Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Notices 56413 

1 42 U.S.C. 6836(b)(2) and (3). 

its final report of findings and 

recommendations in October 2010. 

On February 2, 2011, the Secretary of 

Energy appointed new members to his 

Ultra-Deepwater Advisory Committee 

(UDAC), and met with the members on 

February 23, 2011 to discuss his goals 

for offshore research and development. 

Before presenting its final report of 

findings and recommendations to the 

Secretary in April 2011, the UDAC 

established a Subcommittee on Risk 

Assessment. 

The Department of Energy will be 

continually informed by the UDAC 

based on the work of its Subcommittee 

on Risk. In addition, other Federal 

advisory bodies will help inform the 

Department. These include the 

Secretary of Energy Advisory Board 

(SEAB) which established a 

Subcommittee on Natural Gas, and the 

Department of the Interior’s Ocean 

Energy Safety Committee (OESC) which 

has established four subcommittees 

including the Spill Prevention 

Subcommittee, and the Containment 

Subcommittee. The Department of 

Energy is a member of the OESC. The 

Department will take new information 

into account in the preparation of 

solicitations and the selection of 

research projects for the 2011 portfolio. 

Issued in Washington, DC, on September 7, 

2011. 

Christopher A. Smith, 

Deputy Assistant Secretary, Office of Oil and 

Natural Gas, Office of Fossil Energy. 

[FR Doc. 2011–23328 Filed 9–12–11; 8:45 am] 

BILLING CODE 6450–01–P 

DEPARTMENT OF ENERGY 

Office of Energy Efficiency and 

Renewable Energy 

[Docket No. EERE–2011–BT–BC–0046] 

Building Energy Codes Cost Analysis 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Request for information. 

SUMMARY: The U.S. Department of 

Energy (DOE) is soliciting public input 

on how it may improve the 

methodology DOE intends to use for 

assessing cost effectiveness (which 

includes an energy savings assessment) 

of changes to residential building energy 

codes. DOE supports the development 

of the International Code Council’s (ICC) 

International Energy Conservation Code 

(IECC), the national model code adopted 

by or forming the basis of residential 

energy codes promulgated by a majority 

of U.S. states, as well as other voluntary 

building energy codes. DOE performs a 

cost effectiveness analysis of proposed 

modifications to the codes as part of that 

support. DOE also performs an analysis 

of cost effectiveness of new code 

versions. DOE is interested in public 

input on its methodology, preferred data 

sources, and parameter assumptions. 

DOE is publishing this request for 

information to allow interested parties 

to provide suggestions, comments, and 

other information. This notice identifies 

several areas in which DOE is 

particularly interested in receiving 

information; however, any input and 

suggestions considered relevant to the 

topic are welcome. 

DATES: Written comments and 

information are requested by October 

13, 2011. 

ADDRESSES: Interested persons may 

submit comments in writing, identified 

by docket number EERE–2011–BT–BC– 

0046, by any of the following methods: 

E-mail: Res-CEAM-2011-BC0046@ee.doe.gov. Include EERE–2011– 

BT–BC–0046 in the subject line of the 

message. 

Mail: Ms. Brenda Edwards, U.S. 

Department of Energy, Building 

Technologies Program, Mailstop EE–2J, 

Building Energy Codes, 1000 

Independence Avenue, SW., 

Washington, DC 20585–0121. Phone 

(202) 586–2945. Please submit one 

signed paper original. 

Hand Delivery/Courier: Ms. Brenda 

Edwards, U.S. Department of Energy, 

Building Technologies Program, 6th 

Floor, 950 L’Enfant Plaza, SW., 

Washington, DC 20024. Phone: (202) 

586–2945. Please submit one signed 

paper original. 

Internet: http://www.regulations.gov/

#!docketDetail;dct=FR+PR+N+O+SR

+PS;rpp=250;so=DESC;sb=postedDate;

po=0;D=EERE-2011-BT-BC-0046. Please 

use the input form and complete all 

required fields. 

Instructions: All submissions received 

must include the agency name and 

docket number. 

Docket: For access to the docket to 

read background documents, or 

comments received, visit the U.S. 

Department of Energy, Resource Room 

of the Building Technologies Program, 

950 L’Enfant Plaza, SW., Suite 600, 

Washington, DC 20024, (202) 586–2945, 

between 9 a.m. and 4 p.m., Monday 

through Friday, except Federal holidays. 

Please call Ms. Brenda Edwards at the 

above telephone number for additional 

information regarding visiting the 

Resource Room. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Robert Dewey, U.S. Department of 

Energy, Office of Energy Efficiency and 

Renewable Energy, Building 

Technologies Program, Mailstop EE–2J, 

1000 Independence Avenue, SW., 

Washington, DC 20585–0121, 

Telephone: (202) 287–1354, E-mail: 

Robert.Dewey@ee.doe.gov. 

Ms. Kavita Vaidyanathan, U.S. 

Department of Energy, Office of the 

General Counsel, Forrestal Building, 

Mailstop GC–71, 1000 Independence 

Ave., SW., Washington, DC 20585, 

Telephone: (202) 586–0669, E-mail: 

kavita.vaidyanathan@hq.doe.gov. 

SUPPLEMENTARY INFORMATION:

Authority and Background 

Section 307(b) of the Energy 

Conservation and Production Act 

(ECPA, Public Law 102–486), as 

amended, directs DOE to support 

voluntary building energy codes by 

periodically reviewing the technical and 

economic basis of the voluntary 

building energy codes and ‘‘seek 

adoption of all technologically feasible 

and economically justified energy 

efficiency measures; and * * * 

otherwise participate in any industry 

process for review and modification of 

such codes.’’ 1

This Request for Information (RFI) 

seeks public input on DOE’s 

methodology for assessing the cost 

effectiveness of proposed changes to 

residential building energy codes and 

new editions of such codes. Historically, 

DOE’s analyses have been conducted in 

an ad hoc manner, with the 

methodology selected based on the type 

of code change contemplated and the 

nature of ongoing stakeholder debates 

on the topic. Because residential energy 

codes lagged advances in residential 

efficiency measures, DOE relied on 

successes in relevant research, 

demonstration, and voluntary beyondcode programs (e.g., Building America, 

ENERGY STAR) rather than directly 

calculating the cost effectiveness of code 

changes. However, recent advances in 

the IECC and other voluntary building 

energy codes have improved the energy 

performance of buildings and building 

components to levels that in many cases 

rival those of the beyond-code 

programs. Consequently, for its future 

efforts advancing and promoting 

voluntary building energy codes, DOE 

sees the need for a consistent and 

transparent methodology for assessing 

the cost effectiveness of code change 

proposals and for assessing the cost 

effectiveness of new code versions. 

DOE intends to use the methodology 

described in this document to address 

DOE’s legislative direction related to 

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56414 Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Notices 

2All code change proposals are publicly available 

and are published by the ICC months before the 

code hearings (open to the public) that determine 

whether the code changes are approved for addition 

to the next edition of the IECC. 

3http://www.energyplus.gov/. 

4 ‘‘Exactly complies’’ means that the prototype 

complies with the primary prescriptive 

manifestation of the code’s requirements. DOE will 

address codes without such primary requirements 

(e.g., a purely performance code) on a case by case 

bais. 

building energy codes. DOE also intends 

to use this methodology to inform its 

participation in the update processes of 

the IECC and other building energy 

codes, both in developing code-change 

proposals and in assessing the proposals 

of others when necessary. DOE further 

intends to use this methodology in 

assessing the cost effectiveness of new 

code versions in lieu of prior versions 

or existing state energy efficiency codes. 

The focus of this RFI is residential 

buildings, which DOE defines in a 

manner consistent with the IECC—oneand two-family dwellings, townhouses, 

and low-rise (three stories or less above 

grade) multifamily residential buildings. 

The cost effectiveness methodology is 

separate from the statutory requirement 

that DOE issue a determination 

‘‘whether such revision would improve 

energy efficiency in residential 

buildings’’ whenever the IECC (as 

successor to the 1992 Model Energy 

Code) is revised (42 U.S.C. 6833(a)(5)). 

The determinations under 42 U.S.C. 

6833 are required only for the IECC, not 

any other building energy codes; require 

analysis of only energy savings, not cost 

effectiveness; and may be based on 

qualitative assessments of energy 

efficiency improvements rather than 

quantitative analysis of energy savings. 

DOE’s methodology is intended to 

assess cost effectiveness based on a 

30-year period of analysis, assuming a 

home buyer takes out a 30-year 

mortgage to purchase the home. This 

approach is intended to represent the 

economic perspective of a typical home 

owner or sequence of owners who own 

the home over the 30-year analysis 

period. The perspective of a single 

30-year owner allows consideration of 

economic impacts on home buyers as 

well as consideration of long-term 

energy savings. 

Steps Included in Assessing Cost 

Effectiveness of Code Changes 

Assessing the cost effectiveness of a 

proposed code change or a newly 

revised code involves three primary 

steps: 

1. Estimating the energy savings of the 

changed code provision(s), 

2. Estimating the first cost of the 

changed provision(s), and 

3. Calculation of the corresponding 

economic impacts of the changed 

provision(s). 

These steps are the focus of this 

Request for Information and are 

described in the sections that follow. 

Estimating Energy Savings of Code 

Changes 

The first step is estimating the energy 

savings of code changes. In estimating 

the energy impact of a code change DOE 

will usually employ computer 

simulation analysis (situations in which 

other analysis approaches might be 

preferred are discussed later). DOE may 

also rely on extant studies that directly 

address the building elements involved 

in a proposed change if such can be 

identified. When evaluating code 

changes proposed by entities other than 

DOE,2 DOE may rely on energy 

estimates provided by the proponent(s) 

if DOE deems the calculations credible. 

Where credible energy savings estimates 

are not available, DOE intends to 

conduct analysis using an appropriate 

building energy estimation tool. DOE 

intends to use the EnergyPlus 3 software 

for its analyses unless the code change 

at hand involves a building component 

or strategy that is outside the scope of 

that software. Such code changes would 

be addressed case by case. 

Code changes affecting a particular 

climate zone would be simulated in a 

weather location representative of that 

zone. Where a code change affects 

multiple climate zones, DOE intends to 

produce an aggregate (national) energy 

impact estimate based on simulation 

results from weather locations 

representative of each zone, weighted to 

account for estimated housing starts by 

zone and other factors representing the 

fraction of homes that would be affected 

by the code change (building types, 

foundation types, fuel/equipment 

types). These methodologies, weighting 

factors, and other assumptions are 

described in the sections that follow. 

Building Energy Use Simulation 

Assumptions and Methodology 

The energy performance of most 

energy-efficiency measures in the scope 

of building energy codes can be 

estimated by computer simulation. In 

estimating the energy performance of 

pre- and post-revision codes, two 

prototype buildings would be 

analyzed—one that exactly complies 

with the pre-revision code and an 

otherwise identical building that exactly 

complies with the revised code under 

analysis.4 These two buildings would be 

simulated in a variety of locations to 

estimate the overall (national average) 

energy impact of the new code. The 

inputs and assumptions used in those 

simulations are discussed in the 

following sections. 

Energy Simulation Tool 

DOE intends to use an hour-by-hour 

simulation tool to calculate annual 

energy consumption for relevant end 

uses. For most situations, the 

EnergyPlus software, developed by 

DOE, would be the tool of choice. 

EnergyPlus provides for detailed hourby-hour simulation of a home’s energy 

consumption throughout a full year, 

based on typical weather data for a 

location. It covers almost all aspects of 

residential envelopes, HVAC equipment 

and systems, water heating equipment 

and systems, and lighting systems. 

Depending on how building energy 

codes evolve, it may be necessary to 

identify additional tools to estimate the 

impacts of some changes. 

Prototypes 

Separate simulations would be 

conducted for single-family and 

multifamily buildings. The prototypes 

used in the simulations are intended to 

represent a typical new one- or twofamily home or townhouse and a lowrise multifamily building (apartment, 

cooperative, or condominium). Five 

foundation types would be examined for 

single-family homes: Vented 

crawlspace, unvented (conditioned) 

crawlspace, slab-on-grade, heated 

basement with wall insulation, and 

unheated basement with insulation in 

the floor above the basement. Table 1 

shows the characteristics DOE intends 

to assume for the single-family 

prototype. Note that any of these 

characteristics may be modified if a 

code change impacts it. 

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Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Notices 56415 

5U.S. Census Bureau. 2006 Characteristics of 

New Housing. http://www.census.gov/const/www/ 

charindex.html. 

6The IECC has eight temperature-oriented climate 

zones crossed with three moisture regimes, for a 

theoretical total of 24 distinct climate zones. 

However, only 15 of the possible zones occur 

within the U.S. 

7See http://rredc.nrel.gov/solar/old_data/nsrdb/ 

tmy2/. 

TABLE 1—SINGLE-FAMILY PROTOTYPE CHARACTERISTICS

Parameter Assumption Notes 

Conditioned floor area ........................................ 2400 ft2 ............................................................ Characteristics of New Housing, U.S. Census 

Bureau. 

Footprint and height ........................................... 30 ft by 40 ft, two-story, 8.5 ft high ceilings.

Area above unconditioned space ....................... 1200 ft2 ............................................................ Over a vented crawlspace or unconditioned 

basement. 

Area below roof/ceilings ..................................... 1200 ft2, 70% with attic, 30% cathedral.

Perimeter length ................................................. 140 ft.

Gross wall area .................................................. 2380 ft2.

Window area (relative to gross wall area) ......... 15%.

Door area ........................................................... 42 ft2.

Internal gains ...................................................... 91,436 Btu/day ................................................. 2006 IECC, Section 404. 

Heating system ................................................... Natural gas furnace ......................................... Efficiency will be based on prevailing federal 

minimum manufacturing standards. Where 

relevant code changes impact different 

heating system types differently, additional 

types will be simulated (see below for 

equipment type weightings). 

Cooling system ................................................... Central electric air conditioning (AC) ............... Minimum manufacturing standards. 

Water heating ..................................................... Natural gas.

For the multifamily building 

prototype, U.S. Census data (2006) 5

show that the size and number of 

dwelling units per building in new 

construction varies greatly. The median 

number of dwelling units per building 

is in the range of 20 to 29 with the 

median floor area per unit in the range 

of 1000 to 1199 ft2. The multifamily 

prototype characteristics intended to be 

used for DOE’s analyses are: 

• A rectangular two-story building 

containing dwelling units with 1200 ft2

of conditioned floor area. 

• 600 ft2 floor area and roof/ceiling 

area per dwelling unit. 

• The average exterior wall perimeter 

per dwelling unit is 43 ft, which is set 

to a 20 by 23 ft rectangle in the 

simulations. With 8.5 ft ceilings, the 

wall area is 731 ft2 per dwelling unit. 

The 43 ft perimeter is based on 

assuming a 20-unit building that is 

30-ft wide and 400-ft long, yielding an 

860-ft perimeter, which averages 43 ft 

per dwelling unit. (The dimensions 

used here represent average values of 

both middle and end units, yielding a 

hypothetical dwelling unit with 

dimensions that do not exactly match 

the conditioned floor area.). 

• 42 ft2 of exterior door area per 

dwelling unit. 

• 54668 Btu/day internal gains per 

dwelling unit (2006 IECC). 

• Window area is estimated at 14% of 

the conditioned floor area. 

The heating, cooling, and water 

heating system characteristics are the 

same as for the single-family prototype 

(each dwelling unit is assumed to have 

its own separate heating and cooling 

equipment). 

Weather Locations 

Simulations (and other analyses as 

appropriate) would be conducted in one 

weather location per climate zone in the 

code, including a separate location for 

each moisture regime, for a total of 15 

climate locations.6 Simulation results 

from the climate zones would be 

weighted based on new residential 

building permit data obtained from the 

U.S. Census Bureau. Table 2 shows the 

shares of national construction by IECC 

primary climate zone based on year2000 Census data. More than 90% of the 

construction occurred in climate zones 

2 through 5. Climate zones 7 and 8 are 

combined here, because zone 8 

(northern Alaska) represents only a 

small fraction of the national 

construction activity. 

Within a climate zone, simulation 

results from different moisture regimes 

would be weighted based on population 

densities estimated from USGS 

Populated Places data. Table 3 shows 

the climate locations, each of which is 

represented by a Typical Meteorological 

Year (TMY2) 7 file. The final column 

shows the final weight intended to be 

applied to each TMY2 location, based 

on a combination of the within-zone 

weight of the previous column and the 

by-zone housing starts of Table 2. 

TABLE 2—HOUSING START SHARES BY

CLIMATE ZONE

Climate zone Percentage of 

building permits 

1 ...................................... 2 

2 ...................................... 19 

3 ...................................... 27 

4 ...................................... 19 

5 ...................................... 27 

6 ...................................... 6 

7 & 8 ............................... 0 .3 

TABLE 3—CLIMATE LOCATIONS USED IN ENERGY SIMULATIONS WITH CLIMATE ZONE AND MOISTURE REGIME WEIGHTS

Climate zone Moisture regime 

Representative location Regime weight 

within zone 

(percent) 

Overall location 

weight 

State City HDD(65) * CDD(65) ** (percent) 

1 .................... Moist .................. Florida ................ Miami ................. 139 4157 100 2 

2 .................... Dry ..................... Arizona ............... Phoenix .............. 1350 4162 17 3 .2 

Moist .................. Texas ................. Houston .............. 1371 3012 83 15 .8 

3 .................... Dry ..................... Texas ................. El Paso .............. 2708 2094 47 12 .7 

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56416 Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Notices 

8Briggs, R. S., R. G. Lucas, and Z. T. Taylor. 2002. 

Climate Classification for Building Energy Codes 

and Standards: Part 2—Zone Definitions, Maps, 

and Comparisons. ASHRAE Transactions, Vol. 109, 

Part 1. Atlanta, Georgia. 

9http://www.census.gov/const/www/ 

charindex.html. 

10 Ibid. 

11 Ibid. 

12U.S. DOE. 2005. Residential Energy 

Consumption Survey (Table HC5.2). http:// 

www.eia.doe.gov/emeu/recs2005/hc2005 tables/ 

detailed tables2005.html. 

TABLE 3—CLIMATE LOCATIONS USED IN ENERGY SIMULATIONS WITH CLIMATE ZONE AND MOISTURE REGIME WEIGHTS— 

Continued 

Climate zone Moisture regime 

Representative location Regime weight 

within zone 

(percent) 

Overall location 

weight 

State City HDD(65) * CDD(65) ** (percent) 

Marine ................ California ............ San Francisco .... 3005 65 13 3 .5 

Moist .................. Tennessee ......... Memphis ............ 3082 2118 40 10 .8 

4 .................... Dry ..................... New Mexico ....... Albuquerque ....... 4562 941 3 0 .6 

Marine ................ Oregon ............... Salem ................. 4927 247 10 1 .9 

Moist .................. Maryland ............ Baltimore ............ 4068 1608 87 16 .5 

5 .................... Dry ..................... Idaho .................. Boise .................. 5861 754 13 3 .5 

Moist .................. Illinois ................. Chicago .............. 5753 989 87 23 .5 

6 .................... Dry ..................... Montana ............. Helena ................ 8031 386 11 0 .7 

Moist .................. Vermont ............. Burlington ........... 7771 388 89 5 .3 

7 .................... ............................ Minnesota .......... Duluth ................. 9169 223 100 0 .2 

8 .................... ............................ Alaska ................ Fairbanks ........... 13697 44 100 0 .1 

* HDD = heating degree-days, base 65F. 

** CDD = cooling degree-days, base 65F. 

The locations in Table 3 were selected 

to be reasonably representative of their 

respective climate zones by Briggs et al. 

(2002).8

Note that the above assumes that the 

climate basis of the revised code is the 

same as that of the previous code. 

Revisions that change the climate zones 

or switch to a new climate basis would 

require development of a custom 

procedure to capture the impacts on 

residential energy efficiency. 

Default Assumptions 

Input values for building components 

that do not differ between the two 

subject codes would be set to match a 

shared code requirement if one exists, to 

match standard reference design 

specifications from the code’s 

performance path if the component has 

such specifications, or to match best 

estimates of typical practice otherwise. 

Because such component inputs are 

used in both pre- and post-revision 

simulations, their specific values are of 

secondary importance and it is 

important only that they be reasonably 

typical of the construction types being 

evaluated. 

Weighting Factors 

Building Types 

Building permit data for 2006 through 

2010 indicate that 22% of new 

construction in terms of total dwelling 

units is multifamily (Census 2011).9

However, only 60% of these dwelling 

units are ‘‘low-rise’’ units, the other 

40% being in buildings of four stories or 

more in height and therefore falling 

under the IECC’s nonresidential 

provisions.10 Therefore, about 13.2% 

(0.22 × 0.60) of all residential dwelling 

units are in multifamily buildings that 

fall under the purview of the residential 

requirements of the IECC. About 8.8% 

(0.22 × 0.4) of all residential dwelling 

units fall under the nonresidential IECC 

classification. Thus, low-rise 

multifamily dwelling units account for 

about 14.5% (0.132/(1 ¥ 0.088)) of 

dwelling units classified as residential 

in the IECC. This figure would be used 

to aggregate results from DOE’s singlefamily and multifamily simulation 

results. 

TABLE 4—BUILDING TYPE SHARES

[PERCENT] 

Building type 

Weighting 

factor 

(percent) 

Single-Family ........................ 84 

Multifamily ............................. 16 

Foundation Types 

Simulations would be based on a 

vented crawlspace foundation except in 

cases that deal explicitly with changes 

to requirements for other foundation 

types. In the latter cases, foundationspecific energy changes would be 

weighted by an estimate of foundation 

shares in each climate zone. These 

shares are estimated from the Census 

Bureau data for 2004 housing 

characteristics data (Census 2006) 11

shown in Table 5. 

TABLE 5—FOUNDATION TYPE SHARES (PERCENT) BY CENSUS ZONE

Zone Basement Slab Crawlspace 

Northeast ..................................................................................................................................... 84 13 3 

Midwest ........................................................................................................................................ 76 17 6 

South ............................................................................................................................................ 12 70 17 

West ............................................................................................................................................. 15 65 20 

Total ............................................................................................................................................. 31 54 15 

The data in Table 5 provide the 

fraction of new residences having 

basements, but do not distinguish 

conditioned from unconditioned 

basements. DOE estimates the shares of 

conditioned and unconditioned 

basements based on data from the DOE 

Residential Energy Consumption Survey 

(DOE 2005).12

Because foundation share data is 

available only for census zones, not 

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Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Notices 56417 

13http://www.census.gov/const/www/ 

charindex.html. 14 In DOE’s proposal to add duct testing 

requirements to the 2009 IECC energy savings was 

approximated based on findings from extant postoccupancy studies of duct leakage rather than by 

simulation. These studies include: Washington 

State University. 2001. Washington State Energy 

Code Duct Leakage Study Report. WSUCEEP01105. 

Washington State University Cooperative Extension 

Energy Program, Olympia, Washington. Hales, D., 

A. Gordon, and M. Lubliner. 2003. 2003. Duct 

Leakage in New Washington State Residences: 

Findings and Conclusions. ASHRAE transactions. 

KC–2003–1–3. Hammon, R. W., and M. P. Modera. 

1999. ‘‘Improving the Efficiency of Air Distribution 

Systems in New California Homes-Updated 

Report.’’ Consol. Stockton, California. Journal of 

Light Construction. April 2003. ‘‘Pressure-Testing 

Ductwork.’’ Michael Uniacke. Sherman et al. 2004. 

Instrumented HERS and Commissioning. Xenergy. 

2001. Impact Analysis Of The Massachusetts 1998 

Residential Energy Code Revisions. http:// 

www.mass.gov/Eeops/docs/dps/inf/ 

inf_bbrs_impact_analysis_final.pdf. 

Where better data on the distribution of actual 

leakage rates available, a more rigorous analysis 

might have been contemplated. 

15Although this is a hypothetical illustration, a 

similar issue did arise in DOE’s proposal to add 

duct testing requirements to the 2009 IECC 

described in Footnote 14. 

IECC climate zones, it is necessary to 

estimate the climate zone shares from 

census data and general knowledge 

about regional construction techniques 

(e.g., basements are almost never used 

in the far south). Table 6 shows the 

shares DOE intends to assume. 

TABLE 6—FOUNDATION TYPE SHARES (PERCENT) BY 2006 IECC CLIMATE ZONE

Climate zone Heated 

basement Crawlspace Slab-on-grade Unheated basement 

1 ....................................................................................................................... 0 0 100 0 

2 ....................................................................................................................... 0 5 95 0 

3 ....................................................................................................................... 10 15 70 5 

4 ....................................................................................................................... 30 20 40 10 

5 ....................................................................................................................... 45 20 20 15 

6 ....................................................................................................................... 65 10 5 20 

7 & 8 ................................................................................................................ 70 5 5 20 

Equipment/Fuel Types and Energy 

Costs 

The impacts of code changes would 

be estimated for multiple fuel/ 

equipment types and the results 

weighted by equipment type shares 

derived from Census construction data 

for new houses. 55% of new singlefamily homes in 2010 used natural gas 

for heating, 39% used electric heat 

pumps, and 6% used electric resistance 

furnaces.13 For new multifamily 

dwellings, 36% used natural gas for 

heating, 49% used electric heat pumps, 

and 15% used electric resistance 

furnaces. Only 1% of new single-family 

and multifamily used oil, so this heating 

type would not be analyzed separately 

for national-average analyses as it does 

not have a significant share of the 

national market. These shares would be 

used to weight results for all residential 

buildings. Electric central air 

conditioning would be assumed in all 

climates. 

Provisions Requiring Special 

Consideration 

Some building components and/or 

energy conservation measures do not 

lend themselves to straightforward preand post-change simulation of energy 

consumption. For example, the use of 

hourly simulation was of dubious value 

in assessing the energy savings of duct 

testing required by the 2009 IECC 

because the prior edition of the IECC 

had no testing requirement from which 

a meaningful baseline leakage rate could 

be established. In this case, the majority 

of the uncertainty was in the decision of 

what pre-2009 leakage rate should be 

used as a baseline. This type of 

uncertainty arises from any code change 

that expands the scope of the code. 

Rather than comparing one code to 

another, a new code must be compared 

to an unstated prior condition.14

In the case of a scope expansion, it is 

sometimes inappropriate to compare a 

new code’s requirement against an 

average or typical pre-code level, 

because doing so tends to understate the 

savings of the new requirement. 

Returning to the example of a new 

requirement for testing the duct leakage 

rate, consider Figure 1. The curve 

represents a hypothetical distribution of 

leakage rates prior to the code’s 

regulation of leakage rates. Even if the 

new code requirement were set equal to 

or worse than the pre-change average 

rate, savings would accrue from houses 

that would have had higher leakage 

rates.15 DOE intends to evaluate scope 

expansions case by case to determine 

the most appropriate way to estimate 

energy savings. DOE seeks public input 

on this topic. 

mstockstill on DSK4VPTVN1PROD with NOTICES

56418 Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Notices 

16http://www.rsmeans.com/. 

A second situation requiring special 

consideration is accounting for code 

changes that induce additional, 

unwritten requirements. An example is 

an envelope air tightness requirement 

that results in leakage rates so low that 

a home would need supplemental 

mechanical ventilation to avoid 

moisture and other air quality problems. 

In such a case a proper cost 

effectiveness assessment might require 

accounting for the cost and energy 

penalty of the mechanical ventilation 

system even though the code didn’t 

require it. DOE would evaluate such 

changes case by case to determine 

whether implied requirements must be 

assumed. DOE seeks public input on 

this topic. 

Estimating the First Cost of Code 

Changes 

The second step in assessing the cost 

effectiveness of a proposed code change 

or a newly revised code is estimating 

the first cost of the changed 

provision(s). The ‘‘first cost’’ of a code 

change refers to the marginal cost of 

implementing one or more changed 

code provisions. For DOE’s analyses, it 

refers to the retail cost (the cost to a 

home buyer) prior to amortizing the cost 

over multiple years through the home 

mortgage, and includes the full price 

paid by the home buyer, including 

materials, labor, overhead, and profit, 

minus any tax rebates or other 

incentives generally available to home 

buyers when the new code takes effect. 

DOE recognizes that estimating the 

cost of a code change can be 

challenging, and will attempt to identify 

credible cost estimates from multiple 

sources when possible. Judgment is 

often required to determine an 

appropriate cost for energy code 

analysis when multiple credible sources 

of construction cost data yield a range 

of first costs. Cost data would be 

obtained from existing sources such as 

cost estimating publications such as R.S. 

Means, industry sources such as Lowes 

or Home Depot, and other resources 

including journal articles and research 

studies. DOE has also issued a 

subcontract specifically to collect cost 

data for residential energy efficiency 

measures. DOE would utilize all of these 

resources to determine the most 

appropriate construction cost 

assumptions based on factors including 

the applicability and thoroughness of 

the data source. 

Historical Approach to Cost Data 

Collection 

For code changes that impact many 

insulation and/or construction assembly 

elements of a home, DOE consults the 

national construction cost estimation 

publication RS Means Residential Cost 

Data,16 which provides a wide variety of 

construction cost data. This is 

appropriate for many code changes that 

impact the construction of the home 

(e.g., switching from 2x4 to 2x6 walls) 

such that both materials and labor 

differ. RS Means, however, covers only 

a portion of potential code changes. It 

does not, for example, have detailed 

costs on improved duct sealing or 

building envelope sealing, and its costs 

for fenestration products (windows, 

doors, and skylights) are focused on 

aesthetic features rather than energy 

efficiency. 

When a code change impacts only the 

materials used in a home, without 

impacting labor, cost data can often be 

obtained from national home hardware 

suppliers, such as Home Depot and 

Lowe’s Home Improvement. These 

sources can have the advantage of 

providing recent costs and the costs can 


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17http://www.buildingamerica.gov/. 

18http://www.energystar.gov/. 

be localized if a state or local analysis 

is needed. However, these sources do 

not provide all the specific energy 

efficiency measure improvements that 

are typically needed for code 

improvement analyses. 

As needed, DOE conducts literature 

searches of specialized building science 

research publications that assess the 

costs of new or esoteric efficiency 

measures that are not covered in other 

data sources. Examples include reports 

from DOE’s own Building America 17

program, those generated from the 

Environmental Protection Agency’s 

Energy Star 18 program, and buildingsoriented research publications such as 

ASHRAE Transactions. 

A Plan for the Future 

DOE anticipates that as building 

energy codes advance and incorporate 

more energy features, the traditional 

cost sources will be less useful in 

estimating the first costs of code 

changes. To support analysis of codes 

going forward, DOE has tasked Pacific 

Northwest National Laboratory with 

placing a subcontract for professional 

cost-estimating services to help 

populate a publicly available online 

database of building construction costs. 

A Request for Proposals (RFP) was 

issued in May 2011 and calls for the 

services of a professional costestimating firm to provide cost data for 

equipment and components related to 

building envelope systems, building 

lighting systems, building mechanical 

systems, and building renewable energy 

systems. The database would 

differentiate cost data to the extent 

practicable by building type, building 

location, and building size, and would 

provide both national-average and 

regional/local costs to the extent such 

are available. 

Addressing Code Changes With Multiple 

Approaches to Compliance 

One of the challenges of estimating 

the costs of energy code changes is 

selecting an appropriate 

characterization of new code 

requirements. A requirement for an 

improved wall R-value, for example, 

might be met with higher-density 

insulation within the between-stud 

cavities, with standard-density 

insulation in a thicker wall (e.g., moving 

from 2x4 to 2x6 construction), adding a 

layer of insulating sheathing to the wall, 

or switching to an entirely different 

construction approach (e.g., straw bale). 

Each approach will have different costs 

and may be subject to differing 

constraints depending on the situation. 

Some construction approaches, for 

example, may be inappropriate in 

regions subject to high winds or high 

probabilities of seismic activity. Some 

approaches may open the possibility for 

new and less expensive construction 

approaches. A change that forces a move 

from 2x4 to 2x6 wall construction, for 

example, opens the possibility of 

placing wall studs on 24-inch centers 

rather than the more common 16-inches. 

This can reduce both material and labor 

costs, but requires other changes that 

may exact additional costs or restrict 

designs, such as ‘‘stack framing,’’ in 

which ceiling joists/rafters are aligned 

directly over wall studs. 

It is difficult for DOE to anticipate 

either the types of code changes that 

will emerge in future building energy 

codes or the manner in which builders 

will choose to meet the new 

requirements. It is DOE’s intent, 

however, to evaluate changes on a case 

by case basis and seek the least-first cost 

way to achieve compliance unless that 

approach is deemed inappropriate in a 

large percentage of new home 

situations. For code changes that touch 

on techniques with which there is 

recent research experience (e.g., through 

DOE’s Building America program), DOE 

would consult the relevant publications 

for advice on appropriate construction 

assumptions. DOE is seeking public 

input on this matter. 

DOE anticipates that some new code 

provisions may have significantly 

different first costs depending on 

unrelated aesthetic choices. For 

example, a requirement for overhangs 

on south-facing windows might be more 

costly on a two-story home than on a 

one-story home. Limits on west-facing 

glazing might have substantial effect or 

no effect depending on the lot 

orientation. Again, DOE cannot 

anticipate all future changes, and will 

address each one individually. DOE is 

seeking public input on the proper 

approach to assessing the cost 

effectiveness of such changes. 

Finally, some new code provisions 

may come with no specific construction 

changes at all, but rather be expressed 

purely as a performance requirement. It 

has been suggested, for example, that a 

new IECC might require all homes to 

comply with the energy performance 

path, with a requirement that calculated 

energy consumption be shown to be 

some predetermined percentage below 

that implied by the prescriptive 

specifications. It is also conceivable that 

a code could be expressed simply as an 

energy use intensity (EUI), in which the 

requirement is a limit on energy use per 

square foot of conditioned floor area. 

DOE intends to evaluate any such code 

changes on a case by case basis and will 

search the research literature and/or 

conduct new analyses to determine the 

reasonable construction changes that 

could be expected to emerge in response 

to such new requirements. DOE is 

seeking public input on this issue. 

Economies of Scale and Market 

Transformation Effects 

Construction costs often show 

substantial differences between regions, 

sometimes based primarily on local 

preferences and the associated 

economies of scale. Because new code 

changes may push building construction 

to new and potentially unfamiliar 

techniques in some locations, local cost 

estimates may overstate the long-term 

costs of implementing the change. 

Similar issues may arise where 

manufacturers produce large quantities 

of a product that just meets a current 

energy code requirement, giving that 

product a relatively low price in the 

market. Should the code requirement 

increase, it is likely that manufacturers 

will increase production of a 

conforming product, lowering its price 

relative to the current situation. 

DOE intends to evaluate new code 

changes case by case to determine 

whether it is appropriate to adjust 

current costs for anticipated market 

transformation after a new code takes 

effect. DOE intends to evaluate specific 

new or proposed code provisions to 

determine whether and how prices 

might be expected to follow an 

experience curve with the passage of 

time. See, for example, DOE’s Notice of 

Data Availability published in the 

Federal Register on February 22, 2011 

(76 FR 9696) (http://www1.eere.energy.

gov/buildings/appliance_standards/

pdfs/rf_noda_fr_notice.pdf) for 

information on projecting future costs in 

the manufacture of new refrigeration 

products. It is noted that site-built 

construction may involve several types 

of efficiency improvements. The real 

cost of code changes requiring new 

technologies may drop in the future as 

manufacturers learn to produce them 

more efficiently. The real cost of code 

changes that involve new techniques 

may likewise drop as builders and 

subcontractors learn to implement them 

in the field more efficiently and with 

less labor. Finally, code changes that 

simply require more of a currently used 

technology or technique may have 

relatively stable real costs, with prices 

generally following inflation over time. 

DOE is seeking public input on this 

issue. 

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56420 Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Notices 

19ASTM International. ‘‘Practice for Measuring 

Life-Cycle Costs of Buildings and Building 

Systems,’’ E917, Annual Book of ASTM Standards: 

2010, Vol. 4.11. West Conshohocken, PA: ASTM 

International. 

20ASTM International. ‘‘Practice for Measuring 

Net Benefits and Net Savings for Investments in 

Buildings and Building Systems,’’ E1074, Annual 

Book of ASTM Standards: 2010, Vol. 4.11. West 

Conshohocken, PA: ASTM International. 

21For a detailed discussion of LCC and related 

economic evaluation procedures specifically aimed 

at private sector analyses, see Ruegg and Petersen 

(Ruegg, Rosalie T., and Petersen, Stephen R. 1987. 

Comprehensive Guide to Least-Cost Energy 

Decisions, NBS Special Publication 709. 

Gaithersburg, MD: National Bureau of Standards). 

22The analysis can be done for other periods of 

time (e.g., monthly), but for simplicity DOE uses 

annual periods for the subject analyses. 

Estimating the Cost Effectiveness of 

Code Changes 

Economic Metrics To Be Calculated 

The last step in assessing the cost 

effectiveness of a proposed code change 

or a newly revised code is calculating 

the corresponding economic impacts of 

the changed provision(s). In evaluating 

code change proposals as part of the 

IECC consensus process, assessing new 

editions of the IECC published by the 

ICC, and participating in the 

development of other voluntary 

building energy codes, DOE intends to 

calculate three metrics. 

• Life-cycle cost. 

• Simple payback period. 

• Cash flow. 

Life-cycle cost (LCC) is the primary 

metric DOE intends to use to evaluate 

whether a particular code change is cost 

effective. Any code change that results 

in a net LCC less than or equal to zero 

(i.e., monetary benefits exceed costs) 

will be considered cost effective. The 

payback period and cash flow analyses 

provide additional information DOE 

believes is helpful to other participants 

in code-change processes and to states 

and jurisdictions considering adoption 

of new codes. These metrics are 

discussed further below. 

Life-Cycle Cost 

Life-cycle cost (LCC) is a robust costbenefit metric that sums the costs and 

benefits of a code change over a 

specified time period. Sometimes 

referred to as net present value analysis 

or engineering economics, LCC is a 

well-known approach to assessing cost 

effectiveness. Because the key feature of 

LCC analysis is the summing of costs 

and benefits over multiple years, it 

requires that cash flows in different 

years be adjusted to a common year for 

comparison. This is done with a 

discount rate that accounts for the time 

value of money. Like most LCC 

implementations, DOE’s sums cash 

flows in year-zero dollars, which allows 

the use of standard discounting 

formulas. Cash flows adjusted to year 

zero are termed present values. The 

procedure described herein combines 

concepts from two ASTM International 

standard practices, E917 19 and E1074.20

The resultant procedure is both 

straightforward and comprehensive and 

is in accord with the methodology 

recommended and used by the National 

Institute of Standards and Technology 

(NIST).21

Present values can be calculated in 

either nominal or real terms. In a 

nominal analysis all compounding rates 

(discount rate, mortgage rate, fuel 

escalation rate, etc.) include the effect of 

inflation, while in a real analysis, 

inflation is removed from those rates. 

The two approaches are algebraically 

equivalent, but DOE intends to generally 

conduct economic analyses of 

residential energy codes in nominal 

terms because accounting for mortgage 

cash flows and associated income tax 

effects is more straightforward. 

LCC is defined formally as the present 

value of all costs and benefits summed 

over the period of analysis. Because it 

is defined in terms of costs, the LCC of 

a code change must be zero or negative 

for the change to be considered cost 

effective, as shown in Equation 1. 

A future cash flow (positive or 

negative) is brought into the present by 

assuming a discount rate (D). The 

discount rate is an annually 

compounding rate 22 by which future 

cash flows are discounted in value. It 

represents the minimum rate of return 

demanded of the investment in energysaving measures. It is sometimes 

referred to as an alternative investment 

rate. Thus the present value, (PV) of a 

cash flow in year Y (CFy) is defined as 

The present value of a stream of 

annual cash flows over the period of 

analysis, L years, is then the sum of all 

of those discrete cash flows: 

For an annualized stream of cash 

flows A that is the same from year to 

year, such as a mortgage payment 

lasting L years, Equation (3) is 

equivalent to the following. 

For an annualized stream of cash 

flows that is escalating with time, such 

as the energy cost savings ES that 

increases from year to year because of 

escalations in fuel prices, Equation (5) 


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can be used (EF_is the fuel price 

escalation rate): 

Because DOE intends to compute and 

publish annual cash flow impacts, 

Equation (3) will generally be preferred 

to Equations (4) and (5) because it 

allows presentation and analysis of all 

the yearly cash flows during the LCC 

analysis. Equations (4) and (5) are 

algebraically equivalent and useful 

when year-by-year cash flows are not 

needed. 

There are seven primary cash flows 

that are relevant to LCC analysis of 

energy code changes, summarized in 

Table 7. The down payment cost 

associated with the code changes is the 

down payment rate (RD) multiplied by 

the total cost of the code changes (C) 

and is incurred at the onset (year 0). On 

top of the down payment is a mortgage 

fee, which is the cost of the code 

changes multiplied by the mortgage fee 

rate (RM). Property tax occurs every 

year, starting on year 1, and is the 

property tax rate (RP) multiplied by C, 

and further adjusted by a factor of 

(1+EH)Y to take into account a 

compounding home price escalation 

rate (EH). This assumes that the tax 

assessment of the house increases 

exactly the amount of the code-related 

cost increase, and that the tax 

assessment increases in step with the 

home price. Energy savings occur every 

year, starting at year 1, and are equal to 

the modeled energy cost savings at year 

0, adjusted by a factor of (1+EF)Y to take 

into account a compounding fuel 

(electricity and natural gas) price 

escalation rate (EF). Mortgage payments 

occur every year of the term of the 

mortgage (ML), are constant payments, 

and is equal to 12 times the monthly 

payment, as calculated using the 

industry standard equation shown in 

Table 7. Tax deductions for mortgage 

interest payments and property tax 

payments begin in year 1 and continue 

through the end of the analysis period 

L. They are calculated as the marginal 

income tax rate (RI) multiplied by the 

sum of mortgage interest payments and 

property tax payments each year. 

Finally, the residual value, incurred at 

the end of the analysis period, is the 

cost of the code changes, adjusted for 

the home’s price appreciation, 

multiplied by the fraction of the lifetime 

(i.e., value) of the code changes still 

remaining at resale (RR). This is a rough 

number, but is meant to encapsulate an 

average of the remaining lifetime of all 

of the components. DOE intends to 

assume RR is 50% at the end of 30 years, 

which would roughly correspond to 

straight-line depreciation of home 

features with a 60-year life. 

Additional rigor can be required to 

account for the shorter lifetimes of 

certain equipment (e.g., 12–15 years for 

water heaters, 15–20 years for HVAC 

equipment). However, because the 

efficiencies of most residential 

equipment generally are preemptively 

regulated by federal rulemakings, DOE 

does not expect the IECC to impose 

specific equipment efficiency 

requirements. Nonetheless, highefficiency equipment is likely to be a 

common alternative approach to energy 

code compliance, so the shorter 

lifetimes of equipment would be 

accounted for. While equipment will 

undoubtedly be replaced at the end of 

its useful life, there is no guarantee that 

it will be replaced with equipment of 

comparable efficiency. Because DOE 

cannot predict either minimum code 

requirements or homeowner preferences 

in the future, it will assume that 

replacement equipment efficiency will 

be unaffected by the initial efficiency of 

the equipment—that is, replacement 

equipment will be the same regardless 

of the initial efficiency. This implies 

that the energy savings resulting from 

high-efficiency equipment will accrue 

only for the life of the equipment, not 

the full 30-year period of analysis, and 

that there will be no equipment 

replacement costs at the end of its 

useful life. Thus, when estimating 

energy savings of high-efficiency 

equipment, a home would be simulated 

twice, once with and once without the 

high-efficiency equipment. 


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Simple Payback Period 

The simple payback period is a 

straightforward metric that includes 

only the costs and benefits directly 

related to the implementation of the 

energy-saving measures associated with 

a code change. It represents the number 

of years required for the energy savings 

to pay for the cost of the measures, 

without regard for changes in fuel 

prices, tax effects, measure 

replacements, resale values, etc. The 

payback period P, which has units of 

years, is defined as the marginal cost of 

compliance with a new code (C, the 

‘‘first costs’’ above and beyond the 

baseline code), divided by the annual 

marginal benefit from compliance (ES0, 

the energy cost savings in year 0), as 

shown in Equation 6. 


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The simple payback period is a metric 

useful for its simplicity and ubiquity. 

Because it focuses on the two primary 

characterizations of a code change—cost 

and energy performance—it allows an 

assessment of cost effectiveness that is 

easy to compare with other investment 

options and requires a minimum of 

input data. The simple payback period 

is used in many contexts, and is written 

into some state laws governing the 

adoption of new energy codes, hence 

DOE would calculate the payback 

period when it assesses the cost 

effectiveness of code changes. However, 

because it ignores many of the longerterm factors in the economic 

performance of an energy efficiency 

investment, DOE does not intend to use 

the payback period as a primary 

indicator of cost effectiveness for its 

own decision making purposes. 

Cash Flow Analysis 

In the process of calculating LCC, 

year-by-year cash flows are computed. 

These can be useful in assessing a code 

change’s impact on consumers and will 

be shown by DOE for the code changes 

it analyzes. The cash-flow analysis 

simply shows each year’s net cash flow 

(costs minus benefits) separately (in 

nominal dollars), including any timezero cash flows such as a down 

payment. By publishing the net cash 

flow value for each year, reviewers will 

be able to calculate various metrics of 

interest, such as net cumulative cash 

flow, the year in which cumulative 

benefits exceed cumulative costs, etc. 

DOE believes this information will be 

useful to some stakeholders. 

Economic Parameters and Other 

Assumptions 

Calculating the metrics described 

above requires defining various 

economic parameters. Table 8 shows the 

primary parameters of interest and how 

they apply to the three metrics. 

TABLE 8—ECONOMIC PARAMETERS

FOR COST EFFECTIVENESS METRICS

Parameter Needed for 

First costs ................................ Payback. 

Fuel prices ............................... Cash flow. 

LCC. 

Fuel price escalation rates ...... Cash flow. 

Mortgage parameters .............. LCC. 

Inflation rate.

Tax rates (property, income).

Period of analysis.

Residual value.

Discount rate ............................ LCC. 

These parameters are chosen to be 

representative of a typical home buyer 

who purchases a home with a 30-year 

mortgage. DOE intends to consult 

appropriate sources of information to 

establish assumptions for each financial, 

economic, and fuel price assumption. 

Whenever possible, economic 

assumptions will be taken from the 

published sources discussed below. 

DOE notes that most values vary across 

time, location, markets, institutions, 

circumstances, and individuals. Where 

multiple sources for any parameter are 

identified, DOE will prefer recent values 

from sources DOE deems best 

documented and reliable. DOE intends 

to update parameters for future analyses 

to account for changing conditions. 

First Cost 

As discussed earlier, the first cost 

represents the full cost of code-related 

energy features to a home buyer. It 

represents the full (retail) cost of such 

features, including materials, labor, 

builder overhead and profit, etc., but 

excludes any future costs such as for 

maintenance. 

Mortgage Parameters 

The majority of homes purchased are 

financed. Indeed, the 2010 

Characteristics of New Housing report 

from the Census Bureau reports that 

91% of new homes were purchased 

using a loan while only 9% were 

purchased with cash. Accordingly, for 

purposes of the analysis of the economic 

benefits to the home buyer for improved 

energy efficiency, DOE intends to 

assume that a home is purchased using 

a loan. 

Mortgage Interest Rate (i) 

DOE intends to use recent mortgage 

rates in cost/benefit analyses, and 

would consult Freddie Mac and the 

Federal Home Finance Administration 

to determine a representative rate for 

each analysis. Currently, Freddie Mac 

reports that conventional 30-year real 

estate loans have averaged about 5% 

since the beginning of 2009 (http:// 

www.freddiemac.com/pmms/ 

pmms30.htm) though historical rates 

have been higher. FHFA (http:// 

www.fhfa.gov/Default.aspx?Page=252) 

reports similar rates. Thus DOE intends 

to use a mortgage rate of 5% for cost/ 

benefit analyses at this time. 

An alternative approach would be to 

evaluate historical mortgage rates and 

identify a real rate that approximates a 

long-term average, then use that rate in 

a real analysis or combine it with a 

recent (and anticipated future) inflation 

rate in a nominal analysis. DOE intends 

to use the former approach on the 

theory that recent rates are a better 

indicator of near-term future rates that 

will be in effect when a new code goes 

into effect. 

Loan Term (ML) 

For real estate loans, 30 years is by far 

the most common term and is the value 

DOE intends to use in its analyses. 

According to the 2009 American 

Housing Survey (U.S. Census), Table 3– 

15, approximately 75% of all home 

loans have a term between 28 and 32 

years, with 30 being the median. 

Down Payment (RD) 

The 2009 American Housing Survey 

reports a wide range of down payment 

amounts for loans for new homes (see 

Table 9). DOE intends to assume a down 

payment of 10%. Among the possible 

rates, this is low enough that it is likely 

to favor the experience of first-time and 

younger home buyers (who have little 

significant equity to bring forward from 

a previous home) and is among the more 

common rates (the 6–10% block, at 

13.6% of all mortgages, is the most 

populous block except for ‘‘no down 

payment’’). Almost half (47.1%) of all 

loans have a down payment at or below 

10%. 

TABLE 9—DOWN PAYMENT—2009 

AMERICAN HOUSING SURVEY, TABLE

3–14 

Percent of purchase price Percentage 

of homes 

No down payment .................. 16 .3 

Less than 3 percent ................ 6 .4 

3–5 percent ............................. 10 .8 

6–10 percent ........................... 13 .6 

11–15 percent ......................... 4 .7 

16–20 percent ......................... 12 .2 

21–40 percent ......................... 10 .4 

41–99 percent ......................... 6 .1 

Bought outright ....................... 6 .9 

Not reported ............................ 12 .6 

Points and Loan Fees (RM) 

Points represent an up-front payment 

to buy down the mortgage interest rate. 

As such they are tax deductible. DOE 

assumes all interest is accounted for by 

the mortgage rate, so the points are 

taken to be zero. The loan fee is likewise 

paid up front in addition to the down 

payment and varies from loan to loan. 

DOE assumes the loan fee to be 0.7% of 

the mortgage amount, based on recent 

data from Freddie Mac Weekly Primary 

Mortgage Market Survey: http:// 

www.freddiemac.com/pmms/. 

Discount Rate (D) 

The purpose of the discount rate is to 

reflect the time value of money. Because 

DOE’s economic perspective is that of a 

home buyer, that time value is 

determined primarily by the consumer’s 

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56424 Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Notices 

23The 2007 survey was used as financial 

charcteristic data is not available in the 2009 

survey. 

best alternative investment at similar 

risk to the energy features being 

considered. 

The discount rate is chosen to 

represent the desired perspective of the 

economic analysis, in this case a typical 

home buyer who holds a home 

throughout a 30-year mortgage term. 

DOE intends to set the discount rate 

to be equivalent to the mortgage interest 

rate in nominal terms. Because mortgage 

prepayment is an investment available 

to consumers who purchase homes 

using financing, the mortgage interest 

rate is a reasonable estimate of a 

consumer’s alternative investment rate. 

That the home buyer has borrowed 

money at that rate demonstrates that his 

or her implicit discount rate must be at 

least that high. 

Period of Analysis (L) 

DOE’s economic analysis is intended 

to examine the costs and benefits 

impacting all the consumers who live in 

the house. Because energy efficiency 

features generally last longer than the 

average length of ownership for the 

initial home buyer, a longer analysis 

period than the initial ownership period 

is used. Assuming a single owner keeps 

the house throughout the analysis 

period accounts for long-term energy 

benefits without requiring complex 

accounting for resale values at home 

turnover. 

Homes will typically last 50 years or 

more. However, some energy efficiency 

measures may not last as long as the 

house does. DOE intends to assume a 

30-year lifetime to match the typical 

mortgage term. Although 30 years is less 

than the life of the home, some 

efficiency measures, equipment in 

particular, may require replacement 

during that timeframe. As discussed 

earlier, when equipment efficiencies are 

analyzed, energy savings will be limited 

to the life of the equipment. This will 

impact the present value of energy 

savings only—all other cash flow 

streams will accrue over the entire 

period of analysis. The impact of the 

selection of an analysis term is 

significantly moderated by the effect of 

the discount rate in reducing the value 

of costs and benefits far into the future. 

Property Tax Rate (RP) 

Property taxes vary widely within and 

among states. The median property tax 

rate reported by the 2007 23 American 

Housing Survey (U.S. Census Bureau 

2007, Table 1A–7) for all homes is $9 

per $1,000 in home value. Therefore, for 

purposes of code analysis, DOE intends 

to assume a property tax rate of 0.9%. 

For state-level analyses, state-specific 

rates will be used. 

Income Tax Rate (RI) 

The marginal income tax rate paid by 

the homeowner determines the value of 

the mortgage tax deduction. The 2009 

American Housing Survey (http://www.

census.gov/hhes/www/housing/ahs/ 

ahs09/ahs09.html) on ‘‘income 

characteristics’’ reports a median 

income of $70,200 for purchasers of new 

homes. The Internal Revenue Service 

SOI Tax Stats, Table 2.1 for 2008 (latest 

year available) reported that of the tax 

filers in this income bracket, most 

itemize deductions. DOE intends to 

account for income tax deductions for 

mortgage interest in the cost/benefit 

analyses. A family earning $70,200 in 

2011, with a married-filing-jointly filing 

status, would have a marginal tax rate 

of 25%, which is DOE’s current 

assumption. Where state income taxes 

apply, rates will be taken from state 

sources or collections of state data such 

as provided by the Federation of Tax 

Administrators (http:// 

www.taxadmin.org). 

Inflation Rate (RINF) 

The inflation rate RINF is necessary 

only to give proper scale to the mortgage 

payments so that interest fractions can 

be estimated for tax deduction purposes. 

It does not affect the present values of 

cash flows because all other rates are 

expressed in nominal terms (i.e., are 

already adjusted to match the inflation 

rate). The assumed inflation rate must 

be chosen to match the assumed 

mortgage interest rate (i.e., be estimated 

from a comparable time period). 

Estimates of the annual inflation rate 

would be taken from the most recent 

Consumer Price Index (CPI) data 

published by the Bureau of Labor 

Statistics (http://www.bls.gov/), which 

currently lists the most recent 

annualized CPI to be 1.6%. 

Residual Value 

The residual value of energy features 

is the value assumed to be returned to 

the home buyer upon sale of the home 

(after 30 years). As shown earlier it is 

calculated from an assumed home price 

escalation rate and an assumed fraction 

of the original market value that remains 

and is recoverable at sale. 

Home Price Escalation Rate (EH) 

DOE intends to assume that home 

prices have a real escalation rate of 0%, 

which is equivalent to a nominal 

escalation rate equal to the general rate 

of inflation. While many homes do 

experience nonzero increases in value 

over time, the factors that influence 

future home prices (location, style, 

availability of land, etc.) are too varied 

and situation-specific to warrant direct 

accounting in this methodology. 

Resale Value Fraction (RR) 

DOE intends to assume that 50% of 

the original value of code-related energy 

features remains at the end of 30 years 

(after adjusting for the Home Price 

Escalation Rate). This is roughly 

equivalent to assuming straight-line 

depreciation of features with a 60-year 

service life. 

Fuel Prices 

Fuel prices over the length of the 

period of analysis are needed to 

determine the energy cost savings from 

improved energy efficiency. Both 

current fuel prices and fuel price 

escalation rates are needed to establish 

estimated fuel prices in future years. 

DOE intends to use the most recently 

available national average residential 

fuel prices from the DOE Energy 

Information Administration. If fuel 

prices from the most recent year(s) are 

unusually high or low, DOE may 

consider using a longer-term average of 

past fuel prices, such as the average 

from the past 5 years. However, DOE 

notes that fuel price escalation rates (see 

below) may be tied to specific recentyear prices, so departures from the 

recent-year prices will be approached 

with caution. For air conditioning, fuel 

prices from the summer would be used, 

and for space heating winter prices 

would be used. 

Fuel price escalation rates would be 

obtained from the most recent Annual 

Energy Outlook to account for projected 

changes in energy prices. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / Notices 56425 

24U.S. Department of Energy.2011a. Electric 

Power Monthly. DOE/EIA–0226. Washington, DC. 

U.S. Department of Energy.2011b. Natural Gas 

Monthly. DOE/EIA–0130. Washington, DC. 

TABLE 10—SUMMARY OF CURRENT ECONOMIC PARAMETER ESTIMATES

Parameter Symbol Current 

estimate 

Mortgage Interest Rate .................................................................. I ............... 5%. 

Loan Term ...................................................................................... ML ............ 30 years. 

Down Payment Rate ...................................................................... RD ............ 10% of home price. 

Points and Loan Fees .................................................................... RM ........... 0.7% (nondeductible). 

Discount Rate ................................................................................. D .............. 5% (equal to Mortgage Interest Rate). 

Period of Analysis .......................................................................... L ............... 30 years. 

Property Tax Rate .......................................................................... RP ............ 0.9% of home price/value. 

Income Tax Rate ............................................................................ RI ............. 25% federal, state values vary. 

Home Price Escalation Rate .......................................................... EH ............ Equal to Inflation Rate. 

Inflation Rate .................................................................................. RINF ......... 1.6% annual. 

Fuel Prices and Escalation Rates .................................................. .................. Latest national average prices based on current DOE EIA data 

and projections 24 (as of July 2011, 12 cents/kwh for electricity, $0.963/therm for natural gas); price escalation rates 

taken from latest Annual Energy Outlook 

Public Participation 

A. Submission of Information 

DOE will accept information in 

response to this notice under the 

timeline provided in the DATES section 

above. Information submitted to the 

Department by e-mail should be 

provided in WordPerfect, Microsoft 

Word, PDF, or text file format. Those 

responding should avoid the use of 

special characters or any form of 

encryption, and wherever possible, 

comments should include the electronic 

signature of the author. Comments 

submitted to the Department by mail or 

hand delivery/courier should include 

one signed original paper copy. No 

telefacsimiles will be accepted. 

Comments submitted in response to this 

notice will become a matter of public 

records and will be made publicly 

available. 

B. Issues on Which DOE Seeks 

Information 

DOE is particularly interested in 

receiving information on the following 

issues/topics: 

• General comments on DOE’s use of 

cost effectiveness calculations to 

evaluate code-change proposals and 

new code versions. 

• The appropriateness of DOE’s 

energy simulation methodology for 

evaluating the energy savings of code 

changes. 

Æ DOE’s tool choice (EnergyPlus). 

Æ The default assumptions to be used 

in conducting energy simulations. 

Æ The methodology for assessing 

climatic/regional variation in code 

impacts. 

Æ Approaches to assessing energy 

savings of code changes that expand the 

scope of the code, imply the need for 

additional measures not directly 

required in the new code, or are 

otherwise difficult to evaluate in a 

straightforward pre-post simulation 

analysis. 

• The appropriateness of DOE’s 

approach to assessing the first cost of 

new code requirements 

Æ Preferred cost data sources. 

Æ Arbitrating among differing costs 

from multiple data sources. 

Æ Assessing costs where a new or 

changed requirement can be met by 

multiple construction approaches with 

varying cost implications. 

Æ Desirable features for DOE’s 

planned public cost database. 

Æ Adjusting current costs for likely 

market transformation impacts 

(economies of scale, learning curves, 

etc.). 

• The appropriateness and 

sufficiency of DOE’s cost effectiveness 

methodology 

Æ The appropriateness of the 

economic metrics to be calculated (lifecycle cost, annual cash flows, simple 

payback period). 

Æ The appropriateness of life-cycle 

cost as the primary metric for DOE’s 

cost effectiveness determinations. 

Æ Whether DOE should consider 

constraints on payback period and/or 

cash flow metrics in addition to its lifecycle cost requirement in making 

decisions on cost effectiveness and, if 

so, on appropriate threshold values for 

those metrics 

Æ The appropriateness of the 

economic perspective (that of a home 

buyer with a 30-year loan) of DOE’s lifecycle cost analysis and of the economic 

parameters chosen to represent that 

perspective. 

Æ The appropriateness of the 

identified data sources for economic 

parameters. 

• Input on how DOE’s methodology 

and process should evolve in response 

to changing economic and social 

conditions. 

Issued in Washington, DC, on September 2, 

2011. 

Kathleen B. Hogan, 

Deputy Assistant Secretary for Energy 

Efficiency, Office of Technology 

Development, Energy Efficiency and 

Renewable Energy. 

[FR Doc. 2011–23236 Filed 9–12–11; 8:45 am] 

BILLING CODE 6450–01–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

[ Project No. 459–311] 

Union Electric Company, dba Ameren 

Missouri; Notice of Application for 

Amendment of License and Soliciting 

Comments, Motions To Intervene, and 

Protests 

Take notice that the following 

hydroelectric application has been filed 

with the Commission and is available 

for public inspection: 

a. Application Type: Non-project use 

of project lands and waters. 

b. Project No: 459–311. 

c. Date Filed: August 16, 2011. 

d. Applicant: Union Electric 

Company, dba Ameren Missouri. 

e. Name of Project: Osage 

Hydroelectric Project. 

f. Location: The proposed non-project 

use would be located at the Ozark Yacht 

Club marina which is located at mile 

marker 0.8 + 0.6 in the Jennings Branch 

Cove on the Lake of the Ozarks in 

Camden County, Missouri. The location 

coordinates are 38.199986 North, 

¥92.645562 West. 

g. Filed Pursuant to: Federal Power 

Act, 16 U.S.C. 791a–825r. 

h. Applicant Contact: Mr. Jeff Green, 

Shoreline Supervisor, Ameren Missouri, 

mstockstill on DSK4VPTVN1PROD with NOTICES