CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS

1.1 PURPOSE OF THE DOCUMENT ................................................................................. 1-1 1.2 OVERVIEW OF COMMERCIAL EQUIPMENT STANDARDS................................. 1-1 1.3 OVERVIEW OF BEVERAGE VE NDING MACHINE STANDARDS........................ 1-2 1.4 STRUCTURE OF THE DOCUMENT............................................................................ 1-6

LIST OF TABLES

Table 1.3.1 Beverage Vending Machine Analyses ..................................................................... 1-4

1-i1-iiCHAPTER 1. INTRODUCTION

1.1 PURPOSE OF THE DOCUMENT

This technical support docume nt (TSD) is a stand-alone report that documents the technical analyses and results in support of the information pres ented in the notice of proposed rulemaking (NOPR) for establishing energy c onservation standards for beverage vending machines (BVM).

1.2 OVERVIEW OF COMMERCIAL EQUIPMENT STANDARDS

Title III of EPCA sets forth a variety 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 Auto mobiles. The amendments to EPCA contained in the Energy Policy Act of 2005 (EPACT 2005) , Pub. L. 109-58, include new or amended energy conservation standards and test procedures for some of these products, and direct DOE to undertake rulemakings to promulgate such requ irements. In particular , section 135(c)(4) of EPACT 2005 amends EPCA to direct DOE to prescribe energy conservation standards for beverage vending machines. (42 U.S.C. 6295(v))

Because of its placement in Part A of Title III of EPCA, the rulemaking for beverage vending machine energy conservation standards is bound by the requirements of 42 U.S.C. 6295. However, since beverage vending machines are commercial equipment, DOE intends to place the new requirements for beverage vending machines in Title 10 of the Code of Federal Regulations (CFR), Part 431 (“Energy Efficiency Program for Certain Commercial and Industrial Equipment”), which is consistent w ith DOE’s previous acti on to incorporate the EPACT 2005 requirements for commercial equipmen t. The location of the provisions within the CFR does not affect either their substance or app licable procedure, so DOE is placing them in the appropriate CFR part based on their nature or type and wi ll refer to beverage vending machines as “equipment” throughout the rulemaking. a The test procedures for beverage vending machines appear at Title 10 CFR sections 431.293 and 431.294.

EPCA provides criteria for prescribing new or amended standards for covered equipment. As indicated above, any new or amended standard for beverage vending machines must be designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (42 U.S. C. 6295(o)(2)(A) and (v)) But EPCA precludes DOE from adopting any standard th at would not result in signif icant conservation of energy. (42 U.S.C. 6295(o)(3) and (v)) Moreover, DOE may not prescribe a standa rd for certain equipment if no test procedure has been established for that equipment. (42 U.S.C. 6295(o)(3) and (v)) EPCA also provides that, in deciding whether a standard is economically justified, DOE must determine whether the benefits of the st andard exceed its burdens after receiving comments on the proposed standard. (42 U.S.C. 6295(o)(2)(B )(i) and (v)) To the greatest extent practicable, DOE must consider the following seven factors:

a Because of their placement into 10 CFR 431, beverage vending machines will be referred to as “equipment” throughout this rulemaking.

1-11. The economic impact of the standard on ma nufacturers and consumers of the equipment subject to the standard; 2. The savings in operating costs throughout th e estimated average life of the covered equipment in the type (or class) compared to any increase in the price, or in the initial charges for, or maintenance expenses of, th e equipment likely to result from the imposition of the standard; 3. The total projected amount of energy savings likely to result directly from the imposition of the standard; 4. Any lessening of the utility or the performance of the cove red equipment likely to result from the imposition of the standard; 5. The impact of any lessening of competition, 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 Secret ary considers relevant. Id.

DOE considers stakeholder participation to be a very important part of the process for setting energy conservation standards. Therefor e, before DOE determines whether to adopt a proposed energy conservation standard, it must fi rst solicit comments on the proposed standard. Since any new or amended standard must be designed to achieve significant additional conservation of energy and be technologically feasible and economically justified, DOE must review comments on the proposal and determine th at the benefits of the proposed standard exceed its burdens to the greatest extent practicab le, weighing the seven factors listed above.

Subsequent to the publicati on of the framework document, the standards rulemaking process involves three additional public notices, which are published in the Federal Register

. The first of the rulemaking notices is an a dvance notice of proposed rulemaking (ANOPR), which is designed to publicly vet the models and tools used in th e rulemaking and to facilitate public participation before the proposed rule stage. The second notice is a NOPR, which presents a discussion of comments received in re sponse to the ANOPR; analysis of the impacts of the energy conservation standard on custom ers, manufacturers, and the Nation; DOE’s weighing of the impacts; and the proposed standa rds. The third notice is the Final Rule, which presents a discussion of comments received in res ponse to the NOPR; the revised analysis of the impacts of standards; DOE’s weighing of the impacts; the standards adopted by DOE; and the effective dates of the standards.

1.3 OVERVIEW OF BEVERAGE VE NDING MACHINE STANDARDS

As mentioned above, EPACT 2005 amends s ection 325 of EPCA by adding subsections that direct the Secretary to issue energy conser vation standards for refrig erated bottled or canned beverage vending machines. Such standards shall apply to beverage vending machines manufactured three years after the date of publi cation of a final rule that establishes energy conservation standards for that equipment.

Additionally, section 135(b) of EPACT 2005 amends section 323 of EPCA by adding, in part, new subsections 323(b)(15) (42 U.S.C. 629 3(b)(15)) and 323(f) (42 U.S.C. 6293(f)), which,

1-2respectively, state that the test procedure fo r refrigerated bottled or canned beverage vending machines shall be based on American National Standards Institute (ANSI)/American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) Standard 32.1-2004, “Methods of Testing for Rating Vending Mach ines for Bottled, Canned or Other Sealed Beverages,” and that the Secretar y has until August 8, 2007, to prescrib e that new test procedure.

Section 135(a)(3) of EPACT 2005 amends sec tion 321 of EPCA by adding, in part, new subsection 321(40) (42 U.S.C. 6291(40)), wh ich establishes the following definition:

The term “refrigerated bottled or canned beverage vending machine” means a

commercial refrigerator that cools bottle d or canned beverages and dispenses the bottled or canned beverages on payment.

In addition, section 136(a)(3) of EPACT 2005 amends section 340 of EPCA by replacing subsection 340(9) (42 U.S.C 6311(9)) with, in part, definitions for the following terms relating to commercial refrigeration equipment that ar e relevant to beverage vending machines:

“(9)(A) The term ‘commercial refrig erator, freezer, and refrigerator-freezer’

means refrigeration equipment that—

“(i) is not a consumer produc t (as defined in section 321);

“(ii) is not designed and marketed exclus ively for medical, scientific, or research

purposes;
“(iii) operates at a chilled, frozen, co mbination chilled and frozen, or variable

temperature;
“(iv) displays or stores merchandise a nd other perishable materials horizontally,

semivertically, or vertically;

“(v) has transparent or solid doors, sliding or hing ed doors, a combination of

hinged, sliding, transparent, or solid doors, or no doors;

“(vi) is designed for pull-down temperatur e applications or holding temperature

applications; and

“(vii) is connected to a self-contained condensing unit or to a remote condensing

unit.

“(B) The term ‘holding temperature a pplication’ means a use of commercial

refrigeration equipment other than a pu ll-down temperature application, except a blast chiller or freezer.

* * *

“(D) The term ‘pull-down temperatur e application’ means a commercial

refrigerator with doors that, when fully loaded with 12 ounce beverage cans at 90

1-3degrees F, can cool those beverages to an average stable temperature of 38 degrees F in 12 hours or less.

“(E) The term ‘remote condensing unit’ means a factory-made assembly of

refrigerating components designed to comp ress and liquefy a specific refrigerant that is remotely located from the refrig erated equipment and consists of one or more refrigerant compressors, refrigerant condensers, condenser fans and motors, and factory supplied accessories.

“(F) The term ‘self-contained condens ing unit’ means a factory-made assembly

of refrigerating components designed to compress and liquefy a specific refrigerant that is an integral part of the refrigerated equipment and consists of one or more refrigerant compressors, refr igerant condensers, condenser fans and motors, and factory s upplied accessories.”

In June 2006, DOE published a Rulemaking Framework for Refrigerated Bottled or Canned Beverage Vending Machines describing the procedural and analytical approaches DOE anticipated using to evaluate the establishment of energy conservation standards for BVMs. This document is available at http://www.eere.energy.gov/build ings/appliance_standards/ commercial/pdfs/vending_machines_framework.pdf.

DOE held a public meeting on July 11, 2006, to discuss procedural and analytical approaches to the rulemaking and to facilita te stakeholder involvement in the rulemaking process. The analytical framework presented at the public meeting descri bed different analyses, such as the engineering analysis and the lif e-cycle cost (LCC) and payback period (PBP) analyses, the methods proposed for conducting th em, and the relationships among the various analyses. See Table 1.3.1 for all the analyses discussed at th e public meeting to be undertaken in each of the form al public rulemaking documents.

Table 1.3.1 Beverage Vending Machine Analyses ANOPR NOPR Final Rule* Market and technology assessment Revise d ANOPR analyses Revised NOPR analyses Screening analysis Life-cycle cost sub-group analysis Engineering analysis Manuf acturer impact analysis Energy use characterization Utility impact analysis Markups to determine equipment pri ce Employment impact analysis Life-cycle cost and payback period analyses Environmental assessment Shipments analysis Regulat ory impact analysis National impact analysis Preliminary manufacturer impact analysis
* During the Final Rule phase, DOE considers the comments submitted by the U.S. Department of Justice in the NOPR phase concernin g the impact of any lessening of competition th at is likely to result from the imposition of the standard. (42 U.S.C. 6295(o)(2)(B)( v))
During the July 11, 2006, public meeting, intere sted parties discussed their concerns regarding the BVM rulemaking. Stakeholder comments submitted during the framework document comment period elaborated upon the issues raised at the public meeting. DOE worked with its contractors to address these issues in the analyses.

1-4As part of the information gathering and sharing process, DOE organized and held interviews with BVM manufacturers. DOE had f our objectives for these interviews: (1) solicit feedback on the draft engineering analys is (including methodology, production costs, manufacturing processes, and findi ngs); (2) solicit feedback on topi cs related to the preliminary manufacturer impact analysis; (3) provide an ea rly opportunity to express specific concerns to DOE; and (4) foster cooperation between the manufacturers and DOE.

During the initial manufacturer interviews, six main topics related to the manufacturer impact analysis were discussed: (1) genera l key issues, (2) BVM sh ipment projections, (3) capital conversion costs, (4) product mix and profitability, (5 ) market shares and industry consolidation, and (6) cumulative regulatory burden. DOE incorporated the information gathered at the meetings into its engineering an alysis (see chapter 5 of the ANOPR TSD) and the manufacturer impact analysis (s ee chapter 12 of the ANOPR TSD).

Following the publication of the ANOPR, DOE scheduled additional interviews with manufacturers. These interviews contained follow-up questions on the ANOPR analyses and also contained topics related to the potentia l impact of energy c onservation standards on manufacturers. Appendix J c ontains the questions used to conducted the manufacturer interviews that took place following the publi cation of the ANOPR. Fo llowing the publication of the NOPR and the NOPR public meeting, DOE in tends to continue to solicit comments from manufacturers and other interested parties.

DOE conducted the LCC and PBP analyses ba sed on an approach that establishes an annual energy expense using electri c utility tariffs. Under this approach, LCC results are based on the assumption that manufactur ing plants and commercial building customers in the future will face electricity rates similar to th ose in today’s electricity markets.

DOE developed spreadsheets for the LCC, PBP, and national impact analyses. A spreadsheet tool that demonstrates the calcu lation of annual energy expenses based on commercial and industrial electric utility tari ffs accompanies the LCC spreadsheet. DOE developed a national impact analysis spreadshee t that calculates the national energy savings (NES) and national net present values (NPVs) at various energy-effici ency levels. This spreadsheet includes a model th at forecasts the impacts of energy conservation standards at various levels of BVM shipments.

DOE reviewed the recommendations ma de on April 21, 1998, by the Advisory Committee on Appliance Energy Efficiency St andards. (Advisory Committee, No. 96) b These recommendations related to (1) using the full ra nge of consumer marginal energy rates (CMERs) in the LCC analysis (replacing th e use of national average energy pr ices), (2) defining a range of energy price futures for each fuel used in the economic analyses, and (3) defining a range of primary energy conversion factors and associated emission reductions based on the generation of energy and emissions that would be displaced by energy conservation standards for each

b Advisory Committee, No. 96 refers to the recommendations of the Advisory Committee on Energy Efficiency Standards and is available for inspection at the U.S. Department of Energy, Forrestal Building, Room 1J-018 (Resource Room of the Building Technologies Program) in the file under “Energy Conservation Program for Consumer Products: Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer Products,” RIN [1904–AA83], as document number 96.

1-5rulemaking. As discussed above, DOE conducted the LCC analysis with electricity prices based on electric utility tariffs to capture the full range of CMERs. Thus, DOE incorporated the use of consumer marginal energy rates into the analysis . Also, DOE incorporated a range of future energy prices in the analysis.

1.4 STRUCTURE OF THE DOCUMENT

This NOPR TSD outlines the analytical appr oaches used in this rulemaking. The TSD consists of 14 chapters, an environmental a ssessment, a regulatory impact analysis, and appendices.

Chapter 1 Introduction: provides an ove rview of the appliance and equipment standards program and how it applies to the beverage vending machine rulemaking, and outlines the structure of the document.

Chapter 2 Analytical Framework: desc ribes the rulemaking process step by step.

Chapter 3 Market and Technology Assessmen t: characterizes the beverage vending machine market and the technologies available for increasing equipment efficiency.

Chapter 4 Screening Analysis: determ ines which technology design options are viable for consideration in the engineering analysis.

Chapter 5 Engineering Analysis: discu sses the methods used for developing the relationship between increased manufact urer selling prices and increased efficiency.

Chapter 6 Markups to Determine Equipment Price: discusses the methods used for establishing markups for converting ma nufacturer prices to customer equipment prices.

Chapter 7 Energy Use Characterization: discusses the process used for generating energy use estimates of beverage vending machines for a variety of equipment classes, climate lo cations, and standard levels.

Chapter 8 Life-Cycle Cost and Payback Pe riod Analyses: discusses the effects of energy conservation standards on indi vidual customers and users of the equipment and compares the LCC and PBP of equipment with and without higher energy conservation standards.

Chapter 9 Trial Standard Levels: discusses the trial standard levels and the methods used to derive the energy consumption equations corresponding to the proposed energy conservation standards.

Chapter 10 Shipments Analysis: discu sses the methods used for forecasting shipments with and without highe r energy conservation standards,

1-6including how equipment purchase decisions are ec onomically influenced and modeled with econometric equations.

Chapter 11 National Impact Analysis: di scusses the methods used for forecasting national energy consumption and na tional economic impacts based on estimates of future equipment efficiency distributions and annual equipment shipments in the absen ce and presence of higher energy conservation standards.

Chapter 12 Life-Cycle Cost Sub-Group Anal ysis: discusses the effects of energy conservation standards on a subgroup of beverage vending machine customers and compares the LCC and PBP of equipment with and without higher energy conservation sta ndards for these customers.

Chapter 13 Manufacturer Impact Analysis : discusses the ef fects of energy conservation standards on the financ es and profitability of equipment manufacturers.

Chapter 14 Utility Impact Analysis: di scusses the effects of energy conservation standards on the installed generati on capacity of electric utilities.

Chapter 15 Employment Impact Analysis : discusses the ef fects of energy conservation standards on national employment.

Chapter 16 Environmental Assessment for Beverage Vending Machines: discusses the effects of energy conservation st andards on airborne emissions of electric utilities.

Chapter 17 Regulatory Impact Analysis: discusses the impact of the present regulatory actions and of non-regulatory alternativ es to setting energy conservation standards.

Appendix A Instructions for Using th e Engineering Analysis Spreadsheet: accompanies Chapter 5, Engineering Analysis.

Appendix B Engineering Data: accompanies Chapter 5, Engineering Analysis.

Appendix C Detailed Data for Equipment Price Markups: accompanies Chapter 6, Markups for Equipment Price Determination.

Appendix D Methodology for developing the weighting factors for Beverage Vending Machines: accompanies Chapter 7, Energy Use Characterization.

Appendix E User Instructions for Life-Cycle Cost Spreadsheet: accompanies Chapter 8, Life-Cycle Cost and Payback Period Analyses.

Appendix F Detailed Life-Cycle Cost Out put: accompanies Chapter 8, Life-Cycle Cost and Payback Period Analyses.

1-71-8 Appendix G User Instructions for Nationa l Energy Savings and Net Present Value Spreadsheet: accompanies Chapter 10, National Impact Analysis.

Appendix H Detailed National Energy Savings and National Net Present Value Output: accompanies Chapter 10, National Impact Analysis.

Appendix I Site-to-source Conversion: accompanies Chapter 11, National Impact Analysis.

Appendix J Manufacturer Impact Analysis Interview Guides and Government Regulatory Impact Model: accompan ies Chapter 13, Manufacturer Impact Analysis.

Appendix K Utility Impacts: accompanies Chapter 14, Utilities Impact Analysis.