2

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CHAPTER 2. ANALYTICAL FRAMEWORK, COMMENTS FROM INTERESTED PARTIES, AND DOE RESPONSES

TABLE OF CONTENTS

2.1 INTRODUCTION ................................

................................................................ ........... 2 -1

2.2 MARKET AND TECHNOLOGY ASSESSMENT ................................

........................ 2 -5

2.2.1 Market Assessment ................................

................................................................ .......... 2 -5

2.2.1.1 Definition ................................

................................................................ ....... 2 -5

2.2.1.2 Product Classes and Scope of Coverage ................................

........................ 2 -5

2.2.1.3 Test Procedure ................................................................

............................... 2 -8

2.2.2 Technology Assessment ................................................................

................................ ... 2 -9

2.3 SCREENING ANALYSIS ................................................................

............................ 2 -10

2.4 ENGINEERING ANALYSIS ................................................................

........................ 2 -10

2.5 MARKUPS ANALYSIS ................................................................

............................... 2 -12

2.6 ENERGY USE ANALYSIS

................................................................ .......................... 2 -13

2.6.1 Samples of Dehumidifier Users ................................................................

..................... 2 -13

2.6.2 Energy Use Determination for Portable Dehumidifiers ................................

................. 2 -14

2.6.3 Energy Use Determination for Whole-Home Dehumidifiers

................................ ........ 2 -15

2.7 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS ................................

... 2 -16

2.7.1 Inputs to First Costs ................................

................................................................ ....... 2 -17

2.7.2 Inputs to Operating Cost

................................................................ ................................ 2 -18

2.7.3 Other Inputs ................................

................................................................ ................... 2 -19

2.8 SHIPMENTS ANALYSIS

................................................................ ............................. 2 -19

2.9 NATIONAL IMPACT ANALYSIS ................................................................

.............. 2 -20

2.9.1 National Energy Savings Analysis................................................................

................. 2 -21

2.9.2 Net Present Value Analysis ................................................................

........................... 2 -22

2.10 CONSUMER SUBGROUP ANALYSIS ................................................................

...... 2 -22

2.11 MANUFACTURER IMPACT ANALYSIS................................

................................ .. 2 -23

2.11.1 Industry Cash-Flow Analysis ................................................................

......................... 2 -23

2.11.2 Manufacturer Subgroup Analysis ................................................................

.................. 2 -23

2.11.3 Competitive Impacts Assessment ................................................................

.................. 2 -23

2.11.4 Cumulative Regulatory Burden ................................................................

..................... 2 -24

2.11.5 Preliminary Results for the Manufacturer Impact Analysis ................................

.......... 2 -24

2.12 EMISSIONS ANALYSIS ................................................................

.............................. 2 -24

2.13 MONETIZATION OF EMISSIONS REDUCTION BENEFITS ................................

. 2 -26

2.14 UTILITY IMPACT ANALYSIS

................................................................ ................... 2 -28

2.15 EMPLOYMENT IMPACT ANALYSIS

................................................................ ....... 2 -29

2.16 REGULATORY IMPACT ANALYSIS

................................................................ ........ 2 -29

2.17 REFERENCES

................................ ................................................................ .............. 2 -29

LIST OF FIGURES

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process ................................

..... 2 -22-1 CHAPTER 2. ANALYTICAL FRAMEWORK

2.1 INTRODUCTION

Section 6295(o)(2)(A) of the Energy Policy and Conservation Act (EPCA), Pub. L. 94- 163, 42 U.S.C. 6291 et seq . requires the U.S. Department of Energy (DOE) to set forth energy conservation standards that achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. This chapter describes the general analytical framework that DOE uses in developing such standards, and in particular, amended energy conservation standards for residential dehumidifiers. The analytical framewo rk is a description of the methodology, the analytical tools, and the relationships among the various analyses that are part of this rulemaking.

Figure 2.1.1 summarizes the analytical components of the standards-setting process. The focus of this figure is the center column, identified as “Analyses.” The columns labeled “Key Inputs” and “Key Outputs” show how the analyses fit into the rulemaking process, and how the analyses relate to each other. Key inputs are the types of data and information that the analyses require. Some key inputs exist in public databases; DOE collects other inputs from interested parties or other knowledgeable experts within the field. Key outputs are analytical results that feed directly into the standards-setting process. Dotted lines connecting analyses show types of information that feed from one analysis to another.2-2 Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process2-3

The analyses performed as part of the preliminary analysis stage and reported in this preliminary technical support document (preliminary TSD) are listed below.

 A market and technology assessment to characterize the relevant product markets and existing technology options, including prototype designs.

 A screening analysis to review each technology option and determine if it is technologically feasible; is practical to manufacture, install, and service; would adversely affect product utility or product availability; or would have adverse impacts on health and safety.

 An engineering analysis to develop cost-efficiency relationships that show the manufacturer’s cost of achieving increased efficiency.

 A markups analysis to develop distribution channel markups that relate the manufacturer production cost to the cost to the consumer.

 An energy use analysis to determine the annual energy use in the field of the considered products.

 LCC and payback period (PBP) analyses to calculate, at the consumer level, the discounted savings in operating costs throughout the estimated average life of the covered products, compared to any increase in the installed cost for the products likely to result directly from imposition of the standard.

 A shipments analysis to forecast product shipments, which then are used to calculate the national impacts of standards on energy, consumer net present value (NPV), and future

manufacturer cash flows.

 A national impact analysis (NIA) to assess the aggregate impacts at the national level of potential energy conservation standards for each of the considered products, as measured by the net present value (NPV) of total consumer economic impacts and the national energy savings (NES).

 A preliminary manufacturer impact analysis to assess the potential impacts of energy conservation standards on manufacturers, such as impacts on capital conversion expenditures, marketing costs, shipments, and research and development costs.

The analyses DOE will perform in any subsequent notice of proposed rulemaking (NOPR) stage include those listed below. In addition, DOE will revise the analyses it performed in the preliminary analysis stage based on comments and new information received on topics including, but not limited, to those listed below.

 An LCC subgroup analysis to evaluate variations in customer characteristics that might cause a standard to affect particular consumer sub-populations, such as low-income households, differently than the overall population.

 A manufacturer impact analysis to estimate the financial impact of standards on manufacturers and to calculate impacts on competition, employment, and manufacturing capacity.

 A utility impact analysis to estimate the effects of proposed standards on electric and gas

utilities.2-4

 An employment impact analysis to assess the aggregate impacts of amended energy conservation standards on national employment.

 An environmental impact analysis to provide estimates of the effects of amended energy conservation standards on emissions of carbon dioxide (CO 2 ), sulfur dioxide (SO 2 ), nitrogen oxides (NO

x ), and mercury (Hg).

 A regulatory impact analysis to present major alternatives to proposed amended energy conservation standards that could achieve substantially the same regulatory goal at a

lower cost.

DOE developed this analytical framework and documented its initial findings in the Energy Conservation Standards Rulemaking Framework Document for Residential Dehumidifiers (the framework document). DOE announced the availability of the framework document in a Notice of Public Meeting and Availability of a Framework Document published in

the Federal Register on August 17, 2012

. 77 FR 49739. DOE presented the analytical approach to interested parties during a public meeting on September 24, 2012. The framework document is

available at http://www.regulations.gov/#!documentDetail;D=EERE-2012- BT -STD-0027-0003

.

In response to the publication of the framework document and the associated public meeting, DOE received comments from interested parties regarding its analytical approach. In the preliminary analysis, DOE: (1) summarizes the key comments received from interested parties and describes DOE’s responses to those comments; (2) summarizes any significant changes in the analytical approach made since publishing the framework document; and (3) explains in further detail each of the issues for which DOE seeks public comment in the executive summary. This preliminary TSD contains details of the preliminary analyses

conducted for residential dehumidifiers.2-5

2.2 MARKET AND TECHNOLOGY ASSESSMENT

The market and technology assessment characterizes the relevant product markets and existing technology options, including working prototype designs, for the considered products.

2.2.1 Market Assessment

When DOE begins an energy conservation standards rulemaking, it develops information that provides an overall picture of the market for the products considered, including the nature of the products, the industry structure, and market characteristics for the products. This activity consists of both quantitative and qualitative efforts based primarily on publicly available information. The subjects addressed in the market assessment for residential dehumidifiers included manufacturers, trade associations, and the quantities and types of products sold and offered for sale. DOE examined both large and small and foreign and domestic residential

dehumidifier manufacturers. DOE also examined publicly available data from the key trade association for this product category, the Association of Home Appliance Manufacturers (AHAM). DOE reviewed shipment data collected by AHAM and Appliance magazine to evaluate annual shipment trends. Finally, DOE reviewed other energy efficiency programs fro m utilities, individual States, and other organizations. Chapter 3 of the preliminary TSD provides additional details on the market and technology assessment.

DOE reviewed relevant literature and interviewed manufacturers to develop an overall picture of the residential dehumidifier industry in the United States. Industry publications and trade journals, government agencies, and trade organizations provided the bulk of the information, including (1) manufacturers and their market shares; (2) shipments by product type ( i.e. , portable versus whole-home); (3) detailed product information; and (4) industry trends. The analysis developed as part of the market and technology assessment is described in chapter 3 of the preliminary TSD.

2.2.1.1 Definition

EPCA defines “dehumidifier” as “a self-contained, electrically operated, and mechanically encased assembly consisting of - (A) a refrigerated surface (evaporator) that condenses moisture from the atmosphere; (B) a refrigerating system, including an electric motor; (C) an air-circulating fan; and (D) means for collecting or disposing of the condensate.” (42 U.S.C. 6291(34)) DOE did not receive any comments on this definition in response to the

framework document.

2.2.1.2 Product Classes and Scope of Coverage

When evaluating and establishing energy conservation standards, DOE generally divides covered products into product classes by the type of energy used or by capacity or other performance-related features that affect efficiency. Different energy conservation standards may apply to different product classes. (42 U.S.C. 6295(q))

In the framework document, DOE analyzed six product classes for residential dehumidifiers (for details on these product classes, see chapter 3 of this preliminary TSD). In2-6

particular, DOE analyzed five product classes for portable dehumidifiers, based on the energy conservation standards that became effective on October 1, 2012. (10 CFR 430.32(v)(2)) DOE

also considered an additional product class for whole-home dehumidifiers, which are designed to be installed in a ducted configuration, typically in conjunction with the home’s heating, ventilation, and air conditioning (HVAC) system.

AHAM supported DOE’s proposed product classes, and in particular maintaining the five portable dehumidifier product classes. According to AHAM, consolidating the product classes could eliminate smaller-capacity units from the market because it could become prohibitively costly for manufacturers to produce them, which would be in conflict with the requirements of 42 U.S.C. 6295(o)(4). AHAM stated that larger-capacity units may be able to meet the needs of smaller spaces, but they are more expensive, and, thus consumers may not be able to purchase them and achieve the energy savings under the current proposal. AHAM noted that instead, many consumers may be forced to decide between a cost-effective smaller-capacity unit and an ENERGY STAR-rated product. Additionally, AHAM commented that the consolidated product classes in the ENERGY STAR dehumidifier specifications are biased towards larger-capacity units, and that the ENERGY STAR program could also push smaller-capacity units off themarket. AHAM’s analysis indicated that the payback period for an incremental cost of a largercapacity ENERGY STAR dehumidifier would be over 7 years, as compared to the product’s average 10-year lifetime. (AHAM, No. 8 at pp. 1–3)

The group of California investor-owned utilities (IOUs) comprising Pacific Gas and Electric Company, San Diego Gas and Electric Company, and Southern California Edison (hereafter referred to as “California IOUs”) jointly commented that DOE should consolidate dehumidifiers with capacities under 75 pints/day into a single product class, as the ENERGY STAR specifications currently do, because smaller-capacity units do not offer unique consumer utility. According to the California IOUs, both larger-capacity and smaller-capacity units can be used to dehumidify a room, but the smaller-capacity units are typically less energy efficient and remove moisture more slowly. The California Utilities stated that units rated at 70 pints/day are, on average, almost 50 percent more efficient than units rated at 25 pints/day. (California IOUs, No. 11 at p. 3)

DOE evaluated the possibility of consolidating portable dehumidifiers with capacities less than 75 pints/day, according to the current test procedure, into a single product class, but determined during the engineering analysis that the ability to achieve a certain efficiency at a given capacity is primarily a function of the chassis size rather than being an inherent relationship between capacity and efficiency. Because each manufacturer has developed different sets of chassis sizes to span the range of capacities within its product offerings, the ability to achieve certain efficiency levels within each of the existing product classes is also different from manufacturer to manufacturer. By retaining multiple product classes, DOE is able to individually consider appropriate efficiency levels and potential standards in each class that will take into

consideration its unique performance factors and costs. For that reason, DOE retains product class differentiation for portable dehumidifiers for this preliminary analysis. For further information on product classes, see chapter 5 of this preliminary TSD.2-7

The California IOUs supported DOE’s inclusion of a product class for whole-home dehumidifiers, and recommended that DOE acquire additional data on both the performance and market saturation of these units. (California IOUs, No. 11 at p. 4 ) Southern Company questioned whether whole-home dehumidifiers would be in the same product class as portable dehumidifiers with the same capacity. Southern Company also suggested that DOE consider covering not only whole-home dehumidifiers that function independently but those that are integrated with a central air conditioning system. According to Southern Company, such an integrated product could save energy in total than a slightly more efficient separate dehumidification system. (Southern Company, Public Meeting Transcript, No. 10 at pp. 48– 49, 72

– 73) In consideration of these comments, DOE is maintaining the classification of whole-home dehumidifiers separate from portable dehumidifiers, including those units with similar capacities. Due to potential installation constraints for certain whole-home dehumidifier applications that impact the capacity and potential efficiency improvement, DOE is also considering two product classes within whole-home dehumidifiers based on case volume. For further discussion of product classes, see chapter 5 of this preliminary TSD.

AHAM requested clarification on how portable products that could be installed in a ducted configuration would be classified. It recommended that because every portable dehumidifier technically can be installed with a duct, DOE should clarify that “ducted installation” refers only to products for which the manufacturer provides instructions for ducted installation in its use and care guide. (AHAM, Public Meeting Transcript, No. 10 at p. 28; AHAM, No. 8 at pp. 3– 4) Northwest Energy Efficiency Alliance (NEEA) also questioned how portable dehumidifiers with the capability for ducted installation would be classified, particularly

because if the standards for whole-home dehumidifiers were lower than for portable dehumidifiers, a convertible portable unit could be allowed to be less efficient than other portable units. (NEEA, Public Meeting Transcript, No. 10 at pp. 46– 47) DOE published a NOPR

in the Federal Register on DATE proposing amendments to its dehumidifier test procedure (hereafter referred to as the “DATE Test Procedure NOPR”). In the DATE Test Procedure NOPR, DOE proposed that if a given model meets both the proposed definition of a portable dehumidifier and a whole-home dehumidifier, with conversion achieved by means of optional ducting kits, the product must be tested as both product categories, must meet both applicable standards, and must be certified as meeting both standards, if DOE ultimately establishes

standards for whole home units. [CITE]

Southern Company questioned whether desiccant dehumidifiers would be considered covered products for the purposes of energy conservation standards and test procedures. (Southern Company, Public Meeting Transcript, No. 10 at p. 45) Dehumidifiers that remove moisture solely by means of adsorption via a desiccant do not meet the statutory definition provided by EPCA in 42 U.S.C. 6291(34), because they do not contain a refrigeration system. Therefore, such products would not be covered by the energy conservation standards and test procedures that are the subject of DOE’s current rulemakings. DOE is, however, considering dehumidifiers that contain desiccant wheels in addition to refrigeration systems for moisture

removal. The DATE Test Procedure NOPR and chapter 5 of the preliminary TSD contain further information on these “refrigerant-desiccant” dehumidifiers.2-8

Appliance Standards Awareness Project, American Council for an Energy-Efficient Economy, Consumers Union, Natural Resources Defense Council, and NEEA (hereafter referred to as “Joint Commenters”), urged DOE to work with ENERGY STAR to develop a label for dehumidifiers that would provide information to consumers about the appropriate relative humidity settings to achieve additional energy savings, including the potential consequences of selecting higher or lower settings. (Joint Commenters, No. 9 at pp. 2, 10) The U.S. Environmental Protection Agency (EPA) administers the labeling portion of the ENERGYSTAR program, and therefore would determine the labeling requirements for ENERGY STARqualified dehumidifiers.

2.2.1.3 Test Procedure

The market assessment also provides information on DOE’s current test procedure for measuring the moisture removal capacity and energy efficiency of residential dehumidifiers. In response to the framework document, DOE received multiple comments regarding this test procedure, with topics including (1) whole-home dehumidifier testing; (2) representative ambient conditions; and (3) fan-only mode. T hese topics are addressed in the DATE Test Procedure NOPR, which details these comments, provides responses, and presents DOE’s proposed

amendments. CITE.

In addition, DOE received a comment from the California IOUs regarding the energy efficiency metric that DOE intends to use in its analysis for energy conservation standards. The California IOUs opposed a metric integrating active mode and standby mode energy use, stating that separate energy conservation standards for active mode and standby mode would encourage manufacturers to reduce energy use in each of these modes. The California IOUs further stated that the effectiveness of efficiency improvements to specific operating modes could be obscured if the energy uses from all operating modes are combined into a single metric. They recommended that DOE collect more information on each mode separately to better understand the effectiveness of different approaches that can be applied to reduce energy use in different operating modes, which would help DOE set a standard that maximizes energy savings and cost effectiveness. (California IOUs, No. 11 at p. 4)

EPCA, in relevant part, requires DOE to integrate measures of standby mode and off mode energy consumption into the overall energy efficiency, energy consumption, or other energy descriptor for each covered product, including dehumidifiers, unless the Secretary

determines that— (i) the current test procedures for a covered product already fully account for and incorporate the standby mode and off mode energy consumption of the covered product; or (ii) such an integrated test procedure is technically infeasible for a particular covered product, in which case the Secretary shall prescribe a separate standby mode and off mode energy use test procedure for the covered product, if technically feasible. (42 U.S.C. 6295(gg)(2)(A))

In a final rule published in the Federal Register on October 31, 2012, DOE determined that it is technically feasible to incorporate measures of standby mode and off mode energy2-9

consumption into the efficiency metric for dehumidifiers, and thus established a new efficiency metric, integrated energy factor. 77 FR 65942. EPCA, as amended by EISA 2007, also requires that any final rule establishing or revising a standard for a covered product, adopted after July 1, 2010, shall incorporate standby mode and off mode energy use into a single amended or new standard, if feasible. (42 U.S.C. 6295(gg)(3)(A)) Therefore, the potential standard levels considered in this preliminary analysis are evaluated based on integrated energy factor.

2.2.2 Technology Assessment

DOE typically uses information relating to existing and past technology options and working prototype designs as inputs to determine what technologies manufacturers use to attain higher performance levels. In consultation with interested parties, DOE develops a list of technologies for consideration. Initially, these technologies encompass all those it believes are technologically feasible.

DOE developed its list of technologically feasible design options for residential

dehumidifiers through consultation with manufacturers of components and systems, and from trade publications and technical papers. Since many options for improving product efficiency are available in existing units, product literature and direct examination provided additional

information.

Chapter 3 of the preliminary TSD includes the detailed list of all technology options

identified for residential dehumidifiers. The Joint Commenters supported the evaluation of heat pipes as a technology option. In addition, the Joint Commenters, as well as Appliance Standards Awareness Project (ASAP) individually, recommended that DOE include as a technology option

air- to -air heat exchangers for precooling the inlet air using the evaporator discharge air. (ASAP, Public Meeting Transcript, No. 10 at p. 32; Joint Commenters, No. 9 at pp. 2, 8) AHAM requested that DOE provide additional information on the heat pipe technology option, including product literature, research, and any test procedure revisions necessary to capture the energy efficiency benefits. (AHAM, Public Meeting Transcript, No. 10 at pp. 31– 32, 43

– 44) DOE has

evaluated both air- to -air heat exchangers and heat pipes as technology options in this preliminary analysis. For more information, see chapter 3 and chapter 5 of this preliminary TSD.

ASAP asked whether the potential benefits of a built-in humidistat could be captured by the current test procedure, and encouraged DOE to consider it as a technology option. (ASAP, Public Meeting Transcript, No. 10 at pp. 35– 36) The Joint Commenters recommended including

desiccant wheels that increase the moisture removal capacity of refrigeration-based whole-home

dehumidifiers as a technology option. In such systems, the desiccant wheel removes moisture downstream of the evaporator coil, and heat from the condenser coil is used to dry the wheel with the moist air subsequently discharged outdoors. (Joint Commenters, No. 9 at p. 8) Underwriters Laboratories (UL) asked whether any of the technology options included in the framework document were highly susceptible to molding. (UL, Public Meeting Transcript, No. 10 at pp. 37–3 8) DOE did not consider built-in humidistats as a technology option in this rulemaking because DOE observed all dehumidifiers that it could identify on the market as having this feature, and therefore the feature is included in the baseline models. DOE did2-10

consider refrigerant-desiccant dehumidifiers in this preliminary analysis, but DOE did not find any efficiency improvement associated with this technology under representative ambient conditions. Chapters 3 and 5 of the preliminary TSD contain additional information about refrigerant-desiccant dehumidifiers. In addition, DOE did not find information that would indicate that any of the considered design options were more susceptible to mold formation than

the others.

2.3 SCREENING ANALYSIS

The screening analysis examines various technologies as to whether they: (1) are technologically feasible; (2) are practicable to manufacture, install, and service; (3) have an adverse impact on product utility or availability; and (4) have adverse impacts on health and safety. DOE developed an initial list of efficiency-enhancement options from the technologies identified as technologically feasible in the technology assessment. Then DOE, in consultation with interested parties, review ed the list to determine if these options are practicable to manufacture, install, and service, would adversely affect product utility or availability, or would

have adverse impacts on health and safety. In the engineering analysis, DOE further consider ed efficiency enhancement options that it did not screen out in the screening analysis. Chapter 4 of the preliminary TSD contains details on the screening analysis for residential dehumidifiers.

2.4 ENGINEERING ANALYSIS

The engineering analysis (chapter 5 of the preliminary TSD ) establishes the relationship between the manufacturing production cost (MPC) and the efficiency for each class of residential

dehumidifiers. The purpose of the analysis is to estimate the incremental MPCs for a product that would result from increasing efficiency levels above the level of the baseline model in each product class. This relationship serves as the basis for cost/benefit calculations in terms of individual consumers, manufacturers, and the nation. Chapter 5 discusses the product classes DOE analyzed, the representative baseline units, the incremental efficiency levels, the methodology DOE used to develop the manufacturing production costs, the cost-efficiency curves, and the impact of efficiency improvements on the considered products.

The engineering analysis considered technologies not eliminated in the screening analysis, designated design options, although certain technologies were not analyzed for the reasons set forth in chapter 5 of the preliminary TSD. DOE considered the analyzed design options in developing the cost-efficiency curves.

DOE typically structures its engineering analysis around one of three methodologies: (1) the design-option approach, which calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency-level approach, which calculates the relative costs of achieving increases in energy efficiency levels without regard to the particular design options used to achieve such increases; and/or (3) the reverse- en gineering or cost -assessment approach,2-11

which involves a “bottom-up” manufacturing cost assessment based on a detailed bill of materials derived from tear-downs of the product being analyzed.

DOE used a hybrid approach combining aspects of all three methods in its engineeringanalysis. The efficiency-level approach for residential dehumidifiers, combined with the costassessment approach, allowed DOE to develop a cost for each product analyzed. DOE estimated that the costs for these products reflected the costs for typical units at their respective efficiency levels. This approach involved physically disassembling commercially available products, consulting with outside experts, reviewing publicly available cost and performance information, and modeling equipment cost. To ensure that DOE’s analysis covered the entire range of capacities and efficiencies available on the market, DOE relied on the design-option approach to determine what changes would be needed for a particular unit to meet a certain efficiency level.

The efficiency levels that DOE considered in the engineering analysis are attainable using technologies currently available on the market in residential dehumidifiers. DOE associated efficiency gains with certain design options that were retained through the screening analysis in chapter 4 of this preliminary TSD. DOE also provided further discussion for design options that met the screening criteria, but did not factor into the cost-efficiency relationship. Chapter 5 of this preliminary TSD describes the methodology and results of the efficiency level analysis used to derive the cost-efficiency relationships.

The California IOUs and Joint Commenters urged DOE to consider an equation-based approach for defining energy conservation standards as a function of dehumidifier capacity. The Joint Commenters observed that currently available models exhibit a relatively linear relationship between capacity and energy factor, although the highest efficiency 30 pints/day model has the same energy factor as the highest efficiency 70 pints/day unit. The Joint Commenters noted that an equation-based approach to dehumidifier standards would be similar to the standards for refrigerators and water heaters, where maximum energy use and energy factor are functions of adjusted volume and rated storage volume, respectively. (California IOUs, No. 11 at p. 3; Joint Commenters, No. 9 at pp. 2, 7)

As discussed in section 2.2.1.2 , DOE has determined that it would maintain separate product classes for this preliminary analysis because of the varying ability to achieve certain efficiency levels due to the chassis sizes used by different manufacturers. DOE tentatively

concludes that there is not an inherent relationship between capacity and efficiency that would warrant defining dehumidifier energy conservation standards as an equation relating these two parameters. Therefore, in the engineering analysis, DOE identified efficiency levels for eachproduct class on the basis of available products and design options, and did not use an equationbased approach for setting the efficiency levels.

AHAM agreed with the maximum available efficiency level for the 35.01 to 45.00 pints/day portable dehumidifier product class and with the gap fill level for the 45.01– 54.00 pints/day portable dehumidifier product class. According to AHAM, the ENERGY STAR criterion of 1.85 liters (L)/kilowatt-hour (kWh) is not appropriate as an efficiency level for those capacities. (AHAM, No. 8 at p. 3) The Joint Commenters noted, however, that there are models2-12

in the DOE compliance certification database with efficiencies that exceed 1.85 L/kWh, as well as models in the ENERGY STAR dehumidifier product list with capacities ranging from 30 to 70 pints/day which have a certified energy factor of 1.85 L/kWh. The Joint Commenters further noted that the energy factors and relative rankings of models could change significantly if DOE amends its test procedure to better reflect field performance. (Joint Commenters, No. 9 at pp. 8– 9) ASAP suggested analyzing one or two additional efficiency levels for whole-home dehumidifiers due to the large gap between the proposed levels. (ASAP, Public Meeting Transcript, No. 10 at p. 55)

Because there are products in all product classes that meet the ENERGY STAR qualification level, DOE maintained that efficiency level in the 35.01– 45.00 pints/day and

45.01 –54.00 pints/day product classes. As the Joint Commenters noted, however, both the capacities and EFs associated with the analyzed efficiency levels were adjusted to account for DOE’s proposed test procedure changes. For further information, see chapter 5 of the preliminary TSD. DOE also maintained the efficiency levels for larger whole-home dehumidifiers as proposed in the framework document. In the engineering analysis, DOE observed that these efficiency levels represent the range of product technologies and efficiencies available on the market. However, DOE separated the whole-home product classes into two categories based on product case size, and the efficiency levels for the smaller whole-home product class were different from those proposed in the framework document. Chapter 5 of this preliminary TSD contains further discussion of the whole-home product classes and efficiency

levels.

2.5 Markups Analysis

DOE uses manufacturer- to -customer markups to convert the manufacturer selling price estimates from the engineering analysis to customer prices, which are then used in the LCC and PBP analysis and in the manufacturer impact analysis. Retail prices are necessary for the baseline efficiency level and all other efficiency levels under consideration.

Before developing markups, DOE defines key market participants and identifies distribution channels. Generally, the portable dehumidifier distribution chain includes three parties: (1) the manufacturers producing the products; (2) the retailers purchasing the products from manufacturers and selling them to consumers; and (3) the consumers who purchase the products. For the markups analysis, DOE used two types of distribution channels to describe how most dehumidifiers pass from the manufacturer to the consumer; (1) replacement market and (2)

new first time owners. These distribution channels are explained in detail in chapter 6 of this preliminary TSD.

Because whol e-home dehumidifiers are usually installed as part of the residential cooling and heating system, DOE assumes that they should follow the same distribution channel as central air-conditioners or forced air heating equipment. There are two primary types of markets describing the way most whole-home dehumidifiers pass from the manufacturer to the consumer: one applying to installation in replacement markets or by new owners and the other applying to2-13

installation in new construction. In the replacement distribution channel, (1) the manufacturer generally sells the equipment to (2) a wholesaler, who in turn sells it to (3) a mechanical contractor, who in turn sells it to (4) the consumer. The new construction distribution channel

includes an additional link in the chain— the general contractor: (1) manufacturer (2) wholesaler, (3) mechanical contractor, (4) general contractor, and (5) consumer.

After defining the participants and channels, DOE develops baseline and incremental markups to transform the manufacturer selling price into a consumer product price. DOE uses the baseline markups, which cover all of a manufacturer’s costs, to determine the sales price of baseline models. Incremental markups are coefficients that DOE applies to the incremental cost of high er -efficiency models. Because companies mark up the price at each point in the distribution channel, both baseline and incremental markups are dependent on the particular

distribution channel.

DOE requested comment on the approach to developing estimates of future residential dehumidifier retail prices used in the framework document; however, no comments were

received on the methodology. Therefore, DOE used the same markups methodology for this preliminary analysis.

2.6 Energy U s e Analysis

DOE establishes the annual energy consumption of a product and assesses the energysavings potential of various product efficiencies. As part of the energy use analysis, certain engineering assumptions may be required regarding product application, including how often the

p roduct is operated and under what conditions. DOE uses the annual energy consumption and energy-savings potential in the LCC and PBP analyses to establish the savings in consumer operating costs at various product efficiency levels.

2.6.1 Samples of Dehumidifier Users

DOE used the Energy Information Administration’s (EIA) 2009 Residential Energy Consumption Survey ( RECS 2009 ) to establish a sample of households using dehumidifiers for each dehumidifier product class. 1 The RECS data provides information on dehumidifier ownership and frequency of dehumidifier use by monthly range in each household. The survey also includes household information such as the physical characteristics of housing units, household demographics, information about cooling products, and other relevant data. DOE used the household samples not only to determine dehumidifier annual energy consumption, but also as the basis for conducting the LCC and PBP analysis.

In the framework d ocument, DOE sought stakeholder input on data sources that it can use to characterize the variability in annual energy consumption for dehumidifiers. Underwriters Laboratories asked what characterized a household in the DOE analyses. (Underwriters Laboratories, Public Meeting Transcript, No. 10 at p. 73) DOE used the RECS 2009 data sample to characterize the variability in dehumidifier energy consumption. RECS has 1609 housing2-14

records that indicate dehumidifier ownership and defines household as “[a] family, an individual, or a group of up to nine unrelated persons, occupying the same housing unit. a ”

For the preliminary analysis, DOE seeks stakeholder input on data sources that can be

used to characterize commercial use of residential dehumidifiers.

2.6.2 Energy Use Determination for Portable Dehumidifiers

Portable dehumidifiers are used primarily in basement locations, and their energy use is dependent on at least two conditions: (1) the finished state of the basement and (2) whether the dehumidifier has a condensate collecting bucket that requires emptying or is equipped with a hose that drains liquid directly as moisture is dripped off the condensing coils. To estimate the annual energy consumption of portable dehumidifiers for both conditions, DOE began by assigning each RECS household to one of the 151 National Oceanic and Atmospheric Administration’s National Climatic Data Center (NCDC) weather stations by calculating which weather station (within the appropriate census region or large state) best matched the 2009 heating and cooling degree-days in the RECS data set.

After assigning each RECS household NCDC weather data, DOE calculated the average vapor density for each month of the year. The number of months that the dehumidifier was used (as indicated by RECS data) was mapped onto the months having the highest vapor density. The vapor density for each month was used to calculate the average compressor run time as a fraction of an hour using compressor use as related to environmental conditions from a recent field metering study. 2 This same study provided the basis for determining fan-only mode time and

combined low -power (standby/off) mode time. Assignments for fan-only mode power and standby/off mode power were made considering no relationship was found by the study’s authors between unit capacity and fan or standby/off mode power. The power of the compressor during dehumidification mode was calculated using the method to determine rated capacity and rated efficiency proposed in the XXX Test Procedure NOPR. See chapter 7 of the preliminary TSD for

more detailed information.

At the framework meeting, one stakeholder asked if dehumidifier efficiency used in the analysis was based on the current test procedure. (ASAP, Public Meeting Transcript, No. 10 at p. 74) DOE used dehumidifier efficiencies based on the XXX Test Procedure NOPR. Values for dehumidifier efficiency levels as related to product classes were developed in the engineering analysis.

In the framework d ocument, DOE requested input on its proposed energy use analysis. The Joint Commenters brought DOE’s attention to two field studies that measured portable dehumidifier energy use. One study from Cadmus estimated 1000 kWh per year based on 8 months of operation but excluding the high humidity season. Another field study from the Energy Center of Wisconsin estimated average annual energy consumption to be 477 kWh. (Joint Commenters, No. 9 at p. 9) DOE did not use the above-named studies in its determination

a http://www.eia.gov/emeu/recs/glossary.html2-15

of energy use because the Cadmus study was not conducted during the high humidity season and therefore did not characterize the period of highest dehumidifier use. The Energy Center of Wisconsin study did not determine energy use and frequency during standby or fan modes.

DOE reviewed existing and new literature, including the two studies mentioned by th e Joint Commenters, to establish a range of energy use for dehumidifiers. A newly published field metering study for portable dehumidifiers linked outdoor absolute humidity to indoor air conditions and dehumidifier compressor use. 3 The study found that dehumidifier use was influenced, among other variables, by whether the basement was finished and the type of dehumidifier condensate removal. DOE based its energy use analysis on the equations used to model the relationship between vapor density and compressor use developed from the field metering study. The resulting energy use values were within the range of the values used in the 2007 rulemaking.

2.6.3 Energy Use Determination for Whole-Home Dehumidifiers

DOE estimated energy use for whole-home dehumidifiers based on a recent field metering study for three modes of dehumidifier operation: compressor + fan ( i.e. , active dehumidification), fan-only, and standby ( i.e. , either inactive mode or off-cycle mode). 4 The sample size of the field study was insufficient to calculate compressor use based on environmental conditions, however, as was done for portable dehumidifiers. Consequently, DOE modified the annual energy use equation to account for fan-only mode and standby/off mode.

The equation below and used in the previous rulemaking calculates compressor energy

use.

( ⁄ )

Where:

DEH AEU = annual dehumidifier energy use (kilowatt-hours per year [kWh/year]),

CA P = capacity (pints/day), 0.473 = conversion from pints to liters (L), 24 = number of hours in a day,

Hours = annual operating hours, and Efficiency = efficiency (L/kWh).

After obtaining estimates of average time spent in each mode of dehumidifier operation from the field study, DOE used the following equation to calculate annual energy use for each capacity and efficiency of dehumidifier.2-16 ∑ ( )

[ ( ( ) )

( ( ) ) ( ( ) ) ]

( )

X Dehum = fraction of time in dehumidification mode

X Fan = fraction of time in fan-only mode

X Stby = fraction of time in standby/off mode

kW Dehum = kW power of dehumidification mode

kW Fan = kW power of fan-only mode

kW Stdby = kW power of standby/off mode

Note:

See chapter 7 of the preliminary TSD for more information.

2.7 Life-Cycle Cost and Payback Period Analysis

In determining whether an energy efficiency standard is economically justified, DOE considers the economic impact of potential standards on consumers. The effect of new or amended standards on individual consumers usually includes a reduction in operating cost and an increase in purchase cost. DOE used the following two metrics to measure consumer impacts:

 LCC (life-cycle cost) is the total customer cost of an appliance or product, generally over the life of the appliance or product, including purchase and operating costs. The latter consist of maintenance, repair, and energy costs. Future operating costs are discounted to the time of purchase and summed over the lifetime of the appliance or product.2-17

 PBP (payback period) measures the amount of time it takes consumers to recover the assumed higher purchase price of a more energy-efficient product through reduced operating costs.

DOE analyzed the net effect of potential dehumidifier standards on consumers by calculating the LCC and PBP. Inputs to the LCC calculation include the installed cost to the consumer (purchase price plus installation cost), operating expenses (energy expenses, repair costs, and maintenance costs), the lifetime of the product, and a discount rate. Inputs to the payback period calculation include the installed cost to the consumer and first-year operating

costs.

DOE performed the LCC and PBP analyses using a spreadsheet model combined with Crystal Ball (a commercially-available software program used to conduct stochastic analysis using Monte Carlo simulation and probability distributions) to account for uncertainty and variability among the input variables. Each Monte Carlo simulation consists of 10,000 LCC and PBP calculations. The model performs each calculation using input values that are either sampled from probability distributions and household samples or characterized with single point values. The analytical results include a distribution of 10,000 data points showing the range of LCC savings and PBPs for a given efficiency level relative to the base case efficiency forecast. In performing an iteration of the Monte Carlo simulation for a given consumer, product efficiency is chosen based on its probability. If the chosen product efficiency is greater than or equal to the efficiency of the standard level under consideration, the LCC and PBP calculation reveals that a consumer is not impacted by the standard level. By accounting for consumers who already purchase more-efficient products, DOE avoids overstating the potential benefits from increasing product efficiency.

DOE is also required to perform a PBP analysis to determine whether the rebuttablepresumption of economic justification applies (where the higher installed cost of more energyefficient equipment is less than three times the value of the lowered operating costs in the first year of the energy conservation standard). (42 U.S.C. 6295(o)(2)(B)(iii)) The results of this analysis serve as the basis for DOE to evaluate the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification).

2.7.1 Inputs to First Costs

Installation Cos ts Typically, small incremental changes in product efficiency incur little or no change in installation costs over baseline products. Based on available information, DOE did not include any installation costs from either a portable or whole-home dehumidifier with an increased product efficiency.

Product Costs To calculate the product costs paid by dehumidifier purchasers, DOE multiplied the manufacturing product costs (MPCs) developed from the engineering analysis by industry2-18

markups to derive manufacturers’ selling prices (MSPs). The MSPs in turn are multiplied by supply chain markups (along with sales taxes) to estimate the initial cost to the consumer. DOE used the supply chain markups that include separate markups on the baseline MSP and the incremental cost of each higher efficiency level considered.

AHAM submitted a comment on the framework d ocument that it continues to oppose the use of experience curves in the development of product costs; it referenced their comment on the suppl emental notice of proposed rulemaking for energy conservation standards for microwave oven standby mode and off mode. (AHAM, No. 8 at p. 5)

For the dehumidifier analysis, DOE developed future product prices by fitting historical producer price index ( PPI ) data from the Bureau of Labor Statistics in an exponential function with year as the explanatory variable. DOE uses the “small electric household appliances” PPI for portable dehumidifiers and “room air-conditioners and dehumidifiers” PPI for whole-home dehumidifiers. These two PPI series are the most disaggregated categories that include portable and whole-home units. Given very limited market data available for dehumidifiers, DOE believes that using these two PPI series would generate more robust estimates and reflect more closely real price trends as observed in many other household appliances than an assumption of no price trend. Because the costs estimated in the engineering analysis are based on the year of analysis, DOE believes it is appropriate to apply the price trend estimation to project the product price at the year of compliance in the LCC analysis.

2.7.2 Inputs to Operating Cost

Energy Prices DOE derived average monthly electricity prices for the 27 geographic areas in RECS

2009 by using the latest data from EIA. DOE assigned an appropriate energy price to each household in the sample, depending on its location. For future prices, DOE used the projected annual changes in average residential electricity prices in EIA’s 2013 Annual Energy Outlook ( AEO 2013 ).

Maintenance and Repair Costs Typically, small incremental changes in product efficiency incur little or no change in installation, repair and maintenance costs over baseline products. Having no information to conclude otherwise, DOE did not include any maintenance or repair costs from either a portable or whole-home dehumidifier with an increased product efficiency.

Product Lifetime Product lifetime is the age at which an appliance is retired from service. Based on information from the American Council for an Energy Efficiency Economy and the Northeast Energy Sta r Lighting and Appliance data, DOE identified an average dehumidifier lifetime of 11 years for portable dehumidifiers and 19 years for whole-home dehumidifiers. DOE characterized dehumidifier survival functions using Weibull distributions.2-19

2.7.3 Other Inputs

DOE used discount rates to determine the present value of lifetime operating expenses. The discount rate used in the LCC analysis represents the rate from an individual consumer’s perspective. b Much of the data used for determining consumer discount rates comes from the

Federal Reserve Board’s triennial Survey of Consumer Finances

. c

To estimate the share of consumers affected by a standard at a particular efficiency level, DOE’s LCC and PBP analysis considers the projected distribution ( i.e. , market shares) of product efficiencies that consumers will purchase in the first compliance year under the base case (the case without amended energy conservation standards).

2.8 Shipments Analysis

DOE used forecasts of product shipments to calculate the national impacts of standards and also in its manufacturer impact analysis. DOE developed these shipment forecasts based on an analysis of key market drivers for each product.

DOE estimated portable dehumidifier shipments by projecting shipments in two market segments: (1) replacements; (2) homeowners that did not previously have a dehumidifier, i.e.

, first time owners.

To project portable dehumidifier replacement shipments, DOE developed retirement functions for dehumidifiers from the lifetime estimates and applied them to the existing products in the stock. The existing stock of products is tracked by vintage and developed from historical shipments data. To project shipments to the first time owner market, DOE calibrated the estimated shipments with the historical data by introducing into the model a market segment identified as existing households without dehumidifiers. DOE estimated that 0.34 percent of existing households without a dehumidifier would annually purchase this product over the period

2019 –2048. DOE estimated whole-home shipments at 1 percent of the total portable dehumidifier shipment volume. See chapter 9 of this preliminary TSD for more details regarding the projection of dehumidifier shipments.

The Northwest Energy Efficiency Alliance (NEEA) inquired if the shipments analysis includes new units that are not replacements, nor included in new construction, such as refurbished or retrofit units. (NEEA, Public Meeting Transcript, No. 10 at pp. 89

– 90) Southern Company stated that shipments come not only from replacement and new purchase, but also from retrofit of supplemental dehumidification systems. (Southern Company, Public Meeting Transcript, No. 10 at pp. 90–91) ASAP stated that the market includes people doing retrofit of

b The consumer discount rate differs from the discount rates used in the national impact analysis, which are intended to represent the rate of return on capital in the U.S. economy, as well as the societal rate of return on private consumption.

c Available at www.federalreserve.gov/econresdata/scf/scfindex.htm

.2-20

supplemental dehumidification systems in existing homes and ASAP wondered if any data were available on the retrofit trend. (ASAP, Public Meeting Transcript, No. 10 at pp. 91

– 92)

While DOE has no shipments data specific to the retrofit or refurbish market, this market

is covered in DOE’s first-time owners shipments estimation, described above.

Southern Company also commented that recent versions of the International Energy

Conservation Code (IECC) address the need for supplemental dehumidification, but that most building codes didn't adopt these requirements until about 2009. Southern Company stated as an example that the Florida Solar Energy Center has researched the need to require in Florida’s building code supplemental dehumidification in certain very humid areas of the State. Southern Company stated that shipments trend in the last few years may have a different pattern than in earlier years due to building codes. (Southern Company, Public Meeting Transcript, No. 10 at pp. 57– 58, 87

– 88)

In a July 2013 report published for DOE by the Building Sciences Corporation, it was noted that most building efficiency improvements made in response to building code requirements and above-code incentiv e programs result in lowering sensible heat gains while latent (moisture) gains remain mostly unchanged. 5 Therefore, building codes are not driving the wide-scale implementation of supplemental dehumidification at this time, and are thus unlikely to have significantly affected dehumidifier shipments over the past few years.

2.9 National Impact Analysis

The NIA assesses the NES and the NPV from a national perspective of total consumer costs and savings expected to result from new or amended energy conservation standards at specific efficiency levels. DOE determined the NPV and NES for the standard levels considered for the dehumidifier product classes analyzed. DOE prepared a Microsoft Excel spreadsheet that uses typical values (as opposed to probability distributions) as inputs. To assess the effect of input uncertainty on NES and NPV results, DOE has developed its spreadsheet model to conduct sensitivity analyses by running scenarios on specific input variables.

Analyzing impacts of potential energy conservation standards for dehumidifiers requires comparing projections of U.S. energy consumption with amended energy conservation standards against projections of energy consumption without amended standards. The forecasts include projections of annual appliance shipments, the annual energy consumption of new appliances, and the purchase price of new appliances.

A key component of DOE’s NIA is the energy efficiency forecasted over time for the base case (without new standards) and each of the standards cases. The forecasted efficiencies represent the annual shipment-weighted energy efficiency of the products under consideration during the forecast period ( i.e. , from the assumed compliance date of a new standard to 30 years after compliance is required).2-21

DOE developed a distribution of efficiencies in the base case for 2019 (the assumed compliance date for amended standards) for each dehumidifier product class. In each standards case, a “roll-up” scenario approach was applied to establish the efficiency distribution for 2019. Under the “roll-up” scenario, product efficiencies in the base case that do not meet the standard level under consideration would “roll-up” to meet the new standard level; and product

efficiencies above the standard level under consideration would not be affected. In addition to a

“roll -up” scenario, DOE developed a shift scenario. In the shift scenario DOE applied an annual growth rate in average energy efficiency, as it is done in the base case. To develop standards case forecasted SWIEFs, DOE developed growth trends for each candidate standard level that maintained the same per-unit average total installed cost difference for the year 2019 between the base case and each standards case over the entire forecast period (2019– 2048). DOE’s approach for developing standards case SWIEFs in this manner assumes that the rate of adoption of more efficient products under the standards case can occur only at a rate which ensures that the average total installed cost difference between the standards case and base case over the entire forecast period is held constant. Because the total installed cost versus efficiency relationship for each product class demonstrates an increasing cost rate for more efficient products, the SWIEF growth rate for each standards case is lower than the SWIEF growth rate for the base case.

DOE assumed that energy efficiencies for all dehumidifier product classes will increase at a rate of 0.25% per year in absence of standard. The growth rates in the standard cases are slightly lower than in the base case. Note that for the standards cases, the efficiency trend does not increase past the max tech level.

2.9.1 National Energy Savings Analysis

The inputs for determining the national energy savings for each product analyzed are: (1) annual energy consumption per unit; (2) shipments; (3) product or equipment stock; (4) national energy consumption; and (5) site- to -source conversion factors. DOE calculated the national energy consumption by multiplying the number of units (stock) of each product (by vintage or age) by the unit energy consumption (also by vintage). Vintage represents the age of the product. DOE calculated annual NES based on the difference in national energy consumption for the base case (without new efficiency standards) and for each higher efficiency standard. DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savings to source (primary) energy using annual conversion factors derived from the most recent version of the National Energy Modeling System (NEMS). Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis.

Chapter 10 of this preliminary TSD presents primary energy savings for the considered efficiency levels.2-22

2.9.2 Net Present Value Analysis

The parameters for determining NPV are the present value of costs and the present value of savings. The inputs for the present value of costs and the present value of savings include (1) total annual installed cost; (2) total annual savings in operating costs; (3) a discount factor to calculate the present value of costs and savings; DOE determined the net savings for each year as

the difference between the base case and each standards case in terms of total savings in operating costs versus total increases in installed costs. DOE calculated savings over the lifetime of products shipped in the forecast period. DOE calculated NPV as the difference between the present value of operating cost savings and the present value of total installed costs. DOE used a discount factor based on real discount rates of 3 and 7 percent to discount future costs and savings to present values.

For the NPV analysis, DOE calculates increases in total installed costs as the difference in total installed cost between the base case and standards case ( i.e. , once the standards take effect). Because the more-efficient products bought in the standards case usually cost more than products bought in the base case, cost increases appear as negative values in the NPV.

DOE expresses savings in operating costs as decreases associated with the lower energy consumption of products bought in the standards case compared to the base case. Total savings in operating costs are the product of savings per unit and the number of units of each vintage that survive in a given year.

DOE used the most recent available edition of EIA’s Annual Energy Outlook ( AEO 2013 ) as the default source of projections for future energy prices and total housing stock. It will also calculate the NPV assuming higher and lower economy growth scenarios from the AEO

.

DOE uses the 3 -percent and 7-percent real discount rates in accordance with guidance provided by the Office of Management and Budget (OMB) to Federal agencies on the development of regulatory analysis. (OMB Circular A-4 (Sept. 17, 2003), section E, “Identifying and Measuring Benefits and Costs”)

2.10 Consumer Subgroup Analysis

DOE intends to evaluate impacts on consumer subgroups, especially low-income and senior consumers during any subsequent NOPR analysis. During the preliminary analysis, DOE has identified consumer subgroups that it believes may be affected disproportionately by new or revised energy conservation standards.

At any subsequent NOPR stage of this rulemaking, DOE will conduct a LCC subgroup analysis. A consumer subgroup comprises a subset of the population that may be affected disproportionately by new or revised energy conservation standards ( e.g. , low -income consumers, seniors). The purpose of a subgroup analysis is to determine the extent of any such disproportional impacts.2-23

2.11 MANUFACTURER IMPACT ANALYSIS

DOE performed a preliminary manufacturer impact analysis (MIA) to estimate the financial impact of higher energy conservation standards on manufacturers of residential dehumidifiers, and to calculate the impact of such standards on employment and manufacturing capacity. The MIA has both quantitative and qualitative aspects. The quantitative part of the MIA relies on the government regulatory impact model (GRIM), an industry-cash-flow model customized for this industry. The following is an overview of the information DOE collected and the analysis that was conducted during the preliminary MIA. For more detail on the MIA, see

ch apter 12 of the preliminary TSD.

2.11.1 Industry Cash -Flow Analysis

The industry cash-flow analysis relies primarily on the GRIM. DOE uses the GRIM to analyze the financial impacts of more stringent energy conservation standards on the industrythat produces the products covered by the standard. For more information on the industry cashflow analysis, refer to chapter 12 of the preliminary TSD.

2.11.2 Manufacturer Subgroup Analysis

Industry cost estimates are not adequate to assess differential impacts among subgroup s of manufacturers. For example, small and niche manufacturers, or manufacturers whose cost structure differs significantly from the industry average, could experience a more negative impact from the imposition of standards. Ideally, DOE would consider the impact on every firm individually; however, since this usually is not possible, DOE typically uses the results of the industry characterization to group manufacturers exhibiting similar characteristics.

DOE outlined the process it uses to establish manufacturer subgroups in the framework document and sought comment from interested parties on any potential subgroups within the dehumidifier industry. DOE did not receive any comments in response, but its research suggests

that there are at least five residential dehumidifier manufacturers in the United States that are designated as small businesses pursuant to size standards established by the U.S. Small Business

Administration. DOE therefore seeks comment on its estimates of the number of small businesses who may be impacted by the rule and what those impacts might be.

2.11.3 Competitive Impacts Assessment

DOE must also consider whether a new standard is likely to reduce industry competition, and the Attorney General must determine the impacts, if any, of any reduced competition. DOE will gather and report available firm-specific financial information and impacts. The competitive2-24

impacts assessment will focus on assessing the impacts on smaller manufacturers. DOE will base this assessment on manufacturing cost data and information collected from interviews with manufacturers. The manufacturer interviews will focus on gathering information to help assess asymmetrical cost increases to some manufacturers, increased proportion of fixed costs potentially increasing business risks, and potential barriers to market entry ( e.g. , proprietary technologies). The notice of proposed rulemaking will be submitted to the Attorney General for a review of the impacts of standards on competition. The Attorney General’s comments on th e proposed rule will be considered in preparing the final rule.

2.11.4 Cumulative Regulatory Burden

DOE recognizes and seeks to mitigate the overlapping effects on manufacturers of new or revised DOE standards and other regulatory actions affecting the same equipment. 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 regulations relevant to residential dehumidifiers, including amended energy conservation standards for other products made by dehumidifier manufacturers and international energy

conservation standards.

The cumulative burden typically focuses on the impacts of other product-specific Federal requirements on manufacturers of the covered products with a compliance date 3 years prior to and 3 years after the anticipated compliance dates of the amended energy conservation standards of this rulemaking. DOE discusses these and other regulations in chapter 12 of the preliminary

TSD.

2.11.5 Preliminary Results for the Manufacturer Impact Analysis

As part of the preliminary MIA, DOE discussed potential impacts of amended energy conservation standards with companies representing a majority of residential dehumidifier sales.

The se discussions took place during the interviews DOE conducted for the engineering analysis. The interviews provided valuable information that DOE used to evaluate the impacts of amended energy conservation standards on manufacturers’ cash flows, manufacturing capacities, and employment levels. DOE discusses its findings from the preliminary MIA interviews in the executive summary and in chapter 12 of the preliminary TSD.

2.12 Emissions Analysis

In the emissions analysis, DOE will estimate the reduction in power sector emissions of carbon dioxide (CO 2 ), nitrogen oxides (NO X ), sulfur dioxide (SO 2 ) and mercury (Hg) from potential energy conservation standards for the considered products. In addition, DOE will estimate emissions impacts in production activities (extracting, processing, and transporting fuels) that provide the energy inputs to power plants. These are referred to as “upstream” emissions. Together, these emissions account for the full-fuel -cycle (FFC). In accordance with DOE’s FFC Statement of Policy (76 FR 51282 (Aug. 18, 2011) and 77 FR 49701 (Aug. 17,2-25

2012)), the FFC analysis includes impacts on emissions of methane and nitrous oxide, both of which are recognized as greenhouse gases.

DOE conducts the emissions analysis using emissions factors derived from data in the

latest version of EIA’s AEO , supplemented by data from other sources. EIA prepares the AEO using NEMS. Each annual version of NEMS incorporates the projected impacts of existing air quality regulations on emissions. The text below refers to AEO 2013, which generally represents current legislation and environmental regulations, including recent government actions, for which implementing regulations were available as of December 31, 2012.

SO 2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions cap and trading programs. Title IV of the Clean Air Act sets an annual emissions cap on SO 2 for affected EGUs in the 48 contiguous states and the District of Columbia (D.C.). SO 2 emissions from 28 eastern states and D.C. were also limited under the Clean Air Interstate Rule (CAIR), which created an allowan ce -based trading program that operates along with the Title IV program in those States and D.C. 70 FR 25162 (May 12, 2005). CAIR was remanded to EPA by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), but it remained in effect. See North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008);

North Carolina v. EPA , 531 F.3d 896 (D.C. Cir. 2008). On July 6, 2011 EPA issued a replacement for CAIR, the Cross-State Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the D.C. Circuit issued a decision to vacate CSAPR. See EME Homer City Generation, LP v. EPA , 696 F.3d 7, 38 (D.C. Cir. 2012). The court ordered EPA to continue administering CAIR. AEO 2013 assumes that CAIR remains a binding regulation through 2040. d

The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of emissions allowances and tradable permits. Under existing EPA regulations, any excess SO 2 emissions allowances resulting from the lower electricity demand caused by the adoption of an efficiency standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. In past rulemakings, DOE recognized that there was uncertainty about the effects of efficiency standards on SO 2 emissions covered by the existing cap-and-trade system, but it concluded that no reductions in power sector emissions would occur for SO 2 as a result of standards.

Beginning in 2015, however, SO 2 emissions will fall as a result of the Mercury and Air Toxics Standards (MATS) for power plants, which were announced by EPA on December 21,

d On April 29, 2014, the U.S. Supreme Court reversed the judgment of the D.C. Circuit and remanded the case for further proceedings consistent with the Supreme Court's opinion. The Supreme Court held in part that EPA's methodology for quantifying emissions that must be eliminated in certain states due to their impacts in other downwind states was based on a permissible, workable, and equitable interpretation of the Clean Air Act provision that provides statutory authority for CSAPR. See EPA v. EME Homer City Generation, No 12-1182, slip op. at 32 (U.S. April 29, 2014). Because DOE is using emissions factors based on AEO 2013 for today's preliminary analysis, the preliminary analysis assumes that CAIR, not CSAPR, is the regulation in force. The difference between CAIR and CSAPR is not relevant for the purpose of DOE’s analysis of SO 2 emissions.2-26

2011. 77 FR 9304 (Feb. 16, 2012). In the final MATS rule, EPA established a standard for HCl as a surrogate for acid gas hazardous air pollutants (HAP), and also established a standard for

SO 2 (a non-HAP acid gas) as an alternative equivalent surrogate standard for acid gas HAP. The same controls are used to reduce HAP and non-HAP acid gas; thus, SO 2 emissions will be reduced as a result of the control technologies installed on coal-fired power plants to comply with the MATS requirements for acid gas. AEO 2013 assumes that, in order to continue operating, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed by 2015. Both technologies, which are used to reduce acid gas emissions, also reduce

SO 2 emissions. Under the MATS, NEMS shows a reduction in SO 2 emissions when electricity demand decreases ( e.g. , as a result of energy efficiency standards). Emissions will be far below the cap that would be established by CSAPR, so it is unlikely that excess SO 2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO 2 emissions by any regulated EGU. Therefore, DOE believes that efficiency standards will reduce SO 2 emissions in 2015 and beyond.

CAIR established a cap on NO X emissions in eastern States and the District of Columbia. Energy conservation standards are expected to have little or no physical effect on these emissions in those States covered by CAIR because excess NO X emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NO X emissions. However, standards would be expected to reduce NO

x emissions in the States not affected by the caps, so DOE estimates NO X emissions reductions from potential standards in the States where emissions are not capped.

The MATS limit mercury emissions from power plants, but they do not include emissions caps and, as such, DOE’s energy conservation standards would likely reduce mercury emissions. DOE will estimate mercury emissions reduction using emissions factors based on AEO 2013

, which incorporates the MATS.

Power plants may emit particulates from the smoke stack, which are known as direct particulate matter (PM) emissions. NEMS does not account for direct PM emissions from power plants. DOE is investigating the possibility of using other methods to estimate reduction in PM emissions due to standards. The great majority of ambient PM associated with power plants is in the form of secondary sulfates and nitrates, which are produced at a significant distance from power plants by complex atmospheric chemical reactions that often involve the gaseous emissions of power plants, mainly SO 2 and NO X . The monetary benefits that DOE estimates for

reductions in SO 2 and NO X emissions resulting from standards are in fact primarily related to the

health benefits of reduced ambient PM.

2.13 Monetization of Emissions Reduction Benefits

DOE plans to consider the estimated monetary benefits likely to result from the reduced

emissions of CO 2 and NO X that are expected to accompany each of the standard levels

considered.2-27

To estimate the monetary value of benefits resulting from reduced emissions of CO 2 , DOE plans to use the most current Social Cost of Carbon (SCC) values developed and/or agreed to by an interagency process. The SCC is intended to be a monetary measure of the incremental damage resulting from greenhouse gas (GHG) emissions, including, but not limited to, net agricultural productivity loss, human health effects, property damage from sea level rise, and changes in ecosystem services. Any effort to quantify and to monetize the harms associated with climate change will raise serious questions of science, economics, and ethics. But with full regard for the limits of both quantification and monetization, the SCC can be used to provide

estimates of the social benefits of reductions in GHG emissions.

The Interagency Working Group on Social Cost of Carbon released an update of its previous report e in 2013. 6 The most recent estimates of the SCC in 2015, expressed in 2013 $, are
$ 12.0, $40.5, $62.4, and $119 per metric ton of CO 2 avoided. For emissions reductions that occur in later years, these values grow in real terms over time. Additionally, the interagency group determined that a range of values from 7 percent to 23 percent should be used to adjust the global SCC to calculate domestic effects, although DOE will give preference to consideration of the global benefits of reducing CO 2 emissions.

DOE multiplies the CO 2 emissions reduction estimated for each year by the SCC value for that year in each of the four cases. To calculate a present value of the stream of monetary values, DOE discounts the values in each of the four cases using the discount rates that had been

used to obtain the SCC values in each case.

DOE recognizes that scientific and economic knowledge continues to evolve rapidly as to

the contribution of CO 2 and other GHG to changes in the future global climate and the potential resulting damages to the world economy. Thus, these values are subject to change.

DOE also estimates the potential monetary benefit of reduced NO X emissions resulting from the standard levels it considers. DOE calculates monetary benefits using a medium value

for NO X emissions of $2,6 84 per short ton (in 2013$), and real discount rates of 3 percent and 7

percent.

DOE is evaluating appropriate valuation of avoided SO 2 and Hg emissions. Whether monetization of reduced Hg emissions will occur in this rulemaking is yet to be determined.

AHAM commented that DOE’s analysis regarding monetization of carbon dioxide should be a more comprehensive analysis to understand the total environmental impact. It stated that if a CO2 analysis is done, the analysis should include CO2 emissions that are caused indirectly, as well as directly, from a standards change, such as increased carbon emissions required to

e Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 . Interagency Working Group on Social Cost of Carbon, United States Government, February 2010. http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost- of -Carbon- for -RIA.pdf

.2-28

manufacture a given standard level, the increased transportation and related emissions required for a given standard level, and reduced carbon emissions from peak load reductions. (AHAM, No. 8 at p. 5)

DOE’s emissions analysis does consider reduced carbon emissions from changes in electricity generation. Regarding indirect emissions, the considerations that DOE applies to energy savings also apply to emissions reductions. EPCA directs DOE to consider the total projected amount of energy, or as applicable, water, savings likely to result directly from the imposition of the standard when determining whether a standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(III) and 6316(a)) DOE interprets this to include energy used in the generation, transmission, and distribution of fuels used by appliances or equipment, as well as the energy consumed in extracting, processing, and transporting primary fuels. DOE’s current accounting of full-fuel -cycle energy savings is directly linked to the energy used by appliances or equipment. DOE believes that energy used in manufacturing or transporting of appliances or equipment falls outside the boundaries of “directly” as intended by EPCA. Thus, DOE does not plan to consider such energy use and associated emissions in the NIA or the emissions analysis.

2.14 Utility Impact Analysis

To estimate the impacts of potential energy conservation standards for dehumidifiers on the electric utility industry, DOE will use a variant of the EIA’s National Energy Modeling System called NEMS-BT. f NEMS is a large, multi-sectoral, partial-equilibrium model of the U.S. energy sector that EIA has developed over several years, primarily for the purpose of preparing

the AEO . NEMS produces a widely recognized forecast for the United States through 2035 and is available to the public.

The utility impact analysis is a comparison of the NEMS-BT model results between the base case and standard cases. Outputs of the utility impact analysis usually parallel results that appear in the latest AEO , with some additions. The utility impact analysis reports the changes in installed capacity and generation that result from each standard level by plant type. DOE will model the anticipated energy savings impacts from potential amended energy conservation standards using NEMS-BT to generate forecasts that deviate from the AEO Reference Case.

Southern Company commented that rapid changes are occurring in the electric utility market and that NEMS-BT will handle that, but using the most up- to -date possible information

f For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information Administration documentation. A useful summary is National Energy Modeling System: An Overview 2000

, DOE/EIA-0581 (March 2000), available at : http://tonto.eia.doe.gov/ftproot/forecasting/05812000.pdf . EIA approves use of the name NEMS to describe only an official version of the model without any modification to code or data. Because this analysis entails some minor code modifications and the model is run under various policy scenarios that are variations on EIA assumptions, DOE refers to the model by the name NEMS-BT. (“BT” refers to DOE’s Building Technologies Program, under whose aegis this work is performed.)2-29

in that particular area will be very important. (Southern Company, Public Meeting Transcript, No. 10 at p. 104) DOE will use the most current version of NEMS-BT and the latest inputs.

2.15 Employment Impact Analysis

The adoption of energy conservation standards can affect employment both directly and indirectly. Direct employment impacts are changes in the number of employees at the plants that produce the covered products, along with affiliated distribution and service companies. DOE will evaluate direct employment impacts in the MIA.

Indirect employment impacts may result from expenditures shifting between goods (the substitution effect) and changes in income and overall expenditure levels (the income effect) that occur due to standards. DOE defines indirect employment impacts from standards as net jobs eliminated or created in the general economy as a result of increased spending driven by increased product prices and reduced spending on energy.

The indirect employment impacts will be investigated in the employment impact analysis using the Pacific Northwest National Laboratory’s “Impact of Sector Energy Technologies” (ImSET) model. 7 The ImSET model was developed for DOE’s Office of Planning, Budget, and Analysis to estimate the employment and income effects of energy-saving technologies in buildings, industry, and transportation. Compared with simple economic multiplier approaches, ImSET allows for more complete and automated analysis of the economic impacts of energy

conservation investments.

2.16 Regulatory Impact Analysis

In the NOPR stage, DOE will prepare a regulatory impact analysis (RIA) that evaluates potential non-regulatory policy alternatives, comparing the costs and benefits of each to those of the proposed standards. DOE recognizes that non-regulatory policy alternatives can substantially affect energy efficiency or reduce energy consumption. DOE will base its assessment on the actual impacts of any such initiatives to date, but also will consider information presented by interested parties regarding the potential future impacts of current initiatives.

2.17 REFERENCES

1 “Residential Energy Consumption Survey: 2009 RECS Survey Data,” 2013. U.S. Department of Energy: Energy Information Administration. Available online at: http://www.eia.gov/consumption/residential/data/2009/ . (Accessed November 30, 2013).2-30

2 Willem, Henry et al.

, “Using Field-Metered Data to Quantify Annual Energy Use of Residential Portable Unit Dehumidifiers,” 2013. Lawrence Berkeley National Laboratory. Berkeley, CA. Report No. LBNL-6469 E.

3 Id

.

4 Willem, Henry et al.

, “Field-Monitoring of Whole-Home Dehumidifiers: Initial Results of a Pilot Study,” 2013. Lawrence Berkeley National Laboratory. Berkeley, CA. Report No. LBNL6475E.

5 Rudd, Armin. “Supplemental Dehumidification in Warm-Humid Climates”, Building America Report – 1310

, Building Science Consortium, Prepared for the U.S. Department of Energy, July 2013, p. 4.

6 “Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, ” May 2013; revised November 2013. Interagency Working Group on Social Cost of Carbon, United States Government. Available online at:http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-ofcarbon-for-regulator-impact-analysis.pdf . (Accessed November 30, 2013).

7 Roop, J. M., M. J. Scott, and R. W. Schultz, “ImSET: Impact of Sector Energy Technologies,” 2005. Pacific Northwest National Laboratory. Richland, WA. Report No. PNNL-15273.