[6450-01-P] DEPARTMENT OF ENERGY 10 CFR Part 430 [Docket Number EE–2008–BT–STD–0012] RIN: 1904–AB79

Energy Conservation Program: Energy Cons ervation Standards for Residential Refrigerators, Refrigerator-Freezers, and Freezers

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy.

ACTION: Final rule.

SUMMARY: The Energy Policy and Conservation Act (EPCA) prescribes energy conservation standards for various consum er products and commercial and industrial equipment, including refrigerators, refrigerat or-freezers, and freezers. EPCA also requires the U.S. Department of Energy (DOE) to dete rmine if more stringent, amended standards for these products are technologically feasible and economica lly justified, and would save a significant amount of energy. In this final rule, DOE is adopting more stringent energy conservation standards for refrigerators, re frigerator-freezers, and freezers. It has determined that the amended energy conser vation standards for these products would result in the significant cons ervation of energy and are t echnologically feasible and economically justified.

1DATES: The effective date of this rule is [INSERT DATE 60 DAYS AFTER PUBLICATION DATE] . Compliance with the amended standards established for refrigerators, refrigerator-freezers, and freezer s in today’s final rule is [INSERT DATE 3 YEARS AFTER PUBLICATION DATE].

ADDRESSES: For access to the dock et to read background documents, the technical support document, transcripts of the public m eetings in this proceeding, or comments received, visit the U.S. Department of Energy, Resource Room of the Building Technologies Program, 950 L’Enfant Pl aza, SW., 6th Floor, Washington, DC 20024, (202) 586-2945, between 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. Please call Ms. Brenda Edwards at the above telephone number for additional information regarding visiting the Resource Ro om. You may also obtain copies of certain previous rulemaking documents in this proc eeding (i.e., framework document, notice of public meeting and announcement of a prelim inary technical support document (TSD), notice of proposed rulemaking), draft analyses, public meeting material s, and related test procedure documents from the Office of Energy Efficiency and Renewable Energy’s website at: http://www1.eere.energy.gov/buildings/appliance_standards/resi dential/refrigerators_free zers.html.

FOR FURTHER INFORMATION CONTACT:

2Lucas Adin, U.S. Department of En ergy, Office of Energy Efficiency and Renewable Energy, Building Technologies Pr ogram, EE-2J, 1000 Independence Avenue, SW., Washington, DC, 20585-0121, 202-287-1317, e-mail: Lucas.Adin @ee.doe.gov or Michael Kido, U.S. Department of Ener gy, Office of the General Counsel, GC-71, 1000 Independence Avenue, SW., Washin gton, DC, 20585-0121, (202) 586-9507, e-mail: Michael.Kido@hq.doe.gov

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SUPPLEMENTARY INFORMATION: Table of Contents
I. Summary of the Final Rule and Its Benefits II. Introduction A. Authority B. Background 1. Current Standards 2. History of Standards Rulemaking for Refr igerators, Refrigerator-Freezers, and Freezers III. General Discussion A. Test Procedures 1. Test Procedure Rulemaking Schedule 2. Adjustment of the Energy Standards for the New Test Procedure

a. Products with Variable Anti-Sweat Heater Control b. Products with Multiple Defrost Cycle Types c. Amendments to Capture Precooling Energy Use d. Test Procedures for Special Compartments 3. Standby and Off Mode Energy Use B. Technological Feasibility 1. General 2. Maximum Technologically Feasible Levels C. Energy Savings 1. Determination of Savings 2. Significance of Savings D. Economic Justification 1. Specific Criteria

a. Economic Impact on Manufacturers and Consumers b. Life-Cycle Costs c. Energy Savings d. Lessening of Utility or Performance of Products

3e. Impact of Any Le ssening of Competition f. Need for National Energy Conservation g. Other Factors 2. Rebuttable Presumption IV. Methodology and Discussion A. Market and Technology Assessment 1. Exclusion of Wine Coolers from This Rulemaking 2. Product Classes

a. General Discussion Regarding Added Product Classes b. Possible Combination of Product Cl ass 2 with 1, and Class 12 with 11 c. All-Refrigerators and Basic Refrigerators d. Built-In Refrigeration Products e. Modification of the De finition for Compact Products f. Icemaking B. Screening Analysis 1. Discussion of Comments

a. Compressors b. Alternative Refrigerants c. Alternative Foam-Blowing Agents d. Vacuum-Insulated Panels 2. Technologies Considered C. Engineering Analysis 1. Discussion of Comments 2. Adjustment of the Baseline Energy Use Equations D. Markups to Determine Product Cost E. Energy Use Analysis F. Life-Cycle Cost and Payback Period Analyses 1. Product Cost 2. Installation Cost 3. Annual Energy Consumption 4. Energy Prices 5. Energy Price Projections 6. Maintenance and Repair Costs 7. Product Lifetime 8. Discount Rates 9. Compliance Date of Amended Standards 10. Base Case Efficiency Distribution 11. Inputs to Payback Period Analysis 12. Rebuttable-Presumption Payback Period G. National Impact Analysis–National Energy Savings and Net Present Value Analysis 1. Shipments 2. Forecasted Efficiency in the Base Case and Standards Cases 3. Installed Cost per Unit 4. Site-to-Source Energy Conversion 5. Discount Rates

46. Benefits from Effects of Standards on Energy Prices H. Consumer Subgroup Analysis I. Manufacturer Impact Analysis 1. Comments from Interested Parties 2. GRIM Key Inputs

a. Product and Capital Conversion Costs b. Markup Scenarios 3. Manufacturer Interviews J. Employment Impact Analysis K. Utility Impact Analysis L. Environmental Assessment M. Monetizing Carbon Dioxide and Other Emissions Impacts 1. Social Cost of Carbon

a. Monetizing Carbon Dioxide Emissions b. Social Cost of Carbon Values Used in Past Regulatory Analyses c. Current Approach and Key Assumptions 2. Valuation of Other Emissions Reductions V. Discussion of Other Comments A. Demand Response B. Energy Standard Round-off C. Trial Standard Levels and Proposed Standards 1. Efficiency Levels 2. Maximum Energy Use Equations VI. Analytical Results A. Trial Standard Levels B. Economic Justification and Energy Savings 1. Economic Impacts on Individual Consumers

a. Life-Cycle Cost and Payback Period b. Consumer Subgroup Analysis c. Rebuttable Presumption Payback 2. Economic Impacts on Manufacturers

a. Cash-Flow Analysis Results b. Impacts on Employment c. Impacts on Manufacturing Capacity d. Impacts on Sub-Group(s) of Manufacturers e. Cumulative Regulatory Burden 3. National Impact Analysis

a. Significance of Energy Savings b. Net Present Value of Consumer Costs and Benefits c. Indirect Impacts on Employment 4. Impact on Utility or Performance of Products 5. Impact of Any Lesse ning of Competition 6. Need of the Nation to Conserve Energy 7. Other Factors C. Conclusion 1. Standard-Size Refrigerator-Freezers

52. Standard-Size Freezers 3. Compact Refrigeration Products 4. Built-In Refrigeration Products 5. Summary of Benefits and Costs (Annualized) of Amended Standards VII. Procedural Issues and Regulatory Review A. Review Under Executive Order 12866 and 13563 B. Review Under the Regulatory Flexibility Act C. Review Under the Paperwork Reduction Act D. Review Under the National Environmental Policy Act of 1969 E. Review Under Executive Order 13132 F. Review Under Executive Order 12988 G. Review Under the Unfunded Mandates Reform Act of 1995 H. Review Under the Treasury and Gene ral Government Appropriations Act, 1999 I. Review Under Executive Order 12630 J. Review Under the Treasury and Gene ral Government Appropriations Act, 2001 K. Review Under Executive Order 13211 L. Review Under the Information Quality Bulletin for Peer Review M. Congressional Notification VIII. Approval of the Office of the Secretary

I. Summary of the Final Rule and Its Benefits The Energy Policy and Conservation Act (42 U.S.C. 6291, et seq .; EPCA or the Act), as amended, provides that any new or amended energy conservation standard DOE prescribes for certain consumer products, such as residential refriger ators, refrigeratorfreezers, and freezers (collectively referred to in this document as “refrigeration products”), shall be designed to “achieve the maximum improvement in energy efficiency . . . which the Secretary determines is technologically feasible and economically justified.” (42 U.S.C. 6295(o)(2)(A)) The ne w or amended standard must result in the significant conservation of energy. (42 U.S.C. 6295(o)(3)(B)) In a ccordance with these and other statutory provisions discussed in this notice, DOE is adopting amended energy conservation standards for refr igeration products. The standa rds in today’s final rule,

6which are the maximum allowable energy use expressed as a function of the calculated adjusted volume of a given product, are shown in Table I.1. These standards apply to all products listed in Table I.1 a nd manufactured in, or importe d into, the United States starting in 2014.

Table I.1. Refrigeration Product Energy Co nservation Standards (Effective Starting 2014) Product Class Equations for Maximum Energy Use (kWh/yr) based on AV (ft 3 ) based on av (L)1. Refrigerator-freezers and refrigerators other than allrefrigerators with manual defrost. 7.99AV + 225.0 0.282av + 225.0 1A. All-refrigerators—manual defrost. 6.79AV + 193.6 0.240av + 193.6 2. Refrigerator-freezers—partial automatic defrost 7.99AV + 225.0 0.282av + 225.0 3. Refrigerator-freezers—automati c defrost with top-mounted freezer without an au tomatic icemaker. 8.07AV + 233.7 0.285av + 233.7 3-BI. Built-in refrigerator-free zer—automatic defrost with top-mounted freezer without an automatic icemaker. 9.15AV + 264.9 0.323av + 264.9 3I. Refrigerator-freezers—aut omatic defrost with topmounted freezer with an automatic icemaker without throughthe-door ice service. 8.07AV + 317.7 0.285av + 317.7 3I-BI. Built-in refrigerator-freezers—automatic defrost with top-mounted freezer with an automatic icemaker without through-the-door ice service. 9.15AV + 348.9 0.323av + 348.9 3A. All-refrigerators—automatic defrost. 7.07AV + 201.6 0.250av + 201.6 3A-BI. Built-in All-refrigera tors—automatic defrost. 8.02AV + 228.5 0.283av + 228.54. Refrigerator-freezers—automatic defrost with sidemounted freezer without an automatic icemaker. 8.51AV + 297.8 0.301av + 297.8 4-BI. Built-In Refrigerator-fr eezers—automatic defrost with side-mounted freezer without an automatic icemaker. 10.22AV + 357.4 0.361av + 357.4 4I. Refrigerator-freezers—aut omatic defrost with sidemounted freezer with an automatic icemaker without throughthe-door ice service. 8.51AV + 381.8 0.301av + 381.8 4I-BI. Built-In Refrigerator-freezers—automatic defrost with side-mounted freezer with an automatic icemaker without through-the-door ice service. 10.22AV + 441.4 0.361av + 441.4 5. Refrigerator-freezers—auto matic defrost with bottommounted freezer without an automatic icemaker. 8.85AV + 317.0 0.312av + 317.0 5-BI. Built-In Refrigerator-fr eezers—automatic defrost with bottom-mounted freezer without an automatic icemaker. 9.40AV + 336.9 0.332av + 336.9 5I. Refrigerator-freezers—aut omatic defrost with bottommounted freezer with an automatic icemaker without throughthe-door ice service. 8.85AV + 401.0 0.312av + 401.0 5I-BI. Built-In Refrigerator-freezers—automatic defrost with bottom-mounted freezer with an automatic icemaker without through-the-door ice service. 9.40AV + 420.9 0.332av + 420.9

75A. Refrigerator-freezer—autom atic defrost with bottommounted freezer with thr ough-the-door ice service. 9.25AV + 475.4 0.327av + 475.4 5A-BI. Built-in refrigerator-f reezer—automatic defrost with bottom-mounted freezer with thro ugh-the-door ice service. 9.83AV + 499.9 0.347av + 499.9 6. Refrigerator-freezers—automati c defrost with top-mounted freezer with through-th e-door ice service. 8.40AV + 385.4 0.297av + 385.47. Refrigerator-freezers—automatic defrost with sidemounted freezer with through-the-door ice service. 8.54AV + 432.8 0.302av + 432.8 7-BI. Built-In Refrigerator-fr eezers—automatic defrost with side-mounted freezer with thro ugh-the-door ice service. 10.25AV + 502.6 0.362av + 502.6 8. Upright freezers with manual defrost. 5.57AV + 193.7 0.197av + 193.7 9. Upright freezers with automatic defrost without an automatic icemaker. 8.62AV + 228.3 0.305av + 228.3 9I. Upright freezers with automa tic defrost with an automatic icemaker. 8.62AV + 312.3 0.305av + 312.3 9-BI. Built-In Upright freezers w ith automatic defrost without an automatic icemaker. 9.86AV + 260.9 0.348av + 260.9 9I-BI. Built-in upright freezers w ith automatic defrost with an automatic icemaker. 9.86AV + 344.9 0.348av + 344.9 10. Chest freezers and all other freezers except compact freezers. 7.29AV + 107.8 0.257av + 107.8 10A. Chest freezers with automatic defrost. 10.24AV + 148.1 0.362av + 148.1 11. Compact refrigerator-freezers and refrigerators other than all-refrigerators with manual defrost. 9.03AV + 252.3 0.319av + 252.3 11A.Compact all-refrigerators—manual defrost. 7.84AV + 219.1 0.277av + 219.1 12. Compact refrigerator-freezers—partial automatic defrost 5.91AV + 335.8 0.209av + 335.8 13. Compact refrigerator-freezers—automatic defrost with top-mounted freezer. 11.80AV + 339.2 0.417av + 339.2 13I. Compact refrigerator-freezers—automatic defrost with top-mounted freezer with an automatic icemaker. 11.80AV + 423.2 0.417av + 423.2 13A. Compact all-refrigerators—automatic defrost. 9.17AV + 259.3 0.324av + 259.3 14. Compact refrigerator-freezers—automatic defrost with side-mounted freezer. 6.82AV + 456.9 0.241av + 456.9 14I. Compact refrigerator-freezers—automatic defrost with side-mounted freezer with an automatic icemaker. 6.82AV + 540.9 0.241av + 540.9 15. Compact refrigerator-freezers—automatic defrost with bottom-mounted freezer. 11.80AV + 339.2 0.417av + 339.2 15I. Compact refrigerator-freezers—automatic defrost with bottom-mounted freezer with an automatic icemaker. 11.80AV + 423.2 0.417av + 423.2 16. Compact upright freezers with manual defrost. 8.65AV + 225.7 0.306av + 225.7 17. Compact upright freezers with automatic defrost. 10.17AV + 351.9 0.359av + 351.9 18. Compact chest freezers. 9.25AV + 136.8 0.327av + 136.8 AV= adjusted volume in cubic feet; av = adjusted volume in liters

DOE’s analyses indicate that the ame nded standards would save a significant amount of energy–an estimated 4.84 quads of cumulative energy over 30 years (2014

8through 2043). This amount is equivalent to th ree times the total energy used annually for refrigeration products in U.S. homes.

The cumulative national net present valu e (NPV) of total c onsumer costs and savings of the amended standards for products shipped in 2014–2043, in 2009$, ranges from $6.4 to $10.4 billion (at a 7-percent disc ount rate) to $28.1 to $36.1 billion (at a 3­ percent discount rate). 1 The NPV is the estimated total value of future operating-cost savings during the analysis period, minus the estimated increased product costs, discounted to 2010. The industry net present va lue (INPV) is the su m of the discounted cash flows to the industry from the base year through the end of the analysis period (2010 to 2043). Using a real discount rate of 7.2 percent, DOE estimates that INPV for manufacturers of all refrigeration products in the base case is $3.731 billion in 2009$. By adopting the amended standards, DOE exp ects that manufacturers may lose 15 to 24 percent of their INPV, or approximate ly $0.573 to $0.887 billion. Using a 7-percent discount rate, the NPV of consumer costs a nd savings from today’s amended standards would amount to 4 to 16 times the total es timated industry losses. Using a 3-percent discount rate, the NPV would amount to 26 to 60 times the total estimated industry losses.

The projected economic impacts of th e amended standards on individual consumers are generally positive. For example, the estimated average life-cycle cost (LCC) savings are $44 for top-mount refrigerator-freezers, $22 for bottom-mount

1 DOE uses discount rates of 7 and 3 percent based on guidance from the Office of Management and Budget. See section IV.G for further information.

9refrigerator-freezers, $57 for side-by-side refr igerator-freezers, $195 for upright freezers, $69 for chest freezers, $14 for compact refrig erators, $12 for compact freezers, and from $2 to $71 for built-in refrigeration products, depending on the product class. 2

In addition, the amended standards are projected to have significant environmental benefits. The energy saved is in the form of electricity and DOE expects the energy savings from the amended standard s to eliminate the need for approximately
4.8 gigawatts (GW) of generating capac ity by 2043. The savings would result in cumulative greenhouse gas emission reducti ons of 344 million metric tons (Mt) 3 of carbon dioxide (CO 2 ) in 2014–2043. During this period, th e amended standards would result in emissions reductions 4 of 277,000 short tons (tons ) of nitrogen oxides (NO X ) and
1.45 tons of mercury (Hg).

The value of the CO 2 reductions is calculated usin g a range of values per metric ton of CO 2 (otherwise known as the Social Co st of Carbon, or SCC) developed by a recent interagency process. The derivation of the SCC values is discussed in section
IV.M. DOE estimates the present monetary value of the CO 2 emissions reduction is between $2.8 and $27.5 billion, expressed in 2009$ and discounted to 2010. DOE also

2 The LCC is the total consumer expense over the life of a product, consisting of purchase and installation costs plus operating costs (expenses for energy use, maintenance and repair). To compute the operating costs, DOE discounts future operating costs to the time of purchase and sums them over the lifetime of the product. The sources and methods used to derive purc hase, installation and operating costs are described in section IV.F of this notice. 3 A metric ton is equivalent to 1.1 short tons. Results for NO X and Hg are given in short tons. 4 DOE calculates emissions reductions relative to the most recent version of th e Annual Energy Outlook ( AEO ) Reference case forecast. This forecast accounts for regulatory emissions reductions through 2008, including the Clean Air Interstate Rule (CAIR, 70 FR 25162 (May 12, 2005)), but not the Clean Air Mercury Rule (CAMR, 70 FR 28606 (May 18, 2005)). Subsequent regulations, including the proposed CAIR replacement rule, the Clean Air Transport Rule (75 FR 45210 (Aug. 2, 2010)), do not appear in the forecast. DOE notes that a new CAIR ru le has recently been finalized. See http://www.epa.gov/crossstaterule /

10estimates that the present monetary value of the NO X emissions reduction, expressed in 2009$ and discounted to 2010, is between $35 and $360 million at a 7-percent discount rate, and between $87 and $890 million at a 3-percent discount rate. 5

Table I.2 summarizes the national economic costs and benefits expected to result from today’s standards for refrigeration products.

5 The range of values at each discount rate reflects use of low and high estimates of the benefits of avoiding one ton of NO X emissions. With respect to mercury, DOE is aware of multiple agency efforts to determine the appropriate range of values used in evaluating th e potential economic benefits of reduced Hg emissions. DOE has decided to await further guidance regarding consistent valuation and reporting of Hg emissions before it once again monetizes Hg in its rulemakings.

11Table I.2. Summary of National Economic Benefits and Costs of Refrigeration Product Energy Conservation Standards
Category Present Value Billion 2009$ Discount Rate
Benefits Operating Cost Savings 21.7 7% 55.4 3% CO 2 Reduction Monetized Value (at $4.9/t)* 2.8 5% CO 2 Reduction Monetized Value (at $22.1/t)* 9.0 3% CO 2 Reduction Monetized Value (at $36.3/t)* 13.5 2.5% CO 2 Reduction Monetized Value (at $67.1/t)* 27.5 3% NO X Reduction Monetized Value (at $447/ton)* 0.035 7% 0.087 3% NO X Reduction Monetized Value (at $4,591/ton)* 0.36 7% 0.89 3% Total Benefits† 30.9 7% 64.9 3% Costs Incremental Installed Costs 11.3 to 15.3 7% 19.3 to 27.3 3% Net Benefits Including CO 2 and NO X † 15.6 to 19.5 7% 37.5 to 45.5 3%

* The CO 2 values represent global monetized values of the SCC in 2010 under several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton (t) are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $67.1/t represents the 95 th percentile of the SCC distribution calculated using a 3% discount rate. ** The range of results for incremental product costs reflects the rang e of product price forecasts discussed in section IV.G.3. † Total Benefits for both the 3% and 7% cases are de rived using the SCC value cal culated at a 3% discount rate, and the average of the low and high NO X values used in DOE’s analysis.

The benefits and costs of today’s stan dards, for products sold in 2014-2043, can also be expressed in terms of annualized va lues. The annualized monetary values are the

12sum of (1) the annualized national economic value, expressed in 2009$, of the benefits from operating products that meet the ame nded standards (consisting primarily of operating cost savings from using less en ergy, minus increases in equipment purchase and installation costs, which is another way of representing consumer NPV), and (2) the annualized monetary value of the benefits of emissi on reductions, including CO 2 emission reductions. 6

Although adding the value of consumer savings to the values of emission reductions provides a valuable perspective, tw o issues should be considered. First, the national operating savings are domestic U.S. consumer monetary savings that occur as a result of market transactions while the value of CO 2 reductions is based on a global value. Second, the assessments of operating cost savi ngs and SCC are performed with different methods that use different time frames for anal ysis. The national operating cost savings is measured for the lifetime of refriger ation products shipped in 2014–2043. The SCC values, on the other hand, refl ect the present value of futu re climate-related impacts resulting from the emission of one ton of carbon dioxide in each year. These impacts continue well beyond 2100.

6 DOE used a two-step calculation process to convert th e time-series of costs and benefits into annualized values. First, DOE calculated a present value in 2010 , the year used for discounting the NPV of total consumer costs and savings, for the time-series of costs and benefits using discount rates of three and seven percent for all costs and benefits except for the value of CO 2 reductions. For the latter, DOE used a range of discount rates, as shown in Table I.3. From the pr esent value, DOE then calculated the fixed annual payment over a 30-year period (2014 through 2043) that yields the same present value. This payment includes benefits to consumers which accrue after 20 43 from the refrigerators purchased from 2014 to 2043. Costs incurred by manufacturers, some of which may be incurred prior to 2014 in preparation for the rule, are not directly included, but are indirectly in cluded as part of incremental equipment costs. The extent of these costs and benefits depends on the projected price trends of refrigerators since consumer demand of refrigerators is a function of refrigerator prices. The fixed annual payment is the annualized value. Although DOE calculated annu alized values, this does not imply that the time-series of cost and benefits from which the annualized values were determined is a steady stream of payments.

13Estimates of annualized benefits and co sts of today’s standards are shown in Table I.3. The results under the primary es timate, expressed in 2009$, are as follows. Using a 7-percent discount rate and the S CC series having a value of $22.1/ton in 2010, the cost of the standards in today’s rule is $1,167 to $1,569 million per year in increased equipment costs, while the annualized bene fits are $2,275 million per year in reduced equipment operating costs, $515 million in CO 2 reductions, and $21 million in reduced
NO X emissions. In this case, the net benef it amounts to $1,241 to $1,643 million per year. Using a 3-percent discount rate and the S CC series having a value of $22.1/ton in 2010, the cost of the standards in today’s rule is $1,081 to $1,526 million per year in increased equipment costs, while the benefits ar e $3,160 million per year in reduced operating costs, $515 million in CO 2 reductions, and $28 million in reduced NO X emissions. In this case, the net benefit amounts to $2,176 to $2,622 million per year.

14Table I.3. Annualized Benefits and Costs of Amended Standards for Refrigeration Products Shipped in 2014-2043*

Discount Rate Primary Estimate* Low Net Benefits Estimate* High Net Benefits Estimate* Monetized (million 2009$/year) Benefits Operating Cost Savings 7% 2275 1996 2560 3% 3160 2720 3596 CO 2 Reduction at $4.9/t** 5% 162 162 162 CO 2 Reduction at $22.1/t** 3% 515 515 515 CO 2 Reduction at $36.3/t** 2.5% 772 772 772 CO 2 Reduction at $67.1/t** 3% 1567 1567 1567 NO X Reduction at $2,519/ton** 7% 21 21 21 3% 28 28 28

Total (Operating Cost Savings, CO 2 Reduction and NO x Reduction)† 7% plus CO 2 range 2457 to 3863 2178 to 3584 2742 to 4148

7% 2810 2531 3095 3% 3703 3263 4139 3% plus CO 2 range 3350 to 4755 2910 to 4315 3786 to 5192 Costs
Incremental Product Costs 7% 1167 to 1569 1480 1232 3% 1081 to 1526 1430 1147 Net Benefits

Total† 7% plus CO 2 range 888 to 2696 698 to 2103 1511 to 2916

7% 1241 to 1643 1051 1863 3% 2176 to 2622 1832 2993 3% plus CO 2 range 1823 to 3674 1479 to 2885 2640 to 4045

15*This table presents the annualized costs and benefits associated with refrigerators shipped between 2014 and 2043. These results include benefits to consumers which accrue after 2043 from the refrigerators purchased from 2014 to 2043. Costs incurred by manufacturers, some of which may be incurred prior to 2014 in preparation for the rule, are not directly included, but are indirectly included as part of incremental equipment costs. The extent of these costs and benefits depends on the projected price trends of refrigerators since consumer demand of refrigerators is a function of refrigerator prices

. The extent of the costs and benefits will depend on the proj ected price trends of refrigerat ors, as the consumer demand for refrigerators is a function of refrigerator prices. The Primary, Low Benefits, and High Benefits Estimates utilize forecasts of energy prices and housing starts from the AEO2010 Referen ce case, Low Estimate, and High Estimate, respectively. In addition, incremental product costs reflect a medium decline rate for projected product price trends in the Primary Estimate, a low decline rate for projected product price trends using a Low Benefits Estimate, and a high decline ra te for projected product price trends using a High Benefits Estimate. The different techniques used to derive projected price trends for each estimate are explained in section IV.G.3. In the Primary estimate, the range of results for incremental product costs reflects the range of projected price trends. ** The CO 2 values represent global monetized values (in 2009$) of the SCC in 2010 under several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $67.1/t represents the 95 th percentile of the SCC distribution calculated using a 3% discount rate. The value for NO X (in 2009$) is the average of the low and high valu es used in DOE’s analysis. † Total Benefits for both the 3% and 7% cases are de rived using the SCC value cal culated at a 3% discount rate, which is $22.1/t in 2010 (in 2009$). In the rows labeled as “7% plus CO 2 range” and “3% plus CO 2 range,” the operating cost and NO X benefits are calculated using the la beled discount rate, and those values are added to the full range of CO 2 values.

DOE has concluded that the standards in today’s rule represent the maximum improvement in energy efficiency that is both technologically feasible and economically justified, and would result in the significan t conservation of energy. DOE further notes that products achieving these standard levels are already commercially available for at least some, if not most, product classes covere d by today’s ruling. Based on the analyses described above, DOE found the benefits of today’s standards to the Nation (energy savings, positive NPV of consumer benefits, consumer LCC savings, and emission reductions) outweigh the burdens (loss of INPV for manufacturers and LCC increases for some consumers).

16II. Introduction The following section briefly discusses th e statutory authority underlying today’s final rule as well as some of the releva nt historical backgr ound related to the establishment of standards for refrigeration products.

A. Authority Title III of EPCA sets forth a variet y of provisions designed to improve energy efficiency. Part A of title III (42 U.S.C. 6291-6309) provides for the Energy Conservation Program for Consumer Products Other than Automobiles. 7 EPCA covers consumer products and certain commercial equipment (refe rred to collectively he reafter as “covered products”), including the types of refrigerati on products that are the subject of this rulemaking. (42 U.S.C. 6292(a)(1)) EPCA pres cribed energy conservation standards for these products (42 U.S.C. 6295(b)(1)-(2)), and directed DOE to conduct three cycles of rulemakings to determine whether to amend th ese standards. (42 U.S.C. 6295(b)(3)(A)(i), (b)(3)(B)-(C), and (b)(4)) As explained in furt her detail in section II.B, this rulemaking satisfies the third round of amendments under 42 U.S.C. 6295(b). (DOE notes that under 42 U.S.C. 6295(m), the agency must periodical ly review its alrea dy established energy conservation standards for a covered product. Under this requiremen t, the next review that DOE would need to conduct would occur si x years from the issuan ce of a final rule establishing or amending a sta ndard for a covered product.)

7 This part was titled Part B in EPCA, but was subse quently codified as Part A in the U.S. Code for editorial reasons.

17Under the Act, DOE’s energy conservati on program for covered products consists essentially of four parts: (1 ) testing, (2) labeling, (3) the establishmen t of Federal energy conservation standards, and (4 ) certification and enforcem ent procedures. The Federal Trade Commission (FTC) is generally respons ible for labeling issues for consumer products, and DOE implements the remainder of the program. Sec tion 323 of the Act (codified at 42 U.S.C. 6293) au thorizes DOE, subject to certai n criteria and conditions, to develop test procedures to measure the ener gy efficiency, energy use, or estimated annual operating cost of each covered product. Manufacturers of covered products must use the prescribed DOE test procedure as the basi s for certifying to DOE that their products comply with the applicable energy cons ervation standards adopted under EPCA and when making representations to the public rega rding the energy use or efficiency of those products. (42 U.S.C. 6293(c) and 6295(s)) Sim ilarly, DOE must use these test procedures to determine whether the products comply with standards adopted under EPCA. Id . The test procedures for refrigeration products cu rrently appear at title 10, Code of Federal Regulations (CFR), part 430, subpart B, a ppendices A1 and B1, respectively. (These procedures have recently been amended and recodified as part of new Appendices A and B, which will, pending further comment from in terested parties, be required to be used when certifying compliance with the standards detailed in today’s final rule. See 75 FR 78810 (December 16, 2010).

EPCA prescribes specific criteria for DOE to consider when amending standards for covered products. As indicated above, a ny amended standard for a covered product must be designed to achieve the maximum im provement in energy efficiency that is

18technologically feasible a nd economically justified. (42 U.S.C. 6295(o)(2)(A)) EPCA precludes DOE from adopting any standard that would not result in the significant conservation of energy. (42 U.S.C. 6295(o )(3)) Moreover, DOE may not prescribe a standard for certain products, including refrig eration products, (1) if no test procedure has been established for that product, or (2) if DOE determines by rule that the amended standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) The Act also provides that, in deciding whether an amended standard is economically justified, DOE must determ ine whether the benef its of the standard exceed its burdens. (42 U.S.C. 6295(o)(2 )(B)(i)) DOE must do so after receiving comments on the proposed standard, and by considering, to the greatest extent practicable, the followi ng seven factors:

1. The economic impact of the standard on manufacturers and consumers of the products subject to the standard;
2. The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the co vered products that ar e likely to result from the imposition of the standard;
3. The total projected amount of energy savi ngs likely to result directly from the imposition of the standard;
4. Any lessening of the utility or the performance of the covered products likely to result from the imposition of the standard;

195. The impact of any lessening of comp etition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard;
6. The need for national energy conservation; and
7. Other factors the Secretary of Energy (S ecretary) considers relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII))

EPCA also contains what is known as an “anti-backsliding” provision, which prevents DOE from prescribing any amended st andard that either increases the maximum allowable energy use or decreases the minimu m required energy effici ency of a covered product. (42 U.S.C. 6295(o)(1)) Also, DOE may not prescribe a new standard if interested persons have established by a pre ponderance of the evidence that the standard is likely to result in the unava ilability in the United States of any covered product type (or class) with performance characteristics, feat ures, sizes, capacities, and volumes that are substantially the same as those generally available in th e United States. (42 U.S.C. 6295(o)(4))

Further, EPCA establishes a rebuttable presumption that a standard is economically justified if the Secretary finds th at the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy savings during the first year that the consumer will receive as a result of the standard, as cal culated under the applicable test procedure. See 42 U.S.C. 6295(o)(2)(B)(iii). 8

8 In this context, the presumption provides a legal finding that the criteria under 42 U.S.C. 6295(o)(2) have been met if the specified level of savings within the fi rst year occur. To ensure that it has fully examined

20Additionally, 42 U.S.C. 6295( q)(1) specifies the require ments for setting classes of a covered product. In such cases, DOE may specify a different standard level than that which applies generally to such type or class of products “for any group of covered products which have the same function or intend ed use” if one of two conditions is met: (A) the specific group of products for whic h a class category would apply consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) that specific group of products has a capacity or other performancerelated feature which other products within su ch type (or class) do not have and such feature justifies a higher or lower standard ” than applies or will apply to the other products within that type or class. Id . In determining whether a performance-related feature justifies a different standard for a group of products, DOE must “consider such factors as the utility to the consumer of such a feature” and other factors DOE deems appropriate. Id . Any rule prescr ibing such a standard must include an explanation of the basis on which such higher or lower leve l was established. (42 U.S.C. 6295(q)(2))

Federal energy conservation requirements generally supersede State laws or regulations concerning energy c onservation testing, labeling, and standards. (42 U.S.C. 6297(a)–(c)) DOE can, however, grant waivers of Federal preemption for particular State laws or regulations in accordance with the procedures and other provisions of section 327(d) of the Act. (42 U.S.C. 6297(d))

the potential costs and benefits of a given level, DOE routinely conducts a full analysis of the potential standards it considers.

21Section 310(3) of the Energy Indepe ndence and Security Act of 2007 (EISA 2007; Pub. L. 110-140 (codified at 42 U.S.C. 6295(gg))) amended EPCA to require that energy conservation standards address st andby mode and off mode energy use. Specifically, when DOE adopts a standard for a covered product after July 1, 2010, it must, if justified by the criteria for adoption of standards in secti on 325(o) of EPCA (42
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into the standard, if feasible, or adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)) DOE’s current (and recently amended) test procedures and current standards for refrigeration pr oducts address standby and off mode energy use, as do the amended standards adopted in this final ru le. Standby and off mode energy use is measured by the test procedures and integrated into the energy use metric, thus separate metrics for these quantities are not needed.

DOE has also reviewed this regulation pursuant to Executive Order 13563 (76 FR 3281, Jan. 21, 2011). EO 13563 is supplemental to, and explicitly reaffirms the principles, structures, and definitions gove rning regulatory review established in, Executive Order 12866. To the extent permitted by law, agencies are required by Executive Order 13563 to: (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing th at some benefits and costs are difficult to quantify); (2 ) tailor regulations to impos e the least burden on society, consistent with obtaining regulatory objectiv es, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3 ) select, in choosing among alternative regulatory approaches, thos e approaches that maximize net benefits

22(including potential economic, environmenta l, public health and safety, and other advantages; distributive impacts; and equity ); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alte rnatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.

DOE emphasizes as well that Executive Order 13563 requires agencies “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” In its guidance, the Office of Information and Regulatory Affairs has emphasized that such techniques ma y include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.” For the reasons stated in the preamble, DOE believes that today’s final rule is consistent with these principles, including that, to the extent permitted by law, agencies adopt a regulation only upon a r easoned determination that its benefits justify its costs and select, in choosing among alternative re gulatory approaches, those approaches that maximize net benefits.

Given the range of inputs and parameters analyzed in this rulemaking, there may be multiple standards that would maximize annualized net benefits. 9 For some product classes, depending on different assumptions, th e standard that maximized annualized net benefits could fall within a range of TSLs. Fi ve different TSLs were considered for each

9 The maximum annualized net benefits included monetized emissions savings.

23product class grouping with high and low va lues for the maximum annualized net benefits estimated for each TSL. For standard -size refrigerator-fr eezers, the TSL with maximum annualized net benefits with the highest value was TSL 3, although certain values for maximum annualized net benefits fell within the ranges estimated for TSL 1 to TSL 3. For standard-size freezers, the maximum annualized net benefits fell within the calculated ranges for TSL 3 to TSL 4. However, DOE noted that even using the low end of this range, efficiency levels are signifi cantly higher than the mo st efficient products already available on the mark et (see Section VI.C.2). Therefore, DOE selected TSL 2, which DOE also notes corresponds to the reco mmended level in the Joint Comments. For compact refrigeration products, the maximum annualized net benefits fell within the calculated ranges for TSL 1 to TSL 3, and DOE selected TSL 2. With respect to compact refrigeration products, DOE estimates an a pproximately 10 percent increase in total installation costs as a result of the standa rd. Because DOE was unable to estimate the income subgroup LCC effects due to lack of data, the agency believes choosing a TSL on the lower end of the range of estimated cost impacts (i.e., TSL 2) would provide a more conservative approach to minimize any potenti ally negative consumer welfare impacts on lower income consumers. For built-in re frigeration products, the TSL with maximum annualized net benefits was TSL 2, and DOE se lected TSL 2. Therefore, consistent with EO 13563, the energy efficiency standards adopted herein by DOE achieves maximum net benefits

24B. Background The following discussion provides some background information describing the events leading up to today’s final rule.

1. Current Standards In a final rule published on April 28, 1997 (1997 Final Rule), DOE prescribed energy conservation standards fo r refrigeration products manufact ured on or after July 1, 2001. 62 FR 23102. This 1997 rule set the ener gy conservation standards that are currently in place and completed the second r ound of rulemaking to amend the standards for refrigeration products required under 42 U.S.C. 6295( b)(3)(B)-(C). The current standards consist of separate equations for each product class. Each equation provides a means to calculate the maximum levels of energy use permitted under the regulations. These levels vary based on the storage vol ume of the refrigeration product and on the particular characteristics and features included in a given product ( i.e. , based on product class). 10 CFR 430.32(a). The current standards are set forth in Table II.1. DOE notes that the standard levels denot ed in the additional product cl asses listed as 5A and 10A were established by the Office of Hearings and Appeals (OHA) through that Office’s exception relief process, and are applicable to basic models of those types if their manufacturer has applied for and been gr anted exception relief for them by OHA.

Table II.1: Federal Energy Efficiency St andards for Refrigerators, RefrigeratorFreezers, and Freezers Energy Standard Equations for Maximum Energy Product Class Use (kWh/yr)

25Made Effective by the 1997 Final Rule 1. Refrigerators and refrigera tor-freezers with manual defrost. 8.82AV+248.4 0.31av+248.4 2. Refrigerator-freezers—pa rtial automatic defrost. 8.82AV+248.4 0.31av+248.4 3. Refrigerator-freezers—automatic de frost with top-mounted freezer without through-the-door ice service and all-refrigerator—automatic defrost. 9.80AV+276.0 0.35av+276.0 4. Refrigerator-freezers—automatic de frost with side-mounted freezer without through-the-door ice service. 4.91AV+507.5 0.17av+507.5 5. Refrigerator-freezers—automatic defrost with bottom-mounted freezer without through-the-door ice service. 4.60AV+459.0 0.16av+459.0 6. Refrigerator-freezers—automatic de frost with top-mounted freezer with through-the-door ice service. 10.20AV+356.0 0.36av+356.0 7. Refrigerator-freezers—automatic de frost with side-mounted freezer with through-the-door ice service. 10.10AV+406.0 0.36av+406.0 8. Upright freezers with manual defrost. 7.55AV+258.3 0.27av+258.3 9. Upright freezers with automatic defrost. 12.43AV+326.1 0.44av+326.1 10. Chest freezers and all other freezers except compact freezers. 9.88AV+143.7 0.35av+143.7 11. Compact refrigerators and refrigerator-freezers with manual defrost. 10.70AV+299.0 0.38av+299.0 12. Compact refrigerator-freezer—p artial automatic defrost. 7.00AV+398.0 0.25av+398.0 13. Compact refrigerator-freezers—automatic defrost with top-mounted freezer and compact all-refrigerator—automatic defrost. 12.70AV+355.0 0.45av+355.0 14. Compact refrigerator-freezers—auto matic defrost with side-mounted freezer. 7.60AV+501.0 0.27av+501.0 15. Compact refrigerator-freezers—au tomatic defrost with bottommounted freezer. 13.10AV+367.0 0.46av+367.0 16. Compact upright freezers with manual defrost. 9.78AV+250.8 0.35av+250.8 17. Compact upright freezers with automatic defrost. 11.40AV+391.0 0.40av+391.0 18. Compact chest freezers. 10.45AV+152.0 0.37av+152.0 Product Class Made Effective Through OHA Exception Relief 5A. Refrigerator-freezer—automatic de frost with bottom-mounted freezer with through-the-door ice service. 5.0AV+539.0 0.18av+539.0 10A. Chest freezers with automatic defrost. 14.76AV+211.5 0.52av+211.5 AV: Adjusted Volume in ft 3 ; av: Adjusted Volume in liters (L)

262. History of Standards Rulema king for Refrigerators, Re frigerator-Freezers, and
Freezers The amendments made to EPCA by th e National Appliance Energy Conservation Act of 1987 (NAECA; Pub. L. 100-12) in cluded mandatory energy conservation standards for refrigeration products and requirements that DOE conduct two cycles of rulemakings to determine whether to amend th ese standards. (42 U.S.C. 6295(b)(1), (2), (3)(A)(i), and (3)(B)-(C)) DOE completed the first of th ese rulemaking cycles in 1989 and 1990 by adopting amended performance sta ndards for all refrigeration products manufactured on or after January 1, 1993. 54 FR 47916 (November 17, 1989); 55 FR 42845 (October 24, 1990). As indicated a bove, DOE completed a second rulemaking cycle to amend the standards for refrigerati on products by issuing a final rule in 1997, which adopted the current standards for these products. 62 FR 23102 (April 28, 1997).

In 2005, DOE granted a petition, submitted by a coalition of state governments, utility companies, consumer and low-income advocacy groups, and environmental and energy efficiency organizations, requesting a rulemaking to amend the standards for residential refrigerator-freezers. 10 DOE then conducted limited analyses to examine the technological and economic feasibility of amended standards at the ENERGY STAR levels that were in effect for 2005 fo r the two most popular product classes of refrigerator-freezers. These analyses not only identified potential ener gy savings, benefits and burdens from such standards, but also assessed other issues related to them. Most recently, DOE has undertaken this rulemaking to satisfy the statutory requirement that

10 The petition, submitted June 1, 2004, can be viewed at http://www.standardsasap.org/documents/rfdoe.pdf (last accessed August 18, 2010) and is in the docket as item No. 117.

27DOE publish a final rule to determine whethe r to amend the standards for refrigeration products manufactured in 2014. (42 U.S.C. 6295 (b)(4)) The limited 2005 analyses served as background for the more extensive analysis conducted for this rulemaking.

DOE initiated this rulemaking by making available on its website a framework document for refrigeration products, a PDF copy of which is available at http://www1.eere.energy.gov/buildings/appliance_standards/resi dential/pdfs/refrigerator

_ freezer_framework.pdf ). DOE also published a no tice announcing the availability of the framework document and a public meeting to discuss the document. It also requested public comment on the document. 73 FR 54089 (September 18, 2008). The framework document described the procedural and analytic al approaches that DOE anticipated using to evaluate energy conservation standards for refrigeration products and identified various issues to resolve during the rulemaking.

On September 29, 2008, DOE held the framework document public meeting and discussed the issues detailed in the frame work document. DOE also described the analyses that it planned to conduct during the rulemaking. Through the public meeting, DOE sought feedback from interested parties on these subjects and provided information regarding the rulemaking proce ss that DOE would follow. Inte rested parties discussed the following major issues at the public meeting: test procedure revisions; product classes; technology options; approaches to the engine ering, life-cycle cost, and payback period analyses; efficiency levels analyzed in th e engineering analysis; and the approach for estimating typical energy consumption. At the meeting, and during the related comment

28period, DOE received many comments that help ed it identify and reso lve issues involved in this rulemaking.

DOE then gathered additional informa tion and performed preliminary analyses for the purpose of developing potential amended energy conservation standards for refrigeration products. This process culminated in DOE’s public announcement of the preliminary analysis public meeting. 74 FR 58915 (November 16, 2009) (the November 2009 notice) At that meeting, which was he ld on December 10, 2009, DOE discussed the following matters: the product cl asses DOE analyzed; the analytical framework, models, and tools that DOE was using to evaluate standards; the results of the preliminary analyses performed by DOE; and potential st andard levels that DOE could consider. DOE also invited written and verbal comme nts on these subjects and announced the availability on its website of a preliminary technical support document (preliminary TSD) it had prepared to inform interested partie s and enable them to provide comments. Id

. (The preliminary TSD is available at http://www1.eere.energy.gov/build ings/appliance_standards/re sidential/pdfs/ref_frz_pren opr_prelim_tsd.pdf ) DOE also sought views c oncerning other relevant issues that participants believed would affect energy conservation st andards for refrigeration products, or that merited addressing in the Notice of Proposed Rulemaking (NOPR). Id

. at 58917-18.

The preliminary TSD provided an overvi ew of the activities DOE undertook in developing potential standards for refriger ation products, and discussed the comments

29DOE received in response to the framework document. It also described the analytical framework that DOE used, including a desc ription of the met hodology, the analytical tools, and the relationships among the various analyses that are pa rt of the rulemaking. The preliminary TSD presented and described in detail each analysis DOE had performed up to that point, including descriptions of inputs, sour ces, methodologies, and results. These analyses included a market and technol ogy assessment, a screening analysis, an engineering analysis, an energy use analysis , a markups analysis, a life-cycle cost analysis, a payback period (PBP) analysis, a shipments analysis, a national impact analysis, and a preliminary manufacturer imp act analysis. See the NOPR for an overview of these assessments and analyses. 75 FR 59470, 59477 (September 27, 2010).

At the preliminary analysis meetin g, DOE presented the methodologies and results of the analyses set forth in the prel iminary TSD. Major topics discussed at the meeting included test procedure revisions, pr oduct classes (includi ng wine coolers, allrefrigerators, 11 and built-in refrigeration products), the use of alternative foam blowing agents and refrigerants, engineering analysis tools, the use of vacuum insulated panels (VIPs), mark-ups, field energy consumption, life- cycle cost inputs, e fficiency distribution forecasts, and trial standard level selecti on criteria. DOE also discussed plans for conducting the NOPR analyses. Comment receive d in response to the November 2009 notice, helped shape DOE’s resolution of the issues raised in the preliminary analysis meeting.

11 An “all-refrigerator” is defined as “an electric refr igerator which does not include a compartment for the freezing and long time storage of food at temperatures below 32 °F (0.0 °C). It may include a compartment of 0.50 cubic feet capacity (14.2 liters) or less for the freezing and storage of ice.” (10 CFR part 430, subpart B, appendix A1, section 1.4).

30In response to the preliminary analysis, DOE also received a comment submitted jointly by groups representing manufactur ers (Association of Home Appliance Manufacturers, Whirlpool, General Electric Company (GE), Electrolux, LG Electronics, BSH, Alliance Laundry, Viking Range, Sub Zero-Wolf, Friedrich A/C, U-Line, Samsung, Sharp Electronics, Miele, Heat C ontroller, AGA Marvel, Brown Stove, Haier, Fagor America, Airwell Group, Arcelik, Fish er & Paykel, Scotsman Ice, Indesit, Kuppersbusch, Kelon, DeLonghi); energy a nd environmental advocates (American Council for an Energy Efficient Economy, Appliance Standards Awareness Project, Natural Resources Defense Council, Allianc e to Save Energy, Alliance for Water Efficiency, Northwest Power and Conservati on Council, Northeast Energy Efficiency Partnerships); and consumer groups (Cons umer Federation of America, National Consumer Law Center). This collective set of comments, which DOE refers to in this notice as the “Joint Comments,” 12 recommended specific energy conservation standards for refrigeration products that, in the comme nters’ view, would satisfy the requirements under EPCA. According to this submission, ne gotiations between these various groups commenced in the spring of 2010, resulting in a finalized agreement with recommended standards on July 30, 2010. (Joint Comm ents, No. 52 at p. 8) Those recommended standards were reported in percentages of en ergy use reductions a nd in annual energy use based on the test procedure then in pl ace but after DOE had published its NOPR proposing to amend that procedure. (I d. See also 75 FR 29824 (May 27, 2010)) DOE neither organized nor was a member of the group but made its contractors available to

12 DOE Docket No. EERE-2008-BT-STD-0012, Comment 49. DOE considered the Joint Comments to supersede earlier comments by the listed parties regarding issues subsequently discussed in the Joint Comments.

31perform data processing. Consistent with its legal obligations when developing an energy conservation standard, DOE provided the public with the opportunity to comment on the proposed levels that DOE considered adopti ng for refrigeration products in the NOPR, which mirror those recommended in the Joint Comments.

DOE published the NOPR on September 27, 2010. 75 FR 59470. The NOPR and its accompanying NOPR TSD described the an alyses that DOE conducted after the preliminary analyses, including revisions of analyses to address stakeholder comments. The additional analyses performed duri ng the NOPR phase included the consumer subgroup analysis, manufacturer impact analys is, employment impact analysis, utility impact analysis, environmental analysis, and regulatory impact analysis. The NOPR discussed all of the NOPR anal yses in depth, including the re vision of analyses initially conducted in the preliminary analysis pha se. (see 75 FR at 59485-59530 (September 27, 2010)) DOE held a public meeting to disc uss the NOPR on October 14, 2010. At the meeting, DOE presented its analyses and raised issues for comment. The issues discussed at the meeting included the measurement change s associated with the new test procedures under consideration, product classes, produc t class definitions, status of specific technologies (e.g. high-efficiency compresso rs, VIPs, and isobutane refrigerant), maxtech levels, energy use equation slope change s, adjustments to the methodology for field energy use estimates, maintenance costs, effi ciency distributions, energy standard roundoff, impacts on small manufacturers, setting bui lt-in standards at levels determined to have negative consumer impacts, and DOE ’s treatment of emissions reductions. DOE considered comments received at the pub lic meeting and during the NOPR comment

32period in finalizing the standards.

As discussed in greater deta il in section IV.F.1 below, after publishing the NOPR, DOE more carefully examined trends in pr oduct prices and the po ssible impact of such trends on its analyses. On February 22, 2011, DOE published a notice of data availability (NODA) that discussed the approach it was considering to use in its forecasts of product prices. 76 FR 9696. DOE requested comments on the information provided in the NODA, and several stakeholders responded, includ ing some that had not commented on the
NOPR.

Table II.2 below lists the stakeholders that provided comments on the NOPR and the NODA.

Table II.2 Stakeholders Providing Comments on the NOPR and NODA Name Acronym Type* NOPR Oral Comments Written Comments Air-Conditioning, Heating, and Refrigeration Institute AHRI IR NODA American Council for an Energy Efficient Economy ACEEE EA NODA
American Gas Association AGA UA NODA American Public Power Association APPA UA NOPR Appliance Standards Awareness Project (ASAP) ASAP EA  NODA Appliance Standards Awareness Project (ASAP) and Others 13 Joint Advocates’ Comment (JAC) EA, CA NOPR Association of Home Appliance Manufacturers AHAM IR  NOPR, NODA California Investor-Owned Utilities IOUs U NOPR, NODA

13 Appliance Standards Awareness Proj ect (ASAP), Alliance to Save Ener gy (ASE), American Council for an Energy-Efficient Economy (ACEEE), Consumer Fe deration of America (CFA ), National Consumer Law Center (NCLC), Natural Resources Defense Council (NRDC), Northeast Energy Efficiency Partnerships (NEEP), and Northwest Energy Efficiency Alliance (NEEA).

33Consumer Federation of America CFA CA NODA Earthjustice Earthjustice EA  NOPR Edison Electric Institute EEI UA NOPR, NODA Electrolux Home Products Electrolux M  General Electric Consumer and Industrial GE M  NOPR Ingersoll Rand Residential Solu tions Ingersoll Rand M NODA National Consumer Law Center NCLC CA NODA Natural Resources Defense Council NRDC EA NODA Northeast Energy Efficiency Partnerships NEEP EA NODA Northwest Energy Efficiency Alliance NEEA EA NODA
Northwest Power and Conservation Council NPCC UA  People’s Republic of China WTO/TBT National Notification & Enquiry Center PRC FG NOPR

Portland General Electric Company PGEC U NOPR Sacramento Municipal Utility District SMUD U NOPR Southern Company SC U NOPR, NODA Sub Zero-Wolf, Inc. Sub Zero M NOPR Traulsen Traulsen M NODA Whirlpool Corporation Whirlpool M  NOPR *IR: Industry Representativ e; M: Manufacturer; EA: Efficiency/Environmental Advocate; CA: Consumer Advocate; CS: Comp onent Supplier: TE: T echnical Expert: I: Individual; U: Utility; UA : Utility Advocate; FG: Foreign Government Agency

DOE notes that comments from the PRC indicated that it rece ived notice of the September 27 th NOPR on October 27, 2010, which permitted the Chinese government less than 60 days to provide comment on the proposed regulation. In DOE’s view, the publication of the September 2010 proposal, alo ng with its immediate availability on the Government Printing Office’s websit e ( http://www.gpoaccess.gov ), provided any interested party with the specified 60 days of comment period. In future, however, to accommodate the PRC’s concerns, and to the extent feasible, DOE may examine possible

34steps to ensure the availab ility of its proposals to inte rested foreign parties.

III. General Discussion The following section discusses various technical aspects related to this rulemaking. In particular, it addresses asp ects involving the test procedures for refrigeration products, the tec hnological feasibilit y of potential standards to assign to these products, and the po tential energy savings and economic justification for prescribing the amended standa rds for refrigeration products.

A. Test Procedures As noted above, DOE’s current test pro cedures for refrigeration products appear at 10 CFR part 430, subpart B, appendices A1 (f or refrigerators and refrigerator-freezers) and B1 (for freezers). DOE recently published a notice containing both the test procedure final rule (affecting products manufactured pr ior to 2014) and an inte rim final rule (for products manufactured starting in 2014). The final/interim final rule notice amended Appendices A1 and B1 (which affect pr e-2014 products) and created new Appendices A and B (which affect products starting in 2014) . Appendix A applies to refrigerators and refrigerator-freezers covered by today’s amende d standards ( i.e. , those manufactured or or after the 2014 compliance date prescribed by today’s rule ) and Appendix B applies to freezers covered by today’s amended standards. 75 FR 78810 (December 16, 2010) (this notice contains both the final a nd interim final rules that detail the test procedures for refrigeration products). The new Appendices A and B share many of the same revisions and additions made in Appendices A1 and B 1, but also include a dditional revisions not

35made in Appendices A1 and B1. See i d . at 78817-78818 DOE notes, however, that because the new Appendices A and B were i ssued as an interim final rule, these additional amendments may be subject to po ssible adjustment based on comments that DOE receives. DOE had previously provided commenters with 60 days within which to provide additional feedback regarding the interim final rule. Id . at 78810. DOE may reopen this comment period for a limited period of time after the publication of today’s standards final rule.

EPCA requires DOE to consider during a test procedure rulemaking whether test procedure amendments alter the measured en ergy use of products, and, if so, to amend the energy standards. (42 U.S.C. 6293(e)(1 )-(2)) In this case, DOE simultaneously considered the impacts of any measured energy changes within the context of the standards rulemaking required by statute. Section III.A.2 discusses the adjustment of the final energy conservation standard with resp ect to any test pro cedure changes. The approach used to implement this adjustment is also discussed in the Section IV.C.2 below.

1. Test Procedure Rulemaking Schedule The NOPR analysis documents were published, and the NOPR public meeting was held, prior to publication of the final rule describing the amended test procedure on which the analysis was based. The test procedure final/interim final rule was issued and DOE made copies available to all interest ed parties prior to the end of the energy conservation standard NOPR comment period.

36AHAM and GE both commented that, desp ite DOE’s May 2010 publication of its proposed test procedure, it is difficult to prepare comments on an energy standard when the final test procedure is not yet known. ( AHAM, Public Meeting Transcript, No. 67 at
p. 18; GE, Public Meeting Transcript, No. 67 at p. 37) AHAM clarified that determination of the impact on energy use measurement of the test procedure changes cannot be done without having a final test procedure (AHAM, Public Meeting Transcript, No. 67 at p. 13-14, 35) In written comments, AHAM argued that because the test procedure final/interim final rule was not issued until November 24, 2010, manufacturers did not have a sufficient opportuni ty to test products to evalua te the impacts of the final test procedure changes—as a result, AHAM claimed it was not able to comment on the proposed energy standard equa tions (AHAM, No. 73 at pp. 1-2) 14 GE commented that the industry wanted to know the final test procedure before starting test work to determine whether the energy standard adjustments implemented by DOE in the NOPR sufficiently represent all of the test procedure changes. (GE, Public Meeting Tr anscript, No. 67 at p. 46-47) AHAM also asked whether any rulemaking process options allowed under EPCA could be considered to give the industry mo re time to assess the test procedure impacts. (AHAM, Public Meeting Tran script, No. 67 at p. 37-38)

DOE notes that the test procedur e NOPR was published May 27, 2010, roughly two months prior to the completion of ne gotiations conducted by industry and advocates in creating the standards recommended in their joint comments. 75 FR 29824 (May 27, 2010). In developing those consensus standards, the industry and othe r stakeholders had

14 The rule was issued on November 23, 2010, no t November 24 as indicat ed in AHAM’s comments.

37knowledge of DOE’s test proced ure proposals and ample time to consider adjustments to the negotiated standards to address the propos als for today’s final rule. DOE also notes that stakeholders have had several months since the publication of the test procedure NOPR to quantify the impacts of the proposed test procedure amendments. DOE again asked stakeholders at the energy conser vation standard NOPR public meeting for information that would help quantify these im pacts. None was provided and participants gave no indication that they had performed any such testing. In the absence of such information, DOE has developed its own information to finalize the energy conservation standards, as describe d in section III.A.2.

DOE notes that under EPCA, an amended or new energy conservation standard may not be prescribed unless a test pro cedure for the regulated product has been prescribed. See 42 U.S.C. 6295(o)(3). DOE has met this requirement.

In response to AHAM’s request regarding additional time to evaluate the test procedure impacts, DOE has issued the test procedure amendments affecting products starting in 2014 as an interim final rule. Th is approach resulted in providing interested parties with an additional 60 days to comment on the interim final rule’s amendments. 75 FR at 78810 (December 16, 2010). Additionally, as already indicated, DOE plans to provide interested parties w ith additional time to comment on the interim final rule. Notice of that limited reopening of the comm ent period will be provided in the Federal Register.

382. Adjustment of the Energy Standa rds for the New Test Procedure As described above, DOE amended its test procedures for refrigeration products. These amendments will impact the measured energy use. DOE’s amended standard levels incorporated adjustments (called a “crosswal k”) to reflect these changes in energy use measurements. DOE described the crosswal k process in its September 2010 NOPR. See 75 FR at 59502-59505 (September 27, 2010). In shor t, DOE applied the crosswalk to the baseline (current energy st andard) equations, thus deve loping baseline energy use equations using the new test procedure. DOE applied the percentage energy use reductions representing the new energy standard s to these baseline equations to determine the new energy standards. The NOPR also indi cated that DOE tenta tively concluded that the only test procedure changes that would be likely to impact measured energy use are those associated with comp artment temperatures and the volume measurement method. 75 FR at 59505 (September 27, 2010). The term “ NOPR crosswalk” refers to this set of energy standard adjustments addressing th ese two test procedure changes.

Commenters addressed both (a) the NOPR crosswalk addressing test procedure changes in compartment temperatures and volume measurements and (b) the additional test procedure changes that could affect energy use measurements. The NOPR public meeting was held on October 14, 2010, before the publication of the test procedure final/interim final rule. Hence, stakeholder comments from the meeting addressed the proposed test procedure, rather than the final one that DOE ultimately adopted.

39Whirlpool indicated that it could not co mment on the proposed standard levels prior to publication of the te st procedure and comprehensive testing to determine the impact of the test procedure changes. (Whirlpool, No. 74 at p. 7) GE echoed this comment, indicating that it is e ssential to have the final test procedure to allow evaluation of the impacts of the test procedure changes in order to be able to comment effectively on the proposed standard levels. (GE, No. 76 at p. 1) AHAM commented that the NOPR crosswalk is partly theoretical since it uses extrapolati on and analysis to determine adjustments for some product classes. (AHAM , Public Meeting Transcript, No. 67 at p. 17) AHAM also commented that it “is critical ” to do testing to determine the impact of the test procedure changes, and that the industry was not provided sufficient time between issuance of the final/interim final rule and the end of the comment period to conduct such testing. (AHAM, 73 at p. 2)

The IOUs supported DOE’s approach for adjustment of the energy standards to address test procedure changes. In light of the limited time available to complete the rulemaking, the IOUs commented that DOE’s approach was appropriate in spite of comments by parties at the public meeting calling for additional testing to perform a crosswalk. (IOUs, No. 77 at p. 2)

DOE notes that the NOPR crosswalk was based primarily on data provided by AHAM—which DOE described in detail in its TSD. See chapter 5, “Engineering Analysis”, section 5.4.2. Because AHAM did not initially provide data for all product classes, DOE conducted additional analysis and developed estimates to supplement the

40gaps present in AHAM’s data. These addi tional steps helped DOE to establish appropriate crosswalks for the remaining product classes. DOE first presented this process in its preliminary TSD, which DOE posted on its website in November 2009. Stakeholders have had more than twelve m onths to comment on the crosswalks for these remaining product classes, but have not done so.

Numerous commenters identified other test procedure changes that they believed would affect the measured energy use of refr igeration products and offered their views on how to address them in a final crossw alk. AHAM first indicated that the NOPR crosswalk does not represent all of the m easurement impacts of the test procedure modifications. (AHAM, Public Meeting Transc ript, No. 67 at p. 16; AHAM, No. 73 at p. 2) It asserted that there are many test proced ure changes and that some of these changes, other than those changes aff ecting compartment temperatur e and volume calculation, can impact measured energy use. (AHAM asserted that the impact of these changes cannot be determined as a sum of the impacts of the i ndividual changes, but did not provide data illustrating this assertion, nor did AHAM e xplain why an additive approach is not reasonable. (Id. at p. 35-36)) To this end, AHAM identified four specific proposed test procedure changes that it believed would imp act measured energy use: (1) test procedures addressing products with variable anti-sweat heater control, (2) use of the highest energy use position for special compartments, (3) m odification of the long-time-defrost test procedure to capture precooling energy use, and (4) test procedures addressing products with multiple defrost cycle types. (Id. at 42-43) DOE notes that AHAM identified these same four additional test procedure change s in its comments on the test procedure

41rulemaking NOPR (AHAM, Test Procedure for Residential Refrigerators, RefrigeratorFreezers, and Freezers, Docket Number EER E-2009-BT-TP-0003, No. 16 at p. 3) In its written comments, AHAM indicated that the fi nal test procedure that DOE developed for products with variable anti-swea t heater control doe s not alter measured energy use, since DOE adopted the procedure provided in wa ivers already granted to companies who manufacture products with such f eatures. (AHAM, No. 73 at p. 3)

Whirlpool asserted that applying the highest energy usage setting for special compartments, including procedures designe d to capture precooling energy and to address products that use multiple defrost cycles, will alter measured energy use. (Whirlpool, No. 74 at p. 7)

The IOUs agreed that there were additional test procedure changes that could alter measured energy use that had not been consid ered in establishing th e proposed standards, including test procedures for products with variable anti-sweat heater control, new procedures to capture precooling energy use, and new procedures for special compartments. The IOUs recommended that th e energy standards should be adjusted to account for these test procedure changes. They noted that if the measured impacts of these test procedure changes have not b een determined through testing, DOE should estimate their impact and direction of the impact (positive or negative). They added that if these impacts are small or applicable to only a small portion of the market, DOE should not adjust the baseline energy use equations 15 to avoid the risk of backsliding on the

15 The baseline energy use equations represent energy use for baseline products (i.e. products which are minimally compliant using the current test procedure) when tested using the new test procedure.

42standard levels. (IOUs, No. 77 at p. 2) The I OUs indicated that they did not have any additional data regarding the impacts of the test procedure changes. (Id.)

GE generally noted the importance of conduc ting tests to evaluate the impacts of the test procedure changes. It also expressed concerns that a number of the test procedure changes may have significant measurement im pacts. GE did not, however, specifically identify these test procedure changes. (GE, Public Meeti ng Transcript, No. 67 at pp. 36­ 37) Whirlpool commented that the test procedures addres sing products with variable anti-sweat heater controls re present a significant test burden (in some cases, an additional week of test time) and could impact th e measured energy use of a given product. (Whirlpool, Public Meeting Transcript, No. 67 at pp. 44-45) Whirlpool further identified electric heaters and/or fans in special compar tments that may be used to prevent freezing in such compartments as a factor in the pot ential energy use measurement impact of the test procedure amendments for special compartments. (Id.)

When asked by DOE whether there are a ny manufacturer data that quantify the impacts of the cited additional test procedure amendments, AHAM indicated that they did not have such data. Instead, AHAM cited DOE’s own statement from the refrigeration product test procedure rulema king public meeting presentation discussing the NOPR that the amendments to capture de frost precooling energy use would increase energy use 2 percent for one tested product (AHAM, Public Meeting Transcript, No. 67 at pp. 44, 45-46, 43) AHAM further stressed the importance of evaluating the entire modified test procedure rather than inves tigating the potential im pacts from individual

43changes, because the measurement impacts of the changes may not be additive. (Id. at pp. 26-27) However, AHAM did not provide data illustrating or supporting this assertion, nor did AHAM explain why an additiv e approach is not reasonable.

Stakeholders also commented on the appro ach used to apply the projected energy measurement impacts to the energy conserva tion standards. When asked by DOE during the public meeting if the cr osswalk should apply to th e population average of the minimally compliant products, AHAM agreed, i ndicating that the Jo int Agreement used the words “average” and “minimally compliant ”, but that the crosswalk should also be based on evaluating low-volume and high-volum e products to properly reflect capacity impacts. (AHAM, Public Meeting Transcript, No. 67 at pp. 33-34) ASAP also agreed that the crosswalk should apply to the “average”. (ASAP, Public Meeting Transcript, No. 67 at p. 34) DOE agrees that a shipment-weight ed average approach for applying the energy use measurement impacts of test procedure chan ges is appropriate and is consistent with the requirements of EPCA. (42 U.S.C. 6293(e)(2)) Consistent with this approach, and the requirements of 42 U.S.C. 6293(e)(2), DOE applied a shipment-weighted approach, which provides the best indication across all shipped products of th e magnitude of the impact.

AHAM also commented that anti-backslid ing considerations would not apply because the changes in test procedures and energy standards will take effect simultaneously. (AHAM, Public Meeting Tran script, No. 67 at p. 41) DOE notes that amending a test procedure without an acco mpanying energy standard rulemaking that

44increases stringency may result in an increa se in the maximum allowable energy use for some products. Such a change would not be allowed if the anti-back sliding provisions of EPCA (42 U.S.C. 6295(o)(1)) applied to any pa rticular product rather than to the average for the product class population. However, such considerations do not apply in this case, as indicated by AHAM, because the test pro cedure and energy sta ndard changes will occur simultaneously.

DOE notes that it has received no new in formation from stakeholders quantifying the changes in measured energy use associated with any of the test procedure changes. Hence, DOE adjusted its standards using th e data discussed above that AHAM provided during the preliminary analysis phase, as well as supplemental data and analysis (e.g. testing DOE conducted during the rulema king) that DOE developed on its own.

a. Products with Variable An ti-Sweat Heater Control DOE amended its test procedures to requi re the use of the procedure currently being used by manufacturers under waivers that DOE granted. This procedure, along with a change to assure the consistency of comp artment temperatures during testing, will be required to establish compliance with the 2014 standards for variable anti-sweat heater control-equipped products. The change involve s the description of the conditions that apply to the anti-sweat heater wattages used in the calculation of the anti-sweat heater adjustment factor: the wattages will apply to a 0  ̊ F freezer compartment temperature and
a 39  ̊ F fresh food compartment temper ature, rather than the 5  ̊ F and 45  ̊ F, respectively, used in the waivers. 75 FR at 78828-78830 (D ecember 16, 2010). DOE considers that the

45adjustments made to the energy conserva tion standards to account for compartment temperature changes also apply to the adjust ment factor for anti-sweat heaters operating with variable control. Hence, no additional energy standard adjustment is needed to address this test procedure amendment.

b. Products with Multiple Defrost Cycle Types DOE amended the test procedure to address products with multiple defrost cycle types. Id. at 78836-78838. As explained in the test procedure final rule, the previous procedure could not ensure that the entire de frost energy used for such products would be sufficiently captured. DOE received one test pr ocedure waiver petition for such products, from Samsung, requesting waiver of the curr ent test procedure of Appendix A1 for products manufactured before 2014. 76 FR 1676 0 (March 25, 2011). The waiver petition requests use of the same test procedure to address multiple defrost cycle types that was set forth in the test procedure interim final rule for Appendix A. Samsung did not provide information regarding the change in measured energy use associated with the modified test procedure. Furthermore, they indicated that the current energy efficiency standards are adequate, and they did not request adjust ment of the standards for the products that are the subject of the waiver petition. Id. at p. 16763. DOE is unaware of any other manufacturer who employs this type of design. Accordingl y, DOE is unaware of any impact on the measured energy use of these multiple defrost cycle products associated with this test procedure amendment.

46c. Amendments to Capture Precooling Energy Use DOE amended the test procedure for produc ts with long-time or variable defrost to capture precooling and partial recovery energy use. Id. at 78832-78836. Testing performed during the engineer ing phase of this rulemaking indicates that capturing precooling energy use would yield an imp act of roughly two percent of the total measured energy use. Additionally, the impact of capturing the energy from full temperature recovery (i.e. extending the test period until the compartment temperatures have recovered to their steady-state levels) for products exhibiting partial recovery may comprise another 0.5 percent of total measured energy use fo r those products that do not achieve a full temperature recovery within th e test period prescribed by the current test procedure. Of the nine refrig erator-freezers tested during th e engineering analysis phase, two of these units incorporated precooling. These units fell into current product classes 5 (refrigerator-freezers—automatic defrost w ith bottom-mounted freezer without throughthe-door ice service) and 7 (re frigerator-freezers—automatic defrost with side-mounted freezer with through-the-door ice service). DOE is unaware of any significant percentage of products that currently do not fully recove r temperature within th e time period allotted by the current test procedure. DOE has adjusted the energy standard levels for these and related product classes using the observed measurement impact for capturing precooling energy use and applying that measured impact consistently with the frequency with which this feature has been observed in this group of tested products. The adjustment details are described in detail in section IV.C.2 below.

47d. Test Procedures for Special Compartments DOE amended the test procedures to require that products with special compartments using the addition of heat (“ heat addition”) as a form of temperature control be tested twice. The energy use measurement of such products will be an average of measurements made with the special co mpartment temperature controls set in the warmest position for the first test and in the coldest position for the second test. Id. at 78825-78826. Of the eleven refrigerator-freeze rs purchased for reverse engineering analysis performed during the engineering an alysis phase, two had special compartments with separate temperature control. Neither of these products used heat addition for controlling special compartment temperatures. In examining features of refrigeration products on manufacturer we bsites, DOE found that th e prevalence of special compartments in standard-size refrigerator-f reezers comprised 20 percent of the models examined. Id. at 78823. Because of the lim ited nature of these data, DOE conducted further study of products th at employ heat addition.

DOE identified thirteen basic models that have heated special compartments. In this assessment, DOE concluded that special compartments use heaters for temperature control if the high end of their controllable te mperature range is significantly higher than typical fresh food compartment temperatur es. DOE considered typical fresh food compartment temperature to be the default settings set at the factory. These default settings are in the 37  ̊ F to 39  ̊ F range. (see, e.g., GE Bottom Freezer Refrigerators, No. 78 at p. 4; LG Owner’s Manual LFX28978**, No. 79 at p. 23) The controllable temperature range of heated special compartmen ts typically reaches temperatures of up to

4841  ̊ F or 42  ̊ F. By comparison, special compartments that rely on cooling air to manage temperatures do not exceed the typical fresh food compartment temperature range. (See, e.g., GE Bottom Freezer Refrigerators, No. 78 at p. 18; Use and Care Guide Electrolux 242046401, No. 80 at p. 18) The thirteen products identified include products from current products classes 5 (re frigerator-freezers—automatic defrost with bottom-mounted freezer without through-the-door ice service), 5A (refrigerator-freezer—automatic defrost with bottom-mounted freezer with through-th e-door ice service), and 7 (refrigeratorfreezers—automatic defrost with side-mounted freezer with through-the-door ice service). (Heated Spec ial Compartments Web Pages, No. 81)

DOE does not have information on shipment weighting for these products. As a proxy for shipment weighting, DOE instead determined the percentage of available products represented by the identified products with heated special compartments for each of the represented product classes. To do this, DOE considered the number of available products listed in the California Energy Commission (CEC ) database, adjusted to account for out-of-date product listings. The de tails of this approach are described in the TSD in chapter 5, section 5.4.2.6. The cal culated percentages of products having heated special compartments are 10.6 percent for current product class 5A, 1.5 percent for current product class 5, and 0.7 percent fo r current product class 7. DOE used these percentages to adjust the standards for thes e product classes. The determination of the adjustment is discussed in greater depth in section IV.C.2 below.

49DOE initially conducted analysis, describe d below in section IV.C.2, to estimate what the projected impact from the relevant test procedures would be on the measured energy use for a product with a heated special compartment. Initia l estimates indicated that the change would incr ease measured energy use by 5.9 percent for this type of product. DOE also conducted testing for two of the thirteen products that were identified as having heated special compartments. Thes e tests compared the measured energy use not including icemaking energy use when tested using the interim fi nal test procedures set forth in the new Appendix A with a modi fied test procedure in which the heated special compartment is tested only in its co ldest setting. For both of these tests, the Appendix A requirement to average measurem ents representing the coldest and warmest setting of the compartment re sulted in higher energy use. The impacts were 6.5 percent for one product and 1.7 percent for the other — the average impact determined for these tests was 4.1 percent, which is somewhat lower than the estimated 5.9 percent impact.

After reviewing these results, DOE determined that, because the test data represent only two products, th e uncertainty associated with the average of the measured impacts is fairly high. As a result, DOE concl uded that the more cons ervative approach of basing its adjustment of the energy standard on the calculation rather than the limited testing data is appropriate to ensure that the final standard is not overly aggressive. Taking such an approach is consistent in th is instance with EPCA’s prohibition to make subsequent adjustments that would increas e the permitted energy usage (or reduce the energy efficiency) of a regulated product. See 42 U.S.C. 6295(o)(1). Accordingly, as

50described in greater detail in section IV.C.2, the results of the more conserevative calculation were used to adju st the energy standard.

3. Standby and Off Mode Energy Use DOE notes that EPCA, as amended by EI SA 2007, requires DOE to amend its test procedures for all covered products, including th ose for refrigeration products, to include a measurement for standby mode and off mode energy consumption, except where current test procedures fully address su ch energy consumption. (42 U.S.C. 6295(gg)(2)) As indicated above, DOE’s test procedures for refrigerati on products, both the previous and recently amended versions, already fully address standby and off mode energy use. Whirlpool agreed with this assessment. (Whirlpool, No. 74 at p. 7) No commenters challenged this assessment. Because the test procedures address standby and off mode energy use, the energy conservation standards, which are based on the test procedures, also address this energy use.

B. Technological Feasibility
1. General In each standards rulemaking, DOE conducts a screening analysis based on information gathered on all current technology options and prototype designs that have the potential to improve product or equipmen t efficiency. To conduct the analysis, DOE typically develops a list of design options for consider ation in consultation with manufacturers, design engineer s, and other interested par ties. DOE then determines

51which of these options are technologically f easible. DOE considers a design option to be technologically feasible if it is currently in use by the relevant i ndustry or if a working prototype exists. See 10 CFR part 430, subpa rt C, appendix A, section 4(a)(4)(i) (providing that “[t]echnologies incorporated in commercia lly available products or in working prototypes will be consider ed technologically feasible.”)

Once DOE has determined that particular design options are technologically feasible, it evaluates each one using the fo llowing additional screening criteria: (1) practicability to manufac ture, install, or service; (2) adverse impacts on product utility or availability; and (3) adverse impacts on health or safety. (10 CFR part 430, subpart C, appendix A, section 4(a)(4)). Section IV.B of this notice discusses the results of the screening analysis for refrig eration products, namely, the de signs DOE considered, those it screened out, and those that are the basis for the trial standard levels (TSLs) in this rulemaking. For further details on the screeni ng analysis for this rulemaking, see chapter 4, Screening Analysis, of the NOPR TSD.

2. Maximum Technologically Feasible Levels When DOE proposes to adopt (or not adopt ) an amended standard for a type or class of covered product, it must “determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible” for such product. (42 U.S.C. 6295(p)(1)) Accordingly, DOE determined the maximum technologically feasible (“ma x-tech”) reductions in energy use for refrigeration products in the engineering analysis.

52As described in the preliminary TSD, DOE conducted a full analysis of a set of product classes that comprise a large percen tage of product shipments in the market today. DOE’s approach for extending amende d standard levels established for these product classes to the non-anal yzed product classes is descri bed in chapter 2, Analytical Framework, of the preliminary TSD, in sec tion 2.15. Similarly, this section of today’s rule reports the max-tech efficiency levels for the fully analyzed product classes, which include Classes 3 (refrigerator-freezer—aut omatic defrost with top-mounted freezer without through-the-door ice service), 5 (refri gerator-freezers—automatic defrost with bottom-mounted freezer without through-the-doo r ice service), 7 (refrigerator-freezers— automatic defrost with side-mounted freezer with through-the-door ice service), 9 (upright freezers with automatic defrost), 10 (chest freezers), 11 (compact refrigeratorsand refrigerator-freezers with manual defrost), 18 (compact chest freezers), 3A-BI (builtin all-refrigerators—automatic defrost), 5-BI (built-in Refrigerator-freezers—automatic defrost with bottom-mounted freezer without th rough-the-door ice service), 7-BI (built-in Refrigerator-freezers—automatic defrost with side-mounted freezer with through-thedoor ice service, and 9-BI (built-in upright fr eezers with automatic defrost). DOE considers the max-tech levels for these products classes to be repres entative of the maxtech levels of similar product classes. For example, product class 7 can be considered to represent product class 4 (refr igerator-freezers—automatic defrost with side-mounted freezer without through-the-door ice serv ice) because they are both side-mount refrigerator-freezers, the only di fference being the through-the- door ice feature of product class 7.

53In determining the max-tech efficiency levels of the direct ly analyzed product classes, DOE used the amended test proce dures that would apply once manufacturers are required to meet the new standa rd. The efficiency levels are defined as reductions in that portion of the energy use not associated with icemaking. As described in section III.A, above, the energy use associated with icemak ing under the amended test procedure is a fixed quantity not correlated w ith an efficiency level. Sepa rating this fixed quantity of energy use from the established efficiency level allows a more direct comparison of products, irrespective of whether a given product is equipped with an automatic icemaker. This approach also allows DOE to compare the efficiency levels based on the amended test procedure ( i.e. , projections of possible energy use reductions) against the energy use based on the existing test procedure and current standard. 16

DOE used the full set of design options considered applicable to these directly analyzed product classes to determine their ma x-tech efficiency leve ls. (See chapter 5 of the NOPR TSD, section 5.4.4.) Table III.1 lists th e max-tech levels that DOE determined for this rulemaking. The table also presents the max-tech levels that are commercially available. The max-tech levels differ from those presented in the preliminary TSD and are generally lower ( i.e. , the percent en ergy use reductions are lower for the NOPR analysis, thus, the max-tech energy use is higher). The reduction in the max-tech efficiency levels is due to the revisions DOE implemented in the NOPR engineering

16 In other words, a product with energy usage that is a certain percentage below the current energy standard should remain the same percentage below the baseline energy use under the proposed test procedure after subtracting icemaking energy use. Hence, the max-tech levels expressed as a percentage of energy use reduction should be the same for both sets of test procedures.

54analysis to address new information obtained during this phase of the rulemaking (see the discussion of changes made to the engineer ing analysis in the NOPR, Table IV.10. 75 FR 59470, 59501-59502 (September 27, 2010)). DOE obtained t he new information through NOPR phase interviews with manufacturers.

Table III.1 Max-Tech Efficiency Levels fo r the Refrigeration Products Rulemaking Product Class Description Efficiency Level (Percent Energy Use Reduction) DOE Analysis Max Tech Commercially Available Standard-Size Refrigerator-Freezers 3 Refrigerator-freezers—automatic defrost with top-mounted freezer without through-the-door ice service 36% 30%

5 Refrigerator-freezers—automatic defrost withbottom-mounted freezer without through-thedoor ice service 36% 33%

7 Refrigerator-freezers—automatic defrost with side-mounted freezer with through-the-door ice service 33% 32%

Standard-Size Freezers 9 Upright freezers with au tomatic defrost 44% 27% 10 Chest freezers and al l other freezers except compact freezers 41% 16% Compact Products 11 Compact refrigerators and refrigerator-freezers with manual defrost 59% 27%
18 Compact chest freezers 42% 23% Built-In Products 3A-BI Built-In All-refrigerators—automatic defrost 28% 31% 5-BI Built-In Refrigerator-freezers—automatic defrost with bottom-mounted freezer without through-the-door ice service 27% 27%

7-BI Built-In Refrigerator-freezers—automatic defrost with side-mounted freezer with through-the-door ice service 22% 21%

9-BI Built-In Upright freezers with automatic defrost 27% 27%

55The max-tech efficiency levels identified for commercially available products are, in most cases, different from the max-tech levels shown in Table III.1. The levels in Table III.1 are significantly higher than the commercially available max-tech levels for product classes 9 (upright freezers with automatic defrost), 10 (chest freezers), 11 (compact refrigerators and refrigerator-fr eezers with manual defrost), and 18 (compact chest freezers). DOE determined that higher max-tech levels for these products were possible because available products generally do not use all of the energy efficient design options considered in the DOE max-tech an alyses. Prototypes with the DOE max-tech levels have not been identified, but the de sign options are all used in commercially available products.

DOE determined the max-tech levels using a program initially developed by the Environmental Protection Agency (EPA) calle d the Efficient Refrigerator Analysis program (known simply as the ERA) to conduct energy modeling. DOE conducted this energy modeling for specific products examin ed during the engineering analysis. DOE created energy models for the existing products and adjusted these models to represent modified designs using the screened-in design options. The max-tech levels represent the most efficient design option combinations a pplicable for the analyzed products. This process is described in Chapter 5 of the NOPR TSD. See NOPR TSD, sections 5.4.4 and
5.7. DOE considered different sets of design options for each product class, as indicated in Table III.2.

56Table III.2 Design Options Considered for Max Tech Product Class Design OptionBLDC* FanMotorsHeatExchangerImprovementThickerWallsVacuumInsulationPanels (VIPs)VariableSpeedCompressorAdaptiveDefrostVariableAnti-sweatHeaterControlIsobutaneRefrigerant

3      5       7       9       10     11      18     3A-BI     5-BI      7-BI       9-BI      *Brushless-Direct-Current
DOE requested comments on its max-tech efficiency levels and on the evaluated groups of design options DOE’s analyses i ndicated would be necessary to employ to achieve these levels. 75 FR at 59484 (September 27, 2010). Sub Zero commented that DOE’s analysis leading to the max-tech feasib le levels is reasonabl e. (Sub Zero, No. 69 at p. 1) Sub Zero also commented that ma ny of the design options still available to improve the efficiency of freestanding produc ts have already been used in built-in products that are available on the market.

Whirlpool commented that some of the design option combinations may not be practical, that the resulting efficiency ga ins may not be additive, and that the combinations may not be cost-effective. Whirlpool also commented that it does not believe that DOE has met the obligation to demonstrate the technical and economic

57feasibility of these combinati ons. (Whirlpool, No. 74 at p. 1) . Whirlpool did not identify the specific combinations that it believed to be impractical. Accordingly, DOE has not adjusted its max-tech analysis. DOE adds that max-tech efficiency levels are not required to be cost-effective levels, but that DOE is required by EPCA to determine the maximum improvement that is technologica lly feasible, and to explain w hy the standard is not set at this level, if it is no t. (42 U.S.C. 6295(p)(1))

C. Energy Savings
1. Determination of Savings DOE used its National Impact Analysis (NIA) spreadsheet model to estimate the energy savings from amended standards for the refrigeration products covered by this rulemaking. 17 For each TSL, DOE forecasted ener gy savings beginning in 2014, the year that manufacturers would be required to comp ly with amended standards, and ending in 2043. DOE quantified the energy savings attri butable to each TSL as the difference in energy consumption between the standards case and the base case. The base case represents the forecast of energy consumption in the absence of amended mandatory efficiency standards and considers market demand for more-efficient products.

The NIA spreadsheet model calculates th e electricity savings in “site energy” expressed in kilowatt-hours (kWh). Site energy is the energy directly consumed by refrigeration products at the locations wher e they are used. DOE reports national energy savings on an annual basis in terms of the aggregated source (primary) energy savings, which is the savings in the en ergy that is used to generate and transmit the site energy.

17 The NIA spreadsheet model is described in section IV.G of this rule.

58(See TSD chapter 10.) To convert site en ergy to source energy, DOE derived annual conversion factors from the model used to prepare the Energy Information Administration’s (EIA) Annua l Energy Outlook 2010 (AEO2010)

.

2. Significance of Savings As noted above, DOE must adopt a standard for a covered product that results in “significant” energy savings. 42 U.S.C. 6295(o)(3)(B). While the term “significant” is not defined in the Act, the U.S. Court of App eals, in Natural Resources Defense Council v. Herrington , 768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated that Congress intended “significant” energy savings in this context to be savings that were not “genuinely trivial.” The energy savings for all of the TSLs considered in this rulemaking are nontrivial, and, therefore, DOE considers th em “significant” with in the meaning of section 325 of EPCA.

D. Economic Justification
1. Specific Criteria As noted in section II.A, EPCA provides seven factors for DOE to consider when evaluating whether a potential energy conservation standard is economically justified. (42
U.S.C. 6295(o)(2)(B)(i)) The following sections discuss how DOE has addressed each of those seven factors in this rulemaking.

a. Economic Impact on Manufacturers and Consumers As required by EPCA, DOE considered the economic impact of potential

59standards on consumers and manufactur ers. (42 U.S.C. 6295(o)(2)(B)(i)(I)) For consumers, DOE measured the economic impact as the change in installed cost and lifecycle operating costs ( i.e. , the change in LCC). ( See section IV.F, section VI.B.1 and chapter 8 of the final rule TSD.) DOE inve stigated the impacts on manufacturers through the manufacturer impact analysis (MIA). ( See section IV.I and section VI.B.2 of today’s final rule, and chapter 12 of the final rule TSD accompanying this rule.) The economic impact on consumers and manufacturers is discu ssed in detail in the NOPR. See 75 FR at 59484-59485, 59512-59516, 59519-59526, 59532-59537, and 59537-59549 (September 27, 2010).

For individual consumers, measures of economic impact include the changes in life-cycle cost (LCC) and payback period (PBP) associated with new or amended standards. The LCC, which is separately specified in EPCA as one of the seven factors to be considered in determining the economic justification for a new or amended standard, 42 U.S.C. 6295(o)(2)(B)(i)(II), is discussed in the followi ng section. For consumers in the aggregate, DOE also calculates the nationa l net present value of the economic impacts on consumers over the forecast period us ed in a particular rulemaking.

b. Life-Cycle Costs The LCC is the sum of the purchase pri ce of a product (includi ng its installation) and the operating expense (including energy a nd maintenance and re pair expenditures) discounted over the lifetime of the product. The LCC savings for the considered efficiency levels are calculat ed relative to a base case that reflects likely trends in the

60absence of amended standards. The LCC analys is requires a variety of inputs, such as product prices, product energy consumption, ener gy prices, maintenance and repair costs, product lifetime, and consumer discount rate s. DOE assumed in its analysis that consumers will purchase the products affected by this rule in 2014.

To account for uncertainty and variability in specific inputs, such as product lifetime and discount rate, DOE uses a distribu tion of values with probabilities attached to each value. A distinct advantage of th is approach is that DOE can identify the percentage of consumers estimated to receive LCC savings or experience an LCC increase, in addition to the average LCC savi ngs associated with a particular standard level. Aside from identifyi ng ranges of impacts, DOE evaluates the LCC impacts of potential standards on identifiable subgroups of consumers that may be disproportionately affected by a national standard, such as low-income people or the elderly.

c. Energy Savings While the significant conservation of ener gy is a separate st atutory requirement for imposing an energy conservation standard, in determining the economic justification of a standard, DOE must consid er the total projected energy sa vings that are expected to result directly from the standard. 42 U.S. C. 6295(o)(2)(B)(i)(III). DOE uses the NIA spreadsheet results in its consideratio n of total projected energy savings.

61d. Lessening of Utility or Performance of Products In establishing product classes, and in evaluating design options and the impact of potential standard levels, DOE sought to deve lop standards for refrig eration products that would not lessen the utility or performan ce of these products. None of the TSLs presented in today’s final rule would substantially reduce the utility or performance of the products under consideration in the rulemaking. However, the cost premium for features that increase energy use, such as multiple drawers, may increase, thus shifting their availability to higher-priced products . 42 U.S.C. 6295(o)(2 )(B)(i)(IV).

e. Impact of Any Lessening of Competition EPCA requires DOE to consider any lesse ning of competition that is likely to result from setting new or amended standard s for a covered product. Consistent with its obligations under EPCA, DOE sought the view s of the United States Department of Justice (DOJ). DOE asked DOJ to provide a written determination of the impact, if any, of any lessening of competition likely to resu lt from the amended standards, together with an analysis of the nature and extent of such impact. 42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii).

To assist DOJ in making such a determ ination, DOE provided DOJ with copies of both the NOPR and NOPR TSD for review. DOJ did not provide DOE with comments on this rulemaking. Accordingly, DOE concludes that today’s final rule would not be likely to lead to a lessening of competition.

62f. Need for National Energy Conservation Certain benefits of the amended sta ndards are likely to be reflected in improvements to the security and reliability of the Nation’s energy system. Reductions in the demand for electricity may also result in reduced costs for maintaining the reliability of the Nation’s electricity system. DOE conducts a utility impact analysis to estimate how standards may affect the Nation’s ne eded power generation capacity.

Energy savings from the amended standa rds are also likely to result in environmental benefits in the form of redu ced emissions of air po llutants and greenhouse gases associated with ener gy production. DOE reported the e nvironmental effects from the amended standards for refrigeration produc ts, and from each TSL it considered, in the environmental assessment contained in chapte r 15 in the NOPR TSD. DOE also reported estimates of the economic value of emissions reductions resulting from the considered
TSLs.

g. Other Factors EPCA allows the Secretary of Energy, in determining whether a standard is economically justified, to consider any othe r factors that the S ecretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) In developing this final rule, DOE also considered the comments of the stakehol ders, including those raised in the Joint Comments, which DOE believes sets forth a statement by interested persons that are fairly representative of relevant points of view (i ncluding representatives of manufacturers of covered pr oducts, States, and efficiency advocates) and contains

63recommendations with respect to an energy conservation standard that are in accordance with 42 U.S.C. 6295(o).

2. Rebuttable Presumption As set forth in 42 U.S.C. 6295(o)(2)( B)(iii), EPCA creates a rebuttable presumption that an energy conservation st andard is economically justified if the additional cost to the consumer of a product th at meets the standard is less than three times the value of the first-year of ener gy savings resulting from the standard, as calculated under the applicable DOE test procedure. DOE’s LCC and PBP analyses generate values used to calculate the payb ack period for consumers of potential amended energy conservation standards. These analyses include, but ar e not limited to, the 3-year payback period contemplated under the re buttable presumption test. However, DOE routinely conducts an economic analysis that considers the full range of impacts to the consumer, manufacturer, Na tion, and environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this analysis serve as the basis for DOE to definitively evaluate the economic justific ation for a potential standard level (thereby supporting or rebutting the results of any preliminary dete rmination of economic justification). The rebuttable presumption payback calculation is discussed in section IV.F.12 and chapter 8 of the final rule TSD.

IV. Methodology and Discussion DOE used two spreadsheet tools to estimate the impact of today’s amended standards. The first spreadsheet calculate s LCCs and payback periods of new energy

64conservation standards. The s econd one provides shipments fore casts, and then calculates national energy savings and net present va lue impacts of new energy conservation standards. DOE also assessed manufacture r impacts, largely through use of the Government Regulatory Impact Model (GRI M). The two spreadsh eets are available online at the rulemaking website: http://www1.eere.energy.gov/buildings/appliance_standards/resi dential/refrigerators_free zers.html

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Additionally, DOE estimated the imp acts on utilities a nd the environment stemming from energy efficiency standard s for refrigeration products. DOE used a version of EIA’s National Energy Modeli ng System (NEMS) for the utility and environmental analyses. The NEMS model si mulates the energy sector of the U.S. economy. EIA uses NEMS to prepare its Annual Energy Outlook , a widely known energy forecast for the United States. The version of NEMS used for appliance standards analysis is called NEMS-BT 18 , and is based on the AEO version with minor modifications. 19 The NEMS-BT offers a sophisticated picture of the effect of standards because it accounts for the in teractions between the various energy supply and demand sectors and the economy as a whole.

18 BT stands for DOE’s Building Technologies Program. 19 The EIA allows the use of the name “NEMS” to desc ribe only an AEO version of the model without any modification to code or data. Because the present anal ysis entails some minor c ode modifications and runs the model under various policy scenarios that deviate from AEO assumptions, the name “NEMS-BT” refers to the model as used here. For more information on NEMS, refer to The National Energy Modeling System: An Overview , DOE/EIA–0581 (98) (Feb.1998), available at: http://tonto.eia.doe.gov/FTP ROOT/forecasting/058198.pdf

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65A. Market and Technology Assessment When initiating an energy conservation standards rulemaking, DOE develops information that provides an overall picture of the market for the products concerned, including the purpose of the pr oducts, the industry structure, and market characteristics. This activity includes both quantitative and qualitative assessments, based primarily on publicly available information. The subjects addressed in the market and technology assessment for this rulemaking include produc t classes and manufacturers; quantities, and types of products sold and offered for sale ; retail market trends; regulatory and nonregulatory programs; and technol ogies or design options that could improve the energy efficiency of the product(s) under examin ation. See chapter 3, Market and Technology Assessment, of the TSD for further discussi on of the market and technology assessment.

Discussion presented in this section of today’s notice primarily addresses the scope of coverage of refrigeration products, the product class struct ure, and product class definitions. These issues were discussed duri ng the NOPR public meeting. In response to comments raised during that meeting and from written comments, DOE has modified the product class structure, as discus sed in section IV.A.2, below.

1. Exclusion of Wine Coolers from This Rulemaking The NOPR explained that wine cooler s are not covered products under the definition for electric refrigerator, and henc e, are not covered by this rulemaking. 75 FR at 59486 (September 27, 2010). DOE explained that it would consider initiating a future rulemaking to establish coverage and energy standards for these products. Id. Whirlpool commented that it agrees that wine cooler s do not meet the definition of electric

66refrigerator, but that DOE shoul d reconsider its decision not to include these products in this rulemaking. (Whirlpool, No. 74 at p. 8) GE commented that DOE should regulate these products and should consider the prope r mechanism for doing so. (GE, No. 76 at p. 2) In light of the timetable prescribed by EPCA, insufficient time and resources are available for DOE to conduct the necessary analyses for these products within the context of the current rulemaking. In response to the pr eliminary analysis, the California Investor Owned Utilities agreed with DOE ’s initial decision not to include wine coolers in this rulemaking, indicating that they operate at temperatures outside the range defined for refrigerators, and that they have been covered by Calif ornia’s energy standards since 2002. (IOUs, No. 39 at p. 12) The IOUs submitted no new comments on this topic in response to the NOPR. Sub Zero indicated in the preliminary analysis public meeting that the California energy standard for these products has become a de-facto national standard. (Preliminary Analysis Public Me eting Transcript, N o. 30 at pp. 108-109). As previously indicated, DOE will revisit the cove rage of these products in the future.

2. Product Classes In evaluating and establishing energy conservation standards, DOE generally divides covered products into cl asses by the type of energy us ed, or by capacity or other performance-related feature that justifies a different standard for those products. (See 42
U.S.C. 6295(q)). In deciding whether a featur e justifies a different standard, DOE must consider factors such as the utility of the f eature to users. ( Id .) DOE normally establishes different energy conservation standards fo r different product classes based on these criteria. DOE’s regulations currently set fo rth 18 product classes for refrigerators,

67refrigerator-freezers, and freezers. 20 These classes are based on the following characteristics: type of unit (refrigerator, refrigerator-fre ezer, or freezer), size of the cabinet (standard or compact), type of defros t system (manual, partial, or automatic), presence or absence of through-the-door (TTD ) ice service, and pl acement of the fresh food and freezer compartments for refr igerator-freezers (top, side, bottom).

DOE has created 24 new product classes to account for the increasingly wider number of variants of products. Six new pr oduct classes were disc ussed and proposed in the preliminary analysis phase, and an addi tional 13 were proposed in the NOPR. 75 FR at 59486-59487 (September 27, 2010). Tabl e IV.1 presents the product classes established in this rulemaking, including both current and new classes. DOE changed the designation of some of the curr ent product classes to address the division of these product classes. The subsections below provide addi tional details and disc ussion of comments relating to the product classe s that have been added.

Table IV.1 Product Classes for Refrigeration Products No. Product Class Classes Currently Listed in the CFR 1 Refrigerators and refrigerator-freezers with manual defrost 2 Refrigerator-freezers—partial automatic defrost 3 Refrigerator-freezers—automatic defrost with top-mounted freezer without an automatic icemaker 4 Refrigerator-freezers—automatic defrost with side-mounted freezer without an automatic icemaker 5 Refrigerator-freezers—au tomatic defrost with bottom-mounted freezer without an automatic icemaker 6 Refrigerator-freezers—automatic defrost with top-mounted freezer with through-the-door ice service

20 Title 10—Energy, Chapter II—Department of En ergy, Part 430—Energy Conservation Program for Consumer Products, Subpart A—General Provisions, Section 430.32—Energy and Water Conservation Standards and Effective Dates

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68No. Product Class 7 Refrigerator-freezers—automatic defrost with side-mounted freezer with through-the-door ice service 8 Upright freezers with manual defrost 9 Upright freezers with automatic defro st without an automatic icemaker 10 Chest freezers with manual defrost and all other freezers except compact freezers 11 Compact refrigerators and refri gerator-freezers with manual defrost 12 Compact refrigerator-freezers—partial automatic defrost 13 Compact refrigerator-freezers—automatic defrost with top-mounted freezer 14 Compact refrigerator-freezers—automatic defrost with side-mounted freezer 15 Compact refrigerator-freezers—automati c defrost with bottom-mounted freezer 16 Compact upright freezers with manual defrost 17 Compact upright freezers with automatic defrost 18 Compact chest freezers Product Classes Introduced in the Preliminary TSD 1A All-refrigerators—manual defrost 3A All-refrigerators—automatic defrost 5A Refrigerator-freezers—automatic defrost with bottom-mounted freezer with through-thedoor ice service 10A Chest freezers with automatic defrost 11A Compact all-refrige rators—manual defrost 13A Compact all-refrigerators—automatic defrost Additional Product Classes Proposed in the NOPR 3-BI Built-in refrigerator-freezer—automatic defrost with top-mounted freezer without an automatic icemaker 3I Refrigerator-freezers—automatic defrost with top-mounted freezer with an automatic icemaker without through-the-door ice service 3I-BI Built-in refrigerator-freezers—au tomatic defrost with top-mounted freezer with an automatic icemaker without through-the-door ice service 3A-BI Built-in all-refrigera tors—automatic defrost

4I Refrigerator-freezers—automatic defrost with side-mounted freezer with an automatic icemaker without through-the-door ice service 4-BI Built-in refrigerator-freezers—au tomatic defrost with side-mounted freezer without an automatic icemaker 4I-BI Built-in refrigerator-freezers—au tomatic defrost with side-mounted freezer with an automatic icemaker without through-the-door ice service 5I Refrigerator-freezers—au tomatic defrost with bottom-mounted freezer with an automatic icemaker without through-the-door ice service 5-BI Built-in refrigerator-freezers—automatic defrost with bottom-mounted freezer without an automatic icemaker 5I-BI Built-in refrigerator-freezers—automatic defro st with bottom-mounted freezer with an automatic icemaker without through-the-door ice service 5A-BI Built-in refrigerator-freezer—automatic defrostwith bottom-mounted freezer with throughthe-door ice service 7-BI Built-in refrigerator-freezer s—automatic defrost with side-mounted freezer with through69No. Product Class the-door ice service 9-BI Built-in upright freezers with automatic defrost without an automatic icemaker Additional Product Classes 9I Upright freezers with automatic de frost with an automatic icemaker 9I-BI Built-in upright freezers with automatic defrost with an automatic icemaker

13I Compact refrigerator-freezers—automatic defrost with top-mounted freezer with an automatic icemaker 14I Compact refrigerator-freezers—automatic defro st with side-mounted freezer with an automatic icemaker 15I Compact refrigerator-freezers—automatic defro st with bottom-mounted freezer with an automatic icemaker

a. General Discussion Regardi ng Added Product Classes DOE introduced six new product classes in the preliminary TSD. Two of these, product class 5A, “automatic defrost refriger ator-freezers with bottom-mounted freezer with through-the-door ice serv ice,” and product class 10A, “che st freezers with automatic defrost,” were identified in the framework document as product classes 19 and 20. DOE modified the designation of thes e product classes in order to maintain consistency with the product class designati ons adopted by Canada and ease the overall burden on manufacturers in ascertaining which standa rds to apply to thes e products. Id. at 59487­ 59488. AHAM supported adding the new produc t classes 5A and 10A. (AHAM, No. 73 at p. 6)

Four additional product classes intro duced in the preliminary TSD are allrefrigerators. As described in the NOPR, the new test procedure has led DOE to establish separate product classes for these products. Id. at 59488.

70The NOPR also proposed 13 additional ne w product classes. These classes are based on the incorporation of icemaking ener gy use into the test procedure and address the different consumer utility and energy use characteristics of built-in products. Id. at 59489-59493.

EPCA provides that separate product cla sses be based on either (A) consumption of a different kind of energy from that cons umed by other covered products within such type (or class); or (B) a capacity or ot her performance-related feature which other products within such type (or class) do not ha ve, where such feature justifies a higher or lower standard from that which applies to ot her products within such type (or class). (42
U.S.C. 6295(q)). The second of these criteria applies to all of the new product classes in this rulemaking. DOE detailed the reasons fo r this approach in the NOPR. Id. at 59487­ 59493. DOE received no comments challenging this approach.

DOE also requested comment on whether any additional product classes should be established as built-in or automatic icemak er variants of products to address the range of commercially available products. Sub Ze ro recommended including additional product classes 9I and 9I-BI, freesta nding and built-in versions of upr ight freezers with automatic defrost equipped with an automatic icemaker . The company asserted that such products currently are being sold (Sub Zero, No. 69 at p. 3) DOE’s research confirms the existence of these two product classes (Upright Freezers with Automatic Icemakers, No. 86).

71AHAM and Whirlpool recommended includ ing product classes 9I, 9I-BI, 13I, 14I, and 15I as variants of proposed products without through-the- door ice service that may have automatic icemakers. (AHAM, No. 73 at pp. 6-7; Whirl pool, No. 74 at pp. 1-2, 3) AHAM also recommended including product cl ass 9A, described as “upright freezers with automatic defrost with an automatic i cemaker with through-the-door ice service”. (AHAM, No. 73 at pp. 6-7) DOE has adopted pro duct classes 9I, 9I-BI, 13I, 14I, and 15I. DOE’s research identified at least one existing compact bo ttom-freezer product with an automatic icemaker (product class 15I, Comp act Products with Automatic Icemakers, No. 85 at p. 3). DOE was not able to positivel y identify any compact side-mount products with automatic icemakers (product class 14I), nor any compact top-mount products (product class 13I), but did identify one existing product whose product class is not clearly indicated in the manuf acturer’s literature that is either a 13I or 14I product. (Compact Products with Automatic Icemakers, No. 85 at p. 1)

The standard levels for these classes are equal to the standards of their counterparts without an icemaker plus the addition of 84 kWh to help account for the energy consumed by the automatic icemaker. Ho wever, the suggested product class 9A is not a variant of any of the proposed product cl asses. Instead, it constitutes a new class that DOE had not considered within the cont ext of this rulemaking. Accordingly, DOE is declining to incorporate this particular class as part of the final rule.

Lastly, Whirlpool asserted that the ne gotiated agreement intended to combine product classes 13 and 15, and Whirlpool lik ewise appeared to recommend combining

72product classes 13I and 15I, by grouping them together in its comme nts. (Whirlpool, No. 74 at p. 2) Whirlpool offered no support for th is view and no other comments indicated that these product classes should be combin ed. Hence, DOE is maintaining separate classes for Classes 13, 15, 13I, and 15I.

b. Possible Combination of Product Class 2 with 1, and Class 12 with 11 DOE also indicated in the NOPR that it did not propose the combination of two pairs of product classes that had been discussed in the pre liminary TSD -- specifically, a potential combination of product classes 1 (ref rigerators and refrigerator-freezers with manual defrost) and 2 (refrigerator-freezers—pa rtial automatic defros t) and, separately, a potential combination of product classes 11 (compact refrigerator s and refrigeratorfreezers with manual defrost) and 12 (compact refrigerator-freezers

— partial automatic defrost). DOE requested comment on its propo sal not to combine these pairs of product classes. Id. at 59493. AHAM and NPCC agreed with this proposal. (AHAM, Public Meeting Transcript, No. 67 at p. 52; AHAM, No. 73 at p. 6; NPCC, Public Meeting Transcript, No. 67 at p. 52) Whirlpool pres ented a table suggesti ng that they were opposed to keeping product classes 1 and 2 separated. (Whirlpool, No. 74 at p. 2), but noted that it had nothing s ubstantive to add on this matter because it does not manufacture these products. (Whirlpool, No. 74 at p. 3) In light of these comments, which generally favored DOE’s proposed appr oach, DOE is not combining these product class pairs.

73c. All-Refrigerators and Basic Refrigerators All-refrigerators are refrigerators that do not have a compartment for the freezing and long-term storage of food below 32  ̊ F, but which may have a compartment not larger than 0.5 cubic foot in size for freezing and storage of ice. (10 CFR part 430, subpart B, appendix A1, section 1.2) The definition fo r refrigerator appears in 10 CFR 430.2 and it includes both all-refrigerators a nd refrigerators that are not all-refrigerators. This latter category of refrigerator, whic h does include a compartment for the storage of food below
32  ̊ F, is given the name “basic refrigerat or” in both AHAM standards HRF-1-1979 and HRF-1-2008. Appendix A1 and Appendix A, respectively, both reference these industry-developed definitions.

AHAM supported establishing separate pr oduct classes for all-refrigerators, indicating that these new product classes we re supported in the negotiated agreement described in the Joint Comments. (AHAM, N o. 73 at p. 4) However, AHAM indicated that the product classes for refrigerators that are not all-refrigerat ors should be renamed using “basic refrigerator” to ensure that th ey exclude all-refrigerators. (Id.) Whirlpool supported this view. (Whirl pool, No. 74 at p. 2)

DOE agrees with AHAM that clarifying the product class names for certain classes will improve overall clarity. DOE notes that this change affects product classes 1 (refrigerators and refrigerator-f reezers with manual defrost) and 11 (compact refrigerators and refrigerator-freezers with manual defros t). (These are the product class names as proposed—and currently used in the CFR.) DOE has also considered whether to rely on

74referencing the definition sections of HRF-1-1979 and HRF-1-2008, as described above, to provide the definition for ba sic refrigerator. The definitions for basic refrigerator are the same in these standards and they read as follows:
3.1.1 Basic Refrigerator A refrigerator which includes a low temperature compartment for the freezing and storag e of ice and intended for short-term storage of food at temperatures below 32°F (0°C) and normally above 8°F (­ 13.3°C). It is characterized by a refrigerated surface(s) that partially encloses the low temperature compartment and cools the fresh food compartment by natural convection. It frequently ha s a partition (called the chiller or drip tray) which when removed or adjusted exposes an additional area of the refrigerated surface to the fresh food compartment. HRF-1-1979, HRF-1-2008, section 3.1.1.

DOE notes two concerns regarding this definition of basic refrigerator.

First, the definition does not define a lower size limit for the low temperature compartment, nor does it specify a temperat ure range for it. The clause “short-term storage of food at temperatures below 32  ̊ F” does not distinguish the temperature range of such a compartment from the compartment of an all-refrigerator that is “for freezing and storage of ice”, since freezing and storage of ice also requires temperatures less than
32  ̊ F. As a result, it is not clear whether a product with a low temperature compartment capable of reaching temperatures less than 32  ̊ F and above 8  ̊ F and a size no greater than
0.5 cubic foot is an all-refrig erator or a basic refrigerato r under the AHAM definition.

75Second, characterizing the basic refrigera tor by describing the low-temperature compartment’s sides and how they transfer cooling air to the fresh food compartment could exclude some types of refrigerators fr om AHAM’s basic refrige rator definition. For instance, a product that uses a fan to provide forced convection transfer of cooling air to the fresh food compartment from the refriger ated surfaces enclosing the low-temperature compartment would not fit the definition. If the product class were renamed using “basic refrigerators”, such products that do not fit the basic refrige rator definition would not be included within the product class. A manuf acturer could claim such a product is not covered, assuming it does not meet the require ments of the all-refrigerator definition either.

To resolve these issues, DOE has decided to clarify the prod uct class names forproduct classes 1 and 11, indicating that these product classes do not include allrefrigerators. The new names for these produc t classes are “1. Refr igerator-freezers and refrigerators other than a ll-refrigerators with manual defrost” and “11. Compact refrigerator-freezers and refrigerators other th an all-refrigerators with manual defrost.” DOE has taken this approach rather than using the term “basic refrigerator” and modifying its definition, thus allowing the ex isting definition for basic refrigerator to retain its current meaning.

AHAM provided in its written comments a table (Table A) showing the suggested changes to all of the produc t class names. A similar ta ble appears in Whirlpool’s

76comments. In addition to the suggested na me changes for product classes 1 and 11, AHAM and Whirlpool included the following suggestions.

 Inclusion of basic refriger ators in product class 3.

 Correction of the proposed name for product class 11A.

 Insertion of an “s” to plur alize “all-refrigerators” in the product class 13 name. (AHAM, No. 73 at p. 5; Wh irlpool, No. 74 at p. 2)

DOE notes that basic refrigerators have not previously been part of product class 3 (they instead have been part of product cl ass 1), which makes the incorporation of this suggestion inappropriate. DOE notes that product class 3 de notes "Refrigerator-freezersautomatic defrost with top-mounted freezer without an automatic icemaker". Basic refrigerators do not belong in this product cla ss because they are not refrigerator-freezers. For this reason, DOE is declining to adopt this suggestion and will retain its proposed name for this class --“refrig erator-freezers—automatic defros t with top-mounted freezer without an automatic icemaker” as proposed. However, DOE agrees with the other two suggestions and has implemented them in this final rule.

d. Built-In Refrigeration Products DOE requested comment on its proposal to establish separate product classes for built-in products. 75 FR at 59492 (September 27, 2010). AHAM, Sub Zero, and Whirlpool agreed with this proposal. (AHAM, No. 73 at p. 3; Sub Zero, No. 69 at p. 2; Whirlpool, No. 74 at p. 3) DOE received no comments opposing the creation of built-in product classes.

77DOE proposed to define built-in products as any refrigerator, refrigerator-freezer or freezer with 7.75 cubic feet or greater total volume and 24 inches or less depth, excluding handles and custom front panels. Su ch a product would also be designed to be encased on the sides and rear by cabinetry, secu rely fastened to adjacent cabinetry, walls or floor, and have sides that are not fully finished and not designed to be visible after installation. See 75 FR at 59492 (September 27, 2010).

AHAM and NPCC noted that the proposed definition differed from the definition developed as part of the consensus agr eement and asked why it was different. (AHAM, Public Meeting Transcript, No. 67 at pp. 54- 55; AHAM, No. 73 at pp. 3-4; NPCC, Public Meeting Transcript, No. 67 at pp. 53, 55) Sub Zero commented that the definition developed during the negotiations should be adopted. (Sub Zero, No. 69 at p. 3) Whirlpool also supported this view. (Whi rlpool, No. 74 at p. 3) AHAM recommended that DOE adopt the consensus agreement de finition. AHAM also pointed out that the most important difference between the c onsensus agreement definition and DOE’s proposed definition is the specification in the co nsensus definition of what is not part of the 24-inch depth limit -- specifically, th e doors, panels, and/or handles. AHAM indicated that these components may extend beyond 24 inches in many built-in products. In AHAM’s view, DOE’s proposed definition would not account fo r such situations. (AHAM, No. 73 at p. 4) The JA C also commented that the proposed definition was not the same as the definition of the negotiated ag reement, and suggested that DOE adopt this definition with any minor changes that DOE deems necessary. (JAC, No. 75 at p. 2)

78The negotiated agreement presented to DOE included the following definition for built-in products:

Definition of ’Built-in’ product class – re frigerators, freezers and refrigerators with freezer units that are 7.75 c ubic feet or greater in total volume and 24 inches or less cabinet depth not including doors, handles and custom front panels; are designed to be totally encased by cabinetry or panels attach ed during installation; are designed to accept a custom front panel or equipped with an in tegral factory–finished face; are designed to be securely fastened to adjacent cabinetry, walls or floor; and have sides which are not fully finished and are not intended to be visible after installation. (Joint Comments, No. 52 at p. 30)

The substantive differences between th is definition and the definition DOE proposed in its NOPR are as follows.

 The 24-inch depth allowed by the Joint Co mments definition does not include the door depth. Technically, this removes the de pth of the door edge and the gasket, a difference expected to be typically about 2 inches.

 The Joint Comments mention being “tota lly encased” by cabinetry or panels, while the proposed definition mentions being encased on the sides and rear by cabinetry. DOE did not propose to use the te rm “totally encased” as suggested in AHAM’s preliminary analysis comment b ecause the door is not always encased.

7975 FR at 59492 (September 27, 2010). The Joint Comments added “panels” to apply to the cabinetry that may encase the product.

 The Joint Comments provide that the “panels [are] attached during installation” (emphasis added).

 The Joint Comments include the clause, “are designed to accept a custom front panel or equipped with an integral fact ory-finished face” whereas the proposed definition did not include this clause.

 The Joint Comments indicate that the side s “are not intended to be visible after installation”, while the proposed defin ition uses “not designed to be”.

DOE was aware when proposing the definiti on that, although establishing a depth limitation is entirely consistent with built-in designs and th eir use, the exact dimension that would be appropriate for this limit w ould be subject to further refinement from stakeholder discussion and comment. DOE c onsiders the slightly less restrictive definition of the Joint Comments to embody the consideration and consensus of interested parties regarding the appropriate dimension, and will for this reason adopt the suggested change to the depth limitation.

Regarding the use of the term “totally encased”, DOE recognizes the limitation of its initially proposed approach and that the term does not necessarily mean fully encapsulated to the extent that absolutely no surface of the delivered product is visible after installation. Hence, DOE has reverted to the use of “totally encased” to indicate encased on all surfaces but the door, which cl early needs to be accessible to consumers

80for the product to function properly. DOE also agrees to the addition of the term “panels” that may also serve to encase the product, such as in the case where a product is installed at the end of a row of cabinets and one of the sides is covered with a panel. Further, DOE agrees with the inclusion of the words “att ached during installation” in reference to panels, since this clause cl early distinguishes a built-in product from a freestanding product, for which there would be no atta chment of panels during delivery and installation.

DOE is not convinced, however, that the clause “are designed to accept a custom front panel or equipped with an integral factory-finished fa ce” helps distinguish built-in products from freestanding products, since freest anding products generally come with an integral factory-finished face that is part of the door assembly. Based on the language used in the Joint Comments definition, as we ll as the existence of built-in products that are not designed to accept custom front panels, DOE suspects that the purpose of including this clause is to ensure that bu ilt-in products that do not accept custom front panels are not excluded from the definiti on. Many built-in products have doors with a stainless steel finish (see, e.g., http://products.geappliances.com/ApplProducts/D ispatcher?REQUEST=SPECPAGE&S KU=ZISP480DXSS&SITEID=MON2&TABID=2). Such products are not designed to accept custom front panels, but otherwise have the same distinguishing design features of built-in products that do accept custom front panels. DOE has decided to use language to clarify that such products are not ex cluded from the bui lt-in category.

81Additionally, DOE believes that the defi nition proposed by the Joint Commenters in their negotiated agreement needs to be altered to mitigate the risk of manufacturers applying the built-in definition to a free-sta nding product. To addre ss this risk, DOE is requiring that a built-in product be one th at is designed, intended, and marketed exclusively in a manner that would be consis tent with how a built-in product would be installed for consumer use. Factors that DOE would likely consider relevant in this context could include whether the product is sold in an unfinished state and how the product is advertised. DOE believes that by specifying these additional conditions, the definition clearly requires that a manufacturer take affirmative steps establishing the built-in nature of its products. In effect, DOE ha s taken the “intended” language presented in the negotiated agreement’s propo sal and clarified this concept by specifying the conditions that must be met for a particular model to be consider ed a built-in product.

Because of the problems that both DOE a nd the industry have faced with respect to the actions taken by certain manufacturers, DOE believes that it needs to take a stronger approach than that proposed in th e negotiated agreement with respect to the delineation of these products. Adopting this stronger approa ch helps establish a clear distinction between built-in and free-standing pr oducts. Such a distinction is necessary in light of the considerably highe r energy consumption of these built-in products, a fact that DOE views with some concern. Should DOE receive reports that manufacturers are misapplying this definition or otherwise abusing it, DOE will avail itself of all other options at its disposal to correct that situation and ma y re-examine this definition to assess whether additional modifications are required.

82Accordingly, based on the above considerations, the final definition for built-in products will read as follows:

Built-in refrigerator/refrigerator-fre ezer/freezer means any refrigerator, refrigerator-freezer or freezer with 7.75 cubic feet or greater tota l volume and 24 inches or less depth not including doors, handles, a nd custom front panels; with sides which are not finished and not designed to be visible after installa tion; and that is designed, intended, and marketed exclusively (1) to be installed totally encased by cabinetry or panels that are attached during installation, (2) to be securely fastened to adjacent cabinetry, walls or floor, and (3) to either be equipped with an inte gral factory-finished face or accept a custom front panel.

e. Modification of the Defin ition for Compact Products DOE proposed to eliminate the 36-inch he ight restriction in the definition for compact products. DOE underscored two reasons for this change. First, DOE noted that an increased height level provides no ener gy efficiency benefit. Second, DOE explained that the reason for this 36-inch height rest riction, which applies to undercounter products, is not appropriate for the majority of compact products that are not undercounter products. DOE requested comment on this proposal. 75 FR at 59493-59494 (September 27, 2010).

83ASAP and AHAM both indicated that the consensus agreement did not eliminate the 36-inch height limitation for compact produ cts. (ASAP, Public Meeting Transcript, No. 67 at pp. 57-58; AHAM, Public Meeting Transcript, No. 67 at p. 58; AHAM, No. 73 at p. 6) (DOE notes that the consensus ag reement is silent on this definition. (See, generally, Joint Comments, No. 52)) Whirl pool commented that the current 36-inch limitation should be retained to maintain c onsistency with the consumer’s view of compact, and prevent “gaming”, i.e. circum vention. (Whirlpool, No. 74 at p. 3). The JAC agreed, noting that this lim it helps to distinguish compact products from standard-size products and prevents the weaken ing of standards in other c ountries where products taller than 36” but within the 7.75 cubic foot volum e limit are more prevalent. (JAC, No. 75 at
p. 2)

Whirlpool’s comments do not indicate how removing the 36-inch limitation could lead to circumvention. The new test procedure includes a modified volume calculation method that was specifically developed to li mit circumvention associated with false volume claims. 75 FR at 78839-78840 (December 16, 2010). Further, given the importance of volume as an attribute important to consumers, 21 DOE does not believe that consumers will consider tall, but low-volume, products to be standard-size. None of the commenters took issue with any of the analysis or any of the reasons that DOE presented in the NOPR to support the deci sion to propose eliminating the height restriction. DOE notes that the impact of U. S. standards in other countries, while an

21 See, for example the discussion of the important of product volume in the 1995 TSD supporting the rulemaking to establish the 2001 energy conservation standard, in the discussion regarding increasing insulation thickness in Section 3, page 3-6.

84important concern, are factors beyond the scope of DOE’s authority to control. Hence, DOE is eliminating the height restriction as proposed.

f. Icemaking DOE requested comments on its proposal to establish product classes for products with automatic icemakers, including its pr oposed approach to account for icemakers in the product class structure. 75 FR at 59489 (September 27, 2010). Sub Zero expressed support for AHAM’s intent to work coope ratively with DOE to develop a robust repeatable laboratory-based te st procedure to measure automatic icemaking energy use. Sub Zero also encouraged DOE to conduct field surveys to provide information on consumer use of ice by icemaker type (automatic or manual), product class, demographics, time of year, etc. This inform ation, when combined with the laboratory test and accompanying results, would allow dete rmination of the actual energy used by consumers to make ice. (Sub Zero, No. 69 at p. 2) Sub Zero did not object to DOE’s proposed product class structure to address icemaking. (Id.) DOE received no comments objecting to DOE’s proposed product class stru cture to integrate icemaking energy use.

AHAM supported the approach propos ed by DOE to integrate automatic icemaking into the product class structur e. However, AHAM suggested that some additional product classes, not specifically proposed by DOE , have been sold with automatic icemakers. (AHAM, No. 73 at pp. 5-6) These added product classes were previously discussed in section IV.A.2.a above.

85AHAM also commented that products equi pped with the option to install an automatic icemaker (“kitable models”) should be considered to be products with icemakers, explaining that this approach is consistent with the test procedure and that lack of clarity on this point would crea te confusion among manufacturers. (AHAM, No. 73 at p. 6)

DOE disagrees that AHAM’s suggested approa ch with respect to the treatment of “kitable models” would be consistent with the test procedure. If such a product is installed in a residence without the icemak er installed, it will not use the additional energy use allocated for auto matic icemaking, which is set at 84 kWh in the test procedure. The added energy associated w ith manual icemaking is likely to be significantly less, as indicated by initial test results conduc ted by the National Institute for Standards and Technology (NIST). These in itial results suggest that the energy use associated with the mechanisms that are us ed to eject ice in automatic icemakers is significantly greater than the energy use associ ated with the thermal load of freezing the ice. (NIST, Test Procedure for Residentia l Refrigerators, Refrigerator-Freezers, and Freezers, Docket Number EERE-2009-BT-TP- 0003, Public Meeting Transcript, No. 10 at pp. 157-158) DOE agrees that some unders tanding of the energy use associated with manual icemaking should be developed to allow more accurate re porting of the energy use of products that do not have automatic icemakers but have freezers that allow for the freezing and storage of ice. However, prior to the development of a manual icemaking factor to account for this ener gy usage, better consistency with the test procedure will be maintained by certifying kitable models as two separate models (i.e. with an automatic

86icemaker and without an automatic icemake r), since a consumer may purchase either version.

B. Screening Analysis DOE uses the following four screening crit eria to determine which design options are suitable for further considera tion in a standards rulemaking:

1. Technological feasibility . DOE will c onsider technologies incorporated in commercially available products or in working prototypes to be tec hnologically feasible.

2. Practicability to manuf acture, install, and service . If mass production and reliable installation and serv icing of a technology in co mmercially available products could be achieved on the scale necessary to serve the relevant ma rket at the time the standard comes into effect, DOE would c onsider that technology practicable to manufacture, install, and service.

3. Adverse impacts on product utility or pr oduct availability . If DOE determines that a technology would signifi cantly impact in an adverse way the utility of the product for significant subgroups of consumers or w ould result in the una vailability of any covered product type with performance charact eristics (including re liability), features, sizes, capacities, and volumes that are subs tantially the same as products generally available in the United States at the time, it will not consider this technology further.

874. Adverse impacts on health or safety . If DOE determines that a technology will have significant adverse impacts on health or safety, it will not consider this technology further. 10 CFR part 430, subpart C, appendix A, (4)(a)(4) and (5)(b)

In the framework document 22 and accompanying public workshop held on September 29, 2008, DOE identified the en ergy efficient technologies under consideration for the rulemaking analyses. Th ese technologies are listed below in Table
IV.2. Please see chapter 3 of the TSD for detailed descri ptions of these technology options.

22 Available at: http://www1.eere.energ y.gov/buildings/appliance_sta ndards/residential/pdfs/refr igerator_freezer_framewor k.pdf

88Table IV.2 Technologies DOE Considered for Residential Refrigeration Products Insulation Expansion Valve

Improved resistivity of insula tion Improved expansion valves Increased insulation thickness Cycling Losses VIPs Fluid control or solenoid valve Gas-filled panels Defrost System Gasket and Door Design Reduced energy for automatic defrost

Improved gaskets Adaptive defrost Double door gaskets Condenser hot gas Improved door face frame Control System Reduced heat load for TTD feature Temperature control Anti-Sweat Heater Air-distribution control

Condenser hot gas Other Technologies Electric heater sizing Alternative refrigerants Electric heater controls Component location Compressor Alternative Refrigeration Cycles

Improved compressor efficiency Lorenz-Meutzner cycle Variable-speed compressors Dual-loop system Linear compressors Two-stage system Evaporator Control valve system

Increased surface area Ejector refrigerator Improved heat exchange Tandem system Condenser Alternative Refrigeration Systems

Increased surface area Stirling cycle Improved heat exchange Thermoelectric Force convection condenser Thermoacoustic Fans and Fan Motor

Evaporator fan and fan motor improvements Condenser fan and fan motor improvements
DOE requested, but did not receive, any comments at either the framework workshop or during the framework commen t period that identified additional technologies that DOE should consider . Likewise, DOE received no comments recommending additional technologies during the preliminary analysis or NOPR public meetings or comment periods.

As described in chapter 4 of the TSD, Screening Analysis, DOE screened out several of the technol ogies listed in Table IV.2 from c onsideration in this rulemaking based on one or more of the screening crit eria described above. A summary of the

89screening analysis identifying technologies that were screen ed out and the EPCA criteria used for the screening is presented in Tabl e IV.3. The checkmarks in the table indicate which screening criteria were used to screen out the listed technologies . For greater detail regarding the screeni ng analysis, see chapter 4 of the TSD.

Table IV.3 Summary of Screening Analysis EPCA Criteria for Screening Excluded Technology Option Technological Feasibility Practicability to Manufacture, Install, and service Adverse Impacts on Product Utility Adverse Impacts on Health and Safety Improved Insulation Resistivity 
Gas-Filled Panels   Improved Gaskets, Double Gaskets, Improved Door Frame  

Linear Compressors  Improved Evaporator Heat Exchange   Improved Condenser Heat Exchange   Component Location    Lorenz-Meutzner Cycle   Two-Stage System   Control Valve System and Tandem System   Ejector Refrigerator   Stirling Cycle   Thermoelectric   Thermoacoustic  

In addition to this screening, DOE did not analyze a number of technologies in the engineering analysis because they were j udged unsuitable for improving the measured energy use of refrigeration products for one or more of the following reasons:

90 technology already used in baseline products and in capable of generating additional energy efficiency or reducing energy consumption;

 technology does not reduce energy use; or

 insufficient data available demons trating benefit of the technology.

The technologies not analyzed for thes e reasons include Improved Expansion Valves, Off-Cycle Valves, Reduced Energy fo r Automatic Defrost, Condenser Hot Gas Defrost, Reduced Heat Load for TTD Feature, Warm Liquid or Hot Gas Refrigerant Anti-Sweat Heating, Electric An ti-Sweat Heater Sizing, Elec tronic Temperature Control, Air Distribution Control, Fan Blade Improveme nts, and Dual Loop System. Chapter 4 of the NOPR TSD discusses in greater detail the reasons for not analyzing these technologies.

1. Discussion of Comments DOE discussed several screening issu es in the NOPR. These issues are summarized, along with comments responding to the NOPR, in the sections below.

a. Compressors DOE explained in the NOPR that the propr ietary status of a technology is not a screening criterion. 75 FR at 59495 (September 27, 2010). However, DOE pointed out that selected technologies may be screened out if their proprietary st atus constrains their supply, and that DOE must consider “the impact of any lessening of competition . . . that is likely to result from the imposition of th e standard” (42 U.S.C. 6295(o)(2)(B)(i)(V)).

91DOE indicated in the NOPR that it considered potential supply issues of high-efficiency single-speed and variable speed compresso rs, but concluded that the compressor performance levels analyzed would not likely be subject to signifi cant supply constraints that would merit omitting the considerati on of this particular design option. DOE requested comment on this position. Id.

Sub Zero commented that, as a smaller manufacturer, it may have more difficulty obtaining high-efficiency and variable speed compressors as compressor vendors ramp up to meet refrigeration product manufacturer de mands in 2014. In its view, because of the proposed increased stringency of the sta ndards, larger companies will demand many more of these compressors than they are cu rrently using. (Sub Zero, No. 69 at p. 3) While it is difficult to predict the ev ents that will occur up to the 2014 transition, DOE notes that it reached its tentative conclusion based on its NOPR phase investigation that indicated the compressor industry has been working to develop high efficiency and variable speed compressors for the residential refrigera tion market for many years. (See, e.g., http://www.panasonic.com/industria l/includes/pdf/invertercompressors

improvingefficiency.pdf , a discussion of Panasonic’s development of variable speed compressors, including initial in troduction of variable speed compressors in refrigerators in 1996.) These efforts led DOE to believe that the refrigeration industry has had sufficient lead time to prepare for the possi ble increased demands for higher efficiency and variable speed compressors. Although the submitted comments reiterated the concerns of certain stakeholders, none cont ained information that would help justify

92altering the analysis DOE conducted regard ing the projected supply of compressors available to manufacturers.

Whirlpool concurred with DOE’s findings th at availability of high-efficiency and variable-speed compressors will expand to m eet demand, but indicated that prices might increase. (Whirlpool, No. 74 at p. 3) Whir lpool did not, however, provide any specific information about compressor prices that would allow DOE to accurately revise its analysis to address this comment. Accordingly, the analysis was not altered in this respect.

b. Alternative Refrigerants Most refrigeration products sold in the U. S. currently use HFC-134a refrigerant, a hydrofluorocarbon (HFC) with a high global warming potential (GWP).

The NOPR described comments from severa l stakeholders made in response to the preliminary analysis. These comments indicated that the DOE analysis should acknowledge the widespread accep tance of hydrocarbon refrigerants in other parts of the world and the growing interest in their use in the U.S. Id. at 59496. The NOPR cited the ongoing consideration of these refrigerants for us e in residential refrigerators, particularly isobutane, in Underwriters Laboratories’ (UL’s) ongoing re vision of UL Standard 250, “Household Refrigerators and Fr eezers” (UL 250), and in th e EPA’s proposed rule (see 75 FR 25799 (May 10, 2010)) to add this refriger ant to its list of allowed substances under the Significant New Alternatives Polic y (SNAP) program. DOE explained in the

93NOPR that the EPA proposal calls for a total ch arge limit of 57 g of isobutane. Id. at 25803 (May 10, 2010). Neither effort has been finalized at the time of the preparation of this notice.. The NOPR explained that DOE’s considera tion of isobutane refrigerant was based on the 57 g limit proposed by the EPA, and that this limit was sufficient to allow consideration of the use of isobutane refriger ant only for compact refrigerators, based on the refrigerant charge amounts of the reve rse-engineered produc ts. The preliminary analyses for compact refrigerators, which did not include isobut ane refrigerant as a design option, were adjusted during the NOPR phase to include this design option. DOE acknowledged in the NOPR that multiple seal ed systems could potentially be used in larger products without exceeding the charge lim it per sealed system, but that it rejected this approach due to the potential reduction of consumer utility associated with the extra space that the additional sealed system w ould require. 75 FR at 59496-7 (September 27, 2010). DOE notes that the EPA’s SNAP proposal did not clearly specify whether the 57 gram limit was intended to apply to each se aled system or each appliance. 75 FR at 25803 (May 10, 2010).

DOE requested comment on its approach in considering isobutane only for compact refrigerators.

Whirlpool commented that many compact and full-size refrigerators using hydrocarbon refrigerants are sold all over the world, but that the safety threshold in the
U.S. is higher than many other countries. Whirlpool noted the possible tradeoffs of

94venting versus capturing and transporti ng flammable refrigerants—venting such refrigerants must be done with caution, but it alleviates the need for transport of flammable refrigerants, which may represen t even greater risk, since many pounds of refrigerant captured from many products woul d be transported (as opposed to ounces that are in each individual product), and the duration of transport is much greater than the duration of the venting procedure. Capture a nd transport, however, avoid release of the refrigerant, thus limiting the small global warming impact of these refrigerants and avoiding concerns associated with volat ile organic compound releases. Whirlpool suggested that DOE contact the Consum er Product Safety Commission and/or UL regarding the safety aspects related to the use of these refrigerants. (Whirlpool, No. 74 at
p. 4) DOE’s assessment of the use of isobutan e did not extend to determination of the servicing approach. DOE notes that Section 608 of the Clean Air Act generally prohibits any person in the course of maintaining an appliance to knowingly vent refrigerants from that appliance. See generally, 42 U.S.C. 7671g. EPA regulations at 40 CFR part 82, subpart F, further clarify th is prohibition and permit only de minimis releases where good faith attempts to recycle or recover refrigerants are made.

GE criticized DOE’s approach. First, GE indicated that the UL standard and the EPA proposal are based on charge limits per sealed system, not per product, and that DOE did not fully consider th e potential to use dual syst em designs to implement a switch to isobutane refrigeran t. Second, GE commented that the lack of information regarding refrigeration product technologies using isobutane re frigerant stems to a large extent from the fact that this refrigerant curr ently is not allowed for use in these products.

95GE asserted that when the EPA SNAP approva l is finalized, much more information will become available as products are commercia lized. (GE, Public Meeting Transcript, No. 67 at pp. 60-61) In written comments, GE hi ghlighted recent activiti es related to the introduction of isobutane products, including the EPA SNAP rulemaking and GE’s own plans to start selling an isobutane product. It also mentioned that manufacturers will have to redesign products to use this new refrigerant, thus reitera ting its view that assessing current products does not provide a complete picture of the potent ial use of isobutane. (GE, No. 76 at p. 2)

Sub Zero commented that some studies show that isobutane, when limited to a charge of 57 to 60 grams, is suitable for pr oducts up to 18 cubic feet in volume. Further, using multiple separate refrigeration syst ems, each limited to 57 to 60 grams, would allow the use of isobutane in many full-size products. Sub Zero also highlighted the current uncertainty about potential future re gulation of HFC refrigerants and blowing agents, and suggested that the industry could potentially be compelled to use alternative substances by 2014, which would require significant additional capital investment. The company requested that DOE recognize in th is rulemaking the possible impacts of new requirements for refrigerants and blowing ag ents on system efficiency and insulating performance when setting the standa rds. (Sub Zero, No. 69 at p. 4)

AHAM cited three issues with DOE’s treatment of isobutane in the NOPR:

 There is a pending EPA Si gnificant New Alternatives Policy (SNAP) decision that would approve hydrocarbons for househol d use and is expected to lead to

96sale of full-size refrigeration product s in the U.S. that use isobutane refrigerant.

 DOE’s review of the suitability of is obutane was based on review of existing products rather than future products.

 DOE concluded that the UL limit of 50 grams would apply to the entire product rather than to each refrigerati on system of a product, thus overlooking the possibility that multiple systems could be used to produce full-size products using isobutane. (AHAM, No. 73 at pp. 7-8)

In response, DOE agrees that a dual-sys tem design would be an available option that could, depending on the SNAP rulema king, permit manufacturer s to use isobutane refrigerant within the limits of the UL sta ndard and the anticipated EPA rule. DOE also acknowledges increased manufact urer interest in this approach, as exemplified by GE’s stated intention to introduce such products as soon as the EPA rule is final (see, for example, GE’s announcement for such a pr oduct as reported by Appliance Magazine on October 6, 2010, http://www.appliancemagazine.com/news .php?article=1434814&zone =0&first=1 , GE Designs Isobutane Fridge for Smaller Dwelli ngs, No. 82 at p. 1). DOE explained in the NOPR that consideration of the potential nega tive consumer utility impact of reduced internal volume was a key reason for not adopting isobutan e refrigerant as a design option for the larger product classes. 75 FR at 59497 (September 27, 2010). Other considerations included the lack of information regarding (1) the possible emergence of

97new heat exchanger designs that would alle viate the need to consider dual system approaches and (2) the performance characteri stics of low-charge designs using existing heater exchanger technology. As a result, although isobutane products may become available in the near future, considering the switch to isobutane refrigerant as a design option to reduce energy use could not be cons idered in the analysis, because of the consumer value concerns and the insufficien t information regarding the energy savings characteristics and the costs of these potential new designs.

Moreover, DOE notes that because the parame ters of whatever limits that EPA or UL may consider are not yet final, DOE is declining to speculate what these final limits might be. Without further information rega rding the elements described above, DOE cannot ascertain the overall cost s and benefits that could be reasonably ascribed to an isobutane refrigerant-based design. Accordin gly, in evaluating the standards set by today’s final rule, DOE is continuing to reta in the basic approach laid out in its NOPR and related analyses.

c. Alternative Foam-Blowing Agents DOE discussed in the NOPR the potential th at legislation or newly enacted rules may restrict the use of HFC blowing agents in the future. DOE indicated that it was prepared to address this issue by evaluating th e efficiency improvement and trial standard levels for products using alternative foam insula tion materials, if such legislation or rules banning HFCs should be enacted or othe rwise become effective. 75 FR at 59497 (September 27, 2010). As mentioned above, Sub Zero commented that DOE should

98recognize the potential impacts of restriction on HFC blow ing agent usage in this rulemaking. (Sub Zero, No. 69 at p. 4) DOE rec ognizes that such restrictions may occur sometime in the future. However, as DOE explained in the NOPR, DOE believes that basing energy conservation standards on the unc ertain prospect of passage of specific legislation would be speculative. Such re strictions have not emerged within the timeframe of the preparation of this final rule. Hence, DOE has not adjusted its analysis to account for this possibility.

d. Vacuum-Insulated Panels The NOPR discussed DOE’s assessment of the potential issues regarding VIP supply, longevity, durability, and quality that st akeholders raised during the preliminary analysis comment period. DOE concluded that potential issues surrounding this technology do not rise to a level justifying that it be screened out. DOE requested comment on this tentative conclusion in the NOPR. 75 FR at 59497-59500 (September 27, 2010). Sub Zero commented on this topic, re iterating concerns re garding availability, quality, and potential impact on warranty costs associated with the expected increase in VIP usage. (Sub Zero, No. 69 at p. 4) Wh irlpool commented in a similar fashion, indicating that VIPs are not appropriate for improving effici ency in all situations, are subject to damage during shipment from the supplier and dur ing installation, and expressing concern about the ab ility of VIP suppliers and th e industry to ramp up demand sufficiently. However, the comments provide d no new information or arguments that would impact DOE’s conclusions regarding th e viability of VIPs. Hence, DOE’s final analysis continues to include VIPs as a design option.

992. Technologies Considered DOE has concluded that: (1) a ll of the efficiency levels discussed in today’s final rule are technologically feasib le; (2) products at these e fficiency levels could be manufactured, installed, and serv iced on a scale needed to serve the relevant markets; (3) these efficiency levels would not force ma nufacturers to use technologies that would adversely affect product utility or availability; and (4) these efficiency levels would not adversely affect consumer health or safety. Thus, the efficien cy levels that DOE analyzed and is discussing in this no tice are all achievable using ”s creened in” technology options identified through the screening analysis. The technologies DOE considered for each group of products are shown in Table IV.4.

Table IV.4 Technologies Considered by DOE for Residential Refrigeration Products, by Product Group

Design Option Standard-SizeRefrigeratorFreezers StandardSize Freezers Compact Refrigerators Compact Freezers Increased Insulation Thickness  (see Note 1)  
Isobutane Refrigerant 
VIPs     Improved Compressor Efficiency     Variable-Speed Compressor     Increased Evaporator Surface Area     Increased Condenser Surface Area    

100Forced Convection Condenser  Brushless DC Evaporator Fan   Brushless DC Condenser Fan   Adaptive Defrost   Variable Anti-Sweat Heater Control 
Note 1: Increased Insulation Thickness was not considered for built-in standard-size freezers.

C. Engineering Analysis The engineering analysis uses cost-e fficiency relationships to show the manufacturing cost increases associated w ith achieving increased efficiency. DOE has identified the following three methodologies to generate the manufacturing costs needed for the engineering analysis: (1) the de sign-option approach, which provides the incremental costs of adding design options to a baseline model that will improve its efficiency; (2) the efficiency-level appro ach, which provides the relative costs of achieving increases in energy e fficiency levels, without rega rd to the particular design options used to achieve such increases; and (3) the cost-assessment (or reverse engineering) approach, which provides “bottom-up” manufacturing cost assessments for achieving various levels of increased efficien cy, based on detailed data on costs for parts and material, labor, shipping/ packaging, and investment fo r models that operate at particular efficiency levels.

DOE conducted the engineering analysis for this rulemaking using a combined efficiency level/design option/reverse engi neering approach. DOE defined efficiency

101levels using percentages repr esenting energy use reductions. The reductions were defined to apply to energy use (not including icemaking energy use) measured using the new test procedure. DOE’s premise that efficiency leve ls expressed as a per centage of energy use lower than that of baseline products are eq uivalent when calculated based on both the current test procedure and the new test procedure (without ic emaking energy use) allowed DOE to compare information devel oped from different sources. However, DOE’s analysis is based on the efficiency im provements associated with groups of design options. DOE developed estimates for effi ciency improvements for design options through energy use modeling analysis conduc ted for selected reverse-engineered products. The energy models were first esta blished based on the existing product designs and the models were subsequently adjusted to reflect application of the groups of design options considered for analysis. DOE based some of the design option information on data gained through reverse-engineering analysis, but also used other sources, such as component vendor inquiries and discussions w ith manufacturers as appropriate. Details of the engineering analysis are pr ovided in the NOPR TSD chapter 5.

In the NOPR, DOE addressed preliminary analysis comments regarding the engineering analysis. DOE explained the selection of product classes for detailed analysis, adjustment of the analyses based on new information collected in preparation of the NOPR, development of th e baseline energy use equation s representing baseline product energy use using the new energy test procedure (less automatic icemaking energy use), the approach used to adjust the slope s of some of these e quations, the range of efficiency levels considered, treatment of de sign options in the anal yses, development of

102cost-efficiency curves, and th e development of standards for low-volume product classes. 75 FR at 59500-59508 (September 27, 2010).
1. Discussion of Comments DOE requested comments and informati on on the following topics in the NOPR: 1) The approach used to adjust the slopes of the baseline ener gy use equations of some product classes. Id. at 59505. 2) The treatment of design options in th e engineering analysis. Id. at 59507. 3) Information that would help improve the ERA energy use model used for the engineering analysis. Id. at 59507.

Whirlpool commented that analyzing desi gn options is an appropriate means of assessing technological capability, but that DOE should establish minimum efficiency standards without specifying particular design op tions to use. In its view, this approach would permit manufacturers the freedom to de velop products in a fashion which they believe best meets the needs of consumers. (Whirlpool, No. 74 at p. 5) DOE notes that the standards are expressed in terms of maximum energy us e and do not specify the use of particular design options in satisfying these standards.

DOE received no additional comments on these topics. Consequently, in the absence of any other comments, DOE has not adjusted its engineering analysis for the final rule.

1032. Adjustment of the Baseline Energy Use Equations Comments addressing adjustment of the standard to account for test procedure changes (the “crosswalk”) are discussed in section III.A.2 above. As part of the engineering analysis, DOE adjusted the en ergy standard equati ons to address the modifications to the test procedures. DOE initially made such adjustments during the preliminary analysis based on consideration of the anticipated compartment temperature and volume calculation method changes. DOE used an approach to account for the test procedure changes that involved developing energy use equations representing baseline products based on testing under the new test pr ocedures. Baseline products are those that are minimally compliant under the current ener gy standard when tested using the current test procedure. The initial baseline energy us e equations are presented in the preliminary TSD in Chapter 5, “Engineering Analysis” in section 5.4.2. The efficiency levels examined in this rulemaking are represente d as percentages of energy use reductions from the energy use of baseline products. Hen ce, the efficiency levels expressed in terms of the new test procedures ar e equal to these same percenta ge reductions applied to the baseline energy use equations.

Based on the comments responding to the preliminary analysis, as well as the additional information DOE obt ained during the NOPR phase, DOE adjusted the baseline energy use equations for three product classes. These changes corrected the low slope of the maximum energy use equation of the curre nt energy standards for product classes 4 (refrigerator-freezers—automatic defrost w ith side-mounted freezer without through-thedoor ice service), 5 (refrige rator-freezers—automatic de frost with bottom-mounted

104freezer without through-the-door ice service) , and 5A (refrigerator-freezer—automatic defrost with bottom-mounted freezer with through-the-door ice service). See the NOPR TSD, Chapter 5, section 5.4.2.4. The NOPR-phase adjusted baseline energy use equations are presented in the NOPR TSD in Chapter 5, in section 5.4.2.

Stakeholder comments recommending furthe r adjustment to the baseline energy use equations to address test procedure cha nges are discussed in section III.A.2 above. These comments addressed both (1) extrapol ating the analysis to product classes for which DOE did not have relevant test da ta for the crosswalk associated with compartment temperature changes and vol ume calculation method changes, and (2) measurement changes, including other test procedure changes that were not captured in the NOPR crosswalk. As discussed in section III.A.2, DOE has made adjustments to account for two of these additional test proced ure changes -- those changes that capture precooling energy use and that address the testing for products with heater-based temperature control for special compartments. The analysis to implement these changes is discussed below.

Special Compartments with Heater-Based Control During the NOPR public meeting, DOE reque sted information regarding heaterbased control systems used to control the temperatures of special compartments. DOE sought this information to help it better unders tand and evaluate the energy use impact of these features and the manner in which the new (then proposed) test procedure may change the measured energy use of products having such compartments. DOE received

105no information. In the absence of any information, DOE developed an analysis to help represent the energy use of these compartments, including the change in measured energy use associated with the new test proce dure. The calculated energy use impact was multiplied by the percentages of products that are believed to have such features in each of the applicable product cla sses to develop average impacts associated with the test procedure amendments. The determination of the prevalence of products with these features is discussed in section III.A.2.d above.

The analysis describing the change in energy use for a produc t with a heated special compartment is described in the TSD in Chapter 5, “Engineering Analysis”, (Section 5.4.2.6). DOE conducted this analysis for a baseline-efficiency refrigeratorfreezer with automatic defrost and a bottom- mounted freezer with a total capacity of 25­ cubic feet. The baseline energy use for this product is 733 kWh per year, excluding icemaking energy use. This value was calcu lated using the baseline energy use equation for product class 5 as presented in Ta ble 5.4.12 of the NOPR TSD. The special compartment was assumed to be located at the bottom of the fresh food compartment and to be 20 inches deep, 32 inches wide, and 4 inches high. (These dimensions were based on one of the reverse engin eered products evaluated by DOE during the engineering analysis. This product had a special compartm ent (without heater-based control) at the bottom of the fresh food compartment of roughly the selected dimensions.)

The analysis determined the energy use fo r the product when tested both with the special compartment set for its coldest temperature and with the compartment set at its

106warmest temperature (selected as 28  ̊ F and 42  ̊ F, respectively, consiste nt with the widest range identified for special compartment temper ature control for the product (see Use and Care Guide Electrolux 242046401, No. 80 at p. 18)), with the fresh food and freezer compartments operating at 39  ̊ F and 0  ̊ F, respectively. The influences on the compartment temperature that DOE considered in the analysis include (1) the 39  ̊ F fresh food compartment air surrounding the top, side s, back, and front of this special compartment, transferring heat through the 3/16-inch plastic compartment wall, and the air film thermal resistances outside and inside the special compartment, (2) the air near the top of the freezer compartment, at an average temperature of -5  ̊ F (at 0  ̊ F when the compressor is not operating, and at -10  ̊ F when the compressor is operating and the evaporator discharge air blows forward al ong the underside of the mullion, and assuming a 50 percent compressor run time), transferring heat from the special compartment through the special compartment’s bottom surface, the 1.5-inch thick mullion, and through four air films surrounding the compartment bottom and the mullion, (3) -10  ̊ F evaporator discharge air diverted to the special compartment, if needed to maintain a low temperature, and (4) electric resistive heati ng, if needed to maintain a high temperature.
At the 28  ̊ F setting for the special compartment, a small amount of evaporator discharge air (less than 1 cubic foot per minute) is needed to maintain the compartment temperature, while a heater input of 5.8 W is needed to maintain the 42  ̊ F setting. DOE calculated the additional system energy use a ssociated with removing the 5.8 W of heat input by assuming that the system efficiency is 5 Btu/h-W, which represents a system with a compressor with an Energy Efficiency Ratio (EER) rating of 5.5 and some additional evaporator and conde nser fan power input. As de scribed in the TSD, Chapter

1075, section 5.84, standard-size baseline refrigerato r-freezers typically use compressors with an EER in the range 5.0 to 5.5. DOE used the high end of this range for the estimate, recognizing that a shipment-w eighted average EER would al so include higher-efficiency
compressors.

The calculated energy use impact of the te st procedure change (measurement with the special compartment set at its coldest temp erature, as is done under the current test procedure, as compared with an average of tests with the special compartment setting in the coldest position for one test and in the warmest position for the second test) is 43 kWh, a 5.9 percent energy use increase. As di scussed above in section III.A.2, DOE has conducted testing for two products that have heated special compartments. The average measured impact of the test procedure change for these productss was 4.1 percent, suggesting that the calculated 5.9 percent imp act is conservative. DOE chose to use the more conservative 5.9 percent impact in adju sting the energy conservation standards due to the uncertainty associated with the small data sample and the EPCA requirements prohibiting upward adjustment of maximum allowable energy use after such a standard has been set. See 42 U.S.C. 6295(o)(1).

As discussed in section III.A.2, DOE assume d that this energy use impact applies to the percentage of products of applicable product classe s which currently have such features. Hence, applying the calculated measurement impact to the product model percentages of 10.6 percent (determination of th is value was discussed in section III.A.2) for current product class 5A (refrigerato r-freezer—automatic defrost with bottom108mounted freezer with through-the-door ice se rvice), 1.5 percent for current product class 5 (refrigerator-freezers—automatic defr ost with bottom-mounted freezer without through-the-door ice service), a nd 0.7 percent for current pr oduct class 7 (refrigeratorfreezers—automatic defrost with side-mounted freezer with through-the-door ice service) results in average impacts for these product classes equal to 0.62 pe rcent for product class 5A, 0.088 percent for product class 5, and 0.041 percent for product class 7.

Precooling DOE conducted energy tests of nine standard-size refrig erator-freezers during the engineering analysis. Two of these products exhibited precooling. The increase in measured energy use for these products when using the modified approach that includes precooling energy use was 2.3 percent for one pr oduct and 1.7 percent for the other. (See docket documents Precooling Product 1 and Precooling Product 2, Nos. 82.1 and 82. 2). DOE has adopted an average impact of 2 percent based on these measurements. DOE calculated the shipment-weighted average energy use impact of precooling using this value and the observed frequency of prec ooling as follows: 2% × (2/9) = 0.44%. DOE applied this adjustment to all standard-size refrigerator-freezers with automatic defrost.

Combined Impact To combine the impact of the two test procedure adjustments, DOE multiplied the factors representing their impact. For ex ample, for product class 5A: 1. 0062 × 1.0044 =
1. 0106. 23 This approach addresses the need to consider the compounding of the impact

23 Note that multiplying a number by 1.000062 is equiva lent to increasing it by 0.62%. Hence, the 1.0062 factor represents the adjustment to the energy use eq uation associated with the 0. 62% increase to account

109inherent in multiple influences, similar to the compounding of interest in finance. DOE used similar calculations for other product classes for which one or both of the testprocedure-based adjustments to the standard apply. These adjustments are reflected in the table showing the final baseline energy us e equations in the TSD, Chapter 5, Table
5.4.14. The final energy standards are based on applying the percentage energy use reductions to these adjusted baseline energy use equations.

D. Markups to Determine Product Cost The markups analysis develops appropria te markups in the distribution chain to convert the manufacturer cost estimates derived in the engine ering analysis to consumer prices. DOE determined the distribution ch annels for refrigeration products and the markups associated with the main parties in the distribution ch ain, manufacturers and retailers. DOE developed an average manu facturer markup by examining the annual Securities and Exchange Commission (SEC) 10-K reports filed by four publicly-traded manufacturers primarily engaged in app liance manufacturing and whose combined product range includes reside ntial refrigeration products. Fo r retailers, DOE developed separate markups for baseline products (baselin e markups) and for the incremental cost of more-efficient products (increme ntal markups). Incremental markups are coefficients that relate the change in the manufacturer sale s price of higher-efficiency models to the change in the retailer sales price.

for the heated special compartment shipment-weighted average measurem ent change for product class 5A. Similarly, the 1.0044 factor repres ents the 0.44% adjustment for the precooling shipment-weighted average measurement change. The resulting fact or, 1.0106, means that the energy use equation is increased 1.06%.

110In response to comments that were re ceived on the prelimin ary analysis, DOE extensively reviewed its incremental mar kup approach in the NOPR. Among the tasks DOE performed included assembling and analyz ing relevant data from other retail sectors. DOE found that empirical evidence is lacking with respect to appliance retailer markup practices when a product increases in co st (due to increased efficiency or other factors). DOE understands that real-world re tailer markup practices vary depending on market conditions and on the magnitude of the change in cost of goods sold (CGS) associated with an increase in appliance efficiency.

Given this uncertainty with respect to actual markup practices in appliance retailing, DOE uses an approach that reflec ts two key concepts. First, changes in the efficiency of the appliances sold are not expected to increase economic profits. Thus, DOE calculates markups/gross margins to allo w cost recovery for retailers (including changes in the cost of capital) without ch anges in company profits. Second, efficiency improvements only impact some distribution co sts. DOE sets markups to cover only the variable costs expected to change with efficiency.

DOE’s separation of operating expenses in to fixed and variable components to estimate an incremental markup follows from the above concepts. DOE defines fixed expenses as including labor and occupancy e xpenses because these costs are not likely to increase as a result of a rise in CGS due to amended efficiency standards. All other expenses, as well as the net pr ofit, are assumed to vary in proportion to the change in CGS. DOE acknowledges that its allocation of expenses into fixed and variable

111categories is based largely on limited informa tion and sought additional information from interested parties to help refine its allo cation approach during the NOPR phase. DOE’s method results in an outcome in which retail ers are assumed to cover their costs while maintaining their profit margins when the CGS of appliances changes.

As part of its review, DOE developed a new breakdown into fixed and variable components using the latest expense data pr ovided by the U.S. Census for Electronics and Appliance Stores, which cover 2002. Th e newly-derived incremental markup, which would be applied to an incremental change in CGS, is 1.17, which is slightly higher than the value of 1.15 that DOE used in the prel iminary analysis. DOE requested information regarding the likely retailer responses to in cremental changes in the CGS of appliances associated with the proposed sta ndards. Whirlpool stated that it would not expect retailers to accept reduced margins as a result of higher costing, more efficient products, and asserted that most major re tailers are publicly traded companies whose stockholders demand consistent (or increasi ng) margins (Whirlpool, No. 74 at p. 5) No information or other comments were received addressing this issue. Given the lack of quantitative information, DOE has decided to continue to apply an incremental markup to the incremental MSP of products with higher effici ency than the baseline products. Chapter 6 of the final rule TSD provides a descri ption of both the method and its current application.

112E. Energy Use Analysis DOE’s analysis of the energy use of re frigeration products estimated the annual energy use of products in the field that would meet the considered efficiency levels, i.e. , as they are actually used by consumers. Th e energy use analysis provides the basis for other analyses DOE performs, particularly assessments of the energy-savings and the savings in consumer operati ng costs that could result from DOE’s adoption of amended standard levels. In contrast to the DOE te st procedure, which provides standardized results that can serve as the basis for compar ing the performance of different appliances used under the same conditions, the energy use analysis seeks to capture the range of operating conditions for refrigerat ion products in U.S. homes.

To determine the field energy use of pr oducts that would meet possible amended standard levels, DOE used data from th e Energy Information Administration (EIA)’s 2005 Residential Energy Consumption Survey (RECS), which was the most recent such survey available at the time of DOE’s analysis. 24 RECS is a national sample survey of housing units that collects statistical inform ation on the consumption of, and expenditures for, energy in housing units along with data on energy-related characteristics of the housing units and occupants. RECS provides suff icient information to establish the type (product class) of refrigerat ion product used in each hous ehold, and also provides an estimate of the household’s energy consumpti on attributable to “refrigerators” or “freezers”. As a result, DOE was able to develop household samples for the representative product classes for standa rd-size units. DOE did not use RECS for compact refrigerators and freezers because a large fraction of these products are used

24 For information on RECS, see h ttp://www.eia.doe.gov/emeu/recs/.

113outside the residential sector . Instead, it based the energy use for these products on the DOE test procedure.
DOE believes that, in general, using RECS data in the estimation of field energy use of refrigeration products is valid. However, it acknowledges that the approach used in the preliminary analysis has limits. To compensate for these limits, DOE developed a new approach for the NOPR to estimate energy use of refrigeration products in U.S. homes. This approach involved collecting field-metered electricity use data for residential refrigeration products. Details of this approach and the engineering assumptions that DOE used to estimate energy use of refrigerat ion products in U.S. homes were described in chapter 7 of the NOPR TSD. DOE sought comment on its approach for developing energy use estimates using field-metered data. 75 FR at 59512 (September 27, 2010).

Commenting on the NOPR TSD, AHAM stated that DOE should rely on the test procedure, rather than RECS data, for dete rmining energy use, but offered no reason or data. (AHAM, Public Meeting Tr anscript, No. 67 at p, 78).

As discussed in section IV.E of the NOPR (75 FR at 59510 (September 27, 2010)), test procedures must be reasonabl y designed to produce test results which measure energy efficiency, energy use or estimated annual operating cost of a covered product during a representative average use cycle or period of use. (42 U.S.C. 6293(b)(3)) Relying solely on a representative av erage use cycle or period of use does not provide an accurate measure of the possi ble energy savings since this approach inadequately evaluates the economic impact of the standard on consumers and the

114savings in operating costs throughout the es timated life of the product—two factors under EPCA that DOE must consider when pr omulgating an amended energy conservation standard. Further, the approach sugg ested by AHAM would not account for the variability stemming from house hold differences or be consistent with the above-cited guidance contained in 10 CFR part 430, subpart C, appendix A. In contrast, the approach that DOE has used in residential product rulemakings for over a decade, and continues to apply here, accounts for a ll of these factors.

Sub Zero and AHAM also indicated that more comprehensive field data be collected, including data on ice usage and icemaker energy consumption, for use in future rulemakings (Sub Zero, No. 69 at pp. 4-5; AHAM , No. 73 at p. 8). DOE has retained the approach detailed in the NOPR for the fina l rule. In future rulemakings, DOE may evaluate the appropriateness of collecting ad ditional field data as suggested by these

commenters.

In order to make the 2005 RECS sample more representative of current refrigeration products, DOE ma de two modifications for the NOPR analysis. First, DOE modified the RECS weights for top- vs. botto m-mount refrigerators in order to reflect current information on the relationship between income and refrigerator door style ( i.e ., top- or bottom-mount) provided by AHAM in 2010. Second, DOE examined recent data
from three sources 25 to scale the average interior volume of standard-size refrigerator25 California Energy Commission, Appliances Database—Refrigeration, 1998-2009. < www.energy.ca.gov/appliances/d atabase/excel_based_files/Refrigeration /> (Last accessed April 25, 2009); The NPD Group, Inc., The NPD Group/NPD Houseworld – POS, Refrigerators, January –

115freezers from the 2005 RECS data. DOE requested comments on the weighting of the RECS sample using income rela tionships and volume scaling.

Whirlpool supported efforts to re-weight th e RECS data to better reflect income and volume; however, it reiterated its previ ously stated reserva tions regarding the outdated nature of RECS. (Whirlpool, No. 74 at p. 5) AHAM did not view the weighting of the RECS sample as having meaningfully contributed to the propos ed levels, and as a result, did not comment on these approaches. Instead, it emphasized that the lack of comment on its part did not signify agreemen t with the approaches. (AHAM, No. 73 at p. 8)

Given the value of continuing to apply the RECS-based approach, the analysis modifications to address the limits of the RECS data, and the analysis DOE performed using updated data from AHAM and other sources, DOE believes that this approach sufficiently accounts for the full range of estimated energy savings experienced by households. Accordingly, DOE has retained its above-described approach for the final rule. However, DOE did revise its usage adju stment factor (UAF) fo rmulas, which raised the average UAF by 6 to 14 percent, dependi ng on the product class. The revision is described in chapter 7 of the final rule TSD.

December 2008, 2007-2008, Po rt Washington, NY; and Association of Home Applianc e Manufacturers, data from 2005-2008, memoranda dated January 19, 2009 and March 26, 2010, Washington, D.C.

116F. Life-Cycle Cost and Pa yback Period Analyses DOE conducted LCC and PBP analyses to evaluate the economic impacts on individual consumers of potential energy conservation standards for refrigeration products. The LCC is the total consumer expe nse over the life of a product, consisting of purchase and installation co sts plus operating costs (e xpenses for energy use, maintenance and repair). To compute the ope rating costs, DOE discounts future operating costs to the time of purchase and sums them over the lifetime of the product. The PBP is the estimated amount of time (in years) it takes consumer s to recover the increased purchase cost (including inst allation) of a more efficien t product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost (normally higher) due to a more stringent standard by the change in average annual operating cost (normally lower) that results from the standard.

For any given efficiency level, DOE m easures the PBP and the change in LCC relative to an estimate of the base-case a ppliance efficiency levels. The base-case estimate reflects the market in the absence of amended energy conservation standards, including the market for produc ts that exceed th e current energy conservation standards.

For each considered efficiency level in each product class, DOE calculated the LCC and PBP for a nationally representative set of housing units. For both the NOPR and final rule analyses, DOE developed household samples from the 2005 RECS. For each sampled household, DOE determined the energy consumption for the refrigeration product and the electricity price. By devel oping a representative sample of households,

117the analysis captured the variability in ener gy consumption and energy prices associated with the use of residentia l refrigeration products.

Inputs to the calculation of total installed co st include the cost of the product— which includes manufacturer selling prices, retailer ma rkups, and sales taxes—and installation costs. Inputs to the calculat ion of operating costs include annual energy consumption, energy prices and price projectio ns, repair and maintenance costs, product lifetimes, discount rates, and the year th at amended standards take effect. DOE determined the operating costs for each samp led household using that household’s unique energy consumption and the household’s ener gy price. DOE created distributions of values for some inputs, with probabilities a ttached to each value, to account for their uncertainty and variability. DOE used probabi lity distributions to characterize product lifetime, discount rates, and sales taxes.

The computer model DOE uses to calcul ate the LCC and PBP, which incorporates Crystal Ball (a commercially available software program), relies on a Monte Carlo simulation to incorporate uncertainty and vari ability into the analysis. The Monte Carlo simulations randomly sample input values from the probability distributions and household samples. The model calculated the LCC and PBP for products at each efficiency level for 10,000 housing units per s imulation run. Details of the spreadsheet model, and of all the inputs to the LCC and PBP analyses, are contained in the final rule TSD chapter 8 and its appendices.

118Table IV.5 summarizes the approach and data DOE used to derive inputs to the LCC and PBP calculations. The table provides the data and approach DOE used for the NOPR TSD, as well as the changes made for today’s final rule. The subsections that follow discuss the initial i nputs and the changes DOE made to them. Unless otherwise specified, DOE received no comments on these inputs.

119Table IV.5 Summary of Inputs and Ke y Assumptions in the LCC and PBP Analysis* Inputs NOPR Changes for the Final Rule Installed Costs Product Cost Derived by multiplying manufacturer cost by manufacturer and retailer markups and sales tax, as appropriate. Applied a price trend to estimate equipment prices in 2014.

Operating Costs Annual Energy Use Based on a multiple linear regression of field-metered energy use data, adjusted using a UAF function based on 2005 RECS household characteristics. Revised UAF function, raising average UAF values by 6 to 14 percent, depending on product class. Energy Prices Electricity: Based on EIA’s Form 861 data for 2007. Variability: Regional energy prices determined for 13 regions. No change.

Energy Price Trends Forecasted using Annual Energy Outlook 2010 (AEO2010). No change.

Repair and Maintenance Costs Used repair cost estimation method that estimates the rate of failure for selected components along with the incremental cost of repair or replacement compared to the baseline product. No change.

Present Value of Operating Cost Savings Product Lifetime Estimated using survey results from RECS (1990, 1993, 1997, 2001, 2005) and the U.S. Census American Housing Survey (2005, 2007), along with historic data on appliance shipments. Variability: characterized using Weibull probability distributions. No change.

Discount Rates Approach involves identifying all possible debt or asset classes that might be used to purchase the considered appliances, or might be affected indirectly. Primary data source was the Federal Reserve Board’s SCF** for 1989, 1992, 1995, 1998, 2001, 2004 and 2007. No change.

Compliance Date of New Standard 2014. No change.

* References for the data sources mentioned in this tabl e are provided in the sections following the table or in chapter 8 of the TSD. ** Survey of Consumer Finances.

1201. Product Cost To calculate consumer product costs, DOE multiplied the manufacturer selling prices developed in the engineering analys is by the supply-chain markups described in section IV.E (along with sale s taxes). DOE used different retail markups for baseline products and higher-efficiency products beca use DOE applies an incremental markup to the MSP increase associated w ith higher-efficiency products.

In the NOPR analysis, DOE assumed that the manufacturer selling prices and retail prices of products meeti ng various efficiency levels re main fixed, in real terms, after 2010 (the year for which the engineering analysis esti mated costs) and throughout the analysis period. Subsequently, examinati on of historical price data for various appliances and equipment indicates that the a ssumption of constant re al prices and costs may, in many cases, over-estim ate long-term appliance and equipment price trends. Economic literature and historical data suggest that the real costs of these products may in fact trend downward over time, partially because of “learning” or “ experience”. 26

In light of the historical data and DOE’s aim to improve the accuracy and robustness of its analyses, on February 22, 2011, DOE published a notice that discussed the approach it was considering to use to incorporate experience in its forecasts of product prices. 76 FR 9696. DOE requested publi c comment on the poten tial inclusion of this approach for its future rulemaking activities, as well as on the merits of adopting this

26 A draft paper, “Using the Experience Curve Appro ach for Appliance Price Fo recasting,” posted on the DOE web site at http://www.eere.en ergy.gov/buildings/appliance_standards, provides a summary of the data and literature currently available to DOE that is relevant to price forecasts for selected appliances and equipment.

121approach within the context of its ongoing rulemaking to se t standards for refrigeration products.

DOE received a number of comments on the merits of incorporating experience in its forecasts of product prices. Support for the inclusion of expe rience in appliance standards rulemakings was expressed by NEEP, NCLC, ACEEE, ASAP, NRDC, CFA, NEEA, and the IOUs. 27 (NEEP, No. 107 at p. 2; NCLC, No. 100 at pp. 1-2; ACEEE, No. 109 at p. 1; ASAP, No. 108 at p. 1; NRDC, No. 104 at p. 2; CFA, No. 105 at p. 2; NEEA, No. 101 at p. 4; IOUs, No. 111 and 112 at p. 1) The IOUs, ASAP, NRDC, and CFA specifically noted that incor poration of an experience cu rve would ali gn with other analyses that contribute to analysis of applia nce standards, such as the approach used in NEMS. (IOUs, No. 111 and 112 at p.1; ASAP , No. 108 at p.2; NRDC, No. 104 at p.4; CFA, No. 105 at p.4) ASAP and NRDC include d as part of their comments an appendix that found that the model described in the NODA offers appropriate methodology. (ASAP, No. 108 at p. 10; NRDC, No. 104 at p. 5)

DOE also received a number of commen ts expressing opposition to, or concern with, the proposed incorporation of experi ence into forecasts of product prices. (AHAM, No. 113 at p. 1; AHRI, No. 106 at p. 2; EEI, No. 102 at pp. 2-5; SC, No. 110 at p. 1) The American Gas Association (AGA) criticized the use of experience curves, stating that the current approach offers better opportunities to transparently asse ss costs. (AGA, No. 115 at p. 2) Traulsen, a manufacturer of commerci al refrigerators, c ontended that a price

27 Pacific Gas and Electric Company, Southern California Gas Company, and San Diego Gas and Electric submitted a joint letter, while Southern California Edison submitted an identical letter; comments from these letters are referred to as made by IOUs.

122decrease for technology over time only holds true if market fo rces prevail. (Traulsen, No. 99 at p. 3)

The comments that expressed opposition or reservation regarding application of the experience curve approach cited severa l factors. Ingersoll Rand noted that the experience curve is at best a heuristic model, and it urged mo re extensive examination of several points related to experience curves . (Ingersoll Rand, No. 103 at p. 2) AHAM and AHRI noted that experience curves apply onl y to specific products or companies and should not be inflated to industry wide cases. (AHAM, N o. 113 at p. 53-54; AHRI, No. 106 at p. 2) AGA noted that experience curves could be useful for some DOE regulated products at the early stages of development and commercialization, but would not be relevant to a wide ra nge of equipment with mature de signs and markets, including space heating and water heating. (AGA, No. 115 at p. 2) Similarly, AHAM stated that the experience curve came from early-stage industrie s, and at current cost reduction rates is not reliable enough to apply in mature i ndustries with large cumulative production. (AHAM, No. 113 at p. 54) AHRI and SC noted that past performance does not necessarily indicate future performance, as past trends may have reached a plateau. (AHRI, No. 106 at pp. 2-3; SC, No. 110 at p. 2) DOE’s proposed approach used experience curves that reflect broad industr y-wide changes resulting from many factors. The historical data over lengthy periods (not only early-stage indus tries) suggest that experience curves are mathematically applicab le to mature products as well as newer products. The historic decline in inflatio n-adjusted PPI of household appliances has slowed since 2000, but there is no evidence of a plateau.

123AHAM and AHRI opposed DOE’s analysis us ing prices, when experience or experience curves are actually based on co st. (AHAM, No. 113 at p.55; AHRI, No. 106 at p.3) Ingersoll Rand stated that while vari able manufacturing costs may assume an experience curve, fixed costs and retail pri ce do not. (Ingersoll Rand, No. 103 at p.2) EEI stated that the primary cause of experience is outsourcing, so the domestic Producer Price Index (PPI) should not be used when a signifi cant fraction of manuf acturers are overseas. (EEI, No. 102 at pp. 3-5) In response, DOE ac knowledges that the l iterature generally approaches these effects through the costs of producti on and that the pric e of the relevant good will not reflect learning as di rectly as the costs. This is because the price is a reflection of market conditions . Nevertheless, DOE notes th at experience curves can be based on either cost or price, and that the historical data in the case of refrigerators show that real price declines occurred well befo re outsourcing became a significant factor in manufacturing. DOE does not attempt to for ecast the impact of future outsourcing of production in its forecasts of a ppliance manufacturing costs.

SC noted that the PPI incorporates a performance correction so it would not reflect a true price change. (S C, No. 110 at p.4) EEI stated th at refrigerators and freezers have undergone significant cha nges over the years in terms of types and features and DOE did not explain how they accounted for this. (EEI, No. 102 at p.2-3) Ingersoll Rand stated that product performance has changed dr amatically over many years, and therefore it is unclear what the PPI is actually measuring. (Inge rsoll Rand, No. 103 at p.4) In response, DOE notes that the PPI includes a qu ality adjustment, which attempts to factor

124out physical changes in the pr oduct that affect the price. 28 For that reason, the PPI is a better measure of the trends in prices than actual wholes ale prices would be without quality adjustment.

DOE also received several comments related to forecasting error and the time period of the data used. Ingersoll Rand urge d consideration of the expanding uncertainty band as the forecast period expands, and AHAM also noted that error in forecasts increases with time. (Ingersoll Rand, No. 103 at p. 1; AHAM, No. 113 at pp. 59-62) EEI stated that for refrigerators, the starti ng period used by DOE corresponds to a unique, post-war boom. (EEI, No. 102 at p.2) SC stated that the choice of time period for PPI changes results. (SC, No. 110 at p. 4) In re sponse to these comments, DOE conducted a sensitivity analysis that considers differe nt time periods for estimating product price trends. DOE also notes that potentially gr owing forecast error is diminished by the discounting used in DOE’s analysis.

AHRI and Ingersoll Rand expressed concern related to products that use significant quantities of commod ities, as these prices have been volatile and cannot be predicted. (AHRI, No. 106 at p.3; Ingersoll Rand, No. 103 at pp. 5-6) DOE will rely on historical data to determine whether comm odity price volatility is a concern when estimating experience curves for specific products.

28 See the Bureau of Labor Statistics’ Handbook of Methods (Chapter 14: Producer Prices). http://www.bls.gov/opub/hom/homch14.htm

125Some of the parties generally supporting DOE’s proposed approach to incorporating experience into price forecasting for appliance standards requested specific changes to the proposed approach. AC EEE, NEEA, ASAP, NRDC, and the IOUs expressed concern with the proposal to assume no experience curve in cases with limited or no data; instead they recommended using s cenarios or running sensitivity analyses to examine a range of experience rates. (A CEEE, No. 109 at p.1; NEEA, No. 101 at p.5; ASAP, No. 108 at p.3; NRDC, No. 104. at p.5; IOUs, No. 111 and 112 at p.2) EEI expressed agreement with the IOUs with re spect to running sensit ivity analyses. (EEI Supplemental Comments, No. 116 at p. 2) AS AP and NRDC also re quested that, where possible, DOE should attempt to analyze the more efficient models of certain products separately from the baseline models. (A SAP, No. 108 at p.27; NRDC, No. 104 at p.31) Similarly, the IOUs suggested that separate e xperience coefficients should be used for the base case and the standards case. (IOUs, No. 111 and 112 at p.2) In cases with limited or no data, DOE is considering using data at a hi gher level of aggregation to estimate future product prices. DOE’s approach in future rule makings will be based on available data. At this time DOE is not aware of data sufficien t to separately analyze baseline models and efficient models.

In conclusion, DOE evaluated the co ncerns expressed about its proposed approach for incorporating experience in its forecasts of product pr ices and determined that retaining an assumption-based approach of a constant real price trend was not consistent with the historical data for the pr oducts covered in this rule. In its stead, DOE developed a range of potential pr ice trends that was consistent with the available data.

126For the default price trend for this final rule, DOE estimated an experience rate for residential refrigerators and freezers based on an analysis of long-term historical data. DOE derived a refrigerator/freezer price index from 1947 to 2010 by creating a hybrid index that changed proportional to PPI data for the period when PPI data were available, and changed proportional to the relevant CPI data for the period where CPI data were available. DOE then divided the results by th e GDP deflator for the relevant year to produce an inflation-adjusted index. This proxy for historic price data was then regressed on the quantity of refrigerators and freezer s produced: a corresponding series for total shipments of refriger ators and freezers.

To calculate an experience rate, a leas t-squares power-law fit was performed on the refrigerator/freezer price index versus cumulative shipments. DOE then derived an index, with 2010 equal to 1, to forecast pri ces (using PPI and CPI data as proxies) in 2014, the compliance date for amended energy conservation standards in the LCC and PBP analysis, and for the NIA, for each subsequent year through 2043. The index value in each year is a function of the experien ce rate and the cumulative production through that year. Projected shipments were obtained fr om the base case projections made for the NIA (see section IV.G.1 of this notice). The average annual ra te of price de cline in the default case is 1.87 percent. DOE applied the sa me index value to forecast prices for each group of refrigeration products at ea ch considered efficiency level.

DOE notes that experience rates may decr ease over time since returns from experience about a single technology may diminish over time. As part of its sensitivity

127analysis, DOE included models that derive an experience rate based on different time periods, which may reflect such a “flattening” of the experience curve across time, as well as a model with an explicit term that incorporates “flattening.” DOE notes that learning rates may decrease over time sin ce returns from learning about a single technology may diminish over time. These f its usually incorporate the decrease in learning through a variable representing time . DOE includes in the suite of modeling results for learning in this analysis models th at do and do not reflect such a “flattening” of learning across time; however, the models near the middle range of estimates in their analysis do reflect this effect. DOE will continue to explore the basis and the appropriateness of incorporating for com pounding changing learning effects for future rulemaking analyses.

For the NIA, DOE also analyzed two sensit ivity cases that use a price trend based on an exponential in time extrapolation of refrigeration equipment PPI data. Because cumulative shipments for refrigerators can be fit to an exponentia l function of time for long time periods, the experience curve fo rmulation and an exponential in time extrapolation of PPI data provide mathemati cally very similar price trend forecasts in many cases. In addition to the default price tr end, the NIA considered a high price decline case and a low price decline case. See section IV.G.3 for further discussion

In recognition of the uncertainty regardi ng estimation of the fu ture product price trends, DOE will continue to review the relevant literature and seek to continually improve and refine its methodology through rese arch, enhancements to its models and by

128seeking public input. DOE will also work to en sure the robustness of its data sets as a means to ensure the reliab ility of its projections.

For further information on the method and data sources used to develop price trends for residential refrigeration products, see appendix 8E of the final rule TSD.

2. Installation Cost Installation cost include s labor, overhead, and any mi scellaneous materials and parts needed to install the equipment. DOE did not include an installation cost for refrigeration products because it understands that this cost woul d be the same at all of the considered efficiency levels.

3. Annual Energy Consumption For each sampled household, DOE determined the energy consumption for a refrigeration product at different efficiency levels using the approach described above in section IV.E.

4. Energy Prices DOE derived average energy prices for 13 geographic areas consisting of the nine
U.S. Census divisions, with four large States (New York, Florida, Texas, and California) treated separately. For Census divisions containing one of these large States, DOE calculated the regional average exclud ing the data for the large State.

129DOE estimated average residential electric ity prices for each of the 13 geographic areas based on data from EIA Form 861, “Annual Electric Power Industry Database.” DOE calculated an average annual regional resi dential electricity price by: (1) estimating an average residential price for each util ity (by dividing the residential revenues by residential sales); and (2) weighting each ut ility by the number of residential consumers served in that region (based on EIA Form 861). DOE calculated average commercial electricity prices in a similar manner. Fo r both the NOPR and final rule analyses, DOE used EIA data for 2007.

5. Energy Price Projections To estimate energy prices in future years for the NOPR, DOE multiplied the above average regional electricity prices by the forecast of annual average residential electricity price changes in the Reference Ca se using AEO2010 , which has an end year of 2035. 29 To estimate the electricity price trend after 2035, DOE used the average annual rate of change in prices from 2020 to 2035. DO E used the same energy price forecasts for the final rule.

6. Maintenance and Repair Costs Repair costs are associated with repa iring or replacing components that have failed in the appliance, whereas maintenance costs are associated with maintaining the operation of the equipment. For the NOPR, DOE developed a repair cost estimation method that estimates the rate of failure for selected components (compressor, evaporator, condenser, eva porator fan, condenser fan, electronics and automatic

29 U.S. Energy Information Administration. Annual Energy Outlook 2010 . Washington, DC. April 2010.

130icemaker). The estimated average annual repair cost for a given efficiency level can be expressed as the product of tw o elements: the average rate of repair of a component (expressed as an annual probability of failure) times the incremental cost of repair or replacement compared to the baseline produc t. DOE requested comment on its approach used for estimating repair costs. 75 FR at 59514 (September 27, 2010).

Sub Zero commented that VIPs could add repair and/or replacement costs that have not been adequately evaluated or estimated (Sub Zero, No. 69 at p. 5). However, they did not provide estimates that w ould allow DOE to modify its approach.

Whirlpool supported DOE’s approach to es timate repair costs for more efficient refrigerators and freezers. However, it pointed out that the data shown in Table IV.14 of the NOPR did not appear to be consistent wi th the logic expressed in section IV.F.6 of the NOPR. It added that the use of commercial refrigeration failure rates, may lead to inaccuracies (Whirlpool, No. 74 at pp. 5-6).

With regard to the alleged inconsiste ncy between Table IV.14 of the NOPR (75 FR at 59514 (September 27, 2010)) and the accompanying discussion, DOE has checked the accuracy of the table and notes that the ta ble indicated only increm ental repair costs, not total repair costs, which add be tween $7.66 and $21.90 depending on standard-size refrigerator-freezer product class. DOE also acknowledges the potential inaccuracy of using commercial failure rate data, but notes th at (a) no other data were available, and (b) these data were scaled downward so that th e total failure rate (sum of all component

131failure rates) was equal to observed rates for residential refrigeration products as reported in Consumer Reports (see chapter 8 of TSD).

Accordingly, DOE retained the approach for the final rule. Details of this approach can be found in chapter 8 of the final rule TSD.

7. Product Lifetime Because the basis for lifetime estimates in the literature for refrigeration products is uncertain, DOE used other data sources to estimate the distribution of standard-size refrigerator and freezer lifetimes in the fiel d for both the NOPR and today’s final rule. By combining survey results from various years of RECS and the U.S. Census’s American Housing Survey 30 with the known history of applia nce shipments, DOE estimated the fraction of appliances of a gi ven age still in operation. The survival function, which DOE assumed has the form of a cumulative Wei bull distribution, provides an average and median appliance lifetime.

For compact refrigerators, DOE estimated an average lifetime of 5.6 years in the NOPR using data on shipments and the stock-in -place ( i.e. , the number of units in use). DOE found that, given the data on historic sh ipments of compact refrigerators, using a longer lifetime would result in an equipment stock that is far larger than the stock given by 2005 RECS and EIA’s 2003 Commercial Build ing Energy Consumption Survey. See

30 U.S. Census Bureau, American Housing Survey. Available at: http://www.census.gov/hhes/www/housing/ahs/ahs.html

132chapter 8 of the final rule TSD for further details on the method and sources DOE used to develop product lifetimes for this final rule.

8. Discount Rates To establish discount rates for the LCC anal ysis, DOE identified all debt or asset classes that might be used to purchase refr igeration products, including household assets that might be affected indirectly. DOE us ed data from the Federal Reserve Board’s “Survey of Consumer Finances” (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 2007 to estimate the average percentages of th e various debt and equity classes in the average U.S. household portfolios. DOE used SCF data and other sources to develop distributions of interest or return rates asso ciated with each type of equity and debt. The average rate across all types of household debt and equity, wei ghted by the shares of each class, is 5.1 percent. While this value co rresponds to the averag e discount rate, DOE assigned each sample household a specific discount rate drawn from the distributions.

DOE derived the discount rate for co mmercial-sector compact refrigeration products from the cost of capital of publicly -traded firms in the sectors that purchase those products (including lodging and other commercial sectors). The firms typically finance equipment purchases thr ough debt and/or equity capi tal. DOE estimated the cost of the firms’ capital as the weighted average of the cost of equity financing and the cost of debt financing for recent years for whic h data were available (2001 through 2008). The estimated average discount rate for comp anies that purchase compact refrigeration products is 6.2 percent.

133See chapter 8 in the final rule TSD fo r further details on the development of discount rates for refr igeration products.

9. Compliance Date of Amended Standards In the context of EPCA, the compliance date is the future date when parties subject to the requirements of a new standard must begin to comply with that standard. As described in DOE’s semi-annual impl ementation report for energy conservation standards activities submitted to Congress, a fi nal rule for the refrigeration products that are the subject of this rulemaking is sche duled for completion. Compliance with amended standards for refrigeration products prom ulgated by DOE is required in 2014. DOE calculated the LCC and PBP fo r refrigeration products as if consumers would purchase new products in the year compliance with the standard is required.

10. Base Case Efficiency Distribution To accurately estimate the share of co nsumers that would be affected by a standard at a particul ar efficiency level, DOE’s LCC an alysis considered the projected distribution of product efficien cies that consumers purchase under the base case ( i.e. , the case without new energy efficiency standards). DOE refers to this di stribution of product of efficiencies as a base-case efficiency di stribution. DOE developed base-case efficiency distributions for each of the seven representative product classes. These distributions were developed from industry-supplied data for the year 2007 and were comprised of product efficiencies ranging from existing ba seline levels ( i.e. , meeting existing energy

134conservation standards) to levels meeti ng and exceeding ENERGY STAR levels. DOE then projected these distributions to the year that today’s st andards would become effective (2014).

DOE modified its approach for estimating base-case efficiency distributions for the NOPR analysis for certain product classe s. DOE believes that, because the current ENERGY STAR efficiency level is higher th an it was prior to the requirements established in 2008, the growth in market share may be slower than before due to the reduction in sales generally associated with hi gher cost, more efficient products. For the NOPR, DOE adopted a projected market share of ENERGY ST AR models in 2014 (under current requirements) th at is equal to the averag e of ENERGY STAR market shares in 2007 (the last year under th e old requirements) and 2008 (when current requirements took effect). With this appro ach, the ENERGY STAR market shares for product class 3 (refrigerator-freezer—automatic defrost with top-mounted freezer without through-the-door ice service) and product cl ass 5 (refrigerator-freezers—automatic defrost with bottom-mounted freezer without through-the-door ice service) are projected to grow more slowly between 2008 and 2014 th an they had under the old requirements before 2008. ENERGY STAR products reach a market share in 2014 of 8 percent for product class 3 and 68 percent for bo ttom-mount refrigerator-freezers.

DOE requested comment on its approach for estimating base case efficiency distributions. 75 FR at 59515 (September 27, 2010). Whirlpool stated it had no comment on the approach (Whirlpool, No. 74 at p. 6), and no other comments were received. In

135light of the absence of any comments on its approach, DOE maintained the same approach for the final rule as it used in the NOPR for all of th e product classes. For further information on DOE’s estimate of base- case efficiency distributions, see chapter 8 of the final rule TSD.

11. Inputs to Payback Period Analysis The payback period is the amount of time it takes the consumer to recover the additional installed cost of more-efficien t products, compared to baseline products, through energy cost savings. The simple payback period does not account for changes in operating expense over time or the time valu e of money. Payback periods are expressed in years. Payback periods that exceed the li fe of the product indica te that the increased total installed cost is not recove red in reduced operating expenses.

The inputs to the PBP calculation are the to tal installed cost of the equipment to the customer for each efficiency level and the average annual operating expenditures for each efficiency level. The PBP calculation us es the same inputs as the LCC analysis, except that discount ra tes are not needed.

12. Rebuttable-Presumption Payback Period As noted above, EPCA, as amended, estab lishes a rebuttable presumption that a standard is economically justified if the Secr etary finds that the a dditional cost to the consumer of purchasing a product complying wi th an energy conservation standard level will be less than three times the value of the energy (and, as applicable, water) savings

136during the first year that the consumer will receive as a result of the standard, as calculated under the test procedure in place for that standard. (42 U.S.C. 6295(o)(2)(B)(iii)) For each considered efficien cy level, DOE determined the value of the first year’s energy savings by calculating the qu antity of those savi ngs in accordance with the applicable DOE test procedure, and multiplying that amount by the average energy price forecast for the year in which comp liance with the amended standard would be required.

G. National Impact Analysis–Na tional Energy Savings and Net Present Value Analysis The national impact analysis (NIA) a ssesses the national energy savings (NES) and the national net present va lue (NPV) of total consumer costs and savings that would be expected to result from new or amended standards at specific efficiency levels. (“Consumer” in this context refers to consumers of the product being regulated.) DOE calculates the NES and NPV ba sed on projections of annual appliance shipments, along with the annual energy consumption and total installed cost data from the energy use and LCC analyses. For the present analysis, DOE forecasted the energy savings, operating cost savings, product costs, and NPV of cons umer benefits for products sold from 2014 through 2043.

DOE evaluates the impacts of new and amended standards by comparing basecase projections with standards-case projec tions. The base-case pr ojections characterize energy use and consumer costs for each produc t class in the absence of new or amended energy conservation standards. DOE compar es these projections with projections

137characterizing the market for each product class if DOE adopte d new or amended standards at specific energy efficiency levels ( i .e. , the TSLs or standards cases) for that class. For the base case forecast, DOE cons iders historical trends in efficiency and various forces that are likely to affect the mix of efficiencies over time. For the standards cases, DOE also considers how a given standard would likely affect the market shares of efficiencies greater than the standard.

To make the analysis more accessible and transparent to all interested parties, DOE uses an MS Excel spreadsheet model to calculate the energy savings and the national consumer costs and savings from each TSL. 31 The TSD and other documentation that DOE provides during the rulemaking help explain the models and how to use them, and interested parties can review DOE’s an alyses by changing va rious input quantities within the spreadsheet. The NIA spreadshee t model uses typical values as inputs (as opposed to probability distributions).

For the current analysis, the NIA used pr ojections of energy prices and housing starts from the AEO2010 Reference case. In addition, DOE analyzed scenarios that used inputs from the AEO2010 Low Economic Growth and High Economic Growth cases. These cases have higher and lower energy pri ce trends compared to the Reference case, as well as higher and lower housing starts, wh ich result in higher and lower appliance shipments to new homes. NIA results based on these cases are presented in appendix 10­ A of the final rule TSD.

31 MS Excel is the most widely used spreadsheet calcu lation tool in the United States and there is general familiarity with its basic features. Thus, DOE’s use of MS Excel as the basis for the spreadsheet models provides interested parties with access to the models within a familiar context.

138Table IV.6 summarizes the inputs and ke y assumptions DOE used for the NIA analysis contained in the overall NOPR analys is and the changes to the analyses for the final rule. Discussion of these inputs and cha nges follows the table. See chapter 10 of the final rule TSD for further details.

Table IV.6 Approach and Data Used for National Energy Savings and Consumer Net Present Value Analyses Inputs NOPR Changes for the Final Rule Shipments Annual shipments from shipments model, using 2008 data to estimate theratio of bottom-mount share to sideby-side share. No change.

Compliance Date of Standard 2014. No change.
Base-Case Forecasted Efficiencies Used a “roll-up + ENERGY STAR” scenario to establish the distribution of efficiencies. No change.

Standards-Case Forecasted Efficiencies Used a “roll-up + ENERGY STAR” scenario to establish the distribution of efficiencies. No change.

Annual Energy Consumption per Unit Annual weighted-average values as a function of SWEUF.* No change.

Total Installed Cost per Unit Annual weighted-average values as a function of SWEUF.* Applied a price trend to estimate future product prices. Energy Cost per Unit Annual weighted-average values as a function of the annual energy consumption per unit and energy prices. No change.

Repair and Maintenance Cost per Unit Annual values as a function of efficiency level. No change.

Escalation of Energy Prices AEO2010 forecasts (to 2035) and extrapolation through 2043. No change.Energy Site-toSource Conversion Factor Varies yearly and is generated by DOE/EIA’s NEMS No change.

Discount Rate Three and seven percent real. No change. Present Year Future expenses are discounted to 2010. No change.

139*Shipments-Weighted Energy Use Factor

1. Shipments Forecasts of product shipments are needed to calculate the national impacts of standards on energy use, NPV, and future manufacturer cash flows. DOE develops shipment forecasts based on an analysis of key market drivers for each considered product. In DOE’s shipments model, product shipments are driven by new construction, stock replacements, and other types of pur chases. The shipments models take an accounting approach, tracking market shares of each product class and the vintage of units in the existing stock. Stock accounting us es product shipments as inputs to estimate the age distribution of in-service product stocks for all years. The age distribution of inservice product stocks is a key input to cal culations of both the NES and NPV, because operating costs for any year depend on the age distribution of the stock. DOE also considers the impacts on shipments from cha nges in product purchase price and operating cost associated with higher energy efficiency levels.

In projecting shipments for refrigeration products, DOE accounted for installations in new homes and replacemen t of failed equipment. In addition, for standard-size refrigerator-fr eezers, DOE estimated purchases driven by the conversion of a first refrigerator to a s econd refrigerator. It also es timated purchases by existing household consumers who enter the market as new owners for standard-size freezers.

In conducting the analysis for today’s rule , DOE examined the historical trends in the market shares of different refrigerator-freezer configurati ons to disaggregate the total

140shipments of refrigerator-freezers into the three considered refrigerator-freezer product categories (top-mount, bottom-mount and side-by- side configurations). The market share of side-by-side refrigerator-freezer models has grown significantly during the past two decades. Bottom-freezer models historically ha d a small market share, but that share has also grown in recent years. However, because DOE had insufficient data to forecast longterm growth of this product class, it made the assumption, based on pa st sales trends, that consumer behavior related to bottom-mount m odels in the future would mirror behavior regarding side-by-side models. DOE develope d a model to forecast the combined bottommount and side-by-side market shares thr oughout the 30-year forecast period (beginning in 2014), and assumed that the ratio of botto m-mount share to side-by-side share would remain constant at the 2008 level (the last year for which DOE had disaggregated data).

To estimate the effects on product ship ments from increases in product price projected to accompany amended standards at higher efficiency levels, DOE applied a price elasticity parameter. It estimated this pa rameter with a regression analysis that used purchase price and efficiency data specific to residential refrigerato rs, clothes washers, and dishwashers over the period 1980–2002. The estimated “relativ e price elasticity” incorporates the impacts from purchase pric e, operating cost, and household income, and it also declines over time. DOE estimated sh ipments in each standards case using the relative price elasticity along with the change in the relative price between a standards case and the base case. For details on the sh ipments analysis, see chapter 9 of the final rule TSD.

1412. Forecasted Efficiency in the Base Case and Standards Cases A key component of the NIA is the trend in energy efficiency forecasted for the base case (without new or amended standards) and each of the sta ndards cases. Section
IV.X described how DOE developed a base- case energy efficiency distribution (which yields a shipment-weighted average efficiency ) for each of the considered product classes for the first year of the forecast peri od. Based on recent trends, DOE assumed no improvement of energy efficiency in the base case and held the base-case energy efficiency distribution constant throughout the forecast period.

To estimate efficiency trends in the standards cases, DOE used a “roll-up” scenario in its standards rulemakings. Unde r the “roll-up” scenario, DOE assumes: (1) product efficiencies in the base case th at do not meet the standard level under consideration would “roll-up” to meet the new standard level; and (2) product efficiencies above the standard level under consid eration would not be affected.

For the NOPR, DOE refined its forecast for the base case and each of the standards cases using information obtaine d from ENERGY STAR program staff. To project the efficiency distribu tions after 2014 for the base cas e, DOE first considered the potential for changes to the ENERGY STAR qualification levels. DOE assumed that, in the absence of a new standard, the ENER GY STAR program would re-examine and possibly revise its qualificati on levels regardless of the market share in 2014. When setting a minimum product efficiency level to qualify for ENERGY STAR, one important metric is that the average payback period co mpared to the current standard level should

142not exceed five years. Using the payback pe riod calculation described in section IV.F, DOE applied this criterion to all product cl asses to evaluate the extent to which the current ENERGY STAR efficiency levels would be increased in the future.

DOE then estimated the market shar es for ENERGY STAR products in 2021 based on past experience in the market for these products. Rather than make long-term projections based on limited information, DOE assumed there would be no further change in market shares between 2021 and the end of the forecast period. DOE recognizes that some change in shares is li kely to occur in reality. However, since DOE used the same assumption in the standards cases, the accuracy of the assumption makes no difference to the analysis of energy savings.

For the standards cases (also referred to as candidate standard levels, or CSLs), DOE used the same approach as for the ba se case and assumed that in the case of amended standards, the ENERGY STAR program would re-evaluate its qualifying levels for all product classes using the five-year payback period criterion. For each CSL, DOE identified the maximum efficiency level with a payback period of fi ve years or less. If that level was below the current ENERGY ST AR level, DOE maintained the current ENERGY STAR level. At higher CSLs, there is no efficiency level above the standard level with a payback period of less than 5 years. DOE assumed that the ENERGY STAR program would be suspended with standard s at higher CSLs on a product-class specific basis. This result is projected to occur fo r all product classes at CSL 3 and above; for product classes 9 (upright freeze rs with automatic defrost) and 10 (chest freezers and all

143other freezers except compact freezers), it occurs at lower CSLs. The market share estimates for ENERGY STAR products in 2021 and beyond were based on a similar approach as for the base case.

DOE requested comment on its approach for forecasting base case and standards case efficiency distributions. 75 FR at 59518 (September 27, 2010). Whirlpool stated it had no comment on the approach (Whirlpool, No. 74 at p. 6), and no other comments were received. As a result, DOE retained its approach for the final rule. For further details about the forecasted efficiency distri butions, see chapter 10 of the final rule TSD.

3. Installed Cost per Unit In the NOPR analysis, DOE followed its past practice and assumed that the manufacturer costs and retail prices of products meeting vari ous efficiency levels remain fixed, in real terms, after 2008 (the year fo r which the engineering analysis estimated costs) and throughout the period of the analysis. As discusse d in section IV.F.1, for the final rule DOE used a price trend based on an experience curve derived using historical data on shipments and refrigeration equipment PPI. DOE applied the same price trend to forecast prices for each group of refrigeration products at each considered efficiency level. The average projected annual rate of price decline in th e default case is 1.87 percent.

For the NIA, DOE also analyzed two cas es that use a price trend based on an exponential in time extrapolation of refriger ation equipment PPI data. DOE selected a

144high projected price trend declin e case and a low projected price trend decline case from among a number of price trends that it analy zed (see appendix 8E of the final rule TSD). The high projected price trend decline case is based on the upper end of the 95 percent confidence interval for an exponential fit to the PPI series in 1991-2010 divided by the relevant GDP deflator data from those years. The low projected price trend decline case is based on the lower end of the 95 percent c onfidence interval for an exponential fit to the PPI series in 1976-2010 before dividing it by the relevant GDP deflator data from those years. The annual rate of projected pr ice trend decline is 3.12 percent in the high projected price trend decline case and 1.14 pe rcent in the low pr ojected price trend decline case.

4. Site-to-Source Energy Conversion For each year in the forecast period, DOE calculates the NES for each standard level by multiplying the stock of equipment affected by the energy conservation standards by the per-unit annual energy savings.

To estimate the national energy savings e xpected from appliance standards, DOE uses a multiplicative factor to convert si te energy consumption (at the home or commercial building) into primary or source energy consumption (the energy required to convert and deliver the site energy). These conversion factors account for the energy used at power plants to generate electricity and losses in transmission and distribution, as well as for natural gas losses from pipeline leakage and energy used for pumping. For electricity, the conversion factors vary over ti me due to projected changes in generation

145sources ( i.e. , the power plant types projected to provide elect ricity to the country). The factors that DOE developed are marginal va lues, which represent the response of the system to an incremental decrease in consum ption associated with appliance standards.

For the NOPR and today’s final rule, DOE updated its annual site-to-source conversion factors based on the version of NEMS that corresponds to AEO2010 , which provides energy forecasts through 2035. For 2036-2043, DOE used conversion factors that remain constant at the 2035 values.

In response to a request from DOE’s Of fice of Energy Efficiency and Renewable Energy (EERE), the National Academy of Sc iences (NAS), appointed a committee on “Point-of-Use and Full-Fuel-Cycle Measurem ent Approaches to Energy Efficiency Standards” to conduct a study required by s ection 1802 of the Energy Policy Act of 2005 (Pub. L. No. 109-58 (August 8, 2005)). The fundamental task before the committee was to evaluate the methodology used for setting energy efficiency standards and to comment on whether site (point-of-use) or source (f ull-fuel-cycle) measures of energy savings would better support rulemaking efforts to achieve energy co nservation goals. The NAS committee defined full-fuel-cycle energy cons umption as including, in addition to site energy use, the following: energy consumed in the extraction, processing, and transport of primary fuels such as coal, oil, and natura l gas; energy losses in thermal combustion in

146power generation plants; and energy losses in transmission and distribution to homes and commercial buildings. 32

In evaluating the merits of using point-o f-use and full-fuel-cycle measures, the NAS committee noted that DOE uses what th e committee referred to as “extended site” energy consumption to assess the impact of energy use on the ec onomy, energy security, and environmental quality. The extended site measure of energy consumption includes the energy consumed during the generation, tr ansmission, and distribution of electricity but, unlike the full-fuel-cycle measure, does not include the energy consumed in extracting, processing, and transporting primary fuels. A majority of the NAS committee concluded that extended site energy consumption understate s the total energy consumed to make an appliance operational at th e site. As a result, the NAS committee recommended that DOE consider shifting its an alytical approach over time to use a fullfuel-cycle measure of energy consumption when assessing national and environmental impacts, especially with re spect to the calcula tion of greenhouse gas emissions. The NAS committee also recommended that DOE provide more comprehensive information to the public through labels and other means, such as an enhanced website. For those appliances that use multiple fuels ( e.g. , water heaters) , the NAS committee indicated that measuring full-fuel-cycle energy consumption would provi de a more complete picture of energy consumed and permit comparisons across many different appliances, as well as an improved assessment of impacts.

32 The National Academies, Board on Energy and Envi ronmental Systems, Letter to Dr. John Mizroch, Acting Assistant Secretary, U.S. DOE, Office of EERE from James W. Dally, Chair, Committee on Pointof-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards, May 15, 2009.

147In response to the NAS recommendations, DOE issued, on August 20, 2010, (75 FR 51423), a Notice of Proposed Policy propos ing to incorporate a full-fuel cycle analysis into the methods it uses to estimate the likely impacts of energy conservation standards on energy use and emissions. Specifi cally, DOE proposed to use full-fuel-cycle (FFC) measures of energy and greenhouse gas (GHG) emissions, rather than the primary (extended site) energy measurement it currently uses. Additionally, DOE proposed to work collaboratively with the Federal Trad e Commission (FTC) to make FFC energy and GHG emissions data available to the public to enable consumers to make cross-class comparisons. On October 7, 2010, DOE held an informal public meeting to discuss and receive comments on its planned approach. Th e materials related to this proposed policy are available at: http://www.regulations.gov/search/Regs/ home.html#docketDetail?R=EERE-2010-BT

NOA-0028 . Following the close of the public comme nt period, DOE intends to develop a final policy statement on these subjects and th en take steps to begin implementing that policy in rulemakings and other activiti es that are undertaken during 2011.

5. Discount Rates The inputs for determining the NPV of th e total costs and benefits experienced by consumers of the considered appliances are: (1) total annual installed cost, (2) total annual savings in operating costs, and (3) a discount factor. DOE calculates net savings each year as the difference between the base ca se and each standards case in total savings in operating costs and total increases in inst alled costs. DOE calculates operating cost savings over the life of each produc t shipped in the forecast period.

148DOE multiplies the net savings in future years by a discount factor to determine their present value. For today’s final ru le, DOE estimated the NPV of appliance consumer benefits using both a 3-percent a nd a 7-percent real discount rate. DOE uses these discount rates in accordance with gui dance provided by the Office of Management and Budget (OMB) to Federal agencies on the development of regulatory analysis. 33 The discount rates for the determina tion of NPV are in contrast to the discount rates used in the LCC analysis, which are designed to reflec t a consumer’s perspective. The 7-percent real value is an estimate of the average before -tax rate of return to private capital in the
U.S. economy. The 3-percent real value represen ts the “societal rate of time preference,” which is the rate at which society discounts future consumption flows to their present value.

6. Benefits from Effects of St andards on Energy Prices A decrease in electricity consumption a ssociated with amended standards for refrigeration products could reduce the electr icity prices charged to consumers in all sectors of the economy and thereby reduce their electricity expenditure s. In chapter 2 of the preliminary analysis TSD, DOE explai ned that, because the power industry is a complex mix of fuel and equipment suppliers, electricity producers a nd distributors, it did not plan to estimate the value of potentially reduced electricity costs for all consumers associated with amended standards for refrig eration products. In response, the Northeast

33 OMB Circular A-4 (Sept. 17, 2003), section E, “Iden tifying and Measuring Benefits and Costs. Available at: http://www.whitehouse.gov/omb/memoranda/m03-21.html

.

149Energy Efficiency Partnerships urged DOE to quantify electricity demand reductions achieved by these updated standards in fina ncial terms. (NEEP, No. 41 at p. 1)

For the NOPR and today’s final rule, DOE used NEMS-BT to assess the impacts of the reduced need for new el ectric power plants and infras tructure projected to result from standards. In NEMS-BT, changes in pow er generation infrastruc ture affect utility revenue requirements, which in turn affect electricity prices. DOE estimated the impact on electricity prices associated with e ach considered TSL. Although the aggregate benefits for electricity users are potentially la rge, there may be negative effects on some of the actors involved in the s upply of electricity, particular ly power plant providers and fuel suppliers. Because there is uncertainty about the extent to which the benefits for electricity users from reduced electricity pri ces would be a transfer from actors involved in electricity supply to electricity consum ers, DOE has concluded that, at present, because of this uncertainty, it should not gi ve a heavy weight to this factor in its consideration of the economi c justification of new or amended standards. DOE is continuing to investigate the extent to which electricity price changes projected to result from standards represent a net gain to society.

H. Consumer Subgroup Analysis In analyzing the potential impact of new or amended standards on consumers, DOE evaluates the impact on identifiable sub-groups of consumers that may be disproportionately affected by a national standard. DOE eval uates impacts on particular sub-groups of consumers primarily by anal yzing the LCC impacts and PBP for those

150particular consumers from a lternative standard levels. For both the NOPR and today’s final rule, DOE analyzed the impacts of the considered standard levels on low-income consumers and senior citizens. DOE did not estimate the impacts for compact refrigeration products because the household sample sizes were not large enough to yield meaningful results. For further details on DOE’s consumer sub-group analysis, see Chapter 11 in the final rule TSD.

I. Manufacturer Impact Analysis DOE conducted the MIA to estimate the financial impact of amended energy conservation standards on manufacturers of residential refrigerati on products, and to assess the impacts of such standards on employment and manuf acturing capacity.

The MIA is both a quantitative and qualitativ e analysis. The quantitative part of the MIA relies on the Government Regulator y Impact Model (GRIM), an industry cashflow model customized for the residentia l refrigeration products covered in this rulemaking. The key MIA output is industry net present value (INPV). DOE used the GRIM to calculate cash flows using standa rd accounting principles and to compare changes in INPV between a base case and various TSLs (the standards cases). The difference in INPV between the base and standards cases repr esents the financial impact of the amended standard on ma nufacturers. Different sets of assumptions (scenarios) produce different results. DOE reports the MIA impacts of amended energy conservation standards by grouping together the impacts on manufacturers of certain product classes. DOE presents the industry impacts by the major product types ( i.e. , standard size

151refrigerator-freezers, standard size freezers, compact refrigerators and freezers, and builtin refrigeration products). These product group ings represent markets that are served by the same manufacturers. By segmenting the resu lts into these product types, DOE is able to discuss how these subgroups of manufacturers will be impacted by amended energy conservation standards.

The qualitative part of the MIA addresses f actors such as produc t characteristics, characteristics of particular firms, and market trends. Th e qualitative discussion also includes an assessment of the impacts of st andards on subgroups of manufacturers. DOE outlined its complete methodology for the MIA in the NOPR. 75 FR at 59519-59526 (September 27, 2010). The complete MIA is presented in chapter 12 of the NOPR and final rule TSD.

1. Comments from Interested Parties DOE received a number of comments from interested parties in response to the NOPR. Sub Zero commented that while it is not a small business, it is a small refrigerator manufacturer compared to its competition. It argued that its smaller size places it at a disadvantage compared to larger competito rs with respect to the supply chain for compressors, which could cause Sub Zero to experience supply disruptions that would seriously impact their busine ss and ability to compete. (Sub Zero, No. 69 at p. 3) Sub Zero added that its cost and distribution struct ures are different from the majority of the industry, and its small scale results in higher costs per unit production, including engineering related expenses. (Sub Zero, No. 69 at p. 2) Sub Zero commented that the

152new standards on smaller manufacturers in any segment of the appliance industry introduce costs and personne l requirements that represent a larger percentage of resources than those required by larger competitors. (Sub Zero, No. 69 at p. 3) Whirlpool simply stated that it was not a small business and offered no comment on the proposal’s impact on small manufacturers. (Whirlpool, No. 74 at p 6)

DOE agrees that a smaller manufacturer could face all of the additional challenges raised by Sub Zero relative to a larger competitor. DOE also notes that while many larger refrigerator manufacturers also produce built-in units and co uld experience some benefits in the built-in market from their overall scale, built- in production volumes for any manufacturer are likely to be much lowe r for built-in products than free-standing products. While a smaller manufacturer could face all the challenges listed by Sub Zero, DOE believes that the separate analysis and presentation of results for built-in products adequately addresses Sub Zero’s concerns about the potential impacts on built-in manufacturers. DOE continues to believe th at presenting the built-in analysis results separately from other categor ies is the most appropriate way to analyze the lower production volumes and different cost structure for built-in manufacturing.

In the NOPR, DOE investigated whethe r small business manufacturers should be analyzed as a manufacturer subgroup . 75 FR at 59520, 59548 (September 27, 2010). As part of this effort, DOE identified one co mpany that manufactures products covered by this rulemaking and qualifies as a small business under the appli cable Small Business

153Administration (SBA) definition. 34 DOE did not analyze a sepa rate subgroup of small business manufacturers in the NOPR because it determined this rulemaking would not have a significant economic impact on a subs tantial number of small entities. Id. at 59571-59572. DOE requested comment on this dete rmination and sought any information concerning small businesses that could be im pacted by this rulemaking as well as the nature and extent of those potential impacts of the proposed energy conservation standards on small residen tial refrigeration product manuf acturers. Id. at 59572 and 59575. DOE received no information regardi ng these issues. DOE received comments from Whirlpool and Sub Zero that supported its initial classificat ion of the number of small business manufacturers of residential refrigeration products. (Whirlpool No. 74, at p.6; Sub Zero, No. 69 at p. 3) Therefore, the fi nal rule continues to refrain from treating small business manufacturers as a manufacturer subgroup but also maintains the separate analysis and presentation of results for built-in products.

Sub Zero also commented that the propos ed standards would have implications for their company. At the proposed built-in stan dard levels, it asserted that the company will be pressed to meet the necessary efficiency levels, remain a viable business, and achieve profitability. Sub Zero also argued that the new stan dards could also impact the number of products that m eet high visibility programs such as ENERGY STAR and indicated that these challenges are in additi on to attempting to recover from a difficult business environment. Sub Zero added that di fferent regulations in other areas of the world, notably Canada and Europe, that involve more than energy and are not

34 See http://www.sba.gov/idc/groups/public/documen ts/sba_homepage/serv_sstd_tablepdf.pdf for a list of SBA size standards.

154harmonized with U.S. requirements, pose signi ficant challenges a nd noted that this regulatory burden is the bigge st challenge for the future. (Sub Zero, No. 69 at p. 3) Sub Zero agreed that DOE’s analysis presented in the NOPR confirms that new standards will impact built-in designs more stringently than conventional free-stand ing products to meet any given efficiency level. Sub Zero stat ed it was also concerned that built-ins be separated as distinct product classes with different efficien cy levels from conventional product classes, in order to continue to o ffer consumers the utility they desire at reasonable added costs. (Sub Zero, No. 69 at p. 1-2)

DOE agrees that manufacturers such as Sub Zero face challenges. For example, because Sub Zero holds a large market sh are of the premium, built-in market, DOE expects that a significant portion of the $65 million in product conversion costs and $55 million in capital conversion costs calculated for built-in product classes will be borne by Sub Zero. However, DOE believes that the IN PV impacts calculated in the MIA analyze the potential impacts on built-in manufactur ers due to amended energy conservation standards. This adjustment, along with pr oviding separate product classes for built-in products to help preserve the utility that these products offer, will help mitigate the potential adverse financial impact th at would result from this rule.

DOE also received a number of comments about possible refrigerant and blowing agent changes. Whirlpool, GE, and AHAM all noted possible changes to the regulatory landscape for the refrigerants available in residential refrigerat ion products. (Whirlpool, No. 74 at p. 4; GE, No. 76 at p. 2; AHAM, N o. 73 at pp. 7-8) Sub Zero also highlighted

155the current uncertainty about potential future regulation of HFC refr igerants and blowing agents. It suggested that the industry could potentially be f aced with enforced conversion to other substances by 2014, which woul d require significant additional capital investment. (Sub Zero, No. 69 at p. 4)

These comments are addressed above in section IV.B.1. Because these comments also relate to the cumulative regulatory burden, DOE reiterates that it concluded isobutane products may soon become availabl e. However, DOE did not consider the switch to isobutane refrigerant as a design option to reduce energy use because sufficient information regarding the energy savings char acteristics and the costs of the new designs was not available. DOE did not consider the possible capital investment needed by conversions to other substances by 2014 because DOE believes that basing energy conservation standards on the uncertain pros pect of pending regulat ions or legislation would be speculative.

2. GRIM Key Inputs The GRIM inputs are data characterizing the industry cost struct ure, investments, shipments, and markups. DOE updates the MIA to reflect changes in the outputs of two other key DOE analyses that feed into the GRIM: the engineering analysis and the NIA. For the final rule, DOE did not receive any relevant comments that would necessitate such changes to the engineering analysis. Si milarly, DOE did not receive comments from interested parties that would change assump tions or shipments in the NIA. DOE did not request specific comment on the inputs to the MIA in the NOPR and is maintaining the same methodology for the final rule.

156For the final rule, DOE incorporated trends in prices over time into the analysis. These prices trends in every year also imp act the MIA results. DOE used the same price trends in the NIA from the base year of the analysis through th e end of the analysis period. DOE also assumed that manufacturer product costs (MPCs) and MSPs were similarly impacted by the price trends in both the base case and standards cases. See section IV.F.1 for a description of how DOE im plemented price trends into the analysis. The other major GRIM assumptions and input s that are not part of the engineering analysis or NIA ar e outlined below.

a. Product and Capital Conversion Costs Amended energy conservation standards wi ll cause manufacturers to incur onetime conversion costs to bring their produc tion facilities and product designs into compliance. For the MIA, DOE classified thes e one-time conversion costs into two major groups: (1) product conversion costs and (2) capital conversion costs. Product conversion costs are one-time investments in researc h, development, testing, marketing, and other non-capitalized costs focused on making pr oduct designs comply with the amended energy conservation standard. Capital convers ion costs are one-time investments in property, plant, and equipment to adapt or change existing producti on facilities so that new product designs can be fa bricated and assembled.

DOE based its estimates of the product conve rsion costs that w ould be required to meet each TSL on information obtained fr om manufacturer interviews, the design

157pathways analyzed in the engineering analys is, and market information about the number of platform and product families for each manuf acturer. DOE based its capital conversion cost estimates on manufacturer interviews and assumptions from the engineering analysis. 75 FR at 59521 (September 27, 2010) . DOE’s estimates of the product and capital conversion costs for all of the refrigeration products addressed in this rulemaking can be found in section VI.B.2, of today’s fina l rule and in chapter 12 of the final rule
TSD.

b. Markup Scenarios For the MIA, DOE modeled two standards- case markup scenarios to represent the uncertainty regarding the potential impacts on prices and profitability for manufacturers following the implementation of amended ener gy conservation sta ndards: (1) a flat markup scenario, and (2) a preservation of ope ration profit scenario. These scenarios lead to different markup values, which, when appl ied to the inputted MP Cs, result in varying revenue and cash flow impacts.

The flat markup scenario assumes that the cost of goods sold for each product is marked up by a flat percentage to cover standard SG&A expenses, R&D expenses, and profit. This scenario represents the upper bound of industry profitability in the standards case because manufacturers are able to fu lly pass through to their customers the additional costs due to compliance with appl icable standards. DOE also modeled the preservation of operating profit markup scenar io. In this scenario, the manufacturer markups are lowered such that, in the standa rds case, manufacturers are only able to

158maintain the base-case total operating profit in absolute dollars, despite higher product costs and investment. DOE implemented th is scenario in GRIM by lowering the manufacturer markups at each TSL to yiel d 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. Th is scenario represents the lower bound of industry profitability following amended ener gy conservation standa rds because higher MPCs and the investments required to co mply with the amended energy conservation standard do not yield additional operating pr ofit. 75 FR at 59522 (September 27, 2010).

3. Manufacturer InterviewsDOE interviewed manufacturers representing more than 95 percent of standardsize refrigerator-freezer sales, approximately 95 percent of standard-size freezer sales, about 75 percent of compact refrigerator and freezer sales, and more than 95 percent of built-in refrigeration products. These intervie ws were in addition to those DOE conducted as part of the engineering analysis. DOE outlined the key issues in the rulemaking for manufacturers in the NOPR. 75 FR at 59524-59526 (September 27, 2010).

J. Employment Impact Analysis DOE considers employment impacts in the domestic economy as one factor in selecting an amended standard. Employment impacts consist of di rect and indirect impacts. Direct employment impacts are any changes in the number of employees of manufacturers of the appliance products that are the subjec t of this rulemaking, their suppliers, and related service firms. Indirect employment impacts are changes in national

159employment that occur due to the shift in expenditures and capital investment caused by the purchase and operation of more-efficient appliances. The MIA addresses the direct employment impacts that concern manuf acturers of refrigeration products. The employment impact analysis addresse s the indirect employment impacts.

Indirect employment impacts from standa rds consist of the net jobs created or eliminated in the national economy, other than in the manufacturing sector being regulated, due to: (1) reduced spending by e nd users on energy; (2) reduced spending on new energy supplies by the utility industry; (3) increased spending on new products to which the new standards apply; and (4) the effects of those three factors throughout the economy. DOE expects the net monetary savings fr om standards to be redirected to other forms of economic activity. DOE also expect s these shifts in spending and economic activity to affect the demand for labor in the short term, as explained below.

One method for assessing the possible effects on the demand for labor of such shifts in economic activity is to compare se ctoral employment sta tistics developed by the Labor Department’s Bureau of Labor Statistics (BLS). 35 The BLS regularly publishes its estimates of the number of jobs per million dollars of economic activity in different sectors of the economy, as well as the jobs created elsewhere in the economy by this same economic activity. Data from BLS indicat e that expenditures in the utility sector generally create fewer jobs (both directly and indirectly) than expenditures in other

35 Data on industry employment, hours, labor compensation, value of production, and the implicit price deflator for output for these industries are available upon request by calling the Division of Industry Productivity Studies (202-691-5618) or by sending a request by e-mail to dipsweb@bls.gov. Available at: http://www.bls.gov/news.release/prin1.nr0.htm.

160sectors of the economy. There are many reas ons for these differences, including wage differences and the fact that the utility sector is more capital intensive and less labor intensive than other sectors. 36

Energy conservation standards have the e ffect of reducing consumer utility bills. Because reduced consumer expenditures for energy likely lead to increased expenditures in other sectors of the econom y, the general effect of effici ency standards is to shift economic activity from a less labor-intensive sect or ( i.e. , the utility s ector) to more laborintensive sectors ( e.g. , the reta il and service sectors). Thus, based on the BLS data alone, DOE believes net national employment will increase due to shifts in economic activity resulting from amended standa rds for refrigeration products.

For the standards considered in today’s final rule, DOE estimated indirect national employment impacts using an input/output model of the U.S. economy called Impact of Sector Energy Technologies (ImSET). ImS ET is a spreadsheet model of the U.S. economy that focuses on 187 sectors most re levant to industrial, commercial, and residential building energy use. 37 ImSET is a special pur pose version of the “U.S. Benchmark National Input-Output ” (I–O) model, which has been designed to estimate the national employment and income effects of energy-saving technologies. The ImSET software includes a computer-based I–O model w ith structural coefficients to characterize economic flows among the 187 sectors. ImS ET’s national economic I–O structure is

36 See Bureau of Economic Analysis, Regional Multipliers: A User Handbook for the Regional InputOutput Modeling System (RIMS II) . Washington, DC. U.S. Department of Commerce, 1992. 37 J. M. Roop, M. J. Scott, and R. W. Schultz, ImSET 3.1: Impact of Sector Energy Technologies, PNNL18412, Pacific Northwest National Laboratory, 2009. Available at: http://www.pnl.gov/main/publications/exter nal/technical_reports /PNNL-18412.pdf

161based on a 2002 U.S. benchmark table, spec ially aggregated to the 187 sectors. DOE estimated changes in expenditures using the NIA spreadsheet. Using ImSET, DOE then estimated the net national, i ndirect employment impacts by sector of potential amended efficiency standards fo r refrigeration products.

For more details on the employment imp act analysis, see the final rule TSD, chapter 13.

K. Utility Impact Analysis The utility impact analysis estimates several important effects on the utility industry that would result from the adoption of new or amended standards. For both the NOPR final rule analyses, DOE used the NE MS-BT model to generate forecasts of electricity consumption, electricity generati on by plant type, and electric generating capacity by plant type, that would result from each TSL. DOE obtained the energy savings inputs associated with efficiency im provements to considered products from the NIA. DOE conducts the utility impact analysis as a scenario that de parts from the latest
AEO2010 Reference case. In other words, the estimated impacts of an amended standard are the differences between values forecasted by NEMS–BT and the values in the
AEO2010 Reference case.

As part of the utility impact analysis , DOE used NEMS-BT to assess the impacts

on electricity	prices	of	the	reduc ed need for	new	electric	power plants	and infrastructure	projected	to	result	from	the	considered	standard s.	In NEMS‐BT,

162changes	in power	generation	infrastructure	affect	utility	reven ue	requirements, which	in	turn	affect	electricity prices.	DOE	estimated	the	chan ge	in	electricity	prices projected	to result	over	time	from	each	TSL.

Chapter 14 of the final rule TSD presents more information on the utility impact analysis.

L. Environmental Assessment Pursuant to the National Environmental Policy Act and the requirements of 42
U.S.C. 6295(o)(2)(B)(i)(VI), DOE has prepared an environmental assessment (EA) of the impacts of the standards for refrigeration pr oducts in today’s final rule, which it has included as chapter 15 of the TSD. DOE found that the envir onmental effects associated with the standards for refrigeration products were not significant. Therefore, DOE is issuing a Finding of No Significant Impact (FONSI), pursuant to NEPA, the regulations of the Council on Environmental Qual ity (40 CFR parts 1500–1508), and DOE’s regulations for compliance with NEPA (10 CFR part 1021). The FONSI is available in the docket for this rulemaking.

In the EA, DOE estimated the reducti on in power sector emissions of CO 2 , NO X , and Hg using the NEMS–BT computer model. In the EA, NEMS–BT is run similarly to the AEO NEMS, except that refrigeration product energy use is reduced by the amount of energy saved (by fuel type) due to each TSL. The inputs of national energy savings come from the NIA spreadsheet model, while the output is the forecasted physical emissions. The net benefit of each TSL in today’s final ru le is the difference between the forecasted

163emissions estimated by NEMS–BT at each TSL and the AEO 2010 Reference Case. NEMS–BT tracks CO 2 emissions using a detailed module that provides results with broad coverage of all sectors and incl usion of interactive effects.

DOE has determined that SO 2 emissions from affected fossil fuel fired combustion devices (also known as Electric Generating Units (EGUs)) are subject to nationwide and regional emissi ons cap and trading programs th at create uncertainty about the standards’ impact on SO 2 emissions. Title IV of the Clean Air Act, 42 U.S.C. 7401­ 7671q, sets an annual emissions cap on SO 2 for affected EGUs in the 48 contiguous states and the District of Columbia (D.C.). SO 2 emissions from 28 eastern states and D.C. are also limited under the Clean Air Interstate Rule (CAIR, 70 F.R. 25162 (May 12, 2005)), which created an allowance-based tradi ng program. Although CAIR has been remanded to EPA by the U.S. Court of Appeals for the Di strict of Columbia Circuit (D.C. Circuit),

see North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008), it remains in effect temporarily, consistent with the D. C. Circuit’s earlier opinion in North Carolina v. EPA , 531 F.3d 896 (D.C. Cir. 2008). On August 2, 2010, EPA issued the Transport Rule proposal, a replacement for CAIR, which would limit emissions from EGUs in 32 states, and may allow some amount of interstate tr ading. 75 FR 45210. EPA issued the final transport rule, entitled the Cross-St ate Air Pollution Rule, on July 6, 2011. 38 See http://www.epa.gov/crossstaterule /

.

38 DOE notes that future iterations of the NEMS-BT model will incorporate any changes necessitated by issuance of the Cross-State Air Pollution Rule.

164The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of emissions allowa nces and tradable pe rmits. Under existing EPA regulations, any excess SO 2 emissions allowances resulting from the lower electricity demand caused by the imposition of an efficiency standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. However, if the standard resulted in a permanent increase in the quantity of unused emissions allowances, there would be an overall reduction in SO 2 emissions from the standards. While there remains some uncertainty about the ultimat e effects of efficiency standards on SO 2 emissions covered by the existing cap and tr ade system, the NEMS-BT modeling system that DOE uses to forecast emissions reduc tions currently indicates that no physical reductions in power sector emissions would occur for SO 2 . Because the Transport Rule has not been finalized, there is no way to pr edict the effect of this rulemaking on SO2 emissions after the Transport Rule goes into effect.

A cap on NO X emissions, affecting electric ge nerating units in the CAIR region, means that standards on refrigeration products may have little or no physical effect on
NO X emissions in the 28 eastern States and th e District of Columbia covered by CAIR. Again, as noted above, because the Transport Ru le has not been finalized, there is no way to predict the effect of this rulemaking on NOx emissions after the Transport Rule goes into effect.

165Today’s standards would, however, reduce NO X emissions in those 22 States not affected by the CAIR. As a result, DOE us ed NEMS–BT to forecast emission reductions from the standards that are cons idered in today’s final rule.

Similar to emissions of SO 2 and NO X , future emissions of Hg would have been subject to emissions caps. In May 2005, EPA issued the Clean Air Mercury Rule (CAMR). 70 FR 28606 (May 18, 2005). CAMR would have permanently capped emissions of mercury for new and existing coal -fired power plants in all States by 2010. However, on February 8, 2008, the D. C. Circuit issued a decision in New Jersey v. Environmental Protection Agency , in which it vacated CA MR. 517 F.3d 574 (D.C. Cir. 2008). EPA has decided to deve lop emissions standards for power plants under the Clean Air Act (Section 112), consis tent with the D.C. Circuit’s opinion on CAMR. See http://www.epa.gov/air/mercuryrule/pdfs/ certpetition_withdrawal.pdf . Pending EPA's forthcoming revisions to the rule, DOE is excluding CAMR from its Environmental Analysis. In the absence of CAMR, a DOE standard would likely reduce Hg emissions and DOE plans to use NEMS-BT to estimate these emission reductions. However, DOE continues to review the impact of rules th at reduce energy consumption on Hg emissions, and may revise its assessment of Hg em ission reductions in future rulemakings.

M. Monetizing Carbon Dioxide and Other Emissions Impacts As part of the development of this final rule, DOE considered the estimated monetary benefits likely to resu lt from the reduced emissions of CO 2 and NO X that are expected to result from each of the TSLs c onsidered. In order to make this calculation

166similar to the calculation of the NPV of c onsumer benefit, DOE considered the reduced emissions expected to result over the lifetim e of products shipped in the forecast period for each TSL. This section summarizes the basi s for the monetary values used for each of these emissions and presents the benefits estimates considered.

For today’s final rule, DOE is relying on a set of values for the social cost of carbon (SCC) that were developed by an intera gency process. A summary of the basis for these new values is provided below, and a mo re detailed description of the methodologies used is provided in appendix 16-A of the final rule TSD.

1. Social Cost of Carbon Under Executive Order 12866, agencies must, to the extent permitted by law, “assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to qua ntify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” The purpose of the SCC estimates presented here is to allow agencies to incorporate the monetized social benefits of reducing CO 2 emissions into cost-benefit analyses of regulatory actions that have small, or “marginal,” impacts on cumulative global emissions. The estimates are presented with an acknowledgement of the many uncertainties involved and with a clear understanding that they should be updated over time to reflect increasing knowledge of the science and economics of climate impacts.

167As part of the interagenc y process that developed th ese SCC estimates, technical experts from numerous agencies met on a re gular basis to consid er public comments, explore the technical literature in relevant fields, and discuss key model inputs and assumptions. The main objective of this proc ess was to develop a range of SCC values using a defensible set of input assumptions grounded in the exis ting scientific and economic literatures. In this way, key uncerta inties and model differences transparently and consistently inform the range of SCC estimates used in the rulemaking process.

a. Monetizing Carbon Dioxide Emissions The SCC is an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year. It is intended to incl ude (but is not limited to) changes in net agricultural productivity, human health, property damages from increased flood risk, and the valu e of ecosystem services. Estimat es of the social cost of carbon are provided in dollars per me tric ton of carbon dioxide.

When attempting to assess the increm ental economic impacts of carbon dioxide emissions, the analyst faces a number of seri ous challenges. A recent report from the National Research Council 39 points out that any assessment will suffer from uncertainty, speculation, and lack of information about (1 ) future emissions of greenhouse gases, (2) the effects of past and future emissions on th e climate system, (3) the impact of changes in climate on the physical and biological envi ronment, and (4) the translation of these environmental impacts into economic damages. As a result, any effort to quantify and

39 National Research Council. Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use . National Academies Press: Washington, DC. 2009.

168monetize the harms associated with climat e change will raise serious questions of science, economics, and ethics and should be viewed as provisional.

Despite the serious limits of both quan tification and monetization, SCC estimates can be useful in estimating the social benefits of reducing ca rbon dioxide emissions. Consistent with the directive quoted above, the purpose of the SCC estimates presented here is to make it possible for agencies to incorporate the social benefits from reducing carbon dioxide emissions into cost-benefit analyses of regulatory actions that have small, or “marginal,” impacts on cumulative global em issions. Most Federal regulatory actions can be expected to have margin al impacts on global emissions.

For such policies, the agency can estima te the benefits from reduced (or costs from increased) emissions in any future year by multiplying the change in emissions in that year by the SCC value appropriate for that year. The net present value of the benefits can then be calculated by multiplying each of these future benefits by an appropriate discount factor and summing across all affected years. This approach assumes that the marginal damages from increased emissions ar e constant for small departures from the baseline emissions path, an a pproximation that is reasonable fo r policies that have effects on emissions that are small relative to cu mulative global carbon dioxide emissions. For policies that have a large (non-marginal) impact on globa l cumulative emissions, there is a separate question of whether the SCC is an appropriate tool for cal culating the benefits of reduced emissions. DOE does not attempt to answer that question here.

169At the time of the preparation of the no tice, the most recent interagency estimates of the potential global benef its resulting from reduced CO 2 emissions in 2010, expressed in 2009$, were $4.9, $22.1, $36.3, and $67.1 per me tric ton avoided. For emission reductions that occur in later years, thes e values grow in real terms over time. Additionally, the interagency gr oup determined that a range of values from 7 percent to 23 percent should be used to adjust the global SCC to calculate domestic effects, 40 although preference is given to considerati on of the global benefits of reducing CO 2 emissions.

It is important to emphasize that the in teragency process is committed to updating these estimates as the science and economi c understanding of climate change and its impacts on society improves over time. Speci fically, the interage ncy group has set a preliminary goal of revisiting the SCC values within two years or at such time as substantially updated models become available, and to continue to support research in this area. In the meantime, the interagency group will continue to explore the issues raised by this analysis and consider public comments as part of the ongoing interagency
process.

b. Social Cost of Carbon Values Us ed in Past Regulatory Analyses To date, economic analyses for Federal regulations have used a wide range of values to estimate the benefits associated with reducing carbon dioxide emissions. In the final model year 2011 CAFE rule, the Depart ment of Transportation (DOT) used both a

40 It is recognized that this calculation for domestic values is approximate, provisional, and highly speculative. There is no a priori r eason why domestic benefits should be a constant fraction of net global damages over time.

170“domestic” SCC value of $2 per ton of CO 2 and a “global” SCC value of $33 per ton of
CO 2 for 2007 emission reductions (in 2007 dollars ), increasing both va lues at 2.4 percent
per year. 41 See Average Fuel Economy Standards Passenger Cars and Light Trucks Model Year 2011 , 74 FR 14196 (March 30, 2009); Final Environmental Impact Statement Corporate Average Fuel Economy Standards, Passenger Cars and Light Trucks, Model Years 2011-2015 at 3-90 (Oct. 2008) (Availabl e at: http://www.nhtsa.gov/fuel-economy ). It also included a sensitivity analysis at $80 per ton of CO 2 . A domestic SCC value is meant to reflect the value of damages in the United States resulting from a unit change in carbon dioxide emissions, while a global SCC va lue is meant to reflect the value of damages worldwide.

A 2008 regulation proposed by DOT assumed a domestic SCC value of $7 per ton
of CO 2 (in 2006 dollars) for 2011 emission reduc tions (with a range of $0-$14 for sensitivity analysis), also incr easing at 2.4 percent per year. See Average Fuel Economy Standards, Passenger Cars and Light Trucks, Model Years 2011-2015 , 73 FR 24352 (May 2, 2008); Draft Environm ental Impact Statement Corporate Average Fuel Economy Standards, Passenger Cars and Light Trucks , Model Years 2011-2015 at 3-58 (June 2008) (Available at: http://www.nhtsa.gov/fuel-econom y ). A regulation for packaged terminal air conditioners and packaged terminal heat pumps finaliz ed by DOE in October of 2008 used a domestic SCC range of $0 to $20 per ton CO 2 for 2007 emission reductions (in 2007 dollars). 73 FR 58772, 58814 (Oct. 7, 2008) In addition, EPA’s 2008 Advance Notice of Proposed Rulemaking for Greenhouse Gases identified what it described as “very preliminary” SCC estimates subject to revision. See Regulating Greenhouse Gas

41 Values per ton of CO 2 given in this section refer to metric tons.

171Emissions Under the Clean Air Act , 73 FR 44354 (July 30, 2008). EPA’s global mean values were $68 and $40 per ton CO 2 for discount rates of approximately 2 percent and 3 percent, respectively (in 2006 dollars for 2007 emissions).

In 2009, an interagency process was initiate d to offer a preliminary assessment of how best to quantify the benefits from reducing carbon dioxide emissions. To ensure consistency in how benefits are evaluated ac ross agencies, the Administration sought to develop a transparent and de fensible method, specifically designed for the rulemaking process, to quantify avoided climat e change damages from reduced CO 2 emissions. The interagency group did not undert ake any original analysis. Instead, it combined SCC estimates from the existing literature to use as interim values until a more comprehensive analysis could be conducted. The outcome of the preliminary assessment by the interagency group was a set of five interi m values: global SCC estimates for 2007 (in 2006 dollars) of $55, $33, $19, $10, and $5 per ton of CO 2 .

These interim values represent the first sustained interagency effort within the
U.S. government to develop an SCC for use in regulatory analysis. The results of this preliminary effort were presented in several proposed and final rules and were offered for public comment in connection with proposed rules, including the joint EPA-DOT fuel economy and CO 2 tailpipe emission proposed rules. See CAFE Rule for Passenger Cars and Light Trucks Draft EIS and Final EIS, cited above.

172c. Current Approach and Key Assumptions Since the release of the interim valu es, the interagency group reconvened on a regular basis to generate im proved SCC estimates considered for this amended rule. Specifically, the group considered public comments and further explored the technical literature in relevant fields.

The interagency group relied on three in tegrated assessment models (IAMs) commonly used to estimate the SCC: the FUND, DICE, and PAGE models. 42 These models are frequently cited in the peer-reviewed literature and were used in the last assessment of the Intergovernmental Panel on Climate Change. Each model was given equal weight in the SCC valu es that were developed.

Each model takes a slightly different approach to model how changes in emissions result in changes in economic da mages. A key objective of the interagency process was to enable a consistent explora tion of the three models while respecting the different approaches to quantifying damages taken by the key modelers in the field. An extensive review of th e literature was conducte d to select three sets of input parameters for these models: climate sensitivity, soci o-economic and emissions trajectories, and discount rates. A probability di stribution for climate sensitivity was specified as an input into all three models. In addition, the intera gency group used a range of scenarios for the socio-economic parameters and a range of valu es for the discount rate. All other model features were left unchanged, relying on th e model developers’ best estimates and judgments.

42 The models are described in appendix 16-A of the final rule TSD.

173The interagency group selected four SCC values for use in regulatory analyses. Three values are based on the average SCC fr om the three IAMs, at discount rates of 2.5, 3, and 5 percent. The fourth value, which represents the 95th percentile SCC estimate across all three models at a 3 percent discount rate, is in cluded to represent higher-thanexpected impacts from temperature change furt her out in the tails of the SCC distribution. For emissions (or emission reductions) that occu r in later years, the SCC values grow in real terms over time, as depicted in Table IV.7.

Table IV.7 SCC Values from Interage ncy Process, 2010 – 2050 (2007 dollars per metric ton) Discount Rate 5% Avg 3% 2.5% Avg Avg 3% 95th 2010 2015 2020 2025 2030 2035 2040 2045 2050 4.7 5.7 6.8 8.2 9.7 11.2 12.7 14.2 15.7 21.4 23.8 26.3 29.6 32.8 36.0 39.2 42.1 44.9 35.1 38.4 41.7 45.9 50.0 54.2 58.4 61.7 65.0 64.9 72.8 80.7 90.4 100.0 109.7 119.3 127.8 136.2

It is important to recognize that a numb er of key uncertainties remain, and that current SCC estimates should be treated as provisional and revisable since they will evolve with improved scientific and economic understanding. The inte ragency group also recognizes that the existing models are imperfect and incomplete. The National Research

174Council report mentioned above points out th at there is tension between the goal of producing quantified estimates of the economic damages from an incremental ton of carbon and the limits of existing efforts to m odel these effects. There are a number of concerns and problems that should be addr essed by the research community, including research programs housed in many of the ag encies participating in the interagency process to estimate the SCC.

The U.S. Government intends to periodical ly review and reconsider estimates of the SCC used for cost-benefit analyses to reflect increasing knowledge of the science and economics of climate impacts, as well as improvements in modeling. In this context, statements recognizing the limitations of the anal ysis and calling for further research take on exceptional significance. The interagency group offers the new SCC values with all due humility about the uncertainties embedded in them and with a sincere promise to continue work to improve them.
In summary, in considering the potential global benefits resulting from reduced
CO 2 emissions, DOE used the most recent values identified by the interagency process, adjusted to 2009$ using the GDP price deflator values for 2008 and 2009. For each of the four cases specified, the values used for emissions in 2010 were $4.9, $22.1, $36.3, and $67.1 per metric ton avoided (values e xpressed in 2009$). To monetize the CO 2 emissions reductions expected to result from amended st andards for refrigeration products in 2014–2043, DOE used the values identif ied in Table A1 of the “Social Cost of Carbon for Regulatory Impact Analys is Under Executive Order 12866,” which is

175reprinted in appendix 15-A of the final rule TSD, a ppropriately escalated to 2009$. 43 To calculate a present value of th e stream of monetary values, DOE discounted the values in each of the four cases using the specific disc ount rate that had been used to obtain the SCC values in each case.

2. Valuation of Other Emissions Reductions DOE investigated the potential monetary benefit of reduced NO X emissions from the TSLs it considered. As noted above, ne w or amended energy conservation standards would reduce NO X emissions in those 22 States that are not affected by the CAIR. DOE estimated the monetized value of NO X emissions reductions resulting from each of the TSLs considered for today’s NOPR based on environmental damage estimates from the literature. Available estimates suggest a very wide range of mone tary values, ranging from $370 per ton to $3,800 per ton of NO X from stationary sources, measured in 2001$ (equivalent to a range of $447 to $4,591 per ton in 2009$). 44 In accordance with OMB guidance, DOE conducted two calculations of the monetary benefits derived using each of the economic values used for NO X , one using a real discount rate of 3 percent and another using a real discount rate of 7 percent. 45

DOE is aware of multiple agency efforts to determine the appropriate range of values used in evaluating the potential econom ic benefits of reduced Hg emissions. DOE

43 Table A1 presents SCC values through 2050. For DOE’s calculation, it derived values after 2050 using the 3-percent per year escalation rate used by the interagency group.

44 For additional information, refer to U.S. Office of Management and Budget, Office of Information and Regulatory Affairs, ‘‘2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities,’’ Washington, DC. 45 OMB, Circular A-4: Regulatory Analysis (Sept. 17, 2003).

176has decided to await further guidance regardi ng consistent valuati on and reporting of Hg emissions before it once again monetizes Hg in its rulemakings.

V. Discussion of Other Comments The following section discusses comments received by DOE related to other issues. In general, these issues involved subjects that generally fell outside of the framework described in detail above.

A. Demand Response This section discusses co mments received regarding demand response or smart grid controls. These are controls that can reac t to signals from utilities or other external organizations and alter the pr oduct’s operation. This capability might be used to allow utilities to reduce energy us e during peak demand hours by reducing the power input of many connected appliances.

DOE received comments on this topic during the preliminary analysis phase from LG, the U.S. Navy, and the IOUs. (LG, No. 44 at p. 5; USN, No. 35 at p. 2; IOUs, No. 39 at p. 13). DOE explained in the NOPR that it did not consider a demand response feature, in part because of the uncertainty of overa ll benefits and the limitations of the legal framework under which DOE would be able to pursue such a design requirement approach. 75 FR at 59530 (September 27, 2010)

.

AHAM disagreed with DOE’s conclusi on that demand response would not contribute significantly to energy use. (AHAM, No. 73 at p. 9) However, AHAM’s

177comments did not provide any information quantifying the potential energy savings associated with implementation of demand response in refrigeration products. The highlighted conclusions of the Electric Power Research Institute study cited by AHAM do not even explicitly indicat e that refrigeration product de mand response contributed to energy savings. (Id.) AHAM further indicates that demand response applied to appliances including refrigeration products would help to enable use of renewable energy sources. (AHAM, No. 73 at pp. 9-10)

DOE notes that this rulemaking involves the amending of an energy conservation standard for refrigeration products. The te rm “energy conservation standard” is defined as either a performance standard that prescr ibes a minimum level of energy efficiency or maximum amount of energy use or a design sta ndard for certain specified products. As DOE stated previously, creati ng a design standard as an energy conservation standard is limited to specific enumerated consumer produc ts under 42 U.S.C. 6291(6). See 75 FR at 59530 (September 27, 2010). Since setting a demand response feature requirement would be the same as setting a design sta ndard, DOE must look to those products for which it has the authority to set design standard s. As DOE also point ed out, refrigeration products are not within this li st. Commenters made no effort to challenge the validity of this view, citing instead to polic y-related initiatives that highlighted the potential benefits associated with smart grid approaches. Wh ile the issues cited by commenters are clearly important issues, they do not obviate the requirement that DOE act within the boundaries

178of its authority within the context of this rulemaking. Accordingly, DOE did not incorporate a demand response feature requir ement as part of today’s final rule. 46

B. Energy Standard Round-off The NOPR discussed the adoption of a round-off when reporting energy test results. This approach, explained in greater detail in the test procedure NOPR, would require manufacturers to re port the measured energy consumption to the nearest kWh/year based on consideration of achie vable measurement accuracy. 75 FR at 29849 (May 27, 2010). The energy standard NOPR explained that similar round-off was necessary to avoid meaningless indications of non-compliance. DOE also requested comment on the implementation of energy standard round-off. 75 FR at 59570 (September 27, 2010).

AHAM supported using a round-off when calculating the energy standard using the energy standard equations for refri geration products. (AHAM, Public Meeting Transcript, No. 67 at p. 94; AHAM, No. 73 at p. 10) Whirlpool concurred with this approach. (Whirlpool, No. 74 at p. 6) No commenter objected to the round-off approach.

DOE has implemented the energy use round- off approach as part of the test procedure final rule. As a result, manufacturer s must follow this approach when reporting the energy consumption of its refrigeration pr oducts. The test proce dure rule includes a

46 The inclusion of a demand response feature within these products would also require considerable analysis for which DOE has no data.

179round-off for the calculation of the energy st andard when using the appropriate energy standard equations. See 75 FR at 78831-78832 (December 16, 2010).

C. Trial Standard Levels and Proposed Standards
1. Efficiency Levels Many stakeholders supported DOE’s selecti on of efficiency levels that mirrored the levels of the negotiated agreement. (AHAM, No. 73 at p. 1; IOUs, No. 77 at p. 1; PGEC, No. 68 at p. 1; JAC, No. 75 at p. 1) Sub Zero supported the selection of efficiency levels for built-ins that mirrored the nego tiated agreement while indicating that the analyses suggest that less stringent levels would also have been appropriate. (Sub Zero, No. 69 at p. 5) Whirlpool supported the sele ction of efficiency levels for built-in products, subject to DOE’s adoption of the built-in product definition developed for the consensus agreement. (Whirlpool, No. 74 at p. 6)

However, concerns about the negotiate d levels for numerous products were expressed by other stakeholders, primarily utilities and organizations representing utilities. EEI and APPA expr essed concern about the standard levels chosen for bottommount refrigerator-freezers, built-in botto m-mount refrigerator-freezers, and compact refrigerators and did not endorse the standard levels c hosen for top-mount refrigeratorfreezers, side-by-side refrigerator-freezers, built- in all-refrigerators, built-in side-by-side refrigerators, and built-in upright freezers. (EEI, No. 71 at pp. 3- 4; APPA, No. 72 at pp. 2-3) SC expressed concern about selection of any standard levels above the levels of reasonable life cycle costs . (SC, No. 70 at p. 2) These concerns are based on (1) the

180percentage of consumers determined to experi ence life cycle cost benefits being uncertain or too high, and (2) the implication that DOE used the social cost of carbon dioxide emissions combined with consumer economics to justify the chosen standard levels. (EEI, No. 71 at p. 2; APPA, No. 72 at pp. 1-2; SC, No. 70 at p. 2) Moreover, SC argued that replacement of an older refrigerator with one meeting the current 2001 standard would save 23 times more energy. (SC, No. 70 at p. 2)

Responding to the concern about the per centage of consumers determined to experience a net life cycle cost, DOE must consider a range of factors in setting efficiency levels (see section II.A), and for almost all product classe s, the net savings per consumer is positive.

Regarding the implication that DOE used the societal cost of carbon dioxide emissions to help justify the chosen standa rd levels, DOE did not, in fact, combine the societal cost of carbon with consumer econom ics in any of its calculations, but rather considered the positive benefit of reducing the societal cost of carbon, as part of a general assessment of environmental benefits, in ma king its final determination. Environmental benefits are an important rationale for na tional energy conservation, especially because the energy prices paid by consumers do not include some of the environmental costs associated with their use of energy. Energy savings from energy conservation standards often result in environmental benefits in th e form of reduced emi ssions of air pollutants and greenhouse gases associated with energy production. DOE analyzed the environmental effects from the amended sta ndards for refrigeration products, and from

181each TSL it considered, in the environmental assessment, which is described in section
IV.L of this notice and in ch apter 15 of the TSD. As a co mpanion to the quantitative analysis in the environmental assessment, DOE also estimated a range of the economic value of emissions reductions resulting from th e considered TSLs, as described in section
IV.M of this notice.

With respect to the replacement of old re frigerators in lieu of a more stringent standard, this case was considered as an alte rnative regulatory policy in chapter 16 of the TSD. DOE found that the impact of such a policy would be, in all cases, much less effective than a new standard.

The PRC commented that the maximum en ergy use of the proposed standards was lower than the current ENERGY STAR leve ls for product classes 8, 9, 10, 10A, and 13A, suggested that the current EN ERGY STAR levels reflect cu rrent advanced technologies and achieve the purpose of “protection of the environment and consumers”, and recommended that the maximum allowable energy use be no lower than the current ENERGY STAR levels. (PRC, No. 87 at p. 3) In response, DOE first notes that ENERGY STAR is a voluntary program. As such, manufacturers do not need to meet these levels unless they wish to produce ENERGY STAR-qualified products. Second, DOE is required by EPCA to consider all feasible technology levels, regardless of whether they represent less energy use than current ENERGY STAR le vels, and to set a standard at the most efficient and feasible level that is ec onomically justified. (42 U.S.C. 6295(o)(2)(A)) Accordingly, the non-mandatory nature of ENERGY STAR, coupled

182with the mandatory nature of EPCA’s statut ory requirement to prom ulgate new standards cut in favor of today’s action.

The PRC also commented that the standa rd levels proposed for product classes 5A, 6, 7, and 7-BI were not ve ry stringent, being very close to their current standard levels expressed in kWh/year, even though th e ENERGY STAR effici ency level has been set at a level representing 20 percent le ss energy consumption. The PRC provided an example of a product class 7 product with 500 liter adjusted volume, for which the proposed energy standard is 581.1 kWh/year, while the current standard is only slightly higher at 283.7 kWh/year. (PRC, No. 87 at p. 4) DOE believes that the PRC’s 283.7 kWh/year value is in error and should have been 583.7 kWh/year. DOE notes that these values cannot be directly compared, because the new energy standard is based on the new test procedure, for which both measured en ergy use and the calcula ted adjusted volume are altered.

SMUD made two comments regarding the se lection of standard levels. First, SMUD noted that DOE indicated that it was c onsidering either incr easing or decreasing the stringency of the proposed levels base d on stakeholder comments. It recommended that DOE not consider any decreased stringency. (SMUD, No. 88 at pp. 1, 2) DOE has not altered the standards from those propos ed in the NOPR. Second, SMUD noted that the NOPR stated that products of the effici ency levels of the proposed standards are already commercially available for some, if not most, of the product classes. (See 75 FR at 59474 (September 27, 2010)) SMUD recommended moving the standards to efficiency

183levels more stringent than those of commer cially available products, since these higher levels should be viable. (Id. at p. 2) As described above, DOE is required by EPCA to consider all feasible technol ogy levels and that it must se t the standard at the most efficient of these feasible levels that is economically justified. (42 U.S.C. 6295(o)(2)(A)) The commercial availability of products at a sp ecific efficiency level, alone, is not sufficient justification for setting the standard at a more stringent efficiency level, since the more stringent level may not be economically justified.

2. Maximum Energy Use Equations Several stakeholders indicated that they could not comment on the specific values represented by the maximum energy use equati ons because they did not have sufficient time after the issuance of the test procedure final/interim final rule to conduct tests to evaluate the equation levels. (AHAM, No. 73 at pp. 1-2 ; Whirlpool, No. 74 at p. ; GE, No. 76 at pp. 1-2) This is discussed in greater detail in section III.A.2.

VI. Analytical Results The following section addresses the results from DOE’s analyses with respect to potential energy efficiency standards for the various product classes examined as part of this rulemaking. Issues discussed include the trial standard levels examined by DOE, the projected impacts of each of th ese levels if adopted as energy efficiency standards for refrigeration products, and the standards levels that DOE is adopting in today’s final rule. Additional details regarding th e analyses conducted by the ag ency are contained in the publicly available TSD supporting this rulemaking.

184A. Trial Standard Levels DOE analyzed the benefits and burdens of a number of TSLs for the refrigeration products that are the subject of today’s final rule. A description of each TSL DOE analyzed is provided below. DOE attempted to limit the number of TSLs considered for today’s final rule by excluding efficiency levels that do not exhibit significantly different economic and/or engineering char acteristics from the efficiency levels already selected as a TSL. While DOE only presents the result s for those efficiency levels in TSL combinations in today’s final rule, DOE presents the results for all efficiency levels that it analyzed in the final rule TSD.

Table VI.1 presents the TSLs and the co rresponding product class efficiencies for standard-size refrigerator-freezers. TSL 1 cons ists of those efficiency levels that meet current ENERGY STAR criteria. TSL 2 consists of incrementally higher efficiency levels than the preceding TSL. TSL 3 consists of the highest efficiency levels for which the consumer NPV is positive, using a 7-percen t discount rate, as well as the levels recommended in the Joint Comments. TSL 4 consis ts of those efficiency levels that yield energy use 30 percent below the baseline products , as well as the highest efficiency levels for which the consumer NPV is positive, usi ng a 3-percent discount rate. TSL 5 consists of the max-tech efficiency levels.

185Table VI.1 Trial Standard Levels for Standard-Size Refrigerator-Freezers

Trial Standard

Level Top-Mount Refrigerator-Freezers and All-Refrigerators Bottom-Mount Refrigerator-Freezers Side-by-Side Refrigerator-Freezers
Product classes 1, 1A, 2, 3, 3A, 3I and 6 Product classes 5, 5A, and 5I Product classes 4, 4I, and 7 Efficiency Level (% less than baseline energy use) 1 3 (20) 3 (20) 3 (20) 2 3(20) 3 (20) 4 (25) 3 4 (25) * 3 (20) 4 (25) 4 5 (30) 5 (30) 5 (30) 5 6 (36) 6 (36) 6 (33)

* Level for product classes 1, 1A, and 2 is 20%.

Table VI.2 presents the TSLs and the co rresponding product class efficiencies for standard-size freezers. TSL 1 consists of thos e efficiency levels that yield energy use 20 percent below the baseline products. TSL 2 cons ists of the levels recommended in the Joint Comments. TSL 3 consists of incremen tally higher efficiency levels than the preceding TSL. TSL 4 consists of incremen tally higher efficiency levels than the preceding TSL. TSL 5 consists of the max-t ech efficiency levels, which are also the highest efficiency levels for which the consumer NPV is positive, using both a 3-percent and a 7-percent discount rate.

186Table VI.2 Trial Standard Levels for Standard-Size Freezers

Trial Standard Level Upright Freezers Chest Freezers Product classes 9 and 9I Product class 8 Product classes 10 and 10A Efficiency Level (% less than baseline energy use) 1 3 (20) 3 (20) 3 (20) 2 5 (30) 4 (25) 4 (25) * 3 6 (35) 5 (30) 5 (30) 4 7 (40) 6 (35) 6 (35) 5 8 (44) 7 (41) 7 (41)

* Level for product class 10A is 30%.
Table VI.3 presents the TSLs and the co rresponding product class efficiencies for compact refrigeration products. TSL 1 consists of efficiency levels that meet current ENERGY STAR criteria for some compact re frigerators (product classes 11, 11A, and 12), and efficiency levels th at are 10 percent below the baseline energy use for other compact refrigerators (product classes 13, 13I, 13A, 14, 14I, 15 and 15I) and compact freezers (product classes 16, 17, and 18). TSL 2 consists of the levels recommended in the Joint Comments. TSL 3 consists of incrementally higher efficiency levels than the previous TSL. TSL 4 consists of the highest efficiency levels for which the consumer NPV is positive, using both a 3-percent and a 7-percent discount rate. TSL 5 consists of the max-tech efficiency levels.

187Table VI.3 Trial Standard Levels for Compact Refrigeration Products

Trial Standard Level Compact Refrigerators and Refrigerator-Freezers Compact Freezers

Product classes 11, 11A, 12 Product classes 13, 13I, 13A, 14, 14I, 15, 15I Product classes 16, 17, 18 Efficiency Level (% less than baseline energy use) 1 3 (20) 1 (10) 1 (10) 2 4 (25) 2 (15)* 1 (10) 3 5 (30) 2 (15) 2 (15) 4 7 (40) 4 (25) 4 (25) 5 10 (59) 7 (42) 7 (42)
* Level for product class 13A is 25 percent, and for product classes 14 and 14I, is 20 percent.
Table VI.4 presents the TSLs and the co rresponding product class efficiencies for built-in refrigeration products. TSL 1 consists of the efficiency levels that are 10 percent better than the current standard. TSL 2 consists of the highest efficiency levels for which the consumer NPV is positive, using both a 3- percent and a 7-percent discount rate. TSL 3 consists of the levels recommended in the Joint Comments. TSL 4 consists of incrementally higher efficiency levels than TSL 3. TSL 5 consists of the max-tech efficiency levels.

188Table VI.4 Trial Standard Levels fo r Built-in Refrigeration Products

Trial Standard Level Built-in Top-MountRefrigeratorFreezers andAllRefrigerators Built-in BottomMountRefrigeratorFreezers Built-in Side-bySide RefrigeratorFreezers Built-in Upright Freezers
Product classes 3-BI, 3I-BI, and 3A-BI Product classes 5-BI, 5I-BI, and 5A-BI Product classes 4-BI, 4I-BI and 7-BI Product classes 9-BI and 9I-BI Efficiency Level (% less than baseline energy use) 1 1 (10) 1 (10) 1 (10) 1 (10) 2 2 (15) 2 (15) 1 (10) 3 (20) 3 3 (20) 2 (15) 3 (20) 4 (25) 4 4 (25) 4 (25) 3 (20) 4 (25) 5 5 (29) 5 (27) 4 (22) 5 (27)

B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers

a. Life-Cycle Cost and Payback Period Consumers affected by new or amende d standards usually experience higher purchase prices and lower operating costs. DOE evaluates these im pacts on individual consumers by calculating changes in LCC and th e PBP associated with potential standard levels. Using the approach described in se ction IV.F, DOE calculated the LCC impacts and PBPs for the efficiency levels considered in this rulemaking. For each representative product class, DOE’s analysis provided severa l outputs for each TSL, which are reported in Table VI.5 through Table VI.15. Each tabl e includes the average total LCC and the average LCC savings, as well as the fracti on of product consumers for which the LCC will either decrease (net benefit), increase (n et cost), or exhibit no change (no impact) relative to the product pu rchased in the base case. The last output in the tables is the

189median PBP for the consumer purchasing a de sign that complies with a given TSL. The results for each TSL are relative to the energy efficiency distribution in the base case (no amended standards). DOE based the LCC a nd PBP analyses on energy consumption under conditions of actual product use, whereas it based the rebuttable presumption PBPs on energy consumption under conditions prescr ibed by the DOE test procedure, as required by EPCA. (42 U. S.C. 6295(o)(2)(B)(iii))

Table VI.5 Product Class 3, Top-Mount Refrigerator-Freezers: LCC and PBP Results

Trial Standard

Level Efficiency Level (% less than

baseline energy use ) Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Installed Cost Discounted Operating Cost LCC Average Savings 2009$ % of Households that Experience

Median Net Cost No Impact Net Benefit Baseline $491 $787 $1,278

1 (10) $501 $730 $1,231 $46 0.28% 21.9% 77.8% 2.3 2 (15) $508 $701 $1,209 $69 0.60% 17.6% 81.8% 2.6 1, 2 3 (20) $564 $671 $1,235 $44 34.0% 8.31% 57.7% 8.0

3 4 (25) $602 $634 $1,236 $42 45.7% 0.0% 54.3% 9.5 4 5 (30) $686 $598 $1,284 -$6 65.1% 0.0% 34.9% 13.3 5 6 (36) $806 $560 $1,365 -$87 79.7% 0.0% 20.3% 17.8

Table VI.6 Product Class 5, Bottom-Mount Refrigerator-Freezers: LCC and PBP Results

Trial Efficiency Level (% less than Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Discounted Average % of Households that Experience

Median Standard

Level baseline energy use ) Installed Cost Operating Cost LCC Savings 2009$ Net Cost No Impact Net Benefit

190Baseline $858 $970 $1,828 1 (10) $860 $961 $1,820 $9 0.02% 86.9% 13.1% 2.1 2 (15) $861 $956 $1,817 $14 0.05% 86.9% 13.1% 2.3 1, 2,3 3 (20) $867 $943 $1,809 $22 2.53% 67.8% 29.7% 4.2 4 (25) $926 $901 $1,827 $5 67.9% 0.03% 32.0% 14.9 4 5 (30) $1,023 $862 $1,885 -$53 82.8% 0.03% 17.2% 21.0 5 6 (36) $1,157 $810 $1,968 -$136 89.0% 0.00% 11.1% 24.7

Table VI.7 Product Class 7, Side-by-Side Refrigerator-Freezers with Through-theDoor Ice Service: LCC and PBP Results

Trial Standard

Level Efficiency Level (% less than

baseline energy use ) Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Installed Cost Discounted Operating Cost LCC Average Savings 2009$ % of Households that Experience

Median Net Cost No Impact Net Benefit Baseline $1,040 $1,252 $2,292 1 (10) $1,043 $1,228 $2,271 $22 0.00% 78.1% 21.9% 1.3 2 (15) $1,048 $1,202 $2,249 $44 0.06% 51.7% 48.3% 2.1 1 3 (20) $1,064 $1,167 $2,232 $62 4.27% 36.9% 58.8% 4.0 2, 3 4 (25) $1,123 $1,114 $2,237 $57 41.5% 0.00% 58.6% 9.2

4 5 (30) $1,251 $1,061 $2,312 -$18 69.7% 0.00% 30.3% 15.6 5 6 (33) $1,351 $1,026 $2,377 -$83 79.5% 0.00% 20.5% 19.1

Table VI.8 Product Class 9, Upright Freezers: LCC and PBP Results

Efficiency Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Trial Level (% less than Discounted Average % of Households that Experience

Median Standard

Level baseline energy use ) Installed Cost Operating Cost LCC Savings 2009$ Net Cost No Impact Net Benefit Baseline $505 $1,098 $1,603 1 (10) $516 $1,015 $1,530 $73 0.25% 19.9% 79.9% 1.9 2 (15) $535 $964 $1,499 $105 5.02% 1.67% 93.3% 3.6

1911 3 (20) $552 $912 $1,464 $140 6.03% 0.59% 93.4% 4.0 4 (25) $578 $859 $1,437 $166 9.58% 0.41% 90.0% 4.9 2 5 (30) $602 $806 $1,408 $195 11.5% 0.22% 88.2% 5.3 3 6 (35) $656 $758 $1,414 $189 21.9% 0.00% 78.1% 7.1 4 7 (40) $731 $711 $1,442 $161 34.6% 0.00% 65.4% 9.3 5 8 (44) $898 $673 $1,570 $33 59.7% 0.00% 40.3% 14.7

Table VI.9 Product Class 10, Chest Freezer: LCC and PBP Results

Trial Standard

Level Efficiency Level (% less than

baseline energy use ) Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Installed Cost Discounted Operating Cost LCC Average Savings 2009$ % of Households that Experience

Median Net Cost No Impact Net Benefit Baseline $367 $623 $990 1 (10) $373 $573 $947 $43 0.20% 16.2% 83.6% 2.0 2 (15) $383 $544 $927 $63 3.01% 1.18% 95.8% 3.2 1 3 (20) $393 $515 $908 $82 5.14% 0.22% 94.6% 3.9 2 4 (25) $436 $485 $921 $69 27.3% 0.22% 72.5% 8.1 3 5 (30) $456 $455 $911 $79 29.1% 0.22% 70.6% 8.5 4 6 (35) $510 $433 $943 $47 48.7% 0.00% 51.4% 12.1 5 7 (41) $620 $395 $1,015 -$25 69.1% 0.00% 31.0% 17.8

Table VI.10 Product Class 11, Compact Refrigerators: LCC and PBP Results

Efficiency Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Trial Level (% less than Discounted Average % of Households that Experience

Median Standard

Level baseline energy use ) Installed Cost Operating Cost LCC Savings 2009$ Net Cost No Impact Net Benefit Baseline $131 $167 $298 1 (10) $137 $151 $287 $11 9.01% 1.60% 89.4% 1.8 2 (15) $141 $143 $284 $14 13.6% 1.39% 85.0% 2.1 1 3 (20) $146 $135 $281 $17 19.7% 1.39% 79.0% 2.5

1922 4 (25) $157 $127 $284 $14 36.8% 1.00% 62.3% 3.5 3 5 (30) $166 $119 $285 $13 43.4% 0.92% 55.6% 3.9 6 (35) $192 $112 $304 -$6 71.3% 0.00% 28.7% 6.0 4 7 (40) $199 $104 $303 -$5 69.8% 0.00% 30.2% 5.8 8 (45) $230 $97 $327 -$29 83.5% 0.00% 16.5% 7.7 9 (50) $247 $89 $336 -$38 85.4% 0.00% 14.6% 8.0 5 10 (59) $308 $75 $383 -$85 92.2% 0.00% 7.85% 10.4

Table VI.11 Product Class 18, Compac t Freezers: LCC and PBP Results

Trial Standard

Level Efficiency Level (% less than

baseline energy use ) Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Installed Cost Discounted Operating Cost LCC Average Savings 2009$ % of Households that Experience

Median Net Cost No Impact Net Benefit Baseline $182 $200 $382 1,2 1 (10) $189 $182 $370 $12 7.98% 4.66% 87.4% 2.2 3 2 (15) $201 $172 $373 $9 33.9% 0.00% 66.1% 4.2

3 (20) $242 $163 $404 -$22 87.4% 0.00% 12.6% 9.8 4 4 (25) $252 $153 $405 -$23 84.5% 0.00% 15.5% 9.1 5 (30) $282 $146 $428 -$46 92.4% 0.00% 7.6% 11.4 6 (35) $289 $137 $426 -$44 89.6% 0.00% 10.4% 10.4 5 7 (42) $360 $124 $484 -$102 96.7% 0.00% 3.3% 14.4

Table VI.12 Product Class 3A-BI, Built-In All-Refrigerators: LCC and PBP Results

Efficiency Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Trial Level (% less than Discounted Average % of Households that Experience

Median Standard

Level baseline energy use ) Installed Cost Operating Cost LCC Savings 2009$ Net Cost No Impact Net Benefit Baseline $4,316 $828 $5,144 1 1 (10) $4,323 $769 $5,091 $52 0.02% 22.6% 77.4% 1.4

1932 2 (15) $4,334 $739 $5,073 $71 0.94% 18.4% 80.7% 2.6 3 3 (20) $4,452 $703 $5,155 -$11 61.5% 9.10% 29.4% 13.7 4 4 (25) $4,625 $670 $5,295 -$151 91.0% 0.00% 9.02% 25.5 5 5 (29) $4,756 $646 $5,402 -$258 95.0% 0.00% 5.01% 31.4

Table VI.13 Product Class 5-BI, Built-In Bottom-Mount Refrigerator-Freezers: LCC and PBP Results

Trial Standard

Level Efficiency Level (% less than

baseline energy use ) Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Installed Cost Discounted Operating Cost LCC Average Savings 2009$ % of Households that Experience

Median Net Cost No Impact Net Benefit Baseline $4,968 $960 $5,928 1 1 (10) $4,972 $951 $5,923 $8 0.60% 87.1% 12.3% 3.8 2,3 2 (15) $4,982 $957 $5,939 $2 7.03% 87.0% 5.94% 11.1

3 (20) $5,013 $943 $5,955 -$14 27.4% 67.5% 5.09% 22.3 4 4 (25) $5,168 $911 $6,079 -$138 98.0% 0.00% 2.03% 52.8 5 5 (27) $5,257 $891 $6,148 -$207 98.5% 0.00% 1.50% 52.2

Table VI.14 Product Class 7-BI, Built-In Si de-by-Side Refrigerator-Freezers with Through-the-Door Ice Service: LCC and PBP Results

Trial Standard

Level Efficiency Level (% less than

baseline energy use ) Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Installed Cost Discounted Operating Cost LCC Average Savings 2009$ % of Households that Experience

Median Net Cost No Impact Net Benefit Baseline $7,134 $1,494 $8,628 1,2 1 (10) $7,147 $1,476 $8,623 $10 5.77% 78.5% 15.7% 7.5

2 (15) $7,188 $1,459 $8,647 -$9 36.4% 52.4% 11.2% 17.6 3,4 3 (20) $7,307 $1,423 $8,729 -$91 58.5% 37.2% 4.28% 31.0 5 4 (22) $7,414 $1,405 $8,820 -$182 97.6% 0.00% 2.40% 50.4

194Table VI.15 Product Class 9-BI, Built-In Upright Freezers: LCC and PBP Results

Trial Standard

Level Efficiency Level (% less than

baseline energy use ) Life-Cycle Cost 2009$ Life-Cycle Cost Savings Payback Period (years)

Installed Cost Discounted Operating Cost LCC Average Savings 2009$ % of Households that Experience

Median Net Cost No Impact Net Benefit Baseline $3,928 $1,071 $4,999 1 1 (10) $3,943 $990 $4,933 $66 1.53% 19.9% 78.6% 2.9 2 (15) $3,956 $942 $4,898 $101 3.99% 1.70% 94.3% 3.6 2 3 (20) $4,042 $898 $4,940 $59 42.9% 0.57% 56.5% 10.7 3,4 4 (25) $4,176 $847 $5,023 -$23 68.8% 0.49% 30.7% 17.8 5 5 (27) $4,278 $822 $5,100 -$101 79.8% 0.27% 20.0% 22.6

b. Consumer Subgroup Analysis As described in section IV.H, DOE determ ined the impact of the considered TSLs on low-income households and senior-only hous eholds. DOE did not estimate impacts for compact refrigeration products because th e household sample sizes were not large enough to yield meaningful results.

Table VI.16 through Table VI.18 compare the average LCC savings at each efficiency level for the two consumer subgr oups with the average LCC savings for the entire sample for each representative product class. In general, the average LCC savings for low-income households and senior-only households at the considered efficiency levels are not substantially different from the average for all hous eholds. Chapter 11 of the final rule TSD presents the complete LCC and PBP results for the two subgroups.

195Table VI.16 Standard-Size Refrigerator-Freezers: Comparison of Average LCC Savings for Consumer Subgroups and All Households

Efficiency Level (% less

than baseline energy use) Top-Mount Refrigerator-Freezers Bottom-Mount Refrigerator-Freezers Side-by-Side Refrigerator-Freezers Product class 3 Product class 5 Product class 7
Senior LowIncome All Senior LowIncome All Senior LowIncome All 1 (10) $43 $49 $46 $9 $10 $9 $22 $23 $22 2 (15) $64 $73 $69 $13 $15 $14 $42 $46 $44 3 (20) $36 $48 $43 $21 $24 $22 $59 $64 $62 4 (25) $31 $47 $41 -$1 $6 $5 $48 $56 $57 5 (30) -$20 $0 -$7 -$63 -$52 -$54 -$31 -$23 -$18 6 (36/36/33) -$105 -$81 -$89 -$151 -$136 -$137 -$100 -$91 -$85

Table VI.17 Standard-Size Freezers: Comparison of Average LCC Savings for Consumer Subgroups and All Households

Efficiency Level (% less than

baseline energy use) Upright Freezers Chest Freezers
Product class 9 Product class 10

Senior LowIncome All Senior LowIncome All 1 (10) $69 $69 $73 $45 $42 $43 2 (15) $98 $98 $105 $66 $61 $63 3 (20) $130 $129 $139 $86 $79 $82 4 (25) $153 $153 $166 $74 $65 $68 5 (30) $179 $179 $195 $85 $75 $79 6 (35) $170 $170 $189 $54 $42 $47 7 (40/41) $139 $139 $160 -$18 -$32 -$26

1968 (44) $8 $8 $32

Table VI.18 Built-In Refrigeration Products : Comparison of Average LCC Savings for Consumer Subgroups and All Households

Efficiency

Level (% less than

baseline energy use) Built-in All Refrigerators Built-in Bottom-Mount Refrigerator-Freezers Built-in Side-by-Side Refrigerator-Freezers Built-in Upright Freezers

Product class 3A-BI Product class 5-BI Product class 7-BI Product class 9-BI
Senior LowIncome All Senior LowIncome All Senior LowIncome All Senior LowIncome All 1 (10) $48 $54 $52 $7 $8 $8 $8 $9 $10 $61 $61 $66 2 (15) $65 $74 $71 $0 $2 $2 -$15 -$14 -$9 $93 $92 $101 3 (20) -$25 -$14 -$12 -$19 -$17 -$15 -$107 -$109 -$92 $47 $46 $58

4 (25/25/22/25) -$170 -$155 - $152 -$148 -$141 -$139 -$199 -$201 -$183 -$39 -$41 -$24 5 (29/27/-/27) -$280 -$263 - $260 -$219 -$210 -$208 -$119 -$121 -$102

c. Rebuttable Presumption Payback As discussed in section III.D.2, EPCA pr ovides a rebuttable presumption that an energy conservation standard is economically ju stified if the increased purchase cost for a product that meets the standard is less than th ree times the value of the first-year energy savings resulting from the standard. In calculating a rebuttable presumption payback period for the considered standard levels, DOE used discrete values rather than distributions for input values, and, as requi red by EPCA, based the energy use calculation on the DOE test procedures for refrigerati on products. As a result, DOE calculated a single rebuttable presumption payback value, and not a distribution of payback periods, for each efficiency level. Table VI.19 thr ough Table VI.22 present the average rebuttable presumption payback periods for those effici ency levels where the increased purchase

197cost for a product that meets a standard at that level is less than th ree times the value of the first-year energy savings re sulting from th e standard.

Table VI.19 Standard-Size Refrigerator- Freezers: Efficiency Levels With Rebuttable Payback Period Less Than Three Years Product Class 3:Top-Mount RefrigeratorFreezer Product Class 5:Bottom-Mount RefrigeratorFreezer Product Class 7: Side-by-Side Refrigerator-Freezer with TTD* Efficiency Level ( % less than baseline energy use ) PBP years Efficiency Level ( % less than baseline energy use ) PBP years Efficiency Level ( % less than baseline energy use ) PBP years 1 (10) 2.4 1 (10) 2.1 1 (10) 1.4 2 (15) 2.6 2 (15) 2.4 2 (15) 1.7 3 (20) 2.9
* Through-the-door ice service

Table VI.20 Standard-Size Freezers: Effici ency Levels With Rebuttable Payback Period Less Than Three Years Product Class 9: Upright Freezer Product Class 10: Chest Freezer Efficiency Level ( % less than baseline energy use ) PBP years Efficiency Level ( % less than baseline energy use ) PBP years 1 (10) 1.9 1 (10) 1.8 2 (15) 2.7

Table VI.21 Compact Refrigeration Products : Efficiency Levels With Rebuttable Payback Period Less Than Three Years Product Class 11: Compact Refrigerator Product Class 18: Compact Freezer Efficiency Level ( % less than baseline energy use ) PBP years Efficiency Level ( % less than baseline energy use ) PBP years 1 (10) 1.8 1 (10) 2.0 2 (15) 2.1 3 (20) 2.7

198Table VI.22 Built-In Refrigeration Products : Efficiency Levels With Rebuttable Payback Period Less Than Three Years Product Class 3A-BI:Built-in AllRefrigerator Product Class 5-BI: Built-In Bottom-Mount

Refrigerator-Freezer Product Class 7-BI: Built-In Side-by-Side Refrigerator-Freezer with TTD* Product Class 9-BI: Built-In Upright Freezer Efficiency Level ( % less

than baseline energy

use ) PBP years Efficiency Level ( % less

than baseline energy

use ) PBP years Efficiency Level ( % less

than baseline energy

use ) PBP years Efficiency Level ( % less

than baseline energy

use ) PBP years 1 (10) 1.5 1 (10) 1 (10) 1 (10) 2.7 2 (15) 2.6

* Through-the-door ice service

While DOE examined the rebuttable-pres umption criterion, it considered whether the standard levels considered for today’s rule are economically ju stified through a more detailed analysis of the economic impacts of these levels pursuant to 42 U.S.C. 6295(o)(2)(B)(i). The results of this analysis serve as the basis for DOE to definitively evaluate the economic justific ation for a potential standard level (thereby supporting or rebutting the results of any preliminary de termination of economic justification).

2. Economic Impacts on Manufacturers
The NOPR MIA used changes in INPV to compare the financial impacts of different TSLs on manufacturers. 75 FR at 59537-59546 (September 27, 2010) (describing the MIA used by DOE in its anal ysis). DOE presented the industry impacts by the major product types ( i.e. , standard size re frigerator-freezers, sta ndard size freezers, compact refrigerators and freezers, and built -in refrigeration products). DOE used the

199GRIM to compare the INPV of the base case (no new energy conservation standards) to that of each TSL for each product grouping. The INPV is the sum of all net cash flows discounted by the industry’s cost of capital (discount rate). Th e difference in INPV between the base case and the standards case is an estimate of the economic impacts that implementing that standard level would have on the entire industry. For today’s final rule, DOE continues to use the methodol ogy presented in the NOPR (75 FR at 59519­ 59526 (September 27, 2010)) and in section IV.I. The major methodology change DOE made for the final rule was incorporating long term product price trends into the analysis. Since the price trend for residential refriger ation products declines over the analysis period, the base case industry value is lower for all product groupings. Thus, incorporating price trends in the MIA increa ses the impacts on INPV due to standards.

a. Cash-Flow Analysis Results The tables below depict th e financial impacts on manufacturers (represented by changes in INPV) and the conversion costs DOE estimates manufacturers would incur at each TSL. DOE shows four sets of results , corresponding to the f our sets of TSLs considered in this rulemaking. Each set of TSLs reflects the impacts on manufacturers of a certain group of product classes.

Each set of results below shows two tabl es of INPV impacts: the first table reflects the lower (less seve re) bound of impacts and the second represents the upper bound. To evaluate this range of cash-flow impacts on the resi dential refrigeration products industry, DOE modeled two diffe rent scenarios using different markup

200assumptions. These assumptions correspond to the bounds of a range of market responses that DOE anticipates could occur in the standards case (i.e. where amended energy conservation standards apply). Each scenario results in a unique set of cash flows and corresponding industry value at each TSL.

To assess the lower (less severe) end of the range of potential impacts, DOE modeled the flat markup scenario. The flat ma rkup scenario assumes that in the standards case manufacturers would be ab le to pass the higher producti on costs required for more efficient products on to their customers. Sp ecifically, the industry would be able to maintain its average base-case gross margin, as a percentage of revenue, despite higher product costs. In general, the larger the product price increases, the less likely manufacturers are able to achieve the cash flow from operations calculated in this scenario because manufacturers would be less likely to be able to fully recoup these costs through larger pr ice increases.

Through its discussions with manufacture rs, DOE found that overall profit is driven more by the bundling of product features , such as stainless steel exteriors, ice dispensers, and digital displays , than by energy efficiency characteristics. In other words, more efficient products command higher prices , but these prices ar e driven by the many other features that are also bundled with in creased efficiency. However, the overall profit margin percentage does not vary widely even if the dollar profit per unit increases for products with these additional features. Manuf acturers are skeptical that customers would accept higher prices for increased energy effi ciency because it does not command higher

201margins in the current market. Under such a scenario, it follows that the large retailers that compose the relatively concentrated cust omer base of the industry would not accept manufacturers fully passing through the additi onal cost of improved efficiency because consumers would be wary of higher prices without additional features. Therefore, to assess the higher (more severe) end of the range of potential impacts, DOE modeled the preservation of operating profit markup scen ario in which higher energy conservation standards result in lower manufacturer mar kups. This scenario models manufacturers’ concerns that the higher costs of more effici ent technology would harm profitability if the full cost increases cannot be passed on. The scenario represents the upper end of the range of potential impacts on manufacturers because higher production costs erode profit margins and result in lower cash flows from operations.

DOE used the main NIA shipment scen ario for both the lower- and higher-bound MIA scenarios that were used to characteri ze the potential INPV impacts. The shipment forecast is an important driver of the IN PV results below. The main NIA shipment scenario includes a price elas ticity effect, meaning higher pr ices in the standards case result in lower shipments. Lower shipments also reduce industry revenue, and, in turn,
INPV.

i. Cash-Flow Analysis Results for Standard-Size Refrigerator-Freezers As part of its cash-flow analysis fo r standard-size refrigerator-freezers, DOE applied two different scenario s to project the impacts on ma nufacturers from standards at the various TSLs that DOE considered. Th e following tables pr ovide those projected impacts under the flat-markup and preservati on of operating profit markup scenarios.

202Table VI.23. Manufacturer Impact Analys is for Standard-Size RefrigeratorFreezers – Flat Markup Scenario Units Base Case Trial Standard Level 1 2 3 4 5 INPV (2009$ millions) 2,670.1 2,552.2 2,450.9 2,325.1 1,885.1 1,627.9 Change in INPV (2009$ millions) (117.8) (219.2) (345.0) (784.9) (1,042.2) (%) -4.4% -8.2% -12.9% -29.4% -39.0% Product Conversion Costs (2009$ millions) - 153 197 229 348 406 Capital Conversion Costs (2009$ millions) - 229 393 620 1,405 2,013
Total Conversion Costs (2009$ millions) - 382 590 848 1,753 2,419

Table VI.24. Manufacturer Impact Analys is for Standard-Size RefrigeratorFreezers – Preservation of Operating Profit Markup Scenario Units Base Case Trial Standard Level 1 2 3 4 5 INPV (2009$ millions) 2,670.1 2,417.5 2,274.2 2,089.4 1,360.8 828.6 Change in INPV (2009$ millions) (252.6) (395.9) (580.7) (1,309.3) (1,841.5) (%) -9.5% -14.8% -21.7% -49.0% -69.0% Product Conversion Costs (2009$ millions) - 153 197 229 348 406 Capital Conversion Costs (2009$ millions) - 229 393 620 1,405 2,013
Total Conversion Costs (2009$ millions) - 382 590 848 1,753 2,419

TSL 1 represents the current ENERGY STAR level for standard-size refrigeratorfreezers or a 20-percent reduction in measur ed energy consumption over the current

203energy conservation standards fo r the analyzed standard-size top-mount product class 3, a 20-perecent reduction for the analyzed standa rd-size bottom-mount product class 5, and a 20-percent reduction for the analyzed standard -size side-by-side product class 7. At TSL 1, DOE estimates impacts on INPV to range from -$117.8 million to -$252.6 million, or a change in INPV of -4.4 percen t to -9.5 percent. At this TS L, industry free cash flow is estimated to decrease by approximately 71.8 percent to $51.5 million, compared to the base-case value of $182.8 milli on in the year leading up to the amended energy conservation standards.

The INPV impacts at TSL 1 are relatively mi nor, in part because the vast majority of manufacturers produce ENER GY STAR units in significan t volumes, particularly for product classes 5 and 7. Approximately 42 percent of product class 7 shipments and 47 percent of product class 5 ship ments currently meet this TSL. By contrast, the vast majority of product class 3 shipments are baseline units. Additionally, most of the design options DOE analyzed at this TSL are one-for-one component swaps, including more efficient compressors and brushless DC c ondenser and evaporator fan motors, which require only modest changes to the manuf acturing process at TSL 1. As such, DOE estimated total product conversion costs of $153 million and capital conversion costs of $229 million.

While substantial on a nominal basis, the total conversion costs are relatively low compared to the industry value of $2.7 billi on. The total conversion costs at TSL 1 are mostly driven by the design options that manufacturers could use to improve the

204efficiency of the smaller-sized units of th e product classes analyzed. For example, the analyzed design options for the 22-cubic foot product class 7 unit in cluded a VIP in the freezer door, while the 26-cubic foot product class 7 unit only analyzed less costly component swaps. VIP implementation w ould require significan t capital and product conversion costs because additional production steps are required to hold and bind each panel in its location before the product is foamed. Each additional step requires more equipment to lengthen production lines a nd, because of lower throughput, more production lines for each manufacturer to ma intain similar shipment volumes. Some manufacturers have experience with VIPs, but DOE expects substantial engineering and testing resources would be required for thei r use in new platforms and/or at higher production volumes.

Similarly, the 16-cubic foot product class 3 unit uses a variable speed compressor as a design option. While not a capital inte nsive solution, variable speed compressors would require substantial engineering time to integrate the complex component, especially if electr onic control systems would also be required. Because these changes are more complex than the other analyzed desi gn options, more than three-quarters of the conversion costs for TSL 1 are attributable to the use of the VIPs and variable speed compressors in the smaller-volume product cla ss 7 and product class 3 units, respectively.

The flat markup scenario shows slightly negative impacts at TSL 1, indicating that the outlays for conversion costs margin ally outweigh any additional profit earned on incrementally higher variable costs. On a sh ipment-weighted basis, the average MPC for

205standard-size refrigerator-freezers increases by 10 percent at TSL 1 after standards. These small component cost changes are not significant enough to fully recoup these investments even if manufactur ers earn additional profit on these costs, as the flat markup scenario assumes. Hence, there is a sli ght negative impact, even in the upper-bound scenario, at TSL 1.

The efficiency requirements for product class 3 and product class 5 refrigeratorfreezers are the same at TSL 2 as TSL 1. Ho wever, the efficiency requirements for product class 7 increase to a 25-percent redu ction in measured energy consumption from current energy conservation standards. DOE estimates the INPV impacts at TSL 2 range from -$219.2 million to -$395.9 million, or a cha nge in INPV of -8.2 percent to -14.8 percent. At this TSL, the industry cash flow is estimated to decrease by approximately 113.9 percent to -$25.4 million, compared to th e base-case value of $182.8 million in the year leading up to the amended energy conservation standard.

The additional impacts at TSL 2 relative to TSL 1 result from the further improvements manufacturers must make to product class 7 refrigerator-freezers to achieve a 25-percent energy reduction, as very few shipments of product class 7 currently exceed the ENERGY STAR level. Specifically, for the 22-cubic foot products, the design options DOE analyzed include a variable speed compressor and a VIP in the freezer cabinet, instead of the door as in TSL 1. Fo r the 26-cubic foot product class 7 unit, the design options analyzed include a VIP in the freezer door in addition to additional component swaps and the component swaps needed to meet TSL 1. Total conversion

206costs increase by $208 million compared to TSL 1, which is largely driven by the initial use of VIPs in the 26-cubic foot product cl ass 7 unit. Besides these specific changes to side-by-side units, at TSL 2 most production lin es of standard-size refrigerator-freezers do not use VIPs or other very costly compone nts, which mitigates some of the disruption to current facilities. Conseque ntly, the INPV impacts, while greater than at TSL 1, are still relatively moderate compared to th e value of the industry as a whole.

At TSL 2, the INPV in the flat markup is lower than at TSL 1, which means the additional conversion costs to add more VIPs leaves manufacturers worse off even if they can earn additional profit on these costly com ponents. In the preservation of operating profit markup scenario, the industry earns no ad ditional profit on this greater investment, lowering cash flow from operations in the st andards case and resulting in greater INPV impacts.

The efficiency requirements for product class 5 and product class 7 refrigeratorfreezers are the same at TSL 3 as TSL 2. Ho wever, the efficiency requirements for product class 3 increase to a 25-percent redu ction in measured energy consumption from current energy conservation standards. TSL 3 represents a 25-percent reduction in measured energy consumption over the curr ent energy conservation standards for both product class 3 and product class 7. In additi on, TSL 3 represents a 20-percent reduction in measured energy consumption for product classes 1, 1A, and 2. DOE estimates the INPV impacts at TSL 3 to range from -$345.0 million to -$580.7 million, or a change in INPV of -12.9 percent to -21.7 percent. At this TSL, the industry cash flow is estimated

207to decrease by approximately 168.0 percent to -$124.3 million, compared to the base-case value of $182.8 million in the year leading up to the standards.

The additional negative impacts on industry ca sh flow result from the changes to product class 3 refrigerator-fr eezers to reach a 25-percent reduction in energy use (sideby-side products met this efficiency level at TSL 2). Specifically, the design options DOE analyzed at TSL 3 for 16-cubic foot top-mount refrigerator-freezers included the use of VIPs for the first time (in the freezer cabin et), in addition to the component swaps discussed above. In total, DOE estimates product conversion costs of $229 million and capital conversion costs of $620 million at TSL 3. The high cost to purchase new production equipment and the large engineering effort to manufacture new platforms for these smaller-sized product class 3 units driv e the vast majority of this additional $258
million in conversion costs that DOE estimates manufacturers would incur at TSL 3. Because the smaller size top-mounted units account for a large percentage of total shipments, the production equipment necessary to implement new platforms for these products is costly.

While production of units meeting TSL 3 is fairly limited, several manufacturers have introduced products that meet these efficiency levels in response to Federal production tax credits. This experience mitigates some of the product conversion costs by giving manufacturers some experience with th e newer technologies. However, the more severe impacts at TSL 3, relative to TSL 2, are due to the incremental outlays for conversion costs to make the changes describe d above. In particular, any experience with

208VIPs on some products does not lower the s ubstantial capital conve rsion necessary to purchase production equipment necessary to ma nufacture products that are substantially different from existing products.

As mentioned above, the preservation of operating profit markup scenario assumes no additional profit is earned on the higher production costs. This assumption lowers profit margins as a pe rcentage of revenue and leads to worse impacts on INPV. In the flat markup scenario, the impact of th e investments is mitigated by the assumption that manufacturers can earn a similar profit margin as a percentage of revenues on their higher variable costs. At TSL 3, MPCs in crease by an average of 16 percent after standards, leading to additional per-unit profit in this scenario. However, the magnitude of the conversion investments still leads to negati ve INPV impacts even if additional profit is earned on the incremental manufactur ing costs. The lower industry shipments driven by the relative price elasticity a ssumption account for approximately $45 million of the impact in the flat markup scenario.

TSL 4 represents a 30-per cent reduction in measured energy consumption over the current energy conservation standard s for product class 3, product class 5, and product class 7. DOE estimates the INPV impacts at TSL 4 to range from -$784.9 million to -$1,309.3 million, or a change in INPV of - 29.4 percent to -49.0 percent. At this TSL, the industry cash flow is estimated to decr ease by approximately a factor of 3.6 to ­ $469.3 million, compared to the base-case valu e of $182.8 million in the year leading up to the amended energy conservation standards.

209At TSL 4, significant changes to the manu facturing process are necessary for all refrigerator-freezers. A 30-percent reduction in energy consumption is the maximumefficiency top-mounted produc ts available on the market; 47 the maximum available sideby-side and bottom-mount only slightly exceed a 30-percent reduction. The design options DOE analyzed for all standard-size products—with the excep tion of the 25-cubic foot product class 5 unit—use multiple VIPs in the fresh food compartment, freezer doors, and cabinets to reach the 30-percent efficiency level. The design options also include the use of variable speed compressors for all units analyzed except the 21-cubic foot product class 3 unit. These product change s substantially increase the variable costs across nearly all platforms at this TSL.

While products that meet the efficien cy requirements of TSL 4 are not in widespread production, several manufacturers pr oduce units at these efficiencies due to tax credit incentives. However, at TSL 4, mo st manufacturers expe ct to completely redesign existing production line s if the amended energy cons ervation standards were set at levels that necessitated these change s across most or all of their products. Manufacturers would need to purchase inje ction molding equipment, cabinet bending equipment, and other equipment for interior tooling as they would need to create new molds for these production lines. These cha nges drive DOE’s estim ate of the large product and capital conversion costs at TSL 4 ($348 million and $1,405 million, respectively). The significant incremental inve stment relative to TSL 3 results, in large

47 Throughout the document, the terms “max available” or “max-tech ava ilable” are intended to mean the maximum efficiency level of available products.

210part, from the design option of adding VIPs to the 21-cubic foot an alyzed product class 3 unit. This top-mounted refrigerator-freezer re presents a substantial portion of the market and manufacturers would have to comp letely redesign these platforms.

As a result of the large investment necessary to meet this TSL, some manufacturers could move production to lowe r-labor-costs countries to achieve cost savings for labor expenditures. (More informa tion on employment impacts is provided in section IV.B.1.b.) In addition to the large cap ital conversion costs, the shipment-weighted average MPC increases by approximately 36 pe rcent at TSL 4 after standards compared to the base case. However, the magnitude of the conversion costs at TSL 4 are so large that even if manufacturers can reap additional profit from these higher product costs (as in the flat markup scenario), they would sti ll be substantially impacted, as shown by the negative INPV results in the flat markup s cenario. Additionally, the 36-percent increase in MPC drives shipments lower due to the price elasticity. Lower industry volume from the decline in shipments accounts for a cha nge in industry value of approximately 16 percent in the flat markup scen ario. The large, negative imp act on INPV is even greater under the preservation of operating profit markup scenario due to the inability to pass on the higher costs of expensive design options such as variable speed compressors and
VIPs.

TSL 5 represents max tech for all sta ndard-size refrigerator-freezers. The maxtech level corresponds to reductions in meas ured energy consumpti on compared to the current energy conservation standards for pr oduct class 3 (36 percen t), product class 5

211(36 percent), and product cla ss 7 (33 percent), respectivel y. DOE estimates the INPV impacts at TSL 5 to range from -$1,042.2 million to -$1,841.5 million, or a change in INPV of -39.0 percent to -69.0 percent. At this TSL, the industry cash flow is estimated to decrease by a factor of approximately 5.0 to -$727.5 million, compared to the basecase value of $182.8 million in the year leadi ng up to the amended energy conservation standards.

No products that meet TSL 5 are currentl y offered on the U.S. market. At TSL 5, the changes required to meet this TSL are similar to those at TSL 4, as complete redesigns of all platforms would be required. TSL 5 requires much more extensive use of VIPs, however. The higher conversion costs at TSL 5 are primarily due to the use of VIPs in additional locations in the door, cabinet and freezer, whereas at TSL 4 some of the analyzed design options of the larger-sized units included limited or no VIP use. This level would require manufacturers to further lengthen assembly lines and even modify or move their facilities outside of the United States. These factors dr ive the projected $2,419 million conversion cost estimate at this TSL. As with TSL 4, at TSL 5 some manufacturers could elect to move production out of the U.S. to offset some of the additional product costs. At TSL 5, DOE es timates MPCs increase by approximately 58 percent after standards compared to the base case. Similar to TSL 4, this substantially reduces shipments due to the pr ice elasticity effect and ex acerbates the industry impacts in both markup scenarios.

212As with other TSLs, the impact on INPV is mitigated under the flat markup scenario because manufacturers are able to fully pass on the large increase in MPC to consumers, thereby increasing manufacturers’ gross profit in absolute terms. However, even assuming manufacturers could earn the sa me gross margin percentage per unit on those higher costs, the capita l and product conversion costs ca use negative INPV impacts, as shown by the 39 percent decline in INPV in the flat markup scenario. This large impact even in the lower bound scenario demons trates that the large conversion costs to redesign all existing platforms results in substa ntial harm. The result is predicted even if manufacturers earn a historical margin on these additional costs. Due to the extremely large cost increases at the max-tech level, it is less likely at TSL 5 than at other examined levels that manufacturers coul d fully pass through the incr ease in production costs. If margins are impacted, TSL 5 would result in a substantial INPV lo ss under this scenario.

ii. Cash-Flow Analysis Results for Standard-Size Freezers

213As part of its cash-flow analysis fo r standard-size freezers, DOE applied two different scenarios to project the impacts on manufacturers from sta ndards at the various TSLs that DOE considered. The following tables provide those projected impacts under the flat-markup and preservation of operating profit markup scenarios.
Table VI.25. Manufacturer Impact Analysis for Standard-Size Freezers – Flat Markup Scenario Units Base Case Trial Standard Level 1 2 3 4 5 INPV (2009$ millions) 337.8 308.0 214.1 225.3 252.4 192.7 Change in INPV (2009$ millions) (29.8) (123.7) (112.5) (85.4) (145.0) (%) -8.8% -36.6% -33.3% -25.3% -42.9% Product Conversion Costs (2009$ millions) - 22 51 55 63 70 Capital Conversion Costs (2009$ millions) - 50 175 182 183 320
Total Conversion Costs (2009$ millions) - 72 226 237 247 390

Table VI.26. Manufacturer Impact Analysis for Standard-Size Freezers – Preservation of Operating Profit Markup Scenario Units Base Case Trial Standard Level 1 2 3 4 5 INPV (2009$ millions) 337.8 287.7 167.3 159.6 155.3 39.0 Change in INPV (2009$ millions) (50.0) (170.5) (178.1) (182.4) (298.8) (%) -14.8% -50.5% -52.7% -54.0% -88.5% Product Conversion Costs (2009$ millions) - 22 51 55 63 70 Capital Conversion Costs (2009$ millions) - 50 175 182 183 320
Total Conversion Costs (2009$ millions) - 72 226 237 247 390

214TSL 1 represents a 20-per cent reduction in measured energy use over the current energy conservation standards fo r the analyzed standard-size upright freezer product class 9 and a 20-percent reduction for the analyzed standard-size chest fr eezer product class 10. DOE estimates the INPV impacts at TS L 1 to range from -$29.8 million to -$50.0 million, or a change in INPV of -8.8 percent to -14.8 percent. At this TSL, the industry cash flow is estimated to decrease by approximately 111.2 percent to -$2.6 million, compared to the base-case value of $23.2 m illion in the year leading up to the amended energy conservation standards.

While products meeting TSL 1 are current ly produced only in limited volumes, the changes in the manufacturi ng process would not require co mpletely new platforms to meet the energy requirements at this TSL. Fo r most standard-size freezer platforms, the design options DOE analyzed include the use of brushless direct curr ent (DC) evaporator fan motors and compressors with higher EERs. However, the design options to meet this efficiency level also include increasing door insulation thickne ss for all analyzed products except the 20-cubi c foot product class 10 unit. Increasing door insulation thickness drives the majority of the conversion cost outlay DOE estimates manufacturers would incur at TSL 1. To increase door insu lation thickness, manu facturers would need to purchase new tooling for their door asse mblies. DOE estimates that these changes would result in product conversion costs of $22 million and capital conversion costs of $50 million at TSL 1. However, the conversion costs are somewhat mitigated at TSL 1 because the design options analyzed would not change the production equipment for the cabinet.

215At TSL 1, variable costs increase by a pproximately 10 percent after standards relative to base case MPCs. The flat markup scenario shows less severe impacts because it assumes manufacturers can pass on thes e substantially higher product costs and maintain gross margin percentages. Additionally, the reduction in shipments due to the price elasticity has only a marg inally negative effect at this TSL. The relatively large conversion costs decrease industry value unde r both markup scenarios and account for a substantial portion of the INPV impacts. This is especially the cas e if manufacturers are unable to earn any additional profit on the higher production costs (t he preservation of operating profit scenario).

TSL 2 represents a reduction in measur ed energy consumption over the current standards of 30 percent for product class 9 and 25 percen t for product class 10. TSL 2 also represents reductions for the other produc t classes as well -- produ ct class 8 (upright freezers with manual defrost, 25 percent) a nd product class 10A (chest freezers with automatic defrost, 30 percent). DOE estimates the INPV impacts at TSL 2 to range from ­ $123.7 million to -$170.5 million, or a change in INPV of -36.6 percent to -50.5 percent. At this TSL, the industry cash flow is estimated to decrease by appr oximately a factor of
3.6 to -$60.0 million, compared to the base -case value of $23.2 million in the year leading up to the amended ener gy conservation standards.

The vast majority of the standard-size freezer market does not currently meet the efficiency requirements at TSL 2. DOE’s design options assume that, in addition to the

216component swaps noted above, manufacturers w ould increase the insulation thickness of both the door and cabinet. As a result, pr oduct redesigns are expected across most platforms, which could substantially disr upt current manufacturing processes. These changes account for the majority of DOE’s es timates for total product conversion costs of $51 million and capital conversion costs of $175 million, an increase over TSL 1 of $29 million and $125 million, respectively. The magnitude of the investments, relative to the industry value, results in severe INPV impact s. Even if manufacturer s are able to pass on the estimated 24-percent increase in product costs onto their customers after standards, the large product and capital conversion costs resulting from increased insulation thickness decrease INPV. If manufacturers are not able to pass on these costs, as shown by the preservation of operating profit scenario, INPV impacts are projected to be severe.

TSL 3 represents a 35-per cent reduction in measured energy use over the current energy conservation standards for product cla ss 9 and a 30-percent reduction for product class 10. DOE estimates the INPV impacts at TSL 3 to range from -$112.5 million to ­ $178.1 million, or a change in INPV of -33.3 per cent to -52.7 percent. At this TSL, the industry cash flow is estimated to decreas e by a factor of approximately 3.7 to -$63.8 million, compared to the base-case value of $23.2 million in the year leading up to the amended energy conservation standards.

The efficiency requirements at TSL 3 are more stringent than the max available products in the market for product class 9 and product class 10. The impacts at TSL 3 are similar to those at TSL 2 because the desi gn options analyzed by DOE already required

217platform redesigns at TSL 2. However, the additional design options analyzed at TSL 3 also include a variable speed compressor in the 14-cubic foot product class 9 unit and VIPs in the bottom wall of the 20-cubic foot product class 10 unit. These design options substantially increase the vari able costs associated with th ese products but do not greatly change the product and capital conversion co sts. DOE estimates that under TSL 3, the average MPC of a standard-size freezer is roughly 34 percent higher after standards than in the base case, leading to a 9-percent drop in shipments from the price elasticity assumption for 2014 alone.

The impacts at TSL 3 under the flat markup scenario become less severe than at TSL 2 because the scenario assumes manufact urers can fully pass on the added cost to consumers, while investments do not signi ficantly increase from TSL 2 to TSL 3. However, under the preservation of operating profit markup scenario, manufacturers do not receive any extra profit on units of higher cost, resulting in wo rse INPV impacts at TSL 3 than at TSL 2.

TSL 4 represents a 40-per cent reduction in measured energy use over the current energy conservation standards for product cla ss 9 and a 35-percent reduction for product class 10. DOE estimates the INPV impacts at TSL 4 to range from -$85.4 million to ­ $182.4 million, or a change in INPV of -25.3 per cent to -54.0 percent. At this TSL, the industry cash flow is estimated to decreas e by a factor of approximately 3.9 to -$66.5 million, compared to the base-case value of $23.2 million in the year leading up to the amended energy conservation standards.

218At TSL 4, the design options DOE analyzed include the addition of a variable speed compressor for the 20-cubic foot produc t class 9 unit, the 15-cubic foot product class 10 unit, and the 20-cubic foot product class 10 unit. For the 14-cubic foot product class 9 unit, the design options analyzed were even thicker wall cabinet insulation and the implementation of VIPs.

The relative impacts at TSL 4 are also caused by the incremental MPCs compared to the conversion costs to implement these design options. Outlays for conversion costs increase only slightly at TSL 4 (by 4 percent, compared to TSL 3) while variable costs increase substantially (by approximately 52 percent after standard s compared to the baseline) due to the addition of variab le speed compressors and VIPs. Because manufacturers earn incrementally more prof it on each unit at TSL 4 compared to TSL 3 in the flat markup scenario—without substa ntial changes to conversion costs—further declines in industry value, though still subs tantial, are mitigated in this scenario. However, manufacturers expressed skepticism th at such large cost increases could be passed on. This view is reflect ed by the severely negative re sults in the preservation of operating profit scenario.

TSL 5 represents max tech for the standa rd-size freezer product classes. This TSL reflects a 44-percent reduction in measured energy use for product class 9 and a 41­ percent reduction for product class 10. DOE estimates the INPV impacts at TSL 5 to range from -$145.0 million to -$298.8 million, or a change in INPV of -42.9 percent to ­

21988.5 percent. At this TSL, the industry cash fl ow is estimated to decrease by a factor of approximately 6.3 to -$122.8 million, compared to the base-case value of $23.2 million in the year leading up to the amende d energy conservation standards.

To achieve the max-tech level at TSL 5, DOE analyzed design options that include the widespread implementation of multip le VIPs on all standard-size freezers, in addition to the use of more efficient components and thicker insulation already necessary to achieve the efficiency requirements at TSL 4. DOE estimated that TSL 5 would require product and capital convers ion costs of $70 million and $320 million, respectively. These large conversion costs re sult from the changes associated with multiple VIP implementation and wall thickness increases. In addition, DOE estimates that product costs would almost double base-cas e MPCs after standard s, driven by the use of variable speed compressors and VIPs in th e doors and cabinet of all product lines. As a result, INPV decreases substa ntially from TSL 4 to TSL 5.

iii. Cash-Flow Analysis Results fo r Compact Refrigeration Products

220As part of its cash-flow analysis for compact refrigeration products, DOE applied two different scenarios to project the imp acts on manufacturers fr om standards at the various TSLs that DOE considered. The following tables provide those projected impacts under the flat-markup and preservati on of operating profit markup scenarios.

Table VI.27. Manufacturer Impact Analysis for Compact Refrigeration Products – Flat Markup Scenario Units Base Case Trial Standard Level 1 2 3 4 5 INPV (2009$ millions) 169.4 152.8 133.3 106.5 127.9 14.5 Change in INPV (2009$ millions) (16.6) (36.2) (62.9) (41.5) (154.9) (%) -9.8% -21.4% -37.1% -24.5% -91.4% Product Conversion Costs (2009$ millions) - 15 35 41 48 67 Capital Conversion Costs (2009$ millions) - 24 46 76 71 220
Total Conversion Costs (2009$ millions) - 39 80 118 119 287

221Table VI.28. Manufacturer Impact Analysis for Compact Refrigeration Products – Preservation of Operating Profit Markup Scenario Units Base Case Trial Standard Level 1 2 3 4 5 INPV (2009$ millions) 169.4 141.6 110.8 80.1 76.6 (73.2) Change in INPV (2009$ millions) (27.8) (58.7) (89.3) (92.8) (242.6) (%) -16.4% -34.6% -52.7% -54.8% -143.2% Product Conversion Costs (2009$ millions) - 15 35 41 48 67 Capital Conversion Costs (2009$ millions) - 24 46 76 71 220
Total Conversion Costs (2009$ millions) - 39 80 118 119 287

TSL 1 represents a 20-per cent reduction in measured energy use over the current energy conservation standards for compact refr igerators and refrigerator-freezers (product class 11) and a 10-percent reduction for comp act freezers (product class 18) analyzed by DOE. DOE estimates the INPV impacts at TSL 1 to range from -$16.6 million to -$27.8 million, or a change in INPV of -9.8 percent to -16.4 percent. At this TSL, industry cash flow is estimated to decrease by approximately 125.1 percent to -$2.7 million, compared to the base-case value of $10.7 million in th e year leading up to the amended energy conservation standards. A small percentage of product class 18 ship ments currently meet this TSL, but most product class 11 shipments are baseline units.

The design options analyzed by DOE at TSL 1 assumed that more significant changes in the manufacturing process w ould be required for product class 11, while product class 18 would only require increase d compressor efficiency. For product class 11, DOE analyzed several design options that represent component changes, such as a

222more efficient compressor and increased he at exchanger area, which do not have a significant impact on consumer prices or conve rsion costs. However, DOE also analyzed increasing door insulation thickness for pr oduct class 11, which driv es the bulk of the estimated $15 million and $24 million outla ys for product conversion and capital conversion costs, respectively. As described for standard-size refrigerator-freezers and standard-size freezers, increasing insulation thic kness requires manufacturers to invest in injection molding equipment and other equipm ent for interior tool ing to manufacture products with different door dimensions. Th e overall impacts at TSL 1 are relatively moderate because the conversion costs are still small compared to the industry value of $169.4 million.

The higher production costs at TSL 1 do not have a substantial impact on INPV at TSL 1. The MPC of compact refrigeration products on a shipment-weighted basis increases 11 percent over the base case at TSL 1 after standards. The combined INPV impacts are greater under the preservati on of operating profit scenario since manufacturers cannot pass on any of the added cost to consumers under that scenario, resulting in lower cash flows from operati ons. However, because production costs do not greatly increase at TSL 1, the impacts on IN PV are relatively low under this scenario as well.

TSL 2 represents a 25-per cent reduction in measured energy use over the current energy conservation standards for product cla ss 11 and a 10-percent re duction for product class 18. TSL 2 also represents a 15-percent reduction in measured energy consumption

223for the analyzed product classes 13, 13I, 15, a nd 15I, and a 20-percent reduction for the unanalyzed product classes 14 and 14I. DOE es timates the INPV impacts at TSL 2 to range from -$36.2 million to -$58.7 million, or a change in INPV of -21.4 percent to ­
34.6 percent. At this TSL, the industry cash flow is estimated to decrease by approximately 254.9 percent to -$16.6 million, compared to the base-case value of $10.7 million in the year leading up to the amended energy conservation standards.

At TSL 2, further changes are require d for product class 11. In addition to component swaps, the design options an alyzed by DOE include thicker cabinet insulation. As discussed for TSL 1, increasi ng insulation thickness si gnificantly impacts product and capital conversion co sts, but much more so wh en adding insulation to the cabinet (as opposed to the door). To increas e the insulation thickne ss of the cabinet, manufacturers must replace virtually all stam ping equipment, which greatly increases the capital conversion costs. Additionally, DOE analyzed the use of isobutane refrigerant as a design option for the 4-cubic f oot product class 11 unit. At TS L 2, a substantial portion of the investment to reach TSL 2 would likely be for training service technicians to handle this volatile refrigerant. As a result of thicker cabinet insulation and conversion to isobutane, product conversion and capital c onversion costs roughly double at TSL 2 (to $35 million for product conversion costs and $46 million for capital conversion costs). The shipment-weighted MPC increased 22 percen t at TSL 2 after standards compared to baseline costs, which also contributed to the more severe impacts projected under the preservation of operation profit scenario if manufacturers do not earn additional profit on these higher costs.

224TSL 3 represents a 30-per cent reduction in measured energy consumption over the current energy conservation standards fo r product class 11 and a 15-percent reduction for product class 18. DOE estimates the INPV impacts at TSL 3 to range from -$62.9 million to -$89.3 million, or a change in INPV of --37.1 percent to -52.7 percent. At this TSL, the industry cash flow is estimated to decrease by a factor of approximately 3.9 to ­ $30.6 million, compared to the base-case value of $10.7 million in the year leading up to the amended energy conservation standards.

At TSL 3, the design options analyzed for both product class 18 units include thicker door insulation, which further increases the capital conversion costs over TSL 1 and TSL 2, where this was not analyzed as a design option. The additional impacts at TSL 3 are also due to more stringent re quirements for product class 11. A 30-percent reduction for product class 11 is gr eater than the most efficient units on the market today. For both analyzed sizes of product class 11, DOE analyzed the design option of thicker insulation in the cabinet for both units analyzed. The net e ffect is a large increase in conversion costs due to the much higher cost of the equipment necessary to manufacture the cabinet. At TSL 3, DOE estimated total product conversion costs of $41 million and capital conversion costs of $76 million, a 46 pe rcent total increase in conversion costs over TSL 2. The effect of the design changes at TSL 3 on shipment-weighted unit cost is a 27-percent increase over the average baseli ne MPC after standards. The magnitude of the investments relative to the industry valu e leads to significant impacts, although they

225are moderated somewhat in the flat markup because manufacturers earn additional profit on the investments.

TSL 4 represents a 40-per cent reduction in measured energy use over the current energy conservation standards for product cla ss 11 and a 25-percent re duction for product class 18. DOE estimates the INPV impacts at TSL 4 to range from -$41.5 million to ­ $92.8 million, or a change in INPV of -24.5 per cent to -54.8 percent. At this TSL, the industry cash flow is estimated to decreas e by a factor of approximately 3.9 to -$30.5 million, compared to the base-case value of $10.7 million in the year leading up to the amended energy conservation standards.

The design options analyzed at TSL 4 would also severely disrupt current manufacturing processes. For the 1.7-cubic foot product class 11 unit, DOE analyzed a variable speed compressor and isobutane refr igerant as design options. For the 4-cubic foot product class 11 unit and the 7-cubic foot product class 18 unit, DOE analyzed thicker insulation in the cabin ets. For 3.4-cubic foot product class 18 unit, DOE analyzed both an increase to cabinet insulation thic kness and VIPs in the bottom wall as design options. Although increasing insulation th ickness, converting to isobutane, and implementing VIPs all would necessitate large conversion costs, capital conversion costs decrease slightly from TSL 3 to TSL 4 becau se of the removal of all previous design options in the 1.7-cubic foot un it. In other words, the design options analyzed for this unit cause less substantial changes to existing production equipment, but would also require a large investment by manufacturers to train service technicians to deal with the refrigerant.

226Because this task would require a large outlay for product conversion costs, total conversion costs are roughly the same at TSL 3 and TSL 4. Adding a variable speed compressor in the smaller product class 11 unit analyzed also has a substantial impact on unit price because of its high component cost . At TSL 4, the shipment-weighted MPC is 60-percent higher than the baseline MPC af ter standards. These cost increases are projected to cause a 16-percen t decrease in shipments at TSL 4 in 2014 alone. Over time, this decline significan tly contributes to the negative impacts on INPV in both markup scenarios.

The large conversion costs a nd higher prices leading to lower shipments cause a decrease in INPV from TSL 3 to TSL 4 unde r the preservation of operating profit markup scenario (since this scenario assumes hi gher production costs are not passed on to consumers). However, under the flat markup s cenario, manufacturers are able to earn additional profit on the new high-cost compone nts such as variable speed compressors, resulting in an increase in INPV from TSL 3 to TSL 4.

TSL 5 represents max tech for both product classes 11 and 18. The max-tech level corresponds to a 59-percent a nd 42-percent reduction in meas ured energy use for product class 11 and product class 18, respectively. DOE estimates the INPV impacts at TSL 5 to range from -$154.9 million to -$242.6 million, or a change in INPV of -91.4 percent to ­
143.2 percent. At this TSL, the industry cash flow is estimated to decrease approximately ten-fold to -$97.6 million, compared to the base-case value of $10.7 million in the year leading up to the amended ener gy conservation standards.

227The design options DOE analyzed include the use of VIPs for all analyzed product class 11 and 18 units to reach max-t ech efficiency levels. Additionally, the design options analyzed for some products al so included other costly changes. For the 1.7-cubic foot product class 11 unit, the design options analyzed included multiple VIPs, a larger heat exchanger, and thicker insu lation. The design options analyzed for the 4­ cubic foot product class 11 unit also include d a variable speed compressor and thicker insulation. For product class 18, DOE assume d that manufacturers would remove the design options necessary to meet TSLs 1 th rough 4 and add a variable speed compressor and thicker insulation for both analyzed pr oducts. These significant changes greatly increase the investment required to manuf acture standards-compliant products. DOE estimated that product conversion costs woul d be $67 million at TSL 5, an increase of almost 40 percent over TSL 4. DOE also estim ated that capital conversion costs would be $220 million, a more than three-fold increase over TSL 4. This drastic increase in conversion costs demonstrates the signifi cant investments required by implementing widespread use of VIPs a nd increasing wall thickness.

At TSL 5, the shipment-weighted MPC in creases by over 150 percent over the baseline after standards due to the high ma terial costs of VIPs and variable speed compressors. These large jumps cause shipme nts to decrease by 42 percent due to the price elasticity in 2014 alone. As a result of lower industry shipments and extremely high conversion costs, INPV decreases substa ntially from TSL 4 to TSL 5 and becomes

228negative under the preservation of operating pr ofit scenario, which indicates the industry loses more than its base-case value in the standards case under this scenario.

iv. Cash-Flow Analysis Results fo r Built-In Refrigeration Products As part of its cash-flow analysis for bu ilt-in refrigeration products, DOE applied two different scenarios to project the imp acts on manufacturers fr om standards at the various TSLs that DOE considered. The following tables provide those projected impacts under the flat-markup and preservati on of operating profit markup scenarios.

Table VI.29. Manufacturer Impact Analysis for Built-In Refrigeration Products – Flat Markup Scenario Units Base Case Trial Standard Level 1 2 3 4 5 INPV (2009$ millions) 554.1 502.2 499.0 486.1 471.2 464.2 Change in INPV (2009$ millions) (51.9) (55.1) (68.0) (82.9) (89.9) (%) -9.4% -9.9% -12.3% -15.0% -16.2% Product Conversion Costs (2009$ millions) - 41 51 65 75 87 Capital Conversion Costs (2009$ millions) - 40 38 55 74 84
Total Conversion Costs (2009$ millions) - 81 89 119 149 171

229Table VI.30. Manufacturer Impact Analysis for Built-In Refrigeration Products – Preservation of Operating Profit Markup Scenario Units Base Case Trial Standard Level 1 2 3 4 5 INPV (2009$ millions) 554.1 501.5 497.6 477.0 456.5 442.0 Change in INPV (2009$ millions) (52.6) (56.5) (77.2) (97.6) (112.1) (%) -9.5% -10.2% -13.9% -17.6% -20.2% Product Conversion Costs (2009$ millions) - 41 51 65 75 87 Capital Conversion Costs (2009$ millions) - 40 38 55 74 84
Total Conversion Costs (2009$ millions) - 81 89 119 149 171

TSL 1 represents a 10-per cent reduction in measured energy use over the current energy conservation standards fo r the analyzed built-in all-re frigerator product class 3ABI, the analyzed built-in bottom-mount product class 5-BI, the analyzed built-in side-byside product class 7-BI, and for the analyzed built-in freezer pr oduct class 9-BI. DOE estimates the INPV impacts at TSL 1 to range from -$51.9 million to -$52.6 million, or a change in INPV of -9.4 percen t to -9.5 percent. At this TS L, the industry cash flow is estimated to decrease by approximately 70.7 percent to $11.0 million, compared to the base-case value of $37.5 million in the y ear leading up to the amended energy conservation standards.

At TSL 1, the design options that DOE anal yzed result in moderate changes in the manufacturing process for built-in refriger ation products. For produc t classes 3A-BI and 9-BI, the design options that DOE analyzed to reach TSL 1 included the use of more efficient components that do not require significant changes to the manufacturing

230process. However, for product class 5-BI and product class 7-BI, the design options DOE analyzed also include the use of VIPs in the freezer door. While th ese components add to the overall costs of production, the added costs represent a sm all percentage of the total cost of a built-in refrigeration product. These cost deltas are low co mpared to the overall cost of the products and result in small im pacts even if no additi onal profit is earned on the incremental MPCs. The estimated pr oduct conversion costs for all built-in refrigeration products at TSL 1 are $41 million and the estimated cap ital conversion costs are $40 million. The implementation of VIPs represents a substantial part of the conversion costs, but several bu ilt-in refrigeration manufactur ers have products that use similar technology, which helps to mitigate so me of the product conversion costs that would be required to design products from the ground up.

TSL 2 represents a 15-percen t reduction in measured energy use for product class 3A-BI and product class 5-BI. For product cla sses 7-BI and 9-BI, TSL 2 represents a reduction of 10 percent and 20 percent, respec tively. DOE estimates the INPV impacts at TSL 2 to range from -$55.1 million to -$56.5 million, or a change in INPV of -9.9 percent to -10.2 percent. At th is TSL, the industry cash flow is estimated to decrease by approximately 75.2 percent to $9.3 million, co mpared to the base-case value of $37.5 million in the year leading up to the amended energy conservation standards.

The efficiency requirements for product cl ass 7-BI refrigerator-freezers do not change from TSL 1 to TSL 2, but the efficien cy requirements for all other analyzed builtin product classes increase. The design options that DOE analyzes at TSL 2 for product

231classes 3A-BI and 7-BI still only include component swaps to reach a 15-percent efficiency improvement. Product class 5-BI uses a variable speed compressor in the freezer with a brushless DC c ondenser fan motor, but no longer use the VIPs used to reach TSL 1. The design options analyzed fo r product class 9-BI include a brushless DC evaporator and condenser fan motor, a larger condenser, a variable speed compressor, and a VIP in the upper door. Because product class 5-BI no longer uses VIPs and fewer changes to existing products are necessary, th e overall impact is a slight decrease in capital conversion costs from $40 million at TSL 1 to $38 million at TSL 2. Product conversion costs increase to $51 million at TSL 2 because additional engineering time would be required to implement the additi onal component changes. However, because the complexity of the changes to the products and production facilities are similar at TSL 1 and TSL 2, there is only a small decr ease in INPV from TSL 1 to TSL 2.

TSL 3 represents a 20-percen t reduction in measured energy use for product class 3A-BI and product class 7-BI. For product cla sses 5-BI and 9-BI, TSL 3 represents a reduction of 15 percent and 25 percent, respec tively. DOE estimates the INPV impacts at TSL 3 to range from -$68.0 million to -$77.2 million, or a change in INPV of -12.3 percent to -13.9 percent. At th is TSL, the industry cash flow is estimated to decrease by approximately 102.9 percent to -$1.1 million, compared to the base-case value of $37.5 million in the year leading up to the amended energy conservation standards.

The efficiency requirements for product cl ass 5-BI do not change from TSL 2 to TSL 3. However, the design options for all othe r built-in refrigerati on products at TSL 3

232include the implementation of VIPs. The widespread implementation of VIPs increases product and capital conversion costs, whic h are estimated to be $65 million and $55 million at TSL 3, respectively. Substantial chan ges to existing production facilities would be required to manufacture products that meet the required efficiencies at TSL 3. Most of the capital conversion costs involve purchasing new produc tion equipment and would result in high stranded assets. The exte nsive changes that ma nufacturers would be required to make to existing facilities and th e projected erosion of profitability if the additional production cost of implementing VIPs does not yield additional profit result in a projected decrease in INPV from TSL 3 to TSL 4. However, the industry value is high relative to the required capital conversion costs and the cost of the additional VIP panels is relatively small compared to the overall cost of the products, which helps to mitigate some of the negative impact s caused by these changes.

TSL 4 represents a 25-per cent reduction in measured energy use over the current energy conservation standards for the followi ng product classes: 3A-B I, 5-BI, and 9-BI. For product class 7-BI, TSL 4 represents a 20-percent reduction in measured energy use from current energy conservation standards. DOE estimates the INPV impacts at TSL 4 to range from -$82.9 million to -$97.6 million, or a change in INPV of -15.0 percent to ­
17.6 percent. At this TSL, the industry cash flow is estimated to decrease by approximately 130.3 percent to -$11.4 million, compared to the base-case value of $37.5 million in the year leading up to the amended energy conservation standards.

233The efficiency requirements for product cl ass 7-BI do not change from TSL 3 to TSL 4. The design options for the other built- in refrigeration products all include the addition of more VIPs to reach TSL 4. The design options analyzed for product classes 3A-BI and 5-BI also include using a variab le speed compressor. The complexity of implementing multiple component swaps and the additional production equipment necessary to use additional VIPs increases both the product and capit al conversion costs. These costs are estimated to be $75 milli on and $74 million at TSL 4, respectively, and
result in a decrease in INPV from TSL 3 to TSL 4.

TSL 5 represents max tech for the four built-in product classes. This TSL represents a reduction in measured energy use of 29 percent, 27 per cent, 22 percent, and 27 percent, respectively, for pr oduct classes 3A-BI, 5-BI, 7- BI, and 9-BI. DOE estimates the INPV impacts at TSL 5 to range from -$89.9 million to -$112.1 million, or a change in INPV of -16.2 percent to -20.2 percent. At this TSL, the industry cash flow is estimated to decrease by approximately 149.5 percent to -$18.6 million, compared to the base-case value of $37.5 million in the y ear leading up to the amended energy conservation standards.

The design options analyzed by DOE incl ude the widespread use of VIPs to achieve the max-tech efficien cy levels at TSL 5. Additionally, product class 3A-BI uses multiple variable speed compressors. Since th e implementation of VIPs is both research and capital intensive, product and capital conversion costs increase to $87 million and $84 million, respectively. The complexity of implementing multiple component swaps

234and the additional production equipment necessary to use additional VIPs increases both the product and capital costs.

b. Impacts on Employment DOE quantitatively assessed the impacts of potential amended energy conservation standards on employment. DOE used the GRIM to estimate the domestic labor expenditures and number of domestic pr oduction workers in the base case and at each TSL from 2010 to 2043. DOE used statistical data from the most recent U.S. Census Bureau’s 2007 Economic Census, the results of the engineering analysis, and interviews with manufacturers to determine the inputs necessary to calculate industry-wide labor expenditures and domestic employment levels . Labor expenditures involved with the manufacture of the product are a function of th e labor intensity of the product, the sales volume, and an assumption that wages remain fixed in real terms over time.

In each GRIM, DOE used the labor content of each product and the manufacturing production costs from the engi neering analysis to estimate the annual labor expenditures in the residential refrig eration product industry. DOE used Census data and interviews with manufacturers to estimate the portion of the total labor expenditures that is attributable to U.S. ( i.e. , domestic) labor.

The production worker estimates in this se ction only cover workers up to the linesupervisor level who are directly involved in fabricating and assembling a product within an Original Equipment Manufacturer (OEM) fa cility. Workers performing services that

235are closely associated with production operations, such as material handing with a forklift, are also included as production labor. DOE’s estimates only account for production workers who manufacture the speci fic products covered by this rulemaking. For example, a worker on a wine cooler line would not be included with the estimate of the number of residential refrigeration workers.

The employment impacts shown in Table VI . 31 through Table VI.33 represent the potential production employment that could result following amended energy conservation standards. The upper end of th e results in these tables estimates the maximum change in the number of production workers after amended energy conservation standards must be met. The uppe r end of the results assumes manufacturers would continue to produce the same scope of covered products in the same production facilities. The upper end of the range also assumes that domestic production does not shift to lower-labor-cost countries. Because there is a real risk of manufacturers evaluating sourcing decisions in response to amended energy conservation standards, the lower end of the range of em ployment results in Table VI . 31 through Table VI.33 includes the estimated total num ber of U.S. production worker s in the industry who could lose their jobs if all existing production were moved outside of the U.S. While the results present a range of employment impacts following the compliance date of amended energy conservation standards, the discussion below also includes a qualitative discussion of the likelihood of negative employment im pacts at the various TSLs. Finally, the employment impacts shown are independent of the employment impacts from the broader

236U.S. economy, which are documented in chapte r 13, Employment Impact Analysis, of the final rule TSD.

i. Standard-Size Refrigerator -Freezer Employment Impacts Using the GRIM, DOE estimates that, in the absence of amended energy conservation standards, there would be 7,351 domestic production workers involved in manufacturing standard-size refrigerato r-freezers in 2014. Using 2007 Census Bureau data and interviews with manu facturers, DOE estimates that approximately 42 percent of standard-size refrigerator-freezers sold in the United States are manufactured domestically. Table VI . 31 shows the range of the impact s of potential amended energy conservation standards on U.S. production wo rkers in the standard -size refrigeratorfreezer market.

Table VI.31. Potential Changes in the To tal Number of Domestic Standard-Size Refrigerator-Freezer Production Workers in 2014 Trial Standard Level Base Case 1 2 3 4 5 Total Number of Domestic Production Workers in 2014 (without changes in production locations) 7,351 7,164 7,127 7,172 7,109 6,981 Potential Changes in Domestic Production Workers in 2014* - (187) - (7,351) (224) ­ (7,351) (179) ­ (7,351) (242) ­ (7,351) (307) ­ (7,351) *DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers.
All examined TSLs show relatively minor impacts on domestic employment levels at the lower end of the range. Most of the design options us ed in the engineering analysis involve the swapping of components in baseline units with more efficient parts

237for top-mounted, side-by-side, and bottom-mounted refrigerator-freezers. These component swaps for these design options add primarily material costs and do not greatly impact the labor content of the baseline products. The relatively small decreases in domestic production employment for the lowe r end of the range of the employment impacts arise from higher product prices lo wering shipments the year the standard becomes effective. At these higher TSLs, the e ffects of lower shipments more than offset the additional product labor that is required to manufacture pr oducts that use VIP panels.

During interviews, manufacturers indicated that their domestic employment levels could be impacted under two scenarios: (1) the widespread adoption of VIPs or (2) significant capital conversion costs that w ould force them to consider non-domestic manufacturing locations once the compliance date for the amended energy conservation standards arrive. The widespr ead adoption of VIPs would in crease the labor content of today’s products. The labor cont ent of products with VIPs in creases because of the extra handling steps that would be required to ensure that VIPs are not damaged during production. Because of the competitive nature of the industry, manufacturers believed the extra labor costs could force them to move their remaini ng domestic production to lower labor cost countries to take advantag e of the cheaper labor they offer.

Manufacturers also indicated that large conversion cost s would likely force them to consider investing in lower-labor-cost coun tries. For most product categories, there is a range of efficiency levels that can be met with relatively low-cost components (as analyzed in the engineering analysis). Be yond these levels, manufacturers would need to

238decide to follow the MPC design options anal yzed in the engineering analysis for each product category. Manufacturers i ndicated the analyzed design options that use multiple VIPs would involve significant capital convers ion costs and add very large material costs to their products that would likely result in the relocation of their production facilities abroad. However, manufacturers indicated they would face even larg er capital conversion costs at lower efficiencies if they redesigne d their products with thicker walls. While not analyzed as a design option for standard-s ize refrigerator-freezers, increasing wall thickness would likely result in moving domestic production outside of the U.S. at lower efficiency levels.

ii. Standard-Size Freezer Employment Impacts Using the GRIM, DOE estimates that, in the absence of amended energy conservation standards, there would be 1,643 standard-size freezer production workers in the U.S. in 2014. Using the 2007 Census data and interviews with manufacturers, DOE estimates that approximately 80 percent of stan dard-size freezers sold in the United States are manufactured domestically. Table VI .32 shows the impacts of amended energy conservation standards on U.S. production work ers in the standard-size freezer market.

Table VI.32 Potential Changes in the To tal Number of Domestic Standard-Size Freezer Production Workers in 2014 Trial Standard Level Base Case 1 2 3 4 5 Total Number of Domestic Production Workers in 2014 (without changes in production locations) 1,643 1,597 1,537 1,497 1,410 1,303
Potential Changes in Domestic Production - (46) - (1,643) (106) - (1,643) (146) - (1,643) (233) - (1,643) (340) - (1,643)

239Workers in 2014* *DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers.
Similar to standard-size refrigerator-freezer s, there are relatively small decreases in employment at the lower end of the ra nge of employment impacts. These slight declines are caused by higher pr ices that drive lower ship ments once manufacturers must meet the amended energy conservation st andard. Standard-size freezer manufacturers also indicated that domestic production could be shifted abroad with any efficiency level that required large capital c onversion costs. At TSL 1, DOE does not expect substantial changes to domestic employment in the standa rd-size freezer market if manufacturers use the design options listed in the engineering an alysis to reach the efficiency requirements at this TSL.

However, at TSL 2 through TSL 5, manufact urers indicated that there could be domestic employment impacts depending on the design pathway used to reach the required efficiencies. At TS L 2 and above, the engineering analysis assumes that manufacturers would have to change wall thic knesses to reach the required efficiencies. Manufacturers indicated that be cause these products are typically low-end, they would likely follow the design pathways in the e ngineering analysis and increase the wall insulation thickness to reach hi gher efficiencies in order to avoid having to pass large price increases on to consumers. While this approach would result in extremely large conversion costs and would be more likel y lead to manufacturers moving production abroad, manufacturers believed this strategy w ould help to maintain sales volumes.

240iii. Compact Refrigeration Product Employment Impacts DOE’s research suggests that a limited pe rcentage of compact refrigerators and refrigerator-freezers are made domestica lly (see Table VI.33). The overwhelming majority of products are imported. Manufactur ers with domestic manufacturing facilities tend to source or import their compact pr oducts. The small employment numbers are mostly from remaining domestic production of compact chest freezers. As a result, amended energy conservation standards for comp act refrigerators or refrigerator-freezers are unlikely to noticeably alter domestic employment levels.

Table VI.33 Potential Changes in the Total Number of Domestic Compact Refrigeration Product Production Workers in 2014 Trial Standard Level Base Case 1 2 3 4 5 Total Number of Domestic Production Workers in 2014 (without changes in production locations) 27 26 26 25 24 40
Potential Changes in Domestic Production Workers in 2014* - (1) - (27) (1) - (27) (2) - (27) (3) - (27) 13 - (27) *DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers.

iv. Built-In Refrigeration Product Employment Impacts Using the GRIM, DOE estimates that, in the absence of amended energy conservation standards, there would be 1,139 U.S. works manufacturing built-in refrigeration products in 2014. Using the 2007 Census data and interviews with manufacturers, DOE estimates that approximate ly 94 percent of the built-in refrigeration products sold in the United States are ma nufactured domestically. Table VI.34 shows the

241impacts of amended energy conservation st andards on U.S. production workers in the built-in refrigeration market.

Table VI.34 Potential Changes in the To tal Number of Built-In Refrigeration Product Production Workers in 2014 Trial Standard Level Base Case 1 2 3 4 5 Total Number of Domestic Production Workers in 2014 (without changes in production locations) 1,139 1,139 1,138 1,145 1,148 1,171

Potential Changes in Domestic Production Workers in 2014* - 0 ­ (1,139) (1) - (1,139) 6 - (1,139 9 - (1,139) 32 ­ (1,139) *DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers.
Employment in the built-in refrigeration ma rket follows a pattern similar to that seen in the market for standard-size refr igerator-freezers and standard-size freezers at lower TSLs. At TSL 1 and TSL 2, higher pr ices result in fewer shipments, and a consequent reduction in labor expenditures that more than offsets the additional labor required to manufacture products with VIPs. However, at TSL 3 and above, the use of additional VIPs in built-in refrigeration pr oducts requires enough additional labor to cause a slight increase in the number of do mestic production workers. Because built-in products are high-end products with far fe wer shipments, it is less likely that manufacturers would choose to move all pr oduction facilities in response to amended energy conservation standards. The higher margin s and profit earned in this market also make it more likely that manuf acturers could earn a return on the investments required to reach the amended energy conservation standard s and invest in existing facilities rather than move production abroad.

242c. Impacts on Manufacturing Capacity Manufacturers indicated that design change s involving thicker walls or multiple VIP panels would require substantial change s to their current manufacturing process. While these technologies would require the pu rchase of millions of dollars of production equipment, most manufacturers indicated they would likely be able to make even these substantial changes in between the announcement of the final rule and compliance date of an amended energy conservation standard. Manu facturers have had experience with the design options involving VIPs (e ven if not at the scale that would be required if the higher efficiency levels were adopted) a nd thickening walls. In addition, the design changes and investments analyzed at th e levels required by the amended energy conservation standards for most product classe s are more similar in magnitude to the introduction of a new product line – rather than complete redesi gning of all products. Therefore, a larger capacity concern of manu facturers is the ability of their suppliers, particularly manufacturers of VIPs and more efficient compressors, to ramp up production in time to meet the amen ded energy conservation standard.

d. Impacts on Sub-Group(s) of Manufacturers For this rulemaking, DOE used the results of the industry ch aracterization to identify any subgroups of refrig erator manufacturers that ex hibit similar characteristics different from the industry as a whole. Th e only such subgroup DOE identified was builtin manufacturers. DOE is establishing sepa rate product classes fo r built-in products and is presenting separate analyt ical results for those products classes. Therefore, the MIA

243results DOE presents for those product cla sses already allow DOE to examine the MIA impacts on these manufacturers. Section VI.B.2 presents a more detailed discussion of the results for built-in product classes.

e. Cumulative Regulatory Burden While any one regulation may not impose a significant burden on manufacturers, the combined effects of several impending re gulations may have se rious consequences for some manufacturers, groups of manufacturers, or an entire industry. Assessing the impact of a single regulation may overlook this cumulative regulatory burden. In addition to energy conservation standards, other regulations can significantly affect manufacturers’ financial healt h. Multiple regulations affectin g the same manufacturer can strain profits and can lead companies to abandon product lines or markets with lower expected future returns than competing products. For these reasons, DOE conducts an analysis of cumulative regul atory burden as part of its rulemakings pertaining to appliance efficiency.

During previous stages of this ru lemaking DOE identified a number of requirements with which manufacturers of thes e refrigeration products must comply and which take effect within three years of the anticipated effective date of the amended standards. DOE discusses these and other re quirements, and includes the full details of the cumulative regulatory burden, in chapter 12 of the final rule’s TSD. In chapter 12, DOE shows that many of the same products pr oduced by residential refrigeration product

244manufacturers are also regulat ed by DOE and have a compliance date within 3 years of the compliance date of this rulemaking.

3. National Impact Analysis

a. Significance of Energy Savings To estimate the national energy savings attributable to potential standards for refrigeration products, DOE compared the en ergy consumption of these products under the base case to their anticipated ener gy consumption under each TSL. Table VI-35 through Table VI-38 present DOE’s forecasts of the national energy savings for each TSL, which were calculated using the approach described in secti on IV.G. Chapter 10 of the final rule TSD presents tables that also show the magnitude of the energy savings if the savings are discounted at rates of seven and three percent. Discounted energy savings represent a policy perspective in which energy savings realized farthe r in the future are less significant than energy savings realized in the nearer term.

Table VI.35 Standard-Size Refrigerator-F reezers: Cumulative National Energy Savings in Quads

Trial Standard Level Top-Mount Refrigerator-Freezers and All-Refrigerators Bottom-Mount Refrigerator-Freezers Side-by-Side Refrigerator-Freezers Product classes 1, 1A, 2, 3, 3A, 3I and 6 Product classes 5, 5A, and 5I Product classes 4, 4I, and 7 1 1.73 0.10 0.58 2 1.73 0.10 0.95 3 2.22 0.10 0.95 4 2.67 0.48 1.30 5 3.11 0.70 1.50

245Table VI.36 Standard-Size Freezers: Cumulative National Energy Savings in Quads

Trial Standard Level Upright Freezers Chest Freezers
Product classes 8, 9 and 9I Product classes 10 and 10A 1 0.49 0.31 2 0.75 0.38 3 0.87 0.46 4 0.98 0.53 5 1.01 0.60

Table VI.37 Compact Refrigeration Products : Cumulative National Energy Savings in Quads
Trial Standard Compact Refrigerators Compact Freezers Level Product classes 11, 11A, 12, 13, 13I, 13A, 14, 14I, 15 and 15I Product classes 16, 17, 18 1 0.28 0.03 2 0.35 0.03 3 0.39 0.04 4 0.48 0.07 5 0.51 0.09

Table VI.38 Built-In Refrigeration Products : Cumulative National Energy Savings in Quads Trial Standard Level Built-in All Refrigerators Built-in BottomMountRefrigeratorFreezers Built-in Side-bySide RefrigeratorFreezers Built-in Upright Freezers
Product class 3A-BI Product classes 5-BI and 5I-BI Product classes 4-BI, 4I-BI and 7-BI Product classes 9-BI and 9I-BI 1 0.00 0.00 0.01 0.00 2 0.01 0.00 0.01 0.01 3 0.01 0.00 0.03 0.01 4 0.01 0.02 0.03 0.01 5 0.01 0.02 0.04 0.02

246b. Net Present Value of Consumer Costs and Benefits DOE estimated the cumulative NPV to the Nation of the total costs and savings for consumers that would result from particul ar standard levels fo r refrigeration products. In accordance with the OMB’s guidelines on re gulatory analysis (OMB Circular A-4, section E, September 17, 2003), DOE calcula ted NPV using both a 7-percent and a 3­ percent real discount rate. The 7- percent rate is an estimate of the average before-tax rate of return on private capital in the U.S. economy and reflects th e returns on real estate and small business capital as well as corporate capital. DOE us ed this discount rate to approximate the opportunity cost of capital in the private sector, since a recent OMB analysis has found the average rate of return on capital to be n ear this rate. See http://www.whitehouse.gov/omb/circulars_a004 _a-4 / . In addition, DOE used the 3­ percent rate to capture the potential effects of standa rds on private consumption ( e.g. , through higher prices for products and the pur chase of reduced amount s of energy). This rate represents the rate at which society discounts future consumption flows to their present value. It can be approximated by the real rate of return on long-term government debt ( i.e. yield on Treasury notes minus annua l rate of change in the Consumer Price Index), which has averaged about 3 percent on a pre-tax basis for the last 30 years.

Table VI-39 through Table VI-46 show the default consumer NPV results for each TSL DOE considered for refrigeration products, using both a 7-percent and a 3­ percent discount rate. In each case, the impacts cover the lifetime of products purchased in 2014-2043. See chapter 10 of the final ru le TSD for more detailed NPV results.

247Table VI.39 Cumulative Net Present Value of Consumer Benefits for Standard-Size Refrigerator-Freezers, 3-Percent Discount Rate

Trial Standard Level Top-Mount Refrigerator-Freezers and All-Refrigerators Bottom-Mount Refrigerator-Freezers Side-by-Side Refrigerator-Freezers Product classes 1, 1A, 2, 3, 3A, 3I and 6 Product classes 5, 5A, and 5I Product classes 4, 4I, and 7 billion 2009 dollars 1 11.45 0.94 5.43 2 11.45 0.94 6.34 3 12.91 0.94 6.34 4 9.11 (0.47) 3.52 5 1.87 (2.52) 0.83

Table VI.40 Cumulative Net Present Value of Consumer Benefits for Standard-Size Refrigerator-Freezers, 7-Percent Discount Rate

Trial Standard Level Top-Mount Refrigerator-Freezers and All-Refrigerators Bottom-Mount Refrigerator-Freezers Side-by-Side Refrigerator-Freezers Product classes 1, 1A, 2, 3, 3A, 3I and 6 Product classes 5, 5A, and 5I Product classes 4, 4I, and 7 billion 2009 dollars 1 2.99 0.34 1.88 2 2.99 0.34 1.67 3 2.81 0.34 1.67 4 (0.31) (1.17) (0.60) 5 (5.28) (2.74) (2.53)

248Table VI.41 Cumulative Net Present Value of Consumer Benefits for Standard-Size Freezers, 3-Percent Discount Rate Trial Standard Level Upright Freezers Chest Freezers Product classes 8, 9 and 9I Product classes 10 and 10A billion 2009 dollars 1 5.03 3.25 2 7.37 3.33 3 7.69 3.94 4 7.51 3.52 5 5.17 2.42

Table VI.42 Cumulative Net Present Value of Consumer Benefits for Standard-Size Freezers, 7-Percent Discount Rate
Trial Standard Upright Freezers Chest Freezers Level Product classes 8, 9 and 9I Product classes 10 and 10A billion 2009 dollars 1 1.70 1.11 2 2.38 0.96 3 2.30 1.12 4 1.96 0.75 5 0.56 (0.04)

Table VI.43 Cumulative Net Present Valu e of Consumer Benefits for Compact Refrigeration Products, 3-Percent Discount Rate

Trial Standard Level Compact Refrigerators Compact Freezers Product classes 11, 11A, 12, 13,

13I, 13A, 14, 14I, 15 and 15I Product classes 16, 17, 18
billion 2009 dollars 1 1.61 0.20 2 1.42 0.20 3 1.62 0.21 4 0.81 (0.01) 5 (1.86) (0.48)

249Table VI.44 Cumulative Net Present Valu e of Consumer Benefits for Compact Refrigeration Products, 7-Percent Discount Rate

Trial Standard Level Compact Refrigerators Compact Freezers Product classes 11, 11A, 12, 13,

13I, 13A, 14, 14I, 15 and 15I Product classes 16, 17, 18
billion 2009 dollars 1 0.67 0.09 2 0.51 0.09 3 0.59 0.08 4 0.08 (0.07) 5 (1.44) (0.36)

Table VI.45 Cumulative Net Present Valu e of Consumer Benefits for Built-In Refrigeration Products, 3-Percent Discount Rate

Trial Standard Level Built-in All Refrigerators Built-in BottomMountRefrigeratorFreezers Built-in Side-bySide RefrigeratorFreezers Built-in Upright Freezers
Product class 3A-BI Product classes 5-BI and 5I-BI Product classes 4-BI, 4I-BI and 7-BI Product classes 9-BI and 9I-BI billion 2009 dollars 1 0.04 0.02 0.06 0.05 2 0.05 0.01 0.06 0.07 3 0.02 0.01 (0.17) 0.05 4 (0.04) (0.20) (0.17) 0.05 5 (0.08) (0.31) (0.43) 0.02

250Table VI.46 Cumulative Net Present Valu e of Consumer Benefits for Built-In Refrigeration Products, 7-Percent Discount Rate

Trial Standard Level Built-in All Refrigerators Built-in BottomMountRefrigeratorFreezers Built-in Side-bySide RefrigeratorFreezers Built-in Upright Freezers
Product class 3A-BI Product classes 5-BI and 5I-BI Product classes 4-BI, 4I-BI and 7-BI Product classes 9-BI and 9I-BI billion 2009 dollars 1 0.01 0.01 0.02 0.02 2 0.02 0.00 0.02 0.02 3 0.00 0.00 (0.16) 0.00 4 (0.04) (0.14) (0.16) 0.00 5 (0.07) (0.21) (0.32) (0.02)

The NPV results presented above are base d on a product price trend that reflects the default price trend. As discussed in sect ion IV.G.3, DOE investigated the impact of different price trends on the NPV for the c onsidered TSLs. DOE selected a high price decline case and a low price de cline case from among a numbe r of price trends that it analyzed. Table VI.47 through Table VI.54 pr ovide the annualized NPV of consumer benefits at 7-percent and 3-percent discount ra tes, combined with th e annualized present value of monetized benefits from CO 2 and NO X emissions reductions, for each of the considered TSLs for the default price trend and the two sensitivity cases. (DOE’s method for annualization is described in section VI.C .5 of this notice. Section VI.B.6 provides a complete description and summary of the monetized benefits from CO 2 and NO X emissions reductions.) For details on the combined NPV results, see appendix 10-C of the final rule TSD.

251Table VI.47 Standard-size Refrigerator-Fre ezers: Annualized Net Present Value of Consumer Benefits (7-percent Discount Ra te) and Annualized Present Value of Monetized Benefits from CO 2 and NO X Emissions Reductions* for Products Shipped in 2014-2043 Trial Standard

Level Medium Price Decline (Default) High Price Decline Low Price Decline
Billion 2009$ 1 0.825 0.902 0.726 2 0.845 0.948 0.715 3 0.881 1.017 0.708 4 0.288 0.593 (0.100) 5 (0.507) (0.029) (1.114) Parentheses indicate negative (-) values. * The economic benefits from reduced CO 2 emissions were calculated using a SCC value of $22.1/metric ton in 2010 (in 2009$) for CO 2 , increasing at 3% per year, and a discount rate of 3%. The economic benefits from reduced NO X emissions were calculated using a value of $2,519/ton (in 2009$), which is the average of the low and high va lues used in DOE’s analysis, and a 7-percent discount rate.
Table VI.48 Standard-size Refrigerator-Fre ezers: Annualized Net Present Value of Consumer Benefits (3-percent Discount Ra te) and Annualized Present Value of Monetized Benefits from CO 2 and NO X Emissions Reductions* for Products Shipped in 2014-2043 Trial Standard

Level Medium Price Decline (Default) High Price Decline Low Price Decline
Billion 2009$ 1 1.302 1.389 1.195 2 1.397 1.513 1.255 3 1.537 1.691 1.349 4 1.213 1.560 0.791 5 0.626 1.171 (0.036) Parentheses indicate negative (-) values. * The economic benefits from reduced CO 2 emissions were calculated using a SCC value of $22.1/metric ton in 2010 (in 2009$) for CO 2 , increasing at 3% per year, and a discount rate of 3%. The economic benefits from reduced NO X emissions were calculated using a value of $2,519/ton (in 2009$), which is the average of the low and high va lues used in DOE’s analysis, and a 3-percent discount rate.

Table VI.49 Standard-size Freezers: Annualized Net Present Value of Consumer Benefits (7-percent Discount Rate) and An nualized Present Value of Monetized Benefits from CO 2 and NO X Emissions Reductions* for Products Shipped in 2014
- 2043 Trial Standard

Level Medium Price Decline (Default) High Price Decline Low Price Decline

252Billion 2009$ 1 0.387 0.398 0.372 2 0.482 0.508 0.448 3 0.513 0.550 0.465 4 0.459 0.516 0.387 5 0.239 0.333 0.118

* The economic benefits from reduced CO 2 emissions were calculated using a SCC value of $22.1/metric ton in 2010 (in 2009$) for CO 2 , increasing at 3% per year, and a discount rate of 3%. The economic benefits from reduced NO X emissions were calculated using a value of $2,519/ton (in 2009$), which is the average of the low and high va lues used in DOE’s analysis, and a 7-percent discount rate.

Table VI.50 Standard-size Freezers: Annualized Net Present Value of Consumer Benefits (3-percent Discount Rate) and An nualized Present Value of Monetized Benefits from CO 2 and NO X Emissions Reductions* for Products Shipped in 2014
- 2043 Trial Standard

Level Medium Price Decline (Default) High Price Decline Low Price Decline
Billion 2009$ 1 0.566 0.579 0.551 2 0.745 0.775 0.708 3 0.822 0.865 0.770 4 0.808 0.873 0.729 5 0.623 0.730 0.492 * The economic benefits from reduced CO 2 emissions were calculated using a SCC value of $22.1/metric ton in 2010 (in 2009$) for CO 2 , increasing at 3% per year, and a discount rate of 3%. The economic benefits from reduced NO X emissions were calculated using a value of $2,519/ton (in 2009$), which is the average of the low and high va lues used in DOE’s analysis, and a 3-percent discount rate.
Table VI.51 Compact Refrigeration Produc ts: Annualized Net Present Value of Consumer Benefits (7-percent Discount Ra te) and Annualized Present Value of Monetized Benefits from CO 2 and NO X Emissions Reductions* for Products Shipped in 2014-2043 Trial Standard

Level Medium Price Decline (Default) High Price Decline Low Price Decline
Billion 2009$ 1 0.105 0.112 0.096 2 0.094 0.107 0.077 3 0.106 0.122 0.086 4 0.045 0.077 0.006 5 (0.142) (0.083) (0.216) Parentheses indicate negative (-) values.

253* The economic benefits from reduced CO 2 emissions were calculated using a SCC value of $22.1/metric ton in 2010 (in 2009$) for CO 2 , increasing at 3% per year, and a discount rate of 3%. The economic benefits from reduced NO X emissions were calculated using a value of $2,519/ton (in 2009$), which is the average of the low and high va lues used in DOE’s analysis, and a 7-percent discount rate.
Table VI.52 Compact Refrigeration Produc ts: Annualized Net Present Value of Consumer Benefits (3-percent Discount Ra te) and Annualized Present Value of Monetized Benefits from CO 2 and NO X Emissions Reductions* for Products Shipped in 2014-2043 Trial Standard

Level Medium Price Decline (Default) High Price Decline Low Price Decline
Billion 2009$ 1 0.129 0.137 0.119 2 0.124 0.139 0.105 3 0.141 0.159 0.119 4 0.091 0.127 0.047 5 (0.085) (0.018) (0.166) Parentheses indicate negative (-) values. * The economic benefits from reduced CO 2 emissions were calculated using a SCC value of $22.1/metric ton in 2010 (in 2009$) for CO 2 , increasing at 3% per year, and a discount rate of 3%. The economic benefits from reduced NO X emissions were calculated using a value of $2,519/ton (in 2009$), which is the average of the low and high va lues used in DOE’s analysis, and a 3-percent discount rate.
Table VI.53 Built-in Refrigeration Produc ts: Annualized Net Present Value of Consumer Benefits (7-percent Discount Ra te) and Annualized Present Value of Monetized Benefits from CO 2 and NO X Emissions Reductions* for Products Shipped in 2014-2043 Trial Standard

Level Medium Price Decline (Default) High Price Decline Low Price Decline
Billion 2009$ 1 0.008 0.009 0.008 2 0.009 0.010 0.008 3 (0.011) (0.005) (0.018) 4 (0.028) (0.019) (0.040) 5 (0.056) (0.043) (0.074) Parentheses indicate negative (-) values. * The economic benefits from reduced CO 2 emissions were calculated using a SCC value of $22.1/metric ton in 2010 (in 2009$) for CO 2 , increasing at 3% per year, and a discount rate of 3%. The economic benefits from reduced NO X emissions were calculated using a value of $2,519/ton (in 2009$), which is the average of the low and high va lues used in DOE’s analysis, and a 7-percent discount rate.

254Table VI.54 Built-in Refriger ation Products: Annualized Net Present Value of Consumer Benefits (3-percent Discount Ra te) and Annualized Present Va lue of Monetized Benefits from CO 2 and NO X Emissions Reductions* for Products Shipped in 2014-2043 Trial Standard

Level Medium Price Decline (Default) High Price Decline Low Price Decline
Billion 2009$ 1 0.012 0.013 0.012 2 0.015 0.016 0.014 3 0.002 0.008 (0.006) 4 (0.013) (0.002) (0.025) 5 (0.036) (0.021) (0.056) Parentheses indicate negative (-) values. * The economic benefits from reduced CO 2 emissions were calculated using a SCC value of $22.1/metric ton in 2010 (in 2009$) for CO 2 , increasing at 3% per year, and a discount rate of 3%. The economic benefits from reduced NO X emissions were calculated using a value of $2,519/ton (in 2009$), which is the average of the low and high va lues used in DOE’s analysis, and a 3-percent discount rate.

c. Indirect Impacts on Employment DOE develops estimates of the indire ct employment impacts of potential standards on the economy in general. As discussed above, DOE expects amended energy conservation standards for re frigeration products to redu ce energy bills for consumers and the resulting net savings to be redirect ed to other forms of economic activity. These expected shifts in spending and economic activ ity could affect the demand for labor. As described in section IV.J, above, to estimat e these effects, DOE used an input/output model of the U.S. economy. Table VI.55 presents the estimated net indirect employment impacts in 2020 and 2043 for the TSLs that DOE considered in this rulemaking. Chapter 13 of the final rule TSD presents more detailed results.

Table VI.55 Net Increase in Jobs from Indirect Employment Effects Under Refrigeration Product TSLs TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 thousands Standard-Size Refrigerator-Freezers

2020 2.35 2.34 2.33 -0.06 -3.18

2552043 16.24 18.45 21.33 26.31 28.85 Standard-Size Freezers

2020 0.93 1.06 1.06 0.82 -0.05 2043 5.18 7.24 8.38 9.19 9.12 Compact Refrigeration Products

2020 0.51 0.52 0.60 0.50 -0.04 2043 1.44 1.64 1.88 2.02 1.53 Built-In Refrigeration Products

2020 0.02 0.02 -0.05 -0.11 -0.21 2043 0.14 0.19 0.29 0.31 -0.30

The input/output model suggests that t oday’s amended standards are likely to increase the net demand for labor in the ec onomy. However, the model suggests that the projected gains are very small relative to total national employment (currently approximately 120 million). Moreover, neither the BLS data nor the input/output model DOE uses includes the quality or wage level of the jobs. Therefore, because the analysis indicates an increased demand for labor w ould likely result from the amended energy conservation standards in this rulemaki ng, DOE has concluded that the amended standards are likely to produce employment bene fits sufficient to offset fully any adverse impacts on employment in the manufacturing in dustry for the refrigeration products that are the subject of this rulemaking.

4. Impact on Utility or Pe rformance of Products As presented in section III.D.1.d of this notice, DOE concluded that none of the TSLs considered in this notice would substa ntially reduce the utility or performance of the products under consideration in this rulema king. However, the availability of features that increase energy use, such as multiple drawers, might shift to higher-price products

256because the cost premium for implementi ng such features will likely increase. Manufacturers currently offer refrigeration products that meet or exceed the amended standards for most of the product clas ses. (42 U.S.C. 6295(o)(2)(B)(i)(IV))

5. Impact of Any Lessening of Competition DOE has also considered any lessening of competition that is likely to result from amended standards. The Attorney General dete rmines the impact, if any, of any lessening of competition likely to result from an amended standard, and transmits such determination to the Secretary, together with an analysis of the nature and extent of such impact. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii))

To assist the Attorney General in ma king such determination, DOE has provided DOJ with copies of this final rule and the TSD for review. As indicated earlier, DOE did not receive comments from DOJ. Accordingly, DOE does not believe that there is likely to be any lessening of competition as a result of today’s final rule.

6. Need of the Nation to Conserve Energy An improvement in the energy efficiency of the products subject to today’s rule is likely to improve the security of the Nati on’s energy system by reducing overall demand for energy. Reduced electricity demand may also improve the reliability of the electricity system. As a measure of this reduced de mand, Table VI-56 presents the estimated reduction in generating capacity in 2043 for the TSLs that DOE considered in this rulemaking.

257Table VI.56 Reduction in Electric Generati ng Capacity in 2043 Under Refrigeration Product TSLs TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Gigawatts Standard-Size Refrigerator-Freezers 2.62 3.03 3.56 4.86 5.82 Standard-Size Freezers 0.83 0.83 1.40 1.59 1.71 Compact Refrigeration Products 0.273 0.335 0.386 0.480 0.511 Built-In Refrigeration Products 0.021 0.031 0.062 0.077 0.092

DOE used NEMS-BT to assess the impacts on electricity prices of the reduced need for new electric power plants and infrastr ucture projected to result from standards. The projected impacts on prices, and their value to electricity consumers, are presented in chapter 14 and chapter 10, re spectively, of the final rule TSD. Although the aggregate benefits for all electricity users are potentiall y large, there may be negative effects on the actors involved in electricity supply. Because there is uncertainty about the extent to which the calculated impacts from reduced elec tricity prices would be a transfer from the actors involved in electricity s upply to electricity consumers, DOE has concluded that, at present, it should not assign a heavy weight to this factor in considering the economic justification of standard s on refrigeration products.

Energy savings from amended standards for refrigeration products could also produce environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases associated w ith electricity production. Table VI.57 provides DOE’s estimate of cumulative CO 2 , NO X , and Hg emissions reduction s projected to result from

258the TSLs considered in this rulemaking. DOE reports annual CO 2 , NO X , and Hg emissions reductions for each TSL in chapter 15 of the final rule TSD.

As discussed in section IV.M, DOE did not report SO 2 emissions reductions from power plants because there is uncertainty about the effect of energy conservation standards on the overall level of SO 2 emissions in the Un ited States due to SO 2 emissions caps. DOE also did not include NO X emissions reduction from power plants in States subject to CAIR because an energy conserva tion standard would not affect the overall level of NO X emissions in those States due to the emissions caps mandated by CAIR.

Table VI.57 Summary of Emissions Reduction Estimated for Refrigeration Product TSLs (cumulative for 2014 through 2043) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Standard-Size Refrigerator-Freezers

CO 2 (Mt) NO X (1000 tons) Hg (tons) 175 141 0.79 202 162 0.91 238 191 1.07 323 260 1.45 386 310 1.73 Standard-Size Freezers

CO 2 (Mt) NO X (1000 tons) Hg (tons) 54 43 0.24 77 62 0.34 91 73 0.41 103 83 0.47 110 89 0.50 Compact Refrigeration Products

CO 2 (Mt) NO X (1000 tons) Hg (tons) 20 16 0.10 24 20 0.12 28 23 0.15 35 29 0.19 39 32 0.21 Built-In Refrigeration Products

CO 2 (Mt) NO X (1000 tons) Hg (tons) 1.41 1.14 0.01 2.05 1.65 0.01 4.10 3.30 0.02 5.09 4.09 0.02 6.09 4.90 0.03

As part the analysis for this final rule, DOE estimated monetary benefits likely to result from the reduced emissions of CO 2 and NO X that DOE estimated for each of the TSLs considered. As discussed in section IV .M, DOE used values for the SCC developed

259by an interagency process. The four values for CO 2 emissions reductions resulting from that process (expressed in 2009$) are $4.9/ton (t he average value from a distribution that uses a 5-percent discount rate), $22.1/ton (the average valu e from a distribution that uses a 3-percent discount rate), $36.3/ton (the aver age value from a dist ribution that uses a 2.5-percent discount rate), and $67.1/ton (the 95 th -percentile value from a distribution that uses a 3-percent discount rate). These values correspond to the value of emission reductions in 2010; the values for later years are higher due to incr easing damages as the magnitude of climate change increases.

Table VI-58 through Table VI-61 pr esent the global values of CO 2 emissions reductions at each TSL. For each of the four cases, DOE calculated a present value of the stream of annual values using the same di scount rate as was used in the studies upon which the dollar-per-ton values are based. DOE calculated domestic values as a range from 7 percent to 23 percent of the global valu es, and these results ar e presented in Table VI-62 through Table VI-65.

260Table VI.58 Standard-Size Refrigerator-F reezers: Estimates of Global Present Value of CO 2 Emissions Reduction Under Trial Standard Levels

TSL Billion 2009$ 5% discount rate, average* 3% discount rate, average* 2.5% discount rate, average* 3% discount rate, 95 th percentile* 1 1.45 4.60 6.90 14.0 2 1.67 5.31 7.96 16.16 3 1.96 6.24 9.36 19.00 4 2.68 8.51 12.76 25.90 5 3.20 10.18 15.26 30.98 * Columns are labeled by the discount rate used to calcu late the SCC and whether it is an average value or drawn from a different part of the distribution. Values presented in the table incorporate the escalation of the SCC over time.

Table VI.59 Standard-Size Freezers: Estimates of Global Present Value of CO 2 Emissions Reduction Under Trial Standard Levels

TSL Billion 2009$ 5% discount rate, average* 3% discount rate, average* 2.5% discount rate, average* 3% discount rate, 95 th percentile* 1 0.48 1.51 2.25 4.58 2 0.69 2.16 3.24 6.59 3 0.81 2.55 3.81 7.76 4 0.92 2.89 4.32 8.80 5 0.98 3.09 4.62 9.41 * Columns are labeled by the discount rate used to calcu late the SCC and whether it is an average value or drawn from a different part of the distribution. Values presented in the table incorporate the escalation of the SCC over time.

261Table VI.60 Compact Refrigeration Products : Estimates of Global Present Value of CO 2 Emissions Reduction Under Trial Standard Levels

TSL Billion 2009$ 5% discount rate, average* 3% discount rate, average* 2.5% discount rate, average* 3% discount rate, 95 th percentile* 1 0.12 0.41 0.63 1.26 2 0.15 0.51 0.77 1.54 3 0.18 0.59 0.89 1.79 4 0.22 0.74 1.12 2.25 5 0.24 0.81 1.23 2.47 * Columns are labeled by the discount rate used to calcu late the SCC and whether it is an average value or drawn from a different part of the distribution. Values presented in the table incorporate the escalation of the SCC over time.
Table VI.61 Built-In Refrigeration Products : Estimates of Global Present Value of CO 2 Emissions Reduction Under Trial Standard Levels

TSL Billion 2009$ 5% discount rate, average* 3% discount rate, average* 2.5% discount rate, average* 3% discount rate, 95 th percentile* 1 0.012 0.038 0.057 0.12 2 0.017 0.055 0.083 0.17 3 0.035 0.11 0.17 0.34 4 0.043 0.014 0.20 0.41 5 0.051 0.16 0.24 0.50 * Columns are labeled by the discount rate used to calcu late the SCC and whether it is an average value or drawn from a different part of the distribution. Values presented in the table incorporate the escalation of the SCC over time.

262Table VI.62 Standard-Size Refrigerator-Freezers: Estimates of Domestic Present Value of CO 2 Emissions Reduction Under Trial Standard Levels

TSL Billion 2009$ * 5% discount rate, average** 3% discount rate, average** 2.5% discount rate, average** 3% discount rate, 95 th percentile** 1 0.10 to 0.33 0.32 to 1.06 0.48 to 1.59 0.98 to 3.22 2 0.12 to 0.38 0.37 to 1.22 0.56 to 1.83 1.13 to 3.72 3 0.14 to 0.45 0.44 to 1.44 0.66 to 2.15 1.33 to 4.37 4 0.19 to 0.62 0.60 to 1.96 0.89 to 2.93 1.81 to 5.96 5 0.22 to 0.74 0.71 to 2.34 1.07 to 3.51 2.17 to 7.13 * Domestic values are presented as a rang e between 7% and 23% of the global values. ** Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or drawn from a different part of the distribution. Values presented in the table incorporate the escalation of the SCC over time.

Table VI.63 Standard-Size Freezers: Estima tes of Domestic Present Value of CO 2 Emissions Reduction Under Trial Standard Levels

TSL Billion 2009$ * 5% discount rate, average** 3% discount rate, average** 2.5% discount rate, average** 3% discount rate, 95 th percentile** 1 0.033 to 0.11 0.11 to 0.35 0.16 to 0.52 0.32 to 1.05 2 0.048 to 0.16 0.15 to 0.50 0.23 to 0.74 0.46 to 1.51 3 0.057 to 0.19 0.057 to 0.19 0.057 to 0.19 0.057 to 0.19 4 0.064 to 0.21 0.20 to 0.67 0.30 to 0.99 0.62 to 2.02 5 0.069 to 0.23 0.22 to 0.71 0.32 to 1.06 0.069 to 0.23 * Domestic values are presented as a rang e between 7% and 23% of the global values. ** Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or drawn from a different part of the distribution. Values presented in the table incorporate the escalation of the SCC over time.

263Table VI.64 Compact Refrigeration Products : Estimates of Domestic Present Value of CO 2 Emissions Reduction Under Trial Standard Levels

TSL Billion 2009$ * 5% discount rate, average** 3% discount rate, average** 2.5% discount rate, average** 3% discount rate, 95 th percentile** 1 0.0087 to 0.029 0.029 to 0.095 0.044 to 0.14 0.09 to 0.29 2 0.011 to 0.035 0.035 to 0.12 0.054 to 0.18 0.11 to 0.36 3 0.012 to 0.041 0.041 to 0.14 0.062 to 0.21 0.13 to 0.41 4 0.016 to 0.051 0.052 to 0.17 0.078 to 0.26 0.16 to 0.52 5 0.017 to 0.056 0.057 to 0.19 0.086 to 0.28 0.17 to 0.57 * Domestic values are presented as a rang e between 7% and 23% of the global values. ** Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or drawn from a different part of the distribution. Values presented in the table incorporate the escalation of the SCC over time.
Table VI.65 Built-In Refrigeration Products : Estimates of Domestic Present Value of CO 2 Emissions Reduction Under Trial Standard Levels

TSL Billion 2009$ * 5% discount rate, average** 3% discount rate, average** 2.5% discount rate, average** 3% discount rate, 95 th percentile** 1 0.00083 to 0.0027 0.0026 to 0.0087 0.0040 to 0.013 0.0081 to 0.026 2 0.0012 to 0.0040 0.0039 to 0.013 0.0058 to 0.019 0.012 to 0.039 3 0.0024 to 0.0080 0.0077 to 0.025 0.012 to 0.038 0.023 to 0.077 4 0.0030 to 0.010 0.010 to 0.031 0.014 to 0.047 0.029 to 0.10 5 0.0036 to 0.012 0.011 to 0.037 0.017 to 0.056 0.035 to 0.11 * Domestic values are presented as a rang e between 7% and 23% of the global values. ** Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or drawn from a different part of the distribution. Values presented in the table incorporate the escalation of the SCC over time.

DOE is well aware that scientific and economic knowledge about the contribution of CO 2 and other GHG emissions to changes in th e future global climate and the potential resulting damages to the world economy con tinues to evolve rapidly. Thus, any value placed in this rulemaking on reducing CO 2 emissions is subject to change. DOE, together with other Federal agencies, will continue to review various methodologies for estimating

264the monetary value of reductions in CO 2 and other GHG emissions. This ongoing review will consider the comments on this subject that are part of the public record for this and other rulemakings, as well as other methodol ogical assumptions and issues. However, consistent with DOE’s legal obligations, and taking into account the uncertainty involved with this particular issue, DOE has included in this final rule the most recent values and analyses resulting from the ongoing interagency review process.

DOE also estimated a range for the cumulative monetary value of the economic benefits associated with NO X emissions reductions anticipated to result from amended standards for refrigeration products. The dollar-per-ton values that DOE used are discussed in section IV.M. Table VI.66 presents the cumulative present values for each TSL calculated using seven-percent a nd three-percent di scount rates.

Table VI.66 Estimates of Present Value of NO X Emissions Reduction Under Refrigeration Product Trial Standard Levels TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Billion 2009$ Standard-Size Refrigerator-Freezers 7% discount rate 3% discount rate 0.018 to 0.18 0.044 to 0.45 0.020 to 0.21 0.051 to 0.52 0.024 to 0.25 0.060 to 0.62 0.033 to 0.34 0.082 to 0.84 0.039 to 0.40 0.097 to 1.00
Standard-Size Freezers 7% discount rate 3% discount rate 0.0055 to 0.056 0.014 to 0.15 0.008 to 0.081 0.020 to 0.21 0.009 to 0.095 0.024 to 0.25 0.011 to 0.107 0.027 to 0.28 0.011 to 0.12 0.029 to 0.30 Compact Refrigeration Products 7% discount rate 3% discount rate 0.002 to 0.021 0.004 to 0.044 0.003 to 0.026 0.005 to 0.054 0.003 to 0.030 0.006 to 0.063 0.004 to 0.038 0.008 to 0.079 0.004 to 0.042 0.009 to 0.088 Built-In Refrigeration Products 7% discount rate 3% discount rate 0.000 to 0.002 0.000 to 0.004 0.001 to 0.002 0.001 to 0.005 0.000 to 0.004 0.001 to 0.018 0.001 to 0.005 0.001 to 0.013 0.001 to 0.006 0.002 to 0.016

265The NPV of the monetized benefits associ ated with emissions reductions can be viewed as a complement to the NPV of the consumer savings calculated for each TSL considered in this rulemaking. Table VI.67 shows an example of the calculation of the combined NPV including benefits from emi ssions reductions for the case of TSL 3 for standard-size refrigerator-fr eezers. Table VI.68 and Table VI.69 present the NPV values that would result if DOE were to add the estimates of the poten tial economic benefits resulting from reduced CO 2 and NO X emissions in each of four valuation scenarios to the NPV of consumer savings calculated for each TSL considered in this rulemaking, at both a seven-percent and three-pe rcent discount rate. The CO 2 values used in the columns of each table correspond to the four sc enarios for the valuation of CO 2 emission reductions presented in section IV.M.

266Table VI.67 Adding Net Present Value of Consumer Savings to Present Value of Monetized Benefits from CO 2 and NO X Emissions Reductions at TSL 3 for Standard-Size Refrigerator-Freezers
Category Present Value Billion 2009$ Discount Rate
Benefits Operating Cost Savings 14.65 7% 37.41 3% CO 2 Reduction Monetized Value (at $4.9/t)* 1.96 5% CO 2 Reduction Monetized Value (at $22.1/t)* 6.24 3% CO 2 Reduction Monetized Value (at $36.3/t)* 9.36 2.5% CO 2 Reduction Monetized Value (at $67.1/t)* 19.0 3% NO X Reduction Monetized Value (at $2,519/ton)* 0.136 7% 0.338 3% Total Monetary Benefits ** 21.02 7% 43.99 3% Costs Total Incremental Installed Costs 9.83 7% 17.22 3% Net Benefits Including CO 2 and NO X ** 11.19 7% 26.77 3%

* These values represent global values (in 2009$) of the social cost of CO 2 emissions in 2010 under several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton (t) are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $67.1/t represents the 95 th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details. The value for NO X (in 2009$) is the average of the low an d high values used in DOE’s analysis. ** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO 2 emissions calculated at a 3% discount rate, which is equal to $22.1/t in 2010 (in 2009$).

267Table VI.68 Adding Net Present Value of Consumer Savings (at 7% Discount Rate) to Present Value of Mone tized Benefits from CO 2 and NO X Emissions Reductions at Trial Standard Levels for Refrigeration Products

TSL Consumer NPV at 7% Discount Rate added with: SCC Value of $4.9/metric ton CO 2 * and Low Value for

NO X ** billion 2009$ SCC Value of $22.1/metric ton CO 2 * and Medium Value for NO X **

billion 2009$ SCC Value of $36.3/metric ton CO 2 * and Medium Value for NO X **

billion 2009$ SCC Value of $67.1/metric ton CO 2 * and High Value for NO X **

Billion 2009$ 1 10.92 15.53 18.81 29.06 2 11.55 17.20 21.22 33.77 3 11.75 18.42 23.17 37.99 4 4.20 12.83 18.97 38.14 5 (7.93) 2.08 9.20 31.45

* These label values represent the global SCC of CO 2 in 2010, in 2009$. Their present values have been calculated with scenario-consistent discount rates. See section IV.M for a discussion of the derivation of these values. ** Low Value corresponds to $447 per ton of NO X emissions. Medium Value corresponds to $2,519 per ton of NO X emissions. High Value corresponds to $4,591 per ton of NO X emissions.
Table VI.69 Adding Net Present Value of Consumer Savings (at 3% Discount Rate) to Present Value of Mone tized Benefits from CO 2 and NO X Emissions Reductions at Trial Standard Levels for Refrigeration Products

TSL Consumer NPV at 3% Discount Rate added with: SCC Value of $4.9/metric ton CO 2 * and Low Value for

NO X ** billion 2009$ SCC Value of $22.1/metric ton CO 2 * and Medium Value for NO X **

billion 2009$ SCC Value of $36.31/metric ton CO 2 * and Medium Value for NO X **

billion 2009$ SCC Value of $67.1/metric ton CO 2 * and High Value for NO X **

Billion 2009$ 1 30.20 34.99 38.27 48.69 2 33.85 39.71 43.73 56.50 3 36.64 43.57 48.31 63.39 4 27.59 36.56 42.69 62.19 5 9.25 19.65 26.76 49.39

* These label values represent the global SCC of CO 2 in 2010, in 2009$. Their present values have been calculated with scenario-consistent discount rates. See section IV.M for a discussion of the derivation of these values. ** Low Value corresponds to $447 per ton of NO X emissions. Medium Value corresponds to $2,519 per ton of NO X emissions. High Value corresponds to $4,591 per ton of NO X emissions.

268Although adding the value of consumer savings to the values of emission reductions provides a valuable perspective, tw o issues should be considered. First, the national operating savings are domestic U.S. consumer monetary savings that occur as a result of market transactions while the value of CO 2 reductions is based on a global value. Second, the assessments of ope rating cost savings and CO 2 savings are performed with different methods that use qu ite different time frames for analysis. The national operating cost savings is measured for the lifetime of refrigeration products shipped in 2014–2043. The SCC values, on the other hand, reflect the present value of future climate-related impacts resulting from the emission of one ton of carbon dioxide in each year. These impacts continue well beyond 2100.

7. Other Factors The Secretary, in determining whether a standard is economically justified, may consider any other factors that he deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VI))) DOE is aware of pending legislation that proposes to phase out substances with significant GWP and that HFCs are included in the list of s ubstances to be phased out. DOE recognizes the significance that such legislation would have to the refrigeration products industry and the impact it would have on the ability of manufacturers to meet energy conservation standards. Given the uncertainty regarding such legislation, however, DOE did not factor the impact of potential HFC limitations in developing the standard levels presented in today’s final rule.

269DOE has also considered the Joint Comments submitted to DOE containing the various recommended standard levels for re frigeration products. DOE recognizes the value of consensus agreements submitted by parties in accordance with 42 U.S.C. 6295(p)(4) and has weighed the va lue of such consensus in es tablishing the standards set forth in today’s final rule.

C. Conclusion When prescribing new or amended standa rds, the standard that DOE adopts for any type (or class) of c overed product shall be designed to achieve the maximum improvement in energy efficiency that the Secretary determines is technologically feasible and economically justified. (42 U.S. C. 6295(o)(2)(A)) In de termining whether a standard is economically justified, the Secret ary must determine whether the benefits of the standard exceed its burdens to the greatest extent practic able, in light of the seven statutory factors discussed pr eviously. (42 U.S.C. 6295(o)(2)( B)(i)) The new or amended standard must also “result in significa nt conservation of energy.” (42 U.S.C. 6295(o)(3)(B))

For today’s final rule, DOE considered the impacts of standards at each trial standard level, beginning with the maximum technologically feasible level, to determine whether that level was economically jus tified. Where the max- tech level was not justified, DOE then considered the next mo st efficient level and undertook the same evaluation until it reached the most efficient le vel that is both technologically feasible and economically justified and save s a significant amount of energy.

270For ease of presentation, DOE separately discusses the benefits and/or burdens of each trial standard level for standard-size refrigerator-freezers, standard-size freezers, compact refrigeration products, and built-in refr igeration products. Tables that present a summary of the results of DOE’s quantitative analysis for each TSL have been provided to aid the reader as DOE discusses the bene fits and/or burdens of each trial standard level.

In addition to the quantita tive results presented in the tables, DOE also considers other burdens and benefits th at affect economic justifica tion. These include the impacts on identifiable subgroups of consumers, such as low-income households and seniors, who may be disproportionately affected by a natio nal standard. Section VI.B.1.b presents the estimated impacts of each TSL for these subgroups.

DOE notes that the proposed standards se t forth in the Joint Comments were also carefully considered by the agency. These s uggested standards, along with the comments from all interested parties and the agency’s analytical work devel oped in preparation of today’s final rule, were considered duri ng the development of the standards being adopted today.

DOE also notes that the economics litera ture provides a wide-ranging discussion of how consumers trade off upfront cost s and energy savings in the absence of government intervention. Much of this liter ature attempts to explain why consumers

271appear to undervalue energy efficiency impr ovements. This undervaluation suggests that regulation that promotes energy efficiency can produce significant net private gains (as well as producing social gains by, for exam ple, reducing pollution). There is evidence that consumers undervalue future energy saving s as a result of (1) a lack of information, (2) a lack of sufficient salience of the long- term or aggregate bene fits, (3) a lack of sufficient savings to warrant delaying or alte ring purchases (e.g. an inefficient ventilation fan in a new building or the delayed replacem ent of a water pump), (4) excessive focus on the short term, in the form of inconsiste nt weighting of future energy cost savings relative to available returns on other investme nts; (5) computational or other difficulties associated with the evaluation of relevant tradeoffs; and (6) a divergence in incentives (e.g., renter versus building owner; builder vs . home buyer). Other literature indicates that with less than perfect foresight and a high degree of uncertainty about the future, consumers may trade off these types of inve stments at a higher than expected rate between current consumption and uncer tain future energy cost savings.

In DOE’s current regulatory analysis, poten tial changes in the benefits and costs of a regulation due to changes in consumer purchase decisions are included in two ways. First, if consumers forego a purchase of a product in the standards case, this decreases sales for product manufacturers, and the cost to manufacturers is included in the MIA. Second, DOE accounts for energy savings attributable only to products actually used by consumers in the standards case; if a regul atory option decreases the number of products used by consumers, this decreases the potential energy savings from an energy conservation standard. DOE provides detailed estimates of shipments and changes in the

272volume of product purchases in ch apter 9 of the final rule TSD. However, DOE’s current analysis does not explicitly control for heterogeneity in consumer preferences, preferences across subcategories of products or specific features, or consumer price sensitivity variation accord ing to household income.

While DOE is not prepared at present to provide a fuller quantifiable framework for estimating the benefits and costs of change s in consumer purchase decisions due to an energy conservation standard, DOE has poste d a paper that discusses the issue of consumer welfare impacts of appliance en ergy efficiency standards, and potential enhancements to the methodology by which thes e impacts are defined and estimated in the regulatory process. 48 DOE is committed to developing a framework that can support empirical quantitative tools for improved asse ssment of the consumer welfare impacts of appliance standards. DOE welcomes comments on how to more fully assess the potential impact of energy conservation standards on c onsumer choice and how to quantify this impact in its regulatory anal ysis in future rulemakings.

1. Standard-Size Refrigerator-Freezers Table VI-70 presents a summary of the quantitative impacts estimated for each TSL for standard-size refrigerator-freezers. Th e efficiency levels contained in each TSL are described in section VI.A. The range of re sults for NPV of consumer benefits reflects the range of product price forecas ts discussed in section IV.G.3.

48 Alan Sanstad, Notes on the Economics of Household Energy Consumption and Technology Choice. Lawrence Berkeley National Laboratory. 2010. http://www1.eere.energy.gov/buildings/applian ce_standards/pdfs/consumer_ee_theory.pdf

273Table VI.70 Summary of Results for St andard-Size Refrigerator-Freezers Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 National Energy Savings (quads) 2.41 2.78 3.27 4.45 5.30 NPV of Consumer Benefits (2009$ billion) 3% discount rate 15.96 to 19.35 16.26 to 20.76 16.92 to 22.88 4.800 to 18.20 (11.4) to 9.67 7% discount rate 4.272 to 5.940 3.764 to 5.973 3.173 to 6.104 (5.756) to 0.804 (16.30) to (6.03) Industry Impacts Industry NPV (2009$ million) (117.8) to (252.6) (219.2) to (395.9) (345.0) to (580.7) (784.9) to (1,309.3) (1,042.2) to (1,841.5) Industry NPV (% change) (4.4) to (9.5) (8.2) to (14.8) (12.9) to (21.7) (29.4) to (49.0) (39.0) to (69.0) Cumulative Emissions Reduction CO 2 (Mt) 175 202 238 323 386 NO X (1000 tons) 141 162 191 260 310 Hg (tons) 0.79 0.91 1.07 1.45 1.73 Value of Cumulative Emissions Reduction

CO 2 (2009$ billion)* 1.45 to 14.0 1.67 to 16.2 1.96 to 19.0 2.68 to 25.9 3.20 to 31.0 NO X – 3% discount rate (2009$ billion) 0.044 to 0.45 0.051 to 0.52 0.060 to 0.62 0.082 to 0.84 0.097 to 1.00 NO X – 7% discount rate (2009$ billion) 0.018 to 0.18 0.020 to 0.21 0.024 to 0.25 0.033 to 0.34 0.039 to 0.40 Mean LCC Savings** (2009$) Top-Mount Refrigerator-F reezers 44 44 42 (6) (87) Bottom-Mount Refrigerator-F reezers 22 22 22 (53) (136) Side-by-Side Refrigerator- Freezers 62 57 57 (18) (83) Median PBP (years) Top-Mount Refrigerator-Fr eezers 8.0 8.0 9.5 13.3 17.8 Bottom-Mount Refrigerator-F reezers 4.2 4.2 4.2 21.0 24.7 Side-by-Side Refrigerator- Freezers 4.0 9.2 9.2 15.6 19.1 Distribution of Consumer LCC Impacts Top-Mount Refrigerator-Freezers Net Cost (%) 34 34 46 65 80 No Impact (%) 8.3 8.3 0.0 0.0 0.0 Net Benefit (%) 58 58 54 35 20 Bottom-Mount Refrigerator-Freezers Net Cost (%) 2.5 2.5 2.5 83 89 No Impact (%) 68 68 68 0.0 0.0 Net Benefit (%) 30 30 30 17 11 Side-by-Side Refrigerator-Freezers Net Cost (%) 4.3 42 42 70 80 No Impact (%) 37 0.0 0.0 0.0 0.0 Net Benefit (%) 59 59 59 30 21 Generation Capacity Reduction ( GW ) † 2.62 3.03 3.56 4.86 5.82 Employment Impacts Total Potential Changes in Domestic Production Workers in 2014 (thousands) (0.19) to (7.35) (0.22) to (7.35) (0.18) to (7.35) (0.24) to (7.35) (0.37) to (7.35) Indirect Domestic Jobs (thousands) † 16.24 18.45 21.33 26.31 28.85

274Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Parentheses indicate negative (-) values. * Range of the economic value of CO 2 reductions is based on estimates of the global benefit of reduced CO 2 emissions. ** For LCCs, a negative value means an increase in LCC by the amount indicated. † Changes in 2043.

DOE first considered TSL 5, which represents the max-tech efficiency levels. TSL 5 would save 5.30 quads of energy, an amount DOE considers significant. Under TSL 5, the NPV of consumer benefit woul d be -$6.03 billion to -$16.3 billion, using a discount rate of 7 percent, and -$11.4 to $9.67 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 5 are 386 Mt of CO 2 , 310,000 tons of NO X , and 1.73 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 5 ranges from $3.20 billion to $30.98 billion. Total generating capacity in 2043 is estima ted to decrease by 5.82 GW under TSL 5.

At TSL 5, the average LCC impact is a cost (LCC increase) of $87 for top-mount refrigerator-freezers, a cost of $136 for bottom- mount refrigerator-fr eezers, and a cost of $83 for side-by-side refrigerat or-freezers. The median pa yback period is 17.8 years for top-mount refrigerator-freezers, 24.7 years for bottom-mount refrigerator-freezers, and 19.1 years for side-by-side refrigerator-freez ers. The fraction of consumers experiencingan LCC benefit is 20 percent for top-mount refrigerator-freezers, 11 percent for bottommount refrigerator-freezers, and 21 percent for side-by-side refrigerator-freezers. The fraction of consumers experiencing an LCC costis 80 percent for top-mount refrigerator275freezers, 89 percent for bottom-mount refriger ator-freezers, and 80 percent for side-byside refrigerator-freezers.

At TSL 5, the projected change in INPV ranges from a decrease of $1,042.2 million to a decrease of $1,841.5 million. At TS L 5, DOE recognizes the risk of very large negative impacts if manufacturers’ e xpectations concerning reduced profit margins are realized. If the high end of the range of impacts is reached as DOE expects, TSL 5 could result in a net loss of 69.0 percent in INPV to standa rd-size refrigerator-freezer manufacturers.

The Secretary has concluded that at TSL 5 for standard-size refrigerator-freezers, the benefits of energy savings, generating capacity reductions, emission reductions, and the estimated monetary value of the CO 2 emissions reductions would be outweighed by the negative NPV of consumer benefits, the economic burden on a significant fraction of consumers due to the large increases in produc t cost, and the capital conversion costs and profit margin impacts that could result in a very large reduction in INPV for manufacturers. Consequently, the Secret ary has concluded that TSL 5 is not economically justified.

DOE then considered TSL 4. TSL 4 woul d save 4.45 quads of energy, an amount DOE considers significant. Under TSL 4, th e NPV of consumer benefit would be -$5.76 billion to $0.80 billion, using a discount rate of 7 percent, and $4.80 billion to $18.2 billion, using a discount rate of 3 percent.

276The cumulative emissions reductions at TSL 4 are 323 Mt of CO 2 , 260,000 tons of NO X , and 1.45 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 4 ranges from $2.68 billion to $25.9 bill ion. Total generating capacity in 2043 is estimated to decrease by 4.86 GW under TSL 4.

At TSL 4, DOE projects that the average L CC impact is a cost (LCC increase) of$6 for top-mount refrigerator-freezers, a cost of $53 for bottom-mount refrigeratorfreezers, and a cost of $18 for side-by-side refrigerator-freezers. The median payback period is 13.3 years for top-mount refrig erator-freezers, 21.0 years for bottom-mount refrigerator-freezers, and 15.6 year s for side-by-side refrigerat or-freezers. The fraction of consumers experiencing an LCC benefit is 35 pe rcent for top-mount re frigerator-freezers, 17 percent for bottom-mount refrigerator- freezers, and 30 percent for side-by-side refrigerator-freezers. The fraction of consumer s experiencing an LCC cost is 65 percent for top-mount refrigerator-fr eezers, 83 percent for bottom- mount refrigerator-freezers, and 70 percent for side-by-si de refrigerator-freezers.

At TSL 4, the projected change in INPV ranges from a decrease of $784.9 million to a decrease of $1,309.3 million. DOE recognizes th e risk of large negative impacts if manufacturers’ expectations concerning reduced profit margin s are realized. If the high end of the range of impacts is reached as DOE expects, TSL 4 could resu lt in a net loss of 49.0 percent in INPV to standard-size refrigerator-freez er manufacturers.

277The Secretary has concluded that at TSL 4 for standard-size refrigerator-freezers, the benefits of energy savings, positive NPV of consumer benefits at 3-percent discount rate, generating capacity reductions, and emi ssion reductions and the estimated monetary value of the CO 2 emissions reductions would be outwe ighed by the negative NPV of consumer benefits at 7-percent discount rate, the economic burden on a significant fraction of consumers due to the large in creases in product co st, and the capital conversion costs and profit margin impacts that could result in a subs tantial reduction in INPV for the manufacturers. C onsequently, the Secretary has concluded that TSL 4 is not economically justified.

DOE then considered TSL 3. TSL 3 woul d save 3.27 quads of energy, an amount DOE considers significant. Under TSL 3, th e NPV of consumer benefit would be $3.17 billion to $6.10 billion, using a discount rate of 7 percent, and $16.9 billion to $22.9 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 3 are 238 Mt of CO 2 , 191,000 tons of NO X , and 1.07 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 3 ranges from $1.96 billion to $19.0 bill ion. Total generating capacity in 2043 is estimated to decrease by 3.56 GW under TSL 3.

At TSL 3, the average LCC impact is a gain (consumer savings) of $42 for topmount refrigerator-freezers, a gain of $22 for bottom-mount refrig erator-freezers, and a gain of $57 for side-by-side refrigerator-fre ezers. The median payback period is 9.5 years

278for top-mount refrigerator-freezers, 4.2 year s for bottom-mount refrigerator-freezers, and 9.2 years for side-by-side refrigerator-freezer s. The fraction of consumers experiencingan LCC benefit is 54 percent for top-mount refrigerator-freezers, 30 percent for bottommount refrigerator-freezers, and 59 percent for side-by-side refrigerator-freezers. The fraction of consumers experiencing an LCC costis 46 percent for top-mount refrigeratorfreezers, 2.5 percent for bottom-mount refriger ator-freezers, and 42 percent for side-byside refrigerator-freezers.

At TSL 3, the projected change in INPV ranges from a decrease of $345.0 million to a decrease of $580.7 million. DOE recognizes the risk of negative impacts if manufacturers’ expectations concerning reduced profit margin s are realized. If the high end of the range of impacts is reached as DOE expects, TSL 3 could resu lt in a net loss of
21.7 percent in INPV to standard-size refrigerator-freez er manufacturers.

The Secretary has concluded that at TSL 3 for standard-size refrigerator-freezers, the benefits of energy savings, positive NPV of consumer benefits, generating capacity reductions, emission reductions, and the estimated monetary value of the CO 2 emissions reductions outweigh the economic burden on a significant fraction of consumers due to the increases in product cost, and the capital conversion costs and profit margin impacts that could result in a reduction in INPV fo r the manufacturers. In addition to the aforementioned benefits of the amended standa rds, DOE notes that the efficiency levels in TSL 3 correspond to the recommended levels presented in the Joint Comments and, as

279stated previously, DOE recognizes the valu e of consensus agreements submitted in accordance with 42 U.S.C. 6295(p)(4).

After considering the analysis, comm ents responding to the September 2010 NOPR, and the benefits and burde ns of TSL 3, the Secretary ha s concluded that this trial standard level will offer the maximum improveme nt in efficiency that is technologically feasible and economically justified, and will result in the significant conservation of energy. Therefore, DOE is adopting TSL 3 fo r standard-size refrigerator-freezers. The amended energy conservation standards for stan dard-size refrigerator-freezers, expressed as equations for maximum energy use, are shown in Table VI.71.

Table VI.71 Amended Standards for Standard-Size Refrigerators and RefrigeratorFreezers Product Class Equations for Maximum Energy Use (kWh/yr) based on AV (ft 3 ) based on av (L)1. Refrigerator-freezers and refrigerators other than allrefrigerators with manual defrost. 7.99AV + 225.0 0.282av + 225.0 1A. All-refrigerators—manual defrost. 6.79AV + 193.6 0.240av + 193.6 2. Refrigerator-freezers—partial automatic defrost 7.99AV + 225.0 0.282av + 225.0 3. Refrigerator-freezers—auto matic defrost with topmounted freezer without an automatic icemaker. 8.07AV + 233.7 0.285av + 233.7 3I. Refrigerator-freezers—aut omatic defrost with topmounted freezer with an automatic icemaker without through-the-door ice service. 8.07AV + 317.7 0.285av + 317.7

3A. All-refrigerators—automatic defrost. 7.07AV + 201.6 0.250av + 201.64. Refrigerator-freezers—automatic defrost with sidemounted freezer without an automatic icemaker. 8.51AV + 297.8 0.301av + 297.8 4I. Refrigerator-freezers—aut omatic defrost with sidemounted freezer with an automatic icemaker without through-the-door ice service. 8.51AV + 381.8 0.301av + 381.8

5. Refrigerator-freezers—auto matic defrost with bottommounted freezer without an automatic icemaker. 8.85AV + 317.0 0.312av + 317.0 5I. Refrigerator-freezers—aut omatic defrost with bottommounted freezer with an automatic icemaker without through-the-door ice service. 8.85AV + 401.0 0.312av + 401.0

5A. Refrigerator-freezer—autom atic defrost with bottommounted freezer with thr ough-the-door ice service. 9.25AV + 475.4 0.327av + 475.4

2806. Refrigerator-freezers—auto matic defrost with topmounted freezer with thr ough-the-door ice service. 8.40AV + 385.4 0.297av + 385.4 7. Refrigerator-freezers—automatic defrost with side- 8.54AV + 432.8 0.302av + 432.8 mounted freezer with through-the-door ice service. AV= adjusted volume in cubic feet; av = adjusted volume in liters

2. Standard-Size Freezers Table VI.72 presents a summary of the quantitative impacts estimated for each TSL for standard-size freezers. The efficiency levels contained in each TSL are described in section VI.A. The range of results for NPV of consumer benefits reflects the range of product price forecasts disc ussed in section IV.G.3.

Table VI.72 Summary of Results for Standard-Size Freezers Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 National Energy Savings (quads) 0.79 1.14 1.34 1.52 1.62 NPV of Consumer Benefits (2009$ billion) 3% discount rate 8.00 to 8.50 10.1 to 11.2 10.7 to 12.4 9.66 to 12.2 5.32 to 9.46 7% discount rate 2.67 to 2.92 3.02 to 3.59 2.96 to 3.77 2.03 to 3.25 (0.63) to 1.41 Industry Impacts Industry NPV (2009$ million) (29.8) to (50.0) (123.7) to (170.5) (112.5) to (178.1) (85.4) to (182.4) (145.0) to (298.8) Industry NPV (% change) (8.8) to (14.8) (36.6) to (50.5) (33.3) to (52.7) (25.3) to (54.0) (42.9) to (88.5) Cumulative Emissions Reduction CO 2 (Mt) 54 77 91 103 110 NO X (1000 tons) 43 62 73 83 89 Hg (tons) 0.24 0.34 0.41 0.47 0.50 Value of Cumulative Emissions Reduction CO 2 (2009$ billion)* 0.48 to 4.58 0.69 to 6.59 0.81 to 7.76 0.92 to 8.80 0.98 to 9.41 NO X – 3% discount rate (2009$ billion) 0.014 to 0.15 0.020 to 0.21 0.024 to 0.25 0.027 to 0.28 0.029 to 0.30 NO X – 7% discount rate (2009$ billion) 0.006 to 0.056 0.008 to 0.081 0.009 to 0.095 0.011 to 0.107 0.011 to 0.115 Mean LCC Savings** (2009$) Upright Freezers 1 40 195 189 161 33 Chest Freezers 82 69 79 47 (25) Median PBP (years) Upright Freezers 4.0 5.3 7.1 9.3 14.7

281Chest Freezers 3.9 8.1 8.5 12.1 17.8 Distribution of Consumer LCC Impacts Upright Freezers Net Cost (%) 6.0 12 22 35 60 No Impact (%) 0.6 0.2 0.0 0.0 0.0 Net Benefit (%) 93 88 78 65 40 Chest Freezers Net Cost (%) 5 27 29 49 69 No Impact (%) 0.2 0.2 0.2 0.0 0.0 Net Benefit (%) 95 73 71 51 31 Generation Capacity Reduction ( GW ) † 0.83 0.83 1.40 1.59 1.71 Employment Impacts Total Potential Changes in Domestic Production Workers in 2014 (thousands) (0.05) to (1.64) (0.11) to (1.64) (0.15) to (1.64) (0.23) to (1.64) (0.34) to (1.64)
Indirect Domestic Jobs (thousands) † 5.18 7.24 8.38 9.19 9.12 Parentheses indicate negative (-) values. Range of the economic value of CO 2 reductions is based on estimates of the global benefit of reduced CO 2 emissions. ** For LCCs, a negative value means an increase in LCC by the amount indicated. † Changes in 2043.

DOE first considered TSL 5, which represents the max-tech efficiency levels. TSL 5 would save 1.62 quads of energy, an amount DOE considers significant. Under TSL 5, the NPV of consumer benefit woul d be -$0.63 billion to $1.41 billion, using a discount rate of 7 percent, and $5.32 billion to $9.46 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 5 are 110 Mt of CO 2 , 89,000 tons of
NO X , and 0.50 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 5 ranges from $0.98 billion to $9.41 bill ion. Total generating capacity in 2043 is estimated to decrease by 1.71 GW under TSL 5.

282At TSL 5, the average LCC impact is a gain (LCC decrease) of $33 for upright freezers, and a cost of $25 for chest freezers. The median payback period is 14.7 years for upright freezers and 17.8 years for chest freez ers. The fraction of consumers experiencing an LCC benefit is 40 percent for upright fr eezers and 31 percent for chest freezers. The fraction of consumers experiencing an LCC co st is 60 percent for upright freezers and 69 percent for chest freezers.

At TSL 5, the projected change in INPV ranges from a decrease of $145.0 million to a decrease of $298.8 million. DOE recognizes the risk of very large negative impacts if manufacturers’ expectations concerning reduced profit margin s are realized. Standards at TSL 5 would require efficiency levels that ar e far higher than the most efficient products currently available on the ma rket. Manufacturing products to meet standards at TSL 5 would require large investments in product re design and conversion of facilities. Because standard-size freezers are curr ently low-cost, low-margin products, there is a limited ability to pass on to consumers the require d conversion costs and added product costs associated with efficiency-improving technol ogies for freezers. If the high end of the range of impacts is reached as DOE expect s, TSL 5 could result in a net loss of 88.5 percent in INPV to standard-size freezer manufacturers.

The Secretary has concluded that at TSL 5 for standard-size freezers, the benefits of energy savings, positive NPV of consumer benefits, generating capacity reductions, emission reductions, and the estim ated monetary value of the CO 2 emissions reductions would be outweighed by the economic burden on a significant fraction of consumers due

283to the large increases in product cost, and the capital conversion costs and profit margin impacts that could result in a very la rge reduction in INPV for manufacturers. Consequently, the Secretary has concluded that TSL 5 is not economically justified.

DOE then considered TSL 4. TSL 4 woul d save 1.52 quads of energy, an amount DOE considers significant. Under TSL 4, th e NPV of consumer benefit would be $2.03 billion to $3.25 billion, using a discount rate of 7 percent, and $9.66 billion to $12.2 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 4 are 103 Mt of CO 2 , 83,000 tons of
NO X , and 0.47 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 4 ranges from $0.92 billion to $8.80 bill ion. Total generating capacity in 2043 is estimated to decrease by 1.59 GW under TSL 4.

At TSL 4, the average LCC impact is a gain (consumer savings) of $161 for upright freezers and a gain of $47 for chest freezers. The median payback period is 9.3 years for upright freezers and 12.1 years for chest freezers. The fraction of consumers experiencing an LCC benefit is 65 percent for upright freezers and 51 percent for chest freezers. The fraction of consumers experiencing an LCC cost is 35 percent for upright freezers and 49 percent for chest freezers.

At TSL 4, the projected change in INPV ranges from a decrease of $85.4 million to a decrease of $182.4 million. DOE recognizes the risk of very large negative impacts if

284manufacturers’ expectations concerning reduced profit margin s are realized. Standards at TSL 4 would require efficiency levels that ar e substantially higher than the most efficient products currently available on the market. Ma nufacturing products to meet standards at TSL 4 would require large investments in pr oduct redesign and conversion of facilities. Because standard-size freezers ar e currently low-cost, low-margin products, there is a limited ability to pass on to consumers the required conversion cost s and added product costs associated with efficiency-improving t echnologies for freezers. If the high end of the range of impacts is reached as DOE exp ects, TSL 4 could result in a net loss of 54.0 percent in INPV to standard-size freezer manufacturers.

The Secretary has concluded that at TSL 4 for standard-size freezers, the benefits of energy savings, positive NPV of consumer benefits, generating capacity reductions, emission reductions, the estimated m onetary value of the cumulative CO 2 emissions reductions, and the economic benefit on a significant fraction of upright freezer consumers would be outweighed by the econom ic burden on a significant fraction of chest freezer consumers due to the increas e in product cost, and the large capital conversion costs and margin impacts that co uld result in a large reduction in INPV for manufacturers.

DOE then considered TSL 3. TSL 3 w ould save 1.34 quads of energy, an amount DOE considers significant. Under TSL 3, th e NPV of consumer benefit would be $2.96 billion to $3.77 billion, using a discount rate of 7 percent, and $10.7 billion to $12.4 billion, using a discount rate of 3 percent.

285The cumulative emissions reductions at TSL 3 are 91 Mt of CO 2 , 73,000 tons of
NO X , and 0.41 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 3 ranges from $0.81 billion to $7.76 bill ion. Total generating capacity in 2043 is estimated to decrease by 1.40 GW under TSL 3.

At TSL 3, the average LCC impact is a gain (consumer savings) of $189 for upright freezers and a gain of $79 for chest freezers. The median payback period is 7.1 years for upright freezers and 8.5 years for chest freezers. The fraction of consumers experiencing an LCC benefit is 78 percent for upright freezers and 71 percent for chest freezers. The fraction of consumers experiencing an LCC cost is 22 percent for upright freezers and 29 percent for chest freezers.

At TSL 3, the projected change in INPV ranges from a decrease of $112.5 million to a decrease of $178.1 million. DOE recognizes the risk of very large negative impacts if manufacturers’ expectations concerning reduced profit margin s are realized. Standards at TSL 3 would require efficiency levels that ar e substantially higher than the most efficient products currently available on the market. Similar to the case of TSL 4, manufacturing products to meet standards at TSL 3 would require large investments in product redesignand conversion of facilities. Because standard-size freezers are currently low-cost, lowmargin products, there is a limited ability to pass on to consumers the required conversion costs and added product costs a ssociated with more energy efficient technologies for freezers. If the high end of the range of impacts is reached, as DOE

286expects, TSL 3 could result in a net loss of 52.7 percent in INPV to standard-size freezer manufacturers.

DOE notes that TSL 3 is not at the level recommended in the consensus agreement. DOE also notes that the TSL 3 effi ciency levels are significantly higher than the maximum-efficiency products on the ma rket: from 8% higher for product class 9 (upright freezers with automatic defrost) to 15% higher for product class 10 (chest freezers). Hence, DOE believes that there may be other factors, including additional burdens, that the parties to that agreement ma y have considered that are not reflected in DOE’s analysis. Given this possibility, th e strong support expressed by commenters in favor of the consensus agreement levels, and the lack of product on the market that is close to meeting the requirements of this leve l, DOE is declining to adopt TSL 3 as part of today’s final rule. It may, ho wever, reconsider this level as part of a future review of the standards set by today’s rulemaking as pa rt of the agency’s required review under 42
U.S.C. 6295(m).

Accordingly, the Secretary has concluded that at TSL 3 for standard-size freezers, the benefits of energy savings, positive NPV of consumer benefits, generating capacity reductions, emission reductions, the estimated monetary value of the cumulative CO 2 emissions reductions, and the economic benef it for a significant fraction of freezer consumers would be outweighed by the large capital conversion costs and profit margin impacts and other burdens that manufacturers would bear in order to produce freezers

287that meet efficiency requirem ents substantially more stringent than what products on the market presently can satisfy.

DOE then considered TSL 2. TSL 2 w ould save 1.14 quads of energy, an amount DOE considers significant. Under TSL 2, th e NPV of consumer benefit would be $3.02 billion to $3.59 billion, using a discount rate of 7 percent, and $10.1 billion to $11.2 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 2 are 77 Mt of CO 2 , 62,000 tons of
NO X , and 0.34 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 2 ranges from $0.69 billion to $6.59 bill ion. Total generating capacity in 2043 is estimated to decrease by 0.83 GW under TSL 2.

At TSL 2, the average LCC impact is a gain (consumer savings) of $195 for upright freezers and a gain of $69 for chest freezers. The median payback period is 5.3 years for upright freezers and 8.1 years for chest freezers. The fraction of consumers experiencing an LCC benefit is 88 percent for upright freezers and 73 percent for chest freezers. The fraction of consumers experiencing an LCC cost is 12 percent for upright freezers and 27 percent for chest freezers.

DOE estimated the projected change in INPV ranges from a decrease of $123.7 million to a decrease of $170.5 million. At TSL 2, DOE recognizes the risk of negative impacts if manufacturers’ expectations con cerning reduced profit margins are realized.

288Standards at TSL 2 would pose many of the same issues as discussed above for TSL3, but the projected negative impacts are somewh at less. If the high end of the range of impacts is reached as DOE expects, TSL 2 could result in a net loss of 50.5 percent in INPV to standard-size freezer manufacturers.

The Secretary has concluded that at TSL 2 for standard-size freezers, the benefits of energy savings, positive NPV of consumer benefits, generating capacity reductions, emission reductions, the estimated m onetary value of the cumulative CO 2 emissions reductions, and the economic benefit for a significant fraction of freezer consumers would outweigh the capital conversion costs an d profit margin impacts that could result in a reduction in INPV for th e manufacturers. In addition to the aforementioned benefits, DOE notes that the efficiency levels in TS L 2 correspond to the recommended levels in the Joint Comments and, as stated previous ly, DOE recognizes the value of consensus agreements submitted in accordance with 42 U.S.C. 6295(p)(4).

After considering the analysis, co mments responding to the September 2010 NOPR, and the benefits and burde ns of TSL 2, the Secretary ha s concluded that this trial standard level will offer the maximum improveme nt in efficiency that is technologically feasible and economically justified, and will result in the significant conservation of energy. Therefore, DOE today is adopting TS L 2 for standard-size freezers. The amended energy conservation standards for standard-s ize freezers, expressed as equations for maximum energy use, are shown in Table VI.73.

289Table VI.73 Amended Standards for Standard-Size Freezers Product Class Equations for Maximum Energy Use (kWh/yr) based on AV (ft 3 ) based on av (L) 8. Upright freezers with manual defrost. 5.57AV + 193.7 0.197av + 193.7 9. Upright freezers with automatic defrost without an automatic icemaker. 8.62AV + 228.3 0.305av + 228.3 9I. Upright freezers with automa tic defrost with an automatic icemaker. 8.62AV + 312.3 0.305av + 312.3 10. Chest freezers and all other freezers except compact freezers. 7.29AV + 107.8 0.257av + 107.8 10A. Chest freezers with automatic defrost. 10.24AV + 148.1 0.362av + 148.1 AV= adjusted volume in cubic feet; av = adjusted volume in liters

3. Compact Refrigeration Products Table VI.74 presents a summary of the quantitative impacts estimated for each TSL for compact refrigeration products. The e fficiency levels contained in each TSL are described in section VI.A. The range of results for NPV of consumer benefits reflects the range of product price forecasts discussed in section IV.G.3.

290Table VI.74 Summary of Results for Compact Refrigeration Products Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 National Energy Savings (quads) 0.30 0.37 0.43 0.54 0.59 NPV of Consumer Benefits (2009$ billion) 3% discount rate 1.64 to 1.95 1.29 to 1.89 1.45 to 2.15 0.046 to 1.43 (3.75) to (1.17) 7% discount rate 0.675 to 0.821 0.439 to 0.724 0.482 to 0.819 (0.363) to 0.304 (2.51) to (1.25) Industry Impacts Compact Refrigeration Products Industry NPV (2009$ million) (16.6) to (27.8) (36.2) to (58.7) (62.9) to (89.3) (41.5) to (92.8) (154.9) to (242.6) Industry NPV (% change) (9.8) to (16.4) (21.4) to (34.6) (37.1) to (52.7) (24.5) to (54.8) (91.4) to (143.2) Cumulative Emissions Reduction CO 2 (Mt) 20 24 28 35 39 NO X (1000 tons) 16 20 23 29 31 Hg (tons) 0.10 0.12 0.15 0.19 0.21 Value of Cumulative Emissions Reduction

CO 2 (2009$ billion)* 0.12 to 1.26 0.15 to 1.54 0.18 to 1.79 0.22 to 2.25 0.24 to 2.47 NO X – 3% discount rate (2009$ billion) 0.004 to 0.044 0.005 to 0.054 0.006 to 0.063 0.008 to 0.079 0.009 to 0.088 NO X – 7% discount rate (2009$ billion) 0.002 to 0.021 0.003 to 0.026 0.003 to 0.030 0.004 to 0.038 0.004 to 0.042 Mean LCC Savings** (2009$) Compact Refrigerators 17 14 13 (5) (85) Compact Freezers 12 12 9 (23) (102) Median PBP (years) Compact Refrigerators 2.5 3.5 3.9 5.8 10.4 Compact Freezers 2.2 2.2 4.2 9.1 14.4 Distribution of Consumer LCC Impacts Compact Refrigerators Net Cost (%) 20 37 44 70 92 No Impact (%) 1.4 1.0 0.9 0.0 0.0 Net Benefit (%) 79 62 56 30 7.9 Compact Freezers Net Cost (%) 8 8 34 85 97 No Impact (%) 5 5 0.0 0.0 0.0 Net Benefit (%) 87 87 66 16 3.3 Generation Capacity Reduction ( GW ) † 0.27 0.34 0.39 0.48 0.51 Employment Impacts Total Potential Changes in Domestic Production Workers in 2014 (thousands) (0.00) to (0.03) (0.00) to (0.03) (0.00) to (0.03) (0.00) to (0.03) (0.01) to (0.03) Indirect Domestic Jobs (thousands) † 1.44 1.64 1.88 2.02 1.53 Parentheses indicate negative (-) values. * Range of the economic value of CO 2 reductions is based on estimates of the global benefit of reduced CO 2

291Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 emissions. ** For LCCs, a negative value means an increase in LCC by the amount indicated. † Changes in 2043.
DOE first considered TSL 5, which represents the max-tech efficiency levels. TSL 5 would save 0.59 quads of energy, an amount DOE considers significant. Under TSL 5, the NPV of consumer benefit woul d be -$2.51 billion to -$1.25 billion, using a discount rate of 7 percent, and -$3.75 billion to -$1.17 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 5 are 39 Mt of CO 2 , 31,000 tons of
NO X , and 0.21 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 5 ranges from $0.24 billion to $2.47 bill ion. Total generating capacity in 2043 is estimated to decrease by 0.51 GW under TSL 5.

At TSL 5, the average LCC impact is a cost (LCC increase) of $85 for compact refrigerators and a cost of $102 for compact freezers. The median payback period is 10.4 years for compact refrigerators and 14.4 y ears for compact freezers. The fraction of consumers experiencing an LCC benefit is 7.9 percent for compact refrigerators and 3.3 percent for compact freezers. The fraction of consumers experiencing an LCC cost is 92 percent for compact refrigerators and 97 percent for compact freezers.

At TSL 5, the projected change in INPV ranges from a decrease of $154.9 million to a decrease of $242.6 million. DOE recognizes the risk of very large negative impacts if manufacturers’ expectati ons concerning reduced prof it margins are realized.

292Manufacturing products to meet standards at TSL 5 would require large investments in product redesign and conversion of facilities . Because compact refrigeration products are currently low-cost, low-margin products, there is a limited ab ility to pass on to consumers the required conversion costs and added pr oduct costs associated with efficiencyimproving technologies. If the high end of th e range of impacts is reached as DOE expects, TSL 5 could result in a net lo ss of 143.2 percent in INPV to compact refrigeration product manufacturers.

The Secretary has concluded that at TSL 5 for compact refrigeration products, the benefits of energy savings, generating cap acity reductions, emissi on reductions, and the estimated monetary value of the CO 2 emissions reductions would be outweighed by the negative NPV of consumer benefits, the ec onomic burden on a signi ficant fraction of consumers due to the increases in product cost, the capital conversion costs and profit margin impacts that could result in a large reduction in INPV for manufacturers. Consequently, the Secretary has concluded that TSL 5 is not economically justified.

DOE then considered TSL 4. TSL 4 woul d save 0.54 quads of energy, an amount DOE considers significant. Under TSL 4, th e NPV of consumer benefit would be -$0.363 billion to $0.304 billion, usi ng a discount rate of 7 per cent, and $0.46 billion to $1.43 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 4 are 35 Mt of CO 2 , 29,000 tons of
NO X , and 0.19 tons of Hg. The estimated monetary value of the cumulative CO 2

293emissions reductions at TSL 4 ranges from $0.22 billion to $2.25 bill ion. Total generating capacity in 2043 is estimated to decrease by 0.48 GW under TSL 4.

At TSL 4, the average LCC impact is a cost (LCC increase) of $5 for compact refrigerators and a cost of $23 for compact freezers. The median payback period is 5.8 years for compact refrigerators and 9.1 y ears for compact freezers. The fraction of consumers experiencing an LCC benefit is 30 percent for compact refrigerators and 16 percent for compact freezers. The fraction of consumers experiencing an LCC cost is 70 percent for compact refrigerators and 85 percent for compact freezers.

At TSL 4, the projected change in INPV ranges from a decrease of $41.5 million to a decrease of $92.8 million. DOE recognizes th e risk of very larg e negative impacts if manufacturers’ expectations about reduced profit margins are r ealized. Manufacturing products to meet standards at TSL 4 would require large investments in product redesign and conversion of facilities. Because compact refrigerati on products are currently lowcost, low-margin products, there is a limited ability to pass on to consumers the required conversion costs and added product costs associated with efficiency-improving technologies. If the high end of the range of impacts is reached as DOE expects, TSL 4 could result in a net loss of 54.8 percent in INPV to co mpact refrigeration product manufacturers.

The Secretary has concluded that at TSL 4 for compact refrigeration products, the benefits of energy savings, generating cap acity reductions, emissi on reductions, and the

294estimated monetary value of the CO 2 emissions reductions would be outweighed by the negative NPV of consumer benefits, the ec onomic burden on a signi ficant fraction of consumers due to the increases in product costs, and the capital conversion costs and profit margin impacts that could result in a large reduction in IN PV for manufacturers. Consequently, the Secretary has concluded that TSL 4 is not economically justified.

DOE then considered TSL 3. TSL 3 woul d save 0.43 quads of energy, an amount DOE considers significant. Under TSL 3, th e NPV of consumer benefit would be $0.482 billion to $0.819 billion, usi ng a discount rate of 7 per cent, and $1.45 to $2.15 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 3 are 28 Mt of CO 2 , 23,000 tons of
NO X , and 0.15 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 3 ranges from $0.18 billion to $1.79 bill ion. Total generating capacity in 2043 is estimated to decrease by 0.39 GW under TSL 3.

At TSL 3, the average LCC impact is a gain (consumer savings) of $13 for compact refrigerators and a gain of $9 for compact freezers. The median payback period is 3.9 years for compact refrigerators and 4.2 years for compact freezers. The fraction of consumers experiencing an LCC benefit is 56 percent for compact refrigerators and 66 percent for compact freezers. The fraction of consumers experiencing an LCC cost is 44 percent for compact refrigerators and 34 percent for compact freezers.

295At TSL 3, the projected change in INPV ranges from a decrease of $62.9 million to a decrease of $89.3 million. DOE recognizes the risk of large negative impacts if manufacturers’ expectations about reduced profit margins are r ealized. Manufacturing products to meet standards at TSL 3 would require large investments in product redesign and conversion of facilities. Because compact refrigerati on products are currently lowcost, low-margin products, there is a limited ability to pass on to consumers the required conversion costs and added product costs associated with efficiency-improving technologies. If the high end of the range of impacts is reached as DOE expects, TSL 3 could result in a net loss of 52.7 percent in INPV to co mpact refrigeration product manufacturers.

The Secretary has concluded that at TSL 3 for compact refrigeration products, the benefits of energy savings, positive NPV of consumer benefits, generating capacity reductions, emission reductions, and the estimat ed monetary value of the cumulative CO 2 emissions reductions would be outweighe d by the economic burden on a significant fraction of consumers due to the increases in product costs, and by the capital conversion costs and profit margin impacts that coul d result in a large reduction in INPV for manufacturers. Consequently, the Secret ary has concluded that TSL 3 is not economically justified.

DOE then considered TSL 2. TSL 2 woul d save 0.37 quads of energy, an amount DOE considers significant. Under TSL 2, th e NPV of consumer benefit would be $0.439

296billion to $0.724 billion, usi ng a discount rate of 7 per cent, and $1.29 billion to $1.89 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 2 are 24 Mt of CO 2 , 20,000 tons of
NO X , and 0.12 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 2 ranges from $0.15 billion to $1.54 bill ion. Total generating capacity in 2043 is estimated to decrease by 0.34 GW under TSL 2.

At TSL 2, the average LCC impact is a gain (consumer savings) of $14 for compact refrigerators and a gain of $12 for compact freezers. The median payback period is 3.5 years for compact refrigerators and 2.2 years for compact freezers. The fraction of consumers experiencing an LCC benefit is 62 percent for compact refrigerators and 87 percent for compact freezers. The fraction of consumers experiencing an LCC cost is 37 percent for compact refrigerators and 8 percent for compact freezers.

At TSL 2, the projected change in INPV ranges from a decrease of $36.2 million to a decrease of $58.7 million. DOE recogni zes the risk of negative impacts if manufacturers’ expectations about reduced profit margins are r ealized. Manufacturing products to meet standards at TSL 2 would require investments in product redesign and conversion of facilities. Because compact refr igeration products are currently low-cost, low-margin products, there is a limited ab ility to pass on to consumers the required conversion costs and added product costs associated with efficiency-improving technologies. If the high end of the range of impacts is reached as DOE expects, TSL 2

297could result in a net loss of 34.6 percent in INPV to co mpact refrigeration product manufacturers.

The Secretary has concluded that at TSL 2 for compact refrigeration products, the benefits of energy savings, positive NPV of consumer benefits, generating capacity reductions, emission reductions, the estimated monetary value of the cumulative CO 2 emissions reductions, and the economic benef it to a significant fraction of consumers would outweigh the capital conver sion costs that could result in a reduction in INPV for manufacturers. In addition to the aforemen tioned benefits of the amended standards, DOE notes that the efficiency levels in TS L 2 correspond to the recommended levels in the Joint Comments

AHAM and ASAP both commented that the proposed standard energy efficiency equation for product class 15 (compact refri gerator-freezers—automatic defrost with bottom-mounted freezer) was inconsistent wi th the consensus agreement, which had recommended that both product class 15 and product class 13 (compact refrigeratorfreezers—automatic defrost with top-mounted freezer) should have identical standards. (ASAP, Public Meeting Transcript, No. 67 at p. 91; AHAM, Public Meeting Transcript, No. 67 at p. 92) DOE agrees that the standard s of these two product classes should be the same, based on the similarities between these classes. Commenters favored this approach and none offered any information suggesti ng an alternative approach. As stated previously, DOE recognizes the value of c onsensus agreements submitted in accordance with 42 U.S.C. 6295(p)(4).

298After considering the analysis, comm ents responding to the September 2010 NOPR, and the benefits and burde ns of TSL 2, the Secretary ha s concluded that this trial standard level will offer the maximum improveme nt in efficiency that is technologically feasible and economically justified, and will result in the significant conservation of energy. Therefore, DOE today is adopting TS L 2 for compact refrigeration products. The amended energy conservation standards for co mpact refrigeration products, expressed as equations for maximum energy use, are shown in Table VI-75.

Table VI.75 Amended Standards for Compact Refrigeration Products Product Class Equations for Maximum Energy Use (kWh/yr) based on AV (ft 3 ) based on av (L) 11. Compact refrigerators and re frigerator-freezers with manual defrost. 9.03AV + 252.3 0.319av + 252.3 11A. Compact all-refrigerators—manual defrost. 7.84AV + 219.1 0.277av + 219.1 12. Compact refrigerator-freezers—partial automatic defrost 5.91AV + 335.8 0.209av + 335.813. Compact refrigerator-freezers—automatic defrost with topmounted freezer. 11.80AV + 339.2 0.417av + 339.213I. Compact refrigerator-freezers—automatic defrost with topmounted freezer with an automatic icemaker. 11.80AV + 423.2 0.417av + 423.2 13A. Compact all-refrigerators—automatic defrost. 9.17AV + 259.3 0.324av + 259.314. Compact refrigerator-freezers—automatic defrost with sidemounted freezer. 6.82AV + 456.9 0.241av + 456.9 14I. Compact refrigerator-freezers—automatic defrost with side-mounted freezer with an automatic icemaker. 6.82AV + 540.9 0.241av + 540.9 15. Compact refrigerator-freezers—automatic defrost with bottom-mounted freezer. 11.80AV + 339.2 0.417av + 339.2 15I. Compact refrigerator-freezers—automatic defrost with bottom-mounted freezer with an automatic icemaker. 11.80AV + 423.2 0.417av + 423.2 16. Compact upright freezers with manual defrost. 8.65AV + 225.7 0.306av + 225.7 17. Compact upright freezers with automatic defrost. 10.17AV + 351.9 0.359av + 351.9 18. Compact chest freezers. 9.25AV + 136.8 0.327av + 136.8 AV= adjusted volume in cubic feet; av = adjusted volume in liters

2994. Built-In Refrigeration Products Table V-76 presents a summary of the quantitative impacts estimated for each TSL for built-in refrigeration products. The e fficiency levels contained in each TSL are described in section VI.A. The range of results for NPV of consumer benefits reflects the range of product price forecasts discussed in section IV.G.3.

Table VI.76 Summary of Results for Built-in Refrigeration Products Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 National Energy Savings (quads) 0.02 0.03 0.058 0.071 0.085 NPV of Consumer Benefits (2009$ billion) 3% discount rate 0.166 to 0.184 0.183 to 0.226 (0.228) to 0.029 (0.580) to (0.185) (1.14) to (0.531) 7% discount rate 0.053 to 0.062 0.045 to 0.066 (0.237) to (0.111) (0.455) to (0.261) (0.791) to (0.495) Industry Impacts Industry NPV (2009$ million) (51.9) to (52.6) (55.1) to (56.5) (68.0) to (77.2) (82.9) to (97.6) (89.9) to (112.1) Industry NPV (% change) (9.4) to (9.5) (9.9) to (10.2) (12.3) to (13.9) (15.0) to (17.6) (16.2) to (20.2) Cumulative Emissions Reduction CO 2 (Mt) 1.41 2.05 4.1 5.09 6.09 NO X (1000 tons) 1.14 1.65 3.3 4.09 4.9 Hg (tons) 0.01 0.01 0.02 0.02 0.03 Value of Cumulative Emissions Reduction CO 2 (2009$ billion)* 0.012 to 0.12 0.017 to 0.17 0.035 to 0.34 0.043 to 0.41 0.051 to 0.50 NO X – 3% discount rate (2009$ billion) 0.000 to 0.004 0.001 to 0.005 0.001 to 0.011 0.001 to 0.013 0.002 to 0.016 NO X – 7% discount rate (2009$ billion) 0.000 to 0.002 0.000 to 0.002 0.000 to 0.004 0.001 to 0.005 0.001 to 0.006 Mean LCC Savings** (2009$) Built-in All-Refrigerators 52 71 (11) (151) (258) Built-in Bottom-Mount Refrigerator-Freezers 8 2 2 (138) (207) Built-in Side-by-Side Refrigerator-Freezers 10 10 (91) (91) (182) Built-in Upright Fr eezers 66 59 (23) (23) (101) Median PBP (years) Built-in All-Refrigerators 1.4 2.6 13.7 25.5 31.4 Built-in Bottom-Mount Refrigerator-Freezers 3.8 11.1 11.1 52.8 52.2 Built-in Side-by-Side Refrigerator-Freezers 7.5 7.5 31.0 31.0 50.4 Built-in Upright Fr eezers 2.9 10.7 17.8 17.8 22.6

300Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Distribution of Consumer LCC Impacts Built-in All-Refrigerators Net Cost (%) 0.0 0.9 62 91 95 No Impact (%) 23 18. 9.1 0.0 0.0 Net Benefit (%) 77. 81 29 9.0 5.0 Built-in Bottom-Mount Refrigerator-Freezers Net Cost (%) 0.6 7.0 7.0 98 99 No Impact (%) 87 87 87 0.0 0.0 Net Benefit (%) 12 5.9 5.9 2.0 1.5 Built-in Side-by-Side Refrigerator-Freezers Net Cost (%) 5.8 5.8 59 59 98 No Impact (%) 79 79 37 37 0.0 Net Benefit (%) 16 16 4.3 4.3 2.4 Built-in Upright Fr eezers Net Cost (%) 1.5 43 69 69 80 No Impact (%) 20 0.6 0.5 0.5 0.3 Net Benefit (%) 79 57 31 31 20 Generation Capacity Reduction ( GW ) † 0.02 0.03 0.06 0.08 0.09 Employment Impacts Total Potential Changes in Domestic Production Workers in 2014 (thousands) 0.00 to (1.14) (0.00) to (1.14) 0.01 to (1.14) 0.01 to (1.14) 0.03 to (1.14)

Indirect Domestic Jobs (thousands) † 0.14 0.19 0.29 0.31 0.30 Parentheses indicate negative (-) values. Range of the economic value of CO 2 reductions is based on estimates of the global benefit of reduced CO 2 emissions. ** For LCCs, a negative value means an increase in LCC by the amount indicated. † Changes in 2043.

DOE first considered TSL 5, which represents the max-tech efficiency levels. TSL 5 would save 0.085 quads of energy, an amount DOE considers significant. Under TSL 5, the NPV of consumer benefit would be -$0.791 billion to -$0.495 billion, using a discount rate of 7 percent, and -$1.14 billi on to -$0.531 billion, using a discount rate of 3 percent.

301The cumulative emissions reductions at TSL 5 are 6.09 Mt of CO 2 , 4,900 tons of
NO X , and 0.03 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 5 ranges fr om $0.051 billion to $0.50 billion. Total generating capacity in 2043 is estima ted to decrease by 0.09 GW under TSL 5.

At TSL 5, the average LCC impact is a cost (LCC increase) of $258 for built-in all-refrigerators, a cost of $207 for built-in bo ttom-mount refrigerator-freezers, a cost of $182 for built-in side-by-side refrigerator-freez ers, and a cost of $101 for built-in upright freezers. The median payback period is 31.4 years for built-in all-refrigerators, 52.2 years for built-in bottom-mount refrigerator-freeze rs, 50.4 years for built-in side-by-side refrigerator-freezers, and 22.6 years for built -in upright freezers. The fraction of consumers experiencing an LCC benefit is 5 percent for built-in all-refrigerators, 1.5 percent for built-in bottom-mount refrigerato r-freezers, 2.4 percent for built-in side-byside refrigerator-freezers, and 20 percent for built-in upright freezers. The fraction of consumers experiencing an LCC cost is 95 percent for built-in all-refrigerators, 99 percent for built-in bottom-mount refrigerat or-freezers, 98 percent for built-in side-byside refrigerator-freezers, and 80 per cent for built-in upright freezers.

At TSL 5, the projected change in INPV ranges from a decrease of $89.9 million to a decrease of $112.1 million. If the high end of the range of impacts is reached as DOE expects, TSL 5 could result in a net loss of 20.2 percent in INPV to built-in refrigeration product manufacturers.

302The Secretary has concluded that at TS L 5 for built-in refrigeration products, the benefits of energy savings, generating cap acity reductions, emissi on reductions, and the estimated monetary value of the CO 2 emissions reductions would be outweighed by the negative NPV of consumer benefits, the ec onomic burden on a signi ficant fraction of consumers due to the large increases in produc t cost, and the capital conversion costs and profit margin impacts that could result in a reduction in INPV for the manufacturers. Consequently, the Secretary has concluded that TSL 5 is not economically justified.

DOE then considered TSL 4. TSL 4 would save 0.071 quads of energy, an amount DOE considers significant. Under TSL 4, the NPV of consumer benefit would be -$0.455 billion to -$0.261 billion, using a discount rate of 7 percen t, and -$0.580 billion to -$0.185 billion, using a disc ount rate of 3 percent.

The cumulative emissions reductions at TSL 4 are 5.09 Mt of CO 2 , 4,090 tons of
NO X , and 0.02 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reductions at TSL 4 ranges fr om $0.043 billion to $0.41 billion. Total generating capacity in 2043 is estima ted to decrease by 0.08 GW under TSL 4.

At TSL 4, DOE projects that the average L CC impact is a cost (LCC increase) of $151 for built-in all-refrigerators, a cost of$138 for built-in bottom-mount refrigeratorfreezers, a cost of $91 for built-i n side-by-side refrigerator-f reezers, and a cost of $23 for built-in upright freezers. The median payb ack period is 25.5 years for built-in allrefrigerators, 52.8 years for built-in bottom- mount refrigerator-freezers, 31.0 years for

303built-in side-by-side refrigerator-freezers, a nd 17.8 years for built-in upright freezers. The fraction of consumers experiencing an L CC benefit is 9 percent for built-in allrefrigerators, 2 percent for built-in bottom-mount refrigerator-freezers, 4.3 percent for built-in side-by-side refrigerato r-freezers, and 31 percent for built-in upright freezers. The fraction of consumers experiencing an L CC cost is 91 percent for built-in allrefrigerators, 98 percent for built-in bottom- mount refrigerator-freezers, 59 percent for built-in side-by-side refrigera tor-freezers, and 69 percent fo r built-in upright freezers.

At TSL 4, the projected change in INPV ranges from a decrease of $82.9 million to a decrease of $97.6 million. If the high end of the range of impacts is reached as DOE expects, TSL 4 could result in a net loss of 17.6 percent in INPV to built-in refrigeration product manufacturers.

The Secretary has concluded that at TS L 4 for built-in refrigeration products, the benefits of energy savings, generating cap acity reductions, emissi on reductions, and the estimated monetary value of the CO 2 emissions reductions would be outweighed by the negative NPV of consumer benefits, the ec onomic burden on a signi ficant fraction of consumers due to the increases in product co st, and the capital conve rsion costs and profit margin impacts that could result in a reduction in INPV for the manufacturers. Consequently, the Secretary has concluded that TSL 4 is not economically justified.

DOE then considered TSL 3. TSL 3 would save 0.058 quads of energy, an amount DOE considers significant. Under TSL 3, the NPV of consumer benefit would be

304-$0.237 billion to -$0.111 billion, using a discount rate of 7 percen t, and -$0.228 billion to $0.029 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 3 are 4.1 Mt of CO 2 , 3,300 tons of
NO X , and 0.02 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reduction at TSL 3 ranges from $0.035 billion to $0.34 billion. Total generating capacity in 2043 is estima ted to decrease by 0.06 GW under TSL 3.

At TSL 3, the average LCC impact is a co st (LCC increase) of $11 for built-in allrefrigerators, a gain of $2 for built-in botto m-mount refrigerator-freezers, a cost of $91 for built-in side-by-side refr igerator-freezers, and a cost of $23 for built-in upright freezers. The median payback period is 13.7 years for built-in all-refrigerators, 11.1 years for built-in bottom-mount refrigerator-freeze rs, 31.0 years for built-in side-by-side refrigerator-freezers, and 17.8 years for built -in upright freezers. The fraction of consumers experiencing an LCC benefit is 29 percent for built-in al l-refrigerators, 5.9 percent for built-in bottom-mount refrigerato r-freezers, 4.3 percent for built-in side-byside refrigerator-freezers, and 31 percent for built-in upright freezers. The fraction of consumers experiencing an LCC cost is 62 perc ent for built-in all-refrigerators, 7 percent for built-in bottom-mount refrigerator-freeze rs, 59 percent for built-in side-by-side refrigerator-freezers, and 69 percent for built-in upright freezers.

At TSL 3, the projected change in INPV ranges from a decrease of $68.0 million to a decrease of $77.2 million. If the high end of the range of impacts is reached as DOE

305expects, TSL 3 could result in a net loss of 13.9 percent in INPV to built-in refrigeration product manufacturers.

The Secretary has concluded that at TS L 3 for built-in refrigeration products, the benefits of energy savings, generating cap acity reductions, emissi on reductions, and the estimated monetary value of the CO 2 emissions reductions would be outweighed by the negative NPV of of consumer benefits, the slight economic burden on a significant fraction of consumers due to the increases in product cost, and the capital conversion costs and profit margin impacts that coul d result in a reduction in INPV for the manufacturers. Consequently, the Secret ary has concluded that TSL 3 is not economically justified.

DOE then considered TSL 2. TSL 2 woul d save 0.03 quads of energy, an amount DOE considers significant. Under TSL 2, th e NPV of consumer benefit would be $0.045 billion to $0.066 billion, using a discount ra te of 7 percent, and $0.183 billion to $0.226 billion, using a discount rate of 3 percent.

The cumulative emissions reductions at TSL 2 are 2.05 Mt of CO 2 , 1,650 tons of
NO X , and 0.01 tons of Hg. The estimated monetary value of the cumulative CO 2 emissions reduction at TSL 2 ranges from $0.017 billion to $0.17 billion. Total generating capacity in 2043 is estima ted to decrease by 0.03 GW under TSL 2.

306At TSL 2, the average LCC impact is a gain (LCC decrease) of $71 for built-in all-refrigerators, a gain of $2 for built-in bot tom-mount refrigerator-f reezers, a gain of $10 for built-in side-by-side refrigerator-freezer s, and a gain of $59 for built-in upright freezers. The median payback period is 2.6 years for built-in all-refrigerators, 11.1 years for built-in bottom-mount refrigerator-freeze rs, 7.5 years for built-in side-by-side refrigerator-freezers, and 10.7 years for built -in upright freezers. The fraction of consumers experiencing an LCC benefit is 81 percent for built-in al l-refrigerators, 5.9 percent for built-in bottom-mount refrigerat or-freezers, 16 percent for built-in side-byside refrigerator-freezers, and 57 percent for built-in upright freezers. The fraction of consumers experiencing an LCC cost is 0.9 per cent for built-in all-refr igerators, 7 percent for built-in bottom-mount refrigerator-freeze rs, 5.8 percent for built-in side-by-side refrigerator-freezers, and 43 percent for built-in upright freezers.

At TSL 2, the projected change in INPV ranges from a decrease of $55.1 million to a decrease of $56.5 million. If the high end of the range of impacts is reached as DOE expects, TSL 2 could result in a net loss of 10.2 percent in INPV to built-in refrigeration product manufacturers.

The Secretary has concluded that at TS L 2 for built-in refrigeration products, the benefits of energy savings, positive NPV of consumer benefits, generating capacity reductions, emission reductions, and the estimated monetary value of the CO 2 emissions reductions would outweigh the slight economic burden on a small fraction of consumers

307due to the increases in produc t cost, and the capital convers ion costs and profit margin impacts that could result in a reduc tion in INPV for the manufacturers.

After considering the analysis, co mments responding to the September 2010 NOPR, and the benefits and burde ns of TSL 2, the Secretary ha s concluded that this trial standard level will offer the maximum improveme nt in efficiency that is technologically feasible and economically justified, and will re sult in significant conservation of energy. Therefore, DOE today is adopting TSL 2 fo r built-in refrigeration products. The amended energy conservation standards for built-in refr igeration products, e xpressed as equations for maximum energy use, are shown in Table VI.77.

Table VI.77 Amended Standards for Built-In Refrigeration Products Product Class Equations for Maximum Energy Use (kWh/yr) based on AV (ft 3 ) based on av (L) 3-BI. Built-in refrigerator-freezer—automatic defrost with topmounted freezer without an automatic icemaker. 9.15AV + 264.9 0.323av + 264.9 3I-BI. Built-in refrigerator-freezers—automatic defrost with top-mounted freezer with an automatic icemaker without through-the-door ice service. 9.15AV + 348.9 0.323av + 348.9 3A-BI. Built-in All-refrigera tors—automatic defrost. 8.02AV + 228.5 0.283av + 228.5 4-BI. Built-In Refrigerator-fr eezers—automatic defrost with side-mounted freezer without an automatic icemaker. 10.22AV + 357.4 0.361av + 357.4 4I-BI. Built-In Refrigerator-freezers—automatic defrost with side-mounted freezer with an automatic icemaker without through-the-door ice service. 10.22AV + 441.4 0.361av + 441.4 5-BI. Built-In Refrigerator-fr eezers—automatic defrost with bottom-mounted freezer without an automatic icemaker. 9.40AV + 336.9 0.332av + 336.9 5I-BI. Built-In Refrigerator-freezers—automatic defrost with bottom-mounted freezer with an automatic icemaker without through-the-door ice service. 9.40AV + 420.9 0.332av + 420.9 5A-BI. Built-in refrigerator-f reezer—automatic defrost with bottom-mounted freezer with thro ugh-the-door ice service. 9.83AV + 499.9 0.347av + 499.9 7-BI. Built-In Refrigerator-fr eezers—automatic defrost with side-mounted freezer with thro ugh-the-door ice service. 10.25AV + 502.6 0.362av + 502.6 9-BI. Built-In Upright freezers w ith automatic defrost without 9.86AV + 260.9 0.348av + 260.9

308an automatic icemaker. 9I-BI. Built-in upright freezers w ith automatic defrost with an automatic icemaker. 9.86AV + 344.9 0.348av + 344.9 AV= adjusted volume in cubic feet; av = adjusted volume in liters

5. Summary of Benefits and Costs (Annualized) of Amended Standards The benefits and costs of today’s amende d standards can also be expressed in terms of annualized values. The annualized monetary values are the sum of (1) the annualized national economic value, expre ssed in 2009$, of the be nefits from operating products that meet the amended standards (con sisting primarily of operating cost savings from using less energy, minus increases in eq uipment purchase costs, which is another way of representing consumer NPV), and (2) the monetary value of the benefits of emission reductions, including CO 2 emission reductions. 49 The value of the CO 2 reductions (i.e. SCC) is calculated using a range of values per metric ton of CO 2 developed by a recent interagency process. The monetary costs and benefits of cumulative emissions reductions are reported in 2009$ to permit comparisons with the
other costs and benefits in the same dollar units.

Although combining the values of operating savings and CO 2 reductions provides a useful perspective, two issues should be considered. First, the national operating

49 DOE used a two-step calculation process to convert th e time-series of costs and benefits into annualized values. First, DOE calculated a present value in 2010 , the year used for discounting the NPV of total consumer costs and savings, for the time-series of costs and benefits using discount rates of three and seven percent for all costs and benefits except for the value of CO 2 reductions. For the latter, DOE used a range of discount rates, as shown in Table I.2. From the pr esent value, DOE then calculated the fixed annual payment over a 30-year period (2014 through 2043) that yields the same present value. The fixed annual payment is the annualized value. A lthough DOE calculated annualized values, this does not imply that the time-series of cost and benefits from which the annua lized values were determined is a steady stream of payments.

309savings are domestic U.S. consumer monetary savings that occur as a result of market transactions while the value of CO 2 reductions is based on a global value. Second, the assessments of operating cost savings and SCC are performed with different methods that use quite different time frames for analys is. The national operating cost savings is measured for the lifetime of refriger ation products shipped in 2014–2043. The SCC values, on the other hand, refl ect the present value of futu re climate-related impacts resulting from the emission of one ton of carbon dioxide in each year. These impacts continue well beyond 2100.

Estimates of annualized values are show n in Table VI.78. The results under the primary estimate are as follows. Using a 7- percent discount rate and the SCC series having a value of $22.1/ton in 2010 (in 2009$), the co st of the standards in today’s rule is $1,167 to $1,569 million per year in increased equipment costs, while the annualized benefits are $2,275 million per year in redu ced equipment operating costs, $515 million
in CO 2 reductions, and $21 million in reduced NO X emissions. In this case, the net benefit amounts to $1,241 to $1,643 million per y ear. Using a 3-percent discount rate and the SCC series having a value of $22.1/ton in 2010, the cost of the standards in today’s rule is $1,081 to $1,526 million per year in incr eased equipment costs, while the benefits are $3,160 million per year in reduced operating costs, $515 million in CO 2 reductions, and $28 million in reduced NO X emissions. In this case, the net benefit amounts to $2,176 to $2,622 million per year.

310Table V-78 Annualized Benefits and Costs of Amended Standard s for Refrigeration Products Sold in 2014-2043

Discount Rate Primary Estimate* Low Net Benefits Estimate* High Net Benefits Estimate* Monetized (million 2009$/year) Benefits Operating Cost Savings 7% 2275 1996 2560 3% 3160 2720 3596 CO 2 Reduction at $4.9/t** 5% 162 162 162 CO 2 Reduction at $22.1/t** 3% 515 515 515 CO 2 Reduction at $36.3/t** 2.5% 772 772 772 CO 2 Reduction at $67.1/t** 3% 1567 1567 1567 NO X Reduction at $2,519/ton** 7% 21 21 21 3% 28 28 28

Total† 7% plus CO 2 range 2457 to 3863 2178 to 3584 2742 to 4148

7% 2810 2531 3095 3% 3703 3263 4139 3% plus CO 2 range 3350 to 4755 2910 to 4315 3786 to 5192
Costs
Incremental Product Costs 7% 1167 to 1569 1480 1232 3% 1081 to 1526 1430 1147 Net Benefits/Costs

Total† 7% plus CO 2 range 888 to 2696 698 to 2103 1511 to 2916

7% 1241 to 1643 1051 1863 3% 2176 to 2622 1832 2993 3% plus CO 2 range 1823 to 3674 1479 to 2885 2640 to 4045
* The Primary, Low Benefits, and Hi gh Benefits Estimates utilize forecasts of energy prices and housing starts from the AEO2010 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product costs refl ect a medium decline rate for product prices in the Primary Estimate, a low decline rate for product prices in the Low Benefits Estimate, and a high decline rate for product prices in the High Benefits Estima te. In the Primary estimate, the range of results for incremental product costs reflects th e range of product price forecasts.

311** The CO 2 values represent global values (i n 2009$) of the social cost of CO 2 emissions in 2010 under several scenarios. The values of $4.9, $22.1, and $36.3 per metric ton (t) are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $67.1/t represents the 95 th percentile of the SCC distribution calculated using a 3% discount rate. The value for NO X (in 2009$) is the average of the low and high values used in DOE’s analysis † Total Benefits for both the 3% and 7% cases are de rived using the SCC value cal culated at a 3% discount rate, which is $22.1/t in 2010 (in 2009$). In the rows labeled as “7% plus CO 2 range” and “3% plus CO 2 range,” the operating cost and NO X benefits are calculated using the la beled discount rate, and those values are added to the full range of CO 2 values.

VII. Procedural Issues and Regulatory Review

A. Review Under Executive Order 12866 and 13563 Section 1(b)(1) of Executiv e Order 12866, “Regulatory Planning and Review,” 58 FR 51735 (Oct. 4, 1993), requires each agency to identify the problem that it intends to address, including, where applicable, the failure s of private markets or public institutions that warrant new agency action, as well as to assess the significance of that problem. The problems that today’s standards address are as follows:

(1) There is a lack of consumer informati on and/or information processing capability about energy efficiency opportunitie s in the home appliance market. (2) There is asymmetric information (one pa rty to a transaction has more and better information than the other) and/or high tr ansactions costs (costs of gathering information and effecting exch anges of goods and services). (3) There are external benefits resultin g from improved energy efficiency of refrigeration products that are not captured by the user s of such products. These benefits include externalities related to environmental protection and energy security that are not reflected in ener gy prices, such as re duced emissions of greenhouse gases.

312In addition, DOE has determined that toda y’s regulatory action is an “economically significant regulatory action” under sect ion 3(f)(1) of Executive Order 12866. Accordingly, section 6(a)(3) of the Execu tive Order requires that DOE prepare a regulatory impact analysis (RIA ) on today’s rule and that the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB) review this rule. DOE presented to OIRA for review the draft rule and other documents prepared for this rulemaking, including the RIA, and has included these documents in the rulemaking record. The assessments prepared pursuant to Executive Order 12866 can be found in the technical support document for this rulemaking. They are available for public review in the Resource Room of DOE’s Building Tec hnologies Program, 950 L’Enfant Plaza, SW., Suite 600, Washington, DC 20024, (202) 586-2 945, between 9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal holidays.

DOE has also reviewed this regulation pursuant to Executive Order 13563, issued on January 18, 2011 (76 FR 3281, Jan. 21, 2011). EO 13563 is supplemental to, and explicitly reaffirms the principles, structures , and definitions governing regulatory review established in, Executive Order 12866. To th e extent permitted by law, agencies are required by Executive Order 13563 to: (1) propo se or adopt a regulation only upon a reasoned determination that its benefits justif y its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailo r regulations to impose the least burden on society, consistent with obt aining regulatory objectives, ta king into account, among other things, and to the extent practicable, the co sts of cumulative regulations; (3) select, in

313choosing among alternative regulatory approach es, those approaches that maximize net benefits (including potential economic, environm ental, public health and safety, and other advantages; distributive impacts; and equity ); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alte rnatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.

We emphasize as well that Executive Or der 13563 requires agencies “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” In its guidance, the Office of Information and Regulatory Affairs has emphasized that such techniques ma y include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”

DOE emphasizes that Executive Order 13563 calls for “periodic review of existing significant regulations,” with close reference to empirical evidence. Moreover, with respect to energy conservation standa rds, EPCA mandates that DOE reveiew its regulations, “not later than 6 years after issuance of a ny final rule establishing or amending an energy efficiency standard. As part of the retrospective review, DOE will review its data on refrigerator prices and cost s and, as part of that review, will consider tracking additional data on retail refrigerator prices and costs for the product classes

314identified in the rule as a means of comp aring actual refrigerator prices and costs to prices and costs forecasted as a result of th e standards imposed by today’s and any future rule. Such a review will likely be a part of the periodic review of energy efficiency standards for refrigerators called for unde r Executive Order 13563. DOE’s plan for conducting periodic reveiew, which will be updated regularly, should be consulted for further information. See: http://energy.gov/gc /report-appliance-regu lation-violation/ex

parte-communications/restros pective-regulatory-review

For the reasons stated in the preamble, DOE believes that today’s final rule is consistent with these principles, including that, to the extent permitted by law, agencies adopt a regulation only upon a reasoned determin ation that its benef its justify its costs and select, in choosing among alternative regul atory approaches, those approaches that maximize net benefits.

B. Review Under the Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires preparation of an initial regulatory flexibility an alysis (IRFA) for any rule th at by law must be proposed for public comment, and a final regulatory flexibility analysis (FRFA) for any such rule that an agency adopts as a final rule, unless the ag ency certifies that the rule, if promulgated,

315will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, “Proper Consid eration of Small Entities in Agency Rulemaking,” 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaki ng process. 68 FR 7990. DOE has made its procedures and policies available on the Office of the Genera l Counsel’s website ( www.gc.doe.gov ).

For manufacturers of residential refrigerators, refriger ator-freezers, and freezers, the Small Business Administration (SBA) has set a size threshold, which defines those entities classified as “small businesses” for the purposes of the statute. DOE used the SBA’s small business size standards to determine whether any small entities would be subject to the requirements of the ru le. 65 FR 30836, 30850 (May 15, 2000), as amended at 65 FR 53533, 53545 (September 5, 2000) and c odified at 13 CFR part 121.The size standards are listed by North American Industr y Classification System (NAICS) code and industry description a nd are available at http://www.sba.gov/idc/groups/public/documen ts/sba_homepage/serv_sstd_tablepdf.pdf

. Residential refrigeration product manufact uring is classified under NAICS 335222, “Household Refrigerator and Home Freezer Manu facturing.” The SBA sets a threshold of 1,000 employees or less for an entity to be considered as a sma ll business for this category.

316DOE reviewed its September 2010 NOPR unde r the provisions of the Regulatory Flexibility Act and the procedure and polic ies published on February 19, 2003. In the NOPR, DOE certified that the standards for re sidential refrigeration products set forth in the proposed rule, if promulgated, would not have a significant economic impact on a substantial number of small entities. DOE made this determination because only one small business manufacturer would potent ially be impacted by the proposed energy conservation standards, and that manufacturer represents a small percentage of covered products and is a leader in a niche mark et. 75 FR at 59571-59572 (September 27, 2010).

DOE also sought comment on the impacts of the proposed amended energy conservation standards on small business ma nufacturers of resi dential refrigeration products. DOE received no comments on the certif ication or its additional requests for comment on small business impacts in response to the NOPR. Thus, DOE reaffirms the certification and has not prepared a FRFA for this final rule.

C. Review Under the Paperwork Reduction Act Manufacturers of refrigeration products must certify to DOE that those products comply with any applicable energy conser vation standard. In certifying compliance, manufacturers must test their refrigeration products according to the DOE test procedure for refrigeration products, incl uding any amendments adopted for that test procedure. DOE has proposed regulations for the certific ation and recordkeeping requirements for all covered consumer products and commercial equipment, including refrigeration products (i.e. refrigerators, refrigerator-fr eezers, and freezers). 75 FR 56796 (Sept. 16,

3172010). The information collection requirement fo r the certification a nd recordkeeping is subject to review and approval by OMB under the Paperwork Reduction Act (PRA). DOE received OMB approval for collecting certification, compliance, and enforcement information for all covered products and covered equipment on February 3, 2011 under OMB control number 1910-1400.

Public reporting burden for the certificati on is estimated to average 20 hours per response, including the time for reviewing inst ructions, searching ex isting data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burd en estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Office of the Chief Information Officer, Records Manage ment Division, IM-23, Paperwork Reduction Project (1910-1400), U.S. Department of Energy, 1000 Independence Ave SW, Washington, DC 20585-1290; and to the Offi ce of Management and Budget (OMB), OIRA, Paperwork Reduction Projec t (1910-1400), Washington, DC 20503.

Notwithstanding any other provision of th e law, no person is required to respond to, nor shall any person be subject to a penalt y for failure to comply with, a collection of information subject to the requirements of th e PRA, unless that collection of information displays a currently valid OMB Control Number.

D. Review Under the National Envi ronmental Policy Act of 1969 DOE has prepared an environmental a ssessment (EA) of the impacts of the amended rule pursuant to the National E nvironmental Policy Act of 1969 (42 U.S.C.

3184321 et seq .), the regulations of the Counc il on Environmental Quality (40 CFR parts 1500–1508), and DOE’s regulations for complia nce with the National Environmental Policy Act of 1969 (10 CFR part 1021). This assessment includes an examination of the potential effects of emission reductions likely to result from the rule in the context of global climate change, as well as other types of environmental impacts. The final EA has been included as chapter 15 of the final rule TSD. Before issuing this final rule for refrigeration products, DOE considered public comments. A findi ng of no significant impact (FONSI) accompanies the final EA.

E. Review Under Executive Order 13132 Executive Order 13132, "Federalism, " 64 FR 43255 (August 10, 1999) imposes certain requirements on agencies formulati ng and implementing polic ies or regulations that preempt State law or that have federalism implications. The Executive Order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the St ates and to carefully assess the necessity for such actions. The Executive Order also re quires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that ha ve federalism implications. On March 14, 2000, DOE published a statement of policy desc ribing the intergovernmental consultation process it will follow in the developmen t of such regulations. 65 FR 13735. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of today’s final rule. States can petition DOE for

319exemption from such preemption to the extent , and based on criteria, set forth in EPCA. (42 U.S.C. 6297) No further acti on is required by Executive Order 13132.

F. Review Under Executive Order 12988 With respect to the review of existin g regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, "Civil Justice Reform," imposes on Federal agencies the general du ty to adhere to the followi ng requirements: (1) eliminate drafting errors and ambiguity ; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard and promote simplification and burden reducti on. 61 FR 4729 (February 7, 1996). Section 3(b) of Executive Order 12988 sp ecifically requires that Executive agencies make every reasonable effort to ensure that the regulati on: (1) clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal la w or regulation; (3) provides a clear legal standard for affected conduc t while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues aff ecting clarity and general draftsmanship under any guidelines issued by the Attorney Gene ral. Section 3(c) of Executive Order 12988 requires Executive agencies to review regula tions in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this final ru le meets the relevant standards of Executive Order 12988.

320G. Review Under the Unfunded Mandates Reform Act of 1995 Title II of the Unfunded Mandates Re form Act of 1995 (UMRA) requires each Federal agency to assess the effects of Fe deral regulatory actions on State, local, and Tribal governments and the private sector . Pub. L. No. 104-4, sec. 201 (codified at 2
U.S.C. 1531). For an amended regulatory acti on likely to result in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agen cy to publish a written statement that estimates the resulting costs, benefits, a nd other effects on the national economy. (2
U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officer s of State, local, and Tribal governments on a “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to pot entially affected small governments before establishing any requirements that might significantly or uniquely affect small governments. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820; also available at http:// www.gc.doe.gov

.

Although today’s final rule does not contain a Federal intergovernmental mandate, it may impose expenditures of $100 million or more on the private sector. Specifically, the final rule will likely result in a final rule that could impose expenditures of $100 million or more. Such expenditures may include (1) investment in research and development and in capital expenditures by refrigeration product ma nufacturers in the

321years between the final rule and the comp liance date for the new standard, and (2) incremental additional expenditures by c onsumers to purchase higher-efficiency refrigeration products, starting in 2014.

Section 202 of UMRA authorizes an agency to respond to the content requirements of UMRA in any other statement or analysis that accompanies the final rule. 2 U.S.C. 1532(c). The content requirements of section 202(b) of UMRA relevant to a private sector mandate substantially overla p the economic analysis requirements that apply under section 325(o) of EPCA and Executive Order 12866. The Supplementary Information section of the notice of fina l rulemaking and the “Regulatory Impact Analysis” section of the TSD for this fi nal rule respond to those requirements.

Under section 205 of UMRA, the Department is obligated to identify and consider a reasonable number of regulatory alternativ es before promulgating a rule for which a written statement under section 202 is require d. 2 U.S.C. 1535(a). DOE is required to select from those alternatives the most co st-effective and least burdensome alternative that achieves the objectives of the rule unless DOE publishes an explanation for doing otherwise or the selection of su ch an alternative is inconsis tent with law. As required by 42 U.S.C. 6295(h) and (o), 6313(e), and 6316( a), today’s final rule would establish energy conservation standards for residential refrigeration products that are designed to achieve the maximum improvement in energy e fficiency that DOE has determined to be both technologically feasible and economically justified. A full discussion of the

322alternatives considered by DOE is presented in the “Regulatory Impact Analysis” section of the TSD for today’s final rule.

H. Review Under the Treasury and General Government Approp riations Act, 1999 Section 654 of the Treasury and Genera l Government Approp riations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-b eing. This rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.

I. Review Under Executive Order 12630 DOE has determined, under Executive Order 12630, “Governmental Actions and Interference with Constituti onally Protected Property Rights” 53 FR 8859 (March 18, 1988), that this regulation would not resu lt in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.

J. Review Under the Treasury and General Government Approp riations Act, 2001 Section 515 of the Treasury and Genera l Government Approp riations Act, 2001 (44 U.S.C. 3516, note) provides for agenci es to review most disseminations of information to the public under guidelines established by each ag ency pursuant to general guidelines issued by OMB. OMB’s guideline s were published at 67 FR 8452 (February 22, 2002), and DOE’s guidelines were publis hed at 67 FR 62446 (October 7, 2002). DOE

323has reviewed today’s final rule under the OMB and DOE guidelines and has concluded that it is consistent with applic able policies in those guidelines.

K. Review Under Executive Order 13211 Executive Order 13211, “Actions Concerni ng Regulations That Significantly Affect Energy Supply, Distribution, orUse” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OI RA at OMB, a Statement of Energy Effects for any significant energy action. A “significan t energy action” is defined as any action by an agency that promulgates or is expected to lead to promulgation of a final rule, and that (1) is a significant regulatory acti on under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is desi gnated by the Administrator of OIRA as a significant energy action. For any significant ener gy action, the agency must gi ve a detailed statement of any adverse effects on energy supply, dist ribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their e xpected benefits on energy supply, distribution, and use.

DOE has concluded that today’s regula tory action, which sets forth energy conservation standards for re frigeration products, is not a significant energy action because the amended standards are not likely to have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as such by the Administrator at OIRA. Accordingly, DOE has not prepared a Statement of Energy Effects on the final rule.

324L. Review Under the Information Qua lity Bulletin for Peer Review On December 16, 2004, OMB, in consulta tion with the Office of Science and Technology (OSTP), issued its Final Informati on Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (January 14, 2005). The Bu lletin establishes that certain scientific information shall be peer reviewed by qualif ied specialists before it is disseminated by the Federal Government, including influential scientific information related to agency regulatory actions. The purpose of the bulletin is to enhance th e quality and credibility of the Government’s scientific information. Under the Bulletin, the energy conservation standards rulemaking analyses ar e “influential scientific info rmation,” which the Bulletin defines as “scientific information the agency reasonably can determine will have or does have a clear and substantial impact on im portant public policies or private sector decisions.” 70 FR 2667.

In response to OMB’s Bulletin, DOE conduc ted formal in-progress peer reviews of the energy conservation standards developm ent process and analyses and has prepared a Peer Review Report pertaining to the energy conservation standards rulemaking analyses. Generation of this report in volved a rigorous, formal, and documented evaluation using objective criteria and qualif ied and independent reviewers to make a judgment as to the technical/sci entific/business merit, the actual or anticipated results, and the productivity and management effec tiveness of programs and/or projects. The “Energy Conservation Standards Rulemaking Pe er Review Report” dated February 2007

325has been disseminated and is ava ilable at the following Web site: http://www1.eere.energy.gov/ buildings/appliance_standa rds/peer_review.html

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M. Congressional Notification As required by 5 U.S.C. 801, DOE will subm it to Congress a report regarding the issuance of today’s final rule pr ior to the effective date set forth at the outset of this notice. The report will state that it has been determined that the rule is a “major rule” as defined by 5 U.S.C. 804(2). DOE will also submit the supporting analyses to the Comptroller General in the U.S. Governme nt Accountability Of fice (GAO) and make them available to each House of Congress.

326For the reasons set forth in the preamble, DOE amends chapter II, subchapter D, of title 10 of the Code of Federal Regul ations, as set forth below:

PART 430 - ENERGY CONSERVATI ON PROGRAM FOR CONSUMER PRODUCTS

1. The authority citation for Part 430 continues to read as follows: Authority: 42 U.S.C. 6291- 6309; 28 U.S.C. 2461 note.

2. In §430.2, add the definition for “Built-in refr igerator/refrigerator-freezer/freezer,” in alphabetical order, and revise the definition for “Compact refrigerator/refrigeratorfreezer/freezer” to read as follows: §430.2 Definitions.
* * * * * Built-in refrigerator/refrigerator-fre ezer/freezer means any refrigerator, refrigerator-freezer or freezer with 7.75 cubic feet or greater tota l volume and 24 inches or less depth not including doors, handles, a nd custom front panels; with sides which are not finished and not designed to be visible after installa tion; and that is designed, intended, and marketed exclusively (1) to be installed totally encased by cabinetry or panels that are attached during installation, (2) to be securely fastened to adjacent cabinetry, walls or floor, and (3) to either be equipped with an inte gral factory-finished face or accept a custom front panel.

328* * * * * Compact refrigerator/refrigerator-fre ezer/freezer means any refrigerator, refrigerator-freezer or freezer with total volu me less than 7.75 cubic foot (220 liters) (rated volume as determined in appendices A1 and B1 of subpart B of this part before appendices A and B become mandatory and as determined in appendices A and B of this subpart once appendices A and B become manda tory (see the notes at the beginning of appendices A and B)).
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3. In §430.32 revise paragraph (a) to read as follows: §430.32 Energy and water conservation standards and their effective dates.
* * * (a) Refrigerators/refrigerator-freezers/fr eezers. These standards do not apply to refrigerators and refrigerator-freezers with total refrigerated volume exceeding 39 cubic feet (1104 liters) or freezers with total refrigerated volum e exceeding 30 cubic feet (850 liters). The energy standards as determined by the equations of the following table(s) shall be rounded off to the nearest kWh per year. If the equation calculation is halfway between the nearest two kWh pe r year values, the standard shall be rounded up to the higher of these values. The following standards remain in effect from July 1, 2001 until [INSERT DATE 3 YEARS AFTER PUBLICATION DATE] :

Product Class Energy Standard Equations for Maximum Energy Use (kWh/yr) 1. Refrigerators and refrigera tor-freezers with manual defrost. 8.82AV+248.4 0.31av+248.4 2. Refrigerator-freezers—partial automatic defrost

. 8.82AV+248.4

3290.31av+248.4 3. Refrigerator-freezers—automatic de frost with top-mounted freezer without through-the-door ice service and all-refrigerator—automatic defrost. 9.80AV+276.0 0.35av+276.0 4. Refrigerator-freezers—automatic de frost with side-mounted freezer without through-the-door ice service. 4.91AV+507.5 0.17av+507.5 5. Refrigerator-freezers—automatic de frost with bottom-mounted freezer without through-the-door ice service. 4.60AV+459.0 0.16av+459.0 6. Refrigerator-freezers—automatic defrost with top-mounted freezer with through-the-door ice service. 10.20AV+356.0 0.36av+356.0 7. Refrigerator-freezers—automatic defro st with side-mounted freezer with through-the-door ice service. 10.10AV+406.0 0.36av+406.0 8. Upright freezers with manual defrost. 7.55AV+258.3 0.27av+258.3 9. Upright freezers with automatic defrost. 12.43AV+326.1 0.44av+326.1 10. Chest freezers and all other freezers except compact freezers. 9.88AV+143.7 0.35av+143.7 11. Compact refrigerators and refrigerator-freezers with manual defrost. 10.70AV+299.0 0.38av+299.0 12. Compact refrigerator-freezer—p artial automatic defrost. 7.00AV+398.0 0.25av+398.0 13. Compact refrigerator-freezers—automatic defrost with top-mounted freezer and compact all-refrigerator—automatic defrost. 12.70AV+355.0 0.45av+355.0 14. Compact refrigerator-freezers—auto matic defrost with side-mounted freezer. 7.60AV+501.0 0.27av+501.0 15. Compact refrigerator-freezers—automa tic defrost with bottom-mounted freezer. 13.10AV+367.0 0.46av+367.0 16. Compact upright freezers with manual defrost. 9.78AV+250.8 0.35av+250.8 17. Compact upright freezers with automatic defrost. 11.40AV+391.0 0.40av+391.0 18. Compact chest freezers. 10.45AV+152.0 0.37av+152.0 AV: Adjusted Volume in ft 3 ; av: Adjusted Volume in liters (L)

330The following standards apply to products manufactured starting on [INSERT DATE 3 YEARS AFTER PUBLICATION DATE] :

Product Class Equations for Maximum Energy Use (kWh/yr) based on AV (ft 3 ) based on av (L)1. Refrigerator-freezers and refrigerators other than allrefrigerators with manual defrost. 7.99AV + 225.0 0.282av + 225.0 1A. All-refrigerators—manual defrost. 6.79AV + 193.6 0.240av + 193.6 2. Refrigerator-freezers—partial automatic defrost 7.99AV + 225.0 0.282av + 225.0 3. Refrigerator-freezers—auto matic defrost with topmounted freezer without an automatic icemaker. 8.07AV + 233.7 0.285av + 233.7 3-BI. Built-in refrigerator-free zer—automatic defrost with top-mounted freezer without an automatic icemaker. 9.15AV + 264.9 0.323av + 264.9 3I. Refrigerator-freezers—aut omatic defrost with topmounted freezer with an automatic icemaker without through-the-door ice service. 8.07AV + 317.7 0.285av + 317.7 3I-BI. Built-in refrigerator-freezers—automatic defrost with top-mounted freezer with an automatic icemaker without through-the-door ice service. 9.15AV + 348.9 0.323av + 348.9 3A. All-refrigerators—automatic defrost. 7.07AV + 201.6 0.250av + 201.6 3A-BI. Built-in All-refrigera tors—automatic defrost. 8.02AV + 228.5 0.283av + 228.54. Refrigerator-freezers—automatic defrost with sidemounted freezer without an automatic icemaker. 8.51AV + 297.8 0.301av + 297.8 4-BI. Built-In Refrigerator-fr eezers—automatic defrost with side-mounted freezer without an automatic icemaker. 10.22AV + 357.4 0.361av + 357.4 4I. Refrigerator-freezers—aut omatic defrost with sidemounted freezer with an automatic icemaker without through-the-door ice service. 8.51AV + 381.8 0.301av + 381.8 4I-BI. Built-In Refrigerator-freezers—automatic defrost with side-mounted freezer wi th an automatic icemaker without through-the-door ice service. 10.22AV + 441.4 0.361av + 441.4 5. Refrigerator-freezers—auto matic defrost with bottommounted freezer without an automatic icemaker. 8.85AV + 317.0 0.312av + 317.0 5-BI. Built-In Refrigerator-fr eezers—automatic defrost with bottom-mounted freezer without an automatic icemaker. 9.40AV + 336.9 0.332av + 336.9 5I. Refrigerator-freezers—aut omatic defrost with bottommounted freezer with an automatic icemaker without through-the-door ice service. 8.85AV + 401.0 0.312av + 401.0 5I-BI. Built-In Refrigerator-freezers—automatic defrost with bottom-mo unted freezer with an automatic icemaker without through-the-door ice service. 9.40AV + 420.9 0.332av + 420.9 5A. Refrigerator-freezer—autom atic defrost with bottommounted freezer with thr ough-the-door ice service. 9.25AV + 475.4 0.327av + 475.4 5A-BI. Built-in refrigerator-f reezer—automatic defrost with bottom-mounted freezer with thro ugh-the-door ice service. 9.83AV + 499.9 0.347av + 499.9 6. Refrigerator-freezers—auto matic defrost with topmounted freezer with thr ough-the-door ice service. 8.40AV + 385.4 0.297av + 385.47. Refrigerator-freezers—automatic defrost with sidemounted freezer with through-the-door ice service. 8.54AV + 432.8 0.302av + 432.8 7-BI. Built-In Refrigerator-fr eezers—automatic defrost with side-mounted freezer with thro ugh-the-door ice service. 10.25AV + 502.6 0.362av + 502.6 8. Upright freezers with manual defrost. 5.57AV + 193.7 0.197av + 193.7

3319. Upright freezers with automatic defrost without an automatic icemaker. 8.62AV + 228.3 0.305av + 228.3 9I. Upright freezers with au tomatic defrost with an automatic icemaker. 8.62AV + 312.3 0.305av + 312.3 9-BI. Built-In Upright freezers with automatic defrost without an automatic icemaker. 9.86AV + 260.9 0.348av + 260.9 9I-BI. Built-in upright freezers with automatic defrost with an automatic icemaker. 9.86AV + 344.9 0.348av + 344.9 10. Chest freezers and all other freezers except compact freezers. 7.29AV + 107.8 0.257av + 107.8 10A. Chest freezers with automatic defrost. 10.24AV + 148.1 0.362av + 148.1 11. Compact refrigerator-freezers and refrigerators other than all-refrigerators with manual defrost. 9.03AV + 252.3 0.319av + 252.3 11A.Compact all-refrigerators—manual defrost. 7.84AV + 219.1 0.277av + 219.1 12. Compact refrigerator-freezers—partial automatic defrost 5.91AV + 335.8 0.209av + 335.8 13. Compact refrigerator-freezers—automatic defrost with top-mounted freezer. 11.80AV + 339.2 0.417av + 339.2 13I. Compact refrigerator-freezers—automatic defrost with top-mounted freezer with an automatic icemaker. 11.80AV + 423.2 0.417av + 423.2 13A. Compact all-refrigerators—automatic defrost. 9.17AV + 259.3 0.324av + 259.3 14. Compact refrigerator-freezers—automatic defrost with side-mounted freezer. 6.82AV + 456.9 0.241av + 456.9 14I. Compact refrigerator-freezers—automatic defrost with side-mounted freezer with an automatic icemaker. 6.82AV + 540.9 0.241av + 540.9 15. Compact refrigerator-freezers—automatic defrost with bottom-mounted freezer. 11.80AV + 339.2 0.417av + 339.2 15I. Compact refrigerator-freezers—automatic defrost with bottom-mounted freezer with an automatic icemaker. 11.80AV + 423.2 0.417av + 423.2 16. Compact upright freezers with manual defrost. 8.65AV + 225.7 0.306av + 225.7 17. Compact upright freezers with automatic defrost. 10.17AV + 351.9 0.359av + 351.9 18. Compact chest freezers. 9.25AV + 136.8 0.327av + 136.8 AV=Total adjusted volume, expressed in ft 3 , as determined in appendices A and B of subpart B of this part. av=Total adjusted volume, expressed in Liters.

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332