12-i 

CHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANALYSIS

TABLE OF CONTENTS

12.1 INTRODUCTION ............................................................................................................ 12-1

12.2 METHODOLOGY ........................................................................................................... 12-1

12.2.1 Phase I: Industry Profile........................................................................................ 12-1

12.2.2 Phase II: Industry Cash-Flow Analysis and Interview Guide ............................... 12-2

12.2.2.1 Industry Cash-Flow Analysis .............................................................. 12-2

12.2.2.2 Interview Guide .................................................................................. 12-2

12.2.3 Phase III: Subgroup Analysis................................................................................ 12-2

12.2.3.1 Manufacturer Interviews ..................................................................... 12-2

12.2.3.2 Revised Industry Cash-Flow Analysis ................................................ 12-3

12.2.3.3 Manufacturer Subgroup Analysis ....................................................... 12-3

12.2.3.4 Competitive Impact Assessment ......................................................... 12-3

12.2.3.5 Manufacturing Capacity Impact ......................................................... 12-3

12.2.3.6 Employment Impact ............................................................................ 12-4

12.2.3.7 Cumulative Regulatory Burden .......................................................... 12-4

12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS RESULTS ...................... 12-4

12.3.1 Industry Overview ................................................................................................ 12-4

12.3.1.1 Industry Cost Structure ....................................................................... 12-4

12.3.1.2 Inventory Levels ................................................................................. 12-5

12.3.2 Interview Topics and Preliminary Findings .......................................................... 12-6

12.3.2.1 Market Shares and Industry Consolidation ......................................... 12-7

12.3.2.2 Production and Product Mix ............................................................... 12-7

12.3.2.3 Cumulative Regulatory Burden .......................................................... 12-8

12.3.3 Overall Key Issues ................................................................................................ 12-9

12.3.3.1 Certification, Compliance, and Enforcement ...................................... 12-9

12.3.3.2 Testing Burden .................................................................................. 12-10

12.3.3.3 Customer Impact ............................................................................... 12-10

12.3.3.4 Refrigerants ....................................................................................... 12-10

12.3.3.5 Conflicts with Other Certifications ................................................... 12-11

12.3.3.6 Impact on Small Manufacturers ........................................................ 12-11

LIST OF TABLES

Table 12.3.1 Employment and Earnings for the Air-Conditioning and Warm Air Heating 

Equipment and Commercial and Industrial Refrigeration Equipment 

Manufacturing Industry ..................................................................................... 12-5

Table 12.3.2 Air-Conditioning and Warm Air Heating Equipment and Commercial and 

Industrial Refrigeration Equipment Manufacturing Industry Material and Payroll 

Costs ................................................................................................................... 12-5

Table 12.3.3 End-of-Year Inventory for the Air-Conditioning and Warm Air Heating Equipment 

and Commercial and Industrial Refrigeration Equipment Manufacturing Industry

............................................................................................................................ 12-6
12-ii

Table 12.3.4 Air-Conditioning and Warm Air Heating Equipment and Commercial and 

Industrial Refrigeration Equipment Manufacturing Industry Full Production 

Capacity Utilization Rates ................................................................................. 12-6
12-1 

CHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANALYSIS

12.1 INTRODUCTION

The purpose of the manufacturer impact analysis (MIA) is to identify and quantify the 

likely impacts of energy conservation standards on manufacturers. In the notice of proposed 

rulemaking (NOPR) stage of the analysis, the U.S. Department of Energy (DOE) considers a 

wide range of quantitative and qualitative industry impacts that might occur due to an energy 

conservation standard. For example, a particular standard level could require changes in 

manufacturing practices, equipment, raw materials, etc. DOE fully analyzes these impacts during 

the NOPR stage. 

DOE announced changes to the preliminary analysis MIA format through a report issued 

to Congress on January 31, 2006 (as required by section 141 of the Energy Policy Act of 2005 

(EPACT 2005), titled Energy Conservation Standards Activities.

1 As a result, DOE collects, 

evaluates, and reports preliminary MIA information in the preliminary analysis (as opposed to 

waiting for the NOPR stage). Such preliminary information includes market data, market shares, 

industry consolidation, product mix, key issues, conversion costs, foreign competition, and 

cumulative regulatory burden information, if available. DOE solicits this information during the 

preliminary manufacturer interviews and reports the results in this chapter. 

To the extent appropriate for this rulemaking, DOE applies the methodology described 

below to evaluate energy conservation standards for commercial refrigeration equipment. 

12.2 METHODOLOGY

DOE conducts the MIA in three phases. In Phase I, DOE creates an industry profile to 

characterize the industry and conducts a preliminary MIA to identify important issues that 

require consideration. Section 12.3.1 of this chapter presents initial findings of the Phase I 

analysis. In Phase II, DOE prepares an industry cash flow model and a detailed interview 

questionnaire to guide subsequent discussions with manufacturers. In Phase III, DOE interviews 

manufacturers and assesses the impacts of energy conservation standards both quantitatively and 

qualitatively. DOE assesses industry and subgroup cash flow impacts and industry net present 

value using the Government Regulatory Impact Model (GRIM). For additional details on the 

GRIM, see section 12.2.2.1. DOE also assesses impacts on competition, manufacturing capacity, 

employment, and regulatory burden based on manufacturer interviews and discussions. The 

NOPR and technical support document present results of the Phase II and III analyses. 

12.2.1 Phase I: Industry Profile

In Phase I of the MIA, DOE collects pertinent qualitative and quantitative financial and 

market information. This includes data on wages, employment, industry costs, and capacity 

utilization rates for manufacturers of commercial refrigeration equipment. Sources of 

information include reports published by industry groups, trade journals, the U.S. Census 

Bureau, and Securities Exchange Commission (SEC) 10-K filings. In addition, DOE relies on 

information from its market and technology assessment, engineering analysis, life-cycle cost 
12-2 

analysis, and consumer price analysis to characterize the commercial refrigeration equipment

manufacturing industry. 

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

In Phase II, DOE performs a preliminary industry cash-flow analysis and prepares written 

guidelines for interviewing manufacturers. 

12.2.2.1 Industry Cash-Flow Analysis 

The GRIM is a financial model that analyzes the impacts of energy conservation 

standards. Energy conservation standards may affect investment, production costs, and revenue 

through changes in prices and, possibly, shipments. The GRIM uses several factors to determine 

a series of annual cash flows for the year that energy conservation standards become effective 

and for several years after implementation. These factors include annual expected revenues, costs 

of sales, selling and general administration costs, taxes, and capital expenditures. Inputs to the 

GRIM include financial information, manufacturing costs, shipment forecasts, and price 

forecasts developed in other analyses. The financial information is developed from publicly 

available data and confidentially submitted manufacturer information. DOE compares the results 

of the GRIM against baseline projections in which no energy conservation standards are in place. 

The financial impact of energy conservation standards is the difference between the two sets of 

discounted annual cash flows. 

12.2.2.2 Interview Guide

DOE conducts interviews with manufacturers to gather information on the effects of 

energy conservation standards on revenues, costs, direct employment, capital assets, and industry 

competitiveness. Before the interviews, which occur in Phase III, DOE distributes an interview 

guide to help identify the impacts of energy conservation standards on individual manufacturers 

or subgroups of manufacturers. Interview guide topics include production costs, shipment 

projections, market share, product mix, conversion costs, markups and profitability, competition, 

manufacturing capacity, cumulative regulatory burden, and other relevant topics. 

12.2.3 Phase III: Subgroup Analysis

Phase III activities take place after publication of the preliminary analysis. These 

activities include manufacturer interviews; revision of the industry cash-flow analysis; a 

manufacturer subgroup analysis; and an assessment of the impacts on industry competition, 

manufacturing capacity, direct employment, cumulative regulatory burden, as well as other 

qualitative impacts. 

12.2.3.1 Manufacturer Interviews

DOE conducts detailed interviews with manufacturers to gain insight into the potential 

impacts of energy conservation standards on sales, direct employment, capital assets, and 

industry competitiveness. The interview process is critical to the MIA because it provides an 

opportunity for manufacturers to privately express their views on important issues. Interviews 

are scheduled well in advance to provide every opportunity for manufacturers to be available for 
12-3 

comment. Although a written response to the questionnaire is acceptable, DOE prefers 

interactive interviews, which help clarify responses and provide the opportunity to identify 

additional issues not specifically addressed in the interview questionnaire. A non-disclosure 

agreement allows confidential or sensitive information to be considered in DOE’s decisionmaking process. Confidential information will not be made available in the public record. At 

most, sensitive or confidential information may be aggregated and presented in industry-wide 

representations. 

DOE supplements the information gathered in Phase I and the cash-flow analysis 

performed in Phase II with information gathered during manufacturer interviews. 

12.2.3.2 Revised Industry Cash-Flow Analysis 

As discussed, DOE requests information about profitability impacts, necessary plant 

changes, and other manufacturing impacts during the interview process. DOE revises its industry 

cash flow model based on the feedback it receives in comments and during interviews.

12.2.3.3 Manufacturer Subgroup Analysis

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

adequately assess differential impacts among manufacturer subgroups. Smaller manufacturers, 

niche players, and manufacturers exhibiting a cost structure that differs largely from the industry 

average could be more negatively affected. Ideally, DOE would consider the impact on every 

firm individually; however, it typically uses the results of the industry characterization to group 

manufacturers with similar characteristics. During the interviews, DOE discusses the potential 

subgroups that have been identified for the analysis. DOE asks manufacturers and other 

interested parties to suggest what subgroups or characteristics are most appropriate for the 

analysis.

12.2.3.4 Competitive Impact Assessment

Section 342(6)(B)(i)(V) of the Energy Policy Act of 1992 (EPACT 1992), modifying the 

Energy Policy and Conservation Act (EPCA), directs DOE to consider any lessening of 

competition likely to result from the imposition of standards. EPCA further directs the U.S. 

Attorney General to determine the impacts, if any, of any decrease in competition. DOE attempts 

to gather and report firm-specific financial information and impacts wherever possible. DOE 

bases the competitive impact assessment on manufacturer cost data and other information 

collected from interviews. When assessing competitive impacts, DOE’s interviews generally 

focus on assessing asymmetrical cost increases, the potential increase in business risks from an 

increased proportion of fixed costs, and potential barriers to market entry (e.g., proprietary 

technologies). The competitive analysis will also focus on assessing any differential impacts to 

smaller manufacturers. 

12.2.3.5 Manufacturing Capacity Impact 

One of the significant outcomes of energy conservation standards can be the 

obsolescence of existing manufacturing assets, including tooling and other investments. The 

manufacturer interview guide presents a series of questions to help identify impacts on 
12-4 

manufacturing capacity, specifically capacity utilization and plant location decisions in the 

United States with and without energy conservation standards. The interview guide also 

addresses the ability of manufacturers to upgrade or remodel existing facilities to accommodate 

the new requirements; the nature and value of stranded assets, if any; and estimates for any onetime restructuring or other charges, where applicable. 

12.2.3.6 Employment Impact

The impact of energy conservation standards on employment is an important 

consideration in the rulemaking process. To assess how domestic employment patterns might be 

affected, the interview process explores current employment trends in the commercial 

refrigeration equipment industry and solicits manufacturer views on changes in employment 

patterns that may result from increased standard levels. The employment impacts section of the 

interview guide focuses on current employment levels at production facilities, expected future 

employment levels with and without an energy conservation standard, differences in workforce 

skills, and employee retraining.

12.2.3.7 Cumulative Regulatory Burden

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

conservation standards and other regulatory actions. DOE analyzes and considers the impact on 

manufacturers of multiple, product-specific regulatory actions.

12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS RESULTS

During the preliminary activities phase, DOE conducted a preliminary evaluation of the 

impact of potential energy conservation standards on the commercial refrigeration equipment

industry. 

The primary sources of information for this analysis are the U.S. Census, industry 

reports, and interviews with manufacturers of commercial refrigeration equipment, conducted 

during the summer and fall of 2010. To maintain confidentiality, DOE only reports aggregated 

information here. DOE does not disclose company-specific information, nor does it identify the 

individual manufacturers that disclosed information. 

12.3.1 Industry Overview

The following section summarizes publicly available industry data. 

12.3.1.1 Industry Cost Structure

DOE is unaware of any publicly available industry-wide cost data specific to only 

manufacturers of commercial refrigeration equipment. DOE examined the North American 

Industry Classification System (NAICS) codes for small business sizes and determined that 

commercial refrigeration equipment manufacturing is classified as a subset under NAICS code 

333415, Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial 

Refrigeration Equipment Manufacturing.

2 Therefore, DOE presents the data below as a broader 
12-5 

industry proxy for the commercial refrigeration industry, which, in combination with information 

gained in interviews, inform DOE’s analysis of the industry cost structure. 

DOE obtained the below data from U.S. Census Bureau, Annual Survey of 

Manufacturers, Statistics for Industry Groups and Industries3

 from 2002−2008. 

Table 12.3.1 presents the industry employment levels and earnings from 2002 to 2008. 

The statistics illustrate approximately a 12-percent decrease in production workers and an 11-

percent decrease in overall number of employees from 2002 to 2008. 

Table 12.3.1 Employment and Earnings for the Air-Conditioning and Warm Air Heating 

Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing 

Industry 

Year Production Workers All Employees Annual Payroll

$000s

2002 80,400 108,252 3,815,129

2003 77,471 104,646 3,775,799

2004 73,559 99,669 3,707,969

2005 76,011 102,354 3,942,808

2006 74,909 98,097 4,019,813

2007 74,728 101,485 4,034,043

2008 70,772 96,502 4,010,045

Source: U.S. Census Bureau. Annual Survey of Manufacturers, 2002-2008. 

Table 12.3.2 presents the costs of materials and industry payroll as a percentage of 

shipment value from 2002 to 2008. The cost of materials as a percentage of shipment value has 

steadily increased from 2002 to 2008. The cost of payroll for production workers and the cost of 

total payroll have declined by approximately 17 percent and 15 percent, respectively. 

Table 12.3.2 Air-Conditioning and Warm Air Heating Equipment and Commercial and 

Industrial Refrigeration Equipment Manufacturing Industry Material and Payroll Costs 

Year Cost of Materials

% of shipment value

Cost of Payroll

for Production Workers

% of shipment value

Cost of Total Payroll

% of shipment value

2002 49.36 9.83 15.85

2003 50.59 9.53 15.39

2004 51.81 8.99 14.57

2005 53.78 8.52 13.78

2006 53.17 8.87 13.80

2007 55.59 8.17 13.43

2008 54.83 8.13 13.50

Source: U.S. Census Bureau. Annual Survey of Manufacturers, 2002-2008.

12.3.1.2 Inventory Levels

Table 12.3.3 shows the year-end inventory for the Air-Conditioning and Warm Air 

Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing 

industry obtained from the U.S. Census Bureau, Annual Survey of Manufacturers, Statistics for 

Industry Groups and Industries from 2002 to 2008. Year-end inventory refers to the amount of 
12-6 

inventory a manufacturer has on hand at year end, which includes work-in-progress and finished 

goods. Again, DOE presents these data as a broader measure of the commercial refrigeration 

equipment industry. The industry’s end-of-year inventory from 2002 to 2008 increased when 

expressed both in dollars and as a percentage of shipment value. 

Table 12.3.3 End-of-Year Inventory for the Air-Conditioning and Warm Air Heating 

Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing 

Industry 

Year End-of-Year Inventory

$000s

End-of-Year Inventory

% of shipment value

2002 2,302,012 9.57

2003 2,376,827 9.69

2004 2,473,932 9.72

2005 2,687,441 9.39

2006 2,887,139 9.91

2007 3,036,616 10.11

2008 2,888,034 9.72

Source: U.S. Census Bureau. Annual Survey of Manufacturers, 2002-2008. 

DOE obtained full production capacity utilization rates from the U.S. Census Bureau, 

Current Industrial Reports, Survey of Plant Capacity from 2002 to 2009.4

 Table 12.3.4 presents 

production capacity utilization rates for NAICS code 3334. Full production capacity is defined as 

the maximum level of production an establishment could attain under normal operating 

conditions. In the Survey of Plant Capacity report, the full production utilization rate is a ratio of 

the actual level of operations to the full production level. 

Table 12.3.4 Air-Conditioning and Warm Air Heating Equipment and Commercial and 

Industrial Refrigeration Equipment Manufacturing Industry Full Production Capacity 

Utilization Rates

Year Air Conditioning and Warm Air Heating Equipment and Commercial and 

Industrial Refrigeration Equipment Manufacturing 

%

2002 60

2003 62

2004 60

2005 66

2006 63

2007 58

2008 64

2009 57

Source: U.S. Census Bureau. 2007 Current Industrial Reports: Table 1a - Full Production 

Capacity Utilization Rates by Industry: Fourth Quarters 2002 through 2009.

12.3.2 Interview Topics and Preliminary Findings

The following section summarizes information gathered during interviews held during 

the summer and fall of 2010 for the preliminary MIA.
12-7 

12.3.2.1 Market Shares and Industry Consolidation

Energy conservation standards can alter the competitive dynamics of the marketplace, 

prompting companies to enter the market, exit the market, or merge with other companies. The 

preliminary MIA interview questions asked manufacturers to share their perspectives on industry 

consolidation both in the presence of current energy conservation standards, as well as in the 

case of future, potentially more stringent standard levels. The interview questions focused on 

gathering information that assessed:

• current and anticipated market share in the event of standards;

• disproportionate cost increases to some manufacturers; 

• likelihood of industry consolidation; 

• increased proportion of fixed costs potentially increasing business risks; and

• potential barriers to market entry (e.g., proprietary technologies). 

The need to assess anti-competitive effects of potential amended energy conservation 

standards derives from the need to protect consumer interests. During the interviews, DOE also 

solicited information to determine whether amended energy conservation standards could result 

in disproportionate economic or performance penalties for particular consumer or user 

subgroups. Manufacturers were also asked if energy conservation standards could result in 

products that would be more or less desirable to consumers due to changes in product 

functionality, utility, or other features. 

Market Shares. DOE inquired regarding current market shares of manufacturers in the 

commercial refrigeration equipment industry and about how those shares might change after 

potential amendment of energy conservation standards. Most manufacturers interviewed stated 

that changes to the market shares of manufacturers and the distribution of sales between different 

companies would likely remain fairly static even in the presence of amended standards. One area 

of concern was that, if DOE is not strict in its enforcement of standards, then companies 

knowingly producing noncompliant units could see increases in market share due to their costs 

being lower than those companies that comply with DOE standards. Some companies also stated 

that manufacturers that produce large numbers of doored cases might stand to gain from more 

stringent standards. 

Industry Consolidation. The commercial refrigeration equipment industry is relatively 

stable, with few entrants and exits. The industry has seen some consolidation in recent years, 

such as the exit of Tyler Refrigeration from the market and the sale of its assets to Hill-Phoenix. 

However, manufacturers interviewed as part of the preliminary MIA indicated that they did not 

feel that amended DOE energy conservation standards would be likely to lead to further 

consolidation within the commercial refrigeration equipment industry. 

12.3.2.2 Production and Product Mix

DOE requested manufacturers’ feedback on the possible impact of energy conservation 

standards on profitability. For instance, the capital and product conversion outlays may be 

required to upgrade or redesign products before they have reached the end of their useful life, 

which could result in reduced cash flow and stranded investments. Higher energy conservation 
12-8 

standards could also result in higher per-unit costs that could cause consumers to shift to less 

expensive products, if available.

Product Mix. Currently, a significant percentage of the overall market’s production is 

customized to the customer’s needs. Most manufacturers produce a set of standard models, but 

allow for customization of features such as doors, lighting, trim types, and other features. Some 

manufacturers expressed a willingness to design new equipment to customer specifications, even 

for orders of only a few units. Others stated that their product lineups comprised several hundred 

distinct models at any given time. Nearly all the manufacturers interviewed conveyed concern 

that more stringent standards may affect their ability to customize their products. Some of these 

manufacturers further asserted that DOE’s current “basic model” definition was not broad 

enough to subsume several of their different units into a single grouping, as the only changes that 

the current definition allows for within a given basic model are essentially cosmetic. As a result, 

manufacturers stated that they believe that many smaller-production-volume or custom units will 

be discontinued or obsolete due to the cost of compliance, and that production runs of only a few 

units may no longer be cost-effective. 

Product Utility. Some manufacturers expressed concerns that energy conservation 

standards might require changes in product functionality, utility, and other features that would 

make products less desirable to consumers. For instance, one manufacturer mentioned that in an 

effort to reduce the anti-sweat power of glass doors, manufacturers could end up selling units 

with doors that perform across a much narrower range of ambient conditions, and which could 

produce condensation if store ambients were to deviate from these design conditions. Another 

manufacturer stated that some models of open cases might go away in light of more stringent 

standards, as it would be disproportionally difficult to increase the efficiency of those units as 

compared to doored cases. A reduction in the offerings of open cases would reduce the 

availability of the utility features associated with those equipment types. Manufacturers also 

expressed concern that the servicing and installation of commercial refrigeration equipment 

would be more expensive with the increasingly complex systems which manufacturers may 

develop to meet more stringent standards. This would require additional training and certification 

of field installers and technicians to install and service the equipment. Manufacturers stated that 

new, unproven technologies required by any new standards could challenge product reliability.

12.3.2.3 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 describes other significant equipment-specific regulations that could affect 

commercial refrigeration equipment manufacturers or their parent companies.

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

regulations relevant to commercial refrigeration equipment, including: 

• Refrigerant switch

• Testing costs
12-9 

• Other regulations and certification programs 

Refrigerants. Due to the phase-out of chlorofluorocarbons (CFCs) and 

hydrochlorofluorocarbons (HCFCs), the commercial refrigeration equipment industry had to 

transition to non-ozone-depleting refrigerants. As a result, the industry has transitioned to 

hydrofluorocarbon (HFC)-based refrigerants in its commercial refrigeration equipment. 

However, manufacturers expressed concern regarding the use of even HFC refrigerants, as they 

suspect that regulations reducing the availability of HFC refrigerants may come into effect in the 

future. Additionally, the need for larger refrigerant charges to meet stricter energy consumption 

standards may conflict with manufacturers’ desires to meet other environmental certifications. 

Testing Costs. Several manufacturers expressed concern with the potential costs of 

meeting testing requirements or performing outside testing. Manufacturers stated that this was 

largely due to the highly customized nature of their product line offerings, where in many cases 

they may not even produce a certain model for months, but would be required to build it 

specifically for certification purposes. 

Other Regulations and Certification Programs. Several manufacturers were concerned 

by the fact that changes in the DOE energy efficiency standards, and the resulting re-design of 

their equipment, would require them to re-certify all of their equipment with other organizations 

aside from DOE. This would include re-testing and certification by Underwriters Laboratories 

(UL) and NSF, which these manufacturers asserted to be a more complex process than the 

requirements for meeting the DOE energy conservations standards. 

12.3.3 Overall Key Issues

Perhaps the most important aspect of the preliminary MIA is the opportunity it creates for 

DOE to identify key manufacturer issues early in the development of energy conservation 

standards. During preliminary interviews, manufacturers identified several major issues, which

are detailed in the following sections. 

12.3.3.1 Certification, Compliance, and Enforcement

During the preliminary manufacturer impact analysis interview process, manufacturers 

consistently brought up the issues of certification, compliance, and enforcement. These parties 

expressed a wide range of concerns regarding these topics. Representatives of one manufacturer 

stated that they had heard explicit intent from other manufacturers to remain noncompliant with 

DOE standards in the future due to the lack of enforcement mechanisms for those standards. 

Other manufacturers expressed a desire to conform to current and future energy conservation 

standards, but were confused by the lack of a standardized system for certification and 

compliance. Overall, manufacturers were concerned about potentially losing market share to 

companies offering noncompliant equipment at lower costs. By and large, manufacturers seemed 

less concerned with the direct impacts of more stringent standards than they were with ensuring 

that a system for certification, compliance, and enforcement was put into place that would 

provide an equal footing for all of the entities in the market. 
12-10

12.3.3.2 Testing Burden

Burden of testing was another issue of great importance to the manufacturers 

interviewed. Most of the manufacturers interviewed during the preliminary MIA period stated 

that the cost of testing would be the source of the greatest impact of standards on their business. 

Most of these manufacturers perform their testing in-house, and several stated that they have 

already made large investments in capital and labor in preparation for compliance with the 2012 

DOE standards and for compliance with the EPACT 2005 standard. Manufacturers also stated 

that, including the time to set up a unit for testing, achieve stable test conditions, perform the 

test, verify the data, and tear down the test setup, performing a test of a single unit can take up to 

a few weeks. 

Moreover, the parties that offer large products lines or build custom units to customer 

specifications were concerned about being required to certify every unit in their catalog as being 

compliant with the DOE standards. Some of these models, they continued, may only be produced 

once in a long while per a customer request, and thus would not be kept in stock at the 

production facility. These manufacturers were concerned that they may have to build specimens 

of these models for the sole purpose of compliance testing, which would extend the burden 

beyond the cost of simply performing the test, to include the cost of producing units for testing 

purposes as well. 

12.3.3.3 Customer Impact

Tied to the aforementioned concern about the burden of testing were issues regarding the 

potential impacts on customers in the form of more limited product line offerings. Some 

manufacturers stated that they offered several hundred models at any given time, while others 

responded that they would be willing to design and build anything a customer desired, even if the 

production run were of just a few units. However, if manufacturers are required to test all of 

these units for DOE energy conservation standard compliance, as well as for other certifications 

such as UL and NSF, manufacturers expressed that it would likely not be cost-effective to 

continue production of those extremely low-production-volume models. This could result in a 

consolidation of models and the trimming of product lines, which could in turn limit the variety 

of product offerings available to customers and end users. 

12.3.3.4 Refrigerants

The subject of refrigerant regulation and the availability of refrigerants was another issue 

of concern to the manufacturers interviewed. Manufacturers in this industry expressed general 

concern with the potential of future refrigerant regulations. With CFCs and HCFCs having 

already been phased out, the variety of available refrigerants for use in commercial refrigeration 

equipment has decreased in recent years. This amplifies the effect of refrigerant cost fluctuations 

on manufacturers. According to manufacturers, this is further exacerbated by the fact that more 

stringent energy conservation standards generally result in units being designed with larger coils, 

and thus needing larger refrigerant charges. As a result, manufacturers stated that the need to 

improve efficiency often conflicts with other regulations on the availability of refrigerants, and 

that efforts to develop units utilizing other refrigerants such as carbon dioxide or propane are 

hindered by additional outside regulations. 
12-11

12.3.3.5 Conflicts with Other Certifications

In addition to DOE requirements for energy usage, equipment used for food service and 

sales is also subject to certification through other mandatory or voluntary programs concerning 

food safety and energy use. These programs include UL certification, NSF certification, U.S. 

Environmental Protection Agency ENERGY STAR certification, and various certifications 

required for sale in some foreign countries. Therefore, re-design of a piece of equipment to meet 

DOE energy efficiency standards can also result in that piece of equipment having to be re-tested 

and re-certified for the other programs, multiplying the burden. Manufacturers also noted some 

direct potential conflicts with these other programs. One mentioned that equipment that had to 

meet a more stringent DOE energy use requirement would have difficulty attaining certification 

by NSF for Type II conditions, in which the unit is tested at more extreme ambient temperature 

and humidity conditions than are presented by the DOE test. Another manufacturer noted that 

some of their customers wish to use the equipment in buildings that have been certified by the 

U.S. Green Building Council to achieve a Leadership in Energy and Environmental Design 

(LEED) rating. However, the use of large amounts of high global warming potential HFC 

refrigerants in high-efficiency units works against their efforts to attain these ratings. 

12.3.3.6 Impact on Small Manufacturers

Due to the highly customized nature of this industry, smaller companies may not 

necessarily offer fewer models than the larger firms in the market. However, a requirement on 

compliance with each basic model with DOE standards would mean that the testing requirement 

and associated burden would be equally large on a small manufacturer as it would be on a 

manufacturer with high market share. Therefore, smaller manufacturers were concerned that 

enforcement of certification and compliance testing requirements could impact their companies 

disproportionately. 
12-12

References

1 U.S. Department of Energy. Energy Conservation Standards Activities. 2006. (Last accessed 

March 15, 2011.) 

<http://www1.eere.energy.gov/buildings/appliance_standards/schedule_setting.html> 

2 North American Industry Classification System (NAICS) code 333415. “Air-Conditioning 

and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment 

Manufacturing.” 2007. U.S. Census Bureau. Washington, D.C. < www.census.gov/cgibin/sssd/naics/naicsrch?code=333415&search=2007 NAICS Search> 

3 U.S. Census Bureau. Annual Survey of Manufacturers, Statistics for Industry Groups and 

Industries. (Last accessed November 2, 2010.) 

<www.census.gov/manufacturing/asm/index.html> 

4 U.S. Census Bureau. Current Industrial Reports, Survey of Plant Capacity. 2002 to 2009. 

Washington, D.C.