Appliance Process Improvement Meeting January 17 and 18, 1996 PNL Conference Room

- The Aerospace Center

901 D Street, S.W., 9th Floor Washington, D.C. Sponsored by the Department of Energy , Office of Energy Efficiency and

Renewable Energy, Washington, D.C. Wednesday, January 17th 12:00 PM to 12:45 PM Lunch 12:45 PM to 1:00 PM 1:00 PM to 1:45 PM 1:45 PM to 3:00 PM

3:00 PM to 3:20 PM 3:20 PM to 4:40 PM 4:40 PM to 5:00 PM

9:00 AM to 9:15 AM

9:15 AM to 10:30 AM

10:30 AM to 10:45 AM 10:45 AM to 12:15 PM 12:15 PM to 1:00 PM 1:00 PM to 2:30 PM Introductions , Overview - Doug Brookman Impact/Analysis Overview: Is there a better way to measure the impacts on stakeholder groups than what we do presently? Engineering Analysis/The Impact of Standards on Consumers - Statutory Issues - Process Improvement Break The Impact of Standards on Consumers - Analysis Improvement Preview Day 2, Next Steps - All Thursday, January 18th Introductions, Overview - Doug Brookman - Agenda Review The Impact of Standards on Manufacturers - Statutory Issues - Process Improvement Break The Impact of Standards on Manufacturers - Analysis Improvement Lunch The Impact of Standards on National Energy - Statutory Issues - Process Improvement - Analysis Improvement 2:30 PM to 2:45 PM Break 2:45 PM to 3:45 PM The Impact of Standards on Utilities and National Emissions - Statutory Issues - Process Improvement - Analysis Improvement 3:45 PM to 4:00 PM Next Steps - All 

# /, Appliance Process Improvement Meeting January 17 and 18, 1996 PNL Conference Room

- The Aerospace Center 901- D Street, S.W., 9th Floor Washington, D.C. Sponsored by the Department of Energy, Office of Energy Efficiency and Renewable Energy, Washington, D.C.

12:00 PM to 12:45 PM 12:45 PM to 1:00 PM 1:00 PM to 1:45 'PM
I:45 PM to 3:00 PM
3:00 PM to 3:20 PM 3:20 PM to 4:40 PM 4:40 PM to 5:00 PM

9:00 AM to 9:15 AM

9: 15 AM to 10:30 AM
10:30 AM to 10:45 AM 10:45 AM to 12:15 PM 12:15 PM to 1:00 PM 1:00 PM to 2:30 PM

2:30 PM to 2:45 PM 2:45 PM to 3:45 PM

3:45 PM to 4:00 PM 

### Wednesday, January 17th Lunch Introductions, Overview

- Doug Brookman Impact!Analysis Overview: Is there a better way to measure the impacts on stakeholder groups than what we do presently? Engineering AnalysislThe Impact of Standards on Consumers

- Statutory Issues

- Process Improvement Break The Impact of Standards on Consumers

- Analysis Improvement Preview Day 2, Next Steps -All Thursday, January 18th Introductions, Overview

- Doug Brookman

- Agenda Review The Impact of Standards on Manufacturers

- Statutory Issues

- Process'Improvement Break The Impact of Standards on Manufacturers

- Analysis Improvement Lunch The Impact of Standards on National Energy

- Statutory Issues

- Process Improvement

- Analysis Improvement Break The Impact of Standards on Utilities and National Emissions

- Statutory Issues

- Process Improvement

- Analysis Improvement Next Steps

- All

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## Input/Analysis Stakeholder Meeting, January 17-18, 1996 Issue Matrix for Agenda Development -

IMPACT AREA Product

Consumers

Manufacturers 

### Statutory Issues Process Improvement Analysis Improvement 

### Stakeholder Data Contractor Mdl / o e s Ass tion

ump I Ke Issues Involvement Issues Issues Methods /Issues y Technologically * Pre-ANPR * Appropriate * Industry Engineering * Baseline unit 

### * Diminishing feasible meeting 

### sources experience Analysis * Typical 

### returns

- Need for rule * Role of * Selection * Cost 

### usage * Manufacturing * Economically (progress private sector DOE support efficiency profiles practidality justified 

### review) standards options * Product * Product utility



### - Product associations * Peer review models * Uncertainty * Max tech classes (ASHRAE, * Parcel work

- Technical 

### etc.) options * Life-cycle costs - Test * Life-cycle * Product diversity procedures costs * Regional 

### * Safe harbor - Preferred * Payback impacts approach * Cost of * Equity for (formal, conserved consumer types negotiated) d energy * Discount - Data require rates/paybacks * Uncertainty * Lessening of * Workshops * Public data 

### * Average * Foregone competition 

### * Consultations * Confidentiality manufacturer 

### investment

* Review drafts * Anti-trust 

### * Cost pass- * Stranded assets MAM/GRIM through * Competition 

### impacts * Validity Jobs impacts * Clarity 

### * Cumulative * Stakeholder 

### burden acceptance 

### * Short-run impact S H G M I A 1/ 1 5/96 Reference No

. 47603-00 

### Input/Analysis Stakeholder Meeting,**Jan~ary** 

### 17-18, 1996

- Issue Matrix for Agenda Development - Statutory Iss Process Improvement Analysis Improvement 

### IMPACT Stakeholder Data Contractor Models!

# Assu~Jtion

AREA Involvement Issues Issues Methods !Issues Product * Technologically * Pre-ANPR . * Appropriate * Industry Engineering * Baseline unit * Diminishing feasible meeting sources experience**Anal~sis** * Typical returns

- Need for rule * Role of * Selection * Cost usage * Manufacturing * Economically (progress private sector * DOE support efficiency profiles practicality

justified review) standards options * Product * Product utility

- Product associations * Peer review models *. Uncertainty * Max tech classes (ASHRAE, * Parcel work

- Technical etc.)

options Consumers * Life-cycle costs - Test * Life-cycle * Product diversity * Safe

### ha~bor procedures costs * Regional

- Preferred * Payback impacts

approach * Cost of * Equity for (formal, conserved consumer types negotiated) energy * Discount

- Data require rates/paybacks * Uncertainty * Lessening of * Workshops * Public data * Average * Foregone

competition * Consultations * Confidentiali.ty manufacturer investment * Review drafts * Anti-trust * Cost pass- * Stranded assets Manu- MAM/GRIM through * Competition facturers impacts * Validity

.. Jobs impacts * Clarity * Cumulative * Stakeho burden

acceptance * Short-run impact SHGMIA 

### 1/15/96 Reference No. 47603·00 1

### Input/Analysis Stakeholder Meeting, January 17 -18, 1996 - Issue Matrix for Agenda Development - Statutory Issues Process Improvement Analysis Improvement 

### IMPACT Data Key Assumptions Keylssues AREA Issues Issues /issues National * Need for REM * Price * Regional equity Energy conservation elasticity impacts

* Significant Energy * Consumer * Market solutions 

### savings discount rate * Average energy rates * Baseline 

### energy consumption * Energy price forecasts Utilities ASEUM * Avoided * Impact on costs electric and * Capacity gas utilities 

### savings Lost revenues 

### National ASEUM * Average * Regional impacts Emissions generation * Monetizing Emissions * Effects of externalities



### existing laws/ regulations

S H G M I A 1/15/96 Reference No
. 

### 47603-00 

### Input/Analysis Stakeholder Meeting, January 17-18, 1996

- Issue Matrix for Agenda Development - Statutory Issues Process Improvement
.Analysis Improvement 

### IMPACT Stakeholder Data Contractor

# I Models! AREA Involvement Issues Issues Methods National * Need for REM * Price * Regional equity Energy conservation elasticity impacts * Significant Energy * Consumer * Market solutions

savings discount rate * Average

energy rates * Baseline

energy consumption * Energy price

forecasts Utilities ASEUM * Avoided * Impact on cqsts electric and * Capacity gas utilities

savings * Lost revenues National ASEUM * Average * Regional impacts Emissions generation * Monetizing Emissions * Effects of externalities existing laws/ regulations

SHGMIA 

### 1/15/96 Reference No. 47603-00 2

### APPLIANCE PROCESS IMPROVEMENTS MEETING January 17-18 PNL, Washington PURPOSE: Explore a range of diverse views on DOE 's rulemaking process. 1/17-1/18 GOAL: Uncover/extract potential process improvements with a-focus on

input/analysis issues. Not get lost in detail. GROUND RULES: Not focus on past.

Inform future action. Not trip FACA. Have an open process review. OUTPUT THIS MEETING -- Greater understanding, but not resolve the issues. -- Process improvement is the focus, not resolving each substantive issue. 

### ·APPLIANCE PROCESS IMPROVEMENTS MEETING January 17-18 PNL, Washington PURPOSE: Explore a range ofdiverse views on DOE's rulemaking process. 1/17-1118 

### GOAL: Uncover/extract potential process improvements with a'focus on input/analysis issues.
. Not get lost in detail.



### - GROUND RULES: Not focus on past. Inform future action. Not trip FACA. Have an open process review. OUTPUT THIS MEETING

-- Greater understanding, butnot resolve the issues.

-- Process improvement is the focus, not resolving each substantive issue.

### SIMPLE PROBLEM DEFINITION

1. DOE IS REQUIRED TO MAKE JUDGMENTS 2. ASK FOR PROPRIETARY DATA 3. POOR DATA/NO DATA 4. DOE USES MODELS/ASSUMPTIONS, 5. STAKEHOLDERS DISAGREE ETC. AND ARRIVE AT DATA WITH JUDGMENTS 6. EXCHANGE OF VIEWS ENSUES


### IS THERE A BETTER WAY TO ANSWER THESE QUESTIONS? How to get the input and do the analysis to obtain good results There is a significant variation among products especially regarding Data Spread, depending on the number of manufacturers, product market penetration, etc. There may be a way to get enough data that would not be public that would serve the data needs, especially in areas such as Technology Forcing Standards There are 2 types of data - Don't mix them -- Energy consumption data 

### -- Manufacturer cost data Data disclosure is not the problem PROBLEM: Frequently there are only one or two companies that can submit data DOE has tried to quantify all the data, then these estimates standing alone are given credence. The estimates end up not portraying the uncertainty that exists 

### SIMPLE PROBLEM DEFINITION 1. DOE IS REQUIRED TO MAKE ruDGMENTS 2. ASK FOR PROPRIETARY DATA 4. DOE USES MODELS/ASSUMPTIONS, ETC. AND ARRIVE AT DATA 6. EXCHANGE OF VIEWS ENSUES 3. POORDATAINODATA 5. STAKEHOLDERS DISAGREE WITH ruDGMENTS



### IS THERE A BETTER WAY TO ANSWER 

### THESE QUESTIONS? How to get the input and do the analysis to obtain good results There is a significant variation among products especially regarding Data Spread, depending on the number ofmanufacturers, product market penetration, etc. There may be a way to get enough data that would not be public that would serve the data needs, especially in areas such as Technology Forcing Standards There are 2 types ofdata

- Don't mix them

-- Energy consumption data

-- Manufacturer cost data Data disclosure is not the problem PROBLEM: Frequently there are only.one ortwo companies that can submit data DOE has tried to quantify all the data, then these estimates standing alone are given credence. The estimates end up not portraying the uncertaintythat exists

### HOW TO IMPROVE

One key issue is how to approach/deal with commercial technology and determine minimum vs. pushing, forcing at the leading edge Decision criteria next meeting 

### Cost & Efficiency are the key drivers (Consumer Economy) -- Manufacturer impacts Harder to get data -- Lifecycle costs Getting initial data is not that difficult -- ROE Getting initial data is not that difficult Manufacturers need a higher technology standard product available that can be purchased at premium Impact of design options do not land equally (i.e. Numbers are averaged and effect on manufacturers is unequal) Maybe use some subjective analysis (RE: Manufacturer impact that could achieve manufacturer buy-off impacts) Industry would have lots more interest in developing a new standard if it were the last standard 

### A consensus process would be preferable to results based. on Garbage In-Garbage Out 

### HOW TO IMPROVE One key issue is howto approach/deal with commercial technology and determine minimum vs. pushing, forcing at the leading edge Decision criteria next meeting Cost & Efficiency are the key drivers (Consumer Economy)

-- Manufacturer impacts Harder to get data

-- Lifecycle costs Getting initial datais not that difficult

-- ROE Getting initial data is not that difficult Manufacturers need a higher technology standard product available that can be purchased at premium Impact ofdesign options do not land equally (i.e. Numbers are averaged and effect on . manufactur.ers is unequal) Maybe use some subjective analysis (RE: Manufacturer impact that could achieve manufacturer buy-offimpacts) Industry would have lots more interest in developing anew standard ifit were the last standard A consensus process would be preferable to results based on Garbage In-Garbage Out

### WAYS TO IMPROVE ENGINEERING ANALYSIS

Additions to matrix: Consumers Test Payback Analysis Product installation and infrastructure should also be added to the list Setting efficiency standards on components, not systems, causes redundancy Create a standards end point-a level that once reached, there would be no new standards would be required 

### -- Significant energy savings should be defined -- End point Priorities discussion needed New standards on horizon cause manufacturers to hold back. on taking new technology to market because they know a new rulemaking is ahead Maybe have a much longer period between reconsidering new standards Concurrent rulemakings can be problematic in terms of inputs being used. Maybe try to negotiate some of these issues collectively (e.g. discount rates) which then would provide a common basis Because these issues are quantitative driven, certain elements like discount rates are too important (i.e. Use qualitative analysis more) Product groupings in classes needs more discussion (e.g. Different fuel, different class)



### 01 

### WAYS TO IMPROVE ENGINEERING ANALYSIS Additions to matrix: Consumers Test = Payback Analysis Product installation and infrastructure should also be added to the list Setting efficiency standards on components, not systems, causes redundancy Create a standards end point-a level that once reached, there would be no new standards would be required

-- Significant energy savings should be defined

-- End point Priorities discussion needed New standards on horizon cause manufacturers to hold backontaking new technology to market because they know a new rulemaking is ahead Maybe have a much longer period between reconsidering new standards Concurrent rulemakings can be problematic in terms ofinputs being used. Maybe try to negotiate some ofthese issues collectively (e.g. discount rates) which then would provide a common basis Because these issues are quantitative driven, certain elements like discount rates are too important (i.e. Use qualitative analysis more) Product groupings in classes needs more discussion (e.g. Different fuel, different class)



# ,

### WAYS TO IMPROVE PRODUCT ANALYSIS

Contractors: DOE contractors are not familiar enough with industry for them to make good judgments -- Solutions - early and often stakeholder involvement - share and VETT documents If no good data - suspend/stop the process until you get the data you need, otherwise, models simply create lousy guesses An RFP should go out that describes/addresses analysis needed. -- Not always the same contractor should be used -- "Manufacturer Practicality" needs better definition RE: Product utility - formerly focused on product class -- Goal = No standard adversely affect any significant product utility -- Issues of safety and reliability should be included 

### -- "Changes to the consumer should be invisible" RE: Uncertainty - it gets lost in quantitative analysis -- The uncertainty is not described or quantified throughout nor is confidence level considered -- Two dimensions need to be considered: 1. Can manufacturers do it? 2. Can manufacturers sell it?



### PRODUCT - CONTRACTORS ISSUES -- How do we get the right individuals involved in evaluating/informing a potential contractor selected by a RFP? PROBLEMS: Rigid conflicts of interest standards are a problem Nature of contract (Fixed price, Deliverable) can be a problem First document we see is Technical Support Document - From the manufacturer's perspective, the first page is all that matters 

### WAYS TO IMPROVE PRODUCT ANALYSIS Contractors: DOE contractors are not familiar enough with industry for them to make good judgments Solutions

- early and often stakeholder involvement

- share and VETT documents Ifno good data

- suspend/stop the process until you get the data you need, otherwise, models simply create lousy guesses 

### An RFP should go out that describes/addresses analysis needed.

- Not always the same contractor should be used

-- "ManufacturerPracticality" needs better definition· RE: Product utility.

- formerly focused on product class

-- Goal = No standard adversely affect any significant product utility

- Issues ofsafety and reliability should be included

-- "Changes to the consumer should be invisible" RE: Uncertainty

- it gets lost 

### in quantitative analysis

-- The uncertainty is not described or quantified throughoutnor is confidence level considered

- Two dimensions need to be considered: 1. Can manufacturers do it? 2. Can manufacturers sell it?



### PRODUCT - CONTRACTORS ISSUES How do we get the right individuals involved in evaluating/informing a potential contractor selected by a RFP? PROBLEMS: Rigid conflicts ofinterest standards are a problem Nature ofcontract (Fixed price, Deliverable) can be a problem First document we see is Technical Support Document

- From the manufacturer's perspective, the first page is all that mattersSOLUTIONS:

Early peer review 

### Early review by experts to analyze/evaluate inputs before modeling "Excluding contractors'based on conflicts of interest can cause all involved to not know anything about the issues" Three meetings - The assumptions - What - Brainstorm



### WAYS TO IMPROVE CONSUMERS ANALYSIS Regional impacts should be considered - these are minimum standards -- Consumer can buy higher efficiency products -- States can set Building Code Standards Alternative is to provide enough information for consumers to make informed choices 

### -- This issue is minimized if not setting maximum standards - DOE should consistently set more modest standards Equity - standards setting activities should not eliminate product classes Discount rates - not quantitative only -- Can be addressed as a group SOLUTIONS: Early peer review Early review by experts to analyze/evaluate inputs before modeling «Excluding contractors based on conflicts ofinterest can cause all involved to not know anything about the issues" Three meetings

- The assumptions

- What

- Brainstorm
. 

### WAYS TO IMPROVE CONSUMERS ANALYSIS Regional impacts should be considered

- these are minimum standards Consumer can buy higher efficiencyproducts States can set Building Code Standards Alternative is to provide enough information for consumers to make informed choices This issue is minimized ifnot setting maximum standards

- DOE should consistently set more modest standards Equity

- standards setting activities should not eliminate product classes Discount rates
- not quantitative only

-- Can be addressed as a group

### DEALING WITH CUMULATIVE REGULATORY BURDEN

More accurate analysis of data follows from more stringent standards. The more stringent the standard, the more accurate/rigorous the analysis should be. How much cost can be pass-through to consumers? Develop a research agenda which specifies which products will be considered and when. (Staggering products is one way to address Cumulative Burden) -- COMMEND has been misapplied. It is an energy forecast model. It is designed for systems, but has been used for components. The key issue is DOE balancing both the stringency of standards levels and the list of products so that cumulative burden is minimized.


### MODELS What makes them acceptable/useful? They must not be misapplied - ex. Components vs. Systems They must be understandable to outsiders Real data must be used, not assumptions 

### They must use a methodology that is understandable -- 2 problems regarding the effects of standards on costs and products in the marketplace 1. Transparency Black Box problem - requests economic data not manufacturer/product data (There is no such thing as economic data, i.e. prospective data). 

### 2. Units of measure problem Ex: Not cost accounting based makes it difficult for manufacturers to accept If it is a problem, what to do about it? -- Get research on a few products to analyze the cost pass through. This is complicated, but very stringent standards necessitate this level of analysis. 

### DEALING WITH CUMULATIVE REGULATORY BURDEN More accurate analysis ofdata follows from more stringent standards. The more stringent the standard, the more accurate/rigorous the analysis should be. How much cost can be pass-through to consumers? Develop a research agenda which specifies which products will be considered and when. (Staggering products is one way to address Cumulative Burden)

-- COMMEND 

### has been misapplied. It is an energy forecast model. It is designed for systems, but has been used for components. The key issue is DOEbalahcing both the stringency ofstandards levels and the list of products so that cumulative burden is minimized. 

### MODELS. What makes them acceptable/useful? They must not be misapplied

- ex. Components vs. Systems They must be understandable to outsiders Real data must be used, not assumptions They must use a methodology that is understandable

-- 2 problems regarding the effects ofstandards on costs and products in the marketplace 1. TransparencyBlack Box problem

- requests economic data not manufacturer/product data (There is no such thing as economic data, i.e. prospective data). 2. Units ofmeasure problem Ex: Not cost accounting based makes it difficult for manufacturers to accept Ifit is a problem, what to do about it? Get research on a few products to analyze the cost pass through. This is complicated, but very stringent standards necessitate this level ofanalysis.

### WAYS TO IMPROVE MANUFACTURERS ANALYSIS

Much of this comes down to consultation. There is no process to resolve these model differences and results. Create a new step in the process. Previously, discussion has not led to path toward resolution. Foregone investment: Mandated investments cause industry to forego other investments. Meeting Standards can create a large resource requirement. There may be ways to solve this - demand side, other capital sources, etc. 

### Stranded assets - Rulemakings can cause existing plant, equipment and personnel to be changed. Competition impacts vs. elimination of manufacturers -- Company to company advantage -- Competitiveness vis a vis world competition Jobs impact -- Energy efficiency creates lots of jobs -- Savings gets invested elsewhere -- Energy production creates fewer jobs than EE related jobs



### RE: STRANDED INVESTMENT When does it stop being a problem? 

### -- 20 year old investment may be fully depreciated (should not be considered stranded) -- Maybe stranded investment should be added to analysis Timing ofapplication of new standards need to be considered more (ex. CFC) (Coordinate so manufacturers will only re-tool once) Process to date has ignored energy source competition . This may be due to the statute. 

### WAYS TO IMPROVE MANUFACTURERS ANALYSIS Much ofthis comes down to consultation. There is no process to resolve these model differences and results. Create a new step in the process. Previously, discussion has not led to path toward resolution. Foregone investment: Mandated investments cause industry to forego other investments. Meeting Standards cancreate a large resource requirement. There may be ways to solve this

- demand side, other capital sources, etc. Stranded assets
- Rulemakirigs can cause existing plant, equipment and personnel to be changed. Competition impacts vs. elimination ofmanufacturers Companyto company advantage

-- Competitiveness vis a vis world competition Jobs impact

-- Energy 'efficiency creates lots of jobs

-- Savings gets invested elsewhere

-- Energy production creates fewerjobsthan EE relatedjobs 

### RE: 

## STRANDED INVESTMENT When does it stop being a problem?

- 20 year old investment may befully depreciated (should not be considered stranded)

-- Maybe stranded investment should be added to analysis Timing ofapplication ofnew standards need to be conSIdered more (ex. CFC) (Coordinate so manufacturers will only re-tool once) Process to date has ignored energy source competition. This may be due to the statute.

### ONE THING YOU WOULD CHANGE

More open process in input/analysis, done earlier with Peer Review No. data analysis, until have good data Concrete definition of significant energy savings , limit on number of product standards, end point for product standards Appropriate source of data

- e.g. typical product and usage of product energy profiles Focus on manufacturer practicality vs. technology forcing or max. technology Focus on what is commercially practicable in definition standards, not prototypes Early and more frequent Peer Review
. Use negotiation to reach consensus when possible. Rather have that than Garbage In-Garbage Out Different approach to selection of contractors 

### ONE THING YOU WOULD CHANGE More open process in input/analysis, done earlier with Peer Review No data analysis, .until have good data Concrete definition ofsignificant energy savings, limit on number ofproduct standards, end point for product standards Appropriate source ofdata

- e.g. typical product and usage ofproduct energy profiles Focus on manufacturer practicality vs. technology forcing or max.. technology Focus on what is commercially practicable in definition standards, not prototypes Early and more frequent PeerReview. Use negotiation to reach consensus when possible. Rather have that than Garbage In-Garbage Out Different approach to selection ofcontractors

### ONE THING YOU WOULD CHANGE

More open process in input/analysis, done earlier with Peer Review No data analysis, until have good data Concrete definition of significant energy savings, limit on number of product standards, end point for product standards Appropriate source of data - e.g. typical product and usage of product energy profiles Focus on manufacturer practicality vs. technology forcing or max. technology 

### Focus on what is commercially practicable in definition standards, not prototypes Early and more frequent Peer Review. Use negotiation to reach consensus when possible. Rather have that than Garbage In-Garbage Out Different approach to selection of contractors



### ASHRAE 90.1 METHODOLOGY Product of relative production costs versus efficiency improvement curves is an alternative to current methods. 

### ONE THING YOU WOULD CHANGE More open process in input/analysis, done earlier with PeerReview No data analysis, until have good data Concrete definition ofsignificant energy savings, limit on number ofproduct standards, end point for product standards Appropriate source ofdata

- e.g. typical product and usage ofproduct energy profiles Focus on manufacturer practicality vs. technology forcing ormax. technology Focus on what is commerCially practicable in definition standards, not prototypes Early and more frequent Peer Review. Use negotiation to reach consensus when possible. Rather have that than Garbage In-Garbage Out Different approach to selection ofcontractors 

### ASHRAE 90.1 METHODOLOGY
Product ofrelative production costs versus efficiency improvement curves is an alternative to current methods.