CHAPTER 2. ANALYTICAL FRAMEWORK 

TABLE OF CONTENTS 

2.1 INTRODUCTION ........................................................................................................... 2-1 

2.2 BACKGROUND ............................................................................................................. 2-4 

2.3 MARKET AND TECHNOLOGY ASSESSMENT ........................................................ 2-4 

2.3.1 Market Assessment .................................................................................. 2-4 

2.3.2 Technology Assessment........................................................................... 2-5 

2.3.3 Product Classes ........................................................................................ 2-5 

2.4 SCREENING ANALYSIS .............................................................................................. 2-5 

2.5 ENGINEERING ANALYSIS.......................................................................................... 2-5 

2.5.1 Representative Product Classes ............................................................... 2-6 

2.5.2 Selected Baseline Lamps ......................................................................... 2-6 

2.5.3 Identified Lamps and Ballast Designs ..................................................... 2-6 

2.5.4 Developed Efficacy Levels...................................................................... 2-6 

2.6 ENERGY USE CHARACTERIZATION ....................................................................... 2-7 

2.7 PRODUCT PRICE DETERMINATION ........................................................................ 2-7 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS ..................................... 2-7 

2.9 SHIPMENTS ANALYSIS............................................................................................... 2-8 

2.9.1 Shipment Scenarios.................................................................................. 2-8 

2.10 NATIONAL IMPACT ANALYSIS................................................................................ 2-9 

2.10.1 National Energy Savings Analysis.......................................................2-10 

2.10.2 Net Present Value Analysis .................................................................2-10 

2.11 LIFE-CYCLE COST SUB-GROUP ANALYSIS......................................................... 2-11 

2.12 MANUFACTURER IMPACT ANALYSIS.................................................................. 2-11 

2.13 UTILITY IMPACT ANALYSIS................................................................................... 2-11 

2.14 ENVIRONMENTAL ASSESSMENT .......................................................................... 2-12 

2.15 EMPLOYMENT IMPACT ANALYSIS....................................................................... 2-13 

2.16 REGULATORY IMPACT ANALYSIS........................................................................ 2-13 

2.17 DEPARTMENT OF JUSTICE REVIEW ..................................................................... 2-13 

LIST OF FIGURES 

Figure 2.1.1 Flow Diagram of Analyses for the GSFL and IRL Rulemaking Process...2-2 

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CHAPTER 2. ANALYTICAL FRAMEWORK 

2.1 INTRODUCTION 

 Sections 6295(o)(2)(A) and (3) of Title 42 United States Code (42 U.S.C. 

6295(o)(2)(A) and (3)) require that energy conservation standards set by the U.S. Department of 

Energy (DOE) be technologically feasible and economically justified, and achieve the maximum 

improvement in energy efficiency. This chapter provides a description of the general analytical 

framework that DOE uses in developing such standards, and in particular, standards for general 

service fluorescent lamps (GSFL) and incandescent reflector lamps (IRL). The analytical 

framework is a description of the methodology, the analytical tools, and relationships among the 

various analyses that are part of this rulemaking. For example, the methodology that addresses 

the statutory requirement for economic justification includes analyses of life-cycle cost (LCC); 

economic impact on manufacturers and users; national benefits; impacts, if any, on utility 

companies; and impacts, if any, from lessening competition among manufacturers. DOE will 

also solicit the views of the Department of Justice (DOJ) on any lessening of competition that is 

likely to result from the imposition of a proposed standard. 

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 stakeholders 

or persons with special knowledge. 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. While Figure 2.1.1 summarizes the inputs, outputs and analyses of 

a typical standards rulemaking, individual inputs and outputs may vary by rulemaking. For 

example, as discussed in Chapter 5 and Chapter 7, this rulemaking combines the results of the 

engineering analysis and the product price determination to derive typical inputs for the LCC and 

NIA rather than estimating costs in the engineering analysis and marking them up to derive enduser prices. 

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Utility Impact

Analysis 

Notice of Proposed Rulemaking (NOPR)

Final Rule

Approaches Key Inputs Analyses Key Outputs

Market and Technology

Assessment

Screening Analysis

Engineering Analysis

Product Price

Determination Life-Cycle Cost and 

Payback Period 

Analyses

National Impact

Analysis

Energy Use

Revise ANOPR

Analyses

Life-Cycle Cost 

Sub-Group Analysis

Manufacturer Impact 

Analysis

Shipments

Analysis

Employment Impact

Analysis 

Revise Analyses

• Product Classes

• Technology Options

• Industry Cash Flow

• Sub-Group Cash-Flow

• Direct Employment Impacts

• Competitive Impacts

• Cumulative Regulatory Burden

• Product Designs

• Life-Cycle Costs

• Payback Periods

• National Energy Savings

• Net Present Values

• National Employment Impacts

• Revised Results

• Characterize Industry

• Market Segmentation

• Non-Regulatory Programs

Framework Document

• Efficiency-Level Approach

• Design Option Approach

• Energy Prices

• Installation Costs

• Maintenance & Repair Costs

• Accounting Approach

• Backcast and Forecast

• Market Saturation

• Stakeholder Comments

• Demographics

• Manufacturer Interviews

• GRIM Analysis

• Emission Rates

• National Energy Savings

• Stakeholder Comments

• Identify Firms/Products 

• Historical Shipments

•Retail Price Collection and

Analysis

• Manufacturer Prices

• Average Costs

• Manufacturer Financial Data

Design Options

Product Classes

Retail 

Prices

Design Energy/ Use

Advance Notice of Proposed Rulemaking (ANOPR)

• Efficiency/Performance

• Commercial Products

Candidate

Standard 

Levels

• Analysis of Energy Use 

Data

Environmental

Assessment

Regulatory Impact

Analysis

Technology Options

• Emission Estimates

• Utility Load Factors

• National Energy Savings

• Non-Regulatory

Alternatives

• NEMS-BT

• ImSET

• NEMS-BT

• Design Options

• Energy Price Forecasts

• Site-to-Source Factors

• Energy-Efficiency Levels

Direct Employment 

Impacts

• National Energy Savings

• National Product Costs

• National Operating Costs

• Utility Impacts

• Analysis of Market Data

• Analysis of Product Data

• Life-Cycle Costs

• Payback Periods

• Installation

Costs

• Maint Costs

• Repair Costs

• UEC

• Energy Prices

Annual Energy Use (UEC)

Preliminary 

Manufacturer Impact 

Analysis

• Manufacturer Prices

• Average Costs

• Conversion Capital Expenditures

• Direct Employment Impacts

• National Energy Savings

• Net Present Values

• Trial Standard Levels (TSLs)

TSLs

• Product Prototypes

Energy-Efficiency 

Levels

• Department of Justice Review

Product Designs

Figure 2.1.1 Flow Diagram of Analyses for the GSFL and IRL Rulemaking Process 

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The analyses revised in the final rule stage and reported in this technical support 

document (TSD) include: 

A market and technology assessment to characterize the relevant fluorescent and 

incandescent lamp markets; to identify technology options that improve efficacy; and to develop 

product classes. 

A screening analysis to review each technology option and determine if it is 

technologically feasible; practical to manufacture, install, and service; would adversely affect 

lamp utility or lamp availability; or would have adverse impacts on health and safety. 

An engineering analysis to study the appropriate lamp and lamp-and-ballast designs used 

as substitutes for the baseline lamps, to select efficacy levels and to determine lamp-and-ballast 

system power ratings. 

An energy use analysis to determine the annual energy consumption of fluorescent and 

incandescent reflector lamps. 

A product price determination to develop average end-user prices for the lamp designs 

and lamps-and-ballast designs used in the analyses. 

A life-cycle cost (LCC) and payback period (PBP) analysis to calculate, at the customer 

level, the cost-effectiveness of the efficacy levels. 

A shipments analysis to estimate yearly shipments of covered fluorescent and 

incandescent reflector lamp products over the analysis period. 

A national impact analysis (NIA) to assess the aggregate impacts at the national level of 

the net present value (NPV) and national energy savings (NES) of the standard levels. 

A LCC sub-group analysis to evaluate variations in residential and commercial building 

characteristics (e.g., energy prices, equipment use behavior, installation costs) that might cause a 

standard to impact particular customer sub-populations, such as specific building owners or other 

customers that purchase and use the general service fluorescent lamps and incandescent reflector 

lamps. 

A manufacturer impact analysis (MIA) to calculate the financial impacts of energy 

conservation standards on lamp manufacturers and to identify impacts on competition, 

employment at manufacturing plants, and manufacturing capacity. 

A utility impact analysis to estimate the effects of proposed standards on electric utilities. 

An environmental assessment to provide estimates of changes in emissions of pollutants 

from electricity generation (i.e., carbon dioxide (CO2), oxides of nitrogen (NOx), and sulfur 

dioxide (SO2). 

An employment impact analysis to assess the aggregate impacts on national employment. 

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A regulatory impact analysis to present major alternatives to proposed standards that 

could achieve substantially the same regulatory goal at a lower cost. 

In response to comments it receives on the NOPR, DOE may revise some of its analyses 

before publishing the final rule. 

2.2 BACKGROUND 

As described in Chapter 1 of the TSD, in September 1995, the Department announced a 

formal effort to consider further improvements to the process used to develop appliance 

efficiency standards. The Department called on energy-efficiency groups, manufacturers, trade 

associations, state agencies, utilities, and other interested parties to provide input to this effort. 

As a result of this combined effort, the Department published Procedures, Interpretations and 

Policies for Consideration of New or Revised Energy Conservation Standards for Consumer 

Products (the “Process Rule”), 10 CFR 430, Subpart C, Appendix A. The Process Rule outlined 

the procedural improvements identified by the interested parties, and included a review of the: 1) 

economic models, 2) analytic tools, 3) methodologies, 4) non-regulatory approaches, and 5) 

prioritization of future rules. The Process Rule recommended that the Department take into 

account uncertainty and variability by carrying out scenario or probability analysis. 

DOE developed this analytical framework for the fluorescent and incandescent reflector 

lamps rulemaking under the Process Rule. DOE documented this analytical framework in the 

Rulemaking Framework for General Service Fluorescent Lamps, Incandescent Reflector Lamps, 

and General Service Incandescent Lamps (hereafter, “Framework Document”), and presented 

the analytical approach to stakeholders during a public meeting held on June 15, 2006 (hereafter 

“Public Meeting”). This document is available at

http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/lamps_framework.pd

f. The following sections provide a general description of the different analytical components of 

the rulemaking framework. 

2.3 MARKET AND TECHNOLOGY ASSESSMENT 

The market and technology assessment characterizes the relevant product markets and 

existing technology options, including prototype designs, and outlines product classes. 

2.3.1 Market Assessment 

When initiating a standards rulemaking, DOE develops information on the industry 

structure and market characteristics of the product(s) concerned. This activity consists of both 

quantitative and qualitative efforts to assess the industry based on publicly available information. 

As such, DOE addresses: (1) industry structure and manufacturer market shares, (2) existing 

regulatory and non-regulatory efficiency improvement initiatives, and (3) trends in product 

characteristics and retail markets. This information serves as resource material throughout the 

rulemaking. 

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DOE has used and will use the most reliable and accurate data available at the time of 

each analysis in this rulemaking. DOE welcomes and will consider any submissions of 

additional data. 

2.3.2 Technology Assessment 

DOE typically uses information relating to existing technology options to develop more 

efficacious fluorescent and incandescent reflector lamp designs. DOE prepared a list of 

technologies for consideration which could improve the efficacy of GSFL and IRL. To develop 

this list, DOE reviewed manufacturer catalogs, recent trade publications and technical journals, 

and consulted with technical experts. 

2.3.3 Product Classes 

DOE divides covered products into classes by: (a) the type of energy used; and (b) 

capacity of the product or any other performance-related feature that justifies different standard 

levels, such as features affecting consumer utility. (42 U.S.C. 6295(q)) For this rulemaking on 

lamps, DOE has analyzed GSFL and IRL separately, where appropriate. In general, DOE 

defined product classes using information obtained from manufacturers, trade association, and 

other interested parties. 

2.4 SCREENING ANALYSIS 

The screening analysis examines the technology options from the technology assessment 

as to whether they: (1) are technologically feasible; (2) are practical to manufacture, install, and 

service; (3) do not have an adverse impact on product utility or availability; and (4) do not have 

adverse impacts on health and safety. As described above, DOE develops an initial list of design 

options from the technologies identified in the technology assessment. Then DOE, in 

consultation with interested parties, reviews the list to determine if these technologies 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 only considers design options that meet all four of the screening criteria. 

2.5 ENGINEERING ANALYSIS 

In the engineering analysis, DOE selects representative product classes to analyze. 

It then selects baseline lamps from these representative product classes, and develops lamp 

designs that represent more efficacious versions of the baseline lamps. DOE then uses these 

lamp designs to develop efficacy levels (ELs). While DOE establishes ELs based on lamp 

designs, it also is developing lamp-and-ballast designs for the LCC and NIA. DOE is 

considering lamp-and-ballast designs for the GSFL LCC and NIA because fluorescent lamps are 

a component of a system, and their performance is related to the ballast on which it operates. In 

addition to selecting lamp-and-ballast systems, the engineering analysis develops system power 

ratings which DOE uses to develop energy consumption in Chapter 6. 

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2.5.1 Representative Product Classes 

DOE reviewed covered lamps and the associated product classes. In the case where a 

product had multiple product classes, DOE identified and selected certain product classes as 

“representative” product classes where DOE would concentrate its analytical effort. DOE chose 

these representative product classes primarily because of their high market volumes. 

2.5.2 Selected Baseline Lamps 

DOE selected baseline lamps from the representative product classes on which it 

conducted the engineering analysis (and subsequent analyses). These baseline lamps were 

selected to represent the characteristics of lamps in a given product class. Typically, a baseline 

lamp is one that just meets existing mandatory energy conservation standards or one that 

represents the typical lamp sold. Specific characteristics such as correlated color temperature 

(CCT), operating life, and light output were all selected to characterize the most common lamps 

purchased by consumers today. For all the representative product classes, DOE selected multiple 

baseline lamps, to ensure consideration of different high-volume lamps and their associated 

consumer economics. 

2.5.3 Identified Lamps and Ballast Designs 

DOE selected a series of more-efficacious lamps for each of the baseline lamps 

considered within each representative product class. DOE only considered technologies that met 

all four criteria in the screening analysis. DOE considered these technologies either explicitly as 

design options or implicitly as design options incorporated into commercially available lamps at 

the efficiency levels evaluated. These selections were made such that potential substitutions 

maintained light output above a maximum 10-percent decrease from the baseline lamp’s light 

output and that the substitute lamp had performance characteristics similar to those of the 

baseline lamp. In identifying the more-efficacious substitutes, DOE utilized a database of 

commercially available lamps. For GSFL, DOE considered commercially available lamps under 

two different substitute scenarios: (1) lower-wattage lamps that operated on existing ballasts and 

whose system light output never dropped below 10 percent of the baseline system and (2) moreefficacious lamps that have the same rated wattage, and, therefore, must be associated with a 

ballast replacement in order to save energy and maintain light output. For IRL, DOE used some 

commercially available lamps, but also developed “model” lamps which incorporate design 

options that may not be commercially available for certain lamp types and wattages but which 

use commercially available technologies. For example, DOE developed efficacy estimates for 

reduced-wattage IRL with an HIR coating. 

2.5.4 Developed Efficacy Levels 

Having identified the more-efficacious substitutes for each of the baseline lamps (or 

lamp-and-ballast systems), DOE developed efficacy levels based on the consideration of several 

factors including: (1) the design options associated with the specific lamps being studied (e.g., 

grades of phosphor for fluorescent lamps, the use of infrared coatings for IRL, etc.); (2) the 

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ability of lamps across wattages to comply with the standard level of a given product class;1

 and 

(3) the maximum technologically feasible level. 

2.6 ENERGY USE CHARACTERIZATION 

The energy-use characterization provides estimates of annual energy use for the two 

categories of lamps which DOE uses in the LCC and PBP analyses and the NIA. To develop 

annual energy use estimates, DOE multiplied annual usage (in hours per year) by the system 

power estimates (in watts). DOE developed the system power estimates in the engineering 

analysis. To derive annual energy usage, DOE used data published in the U.S. Lighting Market 

Characterization: Volume I (LMC), the Residential Energy Consumption Survey (RECS), the 

Commercial Building Energy Survey (CBECS) and the Manufacturer Energy Consumption 

Survey (MECS). 

2.7 PRODUCT PRICE DETERMINATION 

This chapter focuses on the methodology followed by DOE in developing enduser product prices for lamps and ballasts used in the rulemaking analysis. DOE based the 

product price determination for lamps and ballasts on marked-down manufacturer price 

schedules, developing low, mid and high end-user retail prices. 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS 

The effects of new energy conservation standards on equipment result in changes in 

operating expenses (usually decreased) and changes in customer price (usually increased). DOE 

analyzed the net effect of new standards on consumers by evaluating the net LCC using the 

efficacies and system power ratings derived in the engineering analysis and the cost trends 

derived from the product price determination. Inputs to the LCC calculation include the installed 

cost to the customer (customer price plus installation cost), operating expenses (energy expenses 

and maintenance costs), the lifetime of the appliance, and a discount rate. 

DOE reviewed the Energy Information Administration’s (EIA’s) energy price data for 

GSFL and IRL to establish electricity prices. DOE relied on regional average electricity price 

data for the residential and commercial sectors. DOE used projections of these electricity prices 

for residential and commercial customers to estimate future electricity prices in its LCC analysis. 

DOE used EIA’s Annual Energy Outlook (AEO) as the default source of projections for future 

electricity prices. 

DOE developed discount rates by estimating the cost of capital to companies that 

purchase lamps covered under this rulemaking. For residential consumers of GSFL and IRL, 

DOE derived the discount rates from estimates of the interest or “finance cost” to purchase 

 

1

 Efficacy levels span multiple lamps of different wattages. In selecting trial standard levels, DOE considered 

whether these multiple lamps can meet the efficacy levels. 

2-7 
residential products. By applying the financial theory, the finance cost of raising funds to 

purchase residential products can be interpreted as: (1) the financial cost of any debt incurred to 

purchase residential products, principally interest charges on debt, or (2) the opportunity cost of 

any equity used to purchase residential products, principally interest earnings on household 

equity. Household equity is represented by holdings in assets such as stocks and bonds, as well 

as the return on homeowner equity. DOE obtained much of the data required to determine the 

cost of debt and equity from the Federal Reserve Board’s triennial Survey of Consumer 

Finances. 

For commercial and industrial consumers of GSFL and IRL, DOE used the same 

approach it relied on for developing discount rates for other commercial equipment. DOE derives 

discount rates for commercial consumers by estimating the cost of capital of companies that 

purchase commercial equipment. The cost of capital is commonly used to estimate the present 

value of cash flows to be derived from a typical company project or investment. Most 

companies use both debt and equity capital to fund investments, so the cost of capital is the 

weighted-average cost of equity and debt financing. This corporate finance approach is referred 

to as the weighted-average cost of capital (WACC). 

Chapter 8 also describes the PBP analysis, which calculates the amount of time needed to 

recover the additional cost that consumers pay for increased efficiency. Numerically, the simple 

payback period is the ratio of the increase in purchase price to the decrease in annual energy 

costs. 

2.9 SHIPMENTS ANALYSIS 

Shipment forecasts are required to calculate the national impacts of standards on energy, 

NPV, and future manufacturer cash flows. DOE developed shipment forecasts using historical 

data as a basis for projecting future shipments of the GSFL and IRL that are the subject of this 

rulemaking. In projecting shipments, DOE accounted for several market segments including: (1) 

new construction; (2) renovation; (3) lamp failure; (4) ballast failure or fixture replacement (for 

GSFL only); and (5) retrofit. In addition, DOE used market-share matrices to characterize the 

product mix of the shipments and installed stock. 

2.9.1 Shipment Scenarios 

To calculate shipments, DOE created several base-case and standards case shipment 

scenarios. As rapidly emerging new lighting technologies (such as reflector compact fluorescent 

lamps (RCFL), ceramic metal-halide, and light-emitting diodes) could penetrate GSFL and IRL 

markets and significantly affect shipment forecasts, DOE creates two base-case shipment 

scenarios: Existing Technologies and Emerging Technologies. The Existing Technologies 

scenario, considering only technologies that have already achieved technological and market 

maturation assumes more limited penetration of other higher efficacy products than the 

Emerging Technologies scenario. 

To characterize consumer behavior in the standards-case for GSFL, DOE considers many 

lamp-and-ballast system properties that consumers take into account when purchasing their 

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GSFL systems. Specifically, DOE regards system price, system energy consumption, and 

system lumen output as three key drivers of consumer purchases. DOE develops two sets of 

shipment scenarios, to characterize consumers that may weigh these factors differently. The first 

set of scenarios comprises the “Roll-up” and “Shift” scenarios; the second set comprises the 

“High” and “Market segment-based” lighting expertise scenarios. 

In the first set of standards-case scenarios for GSFL, the Roll-up scenario represents a 

standards-case in which all product efficacies in the base case that do not meet the standard 

would roll up to meet the new standard level. Consumers who in the base case purchase lamps 

above the standard level are not affected as they are assumed to continue to purchase the same 

base case lamp or lamp system in the Roll-up scenario. The Roll-up scenario characterizes 

consumers primarily driven by the first-cost of the lamp. In contrast, the Shift scenario models a 

standards-case in which all base case consumer purchases are affected by the standard (whether 

or not their base case efficacy is below the standard).scenario. The second set of standards-case 

GSFL scenarios comprises the lighting expertise scenarios: High and Market Segment-Based. 

This set of scenarios characterizes consumers’ decisions (or lack thereof) to either maintain 

equivalent light output upon the purchase of a new higher efficacy lamp or accept higher lighting 

levels. The High expertise scenario generally characterizes more sophisticated lighting decisions 

in which consistent lighting levels and/or energy savings play a determinant role in consumer 

behavior. In this scenario, consumers are more likely to choose a lower ballast factor to pair 

with higher efficacy lamps or reduced-wattage lamps. Conversely, in the Market Segment-Based 

scenario, DOE assumes consumers occasionally accept high lighting levels and reduced (or in 

many cases, zero) energy savings as a consequence of their expertise (or lack thereof). 

As with GSFL, DOE considers two sets of standards-case scenarios for IRL. The first set 

of scenarios for IRL includes the “Roll-up” and “Shift” scenarios. Again, the Roll-up scenario 

represents a standards-case in which all product efficacies in the base case that do not meet the 

standard would roll up to meet the new standard level. Those product efficacies that were above 

the standard level are considered unaffected, as consumers continue to purchase the same base 

case lamp or lamp system. The Roll-up scenario characterizes consumers primarily driven by 

the first-cost of the lamp In contrast, the Shift scenario models a standards-case in which all

base case consumer purchases are affected by the standard (whether or not their base case 

efficacy meets the standard). The second set of standards-case IRL scenarios includes the 

“RCFL Product Substitution” and “Bulged Reflector (BR) Product Substitution” scenarios. In 

both scenarios, DOE assumes consumers do not necessarily continue to purchase the same lamp 

as they do in the base case. Thus, in the RCFL and BR Product Substitution scenarios, DOE 

models a shift to reflector compact fluorescent lamps or exempted BR lamps respectively. 

2.10 NATIONAL IMPACT ANALYSIS 

The national impact analysis assesses the NPV of total customer LCC and NES. DOE 

determined both the NPV and NES for the performance levels considered for the product classes 

analyzed. To make the analysis more accessible and transparent to all stakeholders, DOE 

prepared an NES Spreadsheet Model in Microsoft Excel to forecast energy savings and the 

national economic costs and savings resulting from new standards. The NES Spreadsheet Model 

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does not use probability distributions for inputs or outputs. To assess the impact of input 

uncertainty on the NES and NPV results, DOE can conduct sensitivity analyses for future 

analyses by running scenarios on input variables that are of interest to stakeholders. Chapter 11 

of the TSD describes DOE’s assessment of the aggregate economic impacts at the national level. 

2.10.1 National Energy Savings Analysis 

The inputs DOE uses to determine the NES are: (1) annual energy consumption per unit; 

(2) shipments; (3) equipment stock; (4) national energy consumption; and (5) site-to source 

conversion factors. DOE calculates the national energy consumption by multiplying the number 

of units, or stock, of lamps (by vintage) by the unit energy consumption (also by vintage).2

 DOE 

calculates national annual energy savings from the difference between national energy 

consumption in the base case (without new energy conservation standards) and in each standards 

case (with new energy conservation standards). The analysis includes estimates of energy 

savings by fuel type used for generating electricity. DOE estimates energy consumption and 

savings based on site energy, and converts the electricity consumption and savings to source 

energy. Cumulative energy savings are the sum of the annual NES, which DOE determines over 

specified time periods. 

2.10.2 Net Present Value Analysis 

The inputs DOE uses to determine the NPV are: (1) total annual installed cost; (2) total 

annual operating cost savings; (3) discount factor; (4) present value of costs; and (5) present 

value of savings. DOE calculates net savings each year as the difference between total operating 

cost savings and increases in total installed costs (including equipment price and installation 

cost). DOE calculates savings over the life of the equipment, accounting for differences in 

yearly energy rates. DOE calculates NPV as the difference between the present value of 

operating cost savings and the present value of increased total installed costs. DOE discounts 

future costs and savings to the present with a discount factor. 

DOE calculates increases in total installed costs as the product of the difference in the 

total installed cost between the base case and standards case and the annual shipments in the 

standards case. Because costs of the more-efficient equipment bought in the standards case are 

higher than those of equipment bought in the base case, price increases appear as negative values 

in the NPV. 

DOE expresses operating cost savings as decreases in operating costs associated with the 

lower energy consumption of equipment bought in the standards case compared to the base 

efficiency case. Total operating cost savings are the product of savings per unit and the number 

of units of each vintage surviving in a particular year. 

 

2

 Vintage represents the age of the equipment. 

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2.11 LIFE-CYCLE COST SUB-GROUP ANALYSIS 

A consumer subgroup comprises a subset of the population that is likely, for one reason 

or another, to be impacted disproportionately by new or revised energy conservation standards. 

In this NOPR, DOE identified low-income consumers, houses of worship, historical facilities, 

and institutions that serve low-income populations as consumers that would be 

disproportionately impacted by the proposed standards. The LCC sub-group analysis evaluates 

impacts on these consumer sub-groups by accounting for variations in key inputs to the LCC 

analysis. 

2.12 MANUFACTURER IMPACT ANALYSIS 

DOE performed a MIA to estimate the financial impact of higher energy conservation 

standards on GSFL and IRL manufacturers, and to calculate the impact of such standards on 

domestic manufacturing employment and capacity. The MIA has both quantitative and 

qualitative aspects. The quantitative part of the MIA primarily relies on two separate 

Government Regulatory Impact Models (GRIMs)industry-cash-flow models customized for 

this rulemaking. The GRIM inputs are data characterizing the industry cost structure, shipments, 

and revenues. The key output is the industry net present value. Different sets of assumptions 

(scenarios) will produce different results. The qualitative part of the MIA addresses factors such 

as product characteristics, characteristics of particular firms, and market and product trends, and 

includes an assessment of the impacts of standards on subgroups of manufacturers. The 

complete MIA is outlined in Chapter 12 of the TSD. 

DOE conducted the MIA in three phases. Phase 1, “Industry Profile,” consisted of the 

preparation of an industry characterization. Phase 2, “Industry Cash Flow,” focused on the 

industry as a whole. In this phase, DOE used two separate GRIMs (one for the GSFL industry 

and one for IRL industry) to prepare an industry cash-flow analysis. DOE used publicly 

available information developed in Phase 1 to adapt each GRIM structure to facilitate the 

analysis of amended GSFL and IRL standards. In Phase 3, “Subgroup Impact Analysis,” DOE 

conducted interviews with manufacturers representing the majority of domestic GSFL and IRL 

sales. During these interviews, DOE discussed engineering, manufacturing, procurement, and 

financial topics specific to each company, and also obtained each manufacturer’s view of the 

industry as a whole. The interviews provided valuable information DOE used to evaluate the 

impacts of an amended energy conservation standard on manufacturer cash flows, manufacturing 

capacities, and employment levels. 

2.13 UTILITY IMPACT ANALYSIS 

The utility impact analysis includes an analysis of the impact of higher energy 

conservation standards on the electric utility industries. DOE has adapted the National Energy 

Modeling System (NEMS) produced by the EIA for this analysis. NEMS (EIA 2005) is a large 

multi-sectoral general-equilibrium model of the U.S. energy sector that has been developed over 

the past decade by the EIA, primarily for the purpose of preparing DOE’s AEO. In prior 

rulemakings, a variant of NEMS (currently termed NEMS-BT, BT referring to the DOE’s 

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Building Technologies Program) was developed to better address the specific impacts of an 

equipment efficiency standard. 

The NEMS produces a widely recognized baseline energy forecast for the United States 

through the year 2030, and is available in the public domain. The typical NEMS outputs include 

forecasts of electricity sales, price, and avoided electric generating capacity. DOE conducted the 

utility impact analysis as a scenario departing from the latest AEO reference case. In other 

words, the energy savings impacts from amended energy conservation standards were modeled 

using NEMS-BT to generate forecasts that deviate from the AEO reference case. 

2.14 ENVIRONMENTAL ASSESSMENT 

DOE conducted the environmental assessment (EA) pursuant to the National 

Environmental Policy Act and the requirements under 42 U.S.C. 6295(o)(2) to determine the 

environmental impacts of the amended standards. (42 U.S.C. 6316(a)) The primary 

environmental effects of energy conservation standards for GSFL and IRL are reduced emissions 

resulting from reduced electrical energy consumption. The environmental impact analysis tracks 

the impact of possible standards on three energy-related emissions: carbon dioxide (CO2), 

nitrogen oxides (NOX), and mercury (Hg). The analyses do not include the estimated reduction 

in power plant emissions of sulfur dioxide (SO2) because the Clean Air Act Amendments of 

1990 set an emissions cap on SO2 emitted by the power generation sector and it is assumed that 

SO2 emissions will always be at, or near, the ceiling. DOE based the environmental assessment 

calculations on the NEMS-BT modeling work proposed for the utility impact analysis. The 

output is the forecasted physical emissions. The net benefit of the standard is the difference 

between emissions estimated by NEMS-BT and the AEO2008 Reference Case. This approach 

has the advantage of examining the marginal impact of standards for general service fluorescent 

lamps and incandescent reflector lamps on the utility generation mix and the subsequent 

environmental emissions. 

CO2 emissions are tracked in NEMS-BT by a detailed module that produces robust results 

because of its broad coverage of all sectors and inclusion of interactive effects. NEMS-BT also 

includes a module for SO2-allowance trading and delivers a forecast of SO2-allowance prices. It 

is important to note, however, that simulation of SO2 trading tends to imply that physical 

emissions effects will be zero, as it is assumed that SO2 emissions will always be at, or near, the 

emissions cap set by the Clean Air Act. Thus, there is virtually no possible SO2 environmental 

benefit from electricity savings as long as there is an enforcement of the emissions ceiling. 

However, there is an SO2 benefit from conservation in the form of a lower allowance price and, 

if big enough to be calculable by NEMS, this value can be reported. 

NOX emissions are currently not regulated by a national cap and trade program. DOE 

generated low- and high-end estimates of changes in NOX emissions associated with an energy 

conservation standard using current emission rates for the power sector in the AEO. Hg 

emissions are also currently not regulated by a national cap and trade program. DOE generated 

low- and high-end estimates of changes in Hg emissions associated with an energy conservation 

standard using current emission rates for the power sector in the AEO. 

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2.15 EMPLOYMENT IMPACT ANALYSIS 

The imposition of standards can impact employment both directly and indirectly. Direct 

employment impacts are changes in the number of employees at the factories that produce the 

covered lamp types, along with the affiliated distribution and service companies, resulting from 

the imposition of new standards. DOE evaluates 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 the imposition of standards. The combined direct and indirect employment impacts 

are investigated in the employment impact analysis using the Pacific Northwest National 

Laboratory’s “Impact of Sector Energy Technologies” (ImSET) model. The ImSET model was 

developed for DOE’s Office of Planning, Budget, and Analysis, and estimates the employment 

and income effects of energy-saving technologies in buildings, industry, and transportation. In 

comparison 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 

DOE prepared a regulatory impact analysis (RIA) pursuant to Executive Order 12866, 

“Regulatory Planning and Review,” 58 FR 51735, October 4, 1993, which is subject to review 

under the Executive Order by the Office of Information and Regulatory Affairs at the Office of 

Management and Budget. The RIA addressed the potential for non-regulatory approaches to 

supplant or augment energy conservation standards to improve the energy efficiency of GSFL 

and IRL on the market. 

2.17 DEPARTMENT OF JUSTICE REVIEW 

Section 325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act states that, before 

the Secretary of Energy may prescribe a new or amended energy conservation standard, the 

Secretary shall ask the U.S. Attorney General to make a determination of “the impact of any 

lessening of competition...that is likely to result from the imposition of the standard.” (42 U.S.C. 

6295) Pursuant to this requirement, DOE solicited the views of DOJ on any lessening of 

competition that is likely to result from the imposition of a proposed standard and gave the views 

provided full consideration in assessing economic justification of a proposed standard.