# PRELIMINARY TECHNICAL SUPPORT DOCUMENT: ENERGY EFFICIENCY PROGRAM FOR CONSUMER PRODUCTS:

REFRIGERATORS, REFRIGERAT OR-FREEZERS, AND FREEZERS

November 2009

U.S. Department of Energy Assistant Secretary Office of Energy Efficien cy and Renewable Energy Building Technologies Program Appliances and Commercia l Equipment Standards Washington, DC 20585This Document was prepared for the Department of Energy and by staff members of Navigant Consulting, Inc. and Ernest Orlando Lawrence Be rkeley National LaboratoryEXECUTIVE SUMMARY

TABLE OF CONTENTS

ES.1 OVERVIEW OF PRELIMINARY ACTIVITIES

...................................................... ES-1 ES.2 OVERVIEW OF THE PRELIMINARY A NALYSES AND THE PRELIMINARY TECHNICAL SUPPORT DOCUMENT

.................................................................... ES-3 ES.3 KEY RESULTS OF THE ANALYSIS

...................................................................... ES-4 ES.3.1 Market and Technology Assessment

.......................................................................... ES-4 ES.3.2 Screening Analysis

...................................................................................................... ES-7 ES.3.3 Engineering Analysis

.................................................................................................. ES-7 ES.3.3.1 Product Classes Analyzed

.......................................................................................... ES-7 ES.3.3.2 Manufacturing Cost Assessment

................................................................................ ES-8 ES.3.4 Markups to Determine Product Price

........................................................................ ES-10 ES.3.5 Energy Use Characterization

.................................................................................... ES-10 ES.3.6 Life-Cycle Cost and Payb ack Period Analyses

........................................................ ES-13 ES.3.7 Shipments Analysis

................................................................................................... ES-17 ES.3.8 National Impact Analysis

.......................................................................................... ES-20 ES.3.8.1 National Energy Savings

.......................................................................................... ES-21 ES.3.8.2 Net Present Value

.................................................................................................... ES-22 ES.3.9 Preliminary Manufacturer Impact Analysis

.............................................................. ES-23 ES.4 ISSUES ON WHICH DOE SEEK S PUBLIC COMMENT

..................................... ES-24 ES.4.1 Use of the Proposed Designations fo r Product Classes 5A and 10A

........................ ES-24 ES.4.2 Establishment of Separate Product Cl asses for All-Refrigerators

............................ ES-24 ES.4.3 Possible Combination of Product Classes 1 and 2, and Product Classes 11 and 12.ES-25 ES.4.4 Approach for Development of Base line Energy Use/Adjusted Volume Relationships under the Propos ed Test Procedure

.................................................... ES-25 ES.4.5 Possible Modification of the Baseline Ener gy Use/Adjusted Volume Curve Slope ES-26 ES.4.6 Variation of Product Characteristics as Compared with Teardown Products

........... ES-26 ES.4.7 Development of Energy Standard s for Low-Volume Products

................................ ES-26 ES.4.8 Field Energy Use of Standard-S ize Refrigeration Products

..................................... ES-26 ES.4.9 Field Energy Use of Compact Refrigeration Products

............................................. ES-27 ES.4.10 Repair and Maintenance Costs

.................................................................................. ES-27 ES.4.11 Lifetime of Compact Refr igeration Products

............................................................ ES-27 ES.4.12 Base Case Efficiency Distributions

.......................................................................... ES-27 ES.4.13 Forecasted Market Shares of Top-Mount vs. Side/Bottom-Mount RefrigeratorFreezers

.................................................................................................................... ES -28 ES.4.14 Maturity of Vacuum Insulation Pane ls for High Volume Production

...................... ES-28 ES.4.15 Clarification of the Distinction between Manual Defrost and Automatic Defrost for All-Refrigerators

....................................................................................................... ES-28 ES.4.16 Analysis of Built-In Products

.................................................................................... ES-29 ES.4.17 Technical Data for Alternative Foam-Blowing Agents

............................................ ES-29 ES.4.18 Likely Scenarios for Alternative Foam-Blowing Agents

......................................... ES-29 ES.4.19 Valuing Air-Borne Emission Reductions

................................................................. ES-29

ES-iLIST OF TABLES

Table ES.3.1 Product Classes for Refrigeration Products

....................................................... ES-5 Table ES.3.2 Baseline-Efficiency Product Descriptions

......................................................... ES-8 Table ES.3.3 Incremental Manufacturer Selling Price Results for Standard-Size Refrigerator-Freezers

......................................................................................... ES-9 Table ES.3.4 Incremental Manufacturer Selling Price Re sults for Standard-Size Freezers

.... ES-9 Table ES.3.5 Incremental Manufacturer Selling Pri ce Results for Compact Refrigerators and Freezers

..................................................................................................... ES-10 Table ES.3.6 Markups for Refrigeration Products

................................................................ ES-10 Table ES.3.7 Standard-Size Refrigerator-Freeze rs: Average Annual Energy Use by Efficiency Level

............................................................................................... ES-12 Table ES.3.8 Standard-Size Freezers: Average Annual Energy Use by Efficiency Level

.... ES-12 Table ES.3.9 Compact Refrigerators and Freeze rs: Average Annual Energy Use by Efficiency Level

............................................................................................... ES-13 Table ES.3.10 Product Class 3, Top-Mount Refrigerator -Freezer: LCC and PBP Results

..... ES-14 Table ES.3.11 Product Class 5, Bottom-Mount Refri gerator-Freezer: LCC and PBP Results

.............................................................................................................. ES-15 Table ES.3.12 Product Class 7, Side-by-Side Refrigerator-Freezer with TTD: LCC and PBP Results

...................................................................................................... ES-15 Table ES.3.13 Product Class 9, Upright Freezers: LCC and PBP Results

.............................. ES-16 Table ES.3.14 Product Class 10, Chest Freezers: LCC and PBP Results

............................... ES-16 Table ES.3.15 Product Class 11, Compact Refrigerat ors: LCC and PBP Results

.................. ES-17 Table ES.3.16 Product Class 18, Compact Freezers: LCC and PBP Results

.......................... ES-17 Table ES.3.17 Standard-Size Refrigerator-Freezers: Cumulative NES Results (quads)

......... ES-21 Table ES.3.18 Standard-Size Freezers: Cumula tive NES Results (quads)

............................. ES-21 Table ES.3.19 Compact Refrigerators and Freezers: Cu mulative NES Results (quads)

......... ES-22 Table ES.3.20 Standard-Size Refrigerator-Freezers: Discounted Cumulative NPV Results

.. ES-22 Table ES.3.21 Standard-Size Freezers: Discount ed Cumulative NPV Results

....................... ES-23 Table ES.3.22 Compact Refrigerators and Freezers: Di scounted Cumulative NPV Results

.. ES-23

LIST OF FIGURES

Figure ES.1.1 Flow Diagram of Analyses for th e Refrigerator, Refrigerator-Freezer, and Freezer Rulemaking Process

.............................................................................. ES-2 Figure ES.3.1 Forecasted Shipments (Base Case) fo r Standard-Size Refrigerator Freezers

.. ES-18 Figure ES.3.2 Forecasted Shipments (Base Ca se) for Standard-Size Freezers

...................... ES-18 Figure ES.3.3 Forecasted Shipments (Base Ca se) for Compact Refrigerators

....................... ES-19 Figure ES.3.4 Forecasted Shipments (Bas e Case) for Compact Freezers

.............................. ES-19

ES-iiEXECUTIVE SUMMARY

ES.1 OVERVIEW OF PRELIMINARY ACTIVITIES
Section 6295(o)(2)(A) of 42 U.S.C. requires the U.S. Department of Energy (DOE) to establish energy conservation standards that ar e technologically feas ible and economically justified, and would achieve the maximum improvement in energy efficiency. This executive summary summarizes the preliminary activitie s that DOE conducted in consideration of amended energy conservation standards for refriger ators, refrigerator-freezers, and freezers. The executive summary describes the preliminary ac tivities and summarizes key results from DOE’s preliminary analyses. Additionally, the executive summary delineates issues identified during the analyses about which DOE seeks comments from inte rested parties. These issues are highlighted in the public meeting presentati on and are further discussed in chapter 2 of the preliminary technical support document (TSD).

Figure ES.3.1 presents a summary of the anal ytical components of the standards-setting process and illustrates how key results are generated. The focal point of the figure is the center column, labeled “Analyses.” The columns labele d “Key Inputs” and “Key Outputs” show how the analyses fit into the process and how they rela te to each other. Key inputs are the types of data and other information that the analyses re quire. Some key information is obtained from public databases. DOE collects other inputs from interested parties or persons having special knowledge and expertise. Key outputs are analytical results that feed directly into the standardssetting process. The issues on which DOE seeks co mment from interested parties derive from the key results that are generated by the preliminary analyses. Arrows connecting analyses show the types of information that feed from one analysis to another.

ES-1Utility Impact Analysis

Notice of Proposed Rulemaking (NOPR)

Final Rule Market and Technology Assessment

Screening Analysis

Engineering Analysis

Markups for Product Price Determination Life-Cycle Cost and Payback Period Analysis

National Impact Analysis Energy Use

Revise Pre-NOPR Analyses

Life-Cycle Cost Sub-Group Analysis

Manufacturer Impact Analysis Shipments Analysis

Employment Impact Analysis

Revise Analyses • Product Classes • Technology Options

• Industry Cash Flow • Su b-Group Cash-Flow • Direct Employment Impacts • Compe titive Impacts • Cumulative Regulatory Burden • Cost-Efficie ncy Relat ionship

• Life -Cycle Costs • Pa yback Periods

• National Energ y Savings • Net Prese nt Values

• National Employm ent Im pacts

• Revised Resu lts • Market Se gmenta tion • Non-Regulatory Programs Framework Document

• Energy Prices • Installation Costs • Maintenan ce & Repair Costs

• Backcast an d Fo recast • Ma rket Saturation

• Stakeholder Com ments

• Demographics

• Emission Rat es • National Energy Savings

• Stakeholder Comm ents Environmental Assessment
Regulatory Impact Analysis • Id entify Firms/Products • Historical Shipments

• Manufacturer Prices • Average Co sts

• M anufacturer Financial Da ta Design Options Pro duct Classes

Retail Prices Design Ene rgy

Notice of Public Meeting (NOPM) • Efficie ncy/Perform ance • Ma nufacturing C ost

Candidate Standard

Leve ls Technolo gy Op tions

• Em issio n Estima tes • Utilit y Lo ad Fa cto rs • Na tion al Ene rgy Saving s

• Non -Reg ula tory Alternatives • Desig n Optio ns

• Ene rgy Price Fo recasts • Site-to-Sou rce Fa cto rs • Energy-Efficiency Levels

Direct Em plo ymen t Impacts

• National Energy Savings • National Product Costs • National Operating Costs • Utility Impacts • Life -Cycle Costs • Pa yback Periods • Installation Costs • Maint Costs • Rep air Costs • UEC • Energy Prices • Annu al En ergy Use (UEC)

Preliminary Manufacturer Impact Analysis • Manufa ctu rer Prices • Ave rage Costs • Conversion Capital E xpen ditures • Direct Emp loymen t Impacts

• National Energ y Savings • Net Presen t Values • Trial Standa rd Le vels (TSLs) • Product Prototypes

Energy-Efficie ncy Le vels

• Dep artm ent of Justice Revie w TSLs

Figure ES.1.1 Flow Diagram of Analyses for the Refrigerator, RefrigeratorFreezer, and Freezer Rulemaking Process

ES-2ES.2 OVERVIEW OF THE PRELIM INARY ANALYSES AND THE
PRELIMINARY TECHNICAL SUPPORT DOCUMENT
For the preliminary stage, DOE publishes a notice of public meeting (NOPM) in the Federal Register , which announces the availability of the preliminary technical support document, the date and place of the public meeti ng, and presentation materials interested parties may review before the public meeting. In addition, the NOPM highlights the major analyses DOE developed in the preliminary stage of the rulemaking.

The preliminary TSD describes each preliminar y analysis in detail, providing detailed descriptions of inputs, sources , methodologies, and results. Chap ter 2 of the preliminary TSD provides an overview of each preliminary analys is, the comments received in response to the analytical approaches DOE described in the framework document, and DOE’s responses to those comments. The following chapters of the prelim inary TSD address the analyses performed for the preliminary stag e of the rulemaking.

A market and technology assessment (MTA) characterizes the relevant product markets and technology options, including prototype designs (chapter 3).

A screening analysis reviews each tec hnology option to determ ine whether it is technologically feasible; is practicable to manufacture, inst all, and service; would adversely affect product utility or product av ailability; or would have advers e impacts on health and safety (chapter 4).

An engineering analysis develops cost -efficiency relations hips that show a manufacturer’s cost of achie ving increased efficiency. DOE uses manufacturer markups to convert manufacturer production cost (MPC) to manufacturer sel ling price (MSP) (chapter 5).

A markups analysis converts the manufact urer costs derived fr om the engineering analysis to consumer equipment prices (chapter 6).

An energy use analysis determines the annua l energy use in the field of the considered products (chapter 7).

Life-cycle cost (LCC) and payback period (PBP) analyses calculate, at the consumer level, the discounted savings in operating cost s throughout the estimated average life of the covered products, compared to a ny increase in the product’s installe d cost likely to result directly from the imposition of a give n standard (chapter 8).

A shipments analysis forecasts product shipme nts, which then are used to calculate the national impacts of standards on energy consump tion, the net present valu e (NPV) of consumer costs and savings, and future manuf acturer cash flows (chapter 9).

A national impact analysis (NIA) assesses th e cumulative national en ergy savings (NES) from standards and the NPV of consumer costs and savings associated with standards at different efficiency levels (chapter 10).

ES-3A preliminary manufacturer impact analys is (MIA) assesses the potential impacts of energy conservation standards on manufacturers, such as effects on expenditures for capital conversion, marketing costs, shipments, and re search and developmen t costs (chapter 12).

The remaining chapters of the preliminary TS D address the analyses to be performed for the NOPR stage:

• A life-cycle cost analysis for subgroups ev aluates the effects of energy conservation standards on various national subgro ups of the population (chapter 11).

• A utility impact analysis examines impacts of energy conservation standards on the generation capacity of electri c utilities (chapter 13).

• An employment impact analysis examines th e effects of energy conservation standards on national employment (chapter 14).

• An environmental assessment examines the effects of energy cons ervation standards on various airborne emi ssions (chapter 15).

• A regulatory impact analysis examines the na tional impacts of non-regulatory alternatives to mandatory energy conservation standards (chapter 16).

ES.3 KEY RESULTS OF THE ANALYSIS

The following sections describe in detail the key analyses DOE performed in support of the TSD.

ES.3.1 Market and Technology Assessment
When initiating an analysis of potential energy efficiency standards for appliance, DOE develops information for the products concerned on the present and past industry structure and market characteristics. This activity assesses industries and products both quantitatively and qualitatively, based on publicly available information.

When evaluating and establishing energy cons ervation standards, DOE generally divides covered products into product cl asses by the type of energy used or by capacity or other performance-related features that affect effici ency. Different energy conservation standards may apply to different product classes. (42 U.S.C. 6295(q)) Table ES.3.1 describes all of the product classes being considered in this rulemaking.

ES-4Table ES.3.1 Product Classes for Refrigeration Products
No. Product Class Classes Listed in the CFR (10 CFR 430.32(a))
1 Refrigerator-freezers with manual defrost
2 Refrigerator-freezers—partial automatic defrost
3 Refrigerator-freezers—automatic defrost with top-mounted freezer without TTD* ice service
4 Refrigerator-freezers—automatic defrost with side-mounted freezer without TTD ice service
5 Refrigerator-freezers—automatic defrost with bottom-mounted freezer without TTD ice service
6 Refrigerator-freezers—automatic defrost w ith top-mounted freezer with TTD ice service
7 Refrigerator-freezers—automatic defrost with side-mounted freezer with TTD ice service
8 Upright freezers with manual defrost
9 Upright freezers with automatic defrost
10 Chest freezers and all other freezers except compact freezers
11 Compact** refrigerators and refrigerator-freezers with manual defrost
12 Compact refrigerator-freezers—partial automatic defrost

13 Compact refrigerator-freezers—automatic defrost with top-mounted freezer and compact all

refrigerators—automatic defrost
14 Compact refrigerator-freezers—automatic defrost with side-mounted freezer
15 Compact refrigerator-freezers—automatic defrost with bottom-mounted freezer
16 Compact upright freezers with manual defrost
17 Compact upright freezers with automatic defrost
18 Compact chest freezers Classes Proposed to be Established during this Rulemaking

1A All-refrigerators—manual defrost
3A All-refrigerators—automatic defrost
5A Refrigerator-freezers— automatic defrost with bottom-mount ed freezer with TTD ice service
10A Chest freezers with automatic defrost
11A Compact all-refrige rators—manual defrost
13A Compact all-refrigerators—automatic defrost

* TTD = through the door ** Compact refrigerators, refrigerator-freezers , and freezers have less than 7.75 cubic feet (220 liters) total refrigerated volume and are less than 36 inches (0.91 m) in height.

The product classes listed in Table ES.3.1 as proposed to be es tablished during this rulemaking include the following:

• Product Class 5A was identified as Product Class 19 in the framework document. DOE is proposing to adopt the modified designation 5A to maintain consistency with Canadian Standards.

ES-5• Product Class 10A was identified as Product Class 20 in the framework document. DOE is proposing to adopt the m odified designation 10A to maintain consistency with Canadian Standards.

• Product Classes 1A, 3A, 11A, and 13A are proposed as a result of proposed new test procedures which involve modification of co mpartment temperatures. According to these test procedures the energy use of all-refrig erators decreases, while that of the other products of existing Products Classes 1, 3, 11, and 13 increases significantly. Establishing meaningful energy standard levels for the all-re frigerators requires that they be separated from the other products of the existing product classes.

The CFR establishes the test procedures for refrigerators, refrigerator-freezers, and freezers. (10 CFR part 430, subpart B, appendices A1 and B1) DOE has initiated a separate rulemaking to amend these test procedures. The proposed amendments address a number of issues that have emerged since the last test procedure revision s, including updating the reference to the AHAM HRF-1 test standard, modifying th e test procedures for icemakers, specifying procedures for test sample preparation, modi fying the test procedures for convertible compartments and special-purpose compartments, modification of the de finition for anti-sweat heaters to include those that prevent sweat on in terior surfaces, various test procedure language corrections, incorporating test pr ocedures for variable anti-sweat systems previously addressed in waivers, establishing new compartment te mperatures and volume calculation methods, modification to test procedures for advanced de frost systems, and modification of the definition of refrigerator-freezers to exclude co mbination freezer-wine storage products.

For the residential refrigeration products th at are the topic of this rulemaking, DOE addressed as part of the market assessment (1) manufacturer market share and characteristics, (2) existing regulatory and non-regul atory initiatives for improvi ng product efficiency, and (3) trends in product characteristics and retail market s. This information provided data and resource material throughout the analysis.

DOE reviewed literature and interviewe d manufacturers to develop an overall understanding of the residential refrigeration products industry in the United States. Industry publications, including trade journals, literature from manufacturers, government agencies, and trade organizations provided the bulk of the information, including (1) manufacturers and their market share; (2) shipments by product type; (3) product informa tion; and (4) industry trends. Chapter 3 of the preliminary TSD describes th e market analysis and resulting information.

DOE typically uses information about existi ng and past technology options and prototype designs to determine which technologies and comb inations of technologie s manufacturers use to attain higher performance levels. In consultation with interested parties, DOE develops a list of technologies to be considere d. The identified technologies in itially include all those DOE believes are technolog ically feasible.

DOE developed its list of tec hnologically feasible technologies for refrigeration products based on a review of trade publications, techni cal papers, and manufact urer literature and through consultation with manufacturers of comp onents and systems. Because existing products

ES-6contain many technologies for improving produc t efficiency, product lit erature and direct examination provided additional information. Before performing the screening analysis, DOE removed from the list those t echnologies for which the energy consumption could not be adequately measured using the relevant DOE test procedure.

ES.3.2 Screening Analysis
The screening analysis exam ines whether identified technol ogies (1) are technologically feasible; (2) are practicable to manufacture, install, and service; (3) have an adverse impact on product utility or availability; an d/or (4) have adverse impacts on health and safety. As part of this analysis, DOE develops an initial list of options for enhancing efficiency from the technologies that the technology assessment identified as feasible. In consultation with interested parties, DOE reviews the list to assess whethe r the technologies: (1) are practicable to manufacture, install, and service; (2) would adversely affect produc t utility or avai lability; or (3) would have adverse impacts on health and safety . In the subsequent e ngineering analysis, DOE further examines the technology options that it did not remove from consideration in the screening analysis.

ES.3.3 Engineering Analysis
The engineering analysis (cha pter 5) establishes the rela tionship between the cost of manufacturing residential refrigera tion products and their efficienc y. This relationship serves as the basis for calculating costs and benefits of modified product designs for consumers, manufacturers, and the Nation. Chapter 5 desc ribes the product classes DOE analyzed, the representative baseline units, the efficiency levels DOE cons idered, the methodology DOE used to develop the manufacturing production cost model, and the cost-efficiency results.

ES.3.3.1 Product Classes Analyzed
The engineering analysis analyzed seven ke y product classes that cover the range of product classes within the reside ntial refrigeration product categor y and represent approximately 90% of the shipments of these products. Based on its analysis of thre e product classes of standard-size refrigerator-freez ers, two product classes within standard-size freezers, and two product classes within compact refrigerators an d freezers, DOE generated seven cost-efficiency curves. The fourteen products serving as prototypical baseli ne-efficiency products for the analysis are described in Table ES.3.2. Chapter 5 includes additional details on the representative product classes and the cost-efficiency curves de veloped as part of the engineering analysis.

DOE also reviewed the energy efficiency e quations that define existing Federal energy conservation standards for refrigerators, refriger ator-freezers, and freezer s and the impact which the proposed new energy test procedure woul d have on these equations. The proposed test procedure includes compartment temperatur e changes and changes to the method for determining compartment volumes. New energy efficiency equations representing current baseline efficiency products tested using the proposed test procedure were developed. In addition, these equations were examined to determine whether the slopes of the energy/adjusted volume curves are appropriate for the key product classes examined for the engineering analysis.

ES-7The slopes of these curves determine whether th e efficiency levels defined by the curves are more stringent for larger products as compared with smaller products.

Table ES.3.2 Baseline-Efficiency Product Descriptions Product Class Total Volume (ft 3 ) Annual Energy Use (kWh)* 3 16 455 21 511 5 18.5 560 25 593 7 22 672 26 729 9 14 621 20 758 10 15 397 20 484 11 1.7 317 4 345 18 3.4 213 7 279 *Annual Energy Use based on current DOE Energy Test Procedure

ES.3.3.2 Manufacturing Cost Assessment
DOE estimated the manufacturing costs associated with an increase in energy efficiency for each of the residential refrigeration pr oduct classes analyzed. The assessment method involved disassembling model units, analyzing th e materials and manufacturing processes, analyzing the design approaches manufacturers use, and developing a spreadsheet model to describe costs. DOE built a detailed model fo r assessing manufacturing cost that estimates manufacturer production cost. DOE also aggregated manufact urers’ costs to maintain confidentiality of the data. DOE obtained input fr om interested parties on the manufacturing cost model inputs. Chapter 5 of the preliminary TS D includes information on the inputs used to determine the manufacturing cost, including materi al, labor, and overhead prices. Chapter 5 also includes information on the various components a nd features incorporat ed into designs for residential refrigeration products.

DOE’s engineering analysis produced cost-effi ciency curves for the seven representative refrigeration product classes. The cost-efficiency curves are described by the efficiency levels DOE analyzed and the increase in manufacturer selling price (MSP) required to improve a baseline-efficiency product to each of the considered efficiency levels. Table ES.3.2 through Table ES.3.4 present the key results of the engi neering analysis. The maximum technology levels determined for the product classes (average of the two products analyzed for each product class) ranged from 45% to 56% except for product clas s 11, for which the level was 75%. Incremental cost curves were developed for efficiency le vels up to 45% for all product classes but product class 7, for which the 45% level was higher than the 41% maximum technology level determined for one of the products of this class. DOE pr oposed a maximum technology level of 30% in the
ES-8framework document. Stakeholders commented during the framework workshop that the maximum level should be increased to 35%. DOE ex tended this level to 45% when the analysis indicated that higher efficiency levels could be attained. However, although the analyses, as described in chapter 5 of this TS D, indicated that some product classes could atta in even higher efficiency levels, DOE did not extend incremental cost curves further due to expectations that higher levels would not be cost effective.

Table ES.3.3 Incremental Manufacturer Selling Price Results for Standard-Size Refrigerator-Freezers

Efficiency Level (percent less than baseline energy use) Product Class 3: Refrigerator-freezers

— automatic defrost

with top-mounted freezer without TTD ice service 5: Refrigerator-freezers — automatic defrost with bottom-mounted freezer without TTD ice service 7: Refrigerator-freezers — automatic defrost

with side-mounted freezer with TTD ice service
10% $3.50 $1.80 $11.18

15% $7.68 $5.79 $18.96

20% $16.39 $13.72 $54.26

25% $34.92 $31.38 $106

30% $62.06 $45.06 $167

35% $104 $110 $229

40% $156 $183 $311

45% $208 $251 N/A

Table ES.3.4 Incremental Manufacturer Selling Price Results for Standard-Size Freezers

Efficiency Level (percent less

than baseline energy use) Product Class 9: Upright freezers with automatic defrost 10: Chest freezers and all other freezers except compact freezers
10% $6.41 $2.35

15% $11.45 $6.05

20% $13.57 $24.08

25% $27.51 $29.26

30% $46.58 $34.84

35% $76.82 $74.35

40% $124 $77.12

45% $197 $137

ES-9Table ES.3.5 Incremental Manufacturer Selling Price Results for Compact Refrigerators and Freezers

Efficiency Level (percent less

than baseline energy use) Product Class 11: Compact refrigerators and

refrigerator-freezers with manual defrost 18: Compact chest freezers

10% $3.36 $6.05

15% $6.32 $9.65

20% $8.85 $34.03

25% $20.56 $42.62

30% $21.63 $60.19

35% $26.77 $63.00

40% $39.24 $75.22

45% $57.49 $89.70

ES.3.4 Markups to Determine Product Price
The markups analysis (chapter 6) develops appropriate markups in the distribution chain to convert the estimates of manu facturer cost derived in the e ngineering analysis to consumer prices. In developing markups, DOE determined the distribution channe ls for refrigeration products and the markup associated with each party in the distribution channel. For refrigeration products, DOE estimated markups taken by retaile rs, along with sales taxes. DOE developed separate markups for baseline products (baseline markups) and for the cost increase associated with improvements required to produce more-effi cient products (incremental markups). Table ES.3.5 summarizes the markups deve loped for refrigeration products. Note that the manufacturer markup has already been incorpor ated into the incremental cost s presented in the tables of Section ES.3.3.

Table ES.3.6 Markups for Refrigeration Products Markup Baseline Incremental
Manufacturer 1.26
Retailer 1.45 1.15
Sales Tax 1.069

ES.3.5 Energy Use Characterization
The energy use characterization provides the basis for developi ng the energy savings from higher-efficiency appliances used in th e LCC and subsequent analyses. The DOE test procedure provides standardized results that can serve as the basis for comparing the performance of different appliances used under the same conditions, but actual usage in the field may differ from usage estimated by the test proc edure. DOE conducted a review of studies that measured the field consumption of refrigerato r-freezers to compare such measurements to the

ES-10DOE ratings, which confirmed that measurements of field energy use often vary considerably from the rated usage as determined by the DOE test procedure.

To determine the field energy use by products that would meet possi ble energy efficiency standards, DOE used data from the Energy Info rmation Administration (EIA)’s 2005 Residential Energy Consumption Survey (RECS). RECS is a national sample survey of housing units that collects statistical information on the consump tion of and expenditures for energy in housing units along with data on energy-related characteri stics of the housing units and occupants. RECS provides enough information to establish the type ( i.e ., product class) of refrigeration product used in each household, and also provides an estimate of the househol d’s energy consumption attributable to refriger ators or freezers. As a result, DOE wa s able to develop a household sample for the representative product classes for standard -size units. DOE did not use RECS for compact refrigerators and freezers because a large fracti on of these products are used outside the residential sector.

DOE treated the RECS reported fiel d energy consumption, referred to as FEC RECS , as the actual consumption of the refrigeration product(s) in that household. Energy use for a household’s refrigerator or freeze r is known to vary depending on its operating conditions, the behavior of its users, and other factors. DOE characterized field energy use of each product by using a multiplicative ‘usage adjustment factor’ (UAF) that adjusts the energy use from its test energy consumption to reflect these factors.

To develop a UAF for each RECS house hold, DOE utilized information that RECS provides on the size ( i.e ., volume), age and the product class of the refrigeration product. DOE determined for each household’s unit the corr esponding maximum allowable tested energy consumption, referred to as TEC STD , based on the energy conservation standard that was in effect at the time the household purchased the refrigeration product. Using FEC RECS and TEC STD , DOE then developed the UAF for each household to capture the combined effects of consumer behavior ( e.g ., door openings), operating conditions ( e.g ., room temperature and humidity), and product characteristics ( e.g ., efficiency relative to the minimu m allowable). The UAF represents the adjustment that needs to be made to the maxi mum allowable tested ener gy use to arrive at the field energy consumption of the refrigeration product. For households that reported having ENERGY STAR refrigeration products, DOE calcu lated tested energy consumption based on the ENERGY STAR criteria in effect at the time th e household purchased the refrigeration product. Chapter 7 provides more details on the methods , data, and assumptions used for developing UAFs.

Tables ES.3.6 through ES.3.8 present th e average annual energy use for the representative product classes at each consider ed energy efficiency level. The tables for standard-sized products show the average annual energy consumption calculated according to the proposed DOE test procedure and if the produc ts were used in the appropriate RECS 2005 household sub-samples (“field”). The table for compact appliances shows the average annual energy consumption according to the proposed DOE text procedure, using a distribution of product volumes based on the California Energy Commission’s appliance database.

ES-11Table ES.3.7 Standard-Size Refrigerator-Freezer s: Average Annual Energy Use by Efficiency Level

Efficiency Level (percent less than Product Class 3: Refrigerator-freezers —automatic defrost with topmounted freezer without TTD ice service 5: Refrigerator-freezers — automatic defrost with bottom-mounted freezer without TTD ice service 7: Refrigerator-freezers —automatic defrost with sidemounted freezer with TTD ice service
baseline energy use) Proposed Test (kWh) Field (kWh) Proposed Test (kWh) Field (kWh) Proposed Test (kWh) Field (kWh)

Baseline 534 657 652 699 756 1087

10% 481 591 587 629 680 979
15% 454 558 554 594 643 924
20% 428 526 522 559 605 870
25% 401 493 489 524 567 815
30% 374 460 456 489 529 761
35% 347 427 424 454 491 707
40% 321 394 391 419 454 652
45% 294 361 359 384

- -

Table ES.3.8 Standard-Size Freezers: Average Annual Energy Use by Efficiency Level

Efficiency Level (percent less than

baseline energy use) Product Class 9: Upright freezers with automatic defrost 10: Chest freezers and all other freezers except compact freezers Proposed Test (kWh) Field (kWh) Proposed Test (kWh) Field (kWh)
Baseline 717 980 428 623

10% 646 882 385 561
15% 610 833 364 530
20% 574 784 342 498
25% 538 735 321 467
30% 502 686 300 436
35% 466 637 278 405
40% 430 588 257 374
45% 394 539 235 343

ES-12Table ES.3.9 Compact Refrigerators and Freezers: Average Annual Energy Use by Efficiency Level

Efficiency Level (percent less than baseline energy use) Product Class 11: Compact refrigerators and refrigerator-freezers with manual defrost (kWh) 18: Compact chest freezers (kWh)

Baseline 325 313

10% 292 282
15% 276 266
20% 260 250
25% 244 235
30% 227 219
35% 211 203
40% 195 188
45% 179 172

ES.3.6 Life-Cycle Cost and Payback Period Analyses
Stipulating new energy cons ervation standards for products results in changes in consumer operating expenses—usually a decrease —and changes in consumer price—usually an increase. DOE analyzed the net effect of am ended standards on cons umers by evaluating the LCC using the cost-efficiency relationship derived in the engineering analysis, as well as the energy costs derived from the energy use ch aracterization. Inputs to the LCC calculation included the installed cost to th e consumer (purchase price plus installation cost), operating costs (energy expenses), the lifetime of the applia nce, and a discount rate . Because DOE found no evidence that repair or maintenance costs change as the efficiency of refrigeration products increases, it excluded those costs from its analysis.

Because the installed cost of a product typically increases while operating cost typically decreases in response to new standards, there is a time in the life of products having higher-than

baseline efficiency when the net operating-cost benefit (in dollars) since the time of purchase is equal to the incremental first cost of purchasing the higher-efficiency product. The length of time required for products to reach this cost-equivalen ce point is known as the payback period (PBP).

DOE conducted the LCC and PBP analyses us ing values that refl ect energy consumption in the field. DOE identified several input values for estimating the LCC, including retail prices, energy prices, discount rates, a nd product lifetimes. DOE used EIA’s energy price data to determine prices for electricity in 2007 and used projections of these energy prices from EIA’s Annual Energy Outlook 2009 to estimate future en ergy prices. DOE developed discount rates from estimates of the finance cost for cons umers that purchase refrigeration products.

Because the basis for the lifetime estimates in the literature for refrigeration products is uncertain, DOE used actual data sources to estim ate the distribution of refrigerator and freezer

ES-13lifetimes in the field. By combining survey results from RECS and the U.S. Census’s American Housing Survey with the known history of appliance shipments, DOE estimated the fraction of appliances of a given age sti ll in operation. The survival func tion, which DOE assumed has the form of a cumulative Weibull distribution, provid es an average and median appliance lifetime.

To accurately estimate the share of consumers that would be affected by a standard at a particular efficiency level, DOE’s LCC analysis considered the projecte d distribution of product efficiencies that consumers purchase under the base case (i.e., the case without new energy efficiency standards). DOE refers to this distri bution of product of effi ciencies as a base-case efficiency distribution. DOE developed base-case e fficiency distributions for each of the seven representative product classes. These distributions were devel oped from industry supplied data for the year 2007 and were comprised of product efficiencies ranging fr om existing baseline levels (i.e., meeting existing en ergy conservation standards) to levels meeting and exceeding ENERGY STAR levels. DOE then projected these di stributions to the year that new standards are assumed to become effective (2014). To fo recast the base-case efficiency distribution for each representative product class, DOE accounted for change in the market shares of ENERGY STAR appliances based on historical trends . Using the projected distribution of product efficiencies for each product class, DOE randomly assigned a specific product efficiency to each sample household. If a household wa s assigned a product efficiency th at is greater than or equal to the efficiency of the standard level under c onsideration, the LCC calculation would show that this household is not impacted by that standard level.

Table ES.3.9 through Table ES.3.15 show the re sults of the LCC and PBP analyses for the representative product classes at each consid ered energy efficiency le vel. Figures presented in Chapter 8 show the range of LCC savings and PB Ps for all of the efficiency levels considered for each product class. Chapter 8 provides more details on the methods, data, and assumptions used for the LCC and PBP analyses.

Table ES.3.10 Product Class 3, Top-Mount Refrigera tor-Freezer: LCC and PBP Results

Efficiency Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years) Level (percent less than baseline energy use) Average Equipment Cost Average Annual Operating Cost Average LCC Average Savings Households with

Median Average Net Cost No Impact Net Benefit
Baseline $591 $77 $1,505

- - - - - -

10% $595 $71 $1,434 $71 0.0% 18.5% 81.5% 0.6 0.7
15% $599 $67 $1,398 $106 0.0% 13.0% 86.9% 0.9 1.1
20% $609 $64 $1,368 $137 0.1% 13.0% 86.8% 1.5 1.7
25% $631 $60 $1,343 $162 2.6% 0.0% 97.4% 2.8 3.2
30% $665 $56 $1,329 $176 7.0% 0.0% 93.0% 4.0 4.6
35% $716 $52 $1,333 $172 16.5% 0.0% 83.5% 5.6 6.4
40% $781 $48 $1,350 $155 28.2% 0.0% 71.8% 7.3 8.3
45% $845 $44 $1,367 $138 36.3% 0.0% 63.7% 8.5 9.7

ES-14Table ES.3.11 Product Class 5, Bottom-Mount Refrigerator-Freezer: LCC and PBP Results

Efficiency

Level (percent less than baseline energy use) Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average Equipment Cost Average Annual Operating Cost Average LCC Average Savings Households with

Median Average Net Cost No Impact Net Benefit
Baseline $1,758 $70 $2,591

10% $1,759 $69 $2,581 $11 0.0% 88.5% 11.5% 0.3 0.4
15% $1,759 $69 $2,576 $16 0.0% 88.4% 11.6% 0.7 0.8
20% $1,760 $68 $2,571 $20 0.0% 88.4% 11.6% 1.2 1.4
25% $1,782 $64 $2,542 $49 14.8% 0.0% 85.2% 5.1 6.0
30% $1,799 $60 $2,508 $83 11.2% 0.0% 88.8% 4.6 5.4
35% $1,879 $55 $2,538 $54 44.1% 0.0% 55.9% 9.5 11.0
40% $1,969 $51 $2,577 $14 60.5% 0.0% 39.5% 12.6 14.7
45% $2,053 $47 $2,610 -$19 67.0% 0.0% 33.0% 14.3 16.6

Table ES.3.12 Product Class 7, Side-by-Side Refr igerator-Freezer with TTD: LCC and PBP Results

Efficiency

Level (percent less than baseline energy use) Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average Equipment Cost Average Annual Operating Cost Average LCC Average Savings Households with

Median Average Net Cost No Impact Net Benefit
Baseline $1,459 $116 $2,840

10% $1,463 $113 $2,804 $35 0.0% 74.3% 25.7% 1.1 1.3
15% $1,469 $108 $2,759 $80 0.1% 31.6% 68.4% 1.5 1.6
20% $1,499 $104 $2,738 $102 3.1% 31.6% 65.4% 3.8 4.2
25% $1,563 $97 $2,724 $116 23.8% 0.0% 76.2% 6.7 7.6
30% $1,638 $91 $2,722 $117 32.7% 0.0% 67.3% 8.1 9.0
35% $1,714 $84 $2,721 $119 38.5% 0.0% 61.5% 8.9 9.9
40% $1,815 $78 $2,744 $95 46.2% 0.0% 53.9% 10.1 11.2

ES-15Table ES.3.13 Product Class 9, Upright Freezers: LCC and PBP Results

Efficiency

Level (percent less than baseline energy use) Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average Equipment Cost Average Annual Operating Cost Average LCC Average Savings Households with

Median Average Net Cost No Impact Net Benefit
Baseline $505 $113 $2,064

10% $511 $104 $1,942 $122 0.0% 19.4% 80.6% 0.7 0.8
15% $517 $98 $1,870 $194 0.0% 1.6% 98.4% 0.9 1.1
20% $520 $92 $1,793 $271 0.0% 0.5% 99.5% 0.7 0.9
25% $537 $87 $1,731 $333 0.0% 0.4% 99.6% 1.3 1.5
30% $561 $81 $1,675 $389 0.3% 0.2% 99.6% 1.8 2.1
35% $598 $75 $1,633 $432 1.2% 0.0% 98.8% 2.5 3.0
40% $656 $69 $1,611 $453 4.0% 0.0% 96.0% 3.5 4.3
45% $745 $63 $1,621 $443 9.9% 0.0% 90.1% 5.0 6.0

Table ES.3.14 Product Class 10, Chest Freezers: LCC and PBP Results

Efficiency

Level (percent less than baseline energy use) Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average Equipment Cost Average Annual Operating Cost Average LCC Average Savings Households with

Median Average Net Cost No Impact Net Benefit
Baseline $325 $69 $1,275

10% $328 $63 $1,196 $79 0.0% 15.3% 84.8% 0.4 0.5
15% $332 $60 $1,153 $122 0.0% 1.1% 98.9% 0.8 1.0
20% $355 $56 $1,127 $148 1.2% 0.2% 98.6% 2.5 3.0
25% $361 $53 $1,085 $190 0.7% 0.2% 99.2% 2.4 2.8
30% $368 $49 $1,044 $231 0.4% 0.2% 99.4% 2.3 2.7
35% $416 $46 $1,044 $231 5.3% 0.0% 94.7% 4.2 4.9
40% $420 $42 $999 $276 3.7% 0.0% 96.3% 3.8 4.4
45% $493 $39 $1,024 $251 13.8% 0.0% 86.2% 6.0 6.9

ES-16Table ES.3.15 Product Class 11, Compact Refrigerators: LCC and PBP Results

Efficiency

Level (percent less than baseline energy use) Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average Equipment Cost Average Annual Operating Cost Average LCC Average Savings Consumers with

Median Average Net Cost No Impact Net Benefit
Baseline $166 $33 $325

10% $170 $30 $314 $12 4.2% 2.9% 92.8% 1.4 1.3
15% $173 $28 $309 $16 8.1% 2.6% 89.4% 1.7 1.7
20% $176 $26 $305 $21 9.3% 2.6% 88.1% 1.8 1.8
25% $191 $25 $311 $14 34.1% 1.7% 64.2% 3.4 3.3
30% $192 $23 $304 $21 26.9% 0.0% 73.2% 2.9 2.8
35% $198 $21 $303 $23 30.5% 0.0% 69.6% 3.1 3.0
40% $214 $20 $310 $15 44.6% 0.0% 55.4% 4.0 3.9
45% $236 $18 $324 $1 62.2% 0.0% 37.8% 5.3 5.1

Table ES.3.16 Product Class 18, Compact Freezers: LCC and PBP Results

Efficiency

Level (percent less than baseline energy use) Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average Equipment Cost Average Annual Operating Cost Average LCC Average Savings Consumers with

Median Average Net Cost No Impact Net Benefit
Baseline $207 $34 $399

10% $214 $30 $388 $11 9.6% 5.0% 85.4% 2.4 2.3
15% $218 $29 $382 $16 11.7% 0.0% 88.3% 2.5 2.5
20% $248 $27 $403 -$4 65.8% 0.0% 34.2% 6.7 6.8
25% $259 $25 $404 -$5 65.6% 0.0% 34.4% 6.7 6.7
30% $281 $24 $416 -$17 76.5% 0.0% 23.5% 7.9 7.9
35% $284 $22 $410 -$11 69.3% 0.0% 30.7% 7.1 7.1
40% $299 $20 $415 -$16 72.0% 0.0% 28.0% 7.4 7.4
45% $317 $19 $423 -$24 75.9% 0.0% 24.1% 7.8 7.8

ES.3.7 Shipments Analysis
Shipment forecasts are needed to calculate for each product being considered the national impacts of standards on energy use, NPV, and fu ture manufacturer cash flows. DOE’s shipments models consider shipments for new homes and replacements. Rather than simply extrapolating a current shipments trend, the analysis uses driver input variables to forecast sales in each market segment. For new housing units, annual product shipments are equal to the number of new housing units built multiplied by the purchase rate, which is determined by the market share of the product under consideration. To estimate ship ments due to replacements, the models use sales in previous years and assumptions about the product lifetime, which determine how long an appliance is likely to remain in use. Chapte r 9 of the TSD provides additional detail on the shipments analysis.
ES-171 99

0 1 99

5 2 00

0 2 00

5 2 01

0 2 01

5 2 02

0 2 02

5 2 03

0 2 03

5 2 04

0 Figure ES.3.1 through Figure ES.3.4 illustrate th e forecasted base-case shipments for all of the product classes incl uded in this rulemaking.

0.0 5.0 10.0 15.0 20.0 25.0Millions PC: 5, 5A PC: 4, 7 PC: 1, 1A, 3, 3A, 6 Historical Shipments Modeled Shipments19901995200020052010201520202025203020352040

Figure ES.3.1 Forecasted Shipments (Base Case) for Standard-Size Refrigerator Freezers

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5Millions PC: 10, 10A
PC9
PC8 Historical Shipments Modeled Shipments

Figure ES.3.2 Forecasted Shipments (Base Case) for Standard-Size Freezers

ES-181 99

0 1 99

3 1 99

6 1 99

9 2 00

2 2 00

5 2 00

8 2 01

1 2 01

4 2 01

7 2 02

0 2 02

3 2 02

6 2 02

9 2 03

2 2 03

5 2 03

8 2 04

1

1990 1 993 19 9 6 1999 2 00

2 2005 2 008 2 01

1 2014 2 01

7 20 2 0 2 023 2 02

6 2029 2 03

2 20 3 5 2038 2 04

1 7.0
PC15

0. 0 1. 0 2. 0 3. 0 4. 0 5. 0 6. 0Millions PC14 PC: 13, 13A PC12 PC: 11, 11A Historical Shipments Total Shipments

Figure ES.3.3 Forecasted Shipments (Base Case) for Compact Refrigerators

1.2 PC18

PC17
1.0 PC16

0. 0 0. 2 0. 4 0. 6 0. 8Millions Historical Shipments Total Shipments

Figure ES.3.4 Forecasted Shipments (Base Case) for Compact Freezers

ES-19ES.3.8 National Impact Analysis
The NIA estimates the following national im pacts from possible candidate standard levels for residential refrigera tion products: (1) national energy savings (NES); (2) monetary value of energy savings to consumers of the cons idered products due to st andards; (3) increased total installed costs to consumer s of the considered products due to standards; and (4) the net present value (NPV) of energy savings (diffe rence between value of energy savings and increased total installed costs). DOE prepared an NES spreadsheet model to forecast energy savings and national consumer economic costs a nd savings resulting from new standards. The model uses typical values for inputs.

A key component of DOE’s estimates of NES and NPV is the trend in energy efficiency forecasted for the base case (without new standards) and each of the standards cases (with new standards). To forecast the base-case efficiency distribution for each repr esentative product class, DOE accounted for change in the market shar es of ENERGY STAR appliances based on historical trends. For its determ ination of standards-case effici ency distributions, DOE used a “roll-up + ENERGY STAR” scenario to establish the distribution of efficienci es for the year that amended standards are assumed to become eff ective (i.e., 2014) and subsequent years. DOE assumed that product efficiencies in the base ca se that did not meet the standard level under consideration would “roll up” to meet the new st andard level in 2014. It further assumed that the ENERGY STAR program and related efforts would continue to promote efficient appliances after the introduction of amended st andards in 2014, and that this w ould lead to increased market shares for products with efficiency above the standard level. Chapter 10 provides additional details on this and other as pects of the NIA analysis.

To estimate the national impacts of all of the product classes considered in this rulemaking, DOE allocated the consumer equipment costs and annual energy consumption of the representative product classes anal yzed in detail in the engineeri ng and LCC and PBP analyses to the product classes associat ed with each representative product class. The following list indicates which product classes were associated with each of the representative product classes:

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

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

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

• Upright freezers: product class 9 only.

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

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

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

ES-20ES.3.8.1 National Energy Savings

DOE calculated annual NES as the differen ce between national energy consumption in the base case (without new efficiency standards) and in each higher efficiency standard case. DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savi ngs to source energy. Cumulative en ergy savings are the sum of the annual NES, which DOE determined over specified periods.

The NES results shown in Table ES.3.16 through Table ES.3.18 are cumulative to 2044 and are shown as primary energy savi ngs in quads (quadrillion Btu’s).

Table ES.3.17 Standard-Size Refrigerator-Freezers: Cumulative NES Results (quads) Efficiency Level (percent less than baseline energy use) Top-Mount Refrigerator-Freezer* Bottom-MountRefrigeratorFreezer** Side-by-SideRefrigeratorFreezer***
10% 1.10 0.04 0.31
15% 1.69 0.06 0.73
20% 2.35 0.20 1.31
25% 3.01 0.37 1.91
30% 3.65 0.53 2.50
35% 4.20 0.57 2.93
40% 4.78 0.73 3.35
45% 5.28 0.77

-

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

Table ES.3.18 Standard-Size Freezers: Cumulative NES Results (quads) Efficiency Level (percent less than baseline energy use) Upright Freezers* Chest Freezers**
10% 0.34 0.23
15% 0.55 0.37
20% 0.75 0.50
25% 0.96 0.63
30% 1.15 0.76
35% 1.34 0.87
40% 1.51 1.00
45% 1.63 1.07
* Includes product class 9 only. ** Includes product classes 8 and 10A as well as product class 10.

ES-21Table ES.3.19 Compact Refrigerators and Freezers: Cumulative NES Results (quads) Efficiency Level (percent less than baseline energy use) Compact Refrigerators* Compact Freezers**
10% 0.13 0.03
15% 0.20 0.04
20% 0.27 0.06
25% 0.32 0.07
30% 0.38 0.08
35% 0.44 0.09
40% 0.48 0.10
45% 0.52 0.11

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

ES.3.8.2 Net Present Value
DOE calculated net monetary savings each year as the difference between total savings in operating costs and increases in to tal equipment costs in the base case and standards cases. DOE calculated savings over the life of the product. DOE used discount rates of 7 percent and 3 percent to discount future costs and savings to the present. DOE calculated NPV as the difference between the present value of operating co st savings and the pres ent value of increased total installed costs. The NPV results for the representative pr oduct classes are shown in Table ES.3.19 through Table ES.3.21 as the discounted valu e of the net savings in dollar terms.

Table ES.3.20 Standard-Size Refrigerator-Freezer s: Discounted Cumulative NPV Results

Efficiency Top-Mount RefrigeratorFreezer* Bottom-Mount Refrigerator-Freezer** Side-by-Side RefrigeratorFreezer*** Level (percent less than baseline

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

- -

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

ES-22Table ES.3.21 Standard-Size Freezers: Disco unted Cumulative NPV Results

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

Table ES.3.22 Compact Refrigerators and Freezers: Discounted Cumulative NPV Results

Efficiency Level (percent less than baseline energy use) Compact Refrigerators* Compact Freezers**
3% Discount Rate

(billion 2008$) 7% Discount Rate (billion 2008$) 3% Discount Rate (billion 2008$) 7% Discount Rate (billion 2008$)
10% 1.00 0.43 0.20 0.08
15% 1.39 0.59 0.30 0.12
20% 1.81 0.76 0.08 0.00
25% 1.45 0.55 0.10 0.00
30% 1.97 0.78 0.00 -0.06
35% 2.12 0.83 0.09 -0.02
40% 1.72 0.59 0.06 -0.05
45% 0.92 0.17 0.01 -0.08

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

ES.3.9 Preliminary Manufacturer Impact Analysis
The preliminary MIA focuses on manufacturer s of residential re frigeration products. Potential impacts include financ ial effects, both quantitative a nd qualitative, that might result from new energy conservation st andards and lead to changes in manufacturing practices for refrigerators, refrigerator-freezers, and fr eezers. DOE identified potential impacts through interviews with manufacturers and other interest ed parties. Chapter 12 of the preliminary TSD includes details on the key issues DOE identified during the preliminary MIA.

DOE found key issues regarding the followi ng for residential refrigeration products:

ES-23• Increased conversion costs;

• Impact to U.S. production and jobs;

• Cumulative regulatory burden;

• Impact to product utility;

• Current economic conditions;

• Circumvention and enforcement; and

• Technical difficulty to achieve new standards

DOE conducted the preliminary MIA by first identifying products, methods, and practices used in the resident ial refrigeration products indus try. Next, DOE determined how energy efficiency improvements affect cost, production, and various other manufacturing metrics. Finally, DOE interviewed manufacturers for feedback. DOE developed and distributed a questionnaire for use during the interviews. At the beginning of the in terview process, DOE interviewed manufacturers and adjusted the anal ysis as appropriate, based on the feedback received. During the interviews, DOE also ex amined any additional effects on competition, manufacturing capacity, direct employment, and the cumulative burden of other regulations affecting manufacturers, as we ll as several issues raised by individual manufacturers.

ES.4 ISSUES ON WHICH DOE SEEKS PUBLIC COMMENT
DOE is interested in receiving comments on a ll aspects of this prel iminary analysis. DOE especially invites comments or data to improve DOE’s analysis, including data or information that will respond to the following questions or co ncerns that were raised in response to the framework document and in preparation of the preliminary TSD.

ES.4.1 Use of the Proposed Designations for Product Classes 5A and 10A
Two possible new product classes were id entified in the framework document and designated product class numbers 19 and 20. DOE proposes to redesignate these product classes as 5A and 10A to maintain harmonization with Canadian Standards, as requested in comments received during the framework comment pe riod. See chapter 2, section 2.2.1.1, of the preliminary TSD.

ES.4.2 Establishment of Separate Product Classes for All-Refrigerators
The proposed new energy test procedure uses new compartment temperatures. For refrigerators with freezer compartments and for re frigerator-freezers, the temperature of the fresh food compartment during the test would be reduced from 45  ̊ F to 39  ̊ F under the new test procedure. The freezer temperature for refrig erator-freezers would be reduced from 5  ̊ F to 0  ̊ F.

ES-24For both of these products, measured energy use woul d be significantly higher, in the range from 12 to 15%. For all-refrigerators , the compartment temperatur e would be increased from 38  ̊ F to 39  ̊ F under the new test procedure, which would reduce measured energy use by roughly 3%. Product classes 1, 3, 11, and 13 include products such as refrigerators with freezer compartments and refrigerator-freezers, whose energy use would increase, as well as all-refrigerators, whose energy use would decrease. In order to maintain a meaningful and fair energy conservation standard for these product classes, DOE proposes that new product classes be established for the all-refrigerators. DOE seeks comment on this proposal.

ES.4.3 Possible Combination of Product Classe s 1 and 2, and Product Classes 11 and 12
Shipments of refrigerators and refrigerator-f reezers of product classes 1 and 2 are very low, significantly less than 1% of the shipme nts of residential refrigeration products. DOE believes that the shipments of refrigerator-freeze rs of product class 12 are also very low. The energy standards for product classes 1 and 2 are currently identical. While the energy standard for product class 12 is considerably less stringent that the standa rd for product class 11, there is no clear technical basis that DOE can currently discern for the difference. Product classes 1 and 11 include refrigerators and refr igerator-freezers with manual de frost. Product classes 2 and 12 include refrigerator-freezers w ith partial automatic defrost. Both product class groups have manual defrost evaporators serving the freezer co mpartments. However, product classes 2 and 12 include an evaporator serving the fresh food co mpartment that does not require manual defrost. Typically this evaporator would warm sufficiently during the compressor off-cycle to melt frost. For this reason, there is no defrost cycle invo lved that would add energy use. DOE invites comment on whether these pairs of product classe s should be combined, thus eliminating product classes 2 and 12.

ES.4.4 Approach for Development of Baseline Energ y Use/Adjusted Volume Relationships under the Proposed Test Procedure
In a separate rulemaking, DOE expects to propo se new test procedures based in part on the updated version of AHAM Standard HRF- 1-2008. The test procedures would include modified compartment temperatures and a modi fied volume calculation method. In general, if test procedure revisions affect the measured efficiency of a product, the required efficiency levels must be adjusted based on test results w ith the new test procedure for products which are minimally compliant under the previous test procedure. (U.S.C. 6293(e)(2)) AHAM provided data for some key product classes showing the diffe rences in energy test re sults of the two test procedures. DOE developed curves relating en ergy use and adjusted volume for minimallycompliant products based on use of the modified test procedure for all of the product classes relying in part on the AHAM data. DOE proposes to use these curves, discussed in Chapter 5 of the preliminary TSD, as the basis for the new energy conservation standards to be proposed initially in the NOPR phase of the rulemaking. DOE invites comment on the approach used to develop the curves and the resulting energy use represented by the curves.

ES-25ES.4.5 Possible Modification of the Baseline Energy Use/Adjusted Volume Curve Slope
During manufacturer interviews conducted as part of the preliminary process, some manufacturers indicated that some of the energy vs. adjusted volume curves of the current energy conservation standards for resident ial refrigeration products have slopes that are not consistent with actual energy trends. DOE concluded during the engineering analysis that the cost and energy analysis conducted for two different si zes of product of each product class was not sufficiently precise to allow accura te predictions of size-based diffe rences in the cost-efficiency trends for the products analyzed. Hence, correc tion of the slopes of the energy vs. adjusted volume curves is not possible based on the differen ces in incremental cost curves of the two sizes analyzed for each product class. DOE conducted an energy use analysis to investigate this issue more directly. The analysis shows that the slope of the baseline-efficiency energy use curve may be too low for product class 5. Similarly, the slop e of the curve for product class 4 may be too low (While DOE did not directly analyze this pr oduct class, the trend for product class 7 would apply to product class 4 with an adjustment for the TTD ice feature present in product class 7 -- TTD ice is not present in product class 4). The DOE analysis investigating th is issue is discussed in Chapter 5. DOE invites comment on whether an adjustment to the slopes of the baseline energy use relationships based on proposed test procedures is warranted for any of the product classes and by how much. DOE requests inform ation supporting comments indicating the need for such slope changes.

ES.4.6 Variation of Product Characteristics as Compared with Teardown Products
DOE selected representative refrigerati on products for detailed investigation. This investigatory work encompassed a variety of act ivities, including reverse engineering, physical teardown, manufacturing cost analysis, energy us e analysis, and cost-effectiveness analyses regarding energy-reducing design options. DOE re quested detailed design data for refrigeration products during the framework phase of the wor k, as embodied in Table A-10 of the framework document. Manufacturers, however, did not provide data in response to this request. Such design data would have allowed consider ation of the variation of product designs, pa rticularly variation of the costs to achieve reductions in energy use. DOE requests comment on the variation of refrigeration product designs and the distribution of incremental costs to achieve energy use reductions.

ES.4.7 Development of Energy Standards for Low-Volume Products
The TSD describes possible approaches to the development of en ergy standards for lowvolume products which were not directly analyzed during the preliminary analysis. The percent reduction in energy use for most of these produc t classes would be based on the percentage reduction established for similar product classes. These approaches are presented in Chapter 2, Section 2.15. DOE requests comments on these approaches.

ES.4.8 Field Energy Use of Standard-Size Refrigeration Products
Energy use of a household’s refrigerator or freezer is known to vary depending on its operating conditions, the behavior of its users, and other factors. DOE characterized field energy

ES-26use of a refrigeration product by using a multiplic ative ‘usage adjustment factor’ (UAF) that adjusts the energy use from its test energy consum ption to reflect these factors. The household sample used to calculate life-cy cle costs for standard-sized produc ts exhibits a wide range of UAFs for each product class, with mean values ranging from 1.08 for product class 5 to 1.48 for product class 10. A literature survey conducted by DOE confirms that an average UAF over the lifetime of a refrigeratio n product is likely to be greater than one. This literature spans most of the last two decades, but relatively few studi es have been published recently. DOE invites comment and additional data regarding the re lationship between field and test energy consumption for contemporary refrigeration products.

ES.4.9 Field Energy Use of Compact Refrigeration Products
DOE did not find any usable data on the ty pical field energy consumption of compact products. Therefore, for compact refrigerators an d freezers, DOE assumed th at the average field energy use of units of the representative sizes used in its analysis is the same as the energy use calculated by the DOE test procedure. DOE a ssumed that the variability of energy use of compact products in the field is solely a functi on of volume. To represent the distribution of volumes in the field, DOE used data from the 2008 California Energy Commission appliance model database. DOE invites comment and additi onal data regarding the relationship between field and test energy consumption for compact refrigeration products.

ES.4.10 Repair and Maintenance Costs
Because DOE did not find any evidence that repair and maintenance costs change as refrigeration product efficiency in creases, it did not include th ese costs in its analysis. DOE invites comment on this approach and requests a ny specific information showing the extent to which repair and maintenance costs change as refrigeration product efficiency increases beyond the baseline levels used in DOE’s analysis.

ES.4.11 Lifetime of Compact Refrigeration Products
When DOE applied the average lifetime for a compact refrigerator given in Appliance magazine (10 years) to historical shipments, its model yielded a compact refrigerator stock that was more than double the existing stock indicate d by the EIA’s RECS and Commercial Building Energy Consumption Survey (CBECS). DOE theref ore calibrated the average lifetime to match the existing stock of compact refrigerators as given by the surveys. The resulting calculated mean lifetime is 5.62 years. DOE invites comment on its approach for estimating the lifetime for compact refrigerators and freezers.

ES.4.12 Base Case Efficiency Distributions
To accurately estimate the share of consumers that would be affected by a standard at a particular efficiency level, DOE’s LCC and PBP analyses considered th e projected distribution of product efficiencies that c onsumers would purchase in the ba se case (i.e., the case without amended energy efficiency standards). DOE’s pr ojection takes into account growth in market

ES-27share of ENERGY STAR refrigeration products in the coming years. DOE invites comment on the approach used to forecast base-case market shares of the considered efficiency levels.

ES.4.13 Forecasted Market Shares of Top-Mount vs. Side/Bottom-Mount RefrigeratorFreezers
DOE developed a simple model to forecast th e market share of top-mount refrigeratorfreezers relative to side- and botto m-mounted products. This mode l was based on the historical consumer preferences of homeowners as a whole, as well as high-income homeowners, the historical market share differences between rental and owner-occupied households, and historical market shares of top-, side- and bottom-mount pr oducts in total shipments. The model forecasts that the market share of top-mount refrigerat or-freezers will fall sl owly, reaching 58.3% in 2015, 56.2% in 2025, and 54.7% in 2035, with the remainde r of shipments divided between side- and bottom-mount products in a ratio fixed by their relative sales in 2008. DOE seeks comment on its approach.

ES.4.14 Maturity of Vacuum Insulation Panels for High Volume Production
The engineering analysis indica tes that dramatic reductions in energy use are possible in many of the product classes. The reductions depend on use of a number of design options, including vacuum insulation panels (VIPs). VIPs are currently used in refrigeration products, indicating that this technology is a viable design option. Th e use of VIPs adds dramatically to the MSP estimates, up to $300 in the preliminary analyses. The LCC analysis indicates that efficiency levels incorporating VIPs are econom ically justified. Hence, DOE anticipates that standard levels may be proposed at levels requiring much more widespread use of VIPs in future products. DOE collected information regarding th e viability of VIPs during the preliminary analysis. However, the importance of this techno logy to the preliminary re sults indicates that a more careful review is warranted of its viability for high volume production. DOE invites comments on this issue and also requests informati on that would allow such an assessment to be conducted.

ES.4.15 Clarification of the Distinction between Manual Defrost and Automatic Defrost for All-Refrigerators
DOE is considering adding product classes 1A and 3A for all-refrigerators with manual and automatic defrost. It is uncertain whethe r there are any products of the proposed product class 1A, because all-refrigerator s typically use off-cycle defrost, which does not require manual initiation. Manual defrost “is accomplished by na tural or manual means w ith manual initiation and manual termination of the over-all defros t operation”. AHAM HRF-1-1979 DOE requests comment on the interpretation that off-cycle defro st is a form of automatic defrost for allrefrigerators. DOE also request s comment on whether there are a ny all-refrigerator products on the market that use manual defrost.

ES-28ES.4.16 Analysis of Built-In Products
Comments made during the framework meeti ng and comment period and discussion of potential addition of product cl asses for built-in products is di scussed in Chapter 2 of the preliminary TSD. DOE seeks addi tional technical and cost inform ation on built-in products that would aid in assessment of whether the costs to ac hieve higher efficiency levels are significantly higher with these products.

ES.4.17 Technical Data for Alternative Foam-Blowing Agents
Stakeholders indicated during the framewor k meeting and comment period that DOE should consider the effect of potential climate ch ange legislation on the rulemaking analyses (see Chapter 2 of the preliminary TSD). DOE seeks up to date technical data on the resistivity differences and the impact to thermal perf ormance of alternative foam-blowing agents.

ES.4.18 Likely Scenarios for Alternative Foam-Blowing Agents
DOE seeks comment on the likely scenarios fo r manufacturers, assuming that laws such as the current pending legisl ation banning HFC’s are passed. Specifically, DOE seeks information regarding the timing of switching to alternative agents.

ES.4.19 Valuing Air-Borne Emission Reductions

DOE will conduct an environmental assessment as part of the next phase of the standards rulemaking; the NOPR. The primary environmenta l effects of energy conservation standards for refrigeration products are to reduce power plan t emissions resulting from reduced consumption of electricity. DOE will assess these environmental effects by using NEMS-BT to provide key inputs to its analysis. The portion of the envi ronmental assessment that will be produced by NEMS-BT considers carbon dioxide (CO 2 ), sulfur dioxide (SO 2 ), nitrogen oxides (NO X ), and mercury (Hg). DOE also plans on monetizing the emission reductions due to standards consistent with methods used in recent DOE st andards rulemakings pert aining to refrigerated beverage vending machines and commercial clothes washers. For example, in the case of CO 2 , DOE used values ranging from $5 to $55 per metric ton of CO 2 to value the emission savings due to standards. DOE invites comments on the a pproaches for monetizing the emission savings due to energy conservation standards.

ES-29CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS

1.1 PURPOSE OF THE DOCUMENT

................................................................................. 1-1 1.2 OVERVIEW OF STANDARDS FOR RESIDENTIAL REFRIGERATORS, REFRIGERATOR-FREEZERS, AND FREEZERS

....................................................... 1-1 1.3 PROCESS FOR SETTING ENERGY CONERVATION ST ANDARDS

...................... 1-3 1.4 STRUCTURE OF THE DOCUMENT

............................................................................ 1-6

LIST OF TABLES

Table 1.3.1 Analyses Under the Process Rule

........................................................................ 1-5

1-iCHAPTER 1. INTRODUCTION

1.1 PURPOSE OF THE DOCUMENT
This preliminary technical support document (preliminary TSD) is a stand-alone report that provides the technical analyses and resu lts supporting the information presented in the preliminary notice of public meeting (NOP M) and executive summary for residential refrigerators, refrigerator-freezers, and freezers. This preliminary TSD reports on the preliminary activities and analyses conducted in the peri od preceding the notice of proposed rulemaking (NOPR) of this rulemaking.

1.2 OVERVIEW OF STANDARDS FOR RESIDENTIAL REFRIGERATORS, REFRIGERATOR-FREEZERS, AND FREEZERS
The Energy Policy and Conservation Ac t (EPCA) of 1975, Pub. L. 94-163 (42 United States Code (U.S.C.) 6291–6309), established an energy conservation program for major household appliances. The National Energy Conser vation Policy Act of 1978 (NECPA), Pub. L. 95-619, amended EPCA to add Part C a of Title III (42 U.S.C. 6311–6317), which established an energy conservation program for certain industria l equipment. Additional amendments to EPCA give DOE the authority to regulate the ener gy efficiency of several products, including residential refrigerators, refr igerator-freezers, and freezers—the pr oducts that are the focus of this document. The amendments to EPCA in th e National Appliance Energy Conservation Act of 1987 (NAECA), Pub. L. 100-12, established energy conservation standards for refrigerators, refrigerator-freezers, and freezers, as well as requirements for determining whether these standards should be amended. (42 U.S.C. 6295(b))

NAECA first established performance standards for residential refrigerators, refrigeratorfreezers, and freezers, and further required that DOE conduct two cycles of rulemakings to determine if more stringent standards are justified. b (42 U.S.C. 6295(b)) On November 17, 1989, DOE published a final rule in the Federal Register updating the performance standards; the new standards became effective on January 1, 1993. 54 FR 47916. Subsequent to this final rule, DOE determined that new standards for some of the product classes were based on incomplete data and incorrect analysis. As a result, DOE publishe d a correction that ame nded the new standards for three product classes: (1) refrigerators a nd refrigerator-freezers w ith manual defrost, (2) refrigerator-freezers—automatic defrost with bottom-mounted freezer but without through-the

door (TTD) ice service, and (3) chest freezers and all ot her freezers. 55 FR 42845 (Oct. 24, 1990). DOE updated the performance standards on ce again for refrigerators, refrigeratora Part C has been redesignated Part A-1

b Definition of “refrigerators”, “ref rigerator-freezers”, and “freezers” is prov ided in chapter 3 of the preliminary TSD.

1-1freezers, and freezers by publishing a final rule in the Federal Register on April 28, 1997. 62 FR 23102. The new standards became effective on July 1, 2001. By completing a second standards rulemaking, DOE had fulfilled its legislative requirement to conduct two cycles of standards rulemakings.

Stakeholders submitted a petition in 2004 requesting that DOE conduct another rulemaking to amend the standards for reside ntial refrigerator-freezers. In April 2005, DOE granted the petition and conducted a limited set of analyses to assess the potential energy savings and economic benefit of new standards. DOE i ssued a report in Oct ober 2005 detailing the analyses. 1 The analysis examined the technological a nd economic feasibility of new standards set at Energy Star levels effective in 2005 for the tw o most popular product cla sses of refrigerators: top-mount refrigerator-freezers without TTD feat ures and side-mount refrigerator-freezers with TTD features. DOE confined its updated analysis to these two classes beca use they accounted for a majority of current product shipments. De pending on assumptions about the impact that standards would have on market efficiency, DOE estimated that amended standards at the 2005 Energy Star levels would yi eld between 2.4 to 3.4 quads, c with an associated economic impact to the Nation ranging from a burden or cost of $1.2 billion to a bene fit or savings of $3.3 billion. d

DOE published draft data sheets containing en ergy-savings potentials for refrigeratorfreezers in October 2005 as part of its fiscal year 2006 schedule-setting process. These data sheets summarized the following in table form at: (1) the potential energy savings from regulatory action in cumulative quads from 2010 to 2035, (2) the potential economic benefits or burdens, (3) the potential environmen tal or energy security benefits , (4) the status of required changes to test procedures, (5) other regulatory actions, (6 ) recommendations by interested parties, (7) evidence of market-driven or volun tary efficiency improvements, (8) regulatory issues, and (9) the 2005 priority. The data sheets for refrigerators and re frigerator-freezers were based on the October 2005 draft technical re port analyzing potential new amended energy conservation standards for residential refrigerat or-freezers described above. This report and the associated data sheets provided input to the sett ing of priorities for rule makings activities. Other products were given a higher priority, and limited rulemaking work on refrigerators and freezers was carried out in the following years prior to the enactment of the Energy Independence and Security Act of 2007 (EISA).

EISA, signed into law on December 19, 2007, re quires that DOE publish a final rule no later than December 31, 2010, to determine whether to amend the standards in effect for refrigerators, refrigerator-freezers, and freezer s manufactured on or after January 1, 2014. As a result, DOE is embarking on a standards rulemaking for these products to comply with the requirements of EISA.

A quad represents a quadrillion Btu (or 10 15 Btu).

d Economic impact based on a discount rate of 7 percent real.

1-2 c1.3 PROCESS FOR SETTING ENERGY CONERVATION STANDARDS
Under EPCA, when DOE is studying new or am ended standards, it must consider, to the greatest extent practic able, the following seven factors (42 U.S.C. 6295 (o)(2)(B)(i)):

1) the economic impact of the standard on the ma nufacturers and consumers of the affected products;

2) the savings in operating costs throughout the estimated average life of the product compared to any increases in the initial cost or maintenance expense;

3) the total projected amount of energy savings likely to result directly from the imposition of the standard;

4) any lessening of the utility or the performan ce of the products likely to result from the imposition of the standard;

5) the impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard;

6) the need for national energy conservation; and

7) other factors the Secretary considers relevant.

Other statutory requirements are set forth in 42 U.S.C. 6295 (o)(1)–(2)(A), (2)(B)(ii)– (iii), and (3)–(4) and 42 U.S.C. 6316(e).

DOE considers stakeholder participation to be a very important part of the process for setting energy conservation standards. Through form al public notifications (i.e., Federal Register notices), DOE actively encourages the participati on and interaction of all stakeholders during the comment period in each stage of the rulemaki ng. Beginning with the Framework Document and during subsequent comment periods, interacti ons among stakeholders provide a balanced discussion of the information that is required for the standards rulemaking.

Before DOE determines whether or no t to adopt a proposed energy conservation standard, it must first solicit comments on the proposed standard. (42 U.S.C. 6313(a)(6)(B)(i)) Any new or amended standard must be designed to achieve significant additional conservation of energy and be technologically feasible and econo mically justified. (42 U.S.C. 6313(a)(6)(A)) To determine whether economic just ification exists, DOE must re view comments on the proposal and determine that the benefits of the proposed standard exceed its burdens to the greatest extent practicable, weighing the se ven factors listed above. (42 U.S.C. 6295 (o)(2)(B)(i))

After the publication of the framework document, the energy conservation standards rulemaking process involves three additional, formal public notices, which DOE publishes in the Federal Register. The first of the rulemaking no tices is a NOPM, which is designed to publicly

1-3vet the models and tools used in the preliminary rulemaking and to facilitate public participation before the NOPR stage. The second notice is the NOPR, which presents a discussion of comments received in response to the NOPM and the preliminary analyses and analytical tools; analyses of the impacts of potential amende d energy conservation standards on consumers, manufacturers, and the Nation; DOE’s wei ghting of these impacts of amended energy conservation standards; and the proposed energy conservation standards for each product. The third notice is the final rule, which presents a discussion of the comments received in response to the NOPR; the revised analyses; DOE’s wei ghting of these impacts; the amended energy conservation standards DOE is adopting for each pr oduct; and the effective dates of the amended energy conservation standards.

In September 2008, DOE published a notice of public meeting and av ailability of the framework document. 73 FR 54089 (September 18, 2008). The framework document, Rulemaking Framework for Residential Refriger ators, Refrigerator-Freezers, and Freezers

, describes the procedural and analytical appro aches DOE anticipated using to evaluate the establishment of amended energy conservation st andards for these products. This document is available at: http://www1.eere.energy.gov/buildings/appliance_st andards/residential/pdfs/refrigerator_freezer _framework.pdf

. Subsequently, DOE held a public meeting on September 29, 2008, to discuss procedural and analytical approaches to the rulemaking. In addition, DOE used the public meeting to inform and facilitate involvement of interested part ies in the rulemaking pr ocess. The analytical framework presented at the public meeting desc ribed the different analyses, such as the engineering analysis and the consumer economic analyses (i.e., the life-cycle cost (LCC) and payback period (PBB) analyses), the met hods proposed for conducting them, and the relationships among th e various analyses.

1-4Table 1.3.1 Analyses Under the Process Rule Preliminary Analyses NOPR Final Rule Market and technology assessment Revi sed ANOPR analyses Revised analyses

Screening analysis Life-cycle cost sub-group analysis Engineering analysis Manufacturer impact analysis Energy and water use determination Utility impact analysis Markups for equipment price determination Environmental assessment

Life-cycle cost and payback period analysis Employment impact analysis

Shipments analysis Regulatory impact analysis National impact analysis Preliminary manufacturer impact analysis

During the September 2008 public meeting, interested parties commented about numerous issues relating to each one of th e analyses listed in Table 1.3.1. Comments from interested parties submitted during the framework document co mment period elaborated on the issues raised during the public meeting. DOE attempted to address these issues during its preliminary analyses and summarized the comment s and DOE’s responses in chapter 2 of the preliminary TSD.

As part of the information gathering a nd sharing process, DOE organized and held interviews with manufactu rers of the residential refrigerator s, refrigerator-freezers, and freezers considered in this rulemaking as part of the e ngineering analysis. DOE selected companies that represented production of all types of products, ranging from small to large manufacturers, and included the Association of Home Appliance Manufacturers (AHAM) member companies. DOE had four objectives for these in terviews: (1) solicit manufacturer feedback on the draft inputs to the engineering analysis; (2) solicit feedback on topics related to the preliminary manufacturer impact analysis; (3) provide an opportunity, early in the rulemaking process, to express manufacturers’ concerns to DOE; and (4) fost er cooperation between manufacturers and DOE.

DOE incorporated the information gathered during the engineeri ng interviews with manufacturers into its engineeri ng analysis (Chapter 5) and the preliminary manufacturer impact analysis (Chapter 12). Following the publicati on of the preliminary analyses and the NOPM public meeting, DOE intends to hold additional m eetings with manufacturers as part of the consultative process for the manufacturer impact analysis conducted dur ing the NOPR phase of the rulemaking.

DOE developed spreadsheets for the engine ering, LCC, PBP, and national impact analyses for each product. For each product, DOE de veloped an LCC spreadsheet that calculates

1-5the LCC and PBP at various energy efficiency levels. DOE also developed a national impact analysis spreadsheet that calcu lates the national energy savings (NES) and national net present values (NPVs) at various energy efficiency levels. This spreadsheet includes a model that forecasts the impacts of amended energy conser vation standards at various levels on product shipments. All of these spreadsheets are ava ilable on the DOE website for refrigerators and freezers ( http://www1.eere.energy.gov/buildings/appliance_st andards/residential/refrigerators_freezers.ht ml ).

1.4 STRUCTURE OF THE DOCUMENT
This ANOPR TSD outlines the analytical appr oaches used in this rulemaking. The TSD consists of fourteen chapters , an environmental assessment, a regulatory impact analysis, and appendices.

Chapter 1 Introduction: provides an overview of the appliance standards program and how it applies to th is rulemaking, and outlines the structure of the document.

Chapter 2 Analytical Framework: describes the rulemaking process.

Chapter 3 Market and Technology Assessm ent: characterizes the market for the considered products and the technologies available for increasing equipment efficiency.

Chapter 4 Screening Analysis: identifie s all the design options that improve efficiency of the considered products, and determines which technology options are viable for considera tion in the engineering analysis.

Chapter 5 Engineering Analysis: discu sses the methods used for developing the relationship between increased ma nufacturer price and increased efficiency.

Chapter 6 Markups for Equipment Price Determination: discusses the methods used for establishing markups for converting manufacturer prices to customer equipment prices.

Chapter 7 Energy Use Determination: di scusses the process used for generating energy-use estimates for the consid ered products as a function of standard levels.

Chapter 8 Life-Cycle Cost and Payback Pe riod Analysis: discusses the effects of standards on individual customer s and users of the equipment and

1-6compares the LCC and PBP of e quipment with and without higher efficiency standards.

Chapter 9 Shipments Analysis: discu sses the methods used for forecasting shipments with and without higher e fficiency standards, including how equipment purchase decisions are economically influenced and how DOE models this relationship with econometric equations.

Chapter 10 National Impact Analysis: disc usses the methods used for forecasting national energy consumption and na tional economic impacts based on estimates of future equipment efficiency, new construction and building starts, and annual equipment sales in the absence and presence of higher efficiency standards.

Chapter 11 Life-Cycle Cost Subgroup Analys is: discusses the effects of standards on different subgroups of consumers and compares the LCC and PBP of equipment with and without higher efficiency standards for these

consumers.

Chapter 12 Manufacturer Impact Analysis: discusses the effects of standards on the finances and profitability of equipment manufacturers.

Chapter 13 Utility Impact Analysis: discu sses the effects of standards on electric and gas utilities.

Chapter 14 Employment Impact Analysis : discusses the effects of standards on national employment.

Environmental Assessment for Residential Refrigerators, Refrigerator-Freezers, and Freezers: discusses the effects of standards on three pollutants—sulfur dioxide (SO 2 ), nitrogen oxides (NO x ), and mercury—as well as carbon emissions.

Regulatory Impact Analysis for Residential Refrigerators, Refrigerator-Freezers, and Freezers: discusses the impact of non-regulatory alternatives to efficiency standards.

Appendix 5-A Engineering Data

Appendix 5-B ERA Model Developm ent and WinERA User Manual

Appendix 7-A Literature Survey of Ener gy Consumption by Residential RefrigeratorFreezers

1-7Appendix 7-B Data for Estimating Distributi on of Refrigerator and Freezer Size in the RECS Sample

Appendix 8-A User Instructions for LCC and PBP Spreadsheets

Appendix 8-B Uncertain ty and Variability

Appendix 8-C Consumer Retail Prices for Baseline Residential Refrigerator-Freezers and Freezers

Appendix 8-D Household Discount Rate Distributions

Appendix 9-A Relative Price Elas ticity of Demand for Appliances

Appendix 10-A User Instructions for Shipments and NIA Spreadsheets

Appendix 10-B National Equi pment and Operating Costs

Appendix 12-A MIA (Preliminary MIA Questionaire)

1-81 REFERENCES

U.S. Department of Energy. Technical Report: Analysis of Amended Energy Conservation Standards for Residential Refrigerator-Freezers . October 2005.

< http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/refrigerator_report_1.pdf >

1-9CHAPTER 2. ANALYTICAL FRAM EWORK, COMMENTS FROM INTERESTED PARTIES, AND DOE RESPONSES

TABLE OF CONTENTS

2.1 INTRODUCTION

........................................................................................................... 2-1 2.2 MARKET AND TECHNOLOGY ASSESSMENT

........................................................ 2-2 2.2.1 Definitions

............................................................................................................ 2-3 2.2.1.1 Automatic Defrost Refrigerator -Freezers with Bottom-Mounted Freezer and with TTD Ice Service an d Chest Freezers with Automatic Defrost

............................................................................................................ 2-4 2.2.1.2 Refrigeration Products with Convertible Compartments

............................... 2-4 2.2.2 Product Classes and Scope of Coverage

.............................................................. 2-5 2.2.2.1 Built-In Refrigeration Products

...................................................................... 2-5 2.2.2.2 Wine Storage Products

................................................................................... 2-8 2.2.3 Technology Assessment

....................................................................................... 2-8 2.3 SCREENING ANALYSIS

.............................................................................................. 2-9 2.3.1 Screening Methodology

....................................................................................... 2-9 2.3.2 Alternative Foam-Blowing Agents

.................................................................... 2-10 2.3.3 Alternative Refrigerants

..................................................................................... 2-11 2.4 ENGINEERING ANALYSIS

........................................................................................ 2-11 2.4.1 Efficiency Levels

............................................................................................... 2-12 2.4.2 Compartment Temp eratures

............................................................................... 2-14 2.4.3 Product Classes

.................................................................................................. 2-14 2.4.4 Manufacturing Cost Analysis

............................................................................ 2-15 2.5 MARKUPS TO DETERMINE PRODUCT PRICE

...................................................... 2-15 2.6 ENERGY USE CHARACTERIZATION

..................................................................... 2-16 2.7 LIFE-CYCLE COST AND PAYB ACK PERIOD ANALYSES

.................................. 2-17 2.7.1 Retail Prices

....................................................................................................... 2-18 2.7.2 Energy Prices

..................................................................................................... 2-19 2.7.3 Maintenance and Repair Costs

........................................................................... 2-19 2.7.4 Product Lifetime

................................................................................................ 2-20 2.7.5 Product Energy Efficiency Distribution in the Base Case

................................. 2-20 2.8 NATIONAL IMPACT ANALYSIS

.............................................................................. 2-21 2.8.1 Shipments Analysis

............................................................................................ 2-21 2.8.2 Efficiency Scenarios and Trends

....................................................................... 2-21 2.8.3 National Energy Savings Analysis

..................................................................... 2-22 2.8.4 Net Present Value Analysis

............................................................................... 2-22 2.9 LIFE-CYCLE COST SUBGROUP ANALYSIS

.......................................................... 2-24 2.10 PRELIMINARY MANUFACTURER IMPACT ANALYSIS

..................................... 2-24 2.10.1 Industry Cash-Flow Analysis

............................................................................. 2-26 2.10.2 Manufacturer Subgroup Analysis

...................................................................... 2-26 2.10.3 Competitive Impacts Assessment

...................................................................... 2-27 2.10.4 Cumulative Regulatory Burden

......................................................................... 2-27 2.10.5 Preliminary Results for the Manuf acturer Impact Analysis

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

2-i2.11 UTILITY IMPACT ANALYSIS

................................................................................... 2-28 2.12 ENVIRONMENTAL IMPACT ANALYSIS

................................................................ 2-29 2.13 EMPLOYMENT IMPACT ANALYSIS

....................................................................... 2-31 2.14 REGULATORY IMPACT ANALYSIS

........................................................................ 2-31 2.15 DEVELOPMENT OF STANDARDS FOR LOW-VOLUME PRODUCT CLASSES

...................................................................................................................... 2-32

LIST OF TABLES

Table 2.2.1 Typical Cost Differential for Built-in Product ENERGY STAR Compliance as Compared with a Conventional Product

.......................................................... 2-7 Table 2.15.1 Extrapolation of Standards for St andard-Size Refrigerators and RefrigeratorFreezers

.............................................................................................................. 2-33 Table 2.15.2 Extrapolation of Standards for Standard-Size Freezers

........................................ 2-34 Table 2.15.3 Extrapolation of Standards fo r Compact Refrigerat ors, RefrigeratorFreezers, and Freezers

........................................................................................ 2-35

LIST OF FIGURES

Figure 2.15.1 Current Product Class 3 Products Li sted in the ENERGY STAR Database

....... 2-34

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

2.1 INTRODUCTION
Section 6295(o)(2)(A) of 42 United States Code (U.S.C.) requires the U.S. Department of Energy (DOE) to set forth energy conservation sta ndards that are technologically feasible and economically justified, and would achieve the ma ximum improvement in energy efficiency. This chapter provides a description of the general analytical framework that DOE uses in developing such standards. 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 th e statutory requirement for ec onomic justification includes analyses of life-cycle cost (LCC), economi c impact on manufacturers and users, national benefits, impacts, if any, on util ity companies, and impacts, if any, from lessening competition among manufacturers.

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

• A market and technology assessment to char acterize the relevant product markets and existing technology options, in cluding prototype designs.

• A screening analysis to review each t echnology option and determine if it: is technologically feasible ; is practical to manufacture, inst all, and service; would adversely affect product utility or produc t 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 achievi ng increased efficiency. DOE determines the increased cost to the consumer through an analysis of e ngineering markups, which convert manufacturer production cost (MPC) to manufact urer selling price (MSP).

• An energy use analysis to determine the a nnual energy use of the considered products.

• LCC and payback period (PBP) analyses to calculate, at the consumer level, the discounted savings in operating costs (less maintenance and repair costs) throughout the estimated average life of the c overed products, compared to a ny increase in the installed cost for the products likely to result di rectly from imposition of the standard.

• A shipments analysis to forecast product shipments, which then are used to calculate the national impacts of standards on energy, net present value (NPV), and future manufacturer cash flows.

• A national impact analysis (NIA) to assess the aggregate impacts at the national level of the NPV of total consumer LCC and national energy savings (NES).

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

2-1The analyses DOE will perform in the subsequent Notice of Proposed Rulemaking (NOPR) stage include those listed below. In add ition, DOE will revise the analyses it performed during the preliminary analysis stage base d on comments and new information received.

• An LCC subgroup analysis to evaluate variati ons in customer characteristics that might cause a standard to affect particular c onsumer sub-populations, such as low-income households, differently than the overall population.

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

• A utility impact analysis to estimate the eff ects of proposed standards on electric, gas, or oil utilities.

• An employment impact analysis to assess th e aggregate impacts on national employment.

• An environmental impact analysis to provide estimates of the effects of amended energy conservation standards on emissions of carbon (CO 2 ), sulfur dioxide (SO 2 ), nitrogen oxides (NOx), and mercury.

• A regulatory impact analysis to present major alternatives to proposed amended energy conservation standards that could achieve s ubstantially the same regulatory goal at a lower cost.

DOE developed this analytical framew ork and documented its findings in the Rulemaking Framework Document for Refrigerators, Refrigerator-Freezers, and Freezers (September 18, 2008). DOE presented the analytical approach to interested parties during a public meeting held on September 29, 2008. The framework document is available at http://www1.eere.energy.gov/buildings/appliance_st andards/residential/ref rigerators_freezers.ht ml

. In response to the publication of the fr amework document and the framework public meeting, DOE received numerous comments from in terested parties regarding DOE’s analytical approach. This chapter (chapter 2) of the preliminary TSD summarizes the key comments DOE received from interested parties and describes DOE’s responses to those comments. In addition, in subsequent sections of this chapter, DOE has summarized any significant changes in analytical approach made since publishing the framework document that DOE used in its preliminary analyses. Lastly, in the executive summary of th e preliminary TSD, DOE identified a number of issues for which DOE seeks public comment. DOE has explained each of those issues in the relevant analysis sections below.

2.2 MARKET AND TECHNOLOGY ASSESSMENT
When DOE begins an energy conservation standards rulemaking, it develops information that provides an overall picture of the market for the products cons idered, including the nature of the products, the industry structur e, and market characteristics for the products. This activity consists of both quantitative and qualitative efforts based pr imarily on publicly available

2-2information. The subjects addressed in the ma rket assessment included manufacturers, trade associations, and the quantities and types of products sold and offered for sale. DOE examined manufacturers of residential re frigeration products, which in cluded both large and small and foreign and domestic manufactur ers. DOE also examined data supplied by the key trade association for this product category, the A ssociation of Home Appliance Manufacturers (AHAM). DOE also reviewed shipment data collected by AHAM and Appliance Magazine. Finally, DOE also reviewed other energy efficiency programs from utilities, individual states, and other organizations. Chapter 3 of the pre liminary TSD provides additional details on the market and technology assessment.

DOE reviewed relevant literature and in terviewed manufacturers to develop an overall picture of the residential re frigeration products industry in the United States. Industry publications and trade journals, government agencies, and trade organizations provided the bulk of the information, including: (1) manufacturers and their ma rket shares; (2) shipments by product type (i.e., refrigerator, fr eezer, etc.); (3) product informa tion; and (4) industry trends.

Subsequent sections of this chapter of the preliminary TSD describe the comments DOE received in response to its re view of the market for the framework document. The analysis developed as part of the market and technology assessment is described in chapter 3 of the preliminary TSD.

2.2.1 Definitions

In the framework document, DOE delineated 20 different product classes for residential refrigeration products. Of these, 18 product clas ses based on the following characteristics are already contained in the CFR: type of unit (refrigerator, refrigerator-freezer, or freezer), geometric configuration for refr igerator-freezers (freeze r mounting on top, side, or bottom), size of the cabinet (standard or compact ), type of defrost system (manual, partial, or automatic), and presence or absence of through-the-door (TTD ) ice service. DOE proposed two additional product classes (designated 19 and 20 in the fram ework document) beyond those presented in the CFR: automatic defrost refrigerator-freezers with bottom-mounted freeze r and TTD ice service and chest freezers with automatic defrost.

DOE received comments on the product definitions presented in the framework document. In response, DOE reviewed the definiti ons for refrigerators, re frigerator-freezers, and freezers to determine scope of coverage as it pe rtains to the new product classes designated 19 and 20 in the framework document, and examined the DOE refrigerator test procedure to determine product classification for products with convertible compartments. Discussion of these issues is presented below.

2-32.2.1.1 Automatic Defrost Refrigerator-Freezers with Bottom-Mounted Freezer
and with TTD Ice Service and Chest Freezers with Automatic Defrost
DOE received several comments regarding the classification of automatic defrost refrigerator-freezers with bottom-mounted freezer and TTD ice service. AHAM stated that DOE should re-label its proposed produc t class 19 as product class 5A so as to be consistent with Canadian product class definitions. (AHAM, No. 11 at p. 3) Natural Resources Canada (NRCan) agreed with that view and added that DOE should classify its proposed product class 20 as product class 10A. (NRCan, No. 16 at pp. 2-3)

DOE believes that harmonization with interna tional standards is im portant to reduce the costs of compliance and should be done when ever possible. DOE concurs with AHAM and NRCan and has re-designated product classes 19 and 20 as product classes 5A and 10A, respectively, to maintain consis tency with Canadian standards.

2.2.1.2 Refrigeration Products with Convertible Compartments
Interested parties submitted a number of co mments about convertible compartments to DOE. The American Council for an Energy-E fficient Economy (ACEEE), the Appliance Standards Awareness Project (ASAP), the Consum er Federation of America (CFA), the National Consumer Law Center (NCLC), the Natural Resources Defense Council (NRDC), the Northeast Energy Efficiency Partnerships (NEEP), th e Northwest Power and Conservation Council (NPCC), Pacific Gas and Electri c (PG&E), and Southern California Edison (SCE) submitted a joint comment to DOE, hereafter referred to as th e “Joint Comment,” stat ing that: (1) the test procedure should be updated to re flect product configur ations that are currently on the market; (2) convertible bottom-drawer refri gerator-freezers should be rated with the convertible drawer operating as a freezer, which is not the way so me of these products have been rated for ENERGY STAR; and (3) the convertible bottom-draw er refrigerator-freezer should be rated as bottom-mount refrigerator-freez er (product class 5A). (Joint Comment, No. 10 at pp. 2,3)

Whirlpool Corporation (Whirl pool) agreed that convertible bottom-drawer products should be considered to be “cla ssification 19”, adding that units with convertible compartments must be tested in their highest-energy state. (W hirlpool, Public Meeting Transcript, No. 7 at p. 62-63, No. 17 at p. 4) However, bot h Whirlpool and General Electric (GE) clarified that testing of a convertible compartment as a freezer may define the product as something other than a bottom-mount refrigerator-freezer with TTD ice, and that the pr oduct should be rated the way it is tested. (Whirlpool, Public Meeting Transcript, No. 7 at p. 63-64; GE, Public Meeting Transcript, No. 7 at p. 63-64) AHAM made a si milar statement, adding that a convertible automatic defrost bottom-mount refrigerator-fre ezer equipped with no ice or water dispenser should be classified under product class 5 and th at it should be tested with the convertible compartment operating as a freezer compartment in one test and as a fresh food compartment in a second test to determine which configuration has the highest energy use. (AHAM, No. 11 at p. 4)

2-4Several of the comments noted that the requirement to test a convertible compartment in its highest-energy state come s from AHAM Standard HRF-1, the 1979 edition of which is referenced by the current DOE energy test proced ure for refrigerators and refrigerator-freezers.

DOE has learned that the convertible bottom- drawer product that prompted the question posed in the framework document is no longer on the market, but that a different product with convertible compartments was introduced by anot her manufacturer. This second product is rated in the ENERGY STAR database with one of the convertible compartments operating as a freezer compartment, and one operating as a fresh food compartment. DOE does not intend at this time to establish a new product class based on such a configuration. DOE agr ees with stakeholder comments regarding the requirement that a convertible-compartme nt product be rated with the compartment in its highest energy-use position u nder the current DOE energy test procedures. In the NOPR addressing possible amendments to the test procedure, DOE considers whether the test procedure should be modified to improve clarity regarding th is test requirement.

DOE further notes that issues associated with multiple compartments and/or separate temperature control of drawers or otherwise isol ated spaces within compartments will present a challenge to the energy test procedure that will re quire consideration as su ch features are more frequently added to products. For example, the test procedure does not indicate clearly how to adjust temperature setpoints a nd how to average compartment temperatures for a refrigeratorfreezer that has multiple fresh food compartmen ts, multiple freezer compartments, or large internal sub-compartments that have separate temperature control. DOE notes that working Group 12 of Technical Committee 59 of the Intern ational Electrotechnical Commission (IEC) is developing IEC 62552, an internationa l test procedure for refrigerato rs, refrigerator-freezers, and freezers. The issue of establishing test procedures to accurately address su ch product features has been discussed as part of the IEC test procedur e development. DOE anticipates that future DOE energy test revisions will consid er approaches adopted by the IEC test procedure to address these issues.

2.2.2 Product Classes and Scope of Coverage
When evaluating and establishing energy cons ervation standards, DOE generally divides covered products into product cl asses by the type of energy us ed, capacity, or performancerelated features that affect efficiency. Diffe rent energy conservation standards may apply to different product classes. (42 U.S.C. 6295(q))

DOE received several comments from interest ed parties regarding the product classes and their organization. Specifically, DOE received comments regarding whether to include built-in refrigeration products and wine storage products as additional product classes.

2.2.2.1 Built-In Refrigeration Products

DOE received several comments on the inclus ion of built-in refrigeration products as a separate product class. Sub Zero-Wolf, Inc. (S ub-Zero) requested that DOE establish separate product classes for built-in refriger ation products because they provi de distinct utility and have
2-5limited potential for energy improvement compared to conventional freesta nding units. Sub-Zero cited the distinction made for compact products in the previous refriger ator energy conservation standard rulemaking as an example of establishm ent of separate product classes for products for which options for efficiency improvements are limited. Sub-Zero also noted that built-in products are a niche market with low produc tion volumes, comprising perhaps 1.5% of all residential refrigeration product shipments. (Sub-Zero, Public Meeting Transcript, No. 7 at pp. 61-62 and No. 9 at pp. 1-3) The Edison Electric Institute (EEI) agreed, suggesting that DOE include built-in products as a separate product class. (EEI, No. 13 at p. 3) The Joint Comment disagreed, stating that DOE should not include built-in refrigeration products as a separate product class because built-ins provide the same se rvice and amenity to consumers as standalone units, and they believe that manufacturers will find ways to make built-ins that meet performance standards similar to standalone units. The Join t Comment also notes th at built-in units can already exceed ENERGY STAR and the Consor tium for Energy Efficiency (CEE) Tier 1 and Tier 2 efficiency levels. (Joi nt Comment, No. 10 at p. 3),

Sub-Zero further detailed the request for bu ilt-in product classes in a written comment. (Sub-Zero, No. 9 at p. 1-3) This comment suggests the following possible built-in product classes.

• Built-in auto defrost top mount refrigerato r-freezer w/o TTD ice and auto defrost allrefrigerators

• Built-in auto defrost top mount re frigerator-freezer w/TTD ice

• Built-in auto defrost bottom mount refrigerator-freezer w/o TTD ice

• Built-in auto defrost bottom mount refrigerator-freezer w/TTD ice

• Built-in auto defrost side-by-side refrigerator-freezer w/o TTD ice

• Built-in auto defrost side-by-side refrigerator-freezer w/TTD ice

• Built-in auto defrost upright freezer

• Built-in compact refrigerators, re frigerator-freezers, and freezers

Sub-Zero also pointed out in the written comment a number of design differences between built-in products and conven tional products that make achie ving higher efficiency levels more difficult for built-in products. (Sub-Zero, No. 9 at p. 2) These include the following.

• More doors and drawers than c onventional units, which leads to greater gasket length and door frame/gasket thermal load.

• Limited access to condenser airf low since the products must be designed to be constrained by installation between cabinets.

• More firm constraints on increases in exterior dimensions to allow increase in insulation thickness.

• Use of glass doors.

• Design for multiple compartments of different temperatures.

• More complex hinge systems, which impact the ability to insulate th e cabinet in the hinge region.

2-6DOE notes that establishment of separate pr oduct classes must be based on consumption of a different kind of energy, or a different capacity or other pe rformance-related feature that other products within a product group do not share. The Secretary must cons ider such factors as the utility to the consumer of su ch a feature and other factors as the Secretary deems appropriate, and any rule prescribing a higher or lower level of energy use or efficiency shall include an explanation of the basis on which such higher or lower level was established. (42 U.S.C. 6295(q))

Based on information received in discussions with manufacturers dur ing the preliminary phase of the rulemaking, DOE is aware that ach ieving ENERGY STAR qua lification for built-in products typically requires the use of more high-efficiency components. A conventional refrigerator-freezer, for example, typically requir es use of a brushless DC condenser fan motor and a high-efficiency single-speed compresso r to meet ENERGY STAR, whereas a built-in refrigerator-freezer generally requires use of brus hless DC fan motors for both the condenser and evaporator, and a variable speed compressor. The cost of achieving ENERGY STAR based on these technical differences is estimated to be $43, as summarized in Table 2.2.1 below. a DOE understands that the differential for achieving ENERGY STAR coul d be more or less, depending on the design details of the built-in product.

Table 2.2.1 Typical Cost Differential for Bu ilt-in Product ENERGY STAR Compliance as Compared with a Conventional Product Conventional Refrigerator-Freezer Built-In Refrigerator-Freezer Design Change Cost Impact Design Change Cost Impact Increase Compressor EER from 5.5 to 6.25 $10.50 Replace Compressor with Variable-Speed Compressor $50

Add Brushless DC Condenser Fan Motor $3.75 Add Brushless DC Condenser and Evaporator Fan Motors $3.75 (condenser) $3.50 (evaporator)

TOTAL $14.25 $57.25 Difference $43

Built-in products can be built into the kitchen cabinetry in a way that is not possible for conventional products. Some of the design details a ssociated with this unique utility can impact energy use. These products do not consume a di fferent type of energy from conventional products. While a difference in the ability to achi eve higher efficiency levels is noted, DOE does not have sufficient information to conclude that built-in products cannot m eet efficiency levels that might be considered for future standard s. DOE acknowledges that the cost of achieving higher efficiency levels is greater for built-in products. DOE has not sufficiently completed an assessment of the cost differences associated with built-ins (as compared to conventional products of the high-volume product classes) and for this reason ha s not made a determination at

a Cost assumptions for design changes are described in greater detail in Chapter 5 Engineering Analysis of the TSD.
2-7this preliminary stage regarding establishment of separate product classe s for these products. DOE will work to complete this assessment as the rulemaking process progresses.

2.2.2.2 Wine Storage Products
DOE received a number of comments on the subject of adding of wine storage products as a new product class covered under this rulemaking. Nearly all of these comments were in support of establishing a new product class fo r wine coolers. AHAM, ASAP, and PG&E all stated at the framework public meeting that DOE should include a separate product class for wine storage products. (AHAM, Pu blic Meeting Transcript, No. 7 at pp. 58-59; ASAP, Public Meeting Transcript, No. 7 at p. 46-47; PG&E, P ublic Meeting Transcript, No. 7 at pp. 43-44) Specifically, these comments suggested that DOE cr eate two separate product classes for wine storage products: those with manual defrost, an d those with automatic defrost. EEI, Natural Resources Canada (NRCan), Whirlpool, Sub-Zero , and the Joint Comment expressed support for this position in their written comments as we ll. (EEI, No.13 at pp. 2-3; NRCan, No. 16 at pp. 2­ 3; Whirlpool, No. 17 at pp. 4-5; Sub-Zero, No. 9 at p. 3; Joint Comment, No. 10 at p. 3)

PG&E, however, modified its position in its wr itten comment, stating that DOE should not establish new product classes for wine storage produc ts at this time. The comment points out that the State of California already regulates these products, and that a Fe deral standard would supersede any State regulations. The comment furt her suggests that consid eration is being given to strengthening the California energy standard s for wine storage products and to expand the scope of product coverage, and that DOE intr oduction of a wine stor age product class would limit California’s ability to take advantage of these energy savings opportunities. (PG&E, No. 14 at pp. 1-2)

DOE notes that the definitions of refrigerators and refrigerator-freezers in the Energy Policy and Conservation Act (EPCA) do not include specif ication of temperature levels. DOE defined refrigerators as “designed for storage of food at temperatures above 32°F and below 39°F” in order to assure that refrigerator temperature le vels are suitable for st orage of food. (66 FR 57845, November 19, 2001) Wine coolers, which control for higher temperature levels, are therefore excluded from the product category of refrigerator s. Because wine coolers are not defined either in the statute or regulations as part of this product category, or as a separate and independent product category, they are not covered products. Hen ce, DOE is not consider ing wine coolers as part of this rulemaking.

2.2.3 Technology Assessment
As part of the market and technology asse ssment, DOE developed a list of technologies to consider for improving product efficiency. In itially, these technologies encompass all those that DOE believes are technologi cally feasible. DOE then removed those technology options whose energy consumption could not be adequately measured by the existing DOE test procedure. Finally, DOE also removed technolog ies that do not change or affect the energy efficiency metrics of these products before moving on to the screening analysis. Chapter 3 of the preliminary TSD includes the detailed list of a ll technology options identified for each type of
2-8refrigerator, refrigerator-fr eezer, and freezer. Comments on the selection of technologies identified in the framework docum ent are discussed in section 2.3.

2.3 SCREENING ANALYSIS

After DOE identified the tec hnologies in the technology assess ment that could potentially improve the energy efficiency of residential re frigeration products, DOE conducted the screening analysis. The purpose of the scr eening analysis is to evaluate the technologies to determine which options to consider further and which opti ons to screen out. DOE consults with industry, technical experts, and other interested parties in devel oping a list of technologies for consideration. DOE then applie d the screening crite ria to determine which technologies are unsuitable for further considerati on in this preliminary rulemaki ng. Chapter 4 of the preliminary TSD, the screening analysis, contains details on the criteria that DOE used.

Using the screening analysis DOE, in consul tation with interested parties, examined whether various technologies desc ribed in chapter 3 of the TSD: (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. In the engineering analysis, DOE further considered the efficiency-e nhancement options (i.e., technologies) that it did not screen out in th e screening analysis.

2.3.1 Screening Methodology
DOE received several comments regarding its methodology for screening technologies. The Joint Comment stated that DOE has been too quick to screen out te chnologies in previous rulemakings, that “manufacturers are much better at finding the lowest cost path to compliance than the Department”, and that DOE should review results of previous rulemakings to validate whether the methodology has been successful. (Joint Comment, No. 10 at p. 4) The comment did not indicate what would constitu te success of the methodology, nor di d it specifically address the criteria used to evaluate the technologies. Wh irlpool commented that the screening analysis should also examine whether variou s technologies are proprietary. If they are, they should be excluded as technology options from the engineering analysis. (Whi rlpool, No. 17 at p.5) On the other hand, AHAM stated in both the framework pub lic meeting and in written comments that it believes the screening criteri a are appropriate. (AHAM, No. 11 at p.5 and Public Meeting Transcript, No. 7 at p. 76)

DOE concurs with AHAM that the screening criteria are appropria te. The criteria are explicitly delineated in 10 CFR 430 subpart C appendix A section 4.(a)(4). DOE does not believe that a formal review of previous rulemakings to evaluate whether its screening methodology is “successful” is necessary. The time delay betwee n the preliminary phase of the rulemaking and the effective date of the new standards is suffi ciently long that some t echnologies appropriately screened out initially may be viable when the st andards become effective. DOE is cognizant of the process used and the results achieved in previous rulemakings and has evaluated the

2-9technologies in this rulemaking by rigorously applying the crite ria in section 2.3 based on currently available information. Also, DOE ack nowledges the need to exclude proprietary technologies from the engineering analysis and has done so where appropriate in this rulemaking.

2.3.2 Alternative Foam-Blowing Agents
AHAM and Whirlpool both recommended that DOE add alternative foam-blowing agents to the list of technologies under consideration fo r the screening analysis . (AHAM, No. 11 at p.5; Whirlpool, No. 17 at p. 5) DOE und erstands the intent of the co mment to be that DOE should consider the impact of potential climate change legislation or direct EPA action limiting the use of greenhouse gases (GHGs) such as HFC-245fa. Du ring investigation of technologies, DOE was not able to identify refrigerant blowing agent technology options that (1 ) have not been phased out in the past due to ozone depletion issues, and (2) provide better th ermal performance than HFC-245fa, which is used extensively in th e industry. Manufacturers confirmed during preliminary discussions that there are no availa ble blowing agent options with better thermal performance.

Manufacturers indicated during in terviews that they have concerns about alternative foam-blowing agents which might have to be ad opted as a result of pot ential climate change legislation regulating emissi ons of GHGs. HFC-245fa has a gl obal warming potential (GWP) referenced to that of carbon dioxide (CO 2 ) of about 1,000, but its conduc tivity is lower than all commonly known allowable alternative chemical s that are not GHGs. Hence, switching to a different foam-blowing agent will increase energy use of refrigeration products. Manufacturers expect that new legislation lim iting the use of HFC blowing agen ts and refrigerants will be passed before the amended conservation standards for refrigerators goes in to effect in 2014. For this reason, manufacturers have re quested that DOE consider alte rnative foam-blowing agents in the analysis.

DOE points out that, because there are no alternative blowing agents that will improve efficiency, it is not appr opriate to include this option in the list of t echnologies. An enforced transition to blowing agents with re duced global warming potential but higher thermal conductivity has the poten tial to make achieving high efficiency levels more difficult and more costly However, DOE cannot consider legislation that has not yet b een enacted or rules that have not yet been established in dete rmining its proposed standard levels before such legislation becomes law or before such rules have been es tablished, regardless of the likelihood of these occurrences. Nevertheless, DOE acknowledges that climate change legislation could be enacted before the refrigeration products final rule is published. DOE also recognizes the additional challenge posed to the refriger ation products industry by potentia l limitations on HFC usage. For these reasons, the Department will consider conducting additional analyses addressing possible transition to alternative foam-blowing agents, to allow adjustment of the analysis results in a timely fashion in the case that such climate ch ange legislation is enac ted during the rulemaking process. Such analysis would consider the lik ely effect of increased energy consumption resulting from thermal conductivity increase of likely alte rnatives. This issue is discussed further

2-10in sections 2.10 and 2.10.4 of this chapter, as we ll as in the manufacturing impact analysis in chapter 12.

2.3.3 Alternative Refrigerants

A number of stakeholders commented about the inclusion of alternative refrigerants as a technology option in the screeni ng process. Both AHAM and Whir lpool stated that DOE should exclude hydrocarbon refrigerants be cause they are regulated by sa fety organizations such as Underwriters Laboratories (UL) th at restrict the usage of these substances to quantities under 50 grams due to flammability. (AHAM, Public Mee ting Transcript, No. 7 at p. 117; Whirlpool, Public Meeting Transcript, No. 7 at p. 72-73) Alternatively, GE stat ed that there are processes in place at the Environmental Protection Agency (E PA) to approve of hydrocarbon substances as safe for use as alternative refrigerants. (GE, Public Meeting Transcript, No. 7 at p. 73)

The dominant refrigerant currently used in the U.S. is HFC-134a. A possible replacement refrigerant is R-600a, isobutane. R-600a is used extensively throughout the world in residential refrigerators and has a better thermodynamic effi ciency than HFC-134a. However, R-600a is a hydrocarbon and is flammable.

DOE excluded consideration of R-600a in th e engineering analysis because concerns regarding its acceptance by UL and under the EPA's Significant New Alternatives Policy (SNAP) program have not been resolved. Current safety regulations limit the use of hydrocarbon refrigerants to quantities that are insufficient for most residential refrigeration applications. Underwriters Laboratories (UL) has established that no more th an 50 g of isobutane can escape an appliance before requiring stringent safety te sting, which essentially caps the allowable limit of R-600a at 50 g. This quantity is not enough for the typical residential refrigerator. Further, while thermodynamic efficiency of R-600a may be better than that of HFC-134a, it is not clear that the efficiency level of the alternat ive refrigerant is higher in practice.

2.4 ENGINEERING ANALYSIS
The engineering analysis (chapter 5) establishes the relationship between the manufacturing production cost a nd the efficiency for each resi dential heating product. This relationship serves as the basis for cost/benefit calculations in terms of individual consumers, manufacturers, and the Nation. Chapter 5 di scusses product classes DOE analyzed, the representative baseline units, the incremental efficiency levels, the methodology DOE used to develop the manufacturing producti on costs, the cost-efficiency curves, and the impact of efficiency improvements on the considered products.

In the engineering analysis, DOE evaluates a range of product efficiency levels and their associated manufacturing costs. The purpose of the analysis is to estimate the incremental manufacturer selling prices (MSPs) for a product that would result from increasing efficiency levels above the level of the baseline model in each product cla ss. The engineering analysis

2-11considers technologies not eliminated in the scre ening analysis. The LCC analysis uses the costefficiency relationships develope d in the engineering analysis.

DOE typically structures its engineering analysis around one of three methodologies: (1) the design-option approach, whic h calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency-level approach, wh ich calculates the relative costs of achieving increases in energy e fficiency levels without regard to the particular design options used to achieve such increases; and/or (3) the reverse-engineering or co st-assessment approach, which involves a “bottom-up” ma nufacturing cost assessment based on a detailed bill of materials derived from tear-downs of the product being analyzed.

For the preliminary analysis, DOE used a modified approach combining the designoption approach and the efficiency-level approach. DOE conducte d energy modeling and manufacturing cost modeling to determine the cost impact of groups of design options which combined can achieve defined efficiency levels . Reverse engineering of existing products was used to provide calibration of th e manufacturing cost models. DOE selected several baseline and high-efficiency products on which to conduct te ardowns, which also provided an initial indication of cost-efficiency relationships for certain product classes. This step involved physically disassembling commercially available products, consulting with outside experts, reviewing publicly available cost and perfor mance information, and modeling equipment cost. Product data and energy testing were used to ca librate the energy models . Data requested from the industry was used to compare with data from the DOE analyses. The efficiency levels that DOE considered in the engineering analysis are attainable using technologies currently available on the market and incorporating these technolo gies into residential refrigeration products. Chapter 5 of the preliminary TSD describes the methodology that DOE used to perform the engineering analysis and derive th e cost-efficiency relationship.

In response to the approach outlined in the framework document, DOE received comments regarding the following issues: (1) effi ciency levels; (2) compartment temperatures; (3) product classes; and (4) manufac turing cost analysis. Discussion of these issues is set forth below.

2.4.1 Efficiency Levels

ACEEE and PG&E both stated that DOE shoul d extend the cost-efficiency curves to 35 percent lower energy than the federal standa rd. ACEEE mentioned that there are currently products on the market that exceed 30 percent be low federal standards and that tax credits could increase the product volume s at these efficiency levels. (AC EEE, Public Meeting Transcript, No. 7 at p. 105; PG&E, Public Meeting Transcript, No. 7 at p. 106) In re sponse, Whirlpool stated that a 35 percent efficiency improvement is unrealist ic and would be limited because of high costs. (Whirlpool, No. 17 at p. 8) Additionally, Wh irlpool and AHAM both recommended that DOE conduct analysis for an efficiency level betw een baseline and 15 percent because 15 percent represents a very significant change in efficiency and because the change in the test procedure (lower compartment temperatures for refriger ator-freezers) may make achieving the 15% level even more difficult for some products. (Whi rlpool, No. 17 at p. 8; AHAM, No. 11 at p. 7)

2-12The development of cost-efficiency curves to higher efficiency leve ls does not dictate the level at which new standards will be set and provides fuller insi ght regarding the cost levels required to achieve higher efficiencies. This is important, in partic ular, to provide an understanding of the cost impact of a potential new ENERGY STAR level associated with each new baseline efficiency level. Therefore, DOE ha s extended the analysis up to efficiency levels of 35 percent or more, as appropriate. In re sponse to the comments of AHAM and Whirlpool, DOE has also included a 10 percent e fficiency level in the analysis.

DOE also received comments from AHAM and Whirlpool regarding the definition of efficiency levels under the new test procedure. b Specifically, AHAM a nd Whirlpool stated,

“ These percentages should not be applied directly to baseline values obtained using the new test procedure. These percentages, when applied to baselines using the current test procedure are realistic.” (Whirlpool, No. 17 at p. 7; AHAM, No. 11 at p. 7) DOE interprets these statements to mean that energy use for a percentage efficiency level would be defined to be equal to the newtest baseline energy use minus the percentage e fficiency level multiplied by the current-test baseline energy use. This definiti on is illustrated below in Eq. 2.4.1.

Eq. 2.4.1

Where:

energy consumption associated with efficiency level A, baseline energy as calculated using the new test procedure, efficiency level, expressed as a percentage, and baseline energy as calculated using the current test procedure.

For example, if the current baseline for a product is 500 kWh, and the new-test baseline energy use is 600 kWh, the 20 percent efficiency level would be 500 kWh, which is actually a 16.7 percent reduction from 600 kWh.

DOE believes that this method is not appropr iate as a definition for efficiency levels under the new test procedure because: (1) it is confusing given that the energy use reduction would generally be less than the percent efficiency level; and (2) it is expe cted that a product at a given percentage efficiency level using the current test would exhibit the same percentage efficiency level using the new test. Expre ssed in another way, an ENERGY STAR product should have similar sensitivity to the test procedure change as would a baseline energy product. DOE did not adopt the definitions suggested by AHAM and Whirlpool for these reasons.

b As described in Section 3 Market and Technology Assessment, DOE is proposing adopting provisions of the updated AHAM Standard HRF-1-2008 test procedure, which specifies new compartment temperatures that will increase energy test energy consum ption for many product classes. 2-132.4.2 Compartment Temperatures

AHAM, GE, Sub-Zero, and Whir lpool all submitted comments stating that DOE should use the temperatures and volumes from the new test procedure when performing its engineering analysis. (AHAM, Public Meeting Transcript, N o. 7 at p. 86 and No. 11 at p. 6; GE, Public Meeting Transcript, No. 7 at p. 87; Sub-Zero, N o. 9 at p. 4; and Whirlpool, No. 17 at p. 7)

DOE agreed with the manufacturers’ sugges tion and conducted its engineering analysis using the new temperatures and volumes.

2.4.3 Product Classes
DOE received a number of comments regardi ng product classes and the representative units that were selected for its teardown analysis. AHAM comme nted on DOE selection of an 18 ft 3 product class 5 product, indicating that 17 ft 3 or 19 ft 3 sizes would be more appropriate, based on shipment data showing limited shipment of 18 ft 3 products. AHAM also stated that the units selected for product classes 3, 7, 9, 10, 11, and 18 we re representative of the typical volume for each class (AHAM, Public Meeting Transcript, No. & at p. 98-99, No. 11 at p. 5) Whirlpool commented that the volumes of the proposed tear down units for the product classes in which it participates (3, 4, 5, and 7) are representative of the industry- wide offerings. (Whirlpool, No. 17 at p. 6)

DOE points out that the total volume of the product class 5 listed as 18 ft 3 actually has a rated volume of 18.5 ft 3 , which should have been rounded up to 19 ft 3 . Also, DOE believes that products of this size would exhib it energy-use characteristics that are sufficiently similar to those of slightly larger or smaller sized units within the same product class. Hence, DOE continued its analysis of the 18.5 ft 3 product.

DOE received additional comments from AHAM and Whirlpool suggesting that the representative units for product class 5 should be French door bottom-mount models because they have higher heat-leakage than traditi onal bottom-mount units. (AHAM, Public Meeting Transcript, No. 7 at p. 67 and No. 11 at p. 4; Wh irlpool, No. 17 at p. 5) On the other hand, the Joint Comment suggested that DOE should not an alyze product class 5 based solely on French Door models, stating that product types should not be chosen as the baseline simply because of higher inherent heat loss because this would lead to standards biased against efficiency and the grandfathering in of inefficient desi gns. (Joint Comment, No. 10 at p. 3)

DOE requested information duri ng manufacturer interviews re garding the prevalence of French Door products within product class 5. The information received suggests that more than half of product class 5 shipments are products w ith French Doors. Hence, DOE considers this design feature more representative of the produc t class than single-door designs, and DOE has carried out the analysis based on designs having French Doors.

Additionally, W.C. Wood Co rporation, Ltd. (WC Wood) co mmented on DOE’s selection only of WC Wood products to re present ENERGY STAR products for product classes 9 and 10.

2-14WC Wood suggested that DOE also examine products from another manufacturer. (WC Wood, No. 8 at p. 1) WC Wood states that doing so would provide DOE with a broader selection from which to understand the current leve l of freezer manufacturing technology.

DOE acknowledges that analysis of produc t classes 9 and 10 could be limited if ENERGY STAR products from just one manufact urer were examined, so it procured and conducted reverse engineering analysis on simila r-sized units made by another key manufacturer of these products.

2.4.4 Manufacturing Cost Analysis
DOE received several comments regarding th e manufacturing cost analysis. The Joint Comment, NRDC, and PG&E all stated that DOE should review the accuracy of its costmodeling methods from previous rulemakings, in order to identify and address inaccurate cost assumptions so that such inaccuracies are not incorporated in the refrigerator cost models for this rulemaking. (Joint Comment, No. 10 at p. 4; NR DC, Public Meeting Transcript, No. 7 at pp. 93­ 94; PG&E, Public Meeting Transcri pt, No. 7 at p. 94) Specifically, the Joint Comment states that DOE should account for the increased production levels and reduction of the learning curve associated with producing higher efficiency units.

Thorough review of the accuracy of cost m odeling of past rulemakings is beyond the scope of this rulemaking. DOE recognizes the need for accuracy in determination of the cost of achieving higher efficiency levels. To that e nd, DOE refrains from making or using cost projections that cannot be ve rified based on current information, as well as from making estimates that cannot be substant iated. DOE recognizes that this le ads inevitably to cost estimates that may be high after a standard takes effect . However, the Energy Independence and Security Act of 2007 (EISA) modified EPCA to require that not later than 6 years af ter the issuance of any final rule establishing or amending a standa rd, DOE shall publish either a determination that standards for the product do not need to be amended or a notice of proposed rulemaking including new proposed standards. (42 U.S.C. 6295, section 325 (m)) Hence, if the costeffectiveness of higher efficiency standards improves significantly, the energy conservation standards can be adjusted in a subsequent rulemaking.

2.5 MARKUPS TO DETERM INE PRODUCT PRICE
DOE used markups to convert the manuf acturer selling prices estimated in the engineering analysis to customer prices, which th en were used in the life-cycle cost (LCC) and payback period (PBP) and manufacturer impact an alyses. DOE calculates markups for baseline products (baseline markups) and for more effi cient products (incremental markups). The incremental markup relates the change in the manufacturer sales price of higher-efficiency models (the incremental cost incr ease) to the change in the retail er or distributor sales price.

2-15To develop markups, DOE identifies how the products are distributed from the manufacturer to the customer. After establishi ng appropriate distributi on channels, DOE relied on economic data from the U.S. Census Bureau and other sources to define how prices are marked up as the products pass from the manufactu rer to the customer. See Chapter 6 for details on the development of markups.

2.6 ENERGY USE CHA RACTERIZATION
The energy use characterization, which assess es the energy savings potential from higher efficiency levels, provides the basis for the energy savings values used in the LCC and subsequent analyses. Studies show that m easurements of field energy use often vary considerably from the rated usage as determined by the DOE test procedure. To determine the field energy use by products that would meet possible energy effi ciency standards, DOE used data from the Energy Information Administrati on (EIA)’s 2005 Resident ial Energy Consumption Survey (RECS). 1,c RECS is a national sample survey of housing units that collects statistical information on the consumption of and expenditure s for energy in housing units along with data on energy-related characteristic s of the housing units and occu pants. DOE used RECS to estimate the field energy usage of standard -sized refrigerator-freezers and freezers on a representative sample of housing units using these products. But DOE did not use RECS for compact refrigerators and freezers because a large fraction of these products are used outside the residential sector.

AHAM and Whirlpool expressed opposition to using RECS data for the energy use characterization. (AHAM, No. 11 at p. 8; Whirlpool, No. 17 at p. 9) They stated that the RECS data were collected in 2005 and may not be repr esentative of the quickly changing refrigeration market. DOE uses the RECS to characterize ener gy use of refrigeration products because this survey is the only source that provides a nationally-representative household sample that includes estimates of energy use by refriger ation products. RECS also provides enough information to establish the type ( i.e. , product class) of refriger ation product used in each household. Changes in the refrigeration market are not an important factor because DOE’s approach provides a basis for estimating what the energy consumption would be if a household purchased a new and different product from the one they owned in 2005. As noted previously, DOE did not use RECS for compact refrigerator s and freezers because a la rge fraction of these products are used outside the residential sector.

EEI stated that units in unconditioned area s are more likely to have low energy usage during the winter season and hi gher energy usage during the summ er season. (EEI, No. 13 at p. 4) Although RECS does not report the precise location of the refrigerator, it does identify whether a household has a second refrigerator. For those households with two refrigerators, DOE estimated that the second unit is located in eith er the garage or the basement. DOE accounted for

c This is the most recent RECS. 2-16the operating conditions of units located in such unconditioned areas in its calculation of the energy use of second refrigerators.

EEI stated that DOE should be careful wh en estimating the energy usage of compact equipment, especially since these units are more likely to be shut off most of the time (used only on social occasions) or used on a seasonal basis (e.g., college dormitories) compared to full-size units. (EEI, No. 13 at p. 4) Because DOE was not ab le to find suitable data on the field use of compact refrigerators and freezers, it used the DOE test procedure to calculate the annual energy use of products of different volume, and estimated the distribution of volumes in the field using model data from the California Ener gy Commission appliance database. 2

In calculating energy consump tion of refrigeration products , DOE considered whether it would be appropriate to include a rebound effect (also called a take -back effect), which refers to the increased energy consumption resulting from actions that increase energy efficiency and reduce consumer costs. The rebound effect assumes that consumers give up some of the potential energy savings to receive more service. AHAM st ated that the rebound eff ect does not impact the refrigeration market because most consumers have fixed kitchen space for a refrigeration unit, so purchasing a larger unit is not possi ble, and refrigerator size is a function of life stage, rather than operating cost. (AHAM, No. 11 at p. 8) Whirlpool and EEI agreed with AHAM’s perspective. (Whirlpool, No. 17 at p. 9; EEI, No. 13 at p. 4) DOE agrees that there is no evidence of a direct rebound effect for refrigeration pr oducts and it does not plan to include a rebound effect in its analysis.
Chapter 7 of the preliminary TSD provides more detail about DOE’s approach for characterizing energy use of refrigeration products.

2.7 LIFE-CYCLE COST AND PAYB ACK PERIOD ANALYSES
New energy conservation standards aff ect products’ operating expenses—usually decreasing them—and consumer prices for the products—usually increasing them. DOE analyzed the net effect of amended standard s on consumers by evaluating the net LCC. To evaluate the net LCC, DOE used the cost-effici ency relationship derived in the engineering analysis, along with the energy co sts derived from the energy us e characterization. Inputs to the LCC calculation include the installe d cost of a product to the c onsumer (consumer purchase price plus installation cost), operating expenses (ene rgy expenses and maintenance costs), the lifetime of the unit, and a discount rate.

Because the installed cost of a product typically increases while operating cost typically decreases in response to new standards, there is a time in the life of products having higher-thanbaseline efficiency when the net operating-cost benefit (in dollars) since the time of purchase is equal to the incremental first cost of purchasing the higher-efficiency product. The length of time required for products to reach this cost-equivalen ce point is known as the payback period (PBP).

2-17Recognizing that several i nputs to the determination of consumer LCC and PBP are either variable or uncertain, DOE conducted th e LCC and PBP analysis by modeling both the uncertainty and variability in the inputs using Monte Carlo simulation and probability distributions. DOE developed LCC and PBP spread sheet models incorporating both Monte Carlo simulation and probability distri butions by using Microsoft Excel spreadsheets combined with Crystal Ball (a commercially available add-in program).

As described above in section 2.6, DOE deve loped samples of individual households that use standard-size refrigeration products. By developing househol d samples, DOE was able to perform the LCC and PBP calculations for each household to account for the variability in energy consumption and electricity price associ ated with each household. As noted above, DOE did not develop a household sample for compact refrigerators and freezers since a large number of such products are used in lodging, dormito ries and other commercia l establishments. DOE identified several other input values for estima ting the LCC, including: retail prices; discount rates; and product lifetimes. DOE characterized these values with proba bility distributions.

DOE developed discount rates separately for residential consumers and commercial consumers. Because some compact refriger ators and freezers are used in commercial applications, DOE developed commercial discou nt rates and for those commercial consumers that purchase compact refrigerators and freezers. DOE developed discount rates from estimates of the interest rate, or finan ce cost, applied to purchases of residential and commercial products. Following accepted principles of financial theory, the finance cost of raising funds to purchase such products can be interpreted as: (1) the financial cost of any debt incurred to purchase products, principally interest char ges on debt; or (2) the opportunity cost of any equity used to purchase products, principally intere st earnings on household equity.

2.7.1 Retail Prices

As described in section 2.5, DOE used mar kups to convert the manufacturer selling prices estimated in the engin eering analysis to customer re tail prices for the LCC and PBP analysis. The Joint Comment stated that analysis of past refrigerator standards has demonstrated that DOE has overestimated the increase in pric es resulting from energy efficiency standards, and that DOE should revise its methodology or de velop a correction factor for this rulemaking. (Joint Comment, No. 10 at p. 5) DOE recogni zes that every change in minimum energy conservation standards is an opportunity for ma nufacturers to make investments beyond what would be required to meet the new standards in or der to minimize the costs or to respond to other factors. DOE’s manufacturing cost estimates, MIA interviews, and the GRIM analysis (which is conducted for DOE’s NOPR) seek to gauge the mo st likely industry response to proposed energy conservation standards. DOE’s analysis of re sponses must be based on currently available technology that will be non-propr ietary when a rulemaking becomes effective, and thus cannot speculate on future prod uct and market innovation.

2-182.7.2 Energy Prices
DOE used EIA’s energy price data to determ ine residential and commercial prices of electricity in 2007 in 13 geographic areas. DOE us ed projections of those energy prices from EIA’s Annual Energy Outlook 2009 (AEO 2009) to estimate future energy prices. 3 The Joint Comment recommended that DOE conduct a sensitivity analysis using a basket of other forecasts besides the AEO, as the AEO has estimated lower electricity prices than most other forecasts. (Joint Comment, No. 10 at p. 6) DOE conducts sensitivity analysis using alternative AEO forecasts in addition to the AEO reference forecast. These alternat ive forecasts reflect different assumptions with respect to economic growth and other factors. In gene ral, the range of AEO forecasts brackets long-run energy price forecasts made by other organizations.

The Joint Comment stated that DOE should c onsider consumers’ actual benefit of saving electricity at the margin rather than use the annu al average cost of electricity. They noted that due to block rate structures used in some st ates, the last kWh of variable charges may be significantly higher than the annua l average residential rate per kWh. (Joint Comment, No. 10 at
p. 6 ) DOE did not use marginal energy prices in the current analysis because for a base load appliance such as residential re frigeration there is little differe nce between marginal and average prices. While it is true that many utilities use as cending block rate tariffs, the effect this has on the difference between marginal and average prices is offset by two other features of rate structures: first, residential consumers tend to pa y relatively high fixed charges, which raises the average price relative to the marginal energy pr ice; second, seasonal rate s are also very common, with summer rates typically higher, and winter rates lower, than the average (this may be reversed in winter-peaking regions ). As refrigerator energy use is not seasonal, ove r the year the rate differences average out. These arguments help explain why there is not a large difference between marginal and average prices. However, DOE bases its decision for which price to use on a review of the available data. In particular, analysis of the Edis on Electric Institute Typical Bills and Average Rates Reports for summer and winter 2008 confirms that, averaged over the year and over a wide customer base as is appropriate for refrigerators; marginal and average rates are approximately equal. 4,5

2.7.3 Maintenance and Repair Costs
DOE considered expected changes to mainte nance, repair, and inst allation costs for the products covered in this rulemaking. Typically, sm all incremental changes in product efficiency produce no, or only minor, changes in repair and maintenance costs over baseline efficiency products. Products having efficienci es that are significantly greate r than baseline efficiencies can incur increased repair and maintenance costs since they are more likely to incorporate technologies that are new to the industry.

Whirlpool stated that maintenance, repair and installation (MRI) co sts are, in part, a function of the complexity of the technology empl oyed in the product and th e experience level of the technicians repairing the produc t. Thus, if efficiency is impr oved through greater leverage of known technology, the assumption of little change in MRI costs is correct. However, if exotic new technologies are required to meet new effi ciency levels, MRI cost s could easily be double

2-19current levels. (Whirlpool, No. 17 at p. 10) DOE did not find data indicating increases in MRI costs associated with the efficiency levels considered in its analysis.

2.7.4 Product Lifetime
In DOE’s October 2005 draft technical report analyzing potential new amended energy conservation standards for residential refrigerator-freezers, 6 an average product lifetime of 19 years was estimated based on information in DOE’s 1995 TSD. 7 Whirlpool commented that the September 2007 issue of Appliance magazine shows an average life for refrigerators of 14 years, a low of 10 years and a high of 18 years, and that this is consistent with Whirlpool's experience. (Whirlpool, No. 17 at p. 10) The Joint Comment stated that 19 years is an accurate representation of the actual use of residential refrigerators; that many users continue to utilize their old refrigerators even after purchasi ng a new unit, while still others purchase used refrigerators to save up front costs; and that thes e factors work to increase the real product life such that DOE’s assumption is reasonable. (Joint Comment, No. 10 at p. 6)

DOE found that the basis for the lifetime estimat es in the literature for refrigerators and freezers is uncertain. Therefore, for standard-s ized refrigerator-fr eezers and freezers, DOE conducted an analysis of actual lifetime in the fi eld using a combination of shipments data and responses in RECS on the age of the refriger ation products in the homes. As described in Chapter 8, this analysis yielded an estimate of m ean age for standard-sized refrigerator-freezers of approximately 17 years and for standard-sized freezers of approximately 22 years. It also yielded a survival function that DOE incorpor ated as a probability distribution in its LCC analysis. For compact refrigerators and freezers, DOE based the product lifetime on a combination of historical shipments, historical saturations in the housi ng stock, and historical saturations in the commercial building stock. As de scribed in Chapter 8, this analysis yielded an estimate of mean age for compact refrigerators of 5 years and compact freezers of 7 years.

2.7.5 Product Energy Efficiency Distribution in the Base Case
To accurately estimate the share of consumers that would be affected by a standard at a particular efficiency level, DOE’s LCC and PBP an alysis considered the pr ojected distribution of product efficiencies that consumers purchase unde r the base case (i.e., the case without new energy efficiency standards). DOE relied on da ta submitted by AHAM to estimate the base case efficiency distributions for each of the product cl asses that were analyzed in the LCC and PBP analysis. With respect to the di stribution of future product energy efficiency in the absence of new standards, Whirlpool and EEI stated that the ENERGY STAR a nd the Consortium for Energy Efficiency (CEE) programs are well known a nd widely utilized by retailers, utilities and some state governments as voluntary market tr ansformation programs, and that DOE should consider the future impacts of these programs in its base case projecti on. (Whirlpool, No. 17 at p. 11; EEI, No. 13 at p. 4) DOE agrees that the above programs are like ly to affect the market and it projected an increase in the market share of ENERGY STAR appliances in the coming years for its base case forecast. Chapter 8 of the preliminary TSD provides more detail about DOE’s approach for base case efficiency distributions.

2-202.8 NATIONAL IMPACT ANALYSIS
The national impact analysis assesses the ne t present value (NPV) of total consumer lifecycle cost (LCC) and net energy savings (NES) to the Nation. 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 interested parties, DOE prepared a Microsoft Excel spreadsheet model to forecast NES and th e national consumer economic costs and savings resulting from new standards. The spreadsheet m odel uses as inputs typical values (as opposed to probability distributions). To assess the effect of input uncertainty on NES and NPV results, DOE may conduct sensitivity analyses by running scenarios on specific input variables.

2.8.1 Shipments Analysis
Forecasts of product shipments are needed to calculate the national impacts of standards on energy use, NPV, and future manufacturer cash flows. DOE developed shipment forecasts based on an analysis of key market drivers fo r each considered product. In DOE’s shipments model, shipments of products are driven by ne w construction as well as stock replacements.

The shipments models take an accounting approach, tracking market shares of each product class and the vintage of units in th e existing stock. Stock accounting uses product shipments as inputs to estimate the age distribution of in-service product stocks for all years. The age distribution of in-service product stocks is a key input to calculations of both the NES and NPV, because operating costs for any year de pend on the age distribution of the stock.

Chapter 9 of the preliminary TSD provides additional details on th e shipments analysis.

Framework phase comments regarding the ship ments analysis were limited to agreement by AHAM and manufacturers to sup port the data collec tion effort (e.g. AHAM, No. 11 at p. 9), and statements highlighting the success of voluntary programs such as ENERGY STAR and CEE (e.g. Whirlpool, No. 17 at p.11).

2.8.2 Efficiency Scenarios and Trends
Several of the inputs for determining NE S and NPV depend on the product efficiency. DOE developed efficiency trends for the base case and standards cases. These trends specify the average annual historical and forecasted shipments-weighted product efficiencies.

In the framework document, DOE proposed to use a roll-up efficiency scenario in developing its forecasts of efficien cy trends after standards take effect. Under a roll-up scenario, all products that perform at leve ls below a prospective standard are moved, or rolled-up, to the minimum performance level allowed under the sta ndard. The distribution of products that meet the higher efficiency standa rd levels is unaffected.

The Joint Comment stated that historical data are likely to demonstrate that the roll-up scenario bears no resemblance to the historical re cord and should be dropped from the analysis.

2-21It added that markets may respond with a very te mporary situation where n early all products just meet a new standards, but that it does not ta ke long for a new distri bution of efficiency performance above a new standard to emerge. Th e Joint Comment stated that over the analysis timeframe, a “shift” scenario is the dominant e ffect, and DOE should model a shift scenario that accounts for some time lag for the full shift effect to occur. (Joint Comment, No. 10 at p. 7) DOE agrees that the historical record suggests that the likely market response to new standards is that baseline models will roll-up to the standard efficiency level but some fraction of shipments will be above the minimum. In developing the energy efficiencies forecasted over time for each of the standards cases, DOE used a “r oll-up + ENERGY STAR” scenario to establish the distribution of efficiencies for the year that revised sta ndards are assumed to become effective (i.e., 2014) and subsequent years. In this scenario, product effi ciencies in the base cas e that did not meet the standard level under considerati on would roll-up to meet the ne w standard level in 2014. DOE assumed that new criteria would be establishe d for ENERGY STAR refr igeration products, and that such products would graduall y gain a larger market share. The details of the approach are described in Chapter 10.

2.8.3 National Energy Savings Analysis
The inputs for determining the national energy savings (NES) for each product analyzed are: (1) annual energy consumption per unit; (2 ) shipments; (3) product stock; (4) national energy consumption; and (5) site-to-source c onversion factors. DOE calculated the national energy consumption by multiplying the number of un its, or stock, of each product (by vintage, or age) by the unit energy consumption (also by vi ntage). DOE calculated annual NES based on the difference in national energy consumption for the base case (without new efficiency standards) and for each higher efficiency standard. DOE es timated energy consumption and savings based on site energy, and converted the electricity consumption a nd savings to source energy. Cumulative energy savings are the sum of the NES for each year.

The stock of a product is dependent on annua l shipments and the lifetime of the product. DOE projected shipments under the base effici ency case and higher efficiency cases.

2.8.4 Net Present Value Analysis
The inputs for determining net present value (N PV) are: (1) total annu al installed cost; (2) total annual savings in operating costs; (3) a disc ount factor; (4) present value of costs; and (5) present value of savings. DOE calculated net sa vings each year as the difference between the base case and each standards case in total savi ngs in operating costs and total increases in installed costs. DOE calculated savings over the life of each product, accounting for differences in yearly energy rates. DOE calculated NPV as the difference between the present value of operating cost savings and the pres ent value of total installed costs. DOE used a discount factor based on real discount rates of 3% and 7% to disc ount future costs and savings to present values.

The Joint Comment urged DOE to give primar y weight to calculations based on the lower discount rate. The comment asserted that societ al discount rates are th e subject of extensive academic research, the weight of academic opinion is that the appropriate societal discount rate

2-22is 3% or less, and NRDC and others have presented evidence to support the adoption of a societal discount rate in the range of 2 to 3% real. (Joint Comment, No. 10 at p. 7)

DOE notes that OMB Circular A-4 references an earlier Circular A- 94, which states that a real discount rate of 7 per cent should be used as a base ca se for regulatory analysis. The 7­ percent rate is an estimate of the average before-tax rate of return to private capital in the U.S. economy. It approximates the opportunity cost of capital and, according to Circular A-94, is the appropriate discount rate whenever the main effect of a regulation is to displace or alter the use of capital in the private sector . OMB revised Circular A-94 in 1992 after extensive internal review and public comment. OMB found that the aver age rate of return to capital remains near the 7-percent rate estimat ed in 1992. Circular A-4 also states that when regulation primarily and directly affects private consumption, a lower disc ount rate is appropriate. “The alternative most often used is sometimes called the social rate of time preference...the ra te at which ‘society’ discounts future consumption fl ows to their present value.” 8 It suggests that the real rate of return on long-term government debt may provide a fair approximation of the social rate of time preference, and states that over th e last 30 years, this rate has averaged around 3 percent in real terms on a pre-tax basis. It conc ludes that “for regulatory anal ysis, [agencies] should provide estimates of net benefits usi ng both 3 percent and 7 percent.” 9 Consistent with OMB guidance DOE did not give primary weight to results derived using a 3-percent discount rate.

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

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

The national impacts analysis examines th e potential economic im pacts of alternative standard levels on consumers who purchase the products that meet each standard level. The Joint Comment stated that the electricity price mitig ation effects of new standards on refrigeration products should be documented and the value of reduced electricity bills to all consumers quantified as a benefit. (Joint Comment, No. 10 at p. 6) DOE investigated the possibility of estimating the impact of specific standard leve ls on electricity prices in its rulemaking for general service fluorescent lamps and incadescent reflector lamps. 10 Whereas natural gas markets exhibit a fairly simple chain of agents from producers to consumers, the power industry is a complex mix of fuel suppliers, pr oducers and distributors. While the distribution of electricity is regulated everywhere, its inst itutional structure varies, and upstream components are more complicated, with generation being priced using different methods across the country. For these and other reasons, accurate modeling of the respons e of electricity prices to a decrease in residential-sector demand due to standards is problematic. Thus, DOE does not plan to estimate the value of potentially reduced electricity co sts for all consumers associated with revised standards.

2-23Chapter 10 of the preliminary TSD provides additional details regarding the national impacts analysis.

2.9 LIFE-CYCLE COST SUBGROUP ANALYSIS
The LCC subgroup analysis evaluates economic impacts on selected groups of consumers who might be adversely affected by a change in the national energy conservation standards for the considered products. DOE evaluates impacts on particular subgroups of consumers primarily by analyzing the LCC impacts and PBP for those particular consumers.

AHAM stated that DOE should consider low-income households as a consumer subgroup, since refrigerators are not optional for consumers, and thus the impact of price increase on low-income and fixed-income cons umers may be more pronounced than for products that are more discretionary. (AHAM, No. 11 at p. 9) DOE intends to evaluate impacts of standards on low-income and fixed- income (i.e., senior) consumers.

DOE will use the LCC spreadsheet model to evaluate impacts on consumer subgroups. DOE can analyze the LCC for any subgroup by appl ying the LCC spreadsheet model to only that subgroup. DOE is particularly sens itive to increases in the cons umer price of the considered products, and seeks to avoid a negative economic impact on any identified consumer subgroup.

The Joint Comment stated that if the Depa rtment insists on analyz ing sub-groups in the LCC analysis, it should not only quantify the eff ects on those that are more negatively affected, but also consider those sub-groups that are more positively affected, such as those that rent housing and have no choice in refr igerator efficiency, yet are forced to pay the energy bills. (Joint Comment, No. 10 at p. 7) It is unclear whether renters would be positively affected by revised standards, as the extent to which property owners (the purch asers of refrigerators in most cases) would pass on the higher cost of more-efficient products to tena nts in the rent is uncertain. Therefore, DOE does not plan to analyze renters as a sub-group.

2.10 PRELIMINARY MANUFACTURER IMPACT ANALYSIS
DOE performed a preliminary manufacturer im pact analysis (MIA) to start to estimate the financial impact of higher energy conserva tion standards on manufacturers of residential refrigeration products, and calculate the im pact of such standards on employment and manufacturing capacity. The MIA ha s both quantitative and qualitative aspects. The quantitative part of the MIA relies on the government regul atory impact model (GRIM), an industry-cashflow model customized for this industry. Th e GRIM inputs are information regarding the industry cost structure, shipments, and revenues. This includes information from many of the analyses described above, such as manufacturing costs and prices from the engineering analysis and shipments forecasts. The key GRIM output is the industry net present value (NPV). Different

2-24sets of assumptions (scenarios) will produce different results. The qualitative part of the MIA addresses factors such as equipment characteris tics, characteristics of particular firms, and market and equipment trends, and includes assess ment of the impacts of standards on subgroups of manufacturers. The complete preliminary MIA is described in chapter 12 of the preliminary TSD.

DOE will conduct the MIA in this rulemaking in three phases, and will further tailor the analytical framework for the MIA based on comments from interested parties. In Phase I, DOE creates an industry profile to ch aracterize the industry and identif y important issues that require consideration. In Phase II, DOE prepares an industry cash-flow m odel and an interview questionnaire to guide subsequent discussions. In Phase III, DOE interviews manufacturers, and assesses the impacts of standards both quantit atively and qualitativel y. DOE assesses industry and subgroup cash flow and NPV using the GR IM. DOE then assesses impacts on competition, manufacturing capacity, employme nt, and regulatory burden base d on manufacturer interview feedback and discussions.

Until recently, DOE reported MIA results in its standards rulemakings only during the NOPR phase of the rulemaking. However, DOE is now evaluating and reporting preliminary MIA information in this preliminary analysis . DOE gathered this information during the preliminary manufacturer interviews c onducted for the engineering analysis.

In response to the process outlined in the framework document for conducting the MIA, DOE received comments on the cumulative regulatory burden faced by the industry as a whole and by small, niche manufacturers in partic ular. Specifically, ma nufacturers and trade associations expressed concern ove r potential climate change legi slation that would regulate or eliminate the use of HFCs, the regulation of re frigerants through the Environmental Protection Agency (EPA), and the regulation of potential al ternative refrigerants through safety standards from organizations such as UL.

AHAM, GE, and Whirlpool all st ated that DOE should consid er the effects of potential climate change legislation within its analyses . All three organizations also believe that regulations restricting use of re frigerants and foam-blowing agents could be enacted by EPA in the absence of climate change legislation. This could present a major pr oblem to manufacturers because the use of the most likely alternative refr igerant, R-600a, is currently restricted, due to safety concerns, by UL. (AHAM, No. 11 at p. 9, Public Meeting Transc ript, No. 7 at pp. 116-117 and at pp. 182-183; GE, No. 15 at pp. 1-2; and Whirlpool, No. 17 at pp. 11-12)

DOE agrees that potential climate change legislation and potential regulations and restrictions by EPA would presen t significant challenges to refr igeration products manufacturers. If these kinds of regulations were passed before the final rule for refr igeration products, DOE would consider them in its analysis of cumu lative regulatory burden during this rulemaking. However, DOE cannot, either when determini ng new energy conservation standards or when considering the cumulative regulat ory impact of such standards, factor unenacted legislation or rules that have not yet been fina lized into its analysis. DOE recogni zes the substantial impact that climate change and other regulations would pos e for the refrigeration products industry. DOE

2-25will consider conducting analyses addressing the im pacts of the use of alternative refrigerants and foam-blowing agents possibly required by such legislation or regulations, in order to be prepared to adjust analysis re sults appropriately should such climate change legislation be enacted or rules be finalized during the rulemaki ng process. This issue is discussed also in section 2.3.2 and in chapter 12.

As part of the preliminary MIA, DOE asked manufacturers about the potential impacts of amended energy conservation standards on their busin ess, employment levels, market share, and competitive positions within the marketplace. Ma nufacturers stated that conversion costs are a concern and they anticipate that significant produ ct modifications resulting in the need for new production facilities will drive pr oduction outside of the U.S. a nd substantially lower domestic employment levels. Additionally, manufacturers expressed some concern about competitive position and potential industry c onsolidation as a result of amended energy conservation standards. As part of the NOPR phase of the rulemaking, DOE will further analyze these concerns and seek further comments from manufacturers about conversion costs and profitability. DOE will then estimate both the qualitative and quantitative impacts on the refrigeration products industry.

The following is an overview of the information DOE will collect and the analysis that will be conducted during the MIA. For more detail, see chapter 12 of the preliminary TSD.

2.10.1 Industry Cash-Flow Analysis
The industry cash-flow analysis relies prim arily on the GRIM. DOE uses the GRIM to analyze the financial impacts of more string ent energy conservation standards on the industry that produces the products covered by the standa rd. The GRIM analysis uses many factors to determine annual cash flows from a new standa rd: annual expected revenues; manufacturer costs, including cost of goods sold, depreciation, research and de velopment, selling, general, and administrative expenses; taxes; and conversion capital expenditures. DOE compares the results against base-case projections that involve no new standards. The financial impact of new standards is then the difference between the tw o sets of discounted annual cash flows. Other performance metrics, such as return on invested capital, are also avai lable from the GRIM. For more information on the industry cas h-flow analysis, refer to chap ter 12 of the preliminary TSD.

2.10.2 Manufacturer Subgroup Analysis
Industry cost estimates are not adequate to assess differential impacts among subgroups of manufacturers. For example, small and niche manufacturers, or manufacturers whose cost structure differs significantly from the industry average, coul d experience a more negative impact from the imposition of standards. Ideall y, DOE would consider th e impact on every firm individually; however, since this usually is not possible, DOE typically uses the results of the industry characterization to group manufactur ers exhibiting simila r characteristics.

DOE outlined the process it uses to establ ish manufacturer subgroups in the framework document and sought comment from interested parties on any potential subgroups within the
2-26refrigeration products industrie s. AHAM and Whirlpool both commented that small, niche manufacturers should be considered because they have less access to the resources needed to develop, implement, and market newer technologi es, such as alternative refrigerants. (AHAM, No. 11 at p. 9; Whirlpool, No. 17 at p. 11)

Currently, DOE is characterizing the impact s on residential refrige ration products on the residential refrigeration industr y. DOE did not identify any manu facturer subgroups within the industry other than small manufacturers. DOE will consider the possibility of small businesses being affected by the promulgation of amended energy conservation standards for residential refrigeration products. DOE identified a handful of small businesses within the industry in chapter 3 of the preliminary TS D. During the manufacturer interv iew process conducted as part of the NOPR, DOE will discuss the potential subgroups and subgroup members it has identified for the analysis. DOE will encourage the manufacturers to recommend subgroups or characteristics that are appropriate for th e subgroup analysis. For more detail on the manufacturer subgroup analysis, see ch apter 12 of the preliminary TSD.

2.10.3 Competitive Impacts Assessment

DOE must also consider whether a new sta ndard is likely to reduce industry competition, and the Attorney General must determine the im pacts, if any, of any reduced competition. DOE will make a determined effort to gather and report firm-specific financial information and impacts. The competitive impacts assessment will focus on assessing the impacts on smaller manufacturers. DOE will base this assessment on manufacturing cost data and information collected from interviews with manufacturers. The manufacturer interviews will focus on gathering information to help assess asymmetrical cost increa ses to some manufacturers, increased proportion of fixed costs potentially incr easing business risks, a nd potential barriers to market entry (e.g., proprietary technologies). The NOPR will be submitted to the Attorney General for a review of the impacts of standards on competition. The Attorney General’s comments on the proposed rule will be cons idered in preparing the final rule.

2.10.4 Cumulative Regulatory Burden
DOE recognizes and seeks to mitigate the ove rlapping effects on manu facturers of new or revised DOE standards and other regulatory acti ons affecting the same equipment. DOE will analyze and consider the impact on manufactur ers of multiple, product-specific regulatory actions. Based on its own research and discussion s with manufacturers, DOE identified several regulations relevant to resident ial refrigeration products, includi ng potential climate change and greenhouse gas legislation.

DOE outlined the cumulative regulatory burde n process in the framework document and sought comment from interested parties on any additional regulations facing the residential refrigeration products industry. In response to th e cumulative regulatory burden discussion in the framework document, AHAM, Whirlpool, and GE all commented that DOE should consider the effect of potential climate change regulation. (AHAM, Public Meeting Tr anscript, No. 7 at pp. 116-117 and pp. 182-183, No. 11 at p. 9; Whirlpool, N o. 17 at pp. 11-12; GE, No. 15 at pp. 1-2)
2-27As stated in section 2.3.2, DOE cannot cons ider in its cumulative regulatory burden analysis any legislation that has not yet been enacted or any new rules that have not been finalized. However, DOE recognizes the impact th at such legislation or rules could have to DOE’s rulemaking schedule and the challenge it pr esents to manufacturers. For these reasons, DOE will consider conducting additional analyses, addressing use of alternative foam-blowing agents, to allow adjustment of the analysis results in the case that such climate change legislation is enacted during the rulemaking process.

DOE identified several other regulations releva nt to refrigeration products manufacturers during interviews conducted as pa rt of the manufacturing impact analysis. These issues included regulations from the Consumer Products Safety Commission (CPSC), new DOE test procedures for residential refrigeration products, amended energy conservation standards for other products manufactured by refrigeration products manufactur ers, state energy conservation standards, and international energy conservation standards. All of these regulations and the potential climate change legislation are described further in Chapter 12.

2.10.5 Preliminary Results for the Ma nufacturer Impact Analysis
As part of the preliminary MIA, DOE disc ussed potential impacts of amended energy conservation standards with manufacturers of residential refrigeration products. These discussions took place during the interviews DOE conducted for the engineering analysis. The interviews provided valuable information that DOE will use to evaluate the impacts of amended energy conservation standards on manufacturers’ cash flows, manufactur ing capacities, and employment levels in subsequent phases of the MIA. DOE discusses its findings from the preliminary MIA interviews in the executive summary and in chapter 12 of the preliminary TSD.

2.11 UTILITY IMPACT ANALYSIS
The utility impact analysis includes an analys is of the effect of new energy conservation standards on the electri c and the gas utility industries. Fo r this analysis, DOE adapted NEMS, which is a large multi-sectoral, partial-equilibrium model of the U.S. energy sector that the EIA has developed throughout the past decade, prim arily for preparing EIA’s AEO. In previous rulemakings, a variant of NEMS (currently te rmed NEMS-BT, BT referring to DOE’s Building Technologies Program), was developed to better address the specific impacts of an energy conservation standard.

NEMS, which is available in the public dom ain, produces a widely recognized baseline energy forecast for the United States through the year 2030. The typica l NEMS outputs include forecasts of electricity sales, prices, and electric generating ca pacity. DOE conducts the utility impact analysis as a scenario that departs from the latest AEO reference case. In other words, the

2-28energy savings impacts from amended energy co nservation standards are modeled using NEMSBT to generate forecasts that deviate from the AEO reference case.

2.12 ENVIRONMENTAL IMPACT ANALYSIS
The intent of the environmental assessment is to fulfill requirements to properly quantify and consider the environmental effects of all new Federal rules. The primary environmental effects of energy conservation standards for he ating products would be reduced power plant emissions resulting from reduced consumption of electricity. DOE will assess these environmental effects by using NEMS-BT to provide key inputs to its analysis. The portion of the environmental assessment that will be produced by NEMS-BT considers carbon dioxide (CO 2 ), sulfur dioxide (SO 2 ), nitrogen oxides (NO X ), and mercury (Hg).

DOE has preliminarily determined that SO 2 emissions from affected Electric Generating Units (EGUs) are subject to nationwide and regi onal emissions cap and trading programs that create uncertainty about standard’s impact on SO 2 emissions. Title IV of the Clean Air Act sets an annual emissions cap on SO 2 for all affected EGUs. SO 2 emissions from 28 eastern States and the District of Columbia (D.C.) are also li mited under the Clean Air In terstate Rule (CAIR, published in the Federal Register on May 12, 2005. 70 FR 25162 (May 12, 2005), which creates an allowance-based trading program that will gr adually replace the Titl e IV program in those States and D.C.. (The recent legal history surr ounding CAIR is discussed below.) The attainment of the emissions caps is flexible among EGUs and is enforced through the use of emissions allowances and tradable permits. The standard could lead EGUs to trade allowances and increase SO 2 emissions that offset some or all SO 2 emissions reductions attributable to the standard. DOE is not certain that there will be reduced overall SO 2 emissions from the standards. The NEMS-BT modeling system that DOE plans to use to forecast emissions reductions currently indicates that no physical re ductions in power sector emissions would occur for SO 2,. However, remaining uncertainty prevents DOE from estimating SO 2 reductions from the standards at this time.

Even though DOE is not certain that there will be reduced overall emissions from the standard, there may be an economic benefit from reduced demand for SO 2 emission allowances. Electricity savings decrease the generation of SO 2 emissions from power production, which can lessen the need to purchase SO 2 emissions allowance credits, and thereby decrease the costs of complying with regulatory caps on emissions.

With regard to NO X emissions, the U.S. Environmental Protection Agency (EPA) issued the Clean Air Interstate Rule (CAIR) on March 10, 2005. 70 FR 25162 (May 12, 2005). On July 11, 2008, the U.S. Court of Appeals for the District of Columbia Circuit (D.C . Circuit) issued its decision in North Carolina v. Environmental Protection Agency , in which the court vacated the CAIR and remanded to EPA to promulgate a rule consistent with the court’s opinion. 531 F.3d 896 (D.C. Cir. 2008). If left in place, the CAIR would have permanently capped emissions of NO X in 28 eastern States and the District of Co lumbia. However, upon consideration of petitions for review, the D.C. Circuit decided on Decembe r 23, 2008 to allow CAIR to remain in effect
2-29until it is replaced by a rule consiste nt with the court's earlier opinion. North Carolina v. EnvironmentalProtection Agency , 550 F.3d 1176 (D.C. Cir. 2008). Therefore, DOE’s Environmental Analysis is based on CAIR, pending revision by EPA. See www.epa.gov/cleanairinterstaterule

. Similarly, for Hg emissions, the EPA issued the Clean Air Mercury Rule (CAMR). 70 FR 28606 (May 18, 2005). CAMR would have permanen tly capped emissions of mercury for new and existing coal-fired power plants in all States by 2010. However, on February 8, 2008, the D.C. Circuit issued its decision in New Jersey v. Environmental Protection Agency , in which the D.C. Circuit, among other actions, vacated th e CAMR. 517 F.3d 574 (D.C. Cir. 2008). EPA has decided to develop emissions standards for power plants under the Clean Air Act (Section 112), consistent with the D.C. Circuit’s opinion on the Clean Air Mercury Rule (CAMR). See http://www.epa.gov/air/mercuryrule/pdfs/ certpetition_withdrawal.pdf. Pending EPA's forthcoming revisions to the rule, DOE is excluding the CAMR from its Environmental Analysis.

Both with and without emissions caps, decreased power production at emitting power plants can have environmental-re lated economic benefits. When NO X and Hg emissions are subject to emissions caps, electricity demand reduc tions may result in incremental changes in the prices of emissions allowances in cap-and- trade emissions markets rather than physical emissions reductions. When there are physical emissions reductions, economic benefits can accrue from the decreased environmental damage from lower emissions. Therefore, both with and without emissions caps, sta ndards can produce an environmenta l-related economic benefit in the form of lower prices for emissions allowanc e credits or a monetary value of the economic benefits of lower emissions. Therefore in addition to potential physical emissions reductions, DOE will examine the potential monetary value of NO X and Hg benefits that may arise from a standard. DOE has used updated estimate(s) of the value of avoided NO X and Hg emissions in recent DOE efficiency standards rulemakings. These estimates are summarized in the environmental assessment in the preliminary TSD.

The results for the environmental assessment are similar to NEMS results as published in the AEO. These results include power sector emissions for SO 2 , NO X , Hg, and CO 2 in five-year forecasted increments. The outcome of the analys is for each analyzed standard level will be reported as a deviation from the AEO 2009 reference (base) case.

EEI stated that DOE should account for the ri se in renewable portfolio standards and the possibility of an upcoming CO 2 cap and trade program, which would reduce the amount of CO 2 produced per kWh generated. (EEI, No. 13 at p. 5) As stated above, DOE u tilizes the most recent forecasts from EIA’s NEMS to estimate the future mix of power generation sources. EIA accounts for policies that have been enacted at the time of its analysis, including renewable portfolio standards and regional cap and trade programs, and DOE believes that this approach provides the most reliable basis for estimating future power sector emissions.

NRDC stated that since climate change legi slation is extremely lik ely to be enacted by 2014, which would place limits on CO 2 levels, the analyses should monetize the value of avoided

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