13-23

Table 13.4.22 Preservation of Operating Profit Markups for Two Lamp Normal BF 4ft 

MBP IS & RS (Shift Shipment Scenario) .................................................................... 13-23

Table 13.4.23 Preservation of Operating Profit Markups for Two Lamp Normal BF 4ft 

MBP PS (Roll-up Shipment Scenario) ........................................................................ 13-24

Table 13.4.24 Preservation of Operating Profit Markups for Two Lamp Normal BF 4ft 

MBP PS (Shift Shipment Scenario) ............................................................................. 13-24

Table 13.4.25 Preservation of Operating Profit Markups for Four Lamp Normal BF 4ft 

MBP IS & RS (Roll-up Shipment Scenario) ............................................................... 13-24

Table 13.4.26 Preservation of Operating Profit Markups for Four Lamp Normal BF 4ft 

MBP IS & RS (Shift Shipment Scenario) .................................................................... 13-24

Table 13.4.27 Preservation of Operating Profit Markups for Four Lamp Normal BF 4ft 

MBP PS (Roll-up Shipment Scenario) ........................................................................ 13-24

Table 13.4.28 Preservation of Operating Profit Markups for Four Lamp Normal BF 4ft 

MBP PS (Shift Shipment Scenario) ............................................................................. 13-24

Table 13.4.29 Preservation of Operating Profit Markups for Two Lamp Normal BF 8ft 

SP Slimline (Roll-up Shipment Scenario) ................................................................... 13-25

Table 13.4.30 Preservation of Operating Profit Markups for Two Lamp Normal BF 8ft 

SP Slimline (Shift Shipment Scenario) ........................................................................ 13-25

Table 13.4.31 Preservation of Operating Profit Markups for Two Lamp 8ft RDC HO IS 

& RS (Roll-up Shipment Scenario) ............................................................................. 13-25

Table 13.4.32 Preservation of Operating Profit Markups for Two Lamp 8ft RDC HO IS 

& RS (Shift Shipment Scenario) .................................................................................. 13-25

Table 13.4.33 Preservation of Operating Profit Markups for Two Lamp Normal BF 4ft 

T5 MiniBP SO (Roll-up Shipment Scenario) .............................................................. 13-25

Table 13.4.34 Preservation of Operating Profit Markups for Two Lamp Normal BF 4ft 

T5 MiniBP SO (Shift Shipment Scenario)................................................................... 13-26

Table 13.4.35 Preservation of Operating Profit Markups for Two Lamp 4ft T5 MiniBP 

HO (Roll-up Shipment Scenario)................................................................................. 13-26

Table 13.4.36 Preservation of Operating Profit Markups for Two Lamp 4ft T5 MiniBP 

HO (Shift Shipment Scenario) ..................................................................................... 13-26

Table 13.4.37 Preservation of Operating Profit Markups for Two Lamp 4ft MBP IS & RS 

Residential (Roll-up Shipment Scenario) .................................................................... 13-26

Table 13.4.38 Preservation of Operating Profit Markups for Two Lamp 4ft MBP IS & RS 

Residential (Shift Shipment Scenario) ......................................................................... 13-26

Table 13.4.39 Preservation of Operating Profit Markups for Four Lamp Sign Ballast 

(Roll-up Shipment Scenario) ....................................................................................... 13-27

Table 13.4.40 Preservation of Operating Profit Markups for Four Lamp Sign Ballast 

(Shift Shipment Scenario) ............................................................................................ 13-27

Table 13.4.41 Two-Tier Markups for Two Lamp Normal BF 4ft MBP IS & RS (Existing 

Technologies Scenario) ................................................................................................ 13-28
13-iv

Table 13.4.42 Two-Tier Markups for Two Lamp Normal BF 4ft MBP IS & RS 

(Emerging Technologies Scenario) .............................................................................. 13-28

Table 13.4.43 Two-Tier Markups for Two Lamp Normal BF 4ft MBP PS (Existing 

Technologies Scenario) ................................................................................................ 13-28

Table 13.4.44 Two-Tier Markups for Two Lamp Normal BF 4ft MBP PS (Emerging 

Technologies Scenario) ................................................................................................ 13-28

Table 13.4.45 Two-Tier Markups for Four Lamp Normal BF 4ft MBP IS & RS (Existing 

Technologies Scenario) ................................................................................................ 13-28

Table 13.4.46 Two-Tier Markups for Four Lamp Normal BF 4ft MBP IS & RS 

(Emerging Technologies Scenario) .............................................................................. 13-29

Table 13.4.47 Two-Tier Markups for Four Lamp Normal BF 4ft MBP PS (Existing 

Technologies Scenario) ................................................................................................ 13-29

Table 13.4.48 Two-Tier Markups for Four Lamp Normal BF 4ft MBP PS (Emerging 

Technologies Scenario) ................................................................................................ 13-29

Table 13.4.49 Two-Tier Markups for Two Lamp Normal BF 8ft SP Slimline (Existing 

Technologies Scenario) ................................................................................................ 13-29

Table 13.4.50 Two-Tier Markups for Two Lamp Normal BF 8ft SP Slimline (Emerging 

Technologies Scenario) ................................................................................................ 13-29

Table 13.4.51 Two-Tier Markups for Two Lamp 8ft RDC HO IS & RS (Existing 

Technologies Scenario) ................................................................................................ 13-30

Table 13.4.52 Two-Tier Markups for Two Lamp 8ft RDC HO IS & RS (Emerging 

Technologies Scenario) ................................................................................................ 13-30

Table 13.4.53 Two-Tier Markups for Two Lamp Normal BF 4ft T5 MiniBP SO (Existing 

Technologies Scenario) ................................................................................................ 13-30

Table 13.4.54 Two-Tier Markups for Two Lamp Normal BF 4ft T5 MiniBP SO 

(Emerging Technologies Scenario) .............................................................................. 13-30

Table 13.4.55 Two-Tier Markups for Two Lamp 4ft T5 MiniBP HO (Existing 

Technologies Scenario) ................................................................................................ 13-30

Table 13.4.56 Two-Tier Markups for Two Lamp 4ft T5 MiniBP HO (Emerging 

Technologies Scenario) ................................................................................................ 13-31

Table 13.4.57 Two-Tier Markups for Two Lamp 4ft MBP IS & RS Residential (Existing 

Technologies Scenario) ................................................................................................ 13-31

Table 13.4.58 Two-Tier Markups for Two Lamp 4ft MBP IS & RS Residential 

(Emerging Technologies Scenario) .............................................................................. 13-31

Table 13.4.59 Two-Tier Markups for Four Lamp Sign Ballast (Existing Technologies 

Scenario) ...................................................................................................................... 13-31

Table 13.4.60 Two-Tier Markups for Four Lamp Sign Ballast (Emerging Technologies 

Scenario) ...................................................................................................................... 13-31

Table 13.5.1 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Roll-up Shipments, and Existing Technologies 

Scenarios) ..................................................................................................................... 13-32

Table 13.5.2 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Roll-up Shipments, and Emerging 

Technologies Scenarios) .............................................................................................. 13-32
13-v 

Table 13.5.3 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Shift Shipments, and Existing Technologies 

Scenarios) ..................................................................................................................... 13-33

Table 13.5.4 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Shift Shipments, and Emerging Technologies 

Scenarios) ..................................................................................................................... 13-33

Table 13.5.5 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts (TwoTier Markup, Roll-up Shipments, and Existing Technologies Scenarios)................... 13-33

Table 13.5.6 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts (TwoTier Markup, Roll-up Shipments, and Emerging Technologies Scenarios) ................ 13-33

Table 13.5.7 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts (TwoTier Markup, Shift Shipments, and Existing Technologies Scenarios) ....................... 13-34

Table 13.5.8 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts (TwoTier Markup, Shift Shipments, and Emerging Technologies Scenarios) ..................... 13-34

Table 13.6.1 Comparison of a Typical Small and Large Manufacturer’s Product 

Conversion Costs to Annual R&D Expense ................................................................ 13-42

Table 13.6.2 Comparison of a Typical Small and Large Manufacturer’s Total Conversion 

Costs to Annual Revenue and EBIT ............................................................................ 13-43

Table 13.6.3 Manufacturer Impact Analysis for Sign Ballasts – Preservation of Operating 

Profit Markup, Existing Technologies, and Roll-up Shipment Scenario..................... 13-45

Table 13.6.4 Manufacturer Impact Analysis for Sign Ballasts – Preservation of Operating 

Profit Markup, Emerging Technologies, and Roll-up Shipment Scenario .................. 13-45

Table 13.7.1 Other DOE and Federal Actions Affecting the Fluorescent Lamp Ballast 

Industry ........................................................................................................................ 13-49

Table 13.7.2 DOE Regulations on Products For Which Fluorescent Lamp Ballast 

Manufacturers Hold Significant Market Share ............................................................ 13-51

LIST OF FIGURES

Figure 13.4.1 Using the GRIM to Calculate Cash Flow ................................................ 13-9

Figure 13.5.1 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Roll-up Shipments, and Existing Technologies 

Scenarios) ..................................................................................................................... 13-35

Figure 13.5.2 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Roll-up Shipments, and Emerging 

Technologies Scenarios) .............................................................................................. 13-36

Figure 13.5.3 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Shift Shipments, and Existing Technologies 

Scenarios) ..................................................................................................................... 13-36

Figure 13.5.4 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Shift Shipments, and Emerging Technologies 

Scenarios) ..................................................................................................................... 13-37

Figure 13.5.5 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts (Two-Tier 

Markup, Roll-up Shipments, and Existing Technologies Scenarios) .......................... 13-37
13-vi

Figure 13.5.6 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts (Two-Tier 

Markup, Roll-up Shipments, and Emerging Technologies Scenarios) ........................ 13-38

Figure 13.5.7 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts (Two-Tier 

Markup, Shift Shipments, and Existing Technologies Scenarios) ............................... 13-38

Figure 13.5.8 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts (Two-Tier 

Markup, Shift Shipments, and Emerging Technologies Scenarios) ............................ 13-39
13-1 

CHAPTER 13. MANUFACTURER IMPACT ANALYSIS

13.1 INTRODUCTION

In determining whether a standard is economically justified, the U.S. Department 

of Energy (DOE) is required to consider “the economic impact of the standard on the 

manufacturers and on the consumers of the products subject to such a standard.” (42 

U.S.C. 6313(a)(6)(B)(i)) The law also calls for an assessment of the impact of any 

lessening of competition as determined in writing by the Attorney General. Id. DOE 

conducted a manufacturer impact analysis (MIA) to estimate the financial impact of 

amended energy conservation standards on manufacturers of fluorescent lamp ballasts, 

and assessed the impact of such standards on direct employment and manufacturing 

capacity. 

The MIA has both quantitative and qualitative aspects. The quantitative part of 

the MIA primarily relies on the Government Regulatory Impact Model (GRIM), an 

industry cash-flow model adapted for the products in this rulemaking. The GRIM inputs 

include information on industry cost structure, shipments, and pricing strategies. The 

GRIM’s key output is the industry net present value (INPV). The model estimates the 

financial impact of more stringent energy conservation standards for each product by 

comparing changes in INPV between a base case and the various trial standard levels 

(TSLs) in the standards case. The qualitative part of the MIA addresses product 

characteristics, manufacturer characteristics, market and product trends, as well as the 

impact of standards on subgroups of manufacturers. 

13.2 METHODOLOGY

DOE conducted the MIA in three phases. Phase I, “Industry Profile,” consisted of 

preparing an industry characterization for the fluorescent lamp ballasts industry, 

including data on market share, sales volumes and trends, pricing, employment, and 

financial structure. In Phase II, “Industry Cash Flow,” DOE used the GRIM to assess the 

impacts of amended energy conservation standards on fluorescent lamp ballasts.

In Phase II, DOE created a GRIM for fluorescent lamp ballasts and an interview 

guide to gather information on the potential impacts on manufacturers. DOE presented

the MIA results for fluorescent lamp ballasts based on a set of considered TSLs. These 

TSLs are described in Section 13.4.5 below. 

In Phase III, “Subgroup Impact Analysis,” DOE interviewed manufacturers 

representing more than 90 percent of fluorescent lamp ballast sales. Interviewees 

included large and small manufacturers with various market shares and market focus, 

providing a representative cross-section of the industries. During interviews, DOE 

discussed financial topics specific to each manufacturer and obtained each 

manufacturer’s view of the industry. The interviews provided DOE with valuable 
13-2 

information for evaluating the impacts of amended energy conservation standards on 

manufacturer cash flows, investment requirements, and employment. 

13.2.1 Phase I: Industry Profile

In Phase I of the MIA, DOE prepared a profile of the fluorescent lamp ballast

industry that built upon the market and technology assessment prepared for this 

rulemaking. (See chapter 3 of this Technical Support Document (TSD).) Before initiating 

the detailed impact studies, DOE collected information on the present and past structure 

and market characteristics of each industry. This information included market share data,

product shipments, manufacturer markups, and the cost structure for various 

manufacturers. The industry profile includes: (1) further detail on the overall market and 

product characteristics; (2) estimated manufacturer market shares; (3) financial 

parameters such as net plant, property, and equipment; selling, general and administrative 

(SG&A) expenses; cost of goods sold, etc.; and (4) trends in the number of firms, market, 

and product characteristics. The industry profile included a top-down cost analysis of 

fluorescent lamp ballast manufacturers that DOE used to derive preliminary financial 

inputs for the GRIM (e.g., revenues, depreciation, SG&A, and research and development 

(R&D) expenses). 

DOE also used public information to further calibrate its initial characterization of 

the fluorescent lamp ballast industry, including Securities and Exchange Commission 

(SEC) 10–K reports,

1

 Standard & Poor’s (S&P) stock reports,2 and corporate annual 

reports. DOE supplemented this public information with data released by privately held 

companies.

13.2.2 Phase II: Industry Cash-Flow Analysis and Interview Guide 

Phase II focused on the financial impacts of potential amended energy 

conservation standards on manufacturers of fluorescent lamp ballasts. More stringent 

energy conservation standards can affect manufacturer cash flows in three distinct ways: 

(1) create a need for increased investment, (2) raise production costs per unit, and (3) 

alter revenue due to higher per-unit prices and/or possible changes in sales volumes. To 

quantify these impacts, DOE used the GRIM to perform a cash-flow analysis for 

fluorescent lamp ballasts. In performing these analyses, DOE used the financial values 

derived during Phase I and the shipment scenarios used in the national impact analysis 

(NIA). In Phase II, DOE performed these preliminary industry cash-flow analyses and 

prepared written guides for manufacturer interviews. 

13.2.2.1 Industry Cash-Flow Analysis 

The GRIM uses several factors to determine a series of annual cash flows from 

the announcement year of amended energy conservation standards until several years 

after the standards’ compliance date. These factors include annual expected revenues, 

costs of sales, SG&A, taxes, and capital expenditures related to the amended standards. 

Inputs to the GRIM include manufacturing production costs, selling prices, and 

shipments forecasts developed in other analyses. DOE derived the manufacturing costs 
13-3 

from the engineering analysis and information provided by the industry and estimated 

typical manufacturer markups from public financial reports and interviews with 

manufacturers. DOE developed alternative markup scenarios for the GRIM based on 

discussions with manufacturers. DOE’s shipments analysis, presented in chapter 11 of 

this TSD, provided the basis for the shipment projections in the GRIM. The financial 

parameters were developed using publicly available manufacturer data and were revised 

with information submitted confidentially during manufacturer interviews. The GRIM 

results are compared to base case projections for the industry. The financial impact of 

amended energy conservation standards is the difference between the discounted annual 

cash flows in the base case and standards case at each TSL. 

13.2.2.2 Interview Guides

During Phase III of the MIA, DOE interviewed manufacturers to gather 

information on the effects of amended energy conservation on revenues and finances, 

direct employment, capital assets, and industry competitiveness. Before the interviews, 

DOE distributed an interview guide for the fluorescent lamp ballast industry. The 

interview guide provided a starting point to identify relevant issues and help identify the 

impacts of amended energy conservation standards on individual manufacturers or 

subgroups of manufacturers. Most of the information DOE received from these meetings 

is protected by non-disclosure agreements and resides with DOE’s contractors. Before 

each telephone interview or site visit, DOE provided company representatives with an 

interview guide that included the topics for which DOE sought input. The MIA interview 

topics included (1) test procedure follow-up; (2) preliminary analysis follow-up; (3) key 

issues to this rulemaking; (4) a company overview and organizational characteristics; (5) 

manufacturer markups and profitability; (6) shipment projections and market shares; (7) 

financial parameters; (8) conversion costs; (9) cumulative regulatory burden; (10) direct 

employment impact assessment; (11) manufacturing capacity and non-US sales; (12) 

impact on competition; and (13) impacts on small business. The interview guides are 

presented in appendix 13A.

13.2.3 Phase III: Subgroup Analysis

For its analysis, DOE presented the impacts on all product classes of fluorescent 

lamp ballasts as a whole. While conducting the MIA, DOE interviewed a representative 

cross-section of fluorescent lamp balllast manufacturers. The MIA interviews broadened 

the discussion to include business-related topics. DOE sought to obtain feedback from 

industry on the approaches used in the GRIMs and to isolate key issues and concerns. 

During interviews, DOE defined two manufacturer subgroups (small manufacturers and 

sign ballast manufacturers) that could be disproportionately impacted by amended energy 

conservation standards. These subgroups are described in detail below. 

13.2.3.1 Manufacturing Interviews

The information gathered in Phase I and the cash-flow analysis performed in 

Phase II are supplemented with information gathered from manufacturer interviews in 

Phase III. The interview process provides an opportunity for interested parties to express 
13-4 

their views on important issues privately, allowing confidential or sensitive information 

to be considered in the rulemaking process. 

DOE used these interviews to tailor the GRIM to reflect unique financial 

characteristics for fluorescent lamp ballast manufacturers. DOE contacted companies 

from its database of manufacturers and interviewed small and large companies, 

subsidiaries and independent firms, and public and private corporations to provide a 

representation of the industry. Interviews were scheduled well in advance to provide 

every opportunity for key individuals to be available for comment. Although a written 

response to the questionnaire was acceptable, DOE sought interactive interviews, which 

help clarify responses and identify additional issues. The resulting information provides 

valuable inputs to the GRIM developed for the product classes. 

13.2.3.2 Revised Industry Cash-Flow Analysis 

In Phase II of the MIA, DOE provided manufacturers with preliminary GRIM 

input financial figures for review and evaluation. During the interviews, DOE requested 

comments on the values it selected for the parameters. DOE revised its industry cashflow models based on this feedback. Section 13.4.3 provides more information on how 

DOE calculated the parameters.

13.2.3.3 Manufacturer Subgroup Analysis 

Using average cost assumptions to develop an industry cash flow estimate is not 

adequate for assessing differential impacts among manufacturer subgroups. Small 

manufacturers and other manufacturers with a cost structure significantly different from 

the industry average could be more negatively affected. DOE uses the results of the 

industry characterization to group manufacturers exhibiting similar characteristics. 

During the interviews, DOE discussed the potential subgroups and subgroup members it 

identified for the analysis. DOE asked manufacturers and other interested parties to 

suggest what subgroups or characteristics are the most appropriate to analyze. As 

described in section 13.2.3, DOE presents the industry impacts on fluorescent lamp 

ballasts as a whole because most of the product classes represent the same market served 

by the same manufacturers. However, as discussed below, DOE identified two additional 

manufacturer subgroups that warranted a separate impact analysis: small manufacturers 

and sign ballast manufacturers.

13.2.3.3.1 Small-Business Manufacturer Subgroup

DOE investigated whether small business manufacturers should be analyzed as a 

manufacturer subgroup. DOE used the Small Business Administration (SBA) small 

business size standards published on August 22, 2008, as amended, and the North 

American Industry Classification System (NAICS) code, presented in Table 13.2.1 , to 

determine whether any small entities would be affected by the rulemaking.a

 For the 

a The size standards are available on the SBA’s website at 

http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf. 
13-5 

product classes under review, the SBA bases its small business definition on the total 

number of employees for a business, its subsidiaries, and its parent companies. An 

aggregated business entity with fewer employees than the listed limit is considered a 

small business.

Table 13.2.1 SBA and NAICS Classification of Small Businesses Potentially Affected 

by This Rulemaking

Industry Description Revenue Limit Employee Limit NAICS

Power, Distribution and Specialty 

Transformer Manufacturing N/A 750 335311

DOE used the National Electrical Manufacturers Association (NEMA)3 member 

directory to identify manufacturers of fluorescent lamp ballasts. DOE asked interested 

parties and industry representatives if they were aware of other small business 

manufacturers. DOE also consulted product databases like the Consortium for Energy 

Efficiency (CEE)4 and the California Energy Commission (CEC)5 for potential 

manufacturers. DOE contacted select companies on its list, as necessary, to determine 

whether they met the SBA’s definition of a small business manufacturer of covered 

fluorescent lamp ballasts. DOE screened out companies that did not offer products 

covered by this rulemaking, did not meet the definition of a “small business,” or are 

foreign owned and operated. 

During its research, DOE identified approximately ten companies which 

manufacture products covered by this rulemaking and qualify as small businesses per the 

applicable SBA definition. DOE contacted the small businesses to solicit feedback on the 

potential impacts of energy conservation standards. Two of the small businesses 

consented to being interviewed during the MIA interviews, and DOE received feedback 

from one additional small business through a survey response. In addition to posing the 

standard MIA interview questions, DOE solicited data from other manufacturers on 

differential impacts these companies might experience from amended energy 

conservation standards. Because DOE was not able to certify that the proposed 

rulemaking would not have a significant economic impact on a substantial number of 

small entities, DOE has analyzed small manufacturers as a subgroup. The results of this 

subgroup analysis are presented in section 13.6. 

13.2.3.3.1 Sign Ballast Manufacturer Subgroup

DOE investigated sign ballast manufacturers as a second subgroup. Unlike the 

traditional fluorescent lamp ballast market, which is dominated by four large 

manufacturers with high volume product lines, the sign ballast market is significantly 

more fragmented, with numerous small players providing products in low volumes to 

distinct markets. As such, DOE conducted a subgroup analysis for sign ballast 

manufacturers, the results of which are presented in section 13.6. 

13.2.3.4 Manufacturing Capacity Impact 

One significant outcome of amended energy conservation standards could be the 

obsolescence of existing manufacturing assets, including tooling and investment. The 
13-6 

manufacturer interview guides have a series of questions to help identify impacts of 

amended standards on manufacturing capacity, specifically capacity utilization and plant 

location decisions in the United States and North America, with and without amended 

standards; the ability of manufacturers to upgrade or remodel existing facilities to 

accommodate the new requirements; the nature and value of any stranded assets; and 

estimates for any one-time changes to existing plant, property, and equipment (PPE). 

DOE’s estimates of the one-time capital changes and stranded assets affect the cash flow 

estimates in the GRIM. These estimates can be found in section 13.4.8; DOE’s discussion 

of the capacity impact can be found in section 13.7.2. 

13.2.3.5 Employment Impact 

The impact of amended energy conservation standards on employment is an 

important consideration in the rulemaking process. To assess how domestic direct 

employment patterns might be affected, the interviews explored current employment 

trends in the fluorescent lamp ballast industry. The interviews also solicited manufacturer 

views on changes in employment patterns that may result from more stringent standards. 

The employment impacts section of the interview guide focused on current employment 

levels associated with manufacturers at each production facility, expected future 

employment levels with and without amended energy conservation standards, and 

differences in workforce skills and issues related to the retraining of employees. The 

employment impacts are reported in section 13.7.1. 

13.2.3.6 Cumulative Regulatory Burden

DOE seeks to mitigate the overlapping effects on manufacturers due to amended 

energy conservation standards and other regulatory actions affecting the same products. 

DOE analyzed the impact on manufacturers of multiple, product-specific regulatory 

actions. Based on its own research and discussions with manufacturers, DOE identified 

regulations relevant to fluorescent lamp ballast manufacturers, such as State regulations 

and other Federal regulations that impact other products made by the same 

manufacturers. Discussion of the cumulative regulatory burden can be found in section 

13.7.3. 

13.3 MANUFACTURER IMPACT ANALYSIS KEY ISSUES

Each MIA interview starts by asking: “What are the key issues for your company 

regarding the energy conservation standard rulemaking?” This question prompts 

manufacturers to identify the issues they feel DOE should explore and discuss further 

during the interview. The following sections describe the most significant issues 

identified by manufacturers. These summaries are provided in aggregate to protect 

manufacturer confidentiality. 

13.3.1 Component Shortage

 All manufacturers stated that an ongoing component shortage, which began in the 

fall of 2009, is a key concern for their industry. During the recent economic downturn, 
13-7 

component suppliers scaled back production significantly. When demand recovered as 

the recession ended, electronics suppliers lacked the capacity to meet demand. Suppliers 

have been reluctant to add capacity for fear that the downturn has not actually ended; this 

reluctance has driven a prolonged shortage of ballast components. Electrolytic capacitors 

and transistors are key examples of components in relatively short supply, which come 

almost entirely from Asia. 

The fact that these components are shared among many electronics industries has 

exacerbated the problem for the ballast industry. Because the selling price of a ballast is 

much lower than that of many other products demanding these components, such as 

televisions and cell phones, other industries, which are better able to absorb small 

component prices increases, are able to pay more for these components and thus receive 

priority over the ballast industry. Some of these competing industries also have greater 

scale to help justify prioritization from vendors. Additionally, component manufacturers 

are seeing their customers place duplicate orders with several suppliers (only to later 

cancel the orders with all but one supplier). This has led to component suppliers being 

skeptical that the demand for components is as great as manufacturers claim. As a result, 

suppliers currently cannot meet the full demand for several components used in the 

ballasts industry and many other electronics industries. 

 In turn, ballast manufacturers have been unable to have their orders filled with 

lead times they have been accustomed to. They have been forced to pay higher charges to 

rush parts in order to fill their own customers’ orders. The shortage not only disrupted 

manufacturers’ ability to fill ballast orders within historical lead times, but also hampered 

their R&D efforts as obtaining parts for product development is more difficult. 

Manufacturers predicted the component shortage would last at least into 2011.

Manufacturers were concerned that energy conservation standards for fluorescent 

lamp ballasts would exacerbate the component shortage. New and amended standards, 

particularly at the highest efficiency levels analyzed, would greatly increase the demand 

for highly efficient components, which are only available from a limited number of 

suppliers and are already in short supply. The more stringent the standards are set, the 

more severe the component shortage could be. 

 Manufacturers also stated that the component shortage has forced them to expand 

the number of suppliers they use, which could cause greater variation in production 

output. The component shortage has also impacted their profitability because 

manufacturers are paying more for components but have not yet been able to pass on 

these increased costs to consumers. 

13.3.2 Market Erosion

Manufacturers stated that emerging technologies are penetrating the fluorescent 

lamp ballasts market. Several manufacturers worried that new and amended energy 

conservation standards for ballasts would force them to invest in a shrinking market. 

Depending on the pace of market penetration of emerging technologies—such as lightemitting diodes (LEDs)—these investments might never be recouped. Also, 
13-8 

manufacturers were concerned that new and amended standards on ballasts could hasten 

the switch to emerging technologies by lowering the difference in their first-cost price. If 

the standard did increase the natural migration toward new technology, manufacturers 

said they would be less likely to make the substantial investments to modify ballasts

production equipment for some of their product lines. (To address emerging technologies 

issues discussed by manufacturers, DOE included several shipment scenarios in both the 

NIA and the GRIM. See chapter 11 of this notice of proposed rulemaking (NOPR) TSD 

for a discussion of the shipment scenarios used in the respective analyses.) 

13.3.3 Opportunity Cost of Investments 

Manufacturers also stated that the financial burden of developing products to meet 

amended energy conservation standards has an opportunity cost due to the limited pool of 

capital and R&D dollars. Currently, manufacturers are reinvesting the lion’s share of the 

cash flow from fluorescent lamp ballast operations into emerging technologies such as 

LEDs and control systems. Any investments incurred to meet amended ballast standards 

would therefore reflect foregone investments in these emerging technologies, which the 

industry believes offer both better prospects for market growth and greater potential for 

energy savings than traditional fixed–light-output fluorescent lamp ballasts. Compared to 

these emerging technologies, manufacturers stated that they have little room for 

efficiency improvements within their ballast product lines. 

13.3.4 Maintaining Product Tiers

Several manufacturers stated that they would not want standards to be so stringent 

that they eliminate the ability to carry two efficiency tiers within a product class. Most 

manufacturers—and all major manufacturers—currently offer both standard-efficiency

and high-efficiency product lines. The standard-efficiency product lines are typically 

lower cost and lower margin. These high-volume products provide economies of scale 

and, by establishing a market presence and brand, enhance manufacturers’ ability to enter 

the more profitable retrofit and aftermarket sales. Meanwhile, the high-efficiency product 

lines allow manufacturers to bundle other features within these products, which allows 

them to upsell these products and often command a better margin. Utility rebates and 

other similar programs also play a large role in driving the purchase of higher efficiency 

ballasts. 

If DOE set standards that did not leave room for a high-efficiency product to 

differentiate itself from a baseline product, manufacturers worry the new standard would 

commoditize these now-premium products. In turn, prices of the high-efficiency ballasts 

would fall to the level of what were formerly the lower-tier products, harming 

manufacturer profitability. Utility companies and other programs would have little 

incentive to offer rebates for these former upper-tier products, which would then be 

baseline units. Without rebate incentives, sales to the energy retrofit market could 

decrease greatly due to cost, which would diminish the potential for energy savings due 

to the standard. 
13-9 

13.3.5 Adequate Compliance Periods

A number of manufacturers expressed concern about the timing between the 

announcement of the standard and the effective date of the standard. Manufacturers stated 

that they need adequate time to develop products that meet the amended efficiency 

standards. Without enough development time, manufacturers may not have the resources 

to redesign and test all of their product lines before the required compliance date in 2014, 

which could result in lost sales opportunities in the market.

13.4 GRIM INPUTS AND ASSUMPTIONS

The GRIM serves as the main tool for assessing the impacts on industry due to 

amended energy conservation standards. DOE relies on several sources to obtain inputs 

for the GRIM. Data and assumptions from these sources are then fed into an accounting 

model that calculates the industry cash flow both with and without amended energy 

conservation standards. 

13.4.1 Overview of the GRIM

The basic structure of the GRIM, illustrated in Figure 13.4.1 , is an annual cash 

flow analysis that uses manufacturer prices, manufacturing costs, shipments, and industry 

financial information as inputs, and accepts a set of regulatory conditions such as changes 

in costs, investments, and associated margins. The GRIM spreadsheet uses a number of 

inputs to arrive at a series of annual cash flows, beginning with the base year of the 

analysis, 2011, and continuing to 2043. The model calculates the INPV by summing the 

stream of annual discounted cash flows during this period and adding a discounted 

terminal value.

6

Figure 13.4.1 Using the GRIM to Calculate Cash Flow 

The GRIM projects cash flows using standard accounting principles and compares 

changes in INPV between the base case and the standard-case scenario induced by 

amended energy conservation standards. The difference in INPV between the base case 

and the standard case(s) represents the estimated financial impact of the amended energy 
13-10

conservation standard on manufacturers. Appendix 13B provides more technical details 

and user information for the GRIM. 

13.4.2 Sources for GRIM Inputs

The GRIM uses several different sources for data inputs in determining industry 

cash flow. These sources include corporate annual reports, company profiles, Census 

data, credit ratings, the shipments model, the engineering analysis, and the manufacturer 

interviews.

13.4.2.1 Corporate Annual Reports

Corporate annual reports to the SEC (SEC 10-Ks) provided many of the initial 

financial inputs to the GRIM. These reports exist for publicly held companies and are 

freely available to the general public. DOE developed initial financial inputs to the GRIM 

by examining the annual SEC 10-K reports filed by publicly-traded manufacturers that 

manufacture fluorescent lamp ballasts, among other products. Since these companies do 

not provide detailed information about their individual product lines, DOE used the 

financial information for the entire companies as its initial estimates of the financial 

parameters in the GRIM analysis. These figures were later revised using feedback from 

interviews to be representative of fluorescent lamp ballast manufacturing. DOE used 

corporate annual reports to derive the following initial inputs to the GRIM: 

• Tax rate

• Working capital 

• SG&A

• R&D

• Depreciation

• Capital expenditures 

• Net PPE

13.4.2.2 Standard and Poor Credit Ratings 

S&P provides independent credit ratings, research, and financial information. 

DOE relied on S&P reports to determine the industry’s average cost of debt when 

calculating the cost of capital.

13.4.2.3 Shipment Model

The GRIM used shipment projections derived from DOE’s shipments model in 

the NIA. The model relied on historical shipments data for fluorescent lamp ballasts. 

Chapter 10 of the TSD describes the methodology and analytical model DOE used to 

forecast shipments. 

13.4.2.4 Engineering Analysis 

The engineering analysis establishes the relationship between manufacturer 

production cost (MPC) and energy efficiency for the products covered in this rulemaking. 
13-11

DOE has adopted an efficiency level approach paired with reverse engineering cost 

estimates to develop cost-efficiency curves. DOE began its analysis by conducting 

industry research to determine representative product classes, select baseline ballasts, and 

select representative ballasts for further testing and analysis. Next DOE determined 

efficiency levels based on the design options associated with the specific ballasts studied 

and the maximum technologically feasible efficiency level. Lastly, DOE conducted a 

price analysis by generating a bill of materials (BOM) by tearing down representative 

ballasts and developing a cost model that converts the BOMs for each efficiency level 

into MPCs. By applying derived manufacturer markups to the MPC, DOE calculated the 

manufacturer selling price (MSP) and constructed industry cost-efficiency curves. In 

cases where DOE was not able to generate a BOM for representative ballasts, DOE 

estimated an MSP based on the relationship between teardown data, blue book prices, 

and manufacturer-supplied MSPs. See chapter 5 for a complete discussion of the 

engineering analysis. 

13.4.2.5 Manufacturer Interviews

During the course of the MIA, DOE conducted interviews with a representative 

cross-section of manufacturers. DOE also interviewed manufacturers representing a 

significant portion of sales in every product class. During these discussions, DOE 

obtained information to determine and verify GRIM input assumptions in each industry. 

Key topics discussed during the interviews and reflected in the GRIM include:

• capital conversion costs (one-time investments in PPE);

• product conversion costs (one-time investments in research, product 

development, testing, and marketing); 

• product cost structure, or the portion of the MPCs related to materials, 

labor, overhead, and depreciation costs; 

• possible profitability impacts; and

• cost-efficiency curves calculated in the engineering analysis.

13.4.3 Financial Parameters

Table 13.4.1 below provides financial parameters for four public companies 

engaged in manufacturing and selling fluorescent lamp ballasts. The values listed are 

averages over a 6-year period (2002 to 2007). 
13-12

Table 13.4.1 GRIM Financial Parameters Based on 2002–2007 Weighted Company 

Financial Data 

Parameter Weighted 

Average

Manufacturer

A B C D

Tax Rate % of taxable income 23.4 11.4 28.4 13.1 32.6

Working Capital % of revenues 8.3 -29.4 17.9 11.9 16.4

SG&A % of revenues 19.4 14.0 20.8 17.8 22.6

R&D % of revenues 3.8 3.6 2.7 6.1 3.9

Depreciation % of revenues 3.7 2.1 3.8 5.9 2.7

Capital Expenditures % of revenues 4.2 3.0 4.6 6.4 2.3

Net PPE % of revenues 14.6 18.2 14.1 13.5 13.7

During interviews, fluorescent lamp ballast manufacturers were asked to provide 

their own figures for the parameters listed in Table 13.4.1. Where applicable, DOE 

adjusted the parameters in the GRIM using this feedback and data from publicly traded 

companies to reflect manufacturing fluorescent lamp ballasts. Table 13.4.2 presents the 

revised parameters for fluorescent lamp ballast manufacturers.

Table 13.4.2 GRIM Revised Fluorescent Lamp Ballast Industry Financial 

Parameters

Parameter Revised Estimate

Tax Rate % of taxable income 31.8

Working Capital % of revenues 8.3

SG&A % of revenues 16.6

R&D % of revenues 3.7

Depreciation % of revenues 3.1

Capital Expenditures % of revenues 3.2

Net PPE % of revenues 11.4

13.4.4 Corporate Discount Rate 

DOE used the weighted-average cost of capital (WACC) as the discount rate to 

calculate the INPV. A company’s assets are financed by a combination of debt and 

equity. The WACC is the total cost of debt and equity weighted by their respective 

proportions in the capital structure of the industry. DOE estimated the WACC for the 

fluorescent lamp ballast industry based on several representative companies, using the 

following formula:

WACC = After-Tax Cost of Debt x (Debt Ratio) + Cost of Equity x (Equity 

Ratio) Eq. 1 

The cost of equity is the rate of return that equity investors (including, potentially, 

the company) expect to earn on a company’s stock. These expectations are reflected in 

the market price of the company’s stock. The capital asset pricing model (CAPM) 

provides one widely used means to estimate the cost of equity. According to the CAPM, 

the cost of equity (expected return) is: 

Cost of Equity = Riskless Rate of Return + β x Risk Premium Eq. 2 

where:
13-13

Riskless rate of return is the rate of return on a “safe” benchmark investment, 

typically considered the short-term Treasury Bill (T-Bill) yield.

Risk premium is the difference between the expected return on stocks and the 

riskless rate.

Beta (β) is the correlation between the movement in the price of the stock and that 

of the broader market. In this case, Beta equals one if the stock is perfectly correlated 

with the S&P 500 market index. A Beta lower than one means the stock is less volatile 

than the market index. 

DOE determined that the industry average cost of equity for the fluorescent lamp 

ballast industry is 10.7 percent (Table 13.4.3).

Table 13.4.3 Cost of Equity Calculation 

Parameter

IndustryWeighted 

Average 

%

Manufacturer

A B C D 

(1) Average Beta 1.29 1.65 1.24 1.48 0.92

(2) Yield on 10-Year 

T-Bill (1928-2009) 5.2 - - - - 

(3) Market Risk Premium 

(1928-2009) 6.0 - - - - 

Cost of Equity (2)+[(1)*(3)] 12.9 - - - -

Equity/Total Capital 87.5 90.8 94.7 75.0 82.4

Bond ratings are a tool to measure default risk and arrive at a cost of debt. Each 

bond rating is associated with a particular spread. One way of estimating a company’s 

cost of debt is to treat it as a spread (usually expressed in basis points) over the risk-free 

rate. DOE used this method to calculate the cost of debt for all four manufacturers by 

using S&P ratings and adding the relevant spread to the risk-free rate. 

In practice, investors use a variety of different maturity Treasury bonds to 

estimate the risk-free rate. DOE used the 10-year Treasury bond return because it 

captures long-term inflation expectations and is less volatile than short-term rates. The 

risk free rate is estimated to be approximately 5.2 percent, which is the average 10-year 

Treasury bond return between 1928 and 2009. 

For the cost of debt, S&P’s Credit Services provided the average spread of 

corporate bonds for the four public manufacturers. DOE added the industry-weighted 

average spread to the average T-Bill rate. Since proceeds from debt issuance are tax 

deductible, DOE adjusted the gross cost of debt by the industry average tax rate to 

determine the net cost of debt for the industry. Table 13.4.4 presents the derivation of the 

cost of debt and the capital structure of the industry (i.e. the debt ratio (debt/total 

capital)). 
13-14

Table 13.4.4 Cost of Debt Calculation 

Parameter

IndustryWeighted 

Average 

%

Manufacturer

A B C D 

S&P Bond Rating -- AA+ A- A+ AA- 

(1) Yield on 10-Year 

T-Bill (1928-2009) 5.2 - - - - 

(2) Gross Cost of Debt 8.1 7.2 8.7 7.9 7.7

(3) Tax Rate 23.4 11.4 28.4 13.1 32.6

Net Cost of Debt 

(2) x (1-(3)) 6.2 - - - - 

Debt/Total Capital 12.5 9.2 5.3 25.0 17.6

Using public information for these four companies, the initial estimate for the 

fluorescent lamp ballast industry’s WACC was approximately 10.2 percent. Subtracting 

an inflation rate of 3.1 percent between 1928 and 2009, the inflation-adjusted WACC and 

the initial estimate of the discount rate used in the straw-man GRIM is 7.1 percent. DOE 

also asked for feedback on the 7.1 percent discount during manufacturer interviews and 

used this feedback to determine that 7.4 percent was an appropriate discount rate for use 

in the GRIM. 

13.4.5 Trial Standard Levels

DOE developed TSLs for fluorescent lamp ballasts. Consistent with the 

engineering analysis, DOE analyzed four representative product classes based on ten 

representative ballasts. Table 13.4.5 show the TSLs for the product classes analyzed by 

DOE. DOE scaled the standards for these representative product classes to create 

standards for other product classes that were not directly analyzed (programmed start 

(PS) ballasts that operate 8-foot high output (HO) lamps), as set forth in chapter 5 of the 

TSD. Table 13.4.5 presents the efficiency level (EL) at each TSL used in the GRIM. 

Table 13.4.5 Trial Standard Levels for Fluorescent Lamp Ballasts

Representative Product Class TSL 1 TSL 2 TSL 3

IS and RS ballasts that operate

 4-foot MBP lamps

 8-foot slimline lamps

EL1 EL2 EL3

PS ballasts that operate

 4-foot MBP lamps 

 4-foot MiniBP SO lamps

 4-foot MiniBP HO lamps

EL1 EL2 EL3

IS and RS ballasts that operate

 8-foot HO lamps EL1 EL2 EL3

Ballasts that operate

 8-foot HO lamps in cold 

 temperature outdoor signs

EL1 EL1 EL1
13-15

 TSL 1, which would set energy conservation standards at EL1 for all product 

classes, would eliminate currently available 2-lamp MBP T12 RS (commercial and 

residential), low-efficiency 2-lamp 4-foot MBP T8 PS, magnetic 8-foot HO, and 

magnetic sign ballasts. TSL 1 would require IS and RS 2-lamp MBP ballasts that operate 

T8 lamps. TSL 1 does not impact 8-foot slimline or 4-lamp MBP IS and RS ballasts. TSL 

1 also prevents the baseline inefficient T5 standard and high output ballasts from 

becoming prevalent in future years. For the reasons explained in chapter 5 of the NOPR 

TSD, sign ballasts have only one EL, so TSL 1 represents the max tech level for the sign 

ballast representative product class. TSL 2 and TSL 3 also require EL1 for sign ballasts. 

 TSL 2 would set energy conservation standards at EL2 for the IS and RS, PS, and 

8-foot HO IS and RS product classes. This level would eliminate standard-efficiency, 

dedicated voltage 2-lamp MBP T8 IS ballasts (commercial and residential), but can be 

met with standard-efficiency universal input voltage 2-lamp MBP T8 IS ballasts 

commercial ballasts and high-efficiency dedicated input voltage 2-lamp MBP T8 IS 

residential ballasts. TSL 2 eliminates the least efficient T12 2-lamp slimline ballasts, and 

is just met by the least efficient T8 8-foot slimline ballasts. TSL 2 does not affect 4-lamp 

MBP T8 IS ballasts. For PS ballasts, high-efficiency 4-foot MBP and high-efficiency T5 

standard and high output ballasts are required at TSL 2. This TSL would eliminate the 

least efficient currently available standard and high output T5 ballasts). TSL 2 for the 8-

foot HO IS and RS product class results in the elimination of current T12 electronic 

ballasts, but can be met with T8 electronic ballasts. All three of these ELs represent the 

elimination of the least efficient T8 electronic ballasts. 

TSL 3 would set energy conservation standards at EL3 for the IS and RS, PS, and 

8-foot HO IS and RS product class. TSL 3 represents the highest EL analyzed in all 

representative product classes and is the max tech TSL. Ballasts that meet TSL 3 

represent the most efficient models tested by DOE in their respective representative 

product classes.

13.4.6 NIA Shipment Forecast

The GRIM estimates manufacturer revenues based on total-unit-shipment 

forecasts and the distribution of these values by efficiency level. Changes in the 

efficiency mix at each standard level are a key driver of manufacturer finances. For this 

analysis, the GRIM used the NIA shipments forecasts under two scenarios: existing 

technologies and emerging technologies. In the existing technologies scenario, no 

technologies outside of those covered by this rulemaking were analyzed for market 

penetration. However, DOE recognizes that rapidly emerging new lighting technologies 

could penetrate the fluorescent lighting market and significantly affect ballast shipment 

forecasts. Therefore, in the emerging technologies scenario, DOE calculated the market 

penetration of LED and ceramic metal halide (CMH) systems annually through 2043, 

assessing each sector separately. DOE decreased the analyzed market size in each year in 

each sector by the amount that corresponded to the highest level of market penetration 

achieved by LED or CMH systems. The assumptions and methodology that drive these 

scenarios and the details specific to each are described in chapter 11 of the NOPR TSD.
13-16

Only the shipments in 2011 and beyond have an impact on INPV because 2011 is 

the base year to which future cash flows are summed. Table 13.4.6 shows total shipments 

forecasted in the shipment analysis for fluorescent lamp ballasts in 2014 under each 

scenario. In order to aggregate shipments in the GRIM, DOE assigned each of the 

representative units to one of the four representative product classes shown in Table 

13.4.5. DOE aggregated the shipments for all the scaled product classes under the 

corresponding representative product class and used the cost curve for the representative 

product class with which it is associated.

Table 13.4.6 Total Base Case NIA Shipments Forecast in 2014b

 under the Existing 

and Emerging Technologies Scenarios

Representative 

Product Class No. Representative Unit Total Industry Shipments (thousands)

Existing Technologies Emerging Technologies

1 Two Lamp Normal BF 4ft 

MBP IS & RS 37,875 37,301

2 Two Lamp Normal BF 4ft 

MBP PS 3,840 3,782

1 Four Lamp Normal BF 4ft 

MBP IS & RS 15,602 15,366

2 Four Lamp Normal BF 4ft 

MBP PS 3,495 3,442

1 Two Lamp Normal BF 8ft SP 

Slimline 1,355 1,355

3 Two Lamp 8ft RDC HO IS & 

RS 70 70

2 Two Lamp Normal BF 4ft T5

MiniBP SO 14,428 14,206

2 Two Lamp 4ft T5 MiniBP 

HO 6,253 6,253

1 Two Lamp 4ft MBP IS & RS 

Residential 35,214 35,214

5 Four Lamp Sign Ballast 3,866 3,808

As part of the shipments analysis, DOE estimated the base-case shipment 

distribution by efficiency level for each representative ballast. In the standards case, DOE 

determined efficiency distributions for cases in which a potential standard applies for 

2014 and beyond. DOE assumed that product efficiencies in the base case that did not 

meet the standard under consideration would move to meet the new standard in 2014 

under two scenarios: roll-up and shift. The roll-up scenario represents the case in which 

all shipments in the base case that do not meet the new standard roll up to meet the new 

standard level. Consumers in the base case who purchase ballasts above the standard

level are not affected as they are assumed to continue to purchase the same base-case 

ballast or lamp-and-ballast system in the standards case. In contrast, in a shift scenario, 

DOE assumes that any consumer may purchase a more efficient ballast. The shift 

scenario models a standards case in which all base-case consumer purchases are affected 

by the standard (regardless of whether their base-case efficiency is below the standard). 

b The compliance date for the fluorescent lamp ballast energy conservation standard is estimated to be July

2014.
13-17

As the standard level increases, market share migrates to, and accumulates at, the highest 

efficiency level because it represents “max tech” for each representative ballast type (i.e., 

moving beyond it is impossible given available technology options). See chapter 11 of 

the NOPR TSD for more information on the ballasts standards-case shipment scenarios. 

13.4.7 Production Costs 

Manufacturing a higher-efficiency product is typically more expensive than 

manufacturing a baseline product due to the use of more complex components, which are 

more costly than baseline components. The changes in the MPCs of the analyzed 

products can affect the revenues, gross margins, and cash flow of the industry, making 

these product cost data key GRIM inputs for DOE’s analysis. 

To calculate MPCs at each efficiency level, DOE followed a two-step process. 

First, DOE derived MSPs for each analyzed product and efficiency level from blue book, 

online retail, and teardown-sourced prices as described in chapter 5 of the TSD. Next, 

DOE discounted these MSPs by the manufacturer markup to arrive at the MPCs. For all 

product classes, DOE used a 1.4 manufacturer markup based on manufacturer feedback. 

DOE also used confidential information from manufacturer interviews to verify its MPC 

estimates. In addition, DOE used teardown cost data to disaggregate the MPCs into 

material, labor, and overhead costs. DOE used a depreciation value for fluorescent lamp 

ballasts that is consistent with historical information in SEC 10-Ks. The remainder of 

total overhead was allocated to factory overhead. 

As stated in section 13.4.6, DOE allocated shipments for the unanalyzed product 

classes to the product class for which the amended energy conservation standard is 

scaled. That way, the total revenue and INPV impacts for each representative product 

class is also representative of the INPV impacts on the unanalyzed product classes used 

to promulgate the amended energy conversation standards. 

Table 13.4.7 through Table 13.4.16 show the production cost estimates used in the 

GRIM for each representative unit. 

Table 13.4.7 MPC Breakdown for Two Lamp Normal BF 4ft MBP IS & RS 

Table 13.4.8 MPC Breakdown for Two Lamp Normal BF 4ft MBP PS 

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline Baseline 

(78.3) 0.53 5.11 0.11 0.26 6.01 1.40 8.41

TSL 1 EL 1 (85.8) 0.44 4.21 0.09 0.22 4.96 1.40 6.94

TSL 2 EL 2 (90.2) 0.56 5.37 0.12 0.27 6.32 1.40 8.85

TSL 3 EL 3 (92.2) 0.58 5.63 0.12 0.29 6.62 1.40 9.27

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline Baseline 

(83.5) 0.53 5.09 0.11 0.26 5.99 1.40 8.39

TSL 1 EL 2 (90.0) 0.58 5.64 0.12 0.29 6.63 1.40 9.28

TSL 2 EL 2 (90.0) 0.58 5.64 0.12 0.29 6.63 1.40 9.28
13-18

Table 13.4.9 MPC Breakdown for Four Lamp Normal BF 4ft MBP IS & RS 

Table 13.4.10 MPC Breakdown for Four Lamp Normal BF 4ft MBP PS 

Table 13.4.11 MPC Breakdown for Two Lamp Normal BF 8ft SP Slimline 

Table 13.4.12 MPC Breakdown for Two Lamp 8ft RDC HO IS & RS

Table 13.4.13 MPC Breakdown for Two Lamp Normal BF 4ft T5 MiniBP SO 

Table 13.4.14 MPC Breakdown for Two Lamp 4ft T5 MiniBP HO 

TSL 3 EL 3 (91.2) 0.60 5.82 0.13 0.30 6.85 1.40 9.59

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline EL 2 (92.1) 0.62 5.94 0.13 0.30 6.99 1.40 9.79

TSL 1 EL 2 (92.1) 0.62 5.94 0.13 0.30 6.99 1.40 9.79

TSL 2 EL 2 (92.1) 0.62 5.94 0.13 0.30 6.99 1.40 9.79

TSL 3 EL 3 (93.4) 0.73 7.06 0.15 0.36 8.31 1.40 11.63

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline Baseline

(82.2) 0.57 5.50 0.12 0.28 6.46 1.40 9.05

TSL 1 EL 1 (90.6) 0.74 7.19 0.16 0.37 8.46 1.40 11.84

TSL 2 EL 3 (93.0) 0.84 8.09 0.18 0.41 9.52 1.40 13.33

TSL 3 EL 3 (93.0) 0.84 8.09 0.18 0.41 9.52 1.40 13.33

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline EL 1 (88.9) 0.56 5.37 0.12 0.27 6.31 1.40 8.84

TSL 1 EL 1 (88.9) 0.56 5.37 0.12 0.27 6.31 1.40 8.84

TSL 2 EL 2 (91.6) 0.63 6.10 0.13 0.31 7.18 1.40 10.05

TSL 3 EL 3 (93.2) 0.65 6.25 0.14 0.32 7.35 1.40 10.29

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline Baseline 

(69.9) 0.83 8.05 0.18 0.41 9.46 1.40 13.25

TSL 1 EL 1 (80.4) 0.60 5.80 0.13 0.30 6.82 1.40 9.55

TSL 2 EL 2 (91.5) 0.51 4.95 0.11 0.25 5.82 1.40 8.15

TSL 3 EL 3 (92.5) 0.69 6.71 0.15 0.34 7.89 1.40 11.05

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline Baseline 

(82.8) 0.68 6.55 0.14 0.33 7.70 1.40 10.78

TSL 1 EL 1 (88.7) 0.68 6.59 0.14 0.34 7.75 1.40 10.85

TSL 2 EL 2 (89.6) 0.75 7.24 0.16 0.37 8.51 1.40 11.92

TSL 3 EL 3 (92.3) 0.97 9.33 0.20 0.48 10.97 1.40 15.36

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline Baseline 

(84.2) 0.60 5.84 0.13 0.30 6.86 1.40 9.61

TSL 1 EL 1 (90.6) 0.79 7.64 0.17 0.39 8.99 1.40 12.58
13-19

Table 13.4.15 MPC Breakdown for Two Lamp 4ft MBP IS & RS Residential

Table 13.4.16 MPC Breakdown for Four Lamp Sign Ballast 

13.4.8 Product and Capital Conversion Costs 

New and amended energy conservation standards will cause manufacturers to 

incur conversion costs to bring their production facilities and product designs into 

compliance. For the MIA, DOE classified these conversion costs into two major groups: 

(1) product conversion costs and (2) capital conversion costs. Product conversion costs 

are investments in research, development, testing, marketing, and other non-capitalized 

costs necessary to make product designs comply with the new or amended energy 

conservation standard. Capital conversion costs are investments in property, plant, and 

equipment necessary to adapt or change existing production facilities such that new 

product designs can be fabricated and assembled. 

DOE’s interviews with manufacturers revealed that the majority of the conversion 

costs manufacturers expect to incur at various TSLs derive from the need to develop new 

and improved circuit designs, rather than the purchase of new capital equipment. Due to 

the flexible nature of most ballast production equipment, manufacturers do not expect 

new or amended standards to strand a significant share of their production assets. As 

opposed to other more capital-intensive appliance industries, much of the cash outlay 

required to achieve higher efficiency levels would be expensed through research and 

development, engineering, and testing efforts. 

DOE based its estimates of the product conversion costs that would be required to 

meet each TSL on information obtained from manufacturer interviews, the engineering 

analysis, the NIA shipment analysis, and market information about the number of models 

and stock-keeping units (SKUs) each major manufacturer supports. DOE estimated the 

product development costs manufacturers would incur for each model that would need to 

be converted in response to new or amended energy conservation standards based on the 

TSL 2 EL 2 (91.4) 0.92 8.93 0.19 0.46 10.50 1.40 14.70

TSL 3 EL 3 (92.4) 1.05 10.18 0.22 0.52 11.97 1.40 16.76

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline Baseline 

(77.7) 0.29 2.84 0.06 0.15 3.34 1.40 4.68

TSL 1 EL 1 (87.8) 0.24 2.29 0.05 0.12 2.69 1.40 3.77

TSL 2 EL 3 (92.0) 0.29 2.81 0.06 0.14 3.30 1.40 4.62

TSL 3 EL 3 (92.0) 0.29 2.81 0.06 0.14 3.30 1.40 4.62

TSL Efficiency 

Level

Labor

$

Material

$

Overhead

$

Dep.

$

MPC

$

Mfr. 

Markup

MSP

$

Baseline Baseline 

(71.4) 2.53 24.43 0.53 1.25 28.74 1.40 40.23

TSL 1 EL 1 (90.3) 2.24 21.61 0.47 1.10 25.41 1.40 35.58

TSL 2 EL 1 (90.3) 2.24 21.61 0.47 1.10 25.41 1.40 35.58

TSL 3 EL 1 (90.3) 2.24 21.61 0.47 1.10 25.41 1.40 35.58
13-20

necessary engineering and testing resources required to redesign each model. The R&D 

resources required to reach the efficiency levels represented at each TSL varied according 

to whether models could be converted based on minor upgrades, redesigns based on 

existing topologies, or full redesigns. In addition to per-model R&D costs, DOE 

considered testing and validation costs for every SKU, which included internal testing, 

UL testing, additional certifications, pilot runs, and product training. DOE then 

multiplied these per-model and per-SKU estimates by the total number of ballast models 

and SKUs offered based on information from manufacturer catalogs and interviews to 

calculate the total potential costs each manufacturer could incur to redesign its products. 

Next, to assign these costs to particular representative product classes, DOE multiplied 

this total for each manufacturer by the percentage of models in each product class based 

on the NIA shipment analysis and manufacturer feedback. Lastly, to consider the models 

manufacturers offered that already met efficiency levels above baseline, DOE multiplied 

the total costs for each product class by the percentage of models DOE determined would 

need to be redesigned at each efficiency level based on data from the engineering analysis 

and manufacturer catalogs. 

This methodology derived total product conversion cost estimates for most 

product classes and efficiency levels. For residential ballasts, however, DOE assumed a 

smaller redesign cost per model. According to manufacturer interviews, the residential 

ballast market does not support manufacturer attempts to differentiate through better 

designs, product variation, or additional value-added features. As such, suppliers, often 

Asian manufacturers selling directly to fixture manufacturers, make little attempt to 

compete on anything other than price. Interviews suggested suppliers would leverage 

R&D invested in the larger, more valuable commercial market, making minor design 

adjustments to meet minimum requirements of the residential market. For sign ballasts, 

DOE determined the number of magnetic models on the market based on manufacturer 

catalogs and estimated testing and redesign costs for each of these models.

As discussed above, DOE also estimated the capital conversion costs 

manufacturers would incur to comply with potential amended energy conservation 

standards represented by each TSL. During interviews, DOE asked manufacturers to 

estimate the capital expenditures required to expand the production of higher-efficiency 

products. These estimates included the required tooling and plant changes that would be 

necessary if product lines meeting the potential required efficiency level did not currently 

exist. Estimates for capital conversion costs varied greatly from manufacturer to 

manufacturer, as manufacturers anticipated different paths to compliance based on the 

modernity, flexibility, and level of automation of the equipment already existing in their 

factories. However, all manufacturers DOE interviewed indicated that capital costs would 

be relatively moderate compared to the required engineering effort. The modular nature 

of ballast production and the flexibility of the necessary production capital allows for 

significant equipment sharing across product lines. Based on interviews, DOE assumed 

that for most manufacturers, design changes would require moderate product conversion 

costs but would not require significant changes to existing production lines and 

equipment. It is therefore unlikely that most manufacturers would require high levels of 

capital expenditures compared to ordinary capital additions or existing net plants, 

property, and equipment (PPE). 
13-21

To calculate its estimates of capital conversion costs, DOE aggregated its 

estimated capital costs for the major players in the industry rather than scaled up a 

“typical” manufacturer’s expected conversion costs. Two considerations drove this 

choice in methodology. First, manufacturer feedback varied widely, making it 

impossible to characterize a “typical” manufacturer for conversion cost purposes. Second, 

the expected costs often depended upon the timing of the manufacturers’ last redesign 

efforts and its strategy regarding the capital intensity of their plants and sourcing 

decisions. DOE estimated that some manufacturers would incur very minor capital 

expenditures per product class for testing equipment, even at max tech levels, as their 

factories’ capital equipment would not require significant modification to produce higherefficiency ballasts. For other manufacturers, DOE assumed greater investments would be 

necessary to upgrade lines for each product class with new wave solder equipment, 

reflow solder systems and surface mount device placement machines. The placement 

machines become increasingly important as ballasts become more complex with 

additional circuitry and components. DOE estimates capital conversion costs would rise 

most rapidly at high-efficiency levels not only because of the new production and testing 

equipment described above but also because manufacturers would need to expand 

capacity to account for lower throughput on high-efficiency lines. 

For residential ballasts, DOE assumed the same magnitude of conversion costs as 

for commercial ballasts of the same starting method. While residential ballasts are 

generally not produced by the major four manufacturers, the Asian manufacturers who 

source them to domestic companies would be required to make similar modifications to 

their production lines in response to standards. For sign ballasts, DOE was unable to 

interview a representative sample of the industry. However, DOE recognizes that 

magnetic ballast lines have more capital exposure to changes in efficiency standards than 

electronic lines due to the change in technology. Because several manufacturers produce 

magnetic sign ballasts, DOE assumed new lines would be needed to convert magnetic 

products to electronic ballasts and scaled these line costs to the entire sign ballast market 

for this product class. 

Finally, DOE estimated industry capital conversion costs for all analyzed product 

classes other than residential ballasts and sign ballasts by extrapolating the interviewed 

manufacturers’ costs for each product class to account for the companies that DOE did 

not interview. DOE’s estimates of the product and capital conversion costs for each 

representative product class can be found in Table 13.4.17 through Table 13.4.20 below. 

Table 13.4.17 Product and Capital Conversion Costs for Product Class 1 (4-foot 

MBP IS and RS Ballasts and 8-foot SP Slimline Ballasts) by TSL

TSL (Efficiency Level) Product Conversion Costs

2009$ millions

Capital Conversion Costs

2009$ millions

TSL 1 (EL 1) 2.2 0.5 

TSL 2 (EL 2) 16.6 7.9

TSL 3 (EL 3) 39.5 13.2
13-22

Table 13.4.18 Product and Capital Conversion Costs for Product Class 2 (PS 

Ballasts) by TSL

TSL (Efficiency Level) Product Conversion Costs

2009$ millions

Capital Conversion Costs

2009$ millions

TSL 1 (EL 1) 0.8 4.7

TSL 2 (EL 2) 5.0 9.2

TSL 3 (EL 3) 14.6 12.0

Table 13.4.19 Product and Capital Conversion Costs for Product Class 3 (8-foot HO 

IS and RS Ballasts) by TSL

TSL (Efficiency Level) Product Conversion Costs

2009$ millions

Capital Conversion Costs

2009$ millions

TSL 1 (EL 1) 0.0 0.3

TSL 2 (EL 2) 0.1 2.1

TSL 3 (EL 3) 0.3 2.6

Table 13.4.20 Product and Capital Conversion Costs for Product Class 5 (Sign 

Ballasts) by TSL

TSL (Efficiency Level) Product Conversion Costs

2009$ millions

Capital Conversion Costs

2009$ millions

TSL 1, TSL 2, TSL 3 (EL 1) 2.4 6.0

13.4.9 Markup Scenarios

DOE used several standards case markup scenarios to represent the uncertainty 

about the impacts of amended energy conservation standards on prices and profitability. 

In the base case, DOE used the same baseline markups calculated in the engineering 

analysis for all product classes. In the standards case, DOE modeled two markup 

scenarios to represent the uncertainty about the potential impacts on prices and 

profitability following the implementation of amended energy conservation standards: (1) 

a preservation of operating profit markup scenario, and (2) a two-tier markup scenario.

These scenarios lead to different markups values, which, when applied to the inputted 

MPCs, result in varying revenue and cash flow impacts. 

13.4.9.1 Preservation of Operating Profit Markup Scenario

DOE implemented the preservation of operating profit markup scenario because 

manufacturers stated that they do not expect to be able to markup the full cost of 

production given the highly competitive market, in the standards case. The preservation 

of operating profit markup scenario assumes that manufacturers are able to maintain only 

the base-case total operating profit in absolute dollars in the standards case, despite 

higher product costs and investment. The base-case total operating profit is derived from 

marking up the cost of goods sold for each product by a flat percentage (the baseline 

markup, discussed in chapter 5 of the NOPR TSD) to cover standard SG&A expenses, 

R&D expenses, and profit. To derive this percentage, DOE evaluated publicly available 

financial information for manufacturers of ballasts. DOE also requested feedback on this 
13-23

value during manufacturer interviews. DOE adjusted the manufacturer markups in the 

GRIM at each TSL to yield approximately the same earnings before interest and taxes in 

the standards case in the year after the compliance date of the amended standards as in 

the base case. DOE assumed that the industry-wide impacts would occur under the new 

minimum efficiency levels. DOE altered the markups only for the minimally compliant 

products in this scenario, with margin impacts not occurring for products that already 

exceed the amended energy conservation standard. The preservation of operating profit 

markup scenario represents the upper bound of industry profitability following amended 

energy conservation standards. Under this scenario, while manufacturers are not able to 

earn additional operating profit on higher production costs and the investments required 

to comply with the amended energy conservation standard, they are able to maintain the 

same operating profit in the standards case as was earned in the base case. 

Table 13.4.21 through Table 13.4.40 lists the representative ballast types DOE 

analyzed with the corresponding markups at each TSL under the preservation of 

operating profit markup scenario. Separate markups were calculated for each of the four 

shipment scenarios, but the markups did not vary within four digits between the emerging 

and existing technologies scenarios, so the roll-up and shift shipment scenario markups 

presented encompass both technology scenarios. It is worth noting that in cases where the 

average MPC decreases at a higher efficiency level, this scenario yields a higher markup 

at the new baseline than in the base case.

Table 13.4.21 Preservation of Operating Profit Markups for Two Lamp Normal BF 

4ft MBP IS & RS (Roll-up Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (78.3) 1.4000 - - -

EL 1 (85.8) 1.4000 1.4001 - -

EL 2 (90.2) 1.4000 1.4000 1.3730 - 

EL 3 (92.2) 1.4000 1.4000 1.4000 1.3714

Table 13.4.22 Preservation of Operating Profit Markups for Two Lamp Normal BF 

4ft MBP IS & RS (Shift Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (78.3) 1.4000 - - -

EL 1 (85.8) 1.4000 1.3660 - -

EL 2 (90.2) 1.4000 1.3660 1.3660 - 

EL 3 (92.2) 1.4000 1.4000 1.4000 1.3714
13-24

Table 13.4.23 Preservation of Operating Profit Markups for Two Lamp Normal BF 

4ft MBP PS (Roll-up Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (83.5) 1.4000 - - -

EL 2 (90.0) 1.4000 1.3883 1.3883 - 

EL 3 (91.2) 1.4000 1.4000 1.4000 1.3855

Table 13.4.24 Preservation of Operating Profit Markups for Two Lamp Normal BF 

4ft MBP PS (Shift Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (83.5) 1.4000 - - -

EL 2 (90.0) 1.4000 1.3843 1.3843 - 

EL 3 (91.2) 1.4000 1.4000 1.4000 1.3855

Table 13.4.25 Preservation of Operating Profit Markups for Four Lamp Normal BF 

4ft MBP IS & RS (Roll-up Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

EL 2 (92.1) 1.4000 1.4000 1.4000 - 

EL 3 (93.4) 1.4000 1.4000 1.4000 1.3830

Table 13.4.26 Preservation of Operating Profit Markups for Four Lamp Normal BF 

4ft MBP IS & RS (Shift Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

EL 2 (92.1) 1.4000 1.4000 1.4000 - 

EL 3 (93.4) 1.4000 1.4000 1.4000 1.3830

Table 13.4.27 Preservation of Operating Profit Markups for Four Lamp Normal BF 

4ft MBP PS (Roll-up Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (82.2) 1.4000 - - -

EL 1 (90.6) 1.4000 1.3706 - -

EL 3 (93.0) 1.4000 1.4000 1.3589 1.3589

Table 13.4.28 Preservation of Operating Profit Markups for Four Lamp Normal BF 

4ft MBP PS (Shift Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (82.2) 1.4000 - - -

EL 1 (90.6) 1.4000 1.3603 - -

EL 3 (93.0) 1.4000 1.4000 1.3589 1.3589
13-25

Table 13.4.29 Preservation of Operating Profit Markups for Two Lamp Normal BF 

8ft SP Slimline (Roll-up Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

EL 1 (88.9) 1.4000 1.4000 - -

EL 2 (91.6) 1.4000 1.4000 1.3990 - 

EL 3 (93.2) 1.4000 1.4000 1.4000 1.3967 

Table 13.4.30 Preservation of Operating Profit Markups for Two Lamp Normal BF 

8ft SP Slimline (Shift Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

EL 1 (88.9) 1.4000 1.4000 - -

EL 2 (91.6) 1.4000 1.4000 1.3228 - 

EL 3 (93.2) 1.4000 1.4000 1.4000 1.3967

Table 13.4.31 Preservation of Operating Profit Markups for Two Lamp 8ft RDC 

HO IS & RS (Roll-up Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (69.9) 1.4000 - - -

EL 1 (80.4) 1.4000 1.4094 - -

EL 2 (91.5) 1.4000 1.4000 1.4274 - 

EL 3 (92.5) 1.4000 1.4000 1.4000 1.3809

Table 13.4.32 Preservation of Operating Profit Markups for Two Lamp 8ft RDC 

HO IS & RS (Shift Shipment Scenario) 

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (69.9) 1.4000 - - -

EL 1 (80.4) 1.4000 1.4752 - -

EL 2 (91.5) 1.4000 1.4000 1.4182 - 

EL 3 (92.5) 1.4000 1.4000 1.4000 1.3809

Table 13.4.33 Preservation of Operating Profit Markups for Two Lamp Normal BF 

4ft T5 MiniBP SO (Roll-up Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (82.8) 1.4000 - - -

EL 1 (88.7) 1.4000 1.3998 - -

EL 2 (89.6) 1.4000 1.4000 1.3873 - 

EL 3 (92.3) 1.4000 1.4000 1.4000 1.3579
13-26

Table 13.4.34 Preservation of Operating Profit Markups for Two Lamp Normal BF 

4ft T5 MiniBP SO (Shift Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (82.8) 1.4000 - - -

EL 1 (88.7) 1.4000 1.3998 - -

EL 2 (89.6) 1.4000 1.4000 1.3828 - 

EL 3 (92.3) 1.4000 1.4000 1.4000 1.3579

Table 13.4.35 Preservation of Operating Profit Markups for Two Lamp 4ft T5 

MiniBP HO (Roll-up Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (84.2) 1.4000 - - -

EL 1 (90.6) 1.4000 1.3957 - -

EL 2 (91.4) 1.4000 1.4000 1.3773 - 

EL 3 (92.4) 1.4000 1.4000 1.4000 1.3636

Table 13.4.36 Preservation of Operating Profit Markups for Two Lamp 4ft T5 

MiniBP HO (Shift Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (84.2) 1.4000 - - -

EL 1 (90.6) 1.4000 1.3957 - -

EL 2 (91.4) 1.4000 1.4000 1.3720 - 

EL 3 (92.4) 1.4000 1.4000 1.4000 1.3636

Table 13.4.37 Preservation of Operating Profit Markups for Two Lamp 4ft MBP IS 

& RS Residential (Roll-up Shipment Scenario) 

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (77.7) 1.4000 - - -

EL 1 (87.8) 1.4000 1.4017 - -

EL 3 (92.0) 1.4000 1.4000 1.3801 1.3801

Table 13.4.38 Preservation of Operating Profit Markups for Two Lamp 4ft MBP IS 

& RS Residential (Shift Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (77.7) 1.4000 - - -

EL 1 (87.8) 1.4000 1.3809 - -

EL 3 (92.0) 1.4000 1.3809 1.3801 1.3801
13-27

Table 13.4.39 Preservation of Operating Profit Markups for Four Lamp Sign 

Ballast (Roll-up Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (71.4) 1.4000 - - -

EL 1 (90.3) 1.4000 1.4069 1.4069 1.4069

Table 13.4.40 Preservation of Operating Profit Markups for Four Lamp Sign 

Ballast (Shift Shipment Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (71.4) 1.4000 - - -

EL 1 (90.3) 1.4000 1.4069 1.4069 1.4069

13.4.9.2 Two-Tier Markup Scenario

DOE also modeled a lower bound profitability scenario. During interviews, 

multiple manufacturers stated that they offer two tiers of product lines that are 

differentiated, in part, by efficiency level. The higher-efficiency tier typically earns a 

premium over the baseline efficiency tier. Several manufacturers suggested that the 

premium currently earned by the higher-efficiency tier would erode under new or 

amended standards due to the disappearance of the baseline efficiency tier, which would 

significantly harm profitability. Because of this pricing dynamic described by 

manufacturers and because of the pressure from luminaire manufacturers to commoditize 

the baseline efficiency tier, DOE also modeled a two-tier markup scenario. In this 

scenario, DOE assumed that the markup on fluorescent lamp ballasts varies according to 

two efficiency tiers in both the base case and the standards case. During the MIA 

interviews, manufacturers provided information on the range of typical efficiency levels 

in those two tiers and the change in profitability at each level. DOE used this information, 

retail prices derived in its product price determination, and industry average gross 

margins to estimate markups for fluorescent lamp ballasts under a two-tier pricing 

strategy in the base case. In the standards case, DOE modeled the situation in which 

portfolio reduction squeezes the margin of higher-efficiency products as they become the 

new baseline, presumably high-volume products. This scenario is consistent with 

information submitted during manufacturing interviews and responds to manufacturers’ 

concern that DOE standards could severely disrupt profitability. 

Table 13.4.41 through Table 13.4.60 lists the products DOE analyzed with the 

corresponding two-tier markups at each TSL.
13-28

Table 13.4.41 Two-Tier Markups for Two Lamp Normal BF 4ft MBP IS & RS 

(Existing Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (78.3) 1.3401 - - -

EL 1 (85.8) 1.3401 1.3401 - -

EL 2 (90.2) 1.5463 1.5463 1.3401 - 

EL 3 (92.2) 1.5463 1.5463 1.5463 1.3401

Table 13.4.42 Two-Tier Markups for Two Lamp Normal BF 4ft MBP IS & RS 

(Emerging Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (78.3) 1.3369 - - -

EL 1 (85.8) 1.3369 1.3369 - -

EL 2 (90.2) 1.5426 1.5426 1.3369 - 

EL 3 (92.2) 1.5426 1.5426 1.5426 1.3369

Table 13.4.43 Two-Tier Markups for Two Lamp Normal BF 4ft MBP PS (Existing

Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (83.5) 1.3401 - - -

EL 2 (90.0) 1.5463 1.3401 1.3401 - 

EL 3 (91.2) 1.5463 1.5463 1.5463 1.3401

Table 13.4.44 Two-Tier Markups for Two Lamp Normal BF 4ft MBP PS (Emerging 

Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (83.5) 1.3369 - - -

EL 2 (90.0) 1.5426 1.3369 1.3369 - 

EL 3 (91.2) 1.5426 1.5426 1.5426 1.3369

Table 13.4.45 Two-Tier Markups for Four Lamp Normal BF 4ft MBP IS & RS 

(Existing Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

EL 2 (92.1) 1.3401 1.3401 1.3401 - 

EL 3 (93.4) 1.5463 1.5463 1.5463 1.3401
13-29

Table 13.4.46 Two-Tier Markups for Four Lamp Normal BF 4ft MBP IS & RS 

(Emerging Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

EL 2 (92.1) 1.3369 1.3369 1.3369 - 

EL 3 (93.4) 1.5426 1.5426 1.5426 1.3369

Table 13.4.47 Two-Tier Markups for Four Lamp Normal BF 4ft MBP PS (Existing

Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (82.2) 1.3401 - - -

EL 1 (90.6) 1.3401 1.3401 - -

EL 3 (93.0) 1.5463 1.5463 1.3401 1.3401

Table 13.4.48 Two-Tier Markups for Four Lamp Normal BF 4ft MBP PS

(Emerging Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (82.2) 1.3369 - - -

EL 1 (90.6) 1.3369 1.3369 - -

EL 3 (93.0) 1.5426 1.5426 1.3369 1.3369

Table 13.4.49 Two-Tier Markups for Two Lamp Normal BF 8ft SP Slimline 

(Existing Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

EL 1 (88.9) 1.3401 1.3401 - - 

EL 2 (91.6) 1.3401 1.3401 1.3401 - 

EL 3 (93.2) 1.5463 1.5463 1.5463 1.3401

Table 13.4.50 Two-Tier Markups for Two Lamp Normal BF 8ft SP Slimline 

(Emerging Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

EL 1 (88.9) 1.3369 1.3369 - - 

EL 2 (91.6) 1.3369 1.3369 1.3369 - 

EL 3 (93.2) 1.5426 1.5426 1.5426 1.3369
13-30

Table 13.4.51 Two-Tier Markups for Two Lamp 8ft RDC HO IS & RS (Existing

Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (69.9) 1.3401 - - -

EL 1 (80.4) 1.3401 1.3401 - -

EL 2 (91.5) 1.5463 1.5463 1.3401 - 

EL 3 (92.5) 1.5463 1.5463 1.5463 1.3401

Table 13.4.52 Two-Tier Markups for Two Lamp 8ft RDC HO IS & RS (Emerging 

Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (69.9) 1.3369 - - -

EL 1 (80.4) 1.3369 1.3369 - -

EL 2 (91.5) 1.5426 1.5426 1.3369 - 

EL 3 (92.5) 1.5426 1.5426 1.5426 1.3369

Table 13.4.53 Two-Tier Markups for Two Lamp Normal BF 4ft T5 MiniBP SO 

(Existing Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (82.8) 1.3401 - - -

EL 1 (88.7) 1.3401 1.3401 - - 

EL 2 (89.6) 1.5463 1.5463 1.3401 - 

EL 3 (92.3) 1.5463 1.5463 1.5463 1.3401

Table 13.4.54 Two-Tier Markups for Two Lamp Normal BF 4ft T5 MiniBP SO 

(Emerging Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (82.8) 1.3369 - - -

EL 1 (88.7) 1.3369 1.3369 - - 

EL 2 (89.6) 1.5426 1.5426 1.3369 - 

EL 3 (92.3) 1.5426 1.5426 1.5426 1.3369

Table 13.4.55 Two-Tier Markups for Two Lamp 4ft T5 MiniBP HO (Existing 

Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (84.2) 1.3401 - - -

EL 1 (90.6) 1.3401 1.3401 - - 

EL 2 (91.4) 1.5463 1.5463 1.3401 - 

EL 3 (92.4) 1.5463 1.5463 1.5463 1.3401
13-31

Table 13.4.56 Two-Tier Markups for Two Lamp 4ft T5 MiniBP HO (Emerging

Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (84.2) 1.3369 - - -

EL 1 (90.6) 1.3369 1.3369 - - 

EL 2 (91.4) 1.5426 1.5426 1.3369 - 

EL 3 (92.4) 1.5426 1.5426 1.5426 1.3369

Table 13.4.57 Two-Tier Markups for Two Lamp 4ft MBP IS & RS Residential

(Existing Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (77.7) 1.3401 - - - 

EL 1 (87.8) 1.3401 1.3401 - - 

EL 3 (92.0) 1.3401 1.5463 1.3401 1.3401

Table 13.4.58 Two-Tier Markups for Two Lamp 4ft MBP IS & RS Residential

(Emerging Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (77.7) 1.3369 - - - 

EL 1 (87.8) 1.3369 1.3369 - - 

EL 3 (92.0) 1.5426 1.5426 1.3369 1.3369

Table 13.4.59 Two-Tier Markups for Four Lamp Sign Ballast (Existing 

Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (71.4) 1.3401 - - -

EL 1 (90.3) 1.5463 1.3401 1.3401 1.3401

Table 13.4.60 Two-Tier Markups for Four Lamp Sign Ballast (Emerging 

Technologies Scenario)

EL (BE) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3

Baseline (71.4) 1.3369 - - -

EL 1 (90.3) 1.5426 1.3369 1.3369 1.3369

13.5 INDUSTRY FINANCIAL IMPACTS

Using the inputs and scenarios described in the previous sections, the GRIM 

estimated indicators of financial impacts on the fluorescent lamp ballast industry. The 

following sections detail additional inputs and assumptions for fluorescent lamp ballasts. 

The main results of the MIA are also reported in this section. The MIA consists of two 

key financial metrics: INPV and annual cash flows. 
13-32

13.5.1 Impacts on Industry Net Present Value

The INPV measures the industry value and is used in the MIA to compare the 

economic impacts of different TSLs in the standards case. The INPV is different from 

DOE’s net present value, which is applied to the U.S. economy. The INPV is the sum of 

all net cash flows discounted at the industry’s cost of capital, or discount rate. The 

fluorescent lamp ballasts GRIM estimates cash flows from 2011 to 2043. This timeframe

models both the short-term impacts on the industry from the announcement of the 

standard until the compliance date (2011 until an estimated compliance date of July 

2014) and a long-term assessment over the 30-year analysis period used in the NIA (2014 

– 2043). 

In the MIA, DOE compares the INPV of the base case (no amended energy 

conservation standards) to that of each TSL in the standards case. The difference between 

the base case and a standards case INPV is an estimate of the economic impacts that 

implementing that particular TSL would have on the industry. For the fluorescent lamp 

ballast industry, DOE examined the two markup scenarios described above: the 

preservation of operating profit markup and the two-tier markup. DOE also examined the 

existing and emerging technologies scenarios and the roll-up and shift shipment 

scenarios. This yields eight sets of INPV results for fluorescent lamp ballasts, bounded by 

the preservation of operating profit markup, existing technologies, and shift shipments 

combination and the two-tier markup, emerging technologies, and roll-up shipments 

combination. Table 13.5.1 through Table 13.5.8 provide the INPV estimates for the 

fluorescent lamp ballasts industry. 

Table 13.5.1 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Roll-up Shipments, and Existing 

Technologies Scenarios) 

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$

millions) 1,241 1,229 1,191 1,145 

Change 

in INPV

(2009$

millions) - (11.2) (49.7) (95.3)

(%) - -0.9% -4.0% -7.7%

*For tables in section 13.5.1, values in parenthesis indicate negative numbers 

Table 13.5.2 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Roll-up Shipments, and Emerging

Technologies Scenarios) 

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$

millions) 853 841 808 772 

Change 

in INPV

(2009$

millions) - (11.5) (44.6) (81.0)

(%) - -1.4% -5.2% -9.5%
13-33

Table 13.5.3 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Shift Shipments, and Existing 

Technologies Scenarios) 

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$

millions) 1,241 1,221 1,189 1,145 

Change 

in INPV

(2009$

millions) - (19.4) (51.6) (95.3)

(%) - -1.6% -4.2% -7.7%

Table 13.5.4 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts

(Preservation of Operating Profit Markup, Shift Shipments, and Emerging

Technologies Scenarios) 

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$

millions) 853 836 807 772 

Change 

in INPV

(2009$

millions) - (16.5) (45.7) (81.0)

(%) - -1.9% -5.4% -9.5%

Table 13.5.5 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Two-Tier Markup, Roll-up Shipments, and Existing Technologies Scenarios) 

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$

millions) 1,241 1,092 957 847 

Change 

in INPV

(2009$

millions) - (149.0) (283.8) (393.5)

(%) - -12.0% -22.9% -31.7%

Table 13.5.6 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Two-Tier Markup, Roll-up Shipments, and Emerging Technologies Scenarios) 

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$

millions) 853 740 635 557 

Change 

in INPV

(2009$

millions) - (112.7) (217.9) (296.2)

(%) - -13.2% -25.5% -34.7%
13-34

Table 13.5.7 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Two-Tier Markup, Shift Shipments, and Existing Technologies Scenarios) 

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$

millions) 1,241 1,611 1,108 847 

Change 

in INPV

(2009$

millions) - 370.7 (133.0) (393.5)

(%) - 29.9% -10.7% -31.7%

Table 13.5.8 Changes in Industry Net Present Value for Fluorescent Lamp Ballasts 

(Two-Tier Markup, Shift Shipments, and Emerging Technologies Scenarios) 

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$

millions) 853 1,084 723 557 

Change 

in INPV

(2009$

millions) - 230.9 (130.3) (296.2)

(%) - 27.1% -15.3% -34.7%

13.5.2 Impacts on Annual Cash Flow

While INPV is useful for evaluating the long-term effects of amended energy 

conservation standards, short-term changes in cash flow are also important indicators of 

the industry’s financial situation. For example, a large investment over one or two years 

could strain the industry’s access to capital. Consequently, the sharp drop in financial 

performance could cause investors to flee, even though recovery may be possible. Thus, a 

short-term disturbance can have long-term effects that the INPV cannot capture. To get 

an idea of the behavior of annual free cash flows, Figure 13.5.1 through Figure 13.5.8

below present the annual free cash flows from 2011 through 2025 for the base case and 

different TSLs in the standards case. 

Annual cash flows are discounted to the base year, 2011. Between 2011 and the 

2014 compliance date of the amended energy conservation standard, cash flows are 

driven by the level of conversion costs and the proportion of these investments spent 

every year. After the standard announcement date (i.e., the publication date of the final 

rule), industry cash flows begin to decline as companies use their financial resources to 

prepare for the amended energy conservation standard. The more stringent the amended 

energy conservation standard, the greater the impact on industry cash flows in the years 

leading up to the compliance date, as product conversion costs lower cash inflows from 

operations and capital conversion costs increase cash outflows for capital expenditures. 

Free cash flow in the year the amended energy conservation standards take effect 

is driven by two competing factors. In addition to capital and product conversion costs, 

amended energy conservation standards could create stranded assets, i.e., tooling and 

equipment that would have enjoyed longer use if the energy conservation standard had 

not made them obsolete. In this year, manufacturers write down the remaining book value 
13-35

of existing tooling and equipment whose value is affected by the amended energy 

conservation standard. This one-time write-down acts as a tax shield that alleviates 

decreases in cash flow from operations in the year of the write-down. In this year, there is 

also an increase in working capital that reduces cash flow from operations. A large 

increase in working capital is needed due to more costly production components and 

materials, higher inventory carrying to sell more expensive products, and higher accounts 

receivable for more expensive products. Depending on these two competing factors, cash 

flow can either be positively or negatively affected in the year the standard takes effect. 

In the years following the compliance date of the standard, the impact on cash 

flow depends on the operating revenue. There is very little impact on cash flow from 

operations under the preservation of operating profit scenario because this scenario is 

calibrated to have the same operating income in the standards case at each TSL as the 

base case in the year after the standard takes effect. In this scenario, the industry value is 

impacted because production costs increase, but operating profit remains approximately 

equal to the base case which decreases profit margins as a percentage of revenue. Under 

the two-tier markup scenario, cash flow decreases at each TSL in the standards case 

compared to the base case because products are commoditized in the standards case and 

are unable to command as high of margins in the standards case as in the base case. The 

exception to this pattern under the two-tier markup scenario is at TSL 1 under the shift 

scenario because enough shipments shift to higher-priced units with higher margins to 

compensate for lower markups for minimally compliant products. Figure 13.5.1 through 

Figure 13.5.8 present the annual free cash flows for fluorescent lamp ballasts.

0

20

40

60

80

100

120

140

2009$ Millions

Year

Baseline TSL 1 TSL 2 TSL 3

Estimated Energy Conservation 

Standards Compliance Date -

July 2014

Figure 13.5.1 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Roll-up Shipments, and Existing 

Technologies Scenarios) 
13-36

0

20

40

60

80

100

120

140

2009$ Millions

Year

Baseline TSL 1 TSL 2 TSL 3

Estimated Energy Conservation 

Standards Compliance Date -

July 2014

Figure 13.5.2 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Roll-up Shipments, and Emerging 

Technologies Scenarios) 

0

20

40

60

80

100

120

140

2009$ Millions

Year

Baseline TSL 1 TSL 2 TSL 3

Estimated Energy Conservation 

Standards Compliance Date -

July 2014

Figure 13.5.3 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Shift Shipments, and Existing 

Technologies Scenarios) 
13-37

0

20

40

60

80

100

120

140

2009$ Millions

Year

Baseline TSL 1 TSL 2 TSL 3

Estimated Energy Conservation 

Standards Compliance Date -

July 2014

Figure 13.5.4 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Preservation of Operating Profit Markup, Shift Shipments, and Emerging 

Technologies Scenarios) 

0

20

40

60

80

100

120

140

2009$ Millions

Year

Baseline TSL 1 TSL 2 TSL 3

Estimated Energy Conservation 

Standards Compliance Date -

July 2014

Figure 13.5.5 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Two-Tier Markup, Roll-up Shipments, and Existing Technologies Scenarios) 
13-38

0

20

40

60

80

100

120

140

2009$ Millions

Year

Baseline TSL 1 TSL 2 TSL 3

Estimated Energy Conservation 

Standards Compliance Date -

July 2014

Figure 13.5.6 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Two-Tier Markup, Roll-up Shipments, and Emerging Technologies Scenarios) 

0

20

40

60

80

100

120

140

2009$ Millions

Year

Baseline TSL 1 TSL 2 TSL 3

Estimated Energy Conservation 

Standards Compliance Date -

July 2014

Figure 13.5.7 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Two-Tier Markup, Shift Shipments, and Existing Technologies Scenarios) 
13-39

0

20

40

60

80

100

120

140

2009$ Millions

Year

Baseline TSL 1 TSL 2 TSL 3

Estimated Energy Conservation 

Standards Compliance Date -

July 2014

Figure 13.5.8 Annual Industry Free Cash Flows for Fluorescent Lamp Ballasts 

(Two-Tier Markup, Shift Shipments, and Emerging Technologies Scenarios) 

13.6 IMPACTS ON MANUFACTURER SUBGROUPS

As described in section 13.2.3.3 above, DOE identified two subgroups of 

fluorescent lamp ballast manufacturers: small manufacturers and sign ballast 

manufacturers. The results of these subgroup analyses are described below.

13.6.1 Impacts on Small Business Manufacturers

13.6.1.1 Description and Estimated Number of Small Entities Regulated

DOE conducted a more focused inquiry of the companies that could be small 

business manufacturers of products covered by this rulemaking. During its market 

survey, DOE used all available public information to identify potential small 

manufacturers. DOE’s research involved industry trade association membership 

directories (including NEMA), product databases (e.g., CEC and CEE databases), 

individual company websites, and market research tools (e.g., Dun and Bradstreet 

reports) to create a list of every company that manufactures or sells fluorescent lamp 

ballasts covered by this rulemaking. DOE also asked stakeholders and industry 

representatives if they were aware of any other small manufacturers during manufacturer 

interviews and at previous DOE public meetings. DOE contacted select companies on its 

list, as necessary, to determine whether they met the SBA’s definition of a small business 
13-40

manufacturer of covered fluorescent lamp ballasts. DOE screened out companies that did 

not offer products covered by this rulemaking, did not meet the definition of a “small 

business,” or are foreign owned and operated. 

DOE initially identified at least 54 potential manufacturers of fluorescent lamp 

ballasts sold in the U.S. DOE reviewed publically available information on these 54 

potential manufacturers and determined 30 were large manufacturers, were foreign 

owned, and/or operated or did not manufacture ballasts covered by this rulemaking. DOE 

then attempted to contact the remaining 24 companies that were potential small business 

manufacturers. Though many companies were unresponsive, DOE was able to determine 

that approximately 10 meet the SBA’s definition of a small business and likely 

manufacture ballasts covered by this rulemaking. 

Before issuing this NOPR, DOE attempted to contact the small business 

manufacturers of fluorescent lamp ballasts it had identified. Two of the small businesses 

consented to being interviewed during the MIA interviews, and DOE received feedback 

from one additional small business through a survey response. DOE also obtained 

information about small business impacts while interviewing large manufacturers. 

Four major manufacturers with non-domestic production supply the vast majority 

of the marketplace. None of the four major manufacturers is considered a small business. 

The remaining market share is held by foreign manufacturers and several smaller 

domestic companies with relatively negligible market share. Even for these U.S.-

operated firms, most production is outsourced to overseas vendors or captive overseas 

manufacturing facilities. Some very limited production takes place in the United States–

mostly magnetic ballasts for specialty applications. DOE is unaware of any fluorescent 

lamp ballast companies, small or large, that produce only domestically. See chapter 3 of 

the TSD for further details on the fluorescent lamp ballast market.

The four large manufacturers typically offer a much wider range of designs of 

covered ballasts than small manufacturers. Ballasts can be designed, or optimized, to 

operate different lamp lengths and numbers of lamps under various start methods, often 

in combination with various additional features. Large manufacturers typically offer 

many SKUs per product line to meet this wide range of potential specifications. 

Generally, one product family shares some fundamental characteristic (i.e., lamp 

diameter, number of lamps, etc.) and hosts a large number of SKUs that are manufactured 

with minor variations on the same product line. Some product lines, such as the 4-foot 

MBP IS ballast, are manufactured in high volumes, while other products may be 

produced in much lower volumes but can help manufacturers meet their customers’ 

specific needs and provide higher margin opportunities. For their part, small 

manufacturers generally do not have the volume to support as wide a range of products. 

Beyond variations in ballast types and features, the large manufacturers also offer 

multiple tiers of efficiency, typically including a baseline efficiency product and a highefficiency product within the same family. On the other hand, some small manufacturers 

frequently only offer one efficiency level in a given product class to reduce the number of 

SKUs and parts they must maintain. This strategy is important to small-scale 
13-41

manufacturers because many product development costs (e.g., testing, certification, and 

marketing) are relatively fixed per product line.

Small manufacturers are able to compete in the fluorescent lamp ballast industry 

despite the dominance of the four major manufacturers due, in large part, to the 

fragmented nature of the fixture industry. The largest four fixture manufacturers compose 

about 60 percent of the industry, while as many as 200 smaller fixture manufacturers hold 

the remaining share. Many small ballast manufacturers have developed relationships with 

these small fixture manufacturers, whose production volumes may not be attractive to the 

larger players. The same structure applies to the electrical distributor market – while 

small ballast manufacturers often cannot compete for the business of the largest 

distributors, they are able to successfully target small distributors, often on a regional 

basis.

Lastly, like the major manufacturers, small manufacturers usually offer products 

in addition to those fluorescent lamp ballasts covered by this rulemaking, such as 

additional dimming ballasts, LED drivers, and compact fluorescent ballasts.

13.6.1.2 Description and Estimate of Compliance Requirements

At TSL3, the level proposed in today’s notice, DOE estimates capital conversion 

costs of $0.3 million and product conversion costs of $1.3 million for a typical small 

manufacturer, compared to capital and product conversion costs of $7.6 million and 

$12.7 million, respectively, for a typical large manufacturer. These costs and their 

impacts are described in detail below.

Those small manufacturers DOE interviewed did not expect increased capital 

conversion costs to be a major concern because most of them source all or the majority of 

their products from Asia. Those that source their products would likely not make the 

direct capital investments themselves. Small manufacturers experience the impact of 

sourcing their products through a higher cost of goods sold, and thus a lower operating 

margin, as compared to large manufacturers. The capital costs estimated are largely 

associated with those small manufacturers producing magnetic ballasts. DOE estimates 

capital costs of approximately $340,000 for a typical small manufacturer at TSL 3, based 

on the cost of converting magnetic production lines, such as sign ballasts, to electronic 

production lines. 

 Another challenge facing the industry is the component shortage discussed in 

section 13.3.1. As with large manufacturers, the component shortage is a significant 

issue for small manufacturers, but some small manufacturers stated that the shortage does 

not differentially impact them. At times, they actually can obtain components more easily 

than large manufacturers: because their volumes are lower, they generally pay higher 

prices for parts than their larger competitors, which incentivizes suppliers to fill small 

manufacturers’ orders relatively quickly. The lower-volume orders also allow small 

manufacturers to piggyback off the orders for certain components that are used 

throughout the consumer electronics industry. 
13-42

While capital conversion costs were not a large concern to the small 

manufacturers DOE interviewed, product conversion costs could adversely impact small 

manufacturers at TSL 3, the level proposed in today’s notice. To estimate the differential 

impacts of the proposed standard on small manufacturers, DOE compared their cost of 

compliance with that of the major manufacturers. First, DOE examined the number of 

basic models and SKUs available from each manufacturer to determine an estimate for 

overall compliance costs. The number of basic models and SKUs attributed to each 

manufacturer is based on information obtained during manufacturer interviews and an 

examination of the different models advertised by each on company websites. DOE 

assumed that the product conversion costs required to redesign basic models and test and 

certify all SKUs to meet the standard levels presented in today’s notice would be lower 

per model and per SKU for small manufacturers, as detailed below. (A full description of 

DOE’s methodology for developing product conversion costs is found in section 13.4.8

above.) The table below compares the estimated product conversion costs of a typical 

small manufacturer as a percentage of annual R&D expense to those of a typical large 

manufacturer.

Table 13.6.1 Comparison of a Typical Small and Large Manufacturer’s Product 

Conversion Costs to Annual R&D Expense 

Large Manufacturer Small Manufacturer

Product Conversion 

Costs for a Typical 

Large 

Manufacturer 

(2009$ millions)

Product 

Conversion Costs 

as a Percentage of 

Annual R&D 

Expense

Product Conversion 

Costs for a Typical 

Small 

Manufacturer 

(2009$ millions)

Product 

Conversion Costs 

as a Percentage of 

Annual R&D 

Expense

Baseline $0.00 0% $0.00 0%

TSL 1 $1.48 17% $0.15 39%

TSL 2 $10.19 116% $1.05 269%

TSL 3 $12.73 145% $1.31 336%

 Based on discussions with manufacturers, DOE estimated that the cost to fully 

redesign every ballast model for large manufacturers is approximately $120,000 per 

model and the cost to test and certify every SKU is approximately $20,000 per SKU. A 

typical major manufacturer offers approximately 80 basic covered models and 300 SKUs. 

Based on DOE’s GRIM analysis, a typical major manufacturer has an annual R&D 

expense of $8.6 million. Because not all products would need to be redesigned at TSL 3, 

DOE estimates $12.7 million in product conversion costs for a typical major 

manufacturer at TSL 3 (compared to $15.5 million if all products had to be fully 

redesigned), which represents 145 percent of its annual R&D expense. This means that a 

typical major manufacturer could redesign its products in under a year and a half if it 

were to devote its entire R&D budget for fluorescent lamp ballasts to product redesign 

and could retain the engineering resources.

On the other hand, DOE’s research indicated that a typical small manufacturer 

offers approximately 50 basic covered models and 100 SKUs. However, based on 

manufacturer interviews, DOE does not believe that small manufacturers would incur the 

same level of costs per model and SKU as large manufacturers. Small manufacturers 
13-43

would not be as likely to redesign models in-house as large manufacturers. Instead, they 

would source and rebrand some or all products from the Asian manufacturers who supply 

their ballasts. As a result, DOE assumed a lower R&D investment, in absolute dollars, per 

model. Because this design is effectively sourced, DOE believes smaller manufacturers 

would face a higher level of cost of goods sold (i.e. a higher MPC). Therefore, in a 

competitive environment, small manufacturers would earn a lower markup than their 

larger peers and consequently operate at lower margins. Small manufacturers would also 

have to test and certify every SKU they offer, but they would not conduct the same extent 

of pilot runs and internal testing as large manufacturers because less production takes 

place in internal factories. As such, DOE estimates that their testing and certification 

costs are expected to be $10,000 per SKU for UL and other certifications. Thus, the 

product conversion costs for a typical small manufacturer could total $1.6 million, but 

because not all products would need to be fully redesigned at TSL 3, DOE estimates 

product conversion costs of $1.3 million at TSL 3. Based on scaling GRIM results to an 

average small-manufacturer market share of 1.0 percent, DOE assumed that a small 

manufacturer has an annual R&D expense of $0.4 million, so the estimated product 

conversion costs at TSL 3 would represent 336 percent of its annual R&D expense. This 

means that a typical small manufacturer could redesign its products in a little over the 

three-year compliance period if it were to devote its entire R&D budget for fluorescent 

lamp ballasts to product redesign and could retain the engineering resources.

 Although the conversion costs required can be considered substantial for all 

companies, the impacts could be relatively greater for a typical small manufacturer 

because of much lower production volumes and the relatively fixed nature of the R&D 

resources required per model. The table below compares the total conversion costs of a 

typical small manufacturer as a percentage of annual revenue and earnings before taxes 

and interest (EBIT) to those of a typical large manufacturer.

Table 13.6.2 Comparison of a Typical Small and Large Manufacturer’s Total 

Conversion Costs to Annual Revenue and EBIT

Large Manufacturer Small Manufacturer

Total 

Conversion 

Costs for a 

Typical Large 

Mfr. (2009$ 

millions)

Total 

Conversion 

Costs as a 

Percentage 

of Annual 

Revenue

Total 

Conversion 

Costs as a 

Percentage of 

Annual EBIT

Total 

Conversion 

Costs for a 

Typical Small 

Mfr. (2009$ 

millions)

Total 

Conversion 

Costs as a 

Percentage 

of Annual 

Revenue

Total 

Conversion 

Costs as a 

Percentage of 

Annual EBIT

Baseline $0.00 0% 0% $0.00 0% 0%

TSL 1 $4.06 2% 21% $0.27 3% 38%

TSL 2 $15.85 7% 81% $1.30 12% 184%

TSL 3 $20.33 9% 104% $1.65 16% 233%

As seen in the table above, the impacts for a typical small manufacturer are 

relatively greater than for a large manufacturer at TSL 3. Total conversion costs represent 

233 percent of annual EBIT for a typical small manufacturer compared to 104 percent of 

annual EBIT for a typical large manufacturer. DOE believes these estimates reflect a 

worst-case scenario because they assume small manufacturers would redesign all 
13-44

proprietary models immediately, and not take advantage of the industry’s supply chain 

dynamics or take other steps to mitigate the impacts. However, DOE anticipates that 

small manufacturers would take several steps to mitigate the costs required to meet new 

and amended energy conservation standards. 

At TSL 3, it is more likely that ballast manufacturers may temporarily reduce the 

number of SKUs they offer as in-house designs to keep their product conversion costs at 

manageable levels in the year preceding the compliance date. As noted above, the typical 

small manufacturer business model is not predicated on the supply of a wide range 

models and specifications. They frequently either focus on a few niche markets or on 

customers seeking only basic, low-cost solutions. They therefore can satisfy the needs of 

their customers with a smaller product portfolio than large manufacturers who often 

compete on brand reputation and the ability to offer a full product offering. As such, 

DOE believes that under the proposed standards small businesses would likely selectively 

upgrade existing product lines to offer products that are in high demand or offer strategic 

advantage. Small manufacturers could then spread out further investments over a longer 

time period by upgrading some product lines prior to the compliance date while sourcing 

others until resources allow—and the market supports—in-house design. Furthermore, 

while the initial redesign costs are relatively large, the estimates assume small 

manufacturers would bring compliant designs to market in concert with large 

manufacturers. In reality, there is a possibility some small manufacturers would conserve 

resources by selectively upgrading certain products until new baseline designs become 

commonplace to the point where their in-house development is less resource-intensive. 

The commonality of many consumer electronics components, designs, and products 

fosters considerable sharing of experience throughout the electronics supply chain, 

particularly when unrestricted by proprietary technologies. DOE did not find any 

intellectual property restrictions that would prevent small manufacturers from achieving 

the technologies necessary to meet today’s proposed levels. 

13.6.2 Impacts on Sign Ballast Manufacturers 

DOE is not presenting results under the two-tier markup scenario for sign ballasts 

because it did not observe this two-tier effect in the sign ballast market. Electronic 

ballasts at EL1 neither command a higher price nor a higher markup in the base case. 

Additionally, roll-up and shift scenarios do not have separate impacts for sign ballasts 

because there are no higher ELs above the new baseline to which products could 

potentially shift in the standards case. As such, the tables below present the cash-flow 

analysis results under the preservation of operating profit markup and roll-up shipment 

scenarios with existing or emerging technologies for sign ballast manufacturers.
13-45

Table 13.6.3 Manufacturer Impact Analysis for Sign Ballasts – Preservation of 

Operating Profit Markup, Existing Technologies, and Roll-up Shipment Scenario

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$ 

millions) 142 138 138 138 

Change in INPV

(2009$ 

millions) - (4.2) (4.2) (4.2)

(%) - -2.9% -2.9% -2.9%

Product 

Conversion Costs

(2009$ 

millions) - 2 2 2 

Capital 

Conversion Costs

(2009$ 

millions) - 6 6 6 

Total Conversion 

Costs

(2009$ 

millions) - 8 8 8 

Table 13.6.4 Manufacturer Impact Analysis for Sign Ballasts – Preservation of 

Operating Profit Markup, Emerging Technologies, and Roll-up Shipment Scenario

Units Base 

Case

Trial Standard Level

1 2 3

INPV (2009$ 

millions) 116 111 111 111 

Change in INPV

(2009$ 

millions) - (5.1) (5.1) (5.1)

(%) - -4.4% -4.4% -4.4%

Product 

Conversion Costs

(2009$ 

millions) - 2 2 2 

Capital 

Conversion Costs

(2009$ 

millions) - 6 6 6 

Total Conversion 

Costs

(2009$ 

millions) - 8 8 8 

For sign ballasts (product class 5), DOE analyzed only one efficiency level; thus, 

the results are the same at each TSL. TSLs 1 through 3 represent EL1 for product class 5. 

At TSLs 1 through 3, DOE estimates impacts on INPV to range from -$4.2 million to -

$5.1 million, or a change in INPV of -2.9 percent to -4.4 percent. At these proposed 

levels, industry free cash flow is estimated to decrease by approximately 38.4 percent to 

$4.9 million, compared to the base-case value of $7.9 million in the year leading up to the 

proposed energy conservation standards. 

As shown by the results, DOE expects sign ballast manufacturers to face small 

negative impacts under TSLs 1 through 3. DOE estimates that 64 percent of product class 

5 shipments would meet EL1 in the base case. This means that many manufacturers 

already produce electronic sign ballasts, which is the design option represented by EL1. 

However, many other manufacturers produce only magnetic T12 sign ballasts and 

therefore would face significant capital exposure moving from magnetic to electronic to 

meet TSLs 1 through 3. For that reason, DOE estimates relatively high capital conversion 

costs of $6 million for sign ballast manufacturers. Product redesign and testing costs are 

expected to total $2 million for sign ballasts.
13-46

Unlike most product classes, sign ballasts are expected to decrease rather than 

increase in price moving from baseline to EL1 by a shipment-weighted average decrease 

in MPC of 4.5 percent. This is because electronic ballasts are a cheaper alternative to 

magnetic ballasts, even though the industry has not fully moved toward electronic 

production yet. During interviews, manufacturers stated that consumers were reluctant to 

convert to electronic ballasts although there were no technical barriers to doing so. Under 

the preservation of operating profit markup scenario, however, manufacturers are able to 

maintain the base-case operating profit for the year following the compliance date of

amended standards despite lower production costs, so the average markup increases 

slightly to 1.41 to account for the decrease in MPC. Despite this markup increase, 

revenue is lower at TSLs 1 through 3 than in the base case because of the lower average 

unit price, and the $8 million in conversion costs increases the negative impact. When the 

preservation of operating profit markup is combined with the existing technologies 

scenario rather than the emerging technologies scenario, the impact of this maximized 

revenue per unit is greatest because it is applied to a larger total quantity of shipments.

13.7 OTHER IMPACTS

13.7.1 Employment

DOE typically presents modeled quantitative estimates of the potential changes in

production employment that could result following amended energy conservation 

standards. However, for this rulemaking, DOE determined that none of the major 

manufacturers, which compose more than 90 percent of the market, have domestic 

fluorescent lamp ballast production. Although a few niche manufacturers have relatively 

limited domestic production, based on interviews, DOE believes there are very few 

domestic production employees in the United States Because many niche manufacturers 

did not respond to interview requests, DOE is unable to fully quantify domestic 

production employment. Therefore, while DOE qualitatively discusses potential 

employment impacts below, DOE did not model direct employment impacts explicitly 

because the results would not be meaningful given the very low number of domestic 

production employees. 

Based on interviews, DOE believes that direct employment impacts of relatively 

significant magnitude would only occur in the event that one or more businesses chose to 

exit the market due to new standards. Discussions with manufacturers indicated that, at 

the highest efficiency level (TSL 3), some small manufacturers will be faced with the 

decision to make the investments necessary to remain in the market based on their current 

technical capabilities. In general, however, DOE believes that TSL 3, the level proposed 

in today’s notice, will not have significant adverse impacts on employment because 

achieving these levels is within the expertise of most manufacturers, including small 

manufacturers, due to the lack of intellectual property restrictions and similarity of 

products among manufacturers. 

In summary, however, given the low number of production employees and the 

unlikelihood that manufacturers would exit the market at the efficiency levels proposed in 

the NOPR notice, DOE does not expect a significant impact on direct employment 
13-47

following new and amended energy conservation standards. DOE notes that the 

employment impacts discussed here are independent of the employment impacts from the 

broader U.S. economy, which are documented in chapter 15, Employment Impact 

Analysis, of the NOPR TSD. 

13.7.2 Production Capacity 

Manufacturers stated that new and amended energy conservation standards could 

harm manufacturing capacity due to the current component shortage discussed in section 

13.3.1 above. Manufacturers presently are struggling to produce enough fluorescent lamp 

ballasts to meet demand because of a worldwide shortage of electrical components. The 

components most affected by this shortage are high-efficiency parts, for which demand 

would increase even further following new and amended conservation standards. The 

increased demand could exacerbate the component shortage, thereby impacting 

manufacturing capacity in the near term. While DOE recognizes that the component 

shortage is currently a significant issue for manufacturers, DOE believes it is a relatively 

short term phenomenon to which component suppliers will ultimately adjust. According 

to manufacturers, suppliers have the ability to ramp up production to meet ballast 

component demand by the compliance date of potential new standards, but those 

suppliers have hesitated to invest in additional capacity due to economic uncertainty and 

skepticism about the sustainability of demand. The state of the macroeconomic 

environment through 2014 will likely impact the duration of the component shortage. 

However, potential mandatory standards could create more certainty for suppliers about 

the eventual demand for these components. Additionally, the components at issue are not 

new technologies; rather, they have simply not historically been demanded in large 

quantities by ballast manufacturers.

13.7.3 Cumulative Regulatory Burden 

While any one regulation may not impose a significant burden on manufacturers, 

the combined effects of several impending regulations may have serious consequences 

for some manufacturers, groups of manufacturers, or an entire industry. Assessing the 

impact of a single regulation may overlook this cumulative regulatory burden. For the 

cumulative regulatory burden analysis, DOE looks at other significant product-specific 

regulations that could affect fluorescent lamp ballast manufacturers that will take effect 3 

years before or after the compliance date of amended energy conservation standards for 

these products.c In addition to the amended energy conservation regulations on 

fluorescent lamp ballasts, several other Federal regulations apply to these products and 

other equipment produced by the same manufacturers. While the cumulative regulatory 

burden focuses on the impacts on manufacturers of other Federal requirements, DOE also 

has described a number of other regulations in section 13.7.3.2 because it recognizes that 

these regulations also impact the products covered by this rulemaking. 

c The compliance date for fluorescent lamp ballasts products is 3 years from the date of publication of the 

final rule (approximately July 2014). 
13-48

Companies that produce a wide range of regulated products may be faced with 

more capital and product development expenditures than competitors with a narrower 

scope of products. Regulatory burdens can prompt companies to exit the market or reduce 

their product offerings, potentially reducing competition. Smaller companies in particular 

can be disproportionately affected by regulatory costs since these companies have lower 

sales volumes over which they can amortize the costs of meeting new regulations. A 

proposed standard is not economically justified if it contributes to an unacceptable level 

of cumulative regulatory burden. 

13.7.3.1 DOE Regulations for Other Products Produced by Fluorescent 

Lamp Ballast Manufacturers

In addition to the amended energy conservation standards on fluorescent lamp 

ballasts, several other Federal regulations and pending regulations apply to other products 

produced by the same manufacturers. DOE recognizes that each regulation can 

significantly affect a manufacturer’s financial operations. Multiple regulations affecting 

the same manufacturer can quickly strain manufacturers’ profits and possibly cause an 

exit from the market. Table 13.7.1 lists the other DOE energy conservation standards that 

could also affect manufacturers of fluorescent lamp ballasts in the 3 years leading up to 

and after the compliance date of amended energy conservation standards for these 

products. 
13-49

Table 13.7.1 Other DOE and Federal Actions Affecting the Fluorescent Lamp 

Ballast Industry

Regulation

Approximate 

Compliance 

Date*

Number of Impacted 

Companies from the Market 

and Technology Assessment 

(MTA) (See Chapter 3)

Estimated Total 

Industry 

Conversion Costs

Packaged Terminal Air 

Conditioners and Packaged 

Terminal Heat Pumps 2012 1 

$17.3 million 

(2007$)d

Ranges and Ovens 2012 1

$22.6 million 

(2006$)e

General Service Fluorescent 

Lamps and Incandescent 

Reflector Lamps 2012 10

$363.1 million 

(2008$)f

Dehumidifiers 2012 1 N/A†††

Commercial Clothes Washers 2013 1 

$20.4 million 

(2008$)g

Direct Heating Equipment 2013 1

$5.39 million 

(2009$)h

Battery Chargers and External 

Power Supplies 2013* 1 N/A††

Residential Refrigerators and 

Freezers 2014* 1 N/A††

Room Air Conditioners 2014* 1 N/A††

Residential Clothes Dryers 2014* 1 N/A††

Microwave Ovens 2014* 2 N/A††

d Estimated industry conversion expenses were published in the TSD for the October 2008 packaged 

terminal air conditioners and packaged terminal heat pumps final rule. 73 FR 58772. The TSD for the 2008

packaged terminal air conditioners and packaged terminal heat pumps final rule can be found at 

http://www1.eere.energy.gov/buildings/appliance_standards/commercial/ptacs_pthps_final_tsd.html. e Estimated industry conversion expenses were published in the TSD for the April 2009 residential cooking 

products final rule. 74 FR 16040. The TSD for the 2009 residential cooking products final rule can be 

found at 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/cooking_products_final_rule_tsd.ht

ml. f Estimated industry conversion expenses were published in the TSD for the July 2009 general service 

fluorescent lamps and incandescent reflector lamps final rule. 74 FR 34080. The TSD for the 2009 lamps

final rule can be found at

http://www1.eere.energy.gov/buildings/appliance_standards/residential/incandescent_lamps_standards_fina

l_rule_tsd.html. g Estimated industry conversion expenses were published in the TSD for the January 2010 commercial 

clothes washers final rule. 75 FR 1122. The TSD for the 2010 commercial clothes washers final rule can be 

found at

http://www1.eere.energy.gov/buildings/appliance_standards/commercial/clothes_washers_ecs_final_rule_t

sd.html

h Estimated industry conversion expenses were published in the TSD for the April 2010 heating products 

final rule. 75 FR 20112. The TSD for the 2010 heating products final rule can be found at

http://www1.eere.energy.gov/buildings/appliance_standards/residential/heating_products_fr_tsd.html. 
13-50

Eliptical Reflector (ER), Bulge 

Reflector (BR), and Small 

Diameter Incandescent 

Reflector Lamps 2014* 3 N/A††

Metal Halide Lamp Fixtures 2015* 16 N/A††

Residential Clothes Washers 2015* 1 N/A††

Residential Water Heaters 2015 1 

$95.9 million 

(2009$)i

Commercial Electric Motors 2015* 1 N/A††

Commercial Distribution 

Transformers 2016* 2 N/A††

High-Intensity Discharge 

Lamps 2017* 8 N/A††

*The dates listed are an approximation. The exact dates are pending final DOE action.

†† For energy conservation standards for rulemakings awaiting DOE final action, DOE does not have a 

finalized estimated total industry conversion cost. 

††† For minimum performance requirements prescribed by the Energy Independence and Security Act of 

2007 (EISA 2007), DOE did not estimate total industry conversion costs because an MIA was not 

completed as part of a rulemaking. Pub. L. 110-140. EISA 2007 made numerous amendments to the Energy 

Policy and Conservation Act (EPCA) of 1975, Pub. L. 94-163, (42 U.S.C. 6291–6309), which established 

an energy conservation program for major household appliances and industrial and commercial equipment.

 Some Federal DOE regulations have a more significant impact on manufacturers 

of fluorescent lamp ballasts than others because manufacturers hold a significant market 

share in those covered products. Table 13.7.2 below shows the DOE energy conservation 

standards with compliance dates within three years of fluorescent lamp ballasts where 

manufacturers are expected to be most impacted due to their market positions. For these 

rulemakings, fluorescent lamp ballast manufacturers would likely be burdened by a 

significant portion of the estimated industry conversion costs. In some cases, specific 

market share data was not available, but manufacturers were identified as major or minor 

manufacturers in the given market when this information was publicly available. 

i

Estimated industry conversion expenses were published in the TSD for the April 2010 heating products 

final rule. 75 FR 20112. The TSD for the 2010 heating products final rule can be found at

http://www1.eere.energy.gov/buildings/appliance_standards/residential/heating_products_fr_tsd.html. 
13-51

Table 13.7.2 DOE Regulations on Products For Which Fluorescent Lamp Ballast

Manufacturers Hold Significant Market Share

Manufacturer Market Share in DOE Regulated Product

Regulation

Estimated 

Industry Total 

Conversion 

Expenses 

(millions)

General 

Electric Philips Osram 

Sylvania Universal

Packaged Terminal Air 

Conditioners and 

Packaged Terminal Heat 

Pumps

$17.3 million 

(2007$) N/A (major)

Ranges and Ovens $22.6 million 

(2006$)

47% (electric); 

37% (gas)

General Service 

Fluorescent Lamps and 

Incandescent Reflector 

Lamps

$363.1 million 

(2008$) N/A (major) N/A 

(major)

N/A 

(major)

N/A 

(minor)

Commercial Clothes 

Washers

$20.4 million 

(2008$) N/A (major)

Residential Refrigerators 

and Freezers N/A 27% (refrigerators)

Room Air Conditioners N/A N/A (major)

Residential Clothes 

Dryers N/A 16% (electric); 10% (gas)

Residential Clothes 

Washers N/A 16%

ER, BR, and Small 

Diameter Incandescent 

Reflector Lamps

N/A N/A (major) N/A 

(major)

N/A 

(major)

Metal Halide Lamp 

Fixtures N/A N/A (major) N/A (major)

N/A 

(major)

N/A 

(minor)

High-Intensity Discharge 

Lamps N/A N/A (major) N/A (major)

N/A 

(major)

13.7.3.2 Other Regulations That Could Impact Fluorescent Lamp Ballast 

Manufacturers

While the cumulative regulatory burden focuses on the impacts on manufacturers 

of other Federal requirements, in this section DOE has described a number of other 

regulations below that could also impact the fluorescent lamp ballasts covered by this 

rulemaking. 

State Energy Conservation Standards 

The CEC specifies appliance standards that are applicable as state law to the sale 

of appliances in California. Recent standards set minimum ballast efficacy factor 

requirements for ballasts that operate one and two F34T12 lamps, two F96T12/ES lamps, 

and two F96T12HO/ES lamps. The standards apply to fluorescent lamp ballasts 

manufactured on or after July 1, 2009; sold by the manufacturer on or after October 1, 
13-52

2009; or incorporated into a luminaire by a luminaire manufacturer on or after July 1, 

2010.j

International Toxic Materials Regulations

Fluorescent lamp ballast manufacturers that sell products outside of the United 

States are subject to several international toxic materials regulations. In the European 

Union (EU), products are subject to the Restriction of Hazardous Substances Directive 

(RoHS). This regulation bans the sale of new equipment in the EU that contains more 

than agreed levels of lead, cadmium, mercury, hexavalent chromium, polybrominated 

biphenyl (PBB) and polybrominated diphenyl ethers (PBDE) flame retardants. 

Manufacturers do not have a lengthy history using lead-free solder and expressed 

concerns regarding the reliability of the material based on the experience of European as 

well as U.S. suppliers compliant with RoHS. Manufacturers commented that lead-free 

solder is harder and more brittle, and it is still unknown whether exposure to long term 

thermal expansion and contraction could lead to additional solder joint cracking and, 

ultimately, ballast malfunctioning. While no current Federal U.S. regulation impacts the 

use of lead-solder in ballasts, NEMA has issued a call to action for its members to be 

RoHS-compliant in 2010. 

Anti-Arcing Protection Requirements

The provisions contained in ANSI/UL1598 Standard Third Edition require that 

luminaires be constructed using UL Type CC rated (anti-arcing) ballasts or high 

temperature Circle I rated lampholders in original equipment manufacturer (OEM) 

fixtures and UL-marked retrofit kits. While ballast manufacturers are not required to offer 

Type CC-rated ballasts since fixture manufacturers could use Circle I lampholders to 

prevent arcing and meet UL specifications, offering Type CC-rated ballasts does create a 

regulatory burden for ballast manufacturers. Type CC rating requires control circuitry to 

implement, and these circuits consume system power, which decreases overall ballast 

electrical efficiency.

Electromagnetic Interference (EMI) Requirements

Currently, in the U.S. and Canada, electronic fluorescent ballasts are tested only 

for conducted emission and are required to comply with Federal Communications 

Commission (FCC) Part 18, Subpart C, Class A for industrial and commercial 

applications, or Class B for residential applications. The burden of proof for existing EMI 

tests rests with the luminaire manufacturers. These requirements are not as rigorous as the 

CISPR 15 requirements effective in Europe which require more filtering stages, but 

manufacturers could be required to comply with the model European EMI regulation in 

the future, which would result in design changes that could decrease efficiency or 

increase the cost to meet a given efficiency level. 

j

California Energy Commission. 2009 Appliance Efficiency Regulations. 2009. 

<http://www.energy.ca.gov/2009publications/CEC-400-2009-013/CEC-400-2009-013.PDF >.
13-53

End-of-Life (EOL) Requirements

T5 ballasts are required to have EOL protection systems that detect characteristic 

electrical signals of a lamp in distress and activate control functions in the ballast to limit 

energy supplied to the lamp. This protection prevents fire hazards resulting from melted 

sockets and cracked glass near the lamp base caused by overheating. Compliance with 

EOL requirements has added cost and design complexity to these systems. In the future, 

T8 and T12 ballasts could also require EOL protection, which could add cost and 

decrease efficiency, but DOE does not expect EOL protection to be required for T8 and 

T12 ballasts in the United States as required in Europe due to significant differences 

between the lamps used in the United States and Europe. 

13.8 CONCLUSION

The following section summarizes the impacts for the scenarios DOE believes are 

most likely to capture the range of impacts on fluorescent lamp ballast manufacturers as a 

result of amended energy conservation standards. DOE also notes that while these 

scenarios bound the range of most plausible impacts on manufacturers, there potentially 

could be circumstances which cause manufacturers to experience impacts outside of this 

range. 

TSL 1 represents EL1 for all four representative product classes. At TSL 1, DOE 

estimates impacts on INPV to range from -$19.4 million to -$112.7 million, or a change 

in INPV of -1.6 percent to -13.2 percent. At this proposed level, industry free cash flow is 

estimated to decrease by approximately 11.9 percent to $43.8 million, compared to the 

base-case value of $49.7 million in the year leading up to the proposed energy 

conservation standards. 

The INPV impacts at TSL 1 are relatively minor, in part because the vast majority 

of shipments already meet EL1. DOE estimates that in 2014, the year in which 

compliance with any new and amended standards is proposed to be required, 98 percent 

of product class 1 shipments, 69 percent of product class 2 shipments, 88 percent of 

product class 3 shipments, and 64 percent of product class 5 shipments would meet EL1 

or higher in the base case. The majority of shipments that are at baseline efficiency levels 

and would need to be converted at TSL 1 are 2-lamp 4-foot MBP IS/RS residential 

ballasts in product class 1, 2-lamp and 4-lamp 4ft MBP PS ballasts in product class 4, and 

4-lamp sign ballasts in product class 5. 

Because most fluorescent lamp ballast shipments already meet the efficiency 

levels analyzed at TSL 1, DOE expects conversion costs to be small compared to the 

industry value. DOE estimates product conversion costs of $5 million due to the research, 

development, testing, and certification costs needed to upgrade product lines that do not 

meet TSL 1. For capital conversion costs, DOE estimates $11 million for the industry, 

largely driven by the cost of converting all magnetic sign ballast production lines to 

electronic sign ballast production lines. 

Under the preservation of operating profit markup scenario, impacts on 

manufacturers are marginally negative because while manufacturers earn the same 

operating profit as is earned in the base case for 2015 (the year following the compliance 
13-54

date of amended standards), they are faced with $17 million in conversion costs. INPV 

impacts on manufacturers are not as significant under this scenario as in other scenarios 

because despite most shipments already meeting TSL 1, the shift shipment scenario 

moves products beyond the eliminated baseline to higher-price (and higher gross profit) 

levels. This results in a shipment-weighted average MPC increase of 7.8 percent applied 

to a growing market over the analysis period. While total shipments increase under both 

technology scenarios, shipments under the existing technologies scenario are 216 percent 

greater than shipments under the emerging technologies scenario by the end of the 

analysis period. At TSL 1, the moderate price increase applied to a large quantity of 

shipments lessens the impact of the minor conversion costs estimated at TSL 1, resulting 

in slightly negative impacts at TSL 1 under the preservation of operating profit markup 

scenario.

Under the two-tier markup scenario, manufacturers are not able to fully pass on 

additional costs to consumers and are not guaranteed base-case operating profit levels. 

Rather, products that once earned a higher-than-average markup at EL1 become 

commoditized once baseline products are eliminated at TSL 1. Thus, the average markup 

drops below the base-case average markup (which is equal to the flat manufacturer 

markup of 1.4). There is a slight increase in shipment-weighted average MPC (less than 1 

percent) under the roll-up scenario, but this increase is much smaller than under the shift 

scenario because shipments above the baseline do not move to higher efficiencies with 

greater costs. This MPC increase is outweighed by a lower average markup of 1.38 and 

$17 million in conversion costs, resulting in more negative impacts at TSL 1 under the 

two-tier markup scenario. These impacts increase on a percentage basis under the 

emerging technologies scenario relative to the existing technologies scenario because the 

base-case INPV against which changes are compared is 31 percent lower.

TSL 2 represents EL1 for product class 5 (4-lamp sign ballasts). For product 

classes 1 (4-foot MBP IS/RS and 8-foot SP Slimline), 2 (4-foot MBP PS, 4-foot T5 

MiniBP SO, and 4-foot T5 MiniBP HO),and 3 (2-lamp 8-foot HO), TSL 2 represents 

EL2. At TSL 2, DOE estimates impacts on INPV to range from -$51.6 million to -$217.9 

million, or a change in INPV of -4.2 percent to -25.5 percent. At this proposed level, 

industry free cash flow is estimated to decrease by approximately 32.9 percent to $33.3 

million, compared to the base-case value of $49.7 million in the year leading up to the 

proposed energy conservation standards. 

Because product class 5 remains at EL1 at TSL 2, the additional impacts at TSL 2 

relative to TSL 1 result from increasing product classes 1, 2, and 3 to EL2. At TSL 2, 

DOE estimates that 40 percent of product class 1 shipments, 13 percent of product class 2 

shipments, and 27 percent of product class 3 shipments would meet EL2 or higher in the 

base case. Since product class 3 represents only 0.1 percent of the fluorescent lamp 

ballast market, the vast majority of impacts at TSL 2 relative to TSL 1 result from 

changes in product classes 1 and 2. 

At TSL 2, conversion costs nearly triple compared to TSL 1 but remain small 

compared to the industry value. Product conversion costs increase to $24 million due to 

the increase in the number of product lines within product classes 1 and 2 that would 
13-55

need to be redesigned at TSL 2. Capital conversion costs grow to $25 million at TSL 2 

because manufacturers would need to invest in additional testing equipment and convert 

some production lines. 

Under the preservation of operating profit markup scenario, INPV impacts are 

negative because manufacturers are not able to fully pass on higher product costs to 

consumers. The shipment-weighted average MPC increases by 11.1 percent compared to 

the baseline MPC, but this increase does not generate enough cash flow to outweigh the 

$49 million in conversion costs at TSL 2, resulting in a -4.2 percent change in INPV at 

TSL 2 compared to the base case.

Under the two-tier markup scenario, more products are commoditized to a lower 

markup at TSL 2. The impact of this lower average markup of 1.36 outweighs the impact 

of a 10.3 percent increase in shipment-weighted average MPC, resulting in a negative 

change in INPV at TSL 2. The $49 million in conversion costs further erodes 

profitability, and the lower base case INPV against which the change in INPV is 

compared under the emerging technologies scenario increases impacts on a percentage 

basis.

TSL 3 represents EL1 for product class 5 and EL3 for product classes 1, 2, and 3. 

At TSL 3, DOE estimates impacts on INPV to range from -$95.3 million to -$296.2 

million, or a change in INPV of -7.7 percent to -34.7 percent. At this proposed level, 

industry free cash flow is estimated to decrease by approximately 57.4 percent to $21.2 

million, compared to the base-case value of $49.7 million in the year leading up to the 

proposed energy conservation standards. 

Because product class 5 remains at EL1 at TSL 3, the additional impacts at TSL 3 

relative to TSL 2 result from increasing product classes 1, 2, and 3 to EL3. At TSL 3, 

DOE estimates that only 20 percent of product class 1 shipments, 5 percent of product 

class 2 shipments, and 2 percent of product class 3 shipments would meet the efficiency 

levels proposed by TSL 3 or higher in the base case. 

At TSL 3, conversion costs nearly double again compared to TSL 2. Product 

conversion costs increase to $57 million because a far greater number of product lines 

within product classes 1, 2, and 3 would need to be redesigned at TSL 3. Capital 

conversion costs rise to $34 million at TSL 3 because manufacturers would need to invest 

in equipment such as surface-mount device placement machinery and solder machines to 

convert production lines for the manufacturing of more efficient ballast designs.

Under the preservation of operating profit markup, existing technologies, and shift 

shipment scenarios, INPV decreases by 7.7 percent at TSL 3 compared to the base case, 

which is nearly double the percentage impact at TSL 2. The shipment-weighted average 

MPC increases by 19.5 percent, but manufacturers are not able to pass on the full amount 

of these higher costs to consumers. This MPC increase is outweighed by the $91 million 

in conversion costs at TSL 3. 
13-56

Under the two-tier markup scenario, at TSL 3, products are commoditized to a 

lower markup to an even greater extent. The impact of this lower average markup of 1.34 

outweighs the impact of a 19.3 percent increase in shipment-weighted average MPC, 

resulting in a negative change in INPV at TSL 3 compared to TSL 2. Profitability is 

further impacted by the $91 million in conversion costs and the lower base-case INPV 

over which change in INPV is compared under the emerging technologies scenario.
13-57

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3 NEMA – NEMA Members. Last Accessed December 30, 2010. 

<http://www.nema.org/about/members/ >.

4 CEE Qualifying Products. <http://www.cee1.org/com/com-lt/lamps-ballasts.xls> 

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