# TECHNICAL SUPPORT DOCUMENT:

ENERGY EFFICIENCY PROGRAM

FOR CONSUMER PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT:

CEILING FANS

September 2014

U.S. Department of Energy Assistant Secretary Office of Energy Efficiency and Renewable Energy Building Technologies Program Appliances and Commercial Equipment Standards Washington, DC 20585This Document was prepared for the Department of Energy by staff members of Navigant Consulting, Inc.

and Lawrence Berkeley National LaboratoryEXECUTIVE SUMMARY

TABLE OF CONTENTS

ES.1 OVERVIEW OF PRELIMINARY ANALYSIS ACTIVIT IES ..........................................1

ES.2 OVERVIEW OF THE PRELIMINARY ANALYSIS AND THE TECHNICAL

SUPPORT DOCUMENT ....................................................................................................3

ES.3 KEY RESULTS OF THE A NALYSIS ...............................................................................4

ES.3.1 Market and Technology Assessment .......................................................................6

ES.3.2 Screening Analysis

................................ ................................ ...................................7

ES.3.3 Engineering Analysis ...............................................................................................8

ES.3.3.1 Low -Volume Ceiling Fans (~90% of sales) ...................................................8

ES.3.3.2 High -Volume Ceiling Fans (~10 % of sales) ...............................................10

ES.3.4 Markups Analysis ..................................................................................................12

ES.3.5 Energy Use Analysis ..............................................................................................14

ES.3.6 Life

- Cycle Cost and Payback Period Analyses .....................................................16

ES.3.7 Shipments Analysis ................................................................................................19

ES .3.8 National Impact Analysis .......................................................................................23

ES.3.8.1 National Energy Savings ..............................................................................23

ES.3.8.2 Net Present Value of Consumer Benefits .....................................................24

ES.3.9 Preliminary Manufacturer Impact Analysis ...........................................................25

ES.3.10 Other Analyses .......................................................................................................26

ES.4 ISSUES ON WHICH DOE SEEKS PUBLIC COMMENT ..............................................26

ES.4.1 Scope and Definition..............................................................................................26

ES.4.2 Manufacturing Location for High

- Volume Ceiling Fan ........................................26

ES.4.3 High -Volume Ceiling Fan Market .........................................................................27

ES.4.4 High

- Volume Ceiling Fans Shipments ..................................................................27

ES.4.5 Market Share of Hugger, Multi-mount, and Standard Low- Volume Ceiling

Fans ........................................................................................................................27

ES.4.6 Market Share of Unconventional Blade Low- Volume Ceiling Fans .....................27

ES.4.7 Market Shares by Efficiency Levels ......................................................................28

ES.4.8 Low

- Volume Ceiling Fan Market Saturation ........................................................28

ES.4.9 Product Lifetimes ...................................................................................................28

ES.4.10 Relationship Between Usage and Life Expectancy ...............................................28

ES.4.11 Repair Cost for Ceiling Fans..................................................................................28

ES.4.12 Wind and Temperature Sensors as Technology Option ........................................28

ES.4.13 Technology Options ...............................................................................................29

ES.4.14 Product Classes ......................................................................................................29

ES.4.15 Installation of Multi -Mount Ceiling Fans ..............................................................29

ES.4.16 Market and Technology Assessment .....................................................................29

ES.4.17 Screening Analysis

................................ ................................ .................................29

ES.4.18 More Efficient Alternating Current Motors ...........................................................29

ES.4.19 Other Single -Phase Alternating Current Motor Options .......................................30

ES.4.20 Quiet Fan Speed Controls ......................................................................................30

ES.4.21 Number of Fan Blades ...........................................................................................30

ES -iES.4.22 Twisted Blades .......................................................................................................30

ES.4.23 Patented Blade Shapes ...........................................................................................30

ES.4.24 Blade Attachments .................................................................................................30

ES .4.25 Technologies to Reduce Standby Power ................................................................30

ES.4.26 Approach to the Engineering Analysis ..................................................................31

ES.4.27 Distribution Channels and Price Markups for High- Volume Ceiling Fans ...........31

ES.4.28 Payment of Shipping and Tariff Costs ...................................................................31

ES.4.29 Operating Hours for High- Volume Ceiling Fans ...................................................31

ES.4.30 Life

- Cycle Cost and Payback Period Analysis ......................................................31

ES.4.31 Price Learning ........................................................................................................31

ES.4.32 Permanent Magnets used in DC Motors ................................................................31

ES.4.33 Product Class Switching ........................................................................................32

ES.4.34 Relative Price Elasticity of Demand for Ceiling Fans ...........................................32

ES.4.35 Impact of Ceiling Fan Operation on Air Conditioning and Heating .....................32

ES.4.36 Shipments and National Impact Analysis ..............................................................32

ES.4.37 Regulatory Flexibility Act Analysis ......................................................................32

ES.4.38 Manufacturer Subgroup Analysis ..........................................................................32

ES.4.39 Manufacturer Impact Analysis ...............................................................................32

ES.4.40 Consumer Subgroup Analysis................................................................................33

ES.4.41 Emissions Analysis ................................................................................................33

ES.4.42 Monetization of Emissions Reductions Benefits ...................................................33

ES.4.43 Utility Impact Analysis ..........................................................................................33

ES.4.44 Employment Impact Analysis ................................................................................33

ES.4.45 Regulatory Impact Analysis ...................................................................................33

LIST OF TABLES

Table ES.3.1 Low -Volume Ceiling Fans, 7 Feet in Diameter or Less ....................................5

Table ES.3.2 Product Classes for Ceiling Fans .......................................................................7

Table ES.3.3 Cost- Efficiency Curves for Low -Volume Standard Fans ................................10

Table ES.3.4 Cost- Efficiency Curves for Low -Volume Hugger Fans ..................................10

Table ES.3.5 Cost- Efficiency Curves for High

- Volume Large

- Diameter Ceiling

Fans ..................................................................................................................11

Table ES.3.6 Cost- Efficiency Curves for High

- Volume Small

- Diameter Ceiling

Fans ..................................................................................................................12

Table ES.3.7 Markups for Low-Volume Ceiling Fans ..........................................................13

Table ES.3.8 Markups for High- Volume Ceiling Fans .........................................................13

Table ES.3.9 Tariff, Shipping Cost, and Overhead for Low-Volume and HighVolume Small

- Diameter Ceiling Fans .............................................................14

Table ES.3.10 Average Annual Energy Use and Savings for Low-Volume Standard Ceiling Fans .....................................................................................................15

Ta ble ES.3.11 Average Annual Energy Use and Savings for Low-Volume Hugger Ceiling Fans .....................................................................................................15

ES

- iiTable ES.3.12 Average Annual Energy Use and Savings for High- Volume Small

Diameter Ceiling Fans .....................................................................................15

Table ES.3.13 Average Annual Energy Use and Savings for High- Volume Large

Diameter Ceiling Fans .....................................................................................16

Table ES.3.14 Percentage of each efficiency level in the base case ........................................16

Table ES.3.15 Average LCC and PBP Results for Low-Volume Standard Ceiling

Fans ..................................................................................................................17

Table ES.3.16 Average LCC Savings Relative to the Base Case Efficiency Distribution for Low-Volume Standard Ceiling Fans .....................................17

Table ES.3.17 Average LCC and PBP Results for Low- Volume Hugger Ceiling Fans .........17

Table ES.3.18 Average LCC Savings Relative to the Base Case Efficiency Distribution for Low-Volume Hugger Ceiling Fans ........................................18

Table ES.3.19 Average LCC and PBP Results for High- Volume Small

- Diameter Ceiling Fans .....................................................................................................18

Table ES.3.20 Average LCC Savings Relative to the Base Case Efficiency Distribution for High

- Volume Small

- Diameter Ceiling Fans .........................18

Table ES.3.21 Average LCC and PBP Results for High- Volume Large

- Diameter Ceiling Fans .....................................................................................................19

Table ES.3.22 Average LCC Savings Relative to the Base Case Efficiency Distribution for High

- Volume Large

- Diameter Ceiling Fans .........................19

Table ES.3.23 Estimates of Cumulative Full

- Fuel Cycle National Energy Savings (quads) for Low

- Volume Ceiling Fans ............................................................24

Table ES.3.24 Estimates of Cumulative Full

- Fuel Cycle National Energy Savings (quads) for High

- Volume Ceiling Fans ...........................................................24

Table ES.3.25 Cumulative Net Present Value of Consumer Benefits for Low-Volume Ceiling Fans at 3% in billion 2013$ ................................................................25

Table ES.3.26 Cumulative Net Present Value of Consumer Benefits for Low-Volume Ceiling Fans at 7% in billion 2013$ ................................................................25

Table ES.3.27 Cumulative Net Present Value of Consumer Benefits for High -Volume Ceiling Fans at 3% in billion 2013$ ................................................................25

Table ES.3.28 Cumulative Net Present Value of Consumer Benefits for High -Volume Ceiling Fans at 7% in billion 2013$ ................................................................25

LIST OF FIGURES

Figure ES 1.1 Flow Diagram of Analyses for the Ceiling Fan Rulemaking Process ...............2 Figure ES 3.1 Projected Shipments of Low- Volume Ceiling Fans ........................................21 Figure ES 3.2 Projected Shipments of High- Volume Small

- Diameter Ceiling Fans .............22 Figure ES 3.3 Projected Shipments of High- Volume Large

- Diameter Ceiling Fans .............22

ES

- iiiEXECUTIVE SUMMARY

ES.1 OVERVIEW OF PRELIMINARY ANALYSIS ACTIVITIES

Section 6295(o)(3)(B) of 42 U.S.C. requires the U.S. Department of Energy (DOE) to establish energy conservation standards that achieve the maximum improvement in ener gy efficiency that is technologically feasible and economically justified. This executive summary highlights the activities associated with this preliminary analysis that DOE conducted when considering amended energy conservation standards for ceiling fan s . The executive summary also describes key results from DOE’s preliminary analysis and delineates issues on which DOE

seeks comment.

Figure ES 1.1 presents a summary of the analytical components of the standards- setting process and illustrates how key results are generated. The focal point of the figure is the center column, labeled “Analyses.” The columns labeled “Key Inputs” and “Key Outputs” show how the analyses fi t into the process and how they relate to each other. Key inputs are the types of data and other information that the analyses require. Some key information is obtained from public databases; DOE collects other inputs from interested parties or persons hav ing specialknowledge and expertise. Key outputs are analytical results that feed directly into the standardssetting process. The issues on which DOE seeks comment from interested parties derive from the key results that are generated by the preliminary a nalys is. Arrows connecting analyses show the types of information that feed from one analysis to another.

ES -1Figure ES 1.1 Flow Diagram of Analyses for the Ceiling Fan Rulemaking Process

ES -2ES.2 OVERVIEW OF THE PRELIMINARY ANALYSIS AND THE TECHNICAL

SUPPORT DOCUMENT

For the preliminary analysis, DOE published a notice of public meeting (NOPM) in the Federal Register, which announce d the availability of th is preliminary technical support document (TSD), the date and place of the public meeting, and presentation materials interested parties may review before the public meeting. In addition, the NOPM highlights the major analyses DOE developed in the preliminary analysis stage.

The preliminary TSD describes each preliminary analysis in detail, providing detailed descriptions of inputs, sources, methodologies, and results. Chapter 2 of the preliminary TSD provides an overview of each preliminary analysis, the comments received in response to the analytical approach es DOE described in the framework document, and DOE’s responses to those comments. The following chapters of the preliminary TSD address the analyses performed for the preliminary analysis stage.

• Chapter 3: The market and technology assessment (MTA) characterizes the relevant product markets and technology options, including prototype designs.

• Chapter 4: The screening analysis reviews each technology option uncovered in the MTA to determine whether it is technologically feasible; is practicable to manufact ure, install, and service; would adversely affect product utility or product availability; or would have adverse impacts on health and safety.

• Chapter 5: The engineering analysis develops cost -efficiency relationships that show a manufacturer’s cost of achieving increased efficiency. DOE uses manufacturer markups to convert manufacturer production cost (MPC) to manufacturer selling price (MSP).

• Chapter 6 : The markups analysis converts the MSP derived from the engineering analysis to consumer equipment prices based on distribution chain markups.

• Chapter 7 : The energy use analysis determines the annual energy consumption of the products under consideration.

• Chapter 8: The life- cycle cost (LCC) and payback period (PBP) analysis calculates, at the consumer level, the discounted savings in operating costs throughout the estimated average life of the covered product, compared to any increase in the product’s installed cost likely to result directly from a given standard.

• Chapter 9: The shipments analysis forecasts shipments of products, which are then used to calculate the national impacts of standards on energy consumption, the net present value (NPV) of consumer costs and savings, and future manufacturer cash flows.

• Chapter 10: The national impact analysis (N IA) assesses the cumulative national energy savings (NES) from standards and the NPV of consumer costs and savings associated with standards at different efficiency levels.

• Chapter 12: The preliminary manufacturer impact analysis (MIA) assesses the potential impacts of energy conservation standards on manufacturers, such as effects on

ES -3expenditures for capital conversion, profitability, shipments, and research and development costs.

The remaining chapters of the preliminary TSD address the analyses to be per formed for the notice of proposed rulemaking ( NOPR ) stage:

• Chapter 11: The consumer subgroup analysis evaluates the effects of potential energy conservation standards on various national subgroups of the population.

• Chapter 13: The emissions analysis discusses the effects of potential energy conservation

standards on various airborne emissions.

• Chapter 14: Monetization of emissions reductions benefits considers the estimated

economic benefits likely to result from reduced emissions of carbon dioxide and n itrogen oxides expected to result from the standards.

• Chapter 15: The utility impact analysis examines impacts of potential energy conservation standards on the generation capacity of electric utilities.

• Chapter 16: The employment impact analysis examines the effects of potential energy conservation standards on national employment.

• Chapter 17: A regulatory impact analysis examines the national impacts of non

regulatory alternatives to mandatory energy conservation standards.

ES.3 KEY RESULTS OF THE ANALYSIS

De termination of Scope The Energy Policy and Conservation Act (EPCA) defines a “ceiling fan” as “a nonportable device that is suspended from a ceiling for circulating air via the rotation of fan blades.” (42 U.S.C. 6291(49)) Pursuant to EPCA, DOE has the authority to consider amended energy conservation standards for ceiling fans. (42 U.S.C. 6295(ff )(6)(A) ) EPCA also includes certain statutorily prescribed design standards. (42 U.S.C. 6295(ff)(1)(A)) The statutory design standards will remain in place and are not subject to review as part of this rulemaking process.

As discussed in the concurrent test procedure rulemaking for ceiling fans, DOE is :

1. Proposing to reinterpret the statutory definition of a ceiling fan to include both hugger

and multi-mount ce iling fans ; and

2. C larifying that ceiling fans capable of producing large volumes of airflow, such as those ceiling fans typically used in industrial applications, meet the statutory definition of a ceiling fan

.

DOE is considering standards for hugger ceiling fans, multi-mount ceiling fans, and ceiling fans capable of producing large volumes of airflow, in addition to other ceiling fans, in this rulemaking

.

ES -4EPCA requires that if DOE sets energy efficiency standards for ceiling fans, it must

consider ''esta blishing separate exempted product classes for highly decorative fans for which air movement performance is a secondary design feature.'' (42 U.S.C. 6295(ff)(6)(B)(ii)) There currently is no statutory definition of “highly decorative fans for which air movement performance is a secondary feature.” Because DOE is now considering energy efficiency performance standards for ceiling fans, DOE is considering an exempt ed product class for highly decorative ceiling fans pursuant to the definition below.

DOE is considering defining a “highly decorative ceiling fan” as “a ceiling fan that operates at a maximum rotational speed of 90 RPM and produces less than 2,000 CFM of airflow on high speed.”

DOE also notes that the following definition s for low- and high -volume (where volume refers to the airflow volume) , standard, hugger, and multi-mount ceiling fans have been proposed

in the concurrent t est p rocedure rulemaking for ceiling fans :

• Low-volume ceiling fan : “ A ceiling fan that : (1) I s less than or equal to 7 feet in diameter

, AND (2) Has a blade thickness greater than or equal to 3.2 mm at the edge and a maximum tip speed less than or equal to the limit in Table 1,

OR Has a maximum airflow volume less than or equal to 5,000 CFM.”

• High -volume ceiling fan : “ A ceiling fan that : (1) I s greater than 7 feet in diameter

, OR (2 ) Has a blade thickness of less than 3.2 mm at the edge or a maximum tip speed

that exceeds the threshold in Table 1

AND Has a maximum airflow volume greater than 5,000 CFM.”

Table 1 is reproduced below as Table ES. 3.1

.

Table ES. 3.1 Low- Volume Ceiling Fans, 7 Feet in Diameter or Less

Airflow Thickness (t) of edges of blades Maximum speed at tip of blades

D irection * mm (inch) m/s (feet per minute)

Downward

- Only 4.8 > t ≥ 3.2 (3/16 > t ≥ 1/8) 16.3 (3

, 200)

Downward

- Only t ≥ 4.8 (t ≥ 3/16) 20.3 (4

, 000)

Revers ible 4.8 > t ≥ 3.2 (3/16 > t ≥ 1/8) 12.2 (2

, 400)

Revers ible t ≥ 4.8 (t ≥ 3/16) 16.3 (3

, 200)

* The “downward

- only” and “reversible” airflow directions are mutually exclusive; therefore, a ceiling fan that can produce airflow only in the downward direction need meet only the “downward

- only” blade edge thickness and tip speed requirements and a ceiling fan that can produce airflow in the downward and upward directions

need meet only the “reversible” requirements.

ES -5• Hugger ceiling fan : “A ceiling fan where the lowest po int on the fan blades is no more than ten inches from the ceiling.”

• Standard ceiling fan : “A ceiling fan where the lowest point on the fan blades is more than ten inches from the ceiling.”

• Multi -mount ceiling fan : “A ceiling fan that can be mounted in both the standard

and hugger ceiling fan configurations.”

ES.3.1 Market and Technology Assessment

A market and technology assessment characterizes the relevant equipment

, markets , and technology options, including working prototype designs. DOE addresses (1) manufacturer market share and characteristics, (2) existing regulatory and non

- regulatory initiatives for improving efficiency , and (3) trends in equipment characteristics and retail markets. This information provides data and resource material throughout the analysis.

DOE review ed information from published literature

, manufacturer interviews, industry experts, and consumer surveys to develop an overall understanding of the ceiling fan industry. Market research data, government databases

, surveys of ceiling fan users, retail listings, industry publications ( e.g., manufacturer catalogs), and industry experts provided the bulk of the

information for the market assessment , which includes: (1) manufacturers and their market

share s , (2) histor ical shipments , (3) regulatory and non- regulatory programs

, (4) ceiling fan characteristics, and ( 5) industry trends.

DOE surveyed available products on the market and researched working prototypes to determine which technologies and combinations of techn ologies manufacturers use to attain higher performance levels. DOE then developed a list of technologies to be considered. The list of possible technology options consists of different types of ceiling fan motors, design modifications to the fan blades, and controls. The technologies identified include all those DOE believes may improve ceiling fan efficiency

. See chapter 3 of this TSD for details.

DOE generally divides covered products into product classes by the type of energy used, capacity, or other performance- related features that affect efficiency. Different energy conservation standards may apply to different product classes. (42 U.S.C. 6295(q)) All ceiling fans operate on electricity, so the type of energy consumed was not a factor in considering product classes, but both consumer utility and capacity were taken into account.

DOE is considering separating ceiling fans into low -volume and high-volume fans and creating three low -volume product classes and two high-volume product classes, as shown in

Table ES. 3.2

. Low -volume and high- volume cei ling fans offer distinct utilities. Low -volume ceiling fans can be safely used in settings w h ere the fan blades may be within 10 feet of the floor. High -volume ceiling fans are capable of providing larger volumes of airflow.

For low- volume ceiling fans, DOE is considering establishing separate product classes for hugger and standard ceiling fans, because hugger ceiling fans can be safely used in environments with lower ceilings but are less efficient as a result of their proximity to the ceiling

. Instead of further separating low-volume fans by capacity, DOE intends to use an equation- based approach to potential airflow efficiency standard levels to account for the range

ES -6of diameters for standard and hugger ceiling fans. As noted previously, DOE is also considering establishing a separate product class for highly decorative ceiling fans (which are a type oflowvolume ceiling fan) that would be exempt from standards. (42 U.S.C. 6295(ff)(6)(B)(ii))

For high-volume ceiling fans, DOE is considering establishing two product classes based

on capacity, where blade span is used as a proxy for capacity . Unlike low-volume ceiling fans, the distinct types of construction available to high-volume ceiling fans with blade spans greater

than and less than seven feet m ake it infeasible to apply a single equation across all possible blade spans.

Because multi -mount ceiling fans can be used in either a hugger or standard configuration, DOE is proposing to test multi -mount ceiling fans in both the hugger and standard

co nfigurations in the concurrent test procedure rulemaking for ceiling fans. (The ceiling fans test procedure NOPR was issued on September 19, 2014, and is available at http://www.regulations.gov/#!docketDetail;D=EERE -2013- BT

- TP -0050 .) DOE is considering

r equiring that multi -mount fans meet the potential standard for both product classes. For this preliminary analysis, when the potential impact of a particular hugger fan efficiency level was being analyzed, DOE assumed that a standard would be set at the eq uivalent efficiency level for fans in the standard product class (and vice- versa).

Table ES. 3.2 Product Classes for Ceiling Fans

Product

Class Definition UtilityLow-Volume Hugger Lowest point on fan blades is ≤ 10 inches from the ceiling Safe to use in environments with low ceilings

Standard Lowest point on fan blades > 10 inches from the ceiling Safe to use in environments where blades may be within 10 feet of the

floor but a hugger fan is not required

Highly

Decorative Rotational speed ≤ 90 RPM and

airflow ≤ 2000 CFM at high speed. Decorative only; air movement performance is not a primary featureHigh-Volume Small

Diameter (HVSD) High -volume ceiling fan l ess than 7

feet in diameter Suitable for use in environments that require large airflow volume (and smaller capacity than HVLD fans)

Large

Diameter (HVLD) High -volume ceiling fan g reater
than 7 feet in diameter Suitable for use in environments that require large airflow volume (and larger capacity than HVSD fans)

ES.3.2 Screening Analysis

DOE develops an initial list of options for enhancing the efficiency of ceiling fans from the technologies that the technology assessment identified as feasible. DOE then conducts a screening analysis (chapter 4) in which it examines, in consultation with interested parties, whether the identified technologies: (1) are technologically feasible; (2) are practicable to

ES -7manufacture, install, and service; (3) have an adverse impact on product utility or availability; or (4) have adverse impacts on health and safety. If the technology option does not satisfy these criteria, DOE will not consider that technology option further. In the subsequent engineering analysis, DOE further examines the technology options that it did not remove from consideration

in the scree ning analysis.

ES.3.3 Engineering Analysis

The engineering analysis establishes the relationship between the cost of manufacturing ceiling fans and their efficiency. This relationship serves as the basis for calculating costs and benefits of modified product designs for consumers, manufacturers, and the nation. Chapter 5 describes the product classes DOE analyzed, the representative sizes, the baseline efficiencies, the design options DOE considered, the methodology DOE used to develop the manufacturing production cost model, and the cost- efficiency results.

ES.3.3.1 Low- Volume Ceiling Fans (~90 % of sales)

Product Classes and Representative Sizes

. In t he engineering analysis , DOE directly analyzed two product classes of low-volume fans: standard and hugger fans. Within the standard class, DOE analyzed three r epresentative fan sizes (44 inch, 52 inch, and 60 inch). For the hugger class, DOE analyzed two representative fan sizes (44 inch and 52 inch). These five product class and representative size combinations represent some of the most popular types of

the lo w- volume ceiling fans.

To determine the baseline units for each product class and representative size, DOE first identified the least efficient ceiling fan s on the market. DOE used publicly available information

and found that for the 52 inch standard cl ass, the least efficient fan in terms of CFM/W is an unconventional palm blade fan. Palm blade fans are considered ‘unconventional’ because most fans on the market have flat, wood blades. For the other sizes and product classes, the least

efficient fans on the market have conventional flat-blades. One reason for this could be that the 52-inch standard fans are the most common type of fan in the low-volume fan category, and thus other sizes might not have as large of a selection of fan types and efficiencies

. However, DOE research showed that fans with unconventional blades are generally less efficient than similarly sized fans (same size motor and blade span) with flat

- blades. Because the range of efficiencies of fans with unconventional-blade designs differs from that of fans with flat blades, DOE analyzed the cost and efficiency of both fan types. DOE used the ratio of the efficiencies of the least

efficient 52 inch flat -blade and unconventional- blade fans to calculate the efficiency of market

minimum unconventional-blade fans in other sizes.

Therefore, based on market data, DOE identified two separate market minimum efficiency fans for each product class and size : (1) an unconventional-blade fan, and 2) a flat,

wood-blade fan. DOE found that all market minimum

- efficiency fans have a conventional permanent split capacitor (PSC) alternating current (AC) induction motor. DOE then determined the baseline fan efficiency and cost by aggregating data from the two market minimum efficiency fans.

ES -8With the identified baseline fans, DOE then generated five cost

- efficiency curves, one for each product class and representative size. Chapter 5 of the preliminary TSD includes additional details on the baseline efficiencies, the representative sizes, and the cost

- efficiency curves developed as part of the engineering analysis.

Manufacturing Cost Assessment

. DOE estimated the manufacturing costs associated with each design option for both the standard and hugger product classes. To develop a detailed cost model, the assessment method used information gained during manufacturer site visits, manufacturer interviews, and independent research on component and material costs and product teardowns. For the teardowns, DOE disassembled fans of different types, analyzed the materials, components, and manufacturing processes used to manufacture the products, and developed a comprehensive spreadsheet model itemizing all parts and associated costs. With this information, DOE calculated the amount a fan manufacturer would pay to produce each fan. a This is known as the MPC. DOE obtained input from ceiling fan manufacturers on the manufacturing cost model inputs. DOE aggregated manufacturers’ costs and other information as appropriate. Chapter 5 of the preliminary TSD includes information on the inputs used to determine the manufacturing cost, including material, labor, and overhead prices. Chapter 5 also includesinformation on the various components and features incorporated into the designs for lowvolume ceiling fans.

The primary outputs of the engineering analysis are cost- efficiency curves for each product class and representative size. The cost- efficiency curves are described by the design options DOE analyzed and the increase in MSP associated with implementing them. The MSP is the MPC estimated from teardowns multiplied by a manufacturer markup. Each efficiency level (EL) in its analysis is aligned with specific design options. In conducting this energy conservation standard rulemaking, and as required by EPCA, DOE is not co nsidering mandating any particular design option. If the rulemaking results in an amended energy conservation standard, it will be in the form of an efficiency level equation using the metric in the applicable DOE test procedure.

T able ES. 3.3 and Table ES. 3.4 provide the cost- efficiency relationships for low -volume ceiling fans. The efficiencies are calculated using the efficiency metric from the ceiling fans test procedure NOPR for high and low speeds. These relationships are discussed in greater detail in chapter 5 of this preliminary TSD.

a DOE modeled low

- volume fans as being produced by a third

- party factory in China. See Chapter 5 of th is preliminary TSD for more details.

ES -9Table ES. 3.3 Cost -E fficiency Curves for Low

- Volume Standard Fans

44

- inch 52

- inch 60

- inch

EL Design Option Efficiency (CFM/W) MSP (2013$) Efficiency (CFM/W) MSP (2013$) Efficiency (CFM/W) MSP (2013$)

0 Baseline 50 $45.54 49 $56.62 51 $83.85

1 Aggregated Market

Minimum 66 $45.54 64 $56.62 67 $83.85

2 EL1 + Fan Optimization 72 $45.54 74 $56.62 80 $83.85

3 EL 2 + Larger Direct

Drive motor 79 $52.99 83 $66.66 93 $98.35

4 EL 2 + DC Motor 132 $70.11 139 $89.82 156 $131.86

Table ES. 3.4 Cost -E fficiency Curves for Low -Volume Hugger Fans

44

- inch 52

- inch

EL Design Option Efficiency (CFM/W) MSP (2013$) Efficiency (CFM/W) MSP (2013$)

0 Baseline 37 $43.85 38 $52.19

1 Aggregated Market Minimum 49 $43.85 50 $52.19

2 EL1 + Fan Optimization 51 $43.85 55 $52.19

3 EL 2 + Larger Direct Drive motor 56 $51.22 62 $61.12

4 EL 2 + DC Motor 93 $68.14 104 $81.70

ES.3.3.2 High

- Volume Ceiling Fans (~10 % of sales)

Product Classes and Representative Sizes

. The engineering analysis directly analyzed two product classes of high- volume fans: high -volume large- diameter ( HVLD ) and high -volume

small

- diameter ( HVSD ) ceiling fans. Within the HVLD class, DOE analyzed three representative fan sizes (8, 12, and 24 feet). For the HVSD class, DOE analyzed two representative fan sizes (36 and 56 inch es ). These five product class and representative size combinations in the highvolume ceiling fan category broadly represent the most common high-volume ceiling fans.

Based on its analysis, DOE generated five cost

- efficiency curves, one for each product class and representative size. After a review of publicly available product literature and discussions with manufacturers, DOE found that baseline high-volume ceiling fans have the following design features: (1) a direct

- drive permanent split capacitor (PSC) motor, (2) flat steel blades for HVSD fans and airfoil-shaped aluminum blades for HVLD fans, and (3) a motor housing for HVSD fans and an exposed motor with no housing for HVLD fans.

DOE collected publicly available performance data to calculate the baseline cubic feet per minute per watt (CFM/W) efficiency for each product class and representative size. The efficiencies were calculated using the efficiency metric proposed in the ceiling fans test

ES -10procedure NOPR (issued on September 19, 2014). Chapter 5 of this preliminary TSD includes additional details on the baseline efficiencies, the representative sizes, and the cost

- efficiency curves developed as part of the engineering analysis.

Manufacturing Cost Assessment

. DOE estimated the manufacturing costs associated with each design option for both the HVSD and HVLD product classes. The assessment method used information gained during manufacturer site visits and manufacturer interviews, publicly available fan performance data, independent research on component and material costs, and

relational data from the low

- volume ceiling fan analysis. DOE calculated the MPC for baseline products in each representative size using retail prices and industry average distribution channel markups. MPCs at higher efficiency levels were calculated as percentage increases relative to the

baseline cost . DOE aggregated manufacturers’ costs and other information as appropriate. Chapter 5 of this preliminary TSD includes information on the inputs used to determine the manufacturing cost, including material, labor, and overhead prices. Chapter 5 also includesinformation on the various components and features incorporated into the designs for highvo lume ceiling fans.

The primary outputs of the engineering analysis are cost- efficiency curves for each product class and representative size. The cost- efficiency curves are described by the design options that DOE analyzed and the increase in MSP associated with implementing them. Each efficiency level in its analysis is aligned with specific design options. DOE is not considering mandating any particular design option in this rulemaking, as required by EPCA. If the rulemaking results in an amended energy conservation standard, it will be in the form of an efficiency level equation using the metric in the applicable DOE test procedure. Table ES. 3.5

and Table ES. 3.6 provide the cost-efficiency relationships for high-volume ceiling fans. The efficiencies are calculated using the efficiency metric from the ceiling fans test procedure NOPR (issued on September 19, 2014) for high and low speeds. As shown in Table ES. 3.5 , the baseline

MSP is less than the MSP at EL 1. This is because the baseline HVLD fan is assumed to have eight fan blades, while at EL 1 it has only six blades. Becaus e the number of blades is the only change, the total cost of the six- blade fan is less than t he cost of the eight- blade fan. These relationships are discussed in greater detail in chapter 5 of this preliminary TSD.

Table ES. 3.5 Cost -E fficiency Curves for High -Volume Large- Diameter Ceiling Fans

8

- ft 12

- ft 20

- ft

EL Design Option Efficiency (CFM/W) MSP ( 2013 $) Efficiency (CFM/W) MSP ( 2013 $) Efficiency (CFM/W) MSP ( 2013 $)

0 Baseline 44 $ 1,704 87 $ 1,812 171 $ 2,184

1 EL 0 + Six blades 46 $ 1,700 90 $ 1,807 178 $ 2,175

2 EL 1 + Airfoil

Blades 74 $ 1,795 144 $ 1,949 285 $ 2,412

3 EL 2 + DC Motor 150 $ 3,614 293 $ 3,768 579 $ 4,231

ES -11Table ES. 3.6 Cost -E fficiency Curves for High

- Volume Small

- Diameter Ceiling Fans

36

- inch 56

- inch

EL Design Option Efficiency (CFM/W) MSP ( 2013 $) Efficiency (CFM/W) MSP ( 2013 $)

0 Baseline 80 $ 28.02 231 $ 30.85

1 EL 0 + Curved blades 86 $ 31.88 247 $ 35.09

2 EL 1 + Airfoil blades 112 $ 33.04 323 $ 36.37

3 EL 2 + DC motor 201 $ 58.55 583 $ 64.46

ES.3.4 Markups Analysis

The markups analysis (chapter 6 ) develops appropriate markups in the distribution chain to convert the estimates of MSP derived in the engineering analysis to end

- user purchase prices. In developing markups, DOE determined the distribution channels for ceiling fans and the markup associated with each party in the distribution channel. DOE identified three distribution

channels for low- volume ceiling fans: (1) manufacturer to home improvement center to consumer, (2) manufacturer to electric wholesaler to contractor to consumer, and (3) manufacturer to lighting showroom to consumer.

DOE identified two distribution channels for high-volume fans. For most high-volume fans, the manufacturer sells the product to a dealer, who sells it to an end- user

. DOE is also aware of a direct sale channel for high -volume ceiling fans. In this channel, the manufacturer sells the product directly to an end-user using an in-house dealer. In this case, DOE is assuming the markup for in- house dealers is the same as the conventional deale r markup; therefore, the overall markup for the direct sales channel is the same as the manufacturer

- to

- dealer

- to

consumer distribution channel.

DOE developed separate markups for baseline products (baseline markups) and for the

cost increase associated with improvements required to produce more-efficient products (incremental markups).

Most of the low-volume and high- volume small -diameter ceiling fans sold on the U.S. market are manufactured (components and assembly) in Asia; therefore

, DOE also accou nted for tariffs, shipping cost, and overhead burden from importers in the product price determination for these products. The shipping cost for low-volume ceiling fans passing through the showroom distribution is higher than the other two distribution channels due to the relatively small quantities purchased from manufacturers compared to home improvement centers and electric al wholesalers. The tariff is also applied differently for the showroom channel, because the manufacturer is the ceiling fan importer , whereas the retailer or wholesaler is the importer for the

other channels. Since high -volume large

- diameter ceiling fans are mainly manufactured in the

U nited States , no such extra costs w ere considered. In addition, DOE added sales tax to the

estimated retail prices to derive the final purchase price for all ceiling fans

. Table ES. 3.7 and

Table ES. 3.8 summarize the markups developed for low-volume and high-volume ceiling fans,

ES -12respectively

. Table ES. 3.9 lists the tariff, shipping cost, and overhead burden used for lowvolume and high- volume small

- diameter ceiling fans.

Table ES. 3.7 Markups for Low

- Volume Ceiling Fans

Distribution

Channel Manufacturer  Home

Center  Consumer Manufacturer 

Wholesaler  Contractor
 Consumer Manufacturer 

Showroom  Consumer

Baseline Incremental Baseline Incremental Baseline Incremental

Manufacturer 1.37 1.37 1.37

Home Center 1.50 1.14

Wholesaler 1.25 1.10

Contractor 1. 10 1. 10

Showroom 2.00 1.52

Sales Tax 1.071 1.071 1.071

Table ES. 3.8 Markups for High

- Volume Ceiling Fans

Distribution

Channel Manufacturer  Dealer 

Consumer Manufacturer  In

- house Dealer

 Consumer

Baseline Incremental Baseline Incremental

Manufacturer 1.37 1.37

Dealer/ In

- house

Dealer 1.74 1.21 1.74 1.21

Sales Tax 1.071 1.071 1.071 1.071

ES -13Table ES. 3.9 Tariff, Shipping Cost

, and Overhead for Low -Volume and High- Volume

Small

- Diameter Ceiling Fans

Product Type Low

- Volume Ceiling Fans High

- Volume

Small

- Diameter Ceiling Fan

Distribution

Channel Manufacturer 

Home Center 

Consumer Manufacturer 

Wholesaler 

Contractor 

Consumer Manufacturer 

Showroom 

Consumer Manufacturer 

Dealer 

Consumer

Tariff 4.7% of MSP 4.7% of MPC 4.7% of MSP

Shipping cost $2.50/unit $4.25/unit $2.50/unit

Overhead $2.50/unit $2.50/unit $2.50/unit

ES.3.5 Energy Use Analysis

The purpose of the energy use analysis is to determine the annual energy consumption of ceiling fans and to assess the energy savings potential of increased ceiling fan efficiency

. The energy use analysis provides the basis for developing the energy savings used in the LCC analysis and subsequent analyses. DOE ’s test procedure provides standardized results that can serve as the basis for comparing the performance of different products used under the same conditions, but actual usage in the field ma y differ from usage estimated by the test procedure.

To determine the distribution of field energy use for ceiling fans, DOE combined information on power consumption from chapter 5 of the TSD with information on operating hours from a study that survey ed a nationally representative sample of ceiling fan owners.

DOE has not included any reduction of air conditioner usage in the energy use analysis for ceiling fans . In response to comments on the f ramewor k document, DOE issued a Request for Information (RFI) regarding the potential interaction between ceiling fans and air conditioning usage. 78 FR 62494. While RFI commenters were generally in agreement on the theoretical energy savings potential from substituting ceiling fan usage for air conditioning

usage, no clear evidence was presented indicating that ceiling fans are used in this manner in practice . Given the above, DOE is assuming no impact on air conditioning usage from ceiling fan usage. Chapter 2 contains a full discussion of this topic.

Table ES. 3.10 and Table ES. 3.13 show the averag e annual energy use for each efficiency level that DOE considers in this rulemaking. Chapter 7 provides more details on the methods, data, and assumptions used for the energy use analysis.

ES -14Table ES. 3.10 Average Annual Energy Use and Savings for Low

- Volume Standard Ceiling

Fans

EL 44

- inch diameter 52

- inch diameter 60

- inch diameter

Energy Use

(kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr)

0 96 0 145 0 189 0

1 70 25 106 39 139 51

2 64 31 93 52 116 73

3 59 37 82 63 101 88

4 41 55 57 88 70 120

Table ES. 3.11 Average Annual Energy Use and Savings for Low

- Volume Hugger Ceiling

Fans

EL 44

- inch diameter 52

- inch diameter

Energy Use

(kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr)

0 108 0 131 0

1 79 29 97 35

2 76 32 87 44

3 69 38 77 54

4 48 59 54 78

Table ES. 3.12 Average Annual Energy Use and Savings for High

- Volume Small

- Diameter Ceiling Fans

EL 36

- inch diameter 56

- inch diameter

Energy Use

(kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr)

0 182 0 232 0

1 170 12 217 15

2 130 52 165 66

3 75 106 95 137

ES -15Table ES. 3.13 Average Annual Energy Use and Savings for High

- Volume Large- Diameter Ceiling Fans

EL 8

- foot diameter 12

- foot diameter 20

- foot diameter

Energy Use

(kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr)

0 1532 0 2115 0 2698 0

1 1473 59 2034 81 2595 104

2 923 609 1274 842 1624 1074

3 456 1076 627 1488 799 1899

ES.3.6 Life -Cycle Cost and Payback Period Analyses

The impacts of energy conservation standards on consumers often include a change in operating expense (usually decreased electricity expenses) and a change in purchase price (usually increased). The LC C of a product is the cost it incurs over its lifetime, taking into account both purchase price and operating expenses. The PBP represents the time it takes to

recover the additional installed cost of the more- efficient products through operating expense savings. DOE analyzed the net effect on consumers by calculating the LCC and PBP using the engineering performance data, the markups, and the energy use an alysis.

Inputs to the LCC calculation include the installed cost to the consumer , operating expenses, lifetime of the pro duct, discount rates , and base case efficiency distributions

. DOE estimated an average lifetime of 13.8 years with a minimum and maximum value of 4.1 years and 30 years, respectively. More details on the lifetime distribution can be found in chapter 8 of

this TSD. Table ES. 3.14 shows the base case efficiency distribution used for each product class.

Table ES. 3.14 Percentage of each efficiency level in the base case

EL Low Volume High Volume

Standard Hugger Small Diameter Large Diameter

0 3.3 3.2 25.2 8.7

1 4.9 4.7 24.3 34.8

2 29.6 28.4 37.6 56.5

3 58.4 59.4 12.9 0

4 3.8 4.3

Table ES. 3.15 through Table ES. 3.22 Error! Reference source not found. present the key findings from the analyses , including the average LCC of each EL, the average PBP relative to the baseline product (EL 0), and the average LCC savings relative to the base case efficiency distribution in the compliance year. Note that LCC savings are considered to be zero (i.e.

, there

is no impact) for all purchasers who are projected to purchase a ceiling fan at a given (or higher) efficiency level in the base case. For example , for low-volume ceiling fans at EL3, over 60% of

ES -16purchasers have zero LCC savings. Chapter 8 provides a detailed description of the LCC and PBP analysis and the results.

Table ES. 3.15 Average LCC and PBP Results for Low- Volume Standard Ceiling Fans

EL Average Costs (2013$) Simple Payback

Period (years) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 107 17 182 289

--- 13.8

1 107 13 133 240 0 13.8

2 107 11 117 224 0 13.8

3 120 10 104 224 1.8 13.8

4 149 7 72 221 4.1 13.8

Note: The results for each EL are calculated assuming that all purchasers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table ES. 3.16 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Low- Volume Standard Ceiling Fans

EL % of Purchasers that Experience a Net Cost Average Life

Cycle Cost

Savings* (2013$)

0 0 0

1 0 2

2 0 3

3 22 3

4 59 5

* The calculation includes purchasers with zero LCC savings (no impact).

Table ES. 3.17 Average LCC and PBP Results for Low-Volume Hugger Ceiling Fans

EL Average Costs (2013$) Simple Payback

Period (years) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 94 15 159 253

--- 13.8

1 94 11 117 211 0 13.8

ES -172 94 10 109 203 0 13.8

3 105 9 98 202 1.9 13.8

4 129 6 68 197 4.1 13.8

Note: The results for each EL are calculated assuming that all purchasers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table ES. 3.18 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Low- Volume Hugger Ceiling Fans

EL % of Purchasers that Experience a Net Cost Average Life

Cycle Cost

Savings* (2013$)

0 0 0

1 0 1

2 0 2

3 21 2

4 56 7

* The calculation includes purchasers with zero LCC savings (no impact).

Table ES. 3.19 Average LCC and PBP Results for High

- Volume Small

- Diameter Ceiling

Fans

EL Average Costs (2013$) Simple Payback

Period (years) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 68 23 208 276

--- 13.8

1 73 22 195 268 3.7 13.8

2 75 17 149 224 1.1 13.8

3 100 10 92 192 2.4 13.8

Note: The results for each EL are calculated assuming that all purchasers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table ES. 3.20 Average LCC Savings Relative to the Base Case Efficiency Distribution for High

- Volume Small

- Diameter Ceiling Fans

EL % of Purchasers that Experience a Net Cost Average Life

Cycle Cost

Savings* (2013$)

ES -180 0 0

1 1 2

2 0 24

3 7 52

* The calculation includes purchasers with zero LCC savings (no impact).

Table ES. 3.21 Average LCC and PBP Results for High -Volume Large- Diameter Ceiling

Fans

EL Average Costs (2013$) Simple Payback

Period (years) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cos t LCC

0 3814 221 2007 5821

--- 13.8

1 3801 213 1930 5731 0 13.8

2 4063 133 1208 5271 2.8 13.8

3 5730 66 637 6367 12.3 13.8

Note: The results for each EL are calculated assuming that all purchasers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table ES. 3.22 Average LCC Savings Relative to the Base Case Efficiency Distribution for High -Volume Large- Diameter Ceiling Fans

EL % of Purchasers that Experience a Net Cost Average Life

Cycle Cost

Savings* (2013$)

0 0 0

1 0 8

2 1 210

3 92

- 886

* The calculation includes purchasers with zero LCC savings (no impact).

ES.3.7 Shipments Analysis

Shipments projections are used to calculate the national impacts of standards on energy use, NPV, and future manufacturer cash flows. The details of the modeling DOE used to estimate shipments in this rulemaking are described in chapter 9 of this TSD.

ES -19DOE estimated shipments of low

- volume ceiling fans by projecting historical ceiling fan shipments into three market segments: (1) replacements; (2) new construction; and (3) increased numbers of ceiling fans in existing homes. To forecast ceiling fan repla cement shipments, DOE developed a retirement function for ceiling fans and applied it to the existing products in the housing stock. The existing stock of products is tracked by vintage and developed from historical shipments data. To forecast shipments to new construction, DOE utilized forecasted new housing construction and historic saturation rates of ceiling fans.

DOE estimated shipments of high -volume small

- diameter ceiling fans by scaling the shipments of low- volume ceiling fans by a scaling factor. DOE determined the scaling factor by assuming that the penetration rate of high- volume, small

- diameter ceiling fans into commercial and industrial spaces where high

- volume ceiling fans are typically used would be the same as the penetration rate of low-vol ume ceiling fans into commercial spaces where low

- volume ceiling fans are typically used . As a result, DOE scaled the total shipments of low -volume ceiling fans by 0.12 to determine high- volume small

- diameter fan shipments. For high-volume large

diameter fans, DOE obtained an estimate of the current 2013 stock from manufacturers. DOE then estimated the shipments history necessary to match the current stock using the lifetime

function found for low- volume ceiling fans. The shipments trend was assumed to be linear over the period 2000-2013. DOE extrapolated this trend over the course of the analysis period to represent new shipments of high-volume large

- diameter fans. DOE also considered replacements for this product class.

DOE developed a consumer

- choice mo del calibrated to historical data to assign market shares to efficiency levels within a product class. DOE assumed that each product class provides a specific utility and consumers do not choose between options in different product classes. The

consumer- choice module selects which ceiling fans are purchased within a product class in any given year based on sector- specific consum er sensitivities to first costs and operating costs, as well as on the ceiling fan options available, which were determined in the engineering analysis. Deviations from purely cost-driven behavior are accounted for using calibration factors found by

calibrat ing the model to observed historical data. DOE found that consumers of low-volume ceiling fans are primarily sensitive to first cost only, while consumers of high-volume fans are sensitive to both first cost and operating costs. Details on the implementation of the consumerchoice model can be found in chapter 9 of this TSD.

DOE believes that, consistent with economic theory and its past practice, it is reasonable to expect that standards that result in higher ceiling fan prices will have some dampening effect on sales. To estimate the impact of the price increase for the considered efficiency levels, DOE used a relative price elasticity approach. The impact of higher ceiling fan prices is expressed as a percentage drop in market share for each year during the analysis period. DOE considers the relative price elasti city to be a function of time

, having the largest impact at the year of compliance of a standard when there is a sudden increase in the product price due to a standard. Over time, the price increase has less of an effect on consumer demand reaching a terminal impact at the tenth year of the price increase. A more in -depth discussion can be found in chapter

9 of this TSD.

ES -20DOE is concurrently in the preliminary analysis stage of an energy conservation standard rulemaking for c eiling fan light kits (CFLKs) . An amended standard for CFLKs that results in a higher price for CFLK s would be reflected in a higher price for ceiling fans packaged with a light kit. Therefore, a n amended energy standard on CFLKs could result in reduced sales of ceiling fans packaged wit h light kits. DOE considered the impact of a CFLKstandard on lowvolume ceiling fans shipments and the downstream impact on the NIA in its analysis. Figure ES

3.1 sho ws projected shipmen ts of low-volume ceiling fans for the reference case, in which there

is no amended standard for CFLKs

. Estimates of the impact of CFLK standards on low -volume ceiling fans were found to be relatively small and not noticeably different than what is presented

in Figure ES 3.1 . A mo re in -depth discussion of the impacts of a CFLK standard on shipments can be found in chapter 9 of this TSD. Because D OE r esearch indicates that high

- volume ceiling fans are almost never packaged w ith a light kit, DOE assumes that there will be no impact on shipments of high-volume ceiling fans from a potential amended standard for CFLK s. Projected high

- volume small

- diameter ceiling fans and high-volume large- diameter ceiling fan shipments

are shown in Figure ES 3.2 and Figure ES 3.3 , respectively.

Figure ES 3.1 Projected Shipments of Low- Volume Ceiling Fans

ES -21Figure ES 3.2 Projected Shipments of High

- Volume Small

- Diameter Ceiling Fans

Figure ES 3.3 Projected Shipments of High

- Volume Large- Diameter Ceiling Fans

ES -22The impact of a standard can be seen by the sudden drop in shipments at the year of compliance. This drop is due to the increase in ceiling fan price and the relative price elasticity discussed previously. T he impact on shipments due to a price increase associated with a standard decreases as the relative price e lasticity becomes smaller with time.

ES.3.8 National Impact Analysis

The NIA estimates the following national impacts from possible efficiency levels for ceiling fans : (1) national energy savings; (2) monetary value of the energy savings due to standards; (3) increased total installed costs of the considered products due to standards; and (4) the NPV of the difference between the value of energy savings and increased total in stalled costs. DOE prepared a spreadsheet model to estimate energy savings and national co nsumer economic costs and savings resulting from new standards. In con trast to the LCC and PBP analyses, which use probability distributions for the inputs, t he NIA uses average or typical values for inputs.

A key component of DOE’s estimates of NES and NPV is the trend in energy efficiency projected for the base case (without new standards) and each of the standards cases (with new standards). DOE developed a consumer- choice model to estimate the base

- case efficiency

distribution based on consumer sensit ivity to first cost in the case of low-volume ceiling fans and first cost and operating cost for high -volume ceiling fans. For its determination of standards- case efficiency distributions, DOE recalculated market shares for efficiency levels using only those efficiency levels that meet or exceed a standard in the year a standard comes into effect and subsequent years.

Chapter 10 provides additional details on this and other aspects of the NIA analysis.

ES.3.8.1 National Energy Savings

DOE calculated annual NES as the difference between national energy consumption in the base case (without new efficiency standards) and under each EL. DOE estimated energy consumption and savings based on site energy. Cumulative energy savings are the sum of the annual NES over the period in which products shipped in 2019-2048 are in operation.

The NES results shown in Table ES. 3.23 and Table ES. 3.24 are expressed as full

- fuel cycle energy savings in quads (quadrillion Btu). As described in section ES.3.8 , a standard on

CFLKs may potentially impact shipments of ceiling fans. To explore the range of impacts for low-volume ceiling fans, DOE presents NES results for three shipment scenarios: no CFLK standard, a CFLK standard set at the baseline CFLK level (CSL0) after product class combination, and a standard set at the max- tech level. Because an amended CFLK standard would result in a higher average price for CFLKs, ceiling fans packaged with CFLKs would also become more expensive. The increased fan prices reduce overall low -volume ceiling fan shipments. Although standards can act to reduce shipments, DOE does not attribute energy savings to a decrease in shipments between the bas e case and a standards case . DOE uses the same number of shipments projected for a standards case to calculate annual energy consumption

in the base case when determining energy savings . The NES results do not include any energy savings from reduced energy consumption by CFLKs due to a potential amended efficacy

ES -23standard for CFLKs; instead, the results include only the potential impact of such a standard on shipments of ceiling fans.

Table ES. 3.23 Estimates of Cumulative Full

- Fuel Cycle National Energy Savings (quads)

for Low- Volume Ceiling Fans

EL No CFLK Standard CFLK CSL0 Standard CFLK Max

- Tech Standard

Hugger Standard Hugger Standard Hugger Standard

1 0.048 0.113 0.048 0.113 0.048 0.113

2 0.072 0.176 0.072 0.176 0.072 0.176

3 0.174 0.393 0.174 0.393 0.174 0.392

4 0.845 1.742 0.844 1.740 0.843 1.738

Table ES. 3.24 Estimates of Cumulative Full -Fuel Cycle National Energy Savings (quads) for High- Volume Ceiling Fans

EL Small

- Diameter Large- Diameter

1 0.173 0.008

2 0.392 0.054

3 0.745 0.154

ES.3.8.2 Net Present Value of Consumer Benefits

DOE calculated net monetary savings in each year as the difference between total savings in operating costs and increases in total equipment costs in the base case and standards cases. DOE calculated savings over the life of the products purchased in the forecast period. The NPV

i s the difference between the present value of operating cost savings and the present value of

increased total installed costs. I n accordance wi th guidance provided by the Office of Management and Budget (OMB) to Federal agencies on regulatory analysis, DOE used discount rates of 7 percent and 3 percent to discount future costs and savings to the present. The NPV

results are shown in Table ES. 3.25 through Table ES. 3.28

.

ES -24Table ES. 3.25 Cumulative Net Present Value of Consumer Benefits for Low

- Volume Ceiling Fans at 3% in billion 2013$

EL No CFLK Standard CFL K CSL0 Standard CFLK Max

- Tech Standard

Hugger Standard Hugger Standard Hugger Standard

1 0.296 0.701 0.296 0.700 0.295 0.698

2 0.396 1.003 0.396 1.002 0.395 0.999

3 0.529 1.228 0.528 1.226 0.527 1.223

4 1.757 3.185 1.755 3.182 1.753 3.177

Table ES. 3.26 Cumulative Net Present Value of Consumer Benefits for Low

- Volume Ceiling Fans at 7% in billion 2013$

EL No CFLK Standard CFLK CSL0 Standard CFLK Max

- Tech Standard

Hugger Standard Hugger Standard Hugger Standard

1 0.117 0.278 0.117 0.277 0.116 0.276

2 0.151 0.386 0.150 0.385 0.150 0.383

3 0.136 0.325 0.136 0.325 0.136 0.324

4 0.233 0.249 0.233 0.249 0.233 0.249

Table ES. 3.27 Cumulative Net Present Value of Consumer Benefits for High

- Volume Ceiling Fans at 3% in billion 2013$

EL Small

- Diameter Large

- Diameter

1 0.854 0.026

2 1.995 0.170

3 3.675 0.166

Table ES. 3.28 Cumulative Net Present Value of Consumer Benefits for High

- Volume Ceiling Fans at 7% in billion 2013$

EL Small

- Diameter Large

- Diameter

1 0.333 0.009

2 0.794 0.055

3 1.454

- 0.026

ES.3.9 Preliminary Manufacturer Impact Analysis

The MIA assesses the potential impacts of energy conservation standards on manufacturers, including effects on expenditures for capital conversion, marketing costs,

ES -25shipments, and research and development costs. Impacts to direct employment are also addres sed in the MIA. Potential impacts might lead to changes in manufacturing practices for ceiling fans. DOE identified potential impacts through interviews with manufacturers and other interested parties.

During interviews for this preliminary MIA, manufactu rers identified four major areas of concern: (1) shift to air conditioning, (2) testing burden, (3) off-mode power consumption, and (4) utility of direct -current (DC) motors. See chapter 12 of this preliminary analysis TSD for

details.

ES.3.10 Other Analyses

The remaining chapters of th is preliminary TSD address the following analyses, which will be performed for any NOPR issued for ceiling fan s.

• The consumer subgroup analysis evaluates the effects of energy conservation standards on various national customer subgroups (chapter 1 1).

• The emissions analysis examines the effects of energy conservation standards on various airborne emissions (chapter 1 3).

• The monetization of emissi ons analysis estimates the economic impacts of reduced emissions as a result of energy conservation standards (chapter 14).

• The utility impact analysis examines impacts of energy conservation standards on the generation capacity of electric utilities (chap ter 15 ).

• The employment impact analysis examines the indirect effects of energy conservation standards on national employment (chapter 16).

• The regulatory impact analysis examines the national impacts of non -regulatory alternatives to mandatory energy conservation standards (chapter 1 7 ).

ES.4 ISSUES ON WHICH DOE SEEKS PUBLIC COMMENT

DOE is interested in receiving comment on all aspects of this preliminary analysis. DOE especially invites comment or data to improve DOE’s analyses , including information that will respond to the following questions and concerns raised in the development of this preliminary

TSD.

ES.4.1 Scope and Definition

DOE invites comments on the proposed definition for highly decorative ceiling fans.

ES.4.2 Manufacturing Location for High-Volume Ceiling Fan

DOE research indicates that high-volume large- diameter ceiling fans are manufactured in the United States. However, DOE has not found equivalent information regarding the manufacturing location of high

- volume small

- diameter ceiling fans. In order to apply markups

ES -26associated with shipping, tariffs , and overhead burden , DOE has assume d in this preliminary analysis that high-volume small- diameter fans, like low -volume fans, are manufactured overseas. DOE requests comment and input on the manufacturing locat ion for high -volume ceiling fans, particularly high

- volume small

- diameter ceiling fans.

ES.4.3 High

- Volume Ceiling Fan Market

DOE seeks comment and data on distribution of sizes and motor power for both high

volume large

- diameter ceiling fans and high -volume sm all

- diameter ceiling fans . In particular,

for high -volume large

- diameter ceiling fans

, DOE assumes a 1 horsepower ceiling fan is representative of that entire market and requests comment on the accuracy of th is assumption.

DOE also seeks comment and data on the distribution of end users by industry and application and the geographic distribution of high -volume ceiling fans. DOE used information from manufacturer interviews to estimate the relative proportion of high -volume f ans that are used in commercial settings and industrial settings. DOE estimated the geographic distribution of high -volume ceiling fans to be the same as the geographic distribution of low-volume ceiling

fans.

ES.4.4 High

- Volume Ceiling Fans Shipments

For high -volume large

- diameter fans, DOE estimated the shipments trend for high

volume large

- diameter fans by matching a linear shipments model with the lifetime function to match the current stock value provided by manufacturers. DOE assumed this linear trend

repre sented new installations of high -volume large

- diameter fans. For high -volume small

diameter fans, DOE estimated shipments for high -volume small

- diameter fans by scaling to low

volume ceiling fan shipments. DOE requests data and information on current and h istorical shipments for both high -volume large

- diameter ceiling fans and high -volume small

- diameter ceiling fans.

ES.4.5 Market Share of Hugger, Multi

- mount, and Standard Low

- Volume Ceiling Fans

DOE estimated the market share of hugger, mult i-mount, and standard low-volume ceiling fans using data gathered from in

- store visits of major ceiling fan retailers. DOE performed model counts of fans in each category at major retailer s and weighted each retailer according to its market share of low-volu me ceiling fan sales estimated from NPD data. DOE estimated that 21% of fans are hugger, 26% of fans are standard, and 53% are multi-mount. DOE welcomes comment, data, or information on these estimates.

ES.4.6 Market Share of Unconventional Blade Low

- Volume Ceiling Fans

DOE estimated the market share of low -volume ceiling fans with unconventional blades to be 2% of the total market. DOE determined this estimate through model counts of basic models of unconventional blade and flat-blade ceiling fans. DOE invites comment, input, or data

on this estimate of the fraction of low -volume ceiling fans with unconventional blades.

ES -27ES.4.7 Market Shares by Efficiency Levels

DOE estimated market shares by EL for each product class by performing model counts

of units available fro m retailers. DOE recognizes this may not reflect the efficiency distribution of actual shipments and is interested in obtaining additional information for characterizing the efficiency distribution of current shipments for both high and low-volume fans.

ES.4.8 Lo w- Volume Ceiling Fan Market Saturation

Based on an analysis of the 2009 Residential Energy Consumption Survey (RECS) DOE estimated a current penetration rate of ceiling fans in homes of 73%. DOE assumed that the

residential market for low

- volume ceiling fa ns would saturate at a penetration of 75%. Additionally, DOE estimated an average of 3.1 ceiling fans installed in a new installation. DOE welcomes comment on these assumptions.

ES.4.9 Product Lifetimes

For this analysis, DOE used data from Appliance Magazine

, feedback from manufacturer

interviews , and an online survey to estimate the product lifetime of low-volume ceiling fans.

DOE welcomes comment on these estimates. In particular, for high -volume ceiling fans, DOE

assume d the product lifetime is the same as that of low-volume ceiling fans and requests
comments and data on product lifetime s of high -volume ceiling fans.

ES.4.10 Relationship Between Usage and Life Expectancy

DOE anticipates that lifetimes of ceiling fans will vary greatly depending on intensity of

usage. The variation in usage among regions will be an important factor for DOE to consider. However, DOE has not found significant data on life expectancy of ceiling fans and is unaware of any data on the relationship betw een usage and life expectancy. DOE in vites comment, input, and data on ceiling fan life expectancy and the relationship between ceiling fan usage and ceiling fan life expectancy.

ES.4.11 Repair Cost for C eiling Fans

DOE used information on repairs and installation from manufacturer interviews to

esti mate the cost to consumers of repairing a ceiling fan. DOE invites comment, input, and data that can improve the estimate of repair costs, particularly repairs costs associated with DC

motors.

ES.4.12 Wind and Temperature Sensors as Technology Option

DOE notes that there could be a theoretical potential for reduced energy consumption from wind and temperature sensors for ceiling fans installed outdoors if those fans do not turn on unless the temperature exceeds or the wind falls below certain threshold s. However DOE is not aware of any ceiling fans or working prototypes that include integrated wind or temperature sensors at this time, or any data that would indicate if these products would translate into energy savings in real world applications. Therefore, DOE is tentatively not including wind or temperature sensors as a technology option. DOE request information on the availability of

ES -28ceiling fans including wind and temperature sensors and any data on the potential energy savings

associated with suc h products.

ES.4.13 Technology Options

DOE considers blade configurations, blade designs, motors, and controls as technology options for improving ceiling fan efficiency. DOE requests comment on the se technology options being considered for ceiling fans and any additional options that should be included.

ES.4.14 Product Classes

DOE establishes product classes for ceiling fans based on consumer utility

. The five product classes are summarized in Table ES. 3.2 . DOE seeks comment on the product classes

under consideration for ceiling fans

.

DOE also seeks comment on its approach to highly decorative ceiling fans. Although

h ighly decorative ceiling fans meet the statutory definition of a ceiling fan , DOE is considering establishing an exempted product class for these fans . DOE notes that CFLKs packaged with highly decorative ceiling fans meet the statutory definition of a CFLK, and are therefore a covered product. DOE is considering amending efficiency standards for all CFLKs in the

concurrent CFLK rulemaking.

ES.4.15 Installation of Multi -M ount Ceiling Fans

DOE requests information regarding the similarity of installation distributions between all ceiling fans and the subset of multi -mount fans. DOE also requests information or comment on the assumption that "close-mount" ceiling fans should be categorized as “standard” ceiling fans and not “hugger” ceiling fans.

ES.4.16 Market and Technology Assessment

DOE requests comments on the overall methodology and results of the market and technology assessment for ceiling fans

.

ES.4.17 Screening Analysis

DOE invites comment on the technology options retained and eliminated during the screening analysis.

ES.4.18 More Efficient A l ternating Current Motors

DOE is tentatively considering screening out more efficient AC motors from its analysis on high-volume fans because it believes that high- volume ceiling fans already use the most efficient type of AC motor for their intended application. Based on discussions with manufacturers, DOE believes that using an over- or under-sized motor in a high-volume fan would not lead to an improvement in energy efficiency, because the motor would no longer be operating in its most efficient revolutions per minute ( RPM ) range. DOE requests comments

ES -29from interested parties on if more efficient AC motors could improve the efficiency of high

volume ceiling fans.

ES.4.19 Other Single

- Phase Alternating Current Motor Options

DOE seeks comment from stakeholders on th e feasibility of using capacitor startinduction run (CSIR) and capacitor start capacitor run (CSCR) small electric motors in both lowvolume and high-volume ceiling fans, and on their effect on fan performance.

ES.4.20 Quiet Fan Speed Controls

DOE received a comm ent from the American Lighting Association (ALA) on the

f ramework d ocument that there exists a large installed base of “quiet fan speed controls” that were designed to operate AC motor ceiling fans and that these controls are incompatible with DC motors. (ALA, No. 59 at p. 31) DOE requests more information on these types of controls, their prevalence, compatibility with DC motors, and the impact of the controller on ceiling fan utility.

ES.4.21 Number of Fan Blades

DOE’s analysis of publicly available data has shown that while a fan with fewer blades does not necessarily represent the most efficient design, the number of blades has a significant impact on the efficiency of HVLD fans. DOE requests more information on how manufacturers choose the number of blades to use in their HVLD fans and how this affects fan efficiency.

ES.4.22 Twisted Blades

DOE seeks comment from stakeholders on the technical feasibility of producing twisted blades for HVLD and HVSD fans, and on their effect on fan performance.

ES.4.23 Patented Blade Shapes

AL A commented that there are multiple patents on airfoil blade technology covering its use with regards to ceiling fans. (ALA, No. 59 at p. 30) DOE notes that ceiling fans with twisted and/or airfoil blades are available from many different manufacturers, wh ich implies that patents have not restricted the use of this technology. DOE requests more information on which blade designs are patent -protected and how the patents would prevent manufacturers from incorporating twisted/airfoil blade technologies into their designs or otherwise limit fan efficiency , with respect to high volume fans.

ES.4.24 Blade Attachments

In the f ramework document, DOE included blade attachments as one of the technology options that could be used to improve ceiling fan efficiency. However, DOE has limited information on the effectiveness and cost of this technology. DOE requests additional input on how blade attachments could be used to improve the efficiency of high -volume ceiling fans.

ES.4.25 Technologies to Reduce Standby Power

DOE is not aware of any technical improvements or design options that can be used to reduce the power consumption of ceiling fans in standby mode. Progress Lighting commented on

ES -30the f ramework document that most ceiling fan remote controls use passive radio frequency (RF)

tech nology, which does not draw any power during standby. (Progress, No. 6 at p. 3) DOE requests more information on the meaning of ‘passive radio frequency technology’ and how it works to eliminate standby power. DOE also seeks comments from interested parties on other technologies and design options that could reduce standby power consumption, the cost of these technologies, and the magnitude of the standby power reduction that can be achieved.

ES.4.26 Approach to the Engineering Analysis

DOE is currently taking the design option approach toward conducting the engineering analysis for ceiling fans. In this approach, DOE calculates the incremental costs and efficiency benefit due to adding specific design options to a baseline model. DOE welcomes comments on

an alterna tive to the proposed approach for the engineering analysis.

ES.4.27 Distribution Channels and Price Markups for High

- Volume Ceiling Fans

DOE requests data and information on distribution channels and price markups for high

volume ceiling fans.

ES.4.28 Payment of Shipping and Tariff Costs

DOE requests data and information on who pays the shipping and tariff costs for imported fans in each distribution channel , especially for high

- volume small

- diameter ceiling fans and for the low-volume ceiling fans sold through a wholesaler

.

ES.4.29 Operating Hours for High

- Volume Ceiling Fans

For the energy use calculations of high -volume ceiling fans, DOE used the range of operating hours provided by manufacturer interviews. DOE requests data and information on operating hours for high -volume ceiling fans.

ES.4.30 Life -Cycle Cost and Payback Period Analysis

DOE requests comments on the methodology and results of the LCC and PBP analysis for ceiling fans

.

ES.4.31 Price Learning

DOE ass umed the cost of brushless DC motors would decrease over the course of the analysis period due to price learning by motor manufacturers. DOE adopted a learning rate of 6% applied to the cost premium associated with a brushless DC motor based on information from a technical expert for low-volume ceiling fans. DOE reques ts stakeholder input on the validity of this learning rate , as applied to low-volume and high -volume fans

.

ES.4.32 Permanent Magnets used in DC Motors

DOE’s research into permanent magnets used in DC motors indicated ceiling fan manufacturers primarily utilize ma gnets made of neodymium or a nylon composite magnet

ES -31material. DOE requests information on the type of magnet used in DC motors and the associated cost of the magnet.

ES.4.33 Product Class Switching

DOE assumed that each product class provides a specific utility an d consumers do not choose between options in different product classes. DOE requests input and data regarding the likelihood of consumers choosing between options in different product classes.

ES.4.34 Relative Price El asticity of Demand for Ceiling Fans

DOE assumed that the relative price elasticity of demand for ceiling fans is similar to the relative price elasticity of demand found for other residential household appliances such as refrigerators, dishwashers, and clothes washers. DOE requests data and information to more accurately estimate a price elasticity of demand specific to ceiling fans. Specifically, DOE

requests concurrent data on industry- wide shipments- weighted retail price and efficiency and average household income.

ES.4.35 Impact of Ceiling Fan Operation on Air C onditioning and Heating

For the preliminary analysis, DOE assumed that ceiling fan operation has no impact on the operation of air conditioners or heating equipment. DOE requests data and information on the impact that ceiling fan operation has on the operation of air conditioners and heating equipment.

ES.4.36 Shipments and N ational Impact Analysis

DOE requests comments on the overall methodology used to develop shipment forecasts

and estimate NES and the NPV of those savings.

ES.4.37 Regulatory Flexibil ity Act Analysis

DOE conducts a regulatory flexibility analysis that examines the impact of standards on small entities and considers alternative ways of reducing negative impacts in the NOPR stage. DOE invites interested parties to provide information for any small businesses that manufacture ceiling fans and should be consulted before DOE publishes a NOPR.

ES.4.38 Manufacturer Subgroup Analysis

DOE considers the impacts on certain manufacturer subgroups that have different cost structures or operate within different regulatory frameworks in the NOPR stage. DOE requests feedback on subgroups to analyze and the characteristics appropriate for subgroup analysis.

ES.4.39 Manufacturer Impact Analysis

DOE requests comment on its identification of key issues and requests data and information from interested parties that can assist in evaluating the potential impact on ceiling

fan manufacturers.

ES -32ES.4.40 Consumer Subgroup Analysis

DOE welcomes input regarding which, if any, consumer subgroups should be considered when developing potential energy conservation standards for ceiling fans.

ES.4.41 Emissions Analysis

DOE requests comment on its approach to conducting the emissions analysis for ceiling

fans.

ES.4.42 Monetization of Emi ssions Reductions Benefits

DOE invites input on the proposed approach for estimating monetary benefits associated

with emissions reductions.

ES.4.43 Utility Impact Analysis

DOE seeks comment on the planned approach to conduct the utility impact analysis.

ES.4.44 Employme nt Impact Analysis

DOE welcomes input on its proposed approach for assessing national employment impacts.

ES.4.45 Regulatory Impact Analysis

DOE requests any available data or reports that would contribute to the a nalysis of

alternatives to standards for ceiling f ans. In particular, DOE seeks information on the effectiveness of existing or past efficiency improvement programs for these products.

ES -33CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS

1.1 PURPOSE OF THE DOCUMENT ................................................................................. 1-1

1.2 OVERVIEW OF APPLIANCE STANDARDS .............................................................. 1-1

1.3 OVERVIEW OF CEILING FAN STANDARDS ........................................................... 1-2

1.3.1 Current Standards................................................................................................. 1-2

1.4 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS ................... 1-2

1.5 STRUCTURE OF THE DOCUMENT ............................................................................ 1-5

LIST OF TABLES

Table 1.4.1 Analyses Performed at Each Stage of the Rulemaking Process .................... 1-4

1-iCHAPTER 1. INTRODUCTION

1.1 PURPOSE OF THE DOCUMENT

This preliminary technical support document (preliminary TSD) is a standalone report that documents the technical analyses and results supporting the preliminary analysis for establishing energy conservation standards for ceiling fans

.

1.2 OVERVIEW OF APPLIANC E STANDARDS

Title III of the Energy Policy and Conservation Act of 1975 (42 U.S.C. 6291, et seq.; “EPCA” or, “the Act”) sets forth a variety of provisions designed to improve energy efficiency. (All references to EPCA refer to the statute as amended throug h the American Energy Manufacturing Technical Corrections Act (AEMTCA), Pub. L. 112-210 (Dec. 18, 2012).) Part B of title III, which for editorial reasons was redesignated as Part A upon incorporation into the U.S. Code (42 U.S.C. 6291–6309, as codified), establishes the “Energy Conservation Program

for Consumer Products Other Than Automobiles.” These include ceiling fans - the products that are the focus of this rulemaking.

Pursuant to EPCA, the U.S. Department of Energy (DOE) is required to design each standard for these products to (1) achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified; and (2) result in significant conservation of energy. (42 U.S.C. 6295(o)(2)(A) and (o)(3)(B), 42 U.S.C. 6313(d)(4)) To determine whether a proposed standard is economically justified, DOE will, after receiving comments on the proposed standard, determine whether the benefits of the standard exceed its burdens to the greatest extent practicable, considering the following seven factors:

1. The economic impact of the standard on the manufacturers and on the consumers of the products subject to such standard;

2. The savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared to any increase in the price of, or in the initial charges for maintenance expenses of, the covered products that are likely to result from the imposition of th e 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 covered products likely to result from the imposition of the standard;

5. T he 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. O ther factors the Secretary considers relevant. (42 U.S.C. 6295(o)(2)(B)(i); 6313(d)(4))

1-1EPCA also directs that DOE may not prescribe an amended or new standard if the standard is likely to result in the unavailability in the United States of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States at the time that the standard is prescribed. (42 U.S.C. 6295(o)(4) and 6313(d)(4))

1.3 OVERVIEW OF CEILING FAN STANDARDS

1.3.1 Current Standards

The Energy Po licy Act of 2005 (EPACT 2005), Public Law 109-58, amended EPCA and provided that DOE may establish energy conservation standards for ceiling fans, as well as requirements for determining whether these standards should be amended. (42 U.S.C. 6295(ff))

EPCA defines a “ceiling fan” as “a nonportable device that is suspended from a ceiling for circulating air via the rotation of fan blades” (42 U.S.C. 6291(49)) In addition to giving DOE the discretion to issue electrical energy conservation standards for ceili ng fans, EPCA also includes certain statutorily -prescribed design standards (including a requirement for (i) fan speed controls separate from any lighting controls; (ii) adjustable speed controls (either more than one speed or variable speed); and (iii) th e capability for reverse action (other than fans sold for industrial or outdoor application or where safety would be an issue)). (42 U.S.C. 6295(ff)(1)(A) and (6))

Under this statutory structure, DOE codified energy conservation standards and promulgated test procedures for ceiling fans, which are set forth in the Code of Federal Regulations (CFR). In a final rule technical amendment published in the Federal Register (FR) on October 18, 2005, DOE codified the statutorily prescribed design standards for c eiling fans in the CFR at 10 CFR 430.32(s). 70 FR 60409, 60413. In a final rule published in the Federal Register on December 8, 2006, DOE adopted test procedures for ceiling fans at 10 CFR part 430, subpart B, appendix U. 71 FR 71340, 71366.

1.4 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS

As discussed in section 1.2 , EPCA grants DOE authority to set standards for additional types of products, and requires DOE to review and, if appropriate, amend existing standards. This preliminary analysis is part of DOE’s review to determine whether the standards in effect for ceiling fans should be amended, as directed by EPCA. (42 U.S.C. 6295(ff)(6)) It also addresses 42 U.S.C. 6295(gg)(3) in which DOE is directed to incorporate standby mode and off mode energy use in any amended (or new) standard adopted after July 1, 2010 pursuant to 42 U.S.C. 6295(o). The statutory design standards for ceiling fans will remain in place and are not subject to review as part of this rulemaking process.

After the publication of the F ramework Document, the energy conservation standards rulemaking process involves three additional, formal public notices, which DOE publishes in the Federal Register. The first of the rulemaking notices is a notice of public meeting ( NOPM ), which is designed to publicly vet the models and tools used in the preliminary rulemaking and to facilitate public participation before the NOPR stage. The second notice is the NOPR, which presents a discussion of comments received in response to the NOPM and the preliminary

1-2analyses a nd analytical tools; analyses of the impacts of potential amended energy conservation standards on consumers, manufacturers, and the Nation; DOE’s weighting of these impacts of amended energy conservation standards; and the proposed energy conservation standards for each product. The third notice is the final rule, which presents a discussion of the comments received in response to the NOPR; the revised analyses; DOE’s weighting of these impacts; the amended energy conservation standards DOE is adopting for each product; and the effective dates of the amended energy conservation standards.

On March 15, 2013, DOE published in the Federal Register a Notice of Public Meeting and Availability of the Framework Document to initiate the energy conservation standard rulemaking for ceiling fans. 78 FR 16443. The Framework Document, described the procedural and analytical approaches DOE anticipated using to evaluate the establishment of amended energy conservation standards for ceiling fans

. DOE also requested feedba ck from interested parties in the Framework Document on many issues related to test methods for evaluating the airflow and electrical consumption performance of ceiling fans. This document is available at: http://www.regulations.gov/#!documentDetail;D=EER E-2012- BT

- STD -0045-0001

DOE held the framework public meeting on March 22, 2013 to discuss procedural and analytical approaches to the rulemaking. In addition, DOE used the public meeting to inform and facilitate involvement of interested parties in the ru lemaking process. The analytical framework presented at the public meeting described the different analyses, such as the engineering analysis and the consumer economic analyses (i.e., the life- cycle cost (LCC) and payback period (PBP) analyses), the method s proposed for conducting them, and the relationships among the various analyses

.

DOE originally scheduled the framework comment period to close on April 29, 2013. However, due to the large number and broad scope of questions and issues raised in the

Fr amework Document (and during the public meeting), DOE subsequently published a notice in the Federal Register extending the comment period until June 14, 2013, to allow additional time for interested parties to submit comments. 78 FR 25626 (May 2, 2013). In response to comments on the framework document regarding the potential interaction between ceiling fan and air conditioner usage, DOE published a Request For Information in the Federal Register on October 22, 2013, inviting additional data and information on the subject. 78 FR 62494. In conjunction with the energy conservation standards rulemaking, DOE is conducting a test procedure rulemaking for ceiling fans pursuant to 42 U.S.C. 6295(r). DOE issued the ceiling fan test procedure NOPR on September 19 , 2014. This document is available at http://www.regulations.gov/#!docketDetail;D=EERE -2013- BT

- TP -0050.

During the March 2013 public meeting, interested parties commented about numerous issues relating to each one of the analyses listed in Table 1.4.1 . Comments from interested parties submitted during the F ramework Document comment period elaborated on the issues raised during the public meeting. DOE attempted to addres s these issue s during its preliminary analysi s and summarized the comments and DOE’s responses in chapter 2 of the preliminary TSD.

1-3Table 1.4.1 Analyses Performed at Each Stage of the Rulemaking Process
Preliminary Analyses NOPR Final Rule

Market and technology assessment Revised preliminary analysis Revised analyses

Screening analysis Consumer sub

- group analysis

Engineering analysis Manufacturer impact analysis

Energy use analysis Emissions analysis

Markups analysis Monetization of emissions

reduction benefits

Life

- cycle cost and payback period analysis Utility impact analysis

Shipments analysis Employment impact analysis

National impact analysis Regulatory impact analysis

Preliminary manufacturer impact analysis

As part of the information gathering and sharing process, DOE organized and held interviews with manufacturers of the products considered in this rulemaking as part of the engineering analysis. DOE selected companies that represented production of all types of products, ranging from small to large manufacturers. DOE had four objectives for these interviews: (1) solicit manufactur er feedback on the draft inputs to the engineering analysis; (2) solicit feedback on topics related to the preliminary manufacturer impact analysis; (3) provide an opportunity, early in the rulemaking process, to express manufacturers’ concerns to DOE; and (4) foster cooperation between manufacturers and DOE.

DOE incorporated the information gathered during the engineering interviews with

manufacturers into its engineering analysis (c hapter 5) and the preliminary manufacture r impact analysis (MIA, chapter 12). Following the publication of the preliminary analysis and the preliminary analysis public meeting, DOE intends to hold additional meetings with manufacturers as part of the consultative process for the MIA conducted during the NOPR phase.

DOE conducted the LCC and PBP analyses based on an approach that establishes an annual energy expense using regional average electric utility costs for affected purchasers and projected those electricity costs into the future using electricity price projections for th e residential sector from the DOE Energy Information Agency (EIA). Under this approach, LCC results are based on the assumption that homeowners in the future will face electricity costs similar to those that exist in today’s electricity markets.

DOE develo ped spreadsheets for the engineering, LCC, and PBP analyses for each product. For each product, DOE developed an LCC spreadsheet that calculates the LCC and PBP at various energy efficiency levels. DOE also developed a national impact analysis spreadsheet that calculates the national energy savings (NES) and national net present values (NPVs) at various energy efficiency levels. This spreadsheet includes a model that forecasts the impacts of amended energy conservation standards at various levels on product shipments. All of these

1-4spreadsheets are available on the DOE website for ceiling fans : ( http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/65 ).

1.5 STRUCTURE OF THE DOCUMENT

This preliminary TSD outlines the analytical approaches used in this rulemaking. The

TSD consists of 17 chapters as well as appendices.

• Chapter 1, Introduction: provides an overview of the appliance standards program and how it applies to the ceiling fan rulemaking, and outlines the structure of the document.

• Chapter 2, Analytical Framework: describes the rulemaking process step by step,

summarize s comments made by interested parties during the F ramework Document comment period, and provides DOE responses to those comments.

• Chapter 3, Market and Technology Assessment: characterizes the ceiling fan market and the technologies available for increasin g product efficiency.

• Chapter 4, Screening Analysis: determines which technology options are viable for consideration in the engineering analysis.

• Chapter 5, Engineering Analysis: discusses the methods used for developing the relationship between increased manufacturer price and increased efficiency.

• Chapter 6, Markups Analysis: discusses the methods used for establishing markups for converting manufacturer prices to purchase prices.

• Chapter 7, Energy Use Analysis: discusses the process used for generating energy use

estimates of ceiling fans for a variety of product classes and standard levels.

• Chapter 8, Life-Cycle Cost and Payback Period Analyses: discusses the economic effects of standards on individual customers and users of the products and compares th e LCC and PBP of products with and without higher efficiency standards.

• Chapter 9, Shipments Analysis : discusses the methods used for forecasting shipments with and without higher efficiency standards.

• Chapter 10, National Impact Analysis: discusses the me thods used for forecasting national energy consumption and national economic impacts based on annual product shipments and estimates of future product efficiency distributions in the absence and presence of higher efficiency standards.

• Chapter 11, Consumer Subgroup Analysis : discusses the effects of standards on a subgroup of ceiling fan purchasers and compares the LCC and PBP of products with and without higher efficiency standards.

• Chapter 12, Preliminary Manufacturer Impact Analysis: discusses the effects of standards on the finances and profitability of product manufacturers.

1-5• Chapter 13, Emissions Analysis : discusses the effects of standards on airborne

emissions of electric utilities.

• Chapter 14, Monetization of Emissions Reductions Benefits : considers the estimated monetary benefits likely to result from reduced emissions of carbon dioxide and nitrogen oxides expected to result from the standards.

• Chapter 15, Utility Impact Analysis : discusses the effects of standards on the installed generation capacity of electric utilities.

• Chapter 16, Employment Impact Analysis: discusses the effects of standards on national employment.

• Chapter 17, Regulator Impact Analysis: discusses the present regulatory actions as well as the impact of non -r egulatory alternatives to setting energy efficiency standards.

• A ppendix 5 A, Unconventional-Blade and Flat- Blade Low

- Volume Fans : presents more detailed power consumption and cost- efficiency results fo r unconventional- blade

and flat

- blade ceiling fans.

• Appendix 6A, Detailed Data for Equipment Price Markups : presents the detailed data used to develop markups and sales taxes.

• Appendix 8A, User Instructions for Life

- Cycle Cost Analysis Spreadsheet : contains a description of the spreadsheet and instructions that allow the user to examine and reproduce the detailed results of the LCC and PBP analyses.

• Appendix 8B, Uncertainty and Variability in LCC Analysis: explains how the LCC model accounts for the uncertainty and variability of the numerical values.

• Appendix 8C, Distributions Used for Residential Discount Rates : presents the

distribution of interest and return rates for each type of debt and equity that DOE sampled

to derive the consumer discount rates for the LCC.

• Appendix 9A, Relative Price Elasticity of Demand for Appliances : presents a detailed explanation of the methodology DOE used to quantify the impacts of standards on shipments, including the effects of decreased operating costs and changes in household

income.

• Appendix 10A, User Instructions for Shipments and NIA Spreadsheets : contains a description of the NIA spreadsheet and instructions on how to use it to examine and reproduce the NIA results.

1-6CHAPTER 2. ANALYTICAL FRAMEWORK

TABLE OF CONTENTS

2.1 INTRODUCTION ........................................................................................................... 2-1

2.2 BACKGROUND ............................................................................................................. 2-3

2.2.1 Regulatory Authority and History of Standards Rulemakings for Ceiling

Fans ...................................................................................................................... 2-3

2.2.2 Test Procedure ..................................................................................................... 2-4

2.3 SCOPE ............................................................................................................................. 2-4

2.3.1 Statutory Definition of a Ceiling Fan ................................................................... 2-4

2.3.2 Regulatory Definitions ......................................................................................... 2-5

2.3.2.1 Definitions of Low-Volume and High- Volume Ceiling Fans .................... 2-5

2.3.2.2 Definitions for Hugger, Standard, and Multi-Mount Ceiling Fans ............ 2-6

2.3.2.3 Definition of Highly Decorative Ceiling Fan ............................................. 2-6

2.4 CEILING FAN EFFICIEN CY METRIC ........................................................................ 2-7

2.4.1 Number of Speed Settings Included in the Metric ............................................... 2-8

2.4.2 Standby and Off Mode ......................................................................................... 2-8

2.5 MARKET AND TECHNOLOGY A SSESSMENT ...................................................... 2-10

2.5.1 Market Assessment ............................................................................................ 2-10

2.5.2 Technology Assessment

................................ ..................................................... 2-11

2.5.3 Product Classes .................................................................................................. 2-12

2.6 SCREENING ANALYSIS ............................................................................................ 2-15

2.6.1 Ceiling Fan Design Options ............................................................................... 2-16

2.6.1.1 More Efficient Direct

- Drive Single -Phase Induction Motors .................. 2-16

2.6.1.2 Geared Motors .......................................................................................... 2-17

2.6.1.3 Brushless DC Motors ............................................................................... 2-17

2.6.1.4 Three -Phase Induction Motors ................................................................. 2-19

2.6.1.5 Fans with Fewer Blades ........................................................................... 2-19

2.6.1.6 Twisted, Airfoil, and Beveled Blades ...................................................... 2-20

2.6.1.7 Blade Attachments ................................................................................... 2-21

2.6.1.8 Alternative Blade Materials ..................................................................... 2-21

2.6.1.9 Occupancy Sensors .................................................................................. 2-22

2.7 ENGINEERING ANALYSIS ........................................................................................ 2-23

2.7.1 Low

- Volume Ceiling Fans ................................................................................. 2-24

2.7.1.1 Engineering Approach .............................................................................. 2-24

2.7.1.2 Product Classes and Representative Sizes ............................................... 2-27

2.7.1.3 Baseline Models ....................................................................................... 2-28

2.7.1.4 Manufacturing Cost Analysis ................................................................... 2-28

2.7.2 High

- Volume Ceiling Fans ................................................................................ 2-29

2.7.2.1 Engineering Approach .............................................................................. 2-29

2.7.2.2 Product Classes and Representative Sizes ............................................... 2-29

2.7.2.3 Baseline Models ....................................................................................... 2-29

2.7.2.4 Manufacturing Cost Analysis ................................................................... 2-30

2.8 MARKUPS ANALYSIS ............................................................................................... 2-30

2-i2.9 ENERGY USE ANALYSIS .......................................................................................... 2-31

2.9.1 Usage Interaction between Ceiling Fans and Air Conditioners ......................... 2-31

2.10 LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS ................................... 2-34

2.11 SHIPMENTS ANALYSIS ............................................................................................ 2-36

2.12 NATIONAL IMPACT ANAL YSIS .............................................................................. 2-37

2.12.1 National Energy Savings Analysis

................................ ..................................... 2-38

2.12.2 Net Present Value Analysis ............................................................................... 2-38

2.13 CONSUMER SUBGROUP AN ALYSIS ...................................................................... 2-39

2.14 MANUFACTURER IMPACT ANALYSIS

................................ .................................. 2-39

2.14.1 Sources of Information for the Manufacturer Impact Analysis ......................... 2-40

2.14.2 Industry Cash- Flow Analysis ............................................................................. 2-40

2.14.3 Direct Employment Impact Analysis ................................................................. 2-41

2.14.4 Manufacturer Subgroup Analysis ...................................................................... 2-41

2.14.5 Competitive Impacts Assessment ...................................................................... 2-42

2.14.6 Cumulative Regulatory Burden ......................................................................... 2-42

2.14.7 Preliminary Results for the Manufacturer Impact Analysis .............................. 2-43

2.15 EMISSIONS ANALYSIS .............................................................................................. 2-44

2.16 MONETIZATION OF EMISSION REDUCTIONS BENE FITS ................................. 2-46

2.17 UTILITY IMPACT ANALY SIS ................................................................................... 2-47

2.18 EMPLOYMENT IMPACT AN ALYSIS ....................................................................... 2-48

2.19 REGULATORY IMPACT AN ALYSIS ....................................................................... 2-48

REFERENCES .......................................................................................................................... 2-49

LIST OF TABLES

Table 2.3.1 Low Volume Ceiling Fan s, 7 Feet in Diameter or Less ................................ 2-6

Table 2.5.1 Ceiling Fan Technology Options ................................................................. 2-12

2- iiCHAPTER 2. ANALYTICAL FRAMEWORK

2.1 INTRODUCTION

The Energy Policy and Conservation Act (EPCA), as amended (42 USC 6291 et. seq.), requires that when prescribing new or amended energy conservation standards for covered products, the U.S. Department of Energy (DOE) must promulgate s tandards that achieve the maximum improvements in energy efficiency that are technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and (3)) This chapter provides a description of the general analytical framework that DOE uses in dev eloping such standards, and in particular, standards

for ceiling fans

. It includes a description of the methodology, the analytical tools, and relationships among the various analyses that are part of this rulemaking. Chapter 2 also provides

an overview of the preliminary activities DOE has conducted and discusses the comments it

received in response to the framework document. Finally, chapter 2 provides cross- references to the other chapters of th is preliminary technical support document (TSD) that address DOE ’ s analytical approach, inputs, and findings.

The analyses presented in this preliminary TSD include:

• a market and technology assessment to characterize the ceiling fan market; to identify technology options that improve their energy efficiency ; and to develop product classes;

• a screening analysis to review each technology option and determine if it is technologically feasible; practica ble to manufacture, install, and service; would adversely impact ceiling fan utility or availability; or would have adver se impacts on health and safety;

• an engineering analysis to study representative ceiling fan s , to select candidate standard

level s (CSLs), and to determine ceiling fan power ratings ;

• a markups analysis to develop distribution channel markups that relate the manufacturer production cost (MPC) to the cost to the consumer ;

• an energy

- use characterization that generates energy

- use estimates for ceiling fans ;

• a life

- cycle cost ( LCC ) analysis that calculates, at the consumer level, the discounted

savin gs in operating costs throughout the estimated life of the ceiling fan compared to any increase in the installed costs likely to result directly from imposition of the standard;

• a payback period (PBP) analysis to estimate the amount of time it takes consumers to recover the higher purchase expense of more efficacious ceiling fans through lower operating costs;

• a shipments analysis that forecasts shipments of ceiling fans over th e time period examined in the analysis;

2-1• a national impact analysis ( NIA ) that assesses the aggregate impacts at the national level of potential energy conservation standards as measured by the net present value (NPV) of total consumer economic impacts an d national energy savings (NES); and

• a preliminary manufacturer impact analysis ( MIA ) that begins to evaluate the effects on manufacturers that may result from a n amended energy conservation standard.

DOE may revise any of its analyses based on comments and new information received on this preliminary analysis before publishing any subsequent notice of proposed rulemaking (NOPR) . The analyses DOE would perform in any NOPR stage include those listed below:

• an LCC subgroup analysis that evaluates the economic impacts on identifiable groups of

consumers of ceiling fans , including various categories of ceiling fan purchasers or owners who may experience disproportionate impacts from a national energy conservation standard;

• an MIA that estimates the financial impact of standards on ceiling fan manufacturers and calculates impacts on competition, employment at the manufacturing plant, and manufacturing capacity;

• an emissions analysis to provide estimates of the effects of amended energy conservation standards on emissions of carbon dioxide (CO 2 ), sulfur dioxide (SO 2 ), nitrogen oxides (NO X ), and mercury (Hg);

• a monetization of the reduced emissions that estimates the economic values of reductions

in CO 2 and NO

x emissions from the proposed standard l evels ; and

• a utility impact analysis that estimates the effects of proposed standards on the installed capacity and the generating base of electric utilities;

• an employment impact analysis that estimates the impacts of standards on net jobs eliminated or created in the general economy as a consequence of increased spending on the installed price of ceiling fans and reduced consumer spending on energy;

• a regula tory impact analysis (RIA) that presents major alternatives to proposed standards that may achieve comparable energy savings at a lower cost.

DOE developed its analytical framework in the Energy Conservation Standards Rulemaking Framework Document for Ceiling Fans and Ceiling Fan Light Kits ( March 15,

2013 ). 1 DOE presented the analytical approach to interested part ies during a public meeting held

on March 22, 201 3 (hereafter the “framework public meeting”)

.

In response to the publication of the framework document and the framework public meeting, DOE received comments from interested parties on its analytical appro ach. Based on the discussions and issues raised at the framework public meeting, the American Lighting

2-2Association (ALA ) r equested that DOE extend the comment deadline. (ALA, No. 9 at p. 63-64) a DOE agreed and extended the comment deadline until June 14, 2013. 2 This chapter summarizes the key comments DOE received, describe s DOE’s responses, and summarizes any significant changes in the analytical approach since DOE published the framework document. In the executive summary of this preliminary TSD, DOE identifies issues on which it seeks public comment, which are also discus sed in the sections below.

2.2 BACKGROUND

2.2.1 Regulatory Authority and History of Standards Rulemakings for Ceiling Fans

Title III of EPCA sets forth a variety of provisions designed to improve energy efficiency. Part B of Title III (42 U.S.C. 6291-6309) established the “Energy Conservation Program for Consumer Products Other Than Automobiles,” which includes major household appliances. b Subsequent amendments expanded Title III of EPCA to include additional consumer products and certain commercial and industrial equipment, including certain ceiling

fans —the products that are the focus of this document. EPCA, as amended, provides that DOE may establish energy conservation standards for ceiling fans, as well as requirements for determining whether these standards sho uld be amended. (42 U.S.C. 6295(ff)) In addition to authorizing DOE to issue electrical energy conservation standards for ceiling fans, EPCA also includes certain statutorily -prescribed design standards (including a requirement for (i) fan speed controls separate from any lighting controls; (ii) adjustable speed controls (either more than one speed or variable speed); and (iii) the capability for reverse action (other than fans sold for industrial or outdoor application or where safety would be an issue)). (42 U.S.C. 6295(ff)(1)(A) and (6)) The statutory design standards will remain in place and are not subject to review as part of this rulemaking process.

DOE codified the EPCA energy conservation standards and promulgated test procedures for ceiling fans , which are set forth in the Code of Federal Regulations (CFR). In a final rule published in the Federal Register (FR) on October 18, 2005, DOE codified the statutory design standards for ceiling fans in the CFR at 10 CFR 430.32(s). 70 FR 60407, 60413. In a final rule published in the Federal Register on December 8, 2006, DOE adopted test procedures for ceiling fans at 10 CFR part 430, subpart B, appendix U. 71 FR 71340, 71366-67.

This preliminary analysis is part of DOE’s review to determine whether the standards in effect for ceiling fans should be amended, as directed by EPCA. (42 U.S.C. 6295( ff ) (6)) It also addresses 42 U.S.C. 6295(gg)(3), in which DOE is directed to incorporate standby mode and off mode energy use in any amended (or new) standard adopted after July 1, 2010 pursuant to 42 U.S.C. 6295(o).

a A notation in this form provides a reference for i nformation that is in the docket of DOE’s rulemaking to develop energy conservation standards for ceiling fans (Docket No. EERE

– 201 2– BT

– STD

– 00 45 ), which is maintained at www.regulations.gov. This notation indicates that the statement preceding the referenc e is document number 9 in

the docket for the ceiling fans energy conservation standards rulemaking, and appears at page s 63

- 64 of that

document.

b Part B was re

- designated Part A on codification in the U.S.C

. for editorial reasons.

2-32.2.2 Test Procedure

EPCA sets forth generally applicable criteria and procedures for DOE’s adoption and amendment of test procedures. (42 U.S.C. 6293) Manufacturers of covered products must use these test procedures to certify to DOE that their product complies with EPCA energy

conservation standards and to represent the efficiency of their product. Also, DOE must use these

test proce dures whenever testing is required in an enforcement action to determine whether covered products comply with EPCA standards. (42 U.S.C. 6295 (r

- s))

DOE’s test procedure for ceiling fans is set forth in title 10 of the CFR, part 430, subpart B, appendix U. Th is test procedure provides instructions for measuring ceiling fan performance, largely by incorporating the ENERGY STAR ® Testing Facility Guidance Manual: Building a Testing Facility and Performing the Solid State Test Method for ENERGY STAR® Qualified Ceiling Fans, Version 1.1. c DOE is currently conducting a review of the ceiling fan test procedure. The ceiling fan test procedure NOPR was issued on September 19, 2014, and is

available at http://www.regulations.gov/#!docketDetail;D=EERE-2013- BT

- TP -0050

2.3 SCOPE

In this section, DOE discusses specific issues and comments related to the scope of this rulemaking. The topics of discussion include interpretations and clarifications of the statutory definition of a ceiling fan and regulatory definitions of several types of ceiling fans.

2.3.1 Statutory Definition of a Ceiling Fan

EPCA grants DOE authority to consider and prescribe amended energy conservation standards for ceiling fans, where a ceiling fan is defined as “a nonportable device that is suspended from a ceiling for circulating air via the rotation of fan blades." (42 U.S.C. 6291(49))

As discussed in the concurrent test procedure rulemaking for ceiling fans, DOE is:

1. Proposing to reinterpret the statutory definition of a ceiling fan to include both hugger and multi-mount ceiling fans; and

2. Clarifying that ceiling fans capable of producing large volumes of airflow, such as those ceiling fans typically used in industrial applications, meet the statutory definition of a

ceilin g fan

.

DOE has reviewed the retail market for ceiling fans and found that ceiling fans are commercially available in a range of sizes up to 24 feet in diameter. As noted in the test procedure rulemaking for ceiling fans, there do not appear to be third pa rty testing facilities

accredited to test large

- diameter ceiling fans, though there may be third party testing facilities capable of such testing . DOE is tentatively including ceiling fans up to 24 feet in diameter within the scope of this rulemaking, howe ver, to correspond to the current retail market.

c Available at: http://w ww.energystar.gov/ia/partners/manuf_res/downloads/ceiltestfinal.pdf

2-4DOE also received general comments on the practicality of achieving energy savings through efficiency performance standards for ceiling fans rather than considering other options, such as incentives or education. Hansen Wholesale suggested using voluntary minimum performance standards as an alternative regulatory approach and utilizing a labeling requirement

to educate consumers. (Hansen Wholesale, No. 35 at p. 1- 2) Hunter Fans (Hunter) stated that a

stan dard would cause consumers to shift to purchasing and using less efficient products such as central or room air conditioners. Hunter, along with ALA, proposed educating consumers on fan usage to reduce energy consumption, while additionally working with ut ility companies to create rebate and incentive programs . (Hunter, No. 37 at p. 2, 4-5; ALA, No. 39 at p. 47 ) Fanimation Inc. (Fanimation) also encouraged the use of consumer rebates and tax credits . (Fanimation, No. 8 at p.1) Additionally, Lighting First suggested that DOE educate consumers on potential energy cost savings of ceiling fans. (Lighting First, No. 18 at p. 1) In the regulatory impact analysis,

which would be conducted at any NOPR stage of this rulemaking, DOE would evaluate majo r alternative s to standards in terms of ability to reduce energy consumption and cost- effectiveness.

2.3.2 Regulatory Definitions

To provide clarity regarding how a ceiling fan fits into DOE’s regulatory structure, DOE is considering definitions for various types of ceiling fans. In the test procedure NOPR (issued on September 19, 2014), DOE proposed definitions for low-volume and high-volume ceiling fans, as well as hugger, standard, and multi-mount ceiling fans. Additionally, DOE is considering a definition for highly decorative ceiling fans.

2.3.2.1 Definitions of Low -Volume and High- Volume Ceiling Fans

Although the framework document did not distinguish between low- and high-volume ceiling fans, DOE has since determined that it is necessary to delineate these two types of fans because they deliver distinct utilities to ceiling fan users and require different methods of testing. In the test procedure rulemaking for ceiling fans (issued on September 19, 2014), DOE proposed the following definitions for low- and high-vo lume ceiling fans:

• Low-volume ceiling fan : “a ceiling fan that : (1) I s less than or equal to 7 feet in diameter,

AND (2) H as a blade thickness greater than or equal to 3.2 mm at the edge and a maximum tip speed less than or equal to the limit in Table 1

, OR

Has a maximum airflow volume less than or equal to 5,000 CFM.”

• High -volume ceiling fan : “a ceiling fan that : (1) I s greater than 7 feet in diameter,

OR (2) Has a blade thickness of less than 3.2 mm at the edge or a maximum tip speed

that exceeds the threshold in Table 1

AND Has a maximum airflow volume greater than 5,000 CFM.”

Table 1 is reproduced below as Table 2.3.1

.

2-5Table 2.3.1 Low Volume Ceiling Fans, 7 Feet in Diameter or Less

Airflow Thickness (t) of edges of blades Maximum speed at tip of blades

D irection * m m (inch) m/s (feet per minute)

Downward

- Only 4.8 > t ≥ 3.2 (3/16 > t ≥ 1/8) 16.3 (3

, 200)

Downward

- Only t ≥ 4.8 (t ≥ 3/16) 20.3 (4

, 000)

Reversible 4.8 > t ≥ 3.2 (3/16 > t ≥ 1/8) 12.2 (2

, 400)

Reversible t ≥ 4.8 (t ≥ 3/16) 16.3 (3

, 200)

* The “downward

- only” and “reversible” airflow directions are mutually exclusive; therefore, a ceiling fan that can only produce airflow in the downward direction need only meet the “downward

- only” blade

- edge

- thickness and tip

- speed requirements and a ceiling fan that can produce airflow in the downward and upward directions need only meet the “reversible” requirements.

2.3.2.2 Definition s for Hugger , Standard, and Multi

- Mount Ceiling Fans

In the concurrent test procedure rulemaking for ceiling fans, DOE proposed the following definitions for different types of low-volume ceiling fan s:

• Hugger ceiling fan : “A ceiling fan where the lowest point on the fan blades is no more than ten inches from the ceiling.”

• Standard ceiling fan : “A ceiling fan where the lowest point on the fan blades is more than ten inches from the ceiling.”

• Multi -mount ceiling fan : “A ceiling fan that can be mounted in both the standard and hugger ceiling fan configurations.”

2.3.2.3 Definition of Highly Decorative Ceiling Fan

EPCA requires that if DO E sets energy efficiency standards for ceiling fans, it must consider ''establishing separate exempted product classes for highly decorative fans for which air movement performance is a secondary design feature.'' (42 U.S.C. 6295(ff)(6)(B)(ii)) In this

rul emaking

, therefore, DOE is considering clarifying the statutory language “highly decorative

fans for which air movement performance is a secondary feature .” In the framework document,

DOE consider ed defining highly decorative ceiling fans based on a maximu m rotational speed of 50 revolutions per minute ( RPM ). DOE received a number of comments regarding the definition of highly decorative fans, most suggesting alternative definitions.

ALA disagreed with the considered definition and suggested defining a highly decorative ceiling fan based on one or more of the following characteristics (ALA, No. 39 at p. 4-6):

1. Less than 90 RPM on high

2. Less than 2 ,000 CFM on high

3. Single blade surface area greater than 120 square inches

4. Belt driven fans

5. Rod driven fans

6. Multipl e head fans

7. Orbital fans

2-68. Sweeping fans

Fanimation, during the public meeting for the framework document, suggested using the

blade width to length ratio as basis for defining highly decorative ceiling fans or increasing the maximum RPM threshold. (Fanimation, No. 9 at p. 33) B ig Ass Fans (BAF) disagreed with the concept of basing the definition of highly decorative ceiling fans solely on RPM, noting that high -volume, low speed (HVLS) fans, which are intended to produce significant air movement

, also operate at very low RPMs. Instead, they recommended a maximum tip speed threshold. ( BAF , No. 43 at p. 2) Emerson commented that the consider ed definition simplifies the product definition and does not capture the intended decorative purpose of the fan , not ing that t hese fans are mainly purchased for “artistic expression and visual appeal,” and not air movement. (Emerson, No. 46 at p. 2)

To determine which ceiling fans may be subject to an exemption for highly decorative ceiling fans, a clear, quantitativ e definition for such fans is necessary. A definition based on the size of a blade appears to be problematic because l arger ceiling fans would tend to have fan blades with larger surface areas, without being inherently more decorative.

A quantitative d efinition for highly decorative ceiling fans must also comply with the statutory directive that “ air movement performance is a secondary design feature'' for such fans (42 U.S.C. 6295(ff)(6)(B)(ii)) Relatively low maximum rotational speed may indicate that a ceiling fan was not designed with air movement in mind, as would relatively low maximum

airflow. DOE has carefully considered the maximum rotational speed and airflow threshholds suggested by ALA. A combined definition for highly decorative ceiling fans based on operating

at less than 90 RPM and producing less than 2,000 CFM of airflow on high speed may be reasonable. A requirement for less than 90 RPM on high speed by itself might incorrectly incorporate some larger ceiling fans that operate at relative ly low RPM in the definition of highly decorative ceiling fans. Similarly

, a requirement for less than 2 ,000 CFM at high speed might incorrectly incorporate some smaller ceiling fans and hugger fans into the highly decorative category. Combined, however, this definition seems reasonable across the span of ceiling fan

sizes.

DOE requests comment on the considered definition for highly decorative ceiling fans

.

2.4 CEILING FAN EFFICIENCY METRIC

The current DOE test procedure for ceiling fans measures airflow efficiency, in cubic feet per minute per watt (CFM/watt). In the framework document, DOE considered using a metric based on airflow efficiency as the basis for evaluating the efficiency perfo rmance of ceiling fans.

Hansen Wholesale disagree d with using airflow efficiency as the basis for the metric for ceiling fans, stating that it can be misleading to consumers who do not understand the potential energy savings between different airflow ef ficiencies

. Hansen Wholesale instead suggest ed a metric measuring energy saved or cooling effect , which can better inform consumers. (H ansen Wholesale, No. 35 at p. 2)

2-7DOE research indicates that airflow efficiency is a universal metric used to describe the efficiency of ceiling fans. Airflow efficiency is equal to airflow, i.e. , the service delivered by a ceiling fan, divided by the power consumed. As such, airflow efficiency appears to be an appropriate method of evaluating efficiency performance. Additionally, cooling effect is dependent on ambient temperature and humidity. In this preliminary analysis, DOE continue s to

use airflow efficiency as the metric for ceiling fans, as proposed in the test procedure rulemaking for ceiling fans.

2.4.1 Number of Speed Settings Included in the Metric

Ceiling fans, which are required to be able to operate at more than one speed, consume electrical energy at different rates depending on the speed setting. The number of speeds that can

be included in the metric is determin ed by the number of speeds at which ceiling fans are tested. The current test procedure does not specify the number of fan speeds to be tested, but allows for testing at any available fan speed. In the framework document, DOE considered testing at one or multiple speeds. A number of comments were received on this subject with some commenters in favor of testing at multiple speeds and others in favor of testing at a single speed. A number of comments were also received on the appropriate weighting in an inte grated metric of the efficiency performance at each tested speed. These comments have been addressed in the concurrent test procedure rulemaking for ceiling fans. In the test procedure NOPR (issued on September 19, 2014), DOE proposed to test at the highest and lowest fan speed setting, and weight the performance at each speed according to the ratio of time spent at high and low speed found in a recent, nationally- representative survey of ceiling fan owners (Lawrence Berkeley National Laboratory’s report “ Ceiling Fan and Ceiling Fan Light Kit Use in the U.S ”). 3

2.4.2 Standby and Off Mode

Section 310(3) of the Energy Independence and Security Act of 2007 ( EISA 2007 ) amended EPCA to require energy conservation standards adopted for a covered product after July 1, 2010 to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) EPCA defines active mode as the condition in which an energy

- using piece of equipment is connected to a main power source, has been activated, and provides one or more main functions. (42 U.S.C. 6295)(gg)(1)(A)) Standby mode is defined as the condition in which an energy

- using piece of equipment is connected to a main power source and offers one or more of the following user

oriented or protective functions: facilitating the activation or deactivation of other functions (including active mode) by remote switch (including remote control), internal sensor, or timer; or providing continu ous functions, including information or status displays (including clocks) or

sensor- based functions. Id. Off mode is defined as the condition in which an energy

- using piece of equipment is connected to a main power source, and is not providing any standby or active

mode function. Id.

In the framework document, DOE proposed to include testing of standby mode power consumption as part of the amended ceiling fan test procedure, and to incorporate standby mode power consumption into an integrated metric that addresses overall energy efficiency. If the standby sensor and controller are shared between the ceiling fan and a ceiling fan light kit, DOE

considered account ing for the energy consumption in standby mode under the ceiling fan

2-8efficiency metric and not under the ceiling fan light kit luminous efficacy metric. Se veral comments were received regarding standby and off mode.

Progress Lighting (Progress) commented that most ceiling fan remote control s use passive radio frequency ( RF ) technology, which d oes not draw any power during standby. Furthermore, Progress asserted that DOE’s assumptions of the technologies which consume standby power, and the extent to which they do so, were not based on product testing. (Progress, No. 6 at p. 3)

King of Fans also dis agreed with DOE’s considered approach to test for standby power consumption, stating that “ceiling fans are tied into the building’s power and should not be treated like devices that use external power supplies.” (King of Fans, No. 42 at p. 2) King of

Fans further stated that “[t]he receiver for a remote control fan will draw power and in some cases, the proposed stand

‐ by/no load requirements with the current technology may be not be feasible. Such a change will require new testing ( i.e.

, EEV marks), new designs, new tooling, etc...which will increase costs to the industry that would be passed on to the customers.” Id.

BAF cited the DOE website to show standby power consumption in residential applications accounts for 5 to 10 percent of energy consumption. T herefore, BAF recommended

that DOE set a standard for stand by power consumption of 1 watt or less. (BAF, No. 43 at p. 4)

Hunter and ALA both comment ed that [low-volume] ceiling fans typical ly consume power in standby mode only if they have a remote contr ol and indicated that 1.4 w atts would be a typical industry value for standby power consumption for remote controlled ceiling fans. (Hunter, No. 9 at p. 71; ALA, No. 39 at p. 13) ALA commented that an industry survey showed that 83% of fans were operated b y pull-chain or light-switch and did not consume any standby

power. (A LA , No. 39 at p. 14) ALA further commented that they supported the idea of assigning standby power consumption to the ceiling fan when a remote control is shared between a ceiling

fan an d a ceiling fan light kit. (ALA, No. 39 at p. 22)

While many ceiling fans do not consume power in standby mode, commenters on the

framework document indicated that standby power consumption exists for ceiling fans in some cases. Additionally, DOE tested several ceiling fans with remotes, and the test results have shown non-zero power consumption in standby mode. EPCA directs DOE to amend its test procedures to account for standby mode and off mode energy consumption, with such energy consumption integrated into the overall energy efficiency, energy consumption, or other energy descriptor, if it is technically feasible to do so. (42 U.S.C. 6295(gg)(2)(A) and (3)). Accordingly, DOE plans to include standby mode power consumption in its analysis.

DOE’s approach to standby testing and incorporation in the metric has been described in the test procedure NOPR (issued on September 19, 2014) . DOE clarif ies that, as stated in the test procedure NOPR, standby mode testing would be applicable only to those ceili ng fans that offered standby functionality, as defined in 42 U.S.C. § 6295(gg)(1)(A)(iii)(II), to the ceiling fan. Ceiling fans without standby mode functionality would not be required to perform standby mode testing . Because ceiling fans do not appear to have any power consumption in off mode, DOE

2-9has not proposed to test ceiling fans for off mode power consumption or incorporate off mode power consumption into the efficiency metric for ceiling fans.

2.5 MARKET AND TECHNOLOGY ASSESSMENT

In the initial stages o f an energy conservation standards rulemaking, DOE gather s information that provides an overall picture of the market for the products concerned, including

the nature and market characteristics of the products and the industry structure. This activity consists of both quantitative and qualitative analysis. The subjects addressed in the market and technology assessment for the preliminary analysis include the major manufacturers, product classes, retail market trends, shipments of covered products, regulator y and non -regulatory programs, and technologies that could be used to improve the energy efficiency of ceiling fans. This information serves as a resource throughout the rulemaking.

The discussion below summarizes the analytical approach to the market an d technology

assessment and the comments DOE received in response to the framework document. A more detailed discussion on DOE’s approach can be found in chapter 3 of this TSD.

2.5.1 Market Assessment

As part of the market assessment, DOE examined manufacturers, trade associations, and the quantities and types of products sold and offered for sale. DOE reviewed relevant literature and interviewed manufacturers to develop a picture of the ceiling fan industry in the United

States. Market research data, government databases, surveys of ceiling fans users, retail listings, industry publications ( e.g., manufacturer catalogs) , and industry experts provided the bulk of the information. Using this information, DOE assessed the overall state of the industry, ceiling fan manufacturing and market shares, shipments by fan type, general technical information on ceiling fans, and industry trends.

In the f ramework document, DOE sought comment s in general on the market for ceiling fans and in particular on product features, market shares, and trends. ALA cited market data from TraQline indicating an increase in average retail price for a ceiling fan from $96 in 2007 to $106 in 2012, and noted that January 1, 2007 was the compliance date for the current standards for ceiling f ans. ALA also stated that the ceiling fan industry absorbed the majority of the addi tional costs from regulation to avoid passing the burden on to the consumer. (ALA, No. 39 at p. 23)

ALA also presented market shares b y distribution channel, estimating that 82% of ceiling

fans are purchased from home centers and mass merch ants, 13% from lighting stores and the internet, and 5% from electrical distributors. In addition , ALA included sales information from

their surv ey of ceiling fan manufacturers which in dicate that current ceiling fan sales are flat

. (ALA, No. 39 at p. 23-24)

DOE acknowledges and appreciates the market information provided by ALA and has found similar data on sales trends and market shares by distribution channel. DOE notes that it is unclear whether the prices cited from TraQline have been adjusted for inflation. Consumer survey data from market research firm NPD Group, Inc. indicates that, when adjusted for inflation, average retail prices for ceiling fans were flat between 2007 and 2012.

2-102.5.2 Technology Assessment

In the technology assessment, DOE identifies technology options that appear to be feasible means of improving ceiling fan efficiency. This assessment provides the technical background and structure on which DOE bases its screening and engineering analyses. To develop a list of technology options, DOE reviewed manufacturer catalogs , retail listings, published literature, and patents, and consulted with industry experts. The list of technology options presented in the framework document included using different motor types, changes in blade designs, and the addition of occupancy sensors. DOE received sev eral comments regarding

the feasibility and impact of the technology options identified in the framework document, which

are discusse d in the following sections on the screening and engineering analyses

.

The Appliance Standards Awareness Project (ASAP), National Consumer Law Center (NCLC), Natural Resources Defense Council (NRDC) and Northwest Energy Efficiency Alliance (NEEA) commente d that the technology options presented by DOE in the framework document do not include any options for reducing standby power consumption. (ASAP

- NCLC

NEEA -NRDC, No. 14 at p. 5) While DOE recognizes that the potential to reduce standby power consumption might exist, it is not aware of any specific technologies that could be used to accomplish such a reduction. Based on discussions with manufacturers and DOE’s internal testing, standby power consumption in low- volume ceiling fans is almost entirely due to th e presence of a wireless remote control receiver. DOE has yet to identify any technical improvements within the controls that would allow for a reduction in standby power.

Progress commented on the f ramework document that most ceiling fan remote controls use passive radio frequency (RF) technology, which does not draw any power during standby. (Progress, No. 6 at p. 3) DOE’s research, testing, and discussions with ceiling fan manufacturers has shown that ceiling fan remote control receivers do consume power in standby mode. DOE requests more information on the meaning of ‘passive radio frequency technology’ and how it works to eliminate standby power.

DOE notes that by establishing an integrated metric that incorporates standby power consumption into the overall metric for ceiling fans, any reduction in standby power consumption will make it easier to achieve a given efficiency, providing an incentive to reduce standby power consumption. DOE seeks comment s from interested parties on technology options that could reduce standby power consumption, the cost of these technologies, and the magnitude of the standby power reduction that could be achieved.

Ebm

- papst commented that the use of a fan controller that employs a wind sensor and a temperature sensor would reduce unnecessary operati on of outdoor circulation fans. (Ebm-papst, No. 60 at p. 4) DOE agrees that there could be a theoretical potential for reduced energy consumption from wind and temperature sensors for ceiling fans which are installed outdoors if those fans do not turn on unless the temperature exceeds or the wind falls below certain thresholds. DOE notes, however, that only approximately 3% of ceiling fans are installed outdoors, 3 which limits the potential energy savings for those fans. DOE is not aware of any ceiling fans or working prototypes that include integrated wind or temperature sensors at this time, or any data that would indicate if these products wo uld translate into energy savings as used in the field. Therefore, DOE is tentatively not including wind or temperature sensors as a

2-11technology option. DOE request s information on the availability of ceiling fans including wind and temperature sensors and any data on the potential energy savings associated with such products.

During manufacturer interviews, DOE received feedback from several manufacturers on the potential for efficiency improvements achieved through a beveled blade design. DOE has added them as a technology option becaus e they appear to be a possible method of improving the efficiency of low -volume ceiling fans.

In summary, DOE is considering the technology options shown in Table 2.5.1 in this preliminary analysis.

Table 2.5.1 Ceiling Fan Technology Options

More

- Efficient Motors

More

- Efficient Direct

- Drive Single

- Phase Induction Motors Geared Single

- Phase Induction Motors

Brushless DC Motors

Three

- Phase Induction Motors

More

- Efficient Blades

Fans with Fewer Blades

Twisted Blades

Airfoil Blades

Blade Attachments

Alternative Blade Materials

Beveled Blades
Ceiling Fan Controls Occupancy Sensors

2.5.3 Product Classes

When evaluating and establishing energy conservation standards, DOE divides covered products into classes by: (a) the type of energy used; (b) the capacity of the product; or (c) other performance

- related features that justify different standard levels, such as features affecting consumer utility. (42 U.S.C. 6295(q)) Different energy conservation standards may apply to different product classes. In the framework document, DOE considered four product classes: indoor ceiling fans, highly decorative ceiling fans, outdoor ceiling fans, and hugger ceiling fans

. DOE received seve ral comments regarding these potential product class divisions. The comments and responses are summarized below.

Based on differences in functionality, ALA support ed the four product classes mentioned in the framework document, and clarified that they supported excluding highly decorative fans from the rulemaking. (ALA, No. 39 at p. 25) On the other hand, Hansen Wholesale objected to

the considered product classes and suggested consolidating the product classes into one. Hansen Wholesale noted that hugge r fans have the ability to effectively move air and stated that the slight difference in air movement is not enough reason to establish a separate product class and

2-12standards for hugger fans. (Hansen Wholesale, No. 35 at p. 1) Fanimation recommended

classi fying fans by mounting type and application to form three product classes, indoor fans, hugger fans, and outdoor fans and noted that identifying mounting type separates indoor and outdoor fans from hugger fans. (Fanimation, No. 32 at p.2)

DOE notes that mounting type alone is an insufficient justification for establishing separate product classes because it does not inherently provide additional utility to a consumer.

C eiling fans with blades close to the ceiling , however, may provide an ad ditional utility because they are safe to use in rooms with low ceilings. T he efficiency of a hugger ceiling fan may be lower than a standard ceiling fan due to the reduced access to air, which results in less effective cooling of the ceiling fan motor. Th erefore DOE is considering creating separate product classes for standard ceiling fans and hugger ceiling fans. As required by EPCA, DOE is also considering establishing a separate, exempt product class for highly decorative ceiling fans.

ALA recommended a separate product class for outdoo r ceiling fans. (ALA, No. 39 at p. 6) Progress also supported a separate product class for outdoor fans based on heavier blade

materials for outdoor fans versus indoor fans and differences in the environmental conditions for air movement. (Progress, No. 6 at p.7) BAF disagreed with creating a separate product class for outdoor ceiling fans because the changes made to the fans to obtain damp or wet ratings may not result in decreased fan efficiency. ( BAF , No. 43 at p. 2) Th e California investor- owned utilities ( CA IOU s) also suggested that it was unnecessary to create a separate product class for outdoor fans and noted that, to their knowledge, there may not be design differences between indoor and outdoor ceiling fans that affect the fan efficiencies. (CA IOU s, No. 12 at p. 2) CA IOUs stated that since outdoor ceiling fans can be used indoors, having separate product classes could create potential loopholes to circumvent standards. Id. Fanimation disagreed with CA IOUs comme nt, and stated that ceiling fans should be c lassif ied by application type, noting that outdoor fans have wet or damp ratings. (Fanimation, No. 32 at p. 2)

After conducting testing, reviewing technical specifications of commercially available ceiling fans, and receiving feedback from manufacturers, DOE has not found evidence of significant differences in the efficiencies of outdoor ceiling fans versus indoor ceiling fans. DOE also notes that there appears to be significant overlap in the application an d installation settings between indoor and outdoor ceiling fans based on the significant percentage (20-25%) of ceiling fans available in stores that are identified as wet or damp rated, and the small percentage (less than 4%) of ceiling fans that are actu ally installed outdoors or in bathrooms. 3 Therefore, DOE is not considering separate product classes for outdoor ceiling fans. Instead, all product classes will

be inclusive of both outdoor and indoor fans.

DOE also received several comments regarding the appropriate classif ication and configuration for testing multi -mount fans. These comments have been addressed in the concurrent test procedure rulemaking for ceiling fans. In the test procedure NOPR (issued on September 19, 2014), DOE proposed to test multi-mount ceiling fans in both the hugger and standard ceiling fan configurations. DOE is considering requiring that multi -mount fans meet the potential standard for both product classes. For this preliminary analysis, when the potential impact of a particular hugger f an efficiency level was being analyzed, DOE assumed that a

2-13standard would be set at the equivalent efficiency level for fans in the standard product class (and

vice

- versa).

Using an AcuPOLL survey as a source, ALA commented that 27% of multi-mount

ceilin g fans are installed in the hugger configuration, with the other 73% being installed “ with the down rod (non-hugger) option.” (ALA, No. 39 at pp. 8- 9) Because these results are based on the survey ’s total sample of ceiling fan owners, not solely owners of multi -mount ceiling fans,

this assumes that the proportions of multi-mount ceiling fans installed in the hugger or standard configuration are equivalent to the installation distrib ution for all ceiling fans . Additionally , the AcuPOLL survey categorizes ceiling fan installations as “hugger,” “standard,” or “close -mount.” According to the survey , 27% of all ceiling fans surveyed were installed in the hugger configuration, 54% in the standard configuration and 19% in a “close-mount” configuration 4

. (ALA, No. 39 at pp. 8-9) DOE requests information regarding the similarity of installation distributions between all ceiling fans and the subset of multi -mount fans. DOE also requests information or comment on the assumption that "close-mount" ceiling fans should be categorized

as “ standard ” c eiling fans and not “hugger” ceiling fans . For the shipments and NIA analyses, DOE has included 27% of multi-mount ceiling fans in the results for the hugger product class, with the other 73% being included in the results for the standard product class.

Although DOE did not discuss high-volume ceiling fans in the framework document,after further consideration, DOE believes that there should be separate product classes for highvolume ceiling fans. High-volume ceiling fans appear to provide a distinct util ity for consumers compared to low-volume ceiling fans by being capable of producing larger volumes of airflow at a given diameter. Because high -volume fans use higher tip speeds to achieved increased airflow, they cannot be safely installed in all settings . Low -volume ceiling fans, on the other hand, produce less airflow but can be safely used in settings where the fan blades are within 10 feet of the floor, such as is typical in a residential installation. Because high-volume ceiling fans are not

held to t he same safety requirements that low -volume ceiling fans are, high-volume ceiling fans are typically more efficient.

There appear to be two broad categories of high- volume ceiling fans: those with diameters comparable to low -volume ceiling fans that operate at high RPM, and those with larger diameters that operate at lower RPM. The smaller diameter high -volume ceiling fans can be installed in rooms with overhead obstructions where a large diameter fan cannot fit. They are often used in an array of similarly sized ceiling fans. Large- diameter high -volume ceiling fans that operate at low RPM are referred to as “high volume, low speed” ceiling fans in the ceiling fan industry. They can be installed only in large buildings with minimal overhead obstructions. They can be used independently or in conjunction with other large

- diameter fans in very large buildings. DOE believes that it may be appropriate to group these two types of ceiling fans into two separate product classes based on capacity, where blade span i s used as a proxy for capacity. Larger and smaller diameter high -volume ceiling fans appear to have distinct types of fan design and construction available to them, making it infeasible to apply a single equation for efficiency as a function of blade span across the full range of possible fan diameters, unlike low-volume ceiling fans. The retail market for small

- diameter high -volume ceiling fans appears to primarily

consist of fans that are six feet in diameter or less, and large

- diameter high

- volume ceilin g fans appear to be commercially available between eight and 24 feet in diameter. Therefore DOE is

2-14considering establishing two product classes for high- volume ceiling fans: high -volume small

diameter (HVSD) ceiling fans that have a diameter of seven feet or less and high-volume large

diameter (HVLD) ceiling fans that have a diameter of more than seven feet, but no more than 24 feet. These two product classes would be in addition to the three low-volume ceiling fan product classes that DOE is considering: h ugger fans, standard fans, and highly decorative ceiling fans.

2.6 SCREENING ANALYSIS

The purpose of the screening analysis is to evaluate the technologies identified in the technology assessment to determine which technologies to consider further in the engin eering analysis and which technologies to screen out. DOE consulted with industry, technical experts, and other interested parties in developing a list of energy-saving technologies for the technology

assessment

. DOE then applied the screening criteria to determine which technologies were unsuitable for further consideration in this rulemaking. Chapter 4 of the technical support document ( TSD ) , the screening analysis, contains details about DOE’s screening criteria.

As presented in further detail below, the screening analysis examines whether various technologies: (1) are technologically feasible; (2) are practicable to manufacture, install, and service; (3) have an adverse impact on product utility or availability; and (4) have adverse impacts on health and safety

. In consultation with interested parties, DOE reviewed the list of ceiling fan technologies according to these criteria

. In the engineering analysis, DOE further considers the efficiency

- enhancement technologies that it did not eliminate in the screening analysis.

1. Technological feasibility. DOE screen s out technologies that are not incorporated in commercially -available products or working prototypes.

2. Practicability to manufacture, install, and service. If DOE determines that mass production of a technology in commercial products and reliable installation and servicing of the technology could not be achieved on the scale necessary to serve the relevant market by the time of the compliance date of the standard, it will not consider that technology further.

3. Adverse impacts on product or equipment utility or availability. If DOE determines a technology has a significant adverse impact on the utility of the product for significant consumer subgroups or results in the unavailability of any covered product type with performance characteristics (including reliability), features, size, capacities, and volumes that are substantially the same as products generally available in the United States at the time, it will not consider that technology further.

4. Adver se impacts on health or safety. If DOE determines that a technology will have significant adverse impacts on health or safety, it will not consider that technology

further.

Those technology options not screened out by the above four criteria are called “de sign options” and are considered as possible methods of improving efficiency in the engineering analysis.

2-152.6.1 Ceiling Fan Design Options

In the Framework Document, DOE sought comments on the preliminary technology options that were identified and whether there were any technologies that DOE should not consider based on the four screening criteria above. DOE also requested input on whether occupancy sensors should be included as a design option. The following paragraphs discuss the design options identified in the framework document and indicate whether DOE continues to consider them as design options in the preliminary analysis :

2.6.1.1 More Efficient Direct

- Drive Single

- Phase Induction Motors

The most common ceiling fan motor is a single -phase induction motor (permanent- split capacitor type) with an external rotor. In the Framework Document, DOE stated that the efficiency of such motors can be improved by increasing the size of (or the quality of steel used in) the stator and rotor stack, improving the lamination design, increasing the cross section of copper wiring, or operating the fan at reduced speed through capacitor speed control. ALA commented that the options for improving this type of motor (increased size, higher quality materials, more copper) would yield modestly higher CFM performance, but would also consume more power such that the net efficiency gain would be minimal. ALA also commented

that some efficiency is sacrificed in order to meet UL safety standards and that any modifications to achieve efficiency gains would have to meet the same safety requirements. (ALA, No. 39 at p. 28) Similarly to ALA, Progress commented that the efficiency of a single

- phase alternating current ( AC ) mo tor can be increased only by increas ing the motor size and the gauge of the copper windings. Progress noted that both of these changes would likely increase cost significantly, while improving efficiency only modestly . (Progress, No. 6 at p. 7)

DOE’s disc ussions with manufacturers indicated that ceiling fan efficiency can be improved by increasing the size of the motor, but that the improvement is small and it increases cost. DOE’s internal test data suggests that compared to a baseline product, the efficiency of low-volume ceiling fans can be improved through the use of larger AC motors and that if the CFM is held constant, the overall energy consumption decreases. Chapter 5 of the TSD, the engineering analysis, provides more details on DOE’s results regarding the decrease in overall power consumption with the use of larger AC motors. Furthermore, DOE identified several commercially available ceiling fan models on th e market that use direct -drive single- phase induction motors that are very efficient and still adhere to all existing regulatory and safety

standards. For example, DOE has identified about 65 52- inch standard ceiling fan s that use direct

- drive single -phase induction motors , and are more than twice as efficient as the baseline

fan. The most efficient 52 -inch standard fan without a DC motor is about 2.5 times more efficient than the baseline fan. d DOE has consider ed the efficiency and cost impacts of more

ef

ficient single -phase induction motors in its analysis for low-volume fans.

For high-volume fans, DOE’s research and discussions with manufacturers suggests that high -volume ceiling fans already use the most efficient type of AC motor for their intended

ap plication. For example, it is common f or HVLD manufacturers to offer the same fan blades

d Efficiency is measured in CFM/W as calculated using the procedure described the ceiling fans test procedure

NOPR.

2-16with a variety of different motor sizes (in horsepower). The choice of motor is dependent on the particular application in which the fan will be used (airflow needs, size of room, etc.). Based on this information, DOE concludes that for high-volume fans, using an over- or under-sized motor would not lead to an improvement in energy efficiency because the motor would no longer be operating in its most efficient RPM range . DOE is considering screening out more efficient AC motors from its analysis on high-volume fans and requests more information on this issue.

2.6.1.2 Geared Motors

For low-volume fans, most induction motors are mounted directly to the fan blades. This configurati on is known as direct- drive and means that the fan and motor rotate at the same speed. Some high- volume ceiling fans attach the fan blades to the motor via a geared mechanism that allows the fan blades to rotate at a different speed than the motor. This enables higher motor speeds for a given fan RPM, which could increase overall efficiency. ALA noted that geared

motors might be of use for high- volume ceiling fans. For low-volume fans, ALA commented that ceiling fans are desirable as a climate control appli ance due to their simplicity to install and operate and that using a geared -drive would likely result in significant noise that would cause consumers to utilize less efficient climate control systems. (ALA, No. 39 at p.28) Progress also urged DOE to screen out any motor technology that could potentially produce excessive noise,

because this would impact consumer utility. (Progress, No. 6 at p. 8)

DOE is not aware of any commercially available low -volume ceiling fans or working prototypes of low-volume ceiling fans with this design and concurs that the addition of a gearbox would impact consumer utility by increasing noise. Hence, DOE has screened out geared motors

for low -volume ceiling fans and HVSD fans. For HVLD fans, the incorporation of a gearbox is a common design feature, so DOE considers geared motors as a design option for the HVLD class.

2.6.1.3 Brushless DC Motors

The most efficient ceiling fans on the market have brushless direct current ( DC ) motors.

DC motors are permanent magnet sync hronous AC motors driven by a converter plus inverter combination control system. In this configuration, the motor displays characteristics of direct current motors; thus, they are called brushless direct current motors. Because there is no electrical current flowing in the rotor of a DC motor, there are no rotor energy losses, thereby resulting in greater efficiency

.

Hooyer urged DOE to screen out DC motors because AC motors were known to be reliable and long

- lasting. (Hooyer, No. 48 at p. 2) Monte Carlo urged DOE to screen out DC motors, since these motors were unreliable, with a standard defective rate of up to 15%. (Monte Carlo, No. 41 at p. 1) Capital Lighting commented that DC motors would have reliability issues, and therefore urged DOE to screen them out. (Capital Lighting, No. 27 at p. 3) Fanimation

commented that DC motors should be screened out because the technology is not yet fully developed and has reli ability issues that ma k e them infeasible (Fanimation, No. 30 at p.4). Hunter agreed and commented that DC motors require an electronic control that has the potential

to be unreliable. Hunter mentioned that the electronic controls would counteract the energ ysavings from the motor itself. In addition, Hunter said that more data is needed to ensure that the reliability and utility of DC motors meet consumer demands (Hunter, No. 37 at p. 3). ALA

2-17commented that DC motors represented a market attempt that has no t yet been proven and therefore should not be used as a baseline for new efficiency standards. ALA also commented

that DC motors are less reliable because of their electronic controls and that several ALA members have seen higher service/warranty complaints from consumers with DC motors. (ALA, No. 39 at p. 29)

DOE notes that DC motors have been us ed in ceiling fans since at least 2009. e Currently,

at least 15 low -volume manufacturers offer at least one fan with a DC motor. At least 3 highvolume ceiling fan manufacturers offer a fan with a DC motor. Additionally, market survey data

indicate that lo w-volume ceiling fans with DC motors currently account for approximately 3.4% of sales, up from an estimated 0.7% in 2012. f Ebm- papst specifically pointed out that ceiling fans were a relatively benign application for DC motors, noting that such motors are used successfully in severe heating, ventilation, air-conditioning and refrigeration ( HVAC/R ) applications where fan motors are operated at extreme temperatures, with higher power density and for longer annual run times ( ebm -pabst, No. 60 at p. 1 )

. DOE al so estimated the excess rate

of failure for DC motors compared to AC motors to be approximately 6.5 percent of purchases. 5

F ailures in DC fans are primarily due to failures of the electronic controls ; such failures are dependent on the control technology and how well the controls are protected from surges and electrical interference in the power line. 6 DOE seeks additional data on the failure rates of DC

brushless motors and the causes of those failures.

ALA also commented that according to Lutron Electronics Company, there is a large installed base of “quiet fan speed controls” designed to operate AC motor ceiling fans. ALA adds that any proposal that requires DC motors in ceiling fans would cause an inco mpatibility issue with the installed base of controls and significantly reduce consumer utility. (ALA, No. 39 at p. 31) DOE requests more information on quiet fan speed controls, their prevalence, compatibility with DC motors, and impact on product utility.

DOE is not aware of any ceiling fans with DC motors sold with pull-chain controls. Instead, low-volume ceiling fans with DC motors are typically sold with a handheld remote control. They can also be equipped with a wall control. Manufacturers stated th at there are consumers who prefer a pull-chain and that any ceiling fan standard that required the use of a DC motor would significantly reduce the overall utility of ceiling fans to these consumers. While fans with DC motors are not currently sold with a pull-chain, it may be possible to do so. Manufacturers could relocate the controller hardware from a remote to the fan body and use a pull-chain for fan control instead of a button on the remote. Moreover, comments submitted by ALA on behalf of ceiling fan retailers indicate that the majority of consumers prefer remotes over pull- chains when given the choice. While one retailer claimed that people prefer simplicity and do not want a remote, another said that most do not care for pull-chains, and a third said that customers never want pull-chains. (ALA, No. 39 at p. 19- 20) Manufacturers also stated that there

e See: http://www.hansenwholesale.com/ceilingfans/reviews/emerson_midway_eco.asp

f The market share values for low

- volume fans with DC motors is based on shelf surveys of ceiling fan retailers conducted in 2012 and 2014, as well as information obtained from hans enwholesale.com, a large online ceiling fan

retailer.

2-18is a large accessory remote control market to convert fans with pull -chains to remote control, which indicates consumer preference for remotes.

DOE req uests additional comment on whether brushless DC motors meets the screening

criteria. If DOE determines that these motors meet its screening criteria, DOE would continue to account for any increase in the manufacturing cost and warranty cost of DC motors i n the engineering analysis, which forms the basis for the downstream analyses. In addition, DOE

would continue to account for any difference in the maintenance and repair cost of DC motors compared to AC motors in the life-cycle cost (LCC), shipments and n ational impact analysis (NIA) analyses.

2.6.1.4 Three

- Phase Induction Motors

Due to recent developments in the electronics of control systems, single-phase induction motors may be able to be replaced by more efficient three-phase induction motors. Three- phase motors are more efficient due to their simpler motor circuit, which results in lower losses. ALA agreed that three -phase motors could provide some efficiency gains, but the motors would greatly reduce utility because U.S. homes are not wired with a three-phase supply and therefore these motor types would require electronic convertors. (ALA, No. 39 at p. 29) Hunter noted that

three

- phase motors would require electronic controls, which causes reliability concerns and

raise s costs. (Hunter, No. 9 at p. 101) DOE is currently not aware of any low

- volume ceiling fans

with three

- phase motors that are commercially available or in the working prototype stage. Based on the manufacturer interviews and framework comments, DOE concludes that three

- phase

induction motors ar e not practical to manufacture, install, and service for low

- volume ceiling fans because of the significant amount of research and development (R&D) that would be required. Hence, DOE has screened out three-phase induction motors for low-volume fans. For

h igh -volume fans, DOE has screened out this technology option because a majority of the application areas of these fans are not able to provide three- phase power.

2.6.1.5 Fans with Fewer Blades

In the Framework Document, DOE stated that in general, ceiling fans that have fewer blades are more efficient, because they are subject to less air resistance. BAF commented that fans with fewer blades may not necessarily represent the most efficient design option (BAF, No. 61 at p. 5 ). Progress commented that fans with fe wer blades were not necessarily more efficient, because fan surface area was a significant contributor to fan efficiency. (Progress, No. 6 at p. 8) ALA commented that it cannot be stated with certainty that fewer blades correspond to higher efficiency due to the many other factors involved, such as blade shape and motor RPM. They added that using fewer blades impacts the utility of the fan by altering the fan’s aesthetics. (ALA, No. 39 at p. 29)

DOE stated in the framework document that a potential drawback to using fewer blades is that they can generate more noise during operation because of the additional space between the blades. ALA agreed with th is statement , commenting that fans with fewer blades have increased potential for noise and that it is common for manufacturers to reduce RPM to lessen the noise on fans with 3 blades, which does not necessarily lead to a more efficient product. (ALA, No. 39 at

2-19p. 29) In this preliminary analysis, DOE concludes that increased noise could signific antly reduce the utility of low -volume ceiling fans typically installed in residential environments and

therefore has screen ed out reducing the number of fan

- blade s as a design option for low-volume fans. DOE concludes, however, that increased noise would not reduce the utility of high-volume fans, which are typically installed in louder commercial and industrial environments. DOE’s analysis of publicly available dat a has shown that while a fan with fewer blades does not necessarily represent the most efficient design, the number of blades has a significant impact on the efficiency of HVLD fans. Therefore DOE retains this technology option for the HVLD product class. DOE requests more information on how manufacturers choose the number of blades to use in their HVLD fans and how this affects fan efficiency.

2.6.1.6 Twisted, Airfoil, and Beveled Blades

Twisted blades, where the blade pitch decreases from where the blade attaches to the motor casing to the blade tip, and ‘airfoil’ blades that have an aerodynamic shape similar to the wing of an airplane are two techniques to improve fan efficiency. DOE’s testing confirms that the use of airfoil blade technology is a valid approach to improving efficiency.

Beveled blades were not identified as a technology option in the framework document; however, DOE has since analyzed them as a possible technology option for low- volume ceiling fans (see section 2.5.2 ). Beveled blades are blades where the leading and trailing edges are trimmed from a blunt face into a rounded point. DOE has confirmed the efficiency potential of beveled blades through testing.

ALA commented that any change to the shape of a fan blade impacts the product’s cost and appearance. They also commented that there are multiple patents on airfoil blade technology covering its use with regards to ceiling fans. (ALA, No. 39 at p. 30) DOE notes that ceiling fans with twisted and/or airfoil blades are available from many different manufacturers, which implies that patents have not restricted the use of this technology. DOE requests more information on which blade designs are patent-protected and how the patents would prevent other manufacturers from incorporating twisted/airfoil blade technologies into their designs or otherwise limit fan efficiency

.

Fanimation commented that mandating a specific blade design will harm fan aesthetics, eliminate consumer choice, and drive consumers from ceiling fans to more energy-intensive cooling systems (Fanimation, No. 30 at p. 5) Similarly, ALA commented that material and shape

affected fan aesthetics and therefore affected consumer utility. (ALA, No. 39 at p. 30) Hunter

also commented that mandating a number of blades or blade profile would affect fan aesthetics and therefore consumer utility. (Hunter, No. 37 at p. 4) Progress stated that while blade shape is a contributing factor to performance , it is also a major eleme nt of a fan’s aesthetic appeal and

that f ormulaic design requirements would very likely have a negative effect on consumer

acceptance. (Progress, No 6 at p. 8)

For low- volume fans, DOE recognizes the multiple stakeholder comments noting that fan appearance may have a direct impact on consumer utility, and that the design of the fan blades is an important element for end -users. DOE is considering screen ing out twisted

, airfoil , and

2-20beveled blades for low- volume ceiling fans but seeks additional comment and information on why fan appearance would necessarily impact the utility of the fan

.

For high-volume fans, DOE has not screened out airfoil blades. DOE has , however,

screened out twisted and beveled blades. DOE notes that HVLD fan blades commonly employ

airfoil blades made of extruded aluminum. DOE is not aware of any commercially available high volume ceiling fans or working prototypes that incorporate beveled blades. This is likely because airfoil blades can be made from extruded aluminum just as easily and are more efficient. Based on discussions with manufacturers, manufacturing a twisted high-volume blade would require either new manufacturing techniques or new materials, such as molded carbon fiber. These manufacturing processes do not presently exist in the ceiling fan industry. DOE screened out twisted blades on the basis that they fail to meet the screening criteria of being technologically feasible and practicable to manufacture, install, and service.

Hunter stated that while it is true that some blades are more efficient than others, blades that are extremely efficient with one motor size may be less efficient on others (Hunter, No. 37 at p. 4). DOE agrees that the impact of an improved fan blade will vary according to the size of the motor. DOE plans to account for this by using the design option approach to the engineering analysis for high-volume fans, discussed in section 2.7

.

2.6.1.7 Blade Attachments

Blade attachments refer to upswept blade tips or attachable clips that can be added to a fan blade to increase airflow or reduce drag. DOE is considering eliminating blade attachments from the analysis based on DOE’s research to date because there is insufficient evidence to conclude that incorporating them into a ceiling fan improves efficiency. DOE is aware of only one manufacturer of HVLD ceiling fans that uses blade attachments , and DOE does not have efficiency data for these products. DOE is not aware of any manufacturers that use blade

attachments in low -volume fans. In addition, the comments from manufacturer interviews emphasized that blade attachments do not aid in increasing fan efficiency. Hence, DOE has

screened out blade attachments for both low-volume and high-volume fans. DOE requests additional input on how blade attachments could be used to improve the efficiency of ceiling

fans.

2.6.1.8 Alternative Blade Materials

The most common material s used for low-volume ceiling fan blad es are wood and medium-density fibreboard (MDF)

. Plywood blades with a laminate coating are more resistant to warping than MDF and other cheaper woods. Blades made from MDF (often found on lower-end ceiling fans) are typically heavier than plywood, and the edges cannot be as rounded, which

results in less

- efficient blades. Blades made from metal (generally steel or aluminium ) are less

common in low-volume ceiling fans due to the increased risk of injury and noise. Aluminium blades are more malleable and can be more easily shaped that steel blades

. Blades can also be made of injection

- molded resin, a material that is resistant to warping and weather conditions, and also can be molded into aerodynamically advantageous shapes.

2-21Based on discussions with manufacturers, DOE believes that reducing the weight of fan blades by using alternative blade materials should allow a fan to accelerate quicker, but would not reduce the amount of power required to turn the fan at a constant speed. Therefore, using an alternative blade material alone would not impact fan efficiency. However, the use of alternative materials could permit the manufacture of more complex and efficient blade shapes. For lowvolume fans, if DOE determines that twisted and airfoil blades (see section 2.6.1.6 ) meets its screening criteria , DOE would consider any additional advantages to alternative materials

.

For high-volume fans, DOE’s research and discussions with manufacturers indicate that high

- volume ceiling fans are typically built using metal blades . Metal is used because high

volume blades are either very long, or turn at very high RPMs. The greater forces involved mean that the material’s strength and stiffness are critical consideratio ns. Unlike low-volume fans, alternative fan blade materials are not needed to produce more efficient blade shapes. DOE notes that HVLD fan blades commonly employ airfoil blades made of extruded aluminum. However based on discussions with manufacturers, man ufacturing a twisted high -volume blade would require either new manufacturing techniques or new materials, such as molded carbon fiber. DOE is not aware of any commercially available ceiling fans or working prototypes that take this approach to improving efficiency. For these reasons, DOE has screened out alternative blade materials from the analysis for high

- volume fans.

2.6.1.9 Occupancy Sensors

Occupancy sensors use technolog ies that detect the presence of people through movement and body heat. When coupled with an occupancy sensor, a ceiling fan could power

down if it sense s that a room is unoccupied. By limiting the hours of active mode operation to times when people are in the path of the fan, an occupancy sensor could reduce the overall energy consumption of a ceiling fan. ALA commented that one of the most common uses of ceiling fans is in the bedroom to provide climate control while people are sleeping, and if a ceiling fan is controlled by an occupancy sensor, then the sensors will cease to operate due to the lack of movement, which negates the purpose of the ceiling fan in the bedroom. (ALA, No. 39 at p. 30) Similarly, Progress commented that occupancy sensors a re infeasible since fans a re frequently used in bedrooms, overnight, where the fan would be switched off due to a lack of relative movement. Progress added that occupancy sensors would cons ume significant standby or

off -mode power. (Progress, No. 6 at p. 8)

ALA commented that the industry is currently not aware of any ceiling fan products in the market that incorporate a motion sensor. ALA also commented that it is currently unknown

whether any of the currently available controls of this type are compatible with ceiling fans, and that they would greatly increase consumer price, therefore decreasing adoption. According to ALA, Lutron Electronics reports that both passive infrared and ultrason ic sensor technologies that are available at the present time are subject to false signals due to the close

- by air movement generated by the fan and vibration from the motor itself. They add that the proper location for a sensor in a room with a ceiling fan is on the wall, at the height of a light switch. (ALA, No. 39 at p. 31).

DOE is aware of only one ceiling fan, the Big Ass Fans Haiku with ‘SenseME’ technology, that includes occupancy sensors. The SenseME technology was announced on June

2-225, 2014 and i s currently available for pre

- order only. According to published spec sheets, it includes a passive infrared motion sensor, sensors for ambient and surface temperature, a relative humidity sensor, and Wi

- Fi connectivity. Advertisements claim that SenseME c an detect when a person enters or leaves a room and turn the fan on or off automatically. DOE understands

, however, that some of the technologies employed by SenseME are patent pending, which could make them unavailable to other manufacturers. At the present time, DOE does not have enough information to determine whether the occupancy sensor technology used in SenseME represents a technologically feasible design option that can be applied to all ceiling fans.

DOE is screening out occupancy sensors from the analysis for low-volume and highvolume ceiling fans because there is only one fan on the market that uses the technology, it is not currently commercially available, and there is not enough information to determine if the occupancy sensor technologies in SenseME satisfy DOE’s criteria for inclusion in the analysis. DOE intends to research occupancy sensors in general, and, where possible, the technologies used by SenseME in particular, in greater detail as part of the NOPR analysis.

Chapter 4 includes a detailed discussion regarding the technology options that DOE screened out and retained for further analysis

.

2.7 ENGINEERING ANALYSIS

The engineering analysis (chapter 5 of the preliminary analysis TSD) establishes the relationship between manufacturer sel ling price and efficiency for both low-volume and highvolume ceiling fan s. This relationship serves as the basis for cost- benefit calculations in terms of individual consumers, manufacturers, and the n ation. DOE typically structures its engineering analys is around one of three methodologies: (1) the design-option approach, which calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency- level approach, which calculates the relative costs of achieving increases in energy efficiency levelswithout regard to design options used to achieve such increases; and/or (3) the reverseengineering or cost -assessment approach, which involves a “bottom-up” manufacturing cost

assessment based on a detailed bill of materials (BOM) derived from teardowns of the equipment analyzed. DOE structured its engineering analysis for ceiling fans using a combination of the design -option approach and the reverse- engineering approach. The analysis is performed in terms of incremental increases in efficiency due to the implementation of selected design options, while the

estimated manufacturer production costs (MPCs) for each successive design option are based on product teardowns and a bottom -up manufacturing cost assessment.

Chapter 5 di scusses the product classes, the representative sizes DOE analyzed, the baseline efficiencies, the design options DOE considered, the methodology used to develop manufacturing production costs and the cost

- efficiency curves . To determine the cost to consumers of ceiling fans at various efficiency levels, DOE estimated manufacturing costs, markups in the distribution chain, installation costs, and maintenance costs. The engineering analysis considers technologies not eliminat ed in the screening analysis

. The life

- cycle cost ( LCC ) analysis uses the cost

- efficiency relationships developed in the engineering analysis

.

2-232.7.1 Low- Volume Ceiling Fans

2.7.1.1 Engineering Approach

Based on f ramework document comments, manufacturer interviews and market data,

DOE establishe d product class es and representative fan sizes. For each product class and representative fan size, DOE selected a baseline model as a reference point from which to measure changes resulting from each design option. DOE then deve loped separate cost

efficiency relationships for each product class and representative fan size analyzed. The following is a summary of the three -part method DOE used to determine the cost- efficiency relationship for low- volume ceiling fans:

1. Perform energy efficiency tests on a representative sample of low -volume ceiling fans in every product class and representative size.

2. Develop a detailed BOM for the tested ceiling fans through product teardowns and construct a ceiling fan cost model.

3. Use the test data and cost model to c alculat e the incremental efficiency improvement and

cost increase of adding specific design options to a baseline model.

To develop the relationships between fan efficiency and design options for low -volume ceiling fans, DOE used publicly available data, including data from government databases, manufacturer catalogs and websites, as well as selected product testing for ceiling fans

. The engineering analysis focused on identifying and evaluating commercially available ceiling fans that incorporate design options that improve efficiency. The analysis also identified the highest efficiency that is commercially available within each product class ( i.e., the “ max

- tech ” model).

In the f ramework document, DOE presented plans for its engineering analysis and sought comment on its approach to calculating the cost-efficiency relationship for ceiling fans

. Manufacturers, industry associations, and other interested parties commented on DOE’s approach

. Hunter asserted that it was difficult to c omment on the relationship between the ceiling fan efficiency and each individual technology option, because the relationship was complex and

inter -dependent (Hunter, No. 9 at p. 119). Furthermore, Hunter noted that the most efficient fan was not always th e most practical option for all applications and did not necessarily have the highest utility (Hunter, No. 9 at p. 122). Similarly, ALA noted that the efficiency of a ceiling fan is a derivative of many components functioning together, such as blade width, blade thickness, blade length, number of blades, blade “pitch” angle, blade surface texture, and motor size. ALA commented that sometimes one or more of these characteristics may have to be sacrificed to allow for a quieter running motor (ALA, No. 39 at p . 35). Similarly, BAF commented that DOE’s view on design options was simplistic in that the more efficient blade options affect each other, and that changing one variable may require change s to other variables as well (BAF , No. 43 at p. 5).

DOE recogniz es the complexity of modeling the efficiency of a ceiling fan and that the design options themselves might be interdependent. DOE tested a number of fans and found that when one design option was changed (for example, larger direct drive motor) while all o ther design options remain unchanged, that one design option alone did affect fan efficiency. Therefore, for this preliminary analysis, DOE measured the impact of each design option using

2-24the design -option approach. Also, based on DOE’s discussions with ma nufacturers, ceiling fans are designed to maximize performance given the constraints of aesthetics and cost. W hen adding a design option to a fan, the design engineer can make adjustments to other interdependent design options at the same time. DOE assumes that all commercially available fans are designed in this manner. Consequently DOE compares the performance of similar commercially available ceiling fans and attribute the difference in performance to the difference in design options employed. To validate the methodology, DOE compared the cost- efficiency curves produced using the design-option approach to the efficiency results of fans in the market and found similar

results . DOE welcomes comments on an alternative to its approach for the engineering anal ysis.

ALA also noted that manufacturing cost goes beyond the equipment cost and markup; there are costs for labor, facilities, and shipping that should be considered. The efficiency withwhich manufacturers operate should also be taken into account. ALA further noted that the costbenefit ratio is critical. (ALA, No. 9 at p. 111-112) DOE recognizes that the manufacturing costs for fans are not solely dependent on the cost of the motor and blades and other hardware, but also include items such as labor, fa cilities and shipping , which are included in the analysis.

For the low- volume analysis, DOE estimated the manufacturing costs using a reverse

engineering approach supplemented by feedback from manufacturers. The reverse- engineering approach involves a “bottom-up” manufacturing cost assessment based on a detailed BOM derived from teardowns of the equipment being analyzed. The detailed BOM includes labor costs, depreciation costs, utilities, maintenance, tax and insurance costs, in addition to the individual component costs. These manufacturing costs are developed to be an industry average

and do not incorporate any specifics on how efficiently a particular manufacturing facility

operates.

For the high- volume analysis, DOE estimated manufacturer productio n costs by using the dealer and manufacturer markups to back- calculate manufacturing cost based on the fan’s retail price. Because the retail price of a fan includes costs associated with labor, facilities and shipping, by back- calculating to the manufactu rer production costs, the high-volume analysis

will also account for these costs.

The shipping costs and tariffs associated with importing foreign- made products are incorporated in the distribution chain markup for high- volume small

- diameter fans and all lowvolume fans. Shipping and tariff costs are not applied to high-volume large- diameter fans because DOE understands that those products are manufactured primarily in the US.

DOE also received comments on many of the specific design options presented in the

f ramework document, as follows:

Motors. In the Framework document, DOE noted that brushless DC motors require less electricity and copper wiring to produce the same amount of power, and typically are approximately 300 percent more efficient than conventional ceiling fan motors. DOE received a number of comments indicating that DC motors are more expensive than conventional AC motors. Emerson noted that while it manufactured brushless DC motors, the higher efficiency of

these motors co me s at a greate r cost than conventional alternating current ( AC ) motors.

2-25(Emerson, No. 46 at p. 2) Fanimation commented that these motors were a nascent, still unreliable technology, with a very high cost. Specifically, Fanimation asserted that any of its ceiling fans capable of being fitted with DC motors would cost $120 more than the current price. Fanimation also pointed out that DOE did not take into consideration the engineering cost for manufacturers to redesign fans to make them compatible with DC motors. (Fanimation, No. 30 at p. 4- 5) Specifically regarding motor cost, ALA projected that most fan prices would increa se by
$90 to $100 if the fans are fitted with DC motors . (ALA, No. 39 at p. 3) g ALA also noted that DC motors required rare-earth magnets, which were in short supply in the global market. (ALA , No. 39 at p. 29) Wen commented that DC motors are expensive a nd that this price would be passed on to the consumer. (Wen Zhang, No. 40 at p. 1) In addition, The Modern Fan Company stated that regulatory initiatives such as adding DC motor requirements would significantly impact their business by eliminating many of their products from the market. ( The Modern Fan Company, No. 45 at p. 2)

Available information regarding permanent magne ts used in DC motors indicate s that manufacturers primarily utilize magnets made of either neodymium or a nylon composite magnetic material. 7 Neody m ium is a rare

- earth element with a price that i s heavily dependent on available world market supply. Between 2010 and 2011 the price of neodymium increased significantly as demand increased and market supply decreased. Although the price has decreased from its peak in 2012, the material still remains r elatively expensive ($50 per kilogram). 7 Nylon composite magnets are a mixture of a nylon polymer with other magnetic materials which do not require rare earth eleme nts. These magnets are more readily available and less costly ($6.50 per kilogram). 7 Nylon composite magnets require more material to produce a magnet of similar str ength to a neodymium magnet. However, despite requiring more material, DC motors with nylon composite magnets cost less to manufacture than motors with neodymium magnets and weigh less tha n standard AC induction motors. Information indicate s that

manufactu rers are primarily using nylon -composite magnets in DC motor fans due to its lower

cost. DOE requests more information on the use of rare earth magnets in ceiling fans.

DOE is cognizant of stakeholder comments that DC motors are expensive and DC motor requirements could eliminate many current products in the market. if DOE determines that these motors pass the screening criteria, DOE would continue to account for the increased cost of utilizing DC motors in the engineering analysis, life

- cycle cost (LCC ), shipments, national impact analysis (NIA) , and manufacturer impact analysis (MIA) analyses using product tear downs and manufacturer interviews. More details can be found in chapters 5, 8, 9, 10, and 12 of

this TSD.

Emerson also noted that DC motors a re controlled by a machine processing unit ( MPU ) installed in a controller assembly, leading to a multitude of possible failure modes (Emerson, No. 46 at p. 2). The ALA commented that DC motors require an electronic switch, which the industry has found cha llenging. Fanimation and ALA echoed Emerson’s view that because DC motors require MPUs, which c an not be repaired if they fail, the warranty and maintenance cost of these fans would also be higher (Fanimation, No. 30 at p. 4-5; ALA, No. 39 at p. 29) . ALA

g This comment references ALA’s email to CeilingFanLightKits2012STD0045@ee.doe.gov , which can be found in

EERE

- 2012

- BT

- STD

- 0045

- 0039.

2-26al so noted that while some manufacturers have produced models with DC motors, the challenges of cost and reliability have precluded them from significant introductions. (ALA, No. 39 at p. 29) Furthermore, Hunter asserted that the energy savings from switching to DC motors is minimal, compared to the substantial retail price increase and the potential reliability and warranty issues that could arise given the small amount of time this product has been in the market (Hunter, No. 37 at p. 3). Hunter also commented that while many manufacturers had DC-motor products, the industry should be allowed to grow in this direction until more warranty and maintenance data was acquired over time. (Hunter, No. 37 at p. 2) However, ASAP et al. noted that Energy Star requires ceiling fans to provide a 30 year warranty on motors, and there exist many Energy Star

certified fans with DC motors . ASAP stated that on one retailer’s website, 94 out of 172 ceiling

fans f or sale with a DC motor are listed as Energy Star qualified. (ASAP et al, No. 14 at p. 5) Thus, ASAP asserted that it may be safe to assume that manufacturers are expecting the DC motors in these fans to last for 30 years or longer.

DOE recognizes stakeho lder comments that DC motors require the use of more complex controllers that could fail more frequently, which in turn could affect the warranty and maintenance/repair costs of the DC motors. If DOE determines that these motors pass the screening analysis

, DOE would continue to account for any difference in the maintenance/repair

costs of DC motors compared to AC motors in the LCC, shipments, and NIA analyses by adjusting the maintenance/repair costs and motor failure rate. DOE also accounted for the cost to manufacturers to warranty AC and DC motors by applying a warranty factor to the motors in the engineering analysis. More details can be found in chapters 5, 8, 9, 10, and 12 of this TSD.

Standby Power Consumption. In the framework document, DOE stated that some ceiling fans contain technologies such as remote-controls that consume energy in standby mode. Several commenters stated that most ceiling fans do not draw power in standby mode (see discussion in

s ection 2.4.2 ). Progress commented that most ceiling fan remote control s use passive RF technology, which d oes not draw any power during standby. Furthermore, Progress asserted that DOE’s assumptions of th e technologies which consume standby power, and the extent to which they do so, were not based on product testing (Progress, No. 6 at p. 3).

Wh ile many ceiling fans do not consume power in standby mode, DOE tested several ceiling fans with remotes, and the test results have shown non-zero power consumption in standby mode. Based on this testing and manufacturer interviews, DOE has found that DC motors require the use of remote controls which consume standby power. Therefore, DOE plans

to account for standby power for all ceiling fans with DC motors. Additionally, DOE intends to include standby power for all HVLD fans, because available information indicates that all HVLD

fans in the market use variable frequency drive s, which DOE understands also consume standby

power.

2.7.1.2 Product Classes and Representative Sizes

Based on Framework comments, manufacturer interviews, and publicly available product literature, DOE establishe d the following five product classes and representative sizes for the engineering analy sis of low-volume ceiling fans: (1) 44-inch standard fans, (2) 52-inch standard fans, (3) 60-inch standard fans, (4) 44-inch hugger fans, and (5) 52-inch hugger fans. These

2-27groups represent the range of sizes available in each product class. Chapter 5 of this TSD includes a detailed discussion regarding the representative sizes in each class.

2.7.1.3 Baseline Models

T o analyze technology options for energy efficiency improvements, DOE defined a baseline model for each ceiling fan product class and representative size. Typically, the baseline model would be a model that just meets current energy conservation standards. However, energy

conservation standards for ceiling fans are currently in the form of design standards only. As a result, DOE selected baseline models based on common features and /or bottom-of- market efficiency for each product class and representative size

. Se lection of the baseline model

included consideration of ceiling fan features and performance characteristics, such as motor type, blade shape and span, and fan efficiency.

To determine the baseline units for each product class and representative size, DOE first identified the least efficient ceiling fan in the market. DOE used publicly available information for the ceiling fan market and found that the least efficient fan is an unconventional palm blade

fan. Palm blade fans are considered ‘unconventional’ because most fans on the market have flat, wood blades. Therefore, based on market data, DOE identified two separate market minimum efficiency fans: (1) unconventional blade fan, and 2) flat, wood blade fan. DOE found that all

market minimum efficiency fans have a conventional permanent split capacitor (PSC) alternating current (AC) induction motor. DOE then determined the baseline fan efficiency and cost by aggregating data from the two market minimum efficiency fans.

With the identified baseline fans, DOE then generated five cost

- efficiency curves, one for each product class and representative size. Chapter 5 of the preliminary TSD includes details on the baseline efficiencies, the representative sizes, and the cost

- efficiency curves developed as part of the engineering analysis.

2.7.1.4 Manufacturing Cost Analysis

To develop the relationship between cost and performance for ceiling fans, DOE used a

reverse

- engineering analysis, or teardown analysis . DOE purchased off-the- shelf fans available on the market and dismantled them component by component to determine what technologies and designs manufacturers use to increase ceiling fan energy efficiency . DOE then used independent costing methods, along with manufacturer and component- supplier data, to estimate the costs of the components.

DOE determined the efficiency levels corresponding to various design options from commercially available information on products, DOE test data, data submitted by manufacturers, and engineering calculations . DOE obtained cost estimates from detailed

incremental manufactur ing cost data based on reverse engineering , which include the cost of the product components, labor, pu rchased parts and materials, and investment . DOE estimated manufacturing costs using a combination of teardown analysis and manufacturer -supplied

estimates.

2-282.7.2 High

- Volume Ceiling Fans

2.7.2.1 Engineering Approach

Based on manufacturer interviews and market data, DO E establishe d product classes and representative fan sizes for high -volume fans. DOE then selected a baseline model as a reference point for each product class and representative size from which to measure changes resulting

from the design options. DOE dev eloped separate cost

- efficiency relationships for each product class and representative size analyzed. The following is a summary of the two -part method DOE

used to determine the cost- efficiency relationship for high

- volume ceiling fans:

1. Identify commercially available products available in each representative size and estimate the MPC based on the retail price and industry average markups.

2. Use publicly available efficiency and cost data, manufacturer input, and extrapolations of the cost and efficiency re lationship from the analysis on low- volume fans to calculate the incremental efficiency improvement and cost increase of adding specific design options

to a baseline model.

To develop the relationships between efficiency and design option for high -volume ceiling fans, DOE used publicly available data, including data from government databases, manufacturer catalogs and websites, as well as manufacturer interviews

. In t he engineering analysis , DOE identif ied and evaluated commercially available ceiling fans that incorporate design options that improve efficiency.

2.7.2.2 Product Classes and Representative Sizes

Based on manufacturer interviews, and publicly available product literature, DOE

establishe d the following five product classes and representative sizes for the engineering analysis of high -volume ceiling fans: (1) 36- inch HVSD (2) 56 -inch HVSD, (3) 8-foot HVLD fans (4) 12 -foot HVLD fans, and (5) 20-foot HVLD fans. These groups represent the range of sizes available in each product class. Chapter 5 includes a detailed discussion regarding the representative sizes in each class.

2.7.2.3 Baseline Models

T o analyze technology options for energy efficiency improvements, DOE defined a baseline model for each product class and representative size. Typically, the baseline model would be a model that just meets current energy conservation standards. However, energy

conservation standards for ceiling fans are currently limited to design standards only. As a result,

DOE selected baseline models based on common features and bottom-of- market efficiency for each product class and representative size

. Se lection of the baseline involved consideration of ceiling fan features and performance characteristics, such as motor type, blade shape and span , and fan efficiency.

After review of publicly available product literature, teardowns, and discussions with manufacturers, DOE found that the baseline high-volume ceiling fans include:

2-29For HVLD fans: (1) curved blades made from extruded aluminum, (2) conventional AC [ permanen t split capacitor (PSC)] motor, and (3) exposed motor with no housing

For HVSD fans: the least efficient fan with (1) flat, steel blades, (2) conventional AC (PSC) motor, and (3) basic motor housing

2.7.2.4 Manufacturing Cost Analysis

DOE used commercially available pricing data, as well as information from manufacturer interviews and engineering calculations, to estimate the manufacturer cost for fans with each combination of design options. DOE used this data to analyze the additional manufacturing cost

as sociated with each incremental design option. DOE also used the results of the manufacturing cost analysis for low-volume fans in its analysis of manufacturing cost and efficiency levels for high -volume fans where applicable.

2.8 MARKUPS ANALYSIS

DOE used manufacturer

- to -customer markups to convert the manufacturer selling price estimates from the engineering analysis to customer prices, which are then used in the LCC and PBP analysis and in the manufacturer impact analysis. Retail prices are used for the base line efficiency level and all other efficiency levels under consideration

.

To develop markups, DOE identified how the products are distributed from the manufacturer to the consumer (the distribution channels). After establishing appropriate

distribution channels for each product, DOE used financial data from the U.S. Census Bureau and 10-K reports from U.S. Security and Exchange Commission (SEC) to define how prices are marked up as the products pass from manufacturers to customers. See chapter 6 for details on the development of markups.

DOE received two comments regarding the development of the markups analysis. Hunter, at the framework public meeting, stated that lighting showrooms and electrical distributors can possibly be combined into one distribution channel. (Hunter, No. 9 at p.121) For low-volume ceiling fans, DOE has included distribution channels for home improvement centers, lighting showrooms, and electrical wholesalers /contractors . Lighting showrooms and electrical

wholesalers/contractors are considered separate distribution channels because DOE has found distinct markups associated with each channel.

ALA recommended that DOE take into consideration the 4.7% excise duty and tariff on imported ceiling fans. (ALA, No. 39 at p.36-37) DOE has included the 4.7% excise duty and

tariff on low -volume ceiling fans and high- volume small

- diameter ceiling fans, which DOE has found to be manufactured primarily overseas. DOE has not included an excise duty or tariff on high -volume large- diameter ceili ng fans, which it understands to be manufactured primarily in

the U.S.

2-302.9 ENERGY USE ANALYSIS

The purpose of the energy use analysis is to determine the annual energy consumption of ceiling fans in U.S. homes and to assess the energy savings potential of increased ceiling fan efficiency. DOE determines the energy consumption of ceiling fans using estimates of the fan’s power consumption (in watts) and estimates for the way consumers use the ceiling fan (operating hours per year). This analysis, which is meant to represent typical energy consumption in the field, is an input to both the LCC and PBP analyses and the NIA.

DOE received several comments on the energy use analysis methodology presented in the framework document, including comments on total hours of operation and fraction of time spent at each fan speed setting. These comments were addressed in the concurrent test procedure rulemaking for ceiling fans, which presented average hours of operation for low-volume and high -volume ceiling fans.

To determine operating hours for low-volume ceiling fans for the energy- use characterization, DOE first sampled 10,000 households from all of the households of ceiling fan owners in the Energy Information Administration’s (EIA) 2009 Residential Energy Consumption Survey (RECS ). 8 DOE then used the census division associated with each household drawn from RECS to sample from a division

- specific d istribution of annual operating hours. The distribution of annual operating hours for each census division was based on data from a study that surveyed ceiling fan owners. 3 Th is resulted in a range of operating hours that reflects actual low-volume ceiling fan use in Americ an homes.

To determine operating hours for high-volume ceiling fans, DOE sampled from a uniform distribution ranging from 6 to 18 hours per day. Feedback from manufacturers suggested a range of possible hours of operation, depending on industry and application, with 12 hours as a representative value. The uniform distribution represents DOE’s initial estimate of a reasonable distribution of operating hours for high-volume ceiling fans. DOE welcomes feedback from manufacturers regarding an appropriate distribution of operating hours for high- volume ceiling

fans.

DOE then combined the distribution of operating hours for each ceiling fan product class with the power consumption reported in the e ngineering a nalysis to determine annual energy use.

To characte rize standby power consumption, DOE used the 1.4 W value suggested by Hunter and ALA as a representative industry value for standby power in low-volume ceiling fans. (Hunter, No. 9 at p. 71; ALA, No. 39 at p. 13) DOE has assumed the same value for standby power in high-volume ceiling fans.

Chapter 7 of this TSD provides more detail about DOE’s approach for characterizing energy use of ceiling fans

.

2.9.1 Usage Interaction between Ceiling Fans and Air Conditioners

DOE received comments from ALA and from several individual ceiling fan

manufacturer s stating that ceiling fans are inherently energy

- saving appliances because they reduce the use of air conditioning. (ALA, No. 39 at p. 41-42; Hunter, No. 37 at p.1; Fanimation,

2-31No. 30 at p. 3) Hunter expressed concern that if DOE sets overly stringent standards for ceiling fans, resulting increases in product cost could result in decreased shipments and a corresponding increase in air conditioner use by consumers, thereby potentially negating the energy savings of the current rulemaking. (Hunter, No. 37 at p. 2) In response to these comments, DOE issued a Request for Information (RFI) regarding the interaction between ceiling fans and air conditioning usage in the Federal Register on October 22, 2013. 78 FR 62494.

In response to the RFI, ALA provided information on the ownership rates of ceiling fans and air conditioners, based on RECS. ALA noted that n early 73 percent of U.S. households had ceiling fans in 2009, up from 65 percent in 2001, and that 87 percent of households had an air conditioner. Of those households that own a ceiling fan, more than 90 percent also own an air conditioner. (ALA, No. 59 at p.5- 7) BAF commented that most high

- volume large diameter ceiling fa ns are used in environments without air conditioners, and concluded that the RFI would be irrelevant for such fans. (BAF, No. 61 at p.2)

There seemed to be general agreement among RFI commenters on the theoretical potential for energy savings from use of ceiling fans. BAF commented that ceiling fan s theoretically allow a thermostat set point to be increased by three to five degrees Fahrenheit with similar levels of thermal comfort, citing a Florida Solar Energy Center (FSEC) study. 9 (BAF, No. 61 at p.2) ALA commented that ASHRAE S tandard 55-2010 indicates that air movement “ can extend the thermal comfort zone by as much as six degrees Fahrenheit .” (ALA, No. 59 at p.3) ALA also commented that, according to an AcuPOLL survey, upon being informed of the energy savings potential of ceiling fans: 37% of survey respondents stated that they would set their air conditioner thermostat three to five degrees warmer when using a ceiling fan, 21% stated they

would set thermostat 1 -2 degrees warmer, and 26% indicated they would not set it any war mer, but would feel more comfortable. (ALA, No. 59 at p.15)

While commenters were generally in agreement on the theoretical potential for energy savings from substituting ceiling fan usage for air conditioning usage, RFI commenters disagreed on the pract ical impact. CA IOUs, ASAP

- ACEEE

- NRDC

- NEEA, and BAF all cited a FSEC study 9 of 400 homes which found that consumers who own both cooling systems do not adjust the thermostat set point and concluded that ceiling fans do not appear to be used in a manner that

save s energy . (CA IOUs, No. 62 at p. 2; ASAP

- ACEEE

- NRDC -NEEA, No. 63 at p. 1-2; BAF, No. 61 at p. 1) CA IOUs also noted a 2002 study on ceiling fans by SDG&E. 10 72 percent of 36 respondents sai d they did not change set point when using a ceiling fan and air conditioner simultaneously. (CA IOUs, No.12 at p. 1-2)

In contrast, ALA questioned the validity of the FSEC study, noting that the subset of Florida households who received ceiling fan credit under the Florida Energy Code did increase their thermostat set points. ALA also asserted that the analysis of metered air conditioner loads in the FSEC study did not sufficiently consider “ important variables. ” (ALA, No. 59 at p.10 and 12) ALA cited a 2002 Sacramento Municipal Utility District (SMUD) study h of 25 households

h T he SMUD study was conducted as part of a larger California

- wide study on ceiling fan operational characteristics, and can be found in Chapter 4 of that study. See RLW Analytics, Inc., prepared for San Diego Gas & Electric Company, Statewide Investor Owned Utility Ceiling Fan Study , Chapter 4 (2002) (SMUD Study).

2-32that found higher average indoor temperatures (78.4 F versus 76.7 F) during concurrent usage of ceiling fans and air conditioners than when air conditioners were used without ceiling fans. (ALA, No. 59 at p. 13) ALA noted that according to the SMUD study, this did not appear to be part of a conscious decision making process by the occupants. ALA further noted that both the FSEC and SDG&E studies do not account for unconscious decision-making. ALA also commented that thermostat adjustment in response to ceiling fan usage does not reflect the total energy savings, noting that ceiling fans might also be a substitute for air conditioners in more temperate periods. (ALA, No. 59 at p. 10) BAF noted that when operating in reverse, ceiling fans allow consumers to reclaim hot air above thermostat height without adjusting the thermostat set point. (BAF, No. 61 at p. 1)

CA IOUs also recommended additional data sources: 2009 RECS microdata to ind icate usage patterns for ceiling fan and air conditioning equipment, and 2003 and 2009 California Residential Appliance Saturation study (RASS) and RECS data to identify potential substitution

effect for ceiling fan and air conditioner ownership. (CA IOUs, No. 62 at p. 3)

DOE notes that the SMUD survey has a very small sample size (81 ceiling fans in 25 new homes) drawn from households located in the Sacramento area of northern California, indicating the sample is not nationally representative. For exampl e, the temperature and humidity in

Sacramento at the time of the SMUD survey were likely not representative of average conditions throughout the U.S., and likely specifically different than the conditions in Florida during the FSEC study, particularly with respect to humidity. Additionally, although the indoor temperature was found to be higher during concurrent usage, the weather conditions were not the same when an air conditioner was run alone versus concurrent usage with a ceiling fan. The SMUD study

re corded outdoor as well an indoor temperature, and it was hotter outside as well as inside during concurrent usage. The source of the higher indoor temperature is therefore unclear. Another possible explanation offered by the study’s authors was that on the warmest days ceiling fans and air conditioners may be operated simultaneously and the air

- conditioning systems may have a di fficult time keeping up with a home’s thermal load. h

Another currently available data set resulting from a survey of 2,550 participants across the United States representing the use of 7,695 ceiling fans suggests that more than 70 percent of ceiling fan owners do not adjust their thermo stat setting when operating a ceiling fan i (Lawrence Berkeley National Laboratory’s report “ Ceiling Fan and Ceiling Fan Light Kit Use in the U.S ”). 3
Although RECS 2009 does ask a question regarding ceiling fan usage, the question refers only to the summertime usage of the m ost used ceiling fan in a household, and the possible responses represent broad bins of usage, limiting the usefulness of that survey with respect to ceiling fan

usage. 8 While the AcuPOLL survey indicates that a higher percentage of ceiling fan owners and would-be owners might change their thermostat set point, the question was asked hypothetically in the survey (“Does/would running a ceiling fan allow you to run your air conditioner/furnace less often or at a more moderate temperature?”), and after respondents were informed of the

i Question 17 on the survey asked, “When ceiling fans and air conditioning are running at the same time, do you (or anyone else in your home) adjust the thermostat settings?” This question was onl y asked of respondents who indicated that their home AC is used simultaneously with their ceiling fan(s) at least some of the time.

2-33energy saving potential of ceiling fans. (ALA, No. 39 at AcuPOLL Appendix p.20) Studies have shown a clear bias in the responses given in simil ar situations. 11

, 12

DOE also notes that the high ownership rate of air conditioners by ceiling fan owners indicated by RECS 2009, which is higher than the air conditioner ownership rate by non- ceiling fan owners, suggests that there is limited potential for a substitution effect with regards to purchases of ceiling fans versus air conditioners.

DOE agrees with BAF that energy savings could theoretically occur when ceiling fans are operated in reverse without a change in thermostat set point. Because hot air rises,

recircula ting war m air near the ceiling could in theory slightly raise the indoor temperature at the height of a thermostat. Therefore a thermostat -controlled heater might run less frequently. However, operation in reverse accounts for a small percentage of overall ceiling fan usage and does not significantly impact the energy

- use characterization. 3

Because the LBNL data set indicate s that consumers do not adjust their thermostat when they use a ceiling fan, and there is no clear indication that consumers substitute purchases of ceiling fans for purchases of air conditioners, it appears that ceiling fans are generally not used as a substitute to air conditioners. While a ceiling fan may theoretically be used to increase thermal comfort to levels beyond that which they would have be en achieved with an air conditioner alone, ceiling fans do not appear to be used in practice in a manner that saves energy by reducing air conditioner usage.

DOE notes that any potential impact on AC usage would be due to a reduction in ceiling fan ship ments. The engineering analysis shows that the cost of efficiency improvements at all efficiency levels other than max

- tech is relatively small. As a result, the shipments analysis

indicates that the standards levels under consideration would have a minimal impact on shipments at all but the max

- tech efficiency level.

For the preliminary analysis, DOE ha s assum ed no impact on air conditioning usage from

a potential ceiling fan standard.

2.10 LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

The impacts of amended energy conservation standards on consu mers often include a change in operating expense (usually decreased electricity expenses) and a change in purchase price (usually increased). The life

- cycle cost ( LCC ) of a product is the cost it incurs over its lifetime, taking into account both purchase price and operating expenses. The payback period ( PBP ) represents the time it takes to recover the additional installed cost of the more effic ient products through annual operating-cost savings. In the framework d ocument, DOE presented its approach for the LCC analysis. DOE analyzes the net effect on c onsu mers by calculating the LCC and PBP using the engineering performance data, the markups analysis, and the energy

- use analysis. Inputs to the LCC calculation include the installed cost to the consu mer (purchase price plus installation cost), operating expenses, the lifetime of the product or another defined period of analysis, and a discount rate. Inputs to the PBP calculation include the installed cost to the consumer and annual operating costs.

2-34Recognizing that several inputs to the determination of consumer LCC and PBP are either variable or uncertain, DOE conducted the LCC and PBP analysis by modeling both the uncertainty and variability in the inputs using Monte Carlo simulation and probability distributions. Each Monte Carlo simulation consists of 10,000 LCC and PBP calculations. The model performs each calculation using input values that are either sampled from probability distributions and household samples or characterized with single point values. The analytical results include a distribution of 10,000 data points showing the range of LCC savings and PBPs for a given efficiency level relative to the base

- case efficiency forecast

.

DOE received several comments regarding lifetime and repair rates of ceiling fans. ALA

cited an AcuPOLL survey which indicates that 86% of ceiling fans a re less than 10 years old. Specifically, the survey found that 15% of ceiling fans are less than 1 year old, 41% are between 2 to 5 years old, and 30% are between 5 to 10 years old. ALA also reported results of a consumer survey showing life expectancy of ceiling fans range from 5 to 29 years. (ALA, No. 39 at p. 24)

ALA commented that the lifetime of a ceiling fan depends on the l ifetime of the motor, and that

AC motors last 20

- 30 years. Additionally, ALA stated that ceiling fans are typically replaced instead of repaired , as motor and blade components are no longer produced or available. (ALA, No. 39 at p.40) Craftmade also commen ted that the lifetime of ceiling fans varies based on motor

te chnology, and that the components of DC motors have shorter lifetimes than that of AC motors. (Craftmade, No. 9 at p.128, 129, and 141)

To estimate the ceiling fan lifetime distribution, DOE u sed historical shipments data along with estimates of the ceiling fan age distribution provided by ALA and an additional study that surveyed ceiling fan owners. 3 From this data, DOE estimated an average lifetime of 13.8 years with a minimum and maximum value of 4.1 years an d 30 years, respectively. More details on the lifetime distribution can be found in chapter 8 of this TSD. DOE was not able to determine an alternate lifetime distribution for DC motors, so DOE has used the same lifetime

distribution for AC and DC motor fa ns. In recognition of the comments from ALA and

Craftmad e about DC motors, DOE has modeled an increased failure and replacement rate as a repair cost that affects a certain percentage of ceiling fans with DC motors

.

DOE also received a comment regarding the discount rate used in the LCC analysis. ALA stated that DOE should use a very high discount rate to represent consumers’ disregard for a product’s potential future operating cost savings. (ALA, No. 39 at p. 39 ).

Although DOE recognizes that consumers may disregard future savings when purchasing a product, the LCC analysis is intended to represent the actual product life- cycle cost that consumers are likely to experience. DOE used actual historic consumer discount rates to discount operating costs in the LCC analysis. F or residential consumers, DOE estimated the discount rate by looking across all possible debt or asset classes that might be used to purchase ceiling fans. For the commercial and industrial consumers, DOE estimated the cost of capital for commercial and industrial companies by examining both debt and equity capital, and developed an appropriate weighted average of the cost to the company of equity and debt financing.

2-352.11 SHIPMENTS ANALYSIS

DOE uses projections of product shipments to calculate the national effects of standards on energy use, NPV, and future manufacturer cash flows. Details on the shipments analysis are provided in chapter 9 of this TSD. This section highlights key changes in the shipments modeling approach from the approach presented in the Framework Document, and responds to comments by stakeholders regarding how DOE estimates shipments.

DOE adopted a consumer-choice- based shipments model to estimate ceiling fan shipments for this rulemaking. The details of the modeling are described in chapter 9 of this TSD. The shipments model has four main interacting elements: (1) a ceiling fan shipments module, which estimates the total shipments for ceiling fans for each year of the analysis period; (2) a price learning module, which proje cts future prices based on historic price trends; (3) substitution matrices, which specify the allowable product choices that consumers have available; and (4) a consumer choice module, which assigns shipments to product classes and

ELs based on consumer s ensitivities to first costs and operation and maintenance costs. Ceiling fan shipments are estimating by projecting historical ceiling fan shipments into three market segments: (1) replacements; (2) new construction; and (3) increased numbers of ceiling fans in existing buildings.

Consistent with economic theory, DOE expect s that standards that result in higher ceiling fan prices will have some dampening effect on sales. To estimate the impact of the price increase on the considered efficiency levels, DOE used a relative price elasticity approach. The impact of higher ceiling fan prices is expressed as a percentage drop in market share for each year during the analysis period.

A majority of low

- volume ceiling fan shipments include a ceiling fan light kit ( CFLK). DOE is concurrently in the preliminary analysis phase of an energy conservation standard rulemaking for CFLKs with the potential to increase the price of CFLKs . Therefore

, an amended

standard for CFLKs could result in reduced sales of low-volume cei ling fans packaged with

CFLKs . DOE considered the impact of a CFLK standard on the total shipments of low-volume ceiling fans in its analysis

.

The consumer- choice module selects which ceiling fans are purchased in any given year,

based on sector

- specific consumer sensitivities to first costs and operations and maintenance costs, and on the ceiling fan options available, which were determined in the engineering analysis and the LCC analysis. The available options also depend on the case under

consideration. In the base case, all ceiling fan options are available. In each possible standards case only those ceiling fan options at or above the EL are allowed. In this way, the consumer choice module assigns market shares to the different product classes and ELs based on historical observations of consumer behavior. Deviations from purely price and cost-driven behavior not captured by the model are accounted for using calibration factors to match historical market data

.

Because of the complexity of the consumer -choice-based shipments analysis, the shipments model is executed as a separate computer model. The inputs and outputs of the shipments model are then embedded in the NIA spreadsheet model for all cases and scenarios.

2-36By using an economic consumer-choice model in its shipments analysis and national impacts modeling, DOE accounts for voluntary conversions to more efficient technologies that

are based on economic incentives.

ALA recommended looking at historical reports, industry estimates, and mark et share data to estimate future shipments because ceiling fans are not necessarily replaced at the end of the lifetime. For example, ceiling fans can be replaced during a home renovation or when the consumer style changes. DOE estimated a lifetime function for ceiling fans based on historical shipments data and a nationally representative online survey of household ceiling fan age. The lifetime function accounts for replacements due to home renovation or consumer style changes.

Details on DOE’s estimate for the lifetime function are provided in chapter 8 of this TSD.

ALA believes that the shipments with a standard would follow a “ro ll

- up” scenario where “the fans below the standard would roll-up to meet the standard or would be eliminated completely and the fans above the standard would stay where they were (or potentially come back closer to the standard) in order to keep retails reasonable”. ALA concluded that this scenario would reduce consumer choice and increase energy consumption. (ALA, No. 39 at p.41

and 43). In a “roll -up” approach, market- share for ceiling fans with efficiencies below a standard level is allocated to the lowest efficiency level that meets the standard, and the efficiency shares

above the standard level remain the same. To account for potential changes in market share s of efficiency levels, DOE used a consumer- choice model that calculates market share for available efficiency options based on first cost only for low-volume ceiling fans and first cost and operating costs for high-volum e ceiling fans. DOE analyzes the impact of potential efficiency standard levels on energy consumption in the national impact analysis.

2.12 NATIONAL IMPACT ANALYSIS

The NIA assesses the NES and the NPV from a national perspective of total consumer

costs and s avings expected to result from amended energy conservation standards. Analyzing impacts of potential energy conservation standards for ceiling fans requires comparing projections of U.S. energy consumption with amended energy conservation standards against projections of energy consumption without the standards. Candidate standards cases are specified by setting the hypothetical CSL for each product class.

To explore a range of impacts from potential standards, this preliminary analysis explored

six candidate standards cases for low

- volume fans and three candidate standards cases for high

volume fans. In each standards case, efficiency levels that do not meet the standard are

eliminated and the consumer

- choice model estimates the market shares for ex isting levels. DOE also conducted a sensitivity analysis to explore the impact of adopting a standard in a scenario where prices for all options remain fixed over the analysis period ( i.e., no price learning). In addition to conducting the analysis for the rulemaking as a whole, DOE evaluated the NPV and NES by product class

.

DOE accounts for the direct rebound effect in its NES analyses. Direct rebound is the concept that as appliances become more efficient, consumers use more of their service because

2-37the ir operating cost is reduced. In the case of ceiling fans , the rebound could be manifested in

increased hours of use or in increased airflow

.

ALA commented that it has not found recent data that suggest increased usage of higher efficiency ceiling fans compared to usage of lower efficiency ceiling fans; therefore ALA recommended not considering the rebound effect separately for ceiling fans. (ALA, No. 39 at p.39) DOE has also not found data to support a rebound effect for ceiling fans and has assumed no rebound in its analysis.

2.12.1 National Energy Savings Analysis

The inputs for determining the national energy savings for each product class are: (1) ceiling fan shipments; (2) annual energy consumption per unit; (3) the stocks of ceiling fans in each year; (4) national energy consumption; and (5) site- to

- primary energy and fuel full cycle

conversion factors. The ceiling fan stocks were calculated by the shipments model for each year of the analysis period from the prior year’s stock, minus retirements, plus ship ments, accounting

f or ceiling fan lifetimes. DOE calculated the national electricity consumption in each year by multiplying the number of units of each product class and EL in the stock by its power consumption and operating hours. The electricity savings are estimated from the difference in

national electricity consumption between the base case (without amended effic iency standards)

and the candidate standards cases for ceiling fans shipped during the 2019-2048 period.

DOE has historically presented NE S in terms of primary energy savings. In response to

the recommendations of a committee on “Point-of-Use and Full- Fuel

- Cycle Measurement Approaches to Energy Efficiency Standards” appointed by the National Academy of Science,

DOE announced its intention to use full- fuel

- cycle (FFC) measures of energy use and greenhouse gas and other emissions in the national impact analyses and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (August 18, 2011). After evaluating th e approaches discussed in the August 18, 2011 notice, DOE published a statement of amended policy in the Federal Register in which DOE explained its determination

that NEMS is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (August 17, 2012). For this preliminary analysis, DOE calculated both site and primary energy savings as well as FFC energy savings for the considered ELs.

2.12.2 Net Present Value Analysis

The inputs for determining NPV are: (1) total annual installed cost; (2) total annual savings in operating costs; (3) a discount factor to calculate the present value of costs and savings; (4) present value of costs; and (5) present value of savings. DOE calculated net savings each year as the difference between the base case and each standards case in terms of total savings in operating costs versus total increases in installed costs. DOE calculated savings over the lifetime of products shipped in the 30- year anal ysis period. DOE calculated NPV as the difference between the present value of operating -cost savings and the present value of total installed costs. DOE used a discount factor based on real discount rates of 3 and 7 percent to discount future costs and savings to present values.

2-38For the NP V analysis, DOE calculates increases in total installed costs as the difference in total installed cost between the base case and standards case ( i.e. , once the standards take effect). Because the more effic acious products bought in the standards case usua lly cost more than products bought in the base case, cost increases appear as negative values in the NPV.

DOE expresses savings in operating costs as decreases associated with the lower energy consumption of products bought in the standards case compared to the base case. Total savings in operating costs are the product of savings per unit and the number of units of each vintage that survive in a given year.

2.13 CONSUMER SUBGROUP ANALYSIS

The consumer subgroup analysis evaluates economic impacts on selected g roups of

consu mers. At any NOPR stage of this rulemaking, DOE will conduct the su bgroup analysis and divide consumers into subgroups that account for variations in key inputs to the LCC analysis. A consumer subgroup comprises a subset of the population tha t may be affected disproportionately by amended energy conservation standards ( e.g. , low income consumers, seniors). The purpose of a subgroup analysis is to determine the extent of any such disproportionate effect. DOE will work with industry and other interested parties to identify any subgroups for consideration.

In comparing potential effects on the different consumer subgroups, DOE will evaluate variations in regional electricity prices, usage profiles, and installation costs that might affect

LCC an d PBP for certain c onsumer subgroups under potential energy conservation standards. To the extent possible, DOE will obtain estimates of the variability in each input and consider this variability when calculating effects on c onsumers. For more detail on the approach to the subgroup analysis, see chapter 11 of this TSD.

Fanimation and ALA recommended that DOE consider low-income households as a consumer subgroup, stating that the majority of this subgroup cannot afford ACs or ceiling fans. (Fanimation, No. 32 at p. 4; ALA, No. 39 at p. 44) Further, ALA stated that setting a standard for more efficient ceiling fans would increase the price, burdening the majority of low- income households as they are forced to use less efficient cooling systems. (ALA, No. 39 at p. 44)

DOE agrees that low -income households are an important subgroup to consider. DOE plans to analyze low-income households as part of the subgroup analysis at any subsequent NOPR stage.

2.14 MANUFACTURER IMPACT ANALYSIS

The purpose of the manufacturer impact analysis ( MIA ) is to identify the likely impacts of energy conservation standards on manufacturers. In conducting this analysis , DOE will seek input from manufacturers and other interested parties , as well as conduct market research to inform its analysis. DOE will consider financial impacts, as well as a wide range of quantitative and qualitative industry impacts that might occur after adoption of a standard. For example, a particular standard level could quantitatively change the costs associat ed with manufacturing ceiling fans while qualitatively requiring changes to manufacturing practices. DOE will identify

2-39and discuss these impacts in interviews with manufacturers and other interested parties during

the notice of proposed rulemaking ( NOPR ) s tage of the analysis.

DOE conducts the MIA in three phases, and further tailors the analytical framework

based on the comments it receives throughout the process . In p hase I, DOE creates an industry profile to characterize the industry and identify important issues that require consideration. In phase II, DOE prepares an industry cash-flow model and considers what information it might gather in manufacturer interview s . In p hase III, DOE interviews manufacturers and assesses the impacts of new standards both quantitatively and qualitatively. DOE then assesses industry and subgroup cash -flow and industry net present value (INPV) using the Government Regulatory Impact Model (GRIM). In phase III, DOE also assesses impacts on competition, manufacturing capacity, employment, and regulatory burden based on manufacturer interview feedback and

discussions.

DOE evaluates and reports preliminary MIA information in this preliminary analy sis phase. DOE gathers the information for the analysis during preliminary manufacturer interviews.

S ee chapter 12 of th is TSD for more detail ed information on the MIA.

2.14.1 Sources of Information for the Manufacturer Impact Analysis

In the MIA , DOE uses outputs from other upstream analyses, such as the engineering analysis, the natio nal impact analysis (NIA), and the shipments analysis. These analyses provide important information for the MIA , including the number of shipments and the manufacturer production costs for each product. In the MIA, DOE also uses inputs based on publicly av ailable

financial information, such as information found in U.S. Securities and Exchange Commission (SEC) 10

- K filings . DOE refines these inputs based on feedback during manufacturer interviews. DOE supplements this information with company financial data and other information gathered and/or refined during interviews with manufacturers to estimate the industry financial parameters, such as the tax rate, the R&D rate, the capital expenditure rate, the depreciation rate, and industry discount rate.

The inte rview process plays an important role in the MIA. DOE conducts detailed interviews with manufacturers to gain insight on the range of potential impacts new standards could have on their industry. During the interviews, DOE solicits both quantitative and

qu alitative information regarding the potential impacts of various efficiency levels on sales, direct employment, capital assets, and industry competitiveness. Once all interviews are complete, DOE aggregates information across manufacturers where there is consensus on particular issues and combines industry estimates for quantitative factors such as financial parameters and markups.

2.14.2 Industry Cash

- Flow Analysis

The industry cash- flow analysis relies primarily on the GRIM , a model which DOE uses to analyze th e financial impacts of proposed energy conservation standards on the industry. The GRIM analysis uses several inputs to determine industry annual cash flows with and without energy conservation standard s. These inputs include shipments, production costs, product markups, industry financial parameters, and any conversion costs manufacturers would incur if

2-40higher efficiency standards were implemented

. Once the GRIM is constructed, DOE compares the industry annual cash flows resulting from two scenarios – one where efficiency standards are

mandated and one where base

- case projections , which involve no energy conservation standards, are applied . The financial impact of energy conservation standards is the dif ference between the two sets of discounted industry annual cash flows. Other performance metrics, such as return on invested capital, are als o calculated in the GRIM.

Some ceiling fan manufacturers expressed concern that increasing the efficiency of

ceili ng fans would be complex and costly and that energy conservation standards could significantly increase the retail price of ceiling fans for consumers. These manufacturers stated that a retail price increase could have significant negative impacts on ceili ng fan manufacturers. For example, ALA commented that if standards significantly increase d the retail price of ceiling fans, the number of ceiling fans purchased by consumers could drop significantly. (ALA, No. 39 at p. 23) The Modern Fan Company expressed similar concern s by commenting that the complexity and cost of compliance would make it difficult for them to offer the full range of products that consumers expect from a ceiling fan manufacturer. They also commented that energy conservation standards co uld have other negative impacts on their cash flows. For example, they pointed out that manufacturers would be negatively impacted by burdensome testing and certification requirements. ( The Modern Fan Company, No. 45 at p. 1) The Modern Fan Company further noted that developing new products that comply with higher energy conservation standards could be costly to manufacturers. They stated manufacturers amortize the development and marketing costs of new models over a long period of time. ( The Modern Fan Company, No. 45 at p. 2) Fanimation also raised concerns about the cost of developing new products to meet energy conservation standards. They pointed out that DOE did not take into consideration the engineering cost for manufacturers to redesign fans to make them compatible with DC motors. (Fanimation, No. 30 at p. 4- 5) Any NOPR MIA w ould incorporate all conversion costs (e.g., testing and certification costs, development costs, marketing costs, and capital expenditures ) into the cash -flow analysis. Se e chapter 1 2 of th is TSD for more information on the industry cash- flow analysis.

2.14.3 Direct Employment Impact Analysis

The impact of energy conservation standards on employment is an important consideration in the rulemaking process. DOE uses the information from m anufacturer

interviews to assess how domestic employment patterns might be impacted by energy conservation standards. In the interviews, DOE asks about current employment trends in the ceiling fan industry and solicits feedback from manufacturers on changes in employment patterns that may result from energy conservation standards. ALA commented that standards could reduce the number of ceiling fans sold, which could potentially result in a reduction in domestic employment levels of ceiling fan manufac turers and retailers. (ALA, No. 39 at p. 32 ) See chapter 12 of this TSD for more information on the direct employment impact analysis.

2.14.4 Manufacturer Subgroup Analysis

Average i ndustry impacts may not adequately show differential impacts among subgroups of manufacturers that have different cost structures or operate within different regulatory frameworks . For example, small and niche manufacturers, or manufacturers whose

2-41cost structure differs significantly from the i ndustry average, could experience a more negative impact. Ideally, DOE would consider the impact on every firm individually; however, because this usually is not possible, DOE typically uses the results of the industry characterization to group manufacture rs exhibiting similar characteristics. One common subgroup identified is small business manufacturers. DOE will analyze impacts on small business manufacturers consistent with the Regulatory Flexibility Act. (5 U.S.C. 601 et seq .)

During the interview process, DOE discuss es the potential subgroups and subgroup members it has identified for the analysis with manufacturers. DOE encourages manufacturers to recommend subgroups or characteristics that are appropriate for the subgroup analysis. While ALA commented that they were not aware of any ceiling fan manufacturer subgroups, (ALA, No. 39 at p. 44) Hunter recommended that DOE examine the impact energy conservation standards may have on the lighting showroom channel as a manufacturer subgroup. Hunter also commented that DOE should examine the impact of regulation on small manufacturers and home center businesses because standards could have a significant impact on the retail environment. During any subsequent NOPR phase of this rulemaking, DOE will investigate small ceiling fan

manufacturer s directly impacted by this rulemaking as part of the small business manufacturer subgroup. See c hapter 1 2 of th is TSD for more detail on the manufacturer subgroup analysis and the regulatory flexibility anal ysis

.

2.14.5 Competitive Impacts Assessment

The Energy Policy and Conservation Act ( EPCA ) direct s DOE to consider any lessening of competition likely to result from the imposition of standards. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It further directs the Attorney General to determine

, in writing

, the impacts, if any, of any lessening of competition. (42 U.S.C. 6295(o)(2)(B)(ii))

The manufacturer interviews focus on gathering information that would help in assessing impacts on competition, such as asymmetrical cost increases to some manufacturers, increased proportion of fixed costs potentially escalating business risks, and potential barriers to market entry ( e.g. , proprietary technologies , limited access to resources, etc. ). DOE will provide the Attorney General with a copy of any NOPR and TSD for consideration in evaluating the impact

of energy conservation standards on the lessening of competition. DOE will publish the Attorney General’s letter and address any related comments in any final rule.

2.14.6 Cumulative Regulat ory Burden

Other regulations may apply to the ceiling fans covered under this rulemaking and to other products produced by ceiling fan manufacturers. DOE recognizes that multiple regulations could result in a significant cumulative regulatory burden on man ufacturers. Some ceiling fan manufacturers commented that DOE should attempt to harmonize energy conservation standards for ceiling fans with other state requirements, especially those in California. ALA commented

that DOE should b e aware of the California Energy Commission (CEC) requirements and other

s tate

- level requirements for ceiling fans and if possible u se th ose existing regulations to reduce

or eliminate multiple standards and reporting requirements . (ALA, No. 3 at p. 2; ALA, No. 39 at p. 44) ALA al so commented that coordinating federal standards with s tate requirements, especially those in California, w ould lower costs for manufacturers and consumers. (ALA, No. 9

2-42at p. 17) Progress also commented that DOE should examine EISA 2007 and California Titl e 20 as part of the analysis to reduce the cumulative regulatory burden because al ign ing with these standards would provide improved product efficiency reporting and reduced compliance

overhead for ceiling fan manufacturers. (Progress, No. 6 at p. 2, 9, and 10) The Modern Fan Company commented that if DOE decides to implement regulations for ceiling fans , DOE should focus on developing standards, testing requirements, and product classification with the goal of simplifying the process to avoid excessive, repetitive, and overly-complicated regulations. ( The Modern Fan Company, No. 45 at p. 1) DOE’s initial analysis of regulations affecting ceiling fans

is located in the mar ket and technology assessment (chapter 3 of th is TSD). During any subsequent NOPR p hase , DOE would, as appropriate, investigate the regulations manufacturers mentioned in interviews and the public meeting, and would further analyze and consider the impact of multiple, product- specific regulatory actions on ceiling fan manufacturers.

2.14.7 Prel iminary Results for the Manufacturer Impact Analysis

In the preliminary MIA, DOE has the opportunity to identify key manufacturer issues early in the evaluation of proposed energy conservation standards. During preliminary

interviews , manufacturers identified four major areas of concern: (1) shift to air conditioning, (2) testing burden, (3) off-mode power consumption, and (4) utility of DC motors. These topics and others will be discussed and analyzed in the full MIA that is conducted during any subsequent NOPR stage.

Shift to Air Conditioning. Several manufacturers stated that ceiling fan energy conservation standards either could cause consumers to forgo the purchase of a ceiling fan in lieu

of an air conditioner or could cause con sumers who own ceiling fans to run their air conditioners more frequently instead of using their ceiling fan. Manufacturers stated that if energy conservation standards caused the price of ceiling fans to increase significantly in price, some consumers may decide not to purchase a ceiling fan and instead use air conditioners to cool their homes. Manufacturers claim this could result in more energy use, since ceiling fans tend to be more efficient at cooling rooms than air conditioners. The interaction betwe en ceiling fans and air conditioning is discussed in section 2.9.1 of this chapter.

Manufacturers also stated that overly stringent ceiling fan standards could fo rce manufacturers to reduce the aesthetic quality of some ceiling fans to comply with energy conservation standards. This could cause consumers to forgo the purchase of these ceiling fans because the aesthetic appearance of ceiling fans is an important fac tor when consumers purchase ceiling fans. Manufacturers claim this reduction in aesthetic quality could again result in more energy use, because consumers who do not purchase ceiling fans would need to use air

conditioners to cool their homes. As described in section 2.6.1.6 , DOE seeks more information

on screen ing out design options that impact the aesthetics of low-volume ceiling fans.

Testing Burden. Manufac turers are concerned with the additional testing burdenassociated with complying with energy conservation standards. Most manufacturers use thirdparty testing facilities for testing and reporting purposes, which can be expensive. Manufacturers

stated tha t ceiling fan standards would significantly increase the amount manufacturers already

2-43invest in testing each year. The test burden of complying with energy conservation standards is discussed in the related ceiling fan test procedure NOPR (issued on September 19, 2014).

Off -Mode Power Consumption. Some manufacturers noted that testing the off -mode power consumption of a ceiling fan could be difficult due to the potential power draw of a ceiling fan light kit in off

- mode. Some manufacturers claimed that ceiling fans with light kits may draw more power in off-mode than ceiling fans without a light kit. This could present a potential problem for the off- mode ceiling fan standards, if ceiling fans with light kits were forced to comply with the same standards as ceiling fans without light kits. This could also cause manufacturers to remove ceiling fan light kits on a number of ceiling fan models. The ceiling fan test procedure NOPR (issued on September 19, 2014) addresses power consumption in offmode ; DOE doe s not propose to test ceiling fans in off-mode.

Utility of DC Motors. Manufacturers stated that energy conservation standards that required the use of DC motors in ceiling fans would limit the overall utility of the fan , as well as

increase maintenance costs . Manufacturers claim that DC motors require significantly more maintenance and have a higher warranty factor compared to ceiling fans with AC motors. Additionally, ceiling fans with DC motors require the use of a handheld remote, which manufacturers claim is not preferred by many consumers. Therefore, manufacturers stated any ceiling fan standard that required the use of a DC motor would significantly reduce the overall utility of ceiling fans to consumers. The utility of fans with DC motors is discussed in section

2.6.1.3 of this chapter.

2.15 EMISSIONS ANALYSIS

In the emissions analysis, DOE will estimate the reduction in power sector emissions of

carbon dioxide (CO 2 ), nitrogen oxides (NO X ), sulfur dioxide ( SO 2 ) and mercury (Hg) from potential amended energy conservation standards for ceiling fans . In addition, DOE will estimate emissions impacts in production activities (extracting, processing, and transporting f uels) that provide the energy inputs to power plants. These are referred to as “upstream” emissions. Together, these emissions account for the FFC . In accordance with DOE’s FFC Statement of Policy (76 FR 51281 [Aug. 18, 2011] ), the FFC analysis also includ es impacts of standards on emissions of methane and nitrous oxide, both of which are recognized as greenhouse gases ( GHG s)

.

DOE will conduct the emissions analysis using emissions factors derived from data in the

latest version of EIA’s AEO 13

, supplemented by data from other sources. EIA prepares the Annual Energy Outlook ( AEO ) using the National Energy Modeling System ( NEMS ). Each annual version of NEMS incorporates the projected impacts of existing air quality regulations on

emissions. The text below refers to AEO 201 4, which generally represents current legislation and environmental regulations, including recent government actions, fo r which implementing regulations were available as of October 31, 2012.

SO 2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions cap- and

- trad e programs. Title IV of the Clean Air Act sets an annual

emi ssions cap on SO 2 for affected EGUs in the 48 contiguous s tates and the District of Columbia (D.C.). SO 2 emissions from 28 eastern s tates and D.C. were also limited under the Clean Air

2-44Interstate Rule (CAIR), which created an allowance -based trading progra m that operates along with the Title IV program in those States and D.C. 70 FR 25162 (May 12, 2005). CAIR was remanded to EPA by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), but it remained in effect. j On July 6, 2011 EPA issued a replacement for CAIR, the

Cross

- State Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012,

the D.C. Circuit issued a decision to vacate CSAPR. k The court ordered EPA to continue administering CAIR. AEO 2014 assumes that CA IR remains a binding regulation through 2040. l

The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of emissions allowances and tradable permits. Under existing EPA regulations, any excess SO 2 emissions allowances resulting from the lower electricity demand caused by the adoption of an efficiency standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. In past rulemakings, DOE recognized that there was uncert ainty about

the effects of efficienc y standards on SO 2 emissions covered by the existing cap

- and

- trade system, but it concluded that negligible reductions in power sector SO 2 emissions would occur as

a result of standards.

Beginning in 2016, however, SO 2 emissions will fall as a result of the Mercury and Air Toxics Standards (MATS) for power plants. 77 FR 9304 (Feb. 16, 2012). In the final MATS rule, EPA established a standard for hydrogen chloride as a surrogate for acid gas hazardous air pollutants (HAP), and also established a standard for SO 2 (a non- HAP acid gas) as an alternative equivalent surrogate standard for acid gas HAP. The same controls are used to reduce HAP and non-HAP acid gas; thus, SO 2 emissions will be reduced as a result of the control technologies installed on coal-fired power plants to comply with the MATS requirements for acid gas. AEO

2014 assumes that, in order to continue operating, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed by 2016. Both technologies, which are used to reduce acid gas emissions, also reduce SO 2 emissions. Under the MA TS, e missions will be far below the cap that would be established by CAIR, so it is unlikely that excess SO 2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO 2 emissions by any reg ulated EGU. Therefore, DOE believes that efficiency standards will reduce SO 2 emissions in 2016 and beyond.

CAIR established a cap on NO X emissions in 28 eastern s tates and the District of Columbia. Energy conservation standards are expected to have littl e effect on NO

x emissions in

j See North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008); North Carolina v. EPA , 531 F.3d 896 (D.C. Cir. 2008).

k See EME Homer City Generation , LP v. EPA, 696 F.3d 7, 38 (D.C. Cir. 2012).

l On April 29, 2014, the U.S. Supreme Court reversed the judgment of the D.C. Circuit

, and remanded the case for further proceedings consistent with the Supreme Court's opinion. The Sup reme Court held in part that EPA's methodology for quantifying emissions that must be eliminated in certain states due to their impacts in other downwind states was based on a permissible, workable, and equitable interpretation of the Clean Air Act provisi on that provides statutory authority for CSAPR. See EPA v. EME Homer City Generation , No 12

- 1182, slip op. at 32 (U.S. April 29, 2014). Because DOE is using emissions factors based on AEO 201 4 , the analysis assumes that CAIR, not CSAPR, is the regulation i n force. The difference between CAIR and CSAPR is not relevant for the purpose of DOE's analysis of SO2 emissions.

2-45those s tates covered by CSAPR because excess NO

x emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NO

x emissions

. However, standards would be expected to reduce NO

x emissions in the States not affected by the caps, so DOE estimates NO X emissions reductions from potential standards in the States where emissions are not capped.

The MATS limit mercury emissions from power plants, but they do not include emissions

caps and, as such, DOE’s energy conservation standards wou ld likely reduce Hg emissions. DOE will estimate mercury emissions reduction using emissions factors based on AEO 2014 , which incorporates the MATS.

Power plants may emit particulates from the smoke st ack, which are known as direct particulate matter (PM) emissions. NEMS does not account for direct PM emissions from power plants. DOE is investigating the possibility of using other methods to estimate reduction in PM

emissions due to standards. The great majority of ambient PM associated with power plants is in the form of secondary sulfates and nitrates, which are produced at a significant distance from power plants by complex atmospheric chemical reactions that often involve the gaseous emissions of power plants, mainly SO 2 and NO

x . The monetary benefits that DOE estimates for

reductions in SO 2 and NO

x emissions resulting from standards are in fact primarily related to the

health benefits of reduced ambient PM.

2.16 MONETIZATION OF EMISSION REDUCTIONS BENEFITS

DOE plans to consider the estimated monetary benefits likely to result from the reduced

emissions of CO 2 and NO X that are expected to result from each of the energy conservation

standard levels considered.

To estimate the monetary value of benefits res ulting from reduced emissions of CO 2 , DOE plans to use the most current Social Cost of Carbon (SCC) values developed and/or agreed to by an interagency process. The SCC is intended to be a monetary measure of the incremental damage resulting from GHG emiss ions, including, but not limited to, net agricultural productivity loss, human health effects, property damage from sea level rise, and changes in ecosystem services. Any effort to quantify and to monetize the harms associated with climate change will rais e serious questions of science, economics, and ethics. But with full regard for the limits of both quantification and monetization, the SCC can be used to provide estimates of the

social benefits of reductions in GHG emissions.

The Interagency Working Group on Social Cost of Carbon released an update of its previous report in 2013. 14 The most recent estimates of the SCC in 2015, expressed in 2013 $, are $12.0, $40.5, $62.4, and $119 per metric ton of CO 2 avoided. For emissions reductions that occur in later years, these values grow in real terms over time. Additionally, the interagency group determined that a range of values from 7 percent to 23 percent should be used to adjust the global

SCC to calculat e domestic effects, although DOE will give preference to consideration of the global benefits of reducing CO 2 emissions.

2-46DOE multiplies the CO 2 emissions reduction estimated for each year by the SCC value for that year in each of the four cases. To calculate a present value of the stream of monetary values, DOE discounts the values in each of the four cases using the discount rates that had been

used to obtain the SCC values in each case.

DOE recognizes that scientific and economic knowledge continues to evolve rapidly as to

the contribution of CO 2 and other GHG to changes in the future global climate and the potential resulting damages to the world economy. Thus, these values are subject to change.

DOE also estimates the potential monetary benefit of r educed NO X emissions resulting from the standard levels it considers. Estimates of monetary value for reducing NO X from stationary sources range from $ 476 to $4,893 per ton in 2013$. 15 DOE calculates monetary benefits using a medium v alue for NO X emissions of $2,684 per short ton (in 2013$), and real discount rates of 3 percent and 7 percent, in accordance with OMB guidance. 16

DOE is evaluating an appropriate valuation of avoided SO 2 and Hg emissions. Whether

monetization of these emissions will occur in this rulemaking is yet to be determined.

2.17 UTILITY IMPACT ANALYSIS

In the utility impact analysis, DOE analyzes the changes in electric installed capacity and generation that result for each trial standard level (TSL). The utility impact analysis is based on output of the DOE/Energy Information Administration (EIA)’s National Energy Modeling System (NEMS). NEMS is a public domain, multi

- sectored, partial equilibrium model of the U.S. energy sector. Each year, DOE/EIA uses NEMS to produce an energy forecast for the United States, the Annual Energy Outlook (AEO). The EIA pu blishes a reference case, which incorporates all existing energy

- related policies at the time of publication, and a variety of side cases which analyze the impact of different policies, energy price and market trends. As of 2014, DOE is using a new methodology based on results published for the Annual Energy Outlook 2014 (AEO 2014) Reference case and a set of side cases that implement a variety of efficiency

related policies

.

DOE received a comment on the framework document from CA IOUs recommending

that DOE consider the power factor of ceiling fans, because a reduction in power factor may result in a decrease in power quality and transmission efficiency of the electric grid. CA IOU s also commented that the significance of power factor increases as brushless permanent magnet motors become more popular. (CA IOUs, No. 12 at p. 5) As noted in the test procedure NOPR for ceiling fans, DOE acknowledges that phase shifts introduced into the grid by loads could theoretically increase power production and transmission system demands. However, it is the net impact of many loads that ultimately determines the impact, which in turn depends on a dynamically changing load mix. DOE is not aware of field data quantifying the impact of power factor on the electric grid. Therefore, DOE did not propose a change in the test procedure to account for power factor.

2-472.18 EMPLOYMENT IMPACT ANALYSI S

The adoption of energy conservation standards can affect employment both directly and indirectly. Direct employment impacts are changes in the number of employees at the plants that produce the covered products, along with affiliated distribution and servi ce companies. DOE will evaluate direct employment impacts in the MIA.

Indirect employment impacts may result from expenditures shifting between goods (the substitution effect) and changes in income and overall expenditure levels (the income effect) that occur due to standards. DOE defines indirect employment impacts from standards as net jobs eliminated or created in the general economy as a result of increased spending driven by increased product prices and reduced spending on energy.

The indirect em ployment impacts will be investigated in the employment impact analysis using the Pacific Northwest National Laboratory’s “Impact of Sector Energy Technologies” (ImSET) model. 17 The ImSET model was developed for DOE’s Office of Planning, Budget, and Analysis to estimate the employment and income effects of energy

- sav ing technologies in buildings, industry, and transportation. Compared with simple economic multiplier approaches, ImSET allows for more complete and automated analysis of the economic impacts of energy

conservation investments.

2.19 REGULATORY IMPACT ANALYSIS

In any subsequent NOPR stage of this rulemaking, DOE w ould prepare a regulatory impact analysis that evaluates potential non- regulatory policy alternatives, comparing the costs and benefits of each to those of the proposed standards. DOE recognizes that non-regulatory policy alternatives can substantially affect energy efficiency or reduce energy consumption. DOE

base s its assessment on the actual impacts of any such initiatives to date, but also consider s information presented by interested parties regarding the potential future impacts of current

initiatives.

2-48REFERENCES

1. U.S. Department of Energy– Office of Energy Efficiency and Renewable Energy Building Technologies Program. Rulemaking Framework Document for Ceiling Fans and Ceiling Fan Light Kits. March 8, 2013. Washington, D.C. (Last Accessed March 27, 2014.) http://www.regulations.gov/#!documentDetail;D=EERE -2012- BT

- STD -0045-0001

2. U.S. Department of Energy– Office of Energy Efficiency and Renewable Energy. Energy Conservation Program for Consumer Products: Energy Conservation Standards for Ceiling Fans and Ceiling Fan Light Kits: Notice of public meeting and availability of the

frame work document; correction and extension of the public comment period. Federal Register. Vol. 78, No. 85. May 2, 2013. http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/65

3. Kantner, C.L.S., S.J. Young, S.M. Donovan, and K. Garbesi. Ceiling Fan and Ceiling Fan Light Kit Use in the U.S.—Results of a Survey on Amazon Mechanical Turk. July 2013. Lawrence Berkeley National Laborato ry, Berkeley, CA. Report No. LBNL- 6332E. (Last Accessed March 27, 2014) http://www.escholarship.org/uc/item/3r67c1f9

4. AcuPOLL® Precision Research, Inc. Survey of Consumer Ceiling Fan Usage and Operations. May 31, 2013. (Last Accessed June 17, 2013.)

5. Mehta, V. Personal communication. ICF International, Fairfax, VA. Email to Mohan Ganeshalingam, LBNL. January 14, 2014.

6. Mehta, V. Personal Communication.. ICF International, Fairfax, VA. Email to Mohan Ganeshalingam, LBNL. January 22, 2014

7. Mehta, V. Personal Communication ICF International, Fairfax, VA Email to Mohan Ganeshalingam, LBNL. July 6, 2014

8. U.S. Department of Energy– Energy Information Administration. Residential Energy

Co nsumption Survey. 2009 RECS Survey Data. 2011. Washington, D.C. (Last Accessed March 27, 2014.) http://www.eia.gov/consumption/residential/data/2009/

.

9. James, P., J. Sonne, R. Vieira, D. Parker, and M. Anello. "Are Energy Savings Due to Ceiling Fans Just Hot Air?" In Proceedings of the ACEEE Summer Study on Energy Efficiency in Buildings. 8:89-93. American Counsel for an Energy-Efficient Economy. 1996. Washington D.C.

10. SDG&E. Statewide Investor Owned Utility Ceiling Fan Study. Prepared by RLW Analytics. 2002. (Last Accessed April 10, 2014.) http://www.calmac.org/publications/SDG &E%20Ceiling%20Fan%20Final%20Report%2 0(092002).pdf

2-4911. Harrison, G.W. and E.E. Rutstrom. "Experimental Evidence on the Existence of Hypothetical Bias in Value Eliciation Methods", In Handbook of Experimental Economics Results, Amsterdam. C.R. Plott and V.L. Smith, eds. 2005. Amsterdam

12. Harrison, G.W. "Experimental Evidence on Alternative Environmental Valuation

Methods" In Environmental & Resource Economics 34:125-162 2006.

13. Energy Information Administration. Annual Energy Outlook 2014 with Projections to

2040. Report No. DOE/EIA-03832014. Washington, D.C. http://www.eia.doe.gov/oiaf/aeo/

14. Interagency Working Group on Social Cost of Carbon. Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866. Interagency Working Group on Social Cost of Carbon, U.S. Government. May 2013; revised November 2013. (Last Accessed March 27, 2014.) http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical -update- social

cost -of-carbon- for -regulator- impact -analysis.pdf

15. U.S. Office of Management and Budget. 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities. 2006. Washington, D.C. (Last Accessed March 27, 2014.) http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_cb _final_report.pdf

.

16. U.S. Office of Management and Budget. Circular No. A-4, Regulatory Analysis. 2003. Washington, DC. (Last Accessed March 27, 2014.) http://www.whitehouse .gov/sites/default/files/omb/assets/regulatory_matters_pdf/a -4.pdf

17. Roop, J.M., M.J. Scott, and R.W. Schultz. ImSET: Impact of Sector Energy Technologies. 2005. Pacific Northwest National Laboratory, Richland, WA. Report No. PNNL–15273. (Last Accessed March 27, 2014.) http://www.pnl.gov/main/publications/external/technical_reports/PNNL -15273.pdf

2-50CHAPTER 3. MARKET AND TECHNOLOGY ASSESSMENT

TABLE OF CONTENTS

3.1 INTRODUCTION ........................................................................................................... 3-1

3.2 SCOPE OF COVERAGE ................................................................................................ 3-1

3.2.1 Statutory Definition of a Ceiling Fan ................................................................... 3-1

3.2.2 Reg ulatory Definitions ......................................................................................... 3-2

3.2.2.1 Definitions of Low-Volume and High- Volume Ceiling Fans .................... 3-3

3.2.2.2 Definitions of Hugger, Standard, and Multi-Mount Ceiling Fans ............. 3-4

3.2.2.3 Definition of Highly Decorative Ceiling Fan ............................................. 3-4

3.3 MARKET ASSESSMENT .............................................................................................. 3-5

3.3.1 Manufacturer Trade Group .................................................................................. 3-6

3.3.2 Manufacturers and Market Shares ....................................................................... 3-6

3.3.2.1 Distrib ution Channels ................................................................................. 3-6

3.3.2.2 Major Manufacturers .................................................................................. 3-8

3.3.3 Regulatory Programs ......................................................................................... 3-10

3.3.3.1 California Title 20 .................................................................................... 3-10

3.3.3.2 Federal Trade Commission ...................................................................... 3-10

3.3.3.3 UL Safety Requirement ............................................................................ 3-11

3.3.4 Non

- Regulatory Initiatives

................................ ................................................. 3-11

3.3.4.1 ENERGY STAR ...................................................................................... 3-11

3.3.4.2 AMCA ...................................................................................................... 3-12

3.3.5 Historical Shipments .......................................................................................... 3-13

3.3.6 Saturation of Low- Volume Ceiling Fans ........................................................... 3-16

3.3.7 Pro duct Lifetime ................................................................................................ 3-17

3.4 TECHNOLOGY ASSESSMEN T .................................................................................. 3-18

3.4.1 Basic Structure and Operation of Ceiling Fans .................................................. 3-18

3.4.2 Technology Options for Ceiling Fans ................................................................ 3-19

3.4.2.1 Mor e efficient motors ............................................................................... 3-20

3.4.2.2 More efficient blades ................................................................................ 3-21

3.4.2.3 Ceiling Fan Controls ................................................................................ 3-22

3.5 PRODUCT CLASSES ................................................................................................... 3-22

3.5.1 Product Classes for Low- Vol ume Ceiling Fans ................................................. 3-23

3.5.2 Product Classes for High- Volume Ceiling Fans ................................................ 3-24

3.5.3 Product Class Summary ..................................................................................... 3-25

3.5.4 Metric ................................................................................................................. 3-26

REFERENCES .......................................................................................................................... 3-27

3-iLIST OF TABLES

Table 3.2.1 Types of Ceiling Fans .................................................................................... 3-3

Table 3.2.2 Low

- Volume Ceiling Fans, 7 Feet or Less in Diameter ................................ 3-4

Table 3.3.1 Market Shares of Low

- Volume Ceiling Fan Retailers in 2011 ..................... 3-7

Table 3.3.2 Market Shares of Low

- Volume Ceili ng Fan Manufacturers ......................... 3-9

Table 3.3.3 ENERGY STAR Residential Ceiling Fan Airflow Efficiency Requirements ............................................................................................... 3-11

Table 3.3.4 Historical Shipments of All Low -Volume Ceiling Fans With and Without Light Kits ....................................................................................... 3-13

Table 3.3.5 Historical Shipments and Market Shares of ENERGY STAR

- Qualified

Products........................................................................................................ 3-14

Table 3.3.6 Comparison of Historical Shipments of Ceiling Fans from Different

Data Sources ................................................................................................ 3-14

Tabl e 3.3.7 Market Share of Low

- Volume Ceiling Fans by Blade Span ....................... 3-16

Table 3.5.1 Product Classes for Ceiling Fans ................................................................. 3-26

LIST OF FIGURES

Figure 3.3.1 Market Shares of Low -Volume Ceiling Fan Manufacturers in 2011 (NPD, 2011) ................................................................................................... 3-8 Figure 3.3.2 Market Shares of Low -Volume Ceiling Fans by Blade Span in 2011 (NPD, 2011) ................................................................................................. 3-15 Figure 3.3.3 Market Shares of Low -Volume Ceiling Fans by Blade Span for 2007– 2011 (NPD, 2007-2011)............................................................................... 3-15 Figure 3.3.4 U.S. Low -Volume Ceiling Fan Ownership by Region and Average Number of Ceiling Fans per Household (RECS, 2009) ............................... 3-16 Figure 3.3.5 U.S. Low -Volume Ceiling Fan Usage by Region (RECS, 2009) ................ 3-17

3- iiCHAPTER 3. MARKET AND TECHNOLOGY ASSESSMENT

3.1 INTRODUCTION

This chapter consists of four sections: scope of coverage, market assessment, technology assessment, and product classes. The scope of coverage describes the products covered under this rulemaking and discusses certain amendments to the definitions of these products being considered by the U.S. Department of Energy (DOE). The market assessment provides an overall picture of the market for the products concerned, including the nature of the products, industry structure, and manufacturer market shares; regula tory and non- regulatory efficiency improvement programs; market trends; and quantities of products sold. The technology assessment identifies a preliminary list of technologies to consider in the screening analysis. The product classes section discusses the class -setting factors DOE considered for this rulemaking.

The information DOE gathers from the market and technology assessment serves as resource material for use throughout the rulemaking. DOE considers both quantitative and qualitative information fr om publicly available sources and interested parties.

3.2 SCOPE OF COVERAGE

Pursuant to EPCA, DOE has the authority to regulate the electrical energy consumption of ceiling fans. (42 U.S.C. 6295(ff)(6)(A)) In addition to giving DOE the discretion to issue electrical energy consumption standards for ceiling fans, EPCA also provides certain design standards (including a requirement for (i) fan speed controls separate from any lighting controls; (ii) adjustable speed controls (either more than one speed or variable speed); and (iii) the capability for reverse action (other than fans sold for industrial or outdoor application or where safety would be an issue)). (42 U.S.C. 6295(ff)(1)(A)) The statutory design standards will remain in place and are not subject to review as part of this rulemaking process.

The following sections clarify DOE’s interpretation of the statutory definition of a “ceiling fan” and the products covered in this rulemaking, and describe in more detail the regulatory definitions under consideration for several types of ceiling f ans

.

DOE acknowledges that t he clarification of the definition of a “ceili ng fan” impacts the coverage of ceiling fan light kits (CFLKs) in the concurrent CFLK energy conservation

standards rulemaking. Specifically, DOE clarifies that CFLKs integral or attachable to products defined as a “ceiling fan” in this rulemaking are covered in the CFLK rulemaking, regardless of whether the ceiling fan is subject to standards.

3.2.1 Statutory Definition of a Ceiling Fan

EPCA grants DOE authority to consider and prescribe amended energy conservation standards for ceiling fans, where a ceiling fan is defined as “a nonportable device that is suspended from a ceiling for circulating air via the rotation of fan blades." (42 U.S.C. 6291(49))

As discussed in the concurrent test procedure rulemaking for ceiling fans, DOE is:

3-11. Proposing to reinterpret the statutory definition of a ceiling fan to include both hugger and multi-mount ceiling fans; and

2. Clarifying that ceiling fans ca pable of producing large volumes of airflow, such as those ceiling fans typically used in industrial applications, meet the statutory definition of a ceiling fan

.

DOE has reviewed the retail market for ceiling fans and found that ceiling fans are commercially available in a range of sizes up to 24 feet in diameter. As noted in the test procedure rulemaking for ceiling fans, there do not appear to be third party testing facilities accredited to test large -diameter ceiling fans, though there may be third par ty testing facilities capable of such testing. DOE is tentatively including ceiling fans up to 24 feet in diameter within the scope of this rulemaking, however, to correspond to the current retail market.

3.2.2 Regulatory Definitions

DOE surveyed the market of currently available ceiling fans to better understand the different types and classifications currently being used by manufacturers to describe ceiling fans with different designs. DOE has observed a number of descriptions of ceiling fans in the market (that are not necessarily mutually exclusive), including:

• Hugger

• Low

- profile

• Flush -mount

• Extended

• Standard

• Indoor

• Outdoor

• Damp

- rated

• Wet

- rated

• Decorative

• High -volume (where volume refers to airflow volume)

DOE believes that all of the ceiling fans described in this list are covered by the statutory definition of a ceiling fan. For the purposes of DOE’s regulatory procedures, it may be useful to group these fans into a few types, distinguished by their funct ionality and physical characteristics. For example, a ceiling fan that could be described as either a “hugger” or “low profile” ceiling fan would fall into the “hugger” DOE ceiling fan type because a fan with either description could be used in a room with a low ceiling. Table 3.2.1 summarizes the various ceiling fan groupings that DOE is considering as part of this rulemaking (referred to as DOE ceiling fan type), th e functionalities, and the commonly referred to market descriptions.

3-2Table 3.2.1 Types of Ceiling Fans
DOE Ceiling Fan Type Functionality Market Description

Hugger Safe t o use with low ceilings Hugger, low- prof il e, flushmount

Standard Safe to use in locations where blades may be within 10 feet of the floor but a hugger fan is

not needed Standard, indoor, extended,

outdoor

High

- Volume Suitable for use in environments that require large

airflow volume High -volume, industrial, high -volume low speed (HVLS)

Highly Decorative Decorative only; air movement performance is not a primary

feature Decorative

3.2.2.1 Definition s of Low

- Volume and High- Volume Ceiling Fans

Although the framework document did not distinguish between low- and high-volume ceiling fans, DOE has since determined that it is necessary to delineate these two types of fans because they deliver distinct utilities to ceiling fan users and require different methods of testing. In the test procedure rulemaking for ceiling fans, DOE proposed the following definitions for low- and high- volume ceiling fans:

• Low-volume ceiling fan : “a ceiling fan that: (1) Is less than or equal to 7 feet in diameter,

AND (2) Has a blade thickness greater than or equal to 3.2 mm at the edge and a maximum tip speed less than or equal to the limit in Table 1,

OR Has a maximum airflow volume less than or equal to 5,000 CFM.”

• High -volume ceiling fan : “a ceiling fan that: (1) Is greater than 7 feet in diameter,

OR (2) Has a blade thicknes s of less than 3.2 mm at the edge or a maximum tip speed

that exceeds the threshold in Table 1

AND Has a maximum airflow volume greater than 5,000 CFM.”

Table 1 is reproduced below as Table 3.2.2

.

3-3Table 3.2.2 Low- Volume Ceiling Fans, 7 Feet or Less in Diameter

Airflow Thickness (t) of edges of blades Maximum speed at tip of blades

Direction* mm (inch) m/s (feet per minute)

Downward

- Only 4.8 > t ≥ 3.2 (3/16 > t ≥ 1/8) 16.3 (3,200)

Downward

- Only t ≥ 4.8 (t ≥ 3/16) 20.3 (4,000)

Reversible 4.8 > t ≥ 3.2 (3/16 > t ≥ 1/8) 12.2 (2,400)

Reversible t ≥ 4.8 (t ≥ 3/16) 16.3 (3,200)

* The “downward

- only” and “reversible” airflow directions are mutually exclusive; therefore, a ceiling fan that can only produce airflow in the downward direction need only meet the “downward

- only” blade

- edge

- thickness and tip

- speed requirements and a ceiling fan that can produce airflow in the downward and upward directions need only meet the “reversible” requirements.

3.2.2.2 Definition s of Hugger , Standard, and Multi

- Mount Ceiling Fans

DOE reviewed the marke t for low- volume ceiling fans to identify differen t performance characteristics among such fans. DOE has determined that the differences in functionality and characteristics amongst these types of ceiling fans justify individually defining different types of

low- volume ceiling fans. In the concurrent test procedure rulemaking for ceiling fans, DOE proposed the following definitions for different types of low- volume ceiling fans:

• Hugger ceiling fan : “A ceiling fan where the lowest point on the fan blades is no more than ten inches from the ceiling.”

• Standard ceiling fan : “A ceiling fan where the lowest point on the fan blades is more than ten inches from the ceiling.”

• Multi -mount ceiling fan : “A ceiling fan that can be mounted in both the standard and hugger ceiling fan configurations.”

3.2.2.3 Definition of Highly Decorative Ceiling Fan

There currently is no statutory definition of “highly decorative fans for which air movement performance is a secondary feature.” EPCA requires that if DOE sets energy efficiency standards for ceiling fans, it m ust consider ''establishing separate exempted product classes for highly decorative fans for which air movement performance is a secondary design feature.'' (42 U.S.C. 6295(ff)(6)(B)(ii)) EPCA does not, however, exempt highly decorative fans from the statutorily -prescribed design standards, instead requiring that all ceiling fans have speed controls separate from lighting controls and include adjustable speed controls; most fans also must have the capability of reversible fan action. (42 U.S.C. 6295(ff)( 1)(A)) Because DOE has not established standards for ceiling fans beyond the design standards promulgated by statute, DOE has not yet needed to consider whether highly decorative fans should be a separate regulated or exempted product class. 71 FR 71340, 71343 (Dec. 8, 2006).

However, because DOE is now considering energy efficiency performance standards for ceiling fans, it is necessary to clarify the definition of “highly decorative fans for which air movement perform ance is a secondary feature.” DOE initially proposed defining “highly

decorative fans” with reference to a maximum rotational speed of 50 revolutions per minute

3-4(RPM) . As discussed in chapter 2 of this TSD, commenters disagreed with the suggested

threshold of 50 RPM and ALA recommended a threshold of 90 RPM as one po tential definition of a highly decorative fan . In considering whether 90 RPM was the appropriate threshold, DOE

conducted market research and found that while relatively few low -volume fans advertise that they operate entirely below 90 RPM, some of these fans are c apable of producing a irflow greater than 5,000 cubic feet per minute (CFM). The market research also showed that larger high

volume ceiling fans (especially those 14 -16 feet in diameter and above) routinely operate at 90 RPM or below while being capable of producing very large airflow of greater than 100,000

CFM . Therefore DOE concluded that the definition of “highly decorative fans” should not be solely determined by a maximum rotational speed of 90 RPM, as this def inition could incorporate ceiling fans that are primarily used for air movement.

DOE also considered defining “highly decorative fans” with reference to maximum airflow. Using ALA’s suggestion of a maximum airflow threshold of 2,000 CFM as another possible definition, DOE analyzed the market and noticed that some standard and hugger ceiling fans are producing less than 2,000 CFM on high speed, but appear to be traditional ceiling fans in all other respects. Examples include standard ceiling fans smaller than 30 inches and hugger ceiling fans smaller than 42 inches. From this analysis, DOE concluded that using only a maximum airflow boundary of 2 ,000 CFM would not be sufficient in defining “highly decorative fans” because it might incorrectly categorize c ertain smaller standard or hugger ceiling fans as highly decorative ceiling fans

.

As discussed in chapter 2 of this TSD, DOE is considering defining “highly decorative

fans” with reference to both their maximum rotational speed in revolutions per minute (RPM) and maximum airflow in cubic feet per minute (CFM) . Specifically, DOE is considering defining “highly decorative fans” as: "ceiling fans that operate at a maximum rotational speed of

90 RPM and produce less than 2,000 CFM of airflow at high speed.” A requirement for less than 90 RPM on high speed, by itself, might incorrectly incorporate some larger ceiling fans that operate at relatively low RPM in the definition of highly decorative ceiling fans. Similarly, a requirement for less than 2 ,000 CFM a t high speed might incorrectly incorporate some smaller ceiling fans and hugger fans into the highly decorative category. Combined, however, this definition seems to be reasonable and robust across the span of ceiling fan sizes. It is not possible to esti mate exactly how many ceiling fans would meet this combined definition, however, because the vast majority of residential ceiling fans that operate below 90 RPM do not advertise a value for airflow. This could perhaps be interpreted as an indication that these are ceiling fans that do not have air movement performance as a primary design feature. DOE is also considering establishing a separate product class for highly decorative fans that is exempt from energy conservation standards.

3.3 MARKET ASSESSMENT

T he following market assessment for ceiling fans identifies the relevant manufacturer trade group and domestic manufacturers; discusses manufacturer market share, regulatory

3-5programs, and non- regulatory initiatives; and provides historical shipment data and product

lifetime estimates

. a

3.3.1 Manufacturer Trade Group

DOE recognizes the importance of trade groups in disseminating information and promoting the interests of the industry that they support. DOE identified the American Lighting Association (ALA) and Air Movement and Control Association (AMCA) as the primary groups that support, and have interest in, ceiling fans

.

The ALA is a trade organization that represents lighting and ceiling fan manufacturers, designers, retail showrooms, and distributors working to promote the sale and proper use of quality residential lighting products. The ALA provides specific information regarding the selection, benefits, and proper use of ceiling fans. The ALA also advocates the interests of the industry regarding Feder al and State legislative and regulatory issues.

AMCA is an international association of manufacturers , whose members include fan manufacturers and other types of air system equipment manufacturers. AMCA publishes standards and manuals for air systems as well as test s and certifies ratings for these products.

3.3.2 Manufacturers and Market Shares

This section describes ceiling fan distribution channels, manufacturers and their market shares, historical shipments, saturation levels, and product lifetimes.

3.3.2.1 Distribution Channels

Low -volume ceiling fans are passed from manufacturers to end users through three major types of distribution channels. One type of distribution channel i s for a manufacturer to sell the product to a ce iling fan and lighting showroom, who then sells it to a consumer. Another

distribution channel is for a manufacturer to sell the ceiling fan to an electric wholesaler, wh o in

turn sells it to a contractor , who sells it to t he end user. Lastly, the m ajority of low-volume ceiling fan sal es are from a distribution channel in which a manufacturer sells the ceiling fan to a retailer

, such as a home center, who sell s it to a consumer . Based on responses from the

manufacturer interview s , approximately 80% of low -volume ceiling fan sales are from home

centers

.

Brick

- and

- mortar retailers have a physical retail building that consumers can visit to view products and make purchases. There are several sub -types in this category, including:

• Mass market retailers

— national ch ain stores such as home centers, discount stores, and hardware stores;

• Regional stores, which may have multiple outlets like the mass market retailers, but are limited to a single region;

a As defined by 42 U.S.C 6291 (10), t he term “manufacture” means to manufacture, produce, assemble or import.

3-6• Specialty stores, which usually offer a broad range of products in a narrow product category and can be mass market, regional, or independent owners having a single retail outlet; and

• Club or warehouse stores, which require a membership fee for customers to gain access to the goods, where products are usually sold in bulk.

While mass market retailers dominate the ceiling fan market, ceiling fans are also sold

online. Online sellers can be brick

- and

- mortar retailers that also participate in online sales, sometimes called “clicks and bricks,” or dedicated online retailer s.

DOE consider ed national data from the NPD Group to describe retailers’ market shares

, which is summarized in Table 3.3.1

. b The data from NPD Group includes data for consumers who purchased the ceiling fans from retailers and lighting showrooms. However, the data may not account for consumers who purchased a new home which had a new ceiling fan installed.

Table 3.3.1 demonstrates that three mass market retailers (Home Depot, Lowe’s, and Wal- Mart) comprise approximately 80 percent of the retail market for low-volume ceiling fans in the United

States in 2011

Table 3.3.1 Market Shares of Low- Volume Ceiling Fan Retailers in 2011

Retailer Store

Market

Share % Online

Market

Share % Other †

Market

Share % Total

Market

Share* %

Home Depot 36 .8 1.1 0.2 38.0

Lowe's * 30.3 0.6 0.0 31.0

Wal

- Mart 9.4 0.2 0.0 9.7

Menards 4.8 0.1 0.0 4.9

Ace Hardware 2.2 0.2 0.0 2.4

Lighting and Electrical Supply

Store 1.9 0.2 0.1 0.0

Costco Price Club 1 .1 0.2 0.0 1.3

Sears * 1.0 0.0 0.0 1.1

Target 0.7 0.1 0.0 0.8

Kmart 0.6 0.0 0.0 0.6

Others 5.1 1.9 1.2 8.1

Total share of top 3 retailers * 76.6 1.9 0.2 78.7

Total * 93.9 4.5 1.6 100.0

* May not sum due to rounding

† Other includes catalog and other purchases

b NPD does not collect point

- of

- sales data for ceiling fans and ceiling fan light kits. Instead, it surveys a

representat ive sample of consumers who recently purchased a ceiling fan.

3-7Source: NPD Group, 2011.

High -volume ceiling fans do not use the same distribution channels as low-volume ceiling fans. From interview ing manufacturers

, DOE found that the end users generally purchase ceiling fans from two main types of distribution channels : (1) directly from the manufactu rer or (2) from a dealer who purchased it from the manufacturer. For high

- volume small

- diameter ceiling fans, the dealer may sometimes be a retailer, such as a home center.

3.3.2.2 Major Manufacturers

Six brands represented more than half of low-volume ceiling fa n sales in the United States in 2011: Casablanca, Emerson, Hunter Fans, Hampton Bay, Harbor Breeze, and Westinghouse. c Of those six brands, three (Hunter Fans, Hampton Bay, and Harbor Breeze) represented more than 45 percent of the market in 2011. Hampton Bay is a Home Depot brand, and Harbor Breeze is a Lowe’s brand. Casablanca is owned by Hunter Fans. Table 3.3.2 shows

the market shares of low-volume ceiling fan brands based on 2011 NPD data.

Figure 3.3.1 Market Shares of Low- Volume Ceiling Fan Manufacturers in 2011 (NPD, 2011)

Market shares for low-volume ceiling fans for years between 2007 and 2011 are listed in

Table 3.3.2

.

c Consumer survey data for 2011 purchased from NPD Group, Inc.

3-8Table 3.3.2 Market Shares of Low- Volume Ceiling Fan Manufacturers

Rank Brand 2007 % 2008 % 2009 % 2010 % 2011 %

1 Other 43.6 46.4 43.8 41.3 41.8

2 Hunter 18.6 15.5 15.9 17.3 17.7

3 Hampton Bay 14.6 12.5 14.6 13.6 15.6

4 Harbor Breeze 11.8 11.6 11.9 13.2 11.9

5 Casablanca 4.8 5.1 3.7 5.1 5.0

6 Westinghouse 3.4 4.1 3.8 3.5 3.1

7 Emerson 1.9 1.9 2.3 2.2 2.5

8 Aloha Breeze 0.0 0.9 2.1 1.9 1.1

9 Impressions 0.4 1.0 0.6 0.5 0.5

10 Ace 0.0 0.1 0.3 0.4 0.3

11 Encon 0.3 0.2 0.2 0.4 0.2

12 Minka Aire 0.2 0.3 0.1 0.1 0.2

13 Monte Carlo 0.6 0.5 0.5 0.5 0.0

Total share of top 6

brands % 55.0 50.6 52.2 54.9 55.7

Total share of top 3

brands % 44.9 39.5 42.4 44.1 45.2

Source: NPD Group, 2007

- 2011.

Most low-volume ceiling fans available on the U.S. market are manufactured (components and assembly) in Asia by a variety of manufacturers of various sizes, some of which maintain a steady presence in ceiling fan manufacturing and some of which remain only for short peri ods. Therefore, it is difficult to create a complete and accurate list of ceiling fan manufacturers. Ceiling fan companies undertake design reviews at least annually to select manufacturers for their products. Sometimes more than one factory supplies th e same model of ceiling fan, and the same factory may make ceiling fans for multiple brands. d In 2012, for example, manufacturers of the Home Depot brand (Hampton Bay), included Air Cool Industrial Co., King of Fans, and Hong Kong China Electrical Manufacture Co. Ltd. 1 Manufacturers of the Lowe’s brand, Harbor Breeze, included Artisan Industrial Co Ltd., Chien Luen Industries Co. Ltd. Inc., China, Fanimation Inc., Hong Kong China Electrical Manufacture Co. Ltd., Landmark Enterprise, and Litex Industries Inc./Ellington F ans.

d Opinion Dynamics Corporation for The Consortium for Energy Efficiency

, Residential Lighting Fixture Market Assessment: Ceiling Fans and Outdoor Lighting (2000)

, and Vin Mehta, personal communication (August 2012).

3-9Because low -volume ceiling fans have different designs , materials used

, and physical dimensions compared to high-volume ceiling fans, m any low-volume ceiling fan manufacturers

do not specialize in manufacturing high -volume ceiling fans. Therefore DO E researched and found a few manufacturers who specialize in manufacturing high -volume ceiling fans; these manufacturers are: Airmaster Fan Co., Big Ass Fan Co., Canarm Ltd., Dayton, J&D Manufacturing, Inc., Leading Edge, MacroAir Technologies, Inc., Patterson Fan Co., and TPI Corporation , to name a few

.

DOE believes that most high -volume large- diameter ceiling fans are manufactured in the U.S. However, because high- volume small

- diameter ceiling fans are similar in construction to

low- volume ceiling fan s, DOE assumes that high- volume small diameter ceiling fans, like low

volume ceiling fans, are manufactured overseas. DOE r equests input on manufacturing location for high

- volume small

- diameter ceiling fans.

3.3.3 Regulatory Programs

Several federal and inter national regulatory programs affect the markets for ceiling fans

. The following section summarizes U.S. regulatory initiatives relevant to the ceiling fans covered by this rulemaking. While the following discussion is not exhaustive in describing all regul atory
action related to ceiling fans , it provides detail on some notable initiatives that characterize recent developments in the market.

3.3.3.1 California T itle 20

California’s Office of Administrative Law (OAL) enacts statewide regulatory programs published in the California Code of Regulations (CCR). CCR Title 20, Division 2, Chapter 4,

Article 4 contains appliance efficiency regulations for ceiling fans, last revised in August 2013. This law applies to new ceiling fans that are offered for sale or sold in California for use in California excluding use in mobile equipment like recreational vehicles. This law requires ceiling fans that are not hugger fans to be tested following 10 CFR Section 430.23 (w) (Appendix U to subpart B of Part 430) (2008). Under this article, there are no efficiency standards that are federally or non

- federally regulated. Yet, there are federally and non

- federally regulated energy design standards applicable to ceiling fans manufactured on or after January 1, 2007. These design standards consists of having fan speed controls independent of lighting controls, adjustable speed controls, and a reversible mode. Fans that would violate safety standards with a reversible mode or fans used in industrial or outdoor applications are exempt

fr om having reversible fan functions. Additionally, manufacturers of ceiling fans with diameters greater than 50 inches must clearly display the high, medium, and low speed airflows in CFM and efficiencies in CFM/watt on the package.

3.3.3.2 F ederal Trade Commissio n

Under the Energy Policy Act of 2005, the Federal Trade Commission (FTC) amended the Appliance Labeling Rule to include requirements for energy labeling of ceiling fans. 71 FR 78057 (December 28, 2006). The rule require s manufacturers to show ceiling f an energy usage and efficiencies by affix ing label s on ceiling fan packages and providing product information in paper and online catalogs

. This rule specifies that m anufacturers must report airflow in CFM, electricity usage in watts, airflow efficiency in CFM/watt, and the range of airflow efficiencies

3-10for standard -sized fans on the market. (16 CFR 305.13) To obtain the product information, manufacturers are required to test the ceiling fan at high speed while f ollowing DOE test procedures. In addition to having product information on labels and in catalogs

, manufacturers

are also required to submit the information to the FTC. The amendment became effective January 1, 2009 and does not apply to ceiling fans produced before the effective date.

3.3.3.3 UL Safety Requirement

UL is a safety organization that developed standards for safety requirements of electric fans, which include ceiling fans. Ceiling fans in this rulemaking are referred to as ceil ing

suspended fans in UL 507. UL 507 requires that the distance between the floor and fan blades be greater than 7 feet if the maximum blade tip speed (determined by blade thickness) do es not
exceed the values shown in Table 3.2.2 , and greater than 10 feet if it does exceed the values

shown in Table 3.2.2 . This revised standard b ecame effective May 12, 2007 and is being used as part of the basis for differentiat ing between high -volume ceiling fans and low-volume ceiling fans in DOE’s ceiling fan test procedure NOPR.

3.3.4 Non -Regulatory Initiatives

DOE reviewed several national, region al, and local voluntary programs that promote the use of energy efficient lighting in the United States. The following section summarizes these programs for the ceiling fans covered by this rulemaking. While it is not an exhaustive list, the discussion pro vides detail on some notable initiatives that characterize recent developments in

the market.

3.3.4.1 ENERGY STAR

ENERGY STAR is a joint program of DOE and the Environmental Protection Agency (EPA) designed to protect the environment by promoting energy- efficient products and practices. 2 The ENERGY STAR program works to recognize products that meet or exceed the ENERGY STAR levels, which exceed federal minimum standard levels . ENERGY STAR specifications exist for several products, including ceiling fans . To qualify for the ENERGY STAR label, ceiling fans must meet the criteria specified in ENERGY STAR Residential Ceiling Fan version 3.0, which was revised August 2011 and became effective A pril 1, 2012. The guidelines specify that the ceiling fan at each of three speed s – high, medium, and low – must meet the efficiency levels shown in Table 3.3.3

.

Table 3.3.3 ENERGY STAR Residential Ceiling Fan Airflow Efficiency Requirements

Fan Speed Minimum Airflow (CFM) Minimum Efficiency (CFM/watt)

Low 1,250 155

Medium 3,000 100

High 5,000 75

A February 2014 list of ENERGY STAR partners who manufacture ceiling fan products qualified for ENERGY STAR version 3.0 is provided in the following. 3 Note that this list is updated regularly as new products are certified.

3-11• Aeratron Pty Ltd

• Air Cool Industrial Co., Ltd.

• Akamai Innovative Solutions LLC

• Artisan Industrial Co., Ltd.

• Banvil 2000

• Big Ass Fans

• Canarm Ltd.

• Chien Luen Industries, Co. Ltd., Inc.

• Emerson Electric Company

• Epiphany Lighting

• Fanimation Inc.

• Generation Brands

• Grainger Industrial Supply

• Gulf Coast Fans Inc.

• HD Supply Facilities Maintenance

• Hong Kong China Electric Appliance

Manufacture Company, Ltd

• Hunter Fan Company

• Jiangmen Xinhui Hongji Electrical Appliance Hardware Factory

• Kichler Lighting

• King of Fans

• Lamps Plus Corporate

• Legend Way International Holdings Ltd

• Litex Industries, Inc./ Ellington Fans • Lowe's Home Improvement

• Luminance

• Minka Group

• Nicor Inc.

• Old Jacksonville Ceiling Fan Company

• Orgill, Inc.

• Palm Coast Imports

• Pan Air Electric Company, Ltd.

• Progress Lighting

• Quorum International

• Ralada International Ltd.,

• Regency Ceiling Fans

• Royal Pacific Ltd.

• Savoy House

• Summerwind Inter national Limited

• Sunway Fan Company, Inc.

• TAISHAN SIGMA ELECTRIC PRODUCTS CO.,LTD

• The Home Depot

• TroposAir LLC

• Volume International Corporation

• Westwind Products Inc.

• Yellow Energy

• ZhongShan Weihe Electrical Appliances Co, Ltd.

3.3.4.2 AMCA

As mentioned in section 3.3.2.2 , the Air Movement and Control Association (AMCA)

tests and certifies the ratings of air system equipment products, which include ceiling fans

. For performance rating and certification purposes, AMCA e stablish ed standards for testing air circulating fans, which include ceiling fans that are less than 6 feet in diameter

. (ANSI/AMCA 230) Members of AMCA approved the standard as a uni form method of testing air circulating fans on February 11, 2007. Subsequently, t he American National Standards Institute (ANSI) approved this standard as an American National Standard, which became effective on September 20, 2007. The revision to the standard in 2012 was also approved by ANSI on February 22,

2012.

3-123.3.5 Historical Shipments

In evaluating overall U.S. shipments of low-volume ceiling fans , DOE has considered data from three sources: (1) NPD b ; (2) ENERGY STAR e ; and (3) Appliance Magazine. f DOE collated the data sets for their different time periods and different methodologies based on considering the market from different viewpoints. Additionally, DOE examined historical market compositions by ceiling fan characteristics such as blade span. However DOE did not find data on overall U.S. shipments for high -volume ceiling fans. Therefore, DOE seeks comments, input, and data on U.S. ship ments for high -volume ceiling fans.

Historical NPD shipments data for low -volume ceiling fans are shown in Table 3.3.4

. Note that the NPD consumer survey did not sp ecifically ask whether the ceiling fan light kit was already integrated with the ceiling fan at the time of purchase or simply purchased at the same

time.

Table 3.3.4 Historical Shipments of All Low

- Volume Ce iling Fans With and Without Light Kits

N umber of

U nits 2007 2008 2009 2010 2011

With Light 14,899,594 15,485,300 16,015,248 14,414,909 14,597,241

Without Light 2,176,229 2,226,826 2,106,832 2,184,390 2,035,746

Not Specified 3,970,371 3,080,311 3,561,611 2,830,707 2,140,867

Total 21,046,194 20,792,436 21,683,691 19,430,006 18,773,853

Source: NPD Group ( 2007

- 2011 ).

ENERGY STAR shipments and market share data are reported for two categories, namely ENERGY STAR -qualified ceiling fans with and without li ght kits , as shown in Table

3.3.5

. ENERGY STAR shipments are divided by market share to estimate the total U.S. shipments for ceiling fans with and without light kits

. However, due to a small sample size in the ENERGY STAR data, the proportion of ceiling fans sold with light kits to ceiling fans sold alone differ from the proportion in the NPD data in Table 3.3.4 . In using the small sample size to extrapolate shipments data, large errors in calculations may result, which affect the proportion of ceiling fans without light kits to ceiling fans with light kits. Therefore DOE uses the

e ENERGY STAR takes partner

- reported data to be representative of qualified ceiling fan shipments without adjusting for partners who do not report their shipments. This means that the ENERGY STAR data represent a conservative estimate, although the response rate among ceiling fan manufacturers is typically high, for example, 89 percent in 2010. In order to estimate the market share of ENERGY STAR

- qualified ceiling fans, ENERGY STAR estimates U.S. shipments based on modeled and documented data. Ceiling fan industry data are used as a direct input whenever possible and compared to forecast assumptions to ensure data comparability. Industry sources may include ceiling fan manufacturer associations, publications, and commercially

- available market research.

f Appliance ® Statistical Review, Annual Report, Appliance Magazine (2003

- 2006). Appliance Magazine sources may include the Air

- Conditioning and Refrigeration Institute; A ppliance Magazine, Association of Home Appliance Manufacturers; Consumer Electronics Association; Gartner; Gas Appliance Manufacturers Association; Hearth, Patio & Barbeque Association; International Data Corporation; Outdoor Power Equipment Institute; and the Water Quality Association. The data have not included exports since 1997.

3-13shipments data from NPD to estimate the proportion of ceiling fans with light kits to ceiling fans without light kits.

Table 3.3.5 Historical Shipments and Market Shares of E NERGY STAR

- Qualified

Products

Ceiling Fans Only Ceiling Fans with Light KitsNumber ofManufacturers% of respondentsYearReportedES*ShipmentsTotalShipments% ES*MarketShareReportedES*ShipmentsTotalShipments% ES*MarketShare

2004 2,631,000 7,738,235 34 166,000 8,300,000 2 23 91

2005 3,022,565 7,750,167 39 368,355 9,208,875 4 25 100

2006 1,845,052 7,687,717 24 117,289 11,728,900 1 27 93

2007 2,646,934 7,785,100 34 132,100 13,210,000 1 29 97

2008 2,500,309 7,813,466 32 126,769 12,676,900 1 32 100

2009 1,266,000 7,912,500 16 219,000 10,950,000 2 37 100

2010 1,394,000 7,744,444 18 304,000 10,133,333 3 46 89

2011 1,023,000 7,869,231 13 581,000 9,683,333 6 49 86

2012 1,477,000 7,773,684 19 621,000 10,350,000 6 54 87

*ES = ENERGY STAR

Sour ce: http://www.energystar.gov/index.cfm?c=partners.unit_shipment_data

.

Overall shipments based on NPD, ENERGY STAR, and Appliance Magazine data are fairly consistent, as shown in Table 3.3.6 . The total U.S. ENERGY STAR shipments are the sum

of the total U.S. shipments for ceiling fa ns with and without light kits in Table 3.3.5

.

Table 3.3.6 Comparison of Historical Shipments of Ceiling Fans from Different Data

Sources

Sources: NPD ( 2007

- 2011 ) ; ENERGY STAR ( 200 3- 201 1) ; and Appliance Magazine ( 2003

- 2006 ).

DOE also examined market shares on the basis of blade span. More than half of lowvolume ceiling fans sold have blade spans of between 42 and 52 inches. About a quarter have blade spans of between 30 and 40 inches. Thi s trend seems reasonably c onsistent over time. Figure 3.3.2 shows market shares of low-volume ceiling fans by blade span in 2011.

Total No. of Units

’000 2003 2004 2005 2006 2007 2008 2009 2010 2011

ENERGY STAR 16,664 16,038 16,959 19,417 20,995 20,490 18,863 17,878 18,124

Appliance Magazine 15,500 16,700 16,800 17,000 N/A N/A N/A N/A N/A

NPD N/A N/A N/A N/A 21,046 20,792 21,684 19,430 18,774

3-14Figure 3.3.2 Market Shares of Low- Volume Ceiling Fans by Blade Span in 2011 (NPD, 2011)

Market shares by blade span between 2007 and 2011 are displayed in Figure 3.3.3 and

Table 3.3.7

.

Figure 3.3.3 Market Shares of Low- Volume Ceiling Fans by Blade Span for 2007–2011 (NPD, 2007-2011)

3-15Table 3.3.7 Market Share of Low- Volume Ceiling Fans by Blade Span
Ceiling Fan

Size 2007 % 2008 % 2009 % 2010 % 2011 %

30

- 40 in

. 18 19 21 22 23

42

- 52 in

. 51 53 51 51 51

54 in

. or larger 8 8 7 7 9

Don't know 4 5 6 6 5

Not s pecified 19 15 17 15 11

Source: NPD (2007

– 2011).

N ote : Values may not add to 100% due to r ounding

3.3.6 Saturation of Low

- Volume Ceiling Fans

According to the 2009 Residential Energy Consumption Survey (RECS) 4 , 73 percent of U.S. homes had low-volume ceiling fans in 2009. Ownership varied significantly by region, ranging from 57 percent to 85 percent. Figure 3.3.4 shows U.S. low-volume ceiling fan ownership by region. Figure 3.3.5 shows usage variation by region , also based on RECS.

Figure 3.3.4 U.S. Low- Volume Ceiling Fan Ownership by Region and Average Number of Ceiling Fans p er Household (RECS, 2009)

3-16Figure 3.3.5 U.S. Low- Volume Ceiling Fan Usage by Region (RECS, 2009)

3.3.7 Product Lifetime

DOE has investigate d the life expectancy of ceiling fans. Data from Appliance Magazine suggest significant variation in the life expectancy of ceiling fans, between 7 and 18 yea rs. g

DOE is also aware of a survey which collected data on the age of ceiling fans in U.S.

households. 5 As described in Chapter 8 of this TSD, this information was used to estimate the

lifetime distribution for ceiling fan s, with a mean lifetime of 13.8 years

. DOE notes that ceiling fan motors often come with a limited lifetime warranty for the motor, and that a 30

- year warranty is required for the motor in order for a ceiling fan to qualify for ENERGY STAR. Due to aesthetic updates, ceiling fans will most like ly be retired before failing. DOE considers the retirement age to be the lifetime of the product in the analyses presented in this TSD.

DOE has not found significant data on life expectancy of ceiling fans for high -volume ceiling fans

. Because DOE has no data for lifetimes of high- volume fans, DOE will tentatively assume that high -volume and low- volume fans have the same lifetimes. DOE also anticipates that lifetimes of high -volume ceiling fans may vary depending on intensity of usage. The variation in usage among regions may be an important factor for DOE to consider. DOE seeks comments, input, and data on ceiling fan life expectancy for high volume ceiling fans.

g Estimates represent expert judgment of Appliance Magazine staff.

3-173.4 TECHNOLOGY ASSESSMENT

The purpose of the technology assessment is to develop a prelimi nary list of technologies that could be used to improve the efficiency of ceiling fans . The following assessment provides a description of the basic construction and operation of ceiling fans , followed by technology options to improve efficiency

.

3.4.1 Basic Str ucture and Operation of Ceiling Fans

In preparation for the screening and engineering analyses, DOE prepared a brief description of the characteristics and operation of the ceiling fans covered by this rulemaking. These descriptions provide a basis for understanding the technologies used to improve product efficiency.

The two main components of ceiling fans are the motor and the blades. The resulting airflow from ceiling fan operation mainly depends on the design of these two components.

The primary comp onent of ceiling fan motors is the rotor that converts electromagnetic

force into mechanical rotation to drive the fan blades. The rotor consists of a stack of steel sheets that has slots set at a specific angle and injected with aluminum. The stator contains the main and auxiliary windings that create the magnetic force used to drive the fan rotor. Magnetic force travels along the stationary slots of the stator to the rotor through the air gap between stator and rotor, driving the rotor. Higher quality motors tend to use silicon steel, which reduces loss of power in the rotor compared to cold-rolled steel (CRS) which is often used in cheaper motors.

The most common ceiling fan motor is a single -phase induction motor (permanent- split capacitor type) wi th an external rotor. Most induction motors are mounted to the fan blades directly. This configuration is known as direct- drive and means that the fan and motor rotate at the same speed. In principle, ceiling fans could attach the fan blades to the moto r via a geared mechanism that allows the fan blades to rotate at a different speed than the motor (a technology used in many high -volume fans).

There are many blade characteristics, such as blade pitch, blade shape and width, number of blades, blade span, and RPM, that contribute to ceiling fan operation. The blade pitch is the angle of the blade relative to the fan. The steeper the blade pitch, the more air the blade will move with each sweep. A steep pitch, however, also increases the amount of energy required to move the fan. As with pitch, the shape and width of the fan blade will have a large impact on the amount of air the fan can move and the energy needed to move it. A wider blade will move more air, but it will place a greater burden on the motor. The number of blades impacts the efficiency, RPM, and air noise. Fewer blades increase efficiency and RPM but also may increase air noise due to the increased RPM. The blade span is the length of the fan blades, where l onger blades move more air than smaller blades at a given RPM. As with wider blades, longer blades may place a greater burden on the motor, or require a larger motor. RPM is the number of blade rotations in a minute and a measure of the ceiling fan speed. There are tradeoffs betwe en greater airflow and increased energy consumption at higher RPMs, as well as safety issues associated with very high RPMs. Ceiling fans sold in the U.S. are required to have adjustable speed controls and low-volume ceiling fans typically have 3 , 4, or 6 RPM options.

3-18DOE has found that ceiling fans are currently available with a wide range of blade spans. The size of the ceiling fan will depend on the size of the room in which it is to be used, and guidelines for selection of the correct fan size are available. h Ceiling fans cool the occupants directly beneath them, so larger fans will cool a larger occupied area.

3.4.2 Technology Options for Ceiling Fans

The purpose of the technology assessment is to develop a list of technology options that manufacturers can use to improve product efficiency. The following assessment provides descriptions of technology options for ceiling fans . DOE examined efficiency

- imp roving technologies used today.

Ceiling fan airflow efficiency is the ratio of the volume of air moved by the fan in a given interval of time to the amount of electricity consumed. This air movement depends on three factors: (1) motor type and design; (2) blade design (including number and shape of blades); and (3) installation location (the distance from the ceiling and from the floor/person being cooled). Additionally, ceiling fan contro ls can potentially reduce energy consumption by reducing the usag e of ceiling fans to only be used when people are present.

The height from ceiling and floor serves as a constraint for motor selection in ceiling fans. Fans that are mounted close to the ceiling are more likely to wobble and shudder because of resonance effects on the shorter pendulum arm resulting from any imbalance of the blades or electrical forces in the motor. Fans that are mounted close to the ceiling cannot efficiently move as much air, because the proximity of the ceiling limits access to air s upply and restricts heat dissipation from the motor, thereby requiring motors that do not produce as much heat. Although the distance between the fan and the ceiling affects efficiency, because a relatively short distance between the fan and the ceiling can offer consumer utility in rooms with low ceilings, increased distance from the ceiling will not be treated as a technology option.

The key design factors that can be modified to affect the efficiency of ceiling fans are

motors and fan blades. DOE will consider more- efficient blades , motors, and controls as energy efficiency technology options.

In evaluating the effects of blade design on energy efficiency, DOE researched the relationship between blade span and energy efficiency and has found that, for all types of ceiling fans, efficiency tends to increase with blade span. To investigate this, DOE considered airflow and power separately and has found that both of these parameters increase with blade span, but that the rate of increase is significantly higher for airflow than power. However, because blade span can be thought of as the capacity of a ceiling fan, DOE is not considering blade span as a technology option. The effect of blade span on efficiency is accounted for in the engineering analysis, in chapter 5 of this TSD.

h See for example: http://www.energystar.gov/index.cfm?c=ceiling_fans.pr_ceiling_fans_basics and

http://www.ceiling

- fans.biz/products/Ceiling

- Fans

- Sizing/347.html

.

3-193.4.2.1 M ore efficient m otors

The electric motor that powers the fan is among the most important factors in determining the energy efficiency of a ceiling fan. Different types of ceiling fan motors are capable of different levels of electrical efficiency. This section discusses the types of motors that can be used in ceiling fans

.

Direct

- drive single

- phase induction motors. This is the most common type of motor used in ceiling fans. Fan blades are mounted directly to the motor, and the motor is made to operate at the same speed as blade rotation. The efficiency of such motors can be improved by increasing the size of (or the quality of steel used in) the stator and rotor stack, improving the lamination design, increasing th e cross section of copper wiring, or operating the fan at reduced speed through capacitor speed control.

Geared motors. Most ceiling fan motors are not as efficient as they could be, because they are low

- speed direct -drive motors. Induction motors can be made more efficient if they are designed for much higher RPM. By including a gear mechanism, higher RPM motors can be used in ceiling fans, however, the geared mechanism can result in increased noise during operation. DOE is not aware of any low-volume ceiling fans currently on the market that use gear driven motors, though such motors are used in high

- volume large diameter fans.

Brushless direct current ( DC ) motors. The most efficient ceiling fans on the market

have DC motors. DC motors are permanent magnet synchronous alternating current (AC) motors driven by a converter plus inverter combination control system. In this configuration, the motor displays characteristics of direct current motors; thus, they are called brushless direct

current motors. DC motors require less electricity and copper wiring to produce the same amount of power. The rotor magnetic field in DC motors is stationary, which means that there is no electrical current flowing in the rotor. This reduces rotor losses and makes DC motors significantly more efficient. While a typical ceiling fan has an efficiency of less than 100

CFM/W at high speed , fans that have a DC motor are capable of efficiency ratings of more than 300 CFM/W. These fans tend to be higher-end products, and the increase in efficiency is likely attributable not only to the motor type but also to other design features (e.g., the blade shape and number of blades). Another advantage of these motors is that they tend to be smaller and make less noise than those found in traditional ceiling fan motors. One disadvantage of DC motors is that the lifetime of the motor may be less than the lifetime of an induction motor due to the electronic controls required to run the DC motor (see the discussion on brushless DC motors in Chapter 2 of this TSD).

Three

- phase induction motors. Due to recent developments in the electronics of control systems, single -phase induction motors may be able to be replaced by more efficient three- phase

induction motors. Modern electronics can efficiently transform a single

- phase system commonly

used in residential locations into a thr ee

- phase system. Three

- phase motors are more efficientdue to their simpler motor circuit, which results in lower losses. DOE is not aware of any lowvolume or high-volume ceiling fans currently on the market that use three-phase induction motors, although other types of fans with three-phase motors are commonly used in industrial

and commercial applications.

3-203.4.2.2 More efficient b lades

Modifying the c onfiguration or design of ceiling fan blades can reduce energy consumption of the motor by reducing drag and/or increasing air movement. Optimizing fan blade design and configuration requires a delicate balance between many, sometimes conflicting,

element s. Therefore obtaining optimal ceiling fan efficiency may involve modifying multiple aspects of ceiling fan blades.

For example, for flat blades, the steeper the blade pitch, the more air that the blade will move with each sweep. Blade pitch, however, also increases the amount of energy required to move the fan. Therefore, it is important to balance maximizing the blade pitch with not overworking the motor. Since the optimal pitch depends on the size, shape, and speed at which a ceiling fan is operat ing, it is difficult to isolate it as a separate variable, and instead, it will be incorporated into the general analysis of fan blade shape.

Blade design (the shape, weight, and aerodynamic drag of a ceiling fan blade) can significantly affect efficiency , with reported examples demonstrating more than a doubling of efficiency. i Advanced fan blade technologies consist of modified structural configurations of the blade shape to minimize drag and maximize air displacement. For safety, edges of low -volume ceiling fans must be smooth and well rounded, which has the added benefit of reducing drag. This section discusses several types of blade design modifications that can result in better fan

efficienc y.

Fewer Fan Blades. In general, ceiling fans that have fewer blades are more efficient, because they are subject to less air resistance. However, fans that have fewer blades have also been known to generate more noise during operation because of the additional space between the blades. Unwanted noise is why most low ceiling fans are sold with five blades. DOE understands that by redesigning the blade shape, it may be possible to reduce the number of blades without increasing the noise level.

T

wisted , Airfoil, and Beveled Blades

. Because the speed of the blade at the tip is faster than the speed of the part of the blade that is closest to the motor, twisted blades reduce aerodynamic drag and improve efficiency by decreasing the blade pitch or twist from where the

blade attaches to the motor casing to the blade tip . Additionally, research has shown that twisted airfoil blades can further increase efficiency by reducing energy loss from the decrease in turbulence and flow separation. j Twisted blades are also often tapered so that the blade tip is

narrower than the section of the blade attached to the motor. This means that the decrease in twist or angle of attack is associated with the decrease in blade width. This is similar to blades on propellers of marine and air ves sels. k Beveled fan blades are fan blades that are typically

i For example: Parker, D., Hua, G. & Hibbs, B., High Efficiency Ceiling Fan

, United States Patent , Number 6039541 (2000) (Available at: http://www.haikufan.com/our

- fan/sustainability/ ).

j Gossamer Wind. 2011. (Available at: http://www.gossamerwind.com/content/what

- so

- special

- about

- these

- fans -0 )

k Bird, G.M

, High Efficiency Ceiling Fan

. United States Patent , Number 673324. May11, 2004. Google Patents. (Available at: http://www.google.com/patents/US6733241 )

3-21beveled at the blade edges from the motor casing to the blade tip. Beveled fan blades are more aerodynamic than traditional fan blades, which reduces drag and increases efficiency.

Blade Attach ments. Upswept blade tips or attachable clips can be added as blade

attachments to fan blades, which improve efficiency by to increas ing airflow or reduc ing drag

. DOE is aware of patents for blade attachments, but is not aware of any low

- volume ceiling fa ns on the market that use blade attachments to increase efficiency

. DOE is aware of one highvolume ceiling fan manufacturer that uses blade attachments.

Blade Material. The most common materials used for ceiling fan blades are wood and medium-density fibreboard (MDF). Plywood blades with a laminate coating are more resistantto warping than MDF and other cheaper woods. Blades made from MDF (often found on lowerend ceil ing fans) are typically heavier than plywood, and the edges cannot be as rounded, which

results in less

- efficient blades. Blades made from metal (generally steel or aluminum ) are less common in low-volume ceiling fans due to the increased risk of injury and noise. Aluminum blades are more malleable and can be more easily shaped that steel blades. Blades can also be made of injection molded resin, a material that is resistant to warping and weather conditions, and also can be molded into aerodynamically advantageous shapes.

3.4.2.3 Ceiling Fan Controls

C eiling fan controls can have an impact on the overall efficiency of a ceiling fan by affecting the hours of operation. Ceiling fans can be operated with pull chains or wall switches,

which are manual controls. Therefore, with manual controls, ceiling fans can be operating when people are not present, if the ceiling fan is not manually powered off. Using automatic ceiling fan controls, like occupancy sensors, could reduce power co nsumption by automatically turnin g off the ceiling when people are not present , reducing the usage of the ceiling fan

.

Occupancy Sensors. Occupancy sensors use technologies that detect the presence of people through movement and body heat. When coupled with an occupancy sensor, a ceiling fan could power down if it senses that a room is unoccupied. By limiting the hours of active mode operation to times when people are in the path of the fan, an occupancy sensor could reduce the overall energy consumption of a ceiling fan. DOE is not a ware of any commercially available ceiling fan or ceiling fan prototype that currently uses occupancy sensors to reduce energy consumption.

3.5 PRODUCT CLASSES

When evaluating and establishing energy conservation standards, DOE divides covered products into classes by (a) the type of energy used; (b) the capacity of the product; or (c) other performance

- related features that justify different standard levels, such as features affecting consumer utility. (See 42 U.S.C. 6295(q)) DOE then conducts its analysis and considers separate standard levels for each product class. DOE applied the criteria of 42 U.S.C. 6295(q) to ceiling fans to develop product classes in this preliminary analysis. This section of the TSD describes the factors DOE examined in considering p roduct classes for ceiling fans.

3-22In DOE’s previous rulemaking addressing ceiling fans, DOE did not establish any product classes for ceiling fans. 71 FR 71340 (Dec. 8, 2006). In that rulemaking, DOE did not establish standards for ceiling fans beyond the design standards in section 325(ff) of EPCA, which apply to all ceiling fans. (42 U.S.C. 6295(ff)).

DOE is considering determining product classes on the basis of utility delivered to the

consumer and on capacity

, where blade span is used as a proxy for capacity. DOE does not plan to differentiate product classes based on the type of energy used, because all ceiling fans are powered by electricity

.

DOE believes that there should be separate product classes for h igh -volume and lowvolume ceiling fans. High-volume ceiling fans appear to provide a distinct utility for consumers compared to low-volume ceiling fans by being capable of producing larger volumes of airflow at a given diameter. Because high -volume fans us e higher tip speeds to achieve increased airflow, they cannot be safely installed in all settings. Low -volume ceiling fans, on the other hand, produce less airflow but can be safely used in settings where the fan blades are within 10 feet of the floor, suc h as is typical in a residential installation. Because high -volume ceiling fans are not held to the same safety requirements as low-volume ceiling fans, high- volume ceiling fans are typically more efficient. Due to the differences in utility as well as eff iciency

, DOE is considering separating low-volume and high-volume ceiling fans. Furthermore, DOE is considering establishing three separate product classes for low-volume ceiling fans and two separate product classes for high

- volume ceiling fans.

3.5.1 Product Classes for Low- Volume Ceiling Fans

In the framework document, DOE proposed establishing separate product classes for indoor and outdoor ceiling fans. DOE notes that most ceiling fans are sold with a rating that specifies the type of environment in which they can be safely used (e.g., indoor, wet, or damp).

Wet

- rated or damp -rated ceiling fans are suitable for use outdoors and in humid environments such as bathrooms. Such ceiling fans are designed somewhat differently than indoor ceiling

fans in that th e blades often are made of different material (or with a different finish), and the motor housing is sealed to prevent damage from water or water vapor. However, as discussed in chapter 2 of this TSD, DOE compared several similar indoor ceiling fans to outdoor ceiling fans

and has determined that the different materials or coatings used in constructing outdoor ceiling fans does not result in a difference of efficiencies between indoor and outdoor ceiling fans. DOE also notes that there appears to be signi ficant overlap in the application and installation settings between indoor and outdoor ceiling fans. DOE is considering not establishing separate product classes for outdoor ceiling fans. Instead, all product classes will be inclusive of both outdoor and

indoor fans.

DOE is considering establishing separate product classes for hugger and standard ceiling

fans because hugger ceiling fans offer different functionality to the consumer. DOE has tentatively concluded that the only distinguishing feature of hugger fans is that they can be safely used in rooms with lower ceilings. Using typical ceiling fans ( e.g., ones with a downrod) in rooms having lower ceilings can create safety issues, thereby making hugger fans useful in those circumstances. The close proximity of the ceiling to the fan blades decreases the fan’s efficiency at circulating air when compared to a standard ceiling fan. For these reasons, DOE is

3-23considering establishing a separate product class es for hugger ceiling fans and standard ceiling

fans

. Instead of further separating fans by capacity, DOE intends to use an equation

- based approach to potential efficiency standard levels to account for the range diameters for standard and hugger ceiling fans.

In the test procedure NOPR, DOE proposed to test multi -mount ceiling fans in both the hugger and standard ceiling fan configurations. DOE is considering requiring that multi-mount fans meet the potential standard for both product classes. For this preliminary analysis, when the potential impact of a particular hugger fan efficiency level was being analyzed, DOE assumed that a standard would be set at the equivalent efficiency level for fans in the standard product class (and vice -versa). This assumption was implemented in the energy use analysis and in all subsequent analyses.

Because DOE has not established standards for ceiling fans beyond the design standards promulgated by statute , DOE has not yet needed to consider whether highly decorative fans should be a separate regulated or exempted product class. 71 FR 71340, 71343 (Dec. 8, 2006). However, because DOE is considering establishing efficiency performance standards for ceiling fans in this rulemaking, DOE must now consider establishing “separate exempted product classes for highly decora tive fans for which air movement performance is a secondary design feature.” (42 U.S.C. 6295(ff)(6); see section 2.1) Accordingly, DOE is considering establishing a separate exempt product class for highly decorative ceiling fans.

3.5.2 Product Classes for Hig h- Volume Ceiling Fans

There appear to be two broad categories of high- volume ceiling fans: those with diameters comparable to low -volume ceiling fans that operate at high RPM, and those with larger diameters that operate at lower RPM. The smaller diameter high -volume ceiling fans can be installed in rooms with overhead obstructions where a large diameter fan cannot fit. They are often used in an array of similarly sized ceiling fans. Large- diameter high -volume ceiling fans that operate at low RPM are referred to as “ high -volume, low speed” (HVLS) ceiling fans in the ceiling fan industry. They can be installed only in large buildings with minimal overhead obstructions. They can be used independently or in conjunction with other HVLS fans in very large buildin gs. DOE believes that it may be appropriate to group these two types of ceiling fans into two separate product classes based on capacity, where blade span is used as a proxy for capacity. Larger and smaller diameter high -volume ceiling fans appear to have distinct types of fan design and construction available to them, making it infeasible to apply a single equation forefficiency as a function of blade span across the full range of possible fan diameters, unlike lowvolume ceiling fans. The retail market f or small

- diameter high -volume ceiling fans appears to primarily consist of fans that are six feet in diameter or less, and large

- diameter high -volume ceiling fans appear to be commercially available between eight and 24 feet in diameter.

Therefore DOE is c onsidering establishing two product classes for high- volume ceiling fans: high

- volume small

- diameter (HVSD) ceiling fans that have a diameter of seven feet or less and high -volume large- diameter (HVLD) ceiling fans that have a diameter of more than seven feet,

but no more than 24 feet.

3-243.5.3 Product Class Summary

DOE is considering creating the following product classes based on functionality delivered to the consumer. At this time DOE knows of no performance- related features that would require establishing additional product classes beyond the following.

• Standard ceiling fans. These products represent the bulk of the market. Air movement performance is a primary feature, and these products may be suitable for use in damp or wet conditions, but are not design ed to be mounted flush with the ceiling. For instance, these products can be used in bedrooms, living rooms, bathrooms, or on a covered porch. DOE is considering requiring multi -mount fans to meet the potential standard for this product class (as well as the Hugger product class).

• Hugger fans. These products also have air movement performance as a primary feature, but they can be used in rooms that have low ceilings. Th ese fans are mounted close to the ceiling

. DOE is considering requiring multi -mount fans to meet the potential standard

for this product class (as well as the Standard product class)

.

• Highly decorative ceiling fans for which the air movement performance is a secondary feature. As the name implies, these are products for whic h aesthetics and ambiance are of primary concern and for which air movement performance is a lesser concern. DOE is considering a separate exempt product class for these fans.

• High -volume small

- diameter ceiling fans. These products can produce large volu mes of

air flow and have a high maximum tip speed , but are less than 7 feet in diameter . T hese products can be used , for instance, in gyms, malls, or libraries

.

• High -volume large- diameter ceiling fans . These products are greater than 7 feet in

diameter , and can produce very large volumes of air flow

. Examples of installation settings for these products include manufacturing facilities or warehouses.

3-25Table 3.5.1 Product Classes for Ceiling Fans

Product

Class Definition UtilityLow-Volume Hugger Lowest point on fan blades is ≤ 10

inches from the ceiling Safe t o use in environments with low ceilings

Standard Lowest point on fan blades > 10 inches from the ceiling Safe to use in environments where blades may be within 10 feet of the floor but a hugger fan is not required

Highly

Decorative R otational speed ≤ 90 RPM and

airflow ≤ 2000 CFM at high speed. Decorative only ; air movement performance is not a primary featureHigh-Volume Small

Diameter (HVSD) High

- volume ceiling fan less than 7

feet in diamete r S uitable for use in environments that require large airflow volume (and smaller capacity than HVLD fans)

Large

Diameter (HVLD) High

- volume ceiling fan g reater
than 7 feet in diameter S uitable for use in environments that require large airflow volume (and larger capacity than HVSD fans)

3.5.4 Metric

In the concurrent test procedure rulemaking for ceiling fans, DOE is proposing to use a metric based on airflow efficiency , measured in cubic feet per m inute per watt (CFM/watt), as the basis for evaluating the efficiency performance of ceiling fans. (The ceiling fans test procedure NOPR was issued on September 19, 2014, and is available at http://www.regulations.gov/#!docketDetail;D=EERE -2013- BT

- TP -0050 .) D OE research indicates that airflow efficiency is a universal metric used to describe the efficiency of ceiling

fans. Airflow efficiency is equal to airflow ( the service delivered by a ceiling fan ) divided by the powered consumed by the fan, and as such , airflow efficiency appears to be an appropriate method of evaluating efficiency performance.

3-26REFERENCES

1. Environmental Protection Agency. Fans, Ceiling for Consumers. 2012. List updated August 16, 2012. (Last Accessed August 30, 2012.) http://www.energys tar.gov/index.cfm?fuseaction=find_a_product.showProductGroup&p gw_code=CF

2. U.S. Environmental Protection Agency and U.S. Department of Energy. About ENERGY STAR. (Last Accessed March 28, 2014.) http://www.energystar.gov/index.cfm?c=about.ab_index

3. Environmental Protection Agency. Fans, Ceiling for Consumers. 2013. List updated May 1, 2013. (Last Accessed February 10, 2014.) https://data.energystar.gov/Government/ENERGY- STAR

- Certified

- Ceiling

- Fans/mj8j

2jhz

4. U.S. Department of Energy– Energy Information Administration. Residential Energy Consumption Survey. 2009 RECS Survey Data. 2011. Washington, D.C. (Last Accessed

March 2 7, 2014.) http://www.eia.gov/consumption/residential/data/2009/

.

5. Kantner, C.L.S., S.J. Young, S.M. Donovan, and K. Garbesi. Ceiling Fan and Ceiling Fan Light Kit Use in the U.S.— Resu lts of a Survey on Amazon Mechanical Turk. July 2013. Lawrence Berkeley National Laboratory, Berkeley, CA. Report No. LBNL - 6332E. (Last Accessed March 27, 2014) http://www.escholarship.org/uc/it em/3r67c1f9

3-27CHAPTER 4. SCREENING ANALYSIS

TABLE OF CONTENTS

4.1 INTRODUCTION ........................................................................................................... 4-1

4.2 SCREENED

- OUT TECHNOLOGIES ............................................................................ 4-2

4.2.1 Low -Volume Ceiling Fans ................................................................................... 4-2

4.2.1.1 Geared Motors ............................................................................................ 4-2

4.2.1.2 Three

- Phase Induction Motors ................................................................... 4-2

4.2.1.3 Blade Design Elements .............................................................................. 4-2

4.2.1.4 Fans with Fewer Blades ............................................................................. 4-3

4.2.1.5 Blade Attachments ..................................................................................... 4-3

4.2.1.6 Alternative Blade Materials ....................................................................... 4-3

4.2.1.7 Occupancy Sensors .................................................................................... 4-4

4.2.2 High -Volume Ceiling Fans .................................................................................. 4-4

4.2.2.1 More Efficient Direct

- Drive Single -Phase Induction Motors .................... 4-4

4.2.2.2 Geared Motors ............................................................................................ 4-5

4.2.2.3 Three

- Phase Induction Motors ................................................................... 4-5

4.2.2.4 Fans with Fewer Blades ............................................................................. 4-5

4.2.2.5 Twisted Blades ........................................................................................... 4-5

4.2.2.6 Blade Attachments ..................................................................................... 4-6

4.2.2.7 Alternative Blade Materials ....................................................................... 4-6

4.2.2.8 Occupancy Sensors .................................................................................... 4-6

4.3 REMAINING TECHNOLOGI ES ................................................................................... 4-6

4.3.1 Low -Volume Ceiling Fans ................................................................................... 4-6

4.3.1.1 More Efficient Direct

- Drive Single -Phase Induction Motors .................... 4-7

4.3.1.2 Brushless Direct Current Motors ................................................................ 4-7

4.3.2 High -Volume Ceiling Fans .................................................................................. 4-7

4.3.2.1 Geared Motors ............................................................................................ 4-8

4.3.2.2 Three

- Phase Induction Motors ................................................................... 4-8

4.3.2.3 Brushless DC Motors ................................................................................. 4-8

4.3.2.4 Fans with Fewer Blades ............................................................................. 4-8

4.3.2.5 Curved and Airfoil Blades .......................................................................... 4-8

4.4 SCREENING ANALYSIS SUMMARY ......................................................................... 4-9

LIST OF TABLES

Table 4.4.1 Screened -out Technology Options ............................................................... 4-10

Table 4.4.2 Retained Technology Options...................................................................... 4-10

4-iCHAPTER 4. SCREENING ANALYSIS

4.1 INTRODUCTION

This chapter discusses the U.S. Department of Energy’s (DOE) screening analysis of the technology options identified for ceiling fans. As discussed in the market and technology

assessment (chapter 3) of this preliminary technical support document (TSD), DOE consults with industry, technical experts, and other interested parties in developing a list of technology options for consideration. Chapter 3 also present s DOE’s initial list of technologies that can reduce the energy consumption of ceiling fans. The goal of the screening analysis is to screen out technologies that DOE will not consider further in the rulemaking analyses.

The follow ing section details the specific technology options that were screened out prior to the engineering analysis, along with the rationale for elimination. DOE evaluated the technologies identified in the market and technology assessment pursuant to the criter ia set out in The Energy Policy and Conservation Act, as amended (EPCA or the Act). (42 U.S.C. 6291- 6309) EPCA provides criteria for prescribing new or amended standards, which will achieve the maximum improvement in energy efficiency the Secretary of Ener gy determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)(B)) In view of the EPCA requirements for determining whether a standard is technologically feasible and economically justified, Appendix A to subpart C of Title 10 Code of Federal Regulations Part 430 (10 CFR Part 430), Procedures, Interpretations and Policies for Consideration of New or Revised Energy Conservation Standards for Consumer Products (the Process Rule), sets forth procedures to guide DOE in the consideration and promulgation of new or revised product efficiency standards under EPCA. These procedures elaborate on the statutory criteria provided in 42 U.S.C. 6295 and in part eliminate problematic technologies early in the process of revising an energy efficiency standard. Under the guidelines, DOE eliminates from consideration technologies that present unacceptable problems with respect to the following four factors:

(1) Technological feasibility. DOE screen s out technologies that are not incorporated in commercially

- available products or working prototypes.

(2) Practicability to manufacture, install, and service

. If DOE determines that mass production of a technology in commercial products and reliable installation and servicing of the technology could not be achieved on the scale necessary to serve the relevant market by the time of the compliance date of the standard, it will not consider that technology further.

(3) Adverse impacts on product or equipment u tility or availability. If DOE determines a technology has a significant adverse impact on the utility of the product for significant consumer subgroups or results in the unavailability of any covered product type with performance characteristics (including reliability), features, size, capacities, and volumes that are substantially the same as products generally available in the United States at the time, it will not consider that technology further.

(4) Adverse impacts on health or safety. If DOE determin es that a technology will have significant adverse impacts on health or safety, it will not consider that technology further.

4-14.2 SCREENED

- OUT TECHNOLOGIES

This section describes the technologies that DOE eliminated based on the four factors

that were describe d above and provides the reasons why each was eliminated.

4.2.1 Low

- Volume Ceiling Fans

DOE is screening out the following technology options from further consideration for low-volume ceiling fans:

4.2.1.1 Geared Motors

For low-volume fans, most induction motors are mounted to the fan blades directly. This configuration is known as direct- drive ; the fan and motor rotate at the same speed. In some highvolume ceiling fans, the fan blades are attached to the motor via a geared mechanism that allows the fan blades to rotate at a different speed from the motor. This enables higher motor speeds for a given fan ’s revolutions per minute ( RPM ), which could increase overall efficiency. DOE is not aware of any commercially available low -volume ceiling fans or working prototypes of lowvolume ceiling fans with this design option. In addition, adding a gearbox would adversely affect

the utility of low-volume fans by increasing noise. Hence, DOE has screened out geared motors for low-volume ceiling fans.

4.2.1.2 Three

- Phase Induction Motor s

Due to recent developments in control systems electronics , three -phase induction motors may replace less efficient single

- phase induction motors . Three- phase motors are more efficient because they have a simpler electrical circuit, reducing the potential for electrical and thermal

energy losses . However, because most U.S. homes typically are not wired with a three

- phase supply, these motor types would require electronic convertors. DOE is not aware of any lowvolume ceiling fans with three- phase motors that are commercially available or in the prototype

stage. Therefore, three-phase induction motors are not technologically feasible or practical to manufacture, install, and service for lo w-volume ceiling fans because of the significant amount of research and development (R&D) that would be required. Hence, DOE has screened out three

phase induction motors for low-volume ceiling fans.

4.2.1.3 Blade Design Elements

In the Framework Document, DOE d iscussed the potential effects of the following blade design elements. However, DOE recognizes that the physical appearance of a ceiling fan’s blades constitute substantial product utility to end- users of low volume ceiling fans. Hence, DOE is considering screening out twisted, airfoil, and beveled blades for low -volume ceiling fans but seeks additional comment and information on why fan appearance would necessarily impact the utility of the fan. If DOE determines that these design options pass the screenin g criteria, they

will be considered in the analysis.

Twisted Blades

. In a twisted blade, the pitch angle changes along the blade’s span. Twisted blade is a technique to increase fan efficiency. However, alternative blade materials

4-2(such as plastic) and manufacturing process (such as injection -molding) are required to manufacture twisted blade options, which increase blade cost. Additionally, DOE understands

that manufacturers ’ decision to include twisted blades in their fans depend s on the aesthetic function of the fan, which is turn can affect the utility of the fan.

Airfoil Blades

. Airfoil blades are blades that have an aerodynamic sha pe similar to the wing of an airplane. Airfoil blade is a technique to increase fan efficiency. However, alternative blade materials (such as plastic) and manufacturing process (such as injection

- molding) are required to manufacture airfoil blade options, which increase blade cost. Manufacturers commented that the shape of airfoil blades, while more efficient than a comparable flat blade, could be aesthetically off- putting to consumers , and in turn could affect the utility of the fan.

Beveled Blades

. A beveled blade is standard rectangular ceiling fan blade where the edge has been shaved to reduce the thickness at the edge. Eliminating the blunt edges allows the blade to cut through the air more efficiently. During manufacturer interviews, DOE received f eedback from several manufacturers on the potential for efficiency improvements achieved through a beveled blade design. However, the use of beveled blades can affect the aesthetic function of the fan, which can affect the utility of the fan.

4.2.1.4 Fans with Fe wer Blades

In the Framework Document, DOE stated that in general, ceiling fans that have fewer blades could be more efficient, because they are subject to less air resistance. DOE also stated in the Framework Document that a potential drawback to using few er blades is that they can generate more noise during operation because of the additional space between the blades. Increased noise could significantly reduce the utility of low

- volume ceiling fans, which are typically installed in residential environments . In addition, DOE did not find enough evidence to conclude that fewer blades would improve low- volume ceiling fan efficiency

. Hence, DOE has

screened out fans with fewer blades for low -volume ceiling fans.

4.2.1.5 Blade Attachments

Blade attachments refer to upswept blade tips or attachable clips that can be added to a fan blade to increase airflow or reduce drag. Based on DOE’s research to date

, and input from

manufacturer s during interviews

, there is insufficient evidence to conclude that incorporating

blade at tachments into a ceiling fan improves efficiency

. DOE is also not aware of any

manufacturers that use blade attachments in low -volume ceiling fans . Hence, DOE has screened out blade attachments for low-volume ceiling fans.

4.2.1.6 Alternative Blade Materials

The most common materials used for low-volume ceiling fan blades are wood and

medium -density fiber board (MDF). Plywood blades with a laminate coating are more resistant to warping than MDF and other cheaper woods. Blades can also be made of injection-molded resin, a material that is resistant to warping and weather conditions, and also can be molded into aerodynamically advantageous shapes. Therefore, the use of alternative materials could permit the manufacture of more complex and efficient blade shapes. For low-volume fans, if DOE

4-3determines that twisted and airfoil blades meets its screening criteria, DOE would consider any additional advantages to alternative materials. However s imilar to twisted and airfoil blades, the use of alternative blade materials could directly change the aesthetics of the fan , and physical appearance is a key factor in customer selection of low-volume ceiling fans. Hence, DOE is considering screening out alternative blade materials for low

- volume ceiling fans, but seeks additional comment and information on why fan appearance would necessarily impact the utility

of the fan.

4.2.1.7 Occupancy Sensors

Occupancy sensors use technolog ies that detect the presence of people through movement, body heat, or other means. C eiling fan s used with an occupancy sensor could power

down if they sense that a room is unoccupied. By limiting the hours of active-mode operation to times when people are in the path of the fan, an occupancy sensor could reduce the overall energy consumption of a ceiling fan. Howeve r, if a fan relies on a motion sensor to determine occupancy, then it could turn itself off when the occupants are sleeping. This would adversely impact the utility of fans installed in bedrooms. Infra -red sensors are an alternative technology that could theoretically determine occupancy by measuring body heat.

DOE is aware of only one ceiling fan, the Big Ass Fans Haiku with ‘SenseME’ technology that includes sensors. The SenseME technology was announced on June 5, 2014 and is currently available for pre-order only. According to published spec sheets, it includes a passive infrared motion sensor, sensors for ambient and surface temperature, a relative humidity sensor,

and Wi

- Fi connectivity. Advertisements claim that SenseME can detect when a person enters or leaves a room and turn on the fan automatically. DOE understands that some of the technologies employed by SenseME are patent pending. At the present time, DOE does not have enough information to determine whether the occupancy sensor technology used in SenseME represents a technologically feasible design option that can be applied to all ceiling fans. DOE is screenin g out occupancy sensors from the analysis for low- volume ceiling fans because there is only one fan on the market that uses the technology, it is not currently commercially available, and there is not enough information to determine if the occupancy sensor technologies in SenseME satisfythe statutory criteria for inclusion in the analysis. Once SenseME becomes commercially available, DOE intends to research occupancy sensors in general

, and the technologies used by SenseME in particular

, in greater detail a s part of the NOPR analysis.

4.2.2 High

- Volume Ceiling Fans

DOE is screening out the following technology options from further consideration for

either high- volume small diameter ( HVSD ) or HVLD fans

.

4.2.2.1 More Efficient Direct

- Drive Single

- Phase Induction Motors

Th e most common ceiling fan motor is a single -phase induction motor (permanent- split capacitor type) with an external rotor. In the Framework Document, DOE presented its opinion that the efficiency of such motors can be improved by increasing the size of (or the quality of steel used in) the stator and rotor stack, improving the lamination design, increasing the cross section of copper wiring, or operating the fan at reduced speed through capacitor speed control.

4-4For both HVSD and HVLD fans , DOE’s research and discussions with manufacturers suggests that high

- volume ceiling fans already use the most efficient type of alternating current ( AC ) induction motors for their intended application.

I t is common for HVLD manufacturers to offer the same fan blades with a variety of different motor sizes (measured in horsepower). However, the choice of which motor to use is entirely dependent on the particular application that fan will be used in (airflow needs, size of room, etc.). Based on discussions with manufacturers, using an over- or under-sized motor in a high-volume fan would not improve energy efficiency because the motor would no longer be operating in its most efficient RPM range. Therefore, DOE has screened out more efficient direct

drive motors from i ts analysis for both HVSD and HVLD fans

.

4.2.2.2 Geared Motors

DOE is not aware of any commercially available HVSD ceiling fans or working prototypes of HVSD fans with a gearbox. Hence, DOE has screened out geared motors for

HVSD fans on the basis of technological infeasibility

.

4.2.2.3 Three

- Phase Induction Motors

DOE is screen ing out three -phase induction motors for HVSD fans because many application areas of HVSD fans are not able to provide three -phase power. DOE is not aware of any HVS D fans that employ three-phase motors. In these applications, three -phase induction

motors are not technologically feasible or practical to manufacture, install, and service because of the significant amount R&D that would be required to adapt them to a si ngle-phase

installation

. Hence, DOE has screened out three -phase induction motors for HVSD fans.

4.2.2.4 Fans with Fewer Blades

DOE research of the ceiling fan market shows that HVLD fans are available with as few as two blades and as many as ten. However, nearly all HVSD fans on the market are equipped

with three blades. The consistency suggests that three fan blades could be the optimum number for this type of fan. DOE does not have evidence to conclude that fewer blades would improve

HVSD fan efficiency ; theref ore, DOE has screened out fans with fewer blades as a design option

for HVSD fans only.

4.2.2.5 Twisted Blades

In a twisted blade, the pitch angle changes along the blade’s span. DOE’s research shows

that nearly all h igh-v olume fans currently on the market have metal blades . I n the case of HVLD fans, they are typically manufactured using an extrusion process. The extrusion process creates a blade that has the same shape and orientation ( i.e ., zero twist) everywhere along the length of the

blade. B ased on discussi ons with manufacturers, manufacturing a twisted high-volume blade would require either new manufacturing techniques or new materials, such as molded composite. DOE is aware of possibly one high- volume ceiling fan manufacturer that uses twisted metal blades. The blades appear to be made out of formed sheet-metal. However, DOE understands that the design of these blades is patent -protected. DOE is also aware of possibly one high4-5volume ceiling fan manufacturer that uses twisted blades made of fiberglass reinf orced plastic. DOE understands that the airfoil employed is patented also

. Hence, DOE has screened out twisted blades for both HVSD and HVLD fans on the basis of technological infeasibility.

4.2.2.6 Blade Attachments

DOE is only aware of one manufacturer of HVLD ceiling fans that uses blade attachments, and DOE does not have efficiency data for these products. Based on DOE’s research to date, there is insufficient evidence to conclude that incorporating blade attachments into a ceiling fan improves efficiency. Therefore, DOE has screen ed out blade attachments for

both HVSD and HVLD fans.

4.2.2.7 Alternative Blade Materials

For both HVLD and HVSD fans, DOE’s research and discussions with manufacturers

indicate that nearly all high

- volume ceiling fans are built using metal blades. Metal is commonly used because high-volume blades are either very long, or turn at very high RPM. The greater forces involved mean that the material’s strength and stiffness are critical considerat ions. Unlike low-volume fans, alternative fan blade materials are not needed to produce more efficient blade shapes. HVLD fan blades commonly employ airfoil blades made of extruded aluminum. Twisted blades, however, would require either new manufacturing t echniques or new materials, such as molded composite. DOE is aware of possibly one brand of commercially available ceiling fans that take this approach to improving efficiency, however DOE understands that the airfoil is patent protected . For these reasons , DOE has screened out alternative blade materials from the analysis for all high -volume fans.

4.2.2.8 Occupancy Sensors

DOE is aware of only one commercially available ceiling fan (the Big Ass Fans Haiku with SenseME) that uses occupancy sensors to reduce energ y consumption. The Haiku with SenseME is currently available for pre

- order only. For the preliminary analysis, DOE screened out occupancy sensors from the analysis on high- volume fans because there is only one fan on the market that uses the technology, it is not currently commercially available, and there is not enough information to determine if the occupancy sensor technologies in SenseME satisfythe statutory criteria for inclusion in the analysis. DOE intends to study SenseME in greater detail as

part o f the NOPR analysis once units become available.

4.3 REMAINING TECHNOLOGIES

The following sections list the technology options that were retained by DOE for the products covered by this rulemaking. Each of these technologies is evaluated further as design options in the subsequent engineering analysis (chapter 5)

.

4.3.1 Low

- Volume Ceiling Fans

For low- volume ceiling fans, DOE considered the following technology options for

further analysis.

4-64.3.1.1 More Efficient Direct

- Drive Single

- Phase Induction Motors

The most common ceiling fan motor is a single-phase induction motor (permanent- split capacitor type) with an external rotor. DOE’s discussions with manufacturers indicated that ceiling fan efficiency can be improved by increasing the size of the motor, but that the improvement is small and increases cost. DOE’s internal test data suggests that compared to a baseline product, the efficiency of low-volume ceiling fans can indeed be improved through the use of larger AC direct drive motors and that the overall energy consumption does not necessarily increase. Furthermore, DOE identified several commercially available ceiling fan

models that are available on the market which use direct

- drive single -phase induction motors that are very efficient and still adhere to all existing regulatory and safety standards. Therefore, correctly designed fans with more efficient motors do not pose a safety threat. Therefore, DOE plans to consider the efficiency and cost impacts of more efficient single -phase induction motors

in its analysis for low -volume fans.

4.3.1.2 Brushless Direct Current Motors

Direct current ( DC ) motors are permanent magnet synchronous AC motors driven by a converter plus inverter combination control system. In this configuration, the motor displays

characteristi cs of direct current motors; thus, they are called brushless direct current motors.

Because there is no electrical curr ent flowing in the rotor of a DC motor, there are no rotor energy losses, thereby resulting in greater efficiency . Another advantage of t hese motors is that they tend to be smaller and make less noise than those found in traditional ceiling fan motors. However, DC motors require additional controls to enable them to function on AC current in a typical home.

Most manufacturers h ave urged DOE not to consider DC motors because manufacturers deem them costly, report that the electronics are unreliable

, and note the technology itself is not yet fully developed. However, DOE observes that several ceiling fan manufacturers have successfully deployed DC motors in their low-volume fans, which are some of the most efficient low-volume ceiling fans on the market. Additionally, DOE recognizes that the implem entation of

DC motor technology may increase manufacturing and product retail cost . DOE requests additional comment on whether brushless DC motors meets the screening criteria. If DOE determines that these motors meet the screening criteria, DOE would continue to account for any increase in the manufacturing cost and warranty cost of DC motors in the engineering analysis, which forms the basis for the downstream analyses. In addition, DOE would continue to account for any difference in the maintenance and repair cost of DC motors compared to AC motors in

the life

- cycle cost (LCC), shipments and national impact analysis (NIA) analyses

4.3.2 High

- Volume Ceiling Fans

DOE considered the following design options for the high-volume ceiling fans for further analysis.

4-74.3.2.1 Geared Motors

In some high- volume ceiling fans, the fan blades are attached t o the motor via a geared mechanism that allows the fan blades to rotate at a different speed than the motor. This enables higher motor speeds for a given fan’s RPM, which could increase overall efficiency. For HVLD fans, the incorporation of a gearbox is a common design feature on fans with induction motors. Therefore, DOE proposes to retain geared induction motors as a design option for the HVLD

class.

4.3.2.2 Three

- Phase Induction Motors

HVLD fans are often installed in buildings that are designed specifically for industrial applications. These buildings are able to provide high voltage, three- phase power. Therefore,

m any HVLD ceiling fans are designed to operate on three-phase supply , with some HVLD fans capable of operating on three- phase supply voltages up to 600V. The motors used in these fans are also designed to run on 3-phase power. Because three -phase motors are commonly used in HVLD fans, DOE proposes to retain them as a design option for the HVLD class.

4.3.2.3 Brushless DC Motors

Similar to low -volume ceiling fans, DOE requests additional comment on whether brushless DC motors meets the screening criteria for high -volume fans. DOE observes that

s everal ceiling fan manufacturers have successfully deployed DC motors in their high-volume

fans. If DOE determines that these motors meet the screening criteria, DOE would continue to account for any increase in the manufacturing cost and warranty cost of DC motors in the engineering analysis, which forms the basis for the downstream analyses.

4.3.2.4 F ans with Fewer Blades

In the Framework Document, DOE stated that ceiling fans with fewer blades generally are more efficient because they are subject to less air resistance. The drawback in using fewer blades is that they can generate more noise during ope ration because of the additional space

between the blades. However, the increased noise would not reduce the utility of high-volume fans, which are typically installed in loud commercial and industrial environments. DOE’s analysis of publicly available dat a also has shown that while a fan with fewer blades does not necessarily represent the most efficient design, the number of blades has a significant impact on the efficiency of HVLD fans. Therefore DOE is considering this design option for the HVLD product class.

4.3.2.5 Curved and Airfoil B lades

Curved blades are blades where the centerline of the blade cross section is cambered. Curved blades generally have uniform thickness and no significant internal volume. Airfoil

blades use curv ed surfaces to improve aerodynamics, but unlike the curved blades described above, the thickness is not constant and the top and bottom surfaces do not follow the same path from leading edge to trailing edge. As both curved and airfoil blades are commonly found in

4-8HVSD and HVLD fans and improve fan efficiency, DOE is considering curved and airfoil blades as separate technology options for all high-volume fans.

4.4 SCREENING ANALYSIS SUMMARY

Table 4.4.1 is a summary of the screened

- out technologies in support of the ongoing energy conservation standards rulemakings for ceiling fans. Table 4.4.2 provides the remaining technology options that were retained by DOE for the products covered by this rulemaking. Each of these technologies is evaluated further as design options in the subsequent engineering analysis (chapter 5).

4-9Table 4.4.1 Screened

- out Technology Options

Low

- Volume Fans High

- Volume Fans

HVSD HVLD

• Geared motors

• Three

- phase induction motors

• Fans with fewer blades

• Blade attachments

• Occupancy sensors

• Twisted blades and airfoil blades (with alternative blade materials included)

• Beveled blades • More efficient direct

- drive single-phase induction motors

• Geared motors

• Three -phase induction motors

• Fans with fewer blades

• Twisted blades

• Blade attachments

• Alternative blade materials

• Occupancy sensors • More efficient direct -drive single-phase induction motors

• Twisted blades

• Blade attachments

• Alternative blade materials

• Occupancy sensors

Table 4.4.2 Retained Technology Options

Low

- Volume Fans High

- Volume Fans

HVSD HVLD

• More efficient direct -drive single-phase induction motors

• Brushless DC motors • Brushless DC motors

• Curved blades

• Airfoil b lades • Geared m otors

• Three -phase induction motors

• Brushless DC motors

• Fans with f ewer b lades

• Curved blades

• Airfoil b lades

4-10CHAPTER 5. ENGINEERING ANALYSIS

TABLE OF CONTENTS

5.1 INTRODUCTION ........................................................................................................... 5-1

5.2 METHODOLOGY OVERVIEW .................................................................................... 5-2

5.2.1 Low -Volume Ceiling Fans ................................................................................... 5-2

5.2.1.1 Aggregate Curve ........................................................................................ 5-4

5.2.2 High -Volume Ceiling Fans .................................................................................. 5-6

5.3 PRODUCT CLASSES AND REPRESENTATIVE SIZES ............................................ 5-8

5.3.1 Low -Volume Ceiling Fans ................................................................................... 5-8

5.3.2 High -Volume Ceiling Fans .................................................................................. 5-8

5.4 COST MODEL ................................................................................................................ 5-8

5.4.1 Low -Volume Ceiling Fans ................................................................................... 5-9

5.4.1.1 Teardown Analysis for Low-Volume Ceiling Fans ................................... 5-9

5.4.1.2 Selection of Units ..................................................................................... 5-10

5.4.1.3 Generation of Bill of Materials ................................................................ 5-10

5.4.1.4 Cost Structure of the Spreadsheet Models ............................................... 5-11

5.4.1.5 Teardown Model ...................................................................................... 5-12

5.4.1.6 Motor Warranty Factor ............................................................................. 5-12

5.4.1.7 Market

- minimum and Baseline Fan Costs ............................................... 5-13

5.4.1.8 Cost Deltas ............................................................................................... 5-15

5.4.2 High -Volume Ceiling Fans ................................................................................ 5-16

5.4.2.1 Baseline Fan Costs ................................................................................... 5-16

5.4.2.2 Cost Deltas ............................................................................................... 5-19

5.5 EN ERGY CONSUMPTION MOD EL .......................................................................... 5-20

5.5.1 Low -Volume Ceiling Fans ................................................................................. 5-21

5.5.1.1 Market

- minimum and Baseline Fan Efficiencies ..................................... 5-22

5.5.1.2 Design Option Methodology .................................................................... 5-24

5.5.1.3 Scaling ...................................................................................................... 5-24

5.5.1.4 Power Consumption ................................................................................. 5-26

5.5.2 High -Volume Ceiling Fans ................................................................................ 5-27

5.5.2.1 Baseline Fan Efficiencies ......................................................................... 5-28

5.5.2.2 Design Option Methodology .................................................................... 5-29

5.5.2.3 Power Consumption ................................................................................. 5-29

5.6 DESIGN OPTIONS DISCU SSION .............................................................................. 5-30

5.6.1 Low -Volume Ceiling Fans ................................................................................. 5-30

5.6.1.1 Fan Optimization ...................................................................................... 5-30

5.6.1.2 More Efficient Direct Drive Single Phase Induction Motor (Larger Direct Drive Motor) ................................................................................. 5-31

5.6.1.3 Brushless DC Motor ................................................................................. 5-32

5.6.2 High -Volume Ceiling Fans ................................................................................ 5-33

5.6.2.1 HVSD ....................................................................................................... 5-33

5.6.2.2 HVLD ....................................................................................................... 5-34

5.7 MANUFACTURER PRODUCTION COST ................................................................ 5-365.8 MANUFACTURER SELLING PRICE ........................................................................ 5-36

5.8.1 Manufacturer Markup ........................................................................................ 5-37

5.9 POWER CONSUMPTION RE SULTS ......................................................................... 5-38

5.10 COST

- EFFICIENCY RESULTS

................................ ................................................... 5-40

5.11 CANDIDATE STANDARD L EVELS .......................................................................... 5-43

5.11.1 Low -Volume Ceiling Fans ................................................................................. 5-44

5.11.2 High -Volume Ceiling Fans ................................................................................ 5-45

5.11.2.1 Small Diameter (HVSD) Fans: ................................................................ 5-45

5.11.2.2 Large Diameter (HVLD) Fans: ................................................................ 5-46

5.11.3 Summary of CSLs .............................................................................................. 5-47

LIST OF TABLES

Table 5.3.1 Low -Volume Ceiling Fan Groups ................................................................. 5-8

Table 5.3.2 High

- Volume Ceil ing Fan Groups ................................................................. 5-8

Table 5.4.1 Major Manufacturing Processes .................................................................. 5-11

Table 5.4.2 Market -minimum Flat Wood Blade Fan Costs for Low-Volume Fans ....... 5-13

Table 5.4.3 Market

- minimum Unconventional -blade Fan Costs for Low- Volume

Fans .............................................................................................................. 5-15

Table 5.4.4 Base line Fan Costs for Low-Volume Fans .................................................. 5-15

Table 5.4.5 Low -Volume Design Option Cost Deltas .................................................... 5-16

Table 5.4.6 HVSD Markup Assumptions ....................................................................... 5-17

Table 5.4.7 HVLD Markups Assumptions ..................................................................... 5-18

Table 5.4.8 Baseline Costs for High -Volume Fans ........................................................ 5-19

Table 5.4.9 High -Volume Design Option Cost Deltas ................................................... 5-20

Table 5.5.1 Remaining Design Options .......................................................................... 5-21

Table 5.5.2 Efficiency of Market

- minimum Flat -blade Low-Volume Fans ................... 5-22

Table 5.5.3 Efficiency of Market -minimum Unconventional-blade Low- Volume

Fans .............................................................................................................. 5-23

Table 5.5.4 Baseline Fan Efficiency for Low -Volume Fans .......................................... 5-24

Table 5.5.5 Scaling Factors for Low-Volume Fans ........................................................ 5-26

Table 5.5.6 Low

- Volume Ceiling Fan Wattage Deltas ................................................... 5-27

Table 5.5.7 Baseline Efficiency for High -Volume Ceiling Fans .................................... 5-29

Table 5.6.1 Fan Optimization Efficiency Deltas ............................................................. 5-31

Table 5.6.2 Larger Direct Drive Motor Efficiency and Cost Deltas ............................... 5-32

Table 5.6.3 DC Motor Efficiency and Cost Deltas ......................................................... 5-33

Table 5.6.4 HVSD Efficiency and Cost Deltas ............................................................... 5-34

Table 5.6.5 HVLD Efficiency and Cost Deltas .............................................................. 5-36

Table 5.9.1 Power Consumption for 44-inch Low-Volume Standard Fans.................... 5-38

Table 5.9.2 Power Consumption for 52-inch Low-Volume Standard Fans.................... 5-38

Table 5.9.3 Power Consumption for 60-inch Low-Volume Standard Fans.................... 5-38

Table 5.9.4 Power Consumption for 44-inch Low-Volume Hugger Fans ...................... 5-39

Table 5.9.5 Power Consumption for 52-inch Low-Volume Hugger Fans ...................... 5-39

Table 5.9.6 Power Consumption for 36- inch HVSD Fans ............................................. 5-39

Table 5.9.7 Power Consumption for 56- inch HVSD Fans ............................................. 5-39Table 5.9.8 Power Consumption for 8- foot HVLD Fans ................................................ 5-40

Table 5.9.9 Power Consumption for 12- foot HVLD F ans .............................................. 5-40

Table 5.9.10 Power Consumption for 20-foot HVLD Fans .............................................. 5-40

Table 5.10.1 Cost -Efficiency Curves for 44-inch Low-Volume Standard Fans ............... 5-41

Table 5.10.2 Cost -Efficiency Curves for 52-inch Low-Volume Standard Fans ............... 5-41

Table 5.10.3 Cost -Efficiency Curves for 60-inch Low-Volume Standard Fans ............... 5-41

Table 5.10.4 Cost -Efficiency Curves for 44-inch Low- Volume Hugger Fans ................. 5-42

Table 5.10.5 Cost -Efficiency Curves for 52-inch Low-Volume Hugger Fans ................. 5-42

Table 5.10.6 Cost -Efficiency Curves for 36-inch HVSD Fans ......................................... 5-42

Table 5.10.7 Cost -Efficiency Curves for 56-inch HVSD Fans ......................................... 5-42

Table 5.10.8 Cost -Efficiency Curves for 8- foot HVLD Fans ........................................... 5-43

Table 5.10.9 Cost -Efficiency Curves for 12- foot HVLD Fans ......................................... 5-43

Table 5.10.10 Cost -Efficiency Curves for 20- foot HVLD Fans ......................................... 5-43

Table 5.11.1 Candidate Standard Levels .......................................................................... 5-47

LIST OF FIGURES

Figure 5.2.1 Cost -Efficiency Curve for 52-inch Standard Fans ......................................... 5-5 Figure 5.4.1 Cost Model Methodology for Low-Volume Fans ......................................... 5-9 Figure 5.4.2 Spreadsheet Model Methodology ................................................................ 5-11 Figure 5.8.1 Components of Manufacturer Selling Price ................................................. 5-37 Figure 5.11.1 CSLs for Low -Volume Standard Fans ......................................................... 5-44 Figure 5.11.2 CSLs for Low -Volume Hugger Fans ........................................................... 5-45 Figure 5.11.3 CSLs for HVSD Fans

................................ ................................................... 5-46 Figure 5.11.4 CSLs for HVLD Fans .................................................................................. 5-46

LIST OF EQUATIONS

Equation 5.1 Purchase Price of HVSD Fans .............................................................................. 5-17 Equation 5.2 MPC of HVSD Fans ............................................................................................. 5-17 Equation 5.3 Purchase Price of HVLD Fans ............................................................................. 5-18 Equation 5.4 MPC for HVLD Fans ........................................................................................... 5-18 Equation 5.5 Wattage Delta for Low Volume Fans ................................................................... 5-27 Equation 5.6 Power Consumption of Baseline HVLD Fans ..................................................... 5-30 Equation 5.7 CSL General Equation .......................................................................................... 5-43CHAPTER 5. ENGINEERING ANALYSIS

5.1 INTRODUCTION

After conducting the screening analysis, the U.S. Department of Energy (DOE) performed an engineering analysis based on the remaining design options

. The engineering analysis consists of estimating the energy consumption and costs of products at various levels of increased efficiency . This section provides an overview of the engineering analysis (section 5.1 ), overview of the methodology (section 5.2 ), discusses proposed equipment classes (section 5.3 ), describes the cost model (sec tion 5.4 ), explains the energy consumption model (section 5.5 ), discusses the design option calculations (section 5.6 ), describes the manufacturer product ion cost (MPC) ( section 5.7 ) and the manufacturer selling price (MSP) ( section 5.8 ), provides the power consumption at each efficiency level (section 5.9 ), cost

- efficiency results ( section 5.10 ) and the candidate standard level equations (section 5.11 ).

The primary inputs to the engineering analysis are data from the market and technology assessment ( chapter 3 in the technical support document ( TSD )), screening analysis (chapter 4 in the TSD), energy performance data from testing and publicly available product literature and research reports, input from manufacturers, baseline specifications, independent research on product component and material costs and production cost estimates developed using a cost model. The primary output of the engineering anal ysis is a set of cost

- efficiency relationships that represent the average incremental cost of implementing design options that increas e product efficiency above the baseline levels. In the subsequent markups analysis (chapter 6 in the TSD),

DOE determines customer prices by applying distribution chain or dealer markups, import

tariffs

, shipping costs, and sales tax to the MSPs developed in the engineering analysis. After applying these markups, the data serve as inputs to the energy use characterization (ch apter 7 in the TSD) and the life-cycle cost and payback period analyses (chapter 8 in the TSD).

5-15.2 METHODOLOGY OVERVIEW

This section describes the analytical methodology used in the engineering analysis. DOEtypically structures its engineering analysis around one of three methodologies: (1) the designoption approach, which calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency

- level approach, which calculates the relative costs of achieving increases in energy efficiency levels without regard to design options used to achieve such increases; and/or (3) the reverse -engineering or cost- assessment approach, which involves a “bottom-up” manufacturing cost as sessment based on a detailed bill of materials (BOM) derived from teardowns of the equipment being analyzed.

In this rulemaking, DOE structured its engineering analysis using a combination of the design-option approach and the reverse-engineering approach. The analysis is performed in terms of incremental increases in efficiency due to the implementation of selected design options, while the estimated manufacturer production costs ( MPCs ) for each successive design option are based on product teardowns for low-volume fans, and publicly available retail prices for high-volume fans. The following sections provide an overview of the methodologies used to

determine the cost -efficiency curves for both low-volume and high-volume ceiling fans.

5.2.1 Low

- Volume Ceiling Fans

Most low- volume ceiling fans on the market (and most ceiling fan sales) are fans with four or five flat blades that are made of wood (or wood composites such as plywood or MDF ). However, there are also fans on the market with very different blade shapes. Such “unconventional” designs include fans with blades shaped as palm leafs and asymmetric blades, for example. DOE research showed that fans with unconventional blade s are generally less

efficient than similarly sized fans (same size motor and blade span) with flat -blades. Because the range of efficiencies of fans with unconventional-blade designs differs from that of fans with flat blades, DOE analyzed the cost and efficiency of both fan types . DOE then combined the cost and efficiency results using a market weighted average of both fan types to create aggregated results

, as described below, for each product class and representative size

.

DOE chose to use an aggregate cost -efficiency curve for flat and unconventional- blade fans, as opposed to defining two separate product classes, since it believes that fans with flat blades and fans with unconventional-blades are functionally indistinguishable. Both fan types move air via the rotation of fan blades, improve comfort by this air-movement, and, can be used in similar spaces (unlike the distinction between standard and hugger fans, where the former cannot be used in rooms with low ceilings). Further, since flat blade and unconventional- blade

fans on the mark et appear to operate within the same CFM range, they both have the same product capacity. However, DOE recognizes that while fans with unconventional- blade s tend to have lower performance characteristics, they satisfy a very specific market demand based on their aesthetics. Hence, DOE chose to aggregate the performance of the two types of fans in order to develop the cost- efficiency curves.

For low- volume ceiling fans, efficiency calculations are based primarily on DOE test data, while the cost assessment is based on reverse engineering. First, DOE used publically

available data to determine the least efficient fans currently on the market . DOE applied the

5-2efficiency metric from the test procedure notice of proposed rulemaking to advertised ceiling fan performance data to identify the least efficient flat -blade and unconventional

- blade fan efficiencies in every product class and representative size. Henceforth these fans are known as

‘ market

- minimum ’ fans because they represent the minimum efficiency fans available on the

market . T he market -minimum unconventional- blade fan identified by DOE is a fan with blades shaped as palm leafs . Section 5.5.1.1 provides more details on the calculation of the market

minimum fan efficiencies for all product classes and representative sizes

.

DOE then identified more efficient models for sale that incorporate the design options

that are consider ed in this rulemaking. Design options are discussed in chapter 4. Based on this information, DOE selected a group of ceiling fans for testing and teardown analysis. The units

selected for testing and teardown span a range of manufacturers and efficiencies of commercially available products.

To determine the cost and efficiency tradeoffs associated with each design option, DOE identified fan technology pairs for each of the design options. A fan technology pair is a pair of ceiling fans in the same product class, with the same blade diameter, where one fan possesses the particular design option being considered (for example, a larger direct drive motor ) while the other fan does not, and all other design options are the same in both fans. DOE tested at least one fan technology pair for each design option, and used the test results to calculate the percentage change in efficiency (expressed in cubic feet per minute per watt (CFM/W) ) 1 between the two fans in each pair. The difference in efficiency (“ efficiency delta”)

, for that particular design option was then compared to and combined with catalog data and input from manufacturers to arrive at a final estimate of the efficiency impr ovement attributable to that design option.

Because DOE did not test and tear down a technology pair for each design option in every product class and representative size, the efficiency deltas calculated from the technology pairs

were scaled to other prod uct classes and representative sizes

.

DOE calculated the cost of the fa ns within each technology pair based on the teardown analysis. DOE developed estimate s of the factory cost for each unit it tor e down by disassembling it and developing a bill of materials ( BOM ). This information is used as input to a spreadsheet model that calculates the cost of each of the individual components, i.e. blades, motor, motor housing, packaging, controls, final assembly, etc. DOE validated component costs

and other in puts to the cost model against manufacturer input. The output of the model is an estimate of the factory cost of all the torn -down fans. The factory cost represents the amount it costs a factory to build the fan. Because DOE assumed that low -volume ceiling fan manufacturers do not own the factories where their products are manufactured , the factory cost is less than the MPC, which is the amount the fan manufacturer pays the factory.

T he component costs from the spreadsheet model were used to calculate the difference in

cost, (“ cost delta ”) specific to each of the fan technology pairs. DOE calculated c ost deltas for each design option in terms of the change to the cost of the fan components relevant to that design option. For example, the cost delta for the DC motor technology pair was estimated by comparing the manufacturing cost of an AC motor to the cost of a DC motor

. The cost deltas

1 DOE calculated CFM/W using the efficiency metric from the ceiling fans test procedure NOPR for high and low speeds.

5-3were then compared and combined with input from manufacturers to arrive at a final estimate of

the costs attributable to ea ch design option.

DOE then developed a teardown model to estimate the factory cost of fans that were not torn down. The teardown model was developed such that when design specifications for a certain

fan are entered into the model, it estimate s the factory cost based on the average component costs

from the teardowns. The teardown model was used to calculate the cost of the market

- minimum

flat -blade fans that were not torn down. For the market

- minimum unconventional- blade fan s, DOE assumed that the co st of all components, other than the blades, was the same as the cost of the components used in the market- minimum flat

- blade fan. The difference in cost of the blades

was found by comparing retail prices for replacement unconventional blade s with retail prices for replacement flat blade s. Section 5.4.1.1 provides a more detailed description of the teardown analysis, and section 5.4.1.7 provides more details on the market

- minimum fan costs.

DOE created cost

- efficiency curves by applying the efficiency and cost deltas for each design option to the cost and efficiency values of the market

- minimum fans

. The first point on the curve re present s the market -minimum fans. Each subsequent point represents a design option applied to the baseline design . From least efficient to most efficient , the design options are: fan optimization, a larger direct drive motor, and a DC motor. For example, t he market

- minimum

unconventional- blade fan is a fan with blades shaped as palm leaves . Consequently, the cost

efficiency curve for unconventional- blade fans was created by applying the design opti ons to the cost and efficiency of the market minimum palm

- blade fan

. Hence, t his curve represents the cost and efficiency of the baseline (palm -blade) fan with the addition of each design option. It does

not represent other types of unconventional, blade designs , such as curved , airfoil, or twisted blades. Hence, the efficiency of the unconventional- blade fan at the max

- tech level could be less than the efficiency of unconventional- blade fans that do not have palm leaf style blades currently

for sale. Sect ion 5.6.1 provides a more detailed discussion of the analysis of each design option.

In general, the addition of a design option improves efficiency at the expense of increased manufacturing cost. However, the fan optimization design option represents the increase in efficiency that can be obtained by adjusting or optimizing the design features that already exist in the fan. Therefore DOE believes that this design option is unique and contains no additional manufacturing costs. Section 5.6.1.1 provides more details on the fan optimization design option.

5.2.1.1 Aggregate Curve

The result of the above analysis is two cost

- efficiency curves based on two market

minimum low-volume ceiling fans (unconventional- blade and flat -blade ) for each product class and representative size. DOE research concluded that unconventional- blade fans make up about 2% of the market, while flat -blade fans are about 98% of the market. 2 T hese relative market

shares were used to aggregate the two cost- efficiency curves into a single curve for each product class and representative size. Figure 5.2.1 below provides the cost- efficiency curves for the 52-inch standard fans, with the black curve representing the aggregate curve.

2 The fraction of flat

- blade an d unconventional fans on the market is based on a count of basic models.

5-4Figure 5.2.1 Cost

- Efficiency Curve for 52

- inch Standard Fans

The following discussion describe s the steps taken to combine the flat -blade and

unconventional- blade curves to produce aggregate curve s that best represents the market :

For the aggregate curve, the baseli ne efficiency is the efficiency of the least efficient fan on the market. Thus, the baseline efficiency level (EL 0) is the efficiency of the

market

- minimum unconventional- blade fan . T he baseline cost is the weighted average of the cost
of the market

- minimum unconventional- blade and flat

- blade fans , where the weighting is the market share of both blade types. DOE used the cost of the market

- minimum flat -blade fan to compute the average because DOE assumed that the manufacturing cost of a flat -blade fan

cannot be less than the cost for the market

- minimum. Section 5.5.1.1 provides more details on the baseline fan specifications and efficiencies . Section 5.4.1.7 provides more details on the

calculation of the baseline fan costs.

For the first efficiency level (EL) beyond the baseline (EL 1)

, the efficiency and cost area weighted average of the efficiency and cost of the market minimum unconventional and flatblade fans. The weighting is according to the relative market share of both blade types. The cost

5-5for EL 1 was obtained using the same approach as for EL 0, and therefore both efficiency levels

have the same cost.

For EL 2

, the efficiency and cost are a weighted average of the efficiency and cost of unconventional and flat-blade fans with the fan optimization design option. Because the f an optimization design option does not increase manufacturing cost, the cost at EL 2 is unchanged compared to EL 1. As a result, the costs for ELs 0 through 2 in the aggregate curve are the same. For EL 3, the efficiency and cost are a weighted average of unconventional and flat-blade fans with larger direct drive motors. In this case, adding a larger motor does increase cost, which is reflected in the aggregate curve.

For the max- tech EL (EL 4), the efficiency was set to the maximum efficiency of the

unconventional- blade fan

. This ensures that even at max -tech, all types of ceiling fans, including designs with unconventional- blades

, can achieve this level of efficiency. The cost was obtained

as follows:

(1) DOE determin ed the cost of a flat

- blade fan with an efficiency that corresponds to the

max

- tech efficiency of the unconventional- blade fan through linear interpolation. This calculated point is not shown in Figure 5.2.1 since it is not a design option within the flat

blade curve , but the cost for a specified efficiency

. It represents the cost for a flat -blade

fan that is as efficient as the most efficient unconventional

- blade fan.

(2) DOE then calculated the cost of the max

- tech option for the aggregate curve by averaging

the cost calculated in step 1 with the cost for the most efficient unconventional -blade fan according to the market shares of each fan type

.

DOE followed this process to create an aggregate cost- efficiency curve for each product class and representative size. Each curve has four efficiency levels beyond the baseline (EL 0 ): aggregate market -minimum (EL 1), fan optimization (EL 2 ), larger direct drive motor (EL 3) and

DC mo tor (EL 4).

Th e aggregate curve in Figure 5.2.1 is calculated in terms of factory cost. T o convert factory cost to MPC, DOE multiplied by a factory markup, which was derived based on industry experience with similar products manufactured in China. Doing this for every product class and representative size produces a set of cost

- efficiency curves in terms of MPC. T o determine the manufacturer selling price s ( MSPs ) at each efficiency level, DOE applied a manufacturer markup to the MPCs. The manufacturer markup was derived by evaluating publicly available industry financial data and through manufacturer feedback . The result is a set of cost

- efficiency relationships for each design option, in the form of MS P as a function of CFM/W , for each product class and representative size . Section 5.10 provides the results of the cost- efficiency

curves.

5.2.2 High

- Volume Ceiling Fans

For high-volume ceiling fans, DOE used a design option approach similar to th e one used for low-volume fans, exc ept that no fans were tested or torn down. For the preliminary analysis, DOE calculated the costs and efficiencies associated with each design option using publicly

5-6available data, independent research on component and material costs, input from manufactur ers, and details from the analysis of low-volume ceiling fans. DOE calculated the cost and efficiency deltas separately for high -volume small- diameter (HVSD) fans and high -volume large- diameter (HVLD) fans.

For both HVLD and HVSD fans, DOE calculated the efficiency of the baseline fans by using publicly available performance data to identify the least efficient fans on the market in the

most common blade diameters. DOE then plotted fan diameter versus CFM/W and applied a linear trend line. The trend line provided an equation relating baseline efficiency to diameter.

DOE used t his equation to calculate a baseline CFM/W at each representative size in the HVSD

and HVLD classes. This method was chosen over simply designating the least efficient fans on the market as the baseline to account for variations in motor size over a range of diameters.

Section 5.5.2.1 provides more details on the baseline efficiencies and the baseline fan descriptions.

T o calculate the cost of a baseline HVSD fan, DOE first selected the fan on the market

that possessed baseline design options and advertised the lowest efficiency. DOE assumed that the retail price of this fan served as the purchas e price (PP) for the baseline fan and that HVSD ceiling fan manufacturers do not own their own production facility. DOE estimated manufacturer production costs for the baseline fans by using dealer markups, manufacturer markups, shipping

costs, and tariffs associated with importing foreign -made products to back- calculate manufacturing cost based on the fan’s retail price. For HVLD fans, DOE estimated the manufacturer production cost of the HVLD 20-foot baseline fan using an approach similar to

H VSD fans. DOE identified the fan available on the market that included baseline design options and had the lowest advertised efficiency, and divided the retail price by the manufacturer and dealer markups. DOE determined the baseline cost of other representative HVLD sizes by using market prices of comparable fans to scale the cost of the 20 -foot baseline fan. Section 5.4.2.1 provides more details on the baseline costs.

Because HVSD fans are somewhat similar to low

- volume fans in terms of size and design, DOE calculated the HVSD cost and efficiency deltas primarily using the cost and efficiency deltas obtained from the analysis of low -volume fans. For the HVLD fans, DOE calculated the cost and efficiency deltas using several sources, including publicly available performance and cost data, input from manufacturers, and from the analysis of low-volume ceiling fans . These calculations provided one set of cost and efficiency deltas for all representative sizes of HVLD and another set for HV SD fans. DOE chose not to scale the efficiency deltas to different sizes because sufficient information to calculate scaling factors was

unavailable from publicly available market data.

With the cost and efficiency of the baseline fan in each product class and representative size known, DOE created cost -efficiency curves by applying the efficiency and cost deltas for each design option to the baseline values. To determine the MSPs at eac h efficiency level, DOE applied a manufacturer markup to the MPCs. This provides a set of cost

- efficiency relationships,

in the form of MS P as a function of CFM/W efficiency . Section 5.10 provides the results of the

cost

- efficiency curves.

5-75.3 PRODUCT CLASSES AND REPRESENTATIVE SIZES

5.3.1 Low

- Volume Ceiling Fans

DOE identified five product class and representative size combinations for low -volume ceiling fans. DOE chose these representative sizes because they broadly represent the range of sizes available in each product class. In addition, manufacturer s stated th at the representative sizes represent a large percentage of the sales and shipments of low -volume ceiling fans. DOE directly analyzed the five product classes and representative sizes presented in Table 5.3.1

.

Table 5.3.1 Low

- Volume Ceiling Fan Groups

Product Class Representative Size

Standard Fans 44

- inch

52-inch

60

- inch

Hugger Fans 44

- inch

52

- inch

5.3.2 High

- Volume Ceiling Fans

DOE identified five product class and representative size combinations for high-volume ceiling fans. DOE chose these combinations because they broadly represent the range of sizes available in each product class , and also h ave some of the highest shipment volumes. DOE directly analyzed the five product classes and representative sizes presented in Table 5.3.2

.

Table 5.3.2 High

- Volume Ceiling Fan Groups

Product Class Representative Size

HVLD 8

- f oo t
12-foot

20

- f oo t

HVSD 36

- inch

5 6

- inch

5.4 COST MODEL

The cost model is one of the two key analytical models used in constructing costefficiency curves. This model estimates the costs at various performance levels using a design

option approach. For each product class and representative size, the model estimates the baseline cost and the cost of adding subsequent design options above the baseline.

DOE constructed t he cost model separately for low -volume and high-volume fans. For

low- volume fans, DOE selected a subset of fans to be tested and torn -down, which allowed DOE to develop a “bottoms- up” manufacturing cost assessment. DOE derived a detailed BOM from

5-8the teardowns of low-volume ceiling fans, from which it created a teardown model that calculates the factory cost of a ceiling fan depending on its produc t class, size, and design options. The low-volume cost model used the teardown model and the component costs from the BOMs to calculate the factory cost for each efficiency level. A manufacturer markup was used to convert the factory cost to MPC.

For high-volume fans, DOE did not test or tear down any fans and hence did not developa bottoms-up manufacturing cost assessment. Instead, DOE developed the cost model for highvolume fans using publicly available retail fan prices. DOE estimated manufacturer production costs by using dealer markups, manufacturer markups, shipping costs, and tariff s associated with importing foreign-made products (when applicable), to back- calculate manufacturing cost from the fan’s retail price.

5.4.1 Low

- Volume Ceiling Fans

The cost of the fans within each technology pair was calculated based on DOE’s teardown analysis. Based on input from manufacturers, DOE assumed that low-volume ceiling fan manufacturers do not own their own production facility. Therefore, the costs calcul ated from the teardown analysis represent the amount it costs a factory to build the fan. It is less than the amount the fan manufacturer pays the factory for that fan.

5.4.1.1 Teardown Analysis for Low

- Volume Ceiling Fans

Other than obtaining detailed manufacturi ng costs directly from a manufacturer, the mostaccurate method for determining the production cost of a product is to disassemble it piece-bypiece, compile a BOM, and estimate the material and labor cost of each component

. DOE refers to this practice as a physical teardown. A supplementary method, called a catalog teardown (or “virtual teardown”) , uses published manufacturer product literature and supplementary component data to estimate the major physical differences between the catalog teardown unit and a similar physical teardown unit. DOE performed physical and catalog teardown analyses on products for this rulemaking.

Figure 5.4.1 provides a summary of the teardown analysis for the low-volume ceiling fans. DOE calculated the cost deltas associated with higher efficiency design options by comparing the cost of relevant fan components in each technology pair. DOE used a teardown model that generates an estimate of the factory cost of fans not torn down to calculate the

baseline costs. Section 5.4.1.2 through section 5.4.1.5 detail t he teardown methodology.

Figure 5.4.1 Cost Model Methodology for Low- Volume Fans • Identify baseline models

and more efficient models
that incorporate design
options being considered by DOE

• Select fan technology pairs

for every design option • Conduct teardowns to generate BOMs

• Create spreadsheet model

to calculate component

costs and total fan costs for

each fan that is torn down • Calculate cost deltas by comparing component costs for each fan technology pair

• Create teardown model to

estimate cost of fans not torn

down

5-95.4.1.2 Selection of Units

During the process of selecting units for teardown, DOE considers three main questions:

• What efficiency levels s hould be captured in the teardown analysis?

• Are there units on the market that capture all potential efficiency levels and design options?

• Which of the available units are most representative?

In responding to the preceding questions, DOE adopts the follow ing criteria for selecting units for the teardown analysis:

• T he selected products should span the full range of efficiency levels for each product class under consideration;

• W ithin each product class, if possible, the selected products should come from the same manufacturer and be within the same product series;

• T he selected products should primarily come from manufacturer s with large market share

in that product class, although the highest effi ciency products were chosen irrespective of manufacturer; and

• T he selected products should have non- efficiency

- related features that are the same as, or similar to, features of other products in the same products class to minimize the cost

effects of non -e fficiency

- related design differences among models.

5.4.1.3 Generation of Bill of Materials

The result of each teardown is a structured BOM, describing each product component and its relationship to the other parts in the estimated order in which manufacturers asse mbled them. The BOMs describe each fabrication and assembly operation in detail, including the type of equipment needed for fabrication ( e.g. , stamping presses, injection molding machines, spotwelders, etc.) and the process cycle times. The result is a th orough and explicit model of the production process.

The BOMs incorporate all materials, components , and fasteners classified as either raw materials or purchased parts and assemblies. The classification into raw materials or purchased parts is based on DOE’s previous industry experience, recent information in trade publications, and discussions with low-volume ceiling fan manufacturers.

For purchased parts, the purchase price is an estimate based on volume- variable price quotations and detailed discuss ions with suppliers and manufacturers . For fabricated parts, the price of intermediate materials ( e.g. , tube, sheet metal) and the cost of transforming them into finished parts is an estimate based on current industry pricing.

The cost of raw materials is determined using prices for copper, steel and aluminum from

the American Metals Market. 3 The price of steel drastically increased in 2005, and the price of

copper has increased steadily since 2004. Because DOE is using a 5- year average in material

3 American Metals Market . Available online at http://www.amm.com/

. (Last accessed December 2012)

5-10prices from 2009–2013 , these price increases are normalized, which better represents long

- term material prices.

The BOM for a catalog teardown is identically structured and provides a description in equal detail to the BOM of a physical teardown. However, it is generated using a slightly different methodology . BOMs for catalog teardowns are generated by modifying the BOM of a similar unit that has been physically torn down. These modifications reflect the major physical

differences between the units

.

5.4.1.4 Cost Struc ture of the Spreadsheet Models

The manufacturing cost assessment methodology used is a detailed, component- focused technique for rigorously calculating the manufacturing cost of a product (direct materials, direct labor and some overhead costs.) Figure 5.4.2 shows the three major steps in generating the manufacturing cost. The steps shown in the figure are an expansion of the middle box in Figure

5.4.1

.

Figure 5.4.2 Spreadsheet Model Methodology

The first step in the manufacturing cost assessment is the creation of a complete and structured BOM from the disassembly of the units selected for teardown. The units are dismantled, and each part is characterized according to weight, manufacturing proces ses used, dimensions, material, and quantity. The BOM incorporates all materials, components, and fasteners with estimates of raw material costs and purchased part costs. Assumptions on the sourcing of parts and in -house fabrication are based on industry experience, information in trade publications, and discussions with manufacturers. DOE also conducts i nterviews are also with manufacturers to ensure accuracy on methodology and pricing.

Following the development of a detailed BOM, the major manufacturing processes are identified and developed for the spreadsheet model, as shown in Table 5.4.1

.

Table 5.4.1 Major Manufacturing Processes

Fabrication Finishing Assembly/Joining Quality Control Fixturing Washing Adhesive Bonding Inspectin g & Testing Stamping/Pressing Powder Coating Spot Welding Die Casting De

- burring Seam Welding

Cut ting and Shearing Polishing Machining

DOE estimates fabrication process cycle times and enter s them into the BOM. In the final Purchased Parts Bill of

Materials Fabrication

Processes Assembly

Processes Teardown

Observatio n

s Production

Cost Raw

Materials Finished

Materials

5-11step of the cost assessment, DOE estimates assembly times and associated direct labor costs. Once the cost estimate for each teardown unit is finalized, DOE prepares a detailed summary of relevant components, subassemblies

, and processes. The BOM thus details all aspects of unit

costs.

Design options used in units subject to teardown are noted in the summary sheet of each

cost model and are cost -estimated individually. Thus, various implementations of design options

can be accommodated, ranging from assemblies that are entirely purchased

, to units that are made entirely from raw materials , as well as h ybrid assemblies consisting of both purchased parts and parts made on site

.

5.4.1.5 Teardown Model

DOE used the resulting BOMs to develop a teardown model. The spreadsheet model provided average component and associated fabrication costs from the BOMs for each of the design options. These costs were used to develop a model that allowed DOE to estimate the factory cost of fans that were not torn down. The teardown model was developed such that when design specifications for a certain fan are input into the model, it uses average component costs to generate an estimate for the factory cost of that fan. The inputs for the teardown model

in clude: (1) fan size (2) number of fan heads (3) mounting type (standard versus hugger) (4) number of blades (5) blade material (wood or plastic) (6) blade type (MDF, plywood, composite, plastic ABS) (6) blade shape (flat, beveled, airfoil, twisted) (7) blade dimensions and weight (8) motor type ( alternating current versus direct current ), number of speeds and motor

size (9) control type (electromechanical versus electronic).

The results from the teardown model are the total unit cost, as well as component costs and the costs associated with labor, depreciation and overheads of the low-volume ceiling fans.

5.4.1.6 Motor Warranty Factor

During DOE’s interviews with fan manufacturers, manufacturers indicated that because AC and DC motor technologies have di fferent failure rates, the warranty costs are not the same. DOE has attempted to account for this by applying different warranty factors to the cost of the motors in its analysis. A warranty factor is a front

- end cost that manufacturers build in to cover

e stimated future warranty costs. Similarly, a warranty factor was added to the manufacturing cost of the motors to account for any warranty costs related to motor failure. DOE estimated the warranty factor for a direct current ( DC ) motor to be 8 percent and the warranty factor for an alternating current (AC) motor to be 1.2 percent . The warranty factor for a DC motor is higher than that of an AC motor because DC motors have more complicated and potentially less reliable controls. In addition, if the DC motor fails, then the repair is more complex and the whole fan

5-12might need to be replaced, compared to just replacing the motor or a part of the motor. The

failure rate for AC motors is minimal , and they are more easily repaired or replaced if there is a

failure

. Any differences in additional repair and maintenance costs for DC and AC motors will

be accounted for in the downstream analyses. DOE added these warranty factors on top of the motor costs generated by the teardown model.

5.4.1.7 Market

- minimum and Baseline Fan Costs

DOE used publicly available information about the ceiling fan market to identify the least

efficient low

- volume ceiling fans for each product class and representative size. DOE initially identified separate market

- minimum unconventional and flat -blade fans. These market

- minimum

fan costs were then aggregated with their respective market sizes to calculate the baseline fan

costs for each product class and representative size.

Market

- minimum Flat Wood Blade Fan Cost s. DOE found that regardless of product class and size, market

- minimum flat -blade low-volume ceiling fans shared the following design

features: (1 ) a conventional permanent split capacitor (PSC) AC motor , and (2) a pull-chain

control. The flat -blade market

- mi nimum fans that were used in the analysis were not torn down. Therefore, the fan costs were calculated by inputting the specifications of each fan into the teardown model, as described in section 5.4.1.5 . DOE determined the specifications of the se market

- minimum fans primarily using publicly available ceiling fan data , including spec ification sheets and manufacturer descriptions. However, for those fans that did not have specifications publicly available, the product specifications were estimated based on torn down fans that were of similar size and type as the selected market

- minimum fan s.

DOE used the teardown model to calculate both the total unit cost, as well as component

costs of the market

- minimum flat -blade fans. As described in section 5.4.1.6 , a warranty factor of 1.2 percent was included for the AC motors in the fans. Therefore, the final motor cost for the

market

- minimum fans was the motor cost from the teardown model plus 1.2 percent

. Table 5.4.2 provides the flat -blade market

- minimum fan costs used in the engineering analysis for each product class and representative size.

Table 5.4.2 Market

- minimum Flat Wood Blade Fan Costs for Low

- Volume Fans

Product Class/ Representative Size Manufacturer Production Cost ($)

Standard/44

- inch 33.04

Standard/52

- inch 41.08

Standard/60

- inch 60.83

Hugger/44

- inch 31.81

Hugger/52

- inch 37.86

Market

- minimum Unconventional -blade Fan Cost s. DOE found that regardless of product class and size, market

- minimum unconventional- blade fans also had a conventional PSC AC motor and pull chain control, similar to the market

- minimum flat -blade fans. DOE calculated

5-13the market

- minimum unconventional- blade fan costs based on the market

- minimum flat -blade

costs as follows

.

Market

- minimum 52- inch Unconventional

- blade Standard Fan Costs

. DOE first

calculated the market

- minimum 52-inch unconventional- blade standard fan cost. This is because

the 52- inch standard fans are the most common fans sold in the low -volume fan category. The

market

- minimum unconventional- blade fan identified was not torn down. Hence, DOE

calculated the cost for the market

- minimum 52-inch unconventional- blade standard fan based on

the market

- minimum 52 -inch flat

- blade standard fan.

T he specifications for both fan s were determined primarily using publicly available ceiling fan data including specification sheets and manufacturer descriptions. From this r esearch

, it was determined that both of the fans had the same size motor. Hence, DOE concluded that the factory cost of the motor w as the same

. For the fan blade s, DOE used publically available data to calculate an average retail price for a set of five replacement 52-inch palm blades and for a set of five replacement flat , wood blades. The set of palm blades wa s on average 3.5 times more expensive than the flat wood blades . Hence, to calculate the factory cost of the unconventionalblades, the 3.5 :1 ratio was applied to the factory cost of the flat -blades . DOE assumed that all

other costs between the two fans were the same. Therefore, the market

- minimum 52-inch

unconventional- blade standard fan cost was calculated as the cost of the market

- minimum 52-

inch flat -blade standard fan plus the difference in cost between the 52-inch unconventionalblades and flat

- blade s.

Market

- minimum Unc onventional- blade Fan Costs for O ther Product Classes and Representative Sizes

. The market

- minimum 52-inch unconventional- blade standard fan that was

identified in the previous section was less efficient than the market

- minimum 52-inch flat -blade standard fan. For the other product classes and representative sizes, however, DOE could not

find unconventional- blade fans on the market that were less efficient than the market

- minimum

flat -blade fans identified in section 5.4.1.7

. One reason for this could be that the 52-inch standard

fans are the most common fans sold in the low-volume fan category, and thus have a larger selection of fan types and efficiencies . Therefore, to calculate the market

- minimum

unconventional- blade fan costs for the other product classes and representative sizes, DOE

estimate d costs based on the ratio of market

- minimum 52-inch unconventional-blade and flat

blade standard fan costs.

D OE then assumed that the cost ratio between market -minimum unconventional-blade

and flat- blade fans of the same size i s cons tant regardless of product class and representative

size. For example, the cost ratio between the 52-inch unconventional- blade and f lat

- blade

standard fans would be the same as the cost ratio between the 44 -inch unconventional-blade and

flat -blade hugger fans. DOE applied the ratio obtained from the analysis on 52-inch standard

fans to the market

- minimum flat -blade fan costs identified in Table 5.4.2 to calculate the costs

for the market

- minimum unconventional- blade fans for the other product classes and representative sizes. Table 5.4.3 provides the market

- minimum unconventional-blade fan costs used in the engineering analysis for each product class and representative size.

5-14Table 5.4.3 Market

- minimum Unconventional

- blade Fan Costs for Low- Volume Fans

Product Class/ Representative Size Manufacturer Production Cost ($)

Standard/44

- inch 43.17

Standard/52

- inch 53.68

Standard/60

- inch 79.49

Hugger/44

- inch 41.57

Hugger/52

- inch 49.47

Baseline Fan Costs

. DOE calculated the baseline fan cost s using the market

- minimum

unconventional and flat -blade fan costs. R esearch showed that unconventional-blade fans are about 2% of the market, while wood blade/conventional fans are about 98% of the market. Therefore, DOE calculated the baseline cost as an aggregate of the market

- minimum fan costs

with their relative market shares. Table 5.4.4 provides the baseline fan costs used in the engineering analysis for each product class and representative size

.

Table 5.4.4 Baseline Fan Costs for Low

- Volume Fans

Product Class/ Representative Size Manufacturer Production Cost ($)

Standard/44

- inch 33.24

Standard/52

- inch 41.33

Standard/60

- inch 61.20

Hugger/44

- inch 32.01

Hugger/52

- inch 38.09

5.4.1.8 Cost Deltas

DOE calculated cost deltas to determine the cost tradeoffs associated with adding each

considered design option. At least one fan technology pair was tested for each design option. After testing, DOE tore down the fans and costed them separately. The resulting spreadsheet model provided both the total unit cost for the torn down fan as well as specific component costs. For each technology pair, DOE compared the component costs to calculate the cost delta for the design option. As a result , only those components costs relevant to the design option in question

were compared.

As discussed in section 5.4.1.6 , DOE applied warranty factors to the motor costs generated by the teardown model. This impacts the cost deltas by incre asing the cost of a DC motor compared to an AC motor. For example, for the DC motor design option, the cost delta is the difference between the cost of the DC motor with its corresponding warranty factor, and the

cost of an AC motor with its corresponding warranty factor.

The cost deltas from the teardown model were compared and combined with input from

5-15manufacturers to arrive at a final estimate of the costs attributable to each design option. The cost

deltas are the same regardless of product class and representative size because DOE did not have information to suggest that the cost delta (in percentage terms) changes with either product class or size. Additionally, cost differences due to the fan’s product class and size are already reflected

in the base line cost . Therefore although the cost deltas are constant, absolute costs do vary with product class and size. Table 5.4.5 provides the cost deltas used in the engineering analysis for each of the design options. T he cost deltas for all design options are calculated relative to the baseline component cost , which in this case is the cost of a baseline motor

.

Table 5.4.5 Low

- Volume Design Option Cost Deltas

Design Option Cost Delta Relative to Baseline Component Cost (%)

Fan o ptimization 0

Larger direct drive motor 40

DC motor 207

5.4.2 High

- Volume Ceiling Fans

Fo r high-volume ceiling fans, DOE calculated the manufacturer production cost of the baseline fans and the cost deltas using publicly available retail prices. Based on input from manufacturers, DOE assumed that HVSD ceiling fan manufacturers do not own their own production facility, while HVLD ceiling f an manufacturers do. Therefore, different sales

channels were assumed for the two classes. More discussion on the channels and the resultant markup assumptions can be found in the markups analysis chapter (chapter 6).

5.4.2.1 Baseline Fan Costs

To determine the baseline cost for HVSD fans, DOE collected market data on the retail price and efficiency of all HVSD fans on the market. The least efficient fan ( as defined by the

lowest advertised CFM/W at high speed) in each of the two representative diameters was chosen as the baseline fan. Once the retail price of the baseline fans was determined, DOE used estimates of dealer markups, manufacturer markups , shipping costs

, and tariffs associated with importing foreign- made products, to calculate the manufacturing cost

. DOE assumed that the

HVSD fans are manufactured at a foreign factory, and then shipped to a U.S. manufacturer, who then sells it to the end user through a dealer. Table 5.4.6 describes the markups , shipping costs, and tariffs for the HVSD ceiling fans assumed for each stage

. These values are discussed in greater detail in chapter 6.

5-16Table 5.4.6 HVSD Markup Assumptions

Description Value

Manufacturer Markup 1.37

Shipping from China $2.50

Tariff 4.7% of MSP

Overhead Burden $2.50

Dealer Markup 1.74

DOE used the following equations to calculate the baseline MPC from the retail price s generated from the trend line of least efficient fans:

PP HVSD = [( MPC × Man Markup ) + ( Sh ip + Trf + Ov hd )] × Dlr Markup

Equation 5. 1 Purchase Price of HVSD Fans

MPC HVSD = � PP HVSD Dlr Markup − ( Sh ip + Trf + Ov hd ) �

÷ Man Markup

Equation 5. 2 MPC of HVSD Fans

Where:

PP = purchase price

MPC = manufacturer production cost

Sh ip = shipping cost Trf = tariff

Ov hd = overhead cost

Dlr Markup = dealer markup

In addition to total fan cost, DOE also estimated the component costs for the baseline

HVSD fans in terms of blade costs, motor costs, and the cost of all other components. The component costs are used in conjunction with cost deltas to cal culate the MPC at higher efficiency levels. The component costs for HVSD fans were calculated by applying cost relationships obtained through the teardown analysis of low-volume fans; i n particular, the

contribution to MPC (in percent) due to the motor and the blade for the baseline 52- in ch standard

low-volume fan. DOE found that approximately 44 percent of the cost is attributable to the motor and 11 percent is attributed to the blades – the remaining 45 percent is primarily comprised of mounting and fastening elements, and control mechanisms with costs that do not vary with efficiency level . T hese percentages were then applied to the total MPC of HVSD fans to
calculate HVSD component costs.

5-17For HVLD fans, DOE followed a similar approach to determin e the b aseline MPC using retail prices. The least efficient 20-foo t fan on the market was identified, and the dealer and manufacturer markups were applied to the fan’s retail price, in order to calculate the MPC of the

baseline 20

- foot fan . Based on input from ma nufacturers, the analysis assumed that HVLD ceiling fan manufacturers may purchase components such as motors from other suppliers, but manufacture the blades and assemble the fans at a domestic production facility. Therefore, when DOE used the markups to c alculate MPC from the retail price

, shipping costs or import tariffs

were not included. Table 5.4.7 describes the assumed markups for the HVLD ceiling fans. These values are discussed in greater detail in chapter 6.

Table 5.4.7 HVLD Markups Ass umptions

Description Markups

Manufacturer Markup 1.37

Dealer Markup 1.74

The following equations were then used to calculate MPC:

PP HVLD = MPC HVLD × Man Markup × Dlr Markup

Equation 5. 3 Purchase Price of HVLD Fans

MPC HVLD = PP HVLD
Man

. Markup × Dlr Markup

Equation 5. 4 MPC for HVLD Fans

Where:

PP = purchase price

MPC = manufacturer production cost

Man Markup = manufacturer markup

Dlr Markup = dealer markup

Manufacturer input and review of the HVLD market indicate that among the three representative sizes of HVLD fans, the 20-foo t size is by far the biggest seller . T he least efficient

20-foo t fan on the market (market- minimum ) is also the least expensive. Accordingly, DOE was able to use the retail price of this fan to estimate baseline MPC , as described above . However

, the least efficient 8-foo t and 12 -foo t fans on the market are not the least expensive. This is likely due to the wide range of CFM capacities available for sale in each size, and the fact that the 8

- foot and 12-foo t sizes are less developed markets. In particular , the market- minimum 8-foot and

12-foo t fans are more expensive because they are equippe d with more powerful, more expensive motors to produce greater airflow (CFM). Also, because 8-foot and 12-foo t fans are less popular than 20-foot fans, there might not be enough consumer demand for manufacturers to sell a full

line of fans in these sizes.

To find the MPC of the baseline 8-foot and 12-foot fans, price relationships were used to
scale the MPC of the baseline 20 -foo t fan to the other sizes. DOE calculated the ratio of the retail

5-18price of similar 8 -foo t and 20 -foot fans, and 12-foot and 20- foo t fans, from the same

manufacturer , and applied t hese ratios to the MPC of the 20 -foo t fan. The result s are the MPCs

of theoretical 8 -foo t and 12 -foo t fans that have the same general design as the baseline 20 -foo t
fan.

Finally, to estimate the cost of the blades and motors used in the baseline HVLD fans, DOE estimated the cost to manufacture an extruded aluminum blade based on a partial teardown of an HVLD blade. The torn down blade had an airfoil shape, which is not a baseline design.

DOE used the cost de lta for the airfoil design option, described in section 5.4.2.2

, to determine

the cost of a baseline curved blade. The baseline motor cost was determined from publicly available retail prices o f three

- phase induction motors. Within any given fan size, HV LD fans are available with a wide variety of motor horsepower and corresponding CFM options. For consistency, DOE assumed that the HVLD fans analyzed all use a 1 -horsepower motor because

this size is available in 8 -, 12-, and 20-foo t HVLD fans.

Table 5.4.8 provides the baseline fan costs used in the engineering analysis for each product class and representative size.

Table 5.4.8 Baseline Costs for High

- Volume Fans

Product Class/ Representative Size Manufacturer

Production

Cost ($)

HVLD/8

- ft 1,243.62

HVLD/12

- ft 1,322.76

HVLD/24

- ft 1,594.09

HVSD/36

- inch 20.45

HVSD/56

- inch 22.52

5.4.2.2 Cost Deltas

T he cost deltas for HVSD fans and HVLD fans were calculated separately

. Because

HVSD fans are similar to low -volume fans in terms of size and design, the cost deltas for HVSD

fans were based on the low volume cost deltas. The details on how the cost deltas for each design option were calculated are as follows:

• For both the airfoil blade and DC motor design options, the cost deltas for each option are the same as the cost deltas from the analysis for the low -volume fans.

• For the curved blade design option, the cost delta was determined from an estimation of the manufacturing cost of curved blades. DOE assumed that curved blades would need to be thicker than flat blades, requiring more material per blade. Further, DOE

assume d that curved-blades would require a more complex manufacturing process (such as extrusion) and would therefore have higher labor and factory costs.

For the HVLD fans, DOE compiled the cost deltas using several sources, including publicly available data, input from manufacturers, and from the analysis on low-volume ceiling

fans . The details on how the cost deltas were calculated for each design option are as follows:

5-19• For the brushless DC motor option, DOE established the cost delta by evaluating

various 1-h orsepower motors on the market, and compared the average price of a 1

- horsepower AC motor to the average price of a DC motor to derive the delta.

• T o calculate cost deltas for airfoil blades, DOE started with the same delta used for

HVSD fans but made adj ustments based on manufacturer inputs and market data.

• For the eight- to six -blade option, DOE determined the cost delta from an estimate of the manufacturing cost of a single curved blade , and then multiplied the cost of one curved blade by the number of blades to determine the total cost of eight curved

blades and the cost of six curved blades. The cost delta represents the difference. DOE assumed that there would be no significant changes in the cost of other fan components due to the reduction in the number of blades. Because the number of blades is the only change, the total cost of the six

- blade fan is less than the cost of

the eight -blade fan.

Table 5.4.9 provides the cost deltas used in the engineering analysis for each of the design options. T he cost deltas for all design options are calculated relative to the baseline

component cost. For example, the cost delta for design options related to mo re efficient fan blades are relative to the cost of baseline blades and the cost deltas for design options related to

motors are relative to the cost of a baseline motor. Also, as in the analysis for low-volume fans, the cost deltas are the same regardless of representative size because DOE did not have information to suggest that the cost delta (in percentage terms) changes with diameter. Additionally, costs that are a function of fan diameter (due to a bigger motor, longer/heavier blades, etc.) are already reflected in the baseline cost. Therefore although the cost deltas are constant with size, absolute costs do vary.

Table 5.4.9 High

- Volume Design Option Cost Deltas
Design Option Cost Delta Relative to Baseline Component Cost (%)

HVSD

Curved b lades 125

Airfoil b lades 163

DC m otor 207

HVLD

8 to 6 blades

- 6

Airfoil b lades 161

DC m otors 295

5.5 ENERGY CONSUMPTION MODEL

The energy efficiency model is one of the two key analytical models used in constructing

cost

- efficiency curves. This model estimates the CFM/W at various performance levels using a

5-20design- option approach. For each product class and representative size, the model estimates the baseline efficiency (in CFM/W) and the efficiency of s ubsequent levels of performance above

the baseline. The following subsections discuss the design options and their corresponding efficiency levels from the baseline to maximum technologically feasible (“max

- tech”)

.

In the market and technology assessment (chapter 3 of the preliminary TSD), DOE

defined a list of initial design options that can be used to reduce the energy consumption of both low-volume and high- volume ceiling fans . In the screening analysis (chapter 4 of the preliminary TSD), DOE provided i ts reasoning for screening out some of the design options. The design options that remain were considered further in the engineering analysis.

Table 5.5.1 Remaining Design Options

Low

- Volume Fans High

- Volume Fans

HVSD HVLD

• More efficient direct -drive single-phase induction motors

• Brushless DC motors • Brushless DC motors

• Curved blades

• Airfoil blades • Geared m otors

• Three -phase induction

motors

• Brushless DC motors

• Fans with f ewer b lades

• Curved blades

• Airfoil blades

5.5.1 Low

- Volume Ceiling Fans

DOE calculated the efficiency of low -volume ceiling fans using the equations for CFM/W from the ceiling fans test procedure NOPR. In doing so, standby power consumption was incorporated into the efficiency metric. Based on manufacturer interviews, DOE concluded that DC motors require the use of remote controls, and that remote controls consume standby power. Therefore, standby power was included for the DC motor design option. Fans with DC

motors were assumed to consume 1.4 watts in standby mode. This value is based on stakeholder

comments to the Framework document. Because remote controls are optional for fans with AC motors, standby power was not included for design options with AC moto rs

.

The Framework document described a test method for hugger fans that uses an artificial ceiling. The approach proposed in the test procedure NOPR expanded on this idea so that all

low- volume ceiling fans would be tested using a false ceiling. Because t he approach of using an artificial ceiling to test standard fans is a new proposal, DOE calculated the efficiency of standard fans both with and without the artificial ceiling in place. T his will allow stakeholders to more easily understand the efficiency curves. Several fans were tested both with and without an artificial ceiling and the average difference in CFM/W for both test setups was used to convert efficiency data from the no

- artif icial ceiling configuration to a value that represents the efficiency with an artificial ceiling in place. DOE assumed that all ceiling fan performance data in catalogs was obtained through testing that did not include an artificial ceiling.

5-21Because there is currently no established test procedure to measure air performance of hugger fans, DOE calculated the efficiency for the hugger class assuming that the procedure in the NOPR was used, which relies on an artificial ceiling

. This means that efficiency r esults for hugger fans are presented only for the configuration that uses an artificial ceiling.

5.5.1.1 Market

- minimum and Baseline Fan Efficiencies

For the engineering analysis, DOE select s baseline units for each product class and representative size. The baseline units serve as reference points against which changes resulting from potential new energy conservation standards can be measured. Typically, a baseline unit is

a unit that meets but does not exceed current federal energy conservation standards and provides basic consumer utility . However, energy conservation standards for ceiling fans are currently in the form of design standards only. As a result, DOE generally select s baseline models based on

common features and bottom-of- market efficiency for each product class and representative size

. Se lection of the baseline model included consideration of ceiling fan features and performance characteristics, such as motor type, blade shape and span , and fan efficiency.

DOE used the baseline units for comparison in several analyses, including the engineering analysis, life -cycle cost (LCC) analysis, payback period (PBP) analysis, and national impacts analysis (NIA). To determine energy s avings that will result from a new energy conservation standard, the energy us e at each of the higher energy efficiency levels is compared to the energy consumption of the baseline unit. Similarly, to determine the changes in price to the

consumer that will result from a new energy conservation standard, the price of a baseline unit is compared to the price of a unit at each higher efficiency level.

DOE used p ublically available performance data, such as CFM output and power consumption, to calculate the efficiency of low-volume fan s using the efficiency metric from the ceiling fans test procedure NOPR . This information was used to identify the market- minimum

flat and unconventional- blade fans.

Market

- minimum Flat -blade Fan Efficiencies

. DOE used publically available market data to identify the market

- minimum flat , wood- blade fans for each product class and representative size. Performance data such as CFM output and power consumption were used to calculate the efficiency of each fan. Table 5.5.2 provides the efficiencies for the market

minimum flat

- blade fans for each product class and representative size.

Table 5.5.2 Efficiency of Mark et

- minimum Flat -b lade Low

- Volume Fan s

Product Class/ Representative Size E fficiency w/o Artificial Ceiling (CFM/W) E fficiency with Artificial Ceiling (CFM/W)

Standard/44

- inch 66 44

Standard/52

- inch 64 43

Standard/60

- inch 68 45 Hugger/44

- inch N/A 49 Hugger/52

- inch N/A 50

5-22Market

- minimum Unconventional -blade Fan Efficiencies

. DOE used publically available market data to identify the efficiency of the market

- minimum 52 -inch unconventionalblade standard fan. For the other product classes and representative sizes, DOE w as unable to

find unconventional- blade fan s that were less efficient than the market

- minimum flat -blade fans

identified in Table 5.5.2 . O ne reason for this could be that the 52- inch standard fans are the most common type of fan in the low-volume fan category, and thus they have a larger selection of fan types and efficiencies. Hence, to determine the market

- minimum unconventional- blade fan

eff iciencies for other product classes and representative sizes, DOE estimated the efficiencies

based on the market

- minimum 52-inch unconventional-blade and flat

- blade standard fan

efficiencies.

DOE assumed that the efficiency ratio between market

- minimum unconventional- blade

and flat- blade fans of the same size is constant regardless of product class an d representative size. For example, the ratio between the efficiencies of 52-inch unconventional- blade and flat

blade standard fans would be the same as the ratio between the efficiencies of 44-inch

unconventional- blade and flat

- blade hugger fans. DOE applied the ratio obtained from the analysis on 52 -inch standard fans to the market- minimum flat

- blade fan efficiencies identified in

Tabl e 5.5.2 to calculate the efficiency of the market minimum unconventional-blade fans for the other product classes and representative sizes. Table 5.5.3 provides the market

- minimum

unconventional- blade fan efficiencies used in the engineering analysis for each product class and representative size.

Table 5.5.3 Efficiency of Market

- minimum Unconventional- blade Low

- Volume Fan s

Product Class/ Representative Size E fficiency w/o Artificial Ceiling (CFM/W) E fficiency with Artificial Ceiling (CFM/W)

Standard/44

- inch 50 33

Standard/52

- inch 49 32

Standard/60

- inch 51 34

Hugger/44

- inch N/A 37

Hugger/52

- inch N/A 38

Baseline Fan Efficiencies

. DOE identified the baseline efficiency as the efficiency of the least efficient fan on the market for each product class and representative size. Hence, the baseline efficiency was identified as the efficiency of the market

- minimum unconventional-blade

fan s. Table 5.5.4 provides the baseline efficiencies for each product class and representative size.

5-23Table 5.5.4 Baseline Fan Efficiency for Low

- Volume Fans

Product Class/ Representative Size E fficiency w/o Artificial Ceiling (CFM/W) E fficiency with Artificial Ceiling (CFM/W)

Standard/44

- inch 50 33

Standard/52

- inch 49 32

Standard/60

- inch 51 34

Hugger/44

- inch N/A 37

Hugger/52

- inch N/A 38

As shown in the tables above, with an artificial ceiling in place, the efficiency of baseline

44-in. and 52-in. standard fans is less than the efficiency of baseline hugger fans in the same size. While this may seem counter- intuitive , the chosen baseline fans reflect what is found in the

market. Standard fans are a much bigger part of the low-volume ceiling fan market than hugger fans. There are more models of standard fans for sale than hugger fans and therefore there is a

l arger ran ge of fan efficiencies on the market (including more low-efficiency products) compared to hugger fans. DOE considered applying a conversion factor to the baseline efficiency of 44-in

and 52-in standard fans with an artificial ceiling (33 and 32 CFM/W) to c onvert them to the hugger product class , but determined it did not have enough information to perform the

conversion. Instead, t he baseline values for the hugger product class (37 and 38 CFM/W) are based on test data using the methodology described in Sect ion 5.5.1.1

.

5.5.1.2 Design Option Methodology

For each product class and representative size , DOE analyzed the effect of each design option on efficiency and MPC. To determine the cost and efficiency tradeoffs associated with each design option, fan technology pairs were identified for each of the design options. DOE tested at least one fan technology pair for each design option and used the test results to calculate the difference in efficiency (in CFM/W). 4 The efficiency delta calculated for each fan technology pair was compared to and combined with catalog data and input from manufacturers to arrive at a

final estimate of the e fficiency improvement attributable to the design option. DOE applied the deltas to the baseline values to calculate fan efficiency at efficiency levels above the baseline.

5.5.1.3 Scaling

DOE researched ceiling fan market data and observed that the difference in efficiency

between the baseline fan and the max

- tech fan varies depending on the product class and fan size. This suggests that the efficiency improvement due to a design change is not the same for each fan size or product class. For example, the efficiency range (in percent terms) between the

least efficient fan to the most efficient fan was larger for standard 60- inch fan s than for standard

44-inch fans . Additionally, standard fans showed a large r change in efficiency from baseline to

max

- tech compared to the same size hugger fans. Therefore, DOE concluded that the design options impact fan efficiency differently for various product class es and sizes.

4 The efficiencies used for the technology pairs was calculated using the efficiency metric from the ceiling fans test procedure NOPR for high and low speeds.

5-24Consequently, DOE calculated scaling factor s using ceiling fan market data to account for the difference in the efficiency impact of the design options. This was necessary because while at least one fan technology pair was used for every design option, DOE did not create a pair for every representative product class/size combination. DOE calculated the scaling factors as

follows:

1) DOE identified the least and most efficient fans for each product class and representative size using the ceiling fans market data.

2) The change in efficiency (in percent) was calculated for the standard product class in each of its representative sizes, as follows,

standard standard standard

standard ) (

Efficient Least Efficient Least Efficient Most Range Efficiency −

=

3) The change in efficiency (in percent) was also calculated for the hugger product class and each of its representative sizes, as follows,

hugger hugger hugger
hugger ) (

Efficient Least Efficient Least Efficient Most Range Efficiency −

=

4) DOE used the range of efficiencies calculated above to create scaling factors that convert efficiency deltas from one size to another within each product classes. For example, the following equation scales the efficiency delta from a technology pair of 52-inch standard

fans to 44- inch standard fans. A comparable equation calculates the scaling factor between different sizes within the hugger class.

52_ standard 52_ standard 44_ standard ) ( 4452 Range Efficiency Range Efficiency Range Efficiency

to scale −

=

5) Similarly, the efficiency ranges in Step 2 and 3 were combined to produce a scaling factor that converts deltas between the hugger and standard product classes, within the same representative size. For example,

44_ standard 44_ standard 44_hugger ) ( 44 Range Efficiency Range Efficiency Range Efficiency sttohug scale −

=

Once calculated, the scaling factors were applied to the appropriate design option efficiency deltas to calculate deltas for all representative sizes, in both product classes, for each design option. The scaled efficiency deltas were then compared to and combined with input from manufacturers to arrive at the final efficiency deltas attributable to each design option, for each representative size and product class. DOE then applied t hese efficiency deltas to the baseline efficiency to calculate the efficien cy at each design option. Table 5.5.5 summarizes the scaling factors that were used in the engineering analysis.

5-25Table 5.5.5 Scaling Factors for Low- Volume Fans

Fan sizes Scaling Factor

Within Standard Fans

44

- inch to 52

- inch 1.60

44

- inch to 60

- inch 2.08

52

- inch to 60

- inch 1.30

60

- inch to 44

- inch 0.48

60

- inch to 52

- inch 0.77

52

- inch to 44

- inch 0.63

S tandard to Hugger

44

- inch 0.43

52

- inch 0.71

5.5.1.4 Power Consumption

In conjunction with the calculation of efficiency, DOE also calculated power consumption at each efficiency level. This information was used to perform an assessment of the energy use and savings associated with each efficiency level (chapter 7). As described in section

5.5.1 , DOE calculated CFM/W for standard fans two ways: assuming test setups both with and without a false ceiling. Although the presence of a false ceiling affects measured efficiency, it does so by affecting airflow only. Power consumption is unchanged. Therefore, the power consumption calculations described in this section are appli cable to both test setups.

To determine the power consumption at each efficiency level, DOE assumed that with each new design option, the fan’s CFM output did not change from the baseline. Under this assumption, the improvement in efficiency (CFM/W) will affect the fan’s power consumption only and CFM is constant across all efficiency levels . With the CFM constant, DOE used the efficiency deltas for each design option, product class , and representative size, to calculate th e corresponding wattage deltas. I n addition, since the efficiency deltas were scaled based on product class and representative size, the calculated wattage deltas in turn ar e also scaled.

Section 5.6.1 describes how the efficiency deltas were calculated and the final efficiency deltas for each design option. The efficiency deltas were used to calculate wattage deltas as follows:

For two fans having efficiencies of η 1 and η 2 (in CFM/W ), where η 2 > η 1 , and both produce an output of X CFM,

1 1 η X Watfanby consumed Power =

2 2 η X Watfanby consumed Power =

1

2 1

1 12

−=

−

= η η

W WW delta wattage

5-26)1 ( 12

1 12 + =⇒ −

= delta efficiency delta efficiency ηη η ηη



### 1 1 1

− + = delta efficiency delta wattage

Equation 5. 5 Wattage Delta for Low Volume Fans

Table 5.5.6 provides the wattage deltas for each design option. DOE applied the wattage

deltas to the power consumption values of the market minimum unconventional and flat- blade

fans . From this

, DOE cal culate d the power consumption at each speed (high, medium, and low) for both fan types in every representative size and at every efficiency level. Appendix 5A provides the power consumption results in Watts for the flat and unconventional

- blade fans.

Tab le 5.5.6 Low

- Volume Ceiling Fan Wattage Deltas

Product Class/ Representative

Size Wattage delta for each d esign o ption

Fan Optimization (%) Larger direct drive motor (%) Brushless DC motor (%)

Standard/44

- inch

- 8.6

- 9.0

- 58.2

Standard/52

- inch

- 13.0

- 11.4

- 59.5

Standard/60

- inch

- 16.3

- 13.2

- 60.5

Hugger/44

- inch

- 3.9

- 9.0

- 58.2

Hugger/52

- inch

- 9.6

- 11.4 159.5

To calculate the power consumption for the aggregate curve, DOE followed the same methodology used to calculate aggregate efficiency (Section 5.2.1.1 ). The aggregate baseline power consumption (EL 0) is equal to the power consumption of the market- minimum unconventional-blade fan. The aggregate power consumption at EL 1 is equal to the market weighted average of the power consumption of the market -minimum unconventional and flat

blade fan s. Similarly, f or ELs 2 and 3 the aggregate power consumption is the market weighted average of the power consumption of optimized unconventional and flat-blade fans (EL 2) and of

unconventional and flat-blade fans with larger direct drive motors (EL 3). At EL 4, t he efficiency is set equal to the efficiency of the most efficient unconventional- blade fan . Therefore DOE needed to determine the power consumption of a flat- blade fan at this efficiency level using linear interpolation. The aggregate power consumption at EL 4 is the market weight ed average of this value with the power consumption of the most efficient unconventional-blade fan.

5.5.2 High

- Volume Ceiling Fans

Since there is current ly no DOE test procedure for high-volume ceiling fans, DOE performed this preliminary analysis assuming that efficiency would be measured per the method proposed in the ceiling fan Test Procedure NOPR. Throughout the analysis, DOE calculated the efficiency of high-volume ceiling fans using the equations for CFM/W from the test procedure NOPR. In doing so, standby power consumption was incorporated into the efficiency metric for

HVSD fans with DC motors and all HVLD fans

.

5-275.5.2.1 Baseline Fan Efficiencies

DOE selected baseline units for each product class and representative size. The baseline units serve as reference po ints against which changes resulting from potential new energy conservation standards can be measured. Typically, a baseline unit is a unit that meets but does not exceed federal energy conservation standards and provides basic consumer utility. However, energy conservation standards for ceiling fans are currently in the form of design standards only. As a result, DOE select ed baseline models based on common features and bottom -of- market efficiency for each product class and representative size

. Se lection of the baseline model

included consideration of ceiling fan features and performance characteristics, such as motor type, blade shape and span , and fan efficiency.

DOE used the baseline units for comparison in several analyses, including the engineering analysis, LCC analysis, PBP analysis, and NIA. To determine energy savings that

will result from a new energy conservation standard, DOE compared energy use at each of the higher energy efficiency levels to the energy consumption of the baseline unit . Similarly, to determine the changes in price to the consumer that will result from a new energy conservation standard, DOE compared the price of a baseline unit to the price of a unit at each higher efficiency level.

After review of publicly- available pr oduct literature and discussions with manufacturers,

DOE found that baseline high- volume ceiling fans include a consistent set of design features.

Baseline HVLD fans have (1) curved blades made from extruded aluminum, (2) three

phase induction motor with a gearbox, and (3) exposed motor with no housing.

Baseline HVSD fans have (1) flat, steel blades, (2) conventional AC (PSC) motor, and (3) basic motor housing.

DOE identified the least efficient fan s on the market with these characteristics in each produ ct class and representative size . Efficiency was determined by CFM/W at high speed. Then, DOE plotted fan diameter versus efficiency, and generated a linear trend line for each product class. The linear trend line provides an equation relating baseline eff iciency to diameter. This equation was used to identify the CFM/W on high speed for the baseline fan in each representative size and product class.

Next, DOE applied the equation for fan efficiency (based on efficiency at high speed and standby power) from the ceiling fans test procedure NOPR to calculate the final baseline efficiency. Because fans with AC motors do not require a remote control, DOE assumed that HVSD fans do not consume any standby power unless they are equipped with a DC motor. DOE

assumed that all HVLD fans consume standby power, as DOE understands that all HVLD fans in

the market use variable-frequency drives, which DOE understands to consume standby power. DOE assumed a standby power value of 1.4 watts for these fans in order to maintain consistency with the assumptions made for low-volume fans and because no further data was available to

DOE. Table 5.5.7 presents the baseline efficiencies for each product group.

5-28Table 5.5.7 Baseline Efficiency for High

- Volume Ceiling Fans

Product Class/ Representative Size Efficiency (CFM/W)

HVLD/8

- foot 44.3

HVLD/12

- foot 86.6

HVLD/20

- foot 171.2

HVSD/36

- inch 80.3

HVSD/56

- inch 231.0

5.5.2.2 Design Option Methodology

For each product class and representative size of high -volume fans, DOE analyzed the

effect of each design option on efficiency and MPC. To determine the efficiency tradeoffs associated with each design option, DOE used publicly available data, input from manufacturers, and results from the analysis on low- volume ceiling fans to estimate efficiency delta. Each efficiency delta represents the difference in efficiency for one design option. The deltas were then applied to the baseline values to calculate fan efficiency at levels above the baseline.

5.5.2.3 Power Consumption

In conjunction with the calculatio n of efficiency, DOE also calculated power consumption at each efficiency level. DOE used this information to perform an assessment of the energy use and savings associated with each efficiency level (chapter 7). To determine the decrease in power consumpt ion at each level, DOE identified the power consumption of the baseline fans and applied wattage deltas to it. DOE estimated the power consumption of the

baseline HVSD and HVLD fans as follows.

For HVSD fans, DOE assumed the baseline power consumption at high speed is equal to

the advertised maximum power consumption of the least efficient fan currently on the market for both representative sizes

.

For 20-foot HVL D fans, DOE applied a similar approach, and assum ed that the baseline power consumption at high speed is equal to that of the least efficient fan on the market.
However, because the power consumption of the least efficient fan on the market was not available from catalog data, DOE calculated it instead . DOE used the previously calculated

baseline CF M/W at high speed (see section 5.5.2.1 ) and the advertised max CFM of the least

efficient 20 -foot fan on the market to calculate w atts at high speed. At the other H VLD representative diameters, DOE did not find sufficient market data to directly infer the baseline power consumption. Hence, for12-foot and 8-foot representative diameters, DOE applied ratios to calculate power consumption indirectly based on the 20-foot data. For 8-foo t fans, DOE applied the ratio of the advertised power consumption of similar 1-h orsepower fans with airfoil

blades from the same manufacturer using the following formula.

5-29Baseline Power Consumption ( PC ) ( 8 ft )

= B aseline PC ( 20 ft ) × PC of 1h p
, airfoil (8 ft )

PC of 1h p
, airfoil ( 20 ft ) Equation 5. 6 Power Consumption of Baseline HVLD Fans

DOE did not have sufficient catalog data to perform a simi lar calculation for the baseline power consumption for 12-foot fans . DOE estimated that the power -consumption of baseline 12-

foo t fans is the mean of the baseline power consumption of 8-foot and 20-foot fans. DOE took this approach because market data showed that the air movement (CFM) of typical 12-foo t fans appeared to be roughly halfway between that of the other two representative diameters.

Using the power consumption at the baseline for all representative sizes of HV SD and HVLD fans, DOE next calculated the power consumption at higher efficiency levels. For all high-volume fans, DOE used the baseline power consumption ( in w atts ) and baseline efficiency (CFM/W), to calculate the baseline air displacement (CFM) on high sp eed, as follows :

CFM = CFM

W × W

DOE set this value of airflow (CFM) to be constant across all efficiency levels

. With the airflow fixed at all efficiency levels, and the efficiency at each level found through the application of the efficiency deltas to the baseline values, the power consumption was calculated by rearranging the above formula. DOE divided CFM by efficiency to determine the power consumption at high speed for each efficiency level above baseline.

5.6 DESIGN OPTIONS DISCUSSION

The following sections discuss each of the design options that were not screened out for both low-volume and high-volume ceiling fans. The sections provide more detail on the cost and efficiency tradeoffs associated with each design option

. For all tables in t his section, the efficiency deltas are relative to the baseline efficiency and all cost deltas are relative to the baseline component costs that are relevant to each design option ( i.e.

, either to baseline blade costs or baseline motor cost).

5.6.1 Low

- Volume Ce iling Fans

5.6.1.1 Fan Optimization

The fan optimization level represents the increase in the efficiency of a fan by adjusting or optimizing the design features that already exist in the fan. These adjustments could include changing blade pitch and fine- tuning mot or RPM. DOE included this design option because ceiling fan market data showed that fans of similar size and specifications ( blade type and motor size) reported different efficiency levels. In addition, manufacturers indicated during interviews that they s ometimes make these types of adjustments to improve performance to meet ENERGY

STAR CFM and efficiency criteria. The above-mentioned adjustments for higher efficiency can

be made with little to no additional manufacturing costs. Based on this, DOE has determined that

5-30the fan optimization design option will not require any additional manufacturing costs.

This finding agrees with the information provided by manufacturers during interviews that increasing efficiency is not always the top priority when designing low -volume ceiling fans. When manufacturers design ceiling fans, they typically address aesthetics

, cost targets , and seek

to provide fans that fill a gap in a line of product offerings. Hence, the possibility of improved performance with no increase to manufacturing cost may not be a sufficient reason for manufacturers to optimize their baseline fans. However, DOE acknowledges that implementing any design option, including fan optimization, could require fan manufacturers to incur higher costs for product engineering and development. These costs will be accounted for in the manufacturer impact analysis (chapter 12).

To calculate the efficiency delta for this design option, DOE used publicly available ceiling fan efficiency data and identified several 52 -inch standard technology pairs for the fan optimization design option. DOE used 52-inch standard fans for the technology pair because the 52-inch standard fans are the most common fan sold in the low-volume fan category. For each technology pair, the optimized fan had similar basic features to the non-optimized fan (for example, similar motor size, blade material, blade shape, etc.), but a higher CFM/W efficiency than the non-optimized fan. DOE identified four different technology pairs and each pair had an AC motor, with sizes that ranged from 153mmx12mm to 188mmx20mm. DOE then determined the efficiency delta for each pair by calculating the percentage change in efficiency between the

two fans. The efficiency deltas for all the pairs were then a veraged to calculate a final fan optimization efficiency delta for the 52 -inch standard product group. This efficiency delta was then scaled to the other product classes and representative sizes using the scaling factors from

Table 5.5.5

. Table 5.6.1 summarizes the efficiency and cost deltas for the fan optimization design option used in the engineering analysis.

Table 5.6.1 Fan Optimization Efficiency Deltas

Product Class/ Representative Size E fficiency delta (%) Cost delta (%)

Standard/44

- inch 9.5 0

Standard/52

- inch 15.0 0

Standard/60

- inch 19.5 0

Hugger/44

- inch 4.1 0

Hugger/52

- inch 10.7 0

5.6.1.2 More Efficient Direct Drive Single Phase Induction Motor (Larger Direct

Drive Motor)

The most common ceiling fan motor is a single-phase induction motor ( PSC type) with an external rotor. The efficiency of such motors can be improved by increasing the size of (or the quality of steel used in) the stator and rotor stack, improving the lamination design, increasing the cross section of copper wiring, or operating the fan at reduced speed through capacitor speed control. DOE determined the efficiency delta for larger direct drive motors by identifying a technology pair and calculating the change in efficiency between the two fans in the pair.

5-31DOE scaled the efficiency deltas to different sizes using the scaling approach described

in section 5.5.1.3 . However, DOE did not scale the efficiency between different product classes. The addition of a more efficient motor should improve ceiling fan efficiency primarily by reducing the fan’s power consumption (w atts) an d not by changing airflow performance (CFM). DOE has inadequate information to conclude that a more efficient motor reduces the power consumption of a hugger fan more than it does for a standard fan, or vice- versa. This means that for the same size fan, the efficiency delta is the same for the standard class and the hugger class.

DOE calculated the cost delta for the larger direct drive motor design option by using the technology pair and calculating the change in cost between the two fans in the pair. The cost
delta was then compared to and combined with input from manufacturers to arrive at a final estimate of the cost increase attributable to the design option. The cost of the larger direct drive motor is higher because of additional costs in terms of mat erial and equipment. Table 5.6.2 summarizes the efficiency and cost deltas for the larger direct drive motor design option used in the engineering analysis.

Table 5.6.2 Larger Direct Drive Motor Efficiency and Cost Deltas

Product Class/ Representative Size E fficiency delta (%) Cost delta (%)

Standard/44

- inch 9.9 40.1

Standard/52

- inch 12.9 40.1

Standard/60

- inch 15.2 40.1 Hugger/44

- inch 9.9 40.1 Hugger/52

- inch 12.9 40.1

5.6.1.3 Brushless DC Motor

The most efficient ceiling fans on the market have DC motors. DC motors are permanent magnet synchronous AC motors driven by a converter plus inverter combination control system. In this configuration, the motor displays characteristics of direct current motors; thus, they are called brushless direct current motors. Because there is no electrical current flowing in the rotor of a DC motor, there are no rotor energy losses, thereby resulting in greater efficiency than standard AC motors. DOE research showed that a DC motor is much more expensive than an AC motor. DC motors require electronic controls, whereas the AC motors only require a basic electromechanical (pull

- chain) control. Also, the components within a DC motor itself are expensive. In addition, DC motors are a nascent technology and have a higher failure rate compared to AC motors due to their complicated controls, which adds to their warranty costs.

DOE is cognizant that D C motors are expensive and DC motor requirements could eliminate many current products in the market. Additionally, DOE recognizes stakeholder comments that DC motors require the use of more complex controllers that could fail more frequently, which in turn could affect the warranty and maintenance/repair costs of the DC motors. If DOE determines that these motors pass the screening criteria, DOE would continue to account for the increased cost of utilizing DC motors in the engineering analysis, life

- cycle cost (LCC), shipments, national impact analysis (NIA) , and manufacturer impact analysis (MIA) analyses using product tear downs and manufacturer interviews.

5-32For the preliminary analysis, b ased on manufacturer interviews, DOE determined that DC

motors req uire the use of remote controls and the remote control receiver consumes standby power. Accordingly, standby power of 1.4 W was included in the calculation of CFM/W for fans

with DC motors. DOE estimate d the efficiency improvement from using a DC motor by examining test results for a pair of similar fans with AC and DC motors . The efficiency delta thus found was scaled to the other representative sizes and combined with input from manufacturers to arrive at a final estimate of the efficiency improvement att ributable to the design option. As in the case of the larger direct drive motors, DOE used the same efficiency deltas for both product classes.

DOE calculated the cost delta for the DC motor design option by using the teardown

model to calculat e the change in cost between the two fans in the technology pair. The motor warranty factors described in Section 5.4.1.6 (1.2% for AC motors and 8% for DC motors) were added to the factory cost of the motors for each fan in the technology pair and the factory markup was used to convert to manufacturing cost. The cost delta was then compared to and combined with input from manufacturers to arrive at a final estimate of the cost increase attributable to the design option. Table 5.6.3 summarizes the efficiency and cost deltas for the DC motor design option used in the engineering an alysis.

Table 5.6.3 DC Motor Efficiency and Cost Deltas

Product Class/ Representative Size E fficiency delta (%) Cost delta (%)

Standard/44

- inch 139.1 206.9

Standard/52

- inch 146.8 206.9

Standard/60

- inch 152.9 206.9 Hugger/44

- inch 139.1 206.9 Hugger/52

- inch 146.8 206.9

5.6.2 High

- Volume Ceiling Fans

5.6.2.1 HVSD

Curved Blades

. Curved blades are blades where the centerline of the blade cross section is cambered. Curved blades generally have uniform thickness and no significant internal volume. This shape is more aerodynamic than a traditional flat blade, and has been shown to circulate more air per unit power input, when compared to a flat blade of the same length and width. DOE

determined the efficiency delta for th ese blades through a combination of experimentation with a publicly available airflow simulation model 5 and analysis of publicly available efficie ncy data

for fans on the market.

The cost delta was determined from an estimate of the manufacturing cost of curved blades. DOE assumed that curved blades would need to be thicker than flat blades, requiring more material per blade. Further, DOE assumed that curved -blades would require a more

5 http://www.grc.nasa.gov/WWW /k

- 12/airplane/foil3.html

, accessed Dec. 5, 2013

5-33complex manufacturing process (such as extrusion) and would therefore have higher labor and factory costs.

Airfoil B lades

. Airfoil blades uses curved surfaces to improve aerodynamics , but unlike the curved blades described above, the thickness is not constant and the top and bottom surfaces do not follow the same path from l eading edge to trailing edge

. Because v ery few HVSD fans of this type exist on the market, DOE used test data on low- volume fans to estimate the efficiency delta for this design option. DOE compared internal test data on a pair of 44-inch standard lowvolu me fans with identical features, except that one fan had airfoil blades while the other fan had

curved blades

. DOE used the cost and efficiency deltas from the tested fans for both representative sizes of HVSD fans because the tested size of 44 inches fall s in between the two representative sizes of HVSD fans.

DC Motors

. DC motors are more energy-efficient than conventional PSC motors due to the nature of their design. DC motors have no power flowing through the rotor, thereby greatly minimizing energy losses. A s described in Chapter 4, if DOE determines that these motors meet the screening criteria, DOE would continue to account for any increase in the manufacturing cost and warranty cost of DC motors in the engineering analysis, which forms the basis for the downstream analyses.

For the preliminary analysis, DOE calculated the cost and efficiency deltas for HVSD

fans based on a combination of the DC motor deltas calculated in the analysis for low-volume ceiling fans and input from manufacturer intervi ews. Table 5.6 .4 summarizes the efficiency and cost deltas for the HVSD design options used in the engineering analysis.

T able 5.6.4 HVSD Efficiency and Cost Deltas

Design Option E fficiency delta (%) Cost delta (%)

Curved blades 7 125

Airfoil blades 40 163

DC motors 87 207

5.6.2.2 HVLD

Geared Motors

. Fans with geared motors have fan blades attached to the motor via a geared mechanism, which allows the fan blades to rotate at a different speed from the motor. DOE research showed that the incorporation of a gearbox is a common design feature in all

HVLD fans with induction motors. Hence, geared induction motors are included in the HVLD

baseline fan characteristics.

Three

- Phase Induction Motors

. Since HVLD fans are installed in buildings that are designed specifically for industrial applications, they are designed to operate on three- phase power supply. Therefore, three- phase mo tors are commonly used in HVLD fans. Hence, three

phase induction motors are also included in the HVLD baseline fan characteristics.

5-34Therefore, th e HVLD baseline fan motor characteristics are a combination of two design options. In this analysis, t he HVLD baseline fan motor is described as a geared three

- phase

induction motor.

Eight to Six Blades. By reducing the number of blades in a HVLD fan, the drag of the

fan can be reduced , thereby reducing the load on the motor. If the power consumption drops

more than the airflow (CFM), then the reduction in load could lead to increased fan efficiency. Based on an analysis of publicly available fan performance data, moving to fewer fan blades might be an effective me thod of improving efficiency. DOE has therefore c onsidered reducing the number of blades from eight (the baseline design) to six as a design option. Because many HVLD fans already exist on the market with six -blade designs, DOE felt that this design option

would be feasible. In analyzing this design opti on , DOE assumed that the only change was to the

number of blades and that the cost of all other fan components, such as the motor, remain unchanged.

DOE calculated t he efficiency delta for this design option from publicly available market

data. DOE identi fied a pair of identical fans except that one fan had eight blades and one had six

blades. DOE calculated the efficiency delta from catalog data of these fans. The cost delta was

calculated based on an estimate of the marginal manufacturing cost increase f or an additional fan

blade.

Airfoil B lades

. T o calculate the efficiency delta of airfoil blades for HVLD fans, DOE used publicly available catalog data for fans on the market . DOE compared the average efficiency of a selection of fans with curved blades, the baseline HVLD design, to the average efficiency of fans with airfoil blades and similar motors. DOE then adjust ed this value to incorporate feedback from manufacturer interviews. DOE developed cost deltas for this design option based on the virtual teardown of an aluminum airfoil blade and independent research on

blade material costs.

DC Motors

. Similar to HVSD fans, if DOE determines that DC motors meet the screening criteria, DOE would continue to account for any increase in the manufacturing cost and warranty cost of DC motors in the engineering analysis.

For the preliminary analysis, t he efficiency delta for DC motors in HVLD fans was calculated based on an analysis of the typical electrical efficiency of DC and AC motors in combination with inpu t from manufacturers. DOE assumed that the most commonly used motors

in HVLD fans were on the order of 1hp. Since these motors were much larger than those used in

HVSD and low -volume fans, DOE chose not to use low- volume test data in this analysis for

HVLD fans. Instead, DOE compared the listed efficiency and price of 1hp motors from publicly available market data and catalogues. Table 5.6.5 summarizes the efficiency and cost deltas for the HVLD design options used in the engineering analysis.

5-35Table 5.6.5 HVLD Efficiency and Cost Deltas

Design Option E fficiency delta (%) Cost delta (%)

8 to 6 blades 4

- 6

Airfoil blades 60 161

DC motors 104 295

5.7 MANUFACTURER PRODUCTION COST

For low-volume fans, the cost model calculates the amount it costs a factory to build the fan. The factory cost includes all direct costs , including production- related labor, materials, depreciation, and overhead costs (as defined in section 5.4 ). The f actory cost is less than the amount the fan manufacturer pays the factory for the same fan because DOE assumes that the fan manufacturers do not own the factories. To calculate the MPC, DOE multiplied the factory cost by a factory markup. Based on industry experience, DOE used a factory markup of 1.2. To obtain the MPC, DOE multiplied the factory cost by the factory markup.

For high- volume fans, DOE calculated the MPC of the baseline fans from retail prices, as

described in section 5.4.2.1 . In doing so, DOE assumed that HVSD fans incur shipping and tariff

costs ; however, HVLD fans, which are manufactured within the United States, do not incur these

costs. DOE calculated the MPC at the other efficiency levels above the baseline by applying the cost deltas for each design option.

5.8 MANUFACTURER SELLING PRICE

To obtain the MSP, DOE multiplied the MPC by the manufacturer markup. The MSP includes all production and non-p roduction costs as well as profit . The markup includes sales, general and administrative, research and development, other corporate expenses, and profit. Figure 5.8.1 shows the components of MSP. DOE derived t he manufacturer markup costs as

described in section 5.8.1

.

5-36Figure 5.8.1 Components of Manufacturer Selling Price

5.8.1 Manufacturer Markup

At each stage of the distribution chain, manufacturers, wholesalers, and contractors apply a markup to cover their operating costs and profit margins. In the engineering analysis, DOE determined a manufacturer markup, applied it to the MPC to arrive at the MSP. Wholesaler, contractor, and other markups are determined in the markups analysis, which is further described in chapter 6 of the TSD.

The manufacturer markup was calculated as the market share weighted average value for the industry. For the preliminary analysis, DOE developed this manufacturer markup by

examinin g several major commercial refrigeration equipment manufacturers’ gross margin information from annual reports and Securities and Exchange Commission 10- K reports. Each company is a subsidiary of a more diversified parent company that manufactures equipmen t other than commercial refrigeration equipment. Because the 10-K reports do not provide gross margin information at the subsidiary level, the estimated markups represent the average markups that the parent company applies over its entire range of equipment offerings and does not necessarily represent the manufacturer markup of the subsidiary. The result of the preliminary markup analysis shows that the average manufacturer markup is 1.37. Manufacturer Selling Price

Full Cost of

Product

Manufacturer

Production Cost

Direct

Labor Direct

Material Overhead

Indirect Labor

Indirect Material

Maintenance

Depreciation

Taxes

Insurance related

to assets Non

- Production

Cost

Selling

Market

Research

Advertising

POS Promotion

Salesperson Comp & Travel

Logistics (Warehousing, Delivery, Record

Keeping, Order

Processing) General &

Admin.

Costs of

Service &
Staff Units

General
Corporate

Costs (Comp, etc) R & D

Costs associated with finding new

and improved

products or

processes

Code Compliance

Modernization Interest

Cost of borrowing

funds Profit

5-375.9 POWER CONSUMPTION RESULTS

As discussed in s ections 5.5.1.4 and 5.5.2.3 , DOE calculated power consumption (in

watts ) for each representative diameter, at each design option level. Table 5.9.1 through Table

5.9.5 summarizes the aggregate power consumption for the low- volume fans. Power consumption results in Watts for flat and unconventional- blade fa ns can be found in Appendix

5A. Table 5.9.6 through Table 5.9.10 summarizes the power consumption for the high-volum e fans.

Table 5.9.1 Power Consumption for 44

- inch Low

- Volume Standard Fans

Efficiency Level (EL) Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Baseline 13.4 34.1 63.1

1 Aggregated Market

- minimum 11.0 23.2 47.3

2 EL1 + Fan Optimization 10.1 21.2 43.2

3 EL 2 + Larger Direct Drive

motor 9.2 19.3 39.3

4 EL 2 + DC Motor 6.4 13.3 27. 2

Table 5.9.2 Power Consumption for 52

- inch Low

- Volume Standard Fans

Efficiency Level (EL) Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Baseline 15.9 51.9 98.0

1 Aggregated Market

- minimum 13.1 35.3 73.5

2 EL1 + Fan Optimization 11.4 30.7 63.9

3 EL 2 + Larger Direct Drive

motor 10.1 27.2 56.6

4 EL 2 + DC Motor 6.9 18.7 39. 0

Table 5.9.3 Power Consumption for 60

- inch Low

- Volume Standard Fans

Efficiency Level (EL) Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Baseline 31.7 80.0 111.4

1 Aggregated Market

- minimum 26.1 54.5 83.6

2 EL1 + Fan Optimization 21.9 45.6 69.9

3 EL 2 + Larger Direct Drive

motor 19.0 39.6 60.7

4 EL 2 + DC Motor 13. 0 27.2 41. 7

5-38Table 5.9.4 Power Consumption for 44

- inch Low

- Volume Hugger Fans

Efficiency Level (EL) Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Baseline 17.9 43.3 65.0

1 Aggregated Market

- minimum 14.8 29.5 48.7

2 EL1 + Fan Optimization 14.2 28.3 46.8

3 EL 2 + Larger Direct Drive

motor 12.9 25.8 42.6

4 EL 2 + DC Motor 8.9 17.8 29.5

Table 5.9.5 Power Consumption for 52

- inch Low

- Volume Hugger Fans

Efficiency Level (EL) Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Baseline 10.9 44.5 93.0

1 Aggregated Market

- minimum 9.0 30.3 69.8

2 EL1 + Fan Optimization 8.1 27.4 63.1

3 EL 2 + Larger Direct Drive

motor 7.2 24.3 55.9

4 EL 2 + DC Motor 5.0 16.7 38. 5

Table 5.9.6 Power Consumption for 36

- inch HVSD Fans

Efficiency Level (EL) Design Option Power Consumption at High Speed (W)

0 Baseline 76.0

1 EL 0 + curved blades 71.0

2 EL 0 + airfoil blades 54.3

EL 3 EL 2 + DC motor 29.0

Table 5.9.7 Power Consumption for 56

- inch HVSD Fans

Efficiency Level (EL) Design Option Power Consumption at High Speed (W)

0 Baseline 97.0

1 EL 0 + curved blades 90.7

2 EL 0 + airfoil blades 69.3

3 EL 2 + DC motor 37.1

5-39Table 5.9.8 Power Consumption for 8 -foo t HVLD Fans
Efficiency Level (EL) Design Option Power Consumption at High Speed (W)

0 Baseline 638.8

1 EL 0 + s ix b lades 614.2

2 EL 1 + a irfoil b lades 383.9

3 EL 2 + DC m otor 188.2

Table 5.9.9 Power Consumption for 12 -foo t HVLD Fans

Efficiency Level (EL) Design Option Power Consumption at High Speed (W)

0 Baseline 883.0

1 EL 0 + s ix b lades 849.0

2 EL 1 + a irfoil b lades 530.6

3 EL 2 + DC m otor 260.1

Table 5.9.10 Power Consumption for 20 -foo t HVLD Fans

Efficiency Level (EL) Design Option Power Consumption at High Speed (W)

0 Baseline 1

, 127.2

1 EL 0 + s ix b lades 1083.9

2 EL 1 + a irfoil b lades 677.4

3 EL 2 + DC m otor 332.1

5.10 COST

- EFFICIENCY RESULTS

The result of the engineering analysis is a set of cost -efficiency curves. DOE developed

five aggregate curves representing the low-volume fans and five curves representing the highvolume fans, using the baseline specifications and design options previously described. Table

5.10.1 through Table 5.10.5 summarize the cost -efficiency curves for the low- volume fans.

Results for unconventional- blade and flat -blade low

- volume fan s ( un-aggregated c urves ) can be found in Appendix 5 A. Table 5.10.1 through Table 5.10.3 also include the efficien cy results for standard fans with a false ceiling in place, as described in section 5.5.1 . Table 5.10.6 through

Table 5.10. 10 summarize the cost

- efficiency curves for the high -volume fans.

5-40Table 5.10.1 Cost

- Efficiency Curves for 44

- inch Low

- Volume Standard Fan s

Efficiency Level (EL) Design Option Efficiency w/o artificial ceiling (CFM/W) Efficiency with artificial ceiling (CFM/W) MSP ($)

0 Baseline 50 33 $45.54

1 Aggregated Market

- minimum 66 44 $45.54

2 EL1 + Fan Optimization 72 48 $45.54

3 EL 2 + Larger Direct Drive

motor 79 52 $52.99

4 EL 2 + DC Motor 132 87 $70.11

Table 5.10.2 Cost

- Efficiency Curves for 52

- inch Low

- Volume Standard Fans

Efficiency Level (EL) Design Option Efficiency w/o artificial ceiling (CFM/W) Efficiency with artificial ceiling (CFM/W) MSP ($)

0 Baseline 49 32 $56.62

1 Aggregated Market

- minimum 64 43 $56.62

2 EL1 + Fan Optimization 74 49 $56.62

3 EL 2 + Larger Direct Drive

motor 83 55 $66.66

4 EL 2 + DC Motor 139 92 $89.82

Table 5.10.3 Cost

- Efficiency Curves for 60

- inch Low

- Volume Standard Fans

Efficiency Level (EL) Design Option Efficiency w/o artificial ceiling (CFM/W) Efficiency with artificial ceiling (CFM/W) MSP ($)

0 Baseline 51 34 $83.85

1 Aggregated Market

- minimum 6 7 45 $83.85

2 EL1 + Fan Optimization 80 53 $83.85

3 EL 2 + Larger Direct Drive

motor 93 61 $98.35

4 EL 2 + DC Motor 156 103 $131.86

5-41Table 5.10.4 Cost

- Efficiency Curves for 44

- inch Low -Volume Hugger Fans

Efficiency Level (EL) Design Option Efficiency with artificial ceiling (CFM/W) MSP ($)

0 Baseline 37 $43.85

1 Aggregated Market

- minimum 49 $43.85

2 EL1 + Fan Optimization 51 $43.85

3 EL 2 + Larger Direct Drive

motor 56 $51.22

4 EL 2 + DC Motor 93 $68.14

Table 5.10.5 Cost

- Efficiency Curves for 52

- inch Low -Volume Hugger Fans

Efficiency Level (EL) Design Option Efficiency with artificial ceiling (CFM/W) MSP ($)

0 Baseline 38 $52.19

1 Aggregated Market

- minimum 50 $52.19

2 EL1 + Fan Optimization 55 $52.19

3 EL 2 + Larger Direct Drive

motor 62 $61.12

4 EL 2 + DC Motor 104 $81.70

Table 5.10.6 Cost

- Efficiency Curves for 36

- inch HVSD Fans

Efficiency Level (EL) Design Option Efficiency (CFM/W) MSP ($)

0 Baseline 80 28.02

1 EL 0 + curved blades 86 31.88

2 EL 0 + airfoil blades 112 33.04

3 EL 2 + DC motor 201 58.55

Table 5.10.7 Cost

- Efficiency Curves for 56

- inch HVSD Fans

Efficiency Level (EL) Design Option Efficiency (CFM/W) MSP ($)

0 Baseline 231 30.85

1 EL 0 + Curved blades 247 35.09

2 EL 0 + Airfoil blades 323 36.37

3 EL 2 + DC motor 583 64.46

5-42Table 5.10.8 Cost

- Efficiency Curves for 8 -foo t HVLD Fans
Efficiency Level (EL) Design Option Efficiency (CFM/W) MSP ($)

0 Baseline 44 1,703.76

1 EL 0 + s ix Blades 46 1,700.36

2 EL 1 + a irfoil b lades 74 1,795.03

3 EL 2 + DC m otor 150 3,613.70

Table 5.10.9 Cost

- Efficiency Curves for 12 -foo t HVLD Fans

Efficiency Level (EL) Design Option Efficiency (CFM/W) MSP ($)

0 Baseline 87 1,812.18

1 EL 0 + s ix b lades 90 1,807.08

2 EL 1 + a irfoil b lades 144 1,949.08

3 EL 2 + DC m otor 293 3,767.76

Table 5.10.10 Cost

- Efficiency Curves for 20 -foo t HVLD Fans

Efficiency Level (EL) Design Option Efficiency (CFM/W) MSP ($)

0 Baseline 171 2,183.91

1 EL 0 + s ix b lades 178 2,175.40

2 EL 1 + a irfoil b lades 285 2,412.08

3 EL 2 + DC m otor 579 4,230.76

5.11 CANDIDATE STANDARD LEVELS

DOE adopted an equati on

- based approach to establish candidate standard levels (CSLs) for ceiling fans. The equations specify a minimum fan effi ciency requirement across diameters and represent the efficiency a fan would be required to achieve, in order to meet the CSL. To develop the g eneral form of the linear equation (shown below), DOE evaluated the results of the engineering analysis at every representative sizes in each product class.

Minimum Efficiency = mD + c Equation 5. 7 CSL General Equation

Where:

D = fan diameter in inches

m = slope of the linear equation

c = intercept of the linear equation

DOE established CSLs at each EL analyzed and determined the slope (m) and intercept (c) for the CSL’s for each class, as follows.

5-435.11.1 Low

- Volume Ceiling Fans

For low-volume standard and hugger fans, DOE determined the CSL equations for the

baseline and max

- tech efficiency levels as a straight line of best fit through the results at each representative size . DOE plotted the efficiency, in aggregated CFM/W, for every representative size at each EL and connected the points with straight lines. In order to determine the y

intercepts for the other three efficiency levels, DOE assumed that the gaps between intercepts are proportional to the gaps between the efficiency at the largest analyzed diameter (i.e. 60 -inch es for standard, and 52-inch es for hugger fans).

Figure 5.11.1 CSLs for Low- Volume Standard Fans

5-44Figure 5.11.2 CSLs for Low- Volume Hugger Fans

5.11.2 High

- Volume Ceiling Fans

5.11.2.1 Small Diameter (HVSD) Fans:

For HVSD fans, the CSL equations developed by DOE use a piecewise approach in order to best represent this product class. For diameters equal to or greater than 36-inch es , DOE developed the CSL equation for each efficiency level by plotting a straight line of best fit through all the analyzed diameters. Since DOE had very little information on HVSD fans

smaller than 36 -inch es , DOE set the y- intercept for HVSD fans at the baseline efficiency level to 30 CFM/W, based on publicly available market data showing that HVSD fans with baseline design options did not display efficiencies lower than this . Intercepts for other efficiency levels

were d etermined by assuming that the gaps between the intercepts were proportional to those at

56-inches.

5-45Figure 5.11.3 CSLs for HVSD Fans

5.11.2.2 Large Diameter (HVLD) Fans:

For HVLD fans, DOE determined the CSL at each engineering level as the straight line of best fit through all three analyzed representative diameters at that level.

Figure 5.11.4 CSLs for HVLD Fans

5-465.11.3 Summa ry of CSLs

Table 5.11.1 represents the CSL’s at each product class.

Table 5.11.1 Candidate Standard Levels

Minimum EFFIC IEN CY (CFM/W aggregate)

Level 0 Level 1 Level 2 Level 3 Level 4

Low

Volume Standard 0.04 D + 48.04 0.29 D + 50.55 0.44 D + 52.31 0.6 D + 54.22 1.51 D + 63.5

Hugger 0.13 D + 31.5 0.37 D + 31.68 0.44 D + 31.76 0.57 D + 31.86 1.38 D + 32.5

High

Volume Small

Diameter ≥ 36": 7.53 D

- 190.92

<36": 1.4 D +

30 ≥ 36": 8.06 D

- 204.28

<36": 1.49 D +

32.1 ≥ 36": 10.55 D

- 267.29

<36": 1.96 D +

42 ≥ 36": 19.11 D

- 487.28

<36": 3.47 D +

75.68 NA

Large

Diameter 0.88 D

- 40.29 0.92 D

- 41.91 1.47 D

- 67.07 2.98 D

- 136.94 NA

* where ‘D’ is the fan diameter in inches. At each diameter, the value for minimum efficiency calculated as per the equation must be rounded off in the manner described in the Test Procedure NOPR.

5-47CHAPTER 6. MARKUPS ANALYSIS

TABLE OF CONTENTS

6.1 INTRODUCTION ........................................................................................................... 6-1

6.2 DISTRIBUTION CHANNEL S ....................................................................................... 6-1

6.3 ESTIMATION OF MANUFA CTURER MARKUP ....................................................... 6-3

6.4 ESTIMATION OF OTHER MARKUPS ........................................................................ 6-3

6.4.1 Approach for Home Improvement Center and Showroom Markups for

Low -Volume Fans ............................................................................................... 6-5

6.4.2 Approach for Wholesaler Markup for Low-Volume Fans .................................. 6-7

6.4.3 Approach for Dealer Markup for High- Volume Fans ......................................... 6-8

6.5 DERIVATION OF MARKUP S ...................................................................................... 6-8

6.5.1 Home Improvement Center and Showroom Markups for Low-Volume

Fans ...................................................................................................................... 6-8

6.5.2 Wholesaler Markups for Low-Volume Fans ..................................................... 6-11

6.5.3 Dealer Markups for High -Volume Fans ............................................................ 6-12

6.6 TARIFF AND SHIPPING COSTS ................................................................................ 6-13

6.7 SALES TAX .................................................................................................................. 6-13

6.8 OVERALL MARKUPS

................................ ................................ ................................. 6-14

REFERENCES .......................................................................................................................... 6-17

LIST OF TABLES

Table 6.2.1 Current and Future Estimated Market Shares by Distribution Channel ........ 6-2

Table 6.5.1 Markup Estimation for the Top Three Home Improvement Centers ............. 6-9

Table 6.5.2 Markup Estimation for Building Material and Supplies Dealer .................... 6-9

Table 6.5.3 Markup Summary for Home Improvement Centers .................................... 6-10

Table 6.5.4 Markup Estimation for Electrical and Electronic Appliance, Tel evision

and Radio Set Merchant Wholesalers .......................................................... 6-11

Table 6.5.5 Markup Estimation for Dealers .................................................................... 6-12

Table 6.6.1 Tariff, Shipping Cost and Overhead for Low-Volume and HighVolume Small Diameter Ceiling Fans ......................................................... 6-13

Table 6.7.1 Average Sales Tax Rates by Census Division and Large State ................... 6-14

Table 6.8.1 Markups for Low-Volume Ceiling Fans ...................................................... 6-16

Table 6.8.2 Markups for High- Volume Ceiling Fans .................................................... 6-16

LIST OF FIGURES

Figure 6.2.1 Distribution Channels for Low- Volume Ceiling Fans ................................... 6-2 Figure 6.2.2 Distribution Channe ls for High

- Volume Ceiling Fans .................................. 6-3

6-iCHAPTER 6. MARKUPS ANALYSIS

6.1 INTRODUCTION

To carry out the life

- cycle cost (LCC) calcu lations described in chapter 8 of the technical support document (TSD), the U.S. Department of Energy (DOE) needed to determine the cost to the purchaser of baseline products and the cost of more efficient units th at purchaser wo uld be purchased under new energy conservation standards. DOE calculated such costs based on engineering estimates of manufacturing costs plus appropriate markups for the various

distribution channels for ceiling fans

.

To determine appropriate markups, DOE identified distribution channels for ceiling fan sales and estimated a baseline markup and an incremental markup within each distribution

channel. DOE define s a baseline markup as a multiplier that converts the manufacturer selling price of equipment wi th baseline efficiency to the purchase price for the equipment at the same baseline efficiency level. An incremental markup is defined as the multiplier to convert the

incremental increase in manufacturer selling price of higher efficiency equipment to the purchase price for the same equipment. Because companies mark up the price at each point in the distribution channel, both baseline and incremental markups are dependent on the distribution

channe l, as described in Se ction 6.2

.

Generally, companies mark up the price of a product to cover their business costs and profit margin. In financial statements, gross ma rgin is the difference between the company revenue and the company cost of sales or cost of goods sold ( CGS ). The gross margin takes account of the expenses of companies in the distribution channel, including overhead costs (sales, general, and administrat ion); research and development (R&D) and interest expenses; depreciation; and taxes —and company profits. In order for sales of a product to contribute positively to company cash flow, the product’s markup must be greater than the corporate gross margin. Products command lower or higher markups, depending on company expenses associated with the product and the degree of market competition.

6.2 DISTRIBUTION CHANNELS

The appropriate markups for determining pur chase prices depend on the type of distribution channels through which products move from manufacturers to end -users. DOE considered two major product class categories in this analysis: one is low-volume ceiling fans and the other is high-volume ceiling fans. Low- volume ceiling fans are mostly seen in residential application s; whereas high- volume ceiling fans are installed in commercial and industrial application s.

DOE identified three distribution channels for low-volume ceiling fans based on the

manufacturer interview s. In the first distribution channel, the manufacturer sells the product to a home improvement center who in turn sells the product to the consumer. In the second distribution channel, the manufacturer sells the product to an electric wholesaler , who in turn

sells it to a contractor , who then in turn sells the product to the consumer. The primary role of contractors in this distribution channel is to provide the installation service. Based on 2013

6-1RS Means Electrical Cost Data , the installing contra ctors typically markup the cost of materials

to consumers by 10 percent, separate from the labor cost to install the ceiling fan

. 1 In the last distribution channel, the manufacturer sells the product to a showroom, who in turn sells the product to the consumer. Figure 6.2.1 illustrates the th re e distribution channels for low-volume ceiling fans:

Figure 6.2.1 Distribution Channels for Low- Volume Ceiling Fans

DOE estimated that these three distribution channels will account for 74.5 percent, 18 percent and 7.5 percent, respectively, of the low-volume ceiling market in 2019. DOE b ased this

estimate on manufacturer feedback about the share of distribution channels in 2013, and the Annual Energy Outlook’s 2 (AEO’s) projected increase in the rate of new housing starts between

2013 and 2019. The estimate d increas e in the number of future housing starts will result in more ceiling fans passing through the wholesaler-contractor distribution channel in 2019. Table 6.2.1 summarizes the current sales distribution by each channel in 2013 and the estimated shares in the compliance year. The market shares projected for the compliance year were assumed to be constant over the analysis period, based on AEO’s projected constant growth rate of new housing starts beyond 2019.

Table 6.2.1 Current and Future Estimated Market Share s by Distribution Channel

Distribution Channel Market Share

in 2013 Market Share

in 2019

Manufacturer  Home Improvement Center  Consumer 80 .0 % 74.5%

Manufacturer  Wholesaler  Contractor  Consumer 12 .0 % 18 .0 %

Manufacturer  Showroom  Consumer 8 .0 % 7.5% Electric

Wholesaler Consumer Contractor Manufacturer Home Improvement

Center

Showroom

6-2The major distribution channel considered for high -volume ceiling fans is that the manufacturer sells the product to a dealer, who in turn sells it to the consumer. DOE is also

aware of another direct sale channel for high -volume ceiling fans where the manufacturer sells the product directly to a consumer through their in -house dealer. In this case, DOE is assuming the markup for in-house dealers is the same as the conventional dealer markup; therefore, the overall markup for the direct sale channel is the same as the manufacturer

- to

- dealer

- to -customer
distributio n channel. Figure 6.2.2 shows the two distribution channels for high -volume ceiling

fan s.

Figure 6.2.2 Distribution Channels for High

- Volume Ceiling Fans

6.3 ESTIMATION OF MANUFACTURER MARKUP

DOE uses manufacturer markups to transform a manufacturer’s product cost into a manufacturer sales price. Us ing the CGS and gross margin (GM) , the manufacturer markup can

be calculated as follows:

MFG MFG MFG

MFG CGS GM CGS MU +

=

Where:

MU MFG = m anufacturer markup,

CGS MFG = manufacturer cost of goods sold, and

GM MFG = manufacturer gross margin.

The manufacturer’s CGS (or manufacturer production cost ( MPC )) plus its GM equals the manufacturer selling price ( MSP ). DOE developed separate manufacturer markups for each product class considered in this rulemaking. Detailed description of the methodology and

manufacturer mar kup results can be found in the Engineering Analysis, chapter 5.

6.4 ESTIMATION OF OTHER MARKUPS

DOE examined the manner in which home improvement center, wholesaler and dealer markups may change in response to changes in ceiling fan efficiency levels and other factors. Using the available data, DOE estimated that there are differences between incremental markups Manufacturer Dealer Customer

In

- house

Dealer

6-3on incremental equipment costs of higher efficiency products and the baseline markup on direct business costs of products wi th baseline efficiency

.

DOE based the market derivation for the markups on various data sources. The h ome improvement center markups are based on firm

- level SEC 10- K reports 3 and U.S. Census

Bureau ’s annual retail trade survey for building material and supplier dealer industry. 4 The

electric wholesaler markups are based on U.S. Census Bureau ’s annual wholesale trade report for electrical and electronic appliance, television, and radio set merchant wholesaler industry

. 5
Lastly, the dealer markup s are based on firm

- level SEC 10

- K reports

. DOE used the financial data from all sources in the form of income statements to develop home improvement center, wholesaler and dealer markups. These income statements break down the components of all costs incurred by the firms that distribute and sell ceiling fans.

DOE ’s estimate of the markups using the financial data included the following key assumptions about the costs associated with ceiling fans :

1. The firm’s income statements faithfully represent the various average costs incurred by firms distributing and installing ceiling fan s.

2. These costs ca n be divided into two categories: 1) costs that vary in proportion to the

MSP of ceiling fan s (variant costs ); and 2) costs that do not vary with the MSP of ceiling

fan s (invariant costs).

In support of the first assumption, the income statements itemize firm costs into a number of expense categories, including direct costs to purchase or install the equipment, operating labor and occupancy costs, and other operating costs and profit. Although home improvement centers,

wholesalers and dealer s tend to handl e multiple commodity lines, the data provide the most accurate available indication of the expenses associated with ceiling fan s.

Information obtained from 10-K report and the U.S. Census tends to support the second assumption. T his information indicates that markups vary according to the quantity of labor and materials used to distribute and install appliances . In the following discussion, DOE assumes a division of costs between those that do not scale with the manufacturer price (labor and

occupancy expe nses) and those that do (operating expenses and profit).

DOE concluded that markups for more efficient equipment are un likely to be proportional to all direct costs. When the wholesaler’s purchase price of equipment increases, for example, only a fraction of a business’ expenses increases, while the remainder may stay relatively constant. For example, if the unit price of a ceiling fan unit increases by 30 percent due to improved efficiency, it is unlikely that the cost of secretarial support in an administrative office will increase by 30 percent as well . Therefore, DOE assumed that incremental markups cover only those costs that scale with a change in the MSP (variant costs ).

6-46.4.1 Approach for Home Improvement Center and Showroom Markup s for Low

Volume Fans

According to our market assessment analysis, approximately 80 percent of the ceiling fan

retail market wa s dominated by three major home improvement centers in 2011, Home Depot (38 percent), Lowe’s (31 percent) and Wal

- Mart ( 9.7 percent). Other smaller retailers comprise the rest of the of the ceiling fan market.

Since those top three home improvement centers are publicly owned companies, they are required by law to disclose financial information on a regular basis by the U.S. S ecurities and Exchange Commission (SEC). The annual SEC form 10-K report provides a comprehensive overview of the company’s business and financial conditions. Relevant information required for calculating the markups includes the company’s revenues and dir ect and indirect costs which are

all available in the income statement section of the 10

- K reports.

DOE use d the following two equations to calculate baseline and incremental markups using the financial data available from 10

- K reports.

MU BASE = N et Sales

Cost of Sales

The incremental markup applied to higher efficiency product is lower than the baseline markup because DOE assumed that expenses like labor and occupancy costs remain fixed and need not be recovered in the markup. Pr ofit and other operating costs were assumed to be variable and to scale with the manufacturer selling price. The SEC 10 -K reports did not typically separate labor and occupancy costs from overall expenses, so DOE assumed that these fixed

costs are encompas se d by “selling, distribution and administrative expenses”. DOE also assumed that “operating profit” (operating income) covers other operating costs and profit ( i.e. variable cost). Each company’s incremental markup was calculated as:

MU INCR = 1 + Op erating Profit

Cost of Sales

In addition, DOE calculated the overall markups for home improvement centers based on industry-level financial data for building material and supplies dealers from the 2007 U.S. Census Annual Retail Trade Survey (ARTS), which is the most recent survey available with detailed operating expenses for this particular sector. 1 DOE orga nized the financial data into statements that break down cost components incurred by firms in this category. DOE assumes

that the income statements faithfully represent the various average costs incurred by firms selling home appliances. Although home impr ovement centers handle multiple commodity lines, the data provide the most accurate available indication of expenses for selling ceiling fans

.

The 2007 ARTS data provided for home improvement centers contain total sales and detailed operating expenses. I n order to construct a complete data set to estimate markups, DOE

needed to estimate CGS and GM. The most recent 2011 ARTS publish a separate historical sales

and GM of building material and supplies dealers from 1993 to 2011. DOE then took the GM as

6-5a percent of sale s reported for 2007 and combined this with 2007 ARTS data to construct a complete income statement for building material and supplies dealers to estimate both bas eline and incremental markups for home improvement centers. DOE calculated the bas eline markup ( MU BASE ) for home improvement centers as an average markup using the following equation:

MU HIC

_ BASE = CGS HIC + GM HIC
CGS HIC W here:

MU HIC_B ASE = baseline home improvement center markup,

CGS HIC = home improvement center ’s cost of goods sold,

GM HIC = homer improvement center’s gross margin,

To estimate incremental markups, DOE divides the operating expenses into two categories: (1) those that do not change when CGS increases due to amended efficiency standards (“ invariant ”), and (2) those that increase proportionately with CGS (“ variant ”). DOE defines invariant costs to include labor and occupancy expenses, 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 profit, are assumed to vary in proportion to CGS. Although it is possible that some of the other expenses may not scale with CGS, DOE is inclined to take a more conservative position and include these as variant costs.

DOE calculated the incremental markup ( MU INCR ) for home improvement centers using the following equation:

MU HIC

_ INCR = CGS HIC + VC HIC
CGS HIC W here:

MU HIC_INCR = incremental home improvement center markup,

CGS HIC = home improvement center’s cost of goods sold, and

VC HIC = home improvement center’s variant costs.

After obtaining these two sets of markups, one representing the top three home improvement centers, and the other representing the overall building material and supplies dealers, DOE combined them to calculate the weighted average markups based on each market segment’s market share. The markup results for home improvement centers are summarized in

Table 6.5.3

.

For those ceiling fans that go through the showroom distribution channel, where the manufacturer sells the product to a showroom who in turn sells it to the consumer, public

financial data for showrooms are not available. Therefore, DOE based the baseline markup

estimation on manufacturer interviews. To calculate the incremental markup, DOE applied the ratio between baseline and increment markup for home improvement centers to the showroom baseline markup.

6-66.4.2 Approach for Wholesaler Markup for Low

- Volume Fans

DOE developed baseline and incremental markups for electrical and electronic appliance,

television and radio set merchant wholesalers using the industry- level income statement from the

2007 U.S. Census Annual Wholesaler Trade Report (A WTR ), which is the most recent survey available with detailed operating expe nses for this particular sector. The 2007 AWTR data provided for ceiling fan wholesalers contain total sales and detailed operating expenses. In order to construct a complete data set to estimate markups, DOE needed to estimate CGS and GM. The 2007 Economic Census published the GM as a percent of sales . DOE then took this GM from 2007 Economic Census and combined this with 2007 AWTR data to construct a complete income statement for electrical and electronic appliance, television and radio set merchant

wholesalers to estimate both baseline and incremental markups for ceiling fan wholesalers.

The baseline markups cover all of the wholesaler’s costs ( both invariant costs and variant

costs ). Here , variant costs were defined as costs that likely vary in proportion to the change in

MSP induced by increased efficiency standards; in contrast, invariant costs were defined as costs that are unlikely to vary in proportion to the change in MSP due to increased efficiency standards. DOE calculated the baseline markup for wholesalers using the following equation:

WHOLE WHOLE WHOLE WHOLE

WHOLE WHOLE WHOLE

BASE CGS VC IVC CGS

CGS GM CGS MU ) ( + +

= +

=

Where:

MU BASE = b aseline wholesaler markup,

CGS WHOLE = wholesaler cost of goods sold,

GM WHOLE = wholesaler gross margin,

IVC WHOLE = wholesaler invariant costs, and

VC WHOLE = w holesaler variant costs.

Incremental markups are coefficients that relate the change in the MSP of more energy

efficient models , or those products that meet the requirements of new energy conservation standards, to the change in the wholesaler sales price. Incremental markups cove r only those costs that scale with a change in the MSP (variant costs, VC ). DOE calculated the incremental markup ( MU INCR ) for wholesalers using the following equation:

WHOLE WHOLE WHOLE

INCR CGS VC CGS MU +

=

Where:

MU INCR = i ncremental wholesaler markup,

CGS WHOLE = wholesaler cost of goods sold, and

VC WHOLE = w holesaler variant costs.

The markup results for ceiling fan wholesalers can be found in Table 6.5.4

.

6-76.4.3 Approach for Dealer Markup for High -Volume Fans

For high -volume ceiling fans which are mostly for industrial use, the products are typically sold through dealers (either in -house or third- party) ; therefore, DOE estimated separate dealer markups for those types of ceiling fans. For high

- volume small

- diameter ceiling fans, the

dealer may sometimes be home improvement centers, as they also sometimes carry these types

of fans in store. However, as it is unclear what fraction of the market passes through home improvement centers , DOE assumed that dealer markups are more representative of the business practice in this industry. Through assessment of this market, DOE obta ined a list of high -volume ceiling fan dealers, and Grainger, Inc. is one of the few public companies among all the major

dealers. Analogous to what was done for the top three home improvement centers; DOE used the

financial data from SEC 10

- K report of Gr ainger, Inc. covering the period between 2008 and 2012, to estimate the average baseline and incremental markup s. DOE assumed that the business practice and profitability of handling high -volume ceiling fan do not vary a lot between public and private comp anies so that markups derived from Grainger, Inc. is representative of the ceiling fan dealer industry . The markup results are shown in Table 6.5.5

.

6.5 DERIVATION OF MARKUPS

6.5.1 Home Improvement Center and Showroom Markups for Low-Volume Fans

The annual SEC form 10-K report provides a comprehensive overview of the company’s business and financial conditions. Relevant information required for calculating the markups

include s the company’s revenues and direct and indirect costs which are all available in the

income statement section of the 10 -K reports. The average baseline and incremental markups

from 10

- K report for the three major retailers were summarized in Table 6.5.1

. DOE also calculated the overall markups for home improvement centers based on industry- level financial data for building material and supplies dealers from the 2007 U.S. Census Annual Retail Trade Survey (ARTS). DOE organized the financial data into statements that break down cost components incurred by firms in this category. The markups representing the overall building material and supplies dealers from U.S. Census’ s Annual Retail Trade Survey were summarized

in Table 6.5.2

.

6-8Table 6.5.1 Markup Estimation for the Top Three Home Improvement Centers

Company Financial Figures $1,000 Year

2008 2009 2010 2011 2012

The Home Depot, Inc. Net Sales 74,754,000 70,395,000 67,997,000 66,176,000 71,288,000

Cost of Sales 48,912,000 46,133,000 44,693,000 43,764,000 47,298,000

Operating Profit 7,766,000 6,661,000 5,839,000 4,803,000 4,359,000

Baseline MU 1.53 1.53 1.52 1.51 1.51

Incremental MU 1.16 1.14 1.13 1.11 1.09

Average (Baseline/Incremental) 1.52/1.13

Lowe’s Companies,

Inc. Net Sales 50,521,000 50,208,000 48,815,000 47,220,000 48,230,000

Cost of Sales 33,194,000 32,858,000 31,663,000 30,757,000 31,729,000

Operating Profit 3,137,000 2,906,000 3,228,000 2,825,000 3,506,000

Baseline MU 1.52 1.53 1.54 1.54 1.52

Incremental MU 1.09 1.09 1.10 1.09 1.11

Average (Baseline/Incremental) 1.53/1.11

Wal- Mart Stores, Inc. Net Sales 469,162,000 446,950,000 421,849,000 408,214,000 404,374,000

Cost of Sales 352,488,000 335,127,000 314,946,000 304,657,000 304,056,000

Operating Profit 27,801,000 26,558,000 25,542,000 23,950,000 22,798,000

Baseline MU 1.33 1.33 1.34 1.34 1.33

Incremental MU 1.08 1.08 1.08 1.08 1.07

Average (Baseline/Incremental) 1.33/1.08

Source: U.S. Securities and Exchange Commission, 10

- K reports 2008 to 2012, http://www.sec.gov/edgar/searchedgar/companysearch.html

Table 6.5.2 Markup Estimation for Building Material and Supplies Dealer

Descriptions Per Dollar

Sales Revenue
$ Per Dollar

Cost of Goods
$

Direct Cost of Equipment Sales: Cost of goods sold 0.657 1.00

Labor Expenses: Salaries and benefits 0.152 0.23

Occupancy Expense: Rent, maintenance, and utilities 0.038 0.06

Other Operating Expenses: Depreciation, advertising, and

insurance. 0.083 0.13

Operating Profit 0.069 0.11

Home Improvement Center Baseline Markup ( MU HIC BASE ) 1.52

Home Improvement Center Incremental Markup ( MU HIC

_ INCR ) 1.23

Source: U.S. Census Bureau 2007 Annual Retail Trade Survey (NAICS 4441 Building Material and Supplies Dealer) http://www.census.gov/retail/index.html#arts

6-9In this case, direct equipment expenses (cost of goods sold) represent about $0.657 per dollar sales revenue, so for every $1 home improvement centers take in as sales revenue, $0.657 is used to pay the direct equipment costs. Labor expenses represent $0.152 per dollar sales revenue, occupancy expenses represent $0.038, other operating expenses represent $0.083, and profit accounts for $0.0 67 per dollar sales revenue.

DOE converted the expenses per dollar sales into expenses per dollar cost of goods sold, by dividing each figure in the first data column by $0.657 ( i.e., cost of goods sold per dollar of sales revenue). The data in column two show that, for every $1.00 the home improvement center spends on equipment costs, the home improvement center allocates $0.23 to cover labor costs, $0.06 to cover occupancy expenses, $0.13 for other operating expenses, and $0.11 in profits. This totals to $1.52 in sales revenue earned for every $1.00 spent on equipment costs. Therefore,

the home improvement center baseline markup ( MU HIC_ BASE ) is 1.52 ($1.52 ÷ $1.00).

DOE also used the data in column two to estimate the incremental markup. The incremental markup depends on which of the costs in Table 6.5.2 are variant and which are invariant with MSP. For example, for a $1.00 increase in the MSP, if all of the other costs scale with the MSP ( i.e., all costs are variant), the increase in retail price will be $1.52 , implying that the incremental markup is 1.52, or the same as the baseline markup. At the other extreme, if none

of the other costs are variant, then a $1.00 increase in the MSP will lead to a $1.00 increase in

the retail price, for an incremental markup of 1.0. DOE believes that the labor and occupa ncy costs will be invariant and that the other operating costs and profit will scale with the MSP ( i.e., be variant). In this case, for a $1.00 increase in the MSP, the retail price will increase to match changes in “other” operating costs and operating profit of $0.152, which when divided by 65.7 cents in cost of goods sold yields an increase of $0.23 , giving a home improvement center incremental markup ( MU HIC_INCR ) of 1. 23. See Appendix 6A.1 for cost details.

DOE then calculated the weighted average mark ups by combining these two sets of markups with their corresponding markup share, as shown in Table 6.5.3

.

Table 6.5.3 Markup Summary for Home Improvement Centers

Retailer Market

Share Baseline MU Incremental MU

Home Depot 38 % 1.52 1.13

Lowe's 31 % 1.53 1.11

Wal

- Mart 9.7 % 1.33 1.08

Other s 21 .3 % 1. 52 1. 23

Weighting Average Markups 1.50 1.1 4

6-10DOE estimated that 7.5 percent of the ceiling fan market goes through the showroom distribution channel where the manufacturer sells the product to the showroom who in turn sells it to the consumer. However, the financial data specific for showrooms are mostly not publicly

available. In accordance with manufacturer interview s, it’s estimated that the showroom markup should be higher than the home improvement center markup because showrooms usually carry specialty ceiling fan s with smaller quantities. DOE therefore used the value of 2.0 provided in

manufacturer interviews as the estimated baseline markup for showrooms. DOE then applied the

same ratio between baseline and increment markup for home improvement centers to the baseline markup of 2.0 to derive an incremental markup for showroom. The resulting incremental markup for showroom is 1.52.

6.5.2 Wholesaler Markup s for Low

- Volume Fans

DOE developed the wholesaler baseline and incremental markups using the industrylevel income statement from the 2007 U.S. Census Annual Wholesaler Trade Report (AWTR) for electrical and electronic appliance, television and radio set merchant wholesalers. The 2007 AWTR data provided for ceiling fan wholesalers contain total sales and detailed operating

expenses. Table 6.5.4 summarizes them as cost

- per

- dollar sales reve nue in the first data column.

Table 6.5.4 Markup Estimation for Electrical and Electronic Appliance, Television and

Radio Set Merchant Wholesalers

Descriptions Per Dollar

Sales Revenue
$ Per Dollar

Cost of Goods
$

Direct Cost of Equipment Sales: Cost of goods sold 0.802 1.00

Labor Expenses: Salaries and benefits 0.094 0.12

Occupancy Expense: Rent, maintenance, and utilities 0.020 0.03

Other Operating Expenses: Depreciation, advertising, and

insurance. 0.046 0.06

Operating Profit 0.038 0.05

Wholesaler Baseline Markup ( MU WHOLE_ BASE ) 1.25

Wholesaler Incremental Markup ( MU WHOLE_ INCR ) 1.10

Source: U.S. Census Bureau, 2007 Annual Wholesaler Trade Report (NAICS 423620 Electrical and Electronic Appliance, Television and Radio Set Merchant Wholesaler ) http://www.census.gov/wholesale/index.html

In this case, direct equipment expenses (cost of goods sold) represent about $0.80 per dollar sales revenue, so for every $1 wholesaler s take in as sales revenue, $0.80 is used to pay the direct equipment costs. Labor expenses represent $0.09 per dollar sales revenue, occupancy expenses represent $0.02, other operating expenses represent $0.05, and profit accounts for $0.04 per dollar sales revenue.

6-11DOE converted the expenses per dollar sales into expenses per dollar cost of goods sold, by dividing each figure in the first data column by $0.80 ( i.e., cost of goods sold per dollar of sales revenue). The data in column two show that, for every $1.00 the wholesaler spends on equipment costs, the wholesaler allocates $0.12 to cover labor costs, $0.03 to cover occupancy expenses, $0.06 for other operating expenses, and $0.05 in profits. This totals to $1.25 in sales revenue earned for every $1.00 spent on equipment costs. Therefore, the wholesaler baseline markup ( MU WHOLE BASE ) is 1.25 ($1.25 ÷ $1.00).

DOE also used the data in column two to estimate the incremental markup. The incremental markup depends on which of the costs in Table 6.5.4 are variant and which are invariant with MSP. DOE believes that the labor and occupancy costs will be invariant and that the other operating costs and profit will scale with the MSP ( i.e., be variant). In this case, for a $1.00 increase in the MSP, the wholesale price will increase to match changes in “ other” operatin g costs and operating profit of $0.084, which when divided by 80.2 cents in cost of goods sold yields an increase of $0.10, giving a wholesaler incremental markup ( MU WHOLE INCR ) of

1.10. See A ppendix 6 A. 2 for cost details.

6.5.3 Dealer Markup s for High- Volume Fans

As mentioned in section 6.4.3 , DOE estimated the average baseline and incremental markups for dealers based on the financial data from SEC 10

- K report of Gr ainger, Inc. from 2008 to 2012, which were summarized in Table 6.5.5

.

Table 6.5.5 Markup Estimation for Dealers

Company Financial Figures $1,000 Year

2008 2009 2010 2011 2012

Grainger,

Inc. Net Sales 8,950,045 8,078,185 7,182,158 6,221,991 6,850,032

Cost of Sales 5,033,885 4,567,393 4,176,474 3,623,465 4,041,810

Operating Profit 1,131,125 1,052,429 860,475 665,224 782,672

Baseline MU 1.78 1.77 1.72 1.72 1.69

Incremental MU 1.22 1.23 1.21 1.18 1.19

Average (Baseline/Incremental) 1.74/1.21

Source: U.S. Securities and Exchange Commission, 10

- K reports 2008 to 2012, http://www.sec.gov/edgar/searchedgar/companysearch.html

DOE also considered another direct sale distribution channel for high -volume ceiling fans where the manufacturer sells the produc t directly to the customer . In this case, the manufacturers often provide installation service using their in -house dealers, and an extra markup will be added on equipment price in addition to the manufacturer markup to cover the costs for in-house

dealers . This in-house dealer markup was assumed to be the same as the conventional dealer markup. Hence, the direct sale distribution channel would have the same overall markup as the usual distribution channel through dealers.

6-126.6 TARIFF AND SHIPPING COSTS

Most of the low-volume and high-volume small -diameter ceiling fans sold on the U.S. market are manufactured (components and assembly) in Asia; therefore, DOE also accounted for tariff, shipping cost and overhead burden imposed by exporters in the purchase price

d etermination for these products. The shipping cost for low-volume ceiling fans going through the showroom distribution is higher than the other two distribution channels due to the relatively small quantities purchased from manufacturers compared to home improvement centers and

electric wholesalers. For the showroom distribution channel, these costs were assumed to be paid by the U.S. manufacturers. For the other distribution channels, these costs were assumed to be paid by home improvement centers, wholesa lers, or dealers , based on the assumption that those entities are typically moving significant volumes of products from overseas. Since high -volume large diameter ceiling fans are mainly manufactured in the U.S., no such extra cost was

considered. Tariff w as applied as a multiplier to the MSP except for the showroom distribution channel where tariff was applied as a multiplier to the manufacturer product cost (MPC). T he shipping and overhead costs were applied to each distribution channel on the unit basis. Table

6.6.1 summarizes the values of tariff, shipping costs and overhead used for low-volume and high -volume small diameter ceiling fans.

Table 6.6.1 T ariff, Shipping Cost and Overhead for Low -V olume and High -V olume Small Diameter Ceiling Fans

Product Type Low -Volume Ceiling Fan High -Volume

Small Diameter

Ceiling Fan

Distribution

Channel Manufacturer 

Home Center 

Consumer Manufacturer 

Wholesaler 

Contractor 

Consumer Manufacturer 

Showroom 

Consumer Manufacturer 

Dealer 

Customer

Tariff 4.7% of MSP 4.7% of MPC 4.7% of MSP

Shipping cost $2.50/unit $4.25/unit $2.50/unit

Overhead $2.50/unit $2.50/unit $2.50/unit

6.7 SALES TAX

The sales tax represents state and local sales taxes that are applied to the purchase price. The sales tax is a multiplicative factor that increases the purchase price. DOE derived state and local taxes from data provided by the Sales Tax Clearinghouse

. 6 DOE derived populationweighted average tax values for each Census division and large state, as shown in Table 6.7.1

. See Appendix 6A.3 for the state- level sales tax data

.

6-13Table 6.7.1 Average Sales Tax Rates by Census Division and Large State

Census

Division/ State 2013 Popu lation Tax Rate (2014)

%

New England 14,618,806 5.69

Middle Atlantic 21,673,140 6.63

East North Central 46,662,180 6.91

West North Central 20,885,710 7.09

South Atlantic 42,230,787 6.07

East South Central 18,716,202 8.02

West South Central 11,435,411 8.65

Mountain 22,881,245 6.44

Pacific 13,040,657 5.30

New York 19,651,127 8.40

California 38,332,521 8.45

Texas 26,448,193 7.90

Florida 19,552,860 6.65

Population weighted av era g e 7.108

Source: The Sales Tax Clearinghouse at https://thestc.com/STRates.stm (Accessed on January 10, 2014).

6.8 OVERALL MARKUPS

The overall markup for each distribution channel includes the appropriate markups, sales tax, tariff, shipping cost and overhead. DOE used the baseline markup to estimate the purchase price of baseline models, given the manufacturer cost of the baseline models. As stated previously, DOE considers baseline models to be products sold under existing market conditions ( i.e., without new energy conservation standards). The following equations show how DOE

determine d the purchase price for baseline models depending on their product type and

distribution channel.

• Low -Volume Ceiling Fans through Home Improvement Center or Wholesaler; High

Volume Small Diameter Ceiling Fans through Dealer

PP BASE = [( COST MFG × MU MFG ) × ( 1 + Tariff ) + Cost sh ipping

, over h ead ]

× MU BASE

_ HIC / WHOLE / Deale r × Tax sales

• Low -Volume Ceiling Fans through Showroom

PP BASE = [( COST MFG × ( 1 + Tariff ) + Cost sh ipping

, over h ead ) × MU MFG ]

× MU BAS E Sh owroom × Tax sales

6-14• High -Volume Large Diameter Ceiling Fans through Dealer

PP BASE = COST MFG × MU MFG × MU BASE

_ Dealer × Tax sales

Where:

PP BASE = purchase price for baseline models,

COST MFG = manufacturer cost for baseline models,

MU MFG = m anufacturer markup,

MU BASE _HIC/WHOLE/Dealer = b aseline markup for home improvement center or wholesaler or

dealer

, MU BASE_Showroom = baseline markup for showroom,

MU BASE_ Dealer = baseline markup for dealer, Tariff = tariff, as percent of the cost

, Cost sh ipping

, ov erh ead = shipping and overhead costs, and

Tax sales = s ales tax

Similarly, DOE used the incremental markup to estimate changes in the purchase price, given changes in the manufacturer cost from the baseline model cost resulting from an energy conservation standard to raise product energy efficiency. The total purchase price for more

energy -efficient models is composed of two components: the purc hase price of the baseline model and the change in purchase price associated with the increase in manufacturer cost to meet the new energy conservation standard. The following equation shows how DOE used the incremental markup to determine the purchase pri ce for more energy

- efficient models ( i.e., models meeting new energy conservation standards).

• Low -Volume Ceiling Fans through Home Improvement Center or Wholesaler; High

Volume Small Diameter Ceiling Fans through Dealer

PP STD = PP BASE + [( ∆ COST MFG × MU MFG ) × ( 1 + Tariff ) + Cost sh ipping

, over h ead ]

× MU INCR

_ HIC / WHOLE / Dealer × Tax sales

• Low -Volume Ceiling Fans through Showroom

PP STD = PP BASE + [( ∆ COST MFG × ( 1 + Tariff ) + Cost sh ipping

, over h ead ) × MU MFG ]

× MU INC R Sh owroom × Tax sales

• High -Volume Large Diameter Ceiling Fans through Dealer

PP STD = PP BASE + ( ∆ COST MFG × MU MFG × MU INCR

_ Dealer × Tax sales )

6-15Where:

PP STD = purchase price for models meeting new energy conservation standards,

PP BASE = purchase price for baseline models,

Δ COST MFG = change in manufacturer cost for more energy

- efficient models,

MU MFG = m anufacturer markup,

MU INCR _HIC/WHOLE/Dealer = i ncreme ntal markup for home improvement center, wholesaler

or dealers

, MU INCR_Showroom = incremental markup for showroom,

MU INCR_Dealer = incremental dealer markup, Tariff = tariff, as percent of the cost,

Cost sh ipping

, over h ead = shipping and overhead costs, and

Tax SALES = s ales tax

National average baseline and incremental markups for each market participant are

summarized in Table 6.8.1 and Table 6.8.2 for ceiling fan s.

Table 6.8.1 Markups for Low -V olume Ceiling Fans

Distribution

Channel Manufacturer  Home

Center  Consumer Manufacturer 

Wholesaler  Contractor
 Consumer Manufacturer 

Showroom  Consumer

Baseline Incremental Baseline Incremental Baseline Incremental

Manufacturer 1.37 1.37 1.37

Home Center 1.50 1.14

Wholesaler 1.25 1.10

Contractor 1. 10 1. 10

Showroom 2.00 1.52

Sales Tax 1.071 1.071 1.071

Table 6.8.2 Markups for High -V olume Ceiling Fans

Distribution

Channel Manufacturer  Dealer 

Customer Manufacturer  In

- house Dealer

 Customer

Baseline Incremental Baseline Incremental

Manufacturer 1.37 1.37

Dealer / In

- house

Dealer 1.74 1.21 1.74 1.21

Sales Tax 1.071 1.071 1.071 1.071

6-16REFERENCES

1. RS Means Company Inc. Electrical Cost Data: 36th Annual Edition. 2013. Kingston,

MA.

2. Energy Information Administration. Annual Energy Outlook 2013 with Projections to

2040. Report No. DOE/EIA-03832013. Washington, D.C. http://www.eia.doe.gov/oiaf/aeo/

3. SEC 10-K Reports. U.S. Security and Exchange Commission. Various dates, 2008-2012. (Last Accessed April 2, 2014.) http://www.sec.gov/

4. U.S. Census Bureau. 2007 Annual Retail Trade Survey. Building Material and Supplier Dealer. 2007 (Last Accessed April 2, 2014) http://www.census.gov/retail/arts/historic_releases.html

5. U.S. Bureau of the Census. 2007 Annual Wholesale Trade Report, NAICS 423620: Electrical and Electronic Appliance, Television and Radio Set Merchant Wholesaler. 2007. Washington, DC. http://w ww.census.gov/wholesale/index.html

6. Sales Tax Clearinghouse, Inc. State Sales Tax Rates Along with Combined Average City and County Rates. 2014. (Last Accessed January 10, 2014.) http://thestc.com/STrates.st m

6-17CHAPTER 7. ENERGY USE ANALYSIS

TABLE OF CONTENTS

7.1 INTRODUCTION ........................................................................................................... 7-1

7.2 ENERGY USE CALCULATION ................................................................................... 7-2

7.3 INPUTS FOR LOW

- VOLUME CEILING FANS .......................................................... 7-2

7.3.1 Sample of Purchasers ........................................................................................... 7-2

7.3.2 Operating Hours at Each Speed and Standby ...................................................... 7-2

7.3.3 Power Consumption at Each Speed and Standby ................................................ 7-4

7.4 INPUTS FOR HIGH

- VOLUME CE ILING FANS ......................................................... 7-5

7.4.1 Sample of Purchasers ........................................................................................... 7-5

7.4.2 Operating Hours at Each Speed ........................................................................... 7-5

7.4.3 Power Consumption during Operation and Standby ........................................... 7-6

7.5 ANNUAL ENERGY CONSUMPTION BY EFFICIENCY LEVEL ............................. 7-7

REFERENCES ............................................................................................................................ 7-9

LIST OF TABLES

Table 7.4.1 Percentage of high -speed power used for medium and low speed ................ 7-6

Table 7.5.1 Average Annual Energy Use and Savings for Low-Volume Standard Ceiling Fans ................................................................................................... 7-7

Table 7.5.2 Average A nnual Energy Use and Savings for Low-Volume Hugger Ceiling Fans ................................................................................................... 7-7

Table 7.5.3 Average Annual Energy Use and Savings for High- Volume Small

Diameter Ceiling Fans ................................................................................... 7-8

Table 7.5.4 Average Annual Energy Use and Sav ings for High

- Volume Large

Diameter Ceiling Fans ................................................................................... 7-8

LIST OF FIGURES

Figure 7.3.1 Distribution of operating hours for each census division and

subdivision. .................................................................................................... 7-4

7-iCHAPTER 7. ENERGY USE ANALYSIS

7.1 INTRODUCTION

To carry out the life- cycle cost (LCC) and payback period (PBP) analysis described in chapter 8, the U.S. Department of Energy ( DOE ) must determine the energy savings t hat

consumers will experience from more -efficient products. This chapter describes how DOE determined the annual energy consumption of ceiling fans at various efficiency levels

.

The goal of the energy use analysis is to generate a range of energy use values that reflects actual use by purchasers in the U.S

. DOE estimated annual field energy use for ceiling fans by combining the power consumption estimated in the engineering analysis with estimat es of the distribution of annual operating hours for ceiling fans

. The engineering analysis described in chapter 5 reports power consumption based on the DOE test procedure. The test procedure produces standardized results that serve as the basis for comp aring the performance of appliances

under uniform conditions. Actual energy usage in the field often differs from that estimated by the test procedure because of variation in operating conditions, the behavior of users, and other

factors

.

DOE estimated operating hours for low-volume ceiling fans by using data from a study that surveyed ceiling fan owners. Since the vast majority of low

- volume ceiling fans operate at three speeds, DOE considered energy consumption and hours of operation at three speeds in the energy use analysis. DOE e stimated operating hours for high-volume ceiling fans by using

feedback from manufacturers.

In recognition of the fact that each ceiling fan installation is unique, variability and uncertainty are included in the analysis by calculating the energy use for a representative sample

of ceiling fan pu rchases. This method of analysis, referred to as a Monte Carlo method, is explained in more detail in chapter 8. Results of the energy use analysis for each representa tive fan were derived from 10,000 sample purchases . DOE then used the range of energy use results

in the LCC and PBP analyses, and the average of the energy use results in the NIA analysi s.

For this preliminary analysis, when DOE estimated the energy use of a particular lowvolume hugger fan efficiency level , DOE assumed that the energy use was not affected by potential standards on the low-volume standard product class (and vice- versa).

7-17.2 ENERGY USE CALCULATION

For each sample of representative fan analyzed, DOE calculated the annual energy use by combining power consumption with operating and standby hours, using the following equation:

Annual Energy Use = �� W

i × OH i i=H

, M

, L �

+ W Sb × OH Sb

Eq. 7.1

W here:

W

i = power consumption at a given speed,

OH i = annual operating hours at a given speed,

H = h igh speed,

M = medium speed,

L = low speed,

W

Sb = power consumption in standby mode, and

OH Sb = operating hours in standby mode.

7.3 INPUTS FOR LOW

- VOLUME CEILING FANS

7.3.1 S ample of Purchasers

DOE has included only residential applications in the energy use analysis of low-volume ceiling fans. Although some low- volume fans are used in commercial or industrial settings, DOE believes that they represent a very small portion of the total market for low -volu me ceiling fans. DOE also believes that many commercial applications for low -volume ceiling fans, such as hotel rooms, would have hours of operation that are similar to the hours of operation in residential applications. As a result, DOE has focused on the energy use of low -volume fans in residential setting s.

DOE used the Energy In formation Administration (EIA) 2009 Residential Energy Consumption Survey (RECS) 1 to choose a random sample of households in which new ceiling

fans could be installed. RECS is a national sample survey of housing units that collects statistical information 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 collected data

on 12,083 housing units, and was constructed by EIA to be a national representation of the household population in the Unite d States.

In creating the sample of RECS households, DOE used the subset of RECS records that

met the criterion that the household had a t least one ceiling fan. DOE chose a sample of 10,000 households from RECS to estimate annual energy use for low-volume ceiling fans. Because

RECS provides no means of determining the type of ceiling fan in a given household, DOE used the same sample for standard and hugger product classes

.

7.3.2 Operating Hours at Each Speed and Standby

Although RECS contains information on o peration for many appliances, it contains little information on the operation of ceiling fans within each household. RECS reports only the

7-2number of ceiling fans in the household and qualitatively how often the most- used ceiling fan was operated during the summer months.

DOE used data from a study that surveyed ceiling fan owners ( the Lawrence Berkeley National Laboratory (LBNL) report titled “ Ceiling Fan and Ceiling Fan Light Kit Use in the

U.S. ” 2 ) to estimate the operating hours for each sampled RECS household. In that study, the authors asked a nationally representative sample of more than 2,500 ceiling fan users to report their ceiling fan operating hours for high, medium, and low speeds. The LBNL study reported a

distribution of operating hours , with an average of 6.45 hours of operation per day. Survey respondents reported that fans were run an average of 41 percent of the time at high speed, 37

percent at medium, and 22 percent at low. Although other studies of ceiling fan operation have been performed, th e L BNL study is the only one that provides a distribution of operating hours based on the reported fraction of time spent at each speed. This distribution can be used for estimating a range of field energy use.

DOE used the operating hours reported in the LBNL study for high, medium, and low speeds. Although some low-volume fans have more or fewer than three speeds, the vast majority of models have three speeds. Therefore, DOE believes that three speeds is representative of the range of speed settings for lo w- volume ceiling fans.

DOE is aware that ceiling fan operating hours vary depending on the geographic location

within the U.S. Fo r example, respondents in the LBNL study indicated that ceiling fans are operated more often in the southern states, and less frequently on the Paci fic coast. DOE incorporated this geographic variation when estimating the annual operating hours for each sampled RECS household. For each household, DOE randomly s ampled a value from the

distribution of operating hours from the LBNL study fo r households in the same census division. Figure 7.3.1 shows the range of operating hours used for households from each census division

and subdivision. Black circles in the figure indicate the mean values. Boxes indicate the 25 th and

75 th percentiles, and the error bars indicate the 5 th and 95 th percentiles.

7-3Figure 7.3.1 Distribution of operating hours for each census division and subdivision.

DOE also included hours of standby mode operati on in the energy use analysis. For this analysis, DOE considered standby mode to result from the use of a remote control. For efficiency levels ( EL s) 0 through 3, DOE assigned 7.4 percent of fans to have standby power, because that was the percentage of fans with remote controls reported in the LBNL study. For EL 4, 98

percent of f ans have AC motors, and 2 percent of fans have DC motors. DOE assigned 7.4

percent of AC fans to have standby power, and 100 percent of DC fans to have standby power.

This is consistent with the engineering analysis . For fans with standby power consumption, DOE

calculated the number of standby hours as the total hours in a year that are not spent in high, medium, or low speed. In other words, DOE assumed that fans with standby power consumption did not spend any time in off mode.

7.3.3 Power Consumption at Each S peed and Standby

DOE determined the power consumption at high, medium, and low speed for each representative fan size in the engineering analysis . These values are shown in chapter 5.

DOE used 1.4 w atts as the power consumption value for standby . This value wassuggested by Hunter and ALA as a representative industry value for standby power in lowvolume ceiling fans. (Hunter, No. 9 at p. 71; ALA, No. 39 at p.13)

7-47.4 INPUTS FOR HIGH

- VOLUME CEILING FANS

7.4.1 Sample of Purchasers

DOE has included only commercial and industrial applications in the energy use analysis of high-volume ceiling fans. Although some high-volume fans are used in residentialapplications, DOE believes that they represent a very small portion of the total market for highvolume ceilin g fans. As a result, DOE has focused on the energy use of high-volume fans in commercial and industrial applications

. Similar to low

- volume ceiling fans, DOE created a sample of 10,000 high- volume fans to represent the range of high

- volume ceiling fan ener gy use

.

7.4.2 Operating Hours at Each Speed

DOE found limited publicly available data for high-volume ceiling fans, so DOE used

f eedback from manufacturer s to estimate total hours of operation for high-volume ceiling fans. Manufacturers suggested a range of pos sible hours of operation, depending on industry and application, with 12 hours per day as a representative value. To represent a range of possible operating hours around this representative value, DOE drew 10,000 samples from a uniform distribution between 6 hours per day and 18 hours per day. ( DOE assumed a uniform distribution of operating hours due to the limited availability of information.) DOE requests additional data and information that can be used to refine the estimate of operating hours for high-volume ceiling fans.

DOE used manufacturer feedback to determine the proportion of operating time spent at each speed. Although many high-volume ceiling fans have a continuously- variable speed range, manufacturers referred to the fan speeds using the terms high (at or near maximum RPM), low (at or near minimum RPM), and medium (intermediate RPM). DOE therefore used high, medium, and low speeds to characterize the range of typical operating speeds for high -volume ceiling fans . Manufacturers indicated that high-volume fans spend approximately ten percent of the time at each of high and low speed, and the rest of their time at a medium speed (i.e. approximately 80 percent of the time at medium).

For each sampled fan, DOE chose the proportion of operating time spent at each speed using random values based on the typical values suggested by manufacturers. DOE chose the

percent age of time at medium speed from a uniform distribution between 70 and 90 percent. DOE then chose the percentage of time at high speed from a uniform distribution ranging from

zero percent to the total percentage remaining after the medium-speed percentage was chosen

. DOE then chose the percentage of time at low speed as the total percentage remaining following the choice of medium and high speeds.

For example, if a sample fan were randomly assigned to spend 75 percent of operating hours at medium speed, the percentage of time at high speed would be a random value between 0 and 25 percent (i.e., 100 - 75 = 25). If the sample fan were then randomly assigned to spend 10 percent of its time at high speed, then that fan would spend 15 percent of its time at low speed (i.e., 100 - 75 - 10 = 15).

7-5DOE included hours of standby operation in the energy use analysis for high-volume fans. DOE considered all high- volume small

- diameter fans at the efficiency levels with a DC motor to have standby power, because the engineering analysis included a remote control for this

level. DOE also considered all high -volume large- diameter fans to have standby power, because these fans typically use a variable -frequency drive that consumes standby power. For fans with standby power consumption, DOE calculated the number of standby hours as the total annual hours not spent in high, medium, or low speed.

7.4.3 Power Consumption during Operation and Standby

DOE determined power consumption at high speed for each representative fan in t he engineering analysis. These values are shown in chapter 5. To estimate the power consumption at medium speed, DOE multiplied the high- speed power by the average ratio between high

- speed power and medium-speed power in the low- volume engineering analysis

. DOE used the same approach for low- speed power, using the average ratio between high -speed power and low- speed power from the low-vol ume engineering analysis. Table 7.4.1 shows the percentage of highspeed power used for medium and low speed.

Table 7.4.1 Percentage of high- speed power used for medium and low speed

Speed Percentage of high

- speed power

Medium 53%

Low 23%

DOE assumed 1.4 w atts as the power consumption for standby in high- volume ceiling

fans . This is the same value used for low-volume ceiling fan standby. DOE found limited publicly available data for high

- volume ceiling fa ns , so DOE requests data and information that can be used to refine the estimate of standby power for high-volume ceiling fans.

7-67.5 A NNUAL ENERGY CONSUMPTION BY EFFICIENCY LEVEL

Table 7.5.1 to Table 7.5.4 contain the average annual energy consumption estimated for ceiling fans at the efficiency levels considered in the life-cycle cost, payback period, and national impact analyses

. These tables also show the average annual energy savings, relative to the energy consumption of the baseline efficiency level.

Table 7.5.1 Average Annual Energy Use and Savings for Low

- Volume Standard Ceiling

Fans

EL 44

- inch diameter 52

- inch diameter 60

- inch diameter

Energy Use

(kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr)

0 96 0 145 0 189 0

1 70 25 106 39 139 51

2 64 31 93 52 116 73

3 59 37 82 63 101 88

4 41 55 57 88 70 120

Table 7.5.2 Average Annual Energy Use and Savings for Low- Volume Hugger Ceiling

Fans

EL 44

- inch diameter 52

- inch diameter

Energy Use

(kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr)

0 108 0 131 0

1 79 29 96 35

2 76 32 87 44

3 69 38 77 54

4 48 59 54 78

7-7Table 7.5.3 Average Annual Energy Use and Savings for High- Volume Small

- Diameter Ceiling Fans

EL 36

- inch diameter 56

- inch diameter

Energy Use

(kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr)

0 182 0 232 0

1 170 12 217 15

2 130 52 165 66

3 75 106 95 137

Table 7.5.4 Average Annual Energy Use and Savings for High-Volume Large- Diameter Ceiling Fans

EL 8

- foot diameter 12

- foot diameter 20

- foot diameter

Energy Use

(kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr) Energy Use (kWh/yr) Savings (kWh/yr)

0 1532 0 2115 0 2698 0

1 1473 59 2034 81 2595 104

2 923 609 1274 842 1624 1074

3 456 1076 627 1488 799 1899

7-8REFERENCES

1. U.S. Department of Energy– Energy Information Administration. Residential Energy Consumption Survey. 2009 RECS Survey Data. 2011. Washington, D.C. (Last Accessed March 27, 2014.) http://w ww.eia.gov/consumption/residential/data/2009/

.

2. Kantner, C.L.S., S.J. Young, S.M. Donovan, and K. Garbesi. Ceiling Fan and Ceiling Fan Light Kit Use in the U.S.—Results of a Survey on Amazon Mechanical Turk. July 2013. Lawrence Berkeley National Laborat ory, Berkeley, CA. Report No. LBNL- 6332E. (Last Accessed March 27, 2014) http://www.escholarship.org/uc/item/3r67c1f9

7-9CHAPTER 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

TABLE OF CONTENTS

8.1 INTRODUCTION ........................................................................................................... 8-1

8.1.1 General Approach for Life-Cycle Cost and Payback Period Analysis ................ 8-1

8.1.2 Overview of Life -Cycle Cost and Payback Period Analysis Inputs .................... 8-1

8.2 LIFE

- CYCLE COST INPUTS ........................................................................................ 8-3

8.2.1 Sample of purchasers ........................................................................................... 8-4

8.2.2 Ceiling Fan Diameter ........................................................................................... 8-6

8.2.3 Compliance Date of Standard .............................................................................. 8-7

8.2.4 Base -Case Distribution of Efficiency Levels ....................................................... 8-7

8.2.5 Total Installed Cost .............................................................................................. 8-8

8.2.5.1 Purchase Price ............................................................................................ 8-8

8.2.5.2 Remote Controls ....................................................................................... 8-10

8.2.5.3 Installation Cost ........................................................................................ 8-10

8.2.5.4 Total Installed Cost .................................................................................. 8-10

8.2.6 Operating Cost Inputs ........................................................................................ 8-11

8.2.6.1 Annual Energy Consumption ................................................................... 8-11

8.2.6.2 Electricity Prices ...................................................................................... 8-11

8.2.6.3 Electricity Price Trends ............................................................................ 8-13

8.2.6.4 Repair and Maintenance Cost

................................ ................................... 8-13

8.2.6.5 Lifetime .................................................................................................... 8-14

8.2.6.6 Discount Rates for Low- Volume Ceiling Fans ........................................ 8-17

8.2.6.7 Discount Rates for High- Volume Ceiling Fans ....................................... 8-22

8.3 PAYBACK PERIOD INPUT S ...................................................................................... 8-24

8.4 RESULTS OF LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS ........... 8-25

8.4.1 Low -Volume Standard Ceiling Fans ................................................................. 8-26

8.4.2 Low -Volume Hugger Ceiling Fans .................................................................... 8-28

8.4.3 High

- Volume Small

- Diameter Ceiling Fans ..................................................... 8-30

8.4.4 High

- Volume Large

- Diameter Ceiling Fans ..................................................... 8-32

8.5 REBUTTABLE PAYBACK P ERIOD .......................................................................... 8-35

REFERENCES .......................................................................................................................... 8-37

LIST OF TABLES

Table 8.2.1 Probability of Geographic Location Used for Sampling Ceiling Fan

Purchasers ...................................................................................................... 8-5

Table 8.2.2 Probability of Economic Sector Used for Choosing High-volume Ceiling Fan Purchasers .................................................................................. 8-6

Table 8.2.3 Ceiling Fan Diameter Probability for Each Product Class ............................ 8-7

Table 8.2.4 Percentage of Each Efficiency Level in the Base Case ................................. 8-8

Table 8.2.5 2012 Average Electricity Prices for Each Sector in 2013¢ per kWh ........... 8-12

Table 8.2.6 Purchaser Repair Cost Used for DC Fans in Each Product Class ................ 8-14

Table 8.2.7 Types of Household Debt and Equity by Percentage Shares (%) ................ 8-18

8-iTable 8.2.8 Average Nominal Interest Rates for Household Debt ................................. 8-19

Table 8.2.9 Average Real Effective Interest Rates for Household Debt ........................ 8-19

Table 8.2.10 Average Nominal and Real Interest Rates for Household Equity ............... 8-20

Table 8. 2.11 Average Shares and Rates for Household Debt and Equity ........................ 8-20

Table 8.2.12 Data Used to Calculate Real Effective Mortgage Rate s .............................. 8-22

Table 8.2.13 Risk free rate and equity risk premium, 2011-2013 .................................... 8-23

Table 8.2.14 Weighted Average Real Weighted Average Cost of Capital for

Industrial and Commercial Sectors .............................................................. 8-24

Table 8.4.1 Average LCC and PBP Results for Low-Volume Standard Ceiling

Fans .............................................................................................................. 8-26

Table 8.4.2 Average LCC Savings Relative to the Base Case Efficiency Distribution for Low-Volume Standard Ceiling Fans ................................. 8-26

Table 8.4.3 Average LCC and PBP Results for Low- Volume Hugger Ceiling Fans ..... 8-28

Table 8.4.4 Average LCC Savings Relative to the Base Case Efficiency Distribution for Low-Volume Hugger Ceiling Fans .................................... 8-29

Table 8.4.5 Average LCC an d PBP Results for High- Volume Small

- Diameter Ceiling Fans ................................................................................................. 8-30

Table 8.4.6 Average LCC Savings Relative to the Base Case Efficien cy Distribution for High

- Volume Small

- Diameter Ceiling Fans ..................... 8-31

Table 8.4.7 Average LCC and PBP Results for High-Volume Large

- Diameter Ceiling Fans ................................................................................................. 8-32

Table 8.4.8 Average LCC Savings Relative to the Base Case Efficiency Distribution for High

- Volum e Large

- Diameter Ceiling Fans ..................... 8-33

Table 8.5.1 Daily Operating Hours from the Ceiling Fan Test Procedure ..................... 8-36

LIST OF FIGURES

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP ................. 8-3 Figure 8.2.1 Reference Case National Electricity Price Trends ....................................... 8-13 Figure 8.2.2 Survival Function for Low- and High- Volume Ceiling Fans ...................... 8-16 Figure 8.4.1 Low -Volume Standard Ceiling Fans: LCC Savings Distribution for EL

2................................

................................ .................................................... 8-27 Figure 8.4.2 Range of LCC Savings for Low-Volume Standard Ceiling Fans ................ 8-28 Figure 8.4.3 Low -Volume Hugger Ceiling Fans: LCC Savings Distribution for EL

2................................

................................ .................................................... 8-29 Figure 8.4.4 Range of LCC Savings for Low-Volume Hugger Ceiling Fans .................. 8-30 Figure 8.4.5 High

- Volume Small

- Diameter Ceiling Fans: LCC Savings Distribution

for EL 3 ........................................................................................................ 8-32 Figure 8.4.6 Range of LCC Savings for High- Volume Small

- Diameter Ceiling Fans .... 8-32 Figure 8.4.7 High

- Volume Large

- Diameter Ceiling Fans: LCC Savings Distribution

for EL 2 ........................................................................................................ 8-34 Figure 8.4.8 Range of LCC Savings for High- Volume Large

- Diameter Ceiling Fans .... 8-35

8- iiCHAPTER 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

8.1 INTRODUCTION

The effect of standards on individual purchaser s usually includes a reduction in operating cost and an increase in purchase cost. This chapter describes two metrics used in the analysis to determine the economic impact of standards on individual residential purchaser s.

• Life

- cycle cost (LCC) is the tot al purchaser cost over the life of an appliance or product, including purchase costs and operating costs (which in turn include maintenance, repair, and energy costs). Future operating costs are discounted to the time of purchase and

summed over the lifeti me of the appliance or product.

• Payback period (PBP) measures the amount of time it takes purchaser s to recover the assumed higher purchase price of more energy-efficient products through reduced operating costs.

Inputs to the LCC and PBP analysis are discussed in sections 8.2 and 8.3 respectively. Results for each metric are presented in section 8.4 . Key variables and calculations are presented

for each metric. The calculations discussed here ar e illustrated with a Microsoft Excel spreadsheet available on the U.S. Department of Energy’s rulemaking website for ceiling fans

. 1
Details of the spreadsheet and instructions for using it are discussed in appendix 8A.

8.1.1 General Approach for Life -Cycle Cost and Payback Period Analysis

In recognition of the fact that each ceiling fan installation is unique, variability and uncertainty are analyzed by performing the LCC calculations for a representative sample of

individual purchasers. The results are expressed as the number of installati ons experiencing economic impacts of different magnitudes. The LCC analyses explicitly model both the uncertainty and the variability in the model’s inputs using Monte Carlo simulation and probability distributions (see appendix 8B).

DOE displays LCC resu lts as distributions of impacts compared to base

- case conditions. Results, presented in section 8.4 , were derived from 10 ,000 samples for each Mont e Carlo simulation run. To illustrate the implications of the analysis, DOE generated plots that depict the

variation in LCC for each efficiency level considered

.

For this preliminary analysis, when the potential impact of a particular low -volume hugge r fan efficiency level was being analyzed, DOE assumed that a standard would be set at the equivalent efficiency level for fans in the low -volume standard product class (and vice- versa).

8.1.2 Overview of Life -Cycle Cost and Payback Period Analysi s Inputs

The LCC is the total purchaser cost over the life of the product, including installed cost and operating cost. Operating costs are discounted to the time of purchase and summed over the lifetime of the product. The PBP is the increase in purchase cost of a higher efficiency product divided by the change in operating cost during the first year of the product ’s life . It represents the

8-1number of years that it will take the purchaser to recover the increased purchase cost through decreased operating costs , based on the costs in the first year of the product’s life. Operating

costs are not discounted in the calculation of PBP.

Inputs to the LCC and PBP analysis are categorized as: (1) inputs for establishing the total installed cost; and (2) inputs for calculati ng the operating cost.

The primary inputs for establishing the total installed cost are:

• Baseline manufacturer selling price : The price charged by the manufacturer to a retailer

for a product at the baseline efficiency level . The manufacturer selling price ( MSP ) includes a markup that converts the cost of production ( i.e., the manufacturer cost) to a

MSP.

• Standard- level manufacturer selling price increase : The incremental change in MSP associated with producing a product at each of the higher efficiency level s.

• Markups and sales tax : T he shipping costs, tariffs, retail margins

, and state and local retail sales taxes associated with converting the MSP to a purchaser price.

• Installation cost : The sum of the labor and material costs associated with installing the product after purchase.

The primary inputs for calculating the operating cost are:

• Product energy consumption : The site energy use associated with operating a product.

• Electricity p rices : The prices purchasers paid for electricity in a rece nt year.

• Electricity price trends : The Energy Information Administration’s (EIA’s) Annual Energy Outlook 2014 ( AEO ) 2 is used to forecast electricity prices into the future. For the results presented in this chapter, DOE used the AEO reference case to forecast future energy prices.

• Maintenance costs : The labor and material costs associated with maintaining the operation of the product.

• Repair costs : The labor and material costs associated with repairing or replacing components that have failed.

• Lifetime : The age at which the product is retired from service.

• Discount rate : The rate at which future costs and savings are discounted to establish their present value.

Figure 8.1.1 graphically depicts the relationships between the installed cost and operating cost inputs for the calculation of the LCC and PBP. As noted earlier, most of the inputs are characterized by probability distributions that capture variability in the input variables. All of the inputs depicted in Figure 8.1.1 are discussed in sections 8.2 and 8.3

.

8-2Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

8.2 LIFE

- CYCLE COST INPUTS

Life

- cycle cost is the total purchaser cost over the life of a product, including installed cost and operating costs. Operating costs are discounted to the time of purchase and summed over the lifetime of the product. Life-cycle cost is defined by the following equation:

Eq. 8.1

Where:

LCC = life

- cycle cost ($),

IC = total installed cost ($), ∑ = sum over the lifetime, from year 1 to year N, where N = lifetime of product (years),

OC = operating cost ($),

r = discount rate, and

t = year for which operating cost is being determined. 

# ∑

= 

### + += N

t t

t 

### r OC ICLCC

1 

### )1 /( Baseline Manufacturer

Selling Price

Std

- Level Manufacturer Selling Price Retailer Markup

Sales Tax

Installation Cost Total Installed Cost

Energy Consumption Equipment Price

Lifetime Operating

Cost Annual Energy Cost

Product Lifetime Repair and Maintenance Cost

Discount Rate

Energy Price Trends Annual Operating

Cost Payback Period Life

- Cycle Cost

Energy Prices

8-3DOE expres ses all the costs in 2013$. Total installed cost, operating cost, lifetime, and discount rate are discussed in the following sections. In the LCC analysis, the year of product purchase is assumed to be 2019 , the effective date of the en ergy conservation standard.

8.2.1 Sample of purchasers

In order to determine the relevant usage patterns, electricity prices, an d discount rates,

DOE identified the sector(s) in which each product is used. DOE included only residential applications in the analysis of low- volume cei ling fans ; and only commercial and industrial applications in the analysis of high-volume ceiling fans. DOE understands that some low-volume fans are used in commercial or industrial settings, and some high-volume fans are used in residential applications. DOE believes , however, that these fans represent very small portion s of

the total market . DOE has therefore excluded these portions from the current analysis.

For low- volume ceiling fans, DOE used the Energy In formation Administration (EIA) 2009 Residential Energy Consumption Survey (RECS) 3 to choose a random sample of households in which new ceiling fans could be installed. RECS is a national sample survey of housing units that collects statistical information 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 collected data on 12,083 housing units, and was constructed by EIA to be a national representation of the household population in the United States. In creating the sample of RECS households, DOE used the subset of RECS records that met the criterion that the

household had a t least one ceiling fan. Because RECS provides no means of determining the type of ceiling fan in a given household, DOE used the same sample of 10,000 RECS households for standard and hugger low-volume fans.

DOE created a s ample of 10,000 high-volume fan purchasers to analyze the high -volume ceiling fan product classes . Due to a lack of data on the location of high-volume fans, DOE assumed that the geographic distribution of high- volume ceiling fan purchasers is similar to the geographic distribution of low- volume ceil ing fan purchasers. Therefore, DOE chose the location of high-volume purchasers according to the geographic distribution of households in RECS. DOE assumed that each ceiling fan was installed in the same geographic location as the ceiling

fan’s purchaser.

Table 8.2.1 shows the probability used for choosing the geographic location of each purchaser for low- and high

- volume ceiling fans . These are the probabilities of household locations reported in RECS, and the table reports them by the reportable domains in RECS.

8-4Table 8.2.1 Probability of G eographic Location U sed for S ampling C eiling Fan

P urchasers
State or group of states (RECS reportable domains) Probability (%)

Connecticut, Maine, New Hampshire, Rhode Island, Vermont 2.2

Massachusetts 1.7

New York 4.3

New Jersey 2.6

Pennsylvania 4.2

Illinois 4.4

Indiana, Ohio 6.4

Michigan 3.3

Wisconsin 1.9

Iowa, Minnesota, North Dakota, South Dakota 3.4

Kansas, Nebraska 1.8

Missouri 2.3

Virginia 2.7

Delaware, District of Columbia, Maryland, West Virginia 3.2

Georgia 3.6

North Carolina, South Carolina 5.6

Florida 7.1

Alabama, Kentucky, Mississippi 4.8

Tennessee 2.4

Arkansas, Louisiana, Oklahoma 4.4

Texas 8.8

Colorado 1.6

Idaho, Montana, Utah, Wyoming 1.7

Arizona 2.5

Nevada, New Mexico 1.6

California 8.7

Alaska, Hawaii, Oregon, Washington 2.9

Total 100 .0

In order to identify the correct electricity price and discount rate, DOE estimated the percentage of high -volume ceiling fan purchasers in the commercial and industrial sectors

. (DOE included agricultural applications within the industrial sector.) For high- volume small

- diameter

8-5fans, DOE estimated the ratio in floorspace between likely locations a fan could be installed in

commercial settings to that in industrial settings. Floorspace estimates were taken from the 2010 U.S. Lighting Market Character ization 4 , which extrapolates estimates for commercial floorspace

from the 2003 Commercial Buildings Energy Consumption Survey (CBECS) and industrial floorspace from the 2006 Manufacturing Energy Consumption Survey (MECS) to 2010 values using measured growth trends. DOE assumed the ratio between commercial and industrial floorspace remains constant over the analysis period

. 4 For high-volume large- diameter fans, DOE used manufacturer feedback about common applications for these fans. Table 8.2.2 shows the probability used for choosing the economic sector of each purchaser for high- volume ceiling

fans.

Table 8.2.2 Probability of E conomic S ector U sed for Choosing High-volume C eiling Fan

P urchasers

Economic s ector Small

- d iameter Large

- d iameter

Commercial 80% 20%

Industrial 20% 80%

8.2.2 Ceiling Fan D iameter

DOE developed information for representative fans of several diameters in the engineering analysis. DOE used a distribution of diameters to determine the diameter of fan for each purchaser in the LCC. For low-volume ceiling fans and high- volume small

- diameter ceiling fans, DOE estimated the distribution of diameters using the distribution of models currently seen on the market. This assumes that the distribution of models is equivalent to the distribution of fans sold. For high- volume large

- diameter ceiling fans, DOE used manufacturer feedback to

estimate the distribution of diameters. Table 8.2.3 shows the probability used when choosing ceiling fan diameter for each product class.

8-6Table 8.2.3 Ceiling Fan Diameter Probability for Each Product Class

Diameter Probability (%)

Low

- volume standard

44

- inch 21.1

52

- inch 72.5

60

- inch 6.5

Low

- volume hugger

44

- inch 46.2

52

- inch 53.8

High

- volume small

- diameter

36

- inch 33.3

56

- inch 66.7

High

- volume large

- diameter

8

- foot 16.4

12

- foot 16.4

20

- foot 67.2

8.2.3 Compliance Date of Standard

DOE cal culated the LCC and PBP for purchasers as if they each woul d purchase a new product in 2019.

8.2.4 Base- Case Distribution of Efficiency Levels

DOE estimated t he base

- case distribution market share across efficiency levels using the distribution of models currently seen on the market. This assumes that the distribution of models is equivalent to the distribution of fans sold. For low-volume ceiling fans, DOE used data from the California Energy Commission online database of standard ceiling fans sold in the state of

California and data obtained from in- store visits of major retailers . Models were binned according to their efficiency metric to arrive at the base

- case distribution for the year 2014. DOE

used the consumer-choice model with parameters specific to low -volume ceiling fans (see chapter 9 of this TSD for more detail) to estimate the base

- case energy efficiency distribution for 2019. DOE assumed that that hugger ceiling fans had the same base -case energy distribution as

standard fans in 2014.

For high-volume large- diameter fans, DOE performed a model count of available units online and placed units into appropriate efficiency bins based on available technical data. For high -volume, small- diameter ceiling fans, DOE employed the consumer-choice model with parameters specific to high

- volume ceiling fans (see chapter 9 of this TSD for more detail) to
estimate the base

- case efficiency distribution for 2019.

8-7Table 8.2.4 shows the estimated base

- case distribution of efficiency levels in 2019 for all product classes. This table shows the percentage of each product’s shipments that are made up of each efficiency level ( EL ) . Note that the maximum EL for each product class represents the max

tech level.

Table 8.2.4 Percentage of Each Efficiency Level in the Base Case

EL Low

- Volume High

- Volume

Standard Hugger Small

- d iameter Large

- d iameter

Baseline 3.3 3.2 25.2 8.7

1 4.9 4.7 24.3 34.8

2 29.6 28.4 37.6 56.5

3 58.4 59.4 12.9 0

4 3.8 4.3

8.2.5 Total Installed Cost

DOE calculated the total installed cost based on the following equation:

Total installed cost = PP + ( RC × TAX )

Eq. 8.2

Where:

PP = p urchase price,

RC = retail price of ceiling fan remote control for some fans with AC motors, and

TAX = sales tax.

8.2.5.1 P urchase P rice

DOE estimated the purchase price (PP) by combining MSP with tariffs, import costs, retail markups, and sales tax . Chapter 6, provides results and details of the analysis.

Examination of historical price data for certain appliances and equipment that have been subject to energy conservation standards indicates that the assumption of constant real prices and costs may, in many cases, overestimate long -term trends in appliance and equipment prices. Economic literature and historical data suggest that the real costs of these products may in fact trend downward over time according to “learning” or “experience” curves. Desroches et al. (2013) summarizes the data and literature currently available that is relevant to price forecasts for selected appliances and equipment. 5

In light of these data and DOE’s aim to improve the accuracy and robustness of its analyses, DOE decided to assess future costs by incorporating learning over time. There is a n extensive body of literature that discusses the learning or experience curve phenomenon,

8-8typically from observations in the manufacturing sector. Based on the experience curve approach , the real cost of production is related to the cumulative production, or experience, with a product. Typically, DOE uses the shipments data to estimate cumulative shipments, as equivalent to cumulative production of the product. However, there are in suffi cient shipment data to make robust experience curve estimation of the relationship between cumulative shipments and the cost of production for ceiling fans. Therefore, DOE projected the future price

trend of ceiling fans based on the appropriate Producer P rice Index (PPI) series fit with an exponential function, with year as the explanatory variable. The PPI is a measure of the average change in price that US producers receive for their good. In this case, the functional form looks like the following:

Y = a ∙ e bX
Eq. 8.3

where Y is the appropriate price index, X is the time variable, a is the constant, and b is the slope parameter of the time variable.

DOE adopted a component- based approach to price learn ing for ceiling fans by identifying fan components most likely to undergo learning over the forecast period. Using this approach, price learning only applies to the cost of the component and not to the total cost of the ceiling fan. DOE determined that ceiling fan motors are the most likely component to undergo price learning and analyzed long-term trends in the appropriate PPI series from the Bureau of Labor Statistics for alternating current (AC) induction motors and brushless dire ct current ( DC )

motors. The se PPI data reflect nominal prices, adjusted for product quality changes. An inflationadjusted (deflated) price index was calculated by dividing the PPI series by the Gross Domestic Product Chained Price Index for each product. The deflated price indices are now presented in

2013 values.

DOE obtatined historical PPI data for “Fractional horsepower motors (rated at less than 746 watts)” from 1967 to 2012 from the Bureau of Labor Statistics as a proxy for AC motors in ceiling fans

. a DOE understands that this PPI series encompasses products not specific to AC motors in ceiling fans , but given the similar functionality of these products, DOE assumed the price trend observed in PPI data for “Fractional horsepower motors (rated at less than 746 watts) ” to be representative of AC motors in ceiling fans . DOE performed an exponential trend line fit to the adjusted PPI data with an R -square value of 0.409. The data show significant deviations from an exponential trend expected from price learning. Given the poor fit, DOE assumed no price learning associated with AC motor ceiling fans for its projections

.

DOE did not find any historical data specifically for DC motors. For its analysis, DOE

assumed that it is the circuitry and electronic controls associated with DC motors would be most potentially affected by price learning , based on information provided by a ceiling fan technical expert. DOE obtained PPI data on “ Semiconductors and related device mfg” between 1967 and

2012 to estimate the historic price trend in electronic components

. b The regression performed as

a PCU3353123353121

b PCU334413334413

8-9an exponential trend line fit results in an R-square of 0.989, with an annual price decline rate of 6
percent. DOE notes that this price decline rate only applies to the electronics included in the motor and not the total price of the motor. DOE assumed the cost difference between the EL corresponding to a DC motor (EL 4 and EL 3 for low- and high-volume fans, respectively) and the EL below a DC motor ( EL 3 and EL 2 for low- and high- volume fans, respectively) as the estimate for the price affected by price learning. The final estimated exponential function is:

Y = 729 .3 e ( −0

. 06 ) X
Eq. 8.4

DOE derived an index for the electronics and controls for DC motors, with 2013 equal to 1, to forecast prices . I n 2019 , the compliance dat e for amended standards used in the LCC and PBP analysis, the index has a value of 0.690. This value is only applied to those ELs tha t have a

DC motor and only the portion of the price associated with electronics and controls. In the case of low-volume ceiling fans, DOE applied the learning rate to the 2% of ceiling fans with a DC

motor and unconventional blades included in EL3 of the a ggregate cost

- efficiency curve (see chapter 5 of this TSD for more details).

8.2.5.2 Remote Controls

The cost of a remote control was included in the MSP of all DC -motor low -volume ceiling fans from the engineering analysis. The cost of a remote control , however, was not

included in th e MSP of AC -motor ceiling fans. According a study that surveyed ceiling fan

owners (the Lawrence Berkeley National Laboratory (LBNL) study titled “ Ceiling Fan and Ceiling Fan Light Kit Use in the U.S.”)

, 6 approximately 7.4 percent of ceiling fans in t he U.S.

have remote controls. To ensure that the total installed cost of fans with AC motors reflected the existence of remote controls, DOE added the cost of a remote control to the purchase price of 7.4 percent of AC

- motor fans . DOE estimated the retail price of a remote control as $37 plus tax

because this was the average price found during a shelf survey of ceiling fan remote controls available at Home Depot and Lowe ’s.

DOE added the cost of a remote to 7.4 percent of purchases in low-volume ELs 0 through 3, because those ELs use only AC motors. For EL 4, 98 percent of fans have AC motors, and 2 percent of fans have DC motors. DOE therefore added the cost of a remote to 7.4 percent of the

AC fans in EL 4

.

8.2.5.3 Installation Cost

DOE is not aware of any data that suggest the cost of installation changes as a function of efficiency for ceiling fans . DOE therefore assumed that installation costs are the same regardless of efficiency level and do not impact the LCC or PBP. As a result, DOE did not include

i nstallation costs in the LCC and PBP analysis.

8.2.5.4 Total Installed Cost

T he summary tables in section 8.4 show the average total installed cost , weighted by ceiling fan diameter, for each EL considered in the LCC analys is.

8-108.2.6 Operating Cost Inputs

DOE defined the operating cost by the following equation:

Operating Cost = ( AEC × EP ) + RC

Eq. 8.5

Where:

A EC = annual energy consumption,

EP = electricity price

, and

RC = repair cost associated with component failure

.

8.2.6.1 Annual Energy Consumption

DOE calculated the annual energy use for each sample purchaser and representative ceiling fan . C hapter 7 presents the annual energy consumption results and details

.

8.2.6.2 Electricity Prices

Using data from EIA, D OE derived average annual electricity prices in 2012 for the 27 reportable domains in RECS

. For each purchase sampled, DOE applied the average electricity price for the reportable domain in which the purchase was located. Table 8.2.5 show s the average electricity price for each sector by reportable domain

.

DOE derived average e lectricity prices from data based on EIA Form 861. 7 Those data include, for every utility that serves final consumers, annual electricity sales in kilowatt -hours; revenues from electricity sales; and number of purchaser s in the residential, commercial, and

industrial sectors. For each utility, DOE estimated average electricity price s for each sector b y dividing the sector’s revenues by the sector’s sales volume. DOE then calculated annual electricity prices by weighting each utility’s average price by the number of electricity consumers in each utility’s service area within each reportable domain. DOE converted the electricity prices to 2013$ using the GDP price deflator published by the Bureau of Economic Analysis

. 8

8-11Table 8.2.5 2012 Average Electricity Prices for Each Sector in 2013¢ per kWh

State or group of states Residential

Sector Commercial

Sector Industrial

Sector

Connecticut, Maine, New Hampshire, Rhode Island, Vermont 16.5 14.0 13.2

Massachusetts 15.2 14.5 12.3

New York 19.0 15.9 8.1

New Jersey 16.1 13.5 7.9

Pennsylvania 13.1 10.8 7.1

Illinois 11.6 9.1 7.0

Indiana, Ohio 11.5 9.9 6.8

Michigan 14.4 11.5 8.5

Wisconsin 13.4 10.7 7.8

Iowa, Minnesota, North Dakota, South Dakota 11.1 8.8 7.8

Kansas, Nebraska 10.9 9.8 9.5

Missouri 10.4 8.6 6.2

Virginia 11.3 8.7 7.1

Delaware, District of Columbia, Maryland, West Virginia 12.4 10.3 7.5

Georgia 11.4 10.1 7.9

North Carolina, South Carolina 11.4 9.4 6.7

Florida 11.6 10.0 8.3

Alabama, Kentucky, Mississippi 10.6 10.2 7.1

Tennessee 10.3 10.7 7.9

Arkansas, Louisiana, Oklahoma 9.2 8.1 6.4

Texas 11.2 9.9 7.8

Colorado 11.6 9.7 10.2

Idaho, Montana, Utah, Wyoming 9.9 8.3 6.4

Arizona 11.5 10.1 7.3

Nevada, New Mexico 11.9 9.6 7.4

California 15.6 14.2 10.7

Alaska, Hawaii, Oregon, Washington 12.2 11.5 6.8

8-128.2.6.3 E lectricity Price Trends

To arrive at prices in future years, DOE multiplied the average 2012 electricity prices by

the forecast of annual average price changes for each census division from AEO

. 2 For each purchase sampled, DOE applied the projection for the census division in which the purchase was located. Figure 8.2.1 shows the national electricity price trend for each sector.

DOE us ed the AEO Reference Case scenarios for the nine census divisions. The

reference case is a business- as -usual estimate, given known market, demographic, and technological trends. DOE also included AEO High Growth and AEO Low Growth scenarios in the analysis, but DOE is only presenting results from the Reference Case scenario in this chapter.

To estimate the trend s after 2040, DOE followed past guidelines provided to the Federal Energy Management Program (FEMP) by EIA and used the average rate of change during 2025–2040.

Figure 8.2.1 Reference Case National Electricity Price Trend s

8.2.6.4 Repair and Maintenance Cost

DOE i ncluded a purchaser repair cost for 6.5 percent o f ceiling fans with DC motors. Following the framework document, DOE received comments from several stakeholders that DC motors are less reliable than AC motors (see chapter 2 for full discussion). Although many ceiling fan motors have a long or lifetime w arranty, DOE understands that purchaser s may still experience a cost when a ceiling fan motor fails. To account for this cost , DOE has included a repair cost for DC

- motor fans that represents the repair cost that purchasers are likely to experience while operating a DC

- motor fan , in excess of the repair cost associated with an AC

motor fan

.

8-13DOE also included a higher warranty factor for DC motors in the engineering analysis. This factor accounts for extra warranty costs borne by the manufacturer for DC fans, and it adds to the overall higher MSP of DC fans. Chapter 5 contains details on the warranty factor.

DOE estimated the excess rate of failure for DC motors to be 6.5 percent of purchases, based on an estimate from a ceiling fan technical expert. 9 DOE therefore included the purchaser repair cost for 6.5 percent of the 2 percent of low-volume fans in EL 4 that have DC motors. DOE also included the pur chaser repair cost for 6.5 percent of high -volume fans in EL 3. DOE assumed that each repair would occur at the middle of the sampled purchase’s lifetime. DOE estimated the cost of each repair based on feedback from manufacturers. Table 8.2.6 shows the repair cost used for each product class.

Table 8.2.6 Purchaser Repair Cost Used for DC Fans in Each Product Class

Product class Repair cost

Low

- volume standard $150

Low

- volume hugger $150

High

- volume small

- diameter $150

High

- volume large

- diameter $1000

DOE is not aware of any data that suggest the cost of maintenance changes as a function of efficiency for ceiling fans. DOE therefore assumed that maintenance costs are the same regardless of efficiency level and do not impact the LCC or PBP. As a result, DOE did not

include maintenance costs in the LCC and PBP analysis.

8.2.6.5 Lifetime

DOE estimated product lifetimes by fitting a survival probability function to data of historical shipments and the 2012 age distributions of installed stock . Shipment data w ere only

available for low -volume ceiling fans. Due to limited data, DOE assumed the survival probability function of high- volume ceiling fans was the same as that for low

- volume ceiling

fans.

Data on the age distribution for currently installed low-volume c eiling fan stock was

available from the LBNL study. 6 By combining data from the LBNL studywith a history of lowvolume ceiling fan shipments (see chapter 3 for more information of historical shipments), DOE estimated the percentage of appliances of a given age still in ope ration. This survival function, which DOE assumed has the form of a cumulative Weibull distribution, provides an average and median appliance lifetime.

The Weibull distribution is a probability distribution commonly used to measure failure

rates. Its form is similar to an exponential distribution, which models a fixed failure rate, except that a Weibull distribution allows for a failure rate that changes over time in a particular fashion.

The cumulative Weibull distribution takes the form:

8-14P ( x ) = e −� x−θ

α � β for x > θ and

P ( x ) = 1 for x ≤ θ Eq. 8.6

Where:

P ( x ) = probability that the appliance is still in use at age x
,

x = appliance age,

α = scale parameter, which would be the decay length in an exponential distribution, β = shape parameter, which determines the way in whaich the failure rate changes through time and,

θ = delay parameter, which allows for a delay before any failures occur.

When β = 1 , the failure rate is constant over time, giving the distrib ution the form of a cumulative exponential distribution. In the case of appliances, β commonly is greater than 1, reflecting an increasing failure rate as appliances age.

DOE used the 2012 LBNL study 6 as the source for the ceiling fan age distribution . The survey ask ed re spondents to identify the age of the most-used ceiling fan in increments of two years. Households that did not know the age of their ceiling fan were allocated among the remaining age bins according to the distribution of respondents who did report ceiling fan age.

DOE used the ceiling fan age distribution , combined with shipments history, to develop the survival function for ceiling fans. For example, DOE summed the total shipments from 4 to 6

year s before the LBNL study

, and then compared this number to the number of units still in use

at the time of the LBNL study to approximate the percentage of surviving appliances within that age bin. DOE combined the data from all age bins in the LBNL study to build a fit to a Weibull

distrib ution and find the parameters ( α
, β

, θ ) that best approximate the surviving units. DOE weighted each bin’s contribution to the sum of squares by the inverse of the variance estimated

for the LBNL study results, which controls for the changes in sample siz e between bins and through time. DOE added the additional simultaneous constraint that the shipments history multiplied by the survival function sum to the estimate o f installed stock from 2009 RECS. The equation for the sum of squares that DOE minimized i s: � ( Surve y i − Survive i ) 2

σ

Surve y i 2

i + � ∑ Sh ipments ( j ) ∗ P� ag e j � j − stoc k RECS � 2

σ

RECS 2

Eq. 8.7

Where:

i = identifier for an age bin from the LBNL study

, Surve y i = number of appliances reported by the LBNL study in bin i

, Surviv e i = the number of surviving appliances in bin i predicted by the Weibull distribution applied to the number of appliances shipped (a function of α
, β , and

θ )

,

σ

Surve y i = the standard error of the LBNL study data point for bin i

, j = shipments year starting the beginning of historical time series and ending at 2009,

8-15Sh ipments ( j ) = shipments in year j

, ag e j = shipments vintage relative to the year 2009, P� ag e j � = survival probability of an appliance at ag e j , stoc k RECS = estimate of installed stock at year 2009, and

σ

RECS = the standard error for stock measurement from RECS.

The Weibull distribution, shown in Figure 8.2.2 is characterized by parameters ( α
, β

, θ ) = ( 10

. 93 , 2.0, 4. 14 )

. This distribution has a mean ceiling fan lifetime of 13.8 years and

a median lifetime of 13.0 years. This is in line with the estimate from Appliance Magazine, as

well as estimates received from a technical expert and feedback from manufacturers

.

Figure 8.2.2 Survival Function for Low - and High- Volume Ceiling Fans

The me thod DOE used to calculate product lifetimes incorporates several assumptions:

• Appliance lifetime can be modeled by a survival function. In particular, a Weibull distribution is an appropriate survival function.

• The appliance survival function does not change form through time.

• The survival function is independent of household factors (such as household size or geographic region) as well as product class.

8-16• Survey respondents neither systematically overestimated nor underestimated the current age of their appliance

.

• The historical shipment data are accurate

.

• The shipped appliances are installed predominantly in residences.

• A Weibull shape parameter, β ≥ 2

.

Three of these assumptions reflect analytical choices made by DOE. The first is the assumption that a Weibull distribution is the appropriate distribution to use for observed rates of appliance retirement , which include other factors outside of failure rate (e.g., retirement due to

reasons other than product failure) . Thi s distribution is the standard one used in lifetime analyses, but it is not guaranteed to reflect actual real -world experience. The second assumption is that purchaser behavior and mechanical appliance lifetime have not changed over time . The third assumption concerns the Weibull failure rate parameter . DOE constrained the shape parameter ( β ) to values larger than two in order to avoid potential nonsensical behavior, such as sharp changes in purchaser behavior or appliance survival immediately following the delay period ( θ ).

8.2.6.6 Discount Rate s for Low- Volume Ceiling Fans

The discount rate is the rate at which future expenditures are discounted to establish their present value. The appropriate discount rate to be used in the DOE analysis should equal the opportunity cost of funds used to purchase efficient appliances. The opportunity cost of funds in this case may include interest payments (on debt), interest returns (on assets), and forgone liquidity (on insured accounts).

DOE assumed in the LCC analysi s that all ceiling fans sold through the home center and showroom distribution channels are replacement products purchased by existing households. DOE also assumed that all purchases sold through the wholesal er -contractor distribution channel

are installed in new homes. DOE realizes that some replacement products are sold through the

wholesaler -contractor distribution channel, and that some purchases from the home center and showroom channels are for new homes. DOE believes, however, that these portions are a small part of the market, and that excluding them will not have a substantial effect on the LCC results. Therefore, DOE estimated that 82 percen t of low -volume ceiling fans are replacement products purchased by existing households, and 18 percent of purchases are installed in new homes.

Discount Rates for Replacement Products Purchased by Existing Households. DOE’s approach involved identifying all possible debt or asset classes that might approximate the opportunity cost of funds used to purchase efficient residential appliances. These are shown in

Table 8.2.7

.

As a way of weighting the debt or asset classes, DOE estimated the average percentage shares of the various types of debt and equity using data from the Federal Reserve Board’s Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, 2007, and 2010. 10
DOE derived the mean percentages of each source of financing throughout the eight years surveyed. The se long- term averages are seen as most appropriate for use in the analysis.

8-17Table 8.2.7 Types of Household Debt and Equity by Percentage Shares (%)

Type of Debt or Equity 1989 1992 1995 1998 200 1 2004 2007 2010 Mean

Home equity loan 4.3 4.5 2.7 2.8 2.8 4.4 4.6 4.4 3.8

Credit card 1.6 2.1 2.6 2.2 1.7 2.0 2.4 2.1 2.1

Other installment loan 2.8 1.7 1.4 1.7 1.1 1.3 1.1 1.3 1.6

Other residential loan 4.4 6.9 5.2 4.3 3.1 5.8 7.1 7.3 5.5

Other line of credit 1.1 0.6 0.4 0.2 0.3 0.5 0.3 0.8 0.5

Checking account 5.8 4.7 4.9 3.9 3.6 4.2 3.4 4.3 4.4

Savings or money market account 19.2 18.8 14.0 12.8 14.2 15.1 13.0 16.2 15.4

Certificate of deposit 14.5 11.7 9.4 7.0 5.4 5.9 6.5 6.7 8.4

Savings bond 2.2 1.7 2.2 1.1 1.2 0.9 0.7 0.6 1.3

Bonds 13.8 12.3 10.5 7.0 7.9 8.4 6.7 7.3 9.2

Stocks 22.4 24.0 25.9 36.9 37.5 28.0 28.6 23.4 28.3

Mutual funds 8.0 11.1 20.9 20.1 21.3 23.4 25.5 25.6 19.5

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004,

2007 , and 2010

.

DOE then estimated return or interest rates associated with each type of equity and debt. The source for interest rates for loans, credit cards, and lines of credit was the Federal Reserve

Board’s Survey of Consumer Finances ( SCF ) for 1989, 1992, 1995, 1998, 2001, 2004, 2007, and

2010. Table 8.2.8 shows the average nominal rates in each year and the inflation factors used to calculate real rates. DOE calculated effective interest rates for home equ ity loans in a similar manner as for mortgage rates, because interest on both such loans is tax deductible. Table 8.2.9 shows the average effective real rates in each year and the mean rate across years. Because the interest rates for each type of household debt reflect economic conditions throughout numerous years, they are expected to be representative of rates that may be in effect in the compliance year of the standard

.

8-18Table 8.2.8 Average Nominal Interest Rates for Household Debt

Type of Debt 1989

, % 1992

, % 1995

, % 1998

, % 2001

, % 2004

, % 2007

, % 2010

, % Mean

, %

Home equity loan 11.5 9.6 9.6 9.8 8.7 5.7 7.9 6.0 8.6

Credit card*

- - 14.2 14.5 14.2 11.7 12.6 13.9 13.5

Other installment

loan 9.0 7.8 9.3 7.8 8.7 7.4 10.4 10.4 8.8

Other residential

loan 8.8 7.6 7.7 7.7 7.5 6.0 6.3 6.0 7.2

Other line of credit 14.8 12.7 12.4 11.9 14.7 8.8 12.7 10.6 12.4

Inflation rate 4.82 3.01 2.83 1.56 2.85 2.66 2.85 1.64

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, 2007

and 2010

. * No data on interest rates available for credit cards in 1989 or 1992.

Table 8.2.9 Average Real Effective Interest Rates for Household Debt

Type of Debt 1989

, % 1992

, % 1995

, % 1998

, % 2001

, % 2004

, % 2007

, % 2010

, % Mean

, %

Home equity loan 3.8 4.3 4.4 5.8 3.8 1.9 2.1 3.1 3.8

Credit card*

- - 11.0 12.7 11.1 9.1 3.3 12.1 11.0

Other installment

loan 4.9 5.8 7.0 6.6 6.1 5.4 9.7 9.0 6.7

Other residential

loan 4.0 4.7 4.8 6.0 4.6 3.3 3.4 4.3 4.4

Other line of credit 9.6 9.4 9.3 10.2 11.7 6.0 9.7 8.8 9.4

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, 2007, and 2010.

* No data on interest rates available for credit cards in 1989 or 1992.

No similar rate data are available from the SCF for classes of assets, so the Department

derived that information from national historical data. The interest rates associated with certificates of deposit, 11 savings bonds, 12 and bonds (AAA corporate bonds) 13 were collected

from Federal Reserve Board time

- series data for 1977 –2012 . DOE assumed rates on checking accounts to be zero. Rates on savings and money market accounts came from Cost of Savings Index data covering 1984–2012. 14 The rates for stocks are the annual returns on the Standard and

Poor’s 500 for 1977–2012. 15 Rates for mutual funds are a weighted average of the stock rates (two -thirds weight) and the bond rates (one- third weight) in each year for 1977 –2012 . DOE adjusted the nominal rat es to real rates using the annual inflation rate for each year. Average

nominal and real interest rates for the classes of household assets are listed in Table 8.2.10

. Because the interest and return rates for each type of asset reflect economic conditions throughout numerous years, they are expected to be representative of rates that may be in effect

in the compliance year of the standard

.

8-19Table 8.2.10 Average Nominal and Real Interest Rates for Household Equity

Type of Equity Average

Nominal

Rate

% Average Real

Rate

%

Checking account

- 0.0

Savings and money market

accounts 5.0 2.0

Certificate of deposit 6.0 1.9

Savings bond 7.3 3.2

Bonds 8.1 3.9

Stocks 11.9 7.7

Mutual funds 10.4 6.2

Table 8.2.11 summarizes the shares and mean real effective rates of each type of equity or debt. The average rate across all types of household debt and equity, weighted by the percentages of each type, i s 5.0 percent.

Table 8.2.11 Average Shares and Rates for Household Debt and Equity

Type of Debt or Equity Average Percentage of Household Debt plus Equity

% * Mean Effective Real Rate

% **

Home equity loan 3.8 3.8

Credit card 2.1 11.0

Other installment loan 1.6 6.7

Other residential loan 5.5 4.4

Other line of credit 0.5 9.4

Checking account 4.4 0.0

Savings and money market account 15.4 2.0

Certificate of deposit 8.4 1.9

Savings bond 1.3 3.2

Bonds 9.2 3.9

Stocks 28.3 7.7

Mutual funds 19.5 6.2

Total/weighted

- average discount rate 100.0 5.0

* Not including primary mortgage or retirement accounts. **Adjusted for inflation and, for home equity loans, tax deduction of interest.

8-20DOE developed a normal probability distribution of rates for each debt or asset type by using the mean value and standard deviation from the distribution. To account for variation among households, DOE sampled a rate for each household from the distributions for the

appr opriate asset class. Appendix 8 C presents the probability distributions for each class that

DOE used in the LCC analysis

.

Discount Rates for Products Installed in New Housing

. DOE estimated discount rates

for new -housing appliances using th e effective real (after

- inflation) mortgage rate for homebuyers. This rate corresponds to the interest rate after deduction of mortgage interest for income tax purposes and after adjusting for inflation (using the Fisher formula). c For example, a 6% nominal mortgage rate has an effective nominal rate of 4.5% for a household at the 25% marginal tax rate. When adjusted for an inflation rate of 2%, the effective real rate becomes

2.45%.

The data sources DOE used for mortgage interest rates were the SCF in 1989, 1992, 1995, 1998, 2001, 2004, 2007, and 2010. Using the appropriate SCF data for each year, DOE adjusted the mortgage interest rate for each relevant household in the SCF for mortgage tax deduction and inflation (see Table 8.2.12 ). In cases where the effective interest rate is equal to or below the inflation rate (resulting in a negative real interest rate), DOE set the real effective

interest rate to zero.

The average nominal mortgage rate carried by homeowners in these 6 years was 7.9%. As the mortgage rates carried by households in these years were established over a range of time, DOE believes they are representative of rates that may apply when amended standards take

effect. After adjusting for inflation and interest tax deduction, effective real interest rates on mortgages across the six surveys averaged 3.0%.

c Fisher formula is given b y: Real Interest Rate = [(1 + Nominal Interest Rate) / (1 + Inflation Rate)]

– 1.

8-21Table 8.2.12 Data Used to Calculate Real Effec tive Mortgage Rates

Year Mortgage Interest Rates in Selected Years

%

Average Nominal

Interest Rate Inflation Rate 16 Marginal Tax Rate Applicable to Mortgage

Interest 17 Average Real

Effective Interest

Rate

1989 9.7 4.82 24.1 2.4

1992 9.1 3.01 23.2 3.9

1995 8.2 2.83 24.2 3.3

1998 7.9 1.56 25.0 4.3

2001 7.6 2.85 24.2 2.8

2004 6.2 2.66 20.9 2.2

2007 6.3 2.85 20.6 2.1

2010 5.7 1.64 20.0 2.9

Average 7. 6 3.0

To account for variation among households, DOE sampled a rate for each household in the RECS samples from a distribution of mortgage rates. DOE developed the distribution based

on the SCF data . Appendix 8C presents the probability distribution that DOE used in the LCC analysis

.

8.2.6.7 Discount Rates for High- Volume Ceiling Fans

DOE derived the discount rates for the LCC analysis of high-volume ceiling fans from estimates of the finance cost of purchasing the considered products. Following financial theory, the finance cost of raising funds to purchase equipment can be interpreted as: (1) the financial cost of any debt incurred to purchase equipment, or (2) the opportunity cost of any equity used to purchase equipment. DOE defines the discount rate as the weighted average cost of capital (WACC), calculated as the weighted average of the cost of equity financing and the cost of debt financing, as estimated from financial data for publicly traded firms in the sectors that purchase

motors.

Damodaran Online is a widely used source of information about company debt and equity financing for most types of firms, and was the primary source of data for this analysis. 18
Detailed sectors included in the Damondaran Online database were assigned to the aggregate categories of industrial or commercial.

DOE estimated the cost of equity using the capital asset pricing model (CAPM). 19 The

CAPM assume s that the cost of equity ( k

e ) for a particular company is proportional to the systematic risk faced by that company, where high risk is associated with a high cost of equity and low risk is associated with a low cost of equity. The systematic risk facing a firm isdetermined by several variables: the risk coefficient of the firm (β), the expected return on riskfree assets ( R

f ), and the equity risk premium ( ERP ). The risk coefficient of the firm indicates the

risk associated with that firm relative to the price variability in the stock market. The expected return on risk-free assets is defined by the yield on long-term government bonds. The ERP

8-22represents the difference between the expected stock market return and the risk

- free rate. The cost of equity financing is estimated using the following equation, where the variables are

defined as above:


# ( ) ERP Rk

f

e 

### ×+= β

Eq. 8.8

Where:

k

e = cost of equity,

R

f = expected return on risk- free assets, β = risk coefficient of the firm, and

ERP = equity risk premium.

Several parameters of the cost of capital equations can vary substantially over time, and therefore the estimates can vary with the time period over which data is selected and the

technical details of the data averaging method. For guidance on the time period for selecting and averaging data for key parameters and the averaging method, DOE used Federal Reserve methodologies for calculating these parameters. In its use of the CAPM, the Federal Reserve uses a forty -year period for calculating discount rate averages, utilizes the gross domestic product price deflator for estimating inflation, and considers the best method for determining the

risk free rate as one where “the time horizon of the investor i s matched with the term of the risk

free security.” 20

By taking a forty

- year geometric average of Federal Reserve data on annual nominal

returns for 10

- year Treasury bills , DOE estimated the fo llo wing risk free rates for 2011-2013 ( Table 8.2.13 ) 21 DOE also estimated the ERP by calculating the difference between risk free rate

and stock market return for the same ti me period, as estimated using Damodaran Online data on

the historical return to stocks. 15

Table 8.2.13 Risk free rate and equity risk premium, 2011 -2013

Year Risk free rate (%) ERP (%)

2011 6.61 2.94

2012 6.41 3.46

2013 6.24 5.30

The cost of debt financing ( k d

) is the interest rate paid on money borrowed by a company. The cost of debt is estimated by adding a risk adjustment factor ( R

a ) to the risk

- free rate. This risk adjustment factor depends on the variability of stock returns represented by standard deviations in stock pric es. So for firm i , the cost of debt financing is:

aifdi 

### RRk +=

8-23Eq. 8.9

Where:

k

d = cost of debt financing for firm, i

, R

f = expected return on risk- free assets, and

R ai = risk adjustment factor to risk

- free rate for firm, i

.

DOE estimates the WACC using the following equation:

d dee 

## wkwkWACC ×+×=

Eq. 8.10

Where:

WACC = weighted average cost of capital,

w e = proportion of equity financing, and

w d = proportion of debt financing.

By adjusting for the influence of inflation, DOE estimate d the real weighted average cost of capital, or discount rate, for each sector. DOE then estimated the WACC for each high

volume ceiling fan purchaser by sampling f rom the distribution of WACC values from all industries in the purchaser’s sector (i.e. commercial or industrial).

Table 8.2.14 shows the average WACC values by sect or. While WACC values for any sector may trend higher or lower over substantial periods of time, these values represent a private sector cost of capital that is averaged over major business cycles.

Table 8.2.14 Weighted Average Real Weighted Average Cost of Capital for Industrial and

Commercial Sectors

Industrial Commercial

6. 42 % 6.30 %

8.3 PAYBACK PERIOD INPUTS

The payback period ( PBP ) is the amount of time it takes the purchaser to recover the assumed higher purchase cost of more energy

- efficient equipment as a result of lower operating costs. Numerically, the PBP is the ratio of the increase in purchase cost ( i.e., from a less efficient design to a more efficient design) to the decrease in first

- year annual operating expenditures.

The equation for PBP is:

PBP =∆ IC/ ∆ OC

Eq. 8.11

Where:

PBP = payback period in years,

8-24∆ IC = in crease in the total installed cost between the more efficient equipment (efficiency levels 1, 2, 3, etc.) and the baseline efficiency equipment, and

∆OC = de crease in first

- year annual operating costs.

Payback periods are expressed in years. Payback periods can be greater than the life of the equipment if the increase in total installed cost of the more efficient equipment is not recovered fast enough in reduced operating costs.

The data inputs to PBP are the average total installed cost of the equipment to the purchaser for each efficiency level and the average annual (first year) operating costs for each efficiency level. The inputs to the total installed cost are the equipment price and the installation cost. The inputs to the operating costs are the annual energy cost and the annual maintenance cost. The PBP uses the same inputs as the LCC analysis, except that electricity price trends are not required. Since the PBP is a “simple” payback, the required electricity cost is only for the year in which a new or amended eff iciency standard is to take effect

— in this case, 20 19.

DOE also calculates a rebuttable PBP, which is the time it takes the purchaser to recover the assumed higher purchase cost of more energy- efficient equipment as a result of lower energy

costs. Numerica lly, the rebuttable PBP is the ratio of the increase in purchase cost (i.e., from a less efficient design to a more efficient design) to the decreas e in annual energy expenditures,

which is the decrease in first year annual energy cost as calculated from t he DOE test procedure. The calculation excludes repair costs and maintenance costs.

8.4 RESULTS OF LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

This section presents the results of the LCC and PBP analys es . As discussed in section

8.1

, LCC calculations were performed for each of the 10,000 purchasers in the sample of purchasers established for each product class. Each LCC calculation also sampled from the probability distributions that DOE developed to characterize many of the inputs to the analysis.

For the set of sample purchasers in each product class, DOE calculated the average installed cost, first year’s operating cost, lifetime operating cost, and LCC for each EL. These averages are calculated assuming that all of the sample purchaser s purchase a product at each

EL. This allows the installation costs, operating costs, and LCCs for each EL to be com pared under the same conditions, across a variety of sample purchasers. DOE used these average values to calculate the PBP for each EL, relative to the baseline EL.

DOE also calculated LCC savings for each EL. DOE used a “roll -up” approach to calculate the LCC savings relative to the LCC that each sample purchaser would experience with

the base

- case product that DOE assigned the purchaser . DOE assumed that all purchaser s for

whom DOE assigned base

- case equipment that was less efficien t than the EL being analyzed, would purchase equipment at the EL being analyzed. DOE assumed that all purchasers for whom DOE assigned base

- case equipment that was as efficient as, or more efficient than , the EL being analyzed, would purchase equipmen t at the assigned base

- case EL. Therefore, DOE assigned an LCC savings value of zero to all purchaser s for whom DOE assigned base

- case equipment that was as efficient as, or more efficient than , the EL being analyzed . For this reason, the average

8-25LCC savi ngs are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline product. F or each efficiency level, DOE calculated the share of purchaser s receiving a net LCC cost. DOE considered a purchaser to receive a net L CC cost if the purchaser had negative LCC savings at the EL being analyzed

.

8.4.1 Low- Volume Standard Ceiling Fans

Table 8.4.1 Average LCC and PBP Results for Low- Volume Standard Ceiling Fans

EL Average Costs (2013$) Simple Payback

Period (years) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 107 17 182 289

--- 13.8

1 107 13 133 240 0 13.8

2 107 11 117 224 0 13.8

3 120 10 104 224 1.8 13.8

4 149 7 72 221 4.1 13.8

Note: The results for each EL are calculated assuming that all purchasers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table 8.4.2 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Low- Volume Standard Ceiling Fans

EL % of Purchasers that Experience a Net Cost Average Life

Cycle Cost

Savings* (2013$)

0 0 0

1 0 2

2 0 3

3 22 3

4 59 5

* The calculation includes purchasers with zero LCC savings (no impact).

Figure 8.4.1 shows the distribution of LCC savings for EL 2

. This EL is shown as an example

. The figures are presented as frequency charts that show the distribution of LCC impacts with the corresponding probability of occurrence. DOE generated the figures for the distributions from a Monte Carlo simulation run based on 10,000 samples.

8-26Figure 8.4.1 Low- Volume Standard Ceiling Fans: LCC Savings Distribution for EL 2

Figure 8.4.2 shows the range of LCC savings for all of the E Ls considered. For each standard level, the top and the bottom of the box indicate the 75th and 25th percentiles, respectively. The red line at the middle of the box indicates the median; 50 percent of the purchasers have LCC savings above this value. The horizontal lines above and below each box indicate the 95th and 5th percentiles, respectively. The red circle shows the average LCC savings

for each standard level.

8-27Figure 8.4.2 Range of LCC Savings for Low- Volume Standard Ceiling Fans

8.4.2 Low-Volume Hugger Ceiling Fans

Table 8.4.3 Average LCC and PBP Results for Low -Volume Hugger Ceiling Fans

EL Average Costs (2013$) Simple Payback

Period (years) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 94 15 159 253

--- 13.8

1 94 11 117 211 0 13.8

2 94 10 109 203 0 13.8

3 105 9 98 202 1.9 13.8

4 129 6 68 197 4.1 13.8

Note: The results for each EL are calculated assuming that all purchasers use products with that efficiency level. The PBP is measured relative to the baseline product.

8-28Table 8.4.4 Average LCC Savings Relative to the Base Case Efficiency Distribution for Low-Volume Hugger Ceiling Fans

EL % of Purchasers that Experience a Net Cost Average Life

Cycle Cost

Savings* (2013$)

0 0 0

1 0 1

2 0 2

3 21 2

4 56 7

* The calculation includes purchasers with zero LCC savings (no impact).

Figure 8.4.3 shows the distribution of LCC savings for EL 2. The figures are presented as frequency charts that show the distribution of LCC impacts with their corresponding probability of occurrence. DOE generated the figures for the distributions from a Monte Carlo simulation run based on 10,000 samples. DOE can generate frequency charts similar to th ose shown for

every EL

.

Figure 8.4.3 Low-Volume Hugger Ceiling Fans: LCC Savings Distribution for EL 2

Figure 8.4.4 shows the range of LCC savings for all of the E Ls considered. For each standard level, the top and the bottom of the box indicate the 75th and 25th percentiles,

8-29respectively. The red line at the middle of the box indicates the median; 50 percent of the purchasers have LCC savings above this value. The horizontal lines above and below each box indicate the 95th and 5th percentiles, respectively. The red circle shows the average LCC savings

for each standard level.

Figure 8.4.4 Range of LCC Savings for Low-Volume Hugger Ceiling Fans

8.4.3 High

- Volume Small

- Diameter Ceiling Fans

Table 8.4.5 Average LCC and PBP Results for High- Volume Small

- Diameter Ceiling

Fans

EL Average Costs (2013$) Simple Payback

Period (years) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 68 23 208 276

--- 13.8

1 73 22 195 268 3.7 13.8

2 75 17 149 224 1.1 13.8

3 100 10 92 192 2.4 13.8

8-30Note: The results for each EL are calculated assuming that all purchasers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table 8.4.6 Average LCC Savings Relative to the Base Case Efficiency Distribution for High

- Volume Small

- Diameter Ceiling Fans

EL % of Purchasers that Experience a Net Cost Average Life

Cycle Cost

Savings* (2013$)

0 0 0

1 1 2

2 0 24

3 7 52

* The calculation includes purchasers with zero LCC savings (no impact).

Figure 8.4.5 shows the distribution of LCC savings for EL 3

. The figures are presented as frequency charts that show the distribution of LCC impacts with their corresponding probability of occurrence. DOE generated the figures for the distributions from a Monte Carlo simulation run based on 10,000 samples. DOE can generate frequency charts similar to those shown for

every EL

.

8-31Figure 8.4.5 High

- Volume Small -Diameter Ceiling Fans: LCC Savings Distribution for

EL 3

Figure 8.4.6 shows the range of LCC savings for all of the E Ls considered. For each standard level, the top and the bottom of the box indicate the 75th and 25th percentiles, respectively. The red line at the middle of the box indicates the median; 50 percent of the purchasers have LCC savings above this value. The horizontal lines above and below each box indicate the 95th and 5th percentiles, respectively. The red circle shows the average LCC savings

for each standard level.

Figure 8.4.6 Range of LCC Savings for High- Volume Small

- Diameter Ceiling Fans

8.4.4 High -Volume Large- Diameter Ceiling Fans

Table 8.4.7 Average LCC and PBP Results for High-Volume Large- Diameter Ceiling

Fans

EL Average Costs (2013$) Simple Payback

Period (years) Average

Lifet ime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 3814 221 2007 5821

--- 13.8

8-321 3801 213 1930 5731 0 13.8

2 4063 133 1208 5271 2.8 13.8

3 5730 66 637 6367 12.3 13.8

Note: The results for each EL are calculated assuming that all purchasers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table 8.4.8 Average LCC Savings Relative to the Base Case Efficiency Distribution for High -Volume Large- Diameter Ceiling Fans

EL % of Purchasers that Experience a Net Cost Average Life

Cycle Cost

Savings* (2013$)

0 0 0

1 0 8

2 1 210

3 92

- 886

* The calculation includes purchasers with zero LCC savings (no impact).

Figure 8.4.7 shows the distribution of LCC savings for EL 2

. The figures are presented as frequency charts that show the distribution of LCC impacts with their corresponding probability of occurrence. DOE generated the figures for the distributions from a Monte Carlo simulation run based on 10,000 samples. DOE can generate frequency charts similar to th ose shown for

every EL

.

8-33Figure 8.4.7 High -Volume Large-Diameter Ceiling Fans: LCC Savings Distribution for

EL 2

Figure 8.4.8 shows the range of LCC savings for all of the E Ls considered. For each standard level, the top and the bottom of the box indicate the 75th and 25th percentiles, respectively. The red line at the middle of the box indicates the median; 50 percent of the purchasers have LCC savings above this value. The horizontal lines above and below each box indicate the 95th and 5th percentiles, respectively. The red circle shows the average LCC savings

for each standard level.

8-34Figure 8.4.8 Range of LCC Savings for High-Volume Large- Diameter Ceiling Fans

8.5 REBUTTABLE PAYBACK PERIOD

DOE presents rebuttable PBPs to provide the legally established rebuttable presumption that an energy efficiency standard is economically justified if the additional product costs

attributed to the standard are less than three times the value of the first -year energy cost savings. (42 U.S.C. §6295 (o)(2)(B)(iii))

The basic equat ion for rebuttable PBP is the same as that shown for the PBP in section

8.3 . Unlike the analyses described in section 8.3 , however, the rebuttable PBP is not based on the

use of purchaser samples and probability distributions, but on discrete single-point values. For example, wh ereas DOE uses a probability distribution of ene rgy prices in the distributional PBP analysis, it uses only the national average energy price to determine the rebuttable PBP. In addition, the rebuttable PBP relies on the DOE test procedure to determine a product’s annual energy consumption. The rebuttab le PBP also excludes any maintenance and repair costs.

The following summarizes the single -point values that DOE used in determining the

rebuttable PBP:

• Purchase prices were based on the single -point values used in the LCC analysis.

These values were we ighted by (a) the percentage of products sold through each distribution channel, and (b) the percentage of fan diameter used in the LCC.

• DOE used an average national sales tax of 7.12%.

8-35• For low-volume fans in ELs 0 through 3, $2.74 was added for the cost of a remote. This is equal to the weighted value of the remote used in the LCC. (i.e. $37 × 7.4% = $2.74)

• For low-volume fans in EL 4, $2.68 was added for the cost of a remote. This is equal to the weighted value of the remote used in the LCC. (i.e. $37 × 7.4% × 98% = $2.68)

• DOE used the power values from the engineering analysis.

• In order to match the requirements of the rebuttable presumption, DOE used the operating hours from the ceiling fan test procedure NOPR issued on September 19,

2014. (see Table 8.5.1 ).

• DOE used the national average electric prices that AEO projected for the year 2019.

The effective date of the standard is assumed to be 2019.

• An average discount rate or lifetime is not required in the PBP calculation.

Table 8.5.1 Daily Operating Hours from the Ceiling Fan Test Procedure

Daily Operating Hours for Low- Volume Ceiling Fans

No Standby With Sta ndby

High Speed 4

. 2 4

. 2

Low Speed 2

. 2 2

. 2

Standby Mode 0.0 1 7

. 6

Off Mode 17.6 0.0

Daily Operating Hours for High- Volume Ceiling Fans

No Standby With Standby

Active Mode 12.0 12.0

Standby Mode 0.0 12.0

Off Mode 12.0 0.0

8-36REFERENCES

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- STD -0045-0001

2. Energy Information Administration. Annual Energy Outlook 2014 with Projections to

2040. Report No. DOE/EIA-03832014. Washington, D.C. http://www.eia.doe.gov/oiaf/aeo/

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.

4. Navigant Consulting, Inc. Final Report: 2010 U.S. Lighting Market Characterization. Prepared for the Solid- State Lighting Program, Building Technologies Program, Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy. January 2012. (Last Accessed March 27, 2014.) http://apps1.eere.energy.gov/buildings/publications/pdfs/ssl/2010- lmc

- final

- jan -2012.pdf

.

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6. Kantner, C.L.S., S.J. Young, S.M. Donovan, and K. Garbesi. Ceiling Fan and Ceiling Fan Light Kit Use in the U.S.—Results of a Survey on Amazon Mechan ical Turk. July 2013. Lawrence Berkeley National Laboratory, Berkeley, CA. Report No. LBNL - 6332E. (Last Accessed March 27, 2014) http://www.escholarship.org/uc/item/3r67c1f9

7. U.S. Department of Energy

- Energy Information Administration. Form EIA

- 861 Release Date for 2012: Oct. 29, 2013. (Last Accessed Feb 11, 2014.) http://www.eia.doe.gov/cneaf/electricity/page/eia861.html

8. U.S. Department of Commerce – Bureau of Economic Analysis. Table 1.1.9. Implicit Price Deflators for Gross Domestic Product. (Last Accessed January 30, 2014.) http://www.bea.gov/iTable/

9. Mehta, V. Pers onal communication. ICF International, Fairfax, VA. Email to Mohan Ganeshalingam, LBNL. January 14, 2014.

10. Board of Governors of the Federal Reserve System. Research Resources: Survey of Consumer Finances. 1989, 1992, 1995, 1998, 2001, 2004, 2007, and 2010. (Last

Accessed http://www.federalreserve.gov/econresdata/scf/scfindex.htm >

8-3711. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, Historical Data, Instrument: CDs (secondary market), Maturity: 6 -month, Frequency: Annual, Description: Average rate on 6- month negotiable certificates of deposit (secondary market), quoted on an investment basis. Washington, D.C. (Last Accessed http://www.federalreserve.gov/releases/H15/data.htm

12. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, Historical Data, Instrument: State and local bonds, Maturity: 20- year, Frequency: Monthly, Description: Bond buyer go 20-bond municipal bond index. Washington, D.C. (L ast Accessed http://www.federalreserve.gov/releases/H15/data.htm

13. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, Historical Data, Instrument: Corporate bonds/Moody’s Seasoned AAA, Frequency: Annual, Description: Moody’s yield on seasoned corporate bonds—all industries, AAA. Washington, D.C. (Last Accessed http://www.federalreser ve.gov/releases/H15/data.htm

14. Mortgage-X–Mortgage Information Service. Cost of Savings Index (COSI) Index History. 2010. (Last Accessed http://mortgage -x.com/general/indexes/default.asp

.

15. Damodaran Online. Historical Returns on Stocks, Bonds and Bills–United States. Use link for Updated Data: Data Sets. A. Damodaran, New York University. 2014. (Last

Accessed http://pages.stern.nyu. edu/~adamodar/

16. U.S. Department of Labor - Bureau of Labor Statistics. Bureau of Labor Statistics Data, Prices & Living Conditions. 2012. (Last Accessed http://data.bls.gov

17. National Bureau of Economic Research. U.S. Federal and State Average Marginal

Income Tax Rates. 2011. (Last Accessed http://www.nber.org/~taxsim/marginal

- tax

rates/plusstate.html

18. Damodaran Online. Costs of Capital by Industry Sector. 2014. (Last Accessed http://pages.stern.nyu.edu/~adamodar/

19. Ibbotson Associates. SBBI Valuation Edition 2009 Yearbook. 2009. Chicago, IL.

20. Board of Governors of the Feder al Reserve System. Federal Reserve Bank Services Private Sector Adjustment Factor. 2005. Washington, D.C.

21. Board of Governors of the Federal Reserve System. H.15 Historical Data Selected

Interest Rates. (Last Accessed http://www.federalreserve.gov/releases/H15/data.htm

8-38CHAPTER 9. SHIPMENTS

TABLE OF CONTENTS

9.1 INTRODUCTION ........................................................................................................... 9-1

9.1.1 Analyzed Product Classes, Market Sectors and Market Segments ...................... 9-1

9.2 SHIPMENTS MODEL METH ODOLOGY .................................................................... 9-2

9.2.1 Stock Accounting Approach ................................................................................ 9-2

9.2.2 Consumer-Choice Model ..................................................................................... 9-3

9.3 MARKET SEGMENTS AND MODEL CALIBRATION .............................................. 9-4

9.3.1 Low

- Volume Ceiling Fans ................................................................................... 9-4

9.3.1.1 Historical Shipments .................................................................................. 9-4

9.3.1.2 Shipments Projections by Market Segment ............................................... 9-5

9.3.1.3 Consumer-Choice Model Calibration ........................................................ 9-8

9.3.2 High

- Volume Ceiling Fans ................................................................................ 9-10

9.3.2.1 Historical Shipments ................................................................................ 9-10

9.3.2.2 Shipments Projections by Market Segment ............................................. 9-12

9.3.2.3 Consumer-Choice Model Calibration ...................................................... 9-14

9.4 IMPACT OF ENERGY CONSERVATION STANDARDS ON SHIPMENTS .......... 9-15

9.4.1 Application of Relative Price Elasticity ............................................................. 9-17

9.5 AFFECTED STOCK ..................................................................................................... 9-18

9.6 ALT ERNATIVE SHIPMENT SC ENARIOS

................................ ................................ 9-18

9.6.1 Overview ............................................................................................................ 9-18

9.6.2 Impact of a Ceiling Fan Light Kit Standard ....................................................... 9-18

9.6.3 No Price Learning Shipments Scenario ............................................................. 9-20

9.7 SHIPMEN TS FORECAST IN STANDARDS CASES ................................................ 9-20

REFERENCES .......................................................................................................................... 9-24

LIST OF TABLES

Table 9.3.1 Calibration Factors for Low -Volume Ceiling Fan EL Options ................... 9-10

Table 9.3.2 Input Parameters for Calibrating Consumer Sensitivities for High – Volume Ceiling Fans ................................................................................... 9-14

Table 9.3.3 Best

- fit Logit Parameters for High

- Volume Ceiling Fans ........................... 9-15

Table 9.4.1 Cha nge in Relative Price Elasticity Following a Purchase Price Change ......................................................................................................... 9-17

Table 9.7.1 Cumulative Low -Volume Shipments and Impact to Standards from a Ceiling Fan Standard

................................ .................................................... 9-22

Table 9.7.2 Cumulative High -Volume Ceiling Fan Shipments and Im pact of

Standards ...................................................................................................... 9-22

9-iLIST OF FIGURES

Figure 9.3.1 Low

- Volume Ceiling Fan Historical Shipments Plot .................................... 9-5 Figure 9.3.2 Ceiling Fan Retirement Function ................................................................... 9-7 Figure 9.3.3 Base Case Shipments of Low

- Volume Ceiling Fans by Market Segment

................................ ................................ .......................................... 9-8 Figure 9.3.4 Market Share Distribution of Low- Volume Ceiling Fans by Retail Price with Exponential Fit ............................................................................. 9-9 Figure 9.3.5 Historical Shipments Estimate for HVSD ceiling fans ................................ 9-11 Figure 9.3.6 Historical Shipments Estimate for HVLD ceiling f ans ................................ 9-12 Figure 9.3.7 Base Case Shipments of HVSD Ceiling Fans by Market Segment ............. 9-13 Figure 9.3.8 Base Case Shipments of HVLD Ceiling Fans by Market Segment ............. 9-14 Figure 9.7.1 Projected Shipments for Low- Volume Ceiling Fans, Reference Case ........ 9-21

Fi gure 9.7.2 Projected Shipments for HVSD Ceiling Fans, Reference Case ................... 9-21 Figure 9.7.3 Projected Shipments for HVLD Ceiling Fans , Reference Case .................. 9-22

9- iiCHAPTER 9. SHIPMENTS

9.1 INTRODUCTION

This chapter describes the data and methods the U.S. Department of Energy (DOE) used to forecast annual product shipments and presents resul ts for low-volume and high-volume ceiling fans . Estimates of future product shipments are a necessary input to calculations of the national energy savings (NES) and net present value (NPV), as well as to the manufacturer impact analysis (MIA).

DOE developed a national stock accounting model to estimate annual shipments of ceiling fans . To apportion the shipments of ceiling fans into different product clas ses and efficiency levels

, DOE used a consumer-choice model for consumers’ sensitivity to first cost and operating cost , based on the methodology developed by DOE for the general service fluorescent lamp and incandescent reflector lamp 1 energy conservation standards rulemaking.

The shipments model was executed as a separate computer model written in the Python programming language . The input and outputs of the shipments models were embedded in the national impact assessment (NIA) model, which is implemented in a Microsoft Excel spreadsheet, available on regulations.gov, docket number EERE -2012- BT

- STD -0045 at http://www.regulations.gov/#!docketDetail;D=EERE -2012- BT

- STD -0045 . Appendix 10A discusses how to access and utilize the model spreadsheet. The rest of this chapter explains the shipments mo del in more detail. Section 9.2 presents methodolog y behi nd the model ; section 9.3

describes the data inputs and calibration of the model; section 9.4 discusses impacts on shipments from standards; section 9.5 discusses the affected stock during the analysis period ; section 9.6 describ es alternate shipments sensitivity scenario s considered by DOE ; and section

9.7 presents results for shipments projections.

9.1.1 Analyzed Product Classes, Market Sectors and Market Segments

For its analysis , D OE analyzed four product classes: low-volume standard ceiling fans, low-volume hugger fans, high-volume smal l- diameter ceiling fans (hereafter, HVSD) , and highvolume large- diameter (hereafter, HVLD) ceiling f ans

. Low -volume ceiling fans were assumed

to be primarily in the residential sector . Although manufacturers indicated roughly 5% of lowvolume ceiling fans were installed in commercial settings, DOE ass umed the usage pattern is

similar to the residential sector and that the impact to the analysis would be small. For this preliminary analysis, when the potential impact of a particular hugger fan efficiency level was being analyzed, DOE assumed that a standard would be set at the equivalent efficiency level f or fans in the standard product class (and vice- versa). High -volume fans were assumed to be installed exclusively in industrial and commercial sectors. For the shipments and NIA analyses,

DOE took market- weighted averages of the representative diameter si zes in each product class to derive representative value s fo r each EL. The market weightings were based on DOE’s

observations o f the market for high - and low-volume ceiling fans . See Table 8.2.3 in chapter 8 of

this TSD for information on the assumed size distribution for each product class. DOE assumed that the distribution of ceiling fan diameter remained constant over the analysis period , as reported in Table 8.2.3 in chapter 8 of this TSD.

9-19.2 SHIPMENTS MODEL METHODOLOGY

DOE developed a model of the nation al stock of in- service appliances for estimating

annual ceiling fan shipments. Rather than simply extrapolating a shipments trend, the shipments model used in this rulemaking takes an accounting approach, tracking the units in the existing

stock

.

D OE implemented a consumer -choice model to project the market share distribution for each product class and efficiency level in each year of the analysis period. The model is an econometric conditional logit model developed to estimate the likelihood a cons umer will purchase a particular option from a finite set of choices based on attributes that influence consumer decisions. In the case of appliances, first cost and operating and maintenance (O&M)

cost are considered major factors that influence consumer -p urchasing decisions. Consumer sensitivity to these factors is calibrated using historical market data. The consumer -choice model allows for voluntary conversions to more efficient technologies based on economic incentives.

9.2.1 Stock Accounting Approach

Stock accounting provides an estimate of the age distribution of product stocks for all years, using product shipments, a retirement function, and initial product stock as inputs. The age distribution of product stocks is a key input to both the NES and NPV calculations because the operating costs for any year depend on the age distribution of the stock. Older, less efficient units may have higher operating costs, while young, more efficient units may have lower operating

costs.

DOE calculates the total st ock of each product by integrating historical shipments beginning with the start year of the historical data. As units are added to the stock, some of the older ones retire and exit the stock based on the retirement function for the product. To estimate

fu ture shipments, DOE developed a series of equations that define the dynamics and accounting of stocks. For new units, the equation is:

SStock ( j

, age = 1) = SSh ip ( j − 1) Eq. 9.1

Where:

SStock ( j

, age ) = number of units of a particular age j = year for which the stock is being estimated, and

SSh ip ( j ) = number of units purchased in year j

The above equation states that the number of one- year old units is simply equal to the number of new units pur chased the previous year assuming a negligible number of failures

. Slight ly more complicated equations, such as the following equation, describe how the model accounts for the existing stock of units accounting for units that retire:

SStock ( j + 1, age + 1 ) = SStock ( j

, age ) − SSh ipments ( j − age ) × prob Rtr ( age + 1 ) ) Eq. 9.2

Where:

SStock ( j

, age ) = number of units of a particular age,

9-2j = year for which the stock is being estimated, and

SSh ip ( j − age ) = number of units purchased in year j − age , and

pro b Rtr ( age + 1 ) = the probability a unit is retired at age + 1

.

In this equation, as the year is incremented from j to j + 1 , the age is also incremented

from age to age + 1 . Over time, a fraction of the stock is removed; that fraction is determined by a retirement probability function, prob Rtr ( age ) . Here, prob Rtr ( age ) is the probability that a ceiling fan will be retired at age and is described further in 9.3.1.2

.

9.2.2 Consumer

- Choice Model

In a “roll

- up” approach, market

- share for ceiling fans with efficiencies below a standard level is allocated to the lowest efficiency level that meets the standard. This approach does not account for all efficiency options available to consumers and does not capture voluntary conversions to more efficient technologies after the implementation of a standard. To more accurately estimate market share across efficiency levels, DOE implemented a consumer

- choice

model that calculates market share for available ef ficiency options based on first cost only for low-volume ceiling fans and first cost and operating costs for high-volume ceiling fans. DOE analyzes the impact of potential efficiency standard levels on energy consumption in the national impact analysis.

The consumer-choice model works in the following way. A ceiling fan consumer is faced with making a choice amongst a finite set of options (in this case ceiling fan models at different efficiency levels ). Each option is associated with a first cost and O&M cost that the consumer considers when making their choice. The consumer- choice model calculates the probability the consumer will choose each option based on the consumer’s sensitivity to first cost and O&M

cost. In the case of a standard, options that do not meet the requirements of the standard are

eliminated and th e consumer chooses from the remaining options . Probabilities associated with each option may potentially change as a function of time as first cost and O&M cost for each option change. The con sumer -choice model projects the efficiency distribution of ceiling fans sold in a given year, but does not affect the total number of shipments.

The consumer-choice model uses a conditional logit model to calculate the probability that a consumer will purchase product j based on the logistic curve probability function of the

form:

PP j ( z ) = e z j
∑ e z i

n i=1 Eq. 9.3

Where:

PP

j ( z ) = the probability a consumer will purchase product j among n possible options,

and

z = the ‘logit’, which is defined as follows

z

j = β FC ∗ FC j + β OM ∗ OM j

9-3Eq. 9.4

Where: β FC = consumer sensitivity to first cost,

FC j = first cost of product option j

, β OM = consumer sensitivity to operations and maintenance cost, and

OM j = operations and maintenance cost of product option j

.

The regression coefficients ( β values) represent the consumer’s sensitivity to first cost ( β FC ) and O&M cost ( β OM ). The coefficients are determined using historical shipments market

share data . Consumer sensitivities are sector

- specific and vary between residential and commercial/industrial purchasers. Sections 9.3.1.3 and 9.3.2.3 describe how the regression

coefficients are determined for low -volume and high- volume ceiling fans , respec tively

.

DOE assumed that each product class offered unique utility and therefore did not allow purchasers to choose options across product classes in its implementation of the consumer- choice

model. Low -volume and high-volume ceiling fans offer very different volumetric amounts of airflow. Additionally, in most cases, only low- volume ceiling fan s meet building codes for the

residential sector making low-volume ceiling fans the only option for residential households. Between standard and hugger fans, hugger fans offer less volumetric airflow and are designed specifically for residential households with low ceilings. For high-volume ceiling fans , HVSD and HVLD also offer very different amounts of volumetric airflow and are not directly comparable options. DOE seeks input on the assumption of no product class switching in its

consumer- choice model.

Within a product class, the consumer- choice model allocates market share to ELs based

on first cost and O&M cost of each option. In the base case, all options are a vailable and market shares are calculated accordingly. In a standards case, options that do not meet the standard are eliminated and market shares are recalculated using those ELs that meet or exceed the standard.

9.3 MARKET SEGMENTS AND MODEL CALIBRATION

9.3.1 Low- Volume Ceiling Fans

9.3.1.1 Historical Shipments

DOE used three sources of data to establish histor ical shipment trends in the total number

of low- volume ceiling fans: (1) data from Appliance magazine’s Statistical Review from the period 1991-2006, a (2) data f rom Energy Star Annual Reports from the period 2003-2011, b (3)

a Appliance® Statistical Review, Annual Report, Appliance Magazine (2003

- 2006). Appliance Magazine sources may include the Air

- Conditioning and Refrigeration Institute; Appliance Magazine, Association of Home Appliance Manufacturers; Consumer Electronics Association; Gartner; Gas Appliance Manufacturers Association; Heart h, Patio & Barbeque Association; International Data Corporation; Outdoor Power Equipment Institute; and the Water Quality Association. The data have not included exports since 1997.

9-4and data purchased from NPD Research group from 2007-2011. DOE took an average value in cases where data from multiple sources overlap. Figure 9.3.1 shows the historical time series of

low- volume ceiling fan shipments from 1991-2011. These shipments include both standard and hugger product classes. Based on feed back from manufacturers and DOE’s analysis of t he market, DOE assumed 26 % of shipments are standard ceiling fans , 21% of shipments are hugger ceiling fans , and 53% of shipments are multi-mount fans. In the shipments and NIA, DOE

assumed that 73% of multi- mount ceiling fans are installed as standard fans and 27% as hugger. 2
This assumption leads to 64% of shipments being standard ceiling fans and 36% of shipments being hugger ceiling. DOE assumed that the ratio of standard ceiling fans to hugger ceiling fans remains constant over the course of the analysis period.

Figure 9.3.1 Low- Volume Ceiling Fan Historical Shipments Plot

9.3.1.2 Shipments Projections by Market Segment

The shipments model considers specific market segments in developing a shipments projection. The model considers the following market segments for low- volume ceiling fans: replacement s, new-construction installations, and additions of ceiling fans into existing buildings. Total s hipments for low-volume ceiling fans in a given year are given by:

SSh ip ( j ) = RRpl ( j ) + NI ( j ) + EB ( j )

b ENERGY STAR takes partner

- reported data to be representative of qualifi ed ceiling fan shipments without adjusting for partners who do not report their shipments. This means that the ENERGY STAR data represent a conservative estimate, although the response rate among ceiling fan manufacturers is typically high, for example, 8 9 percent in 2010. In order to estimate the market share of ENERGY STAR

- qualified ceiling fans, ENERGY STAR estimates U.S. shipments based on modeled and documented data. Ceiling fan industry data are used as a direct input whenever possible and compared to forecast assumptions to ensure data comparability. Industry sources may include ceiling fan manufacturer associations, publications, and commercially

- available market research.

9-5Eq. 9.5

Where:

SSh ip ( j ) = Total shipments in year j

, RRpl ( j ) = Units retired and replaced in year j

NI ( j ) = Number of new construction installations in year j

EB ( j ) = Number of units installed in existing buildings in year j

.

The following sections discuss these market segments in further detail.

Replacement Shipments Estimated sales due to replacements in a given year are equal to the total stock of the appliance minus the sum of the appliances sold in previous years that still remain in the stock. The following equation represents how DOE estimated replacement shipments:

RRpl ( j ) = �

i=N j−1 SSh ip ( i ) × pro b Rtr ( age = j − i )

Eq. 9.6

Where: RRpl ( j ) = Units retired and replaced in year j

, SSh ip ( j ) = Total shipments in year j

, pro b Rtr ( age ) = Probability that a ceiling fan of a particular age will be retired

, N = Start year when the model begins its stock accounting.

The retirement function, pro b Rtr ( age ) , is derived from the product lifetime distribution discussed in chapter 8 of this TSD . The product lifetime distribution takes the form of a Weibull

distribution and has an average value of 1 3.8 years, and minimum and maximum values of 4.1 years and 30 years. Figure 9.3.2 shows the retirement function that DOE used to estimate replacement shipments.

9-6Figure 9.3.2 Ceiling Fan Retirement Function

Shipments to New Construction DOE estimated the number of installations due to new construction using projections for new housing starts, the product saturation, and the average

number of low-volume ceiling fan units installed in a household. New housing includes newly constructed single- and multi -family units, referred to as “new housing completions” and mobile home placements. DOE adopted the projections from the DOE Energy Information Administration (EIA)’s Annual Energy Outlook (AEO2014 ) for 2010-2040. 3 DOE estimated a current penetration rate of ceiling fans in homes of 73%, using data from the 2009 Residential Energy Consumption Sur vey (RECS) 4 with an average of 3.1 ceiling fans installed in a single

new home installation . DOE multiplied the projections for new home construction by the penetration rate and the average number of ceiling fan s to estimate the number of shipments to

new construction.

Installations into Existing Buildings The number of first

- time owners was estimated using trends in the penetration of ceiling fans in existing homes over time using RECS data from 1993, 1997, 2001, 2005, and 2009. DOE estimated the rate at which the number of homes without ceiling fans decreased between RECS year s. DOE determined that the number of home s without ceiling fans decreased at a n average rate of 2.8% each year. However, DOE found that using a first -time owner rate of 2.8% over- estimated shipments model estimates for 2010 and 2011 compared to historical data. To match the shipments data from 2010 and 2011 , DOE

assumed that market saturation for purchases of ceiling fan s occurs at a penetration rate of 75% of all households. DOE also considered the addition of ceiling fans into homes that already have ceiling fans and assumed that the average number of ceiling fans in households with ceiling fans

does not exceed 3.1. By the start of the analysis period (2019), installations into existing buildings make up 1% of ceiling fan shipments.

9-7Figure 9.3.3 shows the base- case shipments projections of low-volume ceiling fans using the stock accounting methodology broken down by market segment. The shipments include both standard and hugger product classes.

Figure 9.3.3 Base Case Shipments of Low-Volume Ceiling Fans by Market Segment

9.3.1.3 Consumer

- Choice Model Calibration

As described in section 9.2.2 , DOE used a logit model, described by Eq. 9.3 and Eq. 9.4

, for its consumer-choice model to forecast product market share by EL . The logit has two

parameters, β FC and β OM , which characterize consumer sensitivity to first co st and O&M cost, respectively. DOE used data collected by the NPD group between the years 2007-2011 to analyze factors that influence consumer-purchasing decisions of low-vol ume ceiling fans

. c NPD specifically collects survey data on fan attributes including purchase price, brand, and diameter.

Figure 9.3.4 shows a histogram of market share as a function of first cost for 42-52 in ch ceilings fans sold without a ceiling fan light kit (hereafter, CFLK) . The data show a very strong dependence on first cost. This qualitatively agrees wit h information from manufacturer

interviews that indicate price point is a main factor in how consumers choose a ceiling fan

, with efficiency playing a less important role . Based on these data, DOE assumed the consumer sensitivity to first cost is substantially larger than consumer sensit ivity to o perating cost and set

c NPD does not collect point

- of

- sales data for ceiling fans and ceiling fa n light kits. Instead, it surveys a representative sample of consumers who recently purchased a ceiling fan.

9-8β OM = 0 for purchasers of low

- volume ceiling fans. In other words, consumers are assumed to be only sensitive to first cost when choosing a low- volume ceiling fan.

In the case that β OM = 0, the logit for the consumer- choice model reduces to :

z = β FC ∗ FC Eq. 9.7

Figure 9.3.4 Market Share Distribution of Low

- Volume Ceiling Fans by Retail Price with Exponential Fit

In this form, β FC can be found by fitting an exponential function to the first cost
distribution in Figure 9.3.4 :

MSS ( FC ) = Ne β FC ∗ FC
Eq. 9.8

Where:

N = Normalization factor,

FC = First cost of a ceiling fan in 2013$,

MSS ( FC ) = Market share for a ce iling fan that costs FC

, and β FC = Consumer sensitivity to first cost

.

DOE found a best

- fit consumer sensitivity to first cost of β FC =
− 0. 028 for consumers

of low- volume ceiling fans (both standard and hugger) for the residential sector.

DOE calibrate d the model against observed 2013 market shares for ELs to account for

factors that influence consumer -purchasing decisions that are not captured by the logit model.

9-9DOE accounts for these deviations by introducing calibration factors. The calibra tion factors modify Eq. 9.3 in the following way:

PP j ( z ) = C j e z j
∑ C i e z i

n i=1 Eq. 9.9

Where:

PP

j ( z ) = the probability a consumer will purchase product j among n possible options,

C

j = calibration factor for product j , and

z

j = the logit evaluated for product j

.

DOE estimated the calibration factors by evaluating the right hand side of Eq. 9.9 for each EL (using cost data provided in the chapter 5 of this TSD) and setting the left hand side of the equation equal to the observed 2013 market share of that option. This resulted in a system of equations with the calibration factors

, C j s , as unknowns. DOE solved for the calibration factors in the Python programming language. Table 9.3.1 shows calibration factors calculated for low

volume ceiling fans. DOE believe s the calibration factors may not necessarily reflect consumer preference for different options. It is more likely that the derived calibration factors reflect the

limi ted number of models available on the market for ELs other than EL3.

Table 9.3.1 Calibration Factors for Low

- Volume Ceiling Fan EL Options

EL Calibration Factor

Baseline 0.039

1 0.059

2 0. 352

3 1

4 0. 117

9.3.2 High

- Volume Ceiling Fans

9.3.2.1 Historical Shipments

DOE was unable to find any data corresponding to historical shipments of high-volume ceiling fans. Here, DOE outlines its approach in estimating historical shipments for use in its

stock -accounting approach to projecting shipments.

Based on the similarities between low

- volume fans and HVSD ceiling fans, DOE assumed shipments trends between the two would be similar and scaled total shipments of low

volume ceiling fans by a constant factor

. DOE assume d that the penetration rate of low-volume ceiling fans into commercial spaces where low

- volume ceiling fans are typically used would be the same as the penetration rate of HVSD ceiling fans into commercial spaces where high9-10volume ceiling fans are typicall y used

. To determine the penetration rate, DOE estimated the square footage of floor space corresponding to likely installations of low- volume ceiling fans in commercial spaces such as hotels, restaurants, and other hospitality-based industries. DOE then

e stimated the square footage of floor space for likely installations of HVSD fans in commercial and industrial spaces including manufacturing plants, warehouses, and processing plants. DOE

took the ratio of commercial floor space associated with HVSD ceilin g fans to the commercial floor space associated with low -volume ceiling fans. DOE multiplied this ratio by the percentage

of low- volume ceiling fans in commercial spaces (5% of total low-volume ceiling fan shipments)

to determine that HVSD shipments should be roughly 12 % of the total low-volume shipments.

To estimate historical shipments of HVLD ceiling fans, DOE started with an estimate of roughly 50,000 units of installed stock in 2013 based on information collected from manufacturers. DOE then reconstructed the shipments history required to match this level of stock assuming a linear trend in shipments to new installations starting in the year 2000 (the assumed starting point of HVLD shipments based on when HVLD options became available on

the market ) and including replacements using the same lifetime function of low

- volume ceiling fans. DOE used this historical time series as the starting point for its stock -accounting model for HVLD ceiling fans.

Figure 9.3.5 and Figure 9.3.6 present DOE’s best estimates for HVSD and HVLD historical shipments, respectively.

Figure 9.3.5 Historical Shipments Estimate for HVSD ceiling fans

9-11Figure 9.3.6 Historical Shipments Estimate for HVLD ceiling fans

9.3.2.2 Shipments Projections by Market Segment

The shipments model considers specific market segments in developing a shipments projection. The model considers the following market segments for high -v olume ceiling fans: replacement and new installations . Total shipments for high- volume ceiling fans in a given year are given by:

SSh ip ( j ) = RRpl ( j ) + NI ( j ) Eq. 9.10

Where:

SSh ip ( j ) = Total shipments in year j

, RRpl ( j ) = Units retired and replaced in year j

NI ( j ) = Number of new installations in year j

The following sections discuss these market segments in further detail.

Replacement Shipments

. Estimated sales due to replacements in a given year are equal to the total stock of the appliance minus the sum of the appliances sold in previous years that still remain in the stock. The following equation represents how DOE estimated replacement shipments:

RRpl ( j ) = �

i=N j−1 SSh ip ( i ) × pro b Rtr ( age = j − i )

Eq. 9.11

Where: RRpl ( j ) = Units retired and replaced in year j

, SSh ip ( i ) = Total shipments in year i

,

9-12pro b Rtr ( age ) = Probability that a ceiling fan of a particular age will be retired, and

N = Start year when the model begins its stock accounting.

The retirement function, pro b Rtr ( age ) , is based on the product lifetime distribution of low-volume ceiling fans discussed in chapter 8 of this TSD. The product lifetime distribution has an average value of 13.8 years, and minimum and maximum values of 4.1 years and 30 years.

N

ew Installation Shipments

. For HVSD ceiling fans, DOE scaled new installations by

12 % (as discussed in Section 9.3.2.1 ). For HVLD ceiling fans, DOE assumed the line ar trend in shipments used to in the analysis to estimate current stock would continue to represent new
installation of units.

Figure 9.3.7 and Figure 9.3.8 shows the base case shipments of HVSD and HVLD ceiling fans using the stock accounting methodology by market segment.

Figure 9.3.7 Base Case Shipments of HVSD Ceiling Fans by Market Segment

9-13Figure 9.3.8 Base Case Shipments of HVLD Ceiling Fans by Market Segment

9.3.2.3 Consumer

- Choice Model Calibration

DOE estimated the logit parameters β FC and β OM for high -volume ceiling fans using data

for first cost (including a nationally weighted sales tax) and annual O&M cost from chapter 5 of

this TSD . M arket share data was estimated from model counts of available HVLD cei ling fans

on the Internet. Table 9.3.2 lists the data for HVLD fans used for calibrating logit parameters for high -volume ceiling fans.

Table 9.3.2 Input Parameters for Calibrating Consumer Sensitivities for High

–Volume Ceiling Fans

EL First Cost (2013$) Annual O&M Cost (2013$) Market Share (2013)

Baseline 3809.45 288.93 8.7%

1 3796.20 277.84 34.8%

2 4056.65 173.93 56.5%

3 5988.32 85.64 0.0%

Using t he input data from Table 9.3.2 with Eq. 9.3 and Eq. 9.4 results in a system of four equations. DOE used an analytical equation solver in the programming language Python to numerically solve for β FC and β OM . The results can be found in Table 9.3.3 . For HVLD fans,

DOE lacked data to estimate calibration factors and assumed calibration factors for all ELs are equal to 1.

9-14Table 9.3.3 Best

- fi t Logit Parameters for High-Volume Ceiling Fans

Logit Parameter Best

- Fit Value

β FC - 0.032

β OM - 0.086

The logit parameters found for HVLD ceiling fans were used for HVSD ceiling fans assuming all calibration factors are 1.

9.4 IMPACT OF ENERGY CONSERVATION STANDARDS ON SHIPMENTS

DOE projects that appliance standards often result in an increase in the price of the product. Economic theory suggests that, all else being equal, an increase in the price of a normal good would lead to a decrease in demand for it. DOE conducted a literature review and an analysis of appliance price and efficiency data to estimate the effects on product shipments from increases in product price. DOE also considered the decreases in operating costs from higher energy effi ciency and changes over time in household income. Appendix 9A provides a detailed explanation of the methodology DOE used to quantify the impacts of these variables on shipments.

In the literature, DOE found only a few studies of appliance markets that ar e relevant to

the issue at hand. DOE identified no studies that use time- series data of product price and shipments data after 1980. The information that can be summarized from the literature suggests that the demand for appliances is price- inelastic. Othe r information in the literature suggests that appliances are a normal good, such that rising incomes increase the demand for appliances. Finally, the literature suggests that market behavior indicates relatively high “implicit discount rates” when comparing appliance prices and appliance operating costs.

DOE found insufficient data on product purchase price and operating cost to perform a thorough analysis of dynamic changes in the appliance market. Instead, it used purchase price and efficiency data specific to residential refrigerators, clothes washers, and dishwashers over the period 1980–2002 to evaluate broad market trends and conduct simple regression analyses. These data indicate that there has been a rise in appliance shipments and a decline in appliance purchase price and operating costs over the time period. Household income has also risen during

this time.

To simplify the analysis, DOE combined the available economic information into one variable, termed the relative price, and used this variable in an analysis of market trends, as well

as to co nduct a regression analysis. The relative price is defined with the following expression:

RRPP = TTPP

Income = PPPP + PPVOC

Income Eq. 9.12

Where:

RRPP = Relative price,

9-15TTPP = Total price,

Income = Household income,

PPPP = P urchase price, and

PPVOC = Present value of operating cost.

DOE used an “implicit discount rate” of 37 percent to determine the present value of operating costs. This value is an average from values derived by several studies described in a 1985 journal article. 5

DOE’s regression analysis yields a relative price elasticity of demand, averaged over the three appliances, of -0.34. For example, a relative price increase of 10 percent results in a 3.4 percent decrease i n shipments. B ecause the relative price elasticity incorporates the impacts from three effects (i.e., purchase price, operating cost, and household income), the impact from any single effect is somewhat mitigated by changes from the other two effects.

Th e relative price elasticity of

- 0.34 is consistent with estimates in the literature. Nevertheless, DOE stresses that the measure is based on a small data set, using simple statistical analysis. More importantly, the measure is based on an assumption that economic variables, including purchase price, operating costs, and household income, explain most of the trend in appliances per household in the United States since 1980. Changes in appliance quality and consumer preferences may have occurred during this period, but DOE did not account for them in this analysis. Despite these uncertainties, DOE believes that its estimate of the relative price elasticity of demand provides a reasonable assessment of the impact that purchase price, operating cost, and household income have on product shipments.

DOE considers the relative price elasticity provided by the preceding analysis to be a short-run value. Because DOE’s forecasts of shipments and national impacts due to standards is

over a 30- year time period, it neede d to consider how the relative price elasticity is affected once a new standard takes effect. It was unable to identify sources specific to household durable goods, such as appliances, to indicate how short-run and long- run price elasticities differ. To

es timate how the relative price elasticity changes over time, DOE relied on a study pertaining to

automobiles. 6 This study shows that the automobile price elasticity of demand changes in the years following a purchase price change. With increasing years after the purchase price change, the price elasticity becomes smaller (more inelastic) until it reaches a terminal value around the

ten th year after the pric e change. Table 9.4.1 shows the relative change in the price elasticity of demand for automobiles over time. DOE developed a time series of relative price elasticities for home appliances using the relative change in the automobile price elasticity of demand. For years not shown in the table, DOE performed a linear interpolation to obtain the relative price elasticity.

9-16Table 9.4.1 Change in Relative Price Elasticity Following a Purchase Price Change Years Following Price Change

1 2 3 5 10 20

Change in
Elasticity

Relative to 1 st

year 1.00 0.78 0.63 0.46 0.35 0.33

Relative Price
Elasticity -0.34 -0.26 -0.21 -0.16 -0.12 -0.11

9.4.1 Application of Relative Price Elasticity

DOE estimated shipments in each candidate standards level using the relative price

elasticities described in the previous section , along with the change in the relative price between

a standards case and the no standards case. The relative price in each case is weighted by the market share appropriated to each EL based on the consumer choice model. Based on an analysis of NPD shipme nts data of ceiling fans between 2007 -2011, approximately 88% of low-volume ceiling fans are also sold with CFLKs. In the case of low-volume ceiling fans, t he relative price

reflects the proportional weighting of ceiling fan s with CFLKs and without. Because household income is the same in the standards case and the base case, it does not figure into the calculation of the change in the relative price. Note that in the following equation, the relative price and the relative price elasticity are functio ns of the year because both can change with time. Changes in the relative price are due to price learning which will affect the purchase price of ceiling fans

with DC motors

.

SSh ip STD ( j ) = ( RRp l BASE ( j ) + NI BASE ( j ) + EB BASE ( j ) ) × (1 + e RP ( j ) × RP STD ( j ) −RP BASE ( j )

RP BASE ( j ) )

Eq. 9.13

Where:

SShip STD ( j ) = total shipments under the standards case in year j

, RRp l BASE ( j ) = units under the base case retired and replaced in year j

, NI BASE ( j ) = number of new construction installations u nder the base case in year j

, EB BASE ( j ) = number of installations which are additions to existing buildings in year j

,

e RP ( j ) = relative price elasticity in year j (equals -0.34 for year 1), and

RRPP STD ( j ) = relative price of a ceiling fan after implementation of a ceiling fan standard

level in year j , and

RRPP BASE ( j ) = average relative price of a ceiling fan in absence of a ceiling fan standard in

year j

.

9-17For low-volume ceiling fans, DOE assumed consumers were only sensitive to the purchase price and did not consider operating cost in its calculation of the relative price . In this case, only the purchase price contributes to the relative price. For high-volume ceiling fans, DOE assumed consumers were sensitive to both purchasing price and the present value operating cost. In this case, both the purchase price and the present value of operating cost (using a discount rate of 37% as described in the previous section) contribute to the relative price.

9.5 AFFECTED STO CK

In addition to the forecast of product shipments under both the base case and the standards case, the affected stock is a key output of DOE’s shipments models. The affected stock (stock that is affected by a standards level) consists of those in -service units that are purchased in or after the year the standard has taken effect, as described by the following equation:

Aff SStock ( j ) = ∑ SSh ip ( i ) × pro b
surv ( age = j − i ) j

i= St d yr Eq. 9.14

Where: Aff SStock ( j ) = affected stock of units of all vintages that are in service in year j

, SSh ip ( i ) = shipments in year i

, pro b
surv ( age ) = probability a unit will survive to age
, age = age of the units (years), and

SSt d yr = compliance year of the standard.

For its analysis, DOE assumed a compliance year of 2019 for the potential amended energy conservation standar ds. Thus, the standard level affects all appliances purchased starting

in 2019.

9.6 ALTERNATIVE SHIPMENT SCENARIOS

9.6.1 Overview

DOE estimates the impacts of a standard at four ELs for low-volume ceiling fans and

three ELs for high

- volume ceiling fan s that assum e r eference growth rate and electricity prices

from AEO2014 projections (hereafter, referred to as the ‘reference’ case) . In addition, DOE conducted alternative shipment scenario s to gauge the importance of various assumptions on shipments estimates and its effects on NIA results . These analyses are (1) the impact of a CFLK standard on shipments of low-volume ceiling fans and (2) an analysis of the impact of not applying price learning to brushless direct current (DC) motor fans. DOE assumed the impa ct of a CFLK standard would be limited to low-volume ceiling fans as DOE found a very limited number of CFLKs packaged with high-volume ceiling fans.

9.6.2 Impact of a Ceiling Fan Light Kit Standard

DOE is concurrently pursuing an energy conservation standard rulemaking on CFLKs with a compliance date in 2019. As CFLKs are primarily sold coupled to low- volume ceiling fans, a CFLK standard that increases the average price of a CFLK will increase the average price

9-18of a ceiling fan and CFLK system. This price increa se due to a CFLK standard will decrease the shipments of ceiling fans that are sold with CFLKs in both the ceiling fan base case and the ceiling fan standards case . However, a CFLK standard will only affect shipments of ceiling fans that include light kits . The shipments of ceiling fans in the base case (i.e. in the absence of amended ceiling fan standards) with a CFLK standard can be expressed as:

SShip BASE

, CFLK STD ( j )

= w CFLK � RRp l BASE ( j ) + NI BASE ( j ) + EB BASE ( j ) � ∗ � 1 + e RP ( j ) ∗ RRPP STD

, CFLK ( j ) − RRPP BASE ( j )

RRPP BASE ( j ) � + (1 − w CFLK )( RRp l BASE ( j )

+ NI BASE ( j ) + EB BASE ( j ) ) Eq. 9.15

Where: SShip BASE

, CFLK STD ( j ) = total ceiling fan shipments under a CFLK standard in year j

,

w CFLK = fraction of low- volume ceiling fan s with CFLKs in the case of no CFLK standard and no CF standard, RRp l BASE ( j ) = units under the no ceiling fan and no CFLK standard case and replaced in

year j

, NI BASE ( j ) = number of new construction installations under the no ceiling fan and no

CFLK standard case in year j

, EB BASE ( j ) = units installed in existing buildings under the no ceiling fan and no CFLK

standard case in year j

,

e RP ( j ) = relative price elasticity in year j (equals -0.34 for year 1), and

RRPP BASE = average relative price of a ceiling fan in the absence of a CFLK standard in

year j , and

RRPPSSTTDD

, = average relative price of a ceiling fan due to a CFLK standard level in year j

.

Shipments of low- volume ceiling fans in in the ceiling fan standards case can be expressed as:

SShip STD

, CFLK STD ( j )

= �w

CFLK � RRp l BASE ( j ) + NI BASE ( j ) + EB BASE ( j ) � ∗ � 1 + e RP ∗ RRPP STD

, CFLK ( j ) − RRPP BASE ( j )

RRPP BASE ( j ) �

+ ( 1 − w CFLK ) � RRp l BASE ( j ) + NI BASE ( j ) + EB BASE ( j ) �� ∗ (1 + e RP ( j )

∗ RRPP STD

, CF ( j ) − RRPP BASE ( j )

RRPP BASE ( j ) )

9-19Eq. 9.16

Where: SShip STD

, CF STD ( j ) = total shipments of low-volume ceiling fans under a CFLK standard

and with a ceiling fan standard in year j

,

w CFLK = fraction of low- volume ceiling fans with CFLKs in the no CFLK standard and

no ceiling fan standard scenario, RRp l BASE ( j ) = units under the no ceiling fan and no CFLK standard case and replaced in

year j

, NI BASE ( j ) = number of new construction installations under the no ceiling fan and no

CFLK standard case in year j

, EB BASE ( j ) = units installed in existing buildings under the no ceiling fan and no CFLK

standard case in year j

,

e RP ( j ) = relative price elasticity in year j (equals -0.34 for year 1),

RRPP BASE

, ( j ) = average relative price of a ceiling fan without a ceiling fan or CFLK standard level in year j

, RRPP STD

, CF ( j ) = average relative price of a ceiling fan in presence of a ceiling fan standard level in year j , and

RRPP STD

, CFLK = average relative price of a ceiling fan in presence of a CFLK standard level in year j

.

9.6.3 No Price Learning Shipments Scenario

As discussed in chapter 8 of this TSD, DOE applied price learning to the price premium

associated with the electronics and controls found in DC motor fans. DOE assumed that this price premium is due to the electronics and controls found in DC motors but not in AC moto rs. DOE estimated that the price premium of DC motors should decrease at a rate of 6% per year (see chapter 8 of this TSD for more details)

. DOE recognizes that there is a level of uncertainty in the application of this price trend over the ana lysis period and considers a scenario in which there is no price learning. In the absence of price learning

, the purchase price of all ceiling fan options is the same in each year of the analysis period

.

9.7 SHIPMENTS FORECAST IN STANDARDS CASES

This section presents the shipments forecasts for the ELs which DOE considered for ceiling fans, including the base case. These shipments are considered the reference case , and use the following assumptions: AEO reference projections for construction growth and electri city prices, assumed price learning applied to DC motors, and no standard on CFLKs. DOE generally expects that a standard on ceiling fans will increase per unit price of a given product, which will lead to a decrease in shipments. Figure 9.7.1 to Figure 9.7.3 show DOE’s projections for shipments in the reference case. The decrease in shipments due to a standard is proportional to the increase in average price after implementation o f the standard. For low-volume ceiling fans,

EL 1 and EL 2 result is a small increase in average price compared to the baseline and, thus, do not result in a noticeable change in shipments. Additionally, a standard at EL1 or EL2 would affect a relatively small portion of the market as a majority of the low

- volume ceiling fan market

9-20is at EL3 or above. For these cases, the change in shipments between the candidate standards

case and the base case is so small that it is indistinguishable on the figure s . In that case, the higher standard level overwrites the lower on the plot. Table 9.7.1 and Table 9.7.2 show the cumulative shipments over the analysis period for the reference scenario for each EL along with the percent change expected from a standard.

Figure 9.7.1 Projected Shipments for Low

- Volume Ceiling Fans , Reference Case

Figure 9.7.2 Projected Shipments for HVSD Ceiling Fans , Reference Case

9-21Figure 9.7.3 Projected Shipments for HVLD Ceiling Fan s , Reference Case

Table 9.7.1 Cumulative Low- Volume Shipments and Impact to Standards from a Ceiling

Fan Standard

EL Standard Hugger

Cumulative Shipments from

2019-2048 (millions) Percent change from

Base Case Cumulative Shipments from

2019-2048 (millions) Percent change

from Base Case

1 485.9 0 269.4 0

2 485.6 0 269.3 0

3 483.5 0.5 268.2 0.5

4 471.1 3 .1 261.9 2.8

Table 9.7.2 Cumulative High

- Volume Ceiling Fan Shipments and Impact of Standards

EL HVLD HVSD

Cumulative Shipments from

2019-2048 (millions) Percent change from

Base Case Cumulative Shipments from

2019-2048 (millions) Percent change

from Base Case

1 1.11 0 93.7 0

9-222 1.11 0 93.7 0

3 1. 10 1.4 93.7 0

9-23REFERENCES

1. U.S. Department of Energy- Office of Energy Efficiency and Renewable Energy. Energy Conservation Program for Consumer Products: Energy Conservation Program: Energy Conservation Standards for General Service Fluorescent Lamps and Incandescent Reflector Lamp s. February 2013. Washington, D.C. (Last Accessed March 28, 2014) http://www.regulations.gov/#!docketDetail;D=EERE -2011- BT

- STD -0006

2. AcuPOLL® Precision Research, Inc. Survey of Consumer Ceiling Fan Usage and Operations. May 31, 2013. (Last Accessed June 17, 2013.)

3. Energy Information Administration. Annual Energy Outlook 2014 with Projections to

2040. Report No. DOE/EIA-03832014. Washington, D.C. http://www.eia.doe.gov/oiaf/aeo/

4. Administration., U.S. Department of Energy–Energy Information Manufacturing Energy Consumption Survey. 2010 MECS Survey Data. 2013. Washington, D.C. (Last Accessed September 11, 2014.) http://www.eia.gov/consumption/manufacturing/data/2010/

.

5. Train, K. Discount Rates in Consumers' Energy- Related Decisions. Energy: The

International Journal. 1985. Vol. 10, No. 12.

6. Hymans, S. Consumer Durable Spending: Explanation and Prediction. Brookings Papers on Economic Activity. 1971 (1). pp. 234 - 239.

9-24CHAPTER 10. NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

10.1 INTRODUCTION ......................................................................................................... 10-1

10.2 NATIONAL ENERGY SAVINGS ............................................................................... 10-1

10.2.1 Primary Energy Savings .................................................................................... 10-1

10.2.2 Full

- Fuel

- Cycle Energy Savings ........................................................................ 10-2

10.2.3 National Energy Savings Inputs......................................................................... 10-3

10.2.3.1 Shipments and Affected Stock ................................................................. 10-3

10.2.3.2 Average Unit Energy Consumption ......................................................... 10-3

10.2.3.3 Site

- to -Power Plant Conversion Factor .................................................... 10-4

10.2.3.4 Primary Energy to Full

- Fuel

- Cycle Multipliers ....................................... 10-4

10.2.3.5 Rebound Rate Factor ................................................................................ 10-5

10.3 NATIONAL NET PRESENT VALUE ......................................................................... 10-5

10.3.1 Definition ........................................................................................................... 10-5

10.3.2 Net Present Value Inputs ................................................................................... 10-6

10.3.2.1 Total Annual Installed Cost Increases ...................................................... 10-6

10.3.2.2 Total Annual Operating Cost Savings ...................................................... 10-7

10.3.2.3 Discount Factor ........................................................................................ 10-8

10.4 RESULTS ...................................................................................................................... 10-8

10.4.1 National Energy Savings Results ....................................................................... 10-9

10.4.2 Net Present Value Results ................................................................................ 10-10

REFERENCES ........................................................................................................................ 10-14

LIST OF TABLES

Table 10.4.1 Estimates of Cumulative Full

- Fuel Cycle NES (quads) for Low

Volume Ceiling Fans ................................................................................... 10-9

Table 10.4.2 Estimates of Full -Fuel Cycle NES (quads) for High- Volume Ceiling

Fans .............................................................................................................. 10-9

Table 10.4.3 Cumulative Net Present Value of Consumer Benefits for Low-Volume Ceiling Fans at 3% in billion 2013$ .......................................................... 10-10

Table 10.4.4 Cumulative Net Present Value of Consume r Benefits for Low -Volume Ceiling Fans at 7% in billion 2013$ .......................................................... 10-10

Table 10.4.5 Cumulative Net Present Value of Consumer Benefits for High -Volume Ceiling Fans at 3% in billion 2013$ .......................................................... 10-11

Table 10.4.6 Cumulative Net Present Value of Consumer Benefits for Hig h-Volume Ceiling Fans at 7% in billion 2013$ .......................................................... 10-11

Table 10.4.7 Cumulative Equipment Cost Increase for Low- Volume Ceiling Fans at
3% in billions 2013$ .................................................................................. 10-11

Table 10.4.8 Cumulative Equipment Cost Increase for Low- Volume Ceiling Fans at
7% in billions 2013$ .................................................................................. 10-12

10-iTable 10.4.9 Cumulative Equipment Cost Increase for High- Volume Ceiling Fans at
3% in billions 2013$ .................................................................................. 10-12

Table 10.4.10 Cumulative Equipment Cost Increase for High- Volume Ceiling Fans at
7% in billions 2013$ .................................................................................. 10-12

Table 10.4.11 Cumulative Operating Cost Savings for Low- Volume Ceiling Fans at
3% in billions 2013$ .................................................................................. 10-12

Table 10.4.12 Cumulative Operating Cost Savings for Low- Volume Ceiling Fans at
7% in billions 2013$ .................................................................................. 10-13

Table 10.4.13 Cumulative Operating Cost Savings for High- Volume Ceiling Fans at
3% in billions 2013$ .................................................................................. 10-13

Table 10.4.14 Cumulative Operating Cost Savings for High- Volume Ceiling Fans at
7% in billions 2013$ .................................................................................. 10-13

10- iiCHAPTER 10. NATIONAL IMPACT ANALYSIS

10.1 INTRODUCTION

This chapter describes the method the U.S. Department of Energy (DOE) used to estimate national impacts of new energy conservation standards for ceiling fans

. To estimate those impacts, DOE calculated the quantity and net value to consumers of future natio nal energy savings (NES) and the net present value (NPV) of consumer benefits resulting from the various efficiency levels (E Ls). Results described include (1) national energy consumption and savings, (2) monetary value of national energy savings associate d with each E L, (3) increased total

installed costs nationwide due to E Ls, and (4) the NPV of consumer benefits (difference between value of energy savings and increased total installed costs).

DOE determined both t he NE S and the NPV for all the ELs cons idered for ceiling fan s. All calculations were performed using a Microsoft Excel spreadsheet model. The spreadsheet model, referred to as the national impact analysis (NIA) model, incorporates the calculations of NES and NPV, along with input from the shipments model described in chapter 9. Details and instructions for using the NIA model are provided in appendix 10A.

Chapter 9 provides a detailed description of the shipments model DOE used to forecast future purchases of ceiling fan s through a stock- acco unting approach coupled with a consumerchoice model

. The model also estimates the impact of a ceiling fan standard on shipments based

on sensitivities related to total installed cost, operating costs, and household income.

10.2 NATIONAL ENERGY SAVINGS

This sec tion describes DOE’s calculation of the NES for c eiling fans under the E Ls considered in this preliminary analysis.

10.2.1 Primary Energy Savings

The annual NES quantifies the difference in energy use between the base case and a higher efficiency level in a given year:

NE S y = � AE C base

, y − AE C std

, y � × RF
Eq. 10.1

Where:

NE S y = na tional energy savings in year y (quads),

AE C base

, y = base case annual national energy consumption at the pow er plant for all

affected stock in year y (quads),

AE C std

, y = standards case annual national energy consumption at the power plant for all

affected stock in year y (quads), and

RF = rebound rate factor = 1 - rebound rate.

10-1Positive values of NES correspond to a net energy savings following a standards implementation, in other words, annual energy consumption ( AEC ) in the standards case is less

than AEC in the base case.

The cumulative national energy savings is the sum of each NE S y for all affected stock

. The analysis tracks the energy use of the stock shipped during the analysis period until the last

unit is retired in 2077. The cumulative NES is computed as follows:

NE S
cum = � NE S y

y Eq. 10.2

Where:

NE S
cum = cumulative national energy savings (quads)

DOE calculated the AEC of the affected stock in product class i as follows:

AE C y = � AE C i

, y

i Eq. 10.3

Where:

AE C i

, y = the annual energy consumption of product class i in year y , defined below

AE C i

, y = ��

STOC K i

, v × UE C i

, v

v �

× SP y

Eq. 10.4

Where:

STOC K i

, v = affected stock in product class i , of vinta ge v
, UE C
v =u nit energy consumption of vintage v , given by Eq. 10.7

SP y =time variable site

- to

- power -plant energy consumed at the power plant (quads/kWh).

10.2.2 Full

- Fuel -Cycle Energy Savings

DOE has historically presented the NES computed based on the primary energy savings at the power plant, as described in the previous section. Per DOE’s 2011 Statement of Policy for Adopting Full Fuel Cycle Analyses, DOE now uses full- fuel

- cycle ( hereafter, FFC) measures of energy use and emissions in its energy conservation standards analyses. 1 In addition to the primary energy used at the power plant to supply electricity to the site of use and account fortransmission and distribution losses, the FFC analysis also accounts for energy consumed upstream of the power plant in extracting, processing, and transporting or distributing the primary fuels to the power plant, as described in appendix 10B.

As shown in Eq. 10.5 , the FFC national energy savings NE S FFC are obtained by multiplying the primary energy savings ( Eq. 10.1 ) by the FFC multiplier computed for the same

year, μ y .

10-2NE S FCC

, y = � AE C base

, y − AE C std

, y � × RF × μ y Eq. 10.5

Where:

μ y = the FFC multiplier in year y , and

All other variables were defined in Eq. 10.1

.

The cumulative FFC energy savings is calculated by summing the annual FFC energy saving from 2019-2077.

NE S FFC

, cum = � NE S FCC

, y

y Eq. 10.6

10.2.3 National Energy Savings Inputs

As described in the preceding sections, the following inputs are used for calculating the national energy savi ngs:

• shipments and stock shipped during the analysis period,

• average unit energy consumption (UEC),

• site

- to -power-plant conversion factor (SP),

• primary energy to full fuel cycle multipliers (μ), and

• rebound rate factor (RF).

These inputs are further discussed in the following sections.

10.2.3.1 Shipments and Affected Stock

The shipments model, described in chapter 9 of this TSD, calculated the shipments of ceiling fans and market share distributions among product classes and E Ls for different scenarios, for each year of the 30 -year (2019-2048) shipments analysis. Based on that analysis, the model developed a description of the stock affected by the rulemaking.

10.2.3.2 Average Unit Energy Consumption

DOE calculated the UEC for each product by multiplying the sector dep endent hours of use at each fan speed by the average power consumed at that speed, and adding in any standby power consumed by the fan.

UEC = � � W

j × OH j

j=H

, M

, L �

+ W sb × OH sb

Eq. 10.7

Where:

UEC = annu al unit energy consumption,

10-3W j =the power consumption at a given speed j

, OH i = sector dependen t hours of use at speed j

, H = high speed,

M =medium speed,

L =low speed,

W

sb =power consumption in standby mode, and

OH sb =operating hours in standby mode.

Details on the develo pment of hours of use at each speed for each sector are given in chapter 7 of this TSD.

10.2.3.3 Site

- to -Power Plant Conversion Factor

To estimate the energy used at the power plant in order to supply the electricity used onsite by c eiling fans, DOE multiplied the site energy, UE C y by a site

- to -power plant conversion factor, which accounts for average losses associated with the generation, transmission, and distribution of electricity f ro m the fleet of U.S. power plants to the point of use. DOE used

annual site- to -source conversion factors based on the version of the National Energy Modeling System (NEMS) that corresponds to the Energy Information Administration’s Annual Energy

Outlook 2014 (AEO201 4 ). 2 The factor changes over time in response to projected changes in generation sources (the types of power plants projected to provide electricity to the country). Figure 10.2.1 shows how the site- to -power plant conversion factor is expected to change during the NES and NPV analysis period.

Figure 10.2.1 Site

- to

- Power Plant Conversion Factor for Electricity

10.2.3.4 Primary Energy to Full

- Fuel

- Cycle Multipliers

For this preliminary analysis, DOE calculated FFC energy savings using a methodology described in appendix 10B. As discussed previously, the FFC energy savings are obtained by

10-4multiplying the primary energy savings at the power plant by the FFC multiplier. The estimated FFC multiplier (μ) is essentially constant, ranging between 1.040 and 1.041 from 2019 to 2077.

10.2.3.5 Rebound Rate Factor

A rebound effect accounts for increased usage of an appliance by consumers after the implementati on of a standard, reducing the energy savings attributed to a standard. DOE generally accounts for the direct rebound effect in its estimates of the NES . As discussed in chapter 2 of this TSD, for this preliminary analysis, DOE used a rebound rate of zero based on

feedback from manufacturers. DOE welcomes data on rebound effects in c eiling fans

.

10.3 NATIONAL NET PRESENT VALUE

10.3.1 Definition

The NPV is the difference between the present value of savings (PVS) in operating cost resulting from the use of more efficien t appliances under the standard and the present value of increased total installed costs (PVC) of those appliances. The NPV is described by the following equation:

NPV = PVS − PVC Eq. 10.8

Where:

PVS = present value of savings in operating cost (2013$) for all c eiling fans shipped during the analysis period,

PVC =present value of increase in total installed cost (including costs for equipment, installation, and disposal in 2013$) for all c eiling fans shipped during the analysis period.

Under this definition, reductions in operating costs contribute positively to the NPV

, while increases in total installed costs contribute negatively to the NPV

.

DOE determined the PVS and PVC according to t he following expressions:

PVS = � OC S y × DF y

y Eq. 10.9

PVC = � EC I y × DF y

y Eq. 10.10

Where:

OC S y =the total operating cost savings from the affect stock in year y , relative to the base case (2013$)

EC I y =total annual equipment cost increase for shipments in year y , relative to the base case (2013$)

DF y =discount factor in each year (defined in section 10.2.3.5 )

10-5DOE calculated PVC from 2019 to 2048 (the duration of the shipments analysis period),

and PVS from 2019 to 2077 (to account for the full li fetime of all affected stock). The

contributions to PVC and PVS for each year were discount ed to 2014. The following sections

describe how DOE derives the variables in Eq. 10.9 and Eq. 10.10

.

10.3.2 Net Present Value Inputs

The inputs to DOE’s calculation of the NPV of costs and savings for the nation are:

• total annual installed cost ( TIC ) in the base case and the standards cases,

• total annual operating cost ( TOC ) for the affected stock in the base case and the standards cases, and

• discount factor ( DF ).

The computation of these inputs from the outputs of upstream analyses is detailed in the following sections.

10.3.2.1 Total Annual Installed Cost Increases

DOE calculated the total annual equipment cost increase of using more efficient c eiling

fans in the standards cases relative to the base case as the difference between the TIC in the

standards case and the base case:

EC I y = TI C std

, y − TI C base

, y Eq. 10.11

Where:

TI C std

, y = the total installed cost of equipment shipped in ye ar y in the standards case (2013$), and

TI C base

, y = the total installed cost of equipment shipped in year y in the base case (2013 $).

Due to the higher cost of more efficient products in the standards case versus the base case, cost increases appear as negative values in the NPV

.

For ceiling fan s, the per- unit installed cost includes the first cost of the ceiling fan and the

installation cost. Therefore the TIC is given by the following equation

TIC = � s

i

, y × ( p i

, y + IC i

, y )

i Eq. 10.12

Where:

s i

, y = total shipments of ceiling fan option i in year y (number of units),

p i

, y = purchase price of ceiling fan option i in year y, includin g corrections for learning (2013$/unit), and

IC i

, y = installation cost of ceiling fan (2013$/unit).

10-6The computation of the variables in Eq. 10.12 is described in chapter 9 of this TSD.

DOE assumed the installation cost of a ceiling fan is independent of efficiency level, in

which case installation cost cancels out of the calculation of the total annual cost increase.

10.3.2.2 Total Annual Operating Cost Savings

DOE expresses savings in operating costs as cost reductions associated with the lower energy consumption of products shipped in the standards case compared to the base case. DOE calculated the total annual operating cost savings as the difference between the TOC in the standards case and the base case. As for the computation of the NES , the TOC need s to be

calculated for the affected stock:

OC S y = TO C base

, y − TO C std

, y Eq. 10.13

Where:

OCS y = the total operating cost saving of the affected stock in year y (2013 $),

TO C base

, y = the total operating cost of the affected stock in year y in the base case (2013$), and

TO C std

, y = the total operating cost of the affected stock in year y in the standards case (2013 $).

For ceiling fans

, the annual operating cost is generally the c ost of electricity consumption. However, some ceiling fans will incur a repair cost associated with replacing a

failed motor. For simplicity, DOE assumed that if a ceiling fan experienced a motor failure, it

occurred at 50

- percent of the average lifetime of that type of fan As described in chapter 8, the

a verage ceiling lifetime is 14 years, so a potential motor failure would occur at year 7 of a ceiling

fan ’s lifetime. Based on feedback form manufacturers, motor failure will affect brushless direct current ( DC ) motors disproportionally compared to alternating current (AC) motors due to the failure of electronic components . DOE assumed that 9% of DC motors shipped will fail and

2.5% of AC motors will fail.

As described in the life- cycle cost (LCC) and payback period (PBP) analysis (chapter 8 of this TSD), DOE calculated total annual operating costs based on national average electricity prices. DOE used the reference

- case, sector

- specific electricit y price projections from AEO2014

to establish al l electricity prices. As AEO201 4 only projects prices through 2040 , electricity prices in later years wer e extrapolated based on the trend from 2030-2040 and projected through

2077 for each sector.

DOE calculated annual TOC for ceiling fans by summing over the ope rating costs of all product classes and sectors in the affected stock , according to the following expression:

TO C y = p E

, y × � s

i

, y × UE C i

, y

i Eq. 10.14

Where:

10-7TO C y = annual total operating cost in year y for all affect stock of ceiling fans (2013$)

p E

, y = the price of electricity, in year y , as forecasted in the AEO2014 reference scenario (2013$/kWh),

S i

, y = the affected stock of ceiling fan in year y (number of units), and

UE C i

, y = the averag e unit energy consumption of ceiling fan type i in year y , as computed using Eq. 10.7 (kWh/unit).

For ceiling fans , DOE uses the forecast of national- average residential, commercial, and

industr ial electricity prices for its analysis in those sectors, respectively. DOE perfor med sensitivity analyses using the high- and low-economic growth scenarios from AEO2014 to establish electricity prices.

10.3.2.3 Discount Factor

DOE multiplied monetary values in future years by a discount factor to determine the present value. The DF is describe d by the equation:

DF = 1

( 1 + r ) � y−y p �

Eq. 10.15

Where:

r = discount rate,

y = year of the monetary value, and

y

p = year for which the present value is being determined.

DOE estimated NPV using both a 3- percent and a 7 -percent real discount rate, in accordance with the Office of Management and Budget’s guidance to Federal agencies on the development of regulatory analysis, particularly section E therein: Identifying and Measuring Benefits and Costs

. 3 DOE defined the present year as 2014.

10.4 RESULTS

This section pr esents the results of the NIA for c eiling fans . As discussed in chapter 9, DOE is concurrently pursu ing a n energy conservation standard on ceiling fan light kits (CFLKs ),

which could affect shipments of low-volume ceiling fans. To gauge the impact of a CFLK

standard on low-volume ceiling fans, DOE presents results for three different CFLK standards scenarios; no CFLK standard, CFLK at the baseline standard (CSL 0) after product class

consolidation , and CFLK at Max

- Tech standard. DOE’s observations of the market found very few high -volume ceiling fans packaged with CFLKs and therefore DOE does not believe a CFLK standard will impact high

- volume ceiling fan shipments. For this preliminar y analysis, when the potential impact of a particular hugger fan efficiency level was being analyzed, DOE

assumed that a standard would be set at the equivalent efficiency level for fans in the standard product class (and vice- versa).

10-810.4.1 National Energy Sav ings Results

Table 10.4.1 shows the cumulative FFC NES for low -volume ceiling fans by product class for three possible CFLK standard scenarios: no CFLK standard, CFLK at the baseline standard after product class consolidation, and CFLK at Max- Tech Standard

. Table 10.4.2 Error!

Reference source not found. shows FFC NES for high

- volume ceiling fans by product class. Figure 10.4.1 illustrate s FFC energy savi ngs over the course of the analysis period for low

volume standard ceiling fans.

Table 10.4.1 Estimates of Cumulative Full

- Fuel Cycle NES (quads) for Low- Volume Ceiling Fans

EL No CFLK

Standard CFLK CSL0

Standard CFLK Max

- Tech

Standard
Hugger Standard Hugger Standard Hugger Standard

1 0.048 0.113 0.048 0.113 0.048 0.113

2 0.072 0.176 0.072 0.176 0.072 0.176

3 0.174 0.393 0.174 0.393 0.174 0.392

4 0.845 1.742 0.844 1.740 0.843 1.738

Figure 10.4.1 Annual Full Fuel Cycle NES for Standard Ceiling Fans (quads)

Table 10.4.2 Estimates of Full

- Fuel Cycle NES (quads) for High

- Volume Ceiling Fans

EL Small

- Diameter Large

- Diameter

1 0.173 0.008

2 0.392 0.054

3 0.745 0.154

10-910.4.2 Net Present Value Results

Table 10.4.3 and Table 10.4.4 list the result s for cumulative NPV for low-volume ceiling

fans , for 3

- percent and 7 -percent discount rates, respectively. Table 10.4.5 and Table 10.4.6 list the cumulative NPV for high-volume c eiling fans

, respectively. Figure 10.4.2 illustrates NPV using a 7% discount rate over the analysis period for standard low-volume ceiling fans.

Table 10.4.3 Cumulative Net Present Value of Consumer Benefits for Low

- Volume Ceiling Fans at 3% in billion 2013$

EL No CFLK Standard CFLK

- Baseline

Standard CFLK Max

- Tech

Standard
Hugger Standard Total Hugger Standard Total Hugger Standard Total

1 0.296 0.701 0.997 0.296 0.700 0.996 0.295 0.698 0.993

2 0.396 1.003 1.399 0.396 1.002 1.398 0.395 0.999 1.394

3 0.529 1.228 1.757 0.528 1.226 1.755 0.527 1.223 1.750

4 1.757 3.185 4.942 1.755 3.182 4.938 1.753 3.177 4.930

Table 10.4.4 Cumulative Net Present Value of Consumer Benefits for Low

- Volume Ceiling Fans at 7% in billion 2013$

EL No CFLK Standard CFLK

- Baseline

Standard CFLK Max

- Tech

Standard
Hugger Standard Total Hugger Standard Total Hugger Standard Total

1 0.117 0.278 0.395 0.117 0.277 0.394 0.116 0.276 0.392

2 0.151 0.386 0.536 0.150 0.385 0.535 0.150 0.383 0.533

3 0.136 0.325 0.462 0.136 0.325 0.461 0.136 0.324 0.459

4 0.233 0.249 0.483 0.233 0.249 0.482 0.233 0.249 0.482

10-10Figure 10.4.2 NPV at 7% Discount for Standard Ceiling Fans

Table 10.4.5 Cumulative Net Present Value of Consumer Benefits for High

- Volume Ceiling Fans at 3% in billion 2013$

EL Small

- Diameter Large

- Diameter

1 0.854 0.026

2 1.995 0.170

3 3.675 0.166

Ta ble 10.4.6 Cumulative Net Present Value of Consumer Benefits for High

- Volume Ceiling Fans at 7% in billion 2013$

EL Small

- Diameter Large

- Diameter

1 0.333 0.009

2 0.794 0.055

3 1.454

- 0.026

Table 10.4.7 and Table 10.4.8 list the cumulative equipment cost increase for low-volume

c eiling fans for 3

- percent and 7 -percent discount rates, respectively. Table 10.4.9 and Table

10.4.10 list the cumulative equipment cost increase for high -volume ceiling fans at 3 -percent and 7-percent discount, respectively.

Table 10.4.7 Cumulative Equipment Cost Increase for Low-Volume Ceiling Fans at 3% in
billions 2013$

EL No CFLK Standard CFLK

- Baseline

Standard CFLK Max

- Tech

Standard
Hugger Standard Total Hugger Standard Total Hugger Standard Total

10-111 0.039 0.084 0.123 0.039 0.084 0.123 0.039 0.084 0.123

2 0.103 0.222 0.324 0.102 0.222 0.324 0.102 0.221 0.323

3 0.682 1.506 2.187 0.681 1.504 2.185 0.679 1.500 2.178

4 4.084 8.859 12.943 4.080 8.851 12.930 4.072 8.834 12.906

Table 10.4.8 Cumulative Equipment Cost Increase for Low-Volume Ceiling Fans at 7% in
billions 2013$

EL No CFLK Standard CFLK

- Baseline

Standard CFLK Max

- Tech

Standard
Hugger Standard Total Hugger Standard Total Hugger Standard Total

1 0.021 0.045 0.065 0.021 0.045 0.065 0.021 0.044 0.065

2 0.054 0.117 0.172 0.054 0.117 0.171 0.054 0.117 0.171

3 0.361 0.797 1.157 0.360 0.795 1.156 0.359 0.792 1.151

4 2.158 4.682 6.840 2.156 4.676 6.831 2.150 4.663 6.812

Table 10.4.9 Cumulative Equipment Cost Increase for High-Volume Ceiling Fans at 3%
in billions 2013$

EL Small

- Diameter Large

- Diameter

1 0.120 0.007

2 0.219 0.065

3 0.585 0.508

Ta ble 10.4.10 Cumulative Equipment Cost Increase for High-Volume Ceiling Fans at 7%
in billions 2013$

EL Small

- Diameter Large

- Diameter

1 0.067 0.004

2 0.126 0.031

3 0.362 0.269

Table 10.4.11 and Table 10.4.12 give the cumulative operating cost savings for lowvolume c eiling fans at 3

- percent and 7 -percent discount, respectively. Table 10.4.13 and Table

10.4.14 give the cumulative operating cost savings for high-volume c eiling fans at 3 -percent and 7-percent discount, resp ectively.

Table 10.4.11 Cumulative Operating Cost Savings for Low-Volume Ceiling Fans at 3% in
billions 2013$

EL No CFLK Standard CFLK

- Baseline

Standard CFLK Max

- Tech

Standard
Hugger Standard Total Hugger Standard Total Hugger Standard Total

10-121 0.335 0.785 1.120 0.335 0.784 1.119 0.334 0.782 1.116

2 0.499 1.225 1.724 0.498 1.224 1.722 0.497 1.220 1.717

3 1.211 2.733 3.944 1.209 2.730 3.940 1.206 2.723 3.929

4 5.840 12.044 17.885 5.835 12.033 17.868 5.825 12.012 17.836

Table 10.4.12 Cumulative Operating Cost Savings for Low-Volume Ceiling Fans at 7% in
billions 2013$

EL No CFLK Standard CFLK

- Baseline

Standard CFLK Max

- Tech

Standard
Hugger Standard Total Hugger Standard Total Hugger Standard Total

1 0.138 0.322 0.460 0.137 0.322 0.459 0.137 0.320 0.457

2 0.205 0.503 0.708 0.204 0.502 0.707 0.204 0.500 0.704

3 0.497 1.122 1.619 0.496 1.120 1.616 0.494 1.116 1.610

4 2.392 4.931 7.322 2.389 4.925 7.313 2.382 4.912 7.294

Table 10.4.13 Cumulative Operating Cost Savings for High-Volume Ceiling Fans at 3% in
billions 2013$

EL Small

- Diameter Large

- Diameter

1 0.974 0.033

2 2.215 0.236

3 4.260 0.674

Table 10.4.14 Cumulative Operating Cost Savings for High-Volume Ceiling Fans at 7% in
billions 2013$

EL Small

- Diameter Large

- Diameter

1 0.401 0.012

2 0.920 0.085

3 1.816 0.243

10-13REFERENCES

1. United States

- Office of the Federal Register. Federal Register. Vol. 76, No. 160, pp. 51281-51868. August 18, 2011. UNT Digital Library. Washington D.C.

2. Energy Information Administration. Annual Energy Outlook 2014 with Projections to

2040. Report No. DOE/EIA-03832014. Washington, D.C. http://www.eia.doe.gov/oiaf/aeo/

3. U.S. Office of Management and Budget. Circular No. A-4, Regulatory Analysis. 2003. Washington, DC. (Last Accessed March 27, 2014.) http://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a -4.pdf

10-14CHAPTER 11. CONSUMER SUBGROUP ANALYSIS

TABLE OF CONTENTS

11.1 METHODOLOGY ........................................................................................................ 11-1

11-iCHAPTER 11. CONSUMER SUBGROUP ANALYSIS

11.1 METHODOLOGY

The consumer subgroup analysis evaluates impacts on any identifiable groups or consumers who may be disproportionately affected by a national energy conservation standard. DOE will conduct this analysis as one of the analyses for the notice of proposed rulemak ing (NOPR). DOE will accomplish this, in part, by analyzing the life

- cycle costs (LCCs) and payback periods (PBPs) for those customers that fall into any identifiable groups. DOE plans to evaluate variations in regional energy prices, variations in energy use, and variations in installation costs that might affect the net present value of a standard to customer subpopulations. To the extent possible, DOE will obtain estimates of each input parameter’s variability and will consider this variability in its ca lculation of consu mer impacts.

DOE will determine the impact on consu mer subgroups using the LCC Spreadsheet Model, which allows for different data inputs. The standard LCC analysis (described in c hapter 8) focuses on the customers that use ceiling fans

. DOE can use the LCC Spreadsheet Model to analyze the LCC for any subgroup by sampling only that subgroup. (Chapter 8 explains in detail the inputs to the model used in determining LCC and PBPs.) In the case of ceiling fans , one subgroup DOE plans to consid er is low-income households.

DOE will be especially sensitive to increases in the purchase price of the product due to

amended standards, to avoid negative impacts on identifiable population groups that may not be able to afford significant increases in product price.

11-1CHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANALYSIS

TABLE OF CONTENTS

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

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

12.2.1 Phase I: Industry Profile..................................................................................... 12-2

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

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

12.2.1.2 Interview Guide ........................................................................................ 12-2

12.2.2 Phase III: Subgroup An alysis

................................ ............................................. 12-2

12.2.2.1 Manufacturer Interviews .......................................................................... 12-3

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

12.2.2.3 Manufacturer Subgroup Analysis ............................................................. 12-3

12.2.2.4 Competitive Impact Assessment .............................................................. 12-3

12.2.2.5 Manufacturing Capacity Impact ............................................................... 12-4

12.2.2.6 Employment Impact ................................................................................. 12-4

12.2.2.7 Cumulative Regulat ory Burden ................................................................ 12-4

12.3 INDUSTRY OVERVIEW ............................................................................................. 12-4

12.3.1 Industry Cost Structure ...................................................................................... 12-4

12.3.2 Inventory Levels ................................................................................................ 12-6

12.4 INTERVIEW TOPICS AND PRE LIMINARY FINDINGS ......................................... 12-6

12.4.1 Market Shares and Industry Consolidation ........................................................ 12-6

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

12.4.2.1 Impact on Product Mix ............................................................................. 12-7

12.4.2.2 Product Utilit y .......................................................................................... 12-7

12.4.3 Manufacturer Markup ........................................................................................ 12-8

12.4.4 Conversion Costs ............................................................................................... 12-8

12.4.5 Cumulative Regulatory Burden ......................................................................... 12-8

12.5 OVERALL KEY ISSUES ............................................................................................. 12-9

12.5.1 Shift to Air Conditioning ................................................................................... 12-9

12.5.2 Testing Burden ................................................................................................... 12-9

12.5.3 Off -Mode Power Consumption.......................................................................... 12-9

12.5.4 Utility of D C Motors ........................................................................................ 12-10

LIST OF TABLES

Table 12.3.1 Ceiling Fan and Part Industry Employment and Earnings ........................... 12-5

Table 12.3.2 Ceiling Fan and Part Industry Material and Payroll Costs .......................... 12-5

Table 12.3.3 Ceiling Fan and Part Industry End- of

- Year Inventory ................................ 12-6

12-iCHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANALYSIS

12.1 INTRODUCTION

The purpose of the manufacturer impact analysis (MIA) is to identify and quantify the likely impacts of energy conservation standards on manufacturers. The Process Rule 1 provides guidance for conducting this analysis with input from manufacturers and other interested parties. The U.S. Department of Energy (DOE) will apply this methodology to its evaluation of energy conservation standards for ceiling fans (CF s)

. DOE will consider financial impacts and a wide range of quantitative and qualitative industry impacts that might result from energy conservation standards. For example, a particular standard level could quantitatively change the costs

associated with m anufacturing ceiling fans while qualitatively requiring changes to manufacturing practices

.

DOE will identify and analyze these impacts through interviews with manufacturers and

other interested parties during the notice of proposed rul emaking ( NOPR ) stage of the analysis.

DOE announced changes to the MIA format through a report issued to Congress in January 2006 entitled “Energy Conservation Standards Activities.” (as required by section 141 of the Energy Policy Act of 2005 (EPACT 2005)) 2 Previously, DOE did not report any MIA results before the NOPR phase ; however, under this new format, DOE collects, evaluates, and reports preliminary information and data in the preliminary a nalysis . Such information includes market data, key issues, product mixes, conversion costs, foreign competition, market shares, industry consolidation, and cumulative regulatory burden information. DOE solicits this information during the preliminary manufacturer interviews and reports the results in this chapter.

12.2 METHODOLOGY

DO E conducts the MIA in three phases. In P hase I, DOE creates an industry profile to characterize the industry and conducts preliminary MIA interviews to identify important issues that require consideration. Section 12.3 of this chapter presents initial findings of the P hase I analysis. In Phase II, DOE prepares an industry cash-flow model and an interview guide that is

used subsequent discussions with manufa cturers

. In P hase III, DOE interviews manufacturers

and assesses the impacts of energy conservation standards both quantitatively and qualitatively. DOE assesses industry and subgroup cash flow impacts and the industry net present value (I

NPV ) using the Government Regulatory Impact Model (GRIM). DOE then assesses impacts on competition, manufacturing capacity, employment, and regulatory burden based on manufacturer

interviews and discussions. The Federal Register NOPR and technical support docu ment ( TSD )

will both present results of the P hase II and P hase III analys e s.

1 On July 15, 1996, the Department of Energy p ublished a Process Improvement Rule establishing procedures, interpretations and policies to guide the d epartment in the consideration of new or revised appliance conservation standards (Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer Products). 61 FR 36974.

2 This report is a vailable on the DOE website at http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/congressional_report_013106.pdf

12-112.2.1 Phase I: Industry Profile

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

market information. This includes research and development (R&D) expenses; s elling, g eneral

, and a dministrative (SG&A) e xpenses ; capital expenditures; property, plant, and equipment

expenses; tax rate information ; and depreciation rate information for CF manufacturers

, as well

as wage, emp loyment, and industry cost information for the CF industry. Sources of information include reports published by industry groups, trade journals, the U.S. Census Bureau, and

Securiti es Exchange Commission (SEC) 10- K filings. In addition, DOE relies on information

from its market and technology assessment, engineering analysis, life

- cycle cost analysis, and consumer price analysis to characterize the CF manufacturing industry.

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

In Phase II, DOE performs a preliminary industry ca sh

- flow analysis and prepare s a questionnaire or interview guide for interviewing manufacturers.

12.2.1.1 Industry Cash -Flow Analysis

DOE uses the GRIM to analyze the financial impacts of energy conservation standards. The implementation of these standards may require additional investment, raise production costs,

and/or affect rev enue through higher prices and lower shipments. The GRIM uses several factors to determine a series of annual cash flows for the year s leading up to the effective date of energy conservation standards and for several years after implementation. These factors include annual expected revenues, costs of sales, SG&A costs, taxes, and capital expenditures. Inputs to the

GRIM include financial information, manufacturing costs, shipment forecasts, and price forecasts developed in other analyses. Financial information is developed based on publicly available data and confidentially submitted manufacturer information. DOE compares the GRIM

results for the standards case at each trial stand ard level (TSL) against the results for the base

case in which no energy conservation standards are in place. The financial impact of energy

conservation standards is the difference between the two sets of discounted annual cash flows.

12.2.1.2 Interview Guide

DOE conducts interviews with manufacturers to gather information on the e ffects that

energy conservation standards could have on revenues and finances, direct employment, capital assets, and industry competitiveness. These interviews take place during P hase II I of the MIA. Before the interviews, DOE distribute s an interview guide that will help identify the impacts of

energy conservation standards on individual manufacturers or subgroup s of manufacturers within

the CF industry. The interview guide covers production costs; shipment projections ; market share; product mix; conversion costs; markups and profitability; assessment of the impact on competit ion ; manufacturing capacity ; and other relevant topics.

12.2.2 Phase III: Subgroup Analysis

Phase III activities o ccur after publication of the preliminary a nalysis . These activities include manufacturer interviews; revision of the industry cash- flow analysis; a manufacturer subgroup analysis; an assessment of the impacts on industry competition , manufacturing

12-2capacity, direct employment

, and the cumulative regulatory burden; and other qualitative impacts

.

12.2.2.1 Manufacturer Interviews

DOE supplements the information g athered in P hase I and the cash

- flow analysis performed in P hase II with information gathered through interviews with manufacturers during

P hase III. The interview process plays a key role in the MIA because it provides an opportunity for interested parties to express their views privately on important issues.

DOE conducts detailed interviews with manufacturers to gain insight into the potential impacts of energy conservation standards on sales, direct employment, capital assets, and industry competitiveness. DOE schedules interviews well in advance to provide every

opportu nity for key stakeholders to be available for comment. Although a written response to the questionnaire is acceptable, DOE prefers interactive interview s, which help clarify responses and provide the opportunity to identify additional issues.

A non-disclosure agreement allow s DOE to consider confidential or sensitive information

in the decision

- making process. C onfidential information , however, is not made available in the public record. At most, sensitive or confidential information may be aggre gated and presented in industry- wide representation s.

12.2.2.2 Revised Industry Cash -Flow Analysis

During the interviews, DOE request s information about profitability impacts, necessary plant changes, and other manufacturing impacts. Following the interviews, DOE r evise s the preliminary GRIM prepared in P hase II based on the feedback it receives during interviews.

12.2.2.3 Manufacturer Subgroup Analysis

The use of average cost assumptions to develop an industry cash- flow estimate does not adequate ly assess differential impacts of energy conservation standards among manufacturer subgroup s. Smaller manufacturers, niche players, and manufacturers exhibiting a cost structure that differs largely from the industry average could be more negatively affected. Ideally, DOE would consider the impact on every firm individually; however, it typically uses the results of the industry characterization to group manufacturers with similar characteristics. During the interviews, DOE discuss es the potential subgroup s t hat have been identified for the analysis.

DOE ask s manufacturers and other interested parties to suggest what subgroup s or characteristics are most appropriate for the analysis.

One common subgroup typically identified is small business manufacturers. Sho uld DOE determine this rulemaking affects any small business manufacturers, DOE will conduct a regulatory flexibility analysis pursuant to the Regulatory Flexibility Act. (5 U.S.C. 601 et seq.)

12.2.2.4 Competitive Impact Assessment

Section 342 (6)(B)(i)(V) of the Energy Policy Act of 1992 (EPACT 1992 ) directs DOE to consider any lessening of competition likely to result from the imposition of standards.

EP ACT 1992 further directs the U.S. Attorney General to determine any likely impacts resulting

12-3from a decrease in competition. DOE gather s firm

- specific financial information and attempts to determine the impact of standards on industry competition. T he results of this effort are reported in the competitive impact assessment

. The competitive impact assess ment is based on

manufacturer cost data and information collected from the manufacturer interviews. The interviews focus on assessing asymmetrical cost increases to some manufacturers, the potential increase in business risks from an increased proportion of fixed costs, and potential barriers to market entry ( e.g., proprietary technologies). The competitive impact analysis also focuses on assessing any differential impacts to smaller manufacturers.

12.2.2.5 Manufacturing Capacity Impact

One of the significant outcom es of energy conservation standards can be the obsolescence of existing manufacturing assets, including tooling and other investments. The manufacturer interview guide includes a series of questions to help identify impacts on manufacturing capacity, specifically capacity utilization and plant location decisions in North

America with and without energy conservation standards; the ability of manufacturers to upgrade

or remodel exi sting facilities to accommodate the new requirements; the nature and value of any stranded assets; and estimates for any one

- time restructuring or other charges, where applicable.

12.2.2.6 Employment Impact

The impact of energy conservation standards on employment is an important consideration in the rulemaking process. DOE relies heavily on manufacturer interviews to assess how domestic employment patterns might be affected by energy conservation standards. The interview guide contains a series of questions that ar e designed to explore current employment trends in the CF industry and to solicit manufacturers’ views on changes in employment patterns that may result from increased energy conservation standard levels. These questions focus on current employment levels at production facilities, expected future employment levels with and without energy conservation standards, differences in workforce skills, and employee retraining.

12.2.2.7 Cumulative Regulatory Burden

DOE seeks to mitigate the overlapping effects on manufacturer s of energy conservation standards and other regulatory actions affecting the same products or companies. DOE analyze s and considers the impact of multiple, product- specific regulatory actions on manufacturers

.

12.3 INDUSTRY OVERVIEW

The following section summarize s publicly available industry data

.

12.3.1 Industry Cost Structure

DOE developed the CF industry cost structure from the U.S. Census Bureau, Annual Survey of Manufacturers : Statistics for Industry Groups and Industries with data from 2003 to

2011. Ceili ng fan manufacturing is classified under the North American Industry Classification System (NAICS) code 33521 ( Small Electrical Appliance Manufacturing ).

12-4DOE is unaware of any publicly available industry- wide cost data specific to only

manufacturers of cei ling fans . DOE presents the data below as a broader industry proxy for the

CF industry.

Table 12.3.1 presents the CF manufacturer employment levels and payroll from 2003 to

2011 . The statistics show a 55 percent decrease in the number of production workers from 2003 to 2011 with a corresponding 38 percent de crease in the overall industry payroll from 2003 to

2011.

Table 12.3.1 Ceiling Fan and Part Industry Employment and Earnings

Year Production Workers All Employees Payroll for All Employees

t housand s of dollars

2003 12,682 16,752 556,821

2004 11,475 14,913 509,143

2005 9,680 13297 641,753

2006 9,870 12715 609,740

2007 10,816 13,502 526,607

2008 8,833 11,290 457,438

2009 8,205 10676 427,348

2010 6,383 8536 365,276

2011 5,713 7619 347,556

Source: U.S. Census Bureau. Annual Survey of Manufacturers: 2005 and Earlier Years ; Annual Survey of Manufacturers: 2006 and 2005 ; Annual Survey of Manufacturers: 2008 and 2007 ; Annual Survey of Manufacturers: 2009 and 2008 ; and Annu al Survey of Manufacturers: 2011 and 2010

Table 12.3.2 presents the costs of ceiling fan and part materials and industry payroll as a percentage of shipment value from 2003 to 2011 . The cost of materials has slightly increased by

3 percent as a percentage of shipment value from 200 3 to 2011. While t he cost of payroll for production workers has decreased by 12 percent and the cost of payroll for all emplo yees has

decreased 11 percent as a percentage of shipment value from 2 003 to 2011.

Table 12.3.2 Ceiling Fan and Part Industry Material and Payroll Costs

Year Cost of Materials percent of shipment value Cost of Payroll for

Production Workers percent of shipment value Cost of Payroll for All Employees percent of shipment value

2003 51.6 7.7 12.9

2004 51.9 7.9 13.0

2005 52.8 7.3 16.9

2006 54.1 7.9 16.6

2007 54.8 8.0 13.0

2008 53.9 7.0 11.7

2009 50.2 6.3 11.0

2010 49.1 6.1 11.0

2011 53.2 6.8 11.5

Source: U.S. Census Bureau. Annual Survey of Manufacturers: 2005 and Earlier Years ; Annual Survey of Manufacturers: 2006 and 2005 ; Annual Survey of Manufacturers: 2008 and 2007 ; Annual Survey of Manufacturers: 2009 and 2008 ; and Annual Survey of Manufacturers: 2110 and 2010

12-512.3.2 Inventory Levels

Table 12.3.3 shows the year -end inventory for the ceiling fan and part industry obtained from the U.S. Census Bureau, Annual Survey of Manufacturer : Statistics fo r Industry Groups

and Industries with data from 2005 to 2011. The industry’s end-of-year inventory from 2005 to 2011 significantly increased by 127 percent when expressed in dollars, and grew by 18 8 percent when expressed as a percentage of shipment value.

Table 12.3.3 Ceiling Fan and Part Industry End

- of

- Year Inventory

Year End

- of

- Year Inventory thousand current year dollars End

- of

- Year Inventory percent of shipment value

2005 186,863 4.9

2006 192,103 5.2

2007 520,998 12.8

2008 516,782 13.2

2009 437,135 11.3

2010 427,877 12.9

2011 424,356 14.1

Source: U.S. Census Bureau. Annual Survey of Manufacturers: 2005 and Earlier Years ; Annual Survey of Manufacturers: 2006 and 2005 ; Annual Survey of Manufacturers: 2008 and 2007 ; Annual Survey of Manufacturers: 2009 and 2008 ; and Annual Survey of Manufacturers: 2110 and 2010

12.4 INTERVIEW TOPICS AND PRELIMINARY FINDINGS

The following section summarize s information gathered during interviews held in the

third and fourth quarters of 2013 for the pre liminary MIA.

12.4.1 Market Shares and Industry Consolidation

Energy conservation standards can alter the competitive dynamics of the marketplace, prompting companies to enter the market, exit the market, or merge with other companies. The preliminary MIA interview questions ask ed manufacturers to share their perspectives on industry

consolidation both in the absence of energy conservation standards and assuming standards at various efficiency levels. The interview questions focus ed on gathering inform ation that

assess ed:

• disproportionate cost increases to some manufacturers;

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

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

The need to assess anti

- competit ive effects of proposed energy conservation standards comes from the need to protect consumer interests. During the interviews, DOE solicited

informat ion to determine whether energy conservation standards could result in disproportionate economic or performance penalties for particular consumer or user subgroups. DOE also asked

m anufacturers if energy conservation standards could result in products that will be more or less desirable to consumers due to changes in product functionality, utility, or other fe atures.

12-6Market Shares : DOE inquired about the current market share of manufacturers in the

CF industry and how those market shares might change due to the imposition of energy

conservation standards. Most manufacturers expected their market share to remain constant. However, some raised concerns that the CF market could potentially shrink as a result of the

standards because some consumers might forgo the purchase of a compliant and anticipa ted more expensive ceiling fan in favor of an air conditioner . Those manufacturers that already produce efficient ceiling fan s expect their market share would grow

.

Industry Consolidation: The CF industry is composed of a few large manufacturers and

a hand ful of smaller manufacturers . As described in chapter 3 of the preliminary TSD, three manufacturers hold approximately half of the domestic market share of ceiling fan s.

Most interviewed manufacturers did not think there would be significant consolidation in

the CF industr y in the absence of standards. However, manufacturers did agree that new energy conservation standards most likely would lead to industry consolidation. M anufacturers also

stated that the smaller CF manufacturers could be disproportionatel y affected by a n energy conservation standard that requires significant conversion costs and could potentially exit the

market

.

12.4.2 Production and Product Mix

DOE requested manufacturers’ feedback on what they perceived to be the possible impact of energy conservation standards on cash flow and profitability. For instance, the capital and product conversion outlays needed to upgrade or redesign products or any manufacturing equipment that would become obsolete before the end of their useful life may create significant conversion costs, resulting in reduced cash flow and stranded investments. More stringent energy conservation standards could also result in higher per- unit costs that could cause consumers to
shift to less expensive products or choose to purchase air conditioners instead of ceiling fan s.

12.4.2.1 Impact on Product Mix

Manufacturers believe that energy conservation standards could affect the product mix of ceiling fan s depending on the efficiency level s selected for the standard s. Manufacturers stated

t hat if direct current (DC) motors meet the screening criteria and standard s are adopted that require the use of DC motors in ceiling fan s, there would be a large impact on the product mix of ceiling fans . Any standards requiring DC motors in ceiling fan s, if these motors pass the screening criteria, would eliminate a significant amount of existing products from the CF market.

12.4.2.2 Product Utility

A few manufacturers expressed concern that energy conservation standards might require changes in product utility and other features that would make products less desirable to

consumers. These manufacturers stated that if DC motors meet the screening criteria and standards were adopted requiring these motors, there could be a significant reduc tion in the utility of ceili ng fan s as well as an increase in the retail prices and maintenance costs. According to manufacturers, DC motors reduce the utility of ceiling fan s beca us e they require maintenance more often compare d to ceiling fan s with AC motors, have a higher warranty factor compared to ceiling fan s with AC motors, and can only be operated with a handheld remote.

12-712.4.3 Manufacturer Markup

The manufacturer production costs (MPCs) for ceiling fan s are the manufacturers’ factory costs for those units. These costs include materials, direct labor, depreciation, and overhead, which are collectively referr ed to as the cost of goods sold . The manufacturer selling price ( MSP ) is the price received by CF manufacturers from their customers, typica lly a distributor, regardless of the downstream distribution channel through which the ceiling fan s are ultimately sold. The MSP is not necessarily the cost the end

- user pays for ceiling fan s because there are typically multiple sales along the distributio n chain and various markups applied to each sale. The MSP equals the MPC multiplied by the manufacturer markup. The manufacturer markup covers all the CF manufacturer’s non-production costs ( i.e., SG&A

, R&D, and interest ) as well as profit. Total industry revenue for CF manufacturers equals the MSPs at each efficiency

level for each product class multiplied by th e number of shipments at that efficiency level.

Based on manufacturer interviews and an analysis of any publicly traded CF manufacturers, DOE estim ated the typical CF manufacturer markup to be 1.37. This represents the markup CF manufacturers apply to their MPCs to arrive at their MSPs. A manufacturer markup of 1.37 corresponds to a gross margin of 27 percent. DOE request comment on the use of a 1.37 manufacturer markup used in the preliminary analysis.

12.4.4 Conversion Costs

In some instances, manufacturers may be able to meet proposed standard levels by modifying existing products. If DC motors meet the screening criteria and standards were adopted requir ing these motors, manufacturers may be required to completely redesign their product line s. In either case

, new energy conservation standard s would cause manufacturers to

incur one- time capital and product conversion costs . C apital conversion costs are one

- time investments in property, plant, and equipment. Product conversion costs include one- time investments in research, product development, testing, and marketing.

All manufacturers stated that the conversion costs associated with energy conservat ion standards would depend on the efficiency levels established by those standards. However,

several manufacturers stated that millions of dollars could be required for retooling, testing , and

accreditation depending on the proposed energy conservation sta ndard for ceiling fan s.

12.4.5 Cumulative Regulatory Burden

While any one regulation may not impose a significant burden on manufacturers, the

combined effects of several current and/or impending regulations may have serious consequences for individual manufacturers, groups of manufacturers, or entire industries. Assessing the impact of a single regulation may overlook this cumulative regulatory burden.

Expenditures associated with meeting other regulations are an important aspect of DOE’s consideration of the cumulative regulatory burden the industry faces. The manufacturer interviews help ed DOE identify the level and timing of investments manufacturers are expecting to incur because of these regulations. DOE also asked manufacturers under what circumstances they might be able to coordinate expenditures related to regulations and energy conservation

standards.

12-8S everal international, f ederal and state regulatory programs may affect the markets for ceiling fan s, such as California’s Title 20 . See chapter 3 for a list and description of the regulatory requirements that DOE identified . Several of the CF manufacturers also manufacture ceiling fan light kits (CFLKs) th at are covered by an existing energy conservation standards established by the Energy Policy Act of 2005 (EPACT 2005) which may also be updated by a rulemaking being considered. 78 FR 16443 (March 15, 2013)

12.5 OVERALL KEY ISSUES

One important aspect of the preliminary MIA is the opportunity it creates for DOE to identify key manufacturer issues early in the evaluation of proposed energy conservation standards. During preliminary interviews

, manufacturers identified four major areas of concern: (1) shift to air conditioning, (2) testing burden, (3) off-mode power consumption, and (4) utility

of DC motors.

12.5.1 Shift to Air Conditioning

Several manufacturers stated that CF energy conservation standards could cause consumers to forgo the purchase of a ceiling fan in lieu of an air conditioner due to the anticipated price increase, or could cause ceiling fan owne rs to run their air conditioners more frequently instead of using their ceiling fan

. If consumers instead use their air conditioner to cool their homes, this could result in more energy use, since CF s tend to be more efficient at cooling rooms than air conditioners, m anufacturers claim

.

Manufacturers also stated that overly stringent CF standards could force manufacturers to reduce the aesthetic quality of some CF s to comply with energy conservation standards. This could cause consumers to forgo the purchas e of these CF s because the aesthetic appearance of

CF s is an important factor when consumers purchase CF s. Manufacturers claim this reduction in aesthetic quality could again result in more energy use, because consumers who do not purchase

CF s would need to use air conditioners to cool their homes.

12.5.2 Testing Burden

Manufacturers are concerned about the additional testing burden associated with complying with energy conservation standards. Most manufacturers use third- party testing facilities for testing and r eporting purposes, which can be expensive. Manufacturers stated that

CF standards would significantly increase the amount manufacturers already invest in testing each year.

12.5.3 Off

- Mode Power Consumption

Some manufacturers noted that testing the off-mode power consumption of a ceiling fan could be difficult due to the potential power draw of a CFLK in off-mode. Some manufacturers

claimed that ceiling fans with light kits may draw more power in off

- mode tha n those without a light kit. This could present a potential problem for the off- mode CF standards, if ceiling fans with light kits were forced to comply with the same standards as CF s without light kits. This

could also cause manufacturers to remove light kits on a number of CF models.

12-912.5.4 Utility of DC Motors

If DC motors meet the screening criteria, m anufacturers stated that energy conservation standards that required the use of DC motors in CF s would limit the overall utility of the fan , as well as increase maintenance costs . Manufacturers claim that DC motors require significantly more maintenance and have a higher warranty factor compared to ceiling fans with AC motors. Additionally, ceiling fans with DC motors require the use of a handheld remote, which

ma nufacturers claim is not preferred by many consumers. Therefore, manufacturers stated any

CF standard that required the use of a DC motor would significantly reduce the overall utility of

CF s to consumers.

12-10CHAPTER 13. EMISSIONS ANALYSIS

TABLE OF CONTENTS

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

13.2 APPROACH .................................................................................................................. 13-1

13.3 AIR QUALITY REGULATIONS AND EMISSIONS IMPACTS ............................... 13-1

RE FERENCES .......................................................................................................................... 13-4

13-iCHAPTER 13. EMISSIONS ANALYSIS

13.1 INTRODUCTION

The U.S. Department of Energy (DOE) conducts an emissions analysis for the notice of proposed rulemaking (NOPR) stage

. In the emissions analysis, DOE estimate s the reduction in power sector and site combustion emissions of carbon dioxide (CO 2 ), nitrogen oxides (NO X ), sulfur dioxide (SO 2 ), m ercury (Hg)

, methane (CH 4 ) and nitrous oxide (N 2 O) from potential energy conservation standards for ceiling fans . In addition, DOE estimates emissions impacts in production activities (extracting, processing, and transporting fuels) that provide the energy inputs to power plants and for site combustion . These are referred to as “upstream” emissions. Together, these emissions account for the full- fuel

- cycle (FFC). In accordance with DOE’s FFC Statement of Policy (76 FR 51282 (August 18, 2011)), the FFC analy sis includes impacts on emissions of methane and nitrous oxide, both of which are recognized as greenhouse gases.

13.2 APPROACH

DOE conducts the emissions analysis using emissions factors that are primarily derived from data in the latest version of the Energy Information Administration’s (EIA’s) Annual Energy Outlook (

AEO ), supplemented by data from other sources. EIA prepares the AEO using the National Energy Modeling System (NEMS). a Site emissions of CO 2 and NO X are estimated using emissions intensity factors from a publication of the Environmental Protection Agency (EPA)

. 1 Combustion emissions of CH 4 and N 2 O are estimated using emissions intensity factors published by the EPA GHG Emissions Factors Hub. b The FFC upstream emissions are estimated based on the methodology developed by Coughlin (2013). 2 The upstream emissions include both

emissions from fuel combustion during extraction, processing and transportation of fuel, and “fugitive” emissions (direct leakage to the atmosphere) of CH 4 and CO 2

.

13.3 AIR QUALITY REGULATIONS AND EMISSIONS IMPACTS

Each annual version of NEMS incorporates the projected impacts of existing air quality regulations on emissions. The text below refers to AEO 2014, which generally represents current legislation and environmental regulations, including recent government actions, for which implementing regulations were availab le as of October 31, 2013. The NOPR will use emissions

factors derived from the most current available AEO data

.

SO 2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions cap and trading programs. Title IV of the Clean Air Act sets an annual emissions cap on SO 2 for affected EGUs in the 48 contiguous states and the Dis trict of Columbia (D.C.). SO 2 emissions from 28 eastern states and D.C. were also limited under the Clean Air

a For more information about NEMS, please refer to the U.S. Department of Energy, Energy Information

Administration documentation

. A useful summary is National Energy Modeling System: An Overview 200 9

, DOE/EIA

- 0581 ( October 200 9 ), available at: http://www.eia.gov/oiaf/aeo/overview/

. b http://www.epa.gov/climateleadership/inventory/ghg

- emissions.html

.

13-1Interstate Rule (CAIR), which created an allowance -based trading program that operates along with the Title IV program in those States and D.C. 70 FR 25162 (May 12, 2005). CAIR was remanded to EPA by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), but it remained in effect. c On July 6, 2011 EPA issued a replacement for CAIR, the

Cross

- State Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012,

the D.C. Circuit issued a decision to vacate CSAPR. d The court ordered EPA to continue administering CAIR. AEO 2014 assumes that CAIR remains a binding regulation through 2040. e

The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of emissions allowances and tradable permits. Under existing EPA regulations, any excess SO 2 emissions allowances resulting from the lower electricity demand caused by the adoption of an efficiency standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. In past rulemakings, DOE recognized that there was uncertainty about the effects of efficiency standards on SO 2 emissions covered by the existing cap -and- trade system, but it concluded that no reductions in power sector emissions would occur for SO 2 as a result of standards.

Beginning in 2016, however, SO 2 emissions will fall as a result of the Mercury and Air Toxics Standards (MATS) for power plants. 77 FR 9304 (Feb. 16, 2012) In the final MATS rule, EPA established a standard for HCl as a surrogate for acid gas hazardous air pollutants (HAP),

and also established a standard for SO 2 (a non- HAP acid gas) as an alternative equivalent surrogate standard for acid gas HAP. The same controls are used to reduce HAP and non

- HAP acid gas; thus, SO 2 emissions will be reduced as a result of the control technologies installed on

coal -fired power plants to comply with the MATS requirements for acid gas. AEO 201 4 assum es that, in order to continue operating, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed by 201 6. Both technologies, which are used to reduce acid gas emissions, also reduce SO 2 emissions. Under the MATS, em issions will be far below the cap that would be established by CSAPR, so it is unlikely that excess SO 2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO 2 emissions by any regulate d EGU. Therefore, DOE believes that efficiency standards will reduce

SO 2 emissions in 201 6 and beyond.

CSAPR established a cap on NO X emissions in eastern States and the District of Columbia. Energy conservation standards are expected to have little or no physical effect on

c See North Ca rolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008); North Carolina v. EPA , 531 F.3d 896 (D.C. Cir. 2008).

d See EME Homer City Generation, LP v. EPA , 696 F.3d 7, 38 (D.C. Cir. 2012).

e On April 29, 2014, the U.S. Supreme Court reversed the judgment of the D.C. Circuit and remanded the case for further proceedings consistent with the Supreme Court's opinion. The Supreme Court held in part that EPA's methodology for quantifying emissions that must be eliminated in certain states due to their impacts in other

down wind states was based on a permissible, workable, and equitable interpretation of the Clean Air Act provision that provides statutory authority for CSAPR. See EPA v. EME Homer City Generation , No 12

- 1182, slip op. at 32 (U.S. April 29, 2014). Because DOE i s using emissions factors based on AEO 201 4 , the analysis assumes that CAIR, not CSAPR, is the regulation in force. The difference between CAIR and CSAPR is not relevant for the purpose of DOE's analysis of SO 2 emissions.

13-2these emissions in those States covered by CSAPR because excess NO X emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NO X emissions. However, standards would be expected to r educe NO X emissions in the States not affected by CSAPR. Therefore, DOE estimates NO X emissions reductions from potential standards in the States where emissions are not capped.

The MATS limit mercury emissions from power plants, but they do not include emissions caps and, as such, DOE’s energy conservation standards would likely reduce Hg emissions. For this rulemaking, DOE plans to estimate mercury emissions reductions using emi ssions factors

based on AEO 201 4 , which incorporates the MATS.

Power plants may emit particulates from the smoke stack, which are known as direct particulate matter (PM) emissions. NEMS does not account for direct PM emissions from power plants. DOE is inv estigating the possibility of using other methods to estimate reduction in PM emissions due to standards. The great majority of ambient PM associated with power plants is in the form of secondary sulfates and nitrates, which are produced at a significant d istance from power plants by complex atmospheric chemical reactions that often involve the gaseous emissions of power plants, mainly SO 2 and NO X . The monetary benefits that DOE estimates for

reductions in SO 2 and NO X emissions resulting from standards are in fact primarily related to the

health benefits of reduced ambient PM.

13-3REFERENCES

1. U.S. Environmental Protection Agency. Compilation of Air Pollutant Emission Factors. AP 42. Fifth Edition Volume I: Stationary Point and Area Sources. 1998. (Last Accessed March 31, 2014.) http://www.epa.gov/ttn/chief/ap42/

2. Coughlin, K. Projections of Full- Fuel

- Cycle Energy and Emissio ns Metrics. 2013. Lawrence Berkeley National Laboratory. Report No. LBNL -6025E. (Last Accessed March 31, 2014.) http://ees.lbl.gov/sites/all/files/lbnl6025e_ffc.pdf

13-4CHAPTER 14. MONETIZATION OF EMISSIONS REDUCTION BENEFITS

TABLE OF CONTENTS

14.1 INTRODUCTION ......................................................................................................... 14-1

14.2 APPROACH .................................................................................................................. 14-1

REFERENCES .......................................................................................................................... 14-2

14-iCHAPTER 14. MONETIZATION OF EMISSIONS REDUCTION BENEFITS

14.1 INTRODUCTION

As part of its assessment of energy conservation standards, the U.S. Department of Energy ( DOE ) considers the estimated monetary benefits likely to result from the reduced emissions of carbon dioxide (CO 2 ) and nitrogen oxides (NO X ) that are expected to result from

the energy efficiency standards levels considered for ceiling fans. To make this calcu lation

, similar to the calculation of the net present value (NPV) of consumer benefit, DOE considers the reduced emissions expected to result over the lifetime of the equipment shipped in the projection period for each standard level.

14.2 APPROACH

To estimate the monetary value of benefits resulting from reduced emissions of CO 2 , DOE plans to use the most current Social Cost of Carbon (SCC) values developed and/or agreed to by an interagency process. The SCC is intended to be a monetary measure of the incremental damage resulting from greenhouse gas (GHG) emissions, including, but not limited to, net agricultural productivity loss, human health effects, property damage from sea level rise, and changes in ecosystem services. Any effort to quantify and to monetize the harms associated with climate change will raise serious questions of science, economics, and ethics. But with full regard for the limits of both quantification and monetization, the SCC can be used to provide

estimates of the social benefits of reductions in GHG emissions.

The Interagency Working Group on Social Cost of Carbon released an update of its previous report in 2013. 1 The most recent estimates of the SCC in 2015, expressed in 2013$, are $12.0, $40.5, $62.4, and $119 per metric ton of CO 2 avoided. For emissions reductions that occur in later years, these v alues grow in real terms over time. Additionally, the interagency group determined that a range of values from 7 -percent to 23-percent should be used to adjust the global SCC to calculate domestic effects, although DOE will give preference to consideration of the global benefits of reducing CO 2 emissions. To calculate a present value of the stream of monetary values, DOE will discount the values in each of the four cases using the discount rates

that had been used to obtain the SCC values in each case.

DO E recognizes that scientific and economic knowledge continues to evolve rapidly as to

the contribution of CO 2 and other GHG to changes in the future global climate and the potential resulting damages to the world economy. Thus, these values are subject to change.

DOE also estimates the potential monetary benefit of reduced NO X emissions resulting

from the standard levels it considers. E stimates of monetary value for reducing NO X from stationary sources range from $476 to $4,893 per ton in 2013$. 2 DOE calculate s monetary benefits using a medium value for NO X emissions of $2,684 per short ton (in 2013$ ), and real discount rates of 3-percent and 7- percent.

14-1REFERENCES

1. Interagency Working Group on Social Cost of Carbon Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866 United States Government (Last Accessed http://www.whitehouse.gov/sites/default/files/omb/inforeg/social_cost_of_carbon_for_ria _2013_update.pdf

2. 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 (Last Accessed http://www.whitehouse.gov/omb/inforeg/2006_cb/2006_cb_final_report.pdf

14-2CHAPTER 15. UTILITY IMPACT ANALYSIS

TABLE OF CONTENTS

15.1 INTRODUCTION ......................................................................................................... 15-1

15.2 METHODOLOGY ........................................................................................................ 15-1

REFERENCES .......................................................................................................................... 15-4

15-iCHAPTER 15. UTILITY IMPACT ANALYSIS

15.1 INTRODUCTION

In the utility impact analysis, the U.S. Department of Energy (DOE) analyzes the changes in electric installed capacity and power generation that result for each trial standard level (TSL).

The utility impact analysis is based on output of the DOE/Energy Information Administration (EIA)’s National Energy Modeling System (NEMS). a NEMS is a public domain,

multi -sectored, partial equilibrium model of the U.S. energy sector. Each year, DOE/EIA uses NEMS to produce an energy forecast for the United States, the Annual Energy Outlook (

AEO ). The EIA publishes a reference case, which incorporates all existing energy

- related policies at the time of publication, and a variety of side cases which analyze the impact of different poli cies, energy price and market trends. As of 2014, DOE is using a new methodology based on results published for the Annual Energy Outlook 2014 ( AEO 2014) Reference case and a set of side cases that implement a variety of efficiency

- related policies

. 2

The new approach retains key aspects of DOE’s previous methodology, and provi des some improvements:

• The assumptions used in the AEO reference case and side cases are fully documented and receive detailed public scrutiny.

• NEMS is updated each year, with each edition of the AEO , to reflect changes in energy prices, supply trends, regulations, etc.

• The comprehensiveness of NEMS permits the modeling of interactions among the various energy supply and demand sectors.

• Using EIA published side cases to estimate the utility impacts enhances the transparency of DOE’s analysis.

• The variability in impacts estimates from one edition of AEO to the next will be reduced under the new approach.

On the average, however, over the full analysis period, the results from the new approach

are com parable to results from the old approach.

15.2 METHODOLOGY

DOE estimates the marginal impacts of reduction in energy demand on the energy supply sector. In principle, marginal values should provide a better estimate of the actual impact of energy conservation standards.

a For more information on NEMS, refer to the U.S. Department of Energy, Energy Information Administration documentation. A useful summary is National Energy Modeling System: An Overview

. 1

15-1NEMS uses predicted growth in demand for each end use to build up a projection of the total electric system load growth. The system load shapes are converted internally to load duration curves, which are then used to estimate the most cost- effective additions to capacity. When electricity demand deviates from the AEO reference case, in general there are three inter

related effects: the annual generation in terawatt hours (TWh) from the stock of electric generating capacity changes, the total generation capacity itself in gigawatts (GW) may change, and the mix of capacity by fuel type may change. b Each of these effects can vary for different types of end use. The change in total generating capacity is sensitive to the degree to which the

end -use is peak coincident, while the capacity mix is sensitive to the hourly load shape associated with the end use. Changes in generation by fuel type lead in turn to changes in total power sector emissions of sulfur dioxide ( SO 2 ), nitrogen oxides ( NO X ), mercur y ( Hg ), and carbon dioxide ( CO 2 ).

DOE’s new approach examines a series of AEO side cases to estimate the relationship between demand reductions and the marginal energy, emissions and capacity changes. The assumptions for each side case are documented in Appendix E of the AEO

. c The side cases, or scenarios, that incorporate signifi cant changes to equipment efficiencies relative to the R eference

case are:

• 2013 Technology (leaves all technologies at 2013 efficiencies) ; • Best Available Technology (highest efficiency irrespective of cost) ; • High Technology (higher penetration rates for efficiency and demand management); • Extended Policies (includes efficiency standards that are not in the reference)

.

Scenarios that incorporate policies that directly affect the power sector without changes in energy demand (for example, subsidies for renewables, or high fuel price assumptions) are not appropriate for this analysis. The methodology proceeds in seven steps:

1. Supply-side data on generation, capacity and emissions, and demand- side data on electricity use by sector and end -use , are extracted from each side case. The data are converted to

differences relative to the AEO R eference case.

2. The changes in electricity use on the demand

- side data are allocated to one of three categories: on -peak, shoulder, and off-peak. These categorie s are used in the utility sector to

correlate end -use consumption with supply types. For each of the end- uses that are modeled explicitly in NEMS, load shape information is used to identify the fraction of annual electricity use assigned to each category. On

- peak hours are defined as 12:00 noon to 5:00 p.m., June through September. Off-peak hours are nights and Sundays. All other hours are assigned to the shoulder period.

b T he terawatt is equal to one trillion (10 12 ) watts. The total power used by humans worldwide (about 16 TW in 2006) is commonly measured in this unit. The gigawatt is equal to one billion (10 9 ) watts or 1 gigawatt = 1000 megawatts. This unit is often used for large power plants or power grids.

c Appendix E of AEO 2014 is available at http://www.eia.gov/forecasts/aeo/section_appendices.cfm and http://www.eia.gov/forecasts/aeo/data_side_cases.cfm

15-23. For each year and each side case, the demand -side reductions to on-peak, off-peak and

shoulder- period electricity use are matched on the supply -side to reductions in generation by fuel type. The fuel types are petroleum fuels, natural gas, renewables, nuclear and coal. The allocation is based on the following rules:

3.1. All petroleum

- based gen eration is allocated to peak periods;

3.2. Natural gas generation is allocated to any remaining peak reduction; this is consistent with the fact that oil and gas steam units are used in NEMS to meet peak demand;

3.3. Base

- load generation (nuclear and coal) is alloca ted proportionally to all periods;

3.4. The remaining generation of all types is allocated to the remaining off -peak and shoulder reductions proportionally.

4. The output of S tep 3 defines fuel -share weights giving the fraction of energy demand in each load categ ory that is met by each fuel type as a function of time. These are combined with the weights that define the load category shares by end

- use to produce coefficients that allocate a marginal reduction in end

- use electricity demand to each of the five fuel t ypes

.

5. A regression model is used to relate reductions in generation by fuel type to reductions in emissions of power sector pollutants. The model produces coefficients that define the change in total annual emissions of a given pollutant resulting from a unit change in total annual generation for each fuel type, as a function of time. These coefficients are combined with the weights calculated in Step 4 to produce coefficients that relate emissions changes to changes

in end-use demand.

6. A regression model is used to relate reductions in generation by fuel type to reductions in installed capacity. The categories used for installed capacity are the same as for generation except for peak: NEMS uses two peak capacity types (combustion turbine/diesel and oil and gas steam) which are combined here into a single “peak” category. The model produces coefficients that define the change in total installed capacity of a given type resulting from a unit change in total annual generation for the corresponding fuel type. T hese coefficients are combined with the weights calculated in S tep 4 to produce coefficients that relate installed capacity changes to changes in end -use demand, as a function of time.

7. The coefficient time -series for fuel share, pollutant emissions and ca pacity for the appropriate end use are multiplied by the stream of energy savings calculated in the NIA to produce estimates of the utility impacts.

This analysis does not take into account pumped storage, fuel cells, and distributed generation, as these generation types are not affected by the policy changes modeled in the EIA side cases. The methodology is described in more detail in K. Coughlin, “Utility Sector Impacts of Electricity Demand Reductions” (Coughlin, 2014). 3

15-3REFERENCES

1. U.S. Department of Energy- Energy Information Administration. National Energy Modeling System: An Overview, 2009. Report No. DOE/EIA

- 0581 (2009). (Last Accessed August 10, 2014) http://www.eia.gov/oiaf/aeo/overview/

2. U.S. Department of Energy

- Energy Information Administration Annual Energy Outlook 2014 with Projections to 2040 Washington, DC (Last Accessed May 2014) http://www.eia.gov/forecasts/aeo/

3. Coughlin, Katie Utility Sector I macts of Reduced Electricity Demand Lawrence Berkeley National Laboratory LBNL

- XXXX (Last Accessed

15-4CHAPTER 16. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

16.1 INTRODUCTION ......................................................................................................... 16-1

16.2 METHODOLOGY ........................................................................................................ 16-1

REFERENCES .......................................................................................................................... 16-3

16-iCHAPTER 16. EMPLOYMENT IMPACT ANALYSIS

16.1 INTRODUCTION

The U.S. Department of Energy’s (DOE’s) employment impact analysis estimate s indirect national job creation or job elimination resulting from possible new energy conservation standards, due to reallocation of the associated expenditures for purchasing and operating certain equipment. DOE conducts this analysis for the notice of proposed rulemaking (NOPR) stage

where it estimate s national impacts on major sectors of the U.S. eco nomy, using publicly

available data.

Energy conservation standards can impact employment both directly and indirectly. Direct employment impacts are changes in the number of employees at the plants that produce the covered equipment, along with the affiliated distribution and service companies, resulting from standards. DOE evaluates direct employment impacts in its manufacturer impact analysis, as described in chapter 12 of this Technical Support Document. The employment impact analysis

described in this chapter covers indirect employment impacts which may result from expenditures shifting between goods (the substitution effect) and changes in income and overall expenditure levels (the income effect) that occur due to the implementation of standards.

DOE expects new or amended energy conservation standards to decrease energy consumption and, therefore, reduce expenditures for energy. In turn, savings in energy expenditures may be redirected for new investment and other items. Notwithstanding, energy

conser vation standards may potentially increase the purchase price of equipment, including the retail price plus sales tax, and may increase installation costs.

Using an input-output model of the U.S. economy, the employment impact analysis seeks

to estimate the year

- to

- year effect of these expenditure impacts on net national employment. DOE intends the employment impact analysis to quantify the indirect employment impacts of these expenditure changes.

16.2 METHODOLOGY

To investigate the and indirect employment impac ts, DOE uses the Pacific Northwest National Laboratory’s (PNNL’s) “Impact of Sector Energy Technologies” (ImSET 3.1.1)

model. 1 PNNL developed ImSET, a spreadsheet model of the U.S. economy that focus es on 187 sectors most relevant to industrial, commercial, and residential building energy use , for DOE’s Office of Energy Efficiency and Renewable Energy

. ImSET is a special -purpose 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 that are deployed by DOE’s Office of Energy Efficiency and Renewable Energy. In c omparison with the previous versions of the model used in earlier rulemakings, this version allows for more complete and automated analysis of the essential features of energy efficiency investments in buildings, industry, transportation, and the electric power sectors.

16-1The ImSET software includes a c omputer- based I

- O model with structural coefficients to characterize economic flows among the 18 7 sectors. ImSET’s national economic I

- O structure is

based on the 2002 Benchmark U.S. table

, specially aggregated to 187 sectors. 2

DOE intends to use the ImSet model to estimate changes in employment in the overall U.S. economy resulting from changes in expenditures in the various sectors of the economy. DOE has designed the employment impact analysis to estimate the year

- to

- year net national employment effect of these different expenditure flows.

16-2REFERENCES

1. Roop, J. M., M. J. Scott, and R. W. Schultz ImSET: Impact of Sector Energy Technologies Pacific Northwest National Laborator y Richland, WA PNNL- 15273 (Last

Accessed http://www.pnl.gov/main/publications/external/technical_reports/PNNL

15273.pdf

2. Lawson, Ann M., Kurt S. Bersani, Mah naz Fahim -Nader, and Jiemin Guo Benchmark Input-Output Accounts of the U. S. Economy, 1997 Survey of Current Business December pp. pp. 19- 117 (Last Accessed http://www.bea.gov/scb/pdf/2002/12December/1202I-OAccounts2.pdf

16-3CHAPTER 17. REGULATORY IMPACT ANALYSIS

TABLE OF CONTENTS

17.1 INTRODUCTION ......................................................................................................... 17-1

17.2 METHODOLOGY ........................................................................................................ 17-1

LIST OF TABLES

Table 17.1.1 Alternatives to Standards ............................................................................. 17-1

17-iCHAPTER 17. REGULATORY IMPACT ANALYSIS

17.1 INTRODUCTION

For “economically significant regulatory actions,” Executive Order 12866 requires Federal agencies to provide “an assessment, including the underlying analysis, of costs and benefits of potentially effective and reasonably feasible alternatives to the planned regulation, identified by the agencies or the public (including improving the current regulation and reasonably viable non-regulatory actions), and an explanation why the planned regulatory action is preferable to the identified potential alternatives. ” 58 FR 51735, 51741 (October 4, 1993). Accordingly, in the notice of proposed rulemaking (NOPR) stage, the U.S. Department of Energy (DOE) plans to analyze feasible alternat ives that possibly could provide incentives for the same energy efficiency levels as the proposed standards for the equipment that are subject of the ceiling fans rulemaking. In addition, DOE proposes to analyze five feasible policy alternatives to energy conservation standards for the equipment considered in this rulemaking. The policy alternatives are listed below in Table 17.1.1

. DOE will evaluate each alternative i n terms of its ability to achieve significant energy savings at a reasonable cost, and will compare

the effectiveness of each alternative to the effectiveness of each candidate standard

.

The technical support document (TSD) is prepared in support of DOE’s notice of proposed rulemaking and includes a complete quantitative analysis of each alternative, the methodology for which is briefly addressed below.

Table 17.1.1 Alternatives to Standards

No New Regulatory A ction

Consumer Rebates

Consumer Tax C redits

Manufacturer Tax C redits Voluntary Energy E fficiency Targets

Bulk Government P urchases

17.2 METHODOLOGY

DOE use s the n ational i mpact a nalysis (NIA) s preadsheet model to calculate the national energy savings and t he net present value (NPV) corresponding to each alternative to proposed energy conservation standards. The NIA model is discussed in chapter 10 of the TSD. To compare each alternative quantitatively to the proposed energy conservation standards, DOE

quant if ies the effect of each alternative on the purchase and use of energy efficient equipment, such as ceiling fans . DOE then creates an integrated model, built on the NIA model, in order to make the appropriate revisions to the inputs in the NIA models. Key inputs that DOE may revise

are the market shares of equipment meeting the target efficiency levels, which correspond to the efficiency levels set for the mandatory standards at each trial standard level.

17-1The following a re the key measures of the imp act of each alternative:

• National E nergy S avings (NES) , given in quadrillion Btus (quads), will describe the potential cumulative national primary energy to be saved over the lifetime of equipment purchased during the 30- year analysis period starting in the ef fective date of the policy

. a

• Net Present Value (NPV) , will represent the value of net monetary savings from equipment purchased during the 30- year analysis period starting in the compliance date of the policy. DOE calculates NPV as the difference between the present value s of

installed equipment cost and operating expenditures in the base case and the present

values of th o se costs in each policy case. DOE then calculate s operating expenses (including energy costs ) for the life of equipment.

a The British thermal unit (Btu) is the amount of energy needed to cool or heat one pound of liquid water by one degree Fahrenheit at a constant pressure of one atmosphere.

17-2APPENDIX 5A. UNCONVENTIONAL

- BLADE AND FLAT

- BLADE LOW

- VOLUME

FANS

TABLE OF CONTENTS

5A.1 POWER CONSUMPTION RE SULTS ........................................................................ 5A-1

5A.1.1 Unconventional- Blade Fans .............................................................................. 5A-1

5A.1.2 Flat

- Blade Fans ................................................................................................. 5A-3

5A.2 COST

- EFFICIENCY RESULTS ................................................................................. 5A-4

5A.2.1 Unconventional- Blade Fans .............................................................................. 5A-4

5A.2.2 Flat

- Blade Fans ................................................................................................. 5A-6

LIST OF TABLES

Table 5A.1.1 Power Consumption for 44-inch Unconventional- Blade Low -Volume

Standard Fans .............................................................................................. 5A-1

Table 5A.1.2 Power Consumption for 52-inch Unconventional- Blade Low -Volume

Standard Fans .............................................................................................. 5A-1

Table 5A.1.3 Power Consumption for 60-inch Unconventional- Blade Low -Volume

Standard Fans .............................................................................................. 5A-2

Table 5A.1.4 Power Consumption for 44-inch Unconventional- Blade Low -Volume Hugger Fans ................................................................................................ 5A-2

Table 5A.1.5 Power Consumption for 52-inch Unconventional- Blade Low -Volume Hugger Fans ................................................................................................ 5A-2

Table 5A.1.6 Power Consumption for 44-inch Flat

- Blade Low -Volume Standard

Fans ............................................................................................................. 5A-3

Table 5A.1.7 Power Consumption for 52- inch Flat

- Blade Low -Volume Standard

Fans ............................................................................................................. 5A-3

Table 5A.1.8 Power Consumption for 60- inch Flat

- Blade Low -Volume Standard

Fans ............................................................................................................. 5A-3

Table 5A.1.9 Power Consumption for 44- inch Flat

- Blade Low -Volume Hugger Fans ... 5A-4

Table 5A.1.10 Power Consumption for 52- inch Flat

- Blade Low -Volume Hugger

Fans ............................................................................................................. 5A-4

Table 5A.2.1 Cost- Efficiency Curves for 44 -inch Unconventional- Blade Low

Volume Standard Fans ................................................................................ 5A-5

Table 5A.2.2 Cost- Efficiency Curves for 52 -inch Unconventional- Blade Low

Volume Standard Fans ................................................................................ 5A-5

Table 5A.2.3 Cost- Efficiency Curves for 60 -inch Unconventional- Blade Low

Volume Standard Fans ................................................................................ 5A-5

Table 5A.2.4 Cost- Efficiency Curves for 44 -inch Unconventional- Blade Low

Volume Hugger Fans .................................................................................. 5A-5

Table 5A.2.5 Cost- Efficiency Curves for 52 -inch Unconventional- Blade Low

Volume Hugger Fans .................................................................................. 5A-6

5A-iTable 5A.2.6 Cost- Efficiency Curves for 44

- inch Flat

- Blade Low -Volume Standard

Fans ............................................................................................................. 5A-6

Table 5A.2.7 Cost- Efficiency Curves for 52

- inch Flat

- Blade Low -Volume Standard

Fans ............................................................................................................. 5A-6

Table 5A.2.8 Cost- Efficiency Curves for 60

- inch Flat

- Blade Low -Volume Standard

Fans ............................................................................................................. 5A-7

Table 5A.2.9 Cost- Efficiency Curves for 44

- inch Flat

- Blade Low -Volume Hugger

Fans ............................................................................................................. 5A-7

Table 5A.2.10 Cost- Efficiency Curves for 52

- inch Fl at

- Blade Low -Volume Hugger

Fans ............................................................................................................. 5A-7

5A- iiAPPENDIX 5A. UNCONVENTIONAL

- BLADE AND FLAT

- BLADE LOW

- VOLUME

FANS

5A.1 POWER CONSUMPTION RESULTS

5A.1.1 Unconventional- Blade Fans

As discussed in section 5.5.1.4, DOE calculated power consumption (in watts) for each representative diameter, at each design option level. Table 5A.1.1 through Table 5A.1.5 summarizes the power consumption at each sp eed for the unconventional- blade low-volume

fans.

Table 5A.1.1 Power Consump tion for 44- inch Unconventional -Blade Low- Volume

Standard Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 13.4 34.1 63.1

1 Market Minimum Fan Optimization 12.3 31.2 57.6

2 EL 1 + Larger Standard Direct Drive Motor 11.1 28.3 52.4

3 EL 1 + DC Motor 5.1 13.0 24.1

Table 5A.1.2 Power Consump tion for 52- inch Unconventional -Blade Low- Volume

Standard Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 15.9 51.9 98.0

1 Market Minimum Fan Optimization 13.8 45.1 85.2

2 EL 1 + Larger Standard Direct Drive Motor 12.2 40.0 75.5

3 EL 1 + DC Motor 5.6 18.3 34.5

5A-1Table 5A.1.3 Power Consump tion for 60- inch Unconventional -Blade Low- Volume

Standard Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 31.7 80.0 111.4

1 Market Minimum Fan Optimization 26.5 67.0 93.2

2 EL 1 + Larger Standard Direct Drive Motor 23.0 58.1 80.9

3 EL 1 + DC Motor 10.5 26.5 36.9

Table 5A.1.4 Power Consumption for 44- inch Unconventional- Blade Low- Volume Hugger

Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 17.9 43.3 65.0

1 Market Minimum Fan Optimization 17.2 41.6 62.4

2 EL 1 + Larger Standard Direct Drive Motor 15.7 37.8 56.8

3 EL 1 + DC Motor 7.2 17.4 26.1

Table 5A.1.5 Power Consump tion for 52- inch Unconventional -Blade Low- Volume Hugger

Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 10.9 44.5 93.0

1 Market Minimum Fan Optimization 9.9 40.2 84.1

2 EL 1 + Larger Standard Direct Drive Motor 8.7 35.6 74.5

3 EL 1 + DC Motor 4.0 16.3 34.1

5A-25A.1.2 Flat

- Blade Fans

As discussed in section 5.5.1.4, DOE calculated power consumption (in watts) for each representative diameter, at each design option level. Table 5A.1.6 through Table 5A.1.10 summarizes the power consumption at each speed for flat

- blade low -volume fans.

Table 5A.1.6 Power Consumption for 44

- inch Flat -Blade Low- Volume Standard Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 11.0 23.0 47.0

1 Market Minimum Fan Optimization 10.1 21.0 42.9

2 EL 1 + Larger Standard Direct Drive Motor 9.1 19.1 39.1

3 EL 1 + DC Motor 4.2 8.8 18.0

Table 5A.1.7 Power Consumption for 52- inch Flat -Blade Low- Volume Standard Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 13.0 35.0 73.0

1 Market Minimum Fan Optimization 11.3 30.4 63.5

2 EL 1 + Larger Standard Direct Drive Motor 10.0 27.0 56.2

3 EL 1 + DC Motor 4.6 12.3 25.7

Table 5A.1.8 Power Consumption for 60

- inch Flat -Blade Low- Volume Standard Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 26.0 54.0 83.0

1 Market Minimum Fan Optimization 21.8 45.2 69.5

2 EL 1 + Larger Standard Direct Drive Motor 18.9 39.2 60.3

3 EL 1 + DC Motor 8.6 17.9 27.5

5A-3Table 5A.1.9 Power Consumption for 44- inch Flat

- Blade Low-Volume Hugger Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 14.7 29.2 48.4

1 Market Minimum Fan Optimization 14.1 28.1 46.5

2 EL 1 + Larger Standard Direct Drive Motor 12.9 25.5 42.3

3 EL 1 + DC Motor 5.9 11.7 19.5

Table 5A.1.10 Power Consumption for 52- inch Flat -Blade Low-Volume Hugger Fans

EL Design Option Power Consumption (W)

Low Speed Medium Speed High Speed

0 Market Minimum 9.0 30.0 69.3

1 Market Minimum Fan Optimization 8.1 27.1 62.6

2 EL 1 + Larger Standard Direct Drive Motor 7.2 24.0 55.5

3 EL 1 + DC Motor 3.3 11.0 25.4

5A.2 COST

- EFFICIENCY RESULTS

The result of the engineering analysis is a set of cost

- efficiency curves. DOE initially developed five curves using th e market minimum unconventional- blade low -volume fans, and

five curves for the market minimum flat -blade low-volume fans. The methodology for developing curves started with determining the market minimum efficiencies and MPC. Above the market minimum efficiency level, DOE implemented design options from lowest to highest ceiling fan efficiency.

5A.2.1 Unconventional- Blade Fans

Table 5A.2.1 through Table 5A.2.5 summarizes the cost

- efficiency curves for the

unconventional- blade low -volume fans.

5A-4Table 5A.2.1 Cost

- Efficiency Curves for 44

- inch Unconventional

- Blade Low

- Volume

Standard Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 50 59.14

1 Market Minimum Fan Optimization 55 59.14

2 EL 1 + Larger Standard Direct Drive Motor 61 66.44

3 EL 1 + DC Motor 132 97.16

Table 5A.2.2 Cost

- Efficiency Curves for 52- inch Unconventional

- Blade Low

- Volume

Standard Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 49 73.54

1 Market Minimum Fan Optimization 56 73.54

2 EL 1 + Larger Standard Direct Drive Motor 64 83.58

3 EL 1 + DC Motor 139 125.42

Table 5A.2.3 Cost

- Efficiency Curves for 60

- inch Unconventional

- Blade Low

- Volume

Standard Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 51 108.90

1 Market Minimum Fan Optimization 61 108.90

2 EL 1 + Larger Standard Direct Drive Motor 71 123.30

3 EL 1 + DC Motor 156 183.50

Table 5A.2.4 Cost

- Efficiency Curves for 44- inch Unconventional- Blade Low

- Volume Hugger Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 37 56.95

1 Market Minimum Fan Optimization 39 56.95

2 EL 1 + Larger Standard Direct Drive Motor 43 64.22

3 EL 1 + DC Motor 93 94.69

5A-5Table 5A.2.5 Cost

- Efficiency Curves for 52

- inch Unconventional

- Blade Low

- Volume Hugger Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 38 67.78

1 Market Minimum Fan Optimization 42 67.78

2 EL 1 + Larger Standard Direct Drive Motor 47 76.62

3 EL 1 + DC Motor 104 113.64

5A.2.2 Flat -Blade Fans

Table 5A.2.6 through Table 5A.2.10 summarizes the cost

- efficiency curves for the flat

blade low-volume fans.

Table 5A.2.6 Cost

- Eff iciency Curves for 44

- inch Flat -Blade Low- Volum e Standard Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 66 45.26

1 Market Minimum Fan Optimization 72 45.26

2 EL 1 + Larger Standard Direct Drive Motor 79 52.72

3 EL 1 + DC Motor 173 83.78

Table 5A.2.7 Cost

- Efficiency Curves for 52

- inch Flat -Blade Low- Volume Standard Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 64 56.27

1 Market Minimum Fan Optimization 74 56.27

2 EL 1 + Larger Standard Direct Drive Motor 83 66.32

3 EL 1 + DC Motor 182 108.16

5A-6Table 5A.2.8 Cost

- Efficiency Curves for 60

- inch Flat -Blade Low- Volume Standard Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 68 83.33

1 Market Minimum Fan Optimization 81 83.33

2 EL 1 + Larger Standard Direct Drive Motor 93 97.84

3 EL 1 + DC Motor 204 158.25

Table 5A.2.9 Cost

- Efficiency Curves for 44- inch Flat

- Blade Low-Volume Hugger Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 49 43.58

1 Market Minimum Fan Optimization 51 43.58

2 EL 1 + Larger Standard Direct Drive Motor 56 50.95

3 EL 1 + DC Motor 121 81.66

Table 5A.2.10 Cost

- Efficiency Curves for 52

- inch Flat -Blade Low-Volume Hugger Fans

E

L Design Option Efficiency (CFM/W) MSP ($)

0 Market Minimum 50 51.87

1 Market Minimum Fan Optimization 55 51.87

2 EL 1 + Larger Standard Direct Drive Motor 62 60.80

3 EL 1 + DC Motor 136 98.00

5A-7APPENDIX 6A. DETAILED DATA FOR EQUIPMENT PRICE MARKUPS

TABLE OF CONTENTS

6A.1 DETAILED HOME IMPROV EMENT CENTER COST DATA ................................ 6A-1

6A.2 DETAILED WHOLESALER COST DATA ............................................................... 6A-2

6A.3 STATE SALES TA X RATES ...................................................................................... 6A-4

LIST OF TABLES

Table 6A.1.1 Home Improvement Center Expenses and Markups Used To Scale the Incremental Markups .................................................................................. 6A-2

Table 6A.2.1 Electrical Wholesaler Expenses and Markups ............................................ 6A-3

Table 6A.3.1 State Sales Tax Rates .................................................................................. 6A-4

6A-iAPPENDIX 6A. DETAILED DATA FOR EQUIPMENT PRICE MARKUPS

6A.1 DETAILED HOME IMPROVEMENT CENTER COST DATA

Tables 6.5.2 of chapter 6 provide home improvement center revenues and costs in aggregated form by ‘Cost of Goods Sold’ and ‘Gross Margin.’ The tables are based on data for building material and supplies dealers from the 2007 U.S. Census Annual Retail Trade Survey (ARTS). Further disaggregated breakdowns of costs used to scale the incremental markup are

shown in Table 6A.1.1

.

6A-1Table 6A.1.1 Home Improvement Center Expenses and Markups Used To Scale the Incremental Markups

Amount ($1,000,000)

Sales $283,847

Cost of Goods Sold (CGS) $186,574

Gross Margin (GM) $97,273

Labor & Occupancy Expenses (“Invariant”)

Annual payroll $35,537

employer costs for fringe benefit $7,266

Contract labor costs including temporary help $290

Purchased utilities, total $7,137

Cost of purchased repair and maintenance services $1,711

Cost of purchased professional and technical services $977

Purchased communication services $396

Lease and rental payments $687

Subtotal: $54,001

Other Operating Expenses & Profit (“Variant”)

Expensed equipment $267

Cost of purchased packaging and containers $221

Other materials and supplies not for resale $1,773

Cost of purchased transportation, shipping and warehousing services $1,071

Cost of purchased advertising and promotional services $4,061

Cost of purchased software $108

Cost of data processing and other purchased computer services, except communications + Commissions pai d $354

Depreciation and amortization charges $4,687

Taxes and license fees $2,033

Other operating expenses $9,003

Gross profit before tax $19,694

Subtotal: $43,272

Baseline Markup = Sales/CGS 1.52

Incremental Markup = (CGS+Total Other Operating Expenses and Profit)/CGS 1.23
Source: U.S. Census Bureau 2007 Annual Retail Trade Survey (NAICS 4441 Building Material and Supplies Dealer) http://www.census.gov/retail/index.html#arts

6A.2 DETAILED WHOLESALER COST DATA

Tables 6.5. 4 of chapter 6 provide electrical wholesaler revenues and costs in aggregated form by ‘Cost of Goods Sold’ and ‘Gross Margin.’ The tables are based on the 2007 U.S. Census Annual Wholesaler Trade Report (AWTR) for electrical and electronic appliance, television and

6A-2radio set merchant wholesalers. Further disaggregated breakdowns of costs used to scale the incremental markup are shown in Table 6A.2.1

.

Table 6A.2.1 Electrical Wholesaler Expenses and Markups

Item Dollar Value $1,000 ,000 Percentage

% Scaling

Total Cost of Equipment Sales 279,866 80.20

Gross Margin 69,094 19.80

Payroll Expenses 32,687 9.37

Baseline Total payroll, other employee wages 26,785 7.68

Total fringe benefits 5,008 1.44

Temporary staff and leased employee expenses 894 0.26

Occupancy Expenses 7,033 2.02

Baseline

Rental costs of machinery and equipment 347 0.10

Rental costs of buildings 2,164 0.62

Cost of repair to building 284 0.08

Cost of repair to machinery and equipment 407 0.12

Communication services 790 0.23

Purchased transportation, shipping and warehousing services 2,486 0.71

Purchased electricity and fuel 555 0.16

Other Operating Expenses 16,086 4.61

Baseline &

Incremental Purchased professional and technical services 1,863 0.53

Data processing and other purchased computer services 268 0.08

Expensed computer hardware and other equipment 335 0.10

Expensed purchases of software 353 0.10

Advertising and promotion services 1,890 0.54

All other expenses 6,004 1.72

Refuse removal (including hazardous waste) services 73 0.02

Taxes and license fees 707 0.20

Total depreciation ($1,000) 2,170 0.62

Commission expenses 1,444 0.41

Purchases of packaging material and containers 335 0.10

Purchases of other materials, parts, and supplies (not for resale) 644 0.18

Net Profit Before Income Taxes 13,288 3.81 Baseline &

Incremental
Source: U.S. Census Bureau, 2007 Annual Wholesaler Trade Report (NAICS 423620 Electrical and Electronic Appliance, Television and Radio Set Merchant Wholesaler ) http://www.census.gov/wholesale/index.html

6A-36A.3 STATE SALES TAX RATES

Table 6A.3.1 State Sales Tax Rates

State Combined State

and Local Tax

Rate

% State Combined State

and Local Tax

Rate

% State Combined State

and Local Tax

Rate

%

Alabama 8.55 Kentucky 6.00 North Dakota 5. 9 0

Alaska 1.3 0 Louisiana 8.75 Ohio 7. 10

Arizona 7 .15 Maine 5.5 0 Oklahoma 8. 35

Arkansas 8. 90 Maryland 6.00 Oregon

--
California 8. 45 Massachusetts 6.25 Pennsylvania 6.40

Colorado 6. 05 Michigan 6.00 Rhode Island 7.00

Connecticut 6.35 Minnesota 7. 2 0 South Carolina 7. 20

Delaware

-- Mississippi 7.00 South Dakota 5. 40

Dist. of Columbia 5.75 Missouri 7.45 Tennessee 9. 4 5

Florida 6.65 Montana

-- Texas 7.9 0

Georgia 7. 05 Nebraska 6.00 Utah 6.70

Hawaii 4. 40 Nevada 7.85 Vermont 6.05

Idaho 6.05 New Hampshire -- Virginia 5.60

Illinois 8.05 New Jersey 6.95 Washington 8. 90

Indiana 7.00 New Mexico 6. 60 West Virginia 6. 10

Iowa 6.85 New York 8. 40 Wisconsin 5.45

Kansas 7. 85 North Carolina 6. 90 Wyoming 5. 50
Source: The Sales Tax Clearinghouse at https://thestc.com/STRates.stm (A cc essed on January 10 , 201 4).

6A-4APPENDIX 8A. USER INSTRUCTIONS FOR LIFE

- CYCLE COST ANALYSIS

SPREADSHEET

TABLE OF CONTENTS

8A.1 INTRODUCTION

........................................................................................................ 8A-1

8A.2 DESCRIPTION OF LIFE

- CYCLE COST SPREADSHEET

...................................... 8A-1

8A-iAPPENDIX 8A. USER INSTRUCTIONS FOR LIFE

- CYCLE COST ANALYSIS

SPREADSHEET

8A.1 INTRODUCTION

It is possible to examine the detailed results of the life

- cycle cost ( LCC ) and payback period ( PBP ) analyses using a Microsoft Excel spreadsheet available on the U.S. Department of Energy’s rulemaking website for ceiling fans

. a The spreadsheet post ed on the DOE website

represent s the latest version and has b een tested with Microsoft Excel 2010.

8A.2 DESCRIPTION OF LIFE

- CYCLE COST SPREADSHEET

For all of the product classes, DOE created a single LCC workbook file containing a collection of worksheets. Each worksheet represents a conceptual component within the LCC

calculation.

The LCC workbook contains the following worksheets that present results and sample

calculations :

Summary This worksheet contains summary results for all product classes

.

Low

- vol standard

, Low-vol hugger, High -vol small- diam, High -vol large-diam Each of these work sheets contains detailed results and sample calculations for a single product class. The left side of each sheet shows the results summary, as well as boxplots and histograms of LCC and LCC savings for each efficiency level.

The right side of each sheet contains the calculations used i n the LCC analysis. Users can choose purchaser characteristics with a series of drop-down menus and fillable cells. A series of cells shows the

calculation of life

- cycle cost and life

- cycle cost savings resulting from the chosen purchaser characteristics.

The LCC workbook contains the following worksheets that present purchaser samples used in the LCC and PBP analysis:

Low

- vol sample The Low

- vol sample worksheet contains the purchaser sample used for low

volume product classes.

High

- vol sample The High

- vol sample worksheet contains the purchaser sample used for high

volume product classes.

a http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/65. Accessed May 1, 2014.

This material is available in Docket #EERE

- 2012

- BT

- STD

- 0045 at regulations.gov.

8A-1The LCC workbook contains the following worksheets that present inputs used in the LCC and PBP analysis:

Purchaser Sample The Purchaser Sample worksheet contains the purchaser data for each product class. During a simulation, DOE uses these purchaser characteristics to determine the analysis parameters.

Equip ment

Price The Equip ment Price worksheet contains inputs for purchase price and sales

t ax values.

Energy Use The Energy Use worksheet contains the operating hours and power values

used to calculate annual energy use.

Electricity The Electricity worksheet shows the prices and price trends used to estimate electricity price for each purchaser

. Repair The Repair worksheet contains the parameters used for estimating purchaser repair costs.

Lifetime The Lifetime worksheet contains the distribution of lifetimes.

Discount Rate The Discount Rate worksheet contains the dis tributions of discount rates.

8A-2APPENDIX 8B. UNCERTAINTY AND VARIABILITY IN LCC ANALYSIS

TABLE OF CONTENTS

8B.1 INTRODUCTION

......................................................................................................... 8B-1

8B.2 UNCERTAINTY

........................................................................................................... 8B-1

8B.3 VARIABILITY

.............................................................................................................. 8B-1

8B.4 APPROACHES TO UNCERTAINTY AND VARIABILITY

..................................... 8B-2

8B.5 PROBABILITY ANALYSIS AND THE USE OF MONTE CARLO

SIMULATION

............................................................................................................... 8B-2

LIST OF FIGURES

Figure 8B.5.1 Normal, Triangular, Uniform, Weibull, and Custom Probability

Distributions .................................................................................................8B-3

8B-iAPPENDIX 8B. UNCERTAINTY AND VARIABILITY IN LCC ANALYSIS

8B.1 INTRODUCTION

Analysis of energy conservation standards involves calculations of impacts, for example, the impact of a standard on consumer life-cycle cost (LCC). In order to perform the calculation, the analyst must first: 1) specify the equation or model that will be used; 2) define the quantities in the equation; and 3) provide numerical values for each quantity. In the simplest case, the equation is unambiguous (contains all relevant quantities and no others), each quantity has a single numerical value, and the calc ulation results in a single value. However, unambiguity and precision are rarely the case. In almost all cases, the model and/or the numerical values for each quantity in the model are not completely known (i.e., there is uncertainty) or the model and/or the numerical values for each quantity in the model depend upon other conditions (i.e., there is variability).

Thorough analysis involves accounting for uncertainty and variability. While the simplest analysis involves a single numerical value for each qua ntity in a calculation, arguments can arise about what the appropriate value is for each quantity. Explicit analysis of uncertainty and variability is intended to provide more complete information to the decision- making process.

8B.2 UNCERTAINTY

When making observations of past events or speculating about the future, imperfect knowledge is the rule rather than the exception. For example, the energy actually consumed by a particular appliance type (such as the average U.S. water heater, direct heating equipment, or pool heater) is not directly recorded, but rather estimated based upon available information. Even direct laboratory measurements have some margin of error. When estimating numerical values expected for quantities at some future date, the exact outcome is rarely known in advance.

8B.3 VARIABILITY

Variability means that different applications or situations produce different numerical values when calculating a quantity. Specifying an exact value for a quantity may be difficult because the value depends on something else. For example, water heater ene rgy consumption depends upon the specific circumstances and behaviors of the occupants (e.g., number of persons, length and temperature of showers , etc.). Variability makes specifying an appropriate population value more difficult in as much as any one val ue may not be representative of the entire population. Surveys can be helpful here, and analysis of surveys can relate the variable of interest (e.g., hours of use) to other variables that are better known or easier to forecast (e.g., persons per household ).

8B-18B.4 APPROACHES TO UNCERTAI NTY AND VARIABILITY

This section describes two approaches to uncertainty and variability:

• scenario analysis, and

• probability analysis.

Scenario analysis uses a single numerical value for each quantity in a calculation, then changes one (or more) of the numerical values and repeats the calculation. A number of calculations are done, which provide some indication of the extent to which the result depends upon the assumptions. For example, the life- cycle cost of an appliance could be calculated for energy rates of 2, 8, and 14¢ per kWh.

The advantages of scenario analysis are that each calculation is simple; a range of estimates is used and crossover points can be identified. (An example of a crossover point is the

energy rate a bove which the life-cycle cost is reduced, holding all other inputs constant. That is, the crossover point is the energy rate at which the consumer achieves savings in operating expense that more than compensate for the increased purchase expense.) The dis advantage of scenario analysis is that there is no information about the likelihood of each scenario.

Probability analysis considers the probabilities within a range of values. For quantities with variability (e.g., electricity rates in different househol ds), surveys can be used to generate a frequency distribution of numerical values (e.g., the number of households with electricity rates at particular levels) to estimate the probability of each value. For quantities with uncertainty, statistical or subjec tive measures can be used to provide probabilities (e.g., manufacturing cost to improve energy efficiency to some level may be estimated to be $10 ± $3).

The major disadvantage of the probability approach is that it requires more information, namely information about the shapes and magnitudes of the variability and uncertainty of each quantity. The advantage of the probability approach is that it provides greater information about the outcome of the calculations, that is, it provides the probability that the outcome will be in a particular range.

Scenario and probability analysis provide some indication of the robustness of the policy given the uncertainti es and variability. A policy is robust when the impacts are acceptable over a wide range of possible conditions.

8B.5 PROBABILITY ANALYSIS AND THE USE OF MONTE CARLO

SIMULATION

To quantify the uncertainty and variability that exist in inputs to the engineering , LCC, and payback period (PBP) analyses, DOE used Monte Carlo simulation and probability distributions to conduct probability analyses.

8B-2Simulation refers to any analytical method meant to imitate a real

- life system, especially when other analyses are to o mathematically complex or too difficult to reproduce. Without the aid of simulation, a model will only reveal a single outcome, generally the most likely or average

scenario. Probabilistic risk analysis uses both a spreadsheet model and simulation to

aut omatically analyze the effect of varying inputs on outputs of the modeled system. One type of simulation is Monte Carlo simulation, which randomly generates values for uncertain variables again and again to simulate a model. Monte Carlo simulation was named for Monte Carlo, Monaco, where the primary attractions are casinos containing games of chance. Games of

chance , such as roulette wheels, dice, and slot machines, exhibit random behavior. The random behavior in games of chance is similar to how Monte Carl o simulation selects variable values at random to simulate a model. When you roll a die, you know that a 1, 2, 3, 4, 5, or 6 will come up, but you do not know which for any particular roll. It's the same with the variables that have a known range of values but an uncertain value for any particular time or event (e.g., equipment lifetime, discount rate, and installation cost).

For each uncertain variable (one that has a range of possible values), possible values are defined with a probability distribution. The type of distribution selected is based on the conditions surrounding that variable. Probability distribution types include:

Figure 8B.5.1 Normal, Triangular, Uniform, Weibull, and Custom Probability

Distributions

During a simulation, multiple scenarios of a model are calculated by repeatedly sampling values from the probability distributions for the uncertain variables and using those values for the

cell. Monte Carlo simulations can consis t of as many trials (or scenarios) as desired —hundreds or even thousands. During a single trial, the simulation randomly selects a value from the defined possibilities (the range and shape of the probability distribution) for each uncertain variable and

th en recalculates the LCC and PBP for that trial

.

8B-3 NORMAL UNIFORM TRIANGULAR

WEIBULL CUSTOMAPPENDIX 8C. DISTRIBUTIONS USED FOR RESIDENTIAL DISCOUNT RATES

TABLE OF CONTENTS

8C.1 INTRODUCTION .........................................................................................................8C-1

8C.2 DISTRIBUTION OF RATES FOR DEBT CLASSES C ONSIDERED FOR

REPLACEMENT PRODUCTS ....................................................................................8C-1

8C.3 DISTRIBUTION OF RATES FOR EQUITY CLASSES CONSIDERED FOR

REPLACEMENT PRODUCTS ....................................................................................8C-4

8C.4 DISTRIBUTION OF RATES FOR PRODUCT S INSTALLED IN NEW

HOUSING

................................ ................................ ......................................................8C-7

REFERENCES ..........................................................................................................................8C-9

LIST OF FIGURES

Figure 8C.2.1 Distribution of Home Equity Loan Interest Rates .......................................8C-1 Figure 8C.2.2 Distribution of Credit Card Interest Rates ...................................................8C-2 Figure 8C.2.3 Distribution of Installment Loan Interest Rates ...........................................8C-2 Figure 8C.2.4 Distribution of Other Residence Loan Interest R ates ..................................8C-3 Figure 8C.2.5 Distribution of Other Lines of Credit Loan Interest Rates ..........................8C-3 Figure 8C.3.1 Distribution of Annual Rate of Return on CDs ...........................................8C-4 Figure 8C.3.2 Distribution of Annual Rate of Return on Savings Bonds ...........................8C-5 Figure 8C.3.3 Distributio n of Annual Rate of Return on Corporate AAA Bonds ..............8C-5 Figure 8C.3.4 Distribution of Annual Rate of Savings Accounts .......................................8C-6 Figure 8C.3.5 Distribution of Annual Rate of Return on S&P 500 ....................................8C-6 Figure 8C.3.6 Distribution of Annual Rate of Return on Mutual Funds ............................8C-7 Figure 8C.4.1 Distribution of New Home Mortgage Interest Rates ...................................8C-8

8C-iAPPENDIX 8C. DISTRIBUTIONS USED FOR RESIDENTIAL DISCOUNT RATES

8C.1 INTRODUCTION

DOE derived consumer discount rates for the life-cycle cost (LCC) analysis using data on

interest or return rates for var ious types of debt and equity. To account for variation among households in rates for each of the types, DOE sampled a rate for each household from a distribution of rates for each debt and equity type.

8C.2 DISTRIBUTION OF RATES FOR DEBT CLASSES CONSIDERED FOR

REPLACEMENT PRODUCTS

Figure 8C.2.1 through Figure 8C.2.5 show the distribution of real interest rates for different types of debt used to finance replacement products. The data source for the interest rates for home equity loans, credit cards, installment loans, other residence loans, and other lines

of cre dit is the Federal Reserve Board’s SCF in 1989, 1992, 1995, 1998, 2001, 2004, 2007, and

2010. 1 DOE adjusted the nomina l rates to real rates using the annual inflation rate in each year. For home equity loans, DOE calculated effective interest rates in a similar manner as for mortgage rates, because interest on such loans is tax deductible.

Figure 8C.2 .1 Distribution of Home Equity Loan Interest Rates 0% 5% 10% 15% 20% 25% 30%Probability

Real Interest Rate

8C-1Figure 8C.2 .2 Distribution of Credit Card Interest Rates

Figure 8C.2 .3 Distribution of Installment Loan Interest Rates 0% 1% 2% 3% 4% 5% 6% 7% 8% 9%Probability

Real Interest Rate

0% 5% 10% 15% 20% 25% 30% 35% 40%Probability

Real Interest Rate

8C-2Figure 8C.2 .4 Distribution of Other Residence Loan Interest Rates

Figure 8C.2 .5 Distribution of Other Lines of Credit Loan Interest Rates 0% 2% 4% 6% 8% 10% 12% 14% 16% 18%Probability

Real Interest Rate

0% 2% 4% 6% 8% 10% 12%Probability

Real Interest Rate

8C-38C.3 DISTRIBUTION OF RATES FOR EQUITY CLASSES CONSIDERED FOR

REPLACEMENT PRODUCTS

Figure 8C.3.1 through Figure 8C.3.6 show the distribution of real interest rates for different types of equity used to finance replacement products . Data for equity classes are not

available from the Federal Reserve Board’s SCF , so DOE derived data for these classes from

national- level historical data. The interest rates associated with certificates of deposit (CDs), 2
savings bonds, 3 and AAA corporate bonds 4 are from Federal Reserve Board time

- series data covering 1977 to 2012. DOE assumed rates on checking accounts to be zero. Rates on savings and money market accounts are from Cost of Savings Index data covering 1984 to 2012. 5 The

rates for stocks are the annual returns on the Standard and Po or’s (S&P) 500 from 1977 to 2012. 6
The mutual fund rates are a weighted average of the stock rates (two -thirds weight) and the bond rates (one -third weight ) in each year from 1977 to 2012 . DOE a djusted the nominal rates to real rates using the annual inflation rate in each year.

Figure 8C.3 .1 Distribution of Annual Rate of Return on CDs -2% 0% 2% 4% 6% 8%Annual Rate of Return

Year

8C-4Figure 8C.3 .2 Distribution of Annual Rate of Return on Savings Bonds

Figure 8C.3 .3 Distribution of Annual Rate of Return on Corporate AAA Bonds -2% 0% 2% 4% 6% 8%Annual Rate of Return

Year

-2% 0% 2% 4% 6% 8%Annual Rate of Return

Year

8C-5Figure 8C.3 .4 Distribution of Annual Rate of Savings Accounts

Figure 8C.3 .5 Distribution of Annual Rate of Return on S&P 500 -2% 0% 2% 4% 6% 8%Annual Rate of Return

Year

-40% -30% -20% -10%

0% 10% 20% 30% 40%Annual Rate of Return

Year

8C-6Figure 8C.3 .6 Distribution of Annual Rate of Return on Mutual Funds

8C.4 DISTRIBUTION OF RATES FOR PRODUCTS INSTALLED IN NEW

HOUSING

DOE estimated discount rates for new

- housing appliances using the effective real (after

inflation) mortgage rate for homebuyers. Figure 8C.4.1 shows the distribution of real interest rates for new home mortgages. The data source DOE used for mortgage interest rates is the

Federal Reserve Board’s Survey of Consumer Finances (SCF) in 1989, 1992, 1995, 1998, 2001, 2004, 2007, and 2010. 1 Using the appropriate SCF data for each year, DOE adjusted the nominal mortgage interest rate for each relevant household in the SCF for mortgage tax deduction and inflation. In cases where the effective interest rate is equal to or below the inflation rate (resulting in a negative real in terest rate), DOE set the real effective interest rate to zero. -30% -20% -10%

0% 10% 20% 30%Annual Rate of Return

Year

8C-7Figure 8C.4 .1 Distribution of New Home Mortgage Interest Rates 0% 5% 10% 15% 20% 25% 30% 35%Probability

Real Interest Rate

8C-8REFERENCES

1. Board of Governors of the Federal Reserve System. Research Resources: Survey of Consumer Finances. 1989, 1992, 1995, 1998, 2001, 2004, 2007, and 2010. (Last Accessed March 11, 2014. ) http://www.federalreserve.gov/econresdata/scf/scfindex.htm >

2. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, Historical Data, Instrument: CDs (secondary market), Maturity: 6 -month, Frequency: Annual, Description: Average rate on 6- month negotiable certificates of deposit (secondary market), quoted on an investment basis. Washington, D.C. (Last Accessed March 10, 2014.) http://www.federalreserve .gov/releases/H15/data.htm

3. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, Historical Data, Instrument: State and local bonds, Maturity: 20- year, Frequency: Monthly, Description: Bond buyer go 20-bond municipal bond index. Washington, D.C. (Last Accessed March 10, 2014.) http://www.federalreserve.gov/releases/H15/data.htm

4. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, Historical Data, Instrument: Corporate bonds/Moody’s Seasoned AAA, Frequency: Annual, Description: Moody’s yield on seasoned corporate bonds—all industries, AAA. Washington, D.C. (Last Accessed March 10, 2014.) http://www.federalreserve.gov/releases/H15/data.htm

5. Mortgage-X–Mortgage Information Service. Cost of Savings Index (COSI) Index History. 2010. (Last Accessed March 11, 2014.) http://mortgage

x.com/general/indexes/default.asp

.

6. Damodaran Online. Historical Returns on Stocks, Bonds and Bills–United States. Use link for Updated Data: Data Sets. A. Damodaran, New York University. 2014. (Last

Accesse d September 18, 2012.) http://pages.stern.nyu.edu/~adamodar/

8C-9APPENDIX 9A. RELATIVE PRICE ELASTICITY OF DEMAND FOR APPLIANCES

TABLE OF CONTENTS

9A.1 INTRODUCTION ........................................................................................................ 9A-1

9A.2 LITERATURE REVIEW ............................................................................................. 9A-1

9A.2.1 Price .................................................................................................................. 9A-1

9A.2.2 Income

................................ ................................ ............................................... 9A-1

9A.2.3 Appliance Efficiency and Discount Rates ........................................................ 9A-1

9A.3 VARIABLES DESCRIBING THE MARKET FOR REFRI GERATORS, CLOTHES WASHERS, AND DISHWASHERS ........................................................ 9A-2

9A.3.1 Physical Household/Appliance Variables ......................................................... 9A-2

9A.3.2 Economic variables ........................................................................................... 9A-3

9A.4 REGRESSION ANALYSIS OF VARIABLES AFFECTING APPLIANCE

SHIPMENTS ................................................................................................................ 9A-4

9A.4.1 Broad Trends ..................................................................................................... 9A-5

9A.4.2 Specification of Model ...................................................................................... 9A-7

9A.4.3 Discussion of Model ......................................................................................... 9A-8

9A.4.4 Analysis Results ................................................................................................ 9A-8

9A.4.4.1 Individual Appliance Model .................................................................... 9A-8

9A.4.4.2 Combined Appliance Model ................................................................... 9A-9

9A.4.5 Additional Regression Specifications and Results ......................................... 9A-10

9A.4.5.1 Lower Consumer Discount Rate ........................................................... 9A-10

9A.4.5.2 Disaggregated Variables ....................................................................... 9A-10

9A.5 LONG RUN IMPACTS .............................................................................................. 9A-11

9A.6 SUMMARY ................................................................................................................ 9A-12

9A.7 DATA USED IN THE ANA LYSIS ........................................................................... 9A-13

REFERENCES ....................................................................................................................... 9A-15

9A-iLIST OF TABLES

Table 9A.2.1 Estimates of the Impact of Price, Income and Efficiency on Automobile and Appliance Sales ................................................................ 9A-2

Table 9A.3.1 Physical Household/Appliance Variables ................................................... 9A-3

Table 9A.3.2 Economic Variables .................................................................................... 9A-4

Table 9A.4.1 Estimate of Total Price Elasti city of Demand ............................................. 9A-6

Table 9A.4.2 Tabular Estimate of Relative Price Elasticity of Appliance Demand ......... 9A-7

Table 9A.4.3 Individual Appliance Model Results .......................................................... 9A-9

Table 9A.4.4 Combined Appliance Model Result ............................................................ 9A-9

Table 9A .4.5 Combined and Individual Results, 20 percent discount rate..................... 9A-10

Table 9A.4.6 Disaggregated Regression Results, 37 percent discoun t rate .................... 9A-11

Table 9A.5.1 Change in Price Elasticity of Demand for Automobiles following a Purchase Price Change .............................................................................. 9A-12

Table 9A.5.2 Change in Relative Price Elasticity for Home Appliances following a Purchase Price Change .............................................................................. 9A-12

LIST OF FIGURES

Figure 9A.3.1 Trends in Appliance Shipment, Housing Starts and Replacements ............ 9A-4 Figure 9A.4.1 Residual Shipments and Appliance Price ................................................... 9A-6

9A- iiAPPENDIX 9A. RELATIVE PRICE ELASTICITY OF DEMAND FOR APPLIANCES

9A.1 INTRODUCTION

This appendix summarizes DOE’s study of the price elasticity of demand for home appliances, including refrigerators, clothes washers and dishwashers. DOE chose t his particular

set of appliances because of the availability of data to determine a price elast icity. Section 9A.2

review s the existing economics literature describing the impact of economic variables on the sa le of durable goods. Section 9A.3 describes the market for home appliances and the changes that

have occurred over the past 20 years . In section 9A.4 , DOE summarizes the results of its regression analysis and present s estimates of the price elasticity of demand for the three appliances. In section 9A.5 , DOE presents development of an ‘effective’ purchase price elasticity. DOE’s interpretation of its re sults is presented in section 9A.6

. Finall y, section 9A.7 describes the data used in DOE’s analysis.

9A.2 LITERATURE REVIEW

R elatively few studies measur e the impact of price, income and efficiency on the sale of household appliances. T his section briefly review s the literature that describes the likely importance of these variables on the purchase of household appliances.

9A.2.1 Price

DOE reviewed many studies t hat sought to measure the impact of price on sales in a dynamic market. One study of the automobile market prior to 1970 finds the price elasticity of demand to decline over time. The author explains this as the result of buyers delaying purchases

after a price increase but eventually making the purchase ( Table 9A.2 .1 ). 1 A contrasting study of household white goods also prior to 1970, finds the elasticity of demand to increase over time as more price

- conscious buyers enter the market. 2 An analysis of refrigerator market survey data finds that consumer purchase probability decreases with survey asking price. 3 Estimates of the price elasticity of demand for different brands of the same product tend to vary. A review of 41 studies of the impact of price on market share found the average price elasticity to be -1.75. 4 The average estimate of price elasticity of demand reported in these studies is -0.33 in the appliance

market and -0.47 in the combined automobile and appliance markets.

9A.2.2 Income

Higher income households are more likely to own household appliance. 5 The impact of income on appliance shipments is explored in two econo metric studies of the automobile and appliance markets. 1

, 2 The average income elasticity of demand is 0.50 in the appliance study

cited in the literature rev iew, much larger in the automobile study ( Table 9A.2 .1 ).

9A.2.3 Appliance Efficiency and Discount Rates

Many studies estimate the impact of appliance efficiency on consumers’ choice of appliance. Typically, this impact is summarized by the implicit discount rate; that is , the rate consumers use to compare future savings in appliance operating costs against a higher initial

9A-1purchase price of an appliance. One early and much c ited study co ncludes that consumers use a 20 percent implicit discount rate when purchasin g room air conditioners ( Table 9A.2.1 ). 6 A survey of several studies of di fferent appliances suggests that the consumer implicit discount rate has a broad range and averages about 37 percent

. 7

Table 9A.2.1 Estimates of the Impact of Price, Income and Efficiency on Automobile and Appliance Sales

Durable Good Price Elasticity Income Elasticity Brand

Price Elasticity Implicit

Discount

Rate Model Data

Years Time

Period

Automobiles 1

- 1.07 3.08

- - Linear Regression, stock adjustment - Short run

Automobiles 1

- 0.36 1.02

- - Linear Regression, stock adjustment - Long run

Clothes Dryers 2

- 0.14 0.26

- - Cobb

- Douglas, diffusion 1947

- 1961 Mixed

Room Air

Conditioners 2 - 0.37 8 0.45

- - Cobb

- Douglas, diffusion 1946

- 1962 Mixed

Dishwashers 2

- 0.42 0.79

- - Cobb

- Douglas, diffusion 1947

- 1968 Mixed

Refrigerators 3

- 0.37

- - 39% Logit probability, survey

data 1997 Short run

Various 4

- - - 1.76 9

- Multiplicative regression

- Mixed

Room Air

Conditioners 5 - - - 1.72

- Non

- linear diffusion 1949

- 1961 Short run

Clothes Dryers 5

- - - 1.32

- Non

- linear diffusion 1963

- 1970 Short run

Room Air

Conditioners 6 - - - 20% Qualitative choice, survey

data - -

Household Appliances 7 - - - 37% 10 Assorted

- -

Sources: 1 S. Hymens. 1971; 2 P. Golder and G. Tellis, 1998; 3 D. Revelt and K. Train, 1997;

4 G. Tellis, 1988; 5 D. Jain and R. Rao; 6 J. Hausman; 7 K. Train, 1985.

Notes: 8 Logit probability results are not directly comparable to other elasticity estimates in this table.

9 Average brand price elasticity across 41 studies.

10 Averaged across several household appliance studies referenced in this work.

9A.3 VARIABLES DESCRIBING THE MARKET FOR REFRIGERATORS,

CLOTHES WASHERS, AND DISHWASHERS

In this section DOE evaluate s variables that appear to account for refrigerator, clothes washer and dishwasher shipments, including physical household/appliance variables and

economic variables.

9A.3.1 Physical Household/Appliance Variables

Several variables influence the sale of refrigerat ors, clothes washers and dishwashers. The most important for explaining appliance sales trends are the annual number of new households formed (housing starts) and the number of appliances reaching the end of their operating life (replacements). Housing sta rts influence sales because new homes are often provided with, or soon receive, new appliances, including dishwashers and refrigerators.

9A-2Replacements are correlated with sales because new appliances are typically purchased when old ones wear out. In principle, if households maintain a fixed number of appliances, shipments should equal housing starts plus appliance replacements.

9A.3.2 Economic variables

Appliance price, appliance operating cost and household income are important economic variables affecting ship ments. Low prices and costs encourage household appliance purchases and a rise in income increases householder ability to purchase appliances. In principle, changes in economic variables should explain changes in the number of appliances per household.

During a 1980–2002 study period, annual shipments grew 69 percent for clothes washers, 81 percent for refrigerators a nd 105 percent for dishwashers ( Table 9A.3.1 ). T his rising shipments trend is explained in part by housing starts, which increased 6 percent and by appliance replacements, which rose between 49 percent and 90 percent, depending on the

app liance, over the period ( Table 9A.3.1 ). a For mature markets such as these, replacements exceed appliance sales associated with new housing construction.

Table 9A.3.1 Physical Household/Appliance Variables

Shipments i (millions) Housing Starts ii (millions) Replacements iii (millions)
Appliance 1980 2002 Change 1980 2002 Change 1980 2002 Change
Refrigerators 5.124 9.264 81% 1.723 1.822 6% 3.93 5.84 49%

Clothes Washers 4.426 7.492 69% 1.723 1.822 6% 3.66 5.50 50%

Dishwashers 2.738 5.605 105% 1.723 1.822 6% 1.99 3.79 90%

i Shipments: Number of units sold. Sources: AHAM Fact Book and Appliance Magazine.

ii Housing Starts: Annual number of new homes constructed. Source: U.S. Census.

iii Replacements: Average of annual lagged shipments, with lag equal to expected appliance operating life, ± 5 years.

Shipments increased somewhat more rapidly than housing starts and replacements. This is shown by comparing the beginning and end points of lines that represent “starts plus replacements” (uppermost solid line in Figure 9A.3 .1 ) and “shipment s” (dia mo nd linked line in Figure 9A.3.1 ). In 1980 the “shipment” line begins below the “starts plus replacements” line. In 2002, the “shipments” line ends above the “starts plus replacements” line. This more rapid increase in shipments, compared to housing starts plus replacements, suggests that the appliance per household ratio increased over the study period.

a Appliance replacements are determined from the expected operating life of refrigerators (19 years), clothes washers (14 years), and dishwashers (12 years) and from past shipments. Replacements are further discussed in

section 9A.3 . The dishwasher lifetime used in this analysis does not match the dishwasher used in the primary analysis.

9A-3Figure 9A.3

. 1 Trends in Appliance Shipment, Housing Starts and Replacements

Economic variables, including price, cost and income, may explain this increase in appliances per household. Over the period, appliance prices decreased 40 percent to 50 percent, operating co sts fell between 33 percent and 72 percent, and median household income rose 16 percent ( Table 9A.3.2 ).

Table 9A.3.2 Economic Variables

Price i (1999$) Operating Cost ii (1999$) Household Income iii (1999$)
Appliance 1980 2002 Change 1980 2002 Change 1980 2002 Change
Refrigerators 1208 726

- 40% 333 94

- 72% 37,447 43,381 16%

Clothes Washers 779 392

- 50% 262 175

- 33% 37,447 43,381 16%

Dishwashers 713 369

- 48% 183 95

- 48% 37,447 43,381 16%

i Price: Shipment weighted retail sales price. Sources: AHAM Fact Book and Appliance Magazine.

ii Operating Cost: Annual electricity price times electricity consumption. Source: AHAM Fact Book.

iii Income: Mean Household income. Source: U.S. Census.

9A.4 REGRESSION ANALYSIS OF VARIABLES AFFECTING APPLIANCE

SHIPMENTS

Few data are available to estimat e the impact of economic variables on the demand for appliances. Industry operating cost data is incomplete— appliance energy use data are available for only 12 years of the 1980-2002 study period. Industry price data are also incomplete

— available for only 8 years of the study period for each of the appliances.

The lack of data suggests that regression analysis can at best evaluate broad data trends, utilizing relatively few explanatory variables. This section b egin s by describing broad trends apparent in the economic and physical household data sets and then specifies a simple regression model to measure these trends, making assumptions to minimize the number of explanatory

variables. Finally, results of the reg ression analysis are presented along with an estimate of the price elasticity of demand for appliances. In section 9A.4.5

, DOE present s the results of regression analysis performed with more complex models, which are used to test assumptions Refrigerator Shipments

0 1 2 3 4 5 6 7 8 9 10

1980 1984 1988 1992 1996 2000Millions New Housing

Retirements

Shipments Clothes Washer Shipments

0 1 2 3 4 5 6 7 8

1980 1984 1988 1992 1996 2000Millions Dishwasher Shipments

0 1 2 3 4 5 6

1980 1984 1988 1992 1996 2000Millions

9A-4underlying the simple model. These results support the specification of the simple model and the price elasticity of appliance demand estimated with that model.

9A.4.1 Broad Trends

In this section DOE review s trends in the physical household and economic data sets and posits a simple approach for estimating the price elasticity of appliance demand. As noted above, the physical household variables (housing starts and appliance replacements) explain most of the variability in appliance shipments during the study period (1980-2002). b DOE assume s the rest of the variability in shipment s ( referred to as “ residual shipments” ) is explained by economic

variables . Below, DOE present s a tabular method for measuring price elasticities.

To illustrate this tabular approach, DOE defines two new variables—residual shipments and total price. Residual shipments are defined as the difference between shipments and physical household demand (starts plus replacements). Total price, represented by the following equation, is defined as appliance price plus the present value of lifetime appliance oper ating cost : c



### PVOC PPTP +=

where:

TP = Total price,

PP = Appliance purchase price, and

PVOC = Present value of operating cost.

Over the study period, residual shipments increased in proportion to total shipments by 30 percent for refrigerators, 19 percent for clothes washers , and 23 percent for dishwashers. At

the sam e time, total prices declined 47 percent, 45 percent and 48 percent for refrigerators,

clothes washers , and dishwashers, respectively. Assuming that total price explains the entire change in per household appliance usage, a rough estimate is calculated of the total price elasticity of demand equal to -0 .48 for refrigerators, -0.32 for clothes washers and -0.3 7 for dishwashers ( Ta ble 9A.4.1 ).

b A log regression of the form: Shipments = a + b • Housing Starts + c • Retirements, indicates that these two variables explain 89 percent of the variation in refrigerator shipments, 97 percent of the variation in clothes washer shipments, and 97 percent of the variation in dishwasher shipments.

c Present value operating cost is calculated assuming a 19

- year operating life for refrigerators, 14

- year operating life for clothes washers, and a 12

- year operating life for dishwashers. A 37 percent discount rate is used to sum annual operating costs into a present value operating cost.

9A-5Table 9A.4

. 1 Estimate of Total Price Elasticity of Demand

Residual Shipments (millions) Total Price (1999$)

Elasticity Appliance 1980 2002 Difference Change 1980 2002 Change

Refrigerators

- 0.5 1.6 2.1 30% 1541 820

- 61%

- 0.48

Clothes Washers

- 1.0 0.2 1.1 19% 1042 567

- 59%

- 0.32

Dishwashers

- 1.0

- 0.01 1.0 23% 896 464

- 64%

- 0.37

The negative correlation between total price and residual shipments suggested by these negative price elasticities is illustrated in a graph of residual shipments on the y

- axis and to tal price on the x- axis ( Figure 9A.4.1 ).

Yellow points are observed price data; red points are interpolated price data. Figure 9A.4

. 1 Residual Shipments and Appliance Price

Household income rose during the study period, making it easier for households to purchase appliances. Assuming that a rise in income has a similar impact on shipments as a decline in price, the impact of income is incorporated by defining a third variable, termed

relative price, which is calculated as total price divided by household income and represented by the following equation. d

Income TP RP =

where:

RP = Relative price,

TP = Total price, and

Income = Household income.

d R ecall that the income elasticity of demand cited in the literature review is 0.50 and the price elasticity of demand cited in the review averages

- 0.35. This suggests that combining the effects of income and price will yield an elasticity less negative tha n price elasticity alone. Refrigerators

400 800 1200 1600 2000

-2.0 -1.0 0.0 1.0 2.0

Total PriceResidual Shipments Clothes Washers

400 600 800 1000 1200

-1.5 -1.0 -0.5 0.0 0.5

Total PriceResidual Shipments Dishwashers

200 400 600 800 1000

-2.0 -1.5 -1.0 -0.5 0.0 0.5

Total PriceResidual Shipments

9A-6The percent decline in relative price for the three appliances divi ded by the percent decline in residual shipments suggests a rough estimate of relative price elasticity equal to -0.40 for refrigerators, -0.26 for clothes washers and -0.30 for dishwashers ( Table 9A.4.2 ).

Table 9A.4.2 Tabular Estimate of Relative Price Elasticity of Appliance Demand

Residual Shipments (millions) Relative Price (1999$)

Elasticity Appliance 1980 2002 Change 1980 2002 Change

Refrigerators

- 0.532 1.597 30% 0.041 0.019

- 74%

- 0.40

Clothes Washers

- 0.953 0.174 19% 0.028 0.013

- 72%

- 0.26

Dishwashers

- 0.974

- 0.005 23% 0.024 0.011

- 76%

- 0.30

9A.4.2 Specification of Model

The limited price data suggest it is appropriate to use a simple regression model to estimate the impact of economic variables on shipments, using few explanatory variables. The following equation , chosen for this analysis, includes one physical household variable (housing starts plus replacements) and one relative price variable (the sum of purchase price plus operating cost, divided by income).



## [ ] Rplc Starts cRPba Ship +×+×+= Eq. 9A

. 1

where:

Ship = Quantity of appliance sold,

RP = Relative price,

Starts = Number of new homes, and Rplc = Number of appliances at the end of their operating life.

The natural logs are taken of all variables so that the estimated coefficients for each variable in the model may be interpreted as the percent change in shipments associated with the percent change in the variable. Thus, the coefficient b in this model is interpreted as the relative price elasticity of demand for the three appliances.

DOE used the following combined regression equation to estimate an average price elasticity of demand across the three appliances, using pool ed data in a single regression. A combined regression specification is justified, given the limited data available and the similarity in price and shipment behavior across appliances ( see Figure 9A.4.1 ). Thus, the model represented by the combined regression equation is considered the basic model in DOE’s analysis of applia nce shipments.



## [ ] DW eCWdRplc Starts cRPba Ship ×+×++×+×+= Eq. 9A

. 2

where:

9A-7CW = Quantity of clothes washers sold, and

DW = Quantify of dishwashers sold.

9A.4.3 Discussion of Model

The most important assumption used to specify this model is that changes in economic variables over the study period—income, price, and operating cost—are responsible for all observed growth in residual appliance shipments. In other words, DOE assume s no impact from other possible fact ors , such as changing consumer preferences or increases in the quality of appliances. This assumption seems unlikely, but without additional data, the impact of this assumption on the price elasticity of demand cannot be measured. DOE effectively assume s t hat changes in consumer preferences and appliance characteristics, while affecting which models are purchased, have relatively little impact on the total number of appliances purchased in a year.

Three additional assumptions used to specify this model de serve comment. The relative price variable is specified in the model, assuming that (1) the correct implicit discount rate is used to combine appliance price and operating cost and that (2) rising income has the same impact on shipments as falling total pr ice. The “ starts + replacements ” variable is specified, assuming (3) that starts and replacements have similar impacts on shipments.

To investigate the first assumption about discount rates, DOE calculated “present value operating cost” using a 20 perce nt implicit discount rate and performed a second regression analysis based on the models described in Eq. 9A.1 and Eq. 9A.2 . The results of this analysis, presented in secti on 9A.4.5 , indicate that the elasticity of relati ve price is fairly insensitive to changes in the discount rate.

To investigate the second and third assumptions, DOE specified a regression model separating income from total price and replacements from starts, th ereby adding two additional explanatory variables to the basic mo del as shown in the following equation:

DW gCWf Rplc eStartdInconec TP baShip ×+×+×+×+×+×+= Eq. 9A

. 3

The results of the regression analysis of this model are presented in section 9-A.4.5. These results suggest that the elasticity of total price (coefficient b ) is relatively insensitive to changes in the treatment of income and “starts + replacements ” in the model.

9A.4.4 Analysis Results

The following sections describe result s of analyses using both the individual and combined models for appliances and the effects of a lower consumer discount rate and disaggregated variables.

9A.4.4.1 Individual Appliance Model

The individual appliance regression equations are specified in the following equation.

9A-8

## [ ] Rplc Starts cRPba Ship +×+×+=

In regression analysis of this model, the elasticity of relative price ( b ) is estimated to be

-0.40 for refrigerators, -0.31 for clothes washers and -0.32 for dishwashers ( Table 9A.4.3 ), averaging -0.35. These elasticities are similar to those reported in the literatur e surv ey for appliances ( Table 9A.2.1 ). They are remarkably similar to the price elasticity calculated using a

tabular a pproach ( Table 9A.4.2 ).

The estimated coefficient associated with the “s tarts + r eplacements ” variable is close to one. A coefficient equal to one for this variable would imply that, holding economic variables constant, shipments increase in direct proportion to an incre ase in “s tarts + r eplacements.” The high R-squared values (above 95) and t-statistics (above 5) in the results provide a measure of confidence in this analysis, despite the very small data set.

Table 9A.4.3 Individual Appliance Model Results

Refrigerator Clothes Washer Dishwasher

Variable Coefficient t

- stat Coefficient t

- stat Coefficient t

- stat
Intercept

- 1.51

- 7.26

- 1.47

- 8.23

- 2.08

- 16.78

Relative Price

- 0.40

- 6.60

- 0.31

- 5.69

- 0.32

- 7.03

Starts + Replacements 1.05 5.90 1.08 6.41 1.35 11.46

R 2 0.954 0.954 0.975

Observations 23 23 23

9A.4.4.2 Combined Appliance Model

The combined appliance regression equation is specified in the following equation.



## [ ] DW eCWd Rplc Startsc RP baShip ×+×++×+×+=

This regression analysis indicates that the model fits the existing shipments data well (high R-squared) and that the variables included in the model are st atistically significant ( Table

9A.4.4 ). Estimated with this model, t he elasticity of relative price is -0.34, close to the average value estimated in the individual appliance models (-0.35). It is also similar to elasticity

estim ates reported in the literature survey and calculated using the tabular approach in Table

9A.4.2

.

Table 9A.4.4 Combin ed Appliance Model Result

Variable Coefficient t

- statistic
Intercept

- 1.60

- 15.54

Relative Price

- 0.34

- 10.74
Starts + Replacements 1.21 13.95

CW

- 0.20

- 9.04

DW

- 0.32

- 6.58

R 2 0.983

Observations 69

9A-99A.4.5 Additional Regression Specifications and Results

As described in section 9A.4.3 , DOE used three assumptions to specify its appliance models. The first, made to aggregate appliance price and operating cost , is th at the implicit price variable in the basic regressio n model is specified using a 37 percent implicit discount rate. The

second states that the implicit price variable is defined assuming that rising income has the same impact on shipments as falling total price. The third states that the “starts + r eplacements ” variable is defined assuming that housing starts have a similar impact on shipments as appliance replacements.

9A.4.5.1 Lower Consumer Discount Rate

To investigate the first assumption about discount rates, DOE calculated “present value operating cost” using a 20 percent implicit discount rate and performed a second regression analysis based on the models described in Eq. 9A.1 and Eq. 9A.2

. The estimated coefficient

associated with the relative price variable in these regressio ns is almost identical to the

coefficients estimated for the same variable based on a 37 percent implicit discount rate. The elasticity of relative price calculated using a 20 percent discount rate is -0.33 in the combined regression and averages -0.35 for the three appliances ( Table 9A.4.5 ). The elasticity o f price calculated using a 37 percent discount rate is -0.34 in the combined regression and averages -

0.35 for the three appliances. DOE concludes from this analysis that the elasticity of relative price is fairly insensitive to changes in the discount rate.

Table 9A.4.5 Combined and Individual Results, 20 percent di scount rate

9A.4.5.2 Disaggregated Variables

To investigate the second and third assumptions, DOE constructed a regression model

that separates income from total price and replacements from starts, thus adding two additional explanatory variables to the basic model (as shown earlier as Eq. 9A.3 and shown below ).

DW gCWf Rplc eStartdIncomec TP baShip ×+×+×+×+×+×+= Three Appliances

Variable Coefficient t-Stat
Intercept -1.53 -14.61

Total Price / Income -0.33 -10.69

Starts + Retirements 1.20 13.65

CW -0.18 -8.69

DW -0.32 -6.57

R 2 0.982

Observations 69

Refrigerator Clothes Washers Dishwasher

Variable Coefficient t-Stat Coefficient t-Stat Coefficient t-Stat
Intercept -1.36 -6.26 -1.41 -7.49 -2.04 -17.23

Total Price / Income -0.38 -6.50 -0.32 -5.29 -0.33 -7.30

Starts + Retirements 1.04 5.73 1.06 5.83 1.34 11.64

R 2 0.953 0.950 0.977

Observations 23 23 23

9A-10The estimated coefficient associated with the total price variable in these regressions is

almost identical to the coefficients estimated for the relative price variable reported above. The elasticity of total price in the above equation is -0.36 in the combined appliance regression and

averages -0.35 f or the three appliances ( Table 9A.4 .6 ). The elasticity of relative price based on

the model described in Eq. 9A.2 is -0.34 in the combined regression ( Table 9A.4.4 ) and averages

-0.35 across t he individual appliances ( Table 9A.4 .3 ). DOE concludes that the price elasticity calculated in this analysis is relatively insensitive to the specifi cation of household income and

“s tarts + r eplacements ” variables in the model.

Table 9A.4.6 Disaggregated Regression Results, 37 percent discount rate

9A.5 LONG RUN IMPACTS

As noted above in Table 9A.2.1 , the literature review provides price elasticities over short and long time periods, also referred to as short run and long run price elasticities. As noted in the

first two rows of Table 9A.2 .1 , one source (i.e., Hymans) shows that the price elasticity of demand is significantly different over the short run and long run for automobiles. 1 Because DOE’s forecasts of shipments and national impacts due to standards is over a 30- year time period, consideration must be given to how the relative price elasticity is affected once a new

standa rd takes effect.

DOE considers the relative price elasticities d etermined above in section 9A.4 to be short run elasticities. DOE was unable to identify sources specific to household durable goods, such as appliances, to indicate how short run and long run price elasticities differ. Therefore, to estimate

how the relative price elasticity changes over time, DOE relied on the Hymans study pertaining to automobiles. Based on the Hymans study, Table 9A.5.1 shows how the automobile price elasticity of demand changes in the years following a purchase price change. With increasing years after the price change, the price elasticity becomes more ine lastic until it reaches a terminal value around the tenth year after the price change. Three Appliances

Variable Coefficient t-Stat
Intercept -2.92 -1.26

Income 0.58 2.92

Total Price -0.36 -7.06 Housing Starts 0.44 10.02

Retirements 0.62 8.12

CW -0.24 -9.25

DW -0.46 -7.68

R 2 0.985

Observations 69

Refrigerator Clothes Washers Dishwasher

Variable Coefficient t-Stat Coefficient t-Stat Coefficient t-Stat Intercept -6.19 -2.24 -6.64 -1.63 1.00 0.23

Income 0.89 3.80 0.87 2.31 0.20 0.52

Total Price -0.35 -5.48 -0.27 -2.51 -0.43 -5.18 Housing Starts 0.41 7.38 0.25 3.29 0.62 8.24

Retirements 0.56 6.06 0.56 2.09 0.65 5.86

R 2 0.984 0.958 0.979

Observations 23 23 23

9A-11Table 9A.5.1 Change in Price Elasticity of Demand for Automobiles following a Purchase Price Change
Years Following Price Change

1 2 3 5 10 20 Price Elasticity of Demand

- 1.20

- 0.93

- 0.75

- 0.55

- 0.42

- 0.40
Relative Change in Elasticity to 1 st year 1.00 0.78 0.63 0.46 0.35 0.33

Source: Hymans, 1971.

Based on the relative change in the automobile price elasticity of demand shown in Table

9A.5.1 , DOE developed a time series of relative price elasticities for home appliances. Table

9A.5.2 presents the time series.

Table 9A.5.2 Change in Relative Price Elasticity for Home Appliances following a Purchase Price Change
Years Following Price Change

1 2 3 5 10 20 Relative Change in Elasticity to 1 st year 1.00 0.78 0.63 0.46 0.35 0.33

Relative Price Elasticity

- 0.34

- 0.26

- 0.21

- 0.16

- 0.12

- 0.11

9A.6 SUMMARY

This appendix describes the results of a literature search, tabular analysis , and regression analys es of the impact of price and other variables on appliance shipments. In the literature, DOE found only a few studies of appliance markets that are relevant to this analysis and no stud ies

after 1980 using time series price and shipments data. The information that can be summarized from the literature suggests that the demand for appliances is price inelastic. Other information in the literature suggests that appliances are a normal good, such that rising incomes increase the demand for appliances. Finally, the literature suggests that consumers use relatively high implicit discount rates, when comparing appliance prices and appliance operating costs.

There are too few price and operat ing cost data available to perform complex analysis of dynamic changes in the appliance market. In this analysis, DOE used data available for refrigerators, clothes washers , and dishwashers to evaluate broad market trends and perform simple regression anal ysis.

These data indicate an increase in appliance shipments and a decline in appliance price and operating cost over the study period 1980-2002. Household income has also risen during this time. To simplify the analysis, DOE combined the available economic information into one variable, termed relative price, and used th at variable in a tabular analysis of market trends and a regression analysis.

9A-12DOE’s tabular analysis of trends in the number of appliances per household suggests that the price elastic ity of demand for the three appliances is inelastic. Our regression analysis of these same variables suggests that the relative price elasticity of demand is -0.34. The price elasticity is consistent with estimates in the literature. Nevertheless, DOE str esses that the measure is based on a small data set, using very simple statistical analysis. More important, the measure is based on an assumption that economic variables, including price, income and operating costs, explain most of the trend in appliances per household in the United States since 1980. Changes in appliance quality and consumer preferences may have occurred during this period, but they are not accounted for in this analysis.

9A.7 DATA USED IN THE ANALYSIS

• Appliance Shipments are defined as the annual number of units shipped in millions. These data were collected from the Association of Home Appliance Manufacturers ( AHAM ) 8

, 9 and Appliance Magazine 10 as annual values for each year, 1980–2002. AHAM was used for the period 1989–2002 while Appliance Magazine was used for the period 1980–1988.

• Appliance Price is defined as the shipments weighted retail sales price of the unit in 1999 dollars. Price values for 1980, 1985, 1986, 1991, 1993, 1994, 1998, and 2002 were collected

from AHAM Fact Book s. 11 Price values for other years were interpolated from these eight years of data.

• Housing Starts data were collected from the U.S. Census construction statistics (C25 reports) as annual values for each year, 1980–2002. 12

• Replacements , driven by equipment retirements, are estimated with the assumption that some fraction of sales arise from consumers replacing e quipment at the end of its useful life. Since each appliance has a different expected lifespan (19 years for refrigerators, 13 14 years for clothes washers, 14 12 years for dishwashers 15 ), replacements are calculated differently for each appliance type. Replacements are estimated as the average of shipments 14

– 24 years previous for refrigerators, 9–19 years previous for clothes washers, and 7–17 years previous

for dishwashers. Historical shipments data were collected from AHAM and Appliance Magazine.

• Annual Electricity Consumption (UEC) is defined as the energy consumption of the unit in

kilowatt -hours. Electricity consumption depends on appliance capacity and efficiency. These data were provided by AHAM for 1980, 1990–1997 and 1999–2002. 9 Data were interpolated in the years for which data were not available.

• Operating Cost is the present value of the electricity consumption of an appliance over its expected lifespan. The lifespans of refrigerators, clothes washers and dishwashers are assumed to be 19, 14, and 12 years respectively. Discount rates of 20 percent 6 and 37

percent 16 were used, producing similar estimates of price elasticity. A study by Hausman

recommend ed a discount rate of “about 20 percent” in its introduction and pres ented results ranging from 24.1 percent to 29 percent based on his calculations for room air conditioners.

9A-13A study by Train suggests a range of impli cit discount rates averaging 35 percent for appliances.

• Income : Median annual household income in 2003 dollars. Th ese data were collected for each year, 1980–2002, from Table H-6 of the U.S. Census. 17

9A-14REFERENCES

1. Hymans, S. Consumer Durable Spending: Explanation and Prediction. Brookings Papers on Economic Activity. 1971 (1).

2. Golder, P. N., and G. J. Tellis. Beyond Diffusion: An Affordability Model of the Growth

of New Consumer Durables. Journal of Forecasting. 1998. 17.

3. Revelt, D., and K. Train. Mixed Logit with Repeated Choices: Household's Choice of Appliance Efficiency Level. Review of Economics and Statistics. 1997.

4. Tellis, G. The Price Elasticity of Selective Demand: A Meta -Analysis of Econometric

Models of Sales. Journal of Marketing Research 1988.

5. U.S. Department of Energy - Energy Information Agency. The Effect of Income on Appliances in U.S. Households. 2002. Washington, DC. (Last Accessed April 3, 2014. ) http://www.eia.doe.gov/emeu/recs/appliances/appliances.html

6. Hausman , J. Individual discount rates and the purchase and utilization of energy using

durables. The Bell Journal of Economics. 1979.

7. Train, K. Discount Rates in Consumers' Energy- Related Decisions. Energy: The

International Journal. 1985. 10(12).

8. Assoc iation of Home Appliance Manufacturers. AHAM 2000 Fact Book. 2000. Washington, D.C.

9. Association of Home Appliance Manufacturers. AHAM 2003 Fact Book. 2003. Washington, D.C.

10. Statistical Review. Appliance Magazine. April 1990.

11. Association of H ome Appliance Manufacturers. AHAM Fact Books. 1987, 1988, 1993, 1995, 2000, and 2003. Washington, D.C.

12. U.S. Census Bureau. Current Construction Reports, C25 – New One -Family Houses

Sold. Washington, D.C. (Last Accessed April 3, 2014.) http://www.census.gov/prod/www/abs/c25.html

13. Duemling, R., Energy and Resources Group, University of California. 1999. Berkeley,

CA.

14. U.S. Department of Energy-Office of Building Research and Standards. Final Rule Technical Support Document (TSD): Energy Efficiency Standards for Consumer Products: Clothes Washers. 2000. U.S. Department of Energy. Washington, DC. (Last

9A-15Accessed April 3, 2014.) http://eaei.lbl.gov/publications/final

- rule

- technical -supportdocument

15. U.S. Department of Energy-Office of Codes and Standards. Technical Support Document: Energy Conservation Standards for Consumer Products: Dishwashers,

Cloth es Washers, and Clothes Dryers including: Environmental Impacts, Regulatory Impact Analysis. December, 1990. Washington, D.C. (Last Accessed April 3, 2014.) http://papyrus.lbl.gov/

16. Train, K.E., and T. Atherton. Rebates, loans, and customers’ choice of appliance efficiency level: combining stated

- and revealed

- preference data. The Energy Journal.

1995.

17. U.S. Census Bureau. Income, Historical Income Tables – Households, Table H-6. Washington, D.C. (Last Accessed April 3, 2014.) http://www.census.gov/hhes/www/income/histinc/inchhtoc.html

9A-16APPENDIX 10A. USER INSTRUCTIONS FOR SHIPMENTS AND NIA

SPREADSHEETS

TABLE OF CONTENTS

10A.1 INTRODUCTION ...................................................................................................... 10A-1

10A.2 BASIC INSTRUCTIONS ........................................................................................... 10A-2

10A-iAPPENDIX 10A. USER INSTRUCTIONS FOR SHIPMENTS AND NIA

SPREADHSEETS

10A.1 INTRODUCTION

The results obtained for the shipments analysis and the national impact analysis (NIA) can be examined and reproduced using the Microsoft Excel spreadsheet available on the U.S. Department of Energy Building Technologies website

at: http://www.eere.energy.gov/buildings/appliance_standards/

.

T he spreadsheet s are posted on the DOE website a and represent the latest version that has

been tested with Microsoft Excel 2010.

To execute the sprea dsheet requires Microsoft Excel 2003 or a later version. The N IA spreadsheet performs calculations to project the change in national energy use and net present

value (NPV) due to an energy conservation standard. The energy use and associated costs for a given standard are determined first by calculating the shipments and then calculating the energy use and costs for all equipment shipped under that standard. The differences between the

standards and base cases can then be compared and the overall energy savings and present values

determined.

The N IA spreadsheet consis ts of the following worksheets:

Introduction Contains brief descriptions of worksheets in the NIA spreadsheet.

NIA summary and Contains user input selections and a s ummary table of results for options the selected options. Inputs are found in highlighted cells.

NIAres Contains calculation of energy savings, operational cost savings, and equipment cost increases due to a standard compared to the

base case for ceiling fans in the residential sector.

NIAcom Contains calculation of energy savings, operational cost savings, and equipment cost increases due to a standard compared to the

base case for ceiling fans in the commercial sector.

NIAind Contains calculation of energy savings, operational cost savings, and equipment cost increases d ue to a standard compared to the base case for ceiling fans in the industrial sector.

Parameters and Contains parameters and assumptions used in the shipments and Assumptions NIA models.

a http://www1.eere.energy.gov/buildings/appliance_stand ards/product.aspx/productid/25

. (Last a ccessed May 2 1,

2014 .) This material is available in Docket # EERE

- 201 2- BT

- STD

- 004 5 at regulations.gov.

10A-1Full

- Fuel Cycle Contains the annual site to power plant and upstream conversion Multipliers factors

.

Shipments Contains projected shipments of ceiling fans in the base case and

the standards case for selected scenario

.

Price Contains price trends for ceiling fans for selected scenario

.

Historical Shipmen ts Contains estimated data for historical sales of ceiling fans

.

AEO New Construction Contains projections for new constructions starts from AEO 2013.

Electricity Prices Contains projected average energy price s for the electricity price

scenarios.

Lifetime Contains the probability of survival of a ceiling fan at a given age.

10A.2 BASIC INSTRUCTIONS

Basic instructions for operating the NIA spreadsheet s are as follows:

1. Once the N IA spreadsheet s have been downloaded from the World Wide Web, open the file using Excel. At the bottom, click on the tab for the worksheet ‘NIA options and

summary ’.

2. Use Excel’s View/Zoom commands at the top menu bar to change the size of the display to make it fit your monitor.

3. The user can change the model parameters in highlighted cells. The parameters are:

a. Discount Rate Year: To change the discount rate year, enter a year in the highlighted box.

b. Product Class: To change product class, use the drop-down arrow and select the desired product class to analyze.

c. Efficiency Level: To change the efficiency level used for calculations, use the drop-down arrow and select an efficiency level to analyze.

d. Shipments Scenario: To change value, use the drop -down arrow and select the desired shipments scenario.

e. Electricity Price Scenario: To the change value, use the drop-down arrow and select the desired electricity price scenario (Reference, Low, or High).

4. The results are automatically updated and are reporte d in the summary tab le for each product class below inputs.

10A-2