CHAPTER 10: NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

10.1 INTRODUCTION ......................................................................................................... 10-1 10.2 FORECASTED EFFICIENCIES FOR BASE AND STANDARDS CASES .............. 10-2 10.2.1 Method and Assumptions .............................................................................................. 10-2 10.2.2 Standard-Size Refrigerator-Freezers.............................................................................. 10-6 10.2.3 Standard-Size Freezers................................................................................................. 1 0-10 10.2.4 Compact Refrigerators and Freezers............................................................................ 10-11 10.3 NATIONAL ENERGY SAVINGS ............................................................................. 10-13 10.3.1 Definition .............................................................................................................. ....... 10-14 10.3.2 Inputs.................................................................................................................. .......... 10-15 10.3.2.1 Shipments................................................................................................... 10-15 10.3.2.2 Equipment Stock........................................................................................ 10-15 10.3.2.3 Annual Energy Consumption per Unit ...................................................... 10-15 10.3.2.4 National Annual Energy Consumption...................................................... 10-17 10.3.2.5 Site-to-Source Conversion Factors ............................................................ 10-17 10.4 NET PRESENT VALUE............................................................................................. 10-18 10.4.1 Definition .............................................................................................................. ....... 10-18 10.4.2 Inputs.................................................................................................................. .......... 10-20 10.4.2.1 Average Annual Product Cost ................................................................... 10-20 10.4.2.2 Annual Operating Cost Savings per Unit................................................... 10-21 10.4.2.3 Total Annual Increases in Product Cost.....................................................10-22 10.4.2.4 Total Annual Savings in Operating Cost ................................................... 10-22 10.4.2.5 Discount Factor.......................................................................................... 10-22 10.4.2.6 Present Value of Costs...............................................................................10-23 10.4.2.7 Present Value of Savings ...........................................................................10-23 10.5 RESULTS OF NES AND NPV CALCULATIONS ................................................... 10-23 10.5.1 Summary of Inputs....................................................................................................... 10-23 10.5.2 Results of National Energy Savings Calculations ....................................................... 10-24 10.5.2.1 Standard-Size Refrigerator-Freezers.......................................................... 10-24 10.5.2.2 Standard-Size Freezers............................................................................... 10-25 10.5.2.3 Compact Refrigerators and Freezers.......................................................... 10-26 10.5.3 Annual Costs and Savings ........................................................................................... 10-27 10.5.4 Results of Net Present Value Calculations .................................................................. 10-28 10.5.5 Summary of NIA Results............................................................................................. 10-30

LIST OF TABLES
Table 10.2.1 Standard-Size Refrigerator-Freezers : Base-Case Efficiency Distributions ....... 10-4 Table 10.2.2 Standard-Size Freezers: Base -Case Efficiency Distributions............................ 10-4

10-iTable 10.2.3 Compact Refrigerators and Freezers : Base-Case Efficiency Distributions ....... 10-5 Table 10.2.4 Top-Mount Refriger ator-Freezers: Efficiency Distributions in 2014 for Base and Standards Cases.................................................................................. 10-7 Table 10.2.5 Top-Mount Refriger ator-Freezers: Efficiency Distributions in and After 2021 for Base and Standards Cases ................................................................... 10-7 Table 10.2.6 Bottom-Mount Refrigerator-Freezer s: Efficiency Distributions in 2014 for Base and Standards Cases.................................................................................. 10-8 Table 10.2.7 Bottom-Mount Refrigerator-Freez ers: Efficiency Distributions in and After 2021 for Base and Standards Cases.......................................................... 10-8 Table 10.2.8 Side-by-Side Refrigerator-Free zers: Efficiency Distributions in 2014 for Base and Standards Cases.................................................................................. 10-9 Table 10.2.9 Side-by-Side Refrigerator-Freezer s: Efficiency Distributions in and After 2021 for Base and Standards Cases ................................................................... 10-9 Table 10.2.10 Upright Freezers: Efficiency Dist ributions in 2014 for Base and Standards Cases ................................................................................................................ 10-10 Table 10.2.11 Upright Freezers: Efficiency Di stributions in and After 2021 for Base and Standards Cases ............................................................................................... 10-10 Table 10.2.12 Chest Freezers: Efficiency Dist ributions in 2014 for Base and Standards Cases ................................................................................................................ 10-11 Table 10.2.13 Chest Freezers: Efficiency Dist ributions in and After 2021 for Base and Standards Cases ............................................................................................... 10-11 Table 10.2.14 Compact Refrigerat ors: Efficiency Distribu tions in 2014 for Base and Standards Cases ............................................................................................... 10-12 Table 10.2.15 Compact Refrigerat ors: Efficiency Distribu tions in and After 2021 for Base and Standards Cases................................................................................ 10-12 Table 10.2.16 Compact Freezers: Efficiency Distributions in 2014 for Base and Standards Cases ............................................................................................... 10-13 Table 10.2.17 Compact Freezers: Efficiency Di stributions in and After 2021 for Base and Standards Cases......................................................................................... 10-13 Table 10.3.1 Standard-Size Refrigerator-Freezers: Shipment-Weighted Average Annual Energy Consumption in 2014 .......................................................................... 10-16 Table 10.3.2 Standard-Size Freezers: Sh ipment-Weighted Average Annual Energy Consumption in 2014....................................................................................... 10-16 Table 10.3.3 Compact Refrigerators and Freeze rs: Shipment-Weighted Average Annual Energy Consumption in 2014 .......................................................................... 10-16 Table 10.4.1 Standard-Size Refrigerator-Freezers: Shipment-Weighted Average Product Cost in 2014 for Base and Standards Cases ....................................... 10-21 Table 10.4.2 Standard-Size Freezers: Ship ment-Weighted Average Product Cost in 2014 for Base and Standards Cases ................................................................. 10-21 Table 10.4.3 Compact Refrigerators and Freezers: Shipment-Weighted Average Product Cost in 2014 for Base and Standards Cases ....................................... 10-21 Table 10.5.1 Inputs to Calculati on of National Energy Savings and Net Present Value...... 10-24 Table 10.5.2 Standard-Size Refrigerato r-Freezers: Cumulative National Energy Savings, quads ................................................................................................. 10-25

10-iiTable 10.5.3 Standard-Size Refrigerator-F reezers: Discounted Cumulative National Energy Savings, quads ..................................................................................... 10-25 Table 10.5.4 Standard-Size Freezers: Cumulative National Energy Savings, quads ........... 10-26 Table 10.5.5 Standard-Size Freezers: Discount ed Cumulative National Energy Savings, quads ................................................................................................................ 10-26 Table 10.5.6 Compact Refrigerators and Freezers: Cumulative National Energy Savings, quads ................................................................................................. 10-27 Table 10.5.7 Compact Refrigerators and Freezers: Discounted Cumulative National Energy Savings, quads ..................................................................................... 10-27 Table 10.5.8 Standard-Size Refrigerator-Fr eezers: Discounted Cumulative Net Present Values .............................................................................................................. 10-29 Table 10.5.9 Standard-Size Freezers: Discount ed Cumulative Net Present Values............. 10-30 Table 10.5.10 Compact Refrigerators and Fr eezers: Discounted Cumulative Net Present Values .............................................................................................................. 10-30 Table 10.5.11 Standard-Size Refrigerator-Freezers: NES and NPV Results ......................... 10-31 Table 10.5.12 Standard-Size Freezer s: NES and NPV Results .............................................. 10-31 Table 10.5.13 Compact Refrigerators a nd Freezers: NES and NPV Results ......................... 10-32

LIST OF FIGURES
Figure 10.2.1 Projected Shipment-Weighted Energy Use Factors as a Function of Standard Level for Product Class 7 ................................................................... 10-6 Figure 10.3.1 Marginal Site-to-Source C onversion Factors for Electricity ........................... 10-18 Figure 10.5.1 Non-Discounted Annual Increase s in Installed Cost and Savings in Operating Cost for Product Cla ss 3 at Standard Level 3 ................................. 10-28

10-iiiCHAPTER 10. NATIONAL IMPACT ANALYSIS

10.1 INTRODUCTION This chapter describes the method the U. S. Department of Energy (DOE) used to estimate the national impacts of candidate standard levels for residential refrigeration products. DOE evaluated the following impacts: (1) nation al energy savings (NES) attributable to each possible standard, (2) monetary value of those energy savings to consumers of the considered products, (3) increased total inst alled cost of the products beca use of standards, and (4) net present value (NPV) of energy savings (the diffe rence between the value of energy savings and increased total installed cost).

DOE determined both the NES and NPV for all the efficiency levels considered for new standards for residential refrigeration produc ts. DOE performed all calculations for each considered product using a Microsoft Excel sp readsheet model, which is accessible on the Internet. < www.eere.energy.gov/buildings/appliance_standards/ > The spreadsheets, which implement the National Impact Analysis (NIA) m odel, combine the calculations for determining the NES and NPV for each considered product with input from the appropriate shipments model. Details and instructions for using the NIA model are provided in appendix 10-A.
Chapter 9 provides a detailed description of the shipments models that DOE used to forecast future purchases of the considered product s. Chapter 9 includes detailed descriptions of consumers’ sensitivities to total installed cost, operating cost, and income, and how DOE captured those sensitivities within the model.
Throughout its analysis, DOE st udied seven product classes in detail. For the National Impact Analysis, each of these classes represen ts a product category whic h also contains other product classes. DOE assigned each of the twenty product classes to one of these seven product categories. The following list indicates which pr oduct classes are associated with each product category:

• Top-mount refrigerator-freezers: product cl asses 1, 1A, 2, 3, 3A, and 6; represented by product class 3.

• Bottom-mount refrigerator-freezers: product classes 5 and 5A; represented by product class 5.

• Side-by-side refrigerator-freezers: product classes 4 and 7; represented by product class 7.

• Upright freezers: product class 9 only.

• Chest freezers: product classes 8 a , 10, and 10A; represented by product class 10.

a Product class 8, “upright freezers with manual defrost” is analyzed as pa rt of the “chest freezer” category because products in this class are much more technologically similar to chest freezers.

10-1• Compact refrigerators: product classes 11, 11A, 12, 13, 13A, 14, and 15; represented by product class 11.

• Compact freezers: product classes 16, 17, and 18; represented by product class 18.

To estimate the national impacts of new sta ndards for all the produc t classes considered in this rulemaking, DOE allocated the product cost and annual energy consumption of each representative product cl ass to all product classe s within its category.

10.2 FORECASTED EFFICIENCIES FOR BASE AND STANDARDS CASES

This section describes the method DOE used to forecast the energy efficiencies of considered products under the base case and ea ch of the potential stan dards cases. It provides efficiency distributions for all product classes of standard-size refrigerator-freezers , standard-size freezers, and compact refrigerators and freezers.

10.2.1 Method and Assumptions A key factor in estimating NES and NPV is th e trend in energy efficiency forecasted for the base case (without new standards) and each of the standards cases. In calculating the NES, per-unit annual energy consumption is a direct function of product efficiency. For the NPV, two inputs, the per-unit total inst alled cost and the per-unit a nnual operating cost, depend on efficiency. The first input, the per-unit total instal led cost, is a direct f unction of efficiency. The per-unit annual operating cost, because it is a fu nction of the per-unit annual consumption, is indirectly dependent on product efficiency.
For each product class considered for new st andards, DOE determined the distribution of product efficiencies in the marketplace in 2007 based on data submitted by the Association of Home Appliance Manufacturers (AHAM). 1 Using the 2007 efficiency distribution as a starting point, DOE developed a base-case efficiency dist ribution based on certain assumptions regarding future trends. DOE assumed that increases in efficiency are driven largely by the ENERGY STAR program and the consumer incentives available for ENERGY STAR appliances. DOE evaluated the historical trends in energy use by refrigeration products, as reported in the AHAM Fact Book 2005 2 (as well as data provided by AHAM for 2006 and 2007 1 ). Based on the AHAM information, DOE concluded that the roughly co nstant energy use per appliance observed between 2001 and 2007 reflected the growing mark et share for larger appliances and product classes that use more energy, such as side-mount refrigerator-freezers, balanced by an increasing market share for ENERGY STAR appliances.
The requirements for meeting ENERGY STAR qualification were changed on April 1, 2008, for standard-size refrigerator -freezers, but remained the sa me for standard-size freezers and compact products. 3 DOE assumed that the market for st andard-size refrigerators will shift toward greater efficiency between 2007 and 2014 (the assumed effective date of a new standard)

10-2in response to the change in ENERGY STAR requirements. In particular , DOE assumed (for all product classes) that the percentage of shipments that meet the new ENERGY STAR criteria will be the same in 2014 as it was in 2007. For standard-size freezers and all compact products, DOE assumed no change in the distribu tion of efficiencies before 2014. For standard-size refrigeratorfreezers, DOE assumed that the market share of products that qualified for the ENERGY STAR label in 2007 but could not meet the 2008 criteria, gradually will sh ift to meet the new criteria, resulting in the same market share for ENER GY STAR refrigeration products in 2014 as in 2007. For product class 3, for example, the ENERGY STAR market share in 2007 was 13.4 percent. The assumed market share in 2014 (unde r the new criteria) also is 13.4 percent (see Table 10.2.1).

Base case. For the base-case scenario, DOE assumed that the ENERGY STAR requirements for all product classes will become more stringent in 2014 than in 2008, if there were no revised standards. This assumption refl ects the view that, in the absence of DOE standards, the ENERGY STAR program (and or other federa l or State programs) would feel compelled to increase promotion of higher-effici ency refrigeration products. DOE assumed that energy use by ENERGY STAR prod ucts would be required to be 25 percent, rather than 20 percent, lower than the standard for standard -size refrigerator-freezers and compact products, and 15 percent, rather than 10 percent lower fo r standard-size freezers. DOE then assumed that the ENERGY STAR market shares in 2021, under th e new qualification crit eria, would equal the ENERGY STAR market shares in 2007. Finally, DOE assumed that the efficiency distributions would be fixed from 2021 until the end of th e forecast period (30 years after the assumed effective date of 2014).
Table 10.2.1 shows the market shares of pr oduct efficiencies that DOE projected for standard-size refrigerator-fr eezers in 2007, 2014, and 2021. The tabl e also lists the shipmentweighted energy use factor (SWEUF) for each produc t class for those years. The distributions for product classes of freezers and compact models are not projected to change between 2007 and 2014, but are projected to change between 2014 and 2021 in response to assumed ENERGY STAR requirements (Tables 10.2.2 and 10.2.3).

10-3Table 10.2.1 Standard-Size Refrigerator-Freezers: Base-Case Efficiency Distributions

Energy

Use Top-Mount RefrigeratorFreezers (market share in %) Bottom-Mount RefrigeratorFreezers (market share in %) Side-by-Side RefrigeratorFreezers (market share in %) Factor 2007 2014 2021 2007 2014 2021 2007 2014 2021

1.0 0.90 0.85 0.80* 0.75 0.70 0.65 0.60 0.55 80.7 5.9 13.2

0.2 0.0 0.0 0.0 0.0 0.0 80.7 5.9 0.0 13.4

0.0 0.0 0.0 0.0 0.0 80.7 5.9 0.0 0.0 13.4

0.0 0.0 0.0 0.0 11.8 0.1 69.8 18.3

0.0 0.0 0.0 0.0 0.0 11.8 0.1 0.0 88.1

0.0 0.0 0.0 0.0 0.0 11.8 0.1 0.0 0.0 88.1

0.0 0.0 0.0 0.0 25.0 43.0 30.3

1.7 0.0 0.0 0.0 0.0

- 25.0 43.0

0.0 32.0

0.0 0.0 0.0 0.0

- 25.0 43.0

0.0 0.0 32.0

0.0 0.0 0.0

- SWEUF 0.974 0.967 0.961 0.859 0.824 0.780 0.908 0.893 0.877 * Meets 2008 ENERGY STAR criteria.

Table 10.2.2 Standard-Size Freezers: Base-Cas e Efficiency Distributions

Energy Use Upright Freezers ( market share in %) Chest Freezers (market share in %) Factor 2007 2014 2021 2007 2014 2021

1.0 0.90* 0.85 0.80 0.75 0.70 0.65 0.60 0.55 81.5 17.0

1.0 0.1 0.2 0.2 0.0 0.0 0.0 81.5 17.0

1.0 0.1 0.2 0.2 0.0 0.0 0.0 81.5 0.0 18.0

0.1 0.2 0.2 0.0 0.0 0.0 84.7 14.3

0.8 0.0 0.0 0.2 0.0 0.0 0.0 84.7 14.3

0.8 0.0 0.0 0.2 0.0 0.0 0.0 84.7 0.0 15.1

0.0 0.0 0.2 0.0 0.0 0.0 SWEUF 0.980 0.980 0.972 0.984 0.984 0.977 * Meets 2008 ENERGY STAR criteria.

10-4Table 10.2.3 Compact Refrigerators and Freezers: Base-Case Efficiency Distributions

Energy Use Compact Refrigerators (market share in %) Compact Freezers (market share in %) Factor 2007 2014 2021 2007 2014 2021

1.0 0.90 0.85 0.80* 0.75 0.70 0.65 0.60 0.55 97.1 0.3 0.0 0.9 1.7 0.0 0.0 0.0 0.0 97.1 0.3 0.0 0.9 1.7 0.0 0.0 0.0 0.0 97.1 0.3 0.0 0.0 2.6 0.0 0.0 0.0 0.0 95.4 4.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 95.4 4.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 95.4 4.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 SWEUF 0.994 0.994 0.993 0.995 0.995 0.995 * Meets 2008 ENERGY STAR criteria.

Standards cases. To determine efficiency distributions for cases in which a candidate standard applies, DOE used a “r oll-up + market shift” scenario for 2014, the year that revised standards are assumed to become effective, a nd subsequent years. DOE assumed that product efficiencies in the base case th at did not meet the standard un der consideration would roll up to meet the new standard in 2014.

DOE further assumed that revised standards would result in a market shift such that market shares of products with efficiency better than the standard woul d gradually increase. In keeping with the perspective of the base case sc enario that energy efficiency will be a policy priority, DOE assumed that the ENERGY STAR program will continue to promote efficient appliances after revised standard s are introduced in 2014. For a standard that calls for an energy use factor of 0.9 (a 10-percent re duction in energy use from the current standard) for standardsize refrigerator-freezers, DOE assumed that the ENERGY STAR requirement would remain 20 percent better than the standard. For all other st andard levels for standard-size refrigeratorfreezers other than the maximum-efficiency le vel, DOE assumed that the ENERGY STAR program would use a threshold of 15 percent be tter than the standard, because it might be difficult to achieve 20 percent better than the standa rd at the new, higher efficiency levels. For all standard levels other than the maximum-efficiency level, DOE assumed that the ENERGY STAR program would use a threshold of 10 percen t better than the standard for standard-size freezers, and 20 percent better than the standard for compact refr igeration products. Those levels correspond to the current ENERGY STAR requi rements (relative to the standard).
Using the above criteria, DOE assumed th at from 2014 to 2021 the market share of ENERGY STAR appliances for each product category would grow linearl y until it reached the level obtained in 2007. DOE assumed that afte r 2021 the percentage of shipments at each efficiency level would remain fixed at the 2021 values.

10-5Figure 10.2.1 is a graphical representation of DOE’s approach. The figure shows a plot of the shipment-weighted energy use factor for product class 7 (representative of all side-by-side refrigerator-freezers) for the base case and each ca ndidate standard level. Some units in each year exceed the standard level in all cases except candidate standa rd level 7, which represents the maximum-efficiency case. Similar figures c ould be created for every product class.Shipment-Weighted Energy Use Factor 1

0.9 Base case CSL 1 (0.9)

0.8 CSL 2 (0.85) CSL 3 (0.8) CSL 4 (0.75) 0.7 CSL 5 (0.7) CSL 6 (0.65)
0.6 CSL 7 (0.6)

0.5

0.4

2005 2010 2015 2020 2025 2030 2035 2040 2045 Year
Figure 10.2.1 Projected Shipment-Weighted Energy Use Factors as a Function of Standard Level for Product Class 7

10.2.2 Standard-Size Refrigerator-Freezers Tables 10.2.4 through 10.2.9 show the effici ency distributions for 2014 and 2021 that DOE used for the considered refrigerator-freez er product classes under th e base case and each potential standards case. Efficiency distributi ons for the base and st andards cases transition linearly from 2014 to 2021, after which they rema in fixed. The tables include the shipmentweighted energy use factor (SWEUF) associated with each case.

10-6Table 10.2.4 Top-Mount Refrigerator-Freezers: Effici ency Distributions in 2014 for Base and Standards Cases Efficiency Level (% less

than baseline energy

use) Energy Use Factor Baseline 1.0

1 (10) 0.90 2 (15) 0.85 3 (20) 0.80 4 (25) 0.75 5 (30) 0.70 6 (35) 0.65 7 (40) 0.60 8 (45) 0.55 SWEUF Base Case

80.7

5.9 0.0 13.4

0.0 0.0 0.0 0.0 0.0 0.967 1

- 86.6

0.0 13.4

0.0 0.0 0.0 0.0 0.0 0.887 2

-

- 86.6 13.4

0.0 0.0 0.0 0.0 0.0 0.843 Market Share % Standards Case

3 4 5

- - -

- - -

- - - 100.0 - - 0.0 100.0 - 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.800 0.750 0.700 6 7 8

- - -

- - -

- - -

- - -

- - -

- - - 100.0 - - 0.0 100.0 - 0.0 0.0 100.0 0.650 0.600 0.550

Table 10.2.5 Top-Mount Refrigerator-Freezers: Efficiency Distributions in and After 2021 for Base and Standards Cases Efficiency Market Share % Level Standards Case (% less

than baseline Energy energy Use Base

use) Factor Case 1 2 3 4 5 6 7 8 Baseline 1.0 80.7

- - - - - - - -

1 (10) 0.90 5.9 86.6 - - - - - - - 2 (15) 0.85 0.0 0.0 86.6 - - - - - - 3 (20) 0.80 0.0 0.0 0.0 86.6 - - - - - 4 (25) 0.75 13.4 13.4 13.4 0.0 86.6 - - - - 5 (30) 0.70 0.0 0.0 0.0 13.4 0.0 86.6 - - - 6 (35) 0.65 0.0 0.0 0.0 0.0 13.4 0.0 86.6 - - 7 (40) 0.60 0.0 0.0 0.0 0.0 0.0 13.4 13.4 86.6 - 8 (45) 0.55 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13.4 100.0 SWEUF 0.961 0.880 0.837 0.787 0.737 0.687 0.643 0.593 0.550

10-7Table 10.2.6 Bottom-Mount Refrigerator-Freezers: Efficiency Distributions in 2014 for Base and Standards Cases Efficiency Level (% less

than baseline energy

use) Energy Use Factor Baseline 1.0

1 (10) 0.90 2 (15) 0.85 3 (20) 0.80 4 (25) 0.75 5 (30) 0.70 6 (35) 0.65 7 (40) 0.60 8 (45) 0.55 SWEUF Base Case 11.8

0.1 0.0 88.1

0.0 0.0 0.0 0.0 0.0 0.824 1

- 11.9

0.0 88.1

0.0 0.0 0.0 0.0 0.0 0.812 Market Share % Standards Case

2 3 4 5 6

- - - - -

- - - - - 11.9 - - - - 88.1 100.0 - - -

0.0 0.0 100.0 - - 0.0 0.0 0.0 100.0 - 0.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.806 0.800 0.750 0.700 0.650 7

-

-

-

-

-

-

- 100.0 0.0 0.600 8

-

-

-

-

-

-

-

- 100.0 0.550

Table 10.2.7 Bottom-Mount Refrigerator-Freezers: Efficiency Distributions in and After 2021 for Base and Standards Cases Efficiency Market Share % Level Standards Case (% less

than baseline Energy energy Use Base

use) Factor Case 1 2 3 4 5 6 7 8 Baseline 1.0 11.8

- - - - - - - -

1 (10) 0.90 0.1 11.9 - - - - - - - 2 (15) 0.85 0.0 0.0 11.9 - - - - - - 3 (20) 0.80 0.0 0.0 0.0 11.9 - - - - - 4 (25) 0.75 88.1 88.1 88.1 0.0 11.9 - - - - 5 (30) 0.70 0.0 0.0 0.0 88.1 0.0 11.9 - - - 6 (35) 0.65 0.0 0.0 0.0 0.0 88.1 0.00 11.9 - - 7 (40) 0.60 0.0 0.0 0.0 0.0 0.0 88.1 88.1 11.9 - 8 (45) 0.55 0.0 0.0 0.0 0.0 0.0 0.00 0.00 88.1 100.0 SWEUF 0.780 0.768 0.762 0.712 0.662 0.622 0.606 0.556 0.550

10-8Table 10.2.8 Side-by-Side Refrigerator-Freezers: E fficiency Distributions in 2014 for Base and Standards Cases Efficiency Level (% less than

baseline energy use)

Baseline

1 (10) 2 (15) 3 (20) 4 (25) 5 (30) 6 (35) 7 (40) Energy Use Factor Base Case 1.0 25.0 0.90 43.0 0.85 0.0 0.80 32.0 0.75 0.0 0.70 0.0 0.65 0.0 0.60 0.0 SWEUF 0.893 1

- 68.0

0.0 32.0

0.0 0.0 0.0 0.0 0.868 Market Share % Standards Case

2 3 4 5 6 7

- - - - - -

- - - - - - 68.0 - - - - - 32.0 100.0 - - - -

0.0 0.0 100.0 - - - 0.0 0.0 0.0 100.0 - - 0.0 0.0 0.0 0.0 100.0 - 0.0 0.0 0.0 0.0 0.0 100.0 0.834 0.800 0.750 0.700 0.650 0.600

Table 10.2.9 Side-by-Side Refrigerator-Freezers: E fficiency Distributions in and After 2021 for Base and Standards Cases Efficiency Level (% less than

baseline energy use)

Baseline

1 (10) 2 (15) 3 (20) 4 (25) 5 (30) 6 (35) 7 (40) Energy Use Factor Base Case 1.0 25.0 0.90 43.0 0.85 0.0 0.80 0.0 0.75 32.0 0.70 0.0 0.65 0.0 0.60 0.0 SWEUF 0.877 1

- 68.0

0.0 0.0 32.0

0.0 0.0 0.0 0.852 Market Share % Standards Case

2 3 4 5 6 7

- - - - - -

- - - - - - 68.0 - - - - -

0.0 68.0 - - - - 32.0 0.0 68.0 - - -

0.0 32.0 0.0 68.0 - - 0.0 0.0 32.0 0.0 68.0 - 0.0 0.0 0.0 32.0 32.0 100.0 0.818 0.768 0.718 0.668 0.634 0.600

10-910.2.3 Standard-Size Freezers Tables 10.2.10 through 10.2.13 give the effici ency distributions in 2014 and 2021 that DOE used for the base case and each standard s case for the standard-sized freezer product classes. The efficiency distributions for the base and all standards cases transition linearly from 2014 to 2021, after which they remain fixed. The tables include the SWEUF associated with each case.

Table 10.2.10 Upright Freezers: Efficiency Distribut ions in 2014 for Base and Standards Cases Efficiency Market Share % Level Standards Case (% less

than Energy baseline Use Base energy use) Factor Case 1 2 3 4 5 6 7 8

Baseline 1.0 81.5

- - - - - - - -

1 (10) 0.90 17.0 98.5 - - - - - - - 2 (15) 0.85 1.0 1.0 99.5 - - - - - - 3 (20) 0.80 0.1 0.1 0.1 99.6 - - - - - 4 (25) 0.75 0.2 0.2 0.2 0.2 99.8 - - - - 5 (30) 0.70 0.2 0.2 0.2 0.2 0.2 100.0 - - - 6 (35) 0.65 0.0 0.0 0.0 0.0 0.0 0.0 100.0 - - 7 (40) 0.60 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 - 8 (45) 0.55 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 SWEUF 0.980 0.899 0.849 0.800 0.750 0.700 0.650 0.600 0.550

Table 10.2.11 Upright Freezers: Efficiency Distribut ions in and After 2021 for Base and Standards Cases Efficiency Market Share % Level Standards Case (% less

than Energy baseline Use Base energy use) Factor Case 1 2 3 4 5 6 7 8

Baseline 1.0 81.5

- - - - - - - -

1 (10) 0.90 0.0 81.5 - - - - - - - 2 (15) 0.85 18.0 18.0 81.5 - - - - - - 3 (20) 0.80 0.1 0.1 18.1 81.5 - - - - - 4 (25) 0.75 0.2 0.2 0.2 18.3 81.5 - - - - 5 (30) 0.70 0.2 0.2 0.2 0.2 18.5 81.5 - - - 6 (35) 0.65 0.0 0.0 0.0 0.0 0.0 18.5 81.5 - - 7 (40) 0.60 0.0 0.0 0.0 0.0 0.0 0.0 18.5 81.5 - 8 (45) 0.55 0.0 0.0 0.0 0.0 0.0 0.0 0.0 18.5 100.0 SWEUF 0.972 0.890 0.840 0.791 0.741 0.691 0.641 0.591 0.550

10-10Table 10.2.12 Chest Freezers: Efficiency Distributi ons in 2014 for Base and Standards Cases Efficiency Level (% less

than baseline energy use) Energy Use Factor Base Case 1 Baseline 1.0 84.7 -

1 (10) 0.90 14.3 99.0 2 (15) 0.85 0.8 0.8 3 (20) 0.80 0.0 0.0 4 (25) 0.75 0.0 0.0 5 (30) 0.70 0.2 0.2 6 (35) 0.65 0.0 0.0 7 (40) 0.60 0.0 0.0 8 (45) 0.55 0.0 0.0 SWEUF 0.984 0.900 Market Share % Standards Case

2 3 4 5

- - - -

- - - - 99.8 - - -

0.0 99.8 - - 0.0 0.0 99.8 - 0.2 0.2 0.2 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.850 0.800 0.750 0.700 6 7

- -

- -

- -

- -

- -

- - 100.0 - 0.0 100.0 0.0 0.0 0.650 0.600 8

-

-

-

-

-

-

-

- 100.0 0.550

Table 10.2.13 Chest Freezers: Efficiency Distributions in and After 2021 for Base and Standards Cases Efficiency Market Share % Level (% less than Energy Standards Case

baseline Use Base energy use) Factor Case 1 2 3 4 5 6 7 8

Baseline 1.0 84.7

- - - - - - - -

1 (10) 0.90 0.0 84.7 - - - - - - - 2 (15) 0.85 15.1 15.1 84.7 - - - - - - 3 (20) 0.80 0.0 0.0 15.1 84.7 - - - - - 4 (25) 0.75 0.0 0.0 0.0 15.1 84.7 - - - - 5 (30) 0.70 0.2 0.2 0.2 0.2 15.3 84.7 - - - 6 (35) 0.65 0.0 0.0 0.0 0.0 0.0 15.3 84.7 - - 7 (40) 0.60 0.0 0.0 0.0 0.0 0.0 0.0 15.3 84.7 - 8 (45) 0.55 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.3 100.0 SWEUF 0.977 0.892 0.842 0.792 0.742 0.692 0.642 0.592 0.550

10.2.4 Compact Refrigerators and Freezers Tables 10.2.14 through 10.2.17 show the effici ency distributions in 2014 and 2021 that DOE used for the base case and all potential standards cases for compact refrigeration product classes. The efficiency distributions for the ba se and standards cases transition linearly from 2014 to 2021, after which they remain fixed. The tables include the SWEUF associated with each case.

10-11Table 10.2.14 Compact Refrigerators: Efficiency Distributions in 2014 for Base and Standards Cases Efficiency Market Share % Level (% less than Energy Standards Case

baseline Use Base energy use) Factor Case 1 2 3 4 5 6 7 8

Baseline 1.0 97.1

- - - - - - - -

1 (10) 0.90 0.3 97.4 - - - - - - - 2 (15) 0.85 0.0 0.0 97.4 - - - - - - 3 (20) 0.80 0.9 0.9 0.9 98.3 - - - - - 4 (25) 0.75 1.7 1.7 1.7 1.7 100.0 - - - - 5 (30) 0.70 0.0 0.0 0.0 0.0 0.0 100.0 - - - 6 (35) 0.65 0.0 0.0 0.0 0.0 0.0 0.0 100.0 - - 7 (40) 0.60 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 - 8 (45) 0.55 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 SWEUF 0.993 0.897 0.848 0.799 0.750 0.700 0.650 0.600 0.550

Table 10.2.15 Compact Refrigerators: Efficiency Dist ributions in and After 2021 for Base and Standards Cases Efficiency Market Share % Level (% less than Energy Standards Case

baseline Use Base energy use) Factor Case 1 2 3 4 5 6 7 8

Baseline 1.0 97.1

- - - - - - - -

1 (10) 0.90 0.3 97.4 - - - - - - - 2 (15) 0.85 0.0 0.0 97.4 - - - - - - 3 (20) 0.80 0.0 0.0 0.0 97.4 - - - - - 4 (25) 0.75 2.6 2.6 0.0 0.0 97.4 - - - - 5 (30) 0.70 0.0 0.0 2.6 0.0 0.0 97.4 - - - 6 (35) 0.65 0.0 0.0 0.0 2.6 0.0 0.0 97.4 - - 7 (40) 0.60 0.0 0.0 0.0 0.0 2.6 2.6 0.0 97.4 - 8 (45) 0.55 0.0 0.0 0.0 0.0 0.0 0.0 2.6 2.6 100.0 SWEUF 0.993 0.896 0.846 0.796 0.746 0.697 0.647 0.599 0.550

10-12Table 10.2.16 Compact Freezers: Efficiency Distributions in 2014 for Base and Standards Cases Efficiency Market Share % Level (%less than Energy Standards Case

baseline Use Base energy use) Factor Case 1 2 3 4 5 6 7 8

Baseline 1.0 95.4

- - - - - - - -

1 (10) 0.9 4.6 100.0 - - - - - - - 2 (15) 0.85 0.0 0.0 100.0 - - - - - - 3 (20) 0.80 0.0 0.0 0.0 100.0 - - - - - 4 (25) 0.75 0.0 0.0 0.0 0.0 100.0 - - - - 5 (30) 0.70 0.0 0.0 0.0 0.0 0.0 100.0 - - - 6 (35) 0.65 0.0 0.0 0.0 0.0 0.0 0.0 100.0 - - 7 (40) 0.60 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 - 8 (45) 0.55 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 SWEUF 0.995 0.900 0.850 0.800 0.750 0.700 0.650 0.600 0.550

Table 10.2.17 Compact Freezers: Efficiency Distributions in and After 2021 for Base and Standards Cases Efficiency Market Share % Level (% less than Energy Standards Case

baseline Use Base energy use) Factor Case 1 2 3 4 5 6 7 8

Baseline 1.0 95.4

- - - - - - - -

1 (10) 0.90 4.6 100.0 - - - - - - - 2 (15) 0.85 0.0 0.0 100.0 - - - - - - 3 (20) 0.80 0.0 0.0 0.0 100.0 - - - - - 4 (25) 0.75 0.0 0.0 0.0 0.0 100.0 - - - - 5 (30) 0.70 0.0 0.0 0.0 0.0 0.0 100.0 - - - 6 (35) 0.65 0.0 0.0 0.0 0.0 0.0 0.0 100.0 - - 7 (40) 0.60 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 - 8 (45) 0.55 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 SWEUF 0.995 0.900 0.850 0.800 0.750 0.700 0.650 0.600 0.550

10.3 NATIONAL ENERGY SAVINGS DOE calculated the national energy savings as sociated with the difference between the base case and the case associated with each potential standard for the refrigeration products

10-13considered herein. DOE calculated cumulative energy savings throughout the forecast period, which extends from 2014 to 2044.

10.3.1 Definition The following equation shows that DOE calcu lated annual national energy savings (NES) as the difference between two projections: a base case (without new standards) and a standards case. Positive values of NES represent ener gy savings (that is, national annual energy consumption (AEC) under a standard is less than in the base case).

_ NES y = AEC AEC BASE STD
Cumulative energy savings are the sum of annual national energy savings throughout the forecast period, which extends from the assumed e ffective date of new standards (2014) to 30 years after that date (2044). The calculati on is represented by the following equation.

NES cum = 

# ∑ NES y DOE calculated the national annual energy consum ption by multiplying the number or stock of each product class (by vintage) by its unit energy consumption (UEC; also by vintage). The calculation of national annual energy consump tion is represented by the following equation.

AEC y = 

## ∑ STOCK V × UEC V
DOE defined the quantities for th e above expressions as follows.

AEC = national annual energy consumption each year in quadrillion British thermal units (quads), summed over vintages of the product stock, STOCK V ; NES = annual national energy savings (quads); STOCK V

= stock of product (millions of units) of vintage V that survive in the year for which DOE calculated annual energy consumption; UEC V = annual energy consumption per produc t in kilowatt hours (k Wh) [electricity consumption is converted from site en ergy to source energy (quads) by applying a time-dependent conversion factor]; V

= year in which the product was purchased as a new unit; and y = year in the forecast.
The stock of a product depends on annual ship ments and the lifetime of the product. As described in chapter 9, DOE projected product shipments under the base case and standards cases. DOE projected that shipments under the standards cases would be slightly lower than under the base case, because of the higher purchas e cost of more effici ent products. In other words, DOE believes that the higher purchase cost would cause some consumers to forego purchasing new products.

10-14To avoid including savings attributable to shipments displaced because of standards, DOE used the projected standards-case shipments and, in turn, the standards-case stock, to calculate the annual energy consum ption for the base case.

10.3.2 Inputs The inputs to the calculation of national energy savings (NES) are:

• Shipments;

• product stock ( STOCK V

);

• annual energy consumption per unit ( UE C);

• national annual energy consumption ( AEC ); and

• site-to-source conversion factor ( src_conv ).

10.3.2.1 Shipments DOE forecasted shipments of each consider ed product class under the base case and all standards cases. Several factors affect forecasted shipments, in cluding purchase cost, operating cost, and household income. As noted earlier, the increased cost of more efficient products causes some consumers to forego buying the products. Consequently, shipments forecasted under the standards cases are lowe r than under the base case. The method DOE used to calculate and generate the shipments forecasts for each consid ered product class is described in detail in Chapter 9, Shipments Analysis.

10.3.2.2 Equipment Stock The equipment stock in a given year is th e number of products shipped from earlier years that survive in that year. The NIA model track s the number of the number of units shipped each year. DOE assumes that products have an increasing probability of retiring as they age. The probability of survival as a function of years si nce purchase is the survival function. Chapter 9 provides additional details on the survival functions that DOE used for each product.

10.3.2.3 Annual Energy Consumption per Unit DOE used the shipment-weighted energy use factors (SWEUFs) pres ented in section 10.2 for the base case and standards cases, along w ith the data on annual energy consumption presented in chapters 7 and 8, to estimate th e shipment-weighted average annual per-unit energy consumption under the base and standards cases. The average a nnual per-unit energy consumption projected for 2014 for each product category is shown in Tables 10.3.1 through 10.3.3.

10-15Table 10.3.1 Standard-Size Refrigerator-Freezer s: Shipment-Weighted Average Annual Energy Consumption in 2014 Base Case Standards Case 1 2 3 4 5 6 7 8 Top-Mount

SWEUF Avg. Energy Use (kWh) 0.967 636 0.887 582 0.843 554 0.800 526 0.750 493 0.700 460 0.650 427 0.600 394 0.550 361 Bottom-Mount

SWEUF Avg. Energy Use (kWh) 0.824 575 0.812 567 0.806 563 0.800 559 0.750 524 0.700 489 0.650 454 0.600 419 0.550 384 Side-by-Side

SWEUF Avg. Energy Use (kWh) 0.893 971 0.868 944 0.834 907 0.800 870 0.750 815 0.700 761 0.650 707 0.600 652 -

-

Table 10.3.2 Standard-Size Freezers: Shipment-Weighted Average Annual Energy Consumption in 2014 Base Standards Case Case 1 2 3 4 5 6 7 8 Upright

SWEUF 0.980 0.899 0.849 0.800 0.750 0.700 0.650 0.600 0.550 Avg. Energy Use (kWh) 960 881 832 784 735 686 637 588 539 Chest

SWEUF 0.984 0.899 0.850 0.800 0.750 0.700 0.650 0.600 0.550 Avg. Energy Use (kWh) 613 560 529 498 467 436 405 374 343

Table 10.3.3 Compact Refrigerators and Freezers: Shipment-Weighted Average Annual Energy Consumption in 2014 Base Standards Case Case 1 2 3 4 5 6 7 8 Refrigerator

SWEUF Avg. Energy Use (kWh) 0.994 323 0.897 291 0.848 275 0.799 260 0.750 244 0.700 227 0.650 211 0.600 195 0.550 179 Freezer

SWEUF Avg. Energy Use (kWh) 0.995 311 0.900 281 0.850 266 0.800 250 0.750 235 0.700 219 0.650 203 0.600 188 0.550 172

10-1610.3.2.4 National Annual Energy Consumption The national annual energy consumption (A EC) is the product of the annual energy consumption per unit and the number of units of each vintage. This method of calculation accounts for differences in unit energy consum ption from year to year. The equation for determining the annual energy consumption, which was presented in section 10.3.1, is repeated here.

AEC = 

# ∑ STOCK V × UEC V
In determining national annual energy consumption, DOE first calculated annual energy consumption at the site, then applied a conversion factor, described below, to calculate primary energy consumption.

10.3.2.5 Site-to-Source Conversion Factors In determining national annual energy consum ption, DOE initially calculated the annual energy consumption at the site (for electricity, the energy in kWh consumed at the household or establishment). It then used site energy c onsumption to calculate primary (source) energy consumption by applying a conversion factor to account for losses associated with the generation, transmission, and distri bution of electricity. The site-t o-source conversion factor is a multiplicative factor used to convert site energy consumption into primary or source energy consumption, expressed in quads (quadrillion Bt us). DOE used annual si te-to-source conversion factors based on the version of the National Energy Modeling System (NEMS) b that corresponds to EIA’s Annual Energy Outlook 2008 (AEO 2008). 4 The factors are marginal values, which represent the response of the system to an incr emental decrease in consumption. For electricity, the conversion factors change over time in resp onse to projected changes in generation sources ( i.e., the types of power plants projected to pr ovide electricity to the Nation). Figure 10.3.1 shows the site-to-source conversion factors from 2005 to the end of the forecast period. DOE assumed that conversion factors remain at 2030 values throughout the rest of the forecast.

b For more information on NEMS, pl ease refer to the U.S. Departme nt of Energy, Energy Information Administration documentati on.  A useful summary is National Energy Modeling System: An Overview 2000
, DOE/EIA‐0581(2000), March 2000.  EIA approves use of the name N EMS to describe only an official version of the model without any modifica tion to code or data.  Because this analysis entails some minor code modifications and the model is run under various policy scenari os that are variations on EIA assumptions, DOE refers to the model by the name NEMS‐BT (BT is DOE’s Buildi ng Techno l aegis this work has been perform ed).  NEMS‐BT was previously ca lled NEMS‐BRS. ogies Program, under whose

10-170 2000 4000 6000 8000 10000 12000 14000Marginal Site-to-SourceConversion Factor forElectricty (Btu/kWh)

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Year Figure 10.3.1 Marginal Site-to-Source Conversion Factors for Electricity

10.4 NET PRESENT VALUE DOE calculated the net presen t value (NPV) of the increas ed product cost and reduced operating cost associated with the difference be tween the base case and each potential standards case for the considered refrigeration products.

10.4.1 Definition The NPV is the value in the present of a time-series of costs and savings. The NPV is described by the equation:

_ NPV = PVS PVC

Where:

PVS = present value of savings in operating cost, and PVC = present value of increased total product cost to consumers.

10-18DOE determined the PVS and PVC according to the following expressions.

PVS = 

# ∑ OCS y × DF y

PVC = 

# ∑ TIC y × DF y Where:

OCS = total annual savings in operating cost each year summed over vintages of the product stock, STOCK V ; TIC = total annual increases in product cost each year summed over years of the product shipments, SHIP y ; DF = discount factor in each year; and y = year in the forecast.

DOE calculated the total annual consumer savings in operating cost by multiplying the number or stock of a given produc t class (by vintage) by its per- unit operating cost savings (also by vintage). DOE calculated the total annual incr eases in consumer product cost by multiplying the number or shipments of the given product cl ass (by vintage) by its per-unit increase in consumer product cost (also by vintage). The calculation of total annual operating cost savings and total annual product cost increases is represented by the following equations.

OCS y = 

# ∑ STOCK V × UOCS V

TIC y = 

# ∑ SHIP y × UTIC y

Where:

STOCK V

= stock of products of vintage V that survive in the year for which DOE calculated annual energy consumption, UOCS V = annual per-unit savings in operating cost, V

= year in which the product was purchased as a new unit, SHIP y = shipments of products in year y , and UTIC y = annual per-unit in crease in installed product cost in year y

.

DOE determined the total increased product cost for each year from the effective date of a potential standard to 2044. It determined th e present value of operati ng cost savings for each year from the effective date of the standard to the year when all units purchased by 2044 have been retired. DOE calculated costs and savings as the difference between a standards case and a base case without new standards.

10-19DOE developed a discount factor from the na tional discount rate and the number of years between the present ( i.e. , year to which the sum is being di scounted) and the year in which the costs and savings occur. The NPV is the sum over time of the discounted net savings.

10.4.2 Inputs The inputs to calculation of th e net present value (NPV) are:

• Average annual product cost;

• average annual savings in operating cost,;

• total annual increases in product cost;

• total annual savings in operating cost;

• discount factor;

• present value of costs; and

• present value of savings.

The increase in total annual product cost is equal to th e annual change in the average annual product cost (difference between base case and standards case) multiplied by the shipments forecasted in the standards case. As with the calculation of the NES, DOE did not calculate total annual product costs using base-case shipments. To avoid including savings due to displaced shipments (by consumers deciding no t to buy higher-cost products), DOE used the standards-case projection of shipme nts and, in turn, the standards- case stock, to calculate product costs.
The total annual savings in ope rating cost are equal to the ch ange in annual operating cost (difference between base case and standard s case) per unit multiplied by the shipments forecasted in the standards case.

10.4.2.1 Average Annual Product Cost The average annual product cost is directly dependent on efficiency. DOE therefore used the SWEUFs presented in section 10.2 for the base case and each standards case, along with the product costs at various efficiency levels (presented in chapter 8), to es timate the shipmentweighted average annual product cost under the base and standards cases . Tables 10.4.1 through 10.4.3 show the shipment-weighted average cons umer product cost based on the SWEUFs that correspond to the base case and each standards case in 2014.

10-20Table 10.4.1 Standard-Size Refrigerator-Freezers: Shipment-Weighted Average Product Cost in 2014 for Base and Standards Cases Base Case Standards Case 1 2 3 4 5 6 7 8 Top-Mount SWEUF 0.967 0.887 0.843 0.800 0.750 0.700 0.650 0.600 0.550 Avg. Product Cost 2008$ 1,081 1,086 1,090 1,099 1,121 1,155 1,206 1,271 1,335 Bottom-Mount SWEUF 0.824 0.812 0.806 0.800 0.750 0.700 0.650 0.600 0.550 Avg. Product Cost 2008$ 1,447 1,449 1,449 1,451 1,470 1,525 1,614 1,696 1,790 Side-by-Side SWEUF 0.893 0.868 0.834 0.800 0.750 0.700 0.650 0.600

- Avg. Product Cost 2008$ 1,456 1,460 1,466 1,496 1,559 1,634 1,710 1,817

-

Table 10.4.2 Standard-Size Freezers: Shipment-Weighted Average Product Cost in 2014 for Base and Standards Cases Base Standards Case Case 1 2 3 4 5 6 7 8 Upright SWEUF 0.980 0.899 0.849 0.800 0.750 0.700 0.650 0.600 0.550 Avg. Product Cost 2008$ 501 507 514 517 533 563 597 657 758 Chest SWEUF 0.984 0.899 0.850 0.800 0.750 0.700 0.650 0.600 0.550 Avg. Product Cost 2008$ 514 519 524 545 564 568 581 621 707

Table 10.4.3 Compact Refrigerators and Freezers: Shipment-Weighted Average Product Cost in 2014 for Base and Standards Cases Base Case Standards Case 1 2 3 4 5 6 7 8 Refrigerator SWEUF 0.994 0.897 0.848 0.799 0.750 0.700 0.650 0.600 0.550 Avg. Product Cost 2008$ 159 164 167 171 186 187 192 205 224 Freezer SWEUF 0.995 0.900 0.850 0.800 0.750 0.700 0.650 0.600 0.550 Avg. Product Cost 2008$ 207 214 219 238 258 273 300 302 311

10.4.2.2 Annual Operating Cost Savings per Unit The average annual operating co st includes the costs for ener gy, repair, and maintenance. As described in chapter 8, for all the consider ed products DOE assumed that potential standards

10-21would produce no increase in maintenance or repa ir costs. For all the considered products, therefore, DOE determined the per-unit annual savings in operating cost based only on the savings in energy costs attributab le to a standard. DOE determined the per-unit annual savings in operating cost by multiplying the per-unit annual savings in energy consumption developed for each product class by the appropriate energy price. As described in chapter 8, DOE forecasted energy prices based on EIA’s AEO 2009. 5

10.4.2.3 Total Annual Increases in Product Cost

The total annual increase in product cost for any given sta ndards case is the product of the average cost increase per uni t due to the standard and the number of units of each vintage shipped. This method accounts for differences in product cost from year to year. The equation for determining the total annual in crease in product cost for a given standards case, which was shown in section 10.4.1, is repeated here.

TIC = 

# ∑ SHIP × UTIC y y y

10.4.2.4 Total Annual Savings in Operating Cost The total annual savings in operating cost fo r any given standards case is the product of the annual savings in operating co st per unit attributable to the standard and the number of units of each vintage. This method accounts for differen ces in annual savings in operating cost from year to year. The equation for determining the to tal annual savings in operating cost for a given standards case, which was presented in section 10.4.1, is repeated here.

OCS = 

# ∑ STOCK V × UOCS V

10.4.2.5 Discount Factor DOE multiplied monetary values in future years by a discount factor to determine the present value. The discount factor (DF) is described by the equation:

1 DF =

_ ( y yp ) ( 1+ r ) Where:

r

= discount rate, y = year in which the monetary value exists, and y P = year in which the present value is being determined.
Although DOE used consumer discount rate s to determine the life-cycle cost of refrigeration products (cha pter 8), it used national discount ra tes to calculate national NPV. DOE estimated NPV using both a 3-percent and a 7-percent real discount rate, in accordance with the

10-22Office of Management and Budget’s guidance to Federal agencies on the development of regulatory analysis, particul arly section E therein: Identifying and Measuring Benefits and Costs

. 6 DOE defined the present year as 2009.

10.4.2.6 Present Value of Costs The present value of increased product costs is the annual total cost incr ease in each year (the difference between a standards case and th e base case), discounted to the present and summed throughout the period in which DOE is cons idering the installation of products (that is, from the effective date of standards, 2014, to 2044). DOE calculated annual increases in installed cost as the difference in total product cost for new appliances purchased each year, multiplied by the shipments in the standards case.

10.4.2.7 Present Value of Savings The present value of savings in operating cost is the annual savings on operating cost (the difference between the base case and a standard s case), discounted to the present and summed from the effective date to the time when the la st unit installed by 2044 is retired from service. Savings are decreases in operating cost associated with the higher energy efficiency of products purchased in the standards case compared to the ba se case. Total annual savings in operating cost are the savings per unit multiplied by the number of units of each vintage that survive in a particular year.

10.5 RESULTS OF NES AND NPV CALCULATIONS The National Impact Analysis (NIA) mode l produces estimates of the NES and NPV attributable to a given candidate standard level. The inputs to the NIA model were discussed in sections 10.3.2 (inputs to NES ) and 10.4.2 (inpu ts to NPV). DOE generated the NES and NPV results using a Microsoft Excel spreadsh eet, which is accessible on the Internet
< www.eere.energy.gov/buildings/appliance_standards/ > Details regarding a nd instructions for using the spreadsheet are provided in appendix 10-A.

10.5.1 Summary of Inputs Table 10.5.1 summarizes the inputs to the NIA model. A brief description of the data is provided for each input.

10-23Table 10.5.1 Inputs to Calculation of National Energy Savings and Net Present Value Input Description Shipments Annual shipments from shipments model. (See chapter 9.) Effective date of standard 2014. Base-case forecasted efficiencies See section 10.2. Standards-case efficiencies See section 10.2. Annual energy consumption per un it Annual weighted-average values are a function of SWEUF. (See section 10.3.2.1.) Total installed cost per unit Annual weight ed-average values are a function of the efficiency distribution. (See section 10.4.2.1.) Energy cost per unit Annual weighted-a verage values are a function of annual energy consumption per unit and energy prices. (See chapter 8 for energy prices.) Repair and maintenance costs per unit No changes in repair and maintenance cost assumed at higherthan-baseline efficiency levels. Forecast of energy prices Energy prices: EIA AEO2009 5 forecasts (to 2030) and extrapolation thereafter. (See chapter 8.)

Marginal energy site-to-source conversion factor A time-series conversion factor that includes electric generation, transmission, and distribution losses. Conversion, which changes yearly, is generated by DOE-EIA’s NEMS* program. Discount rates 3% and 7% real. Present year Future expenses are discounted to 2009.
* Chapter 13, Utility Impact Analysis, provides more detail on the National Energy Modeling System (NEMS).

10.5.2 Results of National Ener gy Savings Calculations The following sections provide results of calculating NES for the efficiency levels analyzed for the considered products. NES re sults, which are cumulative from 2014 to 2044, are primary energy savings. DOE based the inputs to the NIA model on weighted-average values, yielding results that are discrete point values, rath er than a distribution of values as in the lifecycle cost and payback period analyses. The resu lts in Tables 10.5.2 through 10.5.7 represent all the product classes that DOE incl uded in each of the seven representative product categories, not only the primary product class that accounts fo r the bulk of shipments in each category.

10.5.2.1 Standard-Size Refrigerator-Freezers Table 10.5.2 shows the NES results for the efficiency levels analyzed for standard-size refrigerator-freezers. Table 10.5.3 shows the magn itude of the NES if the savings are discounted at rates of 3 percen t and 7 percent.

10-24Table 10.5.2 Standard-Size Refrigerator-Freezers: Cumulative National Energy Savings, quads Efficiency Level (% less than baseline energy use) Top-MountRefrigeratorFreezer* Bottom-MountRefrigeratorFreezer** Side-by-SideRefrigeratorFreezer*** 1 (10) 1.10 0.04 0.31 2 (15) 1.69 0.06 0.73 3 (20) 2.35 0.20 1.31 4 (25) 3.01 0.37 1.91 5 (30) 3.65 0.53 2.50 6 (35) 4.20 0.57 2.93 7 (40) 4.78 0.73 3.35 8 (45) 5.28 0.77

-
* Includes product classes 1, 1A, 2, 3A, and 6 as well as product class 3. ** Includes product class 5A as well as product class 5. *** Includes product class 4 as well as product class 7.

Table 10.5.3 Standard-Size Refrigerator-Freezers: Discounted Cumulative National Energy Savings, quads

Efficiency Level

(% less than baseline energy use) Top-Mount Refrigerator-Freezer* Bottom-Mount Refrigerator-Freezer** Side-by-Side Refrigerator-Freezer*** 3% Discount

Rate 7% Discount

Rate 3% Discount

Rate 7% Discount Rate 3% Discount

Rate 7% Discount

Rate 1 (10) 0.57 0.26 0.02 0.01 0.16 0.07 2 (15) 0.87 0.40 0.03 0.01 0.37 0.17 3 (20) 1.21 0.56 0.10 0.04 0.67 0.30 4 (25) 1.55 0.72 0.18 0.08 0.98 0.44 5 (30) 1.88 0.87 0.27 0.12 1.28 0.58 6 (35) 2.17 1.00 0.29 0.13 1.50 0.68 7 (40) 2.47 1.13 0.37 0.17 1.72 0.78 8 (45) 2.72 1.25 0.40 0.18

- -
* Includes product classes 1, 1A, 2, 3A, and 6 as well as product class 3. ** Includes product class 5A as well as product class 5. *** Includes product class 4 as well as product class 7.

10.5.2.2 Standard-Size Freezers Table 10.5.4 shows the NES results for the efficiency levels analyzed for standard-size freezers. Table 10.5.5 shows the magnitude of the NES if the savings are discounted at rates of 3 percent and 7 percent.

10-25Table 10.5.4 Standard-Size Freezers: Cumulative National Energy Savings, quads
Efficiency Level (% less than baseline energy use) Upright Freezers* Chest Freezers** 1 (10) 0.34 0.23 2 (15) 0.55 0.37 3 (20) 0.75 0.50 4 (25) 0.96 0.63 5 (30) 1.15 0.76 6 (35) 1.34 0.87 7 (40) 1.51 1.00 8 (45) 1.63 1.07 * Includes product class 9 only. ** Includes product classes 8 and 10A as well as product class 10.

Table 10.5.5 Standard-Size Freezers: Discounted Cu mulative National Energy Savings, quads
Efficiency Level (% less than baseline energy use) Upright Freezers* Chest Freezers** 3% Discount Rate 7% Discount Rate 3% Discount Rate 7% Discount Rate 1 (10) 0.17 0.08 0.12 0.05 2 (15) 0.28 0.12 0.19 0.08 3 (20) 0.38 0.17 0.25 0.11 4 (25) 0.48 0.22 0.32 0.14 5 (30) 0.58 0.26 0.38 0.17 6 (35) 0.68 0.30 0.44 0.20 7 (40) 0.76 0.34 0.50 0.22 8 (45) 0.83 0.37 0.54 0.24 * Includes product class 9 only. ** Includes product classes 8 and 10A as well as product class 10.

10.5.2.3 Compact Refrigerators and Freezers

Table 10.5.6 shows the NES results for th e efficiency levels analyzed for compact refrigerators and freezers. Table 10.5.7 shows the magnitude of the NE S if the savings are discounted at rates of 3 percent and 7 percent.

10-26Table 10.5.6 Compact Refrigerators and Freezers: Cu mulative National Energy Savings, quads
Efficiency Level (% less than baseline energy use) Comp act Refrigerators* Compact Freezers** 1 (10) 0.13 0.03 2 (15) 0.20 0.04 3 (20) 0.27 0.06 4 (25) 0.32 0.07 5 (30) 0.38 0.08 6 (35) 0.44 0.09 7 (40) 0.48 0.10 8 (45) 0.52 0.11

* Includes product classes 11A, 12, 13, 13A, 14, and 15 as well as product class 11 ** Includes product classes 16 and 17 as well as product class 18

Table 10.5.7 Compact Refrigerators and Freezers: Discounted Cumulative National Energy Savings, quads
Efficiency Level (% less than baseline energy use) Compact Refrigerators* Compact Freezers** 3% Discount Rate 7% Discount Rate 3% Discount Rate 7% Discount Rate 1 (10) 0.07 0.03 0.02 0.01 2 (15) 0.11 0.05 0.02 0.01 3 (20) 0.14 0.07 0.03 0.02 4 (25) 0.17 0.08 0.04 0.02 5 (30) 0.21 0.10 0.04 0.02 6 (35) 0.24 0.12 0.05 0.03 7 (40) 0.26 0.13 0.06 0.03 8 (45) 0.28 0.14 0.06 0.03

* Includes product classes 11A, 12, 13, 13A, 14, and 15 as well as product class 11 ** Includes product classes 16 and 17 as well as product class 18

10.5.3 Annual Costs and Savings Figure 10.5.1 illustrates the basic inputs to the calculation of net present value (NPV) by showing the non-discounted annual increases in product cost and annual savings in operating cost at the national level for efficiency le vel 3 for product class 3 (refrigerator-freezers– automatic defrost with top-mounted freezer and without through-the-door ice service). The figure also shows the net savings, which is the differe nce between the savings and costs for each year. The annual increase in product cost is the total cost for products purchased each year in the forecast period. The annual savings in operating co st applies to products operating in each year. The NPV is the difference between the cumulative annual discounted savings and cumulative

10-27annual discounted costs. DOE coul d create figures like Figure 10.5.1 for each of the considered efficiency levels for each product class.

-0.5

0 0.5

1 1.5

2 2.5

2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070Billions of 2008 Dollars Operating Cost Savings Incremental Product Cost Net Savings

Year Figure 10.5.1 Non-Discounted Annual Increases in Installed Cost and Savings in Operating Cost for Product Class 3 at Standard Level 3

10.5.4 Results of Net Present Value Calculations This section provides results of calculating net present value (NPV) for the potential efficiency standards for the considered refr igeration product classes. Results, which are cumulative, are shown as the discounted value of the savings in dollar terms. Results are provided for each potential efficiency standa rd. DOE based the inputs to the NIA model on weighted-average values, yielding re sults that are discrete point va lues, rather than a distribution of values as in the life-cycle cost and payback period analysis.
The present value of increased total installed cost is the tota l annual increase in installed cost (the difference between the standards case and base case), discounted to the present and summed throughout the period for which DOE evaluated the impact of standards.
Savings are decreases in opera ting cost associated with the higher energy efficiency of products purchased in the standard s case compared to the base case. Total savings in operating

10-28cost are the savings per unit multiplied by the number of units of each vintage ( i.e., year of manufacture) that survive in a particular year . For units purchased by 2044, the operating cost includes energy consumed until the last unit is retired from service.
Tables 10.5.8 though 10.5.10 show the NPV a ssociated with the pot ential standards for the considered refrigeration products. Detailed results showing the breakdown of the NPV into national installed product cost a nd operating cost savings are provided in appendix 10-B. As was the case with NES results, the results for NPV re fer to all the product cl asses that DOE included in each of the seven representative product class categories, not simply to the primary product class that accounts for the bulk of shipments in each case.

Table 10.5.8 Standard-Size Refrigerator-Freezers: Discounted Cumulative Net Present Values Efficiency Level (% less

than baseline energy use) Top-Mount Refrigerator-Freezer* Bottom-Mount Refrigerator-Freezer** Side-by-Side Refrigerator-Freezer***

3% Discount Rate billion 2008$ 7% Discount Rate billion 2008$ 3% Discount Rate billion 2008$ 7% Discount Rate billion 2008$ 3% Discount Rate billion 2008$ 7% Discount Rate billion 2008$ 1 (10) 13.39 5.08 0.50 0.19 3.68 1.35 2 (15) 20.16 7.60 0.73 0.27 8.52 3.11 3 (20) 26.57 9.79 2.13 0.70 11.89 3.82 4 (25) 31.08 11.01 1.98 0.40 14.15 3.94 5 (30) 33.86 11.35 1.61 0.01 15.12 3.42 6 (35) 34.26 10.57 1.43 -0.19 16.17 3.20 7 (40) 32.78 8.75 0.60 -0.91 15.73 2.22 8 (45) 31.53 7.18 0.40 -1.12

- -
* Includes product classes 1, 1A, 2, 3A, and 6 as well as product class 3. ** Includes product class 5A as well as product class 5. *** Includes product class 4 as well as product class 7.

10-29Table 10.5.9 Standard-Size Freezers: Discounted Cumulative Net Present Values Efficiency Level

(% less than baseline energy use) Upright Freezers* Chest Freezers**
3% Discount Rate billion 2008$ 7% Discount Rate billion 2008$ 3% Discount Rate billion 2008$ 7% Discount Rate billion 2008$ 1 (10) 4.52 1.59 3.11 1.10 2 (15) 7.21 2.53 4.78 1.68 3 (20) 9.92 3.48 6.04 2.03 4 (25) 12.23 4.23 7.68 2.60 5 (30) 14.28 4.86 9.14 3.07 6 (35) 15.82 5.25 9.61 3.06 7 (40) 16.62 5.29 11.01 3.52 8 (45) 16.54 4.98 10.51 3.09 * Includes product class 9 only. ** Includes product classes 8 and 10A as well as product class 10.

Table 10.5.10 Compact Refrigerators and Freezers: Discounted Cumulative Net Present Values Efficiency Level

(% less than baseline energy use) Compact Refrigerators* Compact Freezers**
3% Discount Rate billion 2008$ 7% Discount Rate billion 2008$ 3% Discount Rate billion 2008$ 7% Discount Rate billion 2008$ 1 (10) 1.00 0.43 0.20 0.08 2 (15) 1.39 0.59 0.30 0.12 3 (20) 1.81 0.76 0.08 0.00 4 (25) 1.45 0.55 0.10 0.00 5 (30) 1.97 0.78 0.00 -0.06 6 (35) 2.12 0.83 0.09 -0.02 7 (40) 1.72 0.59 0.06 -0.05 8 (45) 0.92 0.17 0.01 -0.08

* Includes product classes 11A, 12, 13, 13A, 14, and 15 as well as product class 11. ** Includes product classes 16 and 17 as well as product class 18.

10.5.5 Summary of NIA Results This section provides NES (undiscounted) and NPV results together for each efficiency level considered for the refrigeration product classes. Tables 10.5.11 though 10.5.13 allow the reader to see which efficiency levels have the highest energy savings while also having a positive NPV.

10-30Table 10.5.11 Standard-Size Refrigerator-Fre ezers: NES and NPV Results

Efficiency Level (percent less than baseline energy

use) Top-Mount Refrigerator-Freezer* Bottom-Mount Refrigerator-Freezer** Side-by-Side Refrigerator-Freezer***

NES (quads) NPV @ 3% Discount

Rate (billion 2008$) NPV@ 7% Discount

Rate (billion 2008$) NES (quads) NPV @ 3% Discount

Rate (billion 2008$) NPV@ 7% Discount

Rate (billion 2008$) NES (quads) NPV @ 3% Discount

Rate (billion 2008$) NPV@ 7% Discount

Rate (billion 2008$) 1 (10%) 1.10 13.39 5.08 0.04 0.50 0.19 0.31 3.68 1.35 2 (15%) 1.69 20.16 7.60 0.06 0.73 0.27 0.73 8.52 3.11 3 (20%) 2.35 26.57 9.79 0.20 2.13 0.70 1.31 11.89 3.82 4 (25%) 3.01 31.08 11.01 0.37 1.98 0.40 1.91 14.15 3.94 5 (30%) 3.65 33.86 11.35 0.53 1.61 0.01 2.50 15.12 3.42 6 (35%) 4.20 34.26 10.57 0.57 1.43 -0.19 2.93 16.17 3.20 7 (40%) 4.78 32.78 8.75 0.73 0.60 -0.91 3.35 15.73 2.22 8 (45%) 5.28 31.53 7.18 0.77 0.40 -1.12

- - -
* Includes product classes 1, 1A, 2, 3A, and 6 as well as product class 3. ** Includes product class 5A as well as product class 5. *** Includes product class 4 as well as product class 7.

Table 10.5.12 Standard-Size Freezers: NES and NPV Results

Efficiency Level

(percent less than baseline

energy use) Upright Freezers* Chest Freezers**

NES (quads) NPV @ 3% Discount

Rate (billion 2008$) NPV@ 7% Discount

Rate (billion 2008$) NES (quads) NPV @ 3% Discount

Rate (billion 2008$) NPV@ 7% Discount

Rate (billion 2008$) 1 (10%) 0.34 4.52 1.59 0.23 3.11 1.10 2 (15%) 0.55 7.21 2.53 0.37 4.78 1.68 3 (20%) 0.75 9.92 3.48 0.50 6.04 2.03 4 (25%) 0.96 12.23 4.23 0.63 7.68 2.60 5 (30%) 1.15 14.28 4.86 0.76 9.14 3.07 6 (35%) 1.34 15.82 5.25 0.87 9.61 3.06 7 (40%) 1.51 16.62 5.29 1.00 11.01 3.52 8 (45%) 1.63 16.54 4.98 1.07 10.51 3.09 * Includes product class 9 only. ** Includes product classes 8 and 10A as well as product class 10.

10-31Table 10.5.13 Compact Refrigerators and Freezers: NES and NPV Results

Efficiency Level (percent less than baseline

energy use) Compact Refrigerators* Compact Freezers**

NES (quads) NPV @ 3% Discount Rate (billion 2008$) NPV@ 7% Discount Rate (billion 2008$) NES (quads) NPV @ 3% Discount

Rate (billion 2008$) NPV@ 7% Discount Rate (billion 2008$) 1 (10%) 0.13 1.00 0.43 0.03 0.20 0.08 2 (15%) 0.20 1.39 0.59 0.04 0.30 0.12 3 (20%) 0.27 1.81 0.76 0.06 0.08 0.00 4 (25%) 0.32 1.45 0.55 0.07 0.10 0.00 5 (30%) 0.38 1.97 0.78 0.08 0.00 -0.06 6 (35%) 0.44 2.12 0.83 0.09 0.09 -0.02 7 (40%) 0.48 1.72 0.59 0.10 0.06 -0.05 8 (45%) 0.52 0.92 0.17 0.11 0.01 -0.08

* Includes product classes 11A, 12, 13, 13A, 14, and 15 as well as product class 11. ** Includes product classes 16 and 17 as well as product class 18.

10-32REFERENCES

1 Association of Home Appliance Manufacturers. Aggregated Refrigerator

‐ Freezer Shipments and Efficiency Data for DOE Refrigerator

‐ Freezer Energy Efficiency Standards Rulemaking , January 16, 2009. Memo to Detlef West phalen, Navigant Consulting, Inc.

2 AHAM. AHAM 2005 Fact Book . 2005. Association of Home Appliance Manufacturers: Washington, D.C.

3 U.S. Environmental Protection Agency . ENERGY STAR–Refrigerators & Freezers Key Product Criteria . 2009. U.S. EPA: Washington, DC. (Last Accessed April 30, 2009.)
< www.energystar.gov/index.cfm?c=re frig.pr_crit_refrigerators >

4 U.S. Department of Energy–Ene rgy Information Administration. Annual Energy Outlook 2008 with Projections to 2030 . February 2008. U.S. DOE–EIA: Washington, D.C. DOE/EIA-0383(2008).

5 U.S. Department of Energy-En ergy Information Administration. An Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the American Recovery and Reinvestment Act and Recent Changes in the Economic Outlook , April, 2009. Washington, DC. SR/OIAF/2009-03.
< http://www.eia.doe.gov/oiaf/servic erpt/stimulus/pdf/sroiaf(2009)03.pdf >

6 Office of Management and Budget. OMB Circular A-4, Regulatory Analysis . 2003. OMB: Washington, D.C. September 17, 2003.
< www.whitehouse.gov/omb/assets/omb/circulars/a004/a-4.pdf >

10-33APPENDIX 10-A. USER INSTRUCT IONS FOR SHIPMENTS AND NIA SPREADSHEETS

TABLE OF CONTENTS

10-A.1 INTRODUCTION ...............................................................................................10-A-1 10-A.1.1 Standard-Size Refrigerator-Freezers....................................................................10-A-1 10-A.1.2 Standard-Size Freezers.........................................................................................10-A-2 10-A.1.3 Compact Refr igerators.........................................................................................10-A-3 10-A.1.4 Compact Freezers.................................................................................................10-A- 4 10-A.2 BASIC INSTRUCTIONS....................................................................................10-A-5

10A-iAPPENDIX 10-A. USER INSTRUCTIONS FOR SHIPMENTS AND NIA SPREADSHEETS

10-A.1 INTRODUCTION The results obtained for the shipments analys is and the national impact analysis (NIA) can be examined and reproduced using the Micr osoft Excel spreadsheet available on the U.S. Department of Energy Building Technologies website at: http://www.eere.energy.gov/buildings/appliance_standards/

. There are a total of four NIA spreadsheet s, one each for the following product types: standard-size refrigerator-freezers, standard-si ze freezers, compact refrigerators, and commercial compact freezers. The four spreadsheets posted on the DOE website represent the latest versions and have been tested wi th Microsoft Excel 2003.
To execute the spreadsheet requires Micr osoft Excel 2003 or a later version. The NIA spreadsheet performs calculations to forecast the change in national energy use and net present value due to an energy conserva tion standard. The energy use and associated costs for a given standard are determined first by calculating the shipments and then calc ulating the energy use and costs for all equipment shipped under that standard. The differences between the standards and base cases can then be compared and th e overall energy savings and present values determined.

10-A.1.1 Standard-Size Refrigerator-Freezers The standard-size refrigerat or-freezer NIA spreadsheet or workbook consists of the following worksheets:
Input and Summary Contains user input selections under “User Inputs” and a summary table, Cumulative Energy Savi ngs and NPV for the selected standard level efficiency distri bution. The sheet contains the efficiency levels being considered for standard-size refrigeratorfreezers and the associated incremen tal prices. This sheet also contains base and standards case e fficiency trends for standard-size refrigerator-freezers, and efficiency weighted average energy use and equipment price for the base and standards cases.
Historical Shipment & Contains data for historical sa les of standard-size refrigeratorMarket Share freezers by product class. The foreca st market share between topmount and side/bottom-mount refr igerator-freezers is provided.

Base Case Contains the calculations for determining the shipments, energy consumption, and operating costs for the base case. The sheet starts with the stock accounting of the e quipment and uses the survival 10-A-1function to calculate the surviv ing stock. It then performs calculations of replacements, and shipments going into new housing. The sheet calculates repl acement units, shipments going into new units, and early replacement shipments, and aggregates them into total shipments.
Base Energy Calc Contains additional stock accounting calculations to properly allocate shipments, energy use, and costs to top-mount and side/bottom-mount refrigerato r-freezers for the base case.

Standards Case Contains stock accounting of the equipment that calculates annual shipments estimates, energy savings, and operating cost savings for the standards case. The energy and co st savings in a single year are the difference between the base ca se energy use and costs and the standard case energy use and costs for that year.
Standards Energy Calc Contains additional stock account ing calculations to properly allocate shipments, energy use, and costs to top-mount and side/bottom-mount refr igerator-freezers for the standards case.
Housing Projections Contains the projected new hous ing construction starts and total housing stock for the three econom ic scenarios (Reference, Low Growth, and High Growth). Also provides the early replacement rate.

Fuel Prices Contains projected average en ergy prices for the three economic scenarios.

Heat Rates Contains the marginal site to source conversion factors that are used in the source energy savings calculations, for both electricity and gas.

Lifetime Contains the probability of survival of a standard-size refrigeratorfreezer at a given age and the average lifetime of a unit.

10-A.1.2 Standard-Size Freezers The standard-size freezer NIA spreadsheet or workbook consists of the following worksheets:
Input and Summary Contains user input selections under “User Inputs” and a summary table, Cumulative Energy Savi ngs and NPV for the selected standard level efficiency distri bution. The sheet contains the efficiency levels being consider ed for standard-size freezers and the associated incremental prices. This sheet also contains base

10-A-2and standards case efficiency trends for standard-size freezers, and efficiency weighted average energy use and equipment price for the base and standards cases.
Historical Shipment Contains data for historical sales of standard-size freezers by product class.

Base Case Contains the calculations for determining the shipments, energy consumption, and operating costs for the base case. The sheet starts with the stock accounting of the e quipment and uses the survival function to calculate the surviv ing stock. It then performs calculations of replacements, and shipments going into new housing. The sheet calculates repl acement units, shipments going into new units, and shipments going to first time owners (existing households that do not already ow n the product), and aggregates them into total shipments.

Standards Case Contains stock accounting of the equipment that calculates annual shipments estimates, energy savings, and operating cost savings for the standards case. The energy and co st savings in a single year are the difference between the base ca se energy use and costs and the standard case energy use and costs for that year.
Housing Projections Contains the projected new hous ing construction starts and total housing stock for the three econom ic scenarios (Reference, Low Growth, and High Growth). Also provides the early replacement rate.

Fuel Prices Contains projected average en ergy prices for the three economic scenarios.

Heat Rates Contains the marginal site to source conversion factors that are used in the source energy savings calculations, for both electricity and gas.

Lifetime Contains the probability of survival of a standard-size refrigeratorfreezer at a given age and the average lifetime of a unit.

10-A.1.3 Compact Refrigerators The compact refrigerator NIA spreadsheet or workbook consists of the following worksheets:
Input and Summary Contains user input selections under “User Inputs” and a summary table, Cumulative Energy Savi ngs and NPV for the selected

10-A-3standard level efficiency distri bution. The sheet contains the efficiency levels being considered for compact refrigerators and the associated incremental prices. This sheet also contains base and standards case efficiency trends for compact refrigerators, and efficiency weighted average energy use and equipment price for the base and standards cases.
Historical Shipment Contains data for historical sales of compact refrigerators by product class. Also provides hi storical saturations of compact refrigerators in lodgi ng, residential, and commercial buildings.

Base Case Contains the calculations for determining the shipments, energy consumption, and operating costs for the base case. The sheet starts with the stock accounting of the e quipment and uses the survival function to calculate the surviv ing stock. It then performs calculations of replacements, and shipments going into new housing, new lodging, and new co mmercial buildings, and aggregates them into total shipments.

Standards Case Contains stock accounting of the equipment that calculates annual shipments estimates, energy savings, and operating cost savings for the standards case. The energy and co st savings in a single year are the difference between the base ca se energy use and costs and the standard case energy use and costs for that year.
Housing & Comm Flrspc Project Contains the projected new hous ing construction starts, total housing stock, projected new comm ercial floorspace projections, and total lodging and commercial floorspace stock for the three economic scenarios (Reference, Low Growth, and High Growth).

Fuel Prices Contains projected average en ergy prices for the three economic scenarios.

Heat Rates Contains the marginal site to source conversion factors that are used in the source energy savings calculations, for both electricity and gas.

Lifetime Contains the probability of survival of a standard-size refrigeratorfreezer at a given age and the average lifetime of a unit.

10-A.1.4 Compact Freezers The compact freezer NIA spreadsheet or wor kbook consists of the following worksheets:

10-A-4Input and Summary Contains user input selections under “User Inputs” and a summary table, Cumulative Energy Savi ngs and NPV for the selected standard level efficiency distri bution. The sheet contains the efficiency levels being considered for compact freezers and the associated incremental prices. Th is sheet also contains base and standards case efficiency trends for compact freezers, and efficiency weighted average energy use and equipment price for the base and standards cases.
Historical Shipment Contains data for historical sales of compact freezers by product class.

Base Case Contains the calculations for determining the shipments, energy consumption, and operating costs for the base case. The sheet starts with the stock accounting of the e quipment and uses the survival function to calculate the surviv ing stock. It then performs calculations of replacements, and shipments going to first time owners (existing households that do not already own the product), and aggregates them into total shipments.

Standards Case Contains stock accounting of the equipment that calculates annual shipments estimates, energy savings, and operating cost savings for the standards case. The energy and co st savings in a single year are the difference between the base ca se energy use and costs and the standard case energy use and costs for that year.
Housing Projections Contains the projected new housi ng construction starts and total housing stock for the three econom ic scenarios (Reference, Low Growth, and High Growth). Housing data used solely to determine a compact freezer saturation in new housing.

Fuel Prices Contains projected average en ergy prices for the three economic scenarios.

Heat Rates Contains the marginal site to source conversion factors that are used in the source energy savings calculations, for both electricity and gas.

Lifetime Contains the probability of survival of a standard-size refrigeratorfreezer at a given age and the average lifetime of a unit.

10-A.2 BASIC INSTRUCTIONS Basic instructions for operating the NIA spreadsheets are as follows:

10-A-51. Once the NIA spreadsheets have been downloaded from the Web, open the file using Excel. At the bottom, click on the tab for the worksheet ‘Input and Summary’.

2. Use Excel’s View/Zoom commands at the top me nu bar to change the size of the display to make it fit your monitor.

3. The user can change the model parameters lis ted in the grey box labelled “User Inputs”. The parameters are:

a. Lifetime: To change value, type in the desired value that lies within the maximum lifetime indicated. b. Discounting future values: To change the value used for discounting NPV and national energy savings, and the ye ar in which to discount to.

c. Relative Price Elasticity: To change valu e, use the drop-down arrow and select the desired impact (this parameter is not considered in the cooking products analysis). d. Economic Growth: To the change value, use the drop-down arrow and select the desired Growth level (Reference, Low, or High).

4. Once the parameters have been set, there are two options;

a. Click the “Select CSL’ button to choose which candidate standard level to analyze. The associated efficiency dist ributions and growth trends are fixed as specified in Chapter 10 of this prelimin ary technical support document. Once the CSL has been selected, click the “OK” button to make your selected CSL effective. (This option is not available for compact freezers.) b. Click the “Set base case/Standards Ca se” button and define the efficiency distribution of the market, and the efficien cy growth rate for both the base case and the standards case. Once the distributi on and the growth rate have been set, click the “update” button to make yo ur defined distribution effective.

5. The results are automatically updated and are reported in the summary table for each product class to the right of the “User Inputs” box.

10-A-6APPENDIX 10-B. NATIONAL EQ UIPMENT AND OPERATING COSTS

TABLE OF CONTENTS

10-B.1 INTRODUCTION ............................................................................................... 10-B-1 10-B.2 RESULTS ............................................................................................................ 10-B- 2 10-B.2.1 Standard-Size Refrigerator-Freezers.................................................................... 10-B-2 10-B.2.2 Standard-Size Freezers......................................................................................... 10-B-8 10-B.2.3 Compact Refr igerators....................................................................................... 10-B-12 10-B.2.4 Compact Freezers............................................................................................... 10-B-14

LIST OF TABLES

Table 10-B.2.1 Standard-Size Refrigerato r-Freezers, Top-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Ra te (billion 2008$)...................... 10-B-3 Table 10-B.2.2 Standard-Size Refrigerato r-Freezers, Top-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Ra te (billion 2008$)...................... 10-B-4 Table 10-B.2.3 Standard-Size Refrigerato r-Freezers, Bottom-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Ra te (billion 2008$)...................... 10-B-5 Table 10-B.2.4 Standard-Size Refrigerato r-Freezers, Bottom-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Ra te (billion 2008$)...................... 10-B-6 Table 10-B.2.5 Standard-Size Refrigerator-Freezers, Side-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Ra te (billion 2008$)...................... 10-B-7 Table 10-B.2.6 Standard-Size Refrigerator-Freezers, Side-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Ra te (billion 2008$)...................... 10-B-8 Table 10-B.2.7 Standard-Size Freezers, Upri ght Product Class: Cumulative National Equipment and Operating Cost s with NPV from 2014–2044, SevenPercent Discount Rate (billion 2008$)..................................................... 10-B-9 Table 10-B.2.8 Standard-Size Freezers, Upri ght Product Class: Cumulative National Equipment and Operating Cost s with NPV from 2014–2044, ThreePercent Discount Rate (billion 2008$)................................................... 10-B-10 Table 10-B.2.9 Standard-Size Freezers, Ches t Product Classes: Cumulative National Equipment and Operating Cost s with NPV from 2014–2044, SevenPercent Discount Rate (billion 2008$)................................................... 10-B-11 Table 10-B.2.10 Standard-Size Freezers, Ches t Product Classes: Cumulative National Equipment and Operating Cost s with NPV from 2014–2044, ThreePercent Discount Rate (billion 2008$)................................................... 10-B-12

10-B-iTable 10-B.2.11 Compact Refr igerators: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Rate (billion 2008$) ............................................................................... 10-B-13 Table 10-B.2.12 Compact Refr igerators: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Rate (billion 2008$) ............................................................................... 10-B-14 Table 10-B.2.13 Compact Freezers: Cumulati ve National Equipment and Operating Costs with NPV from 2014–2044, Se ven-Percent Discount Rate (billion 2008$) ....................................................................................... 10-B-15 Table 10-B.2.14 Compact Freezers: Cumulati ve National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Rate (billion 2008$) ....................................................................................... 10-B-16

10-B-iiAPPENDIX 10-B. NATIONAL EQUIPMENT AND OPERATING COSTS

10-B.1 INTRODUCTION In this appendix, the Department presents th e components of the net present value (NPV), namely, the present value of the equipment (or tota l installed costs) and the present value of the operating costs for each of the four residential refrigerator-freezer product types. The present value of equipment costs is also termed the cumulative national equipment costs while the present value of operating costs is also te rmed the cumulative national operating costs.
As presented in Chapter 10, National Impact Analysis, the NPV is described by the equation:

_ NPV = PVS PVC

where:

PVS = Present value of operating cost saving s (including energy, water, repair, and maintenance costs) and PVC = Present value of increased total in stalled costs (including equipment and installation).

The PVS and PVC are determined according to the following expressions:

PVS = 

# ∑ OCS y × DF y

PVC = 

# ∑ TIC y × DF y

where:

OCS = Total annual operating cost savings each year summed over vintages of the product stock, TIC = Total annual installed cost increas es each year summed over vintages of the product stock, DF = Discount factor in each year, and y = Year in the forecast (i.e., 2012 to 2042).

PVS and PVC are determined for each year from the e ffective date of the standard to the year when units purchased in 2042 retire.
The present value of operati ng costs and the present value of equipment costs (or total installed costs) are the components comprising the PVS and PVC , respectively. The PVS is

10-B-1determined by taking the difference between th e present value of operating costs for the base case and the present value of operating costs for the standards case. The PVC is determined by taking the difference between the present value of equipment costs for the base case and the present value of equipment costs for the standards case.

10-B.2 RESULTS For following sections provide tables showin g the present value of operating costs (also known as the cumulative national operating costs) and the present value of equipment costs (also known as the cumulative national equipment costs) each of the four appliance products. For each product, two sets of results are presented; one based on a seven-percent and another based on a three-percent discount rate.
In the tables provided in the following sections, the national operating and equipment costs are presented for the base case (i.e., with out standards) and each standard level analyzed. Differences between the base case and standards cas es are also presented. The difference in the national equipment costs represents the PVC or present value of equipm ent cost increases while the difference in the national op erating costs represents the PVS or present value of operating cost savings. The difference between the base case and standards case total national equipment and operating costs represents the NPV

.

10-B.2.1 Standard-Size Refrigerator-Freezers Tables 10B.2.1–10B.2.6 present the na tional equipment and operating costs, PVC
, PVS
, and NPV for standard-size refrigerator-freezers at real discount rates of seve n- and three-percent, respectively.

All base case values were determined with shipments projections established under the standards case. As detailed in Chapter 9, shipme nts projections under the standards cases were determined to be lower than those in the base case projection due to the higher installed cost of the more efficient equipment. As a result, DOE used the standards cas e shipments projection and, in turn, the standards case eq uipment stock, to determine the NPV to avoid the inclusion of savings due to displaced shipments. Thus, the ba se case values shown in Tables 10B.2.1–10B.2.6 vary with the standards case.
DOE studied seven three product classes in de tail for standard-size refrigerator-freezers. For the National Impact Analysis, each of these classes represents a prod uct category which also contains other product classes. For standard-si ze refrigerator-freezers, the following list indicates which product classes are associat ed with each product category:

• Top-mount refrigerator-freezers: product cla sses 1, 1A, 2, 3, 3A, and 6; represented by product class 3.

• Bottom-mount refrigerator-freezers: produc t classes 5 and 5A; represented by product class 5.
10-B-2• Side-by-side refrigerator-freezers: product classes 4 and 7; represented by product class 7.

Table 10-B.2.1 Standard-Size Refrigerator-Freezers, Top-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 46.62 101.53 148.15 Standard Level 1 46.89 96.18 143.07 Difference* -0.27 5.36 5.08 Base Case 46.56 101.46 148.03 Standard Level 2 47.19 93.24 140.43 Difference* -0.62 8.22 7.60 Base Case 46.42 101.26 147.68 Standard Level 3 48.03 89.86 137.89 Difference* -1.61 11.40 9.79 Base Case 46.11 100.85 146.96 Standard Level 4 49.72 86.24 135.95 Difference* -3.60 14.61 11.01 Base Case 45.68 100.26 145.93 Standard Level 5 52.06 82.53 134.59 Difference* -6.38 17.73 11.35 Base Case 45.10 99.49 144.59 Standard Level 6 54.92 79.10 134.02 Difference* -9.82 20.39 10.57 Base Case 44.32 98.43 142.75 Standard Level 7 58.77 75.23 134.00 Difference* -14.45 23.20 8.75 Base Case 43.61 97.47 141.08 Standard Level 8 62.04 71.86 133.89 Difference* -18.43 25.61 7.18 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-3Table 10-B.2.2 Standard-Size Refrigerator-Freezers, Top-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 88.80 223.02 311.83 Standard Level 1 89.32 209.12 298.44 Difference* -0.52 13.91 13.39 Base Case 88.71 222.85 311.57 Standard Level 2 89.90 201.51 291.40 Difference* -1.18 21.35 20.16 Base Case 88.45 222.37 310.81 Standard Level 3 91.57 192.68 284.24 Difference* -3.12 29.69 26.57 Base Case 87.91 221.37 309.27 Standard Level 4 94.86 183.33 278.19 Difference* -6.96 38.04 31.08 Base Case 87.14 219.95 307.08 Standard Level 5 99.45 173.78 273.22 Difference* -12.31 46.17 33.86 Base Case 86.15 218.14 304.29 Standard Level 6 104.96 165.07 270.03 Difference* -18.80 53.06 34.26 Base Case 84.79 215.63 300.42 Standard Level 7 112.48 155.16 267.64 Difference* -27.69 60.47 32.78 Base Case 83.57 213.38 296.95 Standard Level 8 118.84 146.58 265.42 Difference* -35.27 66.80 31.53 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-4Table 10-B.2.3 Standard-Size Refrigerator-Freezer s, Bottom-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 31.06 17.30 48.36 Standard Level 1 31.06 17.11 48.17 Difference* 0.00 0.19 0.19 Base Case 31.06 17.30 48.36 Standard Level 2 31.07 17.01 48.08 Difference* -0.02 0.29 0.27 Base Case 31.03 17.29 48.31 Standard Level 3 31.27 16.34 47.61 Difference* -0.24 0.95 0.70 Base Case 30.88 17.22 48.10 Standard Level 4 32.22 15.48 47.70 Difference* -1.34 1.75 0.40 Base Case 30.72 17.16 47.88 Standard Level 5 33.25 14.62 47.87 Difference* -2.53 2.54 0.01 Base Case 30.63 17.12 47.74 Standard Level 6 33.59 14.35 47.94 Difference* -2.97 2.77 -0.19 Base Case 30.39 17.02 47.41 Standard Level 7 34.84 13.48 48.32 Difference* -4.45 3.54 -0.91 Base Case 30.29 16.98 47.27 Standard Level 8 35.18 13.21 48.40 Difference* -4.89 3.77 -1.12 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-5Table 10-B.2.4 Standard-Size Refrigerator-Freezer s, Bottom-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 60.30 40.68 100.98 Standard Level 1 60.31 40.17 100.48 Difference* -0.01 0.51 0.50 Base Case 60.30 40.68 100.97 Standard Level 2 60.33 39.92 100.24 Difference* -0.03 0.76 0.73 Base Case 60.24 40.64 100.88 Standard Level 3 60.75 38.01 98.75 Difference* -0.51 2.64 2.13 Base Case 59.95 40.48 100.43 Standard Level 4 62.72 35.73 98.45 Difference* -2.77 4.75 1.98 Base Case 59.63 40.30 99.93 Standard Level 5 64.86 33.46 98.32 Difference* -5.23 6.84 1.61 Base Case 59.50 40.23 99.73 Standard Level 6 65.41 32.89 98.30 Difference* -5.91 7.34 1.43 Base Case 59.08 40.00 99.08 Standard Level 7 67.86 30.61 98.47 Difference* -8.78 9.38 0.60 Base Case 58.94 39.92 98.86 Standard Level 8 68.41 30.06 98.47 Difference* -9.47 9.86 0.40 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-6Table 10-B.2.5 Standard-Size Refrigerator-Freezer s, Side-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 63.01 81.15 144.17 Standard Level 1 63.16 79.65 142.81 Difference* -0.15 1.50 1.35 Base Case 62.97 81.12 144.09 Standard Level 2 63.40 77.58 140.98 Difference* -0.43 3.53 3.11 Base Case 62.68 80.87 143.55 Standard Level 3 65.16 74.57 139.73 Difference* -2.48 6.30 3.82 Base Case 62.25 80.52 142.77 Standard Level 4 67.53 71.30 138.83 Difference* -5.28 9.22 3.94 Base Case 61.72 80.08 141.81 Standard Level 5 70.39 68.00 138.39 Difference* -8.67 12.08 3.42 Base Case 61.33 79.76 141.09 Standard Level 6 72.31 65.58 137.89 Difference* -10.98 14.18 3.20 Base Case 60.81 79.33 140.15 Standard Level 7 74.82 63.11 137.93 Difference* -14.00 16.22 2.22 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-7Table 10-B.2.6 Standard-Size Refrigerator-Freezer s, Side-Mount Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 122. 36 182.70 305.06 Standard Level 1 122.64 178.74 301.38 Difference* -0.29 3.96 3.68 Base Case 122. 28 182.62 304.90 Standard Level 2 123.11 173.27 296.38 Difference* -0.83 9.35 8.52 Base Case 121. 74 182.00 303.73 Standard Level 3 126.69 165.15 291.84 Difference* -4.96 16.84 11.89 Base Case 120. 97 181.13 302.09 Standard Level 4 131.39 156.55 287.94 Difference* -10.43 24.58 14.15 Base Case 120. 02 180.06 300.09 Standard Level 5 137.07 147.90 284.97 Difference* -17.05 32.17 15.12 Base Case 119. 36 179.31 298.67 Standard Level 6 140.78 141.72 282.50 Difference* -21.42 37.59 16.17 Base Case 118. 47 178.32 296.79 Standard Level 7 145.61 135.45 281.06 Difference* -27.14 42.87 15.73 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B.2.2 Standard-Size Freezers Tables 10B.2.7–10B.2.10 present the na tional equipment and operating costs, PVC
, PVS
, and NPV for standard-size freezers at real discou nt rates of seven- and three-percent, respectively.

All base case values were determined with shipments projections established under the standards case. As detailed in Chapter 9, shipme nts projections under the standards cases were determined to be lower than those in the base case projection due to the higher installed cost of the more efficient equipment. As a result, DOE used the standards cas e shipments projection and, in turn, the standards case eq uipment stock, to determine the NPV to avoid the inclusion of savings due to displaced shipments. Thus, th e base case values shown in Tables 10B.2.7– 10B.2.10 vary with the standards case.

10-B-8Throughout its analysis, DOE studied two product classes in detail for standard-size freezers. For the National Impact Analysis, each of these classes represents a product category which also contains other product classes. For standard-size freezers, the following list indicates which product classes are associat ed with each product category:

• Upright freezers: product class 9 only.

• Chest freezers: product classes 8 a , 10, and 10A; represented by product class 10.

Table 10-B.2.7 Standard-Size Freezers, Upright Pro duct Class: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 7.01 34.32 41.33 Standard Level 1 7.09 32.65 39.74 Difference* -0.09 1.68 1.59 Base Case 6.99 34.29 41.28 Standard Level 2 7.16 31.59 38.75 Difference* -0.17 2.70 2.53 Base Case 6.98 34.26 41.24 Standard Level 3 7.21 30.54 37.76 Difference* -0.23 3.71 3.48 Base Case 6.94 34.13 41.07 Standard Level 4 7.42 29.43 36.84 Difference* -0.48 4.71 4.23 Base Case 6.88 33.96 40.84 Standard Level 5 7.70 28.28 35.98 Difference* -0.82 5.68 4.86 Base Case 6.78 33.69 40.47 Standard Level 6 8.13 27.09 35.22 Difference* -1.34 6.60 5.25 Base Case 6.63 33.26 39.90 Standard Level 7 8.77 25.83 34.61 Difference* -2.14 7.43 5.29 Base Case 6.44 32.72 39.17 Standard Level 8 9.49 24.70 34.19 Difference* -3.05 8.03 4.98 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

a Product class 8, “upright freezers with manual defrost” is analyzed as pa rt of the “chest freezer” category because products in this class are much more technologically similar to chest freezers. 10-B-9Table 10-B.2.8 Standard-Size Freezers, Upright Pro duct Class: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 13.45 78.49 91.94 Standard Level 1 13.62 73.80 87.42 Difference* -0.17 4.69 4.52 Base Case 13.43 78.38 91.81 Standard Level 2 13.74 70.86 84.60 Difference* -0.32 7.53 7.21 Base Case 13.41 78.30 91.71 Standard Level 3 13.85 67.93 81.78 Difference* -0.45 10.37 9.92 Base Case 13.32 77.96 91.29 Standard Level 4 14.24 64.81 79.06 Difference* -0.92 13.15 12.23 Base Case 13.21 77.49 90.69 Standard Level 5 14.79 61.63 76.42 Difference* -1.58 15.86 14.28 Base Case 13.03 76.73 89.76 Standard Level 6 15.63 58.31 73.93 Difference* -2.60 18.42 15.82 Base Case 12.75 75.56 88.30 Standard Level 7 16.88 54.81 71.69 Difference* -4.13 20.75 16.62 Base Case 12.39 74.10 86.49 Standard Level 8 18.26 51.69 69.95 Difference* -5.86 22.41 16.54 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-10Table 10-B.2.9 Standard-Size Freezers, Chest Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 4.65 22.50 27.15 Standard Level 1 4.69 21.36 26.05 Difference* -0.03 1.14 1.10 Base Case 4.64 22.46 27.09 Standard Level 2 4.77 20.65 25.42 Difference* -0.13 1.80 1.68 Base Case 4.59 22.31 26.90 Standard Level 3 5.00 19.87 24.86 Difference* -0.41 2.44 2.03 Base Case 4.57 22.27 26.84 Standard Level 4 5.07 19.17 24.24 Difference* -0.50 3.10 2.60 Base Case 4.54 22.19 26.74 Standard Level 5 5.20 18.46 23.66 Difference* -0.66 3.73 3.07 Base Case 4.43 21.88 26.32 Standard Level 6 5.66 17.60 23.26 Difference* -1.23 4.29 3.06 Base Case 4.41 21.81 26.22 Standard Level 7 5.79 16.91 22.71 Difference* -1.38 4.90 3.52 Base Case 4.25 21.35 25.60 Standard Level 8 6.41 16.10 22.51 Difference* -2.17 5.26 3.09 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-11Table 10-B.2.10 Standard-Size Freezers, Chest Product Classes: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 8.93 51.47 60.40 Standard Level 1 9.00 48.29 57.29 Difference* -0.07 3.18 3.11 Base Case 8.90 51.34 60.25 Standard Level 2 9.16 46.31 55.47 Difference* -0.25 5.03 4.78 Base Case 8.81 50.95 59.76 Standard Level 3 9.60 44.12 53.72 Difference* -0.79 6.83 6.04 Base Case 8.78 50.83 59.61 Standard Level 4 9.74 42.19 51.92 Difference* -0.96 8.64 7.68 Base Case 8.73 50.61 59.34 Standard Level 5 10.01 40.19 50.19 Difference* -1.28 10.42 9.14 Base Case 8.52 49.77 58.30 Standard Level 6 10.88 37.80 48.69 Difference* -2.36 11.97 9.61 Base Case 8.47 49.57 58.04 Standard Level 7 11.14 35.89 47.03 Difference* -2.67 13.68 11.01 Base Case 8.17 48.32 56.49 Standard Level 8 12.34 33.64 45.98 Difference* -4.17 14.68 10.51 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B.2.3 Compact Refrigerators Tables 10B.2.11 and 10B.2.12 present the national equipment and operating costs, PVC
, PVS , and NPV for compact refrigerators at real discou nt rates of seven- and three-percent, respectively.

All base case values were determined with shipments projections established under the standards case. As detailed in Chapter 9, shipme nts projections under the standards cases were determined to be lower than those in the base case projection due to the higher installed cost of the more efficient equipment. As a result, DOE used the standards case shipments projection and, in turn, the standards case eq uipment stock, to determine the NPV to avoid the inclusion of

10-B-12savings due to displaced shipments. Thus, the base case values shown in Tables 10B.2.11 and 10B.2.12 vary with the standards case.
Throughout its analysis, DOE studied one product class in detail for compact refrigerators. For the National Impact Analysis , this class represents a product category which also contains other product classes. For comp act refrigerators, the following indicates which product classes are associated with the prod uct category:

• Compact refrigerators: product classes 11, 11A, 12, 13, 13A, 14, and 15; represented by product class 11.

Table 10-B.2.11 Compact Refrigerators: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 5.54 6.65 12.19 Standard Level 1 5.68 6.09 11.76 Difference* -0.14 0.56 0.43 Base Case 5.50 6.60 12.10 Standard Level 2 5.75 5.76 11.51 Difference* -0.25 0.84 0.59 Base Case 5.46 6.56 12.02 Standard Level 3 5.82 5.44 11.25 Difference* -0.36 1.12 0.76 Base Case 5.28 6.37 11.65 Standard Level 4 6.09 5.01 11.10 Difference* -0.81 1.36 0.55 Base Case 5.27 6.36 11.62 Standard Level 5 6.11 4.73 10.85 Difference* -0.85 1.62 0.78 Base Case 5.19 6.27 11.46 Standard Level 6 6.23 4.40 10.64 Difference* -1.04 1.87 0.83 Base Case 5.01 6.09 11.09 Standard Level 7 6.47 4.03 10.50 Difference* -1.47 2.06 0.59 Base Case 4.75 5.82 10.58 Standard Level 8 6.78 3.62 10.41 Difference* -2.03 2.20 0.17 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-13Table 10-B.2.12 Compact Refrigerators: Cumulative National Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 10.95 14.10 25.05 Standard Level 1 11.22 12.83 24.06 Difference* -0.27 1.26 1.00 Base Case 10.86 13.98 24.84 Standard Level 2 11.36 12.09 23.45 Difference* -0.50 1.89 1.39 Base Case 10.78 13.88 24.66 Standard Level 3 11.48 11.37 22.85 Difference* -0.71 2.52 1.81 Base Case 10.40 13.44 23.84 Standard Level 4 12.00 10.39 22.39 Difference* -1.59 3.04 1.45 Base Case 10.37 13.40 23.77 Standard Level 5 12.04 9.76 21.80 Difference* -1.67 3.64 1.97 Base Case 10.20 13.20 23.40 Standard Level 6 12.26 9.01 21.28 Difference* -2.06 4.18 2.12 Base Case 9.83 12.75 22.58 Standard Level 7 12.71 8.15 20.86 Difference* -2.88 4.60 1.72 Base Case 9.30 12.12 21.42 Standard Level 8 13.27 7.24 20.51 Difference* -3.97 4.89 0.92 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B.2.4 Compact Freezers Tables 10B.2.13 and 10B.2.14 present the national equipment and operating costs, PVC
, PVS , and NPV for compact freezers at real discount rates of seven- and three-percent, respectively.

All base case values were determined w ith shipments projections established under the standards case. As detailed in Chapter 9, shipme nts projections under the standards cases were determined to be lower than those in the base case projection due to the higher installed cost of the more efficient equipment. As a result, DOE used the standards case shipments projection and, in turn, the standards case eq uipment stock, to determine the NPV to avoid the inclusion of

10-B-14savings due to displaced shipments. Thus, the base case values shown in Tables 10B.2.13 and 10B.2.14 vary with the standards case.
Throughout its analysis, DOE studied one produ ct class in detail for compact freezers. For the National Impact Analysis, this class repr esents a product category which also contains other product classes. For compact freezers, th e following indicates which product classes are associated with the product category:

• Compact freezers: product classes 16, 17, and 18; represented by product class 18.

Table 10-B.2.13 Compact Freezers: Cumulative Nation al Equipment and Operating Costs with NPV from 2014–2044, Seven-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 1.31 1.70 3.01 Standard Level 1 1.36 1.57 2.93 Difference* -0.05 0.13 0.08 Base Case 1.30 1.69 2.99 Standard Level 2 1.37 1.49 2.87 Difference* -0.07 0.20 0.12 Base Case 1.24 1.63 2.87 Standard Level 3 1.49 1.38 2.87 Difference* -0.25 0.25 0.00 Base Case 1.22 1.60 2.82 Standard Level 4 1.53 1.29 2.82 Difference* -0.31 0.31 0.00 Base Case 1.18 1.56 2.74 Standard Level 5 1.60 1.20 2.80 Difference* -0.42 0.36 -0.06 Base Case 1.17 1.55 2.72 Standard Level 6 1.61 1.14 2.75 Difference* -0.44 0.42 -0.02 Base Case 1.14 1.52 2.67 Standard Level 7 1.65 1.06 2.71 Difference* -0.51 0.47 -0.05 Base Case 1.11 1.49 2.60 Standard Level 8 1.70 0.98 2.68 Difference* -0.59 0.51 -0.08 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-15Table 10-B.2.14 Compact Freezers: Cumulative Nation al Equipment and Operating Costs with NPV from 2014–2044, Three-Percent Discount Rate (billion 2008$) Standard Level Equipment Operating Total Base Case 2.48 3.46 5.94 Standard Level 1 2.56 3.17 5.74 Difference* -0.09 0.29 0.20 Base Case 2.46 3.44 5.90 Standard Level 2 2.60 3.00 5.60 Difference* -0.14 0.43 0.30 Base Case 2.34 3.28 5.62 Standard Level 3 2.81 2.73 5.54 Difference* -0.47 0.55 0.08 Base Case 2.29 3.23 5.53 Standard Level 4 2.87 2.55 5.42 Difference* -0.58 0.68 0.10 Base Case 2.21 3.13 5.34 Standard Level 5 3.00 2.34 5.34 Difference* -0.79 0.79 0.00 Base Case 2.20 3.11 5.31 Standard Level 6 3.02 2.19 5.21 Difference* -0.82 0.92 0.09 Base Case 2.14 3.04 5.18 Standard Level 7 3.09 2.02 5.11 Difference* -0.96 1.02 0.06 Base Case 2.07 2.96 5.03 Standard Level 8 3.18 1.85 5.02 Difference* -1.11 1.11 0.01 * Equipment Cost Difference represents the PVC ; Operating Cost Diff erence represents the PVC ; NPV is represented by the bold and italicized values.

10-B-16CHAPTER 11. LIFE-CYCLE CO ST SUBGROUP ANALYSIS

TABLE OF CONTENTS

11.1 INTRODUCTION ......................................................................................................... 11-1 11.2 PURCHASE PRICE IMPACTS.................................................................................... 11-1

11-iCHAPTER 11. LIFE-CYCLE COST SU BGROUP ANALYSIS

11.1 INTRODUCTION
The life-cycle cost (LCC) subgroup analysis ev aluates impacts on any identifiable groups or customers who may be dispropo rtionately affected by any nati onal energy efficiency standard level. The Department of Energy (DOE) will conduct this analysis as one of the analyses for the notice of proposed rulemaking (NOPR). DOE wi ll accomplish this, in part, by analyzing the LCC and payback periods (PBPs) for those custom ers that fall into any identifiable groups. DOE plans to evaluate varia tions in regional energy prices and variations in energy use that might affect the net present value of a standard to customer subpopulat ions. To the extent possible, DOE will obtain estimates of each input parameter’s variability and will consider this variability in its calculation of customer impacts. DOE plan s to perform sensitivity analyses to consider how differences in energy use will affect subgroups of customers.
DOE will determine the impact on customer subgroups using the LCC Spreadsheet Model, which allows for different data inputs. The standard LCC analysis (described in Chapter 8) focuses on the households and establishments th at use refrigerators, re frigerator-freezers, and freezers. For standard-size refr igerator-freezers and freezers, DOE can use the LCC Spreadsheet Models to analyze the LCC for any subgroup by sampling only that subgroup. (Chapter 8 explains in detail the inputs to the m odel used in determining LCC and PBPs.)
In the case of households that use refrige rator-freezers and freezers, some possible subgroups DOE may choose to consid er are: (1) low-income househol ds, and (2) senior citizens. In the case of commercial establishments that use compact refrigerators and freezers, small businesses are a subgroup that DOE may choose to consider. If it analyzes small businesses, DOE will likely focus on small business subgroups such as lodging establishments.

11.2 PURCHASE PRICE IMPACTS
DOE will be especially sensitiv e to increases in the purchase price of the equipment due to new standards, to avoid negative impacts on id entifiable population groups that may not be able to afford significant increases in equipment price. For such customers that are sensitive to price increases, increases in first costs of a product can precl ude the purchase of a new model of that product. As a result, some customers may reta in products past their useful life. These older products are generally less efficien t to begin with, and their effici ency may deteriorate further if they are retained beyond th eir useful life. Increas es in first cost also can preclude the purchase and use of a product altogether, re sulting in a potentially large loss of utility to the customer.

11-1CHAPTER 12. PRELIMINARY MANUFAC TURER 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................................................... 12-4 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 ........................................................ 12-5 12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS ..................................... 12-5 12.3.1 General Interview Structure............................................................................... 12-5 12.3.1.1 Key Issues ......................................................................................... 12-6 12.3.1.2 Shipment Projections ........................................................................ 12-6 12.3.1.3 Profitability ....................................................................................... 12-6 12.3.1.4 Product Mix ...................................................................................... 12-6 12.3.1.5 Conversion Costs, Manufactur ing Capacity, and Employment Levels................................................................................................ 12-7 12.3.1.6 Market Shares and Industry Consolidation....................................... 12-8 12.3.1.7 Product Utility and Innovation.......................................................... 12-8 12.3.1.8 Impact on Small Manufacturers........................................................ 12-8 12.3.1.9 Cumulative Burden ........................................................................... 12-9 12.3.1.10 State Energy Conservation Standards............................................... 12-9 12.3.1.11 International Energy Conservation Standards .................................. 12-9 12.4 RESIDENTIAL REFRIGERATION PROD UCT PRELIMINARY MIA RESULTS.. 12-9 12.4.1 Key Issues ........................................................................................................ 12-10 12.4.2 Profitability, Product Mix, and Shipments ...................................................... 12-12 12.4.3 Conversion Costs, Manufacturing Ca pacity, and Employment Levels ........... 12-13 12.4.3.1 Impact on U.S. Production and Jobs............................................... 12-13 12.4.3.2 Foreign Labor.................................................................................. 12-13 12.4.4 Industry Consolidation..................................................................................... 12-14 12.4.5 Impact on Product Utility and Innovation ....................................................... 12-14 12.4.6 Cumulative Burdens......................................................................................... 12-14 12.4.6.1 Pending Regulations from the CPSC.............................................. 12-15 12.4.6.2 Potential Climate Change and Greenhouse Gas Legislation .......... 12-15 12.4.6.3 Standards for Other Products Ma de by Residential Refrigeration Products Manufacturers .................................................................. 12-15 12.4.6.4 State and International Standards.................................................... 12-16

12-i12.4.7 Impact on Small Manufacturers....................................................................... 12-16

12-iiCHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANALYSIS

12.1 INTRODUCTION
The purpose of the manufactur er impact analysis (MIA) is to identify the likely impacts of 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 amended energy conservation standards for residentia l refrigerators, refrigerator-freezers, and freezers. DOE will also consider financial im pacts and a wide range of quantitative and qualitative industry impacts that might o ccur following the amendment of an energy conservation standard. For example, a particul ar energy conservation standard level, if adopted by DOE, could require changes to residential refr igeration products manufacturing practices. DOE will identify and come to understand these impacts through interviews with manuf acturers and other interested parties during the Notice of Proposed Rulemaking (NOPR) stage of its analysis.
Recently, 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 th e 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 information includes the anticipated conversion capital expenditures by efficiency level and the corre sponding anticipated impacts on jobs. DOE solicited this inform ation 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 from interested parties. In Phase 1, DOE creates an industry profile to characterize the industry and conducts a preliminary MIA to identify important issues that require considerati on. The preliminary technical support document (preliminary TSD) presents the results of th e Phase 1 analysis. In Phase 2, DOE prepares an industry cash-flow model and an interv iew questionnaire to guide subsequent discussions. In Phase 3, DOE interviews ma nufacturers, and asse sses the impacts of amended energy conservation standards both qu antitatively and qualitatively. Using the government regulatory impact model (GRI M), DOE assesses industry and sub-group

a This report is available on the DOE website at www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html.

12-1cash flow and NPV. Then, DOE assesses impacts on competition, manufacturing capacity, employment, and regulatory burden ba sed on manufacturer interview feedback and discussions. The NOPR TSD presents re sults of the Phase 2 and 3 analyses.

12.2.1 Phase 1: Industry Profile
In Phase 1 of the manufacturer impact an alysis, DOE collects pertinent qualitative and quantitative financial and market informa tion. This includes residential refrigerator, refrigerator-freezer, and freezer manufacturer market share, corporate operating ratios, wages, employment, and production cost ratio s. Sources of information may include reports published by industry gr oups, trade journals, the U.S. Census Bureau, copies of Securities Exchange Commission (SEC) 10-K fili ngs, and interviews with manufacturers. DOE also relies on information from its mark et and technology assessment, engineering analysis, life-cycle cost analysis, markup an alysis, and analysis of capital expenditure requirements and other data submitted by AHA M to determine the product prices to characterize the residential refrigeration product industry.

12.2.2 Phase 2: Industry Cash-Flow Analysis and Interview Guide
In Phase 2, DOE will perform a prelimin ary industry cash-flow analysis and prepare written guidelines for interviewing manufacturers.

12.2.2.1 Industry Cash-Flow Analysis
DOE uses the GRIM to analyze the financial impacts of amended energy conservation standards on the residential refr igeration products industries. Standards will likely require additional investment, raise pr oduction costs, and affect revenue through higher prices and, possibly, lower sales. The GRIM uses several factors to determine a series of annual cash flows for the year sta ndards become effective and for several years after implementation. These factors include an nual expected revenue s, costs of sales, selling and general administration costs, ta xes, and capital expenditures related to depreciation, new standards, and main tenance. Inputs to the GRIM include manufacturing costs, shipments forecasts, and price forecasts developed in other analyses. Another input, financial informa tion, will be developed based on publicly available data and confidentially submitted manufacturer information. DOE compares the results of the GRIM against baseline proj ections where no standards are in place. The financial impact of amended energy conserva tion standards is the difference between the two sets of discounted annual cash flows.

12.2.2.2 Interview Guide

DOE will conduct interviews with manufact urers to gather information on the effects of standards on revenues and finances, direct employment, capital assets, and industry competitiveness. Before the intervie ws, DOE will distribute an interview guide that will provide a starting point to identify re levant issues and help identify the impacts of standards on individual manufacturers or sub-groups of manufacturers. DOE anticipates that the interview guide will c over current organizational characteristics, industry infrastructure, manufacturer cash-flow analysis, a competitive impacts

12-2assessment, an employment impacts assessm ent, and a manufacturing capacity impacts assessment.

12.2.3 Phase 3: Sub-Group Analysis
Phase 3 activities will take place after the publication of the NOPR documents and will include manufacturer interviews, revision of the industry cash-flow analysis, manufacturer sub-group cash-flow analysis, competitive impact assessment, manufacturing capacity impact, employment imp act, and cumulative regulatory burden.

12.2.3.1 Manufacturer Interviews
The information gathered in Phase 1 a nd the cash-flow analysis performed in Phase 2 will be supplemented with inform ation gathered during interviews with manufacturers during Phase 3. The interview pr ocess has a key role in the manufacturer impact analyses, since it provides an opportunity for interested parties to express their views privately on important issues, allowing c onfidential 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 imp acts of standards. During the interviews, DOE will solicit information on the possible impacts of standards on sales, direct employment, capital assets, and industry competitiveness. Bo th 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 commen t. Although a written response to the questionnaire will be acceptable, DOE prefers an in teractive interview process because it helps clarify responses and provi des the opportunity to identify additional issues.
All information transmitted will be considered, as appropriate, in DOE’s decisionmaking 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 as ked 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 incor porated 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 th e 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.

12-312.2.3.3 Manufacturer Sub-Group Analysis
Using average cost assumptions to devel op an industry cash-flow estimate is not adequate for assessing differential impacts among sub-groups of manu facturers. Smaller manufacturers, niche players, or manufacturer s exhibiting a cost st ructure 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 disc uss 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 sugge st what sub-groups or character istics are most appropriate for the analysis.

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 imposition of standards. It further directs the U.S. Attorney General to determine the impacts, if any, of any decrease in competition. DOE will make a determined effort to gather and report firm-specific financial information and impacts. The compe titive analysis will focus on assessing the impacts on smaller, yet significant, manufacturers. The assessment will be based on manufacturing cost data and in formation 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 st andards could be the obsolescence of existing manufacturing assets, including t ooling and investment. The manufacturer interview guide will have a series of questi ons to help identify im pacts on manufacturing capacity, specifically capacity utilization and plant location decisions in North America with and without a standard; the ability of manufacturers to upgrad e or remodel existing facilities to accommodate the new requirements; the nature and value of stranded assets, if any; and estimates for any one-time restru cturing and other charges, where applicable.

12.2.3.6 Employment Impact
The impact of amended energy conserva tion standards on employment is an important consideration in th e rulemaking process. To assess how domestic employment patterns might be affected, the interview will explore current employment trends in the refrigeration products industry. The interview will also so licit manufacturer views on changes in employment pattern s that may result from increased standard levels. The employment impacts section of the interv iew guide will focus on current employment levels associated with manufacturers at each of their production facilities, expected future

12-4employment levels with and w ithout a standard, and differen ces 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 amended energy conservation standards and othe r 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 several regula tions and proposed regul ations relevant to refrigerator, refrigerator-freezer, and freezer manufacturers, including existing or new standards, potential limits on greenh ouse gas (GHG) emissions, including hydrofluorocarbon (HFC) refrigerants and fo am-blowing agents, standards for other products made by refrigerator, refrigerator -freezer, and freezer manufacturers, State energy conservation standards, and International energy c onservation standards. DOE will study the potential impacts of these cumulative burdens in greater detail during the MIA conducted during the NOPR phase.

12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS
During the preliminary rulemaking phase, DOE conducted a preliminary evaluation of the impact of potential amended energy conservation standards on manufacturer financial performance, manuf acturing capacity and employment levels, and product utility and innovation. A primary focus was to iden tify the cumulative burden that industries face from the overlappi ng effect of new or recent DOE energy conservation standards and/or other regulatory action affecting the same products or industries.
The primary sources of information for th is analysis were on-site or telephone interviews with manufacturers of residential refrigeration products conducted during the fall and winter of 2008. To maintain confidentiality, DOE did not id entify the individual manufacturers that disclosed informati on. The evaluation only reports aggregated information and does not disclose sensitive or company-specific information.
For the preliminary MIA, DOE conduc ted interviews with manufacturers primarily to identify key issues and gain in sights into the qualitative impacts of amended energy conservation standards. For each product, DOE used an interview guide to gather responses from multiple manufacturers on many issues. All of the interview guides covered the same general topic areas, but each interview guide was adapted to the needs of each product category. Appendix 12-A contains a copy of the interview guides for residential refrigerators, re frigerator-freezers, and freezers.

12.3.1 General Interview Structure
The manufacturer interviews included que stions relating to the following topics. DOE received responses to most, if not all, of these topics from various manufacturers.

12-512.3.1.1 Key Issues
Perhaps the most important aspect of th e preliminary MIA is the opportunity to identify key manufacturer issues early in the development of amended energy conservation standards. During the interv iews, DOE engages 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 t opics explored during the interviews. For example, key issues in previous rulemaki ngs have included concerns over patent protections that might prevent some comp anies from implementing higher efficiency designs.

12.3.1.2 Shipment Projections
Shipment projections can be a significan t factor in determining the impacts of amended energy conservation standards. The interviews provide an opportunity for manufacturers to share information that can help DOE quantify the magnitude of any changes in shipments resulting from amende d energy conservation standards. DOE is interested in information re lating to the current number of product shipments, broken down by product class, capacity rating, and effici ency level. DOE also seeks input on the forecast of future shipments absent amended 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 aim to derive a pri ce elasticity estimate for use in the national impact analysis (NIA) spreadsheet.
Another aspect of the sh ipments discussion is to understand the impacts of a reduction in shipments on individual refrigeration products companies.

12.3.1.3 Profitability
DOE requests manufacturers’ views on what they perceive to be the possible impact of potential amended energy conservati on standards on their future profitability. Amended energy conservation standards could affect financial performance in several different ways. Several of these impacts are captured in previous sections. For instance, the capital and product conversion outlays n eeded to upgrade or redesign products and product platforms before they have reached the end of their useful life can engender significant conversion costs that otherwise w ould not be expended, resulting in reduced cash flow and stranded investments. Higher ener gy efficiency standards also can result in higher per-unit costs th at may deter some consumers fr om purchasing the products, or cause some consumers to choose less effici ent products, thereby reducing shipments.

12.3.1.4 Product Mix
DOE is interested in understanding if amended energy conservation standards might change a manufacturer’s product mix and if this change affects profits. For example, higher energy efficiency standard s might limit a manufacturer’s ability to differentiate products and mark et premium products that command higher profit margins.

12-6The interview guide also investigates how amended energy conservation standards might affect a manu facturer’s consumer mix and its distribution channels, and how in turn this might change profitability.

12.3.1.5 Conversion Costs, Manufacturi ng Capacity, and Employment Levels
During the interviews, DOE asks manufactur ers 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 m odifying existing products. In other cases, the necessary changes may entail a complete pr oduct-line redesign. In these situations, an increase in efficiency sta ndards will cause manufacturers to incur one-time conversion capital expenditures and product-conversion expenses. Conversion capital expenditures are one-time investments in property, plant, and equipment. Product-conversion expenses include one-time investments in research, pr oduct development, te sting, and marketing.
One of the significant outcomes of ame nded energy conservation standards could be the obsolescence of existing manufacturing a ssets, including tooli ng and other capital investment. The interview guide includes que stions to identify im pacts on manufacturing capacity. DOE developed these questions to understand the impact of potential amended standards on:

• North American manufacturing capacity;

• capacity utilization and plan t location decisions in No rth America both with and without standards;

• the ability of manufacturer s to upgrade or remodel existing facilities to accommodate a new product mix; and

• the nature and value of stranded assets, if any.
The impact of amended energy conserva tion standards on employment is an important consideration in th e rulemaking process. DOE uses the interviews to explore current trends in production employment and solicit manufacturer views on changes in employment patterns resulting from amended energy conservation standards. Questions regarding employment imp acts help to understand

• current employment levels associated w ith manufacturing the subject products at each production facility;

• expected future employment levels both w ith and without amended standards; and

• differences in workforce skills and is sues related to retraining employees.

12-712.3.1.6 Market Shares and Industry Consolidation
Amended energy conservation standards can alter the competitive dynamics of the marketplace. This can include prompting comp anies to enter the market, exit the market, or merge with other companies. The preliminary MIA interview questions ask manufacturers to share their perspectives on in dustry consolidation bot h in the absence of amended standards and assuming amended stan dards at various efficiency levels. The interview questions focus on gathering information that helps in assessing

• disproportionate cost increas es to some manufacturers;

• increased proportion of fixed costs pote ntially increasing business risks; and

• potential barriers to market entry ( e.g. , proprietary technologies).
DOE conducts an assessment of anti-competitive effects of proposed standards in order to protect the interests of the c onsumer. During the interviews, DOE solicits information to understand if amended sta ndards could result in disproportionate economic or performance penalties for particular consumer/user sub-groups.

DOE also asks manufacturers if amende d energy conservatio n standards could result in products that will be more or le ss desirable to consumers due to changes in product functionality, utilit y, or other features.

12.3.1.7 Product Utility and Innovation
Amended energy conservation standards can force manufacturers to compromise product utility to consumers by eliminati ng energy-consuming features. During the interviews, DOE requests information on the effects of proposed standards on product utility.
Amended energy conservation standards ma y require investment in conversion costs, including research and development (R&D). This required spending may force a manufacturer to reduce funding usually a llocated to product innovation. Amended energy conservation standards may also force manufacturers to eliminate innovative energyconsuming 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 amended energy conservation standards for residential refrigerators, refrigerator-freezers, and freezers. Should any small business manufacturers be identified, DOE will study the potential impacts on these small businesses in greater detail during the MIA.

12-812.3.1.9 Cumulative Burden
While any one regulation may not impose a significant burden on manufacturers, the combined effects of several impending re gulations may have se rious consequences for some manufacturers, groups of manufacturers, or enti re industries. Assessing the impact of a single regulation may overl ook this cumulative regulatory burden.
Expenditures associated with meeting other regulations are an important aspect of DOE’s consideration of the “cumulative re gulatory burden” the industry faces. The interviews help DOE identify the level and timing of investments manufacturers are expecting to incur as a resu lt of these regulations. Manufacturers are also asked under what circumstances they might be able to coordinate any expenditures related to these regulations and efficiency standards.
In addition to the amended energy conservation for resident ial refrigeration products, several other Federal regulations and pending regulati ons apply to other products these manufacturers make. DOE w ill investigate these cumulative regulatory burdens in greater detail during the NOPR phase of the rulemaking.

12.3.1.10 State Energy Conservation Standards
DOE identified and described regulatory progr ams at the state level in the market and technology assessment (chapter 3 of the preliminary TSD) for the products covered in this rulemaking. Multiple States have requirements for products covered under this rulemaking. Accommodating multiple State standa rds in addition to National standards raises costs for manufacturers.

12.3.1.11 International Energy Conservation Standards
DOE discussed regulatory programs from certa in other countries, such as Canada and Mexico, in the market and technology assessment, (chapter 3 of the preliminary TSD). A few manufacturers sell a small portio n of their total pr oduction to countries outside the United States. In these cases, the products must meet the standards for each country. Companies may design some units to meet more stringent standards than those imposed by the United States in order to minimize the number of product variations.

12.4 RESIDENTIAL REFRIGERATIO N PRODUCT PRELIMINARY MIA RESULTS
During the preliminary MIA interview, manufacturers identified key issues surrounding DOE’s rulemaking for refrigeration products and provided feedback regarding the potential impact of amende d energy conservation standards. DOE summarized the feedback below.

12-912.4.1 Key Issues
One of the main questions in each of the preliminary interview guide asks: “What are the key issues for your company re garding the refrigeration products energy conservation standard rulemaking?” This open question initiated dialogue with the manufacturers, enabling them to identify ke y points that DOE would explore and discuss during the interview. This sect ion describes the key issues ma nufacturers felt were of the highest importance in relation to the residential refriger ation products energy conservation standards rulemaking and that w ould have the most significant impact on the industry. Manufacturers indicated that, for the most part, the ri sks associated with these issues increase with more stringent energy conservation standa rds. The issues are overall concerns that many manufacturers ex pressed and in some cases, are dependent upon the product class.
Refrigerator, refrigerator-freezer, an d freezer manufacturers cited concerns regarding a number of issues th at are covered in greater detail elsewhere in this chapter. These issues were conversion costs, the im pact to U.S. production and jobs, cumulative regulatory burden, and the impact on product utility. Detailed descriptions of these manufacturer concerns are pr ovided in the appropriate sec tions that follow; only brief descriptions are provided here.

• Increased Conversion Costs – A number of manufactur ers indicated that conversion costs will be much greater if the adopted standards require significant changes to efficiency rather than moderate changes to efficiency. This is due to the need for wall thickness in creases rather than just component swaps in the case of significantly more stringe nt energy standards.

• Impact to U.S. Production and Jobs – Manufacturers generally agreed that increased standards requiring investment in new plants would most likely have the effect of lowering U.S. production and jobs because plants would be built overseas for the benefit of lower labor costs.

• Cumulative Regulatory Burden – Many manufacturers indica ted that refrigeration products face a number of pieces of new legislation that would exacerbate the burden created from more stringent ener gy standards. These include a potential Greenhouse Gas (GHG) bill in the U.S. a nd changing energy standards in Canada and abroad.

• Impact to Product Utility – Several manufacturers expressed concern about the possibility of lower product utility resulti ng from stricter energy standards. If thicker walls are required to meet new standards, internal volumes would be reduced while still using the same amount of floor space. Other features that can increase energy usage, such as glass doors and multiple temperature zones in drawer compartments, may have to be removed if standards are significantly stricter.

12-10The other issues of key importance to manufacturers are the current poor economic conditions, the circumvention of new standards and need for enforcement, and the timing and technical difficulty of achieving new standards.

• Current Economic Conditions – A number of manufactur ers indicated that the current status of the U.S. economy has put strains on the financial conditions of their companies. This strain diminishes their ability to support the investments required to meet new energy standards and causes a competition for capital between these required investments and ot her opportunities such as research and new product development. Any impact fr om new standards on conversion costs, U.S. production, and jobs would be great er because of the difficult economic environment.

• Circumvention and Enforcement – Several manufacturers expressed concern that some manufacturers have not followed the in tent of the current test procedure or have actively circumvented the test pr ocedure via sensors that detect test conditions. These sensors di rect a controller to di sable certain energy-using functions during the test in order to achieve lower energy consumption for the Energy Guide labeling. These actions have hurt domestic manufacturers competitively. Other companies expressed concern that there is not enough enforcement of energy standards to ensure that products meet the ratings on their labels. Some import brands have submitted incorrect or incomplete data to DOE for labeling, particularly for compact product classes. Since some importers source from multiple manufacturers, and labe l submissions are associated with the import brand rather than the manufacturing company, it is difficult to track labeling issues to the original manufacturer.

• Technical Difficulty to Achieve New Standards – Many manufacturers expressed concerns about the technical difficulty in achieving new standards that are significantly more stringent than current levels. They pointed out that there are fewer additional low-cost technology im provements available now than there were during past rulemakings. Specificall y, compact freezers were cited as a product class in which it will be especially difficult to make significant improvements. The standards for compact freezers are alrea dy more stringent relative to capacity than ar e standards for compact refrigerators. Compact units, in general, pose a challenge because there are very few low-capacity compressors with sufficiently high efficiencies. Several manufacturers indicated that improvements could be made, but highlight ed the importance of staying informed by DOE of the proposed new standard le vels throughout the rulemaking process. They also emphasized having adequate time between the final rule and the effective date of the new standards to ensure adequate time is available to redesign products and to make the a ppropriate investment s in manufacturing lines.

12-1112.4.2 Profitability, Product Mix, and Shipments

DOE asked manufacturers dur ing the preliminary manuf acturer interviews how amended energy conservation standards would affect their profitability, product mix, and overall shipments. Nearly all manufacturers stated that amended energy conservation standards could lower profits depending upon the efficiency level under consideration by DOE. In particular, manufacturers indicate that new standards requiring cost increases of 15-20 percent or more would have si gnificant impacts through lowered industry shipments and a shift in product mix.
Manufacturers of all types of refrigeration products stat e that cost increases at these levels would drive consumers toward lower-cost products. Nearly all manufacturers have certain product lines that would have difficulty meeting new standards that are significantly stricter. They say that they w ould most likely drop some of these products because of technical difficulties in achieving new standards.
Several manufacturers of refrigerators and refrigerator-freezers stated that they would shift their product mix to compete in lower cost products or would no longer be able to compete as heavily in ENERGY STAR products. This would lower profitability because lower cost and baseline products ty pically cannot command as much of a margin as do premium and Energy Star products. Cont rarily, some manufactur ers expect to move more strongly towards higher-end products because of the higher profit margins available. They contend that the cost-c ompetitive nature of low-end refrigeration products makes it very difficult to pass on in creased costs to the consumer. For this reason, they indicate that they would modify their product mix to be weighted more heavily toward higher-margin products. One ma nufacturer even noted that it would exit certain low-margin product classes completely if the investment cost s required to meet the amended energy standards were too high. St ill, other manufacturers did not expect to change their product mix much at all, either because their product platforms are far from the end of their efficiency capability or because their market strategy calls for maintaining a fixed portion of ENERGY STAR products.
All manufacturers agree that amended energy standards would decrease profit margins for refrigeration products in general. Manufacturers stated that the extent to which margins diminish will depend on how much cost their competitors are able to pass through to the customer. Manufacturers of hi gher-end products have higher margins, and thus greater capacity to absorb cost increases, whereas entry level products have very thin margins and minimal capacity to absorb co st increases. Manufacturers stated that customers of lower-end products are very price-sensitive and the ability of a manufacturer to pass cost increases through without a ffecting demand for low-end products is extremely limited. In general, mo st manufacturers agre e that significantly stricter amended energy standards would increase retail prices and lower demand for refrigeration products across the board. Specifi cally, many indicated that increased costs will price some consumers out of the market completely and bring would-be purchasers of higher-end units down to entry-level pr oducts, thereby reducing both overall demand and demand for higher-margin refrigeration products.

12-1212.4.3 Conversion Costs, Manufacturing Capacity, and Employment Levels
DOE estimated that a typical high-volume domestic refriger ator, refrigeratorfreezer, or freezer production line would have a life cycle of approxima tely ten years in the absence of amended energy conserva tion standards. During that period, manufacturers would not make major equi pment changes that alter the underlying platforms. Thus, an amended energy conserva tion standard that took effect and resulted in a major platform redesign before the end of the platform’s life would strand a portion of the earlier capital investments.

DOE asked manufacturers what level of conversion costs th ey anticipate if amended energy conservation standards were to take effect. Manuf acturers said that conversion costs would be significant if amended st andards require new product platforms, as opposed to component swaps onl y. The primary changes that would dictate new product platforms are significa nt alterations to wall thickn esses or the use of vacuum insulated panels (VIP). The cost of such changes varies by manufacturer, depending on the volume of production and whether capital, tooling, and engineering investments are required. Lower-volume manufacturers have in dicated that conversion costs in this scenario could range from a few million dollars to tens of millions. Higher volume manufacturers have indicated potential cost s in the range of hundreds of millions of dollars.
Additionally, manufacturers ha ve identified the cost of plant closings as an important component of conversion costs. Several manufacturer s indicated that significant energy efficiency increases would drive them to construct new plants in lower-cost labor markets. Mexico, specificall y, was offered as a potential location. Some existing U.S. plants would either be clos ed or downsized, reducing domestic employment levels and leaving some stranded assets . Contrarily, a few domestic manufacturers indicated that they would have few strande d assets or that th ey would not move production outside the U.S.

12.4.3.1 Impact on U.S. Production and Jobs
The impact of amended energy conserva tion standards on employment is an important consideration in the rulemaking process. As indicated in section 12.3.2.3 above, significant increases to the energy efficiency standa rds for refrigeration products would cause some manufacturers to close dom estic production facilities and to construct new plants outside of the U.S. Manufacturers w ith existing facilities abroad indicated that they may expand or modify those facilities rather than build entirely new plants.

12.4.3.2 Foreign Labor

Manufacturers indicated that there has been a shift in production out of the United States, in particular to Me xico. For compact products, the trend has been towards production even further from the U.S., partic ularly China. Manufacturers said that amended energy conservation standards could exacerbate these trends. Some manufacturers are very committed to keeping production in the U.S., but in general these

12-13do not include the highest-volume manufactur ers. Consideration of production outside the U.S. is primarily driven by concerns a bout profitability and th e opportunity for lower labor costs.

12.4.4 Industry Consolidation
Three companies now account for the majo rity of U.S. sales of residential refrigeration products. The relative market share among these companies and between these companies and other manufacturers vari es depending on product class. In certain product classes, other manufactur ers dominate the market. A trend of consolidation has occurred within the industry in recent y ears. Most manufacturer s anticipate further consolidation in the future, even in th e absence of amended energy conservation standards. Manufacturers also indicated that new standa rds could impact future consolidation by making certain manufacturers less competitive.

12.4.5 Impact on Product Utility and Innovation
Amended energy conservation standards can affect purchaser s of residential refrigeration products by increasing or decreasing the utility of such products. Manufacturers generally agree th at stringent energy efficiency standards would decrease innovations and reduce product utility. They believe that produc t utility would be impacted in several ways. First, significantl y stricter standards would increase the costs of refrigeration products across the board. Mo st manufacturers beli eve that the price increases would force lower income customers out of the market for refrigeration products altogether. Second, mee ting new standards will likely require manufacturers to increase product wall thicknesses. Most resi dential kitchens have limited refrigerator space, so the wall thicknesses of refrigeration products would be forced to grow inward. This leaves less internal volume available fo r use by the customer. This is an issue of great concern for virtually all manufacturers. Finally, several manufacturers indicated that other product features currently available toda y may have to be removed in order to meet new standard levels and maintain acceptable product costs. Examples of these features include ice and water dispensers, glass doors, soda can dispensers, crisper compartments, antisweat features, and food preservation capabilities.
Manufacturers also believe that product innovation would be affected by amended energy conservation standards. Sp ecifically, they say that innovation will increase in the area of energy efficiency, but it will decrease or disappear in the development of other features. New efficiency standards would cause manufacturers to di vert money from the development of new, brand-differentiating feat ures to the development of features that decrease energy usage.

12.4.6 Cumulative Burdens

Based on its own research and discussions with manufacturers, DOE identified several regulations relevant to reside ntial refrigeration products, including:

• regulations from the Consumer Pr oducts Safety Commission (CPSC);

12-14• potential climate change and greenhouse gas (GHG) regulation;

• new DOE test procedures for resi dential refriger ation products;

• standards for other products made by residential refrigeration product manufacturers;

• other State energy conservation standards; and

• international energy conservation standards.
Complying with such regulations requires corporations to in vest both human and capital resources. The following subsections di scuss in greater detail regulations affecting the residential refrige ration products industry.

12.4.6.1 Pending Regulations from the CPSC

Several manufacturers stated that the CPSC was considering regulations regarding the labeling and materials identification fo r residential refriger ation products. They indicated that the re gulations would essentially d uplicate existing Underwriters Laboratories (UL) certification requirements for safety. At the time that the manufacturer impact analysis interviews were conducted, th e new CPSC regulations were still pending. The rulemaking was passed in December 2008, however, and is published in 16 CFR 1101.

12.4.6.2 Potential Climate Change and Greenhouse Gas Legislation
Many manufacturers expressed concern about potential climate change legislation. This is an area of great importance within the industry. Manufacturers expect a climate change bill that regulates the use and emissions of GHG’s to be passed by Congress in the near future. As a result, us e of hydrofluorocarbons (HFC’s), the most commonly used refrigerants and foam-blowi ng agents, would become restricted. These substances would eventually be phased out, or their use capped at a restricted level. This presents a problem for manufacturers because the key alternative insulation foam blowing agent is cyclopentan e. Insulation made with th is blowing agent has higher conductivity than current state- of-the art foam insulation, a nd conversion to cyclopentane presents factory issues due to its fla mmability..Conversion of the currently-used refrigerant, HFC-134a, to the most likely al ternative, R-600a or is obutane, would require product redesign, and causes issues associated with safety certific ation compliance under UL regulations. Proposed legislation presents uncertainty for manufacturers as to how hydrocarbon refrigerants and foam-blowing agen ts would be regulated for safety within the U.S. Manufacturers indicate that the co sts of making changes associated with conversion to new refrigerants and blowing ag ents would be in the millions of dollars.

12.4.6.3 Standards for Other Products Made by Residential Refrigeration Products Manufacturers
In addition to the efficiency regulations for residential refrigeration products, several other Federal regulations and pe nding regulations apply to other products manufactured by the companie s that manufacture refrigeration products. Many of these companies manufacture multiple lines of residential appliances, including clothes

12-15washers, clothes dryers, dishwashers, and c ooking products, all of which are also subject to Federal efficiency regulations. Some of these products are currently undergoing rulemakings amending the test procedures to incorporate standby and off mode energy consumption as well. Additionally, manufacturers pointed out that changes are being made to the refrigeration products test pr ocedures concurrent with the refrigeration products energy conservation standard rulemaking.

12.4.6.4 State and International Standards

Manufacturers stated that th ere are a number of state and international standards that they must adhere to in addition to those currently under c onsideration in this rulemaking. European standards such as the Restriction on the use of Hazardous Substances (RoHS), Waste Electrical and Electronic Equipment (WEEE), and the Registration, Evaluation, Authorization, and restriction of Chemicals (REACH) create additional compliance costs for manufacturer s that compete in Europe. Manufacturers indicated that California has programs similar to these that are either already in place or are currently in development. Additionally, different efficiency standards in foreign countries add to the range of regulations that manufacturers must meet. DOE will investigate these cumulative regulatory burdens in greater detail du ring the MIA analysis.

12.4.7 Impact on Small Manufacturers
The Small Business Administration (SBA ) defines small business manufacturing enterprises for North American Industry Classification System (NAICS) code 335222, Household Refrigerator and Home Freezer Manufacturing , as companies with 1000 or less employees. SBA lists small business size st andards that are matched to industries as they are described in the NAICS. The size st andard defines the maximum allowable size of a for-profit small business for Federal Government programs. Size standards are generally based on the average annual receipt s or the average number of employees at a firm.

The manufacturer interviews indicat ed that smaller refrigeration product manufacturers typically have smaller co rporate research and development and engineering staff than larger manufacture rs. Smaller manufacturers often produce niche or specialty products and focus on providing pr oducts that other larger manufacturers do not produce. Although small manuf acturers often have a more limited product range than larger manufacturers, the effort to address some aspects of regulations are relatively fixed and do not scale directly with the number of products or product platforms produced. Consequently, the cumulative burden of regul ations will tend to place more of a burden on smaller manufacturers because of their more limited resources.
DOE will study the potential impacts to these small businesses in greater detail during the MIA.

12-16APPENDIX 12-A. PRELIMINARY MANUFACTURER IM PACT ANALYSIS QUESTIONNAIRE

TABLE OF CONTENTS

12A.1 INTRODUCTION ...............................................................................................12-A-1 12A.2 QUESTIONNAIRE .............................................................................................12-A-1

12- A -iAPPENDIX 12-A. PRELIMINARY MANUFACTURER IMPACT ANALYSIS QUESTIONNAIRE

12-A.1 INTRODUCTION DOE used the questionnaire below to inte rview a number of refrigerator and freezer manufacturers during the pre-NOPR phase of the rulemaking to analyze the impact of energy conservation standards on manufacturers. I ndividual manufacturer responses are kept confidential. Aggregated results are summarized in chapter 12.

12-A.2 QUESTIONNAIRE

1 Issues

1.1 What are the key issues for your company regarding a possible future product rulemaking?

2 Shipment Projections

2.1 What is your company’s approximate market share in each of the product classes? 2.2 Would you expect your market share to cha nge once standards become effective? Does your outlook change with higher efficiency levels? 2.3 How would you expect shipments to change for the industry as a whole as a function of standards and why? 2.4 Looking at price/cost effects only, how w ould you expect shipments to change for a 25 percent, 50 percent, 100 pe rcent, or 200 percent manufacturer price/cost increase?

3 Conversion Costs

3.1 What level of capital expenditure and pr oduct conversion costs would you anticipate to make at higher standard levels? Pleas e describe what they are and provide your best estimate of their respective magnitudes. 3.2 How would the imposition of new energy c onservation standards affect capacity utilization and manufacturing assets at your domestic production f acilities? Would a new standard result in stranded capital asse ts? Would any facili ties be closed or downsized? Added or upgraded? 3.3 How might a new standard impact product innovation?

12-A-14 Product Mix and Profitability

4.1 How would your company’s product mix a nd marketing strategy change with changes in the efficiency standard? 4.2 Would the current percentage of shipment s at the Energy Star level be the same under a new standard? 4.3 What distribution channels are used from th e manufacturer to the retail outlet? What is the share of product going through each distribution channel? 4.4 Generally, how would new product standards affect your customer mix, distribution channels, and correspon ding profit margins? 4.5 How might a new standard affect the En ergy Star program, and consequently your firm?
5 Market Shares and Industry Consolidation

5.1 In the absence of new standards, do you expect any industry consolidation? 5.2 How would new standards affect your ability to compete? 5.3 Could new standards disproportionately a dvance or harm the competitive positions of some firms? 5.4 Are there concerns over intellectual property? 5.5 Could new standards result in disproportio nate economic or performance penalties for particular consumer/user subgroups? 5.6 Beyond price and energy efficiency, could ne w standards result in products that will be more or less desirable to consumers due to changes in product functionality, utility, or other features?

6 Cumulative Regulatory Burden

6.1 Are there recent or impendi ng regulations on your specifi c product or other products that impose a cumulative burden on the industry? 6.2 If so, what is the total expected impact of those other regulations?

12-A-2CHAPTER 13. UTILITY IMPACT ANALYSIS

TABLE OF CONTENTS

13.1 INTRODUCTION ......................................................................................................... 13-1 13.2 METHODOLOGY ........................................................................................................ 13-2 13.3 RESULTS ................................................................................................................... ... 13-3

13-iCHAPTER 13. UTILITY IMPACT ANALYSIS

13.1 INTRODUCTION
The Department of Energy (DOE) will analyze specific effects of its proposed standard levels on the electric utility industry as part of the notice of proposed rulemaking analyses, using a variant of the U.S. DOE/Energy Informa tion Administration (EIA)’s National Energy Modeling System (NEMS). The NEMS is a large, multi-sectoral, partial equilibrium model of the U.S. energy sector. EIA uses NEMS to produce the Annual Energy Outlook (AEO)

. 1 NEMS produces a widely recognized baseline energy fo recast for the United States, and this energy forecast is available in the public domain. DOE will use a varian t known as NEMS-BT to provide key inputs to the analysis. a The utility impact analysis will consist of a comparison between model results for the base case and for policy cases in which proposed standards are in place. The use of NEMS-BT for the utility analysis offers several advantages . As the official DOE energy forecasting model, NEMS relies on a set of assumptions that are tr ansparent and have received wide exposure and commentary. NEMS-BT allows an estimate of the interactions betw een the various energy supply and demand sectors and the economy as a w hole. The utility impact analysis will report the changes in installed capacity and generation, by fuel type, that result for each trial standard level, as well as changes in electricity and na tural gas sales to the residential and commercial sectors. DOE plans to conduct the utility impact an alysis as a policy deviation from the 2009 version of the AEO that reflect provisions of the Amer ican Recovery and Reinvestment Act (ARRA) and recent changes in the economic outlook ( AEO2009 ), 1 applying the same basic set of assumptions. For example, the operating char acteristics (e.g., energy conversion efficiency, emissions rates) of future electricity ge nerating plants are as specified in the AEO2009 reference case. DOE also will explore deviations from some of the reference case assumptions, to represent alternative futures. Two alternative scenarios use the high and low economic growth cases. (The reference case corresponds to medium grow th.) The high economic growth case assumes higher projected growth rates for population, la bor force, and labor pr oductivity, resulting in lower predicted inflation and interest rates re lative to the reference case and higher overall aggregate economic growth. The opposite is true for the low growth case. Because EIA does not plan to produce high and low econo mic growth cases corresponding to the AEO2009 that

a For more information on NEMS, pl ease refer to the U.S. Departme nt of Energy, Energy Information Administration documentati on.  A useful summary is National Energy Modeling System: An Overview 2000
, DOE/EIA‐0581(2000), March 2000.  EIA approves use of the name N EMS to describe only an official version of the model without any modifica tion to code or data.  Because this analysis entails some minor code modifications and the model is run under various policy scenari os that are variations on EIA assumptions, DOE refers to the model by the name NEMS‐BT (BT is DOE’s Buildi ng Techno l aegis this work has been perform ed).  NEMS‐BT was previously ca lled NEMS‐BRS. ogies Program, under whose

13-1includes the ARRA, DOE plans to estimate these cases based on the March 2009 release of the AEO2009 that excludes the ARRA. 2

13.2 METHODOLOGY
The electric utility impact analysis will consist of NEMS -BT forecasts for generation, installed capacity, sales, and pric es. NEMS provides reference cas e load shapes for several end uses. The model uses predicted growth in demand for each end use to build up a projection of the total electric system load growth for each region, which it uses in turn to predict the necessary additions to capac ity. NEMS-BT accounts for the implementation of efficiency standards by decrementing the appropriate refere nce case load shape. DOE will determine the size of the decrement using data for the per-unit energy savings developed in the life-cycle cost and payback period analysis (Chapter 8) and the forecast of shipments developed for the national impact analysis (Chapter 9).
The predicted reduction in capacity additions is sensitive to the peak load impacts of the standard. DOE will investigate the need to adjust the hourly load profiles that include this end use in NEMS-BT.

Since the AEO2009 version of NEMS forecasts only to the year 2030, DOE must extrapolate results to 2044. DOE conducts an ex trapolation to 2044 to be consistent with the analysis period being used by DOE in the national imp act analysis (NIA). It will not be feasible to extend the forecast period of NEMS-BT for the purposes of this analysis, nor does EIA have an approved method for extrapolation of ma ny outputs beyond 2030. While it might seem reasonable in general to make simple linear extra polations of results, in practice this is not advisable because outputs could be contradictory. For example, changes in the fuel mix implied by extrapolations of those output s could be inconsistent with the extrapolation of marginal emissions factors. An analysis of various trends sufficiently detailed to guarantee consistency is beyond the scope of this work and, in any case, would involve a great d eal of uncertainty. Therefore, for all extrapolations beyond 2030, DOE intends to use simple replications of year 2030 results; in this way results are guaran teed to be consiste nt. As with the AEO reference case in general, the implicit assumption is that the regulatory environment does not deviate from the current known situation during the extrapolation period. Only changes that have been announced with date-certain introducti on are included in NEMS-BT.
For petroleum products, EIA uses the average growth rate for the world oil price over the years 2010 to 2025, in combination with the refine ry and distribution markups from the year 2025, to determine the regional price forecasts. Sim ilarly, EIA derives natural gas prices from an average growth rate figure in combination wi th regional price margins from the year 2025.

13-213.3 RESULTS
Results of the analysis will include change s in residential and commercial electricity sales, installed capacity and gene ration by fuel type for each trial standard level, in five-year increments extrapolated to the year 2044.

13-3REFERENCES

1 U.S. Department of Energy- Energy Information Administration. An Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the American Recovery and Reinvestment Act and Recent Change s in the Economic Outlook , April, 2009. Washington, DC. SR/OIAF/2009-03.
< http://www.eia.doe.gov/oiaf/servicerpt/stimulus/pdf/sroiaf(2009)03.pdf >

2 U.S. Department of Energy- Energy Information Administration. Annual Energy Outlook with Projections to 2030 , March, 2009. Washington, DC. DOE/EIA-0383(2009).
< http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html >

13-4CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

14.1 INTRODUCTION ......................................................................................................... 14-1 14.2 METHODOLOGY ........................................................................................................ 14-1

14-iCHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

14.1 INTRODUCTION
The Department of Energy (DOE) intends the employment impact analysis to estimate national job creation or job elimin ation resulting from possible new standards, due to reallocation of the associated expenditures for purchasing and operating equipment. DOE will conduct this analysis as one of the analyses for the no tice of proposed rulema king (NOPR). DOE will estimate national impacts on major sectors of th e U.S. economy, using publicly available data and incorporating different energy price scenarios that it will carry out as pa rt of the analysis for the NOPR. DOE will make all methods and documentation available for review.
The imposition of standards can impact employme nt both directly and indirectly. Direct employment impacts are changes in the number of employees at the plants that produce the covered equipment, along with the affiliated dist ribution and service companies, resulting from the imposition of standards. DOE will evaluate direct employment impacts in its manufacturer impact analysis, as described in Chapter 12. Indirect employment impacts may result from expenditures shifting between goods (the substitution effect) and ch anges in income and overall expenditure levels (the income effect) that occur due to the impositi on of standards.
DOE expects new equipment standards to decr ease energy consumpti on, and therefore to reduce expenditures for energy. The savings in energy expenditures may be spent on new investment and other items. The standards may increase the purchase price of equipment, including the retail price plus sales tax, and increase installation costs.
Using an input-output model of the U.S. ec onomy, this analysis seeks to estimate the year-to-year effect of these expenditure impacts on net economic output and employment. A simple model might involve reduced expenditu res for energy and reallocation of that money toward other sectors in the economy. DOE intends the employment impact analysis to quantify the indirect employment impacts of these expe nditure changes. It will evaluate direct employment impacts in the manufacturer impact analysis step of the process.

14.2 METHODOLOGY To investigate the combined direct and indirect employment impacts, DOE will use the Pacific Northwest National Laboratory (PNNL)’s ‘Impact of Sector Energy Technologies’ (ImSET) model. 1 PNNL developed ImSET, a spreadsh eet model of the U.S. economy that focuses on 188 sectors most releva nt to industrial, commercial, and residential building energy use, for DOE’s Office of Energy Efficiency a nd Renewable Energy. ImS ET is a special-purpose version of the U.S. Benchmark National Input-Ou tput (I-O) model, which has been designed to estimate the national employment and income eff ects of energy saving technologies that are deployed by DOE’s Office of Energy Efficiency and Renewable Energy. In comparison with the

14-1previous versions of the model used in earli er rulemakings, this version allows for more complete and automated analysis of the essentia l features of energy effi ciency investments in buildings, industry, transportation, and the electric power sectors.
The ImSET software includes a computer-based I-O model with structural coefficients to characterize economic flows among the 188 sectors. ImSET’s national econo mic I-O structure is based on the 1997 Benchmark U.S. table, specially aggregated to 188 sectors. 2

DOE intends to use the ImSet model to estima te changes in employment, industry output, and wage income in the overall U.S. economy resulting from changes in expenditures in the various sectors of the economy. For example, commercial clothes washer standards may reduce energy expenditures and increase equipment prices in the commercial sect or. These expenditure changes are likely to reduce commercial and energy sector employment. At the same time, these equipment standards may increase commercial s ector investment, and in crease employment in other sectors of the economy. DOE designed the employment imp act analysis to estimate the year-to-year net national employment effect of these different expenditure flows.

14-2REFERENCES

1 Roop, J. M., M. J. Scott, and R. W. Schultz. ImSET: Impact of Sector Energy Technologies
, 2005. Pacific Northwest National La boratory, Richland, WA. PNNL- 15273.

2 Lawson, Ann M., Kurt S. Bersani, Mahnaz Fahim-Nader, and Jiemin Guo. “Benchmark Input-Output Accounts of the U. S. Economy, 1997,” Survey of Current Business , December 2002. pp. 19-117.

14-3ENVIRONMENTAL ASSESSMENT FOR PR OPOSED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL REFRIGERATAORS, REFRIGERATOR

FREEZERS, AND FREEZERS

TABLE OF CONTENTS

1.0 INTRODUCTION ........................................................................................................EA-1 2.0 METHODOLOGY .......................................................................................................EA-2 2.1 Air Emissions................................................................................................................E A-2 2.2 Economic Value of Emission Reductions.....................................................................EA-5 3.0 RESULTS ...................................................................................................................EA-1 5

LIST OF TABLES
Table EA.1 Global Social Cost of Carbon (SCC) Estimates ($/t CO 2 in 2007 (2006$)), Based on 3% and 5% Discount Rates................................................................EA-10 Table EA.2 Global Social Cost of Car bon Estimates ($/t CO2 in 2007 in 2006$), Using Newell & Pizer Adjustment for Future Discount Rate Uncertainty ..................EA-12

EA-iENVIRONMENTAL ASSESSMENT FOR PR OPOSED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL REFRIGERATAORS, REFRIGERATOR

FREEZERS, AND FREEZERS

1.0 INTRODUCTION The Department of Energy (DOE) will conduct an environmental assessment as part of the notice of proposed rulemaking. DOE w ill assess the impacts of proposed energy conservation standards for residential refrigerator s, refrigerator-freezers, and freezers on certain environmental indicators using a variant of the U.S. DOE/Energy Information Administration (EIA)’s National Energy Modeling System (NEMS). a EIA uses NEMS to produce the Annual Energy Outlook (AEO). 1 DOE will use a variant known as NEMS-BT to provide key inputs to the analysis, based on the 2009 version of the AEO ( AEO2009 ). Results of the environmental assessment will be similar to those provided in AEO2009

.
DOE intends the environmental assessment to provide emissions results to policymakers and other stakeholders, and to fulfill requirement s that the environmental effects of all new Federal rules be properly quantified and consid ered. The environmental assessment considers three pollutants— su lfur dioxide (SO 2 ), nitrogen oxides (NO x ), and mercury (Hg)—as well as carbon emissions. The only form of carbon emi ssions tracked by NEMS-BT is carbon dioxide (CO 2 ), so the carbon discussed in this report is only in the form of CO 2 . For each of the trial standard levels, DOE will calculate total emissi ons using NEMS-BT, using additional, external analysis as needed.
Although DOE plans to consider only SO 2 , NO x , mercury, and CO 2 in its environmental assessment, there are other air pollutants which ar e of concern. Specifically, the Clean Air Act requires the Environmental Protection Agency (EPA) to set National Ambient Air Quality Standards for the following six common air polluta nts, also know as “crit eria pollutants”: (1) ozone, (2) particulate matter (PM), (3) carbon monoxide (CO), (4) nitrogen dioxide, (5) SO 2 , and (6) lead. 2 EPA recently added to this list mercury. But none of the “criteria pollutants” not already considered (i.e., ozone, PM, CO, and lead) are driven si gnificantly by electric utility power plants. Therefore, DOE does not intend on addressing them in the environmental assessment. In the case of ozone and particulat e matter, other pollutants are precursors to their formation and atmospheric conditions are th e driver behind their formation. Also, SO 2 and NO x are the primary precursors to ozone and PM, respectively, and will already be addressed by the environmental assessment. In th e case of CO, electric utilities are not significant sources. For electric power plants, almost all carbon emissions come out in the form of CO 2 as the combustion process is lean enough not to yield CO in significant amounts. Finally, with regard to lead, the ban on the use of l eaded gasoline has resulted in a dramatic decrease in lead emissions since the mid 1970s. Now industrial pro cesses (not electric ut ilities), particularly

a For more information on NEMS, please refer to th e U.S. Department of Energy, Energy Information Administration documentation. A useful summary is National Energy Modeling System: An Overview 2000
, DOE/EIA-0581(2000), March 2000. EIA approves use of the name NEMS to describe only an official version of the model without any modification to co de or data. Because this analysis entails some minor code modifications and the model is run under various policy scenarios that are variations on EIA assumptions, DOE refers to the model as NEMS-BT (BT is DOE’s Building Technologies Pr ogram). NEMS-BT was previously called NEMS-BRS.

EA-1primary and secondary lead smelters and battery ma nufacturers, are responsi ble for most of lead emissions and all violations of th e lead air quality standards.

2.0 METHODOLOGY

DOE plans to conduct the utility impact an alysis as a policy deviation from the 2009 version of the AEO that reflect provisions of the Amer ican Recovery and Reinvestment Act (ARRA) and recent changes in the economic outlook ( AEO2009 ), 1 applying the same basic set of assumptions. For example, the emissions characteris tics of an electricity generating plant will be exactly those used in AEO2009 . The NEMS reference case and alternative growth scenarios are as described in the utility impact analysis (s ee Chapter 13 of the prel iminary technical support document). Below are descriptions of the air emissions that DOE will analyze in the environmental assessment.

2.1 Air Emissions
Carbon Dioxide (CO 2 )
Carbon dioxide (CO 2 ) is not a regulated or criteria pollu tant, but it is of interest because of its classification as a greenhous e gas (GHG). GHGs trap the sun’ s radiation inside the Earth’s atmosphere and either occur na turally in the atmosphere or result from human activities. Naturally occurring GHGs include water vapor, CO 2 , methane (CH 4 ), nitrous oxide (N 2 O), and ozone (O 3 ). Human activities, however, add to the leve ls of most of these naturally occurring gases. For example, CO 2 is emitted to the atmosphere when solid waste, fossil fuels (oil, natural gas, and coal), wood, and wood products are burne d. During the past 20 years, about threequarters of anthropogenic (i.e., human-made) CO 2 emissions resulted from burning fossil fuels.

Concentrations of CO 2 in the atmosphere are naturally regulated by numerous processes, collectively known as the “carbon cycle.” The m ovement of carbon between the atmosphere and the land and oceans is dominated by natural processe s, such as plant photosynthesis. While these natural processes can absorb some of the anthropogenic CO 2 emissions produced each year, billions of metric tons are added to th e atmosphere annually. In the U. S., CO 2 emissions from both energy generation and industr ial processes account for 8 4.6 percent of total U.S. GHG emissions.
NEMS-BT tracks carbon emissions using a detailed carbon module; this approach provides good results because of its broad coverage of all sector s and inclusion of interactive effects. Past experience with carbon results from NEMS sugge sts that the NEMS-generated emissions estimates are somewhat lower than estimates based on simple average factors. One of the reasons for this divergence is that NEMS tends to predict that conservation displaces renewable generating capacity in the later year s of its forecast. On the whole, NEMS-BT provides carbon emissions results of reasonable accuracy, at a level consistent with other published Federal results.

EA-2Sulfur Dioxide (SO 2 )
The NEMS-BT model reports the two airborne pollutant emissions that DOE has reported in past analyses, SO 2 and NO x . The Clean Air Act Amendments of 1990 set an SO 2 emissions cap on all power generation. 3 The attainment of this target, however, is flexible among generators through the use of emissions allowan ces and tradable permits. The NEMS-BT model includes a module for SO 2 allowance trading and delivers a forecast of SO 2 allowance prices. Accurate simulation of SO 2 trading tends to imply that physical emissions effects will be zero, as long as emissions are at the ceiling. But to the extent reduced power generation demand decreases the demand for and price of emissions allowance permits, there is an environmentally related economic benefit from the proposed energy conservation standards reducing SO 2 emissions allowance demand. Furthermore, over ti me, if emissions decline, there is greater flexibility in reducing the ceiling amount. However, since DOE does not anticipate a change in SO 2 emissions, DOE does not plant to report SO 2 emission impacts. There is an SO 2 benefit from conservation in the form of a lower allo wance price but, since th e impact of any one standard on the allowance pric e is likely small and highly unc ertain, DOE does not plan to monetize the SO 2 benefit.
Nitrogen Oxides (NOx)
Nitrogen oxides , or NOx, are the generic term for a group of highly reactive gases, all of which contain nitrogen and oxygen in varying amounts. Many of the nitrogen oxides are colorless and odorless. However, one common pollutant, nitrogen dioxide (NO 2 ), along with particles in the air can often be seen as a reddish-brown la yer over many urban areas. NO 2 is the specific form of NOx reported in this document. NOx is one of the main ingredients involved in the formation of ground-level ozone, which can tr igger serious respiratory problems. It can contribute to the formation of acid rain, and can impair visibility in areas such as national parks. NO x also contributes to the fo rmation of fine particles that can impair human health.
Nitrogen oxides form when fossil fuel is bur ned at high temperatures, as in a combustion process. The primary manmade sources of NO x are motor vehicles, electric utilities, and other industrial, commercial, and residentia l sources that burn fossil fuels. NO x can also be formed naturally. Electric utilities acc ount for about 22 percent of NO x emissions in the United States.
NEMS-BT also has an algorithm for estima ting NOx emissions from power generation. The impact of these emissions, however, will be affected by the Clean Air Interstate Rule (CAIR), which the U.S. Environmental Protectio n Agency (EPA) issued under sections 110 and 111 of the Clean Air Act (40 CFR Parts 51, 96, and 97) on May 12, 2005. 4 CAIR will permanently cap emissions of SO 2 and NOx in eastern states of the United States. CAIR achieves large reductions of SO 2 and/or NOx emissions across 28 eastern states and the District of Columbia (DC). States must achieve the required emission reductions using one of two compliance options: 1) meet an emission budget for each regulated state by requiring power plants to participate in an EPA-administered inte rstate cap-and-trade system that caps emissions in two stages, or 2) meet an individual stat e emissions budget through measures of the state’s choosing. Phase 1 caps for NO x are to be in place in 2009. Phase 1 caps for SO 2 are to be in place in 2010. The Phase 2 caps for both pollutants are due in 2015.

EA-3On July 11, 2008, the U.S. Court of Appeals fo r the District of Columbia Circuit (D.C. Circuit) issued its decision in North Carolina v. Environmental Protection Agency
, which vacated the CAIR issued by the U.S. Envi ronmental Protection Agency on March 10, 2005. 5 But on December 23, 2008, the D.C. Circuit decided to allow CAIR to remain in effect until it is replaced by a rule consistent with the court’s earlier opinion. North Carolina v. Environmental Protection Agency , 550 F.3d 1176 (D.C. Cir. 2008) (remand of vacatur).
The NEMS-BT version to be used by DOE to estimate NOx emission impacts includes the cap on NOx emissions as sp ecified by CAIR. As with SO 2 emissions, a cap on NOx emissions means that equipment efficiency st andards may have no physical effect on these emissions in the 28 eastern states and DC. When NOx emissions are subject to emissions caps, DOE’s emissions reduction estimate corresponds to incremental changes in the prices of emissions allowances in cap-and-trade emissi ons markets rather than physical emissions reductions. Therefore, while th e emissions cap may mean that physical emissions reductions will not result from standards in those states covered by CAIR, standards could produce an environmental-related economic benefit in the fo rm of lower prices for emissions allowance credits. However, as with SO 2 allowance prices, DOE does not plan to monetize this benefit because the impact on the NO x allowance price from any single energy conservation standard is likely small and highly uncertain. For those states not covered by CAIR, DOE intends to estimate the impact on NOx emissions using NEMS-BT.
Mercury (Hg)
Coal-fired power plants emit Hg found in co al during the burning pr ocess. While coalfired power plants are the largest remaining s ource of human-generated Hg emissions in the United States, they contribute very little to th e global Hg pool or to contamination of U.S. waters. U.S. coal-fired power plants emit Hg in three different forms: oxidized Hg (likely to deposit within the United States); elemental H g, which can travel thousands of miles before depositing to land and water; and Hg that is in particulate form. Atmospheric Hg is then deposited on land, lakes, rivers, and estuarie s through rain, snow, and dry deposition. Once there, it can transform into methylmercur y and accumulate in fish tissue through bioaccumulation.
Americans are exposed to methylmercury pr imarily by eating contaminated fish. Because the developing fetus is the most sensitive to the toxic effects of methylmercury, women of childbearing age are regarded as the population of greatest concern. Children exposed to methylmercury before birth may be at increased risk of poor performa nce on neurobehavioral tasks, such as those measuring attention, fine motor function, language skills, visual-spatial abilities, and verbal memory.
NEMS-BT has an algorithm fo r estimating these emissions from power generation. EPA issued on May 18, 2005 the final rule entitled “S tandards of Performance for New and Existing Stationary Sources: Electric Steam Generating Un its,” under sections 110 and 111 of the Clean Air Act (40 CFR Parts 60, 63, 72, and 75). 6 This rule, also called the Clean Air Mercury Rule (CAMR), was closely related to the CAIR and established standards of performance for Hg

EA-4emissions from new and existing coal-fired elec tric utility steam gene rating units. The CAMR regulated Hg emissions from coal-fired power plants. But on February 8, 2008, the U.S. Court of Appeals for the District of Co lumbia Circuit (D.C. Circuit) issu ed its decision in State of New Jersey, et al. v. Environmental Protection Agency
, 7 in which the Court, among other actions, vacated the CAMR referenced above. EPA has r ecently decided to develop emissions standards for power plants under the Clean Air Act (Sectio n 112), consistent with the D.C. Circuit’s opinion on the CAMR. Accordingly, on February 6, 2009, the Department of Justice, on behalf of EPA, asked the Supreme Court to dismiss EPA’ s request (petition for certi orari) that the Court review the D.C. Circuit Court’s vacatur of th e Clean Air Mercury Rule (CAMR). On February 23, 2009, the Court also denied th e Utility Air Regulatory Group’s request to review the U.S. Circuit Court of Appeals decision.
The NEMS-BT version to be used by DOE to estimate Hg emission impacts does not cap Hg emissions and will not do so until the EPA issues a rule regarding Hg that is consistent with the Court’s decision.

2.2 Economic Value of Emission Reductions
In examining the impact of potential standard s, DOE plans to assess potential monetary benefits from reduced emissions of CO 2 , NOx, Hg, and SO 2 associated with this rulemaking.
Carbon Dioxide (CO 2 )
DOE plans on relying on a set of values developed by an interagency process that conducted a thorough review of existing estimates of the social cost of carbon (SCC). The SCC is intended to be a monetary measure of the incremental damage resulting from greenhouse gas (GHG) emissions, including, but not limited to, net agricultural productivity loss, human health effects, property damages from sea level rise, a nd changes in ecosystem services. Any effort to quantify and to monetize the harms associated with climate change will raise serious questions of science, economics, and ethics. But with full regard for the li mits of both quantification and monetization, the SCC can be used to provide estimat es of the social benefits of reductions in GHG emissions.
For at least three reasons, any single estimat e of the SCC will be contestable. First, scientific and economic knowledge about the impacts of climate ch ange continues to grow. With new and better information about relevant questi ons, including the cost, burdens, and possibility of adaptation, current estimates will inevitably ch ange over time. Second, some of the likely and potential damages from climat e change—for example, the value society places on adverse impacts on endangered species—are not included in all of the existing economic analyses. These omissions may mean that the best current estim ates are too low. Third, controversial ethical judgments, including those involving the treatment of future generations, play a role in judgments about the SCC (see in particular th e discussion of the discount rate, below).
To date, regulations have used a range of va lues for the SCC. For example, a regulation proposed by the U.S. Department of Transpor tation (DOT) in 2008 assumed a value of $7 per ton CO 2 (2006$) for 2011 emission reductions (with a range of $0–14 for sens itivity analysis). Regulation finalized by DOE used a range of $0–$20 (2007$). Both of these ranges were

EA-5designed to reflect the value of damages to the United States resulting from carbon emissions, or the “domestic” SCC. In the final Model Year 2011 Corporate Average Fuel Economy rule, DOT used both a domestic SCC value of $2/t CO 2 and a global SCC value of $33/t CO 2 (with sensitivity analysis at $80/tCO 2 ), increasing at 2.4 percen t per year thereafter.
In recent months, a variety of agencies ha ve worked to develop an objective methodology for selecting a range of interim SCC estimates to use in regulatory analyses until improved SCC estimates are developed. The following summary re flects the initial result s of these efforts and proposes ranges and values for interim social co sts of carbon used in this rule. It should be emphasized that the analysis described below is preliminary. These complex issues are of course undergoing a process of continuing review. Releva nt agencies will be evaluating and seeking comment on all of the scientific, economic, and et hical issues before establishing final estimates for use in future rulemakings.
The interim judgments resulting from the recent interagency review process can be summarized as follows: (a) DOE and other Federal agencies should consider the global benefits associated with the reductions of CO 2 emissions resulting from efficiency standards and other similar rulemakings, rather continuing the previ ous focus on domestic be nefits; (b) these global benefits should be based on SCC estimates (in 2007$) of $55, $33, $19, $10, and $5 per ton of CO 2 equivalent emitted (or avoided) in 2007; (c) th e SCC value of emissions that occur (or are avoided) in future years should be escalated usi ng an annual growth rate of 3 percent from the current values); and (d) domestic benefits are estimated to be approximately 6 percent of the global values. These interim judgments ar e based on the following considerations.

1. Global and domestic estimates of SCC . Because of the distinctive nature of the climate change problem, estimates of both global and domestic SCC values should be considered, but the global measure should be “primary.” This approach represen ts a departure from past practices, which relied, for the most pa rt, on measures of only domestic impacts. As a matter of law, both global and domestic valu es are permissible; th e relevant statutory provisions are ambiguous and allow the agency to choose either measure. (It is true that Federal statutes are presumed not to have extrat erritorial effect, in pa rt to ensure that the laws of the United States respect the interest s of foreign sovereigns. But use of a global measure for the SCC does not give extraterrito rial effect to Fede ral law and hence does not intrude on such interests.)
It is true that under OMB guidance, analysis from the domestic pers pective is required, while analysis from the international perspe ctive is optional. The domestic decisions of one nation are not typically ba sed on a judgment about the eff ects of those decisions on other nations. But the climate change probl em is highly unusual in the sense that it involves (a) a global public good in which (b) the emissions of one nation may inflict significant damages on other nations and (c) the United States is actively engaged in promoting an international agreemen t to reduce worldwide emissions.
In these circumstances, the global measure is preferred. Use of a global measure reflects the reality of the problem and is expected to contribute to the con tinuing efforts of the United States to ensure that emissi on reductions occur in many nations.

EA-6Domestic SCC values are also presented. The development of a domestic SCC is greatly complicated by the relatively few region- or c ountry-specific estimates of the SCC in the literature. One potential estimate comes from the DICE (Dynamic Integrated Climate Economy, William Nordhaus) model. In an unpublished paper, Nordhaus (2007) produced disaggregated SCC estimates using a regional version of the DICE model. He reported a U.S. estimate of $1/tCO 2 (2007 value, 2007$), which is roughly 11 percent of the global value.
An alternative source of estimates comes from a recent EPA modeling effort using the FUND (Climate Framework for Uncertainty, Negotiation and Distribution, Center for Integrated Study of the Human Dimensions of Global Change) model. The resulting estimates suggest that the ratio of domestic to global benefits varies with key parameter assumptions. With a 3-percent discount rate, for example, the U.S. benefit is about 6 percent of the global benefit for the “cen tral” (mean) FUND results, while, for the corresponding “high” estimates associated with a higher c limate sensitivity and lower global economic growth, the U.S. benefit is less than 4 percent of the global benefit. With a 2-percent discount rate, the U.S. share is about 2 to5 percent of the global estimate.

Based on this available evidence, a domestic SCC value equal to 6 percent of the global damages is used in this rulemaking. This figur e is in the middle of the range of available estimates from the literature. It is recognized that the 6 percent figure is approximate and highly speculative and alternative approaches will be explored before establishing final values for future rulemakings.

2. Filtering existing analyses . There are numerous SCC estimates in the existing literature, and it is legitimate to make use of those es timates to produce a figur e for current use. A reasonable starting point is pr ovided by the meta-analysis in Richard Tol, “The Social Cost of Carbon: Trends, Outliers, and Ca tastrophes, Economics: The Open-Access, Open-Assessment E-Journal,” Vol. 2, 2008-25. http://www.economics

ejournal.org/economics/journalarticles/2008-25 (2008). With that starting point, it is proposed to “filter” existing SCC estimates by us ing those that (1) are derived from peerreviewed studies; (2) do not weight the monetized damages to one country more than those in other countries; (3) use a “business as usual” climate scenario; and (4) are based on the most recent published version of each of the three major integrated assessment models (IAMs): FUND, DICE and PAGE (Policy Analysis of the Greenhouse Effect).
Proposal (1) is based on the view that those studies that have been subject to peer review are more likely to be reliable than those that have not b een. Proposal (2) is based on a principle of neutrality and simplicity; it does not treat the citizens of one nation differently on the basis of speculative or c ontroversial considerati ons. Proposal (3) stems from the judgment that as a general rule, th e proper way to assess a policy decision is by comparing the implementation of the policy against a counterfactual state where the policy is not implemented. A departure from th is approach would be to consider a more dynamic setting in which other countrie s might implement policies to reduce GHG

EA-7emissions at an unknown future date, and th e United States could choose to implement such a policy now or in the future.
Proposal (4) is based on three complementar y judgments. First, the FUND, PAGE, and DICE models now stand as the most compre hensive and reliable efforts to measure the damages from climate change. Second, the latest versions of the th ree IAMs are likely to reflect the most recent eviden ce and learning, and hence they ar e presumed to be superior to those that preceded them. It is acknow ledged that earlier versions may contain information that is missing from the latest versions. Third, any effort to choose among them, or to reject one in favor of the others, would be difficult to defend at this time. In the absence of a clear reason to choose among them, it is reasonable to base the SCC on all of them.
The agency is keenly aware that the current IAMs fail to include all relevant information about the likely impacts from greenhouse gas emissions. For example, ecosystem impacts, including species loss, do not appear to be included in at le ast two of the models. Some human health impacts, including increases in food- borne illnesses and in the quantity and toxicity of airbor ne allergens, also appear to be excluded. In addition, there has been considerable recent discussion of th e risk of catastrophe and of how best to account for worst-case scenarios. It is not clear whether the thr ee IAMs take adequate account of these potential effects.

3. Use a model-weighted average of the estimates at each discount rate . At this time, there appears to be no scientifically valid reason to prefer any of the three major IAMs (FUND, PAGE, and DICE). Consequently, the estima tes are based on an equal weighting of estimates from each of the models. Among estimat es that remain after applying the filter, the average of all estimates within a mode l is derived. The estimated SCC is then calculated as the average of the three model-sp ecific averages. This approach ensures that the interim estimate is not biased towards specific models or more prolific authors.

4. Apply a 3-percent annual growth rate to the chosen SCC values . SCC is assumed to increase over time, because future emissions are expected to produce larger incremental damages as physical and economic systems b ecome more stressed as the magnitude of climate change increases. Indeed, an implied gr owth rate in the SCC is produced by most studies that estimate economic damages cause d by increased GHG emissions in future years. But neither the rate itself nor the info rmation necessary to derive its implied value is commonly reported. In light of the limite d amount of debate thus far about the appropriate growth rate of the SCC, applying a rate of 3 percent per year seems appropriate at this stage. Th is value is consistent with the range recommended by IPCC (2007) and close to the latest published estimate (Hope, 2008).
For climate change, one of the most comple x issues involves the appropriate discount rate. OMB’s current guidance offers a detailed discussion of the relevant issues and calls for discount rates of 3 percent and 7 percent. It also permits a sensitivity analysis with low rates for intergenerational problems . (“If your rule will have important intergenerational benefits or costs you might consider a further sensitivity analysis using a lower but posi tive discount rate in

EA-8addition to calculating net benefi ts using discount rates of 3 and 7 percent.”) The SCC is being developed within the general c ontext of the current guidance.
The choice of a discount rate, especially over long periods of time, raises highly contested and exceedingly difficult questions of science, economics, philosophy, and law. See, e.g. , William Nordhaus, “The Challenge of Gl obal Warming (2008); Nicholas Stern, The Economics of Climate Change” (2007); “Disco unting and Intergenerational Equity” (Paul Portney and John Weyant, eds., 1999). Under imag inable assumptions, decisions based on costbenefit analysis with high discount rates might harm future generations—at least if investments are not made for the benefit of those ge nerations. (See Robert Lind, “Analysis for Intergenerational Discounting,” id . at 173, 176–177.) At the same time, use of low discount rates for particular projects might itself harm future generations, by ensuring that resources are not used in a way that would greatly benefit them. In the context of climate change, questions of intergenerational equity are especially important.
Reasonable arguments support the use of a 3-pe rcent discount rate. Fi rst, that rate is among the two figures suggested by OMB guidance, and hence it fits with existing National policy. Second, it is standard to base the discount rate on the co mpensation that people receive for delaying consumption, and the 3- percent rate is close to the risk-fr ee rate of return, proxied by the return on long term infla tion-adjusted U.S. Treasury Bonds . (In the context of climate change, it is possible to object to this standard method for de riving the discount rate.) Although these rates are currently closer to 2.5 percent, th e use of 3 percent provides an adjustment for the liquidity premium that is refl ected in these bonds’ returns.
At the same time, other arguments support use of a 5-percent discount ra te. First, that rate can also be justified by reference to the level of compensation for delaying consumption, because it fits with market behavior with respect to individuals’ willingness to trade off consumption across periods as measured by the estimated post-ta x average real returns to private investment ( e.g. , the S&P 500). In the climate setting, the 5-per cent discount rate may be preferable to the riskless rate because it is based on risky investment s and the return to projects to mitigate climate change is also risky. In contra st, the 3-percent riskless rate ma y be a more appropriate discount rate for projects where the return is know n with a high degree of confidence ( e.g. , highway guardrails).
Second, 5 percent, and not 3 pe rcent, is roughly consistent with estimates implied by reasonable inputs to the theoretic ally derived Ramsey equation, which specifies the optimal time path for consumption. That equation specifies the optimal discount rate as the sum of two components. The first reflects the fact that consump tion in the future is likely to be higher than consumption today (even accounting for climate impacts), so diminishing marginal utility implies that the same monetary damage will caus e a smaller reduction of utility in the future. Standard estimates of this term from the economics literature are in the ra nge of 3 to 5 percent. The second component reflects the po ssibility that a lower weight s hould be placed on utility in the future, to account for social impatience or extinction risk, whic h is specified by a pure rate of time preference (PRTP). A conventional estimate of the PRTP is 2 percent. (Some observers believe that a principle of intergenerational e quity suggests that the PRTP should be close to zero.) It follows that discount rate of 5 percent is within the range of values which are able to be

EA-9derived from the Ramsey equation, albeit at the low end of the range of estimates usually associated with Ramsey discounting.
It is recognized that the arguments above—f or use of market behavior and the Ramsey equation—face objections in the context of climate change, and of course there are alternative approaches. In light of climate change, it is possi ble that consumption in the future will not be higher than consumption today, and if so, the Ra msey equation will suggest a lower figure. Some people have suggested that a very low discount rate, below 3 percent, is justified in light of the ethical considerations calling fo r a principle of intergenerationa l neutrality. See Nicholas Stern, “The Economics of Climate Change” (2007); for contrary views, see William Nordhaus, The A Question of Balance (2008) ; Martin Weitzman, “ Review of the Stern Review on the Economics of Climate Change." Journal of Economic Literature , 45(3): 703–724 (2007). Additionally, some analyses attempt to deal with uncertainty with respect to interest rates over time; a possible approach enabling the considera tion of such uncertainties is discussed below. Richard Newell and William Pizer, “Discounting the Distant Fu ture: How Much do Uncertain Rates Increase Valuations?” J. Environ. Econ. Manage. 46 ( 2003 ) 52-71.
The application of the methodology outlined abov e yields estimates of the SCC that are reported in Table EA.1. These estimates are report ed separately using 3-percent and 5-percent discount rates. The cells are empty in rows 10 and 11 because these studies did not report estimates of the SCC at a 3-percent discount rate . The model-weighted means are reported in the final or summary row; they are $33 per t CO 2 at a 3-percent discount rate and $5 per t CO 2 with a 5-percent discount rate.

Table EA.1 Global Social Cost of Carbon (SCC) Estimates ($/t CO 2 in 2007 (2006$)), Based on 3% and 5% Discount Rates* Model Study Climate Scenario 3% 5% 1 FUND Anthoff et al. 2009 FUND default 6 -1 2 FUND Anthoff et al. 2009 SRES A1b 1 -1 3 FUND Anthoff et al. 2009 SRES A2 9 -1 4 FUND Link and Tol 2004 No THC 12 3 5 FUND Link and Tol 2004 THC continues 12 2 6 FUND Guo et al. 2006 Constant PRTP 5 -1 7 FUND Guo et al. 2006 Gollier discount 1 14 0 8 FUND Guo et al. 2006 Gollier discount 2 7 -1 FUND Mean 8.25 0 9 PAGE Wahba & Hope 2006 A2-scen 57 7 10 PAGE Hope 2006 7 11 DICE Nordhaus 2008 8 Summary Model-weighted Mean 33 5
* The sample includes all peer reviewed, non-equity-weighted estimates included in Tol (2008), Nordhaus (2008), Hope (2008), and Anthoff et al. (2009), that are based on the most recent published version of FUND, PAGE, or DICE and use business-as-usual climate scenarios. All valu es are based on the best av ailable information from the underlying studies about the base year and year dollars, rather than the Tol (2008) assumption that all estimates included in his review are 1995 values in 1995$. All values were updated to 2007 using a 3-percent annual growth rate in the SCC, and adjusted for inflation using GDP deflator.

EA-10DOE has conducted analyses at $33 and $5 pe r ton as these represent the estimates associated with the 3 percent and 5 percent di scount rates, respectively. The 3 percent and 5 percent estimates have independent appeal and at this time a clear preference for one over the other is not warranted. Thus, DOE has also incl uded—and centered its cu rrent attention on—the average of the estimates associated with these discount rates, which is $19. (Based on the $19 global value, the domestic va lue would be $1.14 per ton of CO 2 equivalent.)
It is true that there is uncertainty ab out interest rates over long time horizons. Recognizing that point, Newell and Pizer have made a careful effort to adjust for that uncertainty. See Newell and Pizer, supra. This is a relatively recent contribution to the literature.

There are several concerns with using this approach in this context. First, it would be a departure from current OM B guidance. Second, an approach that would average what emerges from discount rates of 3 percen t and 5 percent reflect s uncertainty about th e discount rate, but based on a different model of uncertainty. The Newell-Pizer approach models discount rate uncertainty as something that evolves over time ; in contrast, one alternative approach would assume that there is a single discount rate with equa l probability of 3 percent and 5 percent.
Table EA.2 reports on the appl ication of the Newell-Pizer adjustments. The precise numbers depend on the assumptions about the data generating process that governs interest rates. Columns (1a) and (1b) assume that “random wa lk” model best describes the data and uses 3

- percent and 5-percent disc ount rates, respectively. Columns (2a) and (2b) repeat this, except that it assumes a “mean-reverting” process. As Newell and Pizer report, there is stronger empirical support for the random walk model.

EA-11Table EA.2 Global Social Cost of Carbon Estimates ($/t CO2 in 2007 in 2006$),* Using Newell & Pizer Adjustment for Future Discount Rate Uncertainty**

Model Study Climate Scenario Random- walk model Mean-reverting model 3% 5% 3% 5% (1a) (1b) (2a) (2b) 1 FUND Anthoff et al. 2009 FUND default 10 0 7 -1 2 FUND Anthoff et al. 2009 SRES A1b 2 0 1 -1 3 FUND Anthoff et al. 2009 SRES A2 15 0 10 -1 4 FUND Link and Tol 2004 No THC 20 6 13 4 5 FUND Link and Tol 2004 THC continues 20 4 13 2 6 FUND Guo et al. 2006 Constant PRTP 9 0 6 -1 7 FUND Guo et al. 2006 Gollier discount 1 14 0 14 0 8 FUND Guo et al. 2006 Gollier discount 2 7 -1 7 -1 FUND Mean 12 1 9 0 9 PAGE Wahba & Hope 2006 A2-scen 97 13 63 8 10 PAGE Hope 2006 13 8
11 DICE Nordhaus 2008 15 9 Summary Model-weighted Mean 55 10 36 6 *The sample includes all peer reviewed, non-equity-weighted estimates included in Tol (2008), Nordhaus (2008), Hope (2008), and Anthoff et al. (2009), that are based on the most recent published version of FUND, PAGE, or DICE and use business-as-usual climate scenarios. All valu es are based on the best av ailable information from the underlying studies about the base year and year dollars, rather than the Tol (2008) assumption that all estimates included in his review are 1995 values in 1995$. All values were updated to 2007 using a 3-percent annual growth rate in the SCC, and adjusted for inflation using GDP deflator. **Assumes a starting discount rate of 3 percent. Newell and Pizer (2003) based adjustment factors are not applied to estimates from Guo et al. (2006) that use a different approach to account for discount rate uncertainty (rows 7-8).
The resulting estimates of the social cost of carbon are necessarily greater. When the adjustments from the random walk model are app lied, the estimates of th e social cost of carbon are $10 and $55, with the 3 percent and 5 percent discount rates, re spectively. The application of the mean-reverting adjustment yields estimates of $6 and $36. Since the random walk model has greater support from the data, DOE also conducted analyses with the value of the SCC set at $10 and $55.
In summary, DOE will consider in its decision process for the notice of proposed rulemaking the potential global bene fits resulting from reduced CO 2 emissions valued at $5, $10, $19, $30 and $55 per metric ton, and has also presen ted the domestic benefits derived using a value of $1.14 per metric ton.
DOE is well aware that scientific and economic knowledge about the contribution of CO 2 and other GHG emissions to changes in the fu ture global climate and the potential resulting damages to the world economy continues to ev olve rapidly. Thus, any value placed in this rulemaking on reducing CO 2 emissions is subject to likely change.
DOE, together with other Federal agencies , is reviewing various methodologies for estimating the monetary value of reductions in CO 2 and other GHG emissions. This review will consider the comments on this subject that are part of the public record for this and other

EA-12rulemakings, as well as other methodological as sumptions and issues, such as whether the appropriate values should represen t domestic U.S. benefits, as we ll as global benefits (and costs). Given the complexity of the many issu es involved, this review is ongoing.
Nitrogen Oxides (NOx)
As discussed earlier, with respect to NOx the CAIR rule has been reinstated by the courts. Therefore, NOx emissions in those states covered by CAIR will be subject to a cap with corresponding annual allowances openly trade d. DOE’s approach to NOx allowance price impacts are discussed below.
For those states not covered by CAIR, DOE plans on estimating the monetized benefits of NOx emissions reductions in these states ba sed on environmental damage estimates from the literature. Available estimates suggest a very wi de range of monetary values for NOx emissions, ranging from $370 per ton to $3,800 per ton of NOx from stationary sources, measured in 2001$ or a range of $432 per to n to $4,441 per ton in 2007$. 8

Mercury (Hg)
DOE plans on estimating the monetized benef its of Hg emissions reductions based on environmental damage estimates from the literature. DOE has determined that t he basic science linking mercury emissions from power plants to imp acts on humans is considered highly uncertain. However, DOE identified two estimates of the environmental damages of mercury based on two estimates of the adverse impact of childhood expo sure to methyl mercury on IQ for American children, and subsequent loss of lifetime economic productiv ity resulting from these IQ losses. The high-end estimate is based on an estimate of the current aggregat e cost of the loss of IQ in American children that results from exposure to mercury of U.S. power plant origin ($1.3 billion per year in 2000$), which translates to $32.6 million per ton emitted per year (2007$). 9 The lowend estimate was $664,000 per ton emitted in 2004$ or $729,000 per ton in 2007$, which DOE derived from a published evaluation of mercury c ontrol using different methods and assumptions from the first study, but also based on the pres ent value of the lifetime earnings of children exposed. 10 b

Sulfur Dioxide (SO 2 ) and Nitrogen Oxides (NOx) Allowance Prices
With regard to SO 2 emissions, unlike the other polluta nts to be considered in this analysis, these emissions have for some time been subject to a national cap with corresponding annual allowances openly traded ; therefore, considerable ma rket experience with these instruments has already been accumulated. It has been argued that imposition of any standard that lowers U.S. national electricity consump tion creates beneficial downward pressure on the prices of these allowances, and th is cost reduction benefit should be considered in any analysis of a proposed standard. While this assertion is fundamentally sound (i.e., reduced electricity demand should ceteris paribus bring about lower SO 2 and NOx allowance prices) there are a myriad of complications impeding any meaningful quantification of any associated benefit.

b The estimate was derived by back-calculating the annual benefits per ton from the net present value of benefits reported in the study.

EA-13While complexity of analysis alone clearly canno t justify disregarding a po tential consequence of a standard, DOE additionally believes these benefits to be both volatile and de minimis when compared to the direct effects of a st andard as estimated in this analysis.
Some of the problems to be confronted in an allowance price effect forecast are:

• Only any net lowering of the total allowance bill to generators free of transfers is the potential source of a benefit. Any such compliance cost saving would need to be accurately estimated, and this effect is no diffe rent from the benefit derived from a cost reduction for other inputs, such as fuel. When the SO 2 allowance market that was created in 1995 under the Clean Air Act Amendments be gan, initial allowance allocations were directly granted to large affected units based on their historic (1985-87) use of fuel. For 30 years, allowances for the following year ar e issued every spring at a declining rate to these entitled parties, and thereafter can be freely used, traded, or banked. Some additional allowances are allocated in dive rse ways (e.g. as rewards to generators installing control equipment). In other word s, the entitled generators holding emission rights are losers when the valu e of allowances declines, wh ile the buyers of allowances are gainers. Before they are used, allowa nces may be traded many times at prices reflecting the marginal not average cost of compliance.

• The trading system allows for allowance banki ng. Consequently, any observed change in a forecast year could represent the manife station of market fundamentals but could similarly just indicate deposit or withdrawal of allowances. In general, used allowances have fallen short of the cap so emissions may exceed the specified cap for future years.

• Control efforts could further reduce the SO 2 cap for some jurisdictions, creating regulatory uncertainty that pe rturbs the allowance market. The issuance of the proposed and final CAIR rules were likely contributing factors to allowance price increases leading to a dramatic 2005 allowance price spike. While prices had already fallen far below their historic highs by the time CAIR was vacated in the summer of 2008, spot allowance prices nonetheless made a further precipitous drop following the D.C. Circuit Court ruling.

• Because allowances can be traded freely by generators, brokers, and investors, they can serve as financial instruments, and, especi ally since 2003, allowance prices have been volatile. Between 2000, when a tightened Clean Air Amendment cap came into force, and 2007, allowances traded between a low of about $120/short ton in 2002 and a high of about $1600/short ton, with the 2005 spike being pa rticularly dramatic. 11 12 Since there is no reason to believe that these conditions w ill alter over the life of a proposed standard, the challenge of forecasting prices is much more complex than a simple supply-demand balance might suggest. Also, note that any quan tification of the bene fit likely depends on the level of prices as well as their net change. To believe that a simple delta in the prices could be used to estimate the benefit is to believe that the same numerical reduction in price would result from the standard whet her the prevailing trad ing price were $100 or $1000 per short ton.

EA-14With regard to NOx emissions, CAIR has onl y recently been reinstated by the courts, therefore market instruments with regard to NOx are not known. But DOE is left to presume that the same problems that confront an SO 2 allowance price effect for ecast would also apply to a NOx allowance price effect forecast.
As noted earlier, the forecasting tool to be used for this analysis is the AEO2009 version of NEMS-BT, which generates forecasts of both SO 2 and NOx emissions and allowance prices. DOE intends to review the allowance price foreca sts and the effect that refrigerator standards have on them. If this review suggests that the SO 2 and NOx allowance price effects are both significant and estimable using NEMS-BT, it may be included in the environmental assessment for the notice of proposed rulemaking.

3.0 RESULTS

The results for the environmental assesssment are similar to a complete NEMS run, as published in the AEO2009 . These include emissions for SO 2 , NO x , mercury, and CO 2 in fiveyear forecasted increments, extrapolated to th e year 2043. DOE will report the outcome of the analysis for each trial standard level as a deviation from the AEO2009 reference case results.

EA-15REFERENCES

1 U.S. Department of Energy- Energy Information Administration. An Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the American Recovery and Reinvestment Act and Recent Change s in the Economic Outlook , April, 2009. Washington, DC. SR/OIAF/2009-03.
< http://www.eia.doe.gov/oiaf/servicerpt/stimulus/pdf/sroiaf(2009)03.pdf >

2 U.S. Environmental Protection Agency. Six Common Air Pollutants . Washington, DC.
< http://www.epa.gov/air/urbanair/ >

3 U.S. Environmental Protection Agency. Clean Air Act . Washington, DC.
< http://www.epa.gov/air/caa/ >

4 U.S. Federal Register. Rule To Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule); Revisions to Acid Rain Program; Revisions to the NO X SIP Call, Final Rule , May 12, 2005. 70 FR 25162.

5 U.S. Environmental Protection Agency. Clean Air Interstate Rule

. < http://www.epa.gov/cleanairinterstaterule/ >

6 U.S. Federal Register. Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units, Final Rule , May 18, 2005. 70 FR 28606.

7 U.S. Environmental Protection Agency. Clean Air Mercury Rule

. < http://www.epa.gov/oar/mercuryrule/ >

8 Office of Management and Budget, Offi ce of Information and Regulatory Affairs, 2006 Report to Congress on the Costs and Benefi ts of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities , 2006. Washington, DC.
< http://www.whitehouse.gov/omb/inforeg/2006_cb/2006_cb_final_report.pdf >

9 Trasande, L., C. Schechter, K.A. Haynes, and P.J. Landrigan, “Applying Cost Analyses to Drive Policy that Pr otects Children,” 1076 ANN. N.Y. ACAD. SCI . 911 (2006).

10 Ted Gayer and Robert Hahn, “Designing Enviro nmental Policy: Lessons from the Regulation of Mercury Emissions,” Regulatory Analysis 05-01 (AEI-Brookings Jo int Center For Regulatory Studies) p. 31 ( 2004). A version of this paper was published in the Journal of Regulatory Economics in 2006.

11 U.S. Environmental Protection Agency, Allowance Prices (1995-2004), SO 2 Allowance Price Index . Washington, DC. < http://www.epa.gov/airmarkets/progress/alprices.html >

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EA-16REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL REFRIGERATORS, REFRIGERATOR

FREEZERS, AND FREEZERS

TABLE OF CONTENTS

1.0 INTRODUCTION ...................................................................................................... RIA-1 2.0 METHODOLOGY ..................................................................................................... RIA-1

LIST OF TABLES
Table RA.1 Non-Regulatory Alternatives to Standards ......................................................... RA-1

RIA-iREGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL REFRIGERATORS, REFRIGERATOR

FREEZERS, AND FREEZERS

1.0 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 Department of Energy (DOE) is committed to continually expl ore non-regulatory alternatives to standards. DOE will prepare a draft regulatory impact an alysis 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 Info rmation and Regulatory Affairs. 58 FR 51735. DOE has identified six major alternatives to stan dards as representing feasible policy options to achieve customer product energy efficiency. It w ill evaluate each altern ative in terms of its ability to achieve significant energy savings at a reasonable cost, and will compare the effectiveness of each one to the effec tiveness of the proposed standards rule.
The non-regulatory means of achieving energy savings that DOE proposes to analyze are listed in Table RA.1. The technical support doc ument (TSD) in support of DOE’s notice of proposed rulemaking will include a complete quan titative analysis of each alternative, the methodology for which is discussed briefly below.
Table RA.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

2.0 METHODOLOGY DOE will use the National Impact Analysis (NIA) Spreadsheet Models for each of the four appliance products to calcu late the national energy savings and the net present value (NPV) corresponding to each alternative to the proposed standards. The NIA Spreadsheet Models for residential refrigerators, refrigerator-freezers, and freezers are di scussed in Chapter 10 of the preliminary TSD. To compare each alternative quantitatively to the proposed conservation standards, DOE will need to quantify the effect of each alternative on th e purchase and use of energy efficient residential dishwashers, dehum idifiers, and cooking pro ducts, and commercial clothes washers. Once it has quantified each alternative, DOE will make the appropriate

RIA-1revisions to the inputs in the NIA Spreadsheet M odels. Key inputs that DOE may revise in these models are:

• Energy prices and escalation factors;

• Implicit market discount rates for tradi ng off purchase price against operating expense when choosing equipment efficiency;

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

• Consumer price-versus-effi ciency relationships; and

• Equipment stock data (purchase of new equi pment or turnover rates for inventories).
The key measures of the impact of each alternative will be:

• energy use (in exajoules, or 10 18 joules): Cumulative energy use of the equipment from the effective date of the new st andard to the year 2042. DOE will report electricity consumption as primary energy.

• National energy savings: Cumulative nati onal energy use from the base case projection minus the altern ative policy case projection.

• Net present value: The value of future operating cost savings from equipment bought in the period from the effective date of the new standard (2012) to the year 2042. DOE will calculate the NPV as the difference between the present value of equipment 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 equipment expenditures to 2009 using a seven-percent and three-percent real discount rate. It will calculate operating expe nses (including energy costs) for the life of the equipment.

RIA-2