CHAPTER 16. REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY
 

CONSERVATION STANDARDS FOR CENTRAL AIR CONDITIONERS AND HEAT
 

PUMPS
 

TABLE OF CONTENTS
 

16.1 INTRODUCTION ......................................................................................................... 16-1 

16.2 METHODOLOGY ........................................................................................................ 16-1 

LIST OF TABLES 

Table 16.1.1 Non-Regulatory Alternatives to Standards ........................................................ 16-1 

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CHAPTER 16. REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY
 

CONSERVATION STANDARDS FOR CENTRAL AIR CONDITIONERS AND HEAT
 

PUMPS
 

16.1 INTRODUCTION 

Under the Process Rule (Procedures for Consideration of New or Revised Energy 

Conservation Standards for Consumer Products, 61 FR 36974 (July 15, 1996)), the U.S. 

Department of Energy (DOE) is committed to continually explore non-regulatory alternatives to 

standards. DOE will prepare a draft regulatory impact analysis pursuant to E.O. 12866, 

“Regulatory Planning and Review,” which will be subject to review under the Executive Order 

by the Office of Management and Budget’s Office of Information and Regulatory Affairs. 58 FR 

51735. DOE has identified seven major alternatives to standards as representing feasible policy 

options to reduce consumer product energy consumption. It will evaluate each alternative in 

terms of its ability to achieve significant energy savings at a reasonable cost, and will compare 

the effectiveness of each one to the effectiveness of the proposed standards rule. 

The non-regulatory means of achieving energy savings that DOE proposes to analyze are 

listed in Table 16.1.1. The technical support document (TSD) in support of DOE’s notice of 

proposed rulemaking will include a complete quantitative analysis of each alternative, the 

methodology for which is discussed briefly below. 

Table 16.1.1 Non-Regulatory Alternatives to Standards 

No new regulatory action 

Consumer tax credits 

Manufacturer tax credits 

Performance Standards 

Rebates 

Voluntary energy efficiency targets 

Early replacement 

Bulk government purchases 

16.2 METHODOLOGY 

DOE will use the national impact analysis (NIA) spreadsheet models for each of the two 

products to calculate the national energy savings and the net present value (NPV) corresponding 

to each alternative to the proposed standards. The NIA model for each of the two products is 

discussed in chapter 10 of the TSD. To compare each alternative quantitatively to the proposed 

energy conservation standards, DOE will need to quantify the effect of each alternative on the 

purchase and use of energy efficient room air conditioners and clothes dryers. Once it has 

quantified each alternative, DOE will make the appropriate revisions to the inputs in the NIA 

models. Key inputs that DOE may revise in these models are: 

• Energy prices and escalation factors; 

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•	 Implicit market discount rates for trading off purchase price against operating 

expense when choosing product efficiency; 

•	 Consumer purchase price, operating cost, and income elasticities; 

•	 Consumer price-versus-efficiency relationships; and 

•	 Product stock data (purchase of new products or turnover rates for inventories). 

The key measures of the impact of each alternative will be: 

•	 Energy use: Cumulative energy use of the product from the effective date of the new 

standard to the year 2045. DOE will report electricity consumption as primary energy. 

•	 National energy savings: Cumulative national energy use from the base case 

projection minus the alternative policy case projection. 

•	 Net present value: The value of future operating cost savings from products bought in 

the period from the effective date of the new standard 2016 to the year 2045. DOE 

will calculate the NPV as the difference between the present value of product and 

operating expenditures (including energy) in the base case, and the present value of 

expenditures in each alternative policy case. DOE will discount future operating and 

product expenditures to 2010 using a seven-percent and three-percent real discount 

rate. It will calculate operating expenses (including energy costs) for the life of the 

products. 

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