1

- i CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS

1.1 PURPOSE OF THE DOCUM ENT

................................ ................................ ................. 1

- 1

1.2 OVERVIEW OF STANDARD S FOR RESIDENTIAL PO RTABLE AIR

CONDITIONERS

................................ ................................ ................................ ............ 1

- 1

1.3 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS

................... 1

- 2

1.4 STRUCTURE OF THE DOC UMENT

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- 5

LIST OF TABLES

Table 1.3.1 Analyses Under the Process Rule

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- 41-1 CHAPTER 1. INTRODUCTION

1.1 P URPOSE OF THE DOCUME NT

This preliminary technical support document (TSD) is a stand

- alone report that provides the technical analyses and results supporting the information presented in the prel iminary notice of public meeting (NOPM) and executive summary for residential portable air conditioners (ACs) . This preliminary TSD reports on the preliminary activities and analyses conducted in the period preceding the notice of proposed rulemaking (NOPR ) of this rulemaking.

1.2 OVERVIEW OF STANDARD S FOR RESIDENTIAL PORTABLE AIR

CONDITIONERS

The Energy Policy and Conservation Act (EPCA) of 1975, Pub. L. 94

- 163 (42 United States Code (U.S.C.) 6291

– 6309)

, established an energy conservation program for major

ho usehold appliances. Part A of title III of EPCA (42 U.S.C. 6291

- 6309) establishes the “Energy Conservation Program for Consumer Products Other Than Automobiles”, which covers consumer products and certain commercial products (hereinafter referred to as “co vered products”). a EPCA authorizes the U.S. Department of Energy ( DOE ) to establish technologically feasible, economically justified energy conservation standards for covered products or equipment that would be likely to result in significant national ener gy savings. (42 U.S.C. 6295(o)(2)(B)(i)(I)

– ( VII))

In addition to specifying a list of covered residential and commercial products, EPCA contains provisions that enable the Secretary of Energy to classify additional types of consumer products as covered products. For a given product to be classified as a covered product, th e Secretary must determine that (1) classifying the product as a covered product is necessary for the purposes of EPCA; and (2) the average annual per

- household energy use by products of each type is likely to exceed 100 kilowatt

- hours (kWh) per year. (42 U.S.C. 6292(b)(1))

There are currently no DOE test procedures or energy conservation standards for portable

ACs. In a n otice of pro posed d etermination (NOPD) published in the Federal Register on July 5, 2013 (hereinafter referred to as the “July 2013 NOP D”) , DOE outlined its tentative determination that portable ACs fulfill the criteria for being added as a covered product pursuant to 42 U.S.C. 6292(b)(1). 78 FR 40403, 40404.

For the Secretary to prescribe an energy conservation standard pursuant to 42 U.S.C. 6295(o) and (p) for covered products added pursuant to 42 U.S.C. 6292(b)(1 ), he or she must

a For editorial reasons, upon codification in the U.S. Code, Part B was re

- designated Part A.1-2

also determine that (1) t he average household energy use of the products has exceeded 150 kWh per household for a 12

- month period; ( 2) t he aggregate 12

- month energy use of the products has

exceeded 4.2 terawatt

- hours ( TWh ) ; (3) s ubstantial improvement in energy efficiency is technologically feasible; and (4) a pplication of a labeling rule under 42 U.S.C. 6294 is unlikely

to be sufficient to induce manufacturer s to produce, and consumers and other persons to purchase, covered products of such type (or class) that achieve the maximum energy efficiency

that is technologically feasible and economically justified. (42 U.S.C. 6295(l)(1))

1.3 P ROCESS FOR SETTING E NERGY CON S ERVATION STANDARDS

Under EPCA, when DOE is studying new or amended standards, it must consider, to the greatest extent practicable, the following seven factors (42 U.S.C. 6295 (o)(2)(B)(i)):

1) the economic impact of the standard on the manufacturers 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) t he total projected amount of energy savings likely to result directly from the imposition of the standard;

4) any lessening of the utility or the performance 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 requirement s are set forth in 42 U.S.C. 6295(o)(1)

– (2)(A), (2)(B)(ii)

– (iii), and (3)

– (4).

DOE considers stakeholder participation to be a very important part of the process for setting energy conservation standards. Through formal public notifications ( i.e.

, Federa l Register notices) , DOE actively encourages the participation and interaction of all stakeholders during the comment period in each stage of the rulemaking. Beginning with the f ramework d ocument and during subsequent comment periods, interactions among st akeholders provide a balanced discussion of the information that is required for the standards rulemaking.1-3

B efore DOE determines whether to adopt a proposed energy conservation standard, it must first solicit comments on the proposed standard. (42 U.S.C. 6295 ( m )( 2 )(B)) Any new or amended standard must be designed to achieve significant additional conservation of energy and be technologically feasible and economically justified. (42 U.S.C. 6295 ( o )( 2 )(A)) To determine whether economic justification exists, DOE must review comments on the proposal and determine that the benefits of the proposed standard exceed its burdens to the greatest extent practicable, weighing the seven factors listed above. (42 U.S.C. 6295 (o)(2)(B)(i))

After the publication of the f ramework 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 notices is a NOPM, which is designed to publicly

vet the model s 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

c omments received in response to the NOPM and the preliminary analyses and analytical tools; analyses of the impacts of potential amended energy conservation standards on consumers, manufacturers, and the Nation; DOE’s weighting of these impacts of amended energy conservation standards; and the proposed energy conservation standards for the 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 weighting of these impacts; the amended energy conservation standards DOE is adopting for the product; and the compliance dates of the amended energy conservation standards.

In the July 2013 NOPD

, DOE announced that it tentatively determined that portable ACs

meet the crit eria for covered products because classifying products of such type as covered products is necessary or appropriate to carry out the purposes of EPCA, and the average U.S. household energy use for portable ACs is likely to exceed 100 kWh per year. 78 FR 40 403

– 05

. DOE also estimated that 973.7 thousand units were shipped in North America in 2012, with a projected growth to 1743.7 thousand units by 2018, representing nearly 80

- percent growth in 6

years. b The July 2013 NOPD is available at: http://www.regulations.gov/#!documentDetail;D=EERE

- 2013

- BT

- STD

- 0033

- 0001

.

O n May 9 , 201 4 , DOE published in the Federal Register a notice of data availability (NOD A ) (hereinafter referred to as the “May 2014 NODA”), in which it evaluat ed available industry test procedures to determine whether their methodologies may be suitable for incorporation in a future DOE test procedure, should DOE determine that portable ACs ar e a covered product. DOE conducted testing on a range of portable ACs to determine typical cooling capacities and cooling energy efficiencies based on the existing industry test methods and other modified approaches. 79 FR 26639, 26640 (May 9, 2014). The M ay 2014 NODA document is

available at: http://www.regulations.gov/#!documentDetail;D=EERE

- 2014

- BT

- TP

- 0014

- 0001

.

b Transparency Media Research, Air Conditioning Systems Market

- Global Scenario, Trends, Industry Analysis, Size, Share and Forecast, 2012

– 2018 , January 2013.1-4

DOE use s public meeting s as an opportunity to inform and facilitate involvement of interested parties in the rulemaking process. The analytical framework presented at the public meeting s describe s the different analyses, such as the engineering analysis and the consumer economic analyses ( i.e. , the li fe

- cycle cost (LCC) and payback period (PBB) analyses), the methods proposed for conducting them, and the relationships among the various analyses.

Table 1.3.1 Analyses Under the Process Rule

Preliminary Analyses NOPR Final Rule

Market and technology assessment Revised preliminary analyses Revised NOPR analyses

Screening analysis Life

- cycle cost sub

- group analysis

Engineering analysis Manufacturer impact analysis

Energy use determination Emissions impacts analysis

Markups for equipment price

determination Mon etization of emissions analysis

Life

- cycle cost and payback period analysis Utility impact analysis

Shipments analysis Employment impact analysis

National impact analysis Regulatory impact analysis

Preliminary manufacturer impact analysis

In response to the July 2013 NOPD and May 2014 NODA, interested parties commented

on numerous issues related to the analyses listed in Table 1. 3. 1. DOE attempted to address these issues during this preliminary analys i s and summarized the comments and DOE’s responses in chapter 2 of the preliminary TSD.

As part of the information gathering and sharing process, DOE organized and held

interviews with manufacturers of the portable ACs considered in this rulemaking as part of the engineering analysis and preli minary manufacturer impact 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 interviews: (1) solicit manufacturer feedback on 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, t o express manufacturers’ concerns to DOE; and (4) foster cooperation between manufacturers and DOE.

DOE incorporated the information gathered during the interviews with manufacturers into its engineering analysis ( chapter 5) and the preliminary manufactu rer impact analysis ( chapter 12). Following the publication of the NOPM and the public meeting, DOE intends to1-5

hold additional meetings with manufacturers as part of the consultative process for the manufacturer impact analysis conducted during the NOPR ph ase of the rulemaking.

DOE developed spreadsheets for the LCC, PBP, and national impact analyses for portable ACs . DOE developed an LCC spreadsheet that calculates the LCC and PBP at various energy efficiency levels. DOE also developed a national impact analysis spreadsheet that calculates 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 conservation standards at vari ous levels on product shipments. All of these spreadsheets are available on the DOE website for residential portable ACs at : http://www1.eere.energy.gov/bui ldings/appliance_standards/product.aspx/productid/79

.

1.4 STRUCTU R E OF THE DOCUMENT

This preliminary TSD outlines the analytical approaches used in this rulemaking. The

TSD consists of 17 chapters and supporting appendices.

Chapter 1 Introduction: provides an overview of the appliance standards pr ogram

and how it applies to this rulemaking, and outlines the structure of the

document.

Chapter 2 Analytical Framework , Comments from Interested Parties, and DOE

Responses : describes the rulemaking process.

Chap ter 3 Market and Technology Assessment: characterizes the market for the

considered products and the technologies available for increasing product efficiency.

Chapter 4 Screening Analysis: identifies all the design options that improve

efficiency of the considered products, and determines which technology options are viable for consideration in the engineering analysis.

Chapter 5 Engineering Analysis: discusses the methods used for developing the

relationship between increased manufacturer price and in creased efficiency.

Chapter 6 Markups for Equipment Price Determination : discusses the methods

used for establishing markups for converting manufacturer prices to

customer product cost s

.1-6

Chapter 7 Energy Use Analysis : discusses the pro cess used for generating energy

use estimates for the considered products as a function of standard

levels.

Chapter 8 Life

- Cycle Cost and Payback Period Analysis: discusses the effects of

standards on individual customers and user s of the products and compares the LCC and PBP of products with and without higher efficiency standards.

Chapter 9 Shipments Analysis: discusses the methods used for forecasting

shipments with and without higher efficiency standards, including how produc t purchase decisions are economically influenced and how DOE

model s this relationship with econometric equations.

Chapter 10 National Impact Analysis: Discusses the methods used for forecasting

national energy consumption and national economic impacts ba sed on annual product shipments and estimates of future product energy efficiency distributions in the absence and presence of amended energy

conservation standards.

Chapter 11 Consumer Subgroup Analysis: discusses the effects of standards on

different subgroups of consumers and compares the LCC and PBP of products with and without higher efficiency standards for these

consumers.

Chapter 12 Preliminary Manufacturer Impact Analysis: discusses the effects of

standards on the finances and profitability of product manufacturers.

Chapter 1 3 E mission Impact Analysis : discusses the effects of standards on three

pollutants

— sulfur dioxide (SO 2 ), nitrogen oxides (NO
x ), and mercury

— as well as carbon dioxide emissions.

Chapter 1 4 Mon etization o f Emission s Reductions Benefits

.

Chapter 1 5 Utility Impact Analysis: discusses certain effects of the considered on

electric and gas utilities.

Chapter 1 6 Employment Impact Analysis: discusses the effects of standards on

national employment

.

Chapter 17 Regulatory Impact Analysis: discusses the impact of non

- regulatory

alternatives to efficiency standards.

Appendix 5A Engineering Analysis Inter view Guide1-7

Appendix 7A Correlating Weather Station Data Mapping to Sample Buildings

Appendix 7B Energy Use in Commercial Applications

Appendix 8A User Instructions for Life

- Cycle Cost and Payback Period Spreadsheets

Appendix 8B Uncertainty and Variability in LCC Analysis

Appendix 8C Calculating Energy Price s for Portable Air Conditioners

Appendix 8D Lifetime Distr ibutions

Appendix 8E Distributions for Discount Rates

Appendix 10A User Instructions for National Impact Analysis Spreadsheet Model

Appendix 10 B Full

- Fuel

- Cycle Multipliers

Appendix 10C National Net Present Value of Consumer Benefits Using Alternative

Product Price Forecasts

Appendix 10D National Energy Savings and Net Present Value Using Alternative

Growth Scenarios

Appendix 12A M anufacturer Impact Analysis Interview Guide