Vol. 79 Tuesday, 

No. 249 December 30, 2014 

Part III 

Department of Energy 

10 CFR Part 431 

Energy Conservation Program for Certain Industrial Equipment: Energy 

Conservation Standards for Single Package Vertical Air Conditioners and 

Single Package Vertical Heat Pumps; Proposed Rule 

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78614 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

DEPARTMENT OF ENERGY 

10 CFR Part 431 

[Docket Number EERE–2012–BT–STD– 

0041] 

RIN 1904–AC85 

Energy Conservation Program for 

Certain Industrial Equipment: Energy 

Conservation Standards for Single 

Package Vertical Air Conditioners and 

Single Package Vertical Heat Pumps 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Notice of proposed rulemaking 

(NOPR) and announcement of public 

meeting. 

SUMMARY: The Energy Policy and 

Conservation Act of 1975 (EPCA), as 

amended, prescribes energy 

conservation standards for various 

consumer products and certain 

commercial and industrial equipment, 

including single package vertical air 

conditioners and single package vertical 

heat pumps. EPCA also requires that 

each time the American Society of 

Heating, Refrigerating, and Airconditioning Engineers (ASHRAE) 

Standard 90.1 is amended with respect 

to the standard levels or design 

requirements applicable to that 

equipment, the U.S. Department of 

Energy (DOE) must adopt amended 

uniform national standards for this 

equipment equivalent to those in 

ASHRAE Standard 90.1, unless DOE 

determines that there is clear and 

convincing evidence showing that morestringent, amended standards would be 

technologically feasible and 

economically justified, and would save 

a significant additional amount of 

energy. DOE has tentatively concluded 

that there is sufficient record evidence 

to support more-stringent standards for 

two classes of this equipment. However, 

for four equipment classes, DOE is 

proposing to adopt the revised ASHRAE 

levels, due to the absence of any models 

on the market in two classes, and 

absence of any models above the revised 

ASHRAE level in the remaining two 

classes. Accordingly, DOE is proposing 

amended energy conservation standards 

for all classes of single package vertical 

air conditioners and single package 

vertical heat pumps. DOE also 

announces a public meeting to receive 

comment on these proposed standards 

and associated analyses and results. 

DATES: Comments: DOE will accept 

comments, data, and information 

regarding this notice of proposed 

rulemaking (NOPR) before and after the 

public meeting, but no later than March 

2, 2015. See section VII, ‘‘Public 

Participation,’’ for details. 

Meeting: DOE will hold a public 

meeting on Friday, February 6, 2014, 

from 8:30 a.m. to 12:30 p.m., in 

Washington, DC. The meeting will also 

be broadcast as a webinar. See section 

VII, ‘‘Public Participation,’’ for webinar 

registration information, participant 

instructions, and information about the 

capabilities available to webinar 

participants. 

ADDRESSES: The public meeting will be 

held at the U.S. Department of Energy, 

Forrestal Building, Room 8E–089 1000 

Independence Avenue SW., 

Washington, DC 20585. To attend, 

please notify Ms. Brenda Edwards at 

(202) 586–2945. Persons may also attend 

the public meeting via webinar. For 

more information, refer to section VII, 

‘‘Public Participation,’’ near the end of 

the preamble. 

Due to the REAL ID Act implemented 

by the Department of Homeland 

Security (DHS), there have been recent 

changes regarding identification (ID) 

requirements for individuals wishing to 

enter Federal buildings from specific 

States and U.S. territories. As a result, 

driver’s licenses from the following 

States or territory will not be accepted 

for building entry, and instead, one of 

the alternate forms of ID listed below 

will be required. 

DHS has determined that regular 

driver’s licenses (and ID cards) from the 

following jurisdictions are not 

acceptable for entry into DOE facilities: 

Alaska, American Samoa, Arizona, 

Louisiana, Maine, Massachusetts, 

Minnesota, New York, Oklahoma, and 

Washington. 

Acceptable alternate forms of PhotoID include: U.S. Passport or Passport 

Card; an Enhanced Driver’s License or 

Enhanced ID-Card issued by the States 

of Minnesota, New York or Washington 

(Enhanced licenses issued by these 

States are clearly marked Enhanced or 

Enhanced Driver’s License); a military 

ID or other Federal government-issued 

Photo-ID card. 

Instructions: Any comments 

submitted must identify the NOPR for 

Energy Conservation Standards for 

Single Package Vertical Air 

Conditioners and Single Package 

Vertical Heat Pumps, and provide 

docket number EERE–2012–BT–STD– 

0041 and/or regulatory information 

number (RIN) number 1904–AC85. 

Comments may be submitted using any 

of the following methods: 

1. Federal eRulemaking Portal: 

www.regulations.gov. Follow the 

instructions for submitting comments. 

2. Email: SPVU2012STD0041@

ee.doe.gov. Include the docket number 

and/or RIN in the subject line of the 

message. Submit electronic comments 

in WordPerfect, Microsoft Word, PDF, 

or ASCII file format, and avoid the use 

of special characters or any form of 

encryption. 

3. Postal Mail: Ms. Brenda Edwards, 

U.S. Department of Energy, Building 

Technologies Office, Mailstop EE–5B, 

1000 Independence Avenue SW., 

Washington, DC 20585–0121. If 

possible, please submit all items on a 

compact disc (CD), in which case it is 

not necessary to include printed copies. 

4. Hand Delivery/Courier: Ms. Brenda 

Edwards, U.S. Department of Energy, 

Building Technologies Program, 950 

L’Enfant Plaza SW., Suite 600, 

Washington, DC 20024. Telephone: 

(202) 586–2945. If possible, please 

submit all items on a CD, in which case 

it is not necessary to include printed 

copies. 

Written comments regarding the 

burden-hour estimates or other aspects 

of the collection-of-information 

requirements contained in this proposed 

rule may be submitted to the Office of 

Energy Efficiency and Renewable 

Energy through the methods listed 

above and by email to Chad_S._

Whiteman@omb.eop.gov. 

No telefacsimilies (faxes) will be 

accepted. For detailed instructions on 

submitting comments and additional 

information on the rulemaking process, 

see section VII of this document (Public 

Participation). 

Docket: The docket, which includes 

Federal Register notices, public meeting 

attendee lists and transcripts, 

comments, and other supporting 

documents/materials, is available for 

review at www.regulations.gov. All 

documents in the docket are listed in 

the www.regulations.gov index. 

However, some documents listed in the 

index, such as those containing 

information that is exempt from public 

disclosure, may not be publicly 

available. 

A link to the docket Web page can be 

found at: http://www1.eere.energy.gov/

buildings/appliance_standards/

rulemaking.aspx?ruleid=107. This Web 

page contains a link to the docket for 

this NOPR on the www.regulations.gov 

site. The www.regulations.gov Web page 

contains simple instructions on how to 

access all documents, including public 

comments, in the docket. See section 

VII, ‘‘Public Participation,’’ for further 

information on how to submit 

comments through 

www.regulations.gov. 

For further information on how to 

submit a comment, review other public 

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Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 78615 

1For editorial reasons, upon codification in the 

U.S. Code, Part C was redesignated Part A–1. 

comments and the docket, or participate 

in the public meeting, contact Ms. 

Brenda Edwards at (202) 586–2945 or by 

email: Brenda.Edwards@ee.doe.gov. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Ron Majette, U.S. Department of Energy, 

Office of Energy Efficiency and 

Renewable Energy, Building 

Technologies Office, EE–5B, 1000 

Independence Avenue SW., 

Washington, DC 20585–0121. 

Telephone: (202) 586–7935. Email: 

Ronald.Majette@ee.doe.gov. 

Mr. Eric Stas, U.S. Department of 

Energy, Office of the General Counsel, 

GC–33, 1000 Independence Avenue 

SW., Washington, DC 20585–0121. 

Telephone: (202) 586–9507. Email: 

Eric.Stas@hq.doe.gov. 

For information on how to submit or 

review public comments, contact Ms. 

Brenda Edwards at (202) 586–2945 or by 

email: Brenda.Edwards@ee.doe.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Summary of the Proposed Rule 

A. Benefits and Costs to Consumers 

B. Impact on Manufacturers 

C. National Benefits 

II. Introduction 

A. Authority 

B. Background 

1. Current Standards 

2. History of Standards Rulemaking for 

Single Package Vertical Air Conditioners 

and Single Package Vertical Heat Pumps 

III. General Discussion 

A. Compliance Dates 

B. Equipment Classes and Scope of 

Coverage 

1. Consideration of a Space Constrained 

SPVU Equipment Class 

C. Technological Feasibility 

1. General 

2. Maximum Technologically Feasible 

Levels 

D. Energy Savings 

1. Determination of Savings 

2. Significance of Savings 

E. Economic Justification 

1. Specific Criteria 

2. Rebuttable Presumption 

IV. Methodology and Discussion of Related 

Comments 

A. Market and Technology Assessment 

1. Definitions of a SPVAC and a SPVHP 

2. Equipment Classes 

3. Review of the Current Market for SPVUs 

4. Technology Assessment 

B. Screening Analysis 

C. Engineering Analysis 

1. Efficiency Levels for Analysis 

2. Teardown Analysis 

3. Cost Model 

4. Manufacturing Production Costs 

5. Cost-Efficiency Relationship 

6. Manufacturer Markup 

7. Shipping Costs 

8. Manufacturer Interviews 

D. Markups Analysis 

E. Energy Use Analysis 

F. Life-Cycle Cost and Payback Period 

Analysis 

1. Approach 

2. Life-Cycle Cost Inputs 

3. Payback Period 

G. National Impact Analysis 

1. Approach 

a. National Energy Savings 

b. Net Present Value 

2. Shipments Analysis 

3. Base-Case and Standards-Case 

Forecasted Distribution of Efficiencies 

H. Consumer Subgroup Analysis 

I. Manufacturer Impact Analysis 

1. Overview 

2. GRIM Analysis 

3. Manufacturer Interviews 

J. Emissions Analysis 

K. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

1. Social Cost of Carbon 

2. Valuation of Other Emissions 

Reductions 

L. Utility Impact Analysis 

M. Employment Impact Analysis 

V. Analytical Results and Conclusions 

A. Trial Standard Levels 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Commercial 

Consumers 

2. Economic Impact on Manufacturers 

3. National Impact Analysis 

4. Impact on Utility or Performance of 

Equipment 

5. Impact of Any Lessening of Competition 

6. Need of the Nation to Conserve Energy 

7. Other Factors 

C. Proposed Standards 

1. Benefits and Burdens of Trial Standard 

Levels Considered for SPVUs 

2. Summary of Benefits and Costs 

(Annualized) of the Proposed Standards 

VI. Procedural Issues and Regulatory Review 

A. Review Under Executive Orders 12866 

and 13563 

B. Review Under the Regulatory Flexibility 

Act 

C. Review Under the Paperwork Reduction 

Act of 1995 

D. Review Under the National 

Environmental Policy Act of 1969 

E. Review Under Executive Order 13132 

F. Review Under Executive Order 12988 

G. Review Under the Unfunded Mandates 

Reform Act of 1995 

H. Review Under the Treasury and General 

Government Appropriations Act, 1999 

I. Review Under Executive Order 12630 

J. Review Under the Treasury and General 

Government Appropriations Act, 2001 

K. Review Under Executive Order 13211 

L. Review Under the Information Quality 

Bulletin for Peer Review 

VII. Public Participation 

A. Attendance at the Public Meeting 

B. Procedure for Submitting Requests to 

Speak and Prepared General Statements 

for Distribution 

C. Conduct of the Public Meeting 

D. Submission of Comments 

E. Issues on Which DOE Seeks Comment 

VIII. Approval of the Office of the Secretary 

I. Summary of the Proposed Rule 

Title III, Part C1 of the Energy Policy 

and Conservation Act of 1975 (‘‘EPCA’’ 

or ‘‘the Act’’), Pub. L. 94–163 (42 U.S.C. 

6311–6317, as codified), added by 

Public Law 95–619, Title IV, § 441(a), 

established the Energy Conservation 

Program for Certain Industrial 

Equipment, which includes the single 

package vertical air conditioners 

(SPVACs) and single package vertical 

heat pumps (SPVHPs) that are the 

subject of this rulemaking (collectively 

referred to as single package vertical 

units or SPVUs). Pursuant to EPCA, not 

later than 3 years after the date of 

enactment of the Energy Independence 

and Security Act of 2007 (EISA 2007), 

DOE must review the American Society 

of Heating, Refrigerating, and AirConditioning Engineers (ASHRAE) 

Standard 90.1 (ASHRAE Standard 90.1), 

‘‘Energy Standard for Buildings Except 

Low-Rise Residential Buildings,’’ with 

respect to single package vertical air 

conditioners and single package vertical 

heat pumps in accordance with the 

procedures established in 42 U.S.C. 

6313(a)(6). (42 U.S.C. 6313(a)(10)(B)) 

At the time DOE commenced this 

rulemaking, the Department had not 

considered adoption of the then-current 

ASHRAE Standard 90.1–2010 levels as 

part of its analytical baseline (as is 

typically the case under 42 U.S.C. 

6313(a)(6)), because the current energy 

conservation standards for SPVUs were 

already set at those levels by EPCA. 

However, on October 9, 2013, ASHRAE 

adopted ASHRAE Standard 90.1–2013, 

and this revision did contain amended 

standard levels for SPVUs, thereby 

triggering DOE’s statutory obligation to 

promulgate an amended uniform 

national standard at those levels, unless 

DOE determines that there is clear and 

convincing evidence supporting the 

adoption of more-stringent energy 

conservation standards than the 

ASHRAE levels. The test for adoption of 

more-stringent standards is whether 

such standards would result in 

significant additional conservation of 

energy and would be technologically 

feasible and economically justified. (42 

U.S.C. 6313(a)(6)(A)(ii)(I) and (II)) Once 

complete, this rulemaking will satisfy 

DOE’s statutory obligations under both 

42 U.S.C. 6313(a)(6) and (10)(B). 

In accordance with these and other 

statutory provisions discussed in this 

preamble, DOE has tentatively 

concluded that there is sufficient 

evidence to support more-stringent 

standards for two classes of SPVUs. For 

the remaining four equipment classes, 

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2See 42 U.S.C. 6313(a)(6)(A)(ii)(I): In general.— 

Except as provided in subclause (II), not later than 

18 months after the date of publication of the 

amendment to the ASHRAE/IES Standard 90.1 for 

a product described in clause (i), the Secretary shall 

establish an amended uniform national standard for 

the product at the minimum level specified in the 

amended ASHRAE/IES Standard 90.1. 

3U.S. Office of Management and Budget ‘‘Circular 

A–4: Regulatory Analysis’’ (Sept. 17, 2003) contains 

guidelines regarding development of a baseline, 

including that ‘‘This baseline should be the best 

assessment of the way the world would look absent 

the proposed action.’’ (Available at: http://

www.whitehouse.gov/omb/circulars_a004_a-4/). 

DOE has tentatively decided to adopt 

the levels in ASHRAE Standard 90.1– 

2013. Accordingly, DOE is proposing 

amended energy conservation standards 

for all classes of single package vertical 

air conditioners and single package 

vertical heat pumps. As shown in Table 

I.1, the proposed standards are 

expressed in terms of: (1) Energy 

efficiency ratio (EER), which is the ratio 

of the produced cooling effect of an air 

conditioner or heat pump to its total 

work input; and (2) coefficient of 

performance (COP), which is the ratio of 

produced heating effect to total work 

input (applicable only to heat pump 

units). 

If adopted, the proposed standards 

listed in Table I.1 that are more 

stringent than those contained in 

ASHRAE Standard 90.1–2013 would 

apply to such equipment manufactured 

in, or imported into, the United States, 

excluding equipment that is 

manufactured for export, on and after a 

date four years after publication of an 

energy conservation standards final 

rule. If adopted, the proposed standards 

listed in Table I.1 that are set at the 

levels contained in ASHRAE Standard 

90.1–2013 would apply to such 

equipment manufactured in, or 

imported into, the United States, 

excluding equipment that is 

manufactured for export, on and after a 

date two or three years after the effective 

date of the requirements in ASHRAE 

Standard 90.1–2013, depending on 

equipment size (i.e., October 9, 2015 or 

2016). 

TABLE I.1—PROPOSED ENERGY CONSERVATION STANDARDS FOR SPVUS

Equipment class Cooling capacity 

Btu/h 

Efficiency 

level Standard level Anticipated compliance date 

Single Package Vertical Air Conditioner.<65,000 Btu/h ............. EER =11.0 ... More Stringent than 

ASHRAE.

2019. 

[4 years after publication of final 

rule]. 

Single Package Vertical Air Conditioner.≥65,000 Btu/h and 

<135,000 Btu/h.

EER = 10.0 .. ASHRAE ..................... October 9, 2015. 

Single Package Vertical Air Conditioner.≥135,000 Btu/h and 

<240,000 Btu/h.

EER = 10.0 .. ASHRAE ..................... October 9, 2016. 

Single Package Vertical Heat Pump .. <65,000 Btu/h ............. EER = 11.0 ..

COP = 3.3 ....

More Stringent than 

ASHRAE.

2019. 

[4 years after publication of final 

rule]. 

Single Package Vertical Heat Pump .. ≥65,000 Btu/h and 

<135,000 Btu/h.

EER = 10.0 ..

COP = 3.0 

ASHRAE ..................... October 9, 2015. 

Single Package Vertical Heat Pump .. ≥135,000 Btu/h and 

<240,000 Btu/h.

EER = 10.0 ..

COP = 3.0 

ASHRAE ..................... October 9, 2016. 

A. Benefits and Costs to Consumers 

Table I.2 presents DOE’s evaluation of 

the economic impacts of the proposed 

energy conservation standards on 

consumers of SPVACs and SPVHPs, as 

measured by the average life-cycle cost 

(LCC) savings and the median payback 

period (PBP). In order to adopt levels 

above the levels specified in ASHRAE 

Standard 90.1, DOE must determine that 

such more-stringent standards would 

result in significant additional 

conservation of energy (relative to the 

efficiency levels specified in ASHRAE 

Standard 90.1) and that it would be 

technologically feasible and 

economically justified. (42 U.S.C. 

6313(a)(6)(A)(ii)(II)) In compliance with 

this statutory requirement, DOE based 

its determination to adopt more 

stringent standards on an analysis 

comparing these proposed standards 

with ASHRAE 90.1–2013 (Table I.2). 

Thus, economic impacts of this 

determination are calculated as 

compared to the ASHRAE 90.1–2013 

level because DOE is required by statute 

to, at a minimum, adopt that standard.2

The Office of Management and 

Budget’s Circular A–4 3 provides 

guidance on establishing the baseline 

for regulatory impact analyses as 

follows: 

In some cases, substantial portions of a rule 

may simply restate statutory requirements 

that would be self-implementing, even in the 

absence of the regulatory action. In these 

cases, you should use a pre-statute baseline. 

If you are able to separate out those areas 

where the agency has discretion, you may 

also use a post-statute baseline to evaluate 

the discretionary elements of the action. 

Accordingly, DOE presents consumer, 

manufacturer, and economic costs and 

benefits for the proposed SPVU 

standards as compared to the current 

Federal (EPCA) minimum that are 

currently in effect (pre-statute baseline). 

In addition, as required by Statute in 

this case when proposing a standard 

more stringent than ASHRAE 90.1, and 

recommended by Circular A–4, DOE 

also provides these same analyses 

relative to the post-statute (ASHRAE 

90.1–2013) baseline. As noted above, it 

is these latter analyses that DOE has 

used as the basis for its determination 

to adopt more stringent standards. The 

same analytic methodologies are used in 

both baselines. Key analyses (using both 

baselines) are summarized in this 

Executive Summary in Tables I–2: 

Impacts of Proposed Energy 

Conservation Standards on Consumers 

of SPVUs; I–3: Summary of National 

Economic Benefits and Costs of 

Proposed SPVU Energy Conservation 

Standards; and I–4 and I–5: Annualized 

Benefits and Costs of Proposed Energy 

Conservation Standards for SPVUs. 

Additional analyses are presented in 

section V.C of this preamble, and in the 

NOPR TSD. Note that not all analyses 

were conducted using both baselines; 

rather DOE used the baseline(s) most 

appropriate to the purpose of the 

analysis (showing economic impacts 

relative to the pre-statute status quo 

and/or determining whether to adopt 

standards more stringent than ASHRAE 

2013). In all cases, the baseline(s) used 

are indicated in the analyses. 

In overview, the average LCC savings 

are positive for the equipment classes 

for which standards higher than the 

levels in ASHRAE 90.1–2013 are being 

proposed. DOE did not evaluate 

economic impacts to the consumers of 

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4However, there are no models available on the 

market for this class, and therefore these results are 

not carried into the national impact analysis or 

other downstream analyses. 

5Equipment classes for these cooling capacities 

exist in ASHRAE Standard 90.1 and were 

established in DOE regulation through EISA 2007. 

Despite the lack of models and consumers, for these 

equipment classes DOE is proposing to adopt as 

federal standards the efficiency levels in ASHRAE 

90.1–2013 as required under 42 U.S.C. 

6313(a)(6)(A)(ii)(I). 

6 DOE estimated draft financial metrics, including 

the industry discount rate, based on data in 

Securities and Exchange Commission (SEC) filings 

and on industry-reviewed values published in prior 

HVAC final rules. DOE presented the draft financial 

metrics to manufacturer in MIA interviews. DOE 

adjusted those values based on feedback from 

manufacturers. The complete set of financial 

metrics and more detail about the methodology can 

be found in section 12.4.3 of TSD chapter 12. 7All monetary values in this section are 

expressed in 2013 dollars and are discounted to 

2014. National benefits apply only to DOE’s 

proposed standard levels that are higher than the 

ASHRAE levels, and impacts are presented as 

compared to the ASHRAE 90.1–2013 level as 

baseline. For equipment classes where DOE is 

proposing the ASHRAE levels, national benefits do 

not accrue. 

8The base case assumptions are described in 

section IV.G. 

9A metric ton is equivalent to 1.1 short tons. 

Results for NOX and Hg are presented in short tons. 

10 DOE calculated emissions reductions relative 

to the Annual Energy Outlook 2013 (AEO 2013) 

Reference case, which generally represents current 

legislation and environmental regulations for which 

implementing regulations were available as of 

December 31, 2012. Emissions factors based on the 

Annual Energy Outlook 2014 (AEO 2014), which 

became available too late for incorporation into this 

analysis, indicate that a significant decrease in the 

cumulative emission reductions of carbon dioxide 

and most other pollutants can be expected if the 

projections of power plant utilization assumed in 

AEO 2014 are realized. For example, the estimated 

amount of cumulative emission reductions of CO2

is expected to decrease by 33% from DOE’s current 

estimate based on the projections in AEO 2014 

relative to AEO 2013. The monetized benefits from 

GHG reductions would likely decrease by a 

comparable amount. DOE plans to use emissions 

factors based on the most recent AEO available for 

the next phase of this rulemaking, which may or 

may not be AEO 2014, depending on the timing of 

the issuance of the next rulemaking document. 

11Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866, Interagency Working Group on Social 

Cost of Carbon, United States Government (May 

Continued 

SPVACs ≥65,000 Btu/h and <135,000 

Btu/h for the ASHRAE baseline, as the 

ASHRAE level is equal to max-tech. 

However the economic impacts for this 

equipment class using the EPCA 

baseline can be found in Table I.2 and 

in appendix 8B of the NOPR TSD. DOE 

also presents results for the parallel 

class of SPVHPs ≥65,000 Btu/h and 

<135,000 Btu/h using the EPCA 

baseline.4 DOE did not evaluate 

economic impacts for the large 

equipment classes because there are no 

models on the market, and, therefore, no 

consumers.5

TABLE I.2—IMPACTS OF PROPOSED ENERGY CONSERVATION STANDARDS ON CONSUMERS OF SPVUS FOR ASHRAE AND

EPCA BASELINE

Equipment class Cooling capacity 

Btu/h 

Average LCC savings 

2013$ 

Median payback period 

years 

ASHRAE 

baseline 

EPCA 

baseline 

ASHRAE 

baseline 

EPCA 

baseline 

Single Package Vertical Air Conditioner ........... <65,000 Btu/h ....................... $179 ............ $261 8.4 ............... 10.4 

Single Package Vertical Air Conditioner ........... ≥65,000 Btu/h and <135,000 

Btu/h.

Adopt 

ASHRAE.

737 Adopt 

ASHRAE.

7.0 

Single Package Vertical Air Conditioner ........... ≥135,000 Btu/h and 

<240,000 Btu/h.

Adopt 

ASHRAE.

N/A Adopt 

ASHRAE.

N/A 

Single Package Vertical Heat Pump ................. <65,000 Btu/h ....................... $424 ............ 382 4.8 ............... 9.3

Single Package Vertical Heat Pump ................. ≥65,000 Btu/h and <135,000 

Btu/h.

Adopt 

ASHRAE.

241 Adopt 

ASHRAE.

10.9 

Single Package Vertical Heat Pump ................. ≥135,000 Btu/h and 

<240,000 Btu/h.

Adopt 

ASHRAE.

N/A Adopt 

ASHRAE.

N/A 

Note: Expected life of SPVUs is on average 15 years. 

B. Impact on Manufacturers 

The industry net present value (INPV) 

is the sum of the discounted cash flows 

to the industry from the base year 

through the end of the analysis period 

(2014 to 2048). Using a real discount 

rate of 10.4 percent,6 DOE estimates that 

the INPV for manufacturers of SPVUs is 

$36.5 million in 2013$ using ASHRAE 

2013 as a baseline. The INPV of SPVUs 

from the EPCA baseline can be found in 

chapter 12 of the NOPR TSD. Under the 

proposed standards, DOE expects that 

manufacturers may lose up to 9.0 

percent of their INPV, which is 

approximately $3.3 million. 

C. National Benefits 7

DOE’s analyses indicate that the 

proposed energy conservation standards 

for SPVUs would save a significant 

amount of energy. The cumulative 

energy savings for SPVUs purchased in 

the 30-year period that begins in the 

year of compliance with amended 

standards (2019–2048) amount to 0.23 

quadrillion Btus (quads) using ASHRAE 

as a baseline. This is a savings of 6 

percent relative to the energy use of this 

equipment.8 Energy savings using EPCA 

as a baseline can be found in chapter 10 

of the NOPR TSD. 

The cumulative net present value 

(NPV) of total customer costs and 

savings of the proposed SPVU standards 

ranges from $0.11 billion (at a 7-percent 

discount rate) to $0.44 billion (at a 3- 

percent discount rate) using ASHRAE as 

a baseline. NPV results using EPCA as 

a baseline can be found in chapter 10 of 

the NOPR TSD. This NPV expresses the 

estimated total value of future 

operating-cost savings minus the 

estimated increased product costs for 

SPVUs purchased in 2019–2048. 

In addition, the proposed standards 

would have significant environmental 

benefits. The energy savings described 

above using the ASHRAE baseline 

would result in cumulative emission 

reductions (over the same period as for 

energy savings) of 20 million metric 

tons (Mt) 9 of carbon dioxide (CO2), 59 

thousand tons of methane, 53 thousand 

tons of sulfur dioxide (SO2), 18 

thousand tons of nitrogen oxides (NOX), 

and 0.06 tons of mercury (Hg).10 The 

cumulative reduction in CO2 emissions 

through 2030 amounts to 2.2 Mt. 

Emissions results using the EPCA 

baseline can be found in chapter 13 of 

the NOPR TSD, and cumulative 

reduction in CO2 emissions through 

2030 amounts to 4.7 Mt relative to the 

EPCA baseline. 

The value of the CO2 reductions is 

calculated using a range of values per 

metric ton of CO2 (otherwise known as 

the Social Cost of Carbon, or SCC) 

developed by a recent Federal 

interagency process.11 The derivation of 

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78618 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

2013; revised November 2013) (Available at: http:// 

www.whitehouse.gov/sites/default/files/omb/assets/

inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf). 

12 DOE is currently investigating valuation of 

avoided Hg and SO2 emissions. 

13The CO2 and NOX results are based on 

emissions factors in AEO 2013, the most recent 

version available at the time of this analysis. Use 

of emissions factors in AEO 2014 would result in 

a significant decrease in cumulative emissions 

reductions for CO2, estimated at 33%, and an 

increase in NOX, estimated at 13%. In the next 

phase of this rulemaking, DOE plans to use 

emissions factors based on the most recent AEO 

available, which may or may not be AEO 2014, 

depending on the timing of the issuance of the next 

rulemaking document. 

14 DOE used a two-step calculation process to 

convert the time-series of costs and benefits into 

annualized values. First, DOE calculated a present 

value in 2014, the year used for discounting the 

NPV of total consumer costs and savings, for the 

time-series of costs and benefits using discount 

rates of three and seven percent for all costs and 

benefits except for the value of CO2 reductions. For 

the latter, DOE used a range of discount rates, as 

shown in Table I.3. From the present value, DOE 

then calculated the fixed annual payment over a 30- 

year period (2019 through 2048) that yields the 

same present value. The fixed annual payment is 

the annualized value. Although DOE calculated 

annualized values, this does not imply that the 

time-series of cost and benefits from which the 

annualized values were determined is a steady 

stream of payments. 

the SCC values is discussed in section 

IV.K. DOE estimates that the present 

monetary value of the CO2 emissions 

reduction described above is between 

$0.12 and $1.9 billion using the 

ASHRAE baseline. DOE also estimates 

the present monetary value of the NOX

emissions reduction using the ASHRAE 

baseline is $7.3 million at a 7-percent 

discount rate and $21 million at a 3- 

percent discount rate.12 Results using 

the EPCA baseline can be found in 

chapter 14 of the NOPR TSD. 

Table I.3 summarizes the national 

economic costs and benefits expected to 

result from the proposed standards for 

SPVUs using both the ASHRAE and 

EPCA baselines. 

TABLE I.3—SUMMARY OF NATIONAL ECONOMIC BENEFITS AND COSTS OF PROPOSED SPVU ENERGY CONSERVATION

STANDARDS USING ASHRAE AND EPCA BASELINES* 

Category 

Present value 

Billion 2013$ Discount rate 

% ASHRAE 

baseline 

EPCA 

baseline 

Benefits 

Consumer Operating Cost Savings ............................................................................................. 0 .49 1 .0 7 

1 .2 2 .6 3 

CO2 Reduction Monetized Value ($12.0/t case)** ...................................................................... 0 .12 0 .26 5 

CO2 Reduction Monetized Value ($40.5/t case)** ...................................................................... 0 .60 1 .2 3 

CO2 Reduction Monetized Value ($62.4/t case)** ...................................................................... 1 .0 2 .0 2.5 

CO2 Reduction Monetized Value ($119/t case)** ....................................................................... 1 .9 3 .8 3 

NOX Reduction Monetized Value (at $2,684/ton)** .................................................................... 0 .0073 0 .015 7 

0 .021 0 .042 3 

Total Benefits† ...................................................................................................................... 1 .1 2 .3 7 

1 .9 3 .8 3 

Costs 

Consumer Incremental Installed Costs ....................................................................................... 0 .38 0 .77 7 

0 .79 1 .5 3 

Net Benefits 

Including CO2 and NOX Reduction Monetized Value ................................................................. 0 .72 1 .5 7 

1 .1 2 .3 3 

* This table presents the costs and benefits associated with SPVU shipped in 2019–2048. These results include benefits to customers which 

accrue after 2044 from the equipment purchased in 2019–2048. The results account for the incremental variable and fixed costs incurred by 

manufacturers due to the amended standard, some of which may be incurred in preparation for this final rule. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporates an escalation factor.13

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to SCC value of $40.5/t in 2015. 

The benefits and costs of these 

proposed standards, for equipment sold 

in 2019–2048, can also be expressed in 

terms of annualized values. The 

annualized monetary values are the sum 

of: (1) The annualized national 

economic value of the benefits from 

customer operation of equipment that 

meet the proposed standards (consisting 

primarily of operating cost savings from 

using less energy, minus increases in 

equipment purchase and installation 

costs, which is another way of 

representing customer NPV); and (2) the 

annualized monetary value of the 

benefits of emission reductions, 

including CO2 emission reductions.14

Although combining the values of 

operating savings and CO2 emission 

reductions provides a useful 

perspective, two issues should be 

considered. First, the national operating 

savings are domestic U.S. customer 

monetary savings that occur as a result 

of market transactions, whereas the 

value of CO2 reductions is based on a 

global value. Second, the assessments of 

operating cost savings and CO2 savings 

are performed with different methods 

that use different time frames for 

analysis. The national operating cost 

savings is measured for the lifetime of 

equipment shipped in 2019–2048. 

Because carbon dioxide emissions have 

a very long residence time in the 

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15The atmospheric lifetime of CO2 is estimated of 

the order of 30–95 years. Jacobson, MZ (2005). 

‘‘Correction to ‘‘Control of fossil-fuel particulate 

black carbon and organic matter, possibly the most 

effective method of slowing global warming.’’ ’’ J. 

Geophys. Res. 110. pp. D14105. 

16All CO2 and NOX results shown in this 

paragraph are based on emissions factors in AEO 

2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 

2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, estimated 

at 33%, and an increase in NOX, estimated at 13%. 

In the next phase of this rulemaking, DOE plans to 

use emissions factors based on the most recent AEO 

available, which may or may not be AEO 2014, 

depending on the timing of the issuance of the next 

rulemaking document. 

17The CO2 and NOX results are based on 

emissions factors in AEO 2013, the most recent 

version available at the time of this analysis. Use 

of emissions factors in AEO 2014 would result in 

a significant decrease in cumulative emissions 

reductions for CO2, estimated at 33%, and an 

increase in NOX, estimated at 13%. In the next 

phase of this rulemaking, DOE plans to use 

emissions factors based on the most recent AEO 

available, which may or may not be AEO 2014, 

depending on the timing of the issuance of the next 

rulemaking document. 

atmosphere,15 the SCC values reflect 

future climate-related impacts resulting 

from the emission of one ton of carbon 

dioxide that continue well beyond 2100. 

Estimates of annualized benefits and 

costs of the proposed standards (over a 

30-year period) are shown in Table I.4. 

The results under the primary estimate 

using the ASHRAE baseline are as 

follows. Using a 7-percent discount rate 

for benefits and costs other than CO2

reduction, for which DOE used a 3- 

percent discount rate along with the 

average SCC series that has a value of 

$40.5/t in 2015, the cost of the proposed 

standards is $29 million per year in 

increased equipment costs, while the 

benefits are $38 million per year in 

reduced equipment operating costs, $29 

million from CO2 reductions, and $0.57 

million from reduced NOX emissions. In 

this case, the annualized net benefit 

amounts to $38 million per year. Using 

a 3-percent discount rate for all benefits 

and costs and the average SCC series 

that has a value of $40.5/t in 2015, the 

cost of the standards proposed in 

today’s rule is $37 million per year in 

increased equipment costs, while the 

benefits are $58 million per year in 

reduced operating costs, $29 million 

from CO2 reductions, and $0.97 million 

in reduced NOX emissions. In this case, 

the net benefit amounts to $51 million 

per year.16 Results using the EPCA 

baseline are shown in Table I.5. 

TABLE I.4—ANNUALIZED BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION STANDARDS FOR SPVUS

[ASHRAE baseline] 

Discount rate Primary 

estimate* 

Low net 

benefits 

estimate* 

High net 

benefits 

estimate* 

million 2013$/year 

Benefits 

Operating Cost Savings ........................................................................... 7% ............................. 38 ................. 36 ................. 39. 

3% ............................. 58 ................. 55 ................. 61. 

CO2 Reduction Monetized Value ($12.0/t case)** ................................... 5% ............................. 7.7 ................ 7.6 ................ 7.7. 

CO2 Reduction Monetized Value ($40.5/t case)** ................................... 3% ............................. 29 ................. 28 ................. 29. 

CO2 Reduction Monetized Value ($62.4/t case)** ................................... 2.5% .......................... 43 ................. 42 ................. 43. 

CO2 Reduction Monetized Value ($119/t case)** .................................... 3% ............................. 89 ................. 88 ................. 89. 

NOX Reduction Monetized Value (at $2,684/ton)** ................................. 7% .............................

3% .............................

0.57 ..............

0.97 ..............

0.56 ..............

0.97 ..............

0.57. 

0.98. 

Total Benefits† ......................................................................................... 7% plus CO2 range ... 46 to 127 ...... 44 to 125 ...... 48 to 129. 

7% ............................. 67 ................. 65 ................. 69. 

3% plus CO2 range ... 67 to 148 ...... 63 to 144 ...... 70 to 151. 

3% ............................. 88 ................. 84 ................. 91. 

Costs 

Incremental Equipment Costs .................................................................. 7% ............................. 29 ................. 40 ................. 28. 

3% ............................. 37 ................. 53 ................. 36. 

Net Benefits/Costs 

Total† ........................................................................................................ 7% plus CO2 range ... 17 to 98 ........ 4 to 85 .......... 19 to 101. 

7% ............................. 38 ................. 25 ................. 40. 

3% plus CO2 range ... 30 to 111 ...... 11 to 91 ........ 34 to 115. 

3% ............................. 51 ................. 31 ................. 55. 

* This table presents the annualized costs and benefits associated with SPVUs shipped in 2019–2048. These results include benefits to customers which accrue after 2048 from the products purchased in 2019–2048. Costs incurred by manufacturers, some of which may be incurred in 

preparation for the rule, are not directly included, but are indirectly included as part of incremental equipment costs. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices and building growth (leading to higher shipments) from the AEO 2013 Reference 

case, Low Estimate, and High Estimate, respectively. In addition, incremental equipment costs reflect constant real prices for the Primary Estimate, an increase in projected equipment price trends for the Low Benefits Estimate, and a decline rate in projected equipment price trends for 

the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.2.a. 

** The CO2 values represent global monetized SCC values, in 2013$, in 2015 under several scenarios. The first three cases use the averages

of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC 

distribution calculated using a 3% discount rate. The SCC time series incorporates an escalation factor. The value for NOX (in 2013$) is an average value.17

† Total benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3% discount rate ($40.5/t 

case). In the rows labeled ‘‘7% plus CO2 range’’ and ‘‘3% plus CO2 range,’’ the operating cost and NOX benefits are calculated using the labeled 

discount rate, and those values are added to the full range of CO2 values. 

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18The CO2 and NOX results are based on 

emissions factors in AEO 2013, the most recent 

version available at the time of this analysis. Use 

of emissions factors in AEO 2014 would result in 

a significant decrease in cumulative emissions 

reductions for CO2, estimated at 33%, and an 

increase in NOX, estimated at 13%. In the next 

phase of this rulemaking, DOE plans to use 

emissions factors based on the most recent AEO 

available, which may or may not be AEO 2014, 

depending on the timing of the issuance of the next 

rulemaking document. 

19 DOE based this decision to set more stringent 

levels by using 2013 ASHRAE as the base case. 20As shown in section 3.8, chapter 3 of the 

Technical Support Document, for equipment less 

than 65,000 Btu/h, there are 42 SPVAC models and 

69 SPVHP models available at 11 EER or higher. 

TABLE I.5—ANNUALIZED BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION STANDARDS FOR SPVUS

[EPCA baseline] 

Discount rate Primary 

estimate* 

Low net 

benefits 

estimate* 

High net 

benefits 

estimate* 

million 2013$/year 

Benefits 

Operating Cost Savings ........................................................................... 7% ............................. 80 ................. 76 ................. 83. 

3% ............................. 121 ............... 114 ............... 126. 

CO2 Reduction Monetized Value ($12.0/t case)** ................................... 5% ............................. 16 ................. 16 ................. 16. 

CO2 Reduction Monetized Value ($40.5/t case)** ................................... 3% ............................. 58 ................. 58 ................. 59. 

CO2 Reduction Monetized Value ($62.4/t case)** ................................... 2.5% .......................... 87 ................. 87 ................. 88. 

CO2 Reduction Monetized Value ($119/t case)** .................................... 3% ............................. 181 ............... 181 ............... 182. 

NOX Reduction Monetized Value (at $2,684/ton)** ................................. 7% ............................. 1.2 ................ 1.2 ................ 1.2. 

3% ............................. 2.0 ................ 2.0 ................ 2.0. 

Total Benefits† ......................................................................................... 7% plus CO2 range ... 97 to 262 ...... 93 to 257 ...... 100 to 266. 

7% ............................. 139 ............... 135 ............... 143. 

3% plus CO2 range ... 139 to 305 .... 132 to 297 .... 144 to 311. 

3% ............................. 182 ............... 174 ............... 187. 

Costs 

Incremental Equipment Costs .................................................................. 7% ............................. 60 ................. 79 ................. 58. 

3% ............................. 70 ................. 97 ................. 68. 

Net Benefits/Costs 

Total† ........................................................................................................ 7% plus CO2 range ... 37 to 203 ...... 14 to 179 ...... 42 to 208. 

7% ............................. 80 ................. 56 ................. 85. 

3% plus CO2 range ... 68 to 234 ...... 35 to 199 ...... 76 to 243. 

3% ............................. 111 ............... 77 ................. 119. 

* This table presents the annualized costs and benefits associated with SPVUs shipped in 2019–2048. These results include benefits to customers which accrue after 2048 from the products purchased in 2019–2048. Costs incurred by manufacturers, some of which may be incurred in 

preparation for the rule, are not directly included, but are indirectly included as part of incremental equipment costs. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices and building growth (leading to higher shipments) from the AEO 2013 Reference 

case, Low Estimate, and High Estimate, respectively. In addition, incremental equipment costs reflect constant real prices for the Primary Estimate, an increase in projected equipment price trends for the Low Benefits Estimate, and a decline rate in projected equipment price trends for 

the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.2.a. 

** The CO2 values represent global monetized SCC values, in 2013$, in 2015 under several scenarios. The first three cases use the averages

of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC 

distribution calculated using a 3% discount rate. The SCC time series incorporates an escalation factor. The value for NOX (in 2013$) is an average value.18

† Total benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3% discount rate ($40.5/

t case). In the rows labeled ‘‘7% plus CO2 range’’ and ‘‘3% plus CO2 range,’’ the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of CO2 values. 

DOE has tentatively concluded that, 

based upon clear and convincing 

evidence, the proposed standards for the 

equipment classes with levels more 

stringent than those presented in 

ASHRAE Standard 90.1–2013 represent 

the maximum improvement in energy 

efficiency that is technologically 

feasible and economically justified, and 

would result in the significant 

conservation of energy.19 DOE further 

notes that products achieving these 

standard levels are already 

commercially available for all 

equipment classes covered by this 

proposal.20 Based on the analyses 

described above, DOE has tentatively 

concluded that the benefits of the 

proposed standards to the Nation 

(energy savings, positive NPV of 

customer benefits, customer LCC 

savings, and emission reductions) 

would outweigh the burdens (loss of 

INPV for manufacturers). DOE also 

considered higher energy efficiency 

levels as trial standard levels, and is still 

considering them in this rulemaking. 

However, DOE has tentatively 

concluded that the potential burdens of 

the higher energy efficiency levels 

would outweigh the projected benefits. 

For the four equipment classes for 

which no models are available on the 

market at all, or for which there are no 

models with efficiency above those 

levels presented in ASHRAE 90.1–2013, 

DOE is proposing to adopt the levels in 

ASHRAE Standard 90.1–2013, per the 

statutory directive. 

Based on consideration of the public 

comments DOE receives in response to 

this NOPR and related information 

collected and analyzed during the 

course of this rulemaking effort, DOE 

may adopt energy efficiency levels 

presented in this NOPR that are either 

higher or lower than the proposed 

standards, or some combination of 

level(s) that incorporate the proposed 

standards in part. 

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21For editorial reasons, upon codification in the 

U.S. Code, Part C was redesignated Part A–1. 

22All references to EPCA in this document refer 

to the statute as amended through the American 

Energy Manufacturing Technical Corrections Act, 

Pub. L. 112–210 (enacted December 18, 2012). 

As noted previously, in compliance 

with EPCA, DOE based its 

determination to adopt more stringent 

standards on an analysis comparing 

these proposed standards with ASHRAE 

2013 as the base case. DOE presents 

Table I.5 as requested in OMB Circular 

A–4. 

II. Introduction 

The following section briefly 

discusses the statutory authority 

underlying this proposal, as well as 

some of the relevant historical 

background related to the establishment 

of standards for single package vertical 

air conditioners and single package 

vertical heat pumps. 

A. Authority 

Title III, Part C21 of the Energy Policy 

and Conservation Act of 1975 (‘‘EPCA’’ 

or ‘‘the Act’’), Pub. L. 94–163 (42 U.S.C. 

6311–6317, as codified), added by Pub. 

L. 95–619, Title IV, § 441(a), established 

the Energy Conservation Program for 

Certain Industrial Equipment, which 

includes the single package vertical air 

conditioners and single package vertical 

heat pumps that are the subjects of this 

rulemaking.22 In general, this program 

addresses the energy efficiency of 

certain types of commercial and 

industrial equipment. Relevant 

provisions of the Act specifically 

include definitions (42 U.S.C. 6311), 

energy conservation standards (42 

U.S.C. 6313), test procedures (42 U.S.C. 

6314), labelling provisions (42 U.S.C. 

6315), and the authority to require 

information and reports from 

manufacturers (42 U.S.C. 6316). 

EPCA contains mandatory energy 

conservation standards for commercial 

heating, air-conditioning, and waterheating equipment. (42 U.S.C. 6313(a)) 

Specifically, the statute sets standards 

for small, large, and very large 

commercial package air-conditioning 

and heating equipment, packaged 

terminal air conditioners (PTACs) and 

packaged terminal heat pumps (PTHPs), 

warm-air furnaces, packaged boilers, 

storage water heaters, instantaneous 

water heaters, and unfired hot water 

storage tanks. Id. In doing so, EPCA 

established Federal energy conservation 

standards that generally correspond to 

the levels in ASHRAE Standard 90.1, as 

in effect on October 24, 1992 (i.e., 

ASHRAE Standard 90.1–1989), for each 

type of covered equipment listed in 42 

U.S.C. 6313(a). The Energy 

Independence and Security Act of 2007 

(EISA 2007), Pub. L. 110–240, amended 

EPCA by adding definitions and setting 

minimum energy conservation 

standards for single package vertical air 

conditioners (SPVACs) and single 

package vertical heat pumps (SPVHPs). 

(42 U.S.C. 6313(a)(10)(A)) The efficiency 

standards for SPVACs and SPVHPs 

established by EISA 2007 correspond to 

the levels contained in ASHRAE 

Standard 90.1–2004, which originated 

as addendum ‘‘d’’ to ASHRAE Standard 

90.1–2001. 

EPCA requires that DOE must conduct 

a rulemaking to consider amended 

energy conservation standards for a 

variety of enumerated types of 

commercial heating, ventilating, and airconditioning equipment (of which 

SPVACs and SPVHPs are a subset) each 

time ASHRAE Standard 90.1 is updated 

with respect to such equipment. (42 

U.S.C. 6313(a)(6)(A)) Such review is to 

be conducted in accordance with the 

procedures established for ASHRAE 

equipment under 42 U.S.C. 6313(a)(6). 

According to 42 U.S.C. 6313(a)(6)(A), for 

each type of equipment, EPCA directs 

that if ASHRAE Standard 90.1 is 

amended, DOE must publish in the 

Federal Register an analysis of the 

energy savings potential of amended 

energy efficiency standards within 180 

days of the amendment of ASHRAE 

Standard 90.1. (42 U.S.C. 

6313(a)(6)(A)(i)) EPCA further directs 

that DOE must adopt amended 

standards at the new efficiency level in 

ASHRAE Standard 90.1, unless clear 

and convincing evidence supports a 

determination that adoption of a morestringent level would produce 

significant additional energy savings 

and be technologically feasible and 

economically justified. (42 U.S.C. 

6313(a)(6)(A)(ii)) In addition, DOE notes 

that pursuant to the EISA 2007 

amendments to EPCA, under 42 U.S.C. 

6313(a)(6)(C), the agency must 

periodically review its alreadyestablished energy conservation 

standards for ASHRAE equipment. In 

December 2012, this provision was 

further amended by the American 

Energy Manufacturing Technical 

Corrections Act (AEMTCA) to clarify 

that DOE’s periodic review of ASHRAE 

equipment must occur ‘‘[e]very six 

years.’’ (42 U.S.C. 6313(a)(6)(C)(i)) 

AEMTCA also modified EPCA to 

specify that any amendment to the 

design requirements with respect to the 

ASHRAE equipment, would trigger DOE 

review of the potential energy savings 

under U.S.C. 6313(a)(6)(A)(i). 

Additionally, AEMTCA amended EPCA 

to require that if DOE proposes an 

amended standard for ASHRAE 

equipment at levels more stringent than 

those in ASHRAE Standard 90.1, DOE, 

in deciding whether a standard is 

economically justified, must determine, 

after receiving comments on the 

proposed standard, whether the benefits 

of the standard exceed its burdens by 

considering, to the maximum extent 

practicable, the following seven factors: 

(1) The economic impact of the 

standard on manufacturers and 

consumers of the products subject to the 

standard; 

(2) The savings in operating costs 

throughout the estimated average life of 

the product in the type (or class) 

compared to any increase in the price, 

initial charges, or maintenance expenses 

of the products likely to result from the 

standard; 

(3) The total projected amount of 

energy savings likely to result directly 

from the standard; 

(4) Any lessening of the utility or the 

performance of the products likely to 

result from the standard; 

(5) The impact of any lessening of 

competition, as determined in writing 

by the Attorney General, that is likely to 

result from the standard; 

(6) The need for national energy 

conservation; and 

(7) Other factors the Secretary 

considers relevant. (42 U.S.C. 

6313(a)(6)(B)(ii)) 

EISA 2007 amended EPCA to provide 

an independent basis for a one-time 

review regarding SPVUs that is not tied 

to the conditions for initiating review 

specified by 42 U.S.C. 6313(a)(6)(A) or 

42 U.S.C. 6313(a)(6)(C) described 

previously. Specifically, pursuant to 42 

U.S.C. 6313(a)(10)(B), DOE must 

commence review of the most recently 

published version of ASHRAE Standard 

90.1 with respect to SPVU standards in 

accordance with the procedures 

established under 42 U.S.C. 6313(a)(6) 

no later than 3 years after the enactment 

of EISA 2007. DOE notes that this 

provision was not tied to the trigger of 

ASHRAE publication of an updated 

version of Standard 90.1 or to a 6-year 

period from the issuance of the last final 

rule, which occurred on March 7, 2009 

(74 FR 12058). DOE was simply 

obligated to commence its review by a 

specified date. 

Because ASHRAE did not update its 

efficiency levels for SPVACs and 

SPVHPs in ASHRAE Standard 90.1– 

2010, DOE began this rulemaking by 

analyzing amended standards consistent 

with the procedures defined under 42 

U.S.C. 6313(a)(6)(C). Specifically, 

pursuant to 42 U.S.C. 6313(a)(6)(C)(i)(II), 

DOE, must use the procedures 

established under subparagraph (B) 

when issuing a NOPR. The statutory 

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78622 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

provision at 42 U.S.C. 6313(a)(6)(B)(ii), 

recently amended by AEMTCA, states 

that in deciding whether a standard is 

economically justified, DOE must 

determine, after receiving comments on 

the proposed standard, whether the 

benefits of the standard exceed its 

burdens by considering, to the 

maximum extent practicable, the 

following seven factors, as stated 

previously. 

However, before DOE could finalize 

this NOPR, ASHRAE acted on October 

9, 2013 to adopt ASHRAE Standard 

90.1–2013, and this revision did contain 

amended standard levels for SPVUs, 

thereby triggering DOE’s statutory 

obligation under 42 U.S.C. 6313(a)(6)(A) 

to promulgate an amended uniform 

national standard at those levels unless 

DOE determines that there is clear and 

convincing evidence supporting the 

adoption of more-stringent energy 

conservation standards than the 

ASHRAE levels. Consequently, DOE 

prepared an analysis of the energy 

savings potential of amended standards 

at the ASHRAE Standard 90.1 levels (as 

required by 42 U.S.C. 6313(a)(6)(A)(i)) 

and updated this NOPR and 

accompanying analyses to reflect 

appropriate statutory provision, 

timelines, and compliance dates. 

DOE has tentatively concluded that 

following this rulemaking process will 

provide ‘‘clear and convincing 

evidence’’ that for two equipment 

classes for which the proposed 

standards are more stringent than those 

set forth in ASHRAE Standard 90.1– 

2013 would result in significant 

additional conservation of energy and 

would be technologically feasible and 

economically justified, as mandated by 

42 U.S.C. 6313(a)(6). For the other four 

equipment classes, DOE has tentatively 

concluded to adopt the levels set forth 

in ASHRAE Standard 90.1–2013. 

EPCA, as codified, also contains what 

is known as an ‘‘anti-backsliding’’ 

provision, which prevents the Secretary 

from prescribing any amended standard 

that either increases the maximum 

allowable energy use or decreases the 

minimum required energy efficiency of 

a covered product. (42 U.S.C. 

6313(a)(6)(B)(iii)(I)) Also, the Secretary 

may not prescribe an amended or new 

standard if interested persons have 

established by a preponderance of the 

evidence that the standard is likely to 

result in the unavailability in the United 

States of any covered product type (or 

class) of performance characteristics 

(including reliability), features, sizes, 

capacities, and volumes that are 

substantially the same as those generally 

available in the United States. (42 U.S.C. 

6313(a)(6)(B)(iii)(II)) 

Further, EPCA, as codified, 

establishes a rebuttable presumption 

that a standard is economically justified 

if the Secretary finds that the additional 

cost to the customer of purchasing a 

product complying with an energy 

conservation standard level will be less 

than three times the value of the energy 

(and, as applicable, water) savings 

during the first year that the consumer 

will receive as a result of the standard, 

as calculated under the applicable test 

procedure. 

Additionally, when a type or class of 

covered equipment such as ASHRAE 

equipment, has two or more 

subcategories, DOE often specifies more 

than one standard level. DOE generally 

will adopt a different standard level 

than that which applies generally to 

such type or class of products for any 

group of covered products that have the 

same function or intended use if DOE 

determines that products within such 

group: (A) Consume a different kind of 

energy from that consumed by other 

covered products within such type (or 

class); or (B) have a capacity or other 

performance-related feature which other 

products within such type (or class) do 

not have and which justifies a higher or 

lower standard. In determining whether 

a performance-related feature justifies a 

different standard for a group of 

products, DOE generally considers such 

factors as the utility to the customer of 

the feature and other factors DOE deems 

appropriate. In a rule prescribing such 

a standard, DOE includes an 

explanation of the basis on which such 

higher or lower level was established. 

DOE followed a similar process in the 

context of this rulemaking. 

B. Background 

Single package vertical units 

primarily serve modular classroom 

buildings in educational facilities; 

telecommonunications and electronics 

enclosures; and offices and other 

miscellaneous commercial buildings. In 

almost all of these commercial building 

applications, the buildings served are 

expected to be of modular construction, 

because SPVUs, as packaged air 

conditioners installed on external 

building walls, do not impact site 

preparation costs for modular buildings, 

which may be relocated multiple times 

over the building’s life. The verticallyoriented configuration of SPVUs allows 

the building mounting to be unobtrusive 

and minimizes impacts on modular 

building transportation requirements. 

These advantages do not apply to a 

significant extent in site-constructed 

buildings. 

1. Current Standards 

As noted above, EISA 2007 amended 

EPCA to establish separate equipment 

classes and minimum energy 

conservation standards for SPVACs and 

SPVHPs. (42 U.S.C. 6313(a)(10)(A)) DOE 

published a final rule technical 

amendment in the Federal Register on 

March 23, 2009, which codified into 

DOE’s regulations the new SPVAC and 

SPVHP pump equipment classes and 

energy conservation standards for this 

equipment as prescribed by EISA 2007. 

74 FR 12058. These standards apply to 

all SPVUs manufactured on or after 

January 1, 2010. The current standards 

are set forth in Table II.1. 

TABLE II.1—CURRENT FEDERAL ENERGY CONSERVATION STANDARDS FOR SINGLE PACKAGE VERTICAL AIR

CONDITIONERS AND HEAT PUMPS

Equipment type Cooling capacity 

Btu/h 

Efficiency 

level 

Single Package Vertical Air Conditioner ....................................... <65,000 Btu/h ............................................................................... EER = 9.0. 

Single Package Vertical Air Conditioner ....................................... ≥65,000 Btu/h and <135,000 Btu/h .............................................. EER = 8.9. 

Single Package Vertical Air Conditioner ....................................... ≥135,000 Btu/h and <240,000 Btu/h* ........................................... EER = 8.6. 

Single Package Vertical Heat Pump ............................................. <65,000 Btu/h ............................................................................... EER = 9.0. 

COP = 3.0. 

Single Package Vertical Heat Pump ............................................. ≥65,000 Btu/h and <135,000 Btu/h .............................................. EER = 8.9. 

COP = 3.0. 

Single Package Vertical Heat Pump ............................................. ≥135,000 Btu/h and <240,000 Btu/h* ........................................... EER = 8.6. 

COP = 2.9. 

* There are no models on the market at these cooling capacities. 

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Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 78623 

23The relevant language in 42 U.S.C. 

6313(a)(6)(A)(i) was subsequently revised by EISA 

2007 to remove the reference to January 1, 2010. 

2. History of Standards Rulemaking for 

Single Package Vertical Air 

Conditioners and Single Package 

Vertical Heat Pumps 

Single package vertical units were 

established as a separate equipment 

class in ASHRAE Standard 90.1 by 

addendum ‘‘d’’ to ASHRAE Standard 

90.1–2001. DOE subsequently evaluated 

the possibility of creating separate 

equipment classes for SPVUs but 

determined that the Energy Policy Act 

of 2005 (EPACT 2005) had revised the 

language in 42 U.S.C. 6313(a)(6)(A)(i) 23

to limit DOE’s authority to adopt 

ASHRAE amendments for small, large, 

and very large commercial package airconditioning and heating equipment 

until after January 1, 2010, and thus, 

DOE could not adopt equipment classes 

and standards for SPVUs at that time. 

As explained in a March 2007 energy 

conservation standards final rule for 

various ASHRAE products, DOE 

determined that SPVUs fall under the 

definition of ‘‘commercial package air 

conditioning and heating equipment’’ 

(42 U.S.C. 6311(8)(A)), and that any 

SPVU with cooling capacities less than 

760,000 Btu/h would fit within the 

commercial package air conditioning 

and heating equipment categories listed 

in EPCA and be subjected to their 

respective energy efficiency standards. 

72 FR 10038, 10046–10047 (March 7, 

2007). 

Subsequently, EISA 2007 amended 

EPCA to: (1) Create separate equipment 

classes for SPVACs and SPVHPs; (2) set 

minimum energy conservation 

standards for these equipment classes; 

(3) eliminate the restriction on 

amendments for small, large, and very 

large commercial package airconditioning and heating equipment 

until after January 1, 2010; and (4) 

instruct DOE to review the most 

recently published ASHRAE Standard 

90.1 with respect to SPVUs no later than 

3 years after the enactment of EISA 

2007. As noted previously, DOE 

published a final rule technical 

amendment in the Federal Register 

which codified into DOE regulations the 

standards for SPVUs that were 

established by EISA 2007. 74 FR 12058 

(March 23, 2009). 

On October 29, 2010, ASHRAE 

officially released ASHRAE Standard 

90.1–2010 to the public. As an initial 

step in reviewing SPVUs under EPCA, 

DOE published a Notice of Data 

Availability (NODA) on May 5, 2011, 

which contained potential energy 

savings estimates for certain industrial 

and commercial equipment, including 

SPVUs. 76 FR 25622. Although 

ASHRAE Standard 90.1–2010 did not 

update the efficiency levels for SPVUs, 

DOE was obligated to review the 

potential energy savings for these 

equipment classes under 42 U.S.C. 

6313(a)(10)(B), as noted above. On 

January 17, 2012, DOE published a 

notice of proposed rulemaking (January 

2012 NOPR) in which it proposed to 

incorporate by reference the AirConditioning, Heating, and Refrigeration 

Institute (AHRI) Standard 390–2003, 

‘‘Performance Rating of Single Package 

Vertical Air-Conditioners and Heat 

Pumps,’’ into the DOE test procedure for 

SPVUs and proposed an optional 

equipment break-in period of no more 

than 16 hours. 77 FR 2356. DOE also 

decided to conduct additional analysis 

for SPVUs to consider more-stringent 

standards. Id. at 2359. On May 16, 2012, 

DOE published a final rule which 

incorporated by reference AHRI 

Standard 390–2003 into the DOE test 

procedure for SPVUs and increased the 

maximum duration of the optional 

break-in period to 20 hours. 77 FR 

28928. That final rule (as with the 

NOPR) did not contain amended 

standards for SPVUs, as DOE decided to 

consider more-stringent standards for 

such equipment on a separate timeline. 

However, as noted before, during the 

course of the present rulemaking, 

ASHRAE acted on October 9, 2013, to 

adopt ASHRAE Standard 90.1–2013, 

and this revision did contain amended 

standard levels for SPVUs, thereby 

triggering DOE’s statutory obligation to 

promulgate an amended uniform 

national standard at those levels, unless 

DOE determines that there is clear and 

convincing evidence supporting the 

adoption of more-stringent energy 

conservation standards than the 

ASHRAE levels. Once triggered by 

ASHRAE action, DOE became subject to 

certain new statutory requirements and 

deadlines. For example, the statute 

required DOE to publish in the Federal 

Register for comment an analysis of the 

energy savings potential of amended 

energy conservation standards at the 

ASHRAE Standard 90.1–2013 levels, not 

later than 180 days after amendment of 

the ASHRAE standard. DOE published 

this energy savings analysis as a Notice 

of Data Availability (NODA) in the 

Federal Register on April 11, 2014. 79 

FR 20114. 

Once triggered by ASHRAE action, 

the applicable legal deadline for 

completion of this standards rulemaking 

also shifted. When DOE first 

commenced this rulemaking pursuant to 

42 U.S.C. 6313(a)(10)(B), that provision 

directed DOE to follow the procedures 

established under 42 U.S.C. 6313(a)(6). 

Because DOE had not been triggered by 

ASHRAE action at the time (as would 

necessitate use of the procedures under 

42 U.S.C. 6313(a)(6)(A)), DOE proceeded 

as a 6-year-lookback amendment of the 

standard under 42 U.S.C. 6313(a)(6)(C), 

which called for a NOPR followed by a 

final rule not more than two years later. 

DOE was close to issuing a NOPR at the 

time it was triggered by ASHRAE action 

on Standard 90.1–2013. Once triggered, 

DOE was then required to either adopt 

the levels in ASHRAE Standard 90.1– 

2013 not later than 18 months after the 

publication of the amended ASHRAE 

standard (i.e., by April 9, 2015), or to 

adopt more-stringent standards not later 

than 30 months after publication of the 

amended ASHRAE standard (i.e., by 

April 9, 2016). However, given the 

advanced stage of the NOPR and DOE’s 

rulemaking process (including analysis 

of the levels ultimately adopted by 

ASHRAE in Standard 90.1–2013), the 

Department plans to move as 

expeditiously as possible and in 

advance of the statutory deadlines 

associated with the ASHRAE trigger. 

With that said, this NOPR is the next 

step for DOE’s analysis of amended 

energy conservation standards for 

SPVUs. 

In developing this NOPR, DOE 

reviewed the 11 comments it received in 

response to the April 2014 NODA. 

Commenters included: First Co.; Lennox 

International Inc.; National Comfort 

Products (NCP); Earthjustice; Goodman 

Global, Inc.; California Investor-Owned 

Utilities (CA IOUs); GE Appliances; 

Appliance Standards Awareness Project 

(ASAP), the American Council for an 

Energy-Efficient Economy (ACEEE), the 

National Resources Defense Council 

(NRDC), and the Northwest Energy 

Efficiency Alliance (jointly referred to as 

the Advocates); Daikin Applied; Edison 

Electric Institute (EEI); and AirConditioning, Heating & Refrigeration 

Institute (AHRI). All comments relevant 

to SPVU (as opposed to the other 

products discussed in the April 2014 

NODA) are discussed in this NOPR. 

In general, AHRI, Lennox 

International, Goodman Global, Daikin 

Applied, and EEI recommended that 

DOE should adopt the ASHRAE 90.1– 

2013 values as minimum standards for 

all considered equipment, including 

SPVUs. (AHRI, No. 24 at p. 1, Lennox 

International Inc., No. 15 at p. 2; 

Goodman Global, Inc., No. 18 at p. 4; 

Daikin Applied, No. 22 at p. 1; EEI, No. 

23 at p. 2) In contrast, the CA IOUs, as 

well as the Advocates stated that the 

DOE should adopt more-stringent levels 

for certain equipment types, including 

SPVU, because of the potential energy 

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78624 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

24 2017 is the later date compared to the 

alternative of 6 years after the effective date of the 

current standard, which would be 2016 (as the 

current SPVU standards became effective in 2010). 

25Under 42 U.S.C. 6313(a)(6)(D)(i), the applicable 

compliance date when DOE adopts the ASHRAE 

standard levels for small commercial package air 

conditioning and heating equipment (including 

SPVACs and SPVHPs under 135,000 Btu/h) is two 

years after the effective date of the minimum energy 

efficiency requirements in the amended ASHRAE 

Standard 90.1. Under 42 U.S.C. 6313(a)(6)(D)(ii), the 

applicable compliance date when DOE adopts the 

ASHRAE standard levels for large and very large 

commercial package air conditioning and heating 

equipment (including SPVACs and SPVHPs ≥ 

135,000 Btu/h and < 240,000 Btu/h) is three years 

after the effective date of the minimum energy 

efficiency requirement in the amended ASHRAE 

Standard 90.1. 

savings. (CA IOUs, No. 19 at pp. 2–3; 

The Advocates, No. 21 at p. 1) 

After careful consideration of the 

public comments and the available 

information, DOE has tentatively 

decided to propose energy conservation 

standards more stringent than those set 

forth in ASHRAE Standard 90.1–2013 

for two SPVU equipment classes and to 

propose adoption of the levels set forth 

in ASHRAE Standard 90.1–2013 for the 

remaining four SPVU equipment 

classes. Comments specific to 

individual issues or analyses are 

discussed in the relevant sections that 

follow. 

III. General Discussion 

A. Compliance Dates 

As noted above, this rulemaking was 

initiated pursuant to an EISA 2007 

amendment to EPCA that requires DOE 

to conduct a one-time review of the 

standard levels for SPVUs under the 

procedures established in paragraph (6) 

of 42 U.S.C. 6313(a). (42 U.S.C. 

6313(a)(10)(B)) Paragraph (6) contains a 

number of possible compliance dates for 

any resulting amended standards, which 

vary depending on the type of 

equipment, the triggering mechanism 

for DOE review (i.e., whether DOE is 

triggered by a revision to ASHRAE 

Standard 90.1 or by the ‘‘6-year look 

back’’ requirement), and the action 

taken (i.e., whether DOE is adopting 

ASHRAE Standard 90.1 levels or morestringent levels). The discussion below 

explains the potential compliance dates 

as they pertain to the present 

rulemaking. 

Under the first relevant provision, 

EPCA requires that when ASHRAE 

Standard 90.1 is amended with respect 

to certain commercial equipment, DOE 

must amend its minimum standards to 

either adopt levels equivalent to the 

ASHRAE Standard 90.1 levels, or to 

adopt more-stringent levels. (42 U.S.C. 

6313(a)(6)(A)(ii)) If DOE adopts the 

ASHRAE Standard 90.1 levels as 

Federal standard levels, compliance 

with the amended Federal standards is 

required either two or three years from 

the effective date of the ASHRAE 

Standard 90.1 level, depending on the 

equipment type. (42 U.S.C. 

6313(a)(6)(D)) For small commercial 

package air-conditioning and heating 

equipment, PTACs, PTHPs, warm-air 

furnaces, packaged boilers, storage 

water heaters, instantaneous water 

heaters, and unfired hot water storage 

tanks, compliance is required two years 

after the effective date of the applicable 

minimum energy efficiency requirement 

in the amended ASHRAE Standard 90.1. 

For large and very large commercial 

package air-conditioning and heating 

equipment, compliance is required three 

years after the effective date of the 

applicable minimum energy efficiency 

requirement in the amended ASHRAE 

Standard 90.1. If DOE adopts morestringent standard levels than the levels 

contained in the amended ASHRAE 

Standard 90.1 for any type of 

equipment, compliance is required four 

years after the date such final rule is 

published in the Federal Register. Id. 

Under the second relevant provision, 

EPCA requires that at least once every 

6 years, DOE must review standards for 

covered equipment and publish either a 

notice of determination that standards 

do not need to be amended or a NOPR 

proposing new standards. (42 U.S.C 

6313(a)(6)(C)) For any NOPR published 

pursuant to 42 U.S.C. 6313(a)(6)(C), the 

final rule would apply on the date that 

is the later of either 3 years after 

publication of the final rule establishing 

a new standard, or 6 years after the 

effective date of the current standard for 

a covered product. (42 U.S.C. 

6313(a)(6)(C)(iv)). 

In the context of the current 

rulemaking, when DOE first commenced 

the rulemaking process, ASHRAE had 

not released a full revision of ASHRAE 

Standard 90.1 that revises the minimum 

energy efficiency requirements for 

SPVUs. Thus, DOE initially determined 

the procedural requirements of 42 

U.S.C. 6313(a)(6)(C) to be applicable, 

and accordingly, DOE anticipated a 

compliance date of 2017, or 3 years after 

the expected publication of the final 

rule in 2014.24

However, as DOE expected might 

happen, ASHRAE released a revision of 

ASHRAE Standard 90.1 on October 9, 

2013, consistent with its recent practice 

of releasing a full revision of ASHRAE 

Standard 90.1 every 3 years. Because 

this revision increased the energy 

efficiency requirements for SPVUs in 

ASHRAE Standard 90.1, DOE was 

triggered to act on the ASHRAE 

Standard 90.1 levels for SPVUs 

pursuant to 42 U.S.C. 6313(a)(6)(A), and 

consequently, this rulemaking will 

simultaneously satisfy the requirements 

of 42 U.S.C. 6313(a)(6)(A), 42 U.S.C. 

6313(a)(6)(C), and 42 U.S.C. 

6313(a)(10)(B). However, in this case, 

DOE believes that the statutory lead 

time for compliance under such 

circumstances must ultimately be 

dictated by the requirements of 42 

U.S.C. 6313(a)(6)(A), given that there is 

now an ‘‘ASHRAE trigger’’ upon which 

DOE is acting. Thus, DOE will use the 

compliance dates specified under 42 

U.S.C. 6313(a)(6)(D) for analyzing 

amended standards in the final rule. 

More specifically, if DOE adopts the 

ASHRAE Standard 90.1–2013 levels for 

certain SPVU equipment classes, as 

proposed, the applicable compliance 

date would be two or three years after 

the effective date of the applicable 

ASHRAE standard, depending on 

equipment size (i.e., by October 9, 2015 

or October 9, 2016).25 If DOE adopts 

more-stringent standards for certain 

other SPVU equipment classes, as 

proposed, the applicable compliance 

date would be four years after 

publication of the final rule in the 

Federal Register. 

B. Equipment Classes and Scope of 

Coverage 

When evaluating and establishing 

energy conservation standards, DOE 

divides covered products into 

equipment classes by the type of energy 

used or by capacity or other 

performance-related features that 

justifies a different standard. In making 

a determination whether a performancerelated feature justifies a different 

standard, DOE must consider such 

factors as the utility to the consumer of 

the feature and other factors DOE 

determines are appropriate. 

Existing energy conservation 

standards group SPVUs into the 

following six equipment classes based 

on the cooling capacity and whether the 

equipment is an air conditioner or a 

heat pump: 

TABLE III.1—EQUIPMENT CLASSES FOR

SINGLE PACKAGE VERTICAL UNITS

Equipment type Cooling capacity 

Btu/h 

Single Package 

Vertical Air Conditioners.

<65,000. 

≥65,000 and 

<135,000. 

≥135,000 and 

<240,000. 

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Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 78625 

26The term ‘‘covered product’’ means a consumer 

product of a type specified in section 6292 of this 

title. (42 U.S.C. 6291(2)) Central air conditioners 

and central air conditioning heat pumps are listed 

as a covered product in section 6292. (42 U.S.C. 

6292(a)(3)) 

TABLE III.1—EQUIPMENT CLASSES FOR

SINGLE PACKAGE VERTICAL UNITS— 

Continued 

Equipment type Cooling capacity 

Btu/h 

Single Package 

Vertical Heat 

Pumps.

<65,000. 

≥65,000 and 

<135,000. 

≥135,000 and 

<240,000. 

10 Code of Federal Regulations (CFR) 

431.97(d). 

1. Consideration of a Space Constrained 

SPVU Equipment Class 

In the April 2014 NODA, DOE noted 

that ASHRAE Standard 90.1–2013 

created a new equipment class for 

SPVACs and SPVHPs used in spaceconstrained applications, with a 

definition for ‘‘nonweatherized space 

constrained single-package vertical 

unit’’ and efficiency standards for the 

associated equipment class. In the 

NODA, DOE tentatively concluded that 

there was no need to establish a separate 

space-constrained class for SPVUs, 

given that certain models currently 

listed by manufacturers as SPVUs, most 

of which would meet the ASHRAE 

space-constrained definition, are being 

misclassified and should be classified as 

central air conditioners (in most cases, 

space-constrained central air 

conditioners). 79 FR 20114, 20123 

(April 11, 2014). 

In response to the April 2014 NODA, 

AHRI and NCP requested that DOE 

adopt the new ASHRAE 90.1–2013 

space-constrained SPVU product class. 

(AHRI, No. 24 at pp. 1–2; NCP, No. 16 

at p. 3) First Co. disagreed with DOE’s 

conclusion that space-constrained 

SPVUs should be regulated as consumer 

products rather than commercial 

equipment and stated that increasing 

energy conservation standards for SPVU 

should be done by changing EER/COP, 

as ASHRAE has done, not by 

reclassifying them as consumer 

products. (First Co. No. 14 at p. 1) 

DOE does not agree with these 

commenters and has provided responses 

to specific concerns below. 

Lennox and NCP stated that multifamily structures above 3 stories are 

considered commercial buildings by 

both EPCA and ASHRAE Standard 90.1. 

(Lennox International, No. 15 at p. 4; 

NCP, No. 16 at pp. 7–8) AHRI added 

that hotels, apartments, and dormitories 

are all commercial applications in 

building types falling within the scope 

of ASHRAE Standard 90.1. (AHRI, No. 

24 at p. 4) NCP argued that SPVUs are 

distributed to a significant extent for 

commercial applications, including 

commercial lodging such as student 

housing and dormitories, nursing 

homes, assisted care facilities, hotels, 

and high-rise apartment buildings. 

(NCP, No. 16 at p. 10) GE, Lennox, and 

AHRI analogized that many SPVU are 

distributed in the same market segments 

as PTAC/PTHP, which is a type of 

commercial equipment. (GE Appliances, 

No. 20 at p. 2; Lennox International, No. 

15 at p. 4; AHRI, No. 24 at p. 4) 

GE, Lennox, and AHRI stated that 

SPVU are sold to commercial entities 

and that consumers are never involved 

in those sale transactions. (GE 

Appliances, No. 20 at p. 2; Lennox 

International, No. 15 at p. 5; AHRI, No. 

24 at p. 5) Lennox added that SPVUs 

(including space-constrained models) 

involve a much higher degree of design 

integration than residential split system 

central air conditioners. (Lennox 

International, No. 15 at p. 5) NCP argued 

that while SPVUs may be used 

temporarily by individual occupants, 

over their life, they are owned and 

maintained by the commercial entities 

that own the buildings. (NCP, No. 16 at 

p. 7) NCP also added that characterizing 

SPVUs used in lodging as consumer 

products is going overbroad, because it 

overlooks the energy use constraints of 

various multi-family building 

configurations. (NCP, No. 16 at p. 3) 

DOE notes that the definitions for 

‘‘consumer product’’ and ‘‘industrial 

equipment’’ in EPCA are not dependent 

on the definition of residential or 

commercial buildings found elsewhere 

in EPCA or in ASHRAE Standard 90.1. 

As discussed in the April 2014 ASHRAE 

NODA, EPCA defines ‘‘industrial 

equipment’’ as any article of equipment 

of certain specified types that consumes, 

or is designed to consume, energy, 

which is distributed to any significant 

extent for industrial and commercial 

use, and which is not a covered product 

as defined in 42 U.S.C. 6291(2),26

without regard to whether such article 

is in fact distributed in commerce for 

industrial or commercial use. (42 U.S.C. 

6311(2)(A)) EPCA defines ‘‘consumer 

product’’ as any article: (1) Of a type 

that consumes or is designed to 

consume energy, and, to any significant 

extent, is distributed in commerce for 

personal use or consumption by 

individuals, (2) without regard to 

whether such article of such type is in 

fact distributed in commerce for 

personal use or consumption by an 

individual. (42 U.S.C. 6291(1)) 

Consistent with the NODA and these 

relevant statutory provisions, DOE 

maintains that products serving 

individual rooms in multi-family and 

lodging applications is for personal use 

or consumption by individuals, 

regardless of who designed the system, 

was involved in the sale transaction, or 

maintains the equipment. In addition, 

DOE found similarities between units 

designed for multi-family applications 

and those intended for commercial 

lodging applications, indicating that 

those products should be treated the 

same under DOE’s regulatory scheme. 

Furthermore, the definitions of 

‘‘industrial equipment’’ and ‘‘consumer 

product’’ are mutually exclusive. A 

product can only be considered 

commercial/industrial equipment under 

EPCA if it does not fit the definition of 

consumer product. PTACs, referenced 

by stakeholders as commercial 

equipment with applications similar to 

space-constrained SPVUs, are not 

relevant to this argument because the 

definition for ‘‘central air conditioner’’ 

explicitly excludes PTACs (see 42 

U.S.C. 6291(21)). Therefore, DOE 

differentiates these situations, because 

while many of the products that would 

meet the ASHRAE definition for a 

space-constrained SPVU would also 

meet the EPCA definition for central air 

conditioner, PTACs cannot meet the 

latter definition because they are 

explicitly excluded. 

Lennox and AHRI stated that in the 

November 4, 2013 proposed rule, 

‘‘Energy Conservation Program for 

Consumer Products and Certain 

Commercial and Industrial Equipment: 

Test Procedures for Residential and 

Commercial Water Heaters,’’ (78 FR 

66202), DOE recognized that there are 

commercial water heaters that ‘‘could 

have residential applications,’’ yet DOE 

specifically chose not to treat that 

equipment as a consumer covered 

product because it would be distributed 

to a (more) significant extent as a 

commercial product. (Lennox 

International, No. 15 at p. 5; AHRI, No. 

24 at p. 5) NCP agreed that DOE should 

regulate SPVU in the same manner as 

DOE recently proposed for light 

commercial water heaters. (NCP, No. 16 

at p. 10) Lennox International, AHRI, 

and NCP all maintain that SPVUs are 

used to a significant extent in 

commercial applications and more 

rarely in residential applications. 

(Lennox International, No. 15 at p. 5; 

AHRI, No. 24 at p. 5; NCP, No. 16 at p. 

10) 

To clarify this issue, DOE provides 

the following excerpt from the 

November 2013 NOPR, along with 

additional information. The specific 

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78626 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

27A TTW product class was created in a May 

2002 final rule (67 FR 36368 (May 23, 2002)) and 

was replaced by the residential space-constrained 

product class in a June 2011 Direct Final Rule (76 

FR 37408, (June 27, 2011)). 

reference from the November 2013 

NOPR is as follows: ‘‘Although light 

commercial water heaters could have 

residential applications, DOE notes that 

the new ‘light commercial water heater’ 

definition represents a type of water 

heater that, to a significant extent, is 

distributed in commerce for industrial 

or commercial use. These water heaters 

were and continue to be covered 

industrial equipment, and, if these 

proposals are finalized, will continue to 

be subject to the regulations in part 431 

and the certification requirements for 

commercial and industrial equipment in 

part 429.’’ 78 FR 66202, 66207 (Nov. 4, 

2013). One must keep in mind that 

EPCA’s definition addressing various 

types of ‘‘water heater[s]’’ contains 

specific limitations on the input 

capacities for such models to be 

considered consumer products. (42 

U.S.C. 6291(27); codified at 10 CFR 

430.2) DOE further notes that the 

proposed definition for ‘‘light 

commercial water heater’’ makes the 

equipment a subtype of commercial 

water heater. 78 FR 66202, 66207 (Nov. 

4, 2013). Commercial storage and 

instantaneous water heaters are 

specifically listed in EPCA as a type of 

industrial equipment at 42 U.S.C. 

6313(1)(K) and defined at 42 U.S.C. 

6311(12), and there are a number of 

related definitions in DOE’s regulations 

(see 10 CFR 431.102). Therefore, under 

the statutory scheme, equipment can 

only be classified as a ‘‘light commercial 

water heater’’ if it does not meet the 

definition of a ‘‘water heater’’ under 10 

CFR 430.2. In the same way, spaceconstrained SPVUs can only be 

classified as industrial equipment if 

they do not meet the definition of 

‘‘central air conditioner’’ or any other 

covered consumer product. 

Lennox, NCP, and AHRI also referred 

to the history of SPVUs, stating that all 

SPVUs were previously classified as 

central air conditioners; the product 

class was not introduced in ASHRAE 

Standard 90.1 until the 2004 version 

and not established in EPCA until EISA 

2007, which explicitly separated out 

SPVUs as type of covered equipment. 

(NCP, No. 16 at p. 9; Lennox 

International, No. 15 at p. 3; AHRI, No. 

24 at pp. 3–4) NCP and Lennox added 

that EISA 2007 specified that SPVACs 

include equipment that is mounted 

‘‘through an outside wall,’’ expressly 

contemplating space-constrained units. 

(NCP, No. 16 at p. 9; Lennox 

International, No. 15 at pp. 2–3) NCP 

commented that in an October 2000 

NOPR (65 FR 59590, 59610 (Oct. 5, 

2000)), DOE proposed creating 

standards for SPVUs as a niche product, 

noting that SPVUs ‘‘are not distributed 

for personal use or consumption by 

individuals, and therefore believes that 

at present they are commercial 

products. . . .’’ NCP added that the 

NOPR (Id.) acknowledged that ‘‘the 

difficult air flow configuration . . . 

combined with the attempt to minimize 

the size constrains the ability of these 

units to attain higher SEERs.’’ (NCP, No. 

16 at p. 9) 

DOE disagrees that all SPVUs were 

classified as residential central air 

conditioners prior to EISA 2007. 

Traditional (non-space constrained) 

SPVU units and three-phase units 

would have been classified either as 

commercial air conditioners or not 

covered. Furthermore, in the April 2014 

NODA, DOE was referring to products 

classified as through-the-wall (TTW) 

until January 23, 2010 (when TTW was 

removed as a product class and TTW 

products had to meet the regulatory 

requirements for other central air 

conditioner product classes). 79 FR 

20114, 20121–23 (April 11, 2014). In 

regards to the intent of EISA 2007 and 

the October 2000 NOPR, DOE notes that 

before ASHRAE released Addendum ‘‘i’’ 

to Standard 90.1–2010 in March 2011, 

there was no such thing as a spaceconstrained SPVU equipment class. 

Prior to that time, any references to 

SPVUs were in regards to traditional 

units that were not limited in size. 

Consistent with DOE’s position in the 

October 2000 NOPR, EISA 2007 added 

SPVUs as a type of commercial 

equipment, but Congress declined to 

distinguish a separate equipment class 

for space-constrained SPVUs. DOE notes 

that the October 2000 NOPR also 

considered niche products called 

‘‘through-the-wall condensers,’’ which 

were proposed for a separate residential 

product class.27 65 FR 59590, 59610 

(Oct. 5, 2000). It is in this product class 

that DOE expressly contemplated 

residential space-constrained units, 

including those models previously 

classified as TTW that manufacturers 

are now attempting to classify as 

SPVUs. DOE does not believe the 

design, market, and application for 

these space-constrained units has 

changed substantially over the past 10 

years. In fact, DOE believes the spaceconstrained products are properly 

classified, as they were once certified, as 

central air conditioners, a practice 

which changed only when the TTW 

product class was combined with the 

space-constrained product class and 

compliance with amended standards for 

these product classes was required. 

Based upon the above reasoning, DOE 

does not see a basis or a need for the 

space-constrained SPVU equipment 

class, as these basic models are already 

covered products as space-constrained 

central air conditioners. Any product 

that meets the definition of a ‘‘consumer 

product’’ (42 U.S.C. 6291(1)) is 

classified as a consumer product and 

must meet any applicable energy 

conservation standard, regardless of 

whether it is used in a commercial 

application or marketed as commercial 

equipment. 

Lennox and AHRI asserted that the 

existing base of SPVU products in 

commercial buildings with fixed 

physical-dimension requirements limits 

the ability of manufacturers to increase 

efficiency; this was the reason for 

ASHRAE’s development of the spaceconstrained SPVU equipment class. 

(Lennox International No. 15 at p. 5; 

AHRI No. 24 at p. 5) NCP stated that 

lodging and commercial SPVACs are 

configured for ease of access and 

maintenance, which impacts efficiency. 

(NCP, No. 16 at pp. 7–8) NCP added that 

the presence of multiple units venting to 

the outside also would affect an 

individual unit’s ultimate performance. 

(NCP, No. 16 at p. 7) Lennox 

commented that space-constrained 

SPVU cannot meet the efficiency levels 

of residential units. (Lennox 

International, No. 15 at pp. 5–6) 

DOE notes that while equipment 

meeting the ASHRAE Standard 90.1 

definition of a space-constrained SPVU 

may in fact be constrained in efficiency, 

the presence of the space-constrained 

central air conditioner (CAC) equipment 

class already provides respite for these 

products. The SEER requirement for 

space-constrained CAC is 12 SEER, one 

point below the current standards for 

CAC and two points below the standard 

for some CACs (split system CACs in the 

South and all single package CACs) 

beginning January 1, 2015. (10 CFR 

430.32(c)(1)-(3)) Furthermore, DOE 

notes that there are currently spaceconstrained units on the market that 

meet the 12 SEER requirement. 

NCP argued that if DOE excludes 

equipment used in high-rise multifamily or other commercial lodging 

applications from the SPVAC class, DOE 

must establish a new equipment class 

because such equipment does not 

qualify as CAC or otherwise fall within 

any other existing category. (NCP, No. 

16 at p. 10) Specifically, NCP stated that 

their Comfort Pack products cannot be 

classified as CAC because they always 

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include gas or electric resistance heat. 

(NCP, No. 16 at pp. 5–6) 

In response to NCP, EPCA defines 

‘‘central air conditioner’’ as a product, 

other than a packaged terminal air 

conditioner, which: (1) Is powered by 

single phase electric current; (2) is aircooled; (3) is rated below 65,000 Btu per 

hour; (4) is not contained within the 

same cabinet as a furnace with a rated 

capacity above 225,000 Btu per hour; 

and (5) is a heat pump or a cooling only 

unit. (42 U.S.C. 6291(21); 10 CFR 430.2) 

DOE notes that criteria number 5 refers 

to coverage of both a type of air 

conditioner unit that can only perform 

cooling (i.e., a ‘‘cooling only unit’’) as 

well as a type of air conditioner unit 

that can perform both cooling and 

heating (i.e., a ‘‘heat pump’’). Criteria 

number 5 does not refer to other 

components such as a furnace or electric 

heater. The only heating component that 

excludes equipment from coverage 

under this definition is a furnace with 

a rated capacity above 225,000 Btu/

hour, as set forth in criteria number 4. 

DOE notes that for units meeting the 

definition of ‘‘central air conditioner’’ 

and also containing a furnace in the 

package (with a rated capacity under 

225,000 Btu/hour), the air conditioner is 

subject to one set of energy conservation 

standards, while the furnace may be 

subject to separate standards. 

First Co. stated that its commerciallydesigned SPVHPs cannot be tested 

under the HSPF test procedure because 

they cannot be operated at temperatures 

required for testing Frost Accumulation 

or Low Temperature. (First Co., No. 14 

at p. 2) 

In response to First Co., DOE notes 

that whether a product can be tested in 

accordance with the test procedure is 

not typically determinative of whether it 

meets the product’s definition. Instead, 

the characteristics of the product (as 

outlined above for central air 

conditioning) determine whether it 

meets the definition. If a product that 

meets the definition cannot be tested in 

accordance with the test procedure, a 

manufacturer may apply to DOE for a 

waiver of the test procedure.. 

AHRI and GE Appliances stated that 

all models of SPVUs listed in the AHRI 

Directory meet the requirement of 

having components arranged vertically 

and current models of space-constrained 

SPVU meet the EPCA definition of 

‘‘SPVU.’’ (AHRI, No. 24 at pp. 3–4; GE 

Appliances, No. 20 at pp. 1–2) NCP 

reasoned that by ‘‘arranged vertically,’’ 

DOE intends to address products that 

operate in a vertical manner, with a 

bottom ‘‘return air’’ opening and a top 

‘‘supply air’’ opening. This 

configuration is commonly referred to 

within the industry as an ‘‘Upflow’’ 

unit. In addition, for NCP Comfort Pack 

units, the gas furnace or electrical 

heating component is positioned 

vertically above the cooling component 

and along the vertically moving air flow. 

Accordingly, NCP’s products are 

vertically arranged as contemplated by 

the EPCA. (NCP, No. 16 at pp. 4–5) 

In response, the EPCA definition for 

‘‘SPVU’’ requires that the major 

components be arranged vertically. (42 

U.S.C. 6311(22)(A)(i); 10 CFR 431.92) In 

the April 2014 NODA, when stating that 

some models do not have their 

components arranged vertically, DOE 

was referring to units in which all 

components were on the same 

horizontal plane within the cabinet. 79 

FR 20114, 20122 (April 11, 2014). DOE 

acknowledges that most of the products 

in the AHRI database do have their 

components arranged vertically. 

However, even if the units in the AHRI 

database have their components 

arranged vertically and otherwise meet 

the definition of ‘‘SPVU,’’ they may also 

meet the definition of an applicable 

consumer product, which takes 

precedence, as discussed previously. 

For all of the reasons discussed in this 

section, DOE is maintaining the position 

on space-constrained units that it 

outlined in the April 2014 NODA. 

Specifically, DOE has not identified a 

need to establish a separate spaceconstrained class for SPVUs, given that 

certain units currently listed by 

manufacturers as SPVUs, most of which 

would meet the ASHRAE spaceconstrained definition, are being 

misclassified and are appropriately 

classified as central air conditioners (in 

most cases, space-constrained central air 

conditioners). 

Lennox and AHRI stated that DOE 

should expand the applications 

considered in the analysis; AHRI 

specified that in addition to office, 

education, and telecom, DOE should 

consider lodging, multi-family, and 

assisted-living applications. (Lennox 

International No. 15 at p. 7; AHRI No. 

24 at p. 6) DOE notes that the 

applications used in the analysis apply 

to traditional (non-space constrained) 

SPVUs. DOE believes that the additional 

applications suggested by Lennox and 

AHRI are primarily related to spaceconstrained applications. Given that 

DOE is not considering the spaceconstrained units to be SPVUs, DOE has 

not included the additional applications 

in its analysis. 

Issue 1: DOE seeks comment on its 

tentative conclusion that the creation of 

a space-constrained equipment class for 

SPVUs is not warranted. 

C. Technological Feasibility 

1. General 

In each energy conservation standards 

rulemaking, DOE conducts a screening 

analysis based on information gathered 

on all current technology options and 

prototype designs that could improve 

the efficiency of the products or 

equipment that are the subject of the 

rulemaking. As the first step in such an 

analysis, DOE develops a list of 

technology options for consideration in 

consultation with manufacturers, design 

engineers, and other interested parties. 

DOE then determines which of those 

means for improving efficiency are 

technologically feasible. DOE considers 

technologies incorporated in 

commercially-available products or in 

working prototypes to be 

technologically feasible. 10 CFR part 

430, subpart C, appendix A, section 

4(a)(4)(i). 

After DOE has determined that 

particular technology options are 

technologically feasible, it further 

evaluates each technology option in 

light of the following additional 

screening criteria: (1) Practicability to 

manufacture, install, and service; (2) 

adverse impacts on product utility or 

availability; and (3) adverse impacts on 

health or safety. 10 CFR part 430, 

subpart C, appendix A, section 

4(a)(4)(ii)–(iv). Section IV.B of this 

preamble discusses the results of the 

screening analysis for SPVUs, 

particularly the designs DOE 

considered, those it screened out, and 

those that are the basis for the trial 

standard levels (TSLs) in this 

rulemaking. For further details on the 

screening analysis for this rulemaking, 

see chapter 4 of the NOPR Technical 

Support Document (TSD). 

After screening out or otherwise 

removing from consideration most of 

the technologies, the following 

technologies were identified for 

consideration in the engineering 

analysis: (1) Increased frontal coil area; 

(2) increased depth of coil; (3) improved 

fan motor efficiency; (4) improved fan 

blade efficiency; and (5) improved 

compressor efficiency, and (6) dual 

condensing heat exchangers. To adopt 

standards for SPVUs that are more 

stringent than the efficiency levels in 

ASHRAE Standard 90.1 as amended, 

DOE must determine, supported by 

clear and convincing evidence, that 

such standards are technologically 

feasible. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) 

Since these six design options are 

commercially available, have been used 

in SPVU equipment, and are the most 

common ways by which manufacturers 

improve the energy efficiency of their 

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78628 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

28 In the past, DOE presented energy savings 

results for only the 30-year period that begins in the 

year of compliance. In the calculation of economic 

impacts, however, DOE considered operating cost 

savings measured over the entire lifetime of 

products purchased in the 30-year period. DOE has 

chosen to modify its presentation of national energy 

savings to be consistent with the approach used for 

its national economic analysis. 

29Conversion factors based on the Annual Energy 

Outlook 2014 (AEO 2014), which became available 

too late for incorporation into this analysis, show 

very little change compared to the AEO 2013-based 

factors. DOE plans to use convresion factors based 

on the most recent AEO available for the next phase 

of this rulemaking, which may or may not be AEO 

2014, depending on the timing of the issuance of 

the next rulemaking document. 

30 DOE also presents a sensitivity analysis that 

considers impacts for products shipped in a 9-year 

period. 

SPVUs, DOE has tentatively determined 

that clear and convincing evidence 

supports the conclusion that all of the 

efficiency levels evaluated in this NOPR 

are technologically feasible. 

Additionally, DOE notes that the four 

screening criteria do not directly 

address the propriety status of design 

options. DOE only considers efficiency 

levels achieved through the use of 

proprietary designs in the engineering 

analysis if they are not part of a unique 

path to achieve that efficiency level (i.e., 

if there are other non-proprietary 

technologies capable of achieving the 

same efficiency). DOE believes the 

proposed standards for the equipment 

covered in this rulemaking would not 

mandate the use of any proprietary 

technologies, and that all manufacturers 

would be able to achieve the proposed 

levels through the use of nonproprietary designs. DOE seeks 

comment on this tentative conclusion 

and requests additional information 

regarding proprietary designs and 

patented technologies. 

2. Maximum Technologically Feasible 

Levels 

When DOE proposes to adopt an 

amended standard for a type or class of 

covered product, it must determine the 

maximum improvement in energy 

efficiency or maximum reduction in 

energy use that is technologically 

feasible for such product. Accordingly, 

in the engineering analysis, DOE 

determined the maximum 

technologically feasible (‘‘max-tech’’) 

improvements in energy efficiency for 

SPVUs, using the design parameters for 

the most efficient products available on 

the market or in working prototypes. 

(See chapter 5 of the NOPR TSD.) The 

max-tech levels that DOE determined 

for this rulemaking are described in 

section IV.C.1 of this proposed rule. 

D. Energy Savings 

1. Determination of Savings 

For each TSL, DOE projected energy 

savings from the products that are the 

subject of this rulemaking purchased in 

the 30-year period that begins in the 

year of compliance with amended 

standards (2015–2044 for the ASHRAE 

level, and 2019–2048 for higher 

efficiency levels). The savings are 

measured over the entire lifetime of 

products purchased in the 30-year 

analysis period.28 DOE quantified the 

energy savings attributable to each TSL 

as the difference in energy consumption 

between each standards case and both 

base cases. The base case represents a 

projection of energy consumption in the 

absence of amended mandatory energy 

conservation standards, and it considers 

market forces and policies that affect 

demand for more-efficient products. 

DOE used its national impact analysis 

(NIA) spreadsheet model to estimate 

energy savings from amended standards 

for the products that are the subject of 

this rulemaking. The NIA spreadsheet 

model (described in section IV.G of this 

preamble) calculates energy savings in 

site energy, which is the energy directly 

consumed by products at the locations 

where they are used. For electricity, 

DOE reports national energy savings in 

terms of the savings in the energy that 

is used to generate and transmit the site 

electricity. To calculate this quantity, 

DOE derived annual conversion factors 

from the model used to prepare the 

Energy Information Administration’s 

(EIA) Annual Energy Outlook 2013 

(AEO 2013).29

DOE has begun to also estimate fullfuel-cycle energy savings, as discussed 

in DOE’s statement of policy and notice 

of policy amendment. 76 FR 51281 

(August 18, 2011), as amended at 77 FR 

49701 (August 17, 2012). The full-fuelcycle (FFC) metric includes the energy 

consumed in extracting, processing, and 

transporting primary fuels, and, thus, 

presents a more complete picture of the 

impacts of energy efficiency standards. 

DOE’s approach is based on the 

calculation of an FFC multiplier for 

each of the energy types used by 

covered equipment. See section IV.G.1.a 

for further discussion. 

2. Significance of Savings 

Among the criteria that govern DOE’s 

adoption of more-stringent standards for 

SPVUs than the amended levels in 

ASHRAE Standard 90.1, clear and 

convincing evidence must support a 

determination that the standards would 

result in ‘‘significant’’ additional energy 

savings. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) 

Although the term ‘‘significant’’ is not 

defined in the Act, the U.S. Court of 

Appeals, in Natural Resources Defense 

Council v. Herrington, 768 F.2d 1355, 

1373 (D.C. Cir. 1985), indicated that 

Congress intended ‘‘significant’’ energy 

savings in this context to be savings that 

were not ‘‘genuinely trivial.’’ DOE’s 

estimates of the energy savings for each 

of the TSLs considered for the proposed 

rule for SPVUs <65,000 Btu/h 

(presented in section V.B.3.a) provide 

evidence that the additional energy 

savings each would achieve by 

exceeding the corresponding efficiency 

levels in ASHRAE Standard 90.1–2013 

are nontrivial. Therefore, DOE considers 

these savings to be ‘‘significant’’ as 

required by 42 U.S.C. 

6313(a)(6)(A)(ii)(II). 

E. Economic Justification 

1. Specific Criteria 

As discussed beforehand, EPCA 

provides seven factors to be evaluated in 

determining whether a potential energy 

conservation standard is economically 

justified. (42 U.S.C. 6313(a)(6)(B)(ii)(I)– 

(VII)) The following sections discuss 

how DOE has addressed each of those 

seven factors in this rulemaking. 

a. Economic Impact on Manufacturers 

and Consumers 

In determining the impacts of a 

potential amended standard on 

manufacturers, DOE conducts a 

manufacturer impact analysis (MIA), as 

discussed in section IV.I. DOE first uses 

an annual cash-flow approach to 

determine the quantitative impacts. This 

step incorporates both a short-term 

impacts—based on the cost and capital 

requirements during the period between 

when a regulation is issued and when 

entities must comply with the 

regulation—and a long-term impacts 

over a 30-year period.30 The industrywide impacts analyzed include: (1) 

Industry net present value (INPV), 

which values the industry on the basis 

of expected future cash flows; (2) cash 

flows by year; (3) changes in revenue 

and income; and (4) other measures of 

impact, as appropriate. Second, DOE 

analyzes and reports the impacts on 

sub-groups manufacturers, such as 

impacts on small manufacturers. Third, 

DOE considers the impact of standards 

on domestic manufacturer employment 

and manufacturing capacity, as well as 

the potential for standards to result in 

plant closures and loss of capital 

investment, as discussed in section 

IV.M. Finally, DOE takes into account 

cumulative impacts of various DOE 

regulations and other regulatory 

requirements on manufacturers. 

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For individual consumers, measures 

of economic impact include the changes 

in life-cycle cost (LCC) and payback 

period (PBP) associated with new or 

amended standards. These measures are 

discussed further in the following 

section. For consumers in the aggregate, 

DOE also calculates the national net 

present value of the economic impacts 

applicable to a particular rulemaking. 

DOE also evaluates the LCC impacts of 

potential standards on identifiable 

subgroups of consumers that may be 

affected disproportionately by a national 

standard. 

b. Savings in Operating Costs Compared 

to Increase in Price (Life-Cycle Costs) 

EPCA requires DOE to consider the 

savings in operating costs throughout 

the estimated average life of the covered 

product compared to any increase in the 

price of the covered product that are 

likely to result from the imposition of 

the standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(II)) DOE conducts this 

comparison in its LCC and PBP analysis. 

The LCC is the sum of the purchase 

price of a piece of equipment (including 

its installation) and the operating 

expense (including energy, 

maintenance, and repair expenditures) 

discounted over the lifetime of the 

equipment. To account for uncertainty 

and variability in specific inputs, such 

as equipment lifetime and discount rate, 

DOE uses a distribution of values, with 

probabilities attached to each value. For 

its analysis, DOE assumes that 

consumers will purchase the covered 

equipment in the first year of 

compliance with amended standards. 

The LCC savings and the PBP for the 

considered efficiency levels are 

calculated relative to a base case that 

reflects projected market trends in the 

absence of amended standards. DOE 

identifies the percentage of consumers 

estimated to receive LCC savings or 

experience an LCC increase, in addition 

to the average LCC savings associated 

with a particular standard level. DOE’s 

LCC analysis is discussed in further 

detail in section IV.F. 

c. Energy Savings 

Although significant conservation of 

energy is a separate statutory 

requirement for adopting an energy 

conservation standard, EPCA requires 

DOE, in determining the economic 

justification of a standard, to consider 

the total projected energy savings that 

are expected to result directly from the 

standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(III)) As discussed in 

section IV.G, DOE uses the NIA 

spreadsheet to project national energy 

savings. 

d. Lessening of Utility or Performance of 

Products 

In establishing classes of products, 

and in evaluating design options and 

the impact of potential standard levels, 

DOE evaluates potential standards that 

would not lessen the utility or 

performance of the considered products. 

(42 U.S.C. 6313(a)(6)(B)(ii)(IV)) Based on 

data available to DOE, the proposed 

standards would not reduce the utility 

or performance of the products under 

consideration in this rulemaking. 

e. Impact of Any Lessening of 

Competition 

EPCA directs DOE to consider any 

lessening of competition that is likely to 

result from energy conservation 

standards. It also directs the Attorney 

General of the United States (Attorney 

General) to determine the impact, if any, 

of any lessening of competition likely to 

result from a proposed standard and to 

transmit such determination to the 

Secretary within 60 days of the 

publication of a proposed rule, together 

with an analysis of the nature and 

extent of the impact. (42 U.S.C. 

6313(a)(6)(B)(ii)(V)) DOE will transmit a 

copy of this proposed rule to the 

Attorney General with a request that the 

Department of Justice (DOJ) provide its 

determination on this issue. DOE will 

publish and address the Attorney 

General’s determination in the final 

rule. 

f. Need for National Energy 

Conservation 

In evaluating the need for national 

energy conservation, DOE expects that 

the energy savings from the proposed 

standards are likely to provide 

improvements to the security and 

reliability of the nation’s energy system. 

(42 U.S.C. 6313(a)(6)(B)(ii)(VII)) 

Reductions in the demand for electricity 

also may result in reduced costs for 

maintaining the reliability of the 

nation’s electricity system. DOE 

conducts a utility impact analysis to 

estimate how standards may affect the 

nation’s needed power generation 

capacity, as discussed in section IV.L. 

The proposed standards also are 

likely to result in environmental 

benefits in the form of reduced 

emissions of air pollutants and 

greenhouse gases associated with energy 

production. DOE reports the emissions 

impacts from the proposed standards, 

and from each TSL it considered, in 

section IV.J of this preamble. DOE also 

reports estimates of the economic value 

of emissions reductions resulting from 

the considered TSLs, as discussed in 

section IV.K. 

g. Other Factors 

EPCA allows the Secretary of Energy, 

in determining whether a standard is 

economically justified, to consider any 

other factors that the Secretary deems to 

be relevant. (42 U.S.C. 

6313(a)(6)(B)(ii)(VII)) 

2. Rebuttable Presumption 

EPCA creates a rebuttable 

presumption that an energy 

conservation standard is economically 

justified if the additional cost to the 

consumer of a product that meets the 

standard is less than three times the 

value of the first year’s energy savings 

resulting from the standard, as 

calculated under the applicable DOE 

test procedure. DOE’s LCC and PBP 

analyses generate values used to 

calculate the effects that proposed 

energy conservation standards would 

have on the payback period for 

customers. These analyses include, but 

are not limited to, the 3-year payback 

period contemplated under the 

rebuttable-presumption test. 

In addition, DOE routinely conducts 

an economic analysis that considers the 

full range of impacts to customers, 

manufacturers, the Nation, and the 

environment, as required under 42 

U.S.C. 6313(a)(6)(B)(ii). The results of 

this analysis serve as the basis for DOE’s 

evaluation of the economic justification 

for a potential standard level (thereby 

supporting or rebutting the results of 

any preliminary determination of 

economic justification). The rebuttable 

presumption payback calculation is 

discussed in section V.B.1.c of this 

proposed rule. 

IV. Methodology and Discussion of 

Related Comments 

This section addresses the analyses 

DOE has performed for this rulemaking 

with regards to SPVACs and SPVHPs. A 

separate subsection addresses each 

component of the analysis. 

A. Market and Technology Assessment 

To start the rulemaking analysis for 

SPVACs and SPVHPs, DOE researched 

information that provided an overall 

picture of the market for this equipment, 

including the purpose of the equipment, 

the industry structure, manufacturers, 

market characteristics, and technologies 

used in the equipment. This activity 

included both quantitative and 

qualitative assessments based primarily 

on publically-available information. The 

topics addressed in this market and 

technology assessment for the 

rulemaking include definitions, 

equipment classes, manufacturers, 

quantities, and types of equipment sold 

and offered for sale. The key findings of 

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DOE’s market assessment are 

summarized below. For additional 

detail, see chapter 3 of the NOPR TSD. 

1. Definitions of a SPVAC and a SPVHP 

EPCA defines ‘‘single package vertical 

air conditioner’’ and ‘‘single package 

vertical heat pump’’ in 42 U.S.C. 

6311(23) and (24). In particular, these 

units can be single or three-phase; must 

have major components arranged 

vertically; must be an encased 

combination of components; and must 

be intended for exterior mountain on, 

adjacent interior to, or through an 

outside wall. DOE codified these 

definitions into its regulations at 10 CFR 

431.92. Certain of these equipment 

types are sometimes referred to as 

‘‘wall-mount’’ units and are commonly 

installed on the exterior wall of 

classrooms, modular office buildings, 

and telecom shelters. Certain others of 

these units are also sometimes found 

installed in the interior wall of 

classrooms, such as in a utility closet. 

These units are beneficial because they 

provide each room with individual 

temperature control, and because in the 

event of a failure of the system, only one 

room would be affected as opposed to 

the whole space. 

2. Equipment Classes 

In evaluating and establishing energy 

conservation standards, DOE divides 

covered equipment into equipment 

classes based on the type of energy used 

or by capacity or other performancerelated feature that justifies having a 

higher or lower standard from that 

which applies to other equipment 

classes. 

EPCA currently divides both SPVACs 

and SPVHPs into 3 size categories and 

sets a Federal minimum energy 

efficiency standard for each equipment 

class. During its research for the market 

and technology assessment, DOE did 

not find any performance-related 

features that would justify creating a 

new equipment class for SPVUs. 

Accordingly, for this rulemaking, DOE 

is proposing to maintain the same 

equipment classes, as shown in Table 

IV.1. 

TABLE IV.1—CURRENT FEDERAL

EQUIPMENT CLASSES FOR SPVUS

Equipment 

class 

Size category 

(Btu/h) 

SPVAC ...... <65,000. 

≥65,000 and <135,000. 

≥135,000 and <240,000. 

SPVHP ...... <65,000. 

≥65,000 and <135,000. 

≥135,000 and <240,000. 

3. Refrigerants 

Since January 1st, 2010, all newly 

manufactured SPVUs in the United 

States have no longer been allowed to 

use the previously-prevalent R–22 

refrigerant per the Montreal Protocol. As 

result, the vast majority of SPVUs began 

using R410A refrigerant instead. DOE is 

aware of one alternative refrigerant, 

R407C, which can be used as a 

replacement for R410A in SPVUs. DOE 

is aware of some SPVUs which utilize 

R407C; however, these units are not 

offered for sale in the United States and 

therefore are not included among the 

products potentially regulated by this 

rule. 

4. Review of the Current Market for 

SPVUs 

In order to gather information needed 

for the market assessment for SPVUs, 

DOE consulted a variety of sources, 

including manufacturer literature, 

manufacturer Web sites, and the AHRI 

Directory of Certified Product 

Performance. This information served as 

resource material throughout the 

rulemaking. The sections below provide 

an overview of the SPVU market. For 

more detail on the SPVU market, see 

chapter 3 of the NOPR TSD. 

a. Trade Association Information 

The Air-Conditioning, Heating, and 

Refrigeration Institute (AHRI) is the 

trade association representing SPVU 

manufacturers. AHRI develops and 

publishes technical standards for 

residential and commercial airconditioning, heating, and refrigeration 

equipment using rating criteria and 

procedures for measuring and certifying 

equipment performance. The current 

Federal test procedure for SPVUs 

incorporates by reference an AHRI 

standard—AHRI 390–2003, 

‘‘Performance Rating of Single Package 

Vertical Air-Conditioners and Heat 

Pumps.’’ AHRI also maintains the 

Directory of Certified Product 

Performance, which is a database of 

equipment ratings for all manufacturers 

who elect to participate in the program. 

AHRI has two subsections for SPVUs: 

(1) Single Package Vertical Systems— 

AC; and (2) Single Package Vertical 

Systems—HP. DOE used the data in this 

certification directory in its market 

assessment. 

b. Manufacturer Information 

For SPVUs, DOE identified seven 

manufacturers: (1) Bard Manufacturing 

Company; (2) Change’Air; (3) Johnson 

Controls, Inc.; (4) Marvair; (5) Modine 

Manufacturing Company; (6) National 

Coil Company; and (7) Temspec, Inc. 

DOE also identified certain other 

companies that list their products in the 

AHRI Directory, but DOE believes that 

these models are residential products 

and not commercial equipment. 

Therefore, DOE did not include those 

manufacturers in this list. 

Issue 2: DOE seeks comment on 

whether there are additional companies 

not named which manufacture this type 

of equipment. 

DOE also takes into consideration the 

impact of amended energy conservation 

standards on small businesses. At this 

time, DOE has identified one small 

business (Bard Manufacturing 

Company) in the SPVU market that fall 

under the Small Business 

Administration (SBA)’s threshold as 

having 750 employees or fewer. DOE 

studies the potential impacts on these 

small businesses in detail during the 

manufacturer impact analysis (MIA). A 

summary of these impacts is contained 

in section IV.I and VI.B of this NOPR 

and described in further detail in 

chapter 12 of the NOPR TSD. 

c. Market Data 

From the AHRI Directory and 

manufacturers’ Web sites, DOE 

compiled a database of 319 SPVACs and 

270 SPVHPs. Of the 589 total SPVUs, 

DOE was able to gather efficiency data 

on 497 units (about 86 percent of DOE’s 

database). DOE was not able to find any 

units on the market for SPVAC or 

SPVHP equipment with a cooling 

capacity greater than or equal to 135,000 

Btu/h and less than 240,000 Btu/h and 

for SPVHP with a cooling capacity 

greater than or equal to 65,000 Btu/h 

and less than 135,000 Btu/h. For more 

information on the SPVU equipment 

currently available on the market, 

including a full breakdown of these 

units into their equipment classes and 

graphs showing performance data, see 

chapter 3 of the NOPR TSD. 

5. Technology Assessment 

In the technology assessment, DOE 

identifies technology options that 

appear to be feasible mechanisms for 

improving equipment efficiency. This 

assessment provides the technical 

background and structure on which 

DOE bases its screening and engineering 

analyses. 

DOE began its technology assessment 

by examining SPVUs that are currently 

on the market at both the baselines and 

higher efficiency levels. This allowed 

DOE to identify technologies that are 

commonly incorporated into equipment 

to achieve higher efficiencies, as well as 

the impact of certain components and 

improvements on SPVU efficiency. DOE 

also researched technology options that 

are utilized in other air-conditioning 

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and refrigeration equipment to 

determine their potential applicability 

to SPVUs. Lastly, DOE explored the 

market and technical information to 

identify technologies that have not yet 

come to market but that are under 

development and to determine whether 

those technologies have the potential to 

improve SPVU efficiency. Although 

DOE does consider technologies that are 

proprietary, it does not consider 

efficiency levels that can only be 

reached through the use of proprietary 

technologies, which could allow a 

single manufacturer to monopolize the 

market (any such technologies are 

eliminated during the engineering 

analysis). Through these methods, DOE 

identified numerous technologies that 

could improve the energy efficiency of 

SPVUs. 

Generally, these technologies involve 

improvements to either the heat 

exchangers or to the other system 

components that will improve the 

overall energy efficiency of the system. 

First, DOE identified technologies that 

improve the heat exchanger 

effectiveness, which included: (1) 

Increased frontal coil area; (2) increased 

depth of coil (additional tube rows); (3) 

increased fin density; (4) improved fin 

design; (5) improved tube design; (6) 

hydrophilic film coating on fins; (7) 

changing to microchannel heat 

exchangers; and (8) dual condensing 

heat exchangers. Second, DOE 

identified technologies that improve the 

efficiency of other components that 

make up the rest of the system, 

including: (1) Improved indoor and 

outdoor fan motor efficiency; (2) 

improved fan blade efficiency; (3) 

improved compressor efficiency 

(including multi-speed compressors); (4) 

thermostatic or electronic expansion 

valves; and (5) thermostatic cyclic 

controls. All of these technology options 

are presented in Table IV.2. 

TABLE IV.2—POTENTIAL TECHNOLOGY OPTIONS FOR IMPROVED ENERGY EFFICIENCY OF SPVUS

Technology Options 

Heat Exchanger Improvements ................................................................ Increased frontal coil area. 

Increased depth of coil. 

Increased fin density. 

Improved fin design. 

Improved tube design. 

Hydrophilic film coating on fins. 

Microchannel heat exchangers. 

Dual condensing heat exchangers. 

Indoor Blower and Outdoor Fan Improvements ....................................... Improved fan motor efficiency. 

Improved fan blades. 

Compressor Improvements ...................................................................... Improved compressor efficiency. 

Multi-speed Compressors. 

Other Improvements ................................................................................. Thermostatic expansion valves. 

Electronic expansion valves. 

Thermostatic cyclic controls. 

Chapter 3 of the NOPR TSD provides 

additional detail and descriptions of the 

basic construction and operation of 

SPVUs, followed by a detailed 

discussion of each of the technology 

options discussed in the preceding 

paragraph. After identifying technology 

options that will improve the efficiency 

of SPVUs, DOE passed each of those 

technology options to the screening 

analysis for further evaluation. 

B. Screening Analysis 

DOE uses the following four screening 

criteria to determine which technology 

options are suitable for further 

consideration in an energy conservation 

standards rulemaking: 

1. Technological feasibility. DOE will 

consider technologies incorporated in 

commercial products or in working 

prototypes to be technologically 

feasible. 

2. Practicability to manufacture, 

install, and service. If mass production 

and reliable installation and servicing of 

a technology in commercial products 

could be achieved on the scale 

necessary to serve the relevant market at 

the time the standard comes into effect, 

then DOE will consider that technology 

practicable to manufacture, install, and 

service. 

3. Adverse impacts on product utility 

or product availability. If DOE 

determines a technology would have a 

significant adverse impact on the utility 

of the product to significant subgroups 

of consumers, or would result in the 

unavailability of any covered product 

type with performance characteristics 

(including reliability), features, sizes, 

capacities, and volumes that are 

substantially the same as products 

generally available in the United States 

at the time, it will not consider this 

technology further. 

4. Adverse impacts on health or 

safety. If DOE determines that a 

technology will have significant adverse 

impacts on health or safety, it will not 

consider this technology further. 

(10 CFR part 430, subpart C, appendix 

A, 4(a)(4) and 5(b)) 

These four screening criteria do not 

include the propriety status of design 

options. As noted previously, DOE will 

only consider efficiency levels achieved 

through the use of proprietary designs 

in the engineering analysis if they are 

not part of a unique path to achieve that 

efficiency level. DOE does not believe 

that any of the technologies identified in 

the technology assessment are 

proprietary, and thus, did not eliminate 

any technologies for that reason. 

Through a review of each technology, 

DOE found that the technologies 

identified met all four screening criteria 

to be examined further in the analysis. 

Typically, technologies that pass the 

screening analysis are subsequently 

passed through to the engineering 

analysis for consideration in DOE’s 

downstream cost-benefit analysis. 

However, DOE did not analyze some of 

the technologies identified in the 

technology assessment because either: 

(1) Data are not available to evaluate the 

energy efficiency characteristics of the 

technology; (2) available data suggest 

that the efficiency benefits of the 

technology are negligible; or (3) the test 

procedure and EER or COP metric 

would not measure the energy impact of 

these technologies. Accordingly, DOE 

eliminated the following technologies 

from further consideration based upon 

these three additional considerations: 

(1) Increased fin density 

(2) Improved fin design; 

(3) Improved tube design; 

(4) Hydrophilic film coating on fins; 

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78632 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

31Refers to the currently-applicable federal 

minimum efficiency level. See http://

www1.eere.energy.gov/buildings/appliance_

standards/product.aspx/productid/35. 

32Refers to the current minimum efficiency 

permitted by the latest version of the ASHRAE 

standard, ASHRAE 90.1–2013. 

(5) Thermostatic or electronic 

expansion valves; 

(6) Thermostatic cyclic controls; 

(7) Microchannel heat exchangers; 

and 

(8) Multi-speed compressors. 

Of these technologies, numbers 1 

through 4 are used in baseline products, 

so no additional energy savings would 

be expected. Any potential energy 

savings of technologies 5, 6, or 8 cannot 

be measured with the established energy 

use metrics (EER and COP) because 

those technologies are associated with 

part-load performance, which is not 

captured in the EER or COP metrics 

used for rating SPVUs. Information 

indicating efficiency improvement 

potential in SPVUs is not available for 

technology number 7. 

Issue 3: DOE requests comment on its 

elimination of these technologies from 

consideration based upon the criteria 

discussed above. 

After screening out or otherwise 

removing from consideration most of 

the technologies, the following 

technologies were identified for 

consideration in the engineering 

analysis: (1) Increased frontal coil area; 

(2) increased depth of coil; (3) improved 

fan motor efficiency; (4) improved fan 

blade efficiency; (5) improved 

compressor efficiency, and (6) dual 

condensing heat exchangers. 

Chapter 4 of the NOPR TSD contains 

additional details on the screening 

analysis. 

C. Engineering Analysis 

The engineering analysis establishes 

the relationship between an increase in 

energy efficiency of the equipment and 

the increase in manufacturer selling 

price (MSP) associated with that 

efficiency level. This relationship serves 

as the basis for cost-benefit calculations 

for individual consumers, 

manufacturers, and the Nation. DOE 

typically structures its engineering 

analysis using one of three approaches: 

(1) Design-option; (2) efficiency-level; or 

(3) reverse engineering (or costassessment). A design-option approach 

identifies individual technology options 

(from the market and technology 

assessment) that can be used alone or in 

combination with other technology 

options to increase the energy efficiency 

of a unit of equipment. Under this 

approach, cost estimates of the baseline 

equipment and more-efficient 

equipment that incorporates design 

options are based on manufacturer or 

component supplier data or engineering 

computer simulation models. Individual 

design options, or combinations of 

design options, are added to the 

baseline model in descending order of 

cost-effectiveness. An efficiency-level 

approach establishes the relationship 

between manufacturer cost and 

increased efficiency at predetermined 

efficiency levels above the baseline. 

Under this approach, DOE typically 

assesses increases in manufacturer cost 

for incremental increases in efficiency, 

without identifying the technology or 

design options that would be used to 

achieve such increases. A reverseengineering, or cost-assessment, 

approach involves disassembling 

representative units of SPVACs and 

SPVHPs, and estimating the 

manufacturing costs based on a 

‘‘bottom-up’’ manufacturing cost 

assessment; such assessments use 

detailed data to estimate the costs for 

parts and materials, labor, shipping/

packaging, and investment for models 

that operate at particular efficiency 

levels. 

DOE conducted this engineering 

analysis for SPVUs using a combination 

of the efficiency level and costassessment approaches for analysis of 

the EER and COP efficiency levels. More 

specifically, DOE identified the 

efficiency levels for the analysis based 

on market data and then used the costassessment approach to determine the 

manufacturing costs at those levels. 

1. Efficiency Levels for Analysis 

The engineering analysis first 

identifies representative baseline 

equipment, which is the starting point 

for analyzing potential technologies that 

provide energy efficiency 

improvements. ‘‘Baseline equipment’’ 

refers to a model or models having 

features and technologies typically 

found in the least-efficient equipment 

currently available on the market. Based 

on market data, DOE identified 36,000 

Btu/h (3-ton) as the representative 

cooling capacity for SPVACs and 

SPVHPs with a cooling capacity less 

than 65,000 Btu/h, and DOE identified 

72,000 (6-ton) as the representative 

cooling capacity for SPVACs and 

SPVHPs with a cooling capacity greater 

than or equal to 65,000 Btu/h and less 

than 135,000 Btu/h. In the case of 

SPVUs with a cooling capacity less than 

65,000 Btu/h, 3-ton represents the 

cooling capacity with the most models 

in the database for SPVACs and 

SPVHPs. For SPVACs with a cooling 

capacity greater than or equal to 65,000 

Btu/h and less than 135,000 Btu/h, 6-ton 

represents the most common size for 

that equipment class. DOE did not find 

any models of SPVHPs greater than or 

equal to 65,000 Btu/h and less than 

135,000 Btu/h on the market. DOE did 

not find any SPVUs on the market with 

cooling capacities greater than or equal 

to 135,000 Btu/h and less than 240,000 

Btu/h. 

Next, using the information DOE 

gathered during the market and 

technology assessment, DOE selected 

higher efficiency levels for analysis for 

these representative cooling capacities 

based on the most common equipment 

efficiencies on the market and identified 

typical technologies and features 

incorporated into equipment at these 

higher efficiency levels. DOE also 

selected the highest efficiency level on 

the market for each equipment class 

(i.e., the max-tech level). To determine 

the appropriate coefficient of 

performance (COP) levels for SPVHPs, 

DOE performed an analysis of how COP 

relates to energy efficiency ratio (EER). 

DOE reviewed the models in the 

database it compiled, and for each 

equipment class, DOE calculated the 

median COP for each EER efficiency 

level for analysis. Table IV.3 and Table 

IV.4 below list the efficiency levels for 

analysis for SPVUs. Because DOE found 

no equipment on the market for SPVUs 

with cooling capacities ≥135,000 Btu/h 

and <240,000 Btu/h, DOE did not 

analyze any efficiency levels for those 

equipment classes. 

TABLE IV.3—EFFICIENCY LEVELS FOR

ANALYSIS FOR SPVUS <65,000 BTU/H

Efficiency level 

SPVAC, 

36,000 

Btu/h 

SPVHP, 

36,000 

Btu/h 

EPCA Baseline 31 9.0 EER 9.0 EER. 

3.0 COP. 

ASHRAE Baseline 32.10.0 EER 10.0 EER. 

3.0 COP. 

EL1 ....................... 10.5 EER 10.5 EER. 

3.2 COP. 

EL2 ....................... 11.0 EER 11.0 EER. 

3.3 COP. 

EL3 ....................... 11.75 EER 11.75 

EER. 

3.9 COP. 

EL4 (max-tech) ..... 12.3 EER 12.3 EER. 

3.9 COP. 

TABLE IV.4—EFFICIENCY LEVELS FOR

ANALYSIS FOR SPVUS ≥65,000 

BTU/H AND <135,000 BTU/H

Efficiency level 

SPVAC, 

72,000 

Btu/h 

SPVHP, 

72,000 

Btu/h 

EPCA Baseline ..... 8.9 EER 8.9 EER. 

3.0 COP. 

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TABLE IV.4—EFFICIENCY LEVELS FOR

ANALYSIS FOR SPVUS ≥65,000 

BTU/H AND <135,000 BTU/H—Continued 

Efficiency level 

SPVAC, 

72,000 

Btu/h 

SPVHP, 

72,000 

Btu/h 

ASHRAE Baseline 

(max-tech).

10.0 EER 10.0 EER. 

3.0 COP. 

Issue 3: DOE seeks comment on the 

EER and COP pairings for SPVHPs and 

its method of deriving the pairings. 

2. Teardown Analysis 

After selecting a representative 

capacity and efficiency level for each 

equipment class, DOE selected 

equipment near both the representative 

cooling capacity and the selected 

efficiency levels for its teardown 

analysis. DOE gathered information 

from these teardowns to create a 

detailed bill of materials (BOMs) that 

included all components and processes 

used to manufacture the equipment. To 

assemble the BOMs and to calculate the 

manufacturing product costs (MPCs) of 

SPVUs, DOE disassembled multiple 

units into their base components and 

estimated the materials, processes, and 

labor required for the manufacture of 

each individual component, a process 

known as a ‘‘physical teardown.’’ Using 

the data gathered from the physical 

teardowns, DOE characterized each 

component according to its weight, 

dimensions, material, quantity, and the 

manufacturing processes used to 

fabricate and assemble it. 

DOE also used a supplementary 

method called a ‘‘virtual teardown,’’ 

which examines published 

manufacturer catalogs and 

supplementary component data to 

estimate the major differences between 

a unit of equipment that was physically 

disassembled and a similar unit of 

equipment that was not. For virtual 

teardowns, DOE gathered product data 

such as dimensions, weight, and design 

features from publicly-available 

information, (e.g., manufacturer catalogs 

and manufacturer Web sites). DOE also 

obtained information and data not 

typically found in catalogs, such as fan 

motor details or assembly details, from 

physical teardowns of similar 

equipment or through estimates based 

on industry knowledge. The teardown 

analysis included 14 physical and 

virtual teardowns of SPVUs. 

The teardown analysis allowed DOE 

to identify the technologies that 

manufacturers typically incorporate into 

their equipment, along with the 

efficiency levels associated with each 

technology or combination of 

technologies. The end result of each 

teardown is a structured BOM, which 

DOE developed for each of the physical 

and virtual teardowns. The BOMs 

incorporate all materials, components, 

and fasteners (classified as either raw 

materials or purchased parts and 

assemblies) and characterize the 

materials and components by weight, 

manufacturing processes used, 

dimensions, material, and quantity. The 

BOMs from the teardown analysis were 

then used as inputs to the cost model to 

calculate the MPCs for each type of 

equipment that was torn down. The 

MPCs resulting from the teardowns 

were then used to develop an industry 

average MPC for each equipment class 

analyzed. See chapter 5 of the NOPR 

TSD for more details. 

During the development of this 

engineering analysis, DOE held 

interviews with manufacturers to gain 

insight into the SPVU industry and to 

request feedback on the engineering 

analysis and assumptions that DOE 

used. DOE used the information it 

gathered from those interviews, along 

with the information obtained through 

the teardown analysis, to refine the 

assumptions and data in the cost model. 

For additional detail on the teardown 

process, see chapter 5 of the NOPR TSD. 

During the teardown process, DOE 

gained insight into the typical design 

options manufacturers use to reach 

specific efficiency levels. DOE can also 

determine the efficiency levels at which 

manufacturers tend to make major 

technological design changes. For this 

engineering analysis, DOE assumed that 

manufacturers will switch from a 

permanent-split capacitor (PSC) indoor 

motor to a brushless permanent magnet 

(BPM) motor to achieve the 10 EER 

level, which was consistent with DOE 

observations during the physical 

teardowns. As a result, the engineering 

results at 10 EER (and higher levels) 

include the cost of a BPM blower motor. 

This assumption is further supported by 

data gathered during the market 

assessment. In the market assessment, 

DOE found that at 10 EER, there is a 

slightly higher number of models with 

BPM motors than with PSC motors. 

However, DOE found that most of the 

models (18 out of 21 models) using a 

PSC motor at 10 EER are gas-heat units, 

which DOE estimates make up a small 

percentage (<4%) of total SPVU 

shipments. A breakdown of the number 

of models on the market with BPM and 

PSC motors, as well as market share 

estimates of SPVUs with gas-heat, can 

be found in Chapter 3 of the NOPR TSD 

(Market and Technology Assessment). 

After considering the information 

gathered during the market assessment 

and observed during the teardown 

process, DOE concluded that BPM 

motors tend to be the dominant blower 

design option for SPVU manufacturers 

when reaching the 10 EER level. This 

assumption is accounted for in the 

engineering results at the 10 EER level 

and higher levels, as well as in the 

energy use characterization and, 

consequently, in the downstream 

analyses. For more information on the 

design options DOE considered at each 

efficiency level, see chapter 3 of the 

NOPR TSD. 

Issue 4: DOE seeks comment as to 

whether switching to a BPM motor at 10 

EER represents the most probable option 

of achieving that efficiency level. 

3. Cost Model 

DOE developed a manufacturing cost 

model to estimate the manufacturing 

production cost of SPVUs. The cost 

model is a spreadsheet model that 

converts the materials and components 

in the BOMs into dollar values based on 

the price of materials, average labor 

rates associated with fabrication and 

assembling, and the cost of overhead 

and depreciation, as determined based 

on manufacturer interviews and DOE 

expertise. To convert the information in 

the BOMs into dollar values, DOE 

collected information on labor rates, 

tooling costs, raw material prices, and 

other factors. For purchased parts, the 

cost model estimates the purchase price 

based on volume-variable price 

quotations and detailed discussions 

with manufacturers and component 

suppliers. For fabricated parts, the 

prices of raw metal materials (e.g., tube, 

sheet metal) are estimates on the basis 

of five-year averages (from 2006 to 

2011). The cost of transforming the 

intermediate materials into finished 

parts is estimated based on current 

industry pricing. Additional details on 

the cost model are contained in chapter 

5 of the NOPR TSD. 

4. Manufacturing Production Costs 

Once the cost estimates for all the 

components in each teardown unit were 

finalized, DOE totaled the cost of 

materials, labor, and direct overhead 

used to manufacture each type of 

equipment in order to calculate the 

manufacturing production cost. The 

total cost of the equipment was broken 

down into two main costs: (1) The full 

manufacturing production cost, referred 

to as MPC; and (2) the non-production 

cost, which includes selling, general, 

and administration (SG&A) costs; the 

cost of research and development; and 

interest from borrowing for operations 

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33From http://www.bls.gov/news.release/ppi.htm, 

‘‘current price indexes grouped by industry 

according to the North American Industry 

Classification System (NAICS) have series 

identifiers that begin with the prefix ‘‘PCU.’’ After 

the prefix, there are twelve digits (the six-digit 

industry code is listed twice) followed by up to 

seven alphanumeric characters identifying product 

detail.’’ The air-conditioning, refrigeration, and 

forced air heating equipment industry is identified 

by NAICS with the code 333415. 

34See http://www.bls.gov/ppi/. 

or capital expenditures. DOE estimated 

the MPC at each efficiency level 

considered for each equipment class, 

from the baseline through the max-tech 

level. The incremental increases in MPC 

over the EPCA baseline efficiency level 

for each subsequently higher efficiency 

level are shown in Table IV.5. After 

incorporating all of the assumptions 

into the cost model, DOE calculated the 

percentages attributable to each element 

of total production costs (i.e., materials, 

labor, depreciation, and overhead). 

These percentages are used to validate 

the assumptions by comparing them to 

manufacturers’ actual financial data 

published in annual reports, along with 

feedback obtained from manufacturers 

during interviews. DOE uses these 

production cost percentages in the MIA. 

The MPCs were initially developed in 

2011$. To update the MPCs to 2013$, 

DOE multiplied the costs by the ratio of 

the mid-year producer price index (PPI) 

in 2011 to the mid-year PPI in 2013. For 

SPVACs, DOE used the PPI for ‘‘unitary 

air-conditioners, except for air source 

heat pumps’’ (PCU333415333415E),33

and similarly, the SPVHP costs were 

updated using the PPI for ‘‘heat pumps’’ 

(PCU333415333415H), which can be 

found on the Bureau of Labor Statistics 

Web site.34

TABLE IV.5—INCREMENTAL MPC INCREASES

Equipment type EPCA baseline 

ASHRAE 

baseline EL1 EL2 EL3 EL4 

SPVAC <65,000 Btu/h ..................................................... .................... $274.63 $343.35 $412.06 $616.89 $1,001.24 

SPVAC ≥65,000 Btu/h and <135,000 Btu/h .................... .................... 381.65 .................... .................... .................... ....................

SPVHP <65,000 Btu/h ..................................................... .................... 315.51 394.45 473.39 708.71 1,150.27 

SPVHP ≥65,000 Btu/h and <135,000 Btu/h .................... .................... 438.45 .................... .................... .................... ....................

5. Cost-Efficiency Relationship 

The result of the engineering analysis 

is a cost-efficiency relationship. DOE 

created a separate cost-efficiency 

relationship at the representative 

cooling capacity for each of the four 

equipment classes analyzed. DOE 

reported the MPCs in aggregated form to 

maintain confidentiality of sensitive 

component data. DOE obtained input 

from manufacturers during the 

manufacturer interview process on the 

MPC estimates and assumptions to 

confirm their accuracy. For SPVACs 

with a cooling capacity <65,000 Btu/h, 

DOE performed physical teardowns and 

supplemented that with virtual 

teardowns to develop cost-efficiency 

relationships for each manufacturer and 

then created a market-share-weighted 

relationship based on approximate 

market share data obtained during the 

manufacturer interviews. For SPVACs 

with a cooling capacity ≥65,000 Btu/h 

and <135,000 Btu/h, DOE performed 

virtual teardowns of a 6-ton SPVAC and 

determined the average percentage 

increase in cost from a 3-ton SPVAC to 

a 6-ton SPVAC. Then, DOE scaled the 3- 

ton cost-efficiency curve by that average 

percentage increase in cost. Likewise for 

SPVHPs with a cooling capacity <65,000 

Btu/h, DOE performed a physical 

teardown and compared the average 

percentage increase in cost of a 3-ton 

SPVHP compared to a 3-ton SPVAC. 

DOE applied this average percentage 

increase in cost to the cost-efficiency 

curve for both SPVACs with a cooling 

capacity <65,000 Btu/h and SPVACs 

with a cooling capacity ≥65,000 Btu/h 

and <135,000 Btu/h to get the respective 

cost-efficiency curves for the SPVHP 

equipment class. 

In order to develop the cost-efficiency 

relationships for SPVUs, DOE examined 

the cost differential to move from one 

efficiency level to the next for each 

manufacturer. DOE used the results of 

the teardowns on a market-share 

weighted average basis to determine the 

industry average cost increase to move 

from one efficiency level to the next. 

Additional detail on how DOE 

developed the cost-efficiency 

relationships and related results are 

available in chapter 5 of the NOPR TSD. 

Chapter 5 of the NOPR TSD also 

presents these cost-efficiency curves in 

the form of energy efficiency versus 

MPC. 

Issue 5: DOE seeks comment on its 

derivation of the cost-efficiency curves 

for SPVHPs and SPVACs with a cooling 

capacity ≥65,000 Btu/h and <135,000 

Btu/h. 

6. Manufacturer Markup 

To account for manufacturers’ nonproduction costs and profit margin, DOE 

applies a non-production cost multiplier 

(the manufacturer markup) to the full 

MPC. The resulting manufacturer selling 

price (MSP) is the price at which the 

manufacturer can recover all production 

and non-production costs and earn a 

profit. To meet new or amended energy 

conservation standards, manufacturers 

often introduce design changes to their 

equipment lines that result in increased 

MPCs. Depending on the competitive 

pressures, some or all of the increased 

production costs may be passed from 

manufacturers to retailers and 

eventually to customers in the form of 

higher purchase prices. As production 

costs increase, manufacturers typically 

incur additional overhead. The MSP 

should be high enough to recover the 

full cost of the equipment (i.e., full 

production and non-production costs) 

and yield a profit. The manufacturer 

markup has an important bearing on 

profitability. A high markup under a 

standards scenario suggests 

manufacturers can readily pass along 

the increased variable costs and some of 

the capital and product conversion costs 

(the one-time expenditure) to customers. 

A low markup suggests that 

manufacturers will not be able to 

recover as much of the necessary 

investment in plant and equipment. 

DOE normally develops the 

manufacturer markup through an 

examination of corporate annual reports 

and Securities and Exchange 

Commission (SEC) 10–K reports; 

however, in the case of SPVU 

manufacturers, DOE did not feel this 

process would be representative of the 

majority of the industry, because most 

SPVU manufacturers are privately-held 

companies. Therefore, DOE based the 

manufacturer markup for the SPVU 

industry on the markup used for the 

package terminal air conditioner and 

package terminal heat pump final rule 

published on in the Federal Register on 

October 7, 2008 (73 FR 58772), and 

sought manufacturer feedback on this 

markup number during the interview 

process. DOE used the PTAC 

manufacturer markup because it is a 

comparable industry to the SPVU 

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35U.S. Department of Commerce, Bureau of 

Economic Analysis (BEA), Implicit Price Deflators 

for Gross Domestic Product (Available in Section 1, 

Table 1.1.9 at http://www.bea.gov/national/

nipaweb/DownSS2.asp) (Last accessed February 7, 

2014). 

industry in terms of the size of the 

market (i.e., the number of annual 

shipments) and the types of the 

equipment on the market (i.e., both are 

commercial air conditioners of similar 

capacities). Based on manufacturer 

feedback during the interviews, DOE 

determined that the manufacturer 

markup used in the PTAC and PTHP 

final rule (1.29) was slightly high for use 

with SPVU manufacturers. Thus, DOE 

lowered the estimated average 

manufacturer markup for the SPVU 

industry to 1.28 based on the feedback 

received. See chapter 6 of the NOPR 

TSD for additional details. 

7. Shipping Costs 

Manufacturers of heating, ventilation, 

and air-conditioning (HVAC) equipment 

typically pay for shipping to the first 

step in the distribution chain. Freight is 

not a manufacturing cost, but because it 

is a substantial cost incurred by the 

manufacturer, DOE is accounting for 

shipping costs of SPVUs separately from 

other non-production costs that 

comprise the manufacturer markup. To 

calculate the MSP for SPVUs, DOE 

multiplied the MPC at each efficiency 

level (determined from the cost model) 

by the manufacturer markup and added 

shipping costs for equipment at the 

given efficiency level. More specifically, 

DOE calculated shipping costs at each 

efficiency level based on the average 

outer dimensions of equipment at the 

given efficiency and assuming the use of 

a typical 53-foot straight-frame trailer 

with a storage volume of 4,240 cubic 

feet. 

In this rulemaking, shipping costs for 

SPVUs were determined on an area 

basis. These products are typically too 

tall to be double-stacked in a vertical 

fashion, and they cannot be shipped in 

any other orientation other than vertical. 

During interviews, manufacturers 

agreed with this approach and stated 

that the compressor and heat exchangers 

are more likely to be damaged in transit 

if they are oriented in any direction 

other than vertical. To calculate these 

shipping costs, DOE calculated the cost 

per area of a trailer, based on an 

estimated cost of $4,000 per shipping 

load and the standard dimensions of a 

53-foot trailer (which would 

approximate the cost of shipping the 

equipment across the country). Next, 

DOE examined the average sizes of 

equipment in each equipment class at 

each efficiency level. DOE then 

estimated the shipping costs by 

multiplying the equipment area by the 

respective cost per area on the trailer. 

DOE updated the shipping costs to 

2013$ by using a general gross domestic 

product (GDP) deflator.35 Chapter 5 of 

the NOPR TSD contains additional 

details about DOE’s shipping cost 

assumptions and DOE’s shipping cost 

estimates. 

8. Manufacturer Interviews 

As noted in the preceding section, 

throughout the rulemaking process, 

DOE has sought and continues to seek 

feedback and insight from interested 

parties that would improve the 

information used in its analysis. DOE 

interviewed manufacturers as part of the 

NOPR manufacturer impact analysis. 

During the interviews, DOE sought 

feedback on all aspects of its analyses 

for SPVUs. For the engineering analysis, 

DOE discussed the analytical 

assumptions and estimates, cost model, 

and cost-efficiency curves with SPVU 

manufacturers. DOE considered all the 

information manufacturers provided 

when refining the cost model and 

assumptions. However, DOE 

incorporated data and information 

specific to individual manufacturers 

into the analysis as averages in order to 

avoid disclosing sensitive information 

about individual manufacturers’ 

equipment or manufacturing processes. 

More detail about the manufacturer 

interviews are contained in chapter 12 

of the NOPR TSD. 

D. Markups Analysis 

DOE understands that the price of 

SPVU equipment depends on the 

distribution channel the customer uses 

to purchase the equipment. Typical 

distribution channels for most 

commercial HVAC equipment include 

shipments that may pass through 

manufacturers’ national accounts, or 

through entities including wholesalers, 

mechanical contractors, and/or general 

contractors. However, DOE understands 

that there are multiple branched 

distribution channels for SPVU 

equipment for both new construction 

and replacement equipment. For SPVU 

equipment, the new equipment 

distribution channel is one in which 

SPVU equipment is sold directly or 

indirectly to manufacturers of wood and 

non-wood modular buildings, and the 

rest of the supply chain is essentially 

the chain of manufacturing, 

wholesaling, and contractor support for 

wood and non-wood modular buildings. 

The distribution channel for 

replacement equipment goes directly, or 

through air conditioning wholesalers/

distributors, to mechanical contractors 

who install replacements on behalf of 

customers, or to wholesalers/

distributors of modular buildings, who 

own leased fleets of modular buildings 

and who are assumed to perform their 

own SPVU replacements in their leased 

fleets. 

DOE developed supply chain 

markups in the form of multipliers that 

represent increases above equipment 

purchase costs for air-conditioning 

equipment wholesalers/distributors, 

modular building manufacturers and 

wholesalers/distributors, and 

mechanical contractors and general 

contractors working on behalf of 

customers. DOE applied these markups 

(or multipliers) to each distribution 

channel entity’s costs that were 

developed from the engineering 

analysis. DOE then added sales taxes 

and installation costs (where 

appropriate) to arrive at the final 

installed equipment prices for baseline 

and higher-efficiency equipment. (See 

chapter 6 of the NOPR TSD for 

additional details on markups.) As 

noted above, DOE identified two 

separate distribution channels for SPVU 

equipment to describe how the 

equipment passes from the equipment 

manufacturer to the customer, as 

presented in Table IV.6 below. 

TABLE IV.6—DISTRIBUTION CHANNELS FOR SPVU EQUIPMENT

Channel 1 

New SPVU Equipment 

Channel 2 

Replacement SPVU Equipment 

Air-Conditioning Wholesale Distributor or Manufacturer’s Representative.Air-Conditioning Wholesale Distributor or Manufacturer’s Representative. 

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78636 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

36Heating, Air-conditioning & Refrigeration 

Distributors International (HARDI), 2013 Profit 

Report (2012 Data) (Available at: http://

www.hardinet.org/Profit-Report). 

37The U.S. Census Bureau conducts an Economic 

Census every five years. The 2012 Economic Census 

is may become available early in 2015; if so, the 

final rule analysis will be updated with data from 

the 2012 Economic Census. 

38U.S. Census Bureau. 2007. Prefabricated Wood 

Building Manufacturing. Sector 32: 321992. Table 

EC073111 Manufacturing: Industry Series: Detailed 

Statistics by Industry for the United States: 2007. 

(Available at http://factfinder2.census.gov/faces/

nav/jsf/pages/

searchresults.xhtml?ref=top&refresh=t#none). 

39U.S. Census Bureau. 2007. Prefabricated Metal 

Building and Component Manufacturing. Sector 33: 

332311. EC073111 Manufacturing: Industry Series: 

Detailed Statistics by Industry for the United States: 

2007 (Available at http://factfinder2.census.gov/

faces/nav/jsf/pages/

searchresults.xhtml?ref=top&refresh=t#none). 

40U.S. Census Bureau. 2007. Other Concrete 

Product Manufacturing Sector 32: 327390. 

EC073111 Manufacturing: Industry Series: Detailed 

Statistics by Industry for the United States: 2007 

(Available at: http://factfinder2.census.gov/faces/

nav/jsf/pages/

searchresults.xhtml?ref=top&refresh=t#none). 

41U.S. Census Bureau. 2007. 423310 Lumber, 

plywood, millwork, and wood panel merchant 

wholesalers. EC0742SXSB06. Wholesale Trade: 

Subject Series—Misc Subjects: Gross Margin and its 

Components for Merchant Wholesalers for the 

United States: 2007 (Available at: http://

factfinder2.census.gov/faces/nav/jsf/pages/

searchresults.xhtml?ref=top&refresh=t#none). 

42U.S. Census Bureau. 2007. 423390. Other 

construction material merchant wholesalers. 

EC0742SXSB06. Wholesale Trade: Subject Series— 

Misc Subjects: Gross Margin and its Components for 

Merchant Wholesalers for the United States: 2007 

(Available at: http://factfinder2.census.gov/faces/

nav/jsf/pages/

searchresults.xhtml?ref=top&refresh=t#none). 

43U.S. Census Bureau. 2007. Brick, stone, and 

related construction material merchant wholesalers: 

2007. Sector 42: 423320 Other Construction 

Material Merchant Wholesalers. Brick, stone, and 

related construction material merchant wholesalers: 

Merchant wholesalers, except manufacturers’ sales 

branches and offices. Detailed Statistics by Industry 

for the United States: 2007 (Available at: http://

factfinder2.census.gov/faces/nav/jsf/pages/

searchresults.xhtml?ref=top&refresh=t#none). 

44U.S. Census Bureau. 2007. Sector 23: 238220. 

Plumbing, heating, and air-conditioning 

contractors. EC0723I1: Construction: Industry 

Series: Preliminary Detailed Statistics for 

Establishments: 2007 (Available at: http://

factfinder2.census.gov/faces/nav/jsf/pages/

searchresults.xhtml?ref=top&refresh=t#none). 

45U.S. Census Bureau. 2007. Sector 23: 236220. 

Commercial and institutional building construction. 

EC0723I1: Construction: Industry Series: 

Preliminary Detailed Statistics for Establishments: 

2007 (Available at: http://factfinder2.census.gov/

faces/nav/jsf/pages/

searchresults.xhtml?ref=top&refresh=t#none). 

46The Sales Tax Clearing House (2013) (Last 

accessed Feb. 7, 2014) (Available at: 

www.thestc.com/STrates.stm). 

TABLE IV.6—DISTRIBUTION CHANNELS FOR SPVU EQUIPMENT—Continued 

Channel 1 

New SPVU Equipment 

Channel 2 

Replacement SPVU Equipment 

Modular Building Manufacturer ................................................................ Mechanical Contractor or Modular Building Distributor. 

Modular Building Distributor or General Contractor.

Customer .................................................................................................. Customer. 

DOE estimated a baseline markup and 

an incremental markup. DOE defined a 

‘‘baseline markup’’ as a multiplier that 

converts the manufacturer selling price 

of equipment with baseline efficiency 

into the customer 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 higherefficiency equipment into the customer 

purchase price for the same (higherefficiency) equipment. 

DOE developed the markups based on 

available financial data. More 

specifically, DOE based the airconditioning wholesaler/distributor 

markups on data from the Heating, Air 

Conditioning, and Refrigeration 

Distributors International (HARDI) 2013 

Profit Report.36 DOE also used financial 

data from the 2007 U.S. Census 

Bureau 37 for the wood 38 and nonwood 39 modular building 

manufacturing industries; concrete 

product manufacturing sector; 40 the 

wood 41 and non-wood 42 modular 

building wholesale industries; brick, 

stone, and related construction material 

merchant wholesalers; 43 the plumbing, 

heating, and air-conditioning contractor 

industry; 44 and the non-residential 

general contractor industries 45 to 

estimate markups for all of these sectors. 

The overall markup is the product of 

all the markups (baseline or 

incremental) for the different steps 

within a distribution channel plus sales 

tax. DOE calculated sales taxes based on 

2013 State-by-State sales tax data 

reported by the Sales Tax 

Clearinghouse.46 Because both 

distribution channel costs and sales tax 

vary by State, DOE allowed markups 

due to distribution channel costs and 

sales taxes within each distribution 

channel to vary by State. No information 

was available to develop State-by-State 

distributions of SPVU equipment by 

building type or business type, so the 

distributions of sales by business type 

are assumed to be the same in all States. 

The national distribution of the 

markups varies among business types. 

Chapter 6 of the NOPR TSD provides 

additional detail on markups. 

Issue 6: Because the identified market 

channels are complex and their 

characterization required a number of 

assumptions, DOE seeks input on its 

analysis of market channels for the 

above equipment classes. 

E. Energy Use Analysis 

Based on information received from 

manufacturer interviews, DOE believes 

that approximately 35 percent of SPVAC 

shipments go to educational facilities, 

the majority of which are for space 

conditioning of modular classroom 

buildings. Another approximately 35 

percent of the shipments go to providing 

cooling for telecommunications and 

electronics enclosures. The remainder of 

shipments (30 percent) is used in a wide 

variety of commercial buildings, 

including offices, temporary buildings, 

and some miscellaneous facilities. In 

almost all of these commercial building 

applications, the buildings served are 

expected to be of modular construction, 

because SPVUs, as packaged air 

conditioners installed on external 

building walls, do not impact site 

preparation costs for modular buildings, 

which may be relocated multiple times 

over the building’s life. The verticallyoriented configuration of SPVUs allows 

the building mounting to be unobtrusive 

and minimizes impacts on modular 

building transportation requirements. 

These advantages do not apply to a 

significant extent in site-constructed 

buildings. DOE also believes that 

shipments of SPVHP equipment would 

primarily be to educational facilities or 

office-type end uses, but would be 

infrequently used for 

telecommunication or electronic 

enclosures for which the heating 

requirements are often minimal. 

DOE analyzed energy use in three 

different classes of commercial 

buildings that utilize SPVU equipment: 

(1) Modular classrooms; (2) modular 

offices; and (3) telecommunications 

shelters. To estimate the energy use of 

SPVU equipment in these building 

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47EnergyPlus Energy Simulation Software and 

documentation are available at: http://

apps1.eere.energy.gov/buildings/energyplus/. 

48The commercial prototype building models are 

available on DOE’s Web site as Energy Plus input 

files at: http://www.energycodes.gov/development/

commercial/90.1_models. Documentation of the 

initial model development is provided in: Deru, M., 

et al., U.S. Department of Energy Commercial 

Reference Building Models of the National Building 

Stock, NREL/TP–5500–46861 (2011). 

49EnergyConsult Pty Ltd., Equipment Energy 

Efficiency Committee Regulatory Impact Statement 

Consultation Draft: Minimum Energy Performance 

Standards and Alternative Strategies for Close 

Control Air Conditioners, Report No 2008/11 (2008) 

(Available at: www.energyrating.gov.au). 

50American Society of Heating, Refrigerating, and 

Air-Conditioning Engineers (ASHRAE), Energy 

Standard for Buildings Except Low-Rise Residential 

Buildings, ANSI/ASHRAE/IESNA Standard 90.1– 

2004 (2005). 

51ASHRAE 90.1–2004 is still one of the 

prevailing building codes for the design of new 

commercial buildings. In addition, a large 

percentage of existing buildings were built in 

accordance with earlier versions of ASHRAE 

Standard 90.1. 

52American Society of Heating, Refrigerating, and 

Air-Conditioning Engineers (ASHRAE), Ventilation 

for Acceptable Indoor Air Quality, ANSI/ASHRAE/ 

IESNA Standard 62.1–2004 (2004). 

53An ‘‘outside air economizer’’ is a combination 

of ventilation and exhaust air dampers and controls 

that increase the amount of outside air brought in 

to a building when the outside air conditions (i.e., 

temperature and humidity) are low, such that 

increasing the amount of ventilation air reduces the 

equipment cooling loads. 

54 DOE notes that these requirements introduced 

in ASHRAE Standard 90.1–2010 continued 

unchanged in ASHRAE Standard 90.1–2013. 

types, DOE developed building 

simulation models for use with DOE’s 

EnergyPlus software.47 A prototypical 

building model was developed for each 

building type, described by the building 

footprint, general building size, and 

design. The building types were 

represented by a 1,568 ft2 wood-frame 

modular classroom, a 1,568 ft2 woodframe modular office, and a 240 ft2

concrete-wall telecommunication 

shelter. In each case, the building 

construction (footprint, window-wall 

ratio, general design) was developed to 

be representative of typical designs 

within the general class of building. 

Operating schedules, internal load 

profiles, internal electric receptacle 

(plug) loads, and occupancy for the 

modular classroom were those from 

classroom-space-type data found in the 

DOE Primary School commercial 

prototype building model.48 Operating 

schedules, internal load profiles, 

internal plug loads, and occupancy for 

modular office buildings were those 

from office space in the DOE Small 

Office commercial prototype building 

model. Id. For the telecommunications 

shelters, DOE did not identify a source 

for typical representative internal 

electronic loads as a function of 

building size, nor did it find 

information on representative internal 

gain profiles. However, based on 

feedback from shelter manufacturers, 

DOE used a 36,000 Btu/h (10.55 kW) 

peak internal load to reflect internal 

design load in the shelter. DOE 

determined that on average over the 

year, this load ran at a scheduled 65 

percent of peak value, reflecting 

estimates for computer server 

environments.49 Each of these three 

building models was used to establish 

the energy usage of SPVAC and SPVHP 

equipment in the same building class. 

Envelope performance (e.g., wall, 

window, and roof insulation, and 

window performance) and lighting 

power inputs were based on 

requirements in ASHRAE Standard 

90.1–2004.50 DOE believes that the 

requirements in ASHRAE Standard 

90.1–2004 are sufficiently representative 

of a mixture of both older and more 

recent construction 51 and that resulting 

SPVU equipment loads will be 

representative of typical SPVU 

equipment loads in the building stock. 

Ventilation levels were based on 

ASHRAE Standard 62.1–2004.52

DOE simulated each building 

prototype in each of 237 U.S. climate 

locations, taking into account variation 

in building envelope performance for 

each climate as required by ASHRAE 

90.1–2004. For simulations used to 

represent the less than 65,000 Btu/h 

SPVU equipment, no outside air 

economizers were assumed for the 

modular office and modular classroom 

buildings.53 However, for simulations 

used to represent greater than or equal 

to 65,000 Btu/h but less than 135,000 

Btu/h equipment, economizer usage was 

presumed to be climate-dependent in 

these building types, based on ASHRAE 

Standard 90.1–2004 requirements for 

unitary equipment in that capacity 

range. For the telecommunications 

shelters, economizers were assumed for 

45 percent of buildings, based on 

manufacturer interviews. In response to 

the April 2014 NODA and DOE’s 

request for information on the use of 

economizers in telecommunications 

shelters, Lennox International stated 

their belief that economizers would be 

used in a majority of equipment serving 

this market. The commenter pointed out 

that ASHRAE Standard 90.1 now 

requires the use of economizers in 

HVAC equipment greater than 54,000 

Btu/h in all but two climate zones. 

Lennox stated that this change in 

ASHRAE Standard 90.1 has driven this 

economizer requirement to over 90 

percent of units shipped for the 

telecommunications shelter application 

(Lennox International Inc., No. 15 at p. 

7). 

In response, DOE’s understanding is 

that the 54,000 Btu/h limit introduced 

in ASHRAE Standard 90.1–2010 is for 

comfort cooling applications and that 

ASHRAE Standard 90.1 has separate 

economizer requirements for computer 

rooms (generally defined as a space 

where the primary function is to house 

equipment for processing of electronic 

data and which has a design electronics 

power density exceeding 20 W/sf—as 

would be typical of a 

telecommunication shelter).54 These 

computer room economizer 

requirements begin to require 

economizers only for fan cooling units 

greater than or equal to 65,000 Btu/h 

and at that threshold only for certain 

climate zones. The comfort cooling 

requirements in ASHRAE Standard 

90.1, to the extent they are adopted by 

local jurisdictions, would appear not to 

apply to telecommunications shelters. 

And, if such requirements were to 

apply, they would do so only for a 

fraction of the products in the less than 

65,000 Btu/h SPVU market. 

Additionally, manufacturers generally 

agreed during manufacturer interviews 

that approximately 45 percent of SPVUs 

that are shipped for telecommunications 

shelters contain economizers. For these 

reasons, in this NOPR, DOE still 

assumed that 45 percent of these 

buildings used economizers, and 

requests further information regarding 

the percentage of SPVUs in 

telecommunication shelters that use 

economizers. Users of the SPVU LCC 

spreadsheet can change the percentage 

of equipment using economizers to see 

the impact of different weights. In 

addition, for the telecommunication 

shelter, redundant identical air 

conditioners with alternating usage 

were assumed when establishing 

average annual energy consumption per 

unit. 

Simulations were done for the 

buildings using SPVAC equipment and 

electric resistance heating, and then a 

separate set of simulations was done for 

buildings with SPVHP equipment. For 

each equipment type and building type 

combination, DOE simulated each 

efficiency level identified in the 

engineering analysis for each equipment 

class. Fan power at these efficiency 

levels was based on manufacturer’s 

literature and reported fan power 

consumption data as developed in the 

engineering analysis. BPM supply air 

blower motors were assumed at an EER 

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55Wilcox S. and W. Marion, User’s Manual for 

TMY3 Data Sets, National Renewable Energy 

Laboratory, Report No. NREL/TP–581–43156 

(2008). 

56EnergyPlus TMY3-based weather data files and 

design day data files available at: http://apps1.eere.

energy.gov/buildings/energyplus/weatherdata_

about.cfm. 

of 10.0 and higher for all classes of 

equipment based on results from the 

engineering analysis. The supply air 

blower motors are assumed to run at 

constant speed and constant power 

while operating. 

DOE used typical meteorological 

weather data (TMY3) for each location 

in the simulations.55 DOE sized 

equipment for each building simulation 

using a design day sizing method 

incorporating the design data found in 

the EnergyPlus design-day weather data 

files for each climate.56 DOE also 

incorporated an additional cooling 

sizing factor of 1.1 for the equipment 

used in the modular office and modular 

classroom simulations, reflective of the 

typical sizing adjustment needed to 

account for discrete available equipment 

capacities in SPVAC and SPVHP 

equipment. 

EER and heating COP were converted 

to corresponding simulation inputs for 

each efficiency level simulated. These 

inputs, along with the calculated fan 

power at each efficiency level, were 

used in the building simulations. 

Further details of the building model 

and the simulation inputs for the 

SPVAC and SPVHP equipment can be 

found in chapter 7 of the NOPR TSD. 

From the annual simulation results 

for SPVAC equipment, DOE extracted 

the condenser energy use for cooling, 

the supply air blower energy use for 

both heating and cooling hours, the 

electric resistance heating energy, and 

the equipment capacity for each 

building type, climate, and efficiency 

level. From these, DOE developed 

corresponding normalized annual 

cooling energy per cooling ton and 

annual blower energy per ton for the 

efficiency levels simulated. DOE also 

developed the electrical heating energy 

per ton for the building. These per-ton 

cooling and blower energy values were 

added together and then multiplied by 

the average cooling capacity estimated 

for the equipment class simulated to 

arrive at an initial energy consumption 

estimate for SPVAC. In a deviation from 

the SPVU NODA analysis, DOE also 

noted that where fan power was 

reduced for higher efficiency levels, 

there was a corresponding increase in 

the amount of heating required in each 

climate to make up for the loss of heat 

energy imparted into the supply air 

stream through the use of the more 

efficient supply air blower during the 

heating season. This impact was climate 

dependent, with little heating impact in 

warm climates, and greater heating 

impact in cold climates where heating 

energy requirements dominate during 

the year. DOE calculated this heating 

‘‘take back’’ effect for higher efficiency 

levels as a deviation from the baseline 

heating energy use for each equipment 

capacity. The final SPVAC energy 

consumption estimates were then based 

on the calculated cooling and supply 

blower energy uses plus this heating 

take back, which allowed the resulting 

energy savings estimates to correctly 

account for the heating energy increase 

during the year. In addition, it was 

estimated that 5 percent of the market 

for the SPVAC less than 65,000 Btu/h 

class utilize gas furnace heating. The 

heating take back for these systems was 

estimated based on the heating load of 

the systems with electric resistance heat 

and assuming an average 81-percent 

furnace annual fuel utilization 

efficiency (AFUE). 

The analytical method for SPVHP was 

carried out in a similar fashion; 

however, for heat pumps, DOE included 

the heating energy (compressor heating 

and electric resistance backup) directly 

from the simulation results and, thus, 

did not separately calculate a heating 

take back effect. From these data, DOE 

developed per-ton energy consumption 

values for cooling, supply blower, and 

heating electric loads. These per-ton 

energy figures were summed and 

multiplied by the nominal capacity for 

the equipment class simulated to arrive 

at the annual per-ton energy 

consumption for SPVHP for each 

combination of building type, climate, 

and efficiency level. 

For each combination of equipment 

class, building type, climate, and 

efficiency level, DOE developed unit 

energy consumption (UEC) values for 

each State using weighting factors to 

establish the contribution of each 

climate in each State. Once State-level 

UEC estimates were established, they 

were provided as input to the life-cycle 

cost analysis. National average UEC 

estimates for each equipment class and 

efficiency level were also established 

based on population-based weighting 

across States and shipment weights to 

the different building types. With regard 

to the latter, while DOE established 

shipment weights for SPVAC equipment 

related to the three building types 

(educational, office, and 

telecommunications), DOE determined 

that SPVHP equipment was not used to 

a significant extent in 

telecommunication facilities and, thus, 

only allocated shipments of SPVHP 

equipment to two building types, 

educational and office. 

For details of this energy use analysis, 

see chapter 7 of the NOPR TSD. 

Table IV.7 shows the annual UEC 

estimates for SPVAC and SPVHP 

corresponding to the efficiency levels 

analyzed. 

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57See http://www1.eere.energy.gov/buildings/ 

appliance_standards/product.aspx/productid/35. 

58 Damodaran Online (Last accessed Feb. 14, 

2014) (Available at: http://pages.stern.nyu.edu/ 

∼adamodar/New_Home_Page/home.htm). 

TABLE IV.7—NATIONAL UEC ESTIMATES FOR SPVAC AND SPVHP EQUIPMENT

Efficiency level 

Equipment class 

SPVAC, <65 

kBtu/h 

SPVHP, <65 

kBtu/h 

SPVAC, ≥65 

and 

<135 kBtu/h 

SPVHP, ≥65 

and 

<135 kBtu/h 

kWh/yr Gas kBtu/yr * kWh/yr kWh/yr kWh/yr 

EPCA Baseline .................................................................... 6,880 ........................ 20,921 13,743 41,721 

ASHRAE Baseline ** ............................................................ 6,175 54 20,383 12,251 40,589 

EL1 ....................................................................................... 5,923 54 19,921 NA NA 

EL2 ....................................................................................... 5,694 54 19,629 NA NA 

EL3 ....................................................................................... 5,387 54 18,775 NA NA 

EL4 ** ................................................................................... 5,185 54 18,633 NA NA 

* Calculated average gas heating ‘‘take back’’ based on 5 percent of market with gas heat. 

** ASHRAE Baseline represents max-tech levels established for SPVAC and SPVHP greater than or equal to 65,000 Btu/h, but less than 

135,000 Btu/h. EL4 represents max-tech levels established for SPVAC and SPVHP less than 65,000 Btu/h. 

Issue 7: DOE seeks input on its 

analysis of UEC for the equipment 

classes in Table IV.7 and its use in 

establishing the energy savings potential 

for higher standards. Of particular 

interest to DOE is input on shipments of 

SPVHP equipment to 

telecommunication shelters and the 

frequency of use of economizers in 

equipment serving these shelters. 

Issue 8: DOE also recognizes that 

there may be regional differences 

between the shipments of heat pumps 

and air conditioners to warmer or cooler 

climates, and requests stakeholder input 

on how or if such differences can be 

taken into account in the energy use 

characterization. 

F. Life-Cycle Cost and Payback Period 

Analysis 

DOE conducted the life-cycle cost 

(LCC) and payback period (PBP) 

analysis to estimate the economic 

impacts of potential standards on 

individual consumers of SPVU 

equipment. DOE first analyzed these 

impacts for SPVU equipment by 

calculating the change in consumers’ 

LCCs likely to result from higher 

efficiency levels compared with the 

EPCA and ASHRAE baseline efficiency 

levels for the SPVU classes discussed in 

the engineering analysis. The LCC 

calculation considers total installed cost 

(equipment cost, sales taxes, 

distribution chain markups, and 

installation cost), operating expenses 

(energy, repair, and maintenance costs), 

equipment lifetime, and discount rate. 

DOE calculated the LCC for all 

customers as if each would purchase an 

SPVU unit in the year the standard takes 

effect. DOE presumes that the purchase 

year for all SPVU equipment for 

purposes of the LCC calculation is 2015, 

the compliance date for the energy 

conservation standard equivalent to the 

levels in ASHRAE 90.1–2013 (for the 

EPCA baseline), or 2019, the compliance 

date for the energy conservation 

standard more stringent than the 

corresponding levels in ASHRAE 90.1– 

2013 (for the ASHRAE baseline). To 

compute LCCs, DOE discounted future 

operating costs to the time of purchase 

and summed them over the lifetime of 

the equipment. 

Next, DOE analyzed the effect of 

changes in installed costs and operating 

expenses by calculating the PBP of 

potential standards relative to baseline 

efficiency levels. The PBP estimates the 

amount of time it would take the 

customer to recover the incremental 

increase in the purchase price of moreefficient equipment through lower 

operating costs. In other words, the PBP 

is the change in purchase price divided 

by the change in annual operating cost 

that results from the energy 

conservation standard. DOE expresses 

this period in years. Similar to the LCC, 

the PBP is based on the total installed 

cost and operating expenses. However, 

unlike the LCC, DOE only considers the 

first year’s operating expenses in the 

PBP calculation. Because the PBP does 

not account for changes in operating 

expense over time or the time value of 

money, it is also referred to as a simple 

PBP. 

DOE conducted the LCC and PBP 

analyses using a commercially-available 

spreadsheet tool and a purpose-built 

spreadsheet model, available on DOE’s 

Web site.57 This spreadsheet model 

developed by DOE accounts for 

variability in energy use and prices, 

installation costs, repair and 

maintenance costs, and energy costs. It 

uses weighting factors to account for 

distributions of shipments to different 

building types and states to generate 

national LCC savings by efficiency level. 

The results of DOE’s LCC and PBP 

analysis are summarized in section V.B 

and described in detail in chapter 8 of 

the NOPR TSD. 

1. Approach 

Recognizing that each business that 

uses SPVU equipment is unique, DOE 

analyzed variability and uncertainty by 

performing the LCC and PBP 

calculations assuming a correspondence 

between five types of businesses 

(education, telecommunications, 

construction and mining firms 

occupying temporary offices, a variety 

of service and retail firms occupying 

conventional office space, and health 

care firms) for customers located in 

three types of commercial buildings 

(telecommunications, education, and 

office). DOE developed financial data 

appropriate for the customers in each 

business and building type. Each type of 

building has typical customers who 

have different costs of financing because 

of the nature of the business. DOE 

derived the financing costs based on 

data from the Damodaran Online Web 

site.58

The LCC analysis used the estimated 

annual energy use for each SPVU 

equipment unit described in section 

IV.E. Because energy use of SPVU 

equipment is sensitive to climate, 

energy use varies by State. Aside from 

energy use, other important factors 

influencing the LCC and PBP analyses 

are energy prices, installation costs, 

equipment distribution markups, and 

sales tax. All of these factors are 

assumed to vary by State. At the 

national level, the LCC spreadsheets 

explicitly model both the uncertainty 

and the variability in the model’s 

inputs, using probability distributions 

based on the shipments of SPVU 

equipment to different States. 

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78640 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

59RS Means CostWorks 2014, R.S. Means 

Company, Inc. (2013) (Last accessed on February 

27, 2014). 60U.S. Energy Information Administration. 

Electric Sales, Revenue, and Average Price 2013, 

Select table Sales and Revenue Data by State, 

Monthly Back to 1990 (Form EIA–826), (Last 

accessed on February 19, 2014) (Available at: 

http://www.eia.gov/cneaf/electricity/page/sales_

revenue.xls). 

61U.S. Energy Information Administration. 

Annual Energy Outlook 2013 (2013) DOE/EIA– 

0383(2013). (Last Accessed March 12, 2014) 

(Available at: http://www.eia.gov/forecasts/archive/ 

aeo13/). 

62U.S. Energy Information Administration. 

Average Price of Natural Gas Sold to Commercial 

Consumers—by State. (Last accessed on February 

17, 2014) (Available at: http://www.eia.gov/dnav/

ng/ng_pri_sum_a_EPG0_PCS_DMcf_a.htm). 

63American Society of Heating, Refrigerating, and 

Air-Conditioning Engineers, ASHRAE Handbook: 

2011 Heating, Ventilating, and Air-Conditioning 

Applications (2011). 

64Abramson, Interactive Web-based Owning and 

Operating Cost Database, Final Report ASHRAE 

Research Project RP–1237 (2005). 

65Energy Efficient Strategies Pty Ltd., Equipment 

Energy Efficiency Committee Regulatory Impact 

Statement Consultation Draft. Revision to the 

Energy Labelling Algorithms and Revised MEPS 

levels and Other Requirements for Air Conditioners, 

Report No 2008/09 (September 2008) (Last accessed 

March 22, 2012) (Available at: http://

www.energyrating.gov.au/wp-content/uploads/

Energy_Rating_Documents/Library/Cooling/Air_

Conditioners/200809-ris-ac.pdf). 

As mentioned earlier, DOE generated 

LCC and PBP results by business type 

within building type and State and 

developed weighting factors to generate 

national average LCC savings and PBPs 

for each efficiency level. As there is a 

unique LCC and PBP for each calculated 

value at the building type and State 

level, the outcomes of the analysis can 

also be expressed as probability 

distributions with a range of LCC and 

PBP results. A distinct advantage of this 

type of approach is that DOE can 

identify the percentage of customers 

achieving LCC savings or attaining 

certain PBP values due to an increased 

efficiency level, in addition to the 

average LCC savings or average PBP for 

that efficiency level. 

2. Life-Cycle Cost Inputs 

For each efficiency level DOE 

analyzed, the LCC analysis required 

input data for the total installed cost of 

the equipment, its operating cost, and 

the discount rate. Table IV.8 

summarizes the inputs and key 

assumptions DOE used to calculate the 

consumer economic impacts of all 

energy efficiency levels analyzed in this 

rulemaking. A more detailed discussion 

of the inputs follows. 

TABLE IV.8—SUMMARY OF INPUTS AND KEY ASSUMPTIONS USED IN THE LCC AND PBP ANALYSES

Inputs Description 

Affecting Installed Costs 

Equipment Price .............................. Equipment price was derived by multiplying manufacturer sales price or MSP (calculated in the engineering analysis) by distribution channel markups, as needed, plus sales tax from the markups analysis. 

Installation Cost .............................. Installation cost includes installation labor, installer overhead, and any miscellaneous materials and parts, 

derived from RS Means CostWorks 2014 59 and converted to 2013$. 

Affecting Operating Costs 

Annual Energy Use ......................... Annual unit energy consumption for each class of equipment at each efficiency level estimated by state 

and building type using simulation models and a population-based mapping of climate locations to 

states. 

Electricity Prices, Natural Gas 

Prices.

DOE developed average electricity prices based on Energy Information Administration (EIA) Form 826 

data for 2013.60 Future electricity prices are projected based on Annual Energy Outlook 2013 (AEO 

2013).61 DOE developed natural gas prices based on EIA state-level commercial prices in EIA data navigator.62 Future natural gas prices are projected based on AEO 2013. 

Maintenance Cost ........................... DOE estimated annual maintenance costs based on RS Means CostWorks 2014 for small, single-zone 

rooftop commercial air conditioning equipment. Annual maintenance cost did not vary as a function of efficiency. 

Repair Cost ..................................... DOE estimated the annualized repair cost for baseline-efficiency SPVU equipment based on cost data 

from RS Means CostWorks 2014 for small, single-zone rooftop commercial air conditioning equipment. 

DOE assumed that the materials and components portion of the repair costs would vary in direct proportion with the MSP at higher efficiency levels because it generally costs more to replace components that 

are more efficient. 

Affecting Present Value of Annual Operating Cost Savings 

Equipment Lifetime ......................... DOE estimated that SPVU equipment lifetimes range between 10 and 25 years, with an average lifespan 

of 15 years, based on estimates cited in available packaged air conditioner literature.63 64 65

Discount Rate ................................. Mean real discount rates for all buildings range from 2.4 percent for education buildings to almost 11.5 

percent for some office building owners. 

Analysis Start Year ......................... Start year for LCC is 2019, which is the earliest compliance date that DOE can set for new standards if it 

adopts any efficiency level for energy conservation standards higher than that shown in ASHRAE Standard 90.1–2013. 

Analyzed Efficiency Levels 

Analyzed Efficiency Levels ............. DOE analyzed the ASHRAE baseline efficiency levels and up to four higher efficiency levels for SPVUs 

<65,000 Btu/h and only the ASHRAE baseline for SPVUs >65,000 Btu/h. See the engineering analysis 

for additional details on selections of efficiency levels and cost. 

DOE analyzed the EPCA and ASHRAE 

baseline efficiency levels (reflecting the 

efficiency levels in ASHRAE Standard 

90.1–2013) and up to four higher 

efficiency levels for SPVUs <65,000 

Btu/h. Chapter 5 of the NOPR TSD 

provides additional details on selections 

of efficiency levels and cost. 

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66Energy Information Administration, Form EIA– 

826 Database Monthly Electric Utility Sales and 

Revenue Data (EIA–826 Sales and Revenue 

Spreadsheets) (Available at: http://www.eia.gov/

electricity/data/eia826/> On the right side of the 

screen under Aggregated, select 1990-current. (Last 

accessed March 26, 2014). 

67Energy Information Administration, Natural 

Gas Prices (Available at: http://www.eia.gov/dnav/ 

ng/ng_pri_sum_a_EPG0_PCS_DMcf_a.htm) (Last 

accessed February 13, 2014). 

68Energy Information Administration, 

Commercial Building Energy Consumption Survey 

2003, CBECS Public Use Microdata Files (Available 

at: <http://www.eia.gov/consumption/commercial/

data/2003/index.cfm?view=microdata>) (Last 

accessed February 12, 2014). 

a. Equipment Prices 

The price of SPVU equipment reflects 

the application of distribution channel 

markups (mechanical contractor 

markups) and sales tax to the 

manufacturer sales price (MSP), which 

is the cost established in the engineering 

analysis. As described in section IV.D, 

DOE determined distribution channel 

costs and markups for air-conditioning 

equipment. For each equipment class, 

the engineering analysis provided 

contractor costs for the ASHRAE 

baseline equipment and up to four 

higher equipment efficiencies. 

The markup is the percentage increase 

in price as the SPVU equipment passes 

through distribution channels. As 

explained in section IV.D, SPVU 

equipment is assumed to be delivered 

by the manufacturer through a variety of 

distribution channels. If the SPVU 

equipment is for a new installation, it is 

assumed to be sold as a component of 

a new modular building. There are 

several distribution pathways that 

involve different combinations of the 

costs and markups of air-conditioning 

equipment wholesaler/distributors, 

manufacturers of modular buildings, 

and wholesalers/distributors of modular 

buildings. In some cases, a general 

contractor is also involved for site 

preparation and management. Some 

replacement equipment is assumed to 

be sold directly to mechanical 

contractors and to wholesalers/

distributors of modular buildings, but 

some is sold through air-conditioning 

equipment wholesalers/distributors to 

these same entities. The overall 

markups used in LCC analyses are 

weighted averages of all of the relevant 

distribution channel markups. 

To project an MSP price trend for the 

NOPR, DOE derived an inflationadjusted index of the PPI for 

miscellaneous refrigeration and airconditioning equipment over the period 

1990–2010. These data show a general 

price index decline from 1990 to 2004, 

followed by a sharp increase, primarily 

due to rising prices of copper and steel 

components that go into this equipment, 

in turn driven by rapidly rising global 

demand. Since 2009, there has been no 

clear trend in the price index. Given the 

continued slow global economic activity 

in 2009 through 2013, DOE believes that 

the extent to which the future trend can 

be predicted based on the last two 

decades is very uncertain and that the 

observed data do not provide a firm 

basis for projecting future costs trends 

for SPVU equipment. Therefore, DOE 

used a constant price assumption as the 

default price factor index to project 

future SPVU prices in 2019. Thus, 

prices projected for the LCC and PBP 

analysis are equal to the 2013 values for 

each efficiency level in each equipment 

class. Appendix 8–D of the NOPR TSD 

describes the historical data and the 

derivation of the price projection. 

Issue 9: DOE requests comments on 

the most appropriate trend to use for 

real (inflation-adjusted) SPVU prices. 

b. Installation Costs 

DOE derived national average 

installation costs for SPVU equipment 

from data provided in RS Means 

CostWorks 2014 (hereafter referred to as 

RS Means) specifically for packaged airconditioning equipment. RS Means 

provides estimates for installation costs 

for SPVU units by equipment capacity, 

as well as cost indices that reflect the 

variation in installation costs for 295 

cities in the United States. The RS 

Means data identify several cities in all 

50 States and the District of Columbia. 

DOE incorporated location-based cost 

indices into the analysis to capture 

variation in installation costs, 

depending on the location of the 

consumer. 

For more-stringent efficiency levels, 

DOE recognized that installation costs 

potentially could be higher with larger 

units and higher-efficiency SPVU 

equipment, mainly due to increased 

size. DOE utilized RS Means installation 

cost data from RS Means to derive 

installation cost curves by size of unit 

for base-efficiency models. DOE did not 

have data to calibrate the extent to 

which installation costs might change as 

efficiency increased. For the NOPR LCC 

analysis, DOE assumed that installation 

cost would not increase as a function of 

increased efficiency. 

Issue 10: DOE seeks comments on its 

assumption that installation costs would 

not increase for higher-efficiency 

SPVUs. 

c. Annual Energy Use 

DOE estimated the annual electricity 

and natural gas consumed by each class 

of SPVU equipment, by efficiency level, 

based on the energy use analysis 

described in section IV.E and in chapter 

7 of the NOPR TSD. 

d. Electricity and Natural Gas Prices 

Electricity prices and natural gas 

prices are used to convert changes in the 

electric and natural gas consumption 

from higher-efficiency equipment into 

energy cost savings. Because of the 

variation in annual electricity and 

natural gas consumption savings and 

equipment costs across the country, it is 

important to consider regional 

differences in electricity and natural gas 

prices. DOE used average effective 

commercial electricity prices 66 and 

commercial natural gas prices 67 at the 

State level from Energy Information 

Administration (EIA) data for 2013. This 

approach captured a wide range of 

commercial electricity and natural gas 

prices across the United States. 

Furthermore, different kinds of 

businesses typically use electricity in 

different amounts at different times of 

the day, week, and year, and therefore, 

face different effective prices. To make 

this adjustment, DOE used EIA’s 2003 

CBECS data set 68 to identify the average 

prices that the five business types paid 

for electricity and natural gas and 

compared them separately with the 

corresponding average prices that all 

commercial customers paid. DOE used 

the ratios of prices paid by the five types 

of businesses to the national average 

commercial prices seen in the 2003 

CBECS as multipliers to adjust the 

average commercial 2013 State price 

data. 

DOE weighted the electricity and 

natural gas consumption and prices 

each business type paid in each State by 

the estimated percentages of SPVU 

equipment in each business type and by 

the population in each State to obtain 

weighted-average national electricity 

and natural gas costs for 2013. The 

State/building-type weights reflect the 

probabilities that a given unit of SPVU 

equipment shipped will operate with a 

given fuel price. The original State-byState average commercial prices range 

from approximately $0.074 per kWh to 

approximately $0.341 per kWh for 

electricity and from approximately 

$6.81 per MBtu to $43.36 per MBtu for 

natural gas. See chapter 8 of the NOPR 

TSD for further details. 

The electricity and natural gas price 

trends provide the relative change in 

electricity and natural gas costs for 

future years. DOE used the AEO 2013 

reference case to provide the default 

electricity and natural gas price 

scenarios. DOE extrapolated the trend in 

values at the Census Division level from 

2025 to 2040 of the projection for all 

five building types to establish prices 

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78642 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

69 Damodaran financial data used for determining 

cost of capital is available at: http://pages.stern.nyu.

edu/∼adamodar/ for commercial businesses (Last 

accessed February 12, 2014). 

70Federal Reserve Bank of St. Louis, State and 

Local Bonds—Bond Buyer Go 20-Bond Municipal 

Bond Index (Last accessed February 12, 2014 

(Available at: http://research.stlouisfed.org/fred2/

series/MSLB20/downloaddata?cid=32995). 

71Rate calculated with 1973–2013 data. Data 

source: U.S. Federal Reserve (Last accessed 

February 12, 2014) (Available at: http://www.federal

reserve.gov/releases/h15/data.htm). 

72Modular Building Institute, State of the 

Industry 2006 (Available at: http://www.modular.

org/HtmlPage.aspx?name=analysis) (March 6, 

2014). 

73Modular Building Institute, Commercial 

Modular Construction Report 2008 (Available at: 

http://www.modular.org/HtmlPage.aspx?name=

analysis) (March 6, 2014). 

74Modular Building Institute, Commercial 

Modular Construction Report 2009 (Available at: 

http://www.modular.org/HtmlPage.aspx?name=

analysis) (March 6, 2014). 

75Modular Building Institute, Relocatable 

Buildings 2011 Annual Report (Available at: http:// 

www.modular.org/HtmlPage.aspx?name=analysis) 

(March 6, 2014). 

beyond 2040 (see section IV.F.2.g). DOE 

provides a sensitivity analysis of the 

LCC savings and PBP results to different 

fuel price scenarios using both the AEO 

2013 high-price and low-price 

projections in appendix 8–C of the 

NOPR TSD. 

e. Maintenance Costs 

Maintenance costs are the costs to the 

consumer of ensuring continued 

equipment operation. Maintenance costs 

include services such as cleaning heatexchanger coils and changing air filters. 

DOE estimated annual routine 

maintenance costs for SPVU air 

conditioners as $311 per year (2013$) 

for capacities up to 135,000 Btu/h. For 

heat pumps less than 65,000 Btu/h 

capacity, maintenance costs reported in 

the RS Means CostWorks 2013 database 

were $345 per year; costs were $414 per 

year for larger capacities. Because data 

were not available to indicate how 

maintenance costs vary with equipment 

efficiency, DOE used preventive 

maintenance costs that remain constant 

as equipment efficiency increases. 

f. Repair Costs 

The repair cost is the cost to the 

customer of replacing or repairing 

components that have failed in the 

SPVU equipment. DOE estimated the 

one-time repair cost in RS Means as 

equivalent to those for small packaged 

rooftop units: $2,594 (2013$) for both air 

conditioners and heat pumps less than 

65,000 Btu/h capacity, and $3,245 for 

larger units. Based on frequency and 

type of major repairs in the RS Means 

database, DOE assumed that the repair 

would be a one-time event at about year 

10 of the equipment life that involved 

replacing the supply fan motor, 

compressor, some bearings, and 

refrigerant. DOE then annualized the 

present value of the cost over the 

average equipment life of 15 years to 

obtain an annualized equivalent repair 

cost. DOE determined that the materials 

portion of annualized repair costs 

would increase in direct proportion 

with increases in equipment prices, 

because the replacement parts would be 

similar to the more expensive original 

equipment that they replaced. Because 

the price of SPVU equipment increases 

with efficiency, the cost for component 

repair is also expected to increase as the 

efficiency of equipment increases. See 

chapter 8 of the NOPR TSD for details 

on the development of repair cost 

estimates. 

g. Equipment Lifetime 

DOE defines ‘‘equipment lifetime’’ as 

the age when a unit of SPVU equipment 

is retired from service. DOE reviewed 

available literature to establish typical 

equipment lifetimes, which showed a 

wide range of lifetimes from 10 to 25 

years. The data did not distinguish 

between classes of SPVU equipment. 

Consequently, DOE used a distribution 

of lifetimes between 10 and 25 years, 

with an average of 15 years based on a 

review of a range of packaged cooling 

equipment lifetime estimates found in 

published studies and online 

documents. DOE applied this 

distribution to all classes of SPVU 

equipment analyzed. Chapter 8 of the 

NOPR TSD contains a detailed 

discussion of equipment lifetimes. 

h. Discount Rate 

The discount rate is the rate at which 

future expenditures are discounted to 

establish their present value. DOE 

determined the discount rate by 

estimating the cost of capital for 

purchasers of SPVU equipment. Most 

purchasers use both debt and equity 

capital to fund investments. Therefore, 

for most purchasers, the discount rate is 

the weighted-average cost of debt and 

equity financing, or the weightedaverage cost of capital (WACC), less the 

expected inflation. 

To estimate the WACC of SPVU 

equipment purchasers, DOE used a 

sample of more than 340 companies 

grouped to be representative of 

operators of each of five commercial 

business types (health care, education, 

telecommunications, temporary office, 

and general office,) drawn from a 

database of 7,766 U.S. companies 

presented on the Damodaran Online 

Web site.69 This database includes most 

of the publicly-traded companies in the 

United States. The WACC approach for 

determining discount rates accounts for 

the current tax status of individual firms 

on an overall corporate basis. DOE did 

not evaluate the marginal effects of 

increased costs, and, thus, depreciation 

due to more expensive equipment, on 

the overall tax status. 

DOE used the final sample of 

companies to represent purchasers of 

SPVU equipment. For each company in 

the sample, DOE derived the cost of 

debt, percentage of debt financing, and 

systematic company risk from 

information on the Damodaran Online 

Web site. Damodaran estimated the cost 

of debt financing from the nominal longterm Federal government bond rate and 

the standard deviation of the stock 

price. DOE then determined the 

weighted average values for the cost of 

debt, range of values, and standard 

deviation of WACC for each category of 

the sample companies. Deducting 

expected inflation from the cost of 

capital provided estimates of the real 

discount rate by ownership category. 

For most educational buildings and a 

portion of the office buildings occupied 

by public schools, universities, and 

State and local government agencies, 

DOE estimated the cost of capital based 

on a 40-year geometric mean of an index 

of long-term tax-exempt municipal 

bonds (>20 years).70 Federal office space 

was assumed to use the Federal bond 

rate, derived as the 40-year geometric 

average of long-term (>10 years) U.S. 

government securities.71

Based on this database, DOE 

calculated the weighted-average, aftertax discount rate for SPVU equipment 

purchases, adjusted for inflation, in 

each of the five business types, which 

were allocated to the three building 

types used in the analysis based on 

estimated market shares of modular 

buildings used by each business type. 

The allocation percentages came from a 

combination of manufacturer interviews 

and industry data published by the 

Modular Buildings Institute.72 73 74 75

Chapter 8 of the NOPR TSD contains 

the detailed calculations related to 

discount rates. 

3. Payback Period 

DOE also determined the economic 

impact of potential amended energy 

conservation standards on consumers by 

calculating the PBP of more-stringent 

efficiency levels relative to the base-case 

efficiency levels. The PBP measures the 

amount of time it takes the commercial 

customer to recover the assumed higher 

purchase expense of more-efficient 

equipment through lower operating 

costs. Similar to the LCC, the PBP is 

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76 DOE’s Web page on SPVUs can be found at: 

http://www1.eere.energy.gov/buildings/appliance_

standards/product.aspx/productid/35. 

77 Docket ID: EERE–2010–BT–NOA–0028, 

comment by Kirk Lundblade. 

based on the total installed cost and the 

operating expenses for each building 

type and State, weighted on the 

probability of shipment to each market. 

Because the simple PBP does not take 

into account changes in operating 

expense over time or the time value of 

money, DOE considered only the first 

year’s operating expenses to calculate 

the PBP, unlike the LCC, which is 

calculated over the lifetime of the 

equipment. Chapter 8 of the NOPR TSD 

provides additional details about the 

PBP. 

G. National Impact Analysis 

The national impact analysis (NIA) 

evaluates the effects of a considered 

energy conservation standard from a 

national perspective rather than from 

the customer perspective represented by 

the LCC. This analysis assesses the net 

present value (NPV) (future amounts 

discounted to the present) and the 

national energy savings (NES) of total 

commercial consumer costs and savings 

that are expected to result from 

amended standards at specific efficiency 

levels. 

The NES refers to cumulative energy 

savings for the lifetime of units shipped 

from 2019 through 2048. DOE 

calculated energy savings in each year 

relative to a base case, defined as DOE 

adoption of the efficiency levels 

specified by ASHRAE Standard 90.1– 

2013. DOE also calculated energy 

savings from adopting efficiency levels 

specified by ASHRAE Standard 90.1– 

2013 compared to the EPCA base case 

(i.e., the current Federal standards) for 

units shipped from 2015 through 2044. 

The NPV refers to cumulative monetary 

savings. DOE calculated net monetary 

savings in each year relative to the base 

case (ASHRAE Standard 90.1–2013) as 

the difference between total operating 

cost savings and increases in total 

installed cost. DOE accounted for 

operating cost savings until 2068, when 

the equipment installed in the 30th year 

after the compliance date of the 

amended standards should be retired. 

Cumulative savings are the sum of the 

annual NPV over the specified period. 

1. Approach 

The NES and NPV are a function of 

the total number of units in use and 

their efficiencies. Both the NES and 

NPV depend on annual shipments and 

equipment lifetime. Both calculations 

start by using the shipments estimate 

and the quantity of units in service 

derived from the shipments model. 

To make the analysis more 

transparent to all interested parties, 

DOE used a spreadsheet tool, available 

on DOE’s Web site,76 to calculate the 

energy savings and the national 

economic costs and savings from 

potential amended standards. Interested 

parties can review DOE’s analyses by 

changing various input quantities 

within the spreadsheet. 

Unlike the LCC analysis, the NES 

spreadsheet does not use distributions 

for inputs or outputs, but relies on 

national average equipment costs and 

energy costs developed from the LCC 

spreadsheet. DOE used the NES 

spreadsheet to perform calculations of 

energy savings and NPV using the 

annual energy consumption and total 

installed cost data from the LCC 

analysis. For efficiency levels higher 

than ASHRAE, DOE projected the 

energy savings, energy cost savings, 

equipment costs, and NPV of benefits 

for equipment sold in each SPVU class 

from 2019 through 2048. For the 

ASHRAE level, DOE project energy 

savings for equipment sold from 2015 

through 2044. DOE does not calculate 

economic benefits for the ASHRAE level 

because it is statutorily required to use 

the ASHRAE level as the baseline. The 

projection provided annual and 

cumulative values for all four output 

parameters described above. 

a. National Energy Savings 

DOE calculated the NES associated 

with the difference between the per-unit 

energy use under a standards-case 

scenario and the per-unit energy use in 

the base case. The average energy per 

unit used by the SPVUs in service 

gradually decreases in the standards 

case relative to the base case because 

more-efficient SPVUs are expected to 

gradually replace less-efficient ones. 

Unit energy consumption values for 

each equipment class are taken from the 

LCC spreadsheet for each efficiency 

level and weighted based on market 

efficiency distributions. To estimate the 

total energy savings for each efficiency 

level, DOE first calculated the delta unit 

energy consumption (i.e., the difference 

between the energy directly consumed 

by a unit of equipment in operation in 

the base case and the standards case) for 

each class of SPVUs for each year of the 

analysis period. The analysis period 

begins with the earliest expected 

compliance date of amended energy 

conservation standards (i.e., 2015), 

assuming DOE adoption of the baseline 

ASHRAE Standard 90.1–2013 efficiency 

levels. For the analysis of DOE’s 

potential adoption of more-stringent 

efficiency levels, the analysis period 

does not begin until the compliance 

date of 2019, four years after DOE would 

likely issue a final rule requiring such 

standards. Second, DOE determined the 

annual site energy savings by 

multiplying the stock of each equipment 

class by vintage (i.e., year of shipment) 

by the delta unit energy consumption 

for each vintage (from step one). As 

mentioned in section IV.E, this includes 

an increase in gas usage for some 

SPVAC units sold with gas furnaces 

(where fan power was reduced to 

achieve higher efficiency levels). Third, 

DOE converted the annual site 

electricity savings into the annual 

amount of energy saved at the source of 

electricity generation (the source or 

primary energy), using a time series of 

conversion factors derived from the 

latest version of EIA’s National Energy 

Modeling System (NEMS). Finally, DOE 

summed the annual primary energy 

savings for the lifetime of units shipped 

over a 30-year period to calculate the 

total NES. DOE performed these 

calculations for each efficiency level 

considered for SPVUs in this 

rulemaking. 

DOE has historically presented NES 

in terms of primary energy savings. In 

response to the recommendations of a 

committee on ‘‘Point-of-Use and FullFuel-Cycle Measurement Approaches to 

Energy Efficiency Standards’’ appointed 

by the National Academy of Science, 

DOE announced its intention to use fullfuel-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). While DOE stated in that notice 

that it intended to use the Greenhouse 

Gases, Regulated Emissions, and Energy 

Use in Transportation (GREET) model to 

conduct the analysis, it also said it 

would review alternative methods, 

including the use of NEMS. After 

evaluating both models and the 

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 a more 

appropriate tool for its FFC analysis and 

its intention to use NEMS for that 

purpose. 77 FR 49701 (August 17, 2012). 

DOE received one comment, which was 

supportive of the use of NEMS for 

DOE’s FFC analysis.77

The approach used for the NOPR, and 

the FFC multipliers that were applied, 

are described in appendix 10A of the 

NOPR TSD. NES results are presented in 

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78An overview of the NEMS model and 

documentation is found at: www.eia.doe.gov/oiaf/

aeo/overview/index.html. 

79OMB Circular A–4, section E (Sept. 17, 2003) 

(Available at: www.whitehouse.gov/omb/circulars_

a004_a-4.) 

80U.S. Department of Energy—Office of Energy 

Efficiency and Renewable Energy, Technical 

Support Document: Energy Efficiency Program for 

Commercial and Industrial Equipment: Efficiency 

Standards for Commercial Heating, AirConditioning, and Water Heating Equipment 

Including Packaged Terminal Air-Conditioners and 

Packaged Terminal Heat Pumps, Small Commercial 

Packaged Boiler, Three-Phase Air-Conditioners and 

Heat Pumps <65,000 Btu/h, and Single-Package 

Vertical Air Conditioners and Single-Package 

Vertical Heat Pumps <65,000 Btu/h (March 2006) 

(Available at: http://www1.eere.energy.gov/

buildings/appliance_standards/commercial/pdfs/

ashrae_products/ashrae_products_draft_tsd_

030206.pdf). This TSD was prepared for the 

rulemaking that resulted in the Final Rule: Energy 

Efficiency Program for Certain Commercial and 

Industrial Equipment: Efficiency Standards for 

Commercial Heating, Air-Conditioning, and WaterHeating Equipment. 72 FR 10038 (March 7, 2007). 

81Manufacturers reported that in 2012, 50 percent 

of shipments were for new construction. DOE 

originally adjusted that split for 2005 until the 

result from the shipments model was 50/50 in 2012. 

This resulting 2005 split was 84 percent new 

construction and 16 percent replacement. However, 

both primary and FFC savings in section 

V.B.3.a. 

DOE considered whether a rebound 

effect is applicable in its NES analysis 

for SPVUs. A rebound effect occurs 

when an increase in equipment 

efficiency leads to increased demand for 

its service. For example, when a 

consumer realizes that a more-efficient 

air conditioner will lower the electricity 

bill, that person may opt for increased 

comfort in the home by lowering the 

temperature, thereby returning a portion 

of the energy cost savings. The NEMS 

model assumes an efficiency rebound to 

account for an increased demand for 

service due to the increase in cooling (or 

heating) efficiency.78 For the SPVU 

market, there are two ways that a 

rebound effect could occur: (1) 

Increased use of the air-conditioning 

equipment within the commercial 

buildings in which such units are 

installed; and (2) additional instances of 

air-conditioning of spaces that were not 

being cooled before. Because SPVUs are 

a commercial appliance, the person 

owning the equipment (i.e., the building 

owner) is usually not the person 

operating the equipment (i.e., the 

renter). Because the operator usually 

does not own the equipment, that 

person will not have the operating cost 

information necessary to influence their 

operation of the equipment. Therefore, 

DOE believes that the first instance is 

unlikely to occur. Similarly, the second 

instance is unlikely because a small 

change in efficiency is insignificant 

among the factors that determine how 

much floor space will be airconditioned. 

Issue 11: DOE seeks comment on 

whether a rebound effect should be 

included in the determination of annual 

energy savings. If a rebound effect 

should be included, DOE seeks data to 

assist in calculation of the rebound 

effect. 

b. Net Present Value 

To estimate the NPV, DOE calculated 

the net impact as the difference between 

total operating cost savings and 

increases in total installed costs. DOE 

calculated the NPV of each considered 

standard level over the life of the 

equipment using the following three 

steps. 

First, DOE determined the difference 

between the equipment costs under the 

standard-level case and the base case in 

order to obtain the net equipment cost 

increase resulting from the higher 

standard level. As noted in section 

IV.F.2.a, DOE used a constant price 

assumption as the default price forecast; 

the cost to manufacture a given unit of 

higher efficiency neither increases nor 

decreases over time. In addition, DOE 

considered two alternative price trends 

in order to investigate the sensitivity of 

the results to different assumptions 

regarding equipment price trends. One 

of these used an exponential fit on the 

deflated Producer Price Index (PPI) for 

all other miscellaneous refrigeration and 

air-conditioning equipment, and the 

other is based on the ‘‘deflator—other 

durables excluding medical’’ that was 

forecasted for AEO 2013. The derivation 

of these price trends is described in 

appendix 10B of the NOPR TSD. 

Second, DOE determined the 

difference between the base-case 

operating costs and the standard-level 

operating costs in order to obtain the net 

operating cost savings from each higher 

efficiency level. Third, DOE determined 

the difference between the net operating 

cost savings and the net equipment cost 

increase in order to obtain the net 

savings (or expense) for each year. DOE 

then discounted the annual net savings 

(or expenses) to 2014 for SPVUs bought 

on or after 2019 and summed the 

discounted values to provide the NPV 

for an efficiency level. 

In accordance with the OMB’s 

guidelines on regulatory analysis,79

DOE calculated NPV using both a 7- 

percent and a 3-percent real discount 

rate. The 7-percent rate is an estimate of 

the average before-tax rate of return on 

private capital in the U.S. economy. 

DOE used this discount rate to 

approximate the opportunity cost of 

capital in the private sector, because 

recent OMB analysis has found the 

average rate of return on capital to be 

near this rate. DOE used the 3-percent 

rate to capture the potential effects of 

standards on private consumption (e.g., 

through higher prices for products and 

reduced purchases of energy). This rate 

represents the rate at which society 

discounts future consumption flows to 

their present value. This rate can be 

approximated by the real rate of return 

on long-term government debt (i.e., 

yield on United States Treasury notes 

minus annual rate of change in the 

Consumer Price Index), which has 

averaged about 3 percent on a pre-tax 

basis for the past 30 years. 

2. Shipments Analysis 

In its shipments analysis, DOE 

developed shipment projections for 

SPVUs and, in turn, calculated 

equipment stock over the course of the 

analysis period. DOE used the 

shipments projection and the equipment 

stock to determine the NES. In order to 

account for the analysis periods of both 

the ASHRAE level and higher efficiency 

levels, the shipments portion of the 

spreadsheet model projects SPVU 

shipments from 2015 through 2048. 

To develop the shipments model, 

DOE started with 2005 shipment 

estimates from the Air-Conditioning and 

Refrigeration Institute (ARI, now AHRI) 

for units less than 65,000 Btu/h as 

published in a previous rulemaking,80

as more recent data are not available. 

DOE added additional shipments for 

SPVACs greater than or equal to 65,000 

Btu/h and less than 135,000 Btu/h, 

which make up 3 percent of the market, 

based on manufacturer interviews. As 

there are no models on the market for 

SPVHP greater than or equal to 65,000 

Btu/h and less than 135,000 Btu/h, or 

for any SPVUs greater than or equal to 

135,000 Btu/h, DOE did not develop 

shipment estimates (or generate NES 

and NPV) for these equipment classes. 

See chapter 9 of the NOPR TSD for more 

details on the initial shipment estimates 

by equipment class that were used as 

the basis for the shipments projections 

discussed below. 

To project shipments of SPVUs for 

new construction (starting in 2006), 

DOE relied primarily on sector-based 

estimates of saturation and projections 

of floor space. Based on manufacturer 

interview information, DOE allocated 35 

percent of shipments to the education 

sector, 35 percent to telecom, and 30 

percent to offices. DOE used the 2005 

new construction shipments and 2005 

new construction floor space for 

education (from AEO 2013) to estimate 

a saturation rate.81 DOE applied this 

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this led to a steep shipments increase in the model 

from 2005 to 2006. Instead, DOE used the 50/50 

split directly in 2005, which resulted in a much 

steadier shipments trend. Therefore, 2005 new 

construction shipments are derived using 50 

percent of the total 2005 historical shipments. 

82Modular Building Institute, Relocatable 

Buildings 2012 Annual Report; Relocatable 

Buildings 2011 Annual Report (Available at: http:// 

www.modular.org/documents/2012-RB-AnnualReport.pdf and http://www.triumphmodular.com/

resources/documents/2011relocatable.pdf). 

83U.S. Census Bureau, County Business Patterns 

for NAICS 237130 Power and Communication Line 

and Related Structures Construction (Available at: 

http://www.census.gov/econ/cbp/index.html) (Last 

accessed April 15, 2014). 

84Available at: http://www.modular.org/

HtmlPage.aspx?name=analysis (Last accessed May 

18, 2012). 

85See DOE’s technical support document 

underlying DOE’s July 29, 2004 ANOPR. 69 FR 

45460 (Available at: http://www.regulations.gov/

#!documentDetail;D=EERE-2006-STD-0103-0078). 

SPVUs have only had EER standards since 2002, 

which was not long enough to establish an 

efficiency trend. 

saturation rate to AEO 2013 projections 

of new construction floor space to 

project shipments to new construction 

in the education sector through 2048. In 

this projection, shipments to education 

decline through 2026 before rising to 

levels still lower than those in 2005. 

DOE originally used this methodology 

for offices also, as published in the 

April 2014 NODA. However, in 

response to the April 2014 NODA, AHRI 

and Lennox International suggested that 

the SPVU projected shipment trend was 

‘‘optimistic’’ and did not reflect the 

economic downturn. (AHRI, No. 24 at p. 

6; Lennox International Inc., No. 15 at 

p. 7) After reviewing modular building 

industry literature,82 DOE agrees with 

AHRI and Lennox, but for the small 

office sector only; DOE has determined 

that the increasing trend in the AEO for 

small offices does not adequately 

represent the modular building 

industry. As a result, DOE has 

tentatively decided to hold SPVU 

shipments to new office construction 

constant at 2005 levels. (For more 

details, see chapter 9 of the NOPR TSD.) 

For shipments to telecom, DOE 

developed an index based on County 

Business Pattern data for 

establishments 83 and projected this 

trend forward. This projection increases 

significantly over the analysis period, 

which may have led in part to AHRI and 

Lennox’s suggestion that the overall 

shipment projection was optimistic. 

However, in response to the April 2014 

NODA, the CA IOUs pointed out that 

the rapid expansion of wireless 

communications resulted in expanded 

use of SPVUs. (CA IOUs, No. 19 at p. 5) 

DOE agrees with the CA IOUs’ 

assessment for telecom and has chosen 

to maintain the increasing projection for 

that sector. 

To allocate the total projected 

shipments for office, education, and 

telecom into the equipment classes 

applicable to each sector, DOE used the 

fraction of shipments from 2005 for each 

equipment class in each sector. This 

fractions within each sector remained 

constant over time. The complete 

discussion of shipment allocation and 

projected shipments for the different 

equipment classes can be found in 

chapter 9 of the NOPR TSD. 

In order to model shipments for 

replacement SPVUs, DOE developed 

historical shipments for SPVUs back to 

1981 based on an index of square 

footage production data from the 

Modular Buildings Institute.84

Shipments prior to 1994 were 

extrapolated based on a trend from 1994 

to 2005. In the stock model, the lifetime 

of SPVUs follows the distribution 

discussed in section IV.F.2.g, with a 

minimum of 10 years and a maximum 

of 25 years. All retired units are 

assumed to be replaced with new 

shipments. The complete discussion of 

the method for extrapolating historical 

shipments can be found in chapter 9 of 

the NOPR TSD. 

As equipment purchase price and 

repair costs increase with efficiency, 

higher first costs and repair costs can 

result in a drop in shipments. In 

manufacturer interviews, manufacturers 

expressed concern that an increase in 

first cost could lead customers to switch 

to split-system or rooftop units. 

However, manufacturers did not 

provide any information on the price 

point at which this switch might occur, 

and DOE had insufficient data for 

estimating the elasticity of shipments 

for SPVUs as a function of first costs, 

repair costs, or operating costs. In 

addition, DOE notes that SPVUs serve a 

specific niche market and that a switch 

from SPVUs to another type of 

equipment would require significant 

changes in the market, such as 

installation on site rather than at the 

modular building manufacturer, the use 

of a mechanical contractor (including 

their markups), and potential changes to 

needed ductwork and other 

infrastructure. Therefore, DOE assumed 

that the shipments projection would not 

change under the considered standard 

levels. 

Issue 12: DOE seeks comment on 

whether amended standards would be 

likely to affect shipments. 

3. Base-Case and Standards-Case 

Forecasted Distribution of Efficiencies 

DOE uses a base-case distribution of 

efficiency levels to project what the 

SPVU market would look like in the 

absence of amended standards. DOE 

developed a base-case distribution of 

efficiency levels for SPVU equipment 

using manufacturer-provided estimates. 

DOE applied the percentages of models 

within each efficiency range to the total 

unit shipments for a given equipment 

class to estimate the distribution of 

shipments for the base case. Then, from 

those market shares and projections of 

shipments by equipment class, DOE 

extrapolated future equipment 

efficiency trends both for a base-case 

scenario and for standards-case 

scenarios. 

To estimate a base-case efficiency 

trend, DOE used the trend from 2012 to 

2035 found in the Commercial Unitary 

Air Conditioner Advance Notice of 

Proposed Rulemaking (ANOPR), which 

estimated an increase of approximately 

1 EER every 35 years.85 DOE used this 

same trend in the standards-case 

scenarios, when seeking to ascertain the 

impact of amended standards. 

For each efficiency level analyzed, 

DOE used a ‘‘roll-up’’ scenario to 

establish the market shares by efficiency 

level for the year that compliance would 

be required with amended standards 

(i.e., 2015 if DOE adopts the efficiency 

levels in ASHRAE Standard 90.1–2013, 

or 2019 if DOE adopts more-stringent 

efficiency levels than those in ASHRAE 

Standard 90.1–2013). DOE collected 

information suggesting that, as the name 

implies, the efficiencies of equipment in 

the base case that did not meet the 

standard level under consideration 

would roll up to meet the amended 

standard level. This information also 

suggests that equipment efficiencies in 

the base case that were above the 

standard level under consideration 

would not be affected. The base-case 

efficiency distributions for each 

equipment class are presented in 

chapter 10 of the NOPR TSD. 

H. Consumer Subgroup Analysis 

In analyzing the potential impact of 

new or amended standards on 

commercial consumers, DOE evaluates 

the impact on identifiable groups (i.e., 

subgroups) of consumers, such as 

different types of businesses that may be 

disproportionately affected by a national 

standard level. For this rulemaking, 

DOE identified mining and construction 

companies occupying temporary office 

space as a disproportionately affected 

subgroup. Because it has generally 

higher costs of capital and, therefore, 

higher discount rates than other firms 

using SPVUs, this consumer subgroup is 

less likely than average to value the 

benefits of increased energy savings. 

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86Morningstar, Inc., Ibbotson SBBI 2013 Classic 

Yearbook. Market Results for Stocks, Bonds, Bills, 

and Inflation 1926–2012 (2013). 

87Filings & Forms, Securities and Exchange 

Commission (2013) (Available at: http://

www.sec.gov/edgar.shtml) (Last accessed April 3, 

2013). 

88U.S. Census Bureau, Annual Survey of 

Manufacturers: General Statistics: Statistics for 

Industry Groups and Industries (2010) (Available at: 

http://www.census.gov/manufacturing/asm/

index.html>) (Last accessed April 3, 2013). 

89Hoovers | Company Information | Industry 

Information | Lists, D&B (2013) (Available at: http:// 

www.hoovers.com/) (Last accessed April 3, 2013). 

However, this group also faces relatively 

high electricity prices compared with 

some other consumer subgroups. These 

two conditions tend to offset each other, 

so a quantitative analysis was required 

to determine whether this subgroup 

would experience higher or lower than 

average LCC savings. Another type of 

consumer that might be 

disproportionately affected is public 

education facilities. Because of their taxexempt status, public education 

agencies generally have lower capital 

costs than other SPVU users and, thus, 

might disproportionately benefit from 

increased SPVU energy efficiency; 

however, they also typically face lower 

electricity costs than other commercial 

customers, so a quantitative analysis 

was required to determine whether they 

would have lower or higher than 

average LCC savings. 

For the NOPR, DOE also analyzed the 

potential effects of amended SPVU 

standards on businesses with high 

capital costs, which are generally (but 

not always) small businesses. DOE 

analyzed the potential impacts of 

amended standards by conducting the 

analysis with different discount rates, 

because small businesses do not have 

the same access to capital as larger 

businesses, but they may pay similar 

prices for electricity. DOE obtained size 

premium data from Ibbotson Associates’ 

Stocks, Bonds, Bills, and Inflation 2013 

Yearbook.86 For the period of 1926– 

2012, the geometric mean of annual 

returns for the smallest companies in all 

industries (13 percent) was 103.1 

percent of the average for the total 

value-weighted index of companies 

listed on the New York Stock Exchange 

(NYSE), American Stock Exchange 

(AMEX), and National Association of 

Security Dealers Stock Exchange 

(NASDAQ) (9.6 percent), implying that 

on average, historical performance of 

small companies has been (113.0/

109.6)=1.031 or 3.1 percent points 

higher than the market average, in effect 

a ‘‘small company size premium’’, an 

extra cost premium that they have to 

pay to do business. DOE assumed that 

for businesses purchasing SPVUs and 

purchasing or renting modular buildings 

containing SPVUs, the average discount 

rate for small companies is 3.1 percent 

higher than the industry average. 

DOE determined the impact of 

consumer subgroup costs and savings 

using the LCC spreadsheet model. DOE 

conducted the LCC and PBP analyses 

separately for consumers represented by 

the mining and construction firms using 

temporary office buildings and for 

public education agencies using 

portable classrooms, and then compared 

the results with those for average 

commercial customers. DOE also 

conducted an analysis in which only 

firms with a discount rate 3.1 percent 

higher than the corresponding industry 

average were selected. While not all of 

these firms were small businesses (some 

had volatile stock prices or other special 

circumstances), they were the ones that 

had the highest costs of capital and were 

the least likely to benefit from increased 

SPVU standards. 

Due to the higher costs of conducting 

business, benefits of SPVU standards for 

small and other high-capital-cost 

businesses are estimated to be slightly 

lower than for the general population of 

SPVU owners. 

The results of DOE’s LCC subgroup 

analysis are summarized in section 

V.B.1.b and described in detail in 

chapter 11 of the NOPR TSD. 

I. Manufacturer Impact Analysis 

1. Overview 

DOE performed a manufacturer 

impact analysis (MIA) to estimate the 

financial impact of amended energy 

conservation standards on 

manufacturers of SPVUs and to 

calculate the potential impact of such 

standards on employment and 

manufacturing capacity. 

The MIA has both quantitative and 

qualitative aspects. The quantitative 

portion of the MIA primarily relies on 

the Government Regulatory Impact 

Model (GRIM), an industry cash-flow 

model customized for this rulemaking. 

The key GRIM inputs are data on the 

industry cost structure, equipment 

costs, shipments, and assumptions 

about markups and conversion 

expenditures. The key output is the 

industry net present value (INPV). 

Different sets of assumptions (markup 

scenarios) will produce different results. 

The qualitative portion of the MIA 

addresses factors such as equipment 

characteristics, as well as industry and 

market trends. Chapter 12 of the NOPR 

TSD describes the complete MIA. 

DOE calculated manufacturer impacts 

relative to a base case, defined as DOE 

adoption of the efficiency levels 

specified by ASHRAE Standard 90.1– 

2013. Consequently, when comparing 

the INPV impacts of the GRIM model, 

the baseline technology is at an 

efficiency of 10 EER/3.0 COP. 

DOE conducted the MIA for this 

rulemaking in three phases. In Phase 1 

of the MIA, DOE prepared a profile of 

the SPVU industry which includes a 

top-down cost analysis of manufacturers 

that DOE used to derive preliminary 

financial inputs for the GRIM (e.g., 

sales, general, and administration 

(SG&A) expenses; research and 

development (R&D) expenses; and tax 

rates). DOE used public sources of 

information, including the 2008 Energy 

Conservation Program for Commercial 

and Industrial Equipment: Packaged 

Terminal Air Conditioner and Packaged 

Terminal Heat Pump Energy 

Conservation Standards Final Rule (73 

FR 58772 (Oct. 7, 2008)), the 2011 

Energy Conservation Standards Direct 

Final Rule for Residential Furnaces, 

Central Air Conditioners and Heat 

Pumps (76 FR 37408 (June 27, 2011)); 

Securities and Exchange Commission 

(SEC) 10–K filings; 87 corporate annual 

reports; the U.S. Census Bureau’s 

Annual Survey of Manufacturers; 88 and 

Hoovers reports.89

In phase 2 of the MIA, DOE prepared 

an industry cash-flow analysis to 

quantify the potential impacts of an 

amended energy conservation standard. 

In general, new or more-stringent energy 

conservation standards can affect 

manufacturer cash flow in three distinct 

ways: (1) Create a need for increased 

investment; (2) raise production costs 

per unit; and (3) alter revenue due to 

higher per-unit prices and possible 

changes in sales volumes. 

In phase 3 of the MIA, DOE 

conducted structured, detailed 

interviews with a representative crosssection of manufacturers. During these 

interviews, DOE discussed engineering, 

manufacturing, procurement, and 

financial topics to validate assumptions 

used in the GRIM and to identify key 

issues or concerns. See section IV.I.3 for 

a description of the key issues 

manufacturers raised during the 

interviews. 

Additionally, in phase 3, DOE 

evaluates subgroups of manufacturers 

that may be disproportionately 

impacted by standards or that may not 

be accurately represented by the average 

cost assumptions used to develop the 

industry cash-flow analysis. For 

example, small manufacturers, niche 

players, or manufacturers exhibiting a 

cost structure that largely differs from 

the industry average could be more 

negatively affected. Thus, during Phase 

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3, DOE analyzed small manufacturers as 

a subgroup. 

The Small Business Administration 

(SBA) defines a small business for North 

American Industry Classification 

System (NAICS) code 333415, ‘‘AirConditioning and Warm Air Heating 

Equipment and Commercial and 

Industrial Refrigeration Equipment 

Manufacturing,’’ as having 750 

employees or fewer. During its research, 

DOE identified one domestic company 

which manufactures equipment covered 

by this rulemaking and qualifies as a 

small business under the SBA 

definition. The small business subgroup 

is discussed in section VI.B of the 

preamble, and in chapter 12 of the 

NOPR TSD. 

2. GRIM Analysis 

As discussed previously, DOE uses 

the GRIM to quantify the changes in 

cash flow that result in a higher or lower 

industry value due to amended energy 

conservation standards. The GRIM 

analysis uses a discounted cash-flow 

methodology that incorporates 

manufacturer costs, markups, 

shipments, and industry financial 

information as inputs. The GRIM 

models changes in costs, distribution of 

shipments, investments, and 

manufacturer margins that could result 

from amended energy conservation 

standards. The GRIM spreadsheet uses 

the inputs to arrive at a series of annual 

cash flows, beginning in 2014 (the base 

year of the analysis) and continuing to 

2048. DOE calculated INPVs by 

summing the stream of annual 

discounted cash flows during this 

period. DOE applied a discount rate of 

10.4 percent, which was derived from 

industry financials and then modified 

according to feedback received during 

manufacturer interviews. 

The GRIM calculates cash flows using 

standard accounting principles and 

compares changes in INPV between the 

base case and each TSL (the standards 

case). Essentially, the difference in INPV 

between the base case and a standards 

case represents the financial impact of 

the amended energy conservation 

standard on manufacturers. Additional 

details about the GRIM, the discount 

rate, and other financial parameters can 

be found in chapter 12 of the NOPR 

TSD. 

a. GRIM Key Inputs 

i. Manufacturer Production Costs 

Manufacturing a higher-efficiency 

product is typically more expensive 

than manufacturing a baseline product 

due to the use of more expensive 

components and larger quantities of raw 

materials. The changes in the 

manufacturer production cost (MPC) of 

the analyzed products can affect 

revenues, gross margins, and cash flow 

of the industry, making these product 

cost data key GRIM inputs for DOE’s 

analysis. 

In the MIA, DOE used the MPCs for 

each considered efficiency level 

calculated in the engineering analysis, 

as described in section IV.C and further 

detailed in chapter 5 of the NOPR TSD. 

In addition, DOE used information from 

its teardown analysis, described in 

section IV.C, to disaggregate the MPCs 

into material, labor, and overhead costs. 

To calculate the MPCs for products 

higher than the baseline, DOE added the 

incremental material, labor, and 

overhead costs from the engineering 

cost-efficiency curves to the baseline 

MPCs. These cost breakdowns and 

product mark-ups were revised based on 

manufacturer comments received during 

MIA interviews. 

ii. Shipments Forecast 

The GRIM estimates manufacturer 

revenues based on total unit shipment 

forecasts and the distribution of 

shipments by equipment class. For the 

base-case analysis, the GRIM uses the 

NIA base-case shipments forecasts from 

2014 (the base year for the MIA 

analysis) to 2048 (the last year of the 

analysis period). In the shipments 

analysis, DOE estimates the distribution 

of efficiencies in the base case for all 

equipment classes. See section IV.G.2 

for additional details. 

For the standards-case shipment 

forecast, the GRIM uses the NIA 

standards-case shipment forecasts. The 

NIA assumes that product efficiencies in 

the base case that do not meet the 

energy conservation standard in the 

standards case ‘‘roll up’’ to meet the 

amended standard in the standard year. 

See section IV.G.2, above, for additional 

details. 

iii. Product and Capital Conversion 

Costs 

Amended energy conservation 

standards would cause manufacturers to 

incur one-time conversion costs to make 

necessary changes to their production 

facilities and bring product designs into 

compliance. DOE evaluated the level of 

conversion-related expenditures that 

would be needed to comply with each 

considered efficiency level in each 

equipment class. For the purpose of the 

MIA, DOE classified these conversion 

costs into two major groups: (1) Product 

conversion costs; and (2) capital 

conversion costs. Product conversion 

costs are one-time investments in 

research, development, testing, and 

marketing, focused on making product 

designs comply with the amended 

energy conservation standard. Capital 

conversion costs are one-time 

investments in property, plant, and 

equipment to adapt or change existing 

production facilities so that amended 

equipment designs can be fabricated 

and assembled. 

To determine the level of capital 

conversion expenditures manufacturers 

would incur to comply with amended 

energy conservation standards, DOE 

gathered data on the level of capital 

investment required at each efficiency 

level during manufacturer interviews. 

DOE validated manufacturer comments 

through estimates of capital expenditure 

requirements derived from the product 

teardown analysis and engineering 

model described in section IV.C. 

DOE assessed the product conversion 

costs at each considered efficiency level 

by integrating data from quantitative 

and qualitative sources. DOE considered 

market-share-weighted feedback from 

multiple manufacturers to determine 

conversion costs, such as R&D 

expenditures, at each efficiency level. 

Manufacturer numbers were aggregated 

to better reflect the industry as a whole 

and to protect confidential information. 

In general, DOE assumes that all 

conversion-related investments occur 

between the year of publication of the 

final rule and the year by which 

manufacturers must comply with the 

standard. The investment figures used 

in the GRIM can be found in section 

V.B.2 of the preamble. For additional 

information on the estimated product 

conversion and capital conversion costs, 

see chapter 12 of the NOPR TSD. 

b. GRIM Scenarios 

i. Markup Scenarios 

As discussed previously, 

manufacturer selling prices (MSPs) 

include direct manufacturing 

production costs (i.e., labor, materials, 

and overhead estimated in DOE’s MPCs) 

and all non-production costs (i.e., 

SG&A, R&D, and interest), along with 

profit. To calculate the MSPs in the 

GRIM, DOE applied non-production 

cost markups to the MPCs estimated in 

the engineering analysis for each 

equipment class and efficiency level. 

Modifying these markups in the 

standards case yields different sets of 

impacts on manufacturers. For the MIA, 

DOE modeled two standards-case 

markup scenarios to represent the 

uncertainty regarding the potential 

impacts on prices and profitability for 

manufacturers following the 

implementation of amended energy 

conservation standards: (1) A 

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90Emissions factors based on the Annual Energy 

Outlook 2014 (AEO 2014), which became available 

too late for incorporation into this analysis, indicate 

that a significant decrease in the cumulative 

emission reductions of carbon dioxide and most 

other pollutants can be expected if the projections 

of power plant utilization assumed in AEO 2014 are 

realized. For example, the estimated amount of 

cumulative emission reductions of CO2 is expected 

to decrease by 33% from DOE’s current estimate 

based on the projections in AEO 2014 relative to 

AEO 2013. The monetized benefits from GHG 

reductions would likely decrease by a comparable 

preservation of gross margin percentage; 

and (2) a preservation of operating 

profit. These scenarios lead to different 

markup values which, when applied to 

the input MPCs, result in varying 

revenue and cash flow impacts. 

Under the preservation-of-grossmargin-percentage scenario, DOE 

applied a single uniform ‘‘gross margin 

percentage’’ markup across all efficiency 

levels. As production costs increase 

with efficiency, this scenario implies 

that the absolute dollar markup will 

increase as well. DOE assumed the nonproduction cost markup—which 

includes SG&A expenses, research and 

development expenses, interest, and 

profit—to be 1.28 for SPVU equipment. 

This markup is consistent with the one 

DOE assumed in the base case for the 

GRIM. Manufacturers tend to believe it 

is optimistic to assume that they would 

be able to maintain the same gross 

margin percentage markup as their 

production costs increase. Therefore, 

DOE assumes that this scenario 

represents a high bound to industry 

profitability under an amended energy 

conservation standard. 

In the preservation-of-operating-profit 

scenario, as the cost of production goes 

up under a standards case, 

manufacturers are generally required to 

reduce their markups to a level that 

maintains base-case operating profit. 

DOE implemented this scenario in the 

GRIM by lowering the manufacturer 

markups at each TSL to yield 

approximately the same earnings before 

interest and taxes in the standards case 

as in the base case in the year after the 

compliance date of the amended 

standards. The implicit assumption 

behind this markup scenario is that the 

industry can only maintain its operating 

profit in absolute dollars after the 

standard. 

3. Manufacturer Interviews 

As part of the MIA, DOE discussed 

potential impacts of standards with 

three manufacturers of SPVUs. The 

interviewed manufacturers account for 

over 90 percent of the domestic SPVU 

market. In interviews, DOE asked 

manufacturers to describe their major 

concerns about this rulemaking. The 

following section highlights 

manufacturers’ most significant 

concerns. 

a. Size Constraints 

Manufacturers noted that higher 

efficiency standards could force them to 

increase the size of their SPVU 

equipment to levels that are not 

acceptable to their customers. The 

manufacturers stated that some critical 

design options, such as increasing the 

amount of heat exchanger surface area, 

would necessitate an increase in cabinet 

size and footprint. For example, in the 

modular classroom and modular office 

markets, any additional floor space 

taken up by a larger SPVU could not be 

used by students and tenants. In the 

telecom market, manufacturers noted 

that telecom operators have standardsized telecom shelters and current 

SPVU designs already make use of all 

available wall space. Any increase in 

size would force their customers to 

redesign the layout of the shelters and 

the complex telecommunications 

electronics housed therein. These size 

constraints would affect manufacturers 

if the amended standards are increased 

beyond the levels set in ASHRAE 

Standard 90.1–2013. 

According to manufacturers, a change 

in cabinet size would be particularly 

problematic in the replacement market. 

Amended designs may no longer 

physically fit into existing installation 

locations. Some examples include units 

that are too wide to fit through standardwidth doorways, that are too tall for the 

standard ceiling heights, and that 

protrude too far into classrooms or 

offices. Aside from the physical space 

constraints, manufacturers are 

concerned that air vents and wall 

plenums would no longer align. The use 

of sleeves or adaptors to reroute air flow 

would be unsightly, take up valuable 

space, and affect air flow in a manner 

that reduces product efficiency. 

b. Alternative Products 

Multiple manufacturers stated that a 

large increase in efficiency could lead to 

price increases that would cause their 

customers to consider alternative 

products, such as unitary systems or 

commercial roof top units. The 

manufacturers argued that these systems 

are often less convenient for end-users 

due to the need for extensive duct work, 

the use of long refrigerant lines, and/or 

the reduced ability to control the flow 

of fresh air. These manufacturers were 

concerned that an increase in the energy 

conservation standard would raise the 

SPVU prices to the point where endusers would accept the drawbacks of 

alternative products. DOE did not 

receive any quantitative comments on 

the price point at which unitary systems 

and commercial systems typically 

become cost-competitive alternatives. 

c. Compliance Tolerances 

Two manufacturers stated concerns 

about the tolerances required by 

compliance testing. They argued that 

SPVU manufacturers have no control 

over the variability in the performance 

of purchased components (such as 

compressors) or the variability of 

instrumentation within different test 

laboratories. As a result, the 

manufacturers stated that it is 

unrealistic for DOE to expect their 

products could test within the narrow 

confidence limits set forth at 10 CFR 

429.43. 

d. Constrained Innovation and 

Customization 

Multiple manufacturers noted that 

complying with more-stringent energy 

conservation standards would draw 

time, resources, and focus away from 

innovation, customization, and 

customer responsiveness. Manufacturers 

believe that the design, engineering, and 

testing resources used to comply with 

amended standards would be better 

invested in developing features 

requested by their customers. 

Furthermore, multiple manufacturers 

stated that higher standards push 

manufacturers toward similar designs. 

Manufacturers argued that DOE’s energy 

conservation standards constrain their 

ability to customize products in ways 

that maximize efficiency based on the 

end user’s specific use-case. 

J. Emissions Analysis 

In the emissions analysis, DOE 

estimates the reduction in power sector 

emissions of carbon dioxide (CO2), 

nitrogen oxides (NOX), sulfur dioxide 

(SO2), and mercury (Hg) from amended 

energy conservation standards for the 

considered SPVU equipment. In 

addition, DOE estimates emissions 

impacts in production activities 

(extracting, processing, and transporting 

fuels) that provide the energy inputs to 

power plants. 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 51281 

(August 18, 2011)), this FFC analysis 

includes impacts on emissions of 

methane (CH4) and nitrous oxide (N2O), 

both of which are recognized as 

greenhouse gases. 

DOE primarily conducted the 

emissions analysis using emissions 

factors for CO2 and most of the other 

gases derived from data in AEO 2013.90

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amount. DOE plans to use emissions factors based 

on the most recent AEO available for the next phase 

of this rulemaking, which may or may not be AEO 

2014, depending on the timing of the issuance of 

the next rulemaking document. 91See: http://www.epa.gov/climateleadership/

inventory/ghg-emissions.html. 

92 IPCC, 2013: Climate Change 2013: The Physical 

Science Basis. Contribution of Working Group I to 

the Fifth Assessment Report of the 

Intergovernmental Panel on Climate Change 

[Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, 

S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex 

and P.M. Midgley (eds.)]. Cambridge University 

Press, Cambridge, United Kingdom and New York, 

NY, USA. Chapter 8. 

93See EME Homer City Generation, LP v. EPA, 

696 F.3d 7, 38 (D.C. Cir. 2012). 

94On 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 

downwind 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 is using emissions factors based on 

AEO 2013 for this NOPR, 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 SO2 emissions. 

95CSAPR also applies to NOX and it would 

supersede the regulation of NOX under CAIR. As 

stated previously, the current analysis assumes that 

CAIR, not CSAPR, is the regulation in force. The 

difference between CAIR and CSAPR with regard to 

DOE’s analysis of NOX emissions is slight. 

Combustion emissions of CH4 and N2O 

were estimated using emissions 

intensity factors published by the 

Environmental Protection Agency (EPA) 

through its GHG Emissions Factors 

Hub.91 DOE developed separate 

emissions factors for power sector 

emissions and upstream emissions. DOE 

also calculated site and upstream 

emissions from the additional use of 

natural gas associated with some of the 

SPVU efficiency levels. The method that 

DOE used to derive emissions factors is 

described in chapter 13 of the NOPR 

TSD. 

For CH4 and N2O, DOE calculated 

emissions reduction in tons and also in 

terms of units of carbon dioxide 

equivalent (CO2eq). Gases are converted 

to CO2eq by multiplying the physical 

units by the gas’s global warming 

potential (GWP) over a 100-year time 

horizon. Based on the Fifth Assessment 

Report of the Intergovernmental Panel 

on Climate Change,92 DOE used GWP 

values of 28 for CH4 and 265 for N2O. 

EIA prepares the Annual Energy 

Outlook using NEMS. Each annual 

version of NEMS incorporates the 

projected impacts of existing air quality 

regulations on emissions. AEO 2013 

generally represents current legislation 

and environmental regulations, 

including recent government actions, for 

which implementing regulations were 

available as of December 31, 2012. 

SO2 emissions from affected electric 

generating units (EGUs) are subject to 

nationwide and regional emissions capand-trade programs. Title IV of the 

Clean Air Act sets an annual emissions 

cap on SO2 for affected EGUs in the 48 

contiguous States and the District of 

Columbia (DC). SO2 emissions from 28 

eastern States and DC were also limited 

under the Clean Air Interstate Rule 

(CAIR; 70 FR 25162 (May 12, 2005)), 

which created an allowance-based 

trading program that operates along 

with the Title IV program. CAIR was 

remanded to the U.S. Environmental 

Protection Agency (EPA) by the U.S. 

Court of Appeals for the District of 

Columbia Circuit, but it remained in 

effect. 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). In 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.93 The court ordered 

EPA to continue administering CAIR. 

The emissions factors used for this 

NOPR, which are based on AEO 2013, 

assume that CAIR remains a binding 

regulation through 2040.94

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 

SO2 emissions allowances resulting 

from the lower electricity demand 

caused by the adoption of an efficiency 

standard could be used to permit 

offsetting increases in SO2 emissions by 

any regulated EGU. In past rulemakings, 

DOE recognized that there was 

uncertainty about the effects of 

efficiency standards on SO2 emissions 

covered by the existing cap-and-trade 

system, but it concluded that negligible 

reductions in power sector SO2

emissions would occur as a result of 

standards. 

Beginning around 2016, however, SO2

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 SO2 (a nonHAP 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, SO2 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 2013 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 SO2

emissions. Under the MATS, emissions 

will be far below the cap that would be 

established by CAIR, so it is unlikely 

that excess SO2 emissions allowances 

resulting from the lower electricity 

demand would be needed or used to 

permit offsetting increases in SO2

emissions by any regulated EGU. 

Therefore, DOE believes that energy 

efficiency standards will reduce SO2

emissions in 2016 and beyond. 

CAIR established a cap on NOX

emissions in 28 eastern States and the 

District of Columbia.95 Energy 

conservation standards are expected to 

have little effect on NOX emissions in 

those States covered by CAIR because 

excess NOX emissions allowances 

resulting from the lower electricity 

demand could be used to permit 

offsetting increases in NOX emissions. 

However, standards would be expected 

to reduce NOX emissions in the States 

not affected by the caps, so DOE 

estimated NOX emissions reductions 

from the standards considered in the 

NOPR for these States. 

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. DOE 

estimated mercury emissions reduction 

using emissions factors based on AEO 

2013, which incorporates MATS. 

K. Monetizing Carbon Dioxide and 

Other Emissions Impacts 

As part of the development of this 

NOPR, DOE considered the estimated 

monetary benefits from the reduced 

emissions of CO2 and NOX that are 

expected to result from each of the 

considered efficiency levels. In order to 

make this calculation similar to the 

calculation of the NPV of customer 

benefit, DOE considered the reduced 

emissions expected to result over the 

lifetime of products shipped in the 

forecast period for each efficiency level. 

This section summarizes the basis for 

the monetary values used for CO2 and 

NOX emissions and presents the values 

considered in this rulemaking. 

For this NOPR, DOE is relying on a set 

of values for the social cost of carbon 

(SCC) that was developed by an 

interagency process. A summary of the 

basis for those values is provided in the 

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following subsection, and a more 

detailed description of the 

methodologies used is provided as an 

appendix to chapter 14 of the NOPR 

TSD. 

1. Social Cost of Carbon 

The SCC is an estimate of the 

monetized damages associated with an 

incremental increase in carbon 

emissions in a given year. It is intended 

to include (but is not limited to) changes 

in net agricultural productivity, human 

health, property damages from 

increased flood risk, and the value of 

ecosystem services. Estimates of the 

SCC are provided in dollars per metric 

ton of carbon dioxide. A domestic SCC 

value is meant to reflect the value of 

damages in the United States resulting 

from a unit change in carbon dioxide 

emissions, while a global SCC value is 

meant to reflect the value of damages 

worldwide. 

Under section 1(b)(6) of Executive 

Order 12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

agencies must, to the extent permitted 

by law, assess both the costs and the 

benefits of the intended regulation and, 

recognizing that some costs and benefits 

are difficult to quantify, propose or 

adopt a regulation only upon a reasoned 

determination that the benefits of the 

intended regulation justify its costs. The 

purpose of the SCC estimates presented 

here is to allow agencies to incorporate 

the monetized social benefits of 

reducing CO2 emissions into costbenefit analyses of regulatory actions. 

The estimates are presented with an 

acknowledgement of the many 

uncertainties involved and with a clear 

understanding that they should be 

updated over time to reflect increasing 

knowledge of the science and 

economics of climate impacts. 

As part of the interagency process that 

developed the SCC estimates, technical 

experts from numerous agencies met on 

a regular basis to consider public 

comments, explore the technical 

literature in relevant fields, and discuss 

key model inputs and assumptions. The 

main objective of this process was to 

develop a range of SCC values using a 

defensible set of input assumptions 

grounded in the existing scientific and 

economic literatures. In this way, key 

uncertainties and model differences 

transparently and consistently inform 

the range of SCC estimates used in the 

rulemaking process. 

a. Monetizing Carbon Dioxide Emissions 

When attempting to assess the 

incremental economic impacts of carbon 

dioxide emissions, the analyst faces a 

number of challenges. A recent report 

from the National Research Council 

points out that any assessment will 

suffer from uncertainty, speculation, 

and lack of information about: (1) 

Future emissions of greenhouse gases; 

(2) the effects of past and future 

emissions on the climate system; (3) the 

impact of changes in climate on the 

physical and biological environment; 

and (4) the translation of these 

environmental impacts into economic 

damages. As a result, any effort to 

quantify and monetize the harms 

associated with climate change will 

raise questions of science, economics, 

and ethics and should be viewed as 

provisional. 

Despite the limits of both 

quantification and monetization, SCC 

estimates can be useful in estimating the 

social benefits of reducing carbon 

dioxide emissions. The agency can 

estimate the benefits from reduced 

emissions in any future year by 

multiplying the change in emissions in 

that year by the SCC value appropriate 

for that year. The net present value of 

the benefits can then be calculated by 

multiplying the future benefits by an 

appropriate discount factor and 

summing across all affected years. 

It is important to emphasize that the 

interagency process is committed to 

updating these estimates as the science 

and economic understanding of climate 

change and its impacts on society 

improves over time. In the meantime, 

the interagency group will continue to 

explore the issues raised by this analysis 

and consider public comments as part of 

the ongoing interagency process. 

b. Development of Social Cost of Carbon 

Values 

In 2009, an interagency process was 

initiated to offer a preliminary 

assessment of how best to quantify the 

benefits from reducing carbon dioxide 

emissions. To ensure consistency in 

how benefits are evaluated across 

agencies, the Administration sought to 

develop a transparent and defensible 

method, specifically designed for the 

rulemaking process, to quantify avoided 

climate change damages from reduced 

CO2 emissions. The interagency group 

did not undertake any original analysis. 

Instead, it combined SCC estimates from 

the existing literature to use as interim 

values until a more comprehensive 

analysis could be conducted. The 

outcome of the preliminary assessment 

by the interagency group was a set of 

five interim values: global SCC 

estimates for 2007 (in 2006$) of $55, 

$33, $19, $10, and $5 per metric ton of 

CO2. These interim values represented 

the first sustained interagency effort 

within the U.S. government to develop 

an SCC for use in regulatory analysis. 

The results of this preliminary effort 

were presented in several proposed and 

final rules. 

c. Current Approach and Key 

Assumptions 

After the release of the interim values, 

the interagency group reconvened on a 

regular basis to generate improved SCC 

estimates. Specifically, the group 

considered public comments and 

further explored the technical literature 

in relevant fields. The interagency group 

relied on three integrated assessment 

models commonly used to estimate the 

SCC: the FUND, DICE, and PAGE 

models. These models are frequently 

cited in the peer-reviewed literature and 

were used in the last assessment of the 

Intergovernmental Panel on Climate 

Change. Each model was given equal 

weight in the SCC values that were 

developed. 

Each model takes a slightly different 

approach to model how changes in 

emissions result in changes in economic 

damages. A key objective of the 

interagency process was to enable a 

consistent exploration of the three 

models while respecting the different 

approaches to quantifying damages 

taken by the key modelers in the field. 

An extensive review of the literature 

was conducted to select three sets of 

input parameters for these models: 

climate sensitivity, socio-economic and 

emissions trajectories, and discount 

rates. A probability distribution for 

climate sensitivity was specified as an 

input into all three models. In addition, 

the interagency group used a range of 

scenarios for the socio-economic 

parameters and a range of values for the 

discount rate. All other model features 

were left unchanged, relying on the 

model developers’ best estimates and 

judgments. 

The interagency group selected four 

sets of SCC values for use in regulatory 

analyses. Three sets of values are based 

on the average SCC from three 

integrated assessment models, at 

discount rates of 2.5 percent, 3 percent, 

and 5 percent. The fourth set, which 

represents the 95th-percentile SCC 

estimate across all three models at a 3- 

percent discount rate, is included to 

represent higher-than-expected impacts 

from climate change further out in the 

tails of the SCC distribution. The 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 calculate 

domestic effects, although preference is 

given to consideration of the global 

benefits of reducing CO2 emissions. 

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96Social Cost of Carbon for Regulatory Impact 

Analysis Under Executive Order 12866. Interagency 

Working Group on Social Cost of Carbon, United 

States Government (February 2010) (Available at: 

http://www.whitehouse.gov/sites/default/files/omb/

inforeg/for-agencies/Social-Cost-of-Carbon-forRIA.pdf). 

97Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866. Interagency Working Group on Social 

Cost of Carbon, United States Government (May 

2013; revised November 2013) (Available at: http:// 

www.whitehouse.gov/sites/default/files/omb/assets/

inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf). 

Table IV.9 presents the values in the 

2010 interagency group report,96 which 

is reproduced in appendix 14–A of the 

NOPR TSD. 

TABLE IV.9—ANNUAL SCC VALUES FROM 2010 INTERAGENCY REPORT, 2010–2050 

[In 2007 dollars per metric ton CO2] 

Year 

Discount rate % 

5 3 2.5 3 

Average Average Average 95th percentile 

2010 ................................................................................................................. 4.7 21.4 35.1 64.9 

2015 ................................................................................................................. 5.7 23.8 38.4 72.8 

2020 ................................................................................................................. 6.8 26.3 41.7 80.7 

2025 ................................................................................................................. 8.2 29.6 45.9 90.4 

2030 ................................................................................................................. 9.7 32.8 50.0 100.0 

2035 ................................................................................................................. 11.2 36.0 54.2 109.7 

2040 ................................................................................................................. 12.7 39.2 58.4 119.3 

2045 ................................................................................................................. 14.2 42.1 61.7 127.8 

2050 ................................................................................................................. 15.7 44.9 65.0 136.2 

The SCC values used for the NOPR 

were generated using the most recent 

versions of the three integrated 

assessment models that have been 

published in the peer-reviewed 

literature.97 (See appendix 14–B of the 

NOPR TSD for further information.) 

Table IV.10 shows the updated sets of 

SCC estimates in five year increments 

from 2010 to 2050. Appendix 14–B of 

the NOPR TSD provides the full set of 

SCC estimates. The central value that 

emerges is the average SCC across 

models at the 3 percent discount rate. 

However, for purposes of capturing the 

uncertainties involved in regulatory 

impact analysis, the interagency group 

emphasizes the importance of including 

all four sets of SCC values. 

TABLE IV.10—ANNUAL SCC VALUES FROM 2013 INTERAGENCY UPDATE, 2010–2050 

[In 2007 dollars per metric ton CO2] 

Year 

Discount rate % 

5 3 2.5 3 

Average Average Average 95th percentile 

2010 ................................................................................................................. 11 32 51 89 

2015 ................................................................................................................. 11 37 57 109 

2020 ................................................................................................................. 12 43 64 128 

2025 ................................................................................................................. 14 47 69 143 

2030 ................................................................................................................. 16 52 75 159 

2035 ................................................................................................................. 19 56 80 175 

2040 ................................................................................................................. 21 61 86 191 

2045 ................................................................................................................. 24 66 92 206 

2050 ................................................................................................................. 26 71 97 220 

It is important to recognize that a 

number of key uncertainties remain, and 

that current SCC estimates should be 

treated as provisional and revisable 

since they will evolve with improved 

scientific and economic understanding. 

The interagency group also recognizes 

that the existing models are imperfect 

and incomplete. The National Research 

Council report mentioned above points 

out that there is tension between the 

goal of producing quantified estimates 

of the economic damages from an 

incremental ton of carbon and the limits 

of existing efforts to model these effects. 

There are a number of analytical 

challenges that are being addressed by 

the research community, including 

research programs housed in many of 

the Federal agencies participating in the 

interagency process to estimate the SCC. 

The interagency group intends to 

periodically review and reconsider 

those estimates to reflect increasing 

knowledge of the science and 

economics of climate impacts, as well as 

improvements in modeling. 

In summary, in considering the 

potential global benefits resulting from 

reduced CO2 emissions, DOE used the 

values from the 2013 interagency report, 

adjusted to 2013$ using the Gross 

Domestic Product price deflator. For 

each of the four cases specified, the 

values used for emissions in 2015 were 

$12.0, $40.5, $62.4, and $119 per metric 

ton avoided (values expressed in 

2013$). DOE derived values after 2050 

using the relevant growth rates for the 

2040–2050 period in the interagency 

update. 

DOE multiplied the CO2 emissions 

reduction estimated for each year by the 

SCC value for that year in each of the 

four cases. To calculate a present value 

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98U.S. Office of Management and Budget, Office 

of Information and Regulatory Affairs, 2006 Report 

to Congress on the Costs and Benefits of Federal 

Regulations and Unfunded Mandates on State, 

Local, and Tribal Entities, Washington, DC. 

Available at: www.whitehouse.gov/sites/default/

files/omb/assets/omb/inforeg/2006_cb/2006_cb_

final_report.pdf. 

99For 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 

2003, DOE/EIA–0581(2003), March, 2003. 

100 DOE/EIA approves use of the name ‘‘NEMS’’ 

to describe only an official version of the model 

without any modification to code or data. Because 

this analysis entails some minor code modifications 

and the model is run under various policy scenarios 

that are variations on DOE/EIA assumptions, DOE 

refers to it by the name ‘‘NEMS–BT’’ (‘‘BT’’ is DOE’s 

Building Technologies Program, under whose aegis 

this work has been performed). 

101See Bureau of Economic Analysis, ‘‘Regional 

Multipliers: A User Handbook for the Regional 

Input-Output Modeling System (RIMS II),’’ U.S. 

Department of Commerce (1992). 

102M. J. Scott, O. V. Livingston, P. J. Balducci, J. 

M. Roop, and R. W. Schultz, ImSET 3.1: Impact of 

Sector Energy Technologies, PNNL–18412, Pacific 

Northwest National Laboratory (2009) (Available at: 

www.pnl.gov/main/publications/external/

technical_reports/PNNL-18412.pdf). 

of the stream of monetary values, DOE 

discounted the values in each of the 

four cases using the specific discount 

rate that had been used to obtain the 

SCC values in each case. 

2. Valuation of Other Emissions 

Reductions 

As noted above, DOE has taken into 

account how amended energy 

conservation standards would reduce 

NOX emissions in those 22 States not 

affected by emissions caps. DOE 

estimated the monetized value of NOX

emissions reductions resulting from 

each of the TSLs considered for the 

NOPR based on estimates found in the 

relevant scientific literature. Estimates 

of monetary value for reducing NOX

from stationary sources range from $476 

to $4,893 per ton (2013$).98 DOE 

calculated monetary benefits using a 

medium value for NOX emissions of 

$2,684 per short ton (in 2013$), and real 

discount rates of 3 percent and 7 

percent. 

DOE is evaluating appropriate 

monetization of avoided SO2 and Hg 

emissions in energy conservation 

standards rulemakings. It has not 

included such monetization in the 

current analysis. 

L. 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. The 

utility impact analysis uses a variant of 

NEMS,99 which is a public domain, 

multi-sectored, partial equilibrium 

model of the U.S. energy sector. DOE 

uses a variant of this model, referred to 

as NEMS–BT,100 to account for selected 

utility impacts of new or amended 

energy conservation standards. DOE’s 

analysis consists of a comparison 

between model results for the most 

recent AEO Reference Case and for cases 

in which energy use is decremented to 

reflect the impact of potential standards. 

The energy savings inputs associated 

with each TSL come from the NIA. 

Chapter 15 of the NOPR TSD describes 

the utility impact analysis. 

M. Employment Impact Analysis 

Employment impacts include direct 

and indirect impacts. Direct 

employment impacts are any changes in 

the number of employees of 

manufacturers of the products subject to 

standards; the MIA addresses those 

impacts. Indirect employment impacts 

are changes in national employment 

that occur due to the shift in 

expenditures and capital investment 

caused by the purchase and operation of 

more-efficient appliances. Indirect 

employment impacts from standards 

consist of the jobs created or eliminated 

in the national economy due to: (1) 

Reduced spending by end users on 

energy; (2) reduced spending on new 

energy supply by the utility industry; (3) 

increased customer spending on the 

purchase of new products; and (4) the 

effects of those three factors throughout 

the economy. 

One method for assessing the possible 

effects on the demand for labor of such 

shifts in economic activity is to compare 

sector employment statistics developed 

by the Labor Department’s Bureau of 

Labor Statistics (BLS). BLS regularly 

publishes its estimates of the number of 

jobs per million dollars of economic 

activity in different sectors of the 

economy, as well as the jobs created 

elsewhere in the economy by this same 

economic activity. Data from BLS 

indicate that expenditures in the utility 

sector generally create fewer jobs (both 

directly and indirectly) than 

expenditures in other sectors of the 

economy.101 There are many reasons for 

these differences, including wage 

differences and the fact that the utility 

sector is more capital-intensive and less 

labor-intensive than other sectors. 

Energy conservation standards have the 

effect of reducing customer utility bills. 

Because reduced customer expenditures 

for energy likely lead to increased 

expenditures in other sectors of the 

economy, the general effect of efficiency 

standards is to shift economic activity 

from a less labor-intensive sector (i.e., 

the utility sector) to more laborintensive sectors (e.g., the retail and 

service sectors). Thus, based on the BLS 

data alone, DOE believes net national 

employment may increase because of 

shifts in economic activity resulting 

from amended energy conservation 

standards for SPVUs. 

For the amended standard levels 

considered in the NOPR, DOE estimated 

indirect national employment impacts 

using an input/output model of the U.S. 

economy called Impact of Sector Energy 

Technologies version 3.1.1 (ImSET).102

ImSET is a special-purpose version of 

the ‘‘U.S. Benchmark National InputOutput’’ (I–O) model, which was 

designed to estimate the national 

employment and income effects of 

energy-saving technologies. The ImSET 

software includes a computer-based I–O 

model having structural coefficients that 

characterize economic flows among the 

187 sectors. ImSET’s national economic 

I–O structure is based on a 2002 U.S. 

benchmark table, specially aggregated to 

the 187 sectors most relevant to 

industrial, commercial, and residential 

building energy use. DOE notes that 

ImSET is not a general equilibrium 

forecasting model, and understands the 

uncertainties involved in projecting 

employment impacts, especially 

changes in the later years of the 

analysis. Because ImSET does not 

incorporate price changes, the 

employment effects predicted by ImSET 

may over-estimate actual job impacts 

over the long run. For the NOPR, DOE 

used ImSET only to estimate short-term 

(through 2023) employment impacts. 

For more details on the employment 

impact analysis, see chapter 16 of the 

NOPR TSD. 

V. Analytical Results and Conclusions 

The following section addresses the 

results from DOE’s analyses with 

respect to potential energy conservation 

standards for SPVUs in this rulemaking. 

It addresses the TSLs examined by DOE, 

the projected impacts of each of these 

levels if adopted as energy conservation 

standards for SPVUs, and the proposed 

standard levels that DOE sets forth in 

the NOPR. Additional details regarding 

DOE’s analyses are contained in the 

TSD supporting this NOPR. 

A. Trial Standard Levels 

DOE developed Trial Standard Levels 

(TSLs) that combine efficiency levels for 

each equipment class of SPVACs and 

SPVHPs. Table V.1 presents the 

efficiency EERs for each equipment 

class in the EPCA and ASHRAE baseline 

and each TSL. TSL 1 consists of 

efficiency level 1 for equipment classes 

less than 65,000 Btu/h. TSL 2 consists 

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of efficiency level 2 for equipment 

classes less than 65,000 Btu/h. TSL 3 

consists of efficiency level 3 for 

equipment classes less than 65,000 Btu/ 

h. TSL 4 consists of efficiency level 4 

(max-tech) for equipment classes less 

than 65,000 Btu/h. For SPVACs between 

65,000 and 135,000 Btu/h, there are no 

models on the market above the 

ASHRAE level, and for SPVHPs 

between 65,000 and 135,000 Btu/h and 

SPVUs greater than or equal to 135,000 

Btu/h and less than 240,000 Btu/h, there 

are no models on the market at all, and, 

therefore, DOE had no basis with which 

to develop higher efficiency levels or 

conduct analyses. As a result, for each 

TSL, the EER (and COP) for these 

equipment classes is shown as the 

ASHRAE standard level of 10.0 EER 

(and 3.0 COP for heat pumps). 

TABLE V.1—EPCA BASELINE, ASHRAE BASELINE, AND TRIAL STANDARD LEVELS FOR SPVUS

Equipment class EPCA 

baseline 

ASHRAE 

baseline 

Trial standard levels 

EER(/COP) 

1 2 3 4 

SPVAC <65,000 Btu/h ............................. 9.0 10.0 10.5 11.0 11.75 12.3 

SPVHP <65,000 Btu/h ............................. 9.0/3.0 10.0/3.0 10.5/3.2 11.0/3.3 11.75/3.9 12.3/3.9 

SPVAC ≥65,000 Btu/h and <135,000 

Btu/h ..................................................... 8.9 10.0 10.0 10.0 10.0 10.0 

SPVHP ≥65,000 Btu/h and <135,000 

Btu/h ..................................................... 8.9/3.0 10.0/3.0 10.0/3.0 10.0/3.0 10.0/3.0 10.0/3.0 

SPVAC ≥135,000 Btu/h and <240,000 

Btu/h ..................................................... 8.6 10.0 10.0 10.0 10.0 10.0 

SPVHP ≥135,000 Btu/h and <240,000 

Btu/h ..................................................... 8.6/2.9 10.0/3.0 10.0/3.0 10.0/3.0 10.0/3.0 10.0/3.0 

For clarity, DOE has also summarized 

the different design options that would 

be introduced across equipment classes 

at each TSL in Table V.2 below. 

TABLE V.2—DESIGN OPTIONS AT EACH TRIAL STANDARD LEVEL FOR SPVUS

Equipment class ASHRAE baseline 

Trial standard levels 

1 2 3 4 

Design Options for Each TSL (options are cumulative—TSL 4 includes all preceding options) 

SPVAC <65,000 Btu/h BPM Indoor motor, 

Increased HX face 

area.

Addition of HX tube 

row.

Addition of HX tube 

row.

Improved Compressor Efficiency, 

Increased HX face 

area.

BPM Outdoor motor, 

High-Efficiency outdoor fan blade, 

Dual condensing 

heat exchangers. 

SPVHP <65,000 Btu/h BPM Indoor motor, 

Increased HX face 

area.

Addition of HX tube 

row.

Addition of HX tube 

row.

Improved Compressor Efficiency, 

Increased HX face 

area.

BPM Outdoor motor, 

High-Efficiency outdoor fan blade, 

Dual condensing 

heat exchangers. 

*SPVAC ≥65,000 Btu/

h and <135,000 Btu/

h.

BPM Indoor motor, 

Increased HX face 

area.

No change ................ No change ................ No change ................ No change. 

*SPVHP ≥65,000 Btu/

h and <135,000 Btu/

h.

BPM Indoor motor, 

Increased HX face 

area.

No change ................ No change ................ No change ................ No change. 

SPVAC ≥135,000 Btu/

h and <240,000 Btu/

h.

No change ................ No change ................ No change ................ No change ................ No change. 

SPVHP ≥135,000 Btu/

h and <240,000 Btu/

h.

No change ................ No change ................ No change ................ No change ................ No change. 

* TSL1 through TSL4 are marked as ‘‘no change’’ because for these equipment classes, each TSL consists of the ASHRAE efficiency level. 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Commercial 

Consumers 

a. Life-Cycle Cost and Payback Period 

Customers affected by new standards 

usually incur higher purchase prices 

and lower operating costs. DOE 

evaluates these impacts on individual 

customers by calculating changes in 

LCC and the PBP associated with the 

TSLs. The results of the LCC analysis for 

each TSL were obtained by comparing 

the installed and operating costs of the 

equipment in the base-case scenario 

(EPCA and ASHRAE baselines) against 

the standards-case scenarios at each 

TSL. Inputs used for calculating the LCC 

include total installed costs (i.e., 

equipment price plus installation costs), 

operating expenses (i.e., annual energy 

savings, energy prices, energy price 

trends, repair costs, and maintenance 

costs), equipment lifetime, and discount 

rates. 

The LCC analysis is carried out using 

Monte Carlo simulations. Consequently, 

the results of the LCC analysis are 

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103Because there are no units above the ASHRAE 

baseline in the classes greater than or equal to 

65,000 Btu/h and less than 135,000 Btu/h, and no 

units greater than or equal to 135,000 Btu/h and less 

than 240,000 Btu/h, there are no LCC savings for 

these classes. 

distributions covering a range of values, 

as opposed to a single deterministic 

value. DOE presents the mean or 

median values, as appropriate, 

calculated from the distributions of 

results. The LCC analysis also provides 

information on the percentage of 

consumers for whom an increase in the 

minimum efficiency standard would 

have a positive impact (net benefit), a 

negative impact (net cost), or no impact. 

DOE also performed a PBP analysis as 

part of the LCC analysis. The PBP is the 

number of years it would take for the 

consumer to recover the increased costs 

of higher-efficiency equipment as a 

result of energy savings based on the 

operating cost savings. The PBP is an 

economic benefit-cost measure that uses 

benefits and costs without discounting. 

Chapter 8 of the NOPR TSD provides 

detailed information on the LCC and 

PBP analyses. 

As described in section IV.G, DOE 

used a ‘‘roll-up’’ scenario in this 

rulemaking. Under the roll-up scenario, 

DOE assumes that the market shares of 

the efficiency levels (in the ASHRAE 

base-case) that do not meet the standard 

level under consideration would be 

‘‘rolled up’’ into (meaning ‘‘added to’’) 

the market share of the efficiency level 

at the standard level under 

consideration, and the market shares of 

efficiency levels that are above the 

standard level under consideration 

would remain unaffected. Customers in 

the ASHRAE base-case scenario who 

buy the equipment at or above the TSL 

under consideration, would be 

unaffected if the standard were to be set 

at that TSL. Customers in the ASHRAE 

base-case scenario who buy equipment 

below the TSL under consideration 

would be affected if the standard were 

to be set at that TSL. Among these 

affected customers, some may benefit 

from lower LCCs of the equipment and 

some may incur net cost due to higher 

LCCs, depending on the inputs to the 

LCC analysis such as electricity prices, 

discount rates, installation costs, and 

markups. 

DOE’s LCC and PBP analyses 

provided key outputs for each efficiency 

level above the baseline (i.e., efficiency 

levels more stringent than those in 

ASHRAE 90.1–2013), as reported in 

Table V.3 and Table V.4.103 DOE’s 

results indicate that for SPVAC units, 

affected customer savings are positive at 

TSLs 1 and 2, and for SPVHP units, 

customer savings are positive at TSLs 1, 

2, and 3. LCC and PBP results using the 

EPCA baseline are available in appendix 

8B of the NOPR TSD. 

TABLE V.3—SUMMARY LCC AND PBP RESULTS FOR SINGLE-PACKAGE VERTICAL AIR CONDITIONERS, <65,000 BTU/H

CAPACITY

TSL Efficiency level 

Life-cycle cost 

2013$ 

Life-cycle cost savings Payback 

period 

years 

Installed 

cost 

Discounted 

operating 

cost 

LCC 

Average 

savings 

2013$* 

% of customers that experience 

Median Net 

cost 

No 

impact 

Net 

benefit 

ASHRAE Baseline ...... 4,795 12,335 17,130 ................ ................ ................ ................ ................

1 ................ 1 .................................. 4,939 12,074 17,013 116 25 26 49 7.9 

2 ................ 2 .................................. 5,083 11,839 16,922 179 37 1 62 8.4 

3 ................ 3 .................................. 5,546 11,578 17,123 (24) 62 0 38 14.4 

4 ................ 4 .................................. 6,407 11,516 17,924 (825) 87 0 13 27.3 

*Parentheses indicate negative values. 

TABLE V.4—SUMMARY LCC AND PBP RESULTS FOR SINGLE-PACKAGE VERTICAL HEAT PUMPS, <65,000 BTU/H

CAPACITY

TSL Efficiency level 

Life-cycle cost 

2013$ 

Life-cycle cost savings Payback 

period 

years 

Installed 

cost 

Discounted 

operating 

cost 

LCC 

Average 

savings 

2013$ * 

% of customers that experience 

Median Net 

cost 

No 

impact 

Net 

benefit 

ASHRAE Baseline ...... 5,363 30,464 35,827 ................ ................ ................ ................ ................

1 ................ 1 .................................. 5,529 29,939 35,468 358 0 26 74 4.1 

2 ................ 2 .................................. 5,695 29,618 35,313 424 1 1 98 4.8 

3 ................ 3 .................................. 6,224 28,690 34,914 819 7 0 92 6.2 

4 ................ 4 .................................. 7,210 28,698 35,909 (177) 68 0 32 13.6 

*Parentheses indicate negative values. 

b. Life-Cycle Cost Subgroup Analysis 

Using the LCC spreadsheet model, 

DOE estimated the impacts of the TSLs 

on the following consumer subgroups: 

(1) Mining and construction firms using 

modular temporary office buildings; (2) 

public education providers using 

portable classrooms; and (3) small 

businesses and other businesses with 

high risk premiums (often due to 

volatility in their share price and 

reliance on equity rather than debt 

financing) and high discount rates 

(described as ‘‘high rate’’ subgroup in 

this section). DOE analyzed this final 

subgroup because this group has 

typically had less access to capital than 

other businesses, which results in 

higher financing costs and a higher 

discount rate than the industry average. 

Businesses with high discount rates 

need an earlier return on investment 

than other businesses and, other things 

equal, would place a lower value on 

future energy savings relative to 

immediate returns than would other 

businesses. Consequently, the present 

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value of future savings is lower for these 

businesses. DOE estimated the average 

LCC savings and median PBP using the 

ASHRAE baseline for the high rate 

subgroup compared with average SPVU 

consumers, as shown in Table V.5 and 

Table V.6 below. 

The results of the life-cycle cost 

subgroup analysis indicate that for 

SPVAC units, the three subgroups all 

fare slightly worse than the average 

consumer, with those subgroups being 

expected to have lower LCC savings and 

longer payback periods than average. In 

the cases of education and mining and 

construction customers, this occurs 

mainly because although they pay the 

same installed cost premium for moreefficient SPVAC units, they use and 

save less energy than do average 

customers and so benefit less from the 

energy savings. In the case of mining 

and construction customers, LCC 

savings are also further reduced by the 

effects of their higher discount rate, 

which further reduces the value of their 

already-smaller energy savings. The 

picture is somewhat more mixed for 

SPVHPs, with the high-rate subgroup 

and construction/mining firms generally 

faring worse, and education generally 

faring somewhat better than the average 

consumer. Education SPVHP customers 

save more energy than the average 

customer, whereas the opposite is true 

for education customers for air 

conditioners. Thus, even though they 

pay a lower price on average, education 

customers’ energy cost savings are 

higher than average, and they have a 

lower discount rate on those savings, 

making them worth more. In 

combination, these two factors make 

their LCC savings higher than those of 

the average SPVHP customer. The 

construction and mining SPVHP 

customers save less energy than the 

average customer, and their higher 

discount rate makes these savings worth 

less to them. Finally, since high 

discount rate customers save the same 

amount of energy as the average 

customer, they only experience the 

effects of their higher discount rate, 

which moderately reduces their LCC 

savings and has no effect on PBP. 

Chapter 11 of the NOPR TSD provides 

more detailed discussion on the LCC 

subgroup analysis and results. 

TABLE V.5—COMPARISON OF IMPACTS FOR CONSUMER SUBGROUPS WITH ALL CONSUMERS, SPVAC <65,000 BTU/H

TSL Energy efficiency 

level 

LCC Savings 

2013$* 

Median payback period 

years 

Construction 

and mining Education High rate All Construction and mining Education High rate All 

1 .............. 1 .............................. (27) 98 101 116 13.8 9.6 7.9 7.9 

2 .............. 2 .............................. (60) 148 153 179 14.7 10.1 8.3 8.4 

3 .............. 3 .............................. (429) (92) (66) (24) 26.7 17.5 14.3 14.4 

4 .............. 4 .............................. (1,323) (944) (867) (825) 55.0 33.5 28.1 27.3 

*Parentheses indicate negative values. 

TABLE V.6—COMPARISON OF IMPACTS FOR CONSUMER SUBGROUPS WITH ALL CONSUMERS, SPVHP <65,000 BTU/H

TSL Energy efficiency 

level 

LCC savings 

2013$* 

Median payback period 

years 

Construction 

and mining Education High rate All Construction and mining Education High rate All 

1 .............. 1 .............................. 259 440 342 358 4.2 3.8 4.1 4.1 

2 .............. 2 .............................. 274 549 403 424 5.4 4.6 4.8 4.8 

3 .............. 3 .............................. 527 1,056 769 819 6.3 6.1 6.2 6.2 

4 .............. 4 .............................. (488) 83 (222) (177) 14.5 12.7 13.6 13.6 

*Parentheses indicate negative values. 

c. Rebuttable Presumption Payback 

As discussed in section III.E.2, EPCA 

provides a rebuttable presumption that, 

in essence, an energy conservation 

standard is economically justified if the 

increased purchase cost for a product 

that meets the standard is less than 

three times the value of the first-year 

energy savings resulting from the 

standard. However, DOE routinely 

conducts a full economic analysis that 

considers the full range of impacts, 

including those to the consumer, 

manufacturer, Nation, and environment, 

as required under 42 U.S.C. 

6295(o)(2)(B)(i) and 6316(e)(1). The 

results of this analysis serve as the basis 

for DOE to definitively evaluate the 

economic justification for a potential 

standard level, thereby supporting or 

rebutting the results of any preliminary 

determination of economic justification. 

For comparison with the more detailed 

analytical results, DOE calculated a 

rebuttable presumption payback period 

for each TSL. Table V.7 shows the 

rebuttable presumption payback periods 

for the representative equipment classes 

using the ASHRAE baseline. No 

equipment class has a rebuttable 

presumption payback period of less 

than 3 years. 

TABLE V.7—REBUTTABLE PRESUMPTION PAYBACK PERIODS FOR SPVU EQUIPMENT CLASSES

Equipment class 

Rebuttable presumption payback 

years 

TSL 1 TSL 2 TSL 3 TSL 4 

SPVAC <65,000 Btu/h ..................................................................................... 5.2 5.4 8.6 14.8 

SPVHP <65,000 Btu/h ..................................................................................... 3.2 4.0 4.8 9.5 

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2. Economic Impact on Manufacturers 

As noted in section IV.I, DOE 

performed a manufacturer impact 

analysis to estimate the impact of 

amended energy conservation standards 

on manufacturers of SPVUs. DOE 

calculated manufacturer impacts 

relative to a base case, defined as DOE 

adoption of the efficiency levels 

specified by ASHRAE Standard 90.1– 

2013. Consequently, when comparing 

the INPV impacts under the GRIM 

model, the baseline technology is at an 

efficiency of 10 EER/3.0 COP. The 

following subsection describes the 

expected impacts on manufacturers at 

each considered TSL. Chapter 12 of the 

NOPR TSD explains the analysis in 

further detail, and also contains results 

using the EPCA baseline. 

a. Industry Cash-Flow Analysis Results 

Table V.8 depicts the estimated 

financial impacts on manufacturers and 

the conversion costs that DOE expects 

manufacturers would incur at each TSL. 

The financial impacts on manufacturers 

are represented by changes in industry 

net present value. 

The impact of potential amended 

energy conservation standards were 

analyzed under two markup scenarios: 

(1) The preservation of gross margin 

percentage; and (2) the preservation of 

operating profit. As discussed in section 

IV.I.2.b, DOE considered the 

preservation of gross margin percentage 

scenario by applying a uniform ‘‘gross 

margin percentage’’ markup across all 

efficiency levels. As production cost 

increases with efficiency, this scenario 

implies that the absolute dollar markup 

will increase. DOE assumed the 

nonproduction cost markup—which 

includes SG&A expenses, research and 

development expenses, interest, and 

profit to be a factor of 1.28. These 

markups are consistent with the ones 

DOE assumed in the engineering 

analysis and in the base case of the 

GRIM. Manufacturers have indicated 

that it is optimistic to assume that as 

their production costs increase in 

response to an amended energy 

conservation standard, they would be 

able to maintain the same gross margin 

percentage markup. Therefore, DOE 

assumes that this scenario represents a 

high bound to industry profitability 

under an amended energy conservation 

standard. 

The preservation of operating profit 

scenario reflects manufacturer concerns 

about their inability to maintain their 

margins as manufacturing production 

costs increase to reach more-stringent 

efficiency levels. In this scenario, while 

manufacturers make the necessary 

investments required to convert their 

facilities to produce new standardscompliant equipment, operating profit 

does not change in absolute dollars and 

decreases as a percentage of revenue. 

Each of the modeled scenarios results 

in a unique set of cash flows and 

corresponding industry values at each 

TSL. In the following discussion, the 

INPV results refer to the difference in 

industry value between the base case 

and each standards case that result from 

the sum of discounted cash flows from 

the base year 2014 through 2048, the 

end of the analysis period. To provide 

perspective on the short-run cash flow 

impact, DOE includes in the discussion 

of the results a comparison of free cash 

flow between the base case and the 

standards case at each TSL in the year 

before amended standards would take 

effect. This figure provides an 

understanding of the magnitude of the 

required conversion costs relative to the 

cash flow generated by the industry in 

the base case. 

TABLE V.8—MANUFACTURER IMPACT ANALYSIS RESULTS FOR SPVUS

Units Base 

case 

Trial standard level* 

1 2 3 4 

INPV ...................................................... $M 36.5 32.4 to 34.2 33.2 to 38.0 27.5 to 49.2 3.0 to 47.4 

Change in INPV .................................... $M ................ (4.1) to (2.3) (3.3) to 1.5 (9.0) to 12.7 (33.4) to 10.9 

% ................ (11.3) to (6.3) (9.0) to 4.1 (24.7) to 34.9 (91.7) to 29.9 

Free Cash Flow (FCF) in 2018 ............ $M 2.9 0.6 0.4 (2.1) (9.5) 

Change in FCF in 2018 ........................ $M ................ (2.3) (2.5) (5.0) (12.4) 

% ................ (78.2) (85.0) (174.0) (428.2) 

Conversion Costs ................................. $M ................ 6.5 7.2 16.1 33.9 

*Parentheses indicate negative values. 

At TSL 1, the standard for all 

equipment classes with capacity less 

than 65,000 Btu/h is set at 10.5 EER/3.2 

COP. The standard for all equipment 

classes with capacity greater than or 

equal to 65,000 Btu/h and less than 

135,000 Btu/h and greater than or equal 

to 135,000 Btu/h and less than 240,000 

Btu/h is set at the baseline (i.e., 10.0 

EER/3.0 COP). DOE estimates the 

change in INPV to range from ¥$4.1 to 

¥$2.3 million, or a change of ¥11.3 

percent to ¥6.3 percent. At this level, 

free cash flow is estimated to decrease 

to $0.6 million, or a decrease of 78.2 

percent compared to the base-case value 

of $2.9 million in the year 2018, the year 

before the standards year. DOE does 

expect a standard at this level to require 

changes to manufacturing equipment, 

thereby resulting in capital conversion 

costs. The engineering analysis suggests 

that manufacturers would reach this 

amended standard by increasing heat 

exchanger size. Roughly sixty-five 

percent of the SPVU models listed in 

the AHRI Directory would need to be 

updated to meet this amended standard 

level. Estimated industry conversion 

costs total $6.5 million. 

At TSL 2, the standard for all 

equipment classes with capacity less 

than 65,000 Btu/h is set at 11.0 EER/3.3 

COP. The standards for all equipment 

classes with capacity greater than or 

equal to 65,000 Btu/h and less than 

135,000 Btu/h and greater than or equal 

to 135,000 Btu/h and less than 240,000 

Btu/h remain at baseline as in TSL 1. 

DOE estimates impacts on INPV to range 

from $1.5 million to ¥$3.3 million, or 

a change in INPV of 4.1 percent to ¥9.0 

percent. At this level, free cash flow is 

estimated to decrease to $0.4, or a 

change of ¥85.0 percent compared to 

the base-case value of $2.9 million in 

the year 2018. Based on the engineering 

analysis, DOE expects manufacturers to 

reach this level of efficiency by further 

increasing the size of the heat 

exchanger. Product updates and 

associated testing expenses would 

further increase conversion costs for the 

industry to $7.2 million. 

At TSL 3, the standard increases to 

11.75 EER/3.9 COP for equipment with 

capacity less than 65,000 Btu/h. The 

standards for SPVAC and SPVHP 

equipment with capacity greater than or 

equal to 65,000 Btu/h and less than 

135,000 Btu/h and greater than or equal 

to 135,000 Btu/h and less than 240,000 

Btu/h remain at baseline as in TSLs 1 

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104U.S. Census Bureau, Annual Survey of 

Manufacturers: General Statistics: Statistics for 

Industry Groups and Industries (2011) (Available at http://www.census.gov/manufacturing/asm/

index.html). 

and 2. DOE estimates impacts on INPV 

to range from $12.7 million to ¥9.0 

million, or a change in INPV of 34.9 

percent to ¥24.7 percent. At this level, 

free cash flow is estimated to decrease 

to less than zero, to ¥$2.1 million, or 

a change of ¥174.0 percent compared to 

the base-case value of $2.9 million in 

the year 2018. The engineering analysis 

suggests that manufacturers would 

reach this amended standard by once 

again increasing heat exchanger size and 

by switching to more-efficient two-stage 

compressors. Manufacturers that 

produce heat exchangers in-house may 

need to add coil fabrication equipment 

to accommodate the size of the heat 

exchanger necessary to meet the 

standard. Additionally, the new heat 

exchanger size may require 

manufacturers to invest additional 

capital into their sheet metal bending 

lines. Ninety-four percent of the SPVU 

models listed in the AHRI Directory 

would require redesign at this amended 

standard level. DOE estimates total 

conversion costs to be $16.1 million for 

the industry. 

At TSL 4, the standard increases to 

12.3 EER/COP of 3.9 for SPVAC and 

SPVHP equipment with capacity less 

than 65,000 Btu/h. The standards for 

SPVAC and SPVHP equipment with 

capacity greater than or equal to 65,000 

Btu/h and less than 135,000 Btu/h and 

greater than or equal to 135,000 Btu/h 

and less than 240,000 Btu/h remain at 

baseline as in TSLs 1, 2, and 3. DOE 

estimates impacts on INPV to range 

from $10.9 million to ¥33.4 million, or 

a change in INPV of 29.9 percent to 

¥91.7 percent. At this level, free cash 

flow is estimated to decrease to ¥$9.5 

million, or a decrease of 428.2 percent 

compared to the base-case value of $2.9 

million in the year 2018. TSL 4 

represents the max-tech standard level. 

DOE expects manufacturers to meet the 

amended standard by dramatically 

increasing the size of the evaporating 

heat exchanger and incorporating two 

condensing heat exchangers. Ninetyeight percent of all SPVU models listed 

in the AHRI Directory would require 

redesign at this amended standard level. 

Additionally, DOE expects designs to 

use BPMs for both the indoor and 

outdoor motors. Total conversion costs 

are expected to reach $33.9 million for 

the industry. 

b. Impacts on Direct Employment 

To quantitatively assess the potential 

impacts of amended energy 

conservation standards on direct 

employment, DOE used the GRIM to 

estimate the domestic labor 

expenditures and number of direct 

employees in the base case and at each 

TSL from 2014 through 2048. DOE used 

statistical data from the U.S. Census 

Bureau’s 2011 Annual Survey of 

Manufacturers,104 the results of the 

engineering analysis, and interviews 

with manufacturers to determine the 

inputs necessary to calculate industrywide labor expenditures and domestic 

direct employment levels. Labor 

expenditures related to manufacturing 

of the product are a function of the labor 

intensity of the product, the sales 

volume, and an assumption that wages 

remain fixed in real terms over time. 

The total labor expenditures in each 

year are calculated by multiplying the 

MPCs by the labor percentage of MPCs. 

DOE estimates that 95 percent of SPVU 

units are produced domestically. 

The total labor expenditures in the 

GRIM were then converted to domestic 

production employment levels by 

dividing production labor expenditures 

by the annual payment per production 

worker (production worker hours times 

the labor rate found in the U.S. Census 

Bureau’s 2011 Annual Survey of 

Manufacturers). The production worker 

estimates in this section only cover 

workers up to the line-supervisor level 

who are directly involved in fabricating 

and assembling a product within an 

original equipment manufacturer (OEM) 

facility. Workers performing services 

that are closely associated with 

production operations, such as materials 

handling tasks using forklifts, are also 

included as production labor. DOE’s 

estimates only account for production 

workers who manufacture the specific 

products covered by this rulemaking. To 

estimate an upper bound to employment 

change, DOE assumes all domestic 

manufacturers would choose to 

continue producing products in the U.S. 

and would not move production to 

foreign countries. To estimate a lower 

bound to employment, DOE estimated 

the maximum portion of the industry 

that would choose leave the industry 

rather than make the necessary product 

conversions. A complete description of 

the assumptions used to generate these 

upper and lower bounds can be found 

in chapter 12 of the NOPR TSD. 

Using the GRIM, DOE estimates that 

in the absence of amended energy 

conservation standards, there would be 

454 domestic production workers for 

SPVU equipment. As noted previously, 

DOE estimates that 95 percent of SPVU 

units sold in the United States are 

manufactured domestically. Table V.9 

below shows the range of the impacts of 

potential amended energy conservation 

standards on U.S. production workers of 

SPVUs. 

TABLE V.9—POTENTIAL CHANGES IN THE TOTAL NUMBER OF SPVU PRODUCTION WORKERS IN 2019 

Trial standard level* 

Base case 1 2 3 4 

Total Number of Domestic Production Workers in 2019 .......................... 412 389 to 421 389 to 432 339 to 461 285 to 559 

Potential Changes in Domestic Production Workers in 2019 ................... .................... (23) to 9 (23) to 20 (73) to 49 (127) to 147 

*Parentheses indicate negative values. 

c. Impacts on Manufacturing Capacity 

According to SPVU manufacturers 

interviewed, demand for SPVUs, which 

roughly correlates to trends in 

telecommunications spending and 

construction of new schools, peaked in 

the 2001–2006 time frame. As a result, 

excess capacity exists in the industry 

today. 

Except at the max-tech level, any 

necessary redesign of SPVU models 

would not fundamentally change the 

assembly of the equipment. Any 

bottlenecks are more likely to come 

from the redesign, testing, and 

certification process rather than from 

production capacity. To that end, some 

interviewed manufacturers expressed 

concern that the redesign of all products 

to include BPM motors would require a 

significant portion of their engineering 

resources, taking resources away from 

customer responsiveness and R&D 

efforts. Furthermore, some 

manufacturers noted that an amended 

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standard requiring BPMs would 

monopolize their testing resources and 

facilities—to their point when some 

manufacturers anticipated the need to 

build new psychometric test labs just to 

have enough in-house testing capacity 

to meet the amended standard. Once all 

products have been redesigned to meet 

an amended energy conservation 

standard, manufacturers did not 

anticipate any production constraints. 

d. Impacts on Subgroups of 

Manufacturers 

Small manufacturers, niche 

equipment manufacturers, and 

manufacturers exhibiting a cost 

structure substantially different from the 

industry average could be affected 

disproportionately. As discussed in 

section IV.I using average cost 

assumptions developed for an industry 

cash-flow estimate is inadequate to 

assess differential impacts among 

manufacturer subgroups. 

For SPVU equipment, DOE identified 

and evaluated the impact of amended 

energy conservation standards on one 

subgroup, specifically small 

manufacturers. The SBA defines a 

‘‘small business’’ as having 750 

employees or less for NAICS 333415, 

‘‘Air-Conditioning and Warm Air 

Heating Equipment and Commercial 

and Industrial Refrigeration Equipment 

Manufacturing.’’ Based on this 

definition, DOE identified two domestic 

manufacturers in the industry that 

qualifies as a small business. For a 

discussion of the impacts on the small 

manufacturer subgroup, see the 

regulatory flexibility analysis in section 

VI.B of this NOPR and chapter 12 of the 

NOPR TSD. 

e. Cumulative Regulatory Burden 

While any one regulation may not 

impose a significant burden on 

manufacturers, the combined effects of 

several impending regulations may have 

serious consequences for some 

manufacturers, groups of manufacturers, 

or an entire industry. Assessing the 

impact of a single regulation may 

overlook this cumulative regulatory 

burden. Multiple regulations affecting 

the same manufacturer can strain profits 

and can lead companies to abandon 

product lines or markets with lower 

expected future returns than competing 

products. For these reasons, DOE 

conducts an analysis of cumulative 

regulatory burden as part of its 

rulemakings pertaining to appliance 

efficiency. 

For the cumulative regulatory burden 

analysis, DOE looks at other regulations 

that could affect SPVU manufacturers 

that will take effect approximately three 

years before or after the compliance date 

of amended energy conservation 

standards for these products. For 

equipment with proposed standards that 

are more stringent than those contained 

in ASHRAE Standard 90.1–2013, the 

compliance date is four years after 

publication of an energy conservation 

standards final rule (i.e., compliance 

date assumed to be 2019 for the 

purposes of MIA). For equipment with 

proposed standards that are set at the 

levels contained in ASHRAE Standard 

90.1–2013, the compliance date is two 

or three years after the effective date of 

the requirements in ASHRAE Standard 

90.1–2013, depending on equipment 

size (i.e., 2015 or 2016). For this 

cumulative regulatory burden analysis, 

DOE considered regulations that could 

affect SPVU manufacturers that take 

effect from 2012 to 2022, to account for 

the range of compliance years. 

In interviews, manufacturers cited 

Federal regulations on equipment other 

than SPVUs that contribute to their 

cumulative regulatory burden. In 

particular, manufacturers noted that 

some of them also produce residential 

central air conditioners and heat pumps, 

residential furnaces, room air 

conditioners, and water-heating 

equipment. These products have 

amended energy conservation standards 

that go into effect within three years of 

the compliance date for any amended 

SPVU standards. The compliance years 

and expected industry conversion costs 

are listed below: 

TABLE V.10—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION

STANDARDS AFFECTING SPVU MANUFACTURERS

Federal energy conservation standards Approximate 

compliance date 

Estimated total 

industry conversion 

expense 

2008 Packaged Terminal Air Conditioners and Heat Pumps 73 FR 58772 (Oct. 7, 2008) ................. 2012 $33.7M (2007$). 

2011 Room Air Conditioners 76 FR 22454 (April 21, 2011); 76 FR 52854 (August 24, 2011) ........... 2014 $171M (2009$). 

2007 Residential Furnaces & Boilers 72 FR 65136 (Nov. 19, 2007) ................................................... 2015 $88M (2006$).* 

2011 Residential Furnaces 76 FR 37408 (June 27, 2011); 76 FR 67037 (Oct. 31, 2011) .................. 2015 $2.5M (2009$).** 

2011 Residential Central Air Conditioners and Heat Pumps 76 FR 37408 (June 27, 2011); 76 FR 

67037 (Oct. 31, 2011).

2015 $26.0M (2009$).** 

2010 Gas Fired and Electric Storage Water Heaters 75 FR 20112 (April 16, 2010) ........................... 2015 $95.4M (2009$). 

Walk-in Coolers and Freezers 79 FR 32050 (June 3, 2014) ................................................................ 2017 $33.6M (2012$). 

Dishwashers*** ...................................................................................................................................... 2018 TBD. 

Commercial Warm-Air Furnaces*** ....................................................................................................... 2018 TBD. 

Commercial Packaged Air Conditioners and Heat Pumps*** 79 FR 58948 (September 18, 2014) .... 2019 $226.4M (2013$). 

Furnace Fans 79 FR 38130 (July 3, 2014) ........................................................................................... 2019 $40.6M (2013$). 

Packaged Terminal Air Conditioners and Heat Pumps*** 79 FR 55538 (September 16, 2014) ......... 2019 $14.3M (2013$). 

Miscellaneous Residential Refrigeration*** ........................................................................................... 2019 TBD. 

Commercial Water Heaters*** ............................................................................................................... 2019 TBD. 

Commercial Packaged Boilers*** .......................................................................................................... 2020 TBD. 

Residential Water Heaters*** ................................................................................................................ 2021 TBD. 

Clothes Dryers*** ................................................................................................................................... 2022 TBD. 

Central Air Conditioners*** .................................................................................................................... 2022 TBD. 

Room Air Conditioners*** ...................................................................................................................... 2022 TBD. 

*Conversion expenses for manufacturers of oil-fired furnaces and gas-fired and oil-fired boilers associated with the November 2007 final rule 

for residential furnaces and boilers are excluded from this figure. The 2011 direct final rule for residential furnaces sets a higher standard and 

earlier compliance date for oil-fired furnaces than the 2007 final rule. As a result, manufacturers will be required to design the 2011 direct final 

rule standard. The conversion costs associated with the 2011 direct final rule are listed separately in this table. EISA 2007 legislated higher 

standards and earlier compliance dates for residential boilers than were in the November 2007 final rule. As a result, gas-fired and oil-fired boiler 

manufacturers were required to design to the EISA 2007 standard beginning in 2012. The conversion costs listed for residential gas-fired and oilfired boilers in the November 2007 residential furnaces and boilers final rule analysis are not included in this figure. 

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105U.S. Office of Management and Budget, 

‘‘Circular A–4: Regulatory Analysis’’ (Sept. 17, 

2003) (Available at: http://www.whitehouse.gov/

omb/circulars_a004_a-4/). 

106EPCA requires DOE to review its standards at 

least once every 6 years, and requires, for certain 

products, a 3-year period after any new standard is 

promulgated before compliance is required, except 

that in no case may any new standards be required 

within 6 years of the compliance date of the 

previous standards. (42 U.S.C. 6313(a)(6)(C)) While 

adding a 6-year review to the 3-year compliance 

period adds up to 9 years, DOE notes that it may 

undertake reviews at any time within the 6-year 

period and that the 3-year compliance date may 

yield to the 6-year backstop. A 9-year analysis 

period may not be appropriate given the variability 

that occurs in the timing of standards reviews and 

the fact that for some consumer products, the 

compliance period is 5 years rather than 3 years. 

**Estimated industry conversion expense and approximate compliance date reflect a court-ordered April 24, 2014 remand of the residential 

non-weatherized and mobile home gas furnaces standards set in the 2011 Energy Conservation Standards for Residential Furnaces and Residential Central Air Conditioners and Heat Pumps. The costs associated with this rule reflect implementation of the amended standards for the remaining furnace product classes (i.e., oil-fired furnaces). 

***The final rule for this energy conservation standard has not been published. The compliance date and analysis of conversion costs have not 

been finalized at this time. (If a value is provided for total industry conversion expense, this value represents an estimate from the NOPR.) 

Additionally, manufacturers cited 

increasing ENERGY STAR standards for 

room air conditioners and packaged 

terminal air conditioners as a source of 

regulatory burden. In response, the 

Department does not consider ENERGY 

STAR in its presentation of cumulative 

regulatory burden, because ENERGY 

STAR is a voluntary program and is not 

Federally mandated. 

3. National Impact Analysis 

a. Significance of Energy Savings 

For each TSL, DOE projected energy 

savings for SPVUs purchased in the 30- 

year period that begins in the year of 

compliance with amended standards 

(2015–2044 for the ASHRAE level and 

2019–2048 for higher efficiency levels). 

The savings are measured over the 

entire lifetime of equipment purchased 

in the 30-year period. DOE quantified 

the energy savings attributable to each 

TSL as the difference in energy 

consumption between each standards 

case and the ASHRAE base case. DOE 

also compared the energy consumption 

of SPVUs under the ASHRAE Standard 

90.1–2013 efficiency levels to energy 

consumption of SPVUs under the EPCA 

base case (i.e., the current Federal 

standard). 

Table V.11 presents the estimated 

primary energy savings for the ASHRAE 

level and for each considered TSL, and 

Table V.12 presents the estimated FFC 

energy savings. The approach is further 

described in section IV.G.1. As 

mentioned previously, NES (and NPV) 

were not calculated for equipment 

classes with no shipments. 

TABLE V.11—CUMULATIVE NATIONAL PRIMARY ENERGY SAVINGS FOR SPVU TRIAL STANDARD LEVELS FOR UNITS SOLD

IN 2015–2044 (ASHRAE) OR 2019–2048 (HIGHER) 

ASHRAE 

baseline 

Trial standard level 

1 2 3 4 

quads* 

SPVAC <65,000 Btu/h ......................................................... 0.14 0.06 0.13 0.21 0.23 

SPVHP <65,000 Btu/h ......................................................... 0.07 0.04 0.10 0.15 0.16 

SPVAC ≥65,000 Btu/h to <135,000 Btu/h ........................... 0.01 ........................ ........................ ........................ ........................

Total—All Classes ........................................................ 0.22 0.09 0.22 0.36 0.39 

* All energy savings from TSLs above the ASHRAE Standard 90.1–2013 level are calculated with those ASHRAE levels as a baseline.

Note: Components may not sum to total due to rounding. 

TABLE V.12—CUMULATIVE NATIONAL FULL-FUEL-CYCLE ENERGY SAVINGS FOR SPVU TRIAL STANDARD LEVELS FOR

UNITS SOLD IN 2015–2044 (ASHRAE) OR 2019–2048 (HIGHER) 

ASHRAE 

baseline 

Trial standard level 

1 2 3 4 

quads* 

SPVAC <65,000 Btu/h ......................................................... 0.15 0.06 0.13 0.22 0.24 

SPVHP <65,000 Btu/h ......................................................... 0.07 0.04 0.10 0.15 0.16 

SPVAC ≥65,000 Btu/h to <135,000 Btu/h ........................... 0.01 ........................ ........................ ........................ ........................

Total—All Classes ........................................................ 0.22 0.09 0.23 0.37 0.39 

* All energy savings from TSLs above the ASHRAE Standard 90.1–2013 level are calculated with those ASHRAE levels as a baseline.

Note: Components may not sum to total due to rounding. 

Circular A–4 requires agencies to 

present analytical results, including 

separate schedules of the monetized 

benefits and costs that show the type 

and timing of benefits and costs.105

Circular A–4 also directs agencies to 

consider the variability of key elements 

underlying the estimates of benefits and 

costs. For this rulemaking, DOE 

undertook a sensitivity analysis using 

nine rather than 30 years of product 

shipments. The choice of a nine -year 

period is a proxy for the timeline in 

EPCA for the review of certain energy 

conservation standards and potential 

revision of and compliance with such 

revised standards.106 The review 

timeframe established in EPCA is 

generally not synchronized with the 

product lifetime, product manufacturing 

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107OMB Circular A–4, section E (Sept. 17, 2003) 

(Available at: http://www.whitehouse.gov/omb/

circulars_a004_a-4). 

cycles, or other factors specific to 

SPVUs. Thus, such results are presented 

for informational purposes only and are 

not indicative of any change in DOE’s 

analytical methodology. The NES 

results based on a nine-year analytical 

period are presented in Table V.13. The 

impacts are counted over the lifetime of 

products purchased in 2015–2023 for 

the ASHRAE level and for 2019–2027 

for higher levels. 

TABLE V.13—CUMULATIVE NATIONAL PRIMARY ENERGY SAVINGS FOR SPVU TRIAL STANDARD LEVELS FOR UNITS SOLD

IN 2015–2023 (ASHRAE) OR 2019–2027 (HIGHER) 

ASHRAE 

baseline 

Trial standard level 

1 2 3 4 

quads* 

SPVAC <65,000 Btu/h ......................................................... 0.04 0.01 0.03 0.06 0.07 

SPVHP <65,000 Btu/h ......................................................... 0.01 0.01 0.02 0.04 0.05 

SPVAC ≥65,000 Btu/h to <135,000 Btu/h ........................... 0.00 ........................ ........................ ........................ ........................

Total—All Classes ........................................................ 0.06 0.02 0.05 0.10 0.11 

* All energy savings from TSLs above the ASHRAE Standard 90.1–2013 level are calculated with those ASHRAE levels as a baseline.

Note: Components may not sum to total due to rounding. 

b. Net Present Value of Consumer Costs 

and Benefits 

DOE estimated the cumulative NPV of 

the total costs and savings for 

consumers that would result from the 

TSLs considered for SPVUs. In 

accordance with OMB’s guidelines on 

regulatory analysis,107 DOE calculated 

NPV using both a 7-percent and a 3- 

percent real discount rate. Table V.14 

shows the consumer NPV results for 

each TSL considered for SPVUs using 

the ASHRAE baseline. In each case, the 

impacts cover the lifetime of equipment 

purchased in 2019–2048. DOE 

conducted all economic analyses 

relative to the ASHRAE baseline; 

because the ASHRAE level is max-tech 

for classes greater than or equal to 

65,000 Btu/h and less than 135,000 Btu/ 

h, DOE did not include results for these 

classes in the NPV tables. Results for all 

equipment classes using the EPCA 

baseline can be found in chapter 10 of 

the NOPR TSD. 

TABLE V.14—CUMULATIVE NET PRESENT VALUE OF CUSTOMER BENEFIT FOR SPVU TRIAL STANDARD LEVELS FOR UNITS

SOLD IN 2019–2048 

Equipment class Discount rate 

(%) 

Trial standard level 

1 2 3 4 

billion 2013$* 

SPVAC <65,000 Btu/h ......................................................... 3 

7 

0.13 

0.04 

0.13 

0.01 

(0.64) 

(0.38) 

(1.05) 

(0.66) 

SPVHP <65,000 Btu/h ......................................................... 3 

7 

0.13 

0.04 

0.32 

0.10 

0.14 

0.01 

(0.06) 

(0.12) 

Total—All Classes ........................................................ 3 

7 

0.26 

0.09 

0.44 

0.11 

(0.50) 

(0.37) 

(1.10) 

(0.78) 

* Numbers in parentheses indicate negative NPV. 

Note: Components may not sum to total due to rounding. 

The NPV results based on the 

aforementioned nine-year analytical 

period are presented in Table V.15. The 

impacts are counted over the lifetime of 

products purchased in 2019–2027. As 

mentioned previously, this information 

is presented for informational purposes 

only and is not indicative of any change 

in DOE’s analytical methodology or 

decision criteria. 

TABLE V.15—CUMULATIVE NET PRESENT VALUE OF CUSTOMER BENEFIT FOR SPVU TRIAL STANDARD LEVELS FOR UNITS

SOLD IN 2019–2027 

Equipment class Discount rate 

(%) 

Trial standard level 

1 2 3 4 

billion 2013$* 

SPVAC <65,000 Btu/h ......................................................... 3 

7 

0.06 

0.02 

0.09 

0.03 

(0.04) 

(0.08) 

(0.34) 

(0.30) 

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TABLE V.15—CUMULATIVE NET PRESENT VALUE OF CUSTOMER BENEFIT FOR SPVU TRIAL STANDARD LEVELS FOR UNITS

SOLD IN 2019–2027—Continued 

Equipment class Discount rate 

(%) 

Trial standard level 

1 2 3 4 

SPVHP <65,000 Btu/h ......................................................... 3 

7 

0.05 

0.02 

0.09 

0.04 

0.14 

0.05 

(0.01) 

(0.05) 

Total—All Classes ........................................................ 3 

7 

0.10 

0.05 

0.19 

0.08 

0.09 

(0.03) 

(0.35) 

(0.36) 

* Numbers in parentheses indicate negative NPV. 

Note: Components may not sum to total due to rounding. 

The results presented in this section 

reflect an assumption of no change in 

SPVU prices over the forecast period. In 

addition, DOE conducted sensitivity 

analysis using alternative price trends: 

one in which prices decline over time, 

and one in which prices increase. These 

price trends, and the associated NPV 

results, are described in appendix 10B 

of the NOPR TSD. 

c. Indirect Impacts on Employment 

DOE expects energy conservation 

standards for SPVUs to reduce energy 

costs for equipment owners, with the 

resulting net savings being redirected to 

other forms of economic activity. Those 

shifts in spending and economic activity 

could affect the demand for labor. As 

described in section IV.M, DOE used an 

input/output model of the U.S. economy 

to estimate indirect employment 

impacts of the TSLs that DOE 

considered in this rulemaking. DOE 

understands that there are uncertainties 

involved in projecting employment 

impacts, especially changes in the later 

years of the analysis. Therefore, DOE 

generated results for near-term time 

frames (2019–2023), where these 

uncertainties are reduced. 

The results suggest that these 

proposed standards would be likely to 

have negligible impact on the net 

demand for labor in the economy. The 

net change in jobs is so small that it 

would be imperceptible in national 

labor statistics and might be offset by 

other, unanticipated effects on 

employment. Chapter 16 of the NOPR 

TSD presents more detailed results 

about anticipated indirect employment 

impacts. 

4. Impact on Utility or Performance of 

Equipment 

DOE has tentatively concluded that 

the amended standards it is proposing 

in this NOPR would not lessen the 

utility or performance of SPVUs. 

5. Impact of Any Lessening of 

Competition 

DOE has also considered any 

lessening of competition that is likely to 

result from new and amended 

standards. The Attorney General 

determines the impact, if any, of any 

lessening of competition likely to result 

from a proposed standard, and transmits 

such determination in writing to the 

Secretary, together with an analysis of 

the nature and extent of such impact. 

(42 U.S.C. 6313(a)(6)(B)(ii)(V)) 

To assist the Attorney General in 

making such a determination, DOE has 

provided DOJ with copies of this notice 

and the TSD for review. DOE will 

consider DOJ’s comments on the 

proposed rule in preparing the final 

rule, and DOE will publish and respond 

to DOJ’s comments in that document. 

6. Need of the Nation To Conserve 

Energy 

An improvement in the energy 

efficiency of the products subject to this 

rule is likely to improve the security of 

the nation’s energy system by reducing 

overall demand for energy. Reduced 

electricity demand may also improve 

the reliability of the electricity system. 

Reductions in national electric 

generating capacity estimated for each 

considered TSL are reported in chapter 

15 of the NOPR TSD. 

Energy savings from amended 

standards for the SPVU equipment 

classes covered in the NOPR could also 

produce environmental benefits in the 

form of reduced emissions of air 

pollutants and greenhouse gases 

associated with electricity production. 

Table V.16 provides DOE’s estimate of 

cumulative emissions reductions 

projected to result from the TSLs 

considered in this rulemaking using the 

ASHRAE baseline, while results using 

the EPCA baseline can be found in 

chapter 13 of the NOPR TSD. The table 

includes both power sector emissions 

and upstream emissions. The upstream 

emissions were calculated using the 

multipliers discussed in section IV.G. 

DOE reports annual CO2, NOX, and Hg 

emissions reductions for each TSL in 

chapter 13 of the NOPR TSD. As 

discussed in section IV.J, DOE did not 

include NOX emissions reduction from 

power plants in States subject to CAIR, 

because an energy conservation 

standard would not affect the overall 

level of NOX emissions in those States 

due to the emissions caps mandated by 

CSAPR. 

TABLE V.16—CUMULATIVE EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR SPVUS

TSL 

1 2 3 4 

Power Sector and Site Emissions* 

CO2 (million metric tons) ......................................................................... 8 .0 20 32 34 

SO2 (thousand tons) ................................................................................ 22 53 86 90 

NOX (thousand tons) ............................................................................... 3 .6 8 .9 14 14 

Hg (tons) .................................................................................................. 0 .03 0 .06 0 .10 0 .11 

N2O (thousand tons) ................................................................................ 0 .11 0 .27 0 .44 0 .46 

CH4 (thousand tons) ................................................................................ 0 .60 1 .4 2 .4 2 .5 

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TABLE V.16—CUMULATIVE EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR SPVUS—Continued 

TSL 

1 2 3 4 

Upstream Emissions 

CO2 (million metric tons) ......................................................................... 0 .28 0 .68 1 .1 1 .2 

SO2 (thousand tons) ................................................................................ 0 .06 0 .15 0 .24 0 .26 

NOX (thousand tons) ............................................................................... 3 .9 9 .4 16 17 

Hg (tons) .................................................................................................. 0 .0002 0 .0004 0 .0006 0 .0006 

N2O (thousand tons) ................................................................................ 0 .003 0 .007 0 .011 0 .012 

CH4 (thousand tons) ................................................................................ 24 57 94 101 

Total Emissions 

CO2 (million metric tons) ......................................................................... 8 .3 20 33 35 

SO2 (thousand tons) ................................................................................ 22 53 86 91 

NOX (thousand tons) ............................................................................... 7 .4 18 30 31 

Hg (tons) .................................................................................................. 0 .03 0 .06 0 .11 0 .11 

N2O (thousand tons) ................................................................................ 0 .11 0 .28 0 .45 0 .47 

CH4 (thousand tons) ................................................................................ 24 59 97 103 

* Includes emissions from additional gas use of more-efficient SPVUs. 

Note: These results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase 

in NOX, estimated at 13%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, 

which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document. 

As part of the analysis for this NOPR, 

DOE estimated monetary benefits likely 

to result from the reduced emissions of 

CO2 and NOX estimated for each of the 

TSLs considered for SPVUs. As 

discussed in section IV.K, for CO2, DOE 

used values for the SCC developed by 

an interagency process. The interagency 

group selected four sets of SCC values 

for use in regulatory analyses. Three sets 

are based on the average SCC from three 

integrated assessment models, at 

discount rates of 2.5 percent, 3 percent, 

and 5 percent. The fourth set, which 

represents the 95th-percentile SCC 

estimate across all three models at a 3- 

percent discount rate, is included to 

represent higher-than-expected impacts 

from temperature change further out in 

the tails of the SCC distribution. The 

four SCC values for CO2 emissions 

reductions in 2015, expressed in 2013$, 

are $12.0/ton, $40.5/ton, $62.4/ton, and 

$119/ton. The values for later years are 

higher due to increasing emissionsrelated costs as the magnitude of 

projected climate change increases. 

Table V.17 presents the global value 

of CO2 emissions reductions at each TSL 

using the ASHRAE baseline, while 

results using the EPCA baseline are 

available in chapter 14 of the NOPR 

TSD. DOE calculated domestic values as 

a range from 7 percent to 23 percent of 

the global values, and these results are 

presented in chapter 14 of the NOPR 

TSD for both the ASHRAE and EPCA 

baselines. 

TABLE V.17—GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR SPVUS

TSL 

SCC Scenario* 

million 2013$ 

5% discount rate, average 3% discount rate, average 2.5% discount rate, 

average 

3% discount rate, 95th 

percentile 

Power Sector and Site Emissions ** 

1 50 241 386 747 

2 120 584 937 1812 

3 202 969 1552 3006 

4 216 1035 1656 3209 

Upstream Emissions 

1 1.8 8.5 14 26 

2 4.3 21 33 64 

3 7.2 34 55 107 

4 7.8 37 59 114 

Total Emissions 

1 52 249 400 773 

2 124 605 970 1875 

3 209 1003 1607 3112 

4 224 1072 1715 3324 

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4 and $119 per metric ton (2013$).108

** Includes site emissions associated with additional use of natural gas by more-efficient SPVUs. 

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108These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, estimated 

at 33%. The monetized benefits from GHG 

reductions would likely change by a comparable 

amount. In the next phase of this rulemaking, DOE 

plans to use emissions factors based on the most 

recent AEO available, which may or may not be 

AEO 2014, depending on the timing of the issuance 

of the next rulemaking document. 

109These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in an increase in NOX

emissions reductions, estimated at 13%. The 

monetized benefits from NOX reductions would 

likely change by a comparable amount. In the next 

phase of this rulemaking, DOE plans to use 

emissions factors based on the most recent AEO 

available, which may or may not be AEO 2014, 

depending on the timing of the issuance of the next 

rulemaking document. 

DOE is well aware that scientific and 

economic knowledge about the 

contribution of CO2 and other 

greenhouse gas (GHG) emissions to 

changes in the future global climate and 

the potential resulting damages to the 

world economy continues to evolve 

rapidly. Thus, any value placed in this 

rulemaking on reducing CO2 emissions 

is subject to change. DOE, together with 

other Federal agencies, will continue to 

review various methodologies for 

estimating the monetary value of 

reductions in CO2 and other GHG 

emissions. This ongoing review will 

consider the comments on this subject 

that are part of the public record for this 

and other rulemakings, as well as other 

methodological assumptions and issues. 

However, consistent with DOE’s legal 

obligations, and taking into account the 

uncertainty involved with this 

particular issue, DOE has included in 

this NOPR the most recent values and 

analyses resulting from the interagency 

review process. 

DOE also estimated a range for the 

cumulative monetary value of the 

economic benefits associated with NOX

emissions reductions anticipated to 

result from amended standards for the 

SPVU equipment that is the subject of 

this NOPR. The dollar-per-ton values 

that DOE used are discussed in section 

IV.K. Table V.18 presents the present 

value of cumulative NOX emissions 

reductions for each TSL using the 

ASHRAE baseline calculated using the 

average dollar-per-ton values and 7- 

percent and 3-percent discount rates. 

Results using the EPCA baseline are 

available in chapter 14 of the NOPR 

TSD. 

TABLE V.18—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR SPVUS 109

TSL 

million 2013$ 

3% Discount rate 7% Discount rate 

Power Sector and Site Emissions ** 

1 3 .6 1 .0 

2 9 .1 2 .6 

3 15 4 .2 

4 15 4 .3 

Upstream Emissions 

1 4 .8 2 .0 

2 11 4 .7 

3 19 8 .2 

4 21 9 .0 

Total Emissions 

1 8 .4 3 .0 

2 21 7 .3 

3 34 12 

4 36 13 

* Includes site emissions associated with additional use of natural gas by more-efficient SPVUs. 

The NPV of the monetized benefits 

associated with emissions reductions 

can be viewed as a complement to the 

NPV of the consumer savings calculated 

for each TSL considered in this 

rulemaking. Table V.19 presents the 

NPV values that result from adding the 

estimates of the potential economic 

benefits resulting from reduced CO2 and 

NOX emissions in each of four valuation 

scenarios to the NPV of consumer 

savings calculated for each TSL 

considered in this rulemaking using the 

ASHRAE baseline, at both a 7-percent 

and a 3-percent discount rate. The CO2

values used in the columns of each table 

correspond to the four scenarios for the 

valuation of CO2 emission reductions 

discussed above. 

TABLE V.19—SPVU TSLS: NET PRESENT VALUE OF CONSUMER SAVINGS COMBINED WITH NET PRESENT VALUE OF

MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS

TSL 

Consumer NPV at 3% discount rate added with: 

SCC Value of $12.0/metric ton CO2* 

and 

medium value for NOX** 

SCC Value of $40.5/

metric ton CO2* and medium value for NOX** 

SCC Value of $62.4/

metric ton CO2* and 

medium value for NOX** 

SCC Value of $119/ 

metric ton CO2* and 

medium value for NOX** 

1 0.32 0 .52 0 .67 1 .0 

2 0.59 1 .1 1 .4 2 .3 

3 (0.26) 0 .54 1 .1 2 .6 

4 (0.84) 0 .005 0 .65 2 .3 

1 0.14 0 .34 0 .49 0 .86 

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78664 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

110These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, estimated 

at 33%, and in increase in cumulative emissions 

reductions for NOX, estimated at 13%. The 

monetized benefits from GHG reductions would 

likely change by a comparable amount. In the next 

phase of this rulemaking, DOE plans to use 

emissions factors based on the most recent AEO 

available, which may or may not be AEO 2014, 

depending on the timing of the issuance of the next 

rulemaking document. 111These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant change in 

cumulative emissions reductions for CO2 and most 

other pollutants. For example, the estimated change 

for CO2 emissions reductions is a decrease of 33%, 

while the estimated change for NOX emissions 

reductions is an increase of 13%. The monetized 

benefits from GHG reductions would likely change 

by a comparable amount. In the next phase of this 

rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

TABLE V.19—SPVU TSLS: NET PRESENT VALUE OF CONSUMER SAVINGS COMBINED WITH NET PRESENT VALUE OF

MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS—Continued 

TSL 

Consumer NPV at 3% discount rate added with: 

SCC Value of $12.0/metric ton CO2* 

and 

medium value for NOX** 

SCC Value of $40.5/

metric ton CO2* and medium value for NOX** 

SCC Value of $62.4/

metric ton CO2* and 

medium value for NOX** 

SCC Value of $119/ 

metric ton CO2* and 

medium value for NOX** 

2 0.24 0 .72 1 .1 2 .0 

3 (0.15) 0 .65 1 .3 2 .8 

4 (0.54) 0 .31 0 .95 2 .6 

1Billion 2013$. 

Note: Parentheses indicate negative values. 

* These label values represent the global SCC in 2015, in 2013$. The present values have been calculated with scenario-consistent discount 

rates.110

** Medium Value corresponds to $2,684 per ton of NOX emissions. 

Although adding the value of 

consumer savings to the values of 

emission reductions provides a valuable 

perspective, two issues should be 

considered. First, the national operating 

cost savings are domestic U.S. customer 

monetary savings that occur as a result 

of market transactions, while the value 

of CO2 reductions is based on a global 

value. Second, the assessments of 

operating cost savings and the SCC are 

performed with different methods that 

use quite different time frames for 

analysis. The national operating cost 

savings is measured for the lifetime of 

products shipped in 2019–2048. The 

SCC values, on the other hand, reflect 

the present value of future climaterelated impacts resulting from the 

emission of one metric ton of CO2 in 

each year. These impacts continue well 

beyond 2100. 

7. Other Factors 

The Secretary of Energy, in 

determining whether a standard is 

economically justified, may consider 

any other factors that the Secretary 

deems to be relevant. (42 U.S.C. 

6295(o)(2)(B)(i)(VI)) No other factors 

were considered in this analysis. 

C. Proposed Standards 

EPCA contains criteria for prescribing 

new or amended energy conservation 

standards. For commercial HVAC 

equipment such as SPVUs, DOE must 

adopt as national standards the levels in 

amendments to ASHRAE Standard 90.1 

unless DOE determines, supported by 

clear and convincing evidence, that 

standards more stringent than those 

levels ‘‘would result in significant 

additional conservation of energy and 

[be] technologically feasible and 

economically justified.’’ (42 U.S.C. 

6313(a)(6)(A)(ii)(II)) In determining 

whether a standard is economically 

justified, the Secretary must determine 

whether the benefits of the standard 

exceed its burdens by, to the greatest 

extent practicable, considering the 

seven statutory factors discussed 

previously. (42 U.S.C. 6313(a)(6)(B)(ii)) 

In this rulemaking, DOE has evaluated 

whether standards more stringent than 

the efficiency levels in ASHRAE 

Standard 90.1–2013 for SPVUs are 

justified under the above criteria. As 

stated in sections III.C.1 and III.D.2, 

DOE has tentatively determined, based 

on clear and convincing evidence, that 

all of the more-stringent standard levels 

considered in this rulemaking are 

technologically feasible and would save 

significant additional amounts of 

energy. For this NOPR, DOE considered 

the impacts of amended standards for 

SPVUs at each TSL, beginning with the 

maximum technologically feasible level, 

to determine whether that level was 

economically justified. Where the maxtech level was not justified, DOE then 

considered the next-most-efficient level 

and undertook the same evaluation until 

it reached the highest efficiency level 

that is both technologically feasible and 

economically justified and saves a 

significant amount of energy. 

To aid the reader in understanding 

the benefits and/or burdens of each TSL, 

tables in this section summarize the 

quantitative analytical results for each 

TSL, based on the assumptions and 

methodology discussed herein. The 

efficiency levels contained in each TSL 

are described in section V.A. In addition 

to the quantitative results presented in 

the tables, DOE also considers other 

burdens and benefits that affect 

economic justification. These include 

the impacts on identifiable subgroups of 

consumers who may be 

disproportionately affected by a national 

standard, and impacts on employment. 

Section V.B.1.b presents the estimated 

impacts of each TSL for these 

subgroups. DOE discusses the impacts 

on direct employment in SPVU 

manufacturing in section V.B.2.b, and 

discusses the indirect employment 

impacts in section V.B.3.c. 

1. Benefits and Burdens of Trial 

Standard Levels Considered for SPVUs 

Table V.20, Table V.21, and Table 

V.22 summarize the quantitative 

impacts estimated for each TSL for 

SPVUs using the ASHRAE baseline. The 

national impacts are measured over the 

lifetime of SPVUs purchased in the 30- 

year period that begins in the year of 

compliance with amended standards 

(2019–2048). The energy savings, 

emissions reductions, and value of 

emissions reductions refer to full-fuelcycle results. Results for the proposed 

standard level using the EPCA baseline 

can be found in Tables V.24 through 

V.28. 

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TABLE V.20—SUMMARY OF ANALYTICAL RESULTS FOR SPVUS: NATIONAL IMPACTS 111

Category TSL 1 TSL 2 TSL 3 TSL 4 

National Energy Savings quads .......................................................... 0.09 .................. 0.23 .................. 0.37 .................. 0.39. 

NPV of Customer Benefits (2013$ billion) 

3% discount rate .................................................................................. 0.26 .................. 0.44 .................. (0.50) ................ (1.10). 

7% discount rate .................................................................................. 0.09 .................. 0.11 .................. (0.37) ................ (0.78). 

Cumulative Emissions Reduction (Total FFC Emissions) 

CO2 (million metric tons) ...................................................................... 8.3 .................... 20 ..................... 33 ..................... 35. 

SO2 (thousand tons) ............................................................................ 22 ..................... 53 ..................... 86 ..................... 91. 

NOX (thousand tons) ........................................................................... 7.4 .................... 18 ..................... 30 ..................... 31. 

Hg (tons) .............................................................................................. 0.03 .................. 0.06 .................. 0.11 .................. 0.11. 

N2O (thousand tons) ............................................................................ 0.11 .................. 0.28 .................. 0.45 .................. 0.47. 

CH4 (thousand tons) ............................................................................ 24 ..................... 59 ..................... 97 ..................... 103. 

Value of Emissions Reduction (Total FFC Emissions) 

CO2 (2013$ million)* ............................................................................ 52 to 773 .......... 124 to 1875 ...... 209 to 3112 ...... 224 to 3324. 

NOX—3% discount rate (2013$ million) .............................................. 8.4 .................... 21 ..................... 34 ..................... 36 

NOX—7% discount rate (2013$ million) .............................................. 3.0 .................... 7.3 .................... 12 ..................... 13. 

* Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions. 

Note: Parentheses indicate negative values. 

TABLE V.21—NPV OF CONSUMER BENEFITS BY EQUIPMENT CLASS

Equipment class Discount rate 

(%) 

Trial Standard Level 

1 2 3 4 

SPVAC ................................................................................. 3 0.13 0.13 (0.64) (1.05) 

<65,000 Btu/h ...................................................................... 7 0.04 0.01 (0.38) (0.66) 

SPVHP ................................................................................. 3 0.13 0.32 0.14 (0.06) 

<65,000 Btu/h ...................................................................... 7 0.04 0.10 0.01 (0.12) 

Total—All Classes ........................................................ 3 0.26 0.44 (0.50) (1.10) 

7 0.09 0.11 (0.37) (0.78) 

1Billion 2013$. 

Note: Parentheses indicate negative values. 

TABLE V.22—SUMMARY OF ANALYTICAL RESULTS FOR SPVUS: MANUFACTURER AND CONSUMER IMPACTS

[ASHRAE baseline] 

TSL 1 TSL 2 TSL 3 TSL 4 

Manufacturer Impacts 

Industry NPV relative to a base case value of 36.5 (2013$ 

millions) ................................................................................ 32.4 to 34.2 33.2 to 38.0 27.5 to 49.2 3.0 to 47.4 

Industry NPV (% change) ........................................................ (11.3) to (6.3) (9.0) to 4.1 (24.7) to 34.9 (91.7) to 29.9 

Consumer Mean LCC Savings (2013$) 

SPVAC <65,000 Btu/h ............................................................. 116 179 (24) (825) 

SPVHP <65,000 Btu/h ............................................................. 358 424 819 (177) 

Consumer Median PBP (years) 

SPVAC <65,000 Btu/h ............................................................. 7.9 8.4 14.4 27.3 

SPVHP <65,000 Btu/h ............................................................. 4.1 4.8 6.2 13.6 

Distribution of Consumer LCC Impacts 

SPVAC <65,000 Btu/h: 

Net Cost (%) ..................................................................... 25 37 62 87 

Net Benefit (%) ................................................................. 49 62 38 13 

No Impact (%) .................................................................. 26 1 0 0 

SPVHP <65,000 Btu/h: 

Net Cost (%) ..................................................................... 0 1 7 68 

Net Benefit (%) ................................................................. 74 98 92 32 

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78666 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

112These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant change in 

cumulative emissions reductions for CO2 and most 

other pollutants. For example, the estimated change 

for CO2 emissions reductions is a decrease of 33%, 

while the estimated change for NOX emissions 

reductions is an increase of 13%. The monetized 

benefits from GHG reductions would likely change 

by a comparable amount. In the next phase of this 

rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

113These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant change in 

cumulative emissions reductions for CO2 and most 

other pollutants. For example, the estimated change 

for CO2 emissions reductions is a decrease of 33%, 

while the estimated change for NOX emissions 

reductions is an increase of 13%. The monetized 

benefits from GHG reductions would likely change 

by a comparable amount. In the next phase of this 

rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

114These results are based on emissions factors in 

AEO 2013, the most recent version available at the 

time of this analysis. Use of emissions factors in 

AEO 2014 would result in a significant change in 

cumulative emissions reductions for CO2 and most 

other pollutants. For example, the estimated change 

for CO2 emissions reductions is a decrease of 33%, 

while the estimated change for NOX emissions 

reductions is an increase of 13%. The monetized 

benefits from GHG reductions would likely change 

by a comparable amount. In the next phase of this 

rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

TABLE V.22—SUMMARY OF ANALYTICAL RESULTS FOR SPVUS: MANUFACTURER AND CONSUMER IMPACTS—Continued 

[ASHRAE baseline] 

TSL 1 TSL 2 TSL 3 TSL 4 

No Impact (%) .................................................................. 26 1 0 0 

Note: Parentheses indicate negative values. 

First, DOE considered TSL 4, which 

would save an estimated total of 0.39 

quads of energy, an amount DOE 

considers significant. TSL 4 has an 

estimated NPV of customer benefit of 

negative $0.78 billion using a 7-percent 

discount rate, and negative $1.10 billion 

using a 3-percent discount rate. 

The cumulative emissions reductions 

at TSL 4 are 35 million metric tons of 

CO2, 31 thousand tons of NOX, and 0.11 

tons of Hg. The estimated monetary 

value of the CO2 emissions reductions at 

TSL 4 ranges from $224 million to 

$3,324 million.112

At TSL 4, the average LCC savings 

ranges from a negative $825 to a 

negative $177 depending on equipment 

class. The fraction of consumers with 

positive LCC benefits range from 13 

percent for SPVACs less than 65,000 

Btu/h to 32 percent for SPVHPs less 

than 65,000 Btu/h. 

At TSL 4, the projected change in 

INPV ranges from a decrease of $33.4 

million to an increase of $10.9 million. 

At TSL 4, DOE recognizes the risk of 

negative impacts if manufacturers’ 

expectations concerning reduced profit 

margins are realized. If the lower bound 

of the range of impacts is reached, as 

DOE expects, TSL 4 could result in a net 

loss of up to 91.7 percent in INPV for 

manufacturers. 

Accordingly, the Secretary tentatively 

concludes that at TSL 4 for SPVUs, the 

benefits of energy savings, emission 

reductions, and the estimated monetary 

value of the CO2 emissions reductions 

would be outweighed by negative NPV 

of consumer benefit overall, negative 

LCC savings for both equipment classes 

(SPVAC and SPVHP less than 65,000 

Btu/h), and the significant burden on 

the industry. Consequently, DOE has 

concluded that TSL 4 is not 

economically justified. 

Next, DOE considered TSL 3, which 

would save an estimated total of 0.37 

quads of energy, an amount DOE 

considers significant. TSL 3 has an 

estimated NPV of consumer benefit of 

negative $0.37 billion using a 7-percent 

discount rate, and negative $0.50 billion 

using a 3-percent discount rate. 

The cumulative emissions reductions 

at TSL 3 are 33 million metric tons of 

CO2, 30 thousand tons of NOX, and 0.11 

tons of Hg. The estimated monetary 

value of the CO2 emissions reductions at 

TSL 3 ranges from $209 million to 

$3,112 million.113

At TSL 3, the average LCC savings are 

range from a negative $24 to a positive 

$819 depending on equipment class. 

The fraction of consumers with positive 

LCC benefits ranged from 38 percent for 

SPVACs less than 65,000 Btu/h to 92 

percent for SPVHPs less than 65,000 

Btu/h. 

At TSL 3, the projected change in 

INPV ranges from a decrease of $9.0 

million to an increase of $12.7 million. 

If the lower bound of the range of 

impacts is reached, TSL 3 could result 

in a net loss of up to 24.7 percent in 

INPV for manufacturers. 

Accordingly, the Secretary tentatively 

concludes that at TSL 3 for SPVUs, the 

benefits of energy savings, emission 

reductions, and the estimated monetary 

value of the CO2 emissions reductions 

would be outweighed by the negative 

NPV of consumer benefits, negative LCC 

savings for SPVAC less than 65,000 Btu/ 

h, and the negative INPV on 

manufacturers. Consequently, DOE has 

tentatively concluded that TSL 3 is not 

economically justified. 

Next, DOE considered TSL 2, which 

would save an estimated total of 0.23 

quads of energy, an amount DOE 

considers significant. TSL 2 has an 

estimated NPV of consumer benefit of 

$0.11 billion using a 7-percent discount 

rate, and $0.44 billion using a 3-percent 

discount rate. 

The cumulative emissions reductions 

at TSL 2 are 20 million metric tons of 

CO2, 18 thousand tons of NOX, and 0.06 

tons of Hg. The estimated monetary 

value of the CO2 emissions reductions at 

TSL 3 ranges from $124 million to 

$1,875 million.114

At TSL 2, the average LCC savings 

range from $179 to $424 depending on 

equipment class. The fraction of 

consumers with positive LCC benefits 

range from 62 percent for SPVACs less 

than 65,000 Btu/h to 98 percent for 

SPVHPs less than 65,000 Btu/h. 

At TSL 2, the projected change in 

INPV ranges from a decrease of $3.3 

million to an increase of $1.5 million. 

At TSL 2, DOE recognizes the risk of 

negative impacts if manufacturers’ 

expectations concerning reduced profit 

margins are realized. If the lower bound 

of the range of impacts is reached, as 

DOE expects, TSL 2 could result in a net 

loss of up to 9.0 percent in INPV for 

manufacturers. 

After considering the analysis and 

weighing the benefits and the burdens, 

DOE has tentatively concluded that at 

TSL 2 for SPVUs, the benefits of energy 

savings, positive NPV of consumer 

benefit, positive average consumer LCC 

savings, emission reductions, and the 

estimated monetary value of the 

emissions reductions would outweigh 

the potential reduction in INPV for 

manufacturers. The Secretary of Energy 

has tentatively concluded that TSL 2 

would save a significant amount of 

energy, is technologically feasible and 

economically justified, and is supported 

by clear and convincing evidence. For 

the above reasons, DOE proposes to 

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adopt the energy conservation standards 

for SPVUs at TSL 2. Table V.23 presents 

the proposed energy conservation 

standards for SPVUs. As mentioned 

previously, for SPVHPs greater than or 

equal to 65,000 Btu/h and less than 

135,000 Btu/h and for SPVUs greater 

than or equal to 135,000 Btu/h and less 

than 240,000 Btu/h, there are no models 

on the market, and, therefore, DOE had 

no basis with which to develop higher 

efficiency levels or conduct analyses. 

For SPVACs greater than or equal to 

65,000 Btu/h and less than 135,000 Btu/ 

h, there are no models on the market 

higher than the ASHRAE 90.1–2013 

level, and, therefore, DOE has no clear 

and convincing evidence with which to 

adopt higher levels. 

As a result, DOE is proposing 

amended standards for SPVUs 

equivalent to those in ASHRAE 

Standard 90.1–2013 for these four 

equipment classes, as required by law. 

TABLE V.23—PROPOSED ENERGY CONSERVATION STANDARDS FOR SPVUS

Equipment class Cooling capacity 

Btu/h Efficiency level 

Single Package Vertical Air Conditioner .............................. <65,000 Btu/h ....................................................................... EER =11.0. 

Single Package Vertical Air Conditioner .............................. ≥65,000 Btu/h and <135,000 Btu/h ...................................... EER = 10.0. 

Single Package Vertical Air Conditioner .............................. ≥135,000 Btu/h and <240,000 Btu/h .................................... EER = 10.0. 

Single Package Vertical Heat Pump .................................... <65,000 Btu/h ....................................................................... EER = 11.0. 

COP = 3.3. 

Single Package Vertical Heat Pump .................................... ≥65,000 Btu/h and <135,000 Btu/h ...................................... EER = 10.0. 

COP = 3.0. 

Single Package Vertical Heat Pump .................................... ≥135,000 Btu/h and <240,000 Btu/h .................................... EER = 10.0. 

COP = 3.0. 

Table V.24 through Table V.28 

present the benefits and burdens on the 

consumer, the manufacturer, and the 

Nation in comparison to a base case 

including the current Federal standards 

(i.e., the EPCA baseline), although only 

the incremental quantitative impacts 

from the ASHRAE baseline to the 

various TSL standard levels under 

consideration was used to propose these 

standards. The results compared to the 

ASHRAE baseline are also included for 

comparison. 

TABLE V.24—CONSUMER IMPACT RESULTS FOR SPVU PROPOSED TRIAL STANDARD LEVEL

[Baseline Comparison] 

Equipment class Baseline 

Life-cycle cost, all customers 

2013$ 

Life-cycle cost savings 

Median 

payback 

period 

years Installed 

cost 

Discounted 

operating 

cost 

LCC 

Affected 

customers’ 

average 

savings 

2013$ 

% of Consumers that 

experience 

Net 

cost 

No 

impact 

Net 

benefit 

SPVAC <65 kBtu/h .............. ASHRAE ..

EPCA .......

5,083 

5,083 

11,839 

11,839 

16,922 

16,922 

179 

261 

37 

42 

1 

1 

62 

57 

8.4 

10.4 

SPVHP <65 kBtu/h .............. ASHRAE ..

EPCA .......

5,695 

5,695 

29,618 

29,618 

35,313 

35,313 

424 

382 

1 

21 

1 

1 

98 

78 

4.8 

9.3 

SPVAC 65–135 kBtu/h ......... ASHRAE ..

EPCA .......

..................

6,659 

....................

19,805 

..................

26,464 

....................

737 

..............

16 

..............

29 

..............

55 

................

7.0 

SPVHP 65–135 kBtu/h ......... ASHRAE ..

EPCA .......

..................

7,409 

....................

56,078 

..................

63,487 

....................

241 

..............

34 

..............

29 

..............

37 

................

10.9 

TABLE V.25—MANUFACTURER IMPACT ANALYSIS RESULTS FOR SPVU PROPOSED TRIAL STANDARD LEVEL

[Baseline Comparison] 

ASHRAE 

baseline 

EPCA 

baseline 

Base Case INPV (2013$ millions) ..................................................................................................................... 36.5 .................. 33.9. 

Standards Case INPV (2013$ millions) ............................................................................................................. 33.2 to 38.0 ...... 24.0 to 40.2. 

Change in INPV (% Change) ............................................................................................................................ (9.0) to 4.1 ........ (29.2) to 18.6. 

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TABLE V.26—CUMULATIVE NATIONAL PRIMARY AND FULL-FUEL-CYCLE ENERGY SAVINGS AND NET PRESENT VALUE OF

CUSTOMER BENEFIT FOR SPVU PROPOSED TRIAL STANDARD LEVEL FOR UNITS SOLD IN 2019–2048 

[Baseline Comparison] 

National primary 

energy savings 

(quads) 

National FFC 

energy savings 

(quads) 

NPV at 3% 

(billion 2013$) 

NPV at 7% 

(billion 2013$) 

ASHRAE 

baseline 

EPCA 

baseline 

ASHRAE 

baseline 

EPCA 

baseline 

ASHRAE 

baseline 

EPCA 

baseline 

ASHRAE 

baseline 

EPCA 

baseline 

SPVAC <65,000 Btu/h ..................................... 0.13 0.28 0.13 0.28 0.13 0.51 0.01 0.10 

SPVHP <65,000 Btu/h ..................................... 0.10 0.17 0.10 0.17 0.32 0.53 0.10 0.15 

SPVAC ≥65,000 Btu/h to <135,000 Btu/h ....... ................ 0.01 ................ 0.01 ................ 0.02 ................ 0.01 

Total—All Classes .................................... 0.22 0.45 0.23 0.46 0.44 1.07 0.11 0.26 

Note: Components may not sum to total due to rounding. 

TABLE V.27—CUMULATIVE EMISSIONS REDUCTION, GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION, AND

PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR PROPOSED STANDARDS FOR SPVUS

[Baseline Comparison] 

Power sector and site 

emissions * 

Upstream emissions Total emissions 

ASHRAE 

baseline 

EPCA 

baseline 

ASHRAE 

baseline 

EPCA 

baseline 

ASHRAE 

baseline 

EPCA 

baseline 

Cumulative Emissions Reductions 

CO2 (million metric tons) .......................... 20 40 0.68 1.4 20 41 

SO2 (thousand tons) ................................ 53 107 0.15 0.30 53 108 

NOX (thousand tons) ............................... 8.9 18 9.4 19 18 37 

Hg (tons) .................................................. 0.06 0.13 0.0004 0.0007 0.06 0.13 

N2O (thousand tons) ................................ 0.27 0.55 0.007 0.014 0.28 0.56 

CH4 (thousand tons) ................................ 1.4 3.0 57 116 59 119 

Global Present Value of CO2 Emissions Reduction, SCC Scenario ** (million 2013$) 

5% discount rate, average ....................... 120 247 4.3 8.8 124 256 

3% discount rate, average ....................... 584 1194 21 42 605 1236 

2.5% discount rate, average .................... 937 1914 33 67 970 1982 

3% discount rate, 95th percentile ............ 1812 3704 64 131 1875 3834 

Present Value of NOX Emissions Reduction (million 2013$) 

3% discount rate ...................................... 9.1 18 11 24 21 42 

7% discount rate ...................................... 2.6 5.3 4.7 9.7 7.3 15 

* Includes site emissions associated with additional use of natural gas by more-efficient SPVUs. 

** For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4 and $119 per metric ton (2013$). 

TABLE V.28—SPVU PROPOSED TSL: NET PRESENT VALUE OF CONSUMER SAVINGS COMBINED WITH NET PRESENT

VALUE OF MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS

[Baseline Comparison] 

SCC Value of $12.0/metric 

ton CO2* and medium 

value for NOX** 

SCC Value of $40.5/metric 

ton CO2* and medium 

value for NOX** 

SCC Value of $62.4/metric 

ton CO2* and medium 

value for NOX** 

SCC Value of $119/metric 

ton CO2* and medium 

value for NOX** 

ASHRAE 

baseline 

EPCA 

baseline 

ASHRAE 

baseline 

EPCA 

baseline 

ASHRAE 

baseline 

EPCA 

baseline 

ASHRAE 

baseline 

EPCA 

baseline 

billion 2013$ 

Consumer NPV at 3% 

Discount Rate added 

with each SCC and 

NOX value .................... 0.59 1.4 1.1 2.3 1.4 3.1 2.3 4.9 

Consumer NPV at 7% 

Discount Rate added 

with each SCC and 

NOX value .................... 0.24 0.53 0.72 1.5 1.1 2.3 2.0 4.1 

Note: Parentheses indicate negative values. 

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115 DOE used a two-step calculation process to 

convert the time-series of costs and benefits into 

annualized values. First, DOE calculated a present 

value in 2014, the year used for discounting the 

NPV of total consumer costs and savings, for the 

time-series of costs and benefits using discount 

rates of 3 and 7 percent for all costs and benefits 

except for the value of CO2 reductions. For the 

latter, DOE used a range of discount rates. From the 

present value, DOE then calculated the fixed annual 

payment over a 30-year period, starting in 2013 that 

yields the same present value. The fixed annual 

payment is the annualized value. Although DOE 

calculated annualized values, this does not imply 

that the time-series of cost and benefits from which 

the annualized values were determined would be a 

steady stream of payments. 116All CO2 and NOX results shown in this 

paragraph are based on emissions factors in AEO 

2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 

2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, estimated 

at 33%, and an increase in cumulative NOX

reductions, estimated at 13%. In the next phase of 

this rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

* These label values represent the global SCC in 2015, in 2013$. The present values have been calculated with scenario-consistent discount 

rates. 

** Medium Value corresponds to $2,684 per ton of NOX emissions. 

2. Summary of Benefits and Costs 

(Annualized) of the Proposed Standards 

The benefits and costs of the proposed 

standards can also be expressed in terms 

of annualized values. The annualized 

monetary values are the sum of: (1) The 

annualized national economic value, 

expressed in 2013$, of the benefits from 

operating products that meet the 

proposed standards (consisting 

primarily of operating cost savings from 

using less energy, minus increases in 

equipment purchase costs, which is 

another way of representing consumer 

NPV), and (2) the monetary value of the 

benefits of emission reductions, 

including CO2 emission reductions.115

The value of the CO2 reductions, 

otherwise known as the Social Cost of 

Carbon (SCC), is calculated using a 

range of values per metric ton of CO2

developed by a recent interagency 

process. 

Although combining the values of 

operating savings and CO2 reductions 

provides a useful perspective, two 

issues should be considered. First, the 

national operating savings are domestic 

U.S. consumer monetary savings that 

occur as a result of market transactions, 

while the value of CO2 reductions is 

based on a global value. Second, the 

assessments of operating cost savings 

and SCC are performed with different 

methods that use different time frames 

for analysis. The national operating cost 

savings is measured for the lifetime of 

products shipped in 2019–2048. The 

SCC values, on the other hand, reflect 

the present value of future climaterelated impacts resulting from the 

emission of one metric ton of CO2 in 

each year. These impacts continue well 

beyond 2100. 

Table V.29 shows the annualized 

values for the proposed standards for 

SPVUs compared to the ASHRAE 

baselines. The results under the primary 

estimate are as follows. (All monetary 

values below are expressed in 2013$.) 

Using a 7-percent discount rate for 

benefits and costs other than CO2

reduction, for which DOE used a 3- 

percent discount rate along with the 

SCC series corresponding to a value of 

$40.5/ton in 2015, the cost of the SPVU 

standards proposed in the NOPR is $29 

million per year in increased equipment 

costs, while the benefits are $38 million 

per year in reduced equipment 

operating costs, $29 million in CO2

reductions, and $0.57 million in 

reduced NOX emissions. In this case, the 

net benefit amounts to $38 million per 

year. Using a 3-percent discount rate for 

all benefits and costs and the SCC series 

corresponding to a value of $40.5/ton in 

2015, the cost of the SPVU standards 

proposed in the NOPR is $37 million 

per year in increased equipment costs, 

while the benefits are $58 million per 

year in reduced operating costs, $29 

million in CO2 reductions, and $0.97 

million in reduced NOX emissions. In 

this case, the net benefit amounts to $51 

million per year.116

TABLE V.29—ANNUALIZED BENEFITS AND COSTS OF PROPOSED STANDARDS (TSL 2) FOR SPVUS

Discount rate 

million 2013$/year 

Primary 

estimate* 

Low net benefits 

estimate* 

High net 

benefits 

estimate* 

Benefits: 

Operating Cost Savings ................................................................ 7% 38 36 39 

3% 58 55 61 

CO2 Reduction Monetized Value ($12.0/t case)** ....................... 5% 7.7 7.6 7.7 

CO2 Reduction Monetized Value ($40.5/t case)** ....................... 3% 29 28 29 

CO2 Reduction Monetized Value ($62.4/t case)** ....................... 2.5% 43 42 43 

CO2 Reduction Monetized Value $119/t case)** .......................... 3% 89 88 89 

NOX Reduction at $2,684/ton** .................................................... 7% 0.57 0.56 0.57 

3% 0.97 0.97 0.98 

Total Benefits† .............................................................................. 7% plus CO2

range 

46 to 127 44 to 125 48 to 129 

7% 67 65 69 

3% plus CO2

range 

67 to 148 63 to 144 70 to 151 

3% 88 84 91 

Costs: 

Incremental Equipment Costs ...................................................... 7% 29 40 28 

3% 37 53 36 

Net Benefits/Costs: 

Total: ............................................................................................. 7% plus CO2

range 

17 to 98 4 to 85 19 to 101 

7% 38 25 40 

3% plus CO2

range 

30 to 111 11 to 91 34 to 115 

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117All CO2 and NOX results shown in this 

paragraph are based on emissions factors in AEO 

2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 

2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, estimated 

at 33%, and an increase in cumulative NOX

reductions, estimated at 13%. In the next phase of 

this rulemaking, DOE plans to use emissions factors 

based on the most recent AEO available, which may 

or may not be AEO 2014, depending on the timing 

of the issuance of the next rulemaking document. 

TABLE V.29—ANNUALIZED BENEFITS AND COSTS OF PROPOSED STANDARDS (TSL 2) FOR SPVUS—Continued 

Discount rate 

million 2013$/year 

Primary 

estimate* 

Low net benefits 

estimate* 

High net 

benefits 

estimate* 

3% 51 31 55 

* This table presents the annualized costs and benefits associated with SPVUs shipped in 2019–2048. These results include benefits to consumers which accrue after 2048 from the products purchased in 2019–2048. Costs incurred by manufacturers, some of which may be incurred in 

preparation for the rule, are not directly included, but are indirectly included as part of incremental equipment costs. The Primary, Low Benefits, 

and High Benefits Estimates utilize projections of energy prices and building growth from the AEO 2013 Reference case, Low Estimate, and High 

Estimate, respectively. In addition, incremental equipment costs reflect constant real prices for the Primary Estimate, an increase for projected 

equipment price trends for the Low Benefits Estimate, and a decline for projected equipment price trends for the High Benefits Estimate. The 

methods used to derive projected price trends are explained in section IV.F.2.a. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios. The values of $12.0, $40.5, and

$62.4 per metric ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $119/t 

represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX (in 2013$) is the average of the low and high values used in DOE’s analysis.117

† Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to SCC value of $40.5/t. In the rows labeled ‘‘7% plus CO2 range’’ and ‘‘3% plus CO2 range,’’ the operating cost and NOX benefits are calculated using the labeled discount rate, and 

those values are added to the full range of CO2 values. 

VI. Procedural Issues and Regulatory 

Review 

A. Review Under Executive Orders 

12866 and 13563 

Section 1(b)(1) of Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

requires each agency to identify the 

problem that it intends to address, 

including, where applicable, the failures 

of private markets or public institutions 

that warrant new agency action, as well 

as to assess the significance of that 

problem. The problems that the 

proposed standards address are as 

follows: 

(1) There are external benefits 

resulting from improved energy 

efficiency of SPVUs that are not 

captured by the users of such 

equipment. These benefits include 

externalities related to environmental 

protection and energy security that are 

not reflected in energy prices, such as 

reduced emissions of greenhouse gases. 

DOE attempts to quantify some of the 

external benefits through use of Social 

Cost of Carbon values. 

In addition, the Office of Information 

and Regulatory Affairs (OIRA) in the 

Office of Management and Budget 

(OMB) has determined that this 

regulatory action is a ‘‘significant 

regulatory action’’ under Executive 

Order 12866. DOE has also prepared a 

regulatory impact analysis (RIA) for the 

proposed rule. 

DOE has also reviewed this regulation 

pursuant to Executive Order 13563, 

issued on January 18, 2011 (76 FR 3281 

(Jan. 21, 2011)). Executive Order 13563 

is supplemental to and explicitly 

reaffirms the principles, structures, and 

definitions governing regulatory review 

established in Executive Order 12866. 

To the extent permitted by law, agencies 

are required by Executive Order 13563 

to: (1) Propose or adopt a regulation 

only upon a reasoned determination 

that its benefits justify its costs 

(recognizing that some benefits and 

costs are difficult to quantify); (2) tailor 

regulations to impose the least burden 

on society, consistent with obtaining 

regulatory objectives, taking into 

account, among other things, and to the 

extent practicable, the costs of 

cumulative regulations; (3) select, in 

choosing among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify 

performance objectives, rather than 

specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and (5) identify and assess 

available alternatives to direct 

regulation, including providing 

economic incentives to encourage the 

desired behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. 

DOE emphasizes as well that 

Executive Order 13563 requires agencies 

to use the best available techniques to 

quantify anticipated present and future 

benefits and costs as accurately as 

possible. In its guidance, the Office of 

Information and Regulatory Affairs has 

emphasized that such techniques may 

include identifying changing future 

compliance costs that might result from 

technological innovation or anticipated 

behavioral changes. For the reasons 

stated in the preamble, DOE believes 

that the NOPR is consistent with these 

principles, including the requirement 

that, to the extent permitted by law, 

benefits justify costs and that net 

benefits are maximized. 

B. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires preparation 

of an initial regulatory flexibility 

analysis (IRFA) for any rule that by law 

must be proposed for public comment, 

unless the agency certifies that the rule, 

if promulgated, will not have a 

significant economic impact on a 

substantial number of small entities. As 

required by Executive Order 13272, 

‘‘Proper Consideration of Small Entities 

in Agency Rulemaking,’’ 67 FR 53461 

(August 16, 2002), DOE published 

procedures and policies on February 19, 

2003, to ensure that the potential 

impacts of its rules on small entities are 

properly considered during the 

rulemaking process. 68 FR 7990. DOE 

has made its procedures and policies 

available on the Office of the General 

Counsel’s Web site (www.energy.gov/gc/ 

office-general-counsel). 

DOE has determined that it cannot 

certify that the proposed rule, if 

promulgated, would not have a 

significant effect on a substantial 

number of small manufacturers. 

Therefore, DOE has prepared an initial 

regulatory flexibility analysis (IRFA), as 

presented in sections VI.B.1 through 

VI.B.4, for this rulemaking. 

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118Based on model listings in the AHRI directory 

accessed on June 6, 2012 (Available at: http://

www.ahridirectory.org/ahridirectory/pages/ac/

defaultSearch.aspx). 

1. Description and Estimated Number of 

Small Entities Regulated 

For manufacturers of SPVUs, the 

Small Business Administration (SBA) 

has set a size threshold, which defines 

those entities classified as ‘‘small 

businesses’’ for the purposes of the 

statute. DOE used the SBA’s small 

business size standards to determine 

whether any small entities would be 

subject to the requirements of the rule. 

65 FR 30836, 30848 (May 15, 2000), as 

amended at 65 FR 53533, 53544 (Sept. 

5, 2000) and codified at 13 CFR part 

121. The size standards are listed by 

North American Industry Classification 

System (NAICS) code and industry 

description and are available at http:// 

www.sba.gov/content/table-smallbusiness-size-standards. SPVU 

manufacturing is classified under 

NAICS 333415, ‘‘Air-Conditioning and 

Warm Air Heating Equipment and 

Commercial and Industrial Refrigeration 

Equipment Manufacturing.’’ The SBA 

sets a threshold of 750 employees or less 

for an entity to be considered as a small 

business for this category. 

DOE reviewed the proposed energy 

conservation standards for SPVUs 

considered in the notice of proposed 

rulemaking under the provisions of the 

Regulatory Flexibility Act and the 

procedures and policies published on 

February 19, 2003. 68 FR 7990. To better 

assess the potential impacts of this 

rulemaking on small entities, DOE 

conducted a more focused inquiry of the 

companies that could be small business 

manufacturers of equipment covered by 

this rulemaking. DOE used available 

public information to identify potential 

small manufacturers. DOE’s research 

involved industry trade association 

membership directories (including 

AHRI), the DOE certification database, 

individual company Web sites, and 

marketing research tools (e.g., Hoovers 

reports) to create a list of companies that 

manufacture or sell SPVU systems 

covered by this rulemaking. DOE also 

asked stakeholders and industry 

representatives if they were aware of 

any other small manufacturers during 

manufacturer interviews and at previous 

DOE public meetings. DOE reviewed the 

publicly-available data and contacted 

companies on its list, as necessary, to 

determine whether they met the SBA’s 

definition of a small business 

manufacturer of SPVU equipment. DOE 

screened out companies that did not 

offer equipment covered by this 

rulemaking, did not meet the definition 

of a ‘‘small business,’’ or are foreignowned and operated. 

DOE identified seven companies that 

produce equipment covered under the 

single package vertical unit energy 

conservation standard rulemaking. Two 

of the seven companies are foreignowned and operated. Of the remaining 

five businesses, two companies met the 

SBA definition of a ‘‘small business.’’ 

One small business manufacturer has 

the largest market share in the SPVU 

industry and 48 percent of the active 

listings in the AHRI Directory.118 The 

other has a more modest market share 

and 5 percent of active listings in the 

AHRI Directory. 

2. Description and Estimate of 

Compliance Requirements 

At the time of analysis, the domestic 

small manufacturer with the large 

market share had 229 active listings. 

Fifty-four of those listings, or 24 

percent, would meet the proposed 

standards. The other 76 percent of the 

listings would not meet the proposed 

standard. The small manufacturer 

would need to either redesign those 

products or drop those products and 

move their customers to more-efficient 

offerings. However, DOE notes that the 

small manufacturer had more product 

listings than any other manufacturer 

that could meet the proposed standard. 

The domestic small manufacturer 

with the smaller market share had 27 

active listings. None of those listings 

would meet the proposed standards. At 

the proposed standard level, this 

manufacturer would need to redesign its 

entire product offering or leave the 

SPVU market. 

If small manufacturers chose to 

redesign their products that do not meet 

the proposed standard, they would need 

to make capital conversion and product 

conversion investments. DOE estimated 

an average total conversion cost of $1.49 

million per manufacturer. DOE expects 

this investment, which is roughly 12% 

of an average manufacturer’s annual 

revenue, to be made over the four-year 

period between the publication of the 

final rule and the effective date of the 

standard. Since small businesses may 

have a greater difficulty obtaining credit 

or may obtain less favorable terms than 

larger businesses, the small 

manufacturers may face higher overall 

costs if they choose to finance the 

conversion costs resulting from the 

change in standard. 

DOE notes that the small 

manufacturer with the larger market 

share produces more SPVU units than 

its larger competitors. The company 

could potentially spread the conversion 

costs over a larger number of units than 

its competitors. However, the small 

manufacturer did express concern in 

MIA interviews that such an effort 

would tie up their available engineering 

resources and prevent them from 

focusing on technology advancements 

and customer-driven feature requests. 

Larger manufacturers, which do not 

have the same shipment volumes as the 

small manufacturer, may have fewer 

engineers dedicated to SPVU equipment 

but potentially could marshal 

engineering and testing resources across 

their organization. The concern about 

adequate availability of engineering 

resources would also likely apply to the 

small manufacturer with the smaller 

market share. 

Smaller manufacturers generally pay 

higher prices for purchased parts, such 

as BPMs, relative to larger competitors. 

Even the small manufacturer with the 

larger market share, and the highest 

number of SPVU shipments of any 

manufacturer in the industry, could pay 

higher prices for component than the 

larger competition. If their competitors 

have centralized sourcing, those 

companies could combine component 

purchases for SPVU product lines with 

purchases for other non-SPVU product 

lines and obtain higher volume 

discounts than those available to small 

manufacturers. 

Due to the potential conversion costs, 

the potential engineering and testing 

effort, and the potential increases in 

component prices that result from a 

standard, DOE conducted this 

regulatory flexibility analysis. Based on 

DOE’s analysis, including interviews 

with manufacturers, the Department 

believes one of the identified small 

businesses would be able to meet the 

proposed standard. That small 

manufacturer has the strong market 

share, technical expertise, and the 

production capability to meet the 

amended standard. The company 

successfully competes in both the 

current baseline-efficiency and 

premium-efficiency market segments. 

The other small business has 

significantly less market share and does 

not compete in the premium-efficiency 

market today. Given the lack of existing 

product that meets the standard, 

potential conversion costs, and 

disadvantages in financing costs as well 

as in pricing for sourced components, 

the second small business may face 

headwinds in meeting the proposed 

standard. 

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3. Duplication, Overlap, and Conflict 

with Other Rules and Regulations 

DOE is not aware of any rules or 

regulations that duplicate, overlap, or 

conflict with the rule being considered. 

4. Significant Alternatives to the Rule 

The discussion in section VI.B.2 

analyzes impacts on small businesses 

that would result from DOE’s proposed 

rule. In addition to the other TSLs being 

considered, the proposed rulemaking 

TSD includes a regulatory impact 

analysis (RIA). For SPVUs, the RIA 

discusses the following policy 

alternatives: (1) No change in standard; 

(2) consumer rebates; (3) consumer tax 

credits; (4) manufacturer tax credits; (5) 

voluntary energy efficiency targets; (6) 

early replacement; and (7) bulk 

government purchases. While these 

alternatives may mitigate to some 

varying extent the economic impacts on 

small entities compared to the 

standards, DOE determined that the 

energy savings of these regulatory 

alternatives are from 0.01 to 0.5 percent 

smaller than those that would be 

expected to result from adoption of the 

proposed standard levels. Thus, DOE 

rejected these alternatives and is 

proposing the standards set forth in this 

rulemaking. (See chapter 17 of the 

NOPR TSD for further detail on the 

policy alternatives DOE considered.) 

C. Review Under the Paperwork 

Reduction Act of 1995 

Manufacturers of single package 

vertical air conditioners and single 

package vertical heat pumps must 

certify to DOE that their products 

comply with any applicable energy 

conservation standards. In certifying 

compliance, manufacturers must test 

their equipment according to the 

applicable DOE test procedures for 

SPVACs and SPVHPs, including any 

amendments adopted for those test 

procedures on the date that compliance 

is required. DOE has established 

regulations for the certification and 

recordkeeping requirements for all 

covered customer products and 

commercial equipment, including 

SPVACs and SPVHPs. 76 FR 12422 

(March 7, 2011). The collection-ofinformation requirement for the 

certification and recordkeeping is 

subject to review and approval by OMB 

under the Paperwork Reduction Act 

(PRA). This requirement has been 

approved by OMB under OMB Control 

Number 1910–1400. Public reporting 

burden for the certification is estimated 

to average 20 hours per response, 

including the time for reviewing 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing the collection of information. 

Notwithstanding any other provision 

of the law, no person is required to 

respond to, nor shall any person be 

subject to a penalty for failure to comply 

with, a collection of information subject 

to the requirements of the PRA, unless 

that collection of information displays a 

currently valid OMB Control Number. 

D. Review Under the National 

Environmental Policy Act of 1969 

Pursuant to the National 

Environmental Policy Act (NEPA) of 

1969, DOE has determined that the 

proposed rule fits within the category of 

actions included in Categorical 

Exclusion (CX) B5.1 and otherwise 

meets the requirements for application 

of a CX. See 10 CFR part 1021, App. B, 

B5.1(b); 1021.410(b) and Appendix B, 

B(1)–(5). The proposed rule fits within 

the category of actions because it is a 

rulemaking that establishes energy 

conservation standards for customer 

products or industrial equipment, and 

for which none of the exceptions 

identified in CX B5.1(b) apply. 

Therefore, DOE has made a CX 

determination for this rulemaking, and 

DOE does not need to prepare an 

Environmental Assessment or 

Environmental Impact Statement for 

this proposed rule. DOE’s CX 

determination for this proposed rule is 

available at http://cxnepa.energy.gov/. 

E. Review Under Executive Order 13132 

Executive Order 13132, ‘‘Federalism,’’ 

imposes certain requirements on 

Federal agencies formulating and 

implementing policies or regulations 

that preempt State law or that have 

Federalism implications. 64 FR 43255 

(August 10, 1999). The Executive Order 

requires agencies to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the 

States and to carefully assess the 

necessity for such actions. The 

Executive Order also requires agencies 

to have an accountable process to 

ensure meaningful and timely input by 

State and local officials in the 

development of regulatory policies that 

have Federalism implications. On 

March 14, 2000, DOE published a 

statement of policy describing the 

intergovernmental consultation process 

that it will follow in the development of 

such regulations. 65 FR 13735. DOE has 

examined this proposed rule and has 

tentatively determined that it would not 

have a substantial direct effect on the 

States, on the relationship between the 

national government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. EPCA governs and 

prescribes Federal preemption of State 

regulations as to energy conservation for 

the products that are the subject of this 

proposed rule. States can petition DOE 

for exemption from such preemption to 

the extent, and based on criteria, set 

forth in EPCA (42 U.S.C. 6297). 

Therefore, Executive Order 13132 

requires no further action. 

F. Review Under Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of 

Executive Order 12988, ‘‘Civil Justice 

Reform,’’ imposes on Federal agencies 

the general duty to adhere to the 

following requirements: (1) Eliminate 

drafting errors and ambiguity; (2) write 

regulations to minimize litigation; (3) 

provide a clear legal standard for 

affected conduct rather than a general 

standard; and (4) promote simplification 

and burden reduction. 61 FR 4729 (Feb. 

7, 1996). Regarding the review required 

by section 3(a), section 3(b) of Executive 

Order 12988 specifically requires that 

Executive agencies make every 

reasonable effort to ensure that the 

regulation: (1) Clearly specifies the 

preemptive effect, if any; (2) clearly 

specifies any effect on existing Federal 

law or regulation; (3) provides a clear 

legal standard for affected conduct 

while promoting simplification and 

burden reduction; (4) specifies the 

retroactive effect, if any; (5) adequately 

defines key terms; and (6) addresses 

other important issues affecting clarity 

and general draftsmanship under any 

guidelines issued by the Attorney 

General. Section 3(c) of Executive Order 

12988 requires Executive agencies to 

review regulations in light of applicable 

standards in section 3(a) and section 

3(b) to determine whether they are met 

or it is unreasonable to meet one or 

more of them. DOE has completed the 

required review and determined that, to 

the extent permitted by law, this 

proposed rule meets the relevant 

standards of Executive Order 12988. 

G. Review Under the Unfunded 

Mandates Reform Act of 1995 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA) requires 

each Federal agency to assess the effects 

of Federal regulatory actions on State, 

local, and Tribal governments and the 

private sector. Pub. L. 104–4, sec. 201 

(codified at 2 U.S.C. 1531). For a 

proposed regulatory action likely to 

result in a rule that may cause the 

expenditure by State, local, and Tribal 

governments, in the aggregate, or by the 

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private sector, of $100 million or more 

in any one year (adjusted annually for 

inflation), section 202 of UMRA requires 

a Federal agency to publish a written 

statement that estimates the resulting 

costs, benefits, and other effects on the 

national economy. (2 U.S.C. 1532(a), (b)) 

The UMRA also requires a Federal 

agency to develop an effective process 

to permit timely input by elected 

officers of State, local, and Tribal 

governments on a proposed ‘‘significant 

intergovernmental mandate,’’ and 

requires an agency plan for giving notice 

and opportunity for timely input to 

potentially affected small governments 

before establishing any requirements 

that might significantly or uniquely 

affect them. On March 18, 1997, DOE 

published a statement of policy on its 

process for intergovernmental 

consultation under UMRA. 62 FR 

12820. DOE’s policy statement is also 

available at www.energy.gov/gc/officegeneral-counsel. 

Although the proposed rule, which 

proposes amended energy conservation 

standards for SPVUs, does not contain 

a Federal intergovernmental mandate, it 

may require annual expenditures of 

$100 million or more by the private 

sector. Specifically, the proposed rule 

would likely result in a final rule that 

could require expenditures of $100 

million or more, including: (1) 

Investment in research and 

development and in capital 

expenditures by SPVUs manufacturers 

in the years between the final rule and 

the compliance date for the amended 

standards, and (2) incremental 

additional expenditures by consumers 

to purchase higher-efficiency SPVUs, 

starting at the compliance date for the 

applicable standard. 

Section 202 of UMRA authorizes a 

Federal agency to respond to the content 

requirements of UMRA in any other 

statement or analysis that accompanies 

the proposed rule. 2 U.S.C. 1532(c). The 

content requirements of section 202(b) 

of UMRA relevant to a private sector 

mandate substantially overlap the 

economic analysis requirements that 

apply under section 325(o) of EPCA and 

Executive Order 12866. The 

SUPPLEMENTARY INFORMATION section of 

the NOPR and the ‘‘Regulatory Impact 

Analysis’’ section of the TSD for this 

proposed rule respond to those 

requirements. 

Under section 205 of UMRA, the 

Department is obligated to identify and 

consider a reasonable number of 

regulatory alternatives before 

promulgating a rule for which a written 

statement under section 202 is required. 

2 U.S.C. 1535(a). DOE is required to 

select from those alternatives the most 

cost-effective and least burdensome 

alternative that achieves the objectives 

of the proposed rule unless DOE 

publishes an explanation for doing 

otherwise, or the selection of such an 

alternative is inconsistent with law. As 

required by 42 U.S.C. 6313(a), the 

proposed rule would establish amended 

energy conservation standards for 

SPVUs that are designed to achieve the 

maximum improvement in energy 

efficiency that DOE has determined to 

be both technologically feasible and 

economically justified. A full discussion 

of the alternatives considered by DOE is 

presented in the ‘‘Regulatory Impact 

Analysis’’ section of the TSD for the 

proposed rule. 

H. Review Under the Treasury and 

General Government Appropriations 

Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any rule 

that may affect family well-being. This 

rule would not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

I. Review Under Executive Order 12630 

Pursuant to Executive Order 12630, 

‘‘Governmental Actions and Interference 

with Constitutionally Protected Property 

Rights,’’ 53 FR 8859 (March 15, 1988), 

DOE has determined that this proposed 

rule would not result in any takings that 

might require compensation under the 

Fifth Amendment to the U.S. 

Constitution. 

J. Review Under the Treasury and 

General Government Appropriations 

Act, 2001 

Section 515 of the Treasury and 

General Government Appropriations 

Act, 2001 (44 U.S.C. 3516 note) provides 

for Federal agencies to review most 

disseminations of information to the 

public under information quality 

guidelines established by each agency 

pursuant to general guidelines issued by 

OMB. OMB’s guidelines were published 

at 67 FR 8452 (Feb. 22, 2002), and 

DOE’s guidelines were published at 67 

FR 62446 (Oct. 7, 2002). DOE has 

reviewed this NOPR under the OMB 

and DOE guidelines and has concluded 

that it is consistent with applicable 

policies in those guidelines. 

K. Review Under Executive Order 13211 

Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use,’’ 66 FR 28355 (May 

22, 2001), requires Federal agencies to 

prepare and submit to OIRA at OMB, a 

Statement of Energy Effects for any 

proposed significant energy action. A 

‘‘significant energy action’’ is defined as 

any action by an agency that 

promulgates or is expected to lead to 

promulgation of a final rule, and that: 

(1) Is a significant regulatory action 

under Executive Order 12866, or any 

successor order; and (2) is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy, or 

(3) is designated by the Administrator of 

OIRA as a significant energy action. For 

any proposed significant energy action, 

the agency must give a detailed 

statement of any adverse effects on 

energy supply, distribution, or use 

should the proposal be implemented, 

and of reasonable alternatives to the 

action and their expected benefits on 

energy supply, distribution, and use. 

DOE has tentatively concluded that 

this regulatory action, which sets forth 

proposed energy conservation standards 

for SPVUs, is not a significant energy 

action because the proposed standards 

are not likely to have a significant 

adverse effect on the supply, 

distribution, or use of energy, nor has it 

been designated as such by the 

Administrator at OIRA. Accordingly, 

DOE has not prepared a Statement of 

Energy Effects on this proposed rule. 

L. Review Under the Information 

Quality Bulletin for Peer Review 

On December 16, 2004, OMB, in 

consultation with the Office of Science 

and Technology Policy (OSTP), issued 

its Final Information Quality Bulletin 

for Peer Review (the Bulletin). 70 FR 

2664 (Jan. 14, 2005). The Bulletin 

establishes that certain scientific 

information shall be peer reviewed by 

qualified specialists before it is 

disseminated by the Federal 

Government, including influential 

scientific information related to agency 

regulatory actions. The purpose of the 

bulletin is to enhance the quality and 

credibility of the Government’s 

scientific information. Under the 

Bulletin, the energy conservation 

standards rulemaking analyses are 

‘‘influential scientific information,’’ 

which the Bulletin defines as ‘‘scientific 

information the agency reasonably can 

determine will have or does have a clear 

and substantial impact on important 

public policies or private sector 

decisions.’’ Id. at 2667. 

In response to OMB’s Bulletin, DOE 

conducted formal in-progress peer 

reviews of the energy conservation 

standards development process and 

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analyses and has prepared a Peer 

Review Report pertaining to the energy 

conservation standards rulemaking 

analyses. Generation of this report 

involved a rigorous, formal, and 

documented evaluation using objective 

criteria and qualified and independent 

reviewers to make a judgment as to the 

technical/scientific/business merit, the 

actual or anticipated results, and the 

productivity and management 

effectiveness of programs and/or 

projects. The ‘‘Energy Conservation 

Standards Rulemaking Peer Review 

Report’’ dated February 2007 has been 

disseminated and is available at the 

following Web site: energy.gov/eere/

buildings/peer-review. 

VII. Public Participation 

A. Attendance at the Public Meeting 

The time, date, and location of the 

public meeting are listed in the DATES

and ADDRESSES sections at the beginning 

of this proposed rule. If you plan to 

attend the public meeting, please notify 

Ms. Brenda Edwards at (202) 586–2945 

or Brenda.Edwards@ee.doe.gov. Please 

note that foreign nationals participating 

in the public meeting are subject to 

advance security screening procedures 

which require advance notice prior to 

attendance at the public meeting. If a 

foreign national wishes to participate in 

the public meeting, please inform DOE 

as soon as possible by contacting Ms. 

Regina Washington at (202) 586–1214 or 

by email: foreignvisit@ee.doe.gov so that 

the necessary procedures can be 

completed. Please also note that any 

person wishing to bring a laptop 

computer into the Forrestal Building 

will be required to obtain a property 

pass. Visitors should avoid bringing 

laptops, or allow an extra 45 minutes 

In addition, you can attend the public 

meeting via webinar. Webinar 

registration information, participant 

instructions, and information about the 

capabilities available to webinar 

participants will be published on DOE’s 

Web site at: http://

www1.eere.energy.gov/buildings/

appliance_standards/

rulemaking.aspx?ruleid=107. 

Participants are responsible for ensuring 

their systems are compatible with the 

webinar software. 

B. Procedure for Submitting Requests to 

Speak and Prepared General Statements 

for Distribution 

Any person who has an interest in the 

topics addressed in this notice, or who 

is representative of a group or class of 

persons that has an interest in these 

issues, may request an opportunity to 

make an oral presentation at the public 

meeting. Such persons may handdeliver requests to speak to the address 

shown in the ADDRESSES section at the 

beginning of this proposed rule between 

9:00 a.m. and 4:00 p.m., Monday 

through Friday, except Federal holidays. 

Requests may also be sent by mail or 

email to: Ms. Brenda Edwards, U.S. 

Department of Energy, Building 

Technologies Program, Mailstop EE–5B, 

1000 Independence Avenue SW., 

Washington, DC 20585–0121, or 

Brenda.Edwards@ee.doe.gov. Persons 

who wish to speak should include with 

their request a computer diskette or CD– 

ROM in WordPerfect, Microsoft Word, 

PDF, or text (ASCII) file format that 

briefly describes the nature of their 

interest in this rulemaking and the 

topics they wish to discuss. Such 

persons should also provide a daytime 

telephone number where they can be 

reached. 

DOE requests persons scheduled to 

make an oral presentation to submit an 

advance copy of their statements at least 

one week before the public meeting. 

DOE may permit persons who cannot 

supply an advance copy of their 

statement to participate, if those persons 

have made advance alternative 

arrangements with the Building 

Technologies Program. As necessary, 

requests to give an oral presentation 

should ask for such alternative 

arrangements. 

C. Conduct of the Public Meeting 

DOE will designate a DOE official to 

preside at the public meeting and may 

also use a professional facilitator to aid 

discussion. The meeting will not be a 

judicial or evidentiary-type public 

hearing, but DOE will conduct it in 

accordance with section 336 of EPCA 

(42 U.S.C. 6306). A court reporter will 

be present to record the proceedings and 

prepare a transcript. DOE reserves the 

right to schedule the order of 

presentations and to establish the 

procedures governing the conduct of the 

public meeting. There shall not be 

discussion of proprietary information, 

costs or prices, market share, or other 

commercial matters regulated by U.S. 

anti-trust laws. After the public meeting, 

interested parties may submit further 

comments on the proceedings, as well 

as on any aspect of the rulemaking, until 

the end of the comment period. 

The public meeting will be conducted 

in an informal, conference style. DOE 

will present summaries of comments 

received before the public meeting, 

allow time for prepared general 

statements by participants, and 

encourage all interested parties to share 

their views on issues affecting this 

rulemaking. Each participant will be 

allowed to make a general statement 

(within time limits determined by DOE), 

before the discussion of specific topics. 

DOE will allow, as time permits, other 

participants to comment briefly on any 

general statements. 

At the end of all prepared statements 

on a topic, DOE will permit participants 

to clarify their statements briefly and 

comment on statements made by others. 

Participants should be prepared to 

answer questions by DOE and by other 

participants concerning these issues. 

DOE representatives may also ask 

questions of participants concerning 

other matters relevant to this 

rulemaking. The official conducting the 

public meeting will accept additional 

comments or questions from those 

attending, as time permits. The 

presiding official will announce any 

further procedural rules or modification 

of the above procedures that may be 

needed for the proper conduct of the 

public meeting. 

A transcript of the public meeting will 

be included in the docket, which can be 

viewed as described in the Docket 

section at the beginning of this proposed 

rule and will be accessible on the DOE 

Web site. In addition, any person may 

buy a copy of the transcript from the 

transcribing reporter. 

D. Submission of Comments 

DOE will accept comments, data, and 

information regarding this proposed 

rule before or after the public meeting, 

but no later than the date provided in 

the DATES section at the beginning of 

this proposed rule. Interested parties 

may submit comments, data, and other 

information using any of the methods 

described in the ADDRESSES section at 

the beginning of this proposed rule. 

Submitting comments via 

www.regulations.gov. The 

www.regulations.gov Web page will 

require you to provide your name and 

contact information. Your contact 

information will be viewable to DOE 

Building Technologies staff only. Your 

contact information will not be publicly 

viewable except for your first and last 

names, organization name (if any), and 

submitter representative name (if any). 

If your comment is not processed 

properly because of technical 

difficulties, DOE will use this 

information to contact you. If DOE 

cannot read your comment due to 

technical difficulties and cannot contact 

you for clarification, DOE may not be 

able to consider your comment. 

However, your contact information 

will be publicly viewable if you include 

it in the comment itself or in any 

documents attached to your comment. 

Any information that you do not want 

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to be publicly viewable should not be 

included in your comment, nor in any 

document attached to your comment. 

Otherwise, persons viewing comments 

will see only first and last names, 

organization names, correspondence 

containing comments, and any 

documents submitted with the 

comments. 

Do not submit to www.regulations.gov 

information for which disclosure is 

restricted by statute, such as trade 

secrets and commercial or financial 

information (hereinafter referred to as 

Confidential Business Information 

(CBI)). Comments submitted through 

www.regulations.gov cannot be claimed 

as CBI. Comments received through the 

Web site will waive any CBI claims for 

the information submitted. For 

information on submitting CBI, see the 

Confidential Business Information 

section below. 

DOE processes submissions made 

through www.regulations.gov before 

posting. Normally, comments will be 

posted within a few days of being 

submitted. However, if large volumes of 

comments are being processed 

simultaneously, your comment may not 

be viewable for up to several weeks. 

Please keep the comment tracking 

number that www.regulations.gov 

provides after you have successfully 

uploaded your comment. 

Submitting comments via email, hand 

delivery/courier, or mail. Comments and 

documents submitted via email, hand 

delivery, or mail also will be posted to 

www.regulations.gov. If you do not want 

your personal contact information to be 

publicly viewable, do not include it in 

your comment or any accompanying 

documents. Instead, provide your 

contact information in a cover letter. 

Include your first and last names, email 

address, telephone number, and 

optional mailing address. The cover 

letter will not be publicly viewable as 

long as it does not include any 

comments. 

Include contact information each time 

you submit comments, data, documents, 

and other information to DOE. If you 

submit via mail or hand delivery/

courier, please provide all items on a 

CD, if feasible, in which case it is not 

necessary to submit printed copies. No 

telefacsimiles (faxes) will be accepted. 

Comments, data, and other 

information submitted to DOE 

electronically should be provided in 

PDF (preferred), Microsoft Word or 

Excel, WordPerfect, or text (ASCII) file 

format. Provide documents that are not 

secured, that are written in English, and 

that are free of any defects or viruses. 

Documents should not contain special 

characters or any form of encryption 

and, if possible, they should carry the 

electronic signature of the author. 

Campaign form letters. Please submit 

campaign form letters by the originating 

organization in batches of between 50 to 

500 form letters per PDF or as one form 

letter with a list of supporters’ names 

compiled into one or more PDFs. This 

reduces comment processing and 

posting time. 

Confidential Business Information. 

Pursuant to 10 CFR 1004.11, any person 

submitting information that he or she 

believes to be confidential and exempt 

by law from public disclosure should 

submit via email, postal mail, or hand 

delivery/courier two well-marked 

copies: one copy of the document 

marked ‘‘confidential’’ including all the 

information believed to be confidential, 

and one copy of the document marked 

‘‘non-confidential’’ with the information 

believed to be confidential deleted. 

Submit these documents via email or on 

a CD, if feasible. DOE will make its own 

determination about the confidential 

status of the information and treat it 

according to its determination. 

Factors of interest to DOE when 

evaluating requests to treat submitted 

information as confidential include: (1) 

A description of the items; (2) whether 

and why such items are customarily 

treated as confidential within the 

industry; (3) whether the information is 

generally known by or available from 

other sources; (4) whether the 

information has previously been made 

available to others without obligation 

concerning its confidentiality; (5) an 

explanation of the competitive injury to 

the submitting person which would 

result from public disclosure; (6) when 

such information might lose its 

confidential character due to the 

passage of time; and (7) why disclosure 

of the information would be contrary to 

the public interest. 

It is DOE’s policy that all comments 

may be included in the public docket, 

without change and as received, 

including any personal information 

provided in the comments (except 

information deemed to be exempt from 

public disclosure). 

E. Issues on Which DOE Seeks Comment 

Although DOE welcomes comments 

on any aspect of this proposal, DOE is 

particularly interested in receiving 

comments and views of interested 

parties concerning the following issues: 

1. DOE seeks comment on its tentative 

conclusion that the creation of a spaceconstrained equipment class for SPVUs 

is not warranted. (See section III.B.1 of 

this preamble for additional 

information.) 

2. DOE seeks comment on the EER 

and COP pairings for SPVHPs and its 

method of deriving the pairings. (See 

section IV.C.1 of this preamble for 

additional information.) 

3. DOE requests comment on its 

elimination of technologies from 

consideration based upon the criteria 

using in the screening analysis. (See 

section IV.B of the preamble for 

additional information.) 

4. DOE seeks comment as to whether 

switching to a BPM motor at 10 EER 

represents the most probable option of 

achieving that efficiency level for 

manufacturers. (See section IV.C.2 of 

this preamble for additional 

information.) 

5. DOE seeks comment on its 

derivation of the cost efficiency curves 

for SPVHPs and SPVACs with a cooling 

capacity ≥65,000 Btu/h and <135,000 

Btu/h. (See section IV.C.5 of this 

preamble for additional information.) 

6. DOE seeks input on its analysis of 

market channels for the SPVU 

equipment classes. (See section IV.D of 

this preamble for additional 

information.) 

7. DOE seeks input on its analysis of 

unit energy consumption (UEC) for the 

above equipment classes and its use in 

establishing the energy savings potential 

for more-stringent standards. Of a 

particular interest to DOE is input on 

shipments of SPVHP equipment to 

telecommunication shelters and the 

frequency of use of economizers in 

equipment serving these shelters. (See 

section IV.E of this preamble for 

additional information.) 

8. DOE also recognizes that there may 

be regional differences between the 

shipments of heat pumps and air 

conditioners to warmer or cooler 

climates, and requests stakeholder input 

on how or if such differences can be 

taken into account in the energy use 

characterization. (See section IV.E of 

this preamble for additional 

information.) 

9. DOE requests comments on the 

most appropriate trend to use for real 

(inflation-adjusted) SPVU prices. (See 

section IV.F.2.a of this preamble for 

additional information.) 

10. DOE seeks comments on its 

assumption that installation costs would 

not increase for higher-efficiency 

SPVUs. (See section IV.F.2.b of this 

preamble for additional information.) 

11. DOE seeks comment on whether a 

rebound effect should be included in 

the determination of annual energy 

savings. If a rebound effect should be 

included, DOE seeks data to assist in 

calculation of the rebound effect. (See 

section IV.G.1.a of this preamble for 

additional information.) 

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78676 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 

12. DOE seeks comment on whether 

amended standards would affect 

shipments, and if so, DOE also requests 

data with which to estimate the 

elasticity of shipments for SPVUs as a 

function of first costs, repair costs, or 

operating costs. (See section IV.G.2 of 

this preamble for additional 

information.) 

VIII. Approval of the Office of the 

Secretary 

The Secretary of Energy has approved 

publication of this notice of proposed 

rulemaking. 

List of Subjects in 10 CFR Part 431 

Administrative practice and 

procedure, Confidential business 

information, Energy conservation, 

Reporting and recordkeeping 

requirements. 

Issued in Washington, DC, on December 

10, 2014. 

David T. Danielson, 

Assistant Secretary of Energy, Energy 

Efficiency and Renewable Energy. 

For the reasons set forth in the 

preamble, DOE proposes to amend part 

431 of Chapter II, Subchapter D, of Title 

10 of the Code of Federal Regulations as 

set forth below: 

PART 431—ENERGY EFFICIENCY 

PROGRAM FOR CERTAIN 

COMMERCIAL AND INDUSTRIAL 

EQUIPMENT 

■ 1. The authority citation for part 431 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6317. 

■ 2. Section 431.97 is amended by: 

■ a. Revising paragraph (d); and 

■ b. Redesignating Table 7 in paragraph 

(e) as Table 9, and Table 8 in paragraph 

(f) as Table 10; 

The revisions read as follows: 

§ 431.97 Energy efficiency standards and 

their compliance dates. 

* * * * * 

(d)(1) Each single package vertical air 

conditioner and single package vertical 

heat pump manufactured on or after 

January 1, 2010, but before October 9, 

2015 (for models ≥65,000 Btu/h and 

<135,000 Btu/h) or October 9, 2016 (for 

models ≥135,000 Btu/h and <240,000 

Btu/h), must meet the applicable 

minimum energy conservation standard 

level(s) set forth in Table 6 of this 

section. 

TABLE 6 TO § 431.97—MINIMUM EFFICIENCY STANDARDS FOR SINGLE PACKAGE VERTICAL AIR CONDITIONERS AND

SINGLE PACKAGE VERTICAL HEAT PUMPS

Equipment type Cooling capacity Sub-category Efficiency level 

Compliance date: 

products 

manufactured on 

and after . . . 

Single package vertical air conditioners 

and single package vertical heat 

pumps, single-phase and threephase.

<65,000 Btu/h ........................................ AC ....................

HP .....................

EER = 9.0 .........

EER = 9.0 .........

COP = 3.0 

January 1, 2010. 

January 1, 2010. 

Single package vertical air conditioners 

and single package vertical heat 

pumps.

≥65,000 Btu/h and <135,000 Btu/h ....... AC ....................

HP .....................

EER = 8.9 .........

EER = 8.9 .........

COP = 3.0 

January 1, 2010. 

January 1, 2010. 

Single package vertical air conditioners 

and single package vertical heat 

pumps.

≥135,000 Btu/h and <240,000 Btu/h ..... AC ....................

HP ....................

EER = 8.6 .........

EER = 8.6 .........

COP = 2.9 

January 1, 2010. 

January 1, 2010. 

(2) Each single package vertical air 

conditioner and single package vertical 

heat pump manufactured on and after 

October 9, 2015 (for models ≥65,000 

Btu/h and <135,000 Btu/h) or October 9, 

2016 (for models ≥135,000 Btu/h and 

<240,000 Btu/h), but before [date 4 

years after publication of a final rule] 

must meet the applicable minimum 

energy conservation standard level(s) set 

forth in Table 7 of this section. 

TABLE 7 TO § 431.97—MINIMUM EFFICIENCY STANDARDS FOR SINGLE PACKAGE VERTICAL AIR CONDITIONERS AND

SINGLE PACKAGE VERTICAL HEAT PUMPS

Equipment type Cooling capacity Sub-category Efficiency level 

Compliance date: 

products 

manufactured on 

and after . . . 

Single package vertical air conditioners 

and single package vertical heat 

pumps, single-phase and threephase.

<65,000 Btu/h ........................................ AC ....................

HP .....................

EER = 9.0 .........

EER = 9.0 .........

COP = 3.0 

January 1, 2010. 

January 1, 2010. 

Single package vertical air conditioners 

and single package vertical heat 

pumps.

≥65,000 Btu/h and <135,000 Btu/h ....... AC ....................

HP .....................

EER = 10.0 .......

EER = 10.0 .......

COP = 3.0 

October 9, 2015. 

October 9, 2015. 

Single package vertical air conditioners 

and single package vertical heat 

pumps.

≥135,000 Btu/h and <240,000 Btu/h ..... AC ....................

HP ....................

EER = 10.0 .......

EER = 10.0 .......

COP = 3.0 

October 9, 2016. 

October 9, 2016. 

(3) Each single package vertical air 

conditioner and single package vertical 

heat pump manufactured on and after 

[date 4 years after publication of a final 

rule] must meet the applicable 

minimum energy conservation standard 

level(s) set forth in Table 8 of this 

section. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS3

Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Proposed Rules 78677 

TABLE 8 TO § 431.97—UPDATED MINIMUM EFFICIENCY STANDARDS FOR SINGLE PACKAGE VERTICAL AIR CONDITIONERS

AND SINGLE PACKAGE VERTICAL HEAT PUMPS

Equipment type Cooling capacity Sub-category Efficiency level 

Compliance date: 

products 

manufactured on 

and after . . . 

Single package vertical air conditioners 

and single package vertical heat 

pumps, single-phase and threephase.

<65,000 Btu/h ........................................ AC .................... EER = 11.0 ....... [Date 4 years after 

publication of final 

rule]. 

HP ..................... EER = 11.0 .......

COP = 3.3 ........

[Date 4 years after 

publication of final 

rule]. 

Single package vertical air conditioners 

and single package vertical heat 

pumps.

≥65,000 Btu/h and <135,000 Btu/h ....... AC ....................

HP .....................

EER = 10.0 .......

EER = 10.0 .......

COP = 3.0 

October 9, 2015. 

October 9, 2015. 

Single package vertical air conditioners 

and single package vertical heat 

pumps.

≥135,000 Btu/h and <240,000 Btu/h ..... AC ....................

HP ....................

EER = 10.0 .......

EER = 10.0 .......

COP = 3.0 

October 9, 2016. 

October 9, 2016. 

* * * * * 

[FR Doc. 2014–29865 Filed 12–29–14; 8:45 am] 

BILLING CODE 6450–01–P 

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