12-i

CHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANLAYSIS

TABLE OF CONTENTS

12.1 INTRODUCTION ......................................................................................................... 12-1

12.2 METHODOLOGY ........................................................................................................ 12-1

12.2.1 Phase 1: Industry Profile.................................................................................... 12-2

12.2.2 Phase 2: Industry Cash-Flow Analysis and Interview Guide ............................ 12-2

12.2.2.1 Industry Cash-Flow Analysis............................................................ 12-2

12.2.2.2 Interview Guide ................................................................................ 12-2

12.2.3 Phase 3: Sub-Group Analysis ............................................................................ 12-3

12.2.3.1 Manufacturer Interviews................................................................... 12-3

12.2.3.2 Revised Industry Cash-Flow Analysis.............................................. 12-3

12.2.3.3 Manufacturer Sub-Group Analysis................................................... 12-3

12.2.3.4 Competitive Impact Assessment....................................................... 12-4

12.2.3.5 Manufacturing Capacity Impact ....................................................... 12-4

12.2.3.6 Employment Impact.......................................................................... 12-4

12.2.3.7 Cumulative Regulatory Burden ........................................................ 12-4

12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS ..................................... 12-5

12.3.1 General Interview Structure............................................................................... 12-5

12.3.1.1 Key Issues......................................................................................... 12-5

12.3.1.2 Shipment Trends and Projections ..................................................... 12-5

12.3.1.3 Profitability ....................................................................................... 12-6

12.3.1.4 Product Mix ...................................................................................... 12-6

12.3.1.5 Conversion Costs.............................................................................. 12-6

12.3.1.6 Market Shares and Industry Consolidation....................................... 12-6

12.3.1.7 Product Utility and Innovation.......................................................... 12-7

12.3.1.8 Impact on Small Manufacturers........................................................ 12-7

12.3.1.9 Cumulative Regulatory Burden ........................................................ 12-7

12.4 MISCELLANEOUS REFRIGERATION PRODUCT PRELIMINARY MIA RESULTS12-8

12.4.1 Key Issues.......................................................................................................... 12-8

12.4.2 Shipments and Profitability................................................................................ 12-8

12.4.3 Product Mix ....................................................................................................... 12-9

12.4.4 Conversion Costs, Manufacturing Capacity, and Employment Levels........... 12-10

12.4.5 Impact on Innovation and Product Utility ....................................................... 12-11

12.4.6 Cumulative Burdens......................................................................................... 12-12

12.4.6.1 Standards for Other Products Made by Miscellaneous Refrigeration 

Product Manufacturers..................................................................................... 12-12

12.1.1.1 Refrigerants..................................................................................... 12-12

12.4.6.2 Materials ......................................................................................... 12-13

12.4.7 Impact on Small Manufacturers....................................................................... 12-13
12-1

CHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANALYSIS

12.1 INTRODUCTION

The purpose of the manufacturer impact analysis (MIA) is to identify the likely impacts 

of new or amended energy conservation standards on manufacturers. The U.S. Department of 

Energy (DOE) will conduct this analysis with input from manufacturers and other interested 

parties and will apply this methodology to its evaluation of new energy conservation standards

for miscellaneous refrigeration products. DOE will also consider the financial impacts and a 

wide range of quantitative and qualitative industry impacts that might occur following the 

implementation of an energy conservation standard. For example, a particular energy 

conservation standard level, if adopted by DOE, could require changes to practices used in 

manufacturing miscellaneous refrigeration products. DOE will identify and come to understand 

these impacts through interviews with manufacturers and other interested parties during the 

Notice of Proposed Rulemaking (NOPR) stage of its analysis.

DOE announced changes to the MIA format through a report issued to Congress on 

January 31, 2006 (as required by section 141 of the Energy Policy Act of 2005 (EPACT 2005)), 

entitled “Energy Conservation Standards Activities.”a Previously, DOE did not report any MIA 

results until the Notice of Proposed Rulemaking (NOPR) phase; however, under this new format, 

DOE has collected, evaluated, and reported preliminary information and data during the 

preliminary phase (the phase preceding the NOPR) of this rulemaking. Such preliminary 

manufacturer information includes the anticipated conversion capital expenditures and impacts 

on profitability and market share. DOE solicited this information during the engineering analysis 

manufacturer interviews and reported the results below.

12.2 METHODOLOGY

DOE conducts the MIA in three phases and further tailors the analytical framework based 

on comments received from interested parties. In Phase 1, DOE creates an industry profile to 

characterize the industry and conducts preliminary manufacturer interviews to identify important 

issues that require special consideration. The preliminary analysis technical support document 

(TSD) presents the results of the Phase 1 analysis. In Phase 2, DOE prepares an industry cashflow model and an interview questionnaire to guide subsequent discussions. In Phase 3, DOE 

interviews manufacturers, and assesses the impacts of new or amended energy conservation 

standards both quantitatively and qualitatively. Using the government regulatory impact model 

(GRIM), DOE assesses industry and sub-group cash flows and net present values. Then, DOE 

assesses impacts on competition, manufacturing capacity, employment, and regulatory burden 

 

a This report is available on the DOE website at 

www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html.
12-2

based on feedback received during manufacturer interviews and subsequent discussions. The 

NOPR TSD presents the results of Phase 2 and Phase 3 analyses.

12.2.1 Phase 1: Industry Profile

In Phase 1 of the manufacturer impact analysis, DOE collects pertinent qualitative and 

quantitative financial and market information. This includes miscellaneous refrigeration product

manufacturer market shares, corporate operating ratios, wages, employment levels, and

production cost ratios. Sources of information may include reports published by industry groups,

trade journals, the U.S. Census Bureau, copies of Securities Exchange Commission (SEC) 10-K 

filings, and interviews with manufacturers. DOE also relies on information from its market and 

technology assessment, engineering analysis, life-cycle cost analysis, and markup analysis.

12.2.2 Phase 2: Industry Cash-Flow Analysis and Interview Guide

In Phase 2, DOE will perform a preliminary industry cash-flow analysis and prepare

written guidelines for interviewing manufacturers.

12.2.2.1 Industry Cash-Flow Analysis

DOE will use the GRIM to analyze the financial impacts of new energy conservation

standards on the miscellaneous refrigeration product industry. Standards will likely require 

additional investment, raise production costs, and affect revenues through higher prices and, 

possibly, lower sales. The GRIM uses several factors to determine a series of annual cash flows 

starting with the year standards are announced and extending through several years after 

implementation. These factors include annual expected revenues, costs of sales, selling and 

general administration costs, and taxes, as well as capital expenditures, depreciation and 

maintenance related to new standards. Inputs to the GRIM include manufacturing costs, 

shipments forecasts, and price forecasts developed in other analyses. Financial parameters for the 

industry will be developed based on publicly available data and confidentially submitted 

manufacturer information. DOE compares the results of the GRIM against baseline projections 

where no standards are in place. The financial impact of new energy conservation standards is 

the difference between the two sets of discounted annual cash flows.

12.2.2.2 Interview Guide

DOE will conduct interviews with manufacturers to gather information on the effects of

standards on revenues and finances, direct employment, capital assets, and industry

competitiveness. Before the interviews, DOE will distribute an interview guide that will provide 

a starting point to identify relevant issues and help identify the impacts of standards on 

individual manufacturers or sub-groups of manufacturers. DOE anticipates that the interview 

guide will cover current organizational characteristics, industry infrastructure, manufacturer 

cash-flow analysis, a competitive impacts assessment, an employment impacts assessment, and a 

manufacturing capacity impacts assessment.
12-3

12.2.3 Phase 3: Sub-Group Analysis

Phase 3 activities will include manufacturer interviews, revision of the industry cash-flow 

analysis, manufacturer sub-group cash-flow analysis, competitive impact assessment, 

manufacturing capacity impact, employment impact, and cumulative regulatory burden.

12.2.3.1 Manufacturer Interviews

The information gathered in Phase 1 and the cash-flow analysis performed in Phase 2 will 

be supplemented with information gathered during interviews with manufacturers during Phase 

3. The interview process has a key role in the manufacturer impact analysis, since it provides an 

opportunity for interested parties to express their views privately on important issues, allowing 

confidential or sensitive information to be considered in the rulemaking decision.

DOE will conduct detailed interviews with as many manufacturers as necessary to gain 

insight into the range of potential impacts of standards. During the interviews, DOE will solicit 

information on the possible impacts of standards on sales, direct employment, capital assets, and 

industry competitiveness. Both qualitative and quantitative information are valuable. Interviews 

will be scheduled well in advance in order to provide every opportunity for key individuals to be

available for comment. Although a written response to the questionnaire is acceptable, DOE 

prefers an interactive interview process because it helps clarify responses and provides the

opportunity to identify additional issues.

All information transmitted will be considered, as appropriate, in DOE’s decision-making 

process. Interview participants will be asked to identify all confidential information provided in 

writing or orally; no confidential information will be made available in the public record.

Participants will also be asked to identify all information they wish included in the public record,

but do not want to have associated with their interview. This information will be incorporated 

into the public record, but reported without attribution.

12.2.3.2 Revised Industry Cash-Flow Analysis

In Phase 2 of the MIA, DOE will provide manufacturers with a preliminary GRIM for 

review and evaluation. During the interviews, DOE will seek comment and suggestions 

regarding the values selected for the parameters. Upon completion of the interviews, DOE will 

revise its industry cash-flow model based on manufacturer feedback.

12.2.3.3 Manufacturer Sub-Group Analysis

Using average cost assumptions to develop an industry cash-flow estimate is not adequate 

for assessing differential impacts among sub-groups of manufacturers. Smaller manufacturers, 

niche players, or manufacturers exhibiting a cost structure that differs largely from the industry 

average could be more negatively affected. Ideally, DOE would consider the impact on every 

firm individually; however, it typically uses the results of the industry characterization to group 

manufacturers exhibiting similar characteristics. During the interview process, DOE will discuss 

the potential sub-groups and sub-group members that have been identified for the analysis. DOE

will look to the manufacturers and other stakeholders to suggest what sub-groups or 

characteristics are most appropriate for the analysis.
12-4

12.2.3.4 Competitive Impact Assessment

Section 342 (6)(B)(i)(V) of the Energy Policy Act of 1992 (EPCA) directs DOE to 

consider any lessening of competition likely to result from standards. It further directs the U.S. 

Attorney General to determine the impacts, if any, of a decrease in competition. DOE will make 

a determined effort to gather and report firm-specific financial information and impacts. The 

competitive analysis will focus on assessing the impacts on smaller, yet significant, 

manufacturers. The assessment will be based on manufacturing cost data and information 

collected from interviews with manufacturers. The manufacturer interviews will focus on 

gathering information that would help in assessing asymmetrical cost increases to some 

manufacturers, the potential increase in business risks from an increased proportion of fixed 

costs, and potential barriers to market entry (e.g., proprietary technologies).

12.2.3.5 Manufacturing Capacity Impact

One of the significant outcomes of standards could be the obsolescence of existing 

manufacturing assets, including tooling and investment. The manufacturer interview guide will 

have a series of questions to help identify impacts on manufacturing capacity, specifically 

capacity utilization and plant location decisions in North America with and without a standard; 

the ability of manufacturers to upgrade or remodel existing facilities to accommodate the new 

requirements; the nature and value of stranded assets, if any; and estimates for any one-time 

restructuring and other charges, where applicable.

12.2.3.6 Employment Impact

The impact of new energy conservation standards on employment is an important 

consideration in the rulemaking process. To assess how domestic employment patterns might be 

affected, the interview will explore current employment trends in the miscellaneous refrigeration 

product industry. The interview will also solicit manufacturer views on changes in employment 

patterns that may result from new standards. The employment impacts section of the interview 

guide will focus on current employment levels associated with manufacturers at each of their 

production facilities, expected future employment levels with and without a standard, and 

differences in workforce skills and issues related to the retraining of employees.

12.2.3.7 Cumulative Regulatory Burden

DOE recognizes and seeks to mitigate the overlapping effects on manufacturers of new 

energy conservation standards and other regulatory actions affecting the same products. DOE 

will analyze and consider the impact on manufacturers of multiple, product-specific regulatory 

actions. Based on its own research and discussions with manufacturers, DOE identified 

regulations relevant to miscellaneous refrigeration product manufacturers including standards for 

other products made by miscellaneous refrigeration product manufacturers, as well as restrictions 

on the use and recovery of certain refrigerants and materials. DOE will study the potential 

impacts of these cumulative burdens in greater detail during the MIA conducted during the 

NOPR phase.
12-5

12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS 

For the preliminary analysis rulemaking phase, DOE conducted on-site or telephone 

interviews with manufacturers of miscellaneous refrigeration products in April and May of 2013.

To maintain confidentiality, DOE did not identify the individual manufacturers that disclosed 

information. The subsequent analysis only reports aggregated information and does not disclose 

sensitive or company-specific information.

These interviews primarily served to identify key issues and gain insights into the 

qualitative effects of new energy conservation standards including the impact on manufacturer

market share and financial performance, industry consolidation, manufacturing capacity, as well 

as product utility and innovation. The interviews also served as an opportunity to get feedback 

from manufacturers relating to the other overlapping regulatory burdens they may face. 

Appendix 12-A contains a copy of the interview guide DOE used to gather responses from 

multiple manufacturers.

12.3.1 General Interview Structure

The manufacturer interviews included questions relating to the following topics. DOE 

received responses to most, if not all, of these topics from various manufacturers.

12.3.1.1 Key Issues

The most important aspect of the preliminary MIA is the opportunity to identify key 

manufacturer issues early in the development of energy conservation standards. During the 

interviews, DOE engaged manufacturers in a discussion about what they perceive to be the key 

issues in the rulemaking. Key issues, once identified, are added to the list of topics explored 

during NOPR-phase interviews. For example, key issues identified in other rulemakings have 

included the ability to pass cost increases on to consumers and space constraints which limit the 

range of technologically feasible design options.

12.3.1.2 Shipment Trends and Projections

Shipment projections play a critical role in determining the impacts of new energy 

conservation standards. The interviews provided an opportunity for manufacturers to share 

information that can help DOE quantify the magnitude of any changes in shipments resulting 

from new energy conservation standards. DOE sought information relating to the historical and 

current number of product shipments, broken down by product class, capacity rating, and 

efficiency level. DOE also solicited input on the forecast of future shipments absent energy 

conservation standards. Manufacturers are asked how they would expect shipments to change for 

the industry as a whole as a function of standard levels and why they expect these changes might 

occur. More specific questions aimed to inform an estimate of price elasticity for use in the 

national impact analysis (NIA).Yet another goal of the shipments discussion is to better 

understand the impacts of a potential reduction in shipments on individual manufacturers of 

miscellaneous refrigeration products.
12-6

12.3.1.3 Profitability

DOE requested manufacturers’ views on the perceived possible impacts of potential 

energy conservation standards on their future profitability. Energy conservation standards could 

affect financial performance in several different ways. Several of these impacts are captured in 

previous sections. For instance, the outlays of capital to upgrade manufacturing equipment and 

the investment in product development to redesign products to comply with standards can incur 

significant conversion costs, resulting in reduced cash flow and stranded assets. More stringent 

energy efficiency standards may also contribute to higher per-unit costs that for some consumers, 

may deter them from purchasing the products, or cause them to choose less efficient products,

thereby reducing shipments. Alternatively, if manufacturers wish to maintain a cost competitive

product offering on minimally compliant products, the inability to pass-through increased perunit costs to the consumer may decrease the manufacturers’ gross margin (as a percentage).

12.3.1.4 Product Mix

During the interviews, DOE asked manufacturers if new energy conservation standards 

might change a manufacturer’s product mix and if this change affects profits. For example,

higher energy efficiency standards might limit a manufacturer’s ability to differentiate and 

market premium products that command higher profit margins.

The interview guide also investigates how new energy conservation standards might 

affect a manufacturer’s consumer mix and its distribution channels, and how in turn this might 

change profitability.

12.3.1.5 Conversion Costs

During the interviews, DOE asked manufacturers to quantify and explain both the capital 

and product conversion costs necessary to raise the energy efficiency of their product lines to the 

proposed standard levels. In some instances, manufacturers may be able to meet proposed 

standard levels by modifying existing products. In other cases, the necessary changes may entail 

a complete product-line redesign. In these situations, new efficiency standards will cause 

manufacturers to incur one-time conversion capital expenditures and product conversion 

expenses. Capital conversion costs are one-time investments in property, plant, and equipment.

Product conversion costs include one-time investments in research, product development, 

testing, and marketing.

12.3.1.6 Market Shares and Industry Consolidation

New energy conservation standards can alter the competitive dynamics of the 

marketplace. This can include prompting companies to enter the market, exit the market, or 

merge with other companies. The preliminary MIA interview questions asked manufacturers to 

share their perspectives on industry consolidation both in the absence of new standards and 

assuming new standards at various efficiency levels. The interview questions focused on 

gathering information that helps in assessing:
12-7

• disproportionate cost increases to some manufacturers;

• increased proportion of fixed costs potentially increasing business risks; and

• potential barriers to market entry (e.g., proprietary technologies).

12.3.1.7 Product Utility and Innovation

DOE conducts an assessment of anti-competitive effects of proposed standards in order to 

protect the interests of the consumer. During the interviews, DOE solicited information to 

understand if new standards could result in disproportionate economic or performance penalties 

for particular consumer/user sub-groups.

DOE also asked manufacturers if new energy conservation standards could result in 

products that will be more or less desirable to consumers due to changes in product functionality, 

utility, or other features.

Energy conservation standards may require investment in conversion costs, including 

research and development (R&D). This required spending may force a manufacturer to reduce 

funding usually allocated to product innovation. Energy conservation standards may also force 

manufacturers to eliminate innovative energy-consuming features from their products. During 

the interviews, DOE requests information on the effect of proposed standards on innovation.

12.3.1.8 Impact on Small Manufacturers

DOE will consider the possibility of small businesses being affected by the promulgation 

of new energy conservation standards for miscellaneous refrigeration products. Should any small 

business manufacturers be identified, DOE will study the potential impacts on these small 

businesses in greater detail during the MIA.

12.3.1.9 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 entire industries. Assessing the impact of a single 

regulation may overlook this cumulative regulatory burden.

Expenditures associated with meeting other regulations are an important aspect of DOE’s 

consideration of the “cumulative regulatory burden” the industry faces. The interviews helped

DOE identify the level and timing of investments manufacturers are expecting to incur as a result 

of these regulations. Manufacturers were also asked under what circumstances they might be 

able to coordinate expenditures related to these regulations and efficiency standards.

In addition to the new energy conservation standards for miscellaneous refrigeration 

products, several other Federal regulations and pending regulations apply to these products. DOE 

will investigate these cumulative regulatory burdens in greater detail during the NOPR phase of 

the rulemaking.
12-8

12.4 MISCELLANEOUS REFRIGERATION PRODUCT PRELIMINARY MIA

RESULTS

During the preliminary MIA interview, manufacturers identified key issues surrounding 

DOE’s rulemaking for miscellaneous refrigeration products and provided feedback regarding the 

potential impact of new energy conservation standards. DOE summarized the feedback below.

12.4.1 Key Issues

One of the central questions of the preliminary analysis manufacturer interview guide is:

“What are the key issues for your company regarding the miscellaneous refrigeration product

energy conservation standards rulemaking?” This open question initiated dialogue with 

manufacturers, enabling them to identify key points that DOE would explore and discuss during 

the interview. This section describes the key issues manufacturers felt were of the highest 

importance and that would have the most significant impact on the industry. Manufacturers 

indicated that, for the most part, the risks associated with these issues increase with more 

stringent energy conservation standards. The issues are overall concerns that many 

manufacturers expressed and in some cases, are specific to a given product class.

Miscellaneous refrigeration product manufacturers cited concerns regarding a number of 

issues that are covered in greater detail elsewhere in this chapter. Detailed descriptions of these 

manufacturer concerns are provided in the appropriate sections that follow; only brief 

descriptions are provided here.

• Impacts of higher selling prices – A number of manufacturers cited that the higher selling 

prices necessitated by increased manufacturing costs would be detrimental to the 

industry, and could dissuade consumers from purchasing miscellaneous refrigeration 

products across all price points. 

• Impacts on consumer utility – Manufacturers of miscellaneous refrigeration products

believe that increased product efficiency will come at a cost to consumer-valued features 

such as temperature stability, accurate humidity control, as well as product appearance 

for cooled cabinets, and product size and the quality of ice for ice makers.

• Timing of standard – Several manufacturers emphasized that, given the large capital 

investments currently being made to comply with 2014 refrigerator and freezer standards, 

the timing of this new standard is particularly burdensome.

The other issues of key importance to manufacturers are the conversion costs associated with 

new efficiency standards and disproportionate impacts on small businesses.

12.4.2 Shipments and Profitability

DOE asked manufacturers during the preliminary manufacturer interviews about how 

new energy conservation standards would affect their overall shipments and profitability.

Nearly all manufacturers stated that new energy conservation standards would have a 

negative impact on total industry shipments and profitability, although the magnitude of the 
12-9

decrease would depend on the efficiency levels chosen. The majority of manufacturers expressed 

concerns about the elasticity of the market for miscellaneous refrigeration products. These 

manufacturers affirmed that increased production costs can only be passed through to a certain 

point, after which demand would decline. 

Some manufacturers discussed the impacts of new conservation standards on shipments 

in terms of the different price point categories of their products. Manufacturers of both cooled 

cabinets and ice makers commented that consumers of low-end products are relatively intolerant 

of price increases, meaning that demand for low-end products will decline as manufacturers 

attempt to recoup higher costs by raising prices for low-end product offerings. One manufacturer 

believes that a 5 percent increase in efficiency for its low-end cooled cabinet product would 

impart cost increases that, if passed through, could have large adverse consequences for sales. If 

price points for low-end products must remain relatively fixed in order to maintain shipments 

level, manufacturer profit margins will be squeezed.

Regarding high-end products, several manufacturers noted that, although consumers of 

these products may be better financially equipped to deal with increases in purchase price, these 

products are still highly discretionary. As such, like lower-end products, demand is also elastic in 

the high-end product segment. Coupled with the low-volume nature of this segment, 

manufacturers insist that new energy conservation standards could have a detrimental impact on 

shipments of high-end products. One manufacturer predicted that an increase in product cost of 

25 percent or more would drastically reduce sales in this segment. However, contrasting this 

view, two manufacturers believe that because high-end products are luxury goods, price impacts 

on shipments and profitability would be less severe for this segment than for low-end products. 

One of these manufacturers suggested that a 10 percent to 15 percent increase in price would not 

affect shipments.

Manufacturers also commented on price effects of new energy conservation standards in 

terms of their product mix. One manufacturer asserted that higher prices will first cause its fullsized cooled cabinets to be “priced out” of the market, followed then by its under-counter 

products. Ice maker manufacturers also emphasized the elasticity of the ice maker market. One

manufacturer suggested that a 5 to 10 percent increase in product cost would lead to decreased 

shipments whereas two manufacturers suggested that a price increase of 20 to 50 percent could 

eliminate the ice maker market altogether. 

Finally, one manufacturer noted that increased efficiency mandated by new energy 

conservation standards for miscellaneous refrigeration products will come at the cost of product 

utility from the consumer standpoint, further dampening demand for these products. Product 

utility is discussed in more detail in section 12.4.5.

12.4.3 Product Mix

DOE asked manufacturers what changes to their current product mixes they would expect 

if new energy conservation standards are established. Due to the relative inefficiency of 

thermoelectric cooled cabinets, one manufacturer noted that conservation standards for cooled 

cabinets may effectively eliminate thermoelectric cooling technology from the market.
12-10

Several manufacturers predicted that they may be forced to stop producing lower-end 

miscellaneous refrigeration products because targeted consumer subgroups will not be able to

tolerate the pass-through of increased costs associated with meeting new energy conservation 

standards (as described above). This would lead to fewer options for customers of miscellaneous 

refrigeration products, as some manufacturers reorient their production towards higher-end 

products or simply exit the market. 

Additionally, one ice maker manufacturer indicated that it may choose to shift all ice 

maker production to the commercial side, as the price differential between residential ice makers

and commercial ice-makers decreases. Still another manufacturer of ice makers commented that 

small business customers and individuals may opt to buy a freezer with built-in ice maker as the 

price of ice makers increases. 

12.4.4 Conversion Costs, Manufacturing Capacity, and Employment Levels

DOE asked manufacturers what level of conversion costs they anticipate if new energy 

conservation standards were to take effect. Several manufacturers stressed that they had recently 

made large capital investments in response to the 2014 DOE standards for refrigerators and 

freezers. Consequently, these manufacturers emphasized the unfortunate timing of new 

conservation standards for miscellaneous refrigeration products. Relatedly, one small 

manufacturer emphasized the fact that its cooled cabinets share the same platforms as its 

refrigerator and freezer products, and that a new standard for cooled cabinets that required a new 

platform would equate to a very large capital investment that may not be justifiable based on 

their volume of shipments. 

Most manufacturers said that conversion costs would be significant if standards require 

new product platforms. One manufacturer estimated that a reduction in energy efficiency greater 

than 10 percent above their current baseline would require a platform switch, and a 30 to 40 

percent or higher reduction would cause the manufacturer to exit the U.S. market altogether. One 

manufacturer noted that it takes on a portion of the capital conversion costs of its OEM supplier 

based on the portion of the OEM’s production that it sources. This manufacturer indicated 

potential conversion costs could range from 15 million to 20 million dollars, if the standard 

requires changing internal dimensions of its cooled cabinets.

Relating to ice makers, one manufacturer suggested that conversion costs are more 

worrisome for ice makers than for cooled cabinets. This manufacturer noted that ice makers are 

low-cost products that are not as suited to alternative refrigerants, and have a higher degree of

mechanical and electrical components, all which result in making energy efficiency upgrades 

more financially challenging. Another ice maker manufacturer noted that an increase in 

efficiency above 5 percent would require them to redesign their current product, and an increase 

of 15 percent or more, would require a platform change. Ice maker manufacturers estimated that 

standards compliance would require capital expenditures in the range of $250,000 to $4 million, 

depending on the standard level chosen.
12-11

12.4.5 Impact on Innovation and Product Utility 

Several manufacturers expressed concerns that energy efficiency standards could have a 

negative impact on product characteristics and performance attributes valued by the consumer.

Relating to cooled cabinets, most manufacturers expressed the belief that energy 

efficiency is not valued by consumers and conflicts with other innovations in product 

performance. In this regard, certain manufacturers of higher-end cooled cabinets stressed the 

difference between a true “wine storage” product and the lower price point “wine cooler.” They 

defined a wine storage unit as a specialized, high-end product providing distinct utility and 

performance in the form of temperature consistency, accurate monitoring of humidity, and 

physically separated temperature zones. These manufacturers went on to note that all of these 

features require more componentry than a simple cooler. These manufacturers fear that the

combined treatment of these distinct product types will have a disproportionately negative 

impact on product utility and innovation for higher-end products.

Other cooled cabinet manufacturers cited multiple points of impact brought about by

stricter standards including the inability to maintain a dual zone offering at lower price points, 

increased wall thickness (which would decrease the internal capacity of the cooled cabinet), and

potential elimination of the glass door. Regarding the glass door, most cooled cabinet 

manufacturers agreed that this feature is essential to consumer utility, yet it provides the greatest 

challenge in increasing product efficiency.

Finally, two manufacturers noted that they pool research and development resources for 

cooled cabinets and other refrigeration and freezer product lines. They maintained that an energy 

conservation standard for cooled cabinets would reduce their ability to innovate in the more 

traditional refrigerator and freezer segments, despite the fact that these segments likely account 

for a much greater share of total revenues.

One manufacturer of cooled cabinets noted that an energy conservation standard could 

improve consumer utility if it leads to the elimination of thermoelectric cooling technology from 

the market. This manufacturer affirms that thermoelectric cooled cabinets cannot achieve 

stabilized, low temperatures. Additionally, this manufacturer suggested a standard may provide 

consumers with some valuable clarity regarding the benefits of energy efficiency.

In terms of ice makers, manufacturers affirm that, for a certain segment of the market,

consumer utility is tied to the production of clear (wet) ice. They asserted that ice makers capable 

of producing clear ice typically have more componentry and use more energy than ice makers

incapable of producing clear ice. They noted that a standard that does not take into account the 

utility provided by clear ice production would force manufacturers to compromise utility for 

increased efficiency.

Additionally, ice maker manufacturers noted that they are also constrained by product 

size, as consumers frequently value a small product that can be placed under a counter. An 

energy conservation standard will likely require manufacturers to increase the size of their 

products in certain dimensions. 
12-12

12.4.6 Cumulative Burdens

Based on its own research and discussions with manufacturers, DOE identified the 

following regulations relevant to miscellaneous refrigeration products, including: 

• Standards for other products made by miscellaneous refrigeration product manufacturers;

• Federal- and state-level regulations of refrigerants; and

• Domestic and international materials and sourcing requirements.

Complying with such regulations requires corporations to invest both human and capital 

resources. The following subsections discuss in greater detail regulations affecting the 

miscellaneous refrigeration products industry.

12.4.6.1 Standards for Other Products Made by Miscellaneous Refrigeration 

Product Manufacturers

In addition to the efficiency regulations for miscellaneous refrigeration products, several 

other Federal regulations and pending regulations apply to other products manufactured by the 

same companies that manufacture miscellaneous refrigeration products. Several of these 

companies also manufacture residential and commercial air-conditioning, refrigeration and 

laundry equipment. In July of 2013, DOE published a notice of proposed determination 

regarding portable air conditioners. If DOE issues a final determination that portable airconditioners are a covered product, DOE may prescribe test procedures and energy conservation 

standards for portable air-conditioners. Compliance with standards for residential clothes 

washers will be required in 2015 and 2018. Additionally, new energy conservation standards for 

commercial refrigeration equipment and automatic ice makers will take effect in late 2015 and 

2017, respectively.

Other federal energy conservation standards that may impact manufacturers of 

miscellaneous refrigeration products include the standard for residential dehumidifiers, the 

standard for microwave ovens standby and off mode, the standard for packaged terminal air 

conditioners and heat pumps, and the amended test procedure for conventional cooking products.

12.4.6.2 Refrigerants

The subject of refrigerant regulation and the availability of refrigerants was another point 

of concern raised by the manufacturers interviewed. Manufacturers in this industry expressed 

general concern with the potential of future refrigerant regulations. With 

chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs) having already been phased 

out, the variety of available refrigerants for use in consumer refrigeration equipment has 

decreased in recent years. This serves to amplify the effect of refrigerant cost fluctuations on 

manufacturers. 

Manufacturers expect a climate change bill that regulates the use and emissions of GHGs 

to be passed by Congress in the near future. As a result, use of hydrofluorocarbons (HFCs), the 
12-13

most commonly used refrigerants and foam-blowing agents, would become restricted. These 

substances would eventually be phased out, or their use capped at a restricted level. Conversion 

of the currently-used refrigerant, HFC-134a, to the most likely alternative, R-600a, would require 

product redesign, and causes issues associated with safety certification compliance under UL 

regulations. Proposed legislation presents uncertainty for manufacturers as to how hydrocarbon 

refrigerants and foam-blowing agents would be regulated for safety within the U.S.

Additionally, two manufacturers cited increased state-level recycling requirements 

pertaining to the proper recovery of refrigerants from their appliances as an additional source of 

regulatory burden.

12.4.6.3 Materials

Several manufacturers stated that there are a number of domestic and international 

standards relating to the sourcing and types of materials used in their refrigeration products. One 

manufacturer noted that European standards such as the Restriction on the use of Hazardous 

Substances (RoHS) create additional compliance costs for manufacturers that compete in Europe. 

Manufacturers indicated that California and some other states have programs similar to these that 

are either already in place or are currently in development. 

One manufacturer expressed concerns about the conflict minerals directive included in 

the Dodd-Frank Act of 2010 (H.R. 4173, section 1502)b

. When promulgated, this rule will 

require that U.S. companies report and make public available their use of certain minerals from 

the Democratic Republic of the Congo and adjoining countries. This may require manufacturers 

to make investments in new tracking systems to ensure visibility throughout their supply chain.

DOE will investigate these cumulative regulatory burdens in greater detail during the 

MIA in the NOPR phase of this rulemaking.

12.4.7 Impact on Small Manufacturers

The manufacturers of the products covered in this rulemaking have a primary NAICS 

code of 335222: Household Refrigerator and Home Freezer manufacturing or 333415: AirConditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration 

Equipment Manufacturing. The Small Business Association defines a small business as a 

company that has fewer than 750 employees and fewer than 1,000 employees for NAICS codes 

335222 and 333415, respectively. At this time, DOE has identified five small business 

manufacturers which are based in the U.S. and produce one or more of the covered products.

Initial research and manufacturer interviews indicated that, due to the more limited 

product offerings of small miscellaneous refrigeration product manufacturers relative to larger, 

 

b http://www.sec.gov/rules/proposed/2010/34-63547fr.pdf.
12-14

more diversified appliance manufacturers and the low-volume nature of the niche cooled cabinet 

and ice maker market, some manufacturers believe that DOE efficiency standards will place a 

disproportionate burden on these businesses. 

DOE will study the potential impacts to these small businesses in greater detail during the 

NOPR phase of this energy conservation standards rulemaking for miscellaneous refrigeration 

products.