17-i 

CHAPTER 17. REGULATORY IMPACT ANALYSIS

TABLE OF CONTENTS

17.1 INTRODUCTION ............................................................................................................ 17-1

17.2 METHODOLOGY ........................................................................................................... 17-1

17.3 NON-REGULATORY POLICIES ................................................................................... 17-3

17.3.1 No New Regulatory Action ............................................................................... 17-3

17.3.2 Consumer Rebates ............................................................................................. 17-3

17.3.3 Consumer Tax Credits ....................................................................................... 17-4

17.3.4 Manufacturer Tax Credits .................................................................................. 17-4

17.3.5 Voluntary Energy Efficiency Programs ............................................................. 17-4

17.3.6 Bulk Government Purchases .............................................................................. 17-5

17.4 SUMMARY OF RESULTS FOR NON-REGULATORY ALTERNATIVES ............... 17-6

REFERENCES .......................................................................................................................... 17-7

LIST OF TABLES

Table 17.4.1 Cumulative NES of Non-Regulatory Alternatives Compared to the Proposed 

Standards for Ballasts ........................................................................................ 17-6

Table 17.4.2 Cumulative NPV of Non-Regulatory Alternatives Compared to the 

Proposed Standards for Ballasts......................................................................... 17-6
17-1 

CHAPTER 17. REGULATORY IMPACT ANALYSIS

17.1 INTRODUCTION

The U.S. Department of Energy (DOE) has determined that energy conservation 

standards for ballasts constitute an “economically significant regulatory action” under Executive 

Order (E.O.) 12866, Regulatory Planning and Review. 58 FR 51735, 51735. (Oct. 4, 1993). 

Under 10 CFR part 430, subpart C, appendix A, section III.12, DOE committed to evaluating 

non-regulatory alternatives to proposed standards by performing a regulatory impact analysis 

(RIA). 61 FR 36981, 36978 (July 15, 1996). This RIA, which DOE has prepared pursuant to 

E.O. 12866, evaluates potential non-regulatory alternatives, comparing the costs and benefits of 

each to those of the proposed standards. 58 FR 51735, 51741. As noted in E.O. 12866, this RIA 

is subject to review by the Office of Management and Budget’s Office of Information and 

Regulatory Affairs. 58 FR 51735, 51740. 

For this notice of proposed rulemaking (NOPR), DOE identified six major, nonregulatory alternatives to standards as representing feasible policy options to achieve potentially 

similar improvements in ballast energy efficiency:

• No New Regulatory Action

• Consumer Rebates

• Consumer Tax Credits 

• Manufacturer Tax Credits

• Voluntary Energy Efficiency Programs 

• Bulk Government Purchases 

DOE evaluated each alternative that applies to the ballasts covered by this proposed rule 

in terms of its ability to achieve significant energy savings at a reasonable cost, and compared 

the effectiveness of each alternative to that of the proposed standards. The following sections 

discuss the analysis method used, the non-regulatory alternatives considered, and the energy 

savings calculated.

17.2 METHODOLOGY

This section describes the method DOE used to analyze the energy savings and cost 

effectiveness of the six non-regulatory policy alternatives (excluding the alternative of no new 

regulatory action) for the identified ballasts. This section also describes the assumptions 

underlying the analysis. 

DOE used integrated national impact analysis-regulatory impact analysis (NIA-RIA) 

spreadsheet models to calculate the national energy savings (NES) and net present value (NPV) 

associated with each non-regulatory policy alternative. Chapter 11 of the NOPR technical 

support document (TSD) describes the NIA spreadsheet models. 

DOE quantified the effect of each alternative on the purchase of products that meet target 

levels, which are defined as the efficiency levels in the proposed standards. After establishing the 
17-2 

quantitative assumptions underlying each alternative, DOE appropriately revised inputs to the 

NIA-RIA spreadsheet models. The primary model input revised was market shares of products 

meeting target efficiency levels. The shipments of products for any given year reflect a 

distribution of efficiency levels. DOE assumed that the proposed standards would affect 100 

percent of the shipments of products that did not meet target levels in the base case, whereas the 

non-regulatory policies would affect a smaller percentage of those shipments. DOE made certain 

assumptions about the percentage of shipments affected by each alternative policy. 

Increasing a product’s efficiency often increases its average installed cost but generally 

decreases its operating costs because energy consumption declines. DOE therefore calculated an 

NPV for each non-regulatory alternative in the same way it did for the proposed standards. 

Because DOE assumed that consumers would re-pay credits and rebates in some way (such as 

additional taxes), DOE did not include rebates or tax credits as a consumer benefit when 

calculating national NPV. DOE’s analysis also excluded any administrative costs for the nonregulatory policies; including such costs would decrease the NPVs slightly. 

The following are key measures for evaluating the impact of each alternative:

• National energy savings, given in quadrillion British thermal units (quads), describes 

the cumulative national primary energy savings for products bought during the period 

from the effective date of the policy (2014) through the end of the analysis period 

(2043). 

• Net present value represents the value in 2009$ (discounted to 2011)a

 of net monetary 

savings from products bought during the period from the effective date of the policy 

(2014) through the end of the analysis period (2043). 

• DOE calculated the NPV as the difference between the present value of installed 

product cost and operating expenditures in the base case and the present value of 

those costs in each policy case. DOE calculated operating expenses (including energy 

costs) for the life of the product. 

DOE quantified the market penetration of each alternative, i.e., what percent of 

consumers below the target efficacy level would migrate to the higher efficacy product, and 

revised its inputs to the NIA-RIA spreadsheet models. With these modifications, DOE calculated 

the NES and NPV of each non-regulatory alternative and compared it to that of the proposed 

standards, which correspond with trial standard level (TSL) 3. 

DOE’s analyses indicated that the proposed standards at TSL 3 would save a significant 

amount of energy—with cumulative NES estimated at 3.7–6.3 quads over 30 years (2014 

through 2043). The corresponding cumulative NPV of total consumer costs and savings of the 

proposed standards for ballasts, in 2009$, ranges from $11.2 billion (at a 7-percent discount rate) 

to $23.0 billion (at a 3-percent discount rate). 

 

a The final rule for ballasts is expected to be published in 2011.
17-3 

DOE calculated the impacts of each regulatory policy separately from those of the other 

policies. In actual practice, certain policies are often most effective when implemented in 

combination to provide incentives, such as consumer and manufacturer credits. DOE attempted 

to make conservative assumptions to avoid double-counting policy impacts. Therefore, the 

policy impacts reported below are not additive; the combined impact of several or all of the 

policies may not be inferred from adding the results together. 

17.3 NON-REGULATORY POLICIES

The following subsections describe DOE’s analysis of the impacts of the six nonregulatory policy alternatives to chosen standards for ballasts. (Because the alternative of No 

New Regulatory Action has no energy or NPV impacts, essentially representing the NIA base 

case, DOE did not perform additional analysis for that alternative.) DOE developed estimates of 

the market penetration of high-efficiency products with each of the non-regulatory policy 

alternatives and compared them to the NIA base case. 

17.3.1 No New Regulatory Action 

The base case is the one in which no new regulatory action is taken with regard to the 

energy efficiency of ballasts, as described in the NOPR TSD chapter 11, National Impact 

Analysis. The base case provides the basis of comparison for all other policies. By definition, no 

new regulatory action yields zero energy savings and an NPV of zero dollars. 

17.3.2 Consumer Rebates

Consumer rebates cover a portion of the difference in incremental product price between 

products meeting baseline efficacy levels and those meeting higher efficacy levels, resulting in a 

higher percentage of consumers purchasing more efficacious models and decreased aggregated 

energy use compared to the base case. For ballasts, DOE assumed a rebate that paid 70 percent 

of the incremental product price, based on its research for the 2009 Lamps Rule,1

 focusing on 

existing utility rebate programs for replacing a T12 system with a T8 system or upgrading an 

existing T8 system to a more efficacious T8 system. 

DOE’s previous research (for the 2000 Ballast Rule2

) showed that for the rebate amount 

that was equal to the full incremental cost, consumer response rate was about 25 percent. For a 

rebate worth 70 percent of the incremental cost, DOE assumed a response rate of 18 percent, and

estimated a corresponding shift of 18 percent in market shares toward more efficient products, with 

no change in total shipments.

Although the rebate program reduces the total installed cost to the customer, it is financed by 

tax revenues. Therefore, from a societal perspective, the installed cost at any efficiency level does not 

change with the rebate program; rather, part of the cost is transferred from the consumer to taxpayers 

as a whole. Consequently, DOE assumed that equipment costs in the rebates scenario were identical 

to the NIA base case. 

DOE assumed that rebates would remain in effect for the duration of the analysis period. 
17-4 

17.3.3 Consumer Tax Credits

Consumer tax credits are considered a viable non-regulatory market transformation 

program, as shown by the inclusion of Federal consumer tax credits in the Energy Policy Act of 

2005 (EPAct 2005; Pub L. No 109-58, 119 Stat 1026 (2005)) for various residential appliances.

From a consumer perspective, the most important difference between rebate and tax credit programs 

is that a rebate can be obtained quickly, whereas receipt of tax credits is delayed until income taxes 

are filed or a tax refund is provided by the Internal Revenue Service (IRS). 

As with consumer rebates, DOE assumed that consumer tax credits paid 70 percent of the 

incremental product price, but estimated a different response rate. The delay in reimbursement 

makes tax credits less attractive than rebates; consequently, DOE estimated a response rate that is 60

percent of that for rebate programs (per the 2000 Ballast Rule), or 11 percent. 

From a societal perspective, tax credits (like rebates) do not change the installed cost of the 

equipment, but rather transfer a portion of the cost from the consumer to taxpayers as a whole. DOE, 

therefore, assumed that equipment costs in the consumer tax credits scenario were identical to the 

NIA base case.

17.3.4 Manufacturer Tax Credits

Manufacturer tax credits are considered a viable non-regulatory market transformation 

program, as shown by the inclusion of Federal tax credits in EPAct 2005 for manufacturers of 

residential appliances. Those manufacturer tax credits were in effect for models produced in 

2006 and 2007 and reinstated under the American Recovery and Reinvestment Act (ARRA) for 

2009 and 2010. DOE was unable to locate data from the IRS or other sources on manufacturer 

response to the Federal credits. Similar to consumer tax credits, manufacturer tax credits would 

effectively result in lower product prices for consumers by an amount that covers part of the 

incremental price difference between products meeting baseline efficiency levels and those 

meeting targeted efficiency levels.

DOE assumed that this incentive policy would help reimburse manufacturers for 

retooling costs. Because these tax credits would go to manufacturers instead of consumers, DOE 

assumed that manufacturers would pass the reduced costs on to consumers. Only these “direct 

price effects” that would be visible to the consumer, with the tax credit program itself visible 

only to affected manufacturers. The impact of manufacturer tax credits is differentiated into 

direct price effects, which arise from the consumer cost savings, and “announcement effects” 

that establish credibility of a particular technology by its inclusion in an incentive program. DOE 

assumed that these effects split the overall response rate equally.3

 

Therefore, the response rate for manufacturer tax credits is assumed to be a half of that 

for consumer tax credits, or 5.5 percent. As discussed above, DOE assumed that total installed 

costs will remain unchanged from the NIA base case, with no change in total shipments. 

17.3.5 Voluntary Energy Efficiency Programs

DOE estimated the impact of a voluntary energy efficiency program based on its research 

for the 2009 Lamps Rule, in which it reviewed the historical and projected market transformation 
17-5 

performance of past and current ENERGY STAR programs. In 1991, the Environmental 

Protection Agency (EPA) introduced Green Lights, a voluntary (non-regulatory) program to

reduce air pollution by promoting energy-efficient lighting. Companies that participated in this 

program installed energy-efficient lighting where it proved to be cost-effective (as long as 

lighting quality was not diminished). In return, the EPA provided technical assistance and public 

recognition. In a similar effort, the EPA launched ENERGY STAR in 1992 as a voluntary 

labeling program to help consumers identify the most energy efficient products on the market. In 

1996, Green Lights became a part of the ENERGY STAR program.4

To determine how a lighting market would respond to a voluntary energy program, DOE 

analyzed the success of the Green Lights program in the 1990s. One of the significant results of 

the Green Lights program was observed in the fluorescent ballast market. Electronic ballasts are, 

on average, more efficient than magnetic ballasts. As such, as a result of the Green Lights 

initiative, electronic ballasts began to enter the market in increasing numbers. The study that 

analyzed the impact of public programs on fluorescent ballast shipments concluded that of all the 

electronic ballasts shipped between 1986 and 2000, about 45 percent were due to a public 

program.5 To estimate how the market would change over the analysis period for this rule, DOE

took 45 percent of the higher-efficiency ballast shipments and divided it by the sum of those 

shipments plus the total ballast shipments. The 55 percent of higher-efficiency ballast shipments 

that did not occur as a result of a public program were not included in the denominator, since 

consumers who bought these ballasts were considered to already be using energy-efficient 

technologies. DOE concluded that 13 percent of the market would shift to more efficient 

products as a result of a voluntary energy efficiency program. This percentage was applied 

across all baselines and efficiency levels.

DOE assumed that the impact of this policy would be to permanently transform the 

market so that the increased market penetration seen in the first year of the program would be 

maintained throughout the forecast period. 

17.3.6 Bulk Government Purchases

In this policy alternative, “bulk government purchases” refers to programs that encourage 

Federal, State, and local governments to purchase products meeting applicable energy 

conservation standards. The motivations for this policy are that (1) aggregating public sector 

demand could provide a market signal to manufacturers and vendors that some of their largest 

customers seek suppliers with products that meet efficiency targets at competitive prices, and (2) 

this could induce “market pull” impacts through the effects of manufacturers and vendors 

achieving economies of scale for high-efficiency products. 

Similar to previous analysis, DOE used floor space data from the 2003 commercial 

buildings energy consumption survey (CBECS 2003)6

 to derive the proportion of governmentowned floor space to total commercial floor space (including malls), which is 23.7 percent. DOE 

assumed that floor space owned by government was proportional to ballast sales. DOE then 

added a 1.4 percent market-pull impact to arrive at a conservative 25.1 percent market 

penetration rate.7 This percentage was used for commercial and industrial ballasts across all 

TSLs. Bulk government purchases will not affect the residential market. DOE assumed that the 

impact of this policy would be to permanently transform the market so that the increased market 
17-6 

penetration seen in the first year of the program would be maintained throughout the forecast 

period.

17.4 SUMMARY OF RESULTS FOR NON-REGULATORY ALTERNATIVES

Table 17.4.1 and Table 17.4.2 show the NES and NPV for the non-regulatory alternatives 

analyzed. The case in which no regulatory action is taken with regard to ballasts constitutes the

base case (or “No Action”) scenario. Since this is the base case, energy savings and NPV are 

zero by definition. For comparison, the table includes the results of the NES and NPV for TSL 3 

associated with the proposed energy conservation standard. Energy savings expressed in quads in 

terms of primary or source energy, which includes generation and transmission losses from 

electricity utility sector. The NES and NPVs shown in the tables are computed only for roll up 

scenario for both existing and emerging technologies. This scenario better reflects market 

behavior, because only consumers of below the target efficiency levels are affected. This is the 

same target group that non-regulatory alternatives aim to influence. 

Table 17.4.1 Cumulative NES of Non-Regulatory Alternatives Compared to the Proposed 

Standards for Ballasts 

Policy Alternatives Cumulative NES 

(billion 2009$)

Existing technologies Emerging technologies

No New Regulatory Action 0 0

Consumer Rebates 1.98 1.28

Consumer Tax Credits 1.13 0.70

Manufacturer Tax Credits 0.88 0.55

Voluntary Energy Efficiency Programs 1.24 0.76

Bulk Government Purchases 1.78 1.08

Proposed Standards (TSL 3) 5.34 3.12

Table 17.4.2 Cumulative NPV of Non-Regulatory Alternatives Compared to the Proposed 

Standards for Ballasts 

Policy Alternatives Cumulative NPV (billion 2009$)

Existing technologies Emerging technologies

7% Discount 3% Discount 7% Discount 3% Discount

No New Regulatory Action 0 0 0 0

Consumer Rebates 5.18 10.40 3.96 7.49

Consumer Tax Credits 2.55 5.35 1.82 3.55

Manufacturer Tax Credits 1.96 4.12 1.40 2.73

Voluntary Energy Efficiency Programs 2.81 5.88 2.00 3.90

Bulk Government Purchases 4.07 8.51 2.90 5.65

Proposed Standards (TSL 3) 11.23 23.86 7.92 15.73

As shown above, none of the policy alternatives DOE examined would save as much 

energy as and have a lower NPV than the proposed standards level of TSL 3. Also, several 

alternatives would require legislation, such as commercial customer or Federal tax credits, because 

there is currently no authority to carry out those alternatives. 
17-7 

REFERENCES

1. U.S. Department of Energy–Office of Energy Efficiency and Renewable Energy. Energy 

Conservation Standards and Test Procedures for General Service Fluorescent Lamps and 

Incandescent Reflector Lamps: Technical Support Document; Final Rule. July 2009. 

Washington, D.C. 

<http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/ch_17_lamps_

standards_final_tsd.pdf> 

2. U.S. Department of Energy–Office of Energy Efficiency and Renewable Energy. Energy 

Conservation Program for Consumer Products: Fluorescent Lamp Ballasts Energy 

Conservation Standards: Technical Support Document; Proposed Rule. January 2000. 

Washington, D.C. 

<www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/appendix_b.pdf> 

3. U.S. Department of Energy–Office of Energy Efficiency and Renewable Energy. Energy 

Conservation Program for Consumer Products: Energy Conservation Standards for 

Residential Furnaces and Boilers: Technical Support Document; Final Rule. November 2007. 

Washington, D.C. 

<http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/fb_fr_tsd/ria.p

df> 

4. ENERGY STAR. Major Milestones. (Last accessed December 2010.) 

<www.energystar.gov/index.cfm?c=about.ab_milestones> 

5. Horowitz, Marvin J. Economic Indicators of Market Transformation: Energy Efficient 

Lighting and EPA’s Green Lights. Energy Journal. 2001. 22:(4): pp. 95–122. 

6. U.S. Department of Energy–Energy Information Administration. Commercial Building 

Energy Consumption Survey: Micro-level Data, File 2 Building Activities, Special Measures 

of Size, and Multi-building Facilities. (Last accessed February 9, 2011.) 

<http://www.eia.doe.gov/emeu/cbecs/public_use.html> 

7. U.S. Department of Energy– Office of Energy Efficiency and Renewable Energy. Regulatory 

Impact Analysis: Energy Conservation Standards for Consumer Products, Covering: 

Fluorescent Lamp Ballasts. October 1999. Washington, D.C. 

<http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/regulatory_im

pact.pdf>