2

- i

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

TABLE OF CONTENTS

2.1 INTRODUCTION

................................ ................................ ................................ ........... 2

- 1

2.2 MARKET AND TECHNOLOG Y ASSESSMENT

................................ ........................ 2

- 5

2.2.1 Market Assessment

................................ ................................ ................................ .......... 2

- 5

2.2.1.1 Definition and Scope of Coverage

................................ ................................ . 2

- 5

2.2.1.2 Product Classes

................................ ................................ .............................. 2

- 9

2.2.1.3 Test Procedure

................................ ................................ ............................. 2

- 10

2.2.2 Technology Assessment

................................ ................................ ................................ . 2

- 12

2.3 SCREENING ANALYSIS

................................ ................................ ............................ 2

- 12

2.4 ENGINEERING ANALYSIS

................................ ................................ ........................ 2

- 12

2.5 MARKUPS ANALYSIS

................................ ................................ ............................... 2

- 14

2.6 ENERGY USE ANALYSIS

................................ ................................ .......................... 2

- 14

2.7 LIFE

- CYCLE COST AND PAYBA CK PERIOD ANALYSIS

................................ ... 2

- 17

2.8 SHIPMENTS ANALYSIS

................................ ................................ ............................ 2

- 18

2.9 NATIONAL IMPACT ANAL YSIS

................................ ................................ .............. 2

- 19

2.9.1 National Energy Savings

................................ ................................ ................................ 2

- 20

2.9.2 Net Present Value of Consumer Benefits

................................ ................................ ...... 2

- 20

2.10 CONSUMER SUBGROUP AN ALYSIS

................................ ................................ ...... 2

- 20

2.11 MANUFACTURER IMPACT ANALYSIS

................................ ................................ .. 2

- 21

2.12 EMISSIONS ANALYSIS

................................ ................................ .............................. 2

- 21

2. 13 MONETIZING REDUCED C O 2 AND OTHER EMISSIONS

................................ .... 2

- 24

2.14 UTILITY IMPACT ANALY SIS

................................ ................................ ................... 2

- 25

2.15 EMPLOYMENT IMPACT AN ALYSIS

................................ ................................ ....... 2

- 25

2.16 REGULATORY IMPACT AN ALYSIS

................................ ................................ ....... 2

- 26

REFERENCES

................................ ................................ ................................ .......................... 2

- 27

LIST OF FIGURES

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process

................................ ......... 2

- 22-1

CHAPTER 2. ANALYTICAL FRAMEWORK , COMMENTS FROM INTE RESTED

PARTIES, AND DOE RES PONSES

2.1 I ntroduction

Section 6295(o)(2)(A) of the Energy Policy and Conservation Act (EPCA), Pub. L. 94

- 163, 42 U.S.C. 6291 et seq . requires the U.S. Department of Energy (DOE) to establish energy conservation standards that achieve the maximum improvement in energy efficiency of consumer products that is technologically feasible and economically justified. This chapter describes the general analytical framework that DOE uses in developing s uch standards, and i n particular, energy conservation standards for portable air conditioners (ACs) . The analytical framework is a description of the methodology, the analytical tools, and the relationships among the various analyses that are part of this rulemaking. The methodology that addresses the statutory requirement for economic justification, for example, includes analyses of life

- cycle cost; economic impact on manufacturers and users; national benefits; effects, if any, on utility companies; and im pacts from any lessening in competition among manufacturers.

Figure 2.1

. 1 summarizes the analytical components of the standards

- setting process. The

focus of this figure is the center col umn, identified as “Analyses.” The column labeled “Key Inputs” lists the types of data and information required for each analysis. Some key inputs come from public databases; DOE collects other inputs from interested parties or othe r knowledgeable experts within the field. The column labeled “Key Outputs” shows analytical results that feed directly into the standards

- setting process. The figure shows how the analyses fit into the rulemaking process and how they relate to one another. Arrows connecting analyses show the types of information that feed from one analysis to another.2-2 Figure 2.1

. 1 Flow Diagram of Analyses for the Rulemaking Process2-3

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

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

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

 An engineering analysis to develop cost

- efficiency relationships that show the manufacturer’s cost of achieving increased efficiency.

 An analysis of markups for determining product price; markups throughou t the distribution channel relate the manufacturer production cost to the retail cost paid by the

consumer.

 An energy use analysis to determine the annual energy use of the considered product for a representative set of users.

 A life

- cycle cost (LCC) and p ayback period (PBP) analysis to calculate the savings in operating costs the consumer will realize throughout the life of the covered product compared to any increase in installed product cost likely to result directly from imposition of a standard.

 A ship ments analysis to forecast product shipments, which then are used to calculate the national impacts of potential standards on energy consumption, net present value (NPV),

and future manufacturer cash flows.

 A national impact analysis (NIA) to assess the ag gregate impacts, at the national level, of potential energy conservation standards for the considered product, as measured by the NPV of total consumer economic impacts and the national energy savings (NES).

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

The analyses DOE will perform in any subsequent notic e of proposed rulemaking (NOPR) stage include those listed below. In addition, DOE will revise the analyses it performed

in the preliminary analysis stage based on comments and new information received on topics including, but not limited, to those listed below.

 An LCC subgroup analysis to evaluate variations in customer characteristics that might cause a standard to affect particular consumer sub

- populations, such as low

- income households, differently than the overall population.

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

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

utilities.

 An emplo yment impact analysis to assess the aggregate impacts of amended energy conservation standards on national employment.2-4

 An environmental impact analysis to provide estimates of the effects of amended energy

conservation standards on emissions of carbon diox ide (CO 2 ), sulfur dioxide (SO 2 ), nitrogen oxides (NO
x ), and mercury (Hg).

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

lower cost

.

For each rulemaking, DOE typically first develops a framework document that describes the approaches and methods DOE will use in evaluating the need for new or amended standards ; however, portable AC s are not currently covered products under EPCA. Fo r this rulemaking, DOE began the process by publishing a notice of proposed determination (NOPD) in the Federal Register on July 5, 2013 (hereinafter the “July 2013 NOPD”) , which included DOE’s tentative determination that portable AC s fulfill the criteria for being added as a covered product pursuant to 42 U.S.C. 6292(b)(1)

. 78 FR 40403 , 40404 . The July 2013 NOPD is available at http://www.regulations.gov/#!docume ntDetail;D=EERE

- 2013

- BT

- STD

- 0033

- 0001

.

In response to the publication of the July 2013 NOPD , DOE received comments from

i nterested parties regarding DOE’s tentative determination that portable AC s meet the criteria for being considered a covered product

. Additionally, interested parties commented on potential issues DOE should address in developing any test procedures or energy conservation standards for portable AC s. In the preliminary analysis , DOE: (1) summarizes the key comments received

from interest ed parties and describes DOE’s responses to those comments; and ( 2 ) explains in further detail each of the issues for which DOE seeks public comment in the executive summary

. This preliminary TSD contains details of the preliminary analyses conducted for p ortable AC s

.2-5

2.2 M arket and Technology Assessment

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

2.2.1 Market Assessment

When DOE begins an energy conservation standards rulemaking, it develops information that provides an overall picture of the market for the products considered, including the nature of the products, the industry structure, and market characteristics for th e products. This activity consists of both quantitative and qualitative efforts based primarily on publicly available information. The subjects addressed in the market assessment for portable AC s included manufacturers, trade associations, and the quantiti es and types of products sold and offered for sale. DOE examined both large and small and foreign and domestic manufacturers. Finally, DOE reviewed other energy efficiency programs from utilities, individual States, and other organizations.

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

2.2.1.1 Definition and Scope of Coverage

In the July 2013 NOPD, DOE presented discussion (1) explaining why classifying portable AC s as covered products is necessary and appropriate to carry out the purposes of EPCA, and (2) describing the estimate that the average annual per

- household energy use by portable AC s is likely to exceed 100 kilowatt

- hours (kWh) per year. 78 FR 40403, 40404

– 05 (Jul. 5, 2013).

In response to the July 2013 NOPD, interested parties commented on DOE’s preliminary determination that p ortable AC s fulfill the requirements for covered products under EPCA. The Association of Home Appliance Manufacturers ( AHAM ) ; Pacific Gas and Electric Company, Southern California Gas Company, San Diego Gas and Electric, and Southern California Edison (her einafter referred to as the “California Investor

- Owned Utilities (IOUs)”) ; and the American Council for an Energy

- Efficient Economy (ACEEE), Natural Resources Defense Council (NRDC), Appliance Standards Awareness Project (ASAP), Alliance to Save Energy (AS E), Consumer Federation of America (CFA), Consumers Union (CU), National Consumer Law Center (NCLC), Northwest Energy Efficiency Alliance (NEEA), and Northwest Power and Conservation Council (NPCC), (hereinafter referred to as the “Joint Commenters”) all

c ommented in support of DOE’s proposed determination that portable AC s are a covered product2-6

under EPCA. (AHAM, NOPD No. 6 at p. 1 a ; California IOUs, NOPD No. 5 at p. 1; Joint Commenters, NOPD No. 4 at p. 2) Edison Electric Institute (EEI) stated that it di d not object to DOE’s proposed determination

. However, EEI also commented that it is not clear if the aggregate annual energy consumption of portable AC s exceeds 4.2 terawatt

- hours (TWh)

, which according to EEI is required under EPCA . Additionally, EEI com mented that DOE did not address energy labeling in the proposed determination , and that if portable AC s were tested and

labeled in the same manner as for a room AC , consumers could compare estimated energy costs and usage, encouraging manufacturers to produce portable AC s that are as efficient as room

AC s

. (EEI, NOPD No. 3 at p p . 2

– 3 , 5 )

DOE notes that the 4.2 TWh aggregate energy consumption threshold and the assessment of whether labeling would be sufficient to achieve the maximum energy efficiency that is technologically feasible and economically justified are requirements that must be met in order for DOE to pr escribe an energy conservation standard for a particular product. (42 U.S.C. 6295(l)(1)) However, f

or a product to be classified as a covered product, DOE must determine only that: (1) classifying the product as a covered product is necessary for the purpo ses of EPCA; and (2) the average annual per

- household energy use by products of such type is likely to exceed 100 kWh per year. (42 U.S.C. 6292(b)(1))

Because i nterested parties generally supported DOE’s proposed determination in the July

2013 N OPD, DOE h as continued its analysis of portable AC s in this preliminary analysis and in

a separate rulemaking in support of developing test procedures for these products. In support of the test procedure rulemaking, DOE published a notice of data a vailability (NODA) in the Federal Register on May 9, 2014 (hereinafter the “May 2014 NODA,” 79 FR 26639) and issued a notice of proposed rulemaking (NOPR) on February 12, 2015 ( hereinafter the “ February 2015

Test Procedure NOPR ” )

. b

Because portable AC s are not currently considered covered products under E PCA , there

is no regulatory definition for these products. In the July 2013 NOPD, DOE proposed a definition for portable AC s to be added in the Code of Federal Regulations to clarify coverage of any potential test procedure or energy conservation standards for these produc ts. DOE proposed defining a portable AC as “a consumer product, other than a ‘packaged terminal air conditioner,’ which is powered by a single phase electric current and which is an encased assembly designed as a portable unit that may rest on the floor or other elevated surface for the purpose of providing delivery of conditioned air to an enclosed space. It includes a prime source of refrigeration and may include a means for ventilating and heating.” DOE also noted that this proposed definition is

a A notation in the form “AHAM, NOPD No. 6 at p. 1” identifies a written comment: (1) made by AHAM; (2) recorded in document number 6 that is filed in the docket of the rulemaking for determination of coverage of portable ACs as a covered consumer product ( Docket No

. EERE

– 201 3

– BT

– STD

– 00 33 ) and a vailable for review at www.regulations.gov ; and (3) w hich appears on page 1 of document number 6.

b The test procedure is available at: http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/produ ctid/79

.2-7

mutuall y exclusive to the definition for a room AC , which is “designed as a unit for mounting in a window or through the wall.” 79 FR 40403, 40404 (Jul. 5, 2013).

In response to the July 2013 NOPD, interested parties commented on the scope of coverage under the proposed portable AC definition. AHAM supported the scope of coverage based on the proposed definition, and suggested that DOE indicate that the definition covers spot coolers, single

- duct, and dual

- duct portable AC s. (AHAM, NOPD No. 6 at p. 2) The California IOUs and EEI stated that the requirement in the definition to be powered by a single

- phase electric current may exclude some equipment designed for commercial applications. The California IOUs encouraged DOE to consider a large range of portable AC s, both residential and commercial, to ensure that all potential savings are examined and analyzed. In particular, the California IOUs recommended that DOE consider covering portable AC s with capacities above 14,000 British thermal units per hour ( Btu/h ) because there are units currently on the market with cooling capacities up to and above 65,000 Btu/h. (California IOUs, NOPD No. 5 at pp. 1

– 2; EEI, NOPD No. 3 at p. 5) EEI also commented that DOE should consider revising the definition of “portable air c onditioner” to ensure that three

- phase electrical current units are covered, and to better reflect products that currently are on the market with and without heating capability. (EEI, NOPD No. 3 at p. 5)

Oceanaire , Inc. (Oceanaire) commented in response t o the May 2014 NODA , which referenced the portable AC definition included in the July 2013 NOPD, that according to the EPCA definition, commercial spot coolers (portable AC s that do not have ducting attached to the condenser) are not covered products. Acco rding to Oceanaire, commercial spot coolers are mainly used in the rental market where emergencies create a need for immediate and focused cooling systems, with example applications including food and cosmetics processing plants,

outdoor entertainment venu es, and steel processing factories. Oceanaire noted that the cooling capacity of these rental units range between 1 and 5 tons (12,000 to 60,000 Btu/h), where actual performance is determined by a wide range of operating environments which may include high temperature, high humidity, and corrosive conditions that are not experienced in household applications. Further, Oceanaire noted that its commercial product construction is robust, comprising mainly 18 gauge and thicker steel cabinetry and support struct ures. (Oceanaire,

NODA No. 2 at pp. 1

– 2 c )

P ortable AC s , most commonly in single

- duct and dual

- duct configurations, typically range in cooling capacity from 5,000 to 14,000 Btu/h when measured according to existing industry test methods

. Spot coolers, portable AC s with no ducting attached to the condenser air

stream, are typically intended for larger spaces and harsher applications , and m ost have a cooling capacity greater than 14,000 Btu/h

.

c A notation in the form “Oceanaire, NODA No. 2 at pp. 1

– 2” identifies a written comment: (1) made by Oceanaire, Inc. (Oceanaire); (2) recorded in document number 2 that is filed in the docket of the portable AC test procedure rulemaking (Docket No

. EERE

– 201 4

– BT

– TP

– 00 14 ) and a vailable for review at www.regulations.gov ; and (3)

w hich appears on pages 1

– 2 of document number 2.2-8

As discussed in the February 2015 Test Procedure NOPR, the proposed portable AC test procedure does not include measures of spot cooler performance. Therefore, D OE conducted this preliminary analysis only on single

- duct and dual

- duct portable ACs

.

DOE also recognizes that certain portable AC s include options for operating as a dehumidifier and/or heater, with heating means provided by either an electric resistance heater or by modifying internal refrigerant flow to operate the unit as a heat pump. The dehumidification function may be achieved in some units by removing the condenser duct(s), and for certain units, disabling the self

- evaporative feature by draining the condensate before it reaches the condenser coils or deactivating the condensate slinger fan when the controls are set to dehumidification mode. In all of these cases, the air flow pattern and psychrometrics differ fundamentally from

those of a dehumidifier, resulting in different energy efficiencies, even though both products may use a refrigeration system to remove moisture from the air.

DOE also recognizes that although room AC s and portable AC s share many of the same components that operate similarly to provide cooled air to a conditioned space, a portable AC

, unlike a room AC , may be entirely located within the conditioned space so that some or all of the condenser air may be drawn from that space, and heat from the refrigeration system and ducting is transferred to the conditioned space as well. These differences lead to diff ering energy

efficiencies between room AC s and portable AC s, even if the products were to incorporate the same components. In addition, operation of the portable AC without activation of the refrigeration system may be more accurately characterized as “air circulation” rather than “ventilation”, because the portable AC may be operated without drawing air from outside the conditioned space. Thus, DOE propose d in the February 2015 Test Procedure NOPR to clarify in the definition of “portable air conditioner” that the primary function of the product is to provide cooled conditioned air to the space in addition to other functions such as air circulation or heating , and that it is a product other than a r oom AC or dehumidifier. In sum, DOE propose d in

the February 2015 Test Procedure NOPR to add to 10 CFR 430.2 the following definition for “portable air conditioner” that clarifies the scope of products and aligns with the definitions for

dehumidifiers and room ACs :

A n encased assembly , other than a “packaged terminal air conditioner,” “room air conditioner,” or “ dehumidifier, ” desi gned as a portable unit for delivering cooled, conditioned air to an enclosed space, that is powered by single

- phase electric current

, which may rest on the

floor or other elevated surface . It includes a source of refrigeration and may include additional means for air circulation and heating.

DOE conducted this preliminary analysis according to th is proposed definition of portable AC and excluded spot coolers from consideration as discussed above

. However, DOE will consider comments and information received from interested parties on the revised portable AC definition proposed in the February 2015 Test Procedure NOPR, and expects to establish the final definition in a future determination of coverage.

In response to the July 2013 NOPD, EEI also commented that unvented gas space heaters are a competing product to portable AC s with heating mode. EE I stated that DOE should add2-9

unvented gas space heaters as a covered product to be market neutral. (EEI, NOPD No. 3 at p. 6) DOE evaluates products to determine whether they meet the EPCA requirements for being considered a covered product. Any such determ ination for unvented gas space heaters would be the subject of a separate rulemaking for those products.

2.2.1.2 Product Classes

When evaluating and establishing energy conservation standards, DOE generally divides covered products into product classes by the type of energy used or by capacity or other performance

- related features that affect efficiency. Different energy conservatio n standards may apply to different product classes. (42 U.S.C. 6295(q))

In response to the July 2013 NOPD, the Joint Commenters commented that any potential energy conservation standards should not differentiate between single

- duct and dual

- duct units

b ecause both provide the same utility to consumers. (Joint Commenters, NOPD No. 4 at p. 2)

For this preliminary analysis, DOE consider ed whether it should separat e portable AC s into separate product classes based on two characteristics: duct configuration and capacity.

Portable AC s are typically available with three types of duct configurations that affect product performance : single

- duct, dual

- duct, and spot cooler

. As mentioned previously, DOE did not consider spot coolers for this preliminary ana lysis . Single

- duct units draw all of the condenser inlet air directly from the conditioned space without the means of a duct, and discharge the hot condenser outlet air to the unconditioned space through a duct . Dual

- duct units

draw some or all of the cond enser inlet air from the unconditioned space through a duct, and may draw additional condenser inlet air directly from the conditioned space. The condenser outlet air is discharged to the unconditioned space by means of a separate duct . Single

- duct units t ypically create more net negative pressure within the conditioned space than dual

- duct units , leading to

more infiltration airflow from outside the conditioned space. This typically leads to lower single

duct unit efficiencies than for comparable dual

- duct units when measured according to the method proposed in the February 2015 Test Procedure NOPR

.

DOE evaluated whether there is any consumer utility associated with the different duct configurations. DOE considered whether all installation locations would be able to accommodate both single

- duct and dual

- duct units. Based on manufacturer feedback and a review of the market and the range of possible window connections, DOE is not aware of any installation location that would preclude the use of either duct configuration. DOE also investigated whether duct configuration may affect noise performance of a p ortable AC . Based on a review of published noise data, DOE did not find a correlation between noise levels and duct configuration. Although duct configuration impacts unit performance, DOE tentatively concludes that duct configuration does not require sepa rate product classes because it is not aware of any unique consumer utility associated with either configuration.

Additionally, portable AC efficiencies are a function of product capacity. Higher

- capacity units typically achieve a higher cooling energy e fficiency ratio ( EER c m ) than lower

- capacity2-10

units when measured according to the method proposed in the February 2015 Test Procedure

NOPR . DOE observed from its test data that this relationship between efficiency and capacity is

consistent across the ra nge of measured capacities for products that implement the same technologies

. DOE did not identify any inherent differences in efficiency for different ranges of capacity that would produce a different efficiency

- capacity relationship. Therefore , DOE is no t proposing separate portable AC product classes based on capacity. Instead, DOE is proposing equations to relate efficiency to capacity.

As a result, DOE did not separate portable AC s into any additional product classes for this preliminary analysis.

2.2.1.3 Test Procedure

The market assessment also typically provides information on DOE’s test procedure for measuring the efficiency or energy consumption of the product being analyzed

. DOE does not currently specify a test procedure for portable AC s, but is dev elop ing such a test procedure in a separate rulemaking.

In response to the July 13 NOPD, DOE received multiple comments from interested parties describing issues DOE should consider in the development of a portable AC test procedure.

AHAM commented that a DOE rulemaking to develop a test procedure for portable AC s would eliminate the issue of inconsistent manufacturer rating and reporting. (AHAM, NOPD No. 6 at p. 3). AHAM also commented that the Canadian Standards Association (CSA) has a test procedure that could be incorporat ed by reference , and that American National Standards Institute (ANSI)/AHA M PAC

- 1

- 2009 “Portable Air Conditioners” d (ANSI/AHAM PAC

- 1

- 2009) is almost identical to that procedure. A HAM stated that it was nearing comp letion of a n updated

version of PAC

- 1 , which would be fully harmonized with the CSA test procedure. AHAM further suggested that DOE work with Natural Resources Canada (NRCan) and CSA to ensure harmonization between the U.S. and Canadian test procedures bec ause the market for appliances, including portable AC s, is integrated in North America. (AHAM, NOPD No. 6 at pp. 2

– 4)

The California IOUs commented that establishing a test procedure as a part of a standards rulemaking process would ensure that represent ations of energy use for the product would better reflect actual usage and be more meaningful for consumers making purchasing decisions. (California IOUs, NOPD No. 5 at p. 3)

The Joint Commenters commented that any DOE test procedure for portable AC s mus t be based on net capacity, with realistic reductions for the heat of compression dissipated by the

indoor

- mounted compressor. (Joint Commenters, NOPD No. 4 at p. 2) The Joint Commenters and Consumer Reports urged DOE to develop a portable AC test procedur e that is comparable to

d ANSI/AHAM test procedures are available for purchase online at: www.aham.org

.2-11

the room AC test procedure to allow consumers to make comparisons between the two products that serve similar functions. (Consumer Reports, NOPD No. 2 at p. 2; Joint Commenters, NOPD No. 4 at p. 2)

DOE is conducting a separate rulemaking to develop a portable AC test procedure, in

which it addresse s these comments and other issues related to portable AC testing. DOE initiated the test procedure rulemaking by publishing the May 2014 NODA to request fe edback on potential testing options. 79 FR 26639. In the May 2014 NODA, DOE presented data from investigative testing according to ANSI/AHA M PAC

- 1

- 2009 and ANSI/ American Society of Heating, Refrigerating, and Air

- Conditioning Engineers (ASHRAE) Standard 1 6

- 1983 (RA 99), “Method of Testing for Rating Room Air Conditioners and Packaged Terminal Air Conditioners” (ANSI/ASHRAE Standard 16

- 1983 e ), with certain modification s to allow testing of portable AC s. DOE also presented an alternate test approach, in whic h testing would be conducted according to ANSI/AHAM PAC

- 1

- 2009, but the calculations for cooling capacity and

EER c m would account for the heating effect of infiltration air and heat lost through the case and

ducts to the conditioned space

.

I n response t o the May 2014 NODA, the California IOUs commented that t he outputs of any DOE test procedure for portable AC s should include the airflow delivered, total capacity, sensible capacity, and latent capacity. The California IOUs stated that i n the dry regions of the
country

, customers need sensible capacity while in humid regions customers need latent capacity , and that r eporting and displaying all this information will help inform consumers in the selection of the equipment for their humidity conditions. (Cali fornia IOUs, NODA No. 5 at p. 3)

DOE notes that while these parameters may be calculated as intermediate steps in determining the test unit’s cooling capacity and EER
c m , EPCA defines a performance

- based energy conservation standard for products that do not consume water as one which prescribes a minimum level of energy efficiency or a maximum quantity of energy use. (42 U.S.C. 6291(6)(a)) Thus , DOE cannot establish energy conservation standards for portable AC s based

on multiple metrics. However, DOE could specify that this granular data be report ed by the

manufacturer under the certification, compliance, and enforcement requirements of 10 CFR part 429. DOE also notes that labeling of energy performance falls under the scope of the Federal
Trade Commission’s (FTC) regulations.

Based on feedback received in response to the May 2014 NODA and further investigative testing, DOE proposed a test procedure for portable AC s in the February 2015 T est P rocedure

NOPR. The proposed test procedure is consisten t with the alternate approach in the May 2014 NODA; however the February 2015 Test Procedure NOPR references the recently updated

version of the PAC

- 1 standard, AHAM PAC

- 1

- 2014 “Portable Air Conditioners” (AHAM PAC

1

- 2014). The 2014 version of the stand ard includes minor revisions to the indoor and outdoor

conditions from the 2009 version to fully harmonize with CSA’s test procedure

. After careful

e ANSI/ASHRAE test procedures are available for purchase online at: www.techstreet.com

.2-12

review of both versions of PAC

- 1, DOE does not expect the revisi ons to that test procedure to have a signifi cant impact on test results

.

For this preliminary analysis, DOE use d the procedure proposed in the February 2015 Test Procedure NOPR to characterize portable AC performance.

2.2.2 Technology Assessment

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

DOE developed its list of technologically feasible design options for portable AC s through consultation with man ufacturers, and from trade publ ications and technical papers.

Because many options for improving product efficiency are available in existing units, product literature and direct examination provided additional information.

Chapter 3 of the preliminary TS D includes the detailed list of all technology options

identified for potential efficiency improvements in portable AC s

.

2.3 S creening Analysis

The screening analysis examines various technologies as to whether they: (1) are technologically feasible; (2) are practicable to manufacture, install, and service; (3) have an adverse impact on product utility or availability; and (4) have adverse impacts on health and safety. DOE developed an initial list of efficiency

- enhancement options from the technologies

ident ified as technologically feasible in the technology assessment. Then DOE, in consultation with interested parties, review ed the list to determine if these options are practicable to manufacture, install, and service, would adversely affect product utility or availability, or would

have adverse impacts on health and safety. In the engineering analysis, DOE further consider ed

ef ficiency enhancement options that it did not screen out in the screening analysis. Chapter 4 of

the preliminary TSD contains details on the screening analysis for portable AC s

.

2.4 E ngineering Analysis

The engineering analysis (chapter 5 of the preliminary TSD ) establishes the relationship

between the manufactur er production cost (MPC) and the efficiency of portable AC s

. The purpose of the analysis is to estimate the incremental MPCs for a product that would result from increasing efficiency levels above th e baseline model. This relationship serves as the basis for cost/benefit calculations in terms of individual consumers, manufacturers, and the nation. Chapter 5 discusses the product classes DOE analyzed, the representative baseline units, the2-13

incremental efficiency levels, the methodology DOE used to develop the MPCs , the cost

efficiency curves, and the impact of efficiency improvements on the considered products.

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

- efficiency curves.

In response to the May 2014 NODA, AHAM commented that it will be difficult for DOE to determine appropriate standards or trial standards levels without a sufficient baseline according to the AHAM test procedure. Because of the range of differences between rated and measured capacitie s and efficiencies, AHAM stated that a conversion factor between rated and tested values is not feasible. AHAM suggested that DOE would need to know test results for a majority of products on the market to conduct a robust analysis. (AHAM, NODA No. 4 at p. 3)

DOE agrees that a conversion factor between rated capacity or efficiency and the tested value is not feasible. However, during investigative testing, DOE observed trends relating cooling efficiency to cooling capacity. DOE used these trends to define efficiency levels for products with similar design options, including the baseline efficiency level. The efficiency levels that DOE considered in the engineering analysis are not all attainable by the products in

D OE’s investigative test sample

. DOE relied on its investigative test data and modeling to determine the extent of efficiency improvements possible for portable AC s beyond the maximum

observed efficiency . DOE again established trends relating efficiency to capacity to define the higher efficiency levels

.

DOE typically structures its engineering analysis around one of three methodologies: (1) the design

- option approach, which calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency

- level approach, which calculates the relative costs of achieving increases in energy efficiency levels without regard to the particular design options used to achieve such increases; and/or (3) the reverse

- engineering or cost

- asse ssment approach,
which involves a “bottom

- up” manufacturing cost assessment based on a detailed bill of

materials derived from tear

- downs of the product being analyzed.

DOE used a hybrid approach of the design

- option and reverse

- engineering approaches for this preliminary analysis . This approach involved physically disassembling commercially available products, reviewing publicly available cost information, and modeling equipment cost. From this information, DOE estimated the MPCs for a range of product s currently available on the market. DOE then considered the steps manufacturers would likely take to improve product efficiencies. In its analysis, DOE determined that manufacturers would likely rely on certain design options to reach higher efficiencies. From this information, DOE estimated the cost and efficiency impacts of incorporating specific design options at each efficiency level. DOE also provide s further discussion on the design options and efficiency improvements in chapter 5 of this TSD, includ ing design options that met the screening criteria, but did not factor into the cost

efficiency relationship.2-14

In response to the July 2013 NOPD, the Joint Commenters suggested that the engineering analysis consider the feasibility of mounting the compres sor in the condenser cooling airstream so its heat is discharged outdoors, instead of adding to the load on the portable AC . (Joint Commenters, NOPD No. 4 at p. 2) DOE notes that all of the products observed in its teardown sample used the condenser airstr eam to cool the compressor. As a result, this design option is incorporated into the MPC estimates at each of the analyzed efficiency levels.

Chapter 5 of this preliminary TSD describes the methodology and results of the analysis

used to derive the cos t

- efficiency relationships.

2.5 Markups Analysis

DOE analyzed product markups to convert the MPCs estimated in the engineering analysis to consumer prices, which then are used in analyzing the LCC and PBP and manufacturer impacts. To develop markups, DOE identified how portable AC s are distributed from the manufacturer to the consumer. After identifying appropriate distribution channels, DOE relied on economic data from the U.S. Census Bureau and other sources to determine how prices are marked up as produ cts pass from the manufacturer to the consumer. The manufacturer markup converts MPC to manufacturer selling price. DOE developed an average manufacturer markup by examining the annual Securities and Exchange Commission (SEC) 10

- K reports filed by publicly traded manufacturers primarily engaged in appliance manufacturing

. DOE calculated markups for baseline products (baseline markups) and for more efficient products (incremental markups). The incremental markup relates the change in the manufacturer sales p rice of higher

efficiency models (the incremental cost increase) to the change in the retailer or distributor sales price. Chapter 6 of this preliminary TSD provides details on DOE’s development of markups for portable AC s.

2.6 Energy U s e A nalysis

DOE assessed the energy savings potential from higher

- efficiency portable AC s in order to develop energy savings values to be used in the LCC and subsequent analyses. The goal of the energy use characterization is to generate a range of energy use values that reflect real

- world use

of portable AC s in American homes and businesses. By incorporating data on how portable AC s actually are used by U.S. consumers, DOE can estimate the energy that would be consumed (or potentially saved) by products having variou s efficiency levels. As part of the energy use analysis, certain engineering assumptions and data are required, including how often the product is operated and in which mode of operation (cooling or fan

- only), the size of the area to be cooled, installatio n conditions, and climate conditions. DOE, however, found few real

- world data to help approximate portable AC energy use, and thus had to make various assumptions in the energy use analysis.

Critical to DOE’s energy use analysis was room AC data from th e Energy Information Administration’s (EIA’s) 2009 Residential Energy Consumption Survey ( RECS 2009) and 20032-15

Commercial Buildings Energy Survey ( CBECS 2003), the most recent surveys available at the time of DOE’s analysis. Both surveys collect nationally representative information related to consumers’ appliance use and energy consumption, including the use of window

- or wall

mounted room ACs . The two surveys collect data on annual energy costs for cooling, along with

climate

- related characteristics. DOE’s assumptions include the following considerations.

 Ownership of a window

- or wall

- mounted room AC used in a RECS 2009 household

or CBECS 2003 enterprise could be used to approximate the ownership of a portable

AC

.

 The portable AC was installed according to manufacturer instructions (for example, a

dual

- duct portable AC would have both ducts installed and properly insulated).

 The number of operating hours spent in cooling mode for a window

- or wall

- mounted

room AC used in a RECS household or CBECS enterprise could be used to approximate the hours a portable AC spends in cooling mode.

 The upper limit of total hours of portable AC operation in either cooling or fan

- only mode were estimated assuming that a portable AC would be operated only in months having 5 or more cooling

- degree days that exceed 65° F.

 For rooms measuring less than 250 square feet, the portable AC setpoint can be reached (the cooling load is constant) and operating hours would decrease with a higher

- capacity portable AC

.

 For rooms measuring 25 0 square feet or more, the cooling load could not be met by increasing the capacity of the portable AC and, therefore, cooling operation would continue until the user turned off the unit. The operating hours spent in cooling mode

would remain constant for any portable AC operating at any efficiency level.

 The average capacity at each efficiency level reflects the full range of capacities at

that efficiency level.

The energy use analysis requires DOE to establish a range of total annual operating hours

as well as hours for each mode of operation (cooling or fan

- only). DOE utilized RECS 2009 and

CBECS 2003 data to establish the upper limit of portable AC annual operating hours for both modes of operation. To estimate annual portable AC use and energy consum ption, DOE began by assigning each RECS household and CBECS commercial enterprise that uses a room AC to
one of the 32 1 weather stations operated by the National Oceanic and Atmospheric Administration (NOAA). DOE identified which weather station best match ed the heating and cooling degree

- days in the RECS 2009 data set or the CBECS 2003 data set. The climate data obtained from NOAA’s National Climatic Data Center helped DOE determine the maximum

amount of time the portable AC would be operated annually and apportion the annual electricity

use for portable AC s in various geographic areas among the months of the year. DOE assumed a portable AC would be operated only in months having 5 or more cooling

- degree days that

exceed 65° F.

DOE was able to use RECS 20 09 and CBECS 2003 room AC data to estimate the range of annual operating hours a portable AC spends in cooling mode based on the method used in DOE’s 2011 final energy conservation standards rulemaking for room ACs. DOE assumed the operating hours calculat ed for households and businesses having a room AC represent operating2-16

hours spent in cooling mode for a baseline portable AC unit. The energy use of a portable AC motor during cooling mode was calculated using the method for determining rated capacity and efficiency stipulated in the proposed DOE test procedure. The distribution of operating hours spent in fan

- only mode is based on a preliminary analysis of field

- metered data (Burke et al

. f ), in

which DOE assumed that fan

- only time was propo rtional to cooling

- mode time. DOE estimated that time spent in fan

- only mode was about 30 percent of the time spent in cooling mode.

An additional factor in DOE’s energy use analysis is the square footage of the room the portable AC attempts to cool. In cases where the baseline portable AC adequately meets the cooling load of a room, a higher

- capacity unit will reduce the hours of operation in cooling mode. If the baseline unit cannot handle the cooling load, however, field metering data indicate the comp ressor will remain running until a user turns the unit off. (Burke, et al. ). A study of portable AC performance conducted by Consumer Reports g found that portable AC s tested in a

250

- square

- foot room labored to provide adequate cooling. Based on those observations, DOE assumed households using a higher

- efficiency (and thus higher

- capacity) portable AC in a room measuring less than 250 square feet would experience a reduction in hours of operation in cooling mode, assuming a fixed load. In areas t hat meet or exceed 250 square feet the hours spent in each mode would not change, because no portable AC would be able to cool the room adequately.

DOE used the following equation to estimate portable AC energy consumption at each efficiency level being considered.

PA C ENERGY = ( Total Hours of Use

Year ) × [ ( Capacity × X COOL
EER ) ( 1

1000 ) + ( X

Fan × k W

Fan ) + ( X

Stby × k W

stby ) ]

Where:

PAC ENERGY = annual energy consumption of portable AC (kWh/year),

Total Hours of Use

Year = number of hours the portable AC is used per year (at > 0 W),

Capacity = rated capac ity in Btu/h as measured by the test procedure for

portable AC s, EER = energy efficiency ratio (Btu/ W h),

X Cool = fraction of time in cooling mode,

f T. Burke, et al. , Using Field

- Metered Data to Quantify Annual Energy Use of Portable Air Conditioners, Lawrence Berkeley National Laboratory, Report No. LBNL

- 6868E (December 2014). Available at: www.osti.gov/scitech/servlets/purl/1166989

.

g June 12, 2014 06:00 AM, http://www.consumerreports.org/cro/news/2014/06/are

- portableair

- conditi oner

- claims

- a

lot

- of

- hot

- air/index.htm2-17

X Fan = fraction of time in fan

- only mode,

X Stby = fraction of time in standby mode,

k W Fan = power consumption (in kW) of fan

- only mode, and

k W Stby = power consumption (in kW) of standby/off mode.

DOE is considering efficiency levels that exceed the baseline level through implementation of technology options that increase both the EER c m and cooling capacity of portable AC s. When the hours spent in co oling mode decreased in a potential standards case compared to the base case, DOE allocated the time difference to fan

- only mode.

Chapter 7 of this preliminary TSD provides more detail about DOE’s approach to characterizing energy use of port able ACs

.

2.7 Life

- Cycle Cost and Payback Period A n alys i s

In determining whether an energy efficiency standard is economically justified, DOE considers the economic impacts of efficiency levels on consumers. Energy conservation standards produce a change in consumer operating costs

—usually a decrease

— and a change in product purchase price

— usually an increase. DOE used the following two metrics to measure potential impacts on consumers.

 LCC is th e total consumer cost of an appliance or product, generally over the life of the product. The LCC calculation includes total installed cost (product manufacturer selling price, markups throughout distribution channel, sales tax, and any installation costs) ; operating costs (energy, repair, and maintenance costs); product lifetime, and discount rate. Future operating costs are discounted to the time of purchase and summed over the lifetime of the appliance or product.

 PBP measures the amount of time required for consumers to recover the assumed higher purchase price of a more energy efficient product through reduced operating costs. Inputs to the calculation of PBP include the installed cost to the consumer and

first

- year operating costs. DOE's analysis produ ces a simple PBP based on using single

- point average values to estimate the purchase price and undiscounted first

- year operating cost.

DOE analyzed the net effect on consumers of potential standards for portable AC s by calculating the LCC and PBP using th e engineering performance data, energy use data, and markups. Other inputs included retail prices and installation costs, energy prices, discount rates, and product lifetimes. DOE examined installation, maintenance, and repair costs for the efficiency leve ls considered in this rulemaking. Typically, incremental changes in energy efficiency produce no, or only minor, changes in installation, repair, and maintenance costs over baseline efficiency products.

The LCC and simple PBP analysis utilized values that reflect unit energy consumption in the field. DOE used EIA’s energy price data to determine the range and variability of prices for electricity in 2012, then used projections of the prices from EIA’s Ann ual Energy Outlook 2014 12-18

to estimate future electricity prices. DOE developed discount rates by estimating the finance cost for consumers to purchase appliances. As described in section 2.6, DOE developed samples of

individual households and commercial ent erprises that use portable AC s. By developing such samples, DOE was able to calculate the LCC to account for the variability in energy consumption and electricity price among users of portable AC s.

DOE used probability distributions to characterize disc ount rates and product lifetimes. DOE developed discount rates separately for residential consumers and for those in the commercial subsectors that purchase portable AC s. DOE developed discount rates from estimates of the interest rate, or finance cost, ap plied to purchases of residential products. Following accepted principles of financial theory, the finance cost of raising funds to purchase products can be interpreted as (1) the financial cost of any debt incurred by the purchase, principally interest ch arges on debt; or (2) the opportunity cost of any equity used for the purchase, principally forfeited interest earnings on household equity.

DOE used Monte Carlo simulations and probability distributions to model both the uncertainty and variability in in puts to the LCC and PBP analysis. DOE developed LCC and PBP spreadsheet models that incorporate the results of Monte Carlo simulations sampling from probability distributions. Because certain key inputs to the analysis consist of probability

distributions rather than single

- point values, the analysis produces a range of LCC and PBP results that enables DOE to identify the percentage of consumers who will achieve LCC savings

or incur net cost at each considered efficiency level. Chapter 8 of this preliminary TSD describes the results of the LCC and PBP analysis.

In performing an iteration of the Monte Carlo simulation for a given consumer, product efficiency is chosen based on its probability. If the chosen product efficiency is greater than or equal to the efficiency level under consideration, the LCC and PBP calculation reveals that a consumer is not affected by the efficiency level. By accounting for consumers who already purchase more efficient products, DOE avoids overstating the potential benefits from increasing product efficiency.

2.8 Shipments Analysis

DOE needs projections of product shipments to calculate the national impacts of potential standards on energy use, NPV, and future manufacturer cash flows. DOE projected shipments based on an analysis of k ey market drivers for portable AC s. DOE estimated future shipments of portable AC s to two market segments: (1) replacements; and (2) homeowners who previously

had no portable AC (first

- time owners).

To project shipments of replacement units, DOE utilized the 10

- year estimated lifetime to develop a retirement function for portable AC s. DOE applied that retirement function to the current stock of products. DOE's shipments model, which takes a stock acco unting approach, uses historical product shipment data as inputs to estimate the age distribution of in

- service product stocks for all years. The age distribution of product stocks is a key input to calculations2-19

of both the NES and NPV, because operating c osts for any year depend on the age distribution of

the stock.

To project shipments to first

- time owners, DOE calibrated the estimated shipments with the historical data by introducing into the model a market segment identified as households currently lacking portable AC s. DOE estimated that annually 0.17 percent of c urrent households

that have no portable AC would purchase one during 2019

– 2048. DOE also considered the impacts on shipments from changes in product purchase price and operating costs associated with higher energy efficiency levels . See chapter 9 of this p reliminary TSD for more details regarding the shipments analysis.

2.9 National Impact Analysis

The NIA assesses the NPV, to the nation, of total consumer LCC and NES. DOE

determined both the NPV and NES for the efficiency levels examined for portable AC s. To m ake the analysis more accessible and transparent to all interested parties, DOE prepared a Microsoft Excel spreadsheet model to forecast NES and the national consumer economic costs and savings resulting from potential efficiency levels . The spreadsheet mo del uses as inputs typical values as opposed to probability distributions. To assess the effect of input uncertainty on NES and NPV results, DOE can conduct sensitivity analyses by running alternative scenarios on specific input

variables.

Several of th e inputs for determining NES and NPV depend on projected trends in product energy efficiency. Analyzing impacts of potential energy conservation standards for portable AC s requires comparing projections of U.S. energy consumption with energy

conservation s tandards against projections of energy consumption without standards. The analysis includes projections of annual product shipments, the annual energy consumption of new products, and the purchase price of new products.

A key component of DOE’s NIA is t he energy efficiency projected over time for the base case (without new standards) and for each efficiency level. For the base case, DOE uses the efficiency distributions developed for the LCC analysis, assuming some rate of change each year during the ana lysis period. The projected efficiencies represent the annual shipment

- weighted energy efficiencies of portable AC s during the analysis period ( i.e., from the assumed compliance date of a new standard to 30 years after compliance is required, in this case 2019

– 2048).

For the standards case analysis, DOE used a roll

- up scenario in projecting efficiency trends after potential standards take effect. Under a roll

- up scenario, all products that perform at efficiencies less than a prospective standard are move d, or rolled

- up, to the minimum efficiency

level allowed under the standard. Product efficiencies that exceed a given efficiency level remain
the same as before the standard takes effect. In addition to a “roll

- up” scenario, DOE developed a

shift scenario. In the shift scenario DOE applies an annual increase in average energy efficiency2-20

to the shipments

- weighted energy efficiencies, as done for the base case. Chapter 10 of this preliminary TSD provides additional details regarding the NIA.

2.9.1 National Energy S avings

DOE calculated annual NES as the difference between national energy consumption in

the base case and under each efficiency level considered. The inputs for determining the NES are: (1) annual energy consumption per unit, (2) shipments, (3) product stock, (4) national energy consumption, and (5) site

- to

- power

- plant and full

- fuel

- cycle conversion factors for energy. DOE calculated national energy consumption by multiplying the number of units, or stock (by vintage, or age), by the unit energy consump tion (also by vintage). DOE estimated energy consumption and savings based on site energy consumption, which it then converted to primary and full

- fuel

cycle energy using annual conversion factors derived from the most recent version of the National Energy Modeling System. Cumulative energy savings are the sum of the NES for each year throughout the forecast period.

2.9.2 Net Present Value of Consumer Benefits

DOE calculated net monetary savings for consumers in each year after potential standards

take effect fo r the base case and each standards case. The inputs for determining the NPV of the total costs and savings experienced by consumers are (1) total annual installed cost, (2) total annual savings in operating costs, and (3) a discount factor to calculate the present value of costs and savings. DOE calculated savings throughout the lifetime of products shipped in 2019

– 2048, accounting for differences in yearly energy prices. DOE used the most recent edition of EIA’s Annual Energy Outlook ( AEO 2014 ) as the defa ult source of projections for future energy prices and total housing stock. DOE also will calculate the NPV assuming economic growth scenarios that are higher and lower than the AEO reference case, and assuming product price alternatives that are higher an d lower than the default product price

.

Total savings in operating costs are the product of savings per unit and the number of units of each vintage that survive in a given year. DOE calculated NPV as the difference between the present value of operating cost savings and the present value of total installed costs. DOE applied real discount rates of both 3 percent and 7 percent to discount future costs and savings to present values. DOE uses 3

- percent and 7

- percent real discount rates in accordance with gui dance provided by the Office of Management and Budget (OMB) to Federal agencies on the development of regulatory analysis. (OMB Circular A

- 4 (Sept. 17, 2003), section E, “Identifying and Measuring Benefits and Costs”)

2.10 Consumer Subgroup Analysis

DOE intends to evaluate impacts on consumer subgroups, especially low

- income and senior consumers during any subsequent NOPR analysis. During the preliminary analysis, DOE has identified consumer subgroups that it believes may be affected disproportionately by new or revised energy conservation standards.2-21

At any subsequent NOPR stage of this rulemaking, DOE will conduct a n LCC subgroup analysis. A consumer subgroup comprises a subset of the population that may be affected disproportionately by new or revised energy conservation standards ( e.g. , low

- income consumers, seniors). The purpose of a subgroup analysis is to determi ne the extent of any such disproportional impacts.

2.11 M anufacturer Impact Analysis

DOE performed a preliminary manufacturer impact analysis (MIA) to estimate the financial impact of higher energy conservation standards on manufacturers of portable AC s , and to calculate the impact of such standards on competition, employment and manufacturing capacity. The MIA has both quantitative and qualitative aspects. The quantitative part of the MIA relies on the government regulatory impact model (GRIM), an indus try

- cash

- flow model customized for this industry. For more detail on the MIA, see chapter 12 of the preliminary TSD.

In response to the July 2013 NOPD, AHAM commented that NRCan is also working on developing energy conservation standards for portable AC s . AHAM urged DOE to work with NRCan to harmonize potential standards in the United States and Canada, and to harmonize compliance timelines to avoid increased consumer confusion and manufacturer cost. (AHAM, NOPD No. 6 at p. 4) EEI stated that DOE should a lign any rulemaking for portable AC s with the timetables for standards for competitive products so that the impacts of a new standard will be market neutral to the greatest extent. (EEI, NOPD No. 3 at p. 6)

As part of the MIA, DOE considers the timing a nd impact of cumulative regulatory

burdens on manufacturers of portable ACs , including all DOE energy conservation standards affecting manufacturers of portable ACs, as well as other portable AC

- focused federal, regional, and local regulations . DOE conside rs all such regulations that have taken or will take effect three years before or after the compliance date of the new energy conservation standards for portable

ACs

.

2.12 Emissions Analysis

In the emissions analysis, DOE will estimate the reduction in power sector emissions of carbon dioxide (CO 2 ), nitrogen oxides (NO X ), sulfur dioxide (SO 2 ) and mercury (Hg) from potential energy conservation standards for the considered products. In addition, DOE will estimate emissions impacts in production activities (extr acting, processing, and transporting fuels) that provide the energy inputs to power plants. These are referred to as “upstream” emissions. Together, these emissions account for the full

- fuel

- cycle (FFC). In accordance with DOE’s FFC Statement of Policy (76 FR 51282 (Aug. 18, 2011)), the FFC analysis includes impacts on emissions of methane and nitrous oxide, both of which are recognized as greenhouse

gases.2-22

DOE primarily will c onduct the emissions analysis using emissions factors for CO 2 and

most of the ot her gases derived from data in the latest version of EIA’s Annual Energy Outlook (AEO)

. Combustion emissions of CH 4 and N 2 O will be estimated using emissions intensity factors published by the Environmental Protection Agency ( EPA ) , GHG Emissions Factors

Hu b

. h

EIA prepares the Annual Energy Outlook using the National Energy Modeling System ( NEMS )

. Each annual version of NEMS incorporates the projected impacts of existing air quality regulations on emissions. The text below refers to AEO 201 4

, which general ly represents current legislation and environmental regulations, including recent government actions, for which implementing regulations were available as of Octo ber 31, 201 3

.

SO 2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions cap and trading programs. Title IV of the Clean Air Act sets an annual emissions cap on SO 2 for affected EGUs in the 48 contiguous states and the Dis trict of Columbia (D.C.). SO 2 emissions from 28 eastern states and D.C. were also limited under the Clean Air Interstate Rule (CAIR), which created an allowance

- based trading program that operates along with the Title IV program in those States and D.C. 70 FR 25162 (May 12, 2005). CAIR was remanded to EPA by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), but it remained in effect. i On July 6, 2011 EPA issued a replacement for CAIR, the

Cross

- State Air Pollution Rule (CSAPR). 76 FR 48208 (Aug

. 8, 2011). On August 21, 2012, the

D.C. Circuit issued a decision to vacate CSAPR. j The court ordered EPA to continue administering CAIR. AEO 201 4 assumes that CAIR remains a binding regulation through 2040. k

The attainment of emissions c aps is typically flexible among EGUs and is enforced through the use of emissions allowances and tradable permits. Under existing EPA regulations, any excess SO 2 emissions allowances resulting from the lower electricity demand caused by the adoption of an efficiency standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. In past rulemakings, DOE recognized that there was uncertainty about the effects of efficiency standards on SO 2 emissions covered by the existing cap

- an d

- trade

h www.epa.gov/climateleadership/inventory/ghg

- emissions.html

i See North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008); North Caroli na v. EPA , 531 F.3d 896 (D.C. Cir. 2008).

j See EME Homer City Generation, LP v. EPA

, 696 F.3d 7, 38 (D.C. Cir. 2012).

k On April 29, 2014, the U.S. Supreme Court reversed the judgment of the D.C. Circuit and remanded the case for further proceedings consistent with the Supreme Court's opinion. The Supreme Court held in part that EPA's methodology for quantifying emissions that must be eliminated in certain states due to their impacts in other

downwind states was based on a permissible, workable, and e quitable interpretation of the Clean Air Act provision that provides statutory authority for CSAPR. See EPA v. EME Homer City Generation , No 12

- 1182, s lip o p. at 32 ( U.S. April 29, 2014). B ecause DOE is using emissions factors based on AEO 2014 , the analys is assumes that CAIR, not CSAPR, is the regulation in force. The difference between CAIR and CSAPR is not relevant for the purpose of DOE's analysis of SO 2 emissions.2-23

system, but it concluded that no reductions in power sector emissions would occur for SO 2 as a result of standards.

Beginning in 201 6 , however, SO 2 emissions will fall as a result of the Mercury and Air Toxics Standards (MATS) for power plants. 77 FR 9304 (Feb. 16, 2012). In the final MATS rule, EPA established a standard for HCl as a surrogate for acid gas hazardous air pollutants (HAP), and also established a standard for SO 2 (a non

- HAP acid gas) as an alternative equivalent surrogate standard fo r acid gas HAP. The same controls are used to reduce HAP and non

- HAP acid gas; thus, SO 2 emissions will be reduced as a result of the control technologies installed on

coal

- fired power plants to comply with the MATS requirements for acid gas. AEO 2014 assu mes that, in order to continue operating, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed by 201 6 . Both technologies, which are used to reduce acid gas emissions, also reduce SO 2 emissions. Under the MATS, e missions will be far below the cap that would be established by CAIR , so it is unlikely that excess SO 2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO 2 emissions by any regulate d EGU. Therefore, DOE believes that energy efficiency standards will

reduce SO 2 emissions in 201 6 and beyond.

CAIR established a cap on NO X emissions in eastern States and the District of Columbia. Energy conservation standards are expected to have littl e or no physical effect on these emissions in those States covered by CAIR because excess NO X emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NO X emissions. However, standards would be expected to reduce NO X emissions in the States not affected by the caps, so DOE estimate d NO X emissions reductions from potential standards in the States where emissions are not capped.

The MATS limit mercury emissions from power plants, but they do not include emissions caps and, as such, DOE’s energy conservation standards would likely reduce Hg emissions. DOE

estimate d mercury emissions reduction using emissions factors based on AEO 2014 , which incorporates the MATS.

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

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

the health benefits of reduced ambient PM.2-24

2.13 Monet izing Reduced C O 2 a nd o ther Emissions

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

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

considered.

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

estimates of the social benefits of re ductions in GHG emissions.

The Interagency Working Group on Social Cost of Carbon released an update of its previous report in 2013. l The most recent estimates of the SCC in 2015, expressed in 201 3 $, are $ 12.0, $40.5, $62.4, and $119 per metric ton of CO 2 avoided. For emissions reductions that occur in later years, these values grow in real terms over time. Additionally, the interagency group determined that a range of values from 7 percent to 23 percent should be used to adjust the global

SCC to calculat e domestic effects, although DOE give s preference to consideration of the global benefits of reducing CO 2 emissions.

DOE will multiply the CO 2 emissions reduction estimated for each year by the SCC value for that year in each of the four cases. To calcul ate a present value of the stream of monetary values, DOE will discount the values in each of the four cases using the discount rates that had

been used to obtain the SCC values in each case.

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

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

DOE also will estimate the potential monetary bene fit of reduced NO X emissions resulting from the standard levels it considers. Estimates of monetary value for reducing NO X from stationary sources range from $476 to $4,893 per ton in 201 3 $

. m DOE will calculate

l Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Exe cutive Ord er 12866

. Interagency Working Group on Social Cost of Carbon, United States Government ; revised November 2013. www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical

- update

- social

- cost

- of

- carbon

- for

- reg ulator

impact

- analysis.pdf

m U.S. Office of Management and Budget , Office of Information and Regulatory Affairs, 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities

, Washington , DC

.2-25

monetary benefits using a medium value for NO X emissions of $2,6 84 per short ton (201 3 $), and real discount rates of 3 percent and 7 percent.

2.14 Utility Impact Analysis

In the utility impact analysis, DOE analyzes the changes in electric installed capacity and generation that result for each trial standard level (TSL). The utility impact analysis is based on output of the DOE/Energy Information Administration (EIA)’s Nati onal Energy Modeling System (NEMS). NEMS is a public domain, multi

- sectored, partial equilibrium model of the U.S. energy sector. Each year, DOE/EIA uses NEMS to produce an energy forecast for the United States, the Annual Energy Outlook (AEO) . The EIA pu blishes a reference case, which incorporates all existing energy

- related policies at the time of publication, and a variety of side cases which analyze the impact of different policies, energy price and market trends. As of 2014,

DOE will use a new methodo logy based on results published for the Annual Energy Outlook 2014 (AEO 2014) Reference case and a set of side cases that implement a variety of efficiency

related policies.

2.15 Employment Impact Analysis

The adoption of energy conservation standards can affec t employment both directly and indirectly. Direct employment impacts are changes in the number of employees at the plants that produce the covered products. 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 standards. DOE defines indirect employment impacts from standards as net jobs eliminated or

created in the general economy as a result of increased spending driven by increased product prices and reduced spending on energy.

Indirect employment impacts are investigated in the employment impact analysis using the Pacific Northwest National Laboratory’s “Impa ct of Sector Energy Technologies” (ImSET)

model. n The ImSET model was developed for DOE’s Office of Planning, Budget, and Analysis to estimate the employment and income effects of energy

- saving technologies in buildings, industry, and transportation

. Compa red with simple economic multiplier approaches, ImSET allows for more complete and automated ana lysis of the economic impacts of energy

conservation investments.

n M.J. Scott, O.V. Livingston, P.J. Balducci, J.M. Roop, and R.W. Schultz, ImSET 3.1: Impact of Sector Energy Technologies , PNNL

- 18412, Pacific Northwest National Laboratory (2009) (Available at: www.pnl.gov/main/publications/external/technical_reports/PNNL

- 18412.pdf )

.2-26

2.16 Regulatory Impact Analysis

In the NOPR stage, DOE will prepare a regulatory impact analysis (R IA). The RIA addresses the potential for non

- regulatory approaches to supplant or augment energy conservation standards in order to improve the energy efficiency or reduce the energy consumption of the product covered under this rulemaking. DOE recognizes that voluntary or

other non

- regulatory efforts by manufacturers, utilities, and other interested parties can substantially affect energy efficiency or reduce energy consumption. DOE bases its assessment on the actual impacts of any such initiatives to dat e, but also considers information presented by interested parties regarding the impacts existing initiatives might have in the future.2-27

R EFERENCES

1 U.S. Department of Energy

, Energy Information Administration. Annual Energy Outlook 2014 with Projections to 2040. 2014. Washington , D.C. Report Number DOE/EIA

- 0383(2014)

. (Last accessed May 22, 2014.) < http://www.eia.gov/forecasts/aeo/ >