[Federal Register Volume 79, Number 203 (Tuesday, October 21, 2014)]
[Proposed Rules]
[Pages 62899-62910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24983]


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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket Number EERE-2014-BT-STD-0042]
RIN 1904-AD34


Energy Conservation Program for Certain Industrial Equipment: 
Energy Conservation Standards for Commercial Water Heating Equipment

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Request for information (RFI).

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SUMMARY: The U.S. Department of Energy (DOE) is initiating a rulemaking 
to consider amended energy conservation standards for commercial water 
heaters, hot water supply boilers, and unfired hot water storage tanks 
(commercial water heating equipment). Once completed, this rulemaking 
will fulfill DOE's statutory obligation to either propose amended 
energy conservation standards for commercial

[[Page 62900]]

water heating equipment or to determine that the existing standards do 
not need to be amended. This notice seeks to solicit information to 
help DOE determine whether national standards more stringent than those 
currently in place would result in a significant amount of additional 
energy savings and whether such amended national standards would be 
technologically feasible and economically justified. In overview, this 
document presents a brief description of the analysis DOE plans to 
perform for this rulemaking and requests comment on various issues 
relating to each of the analyses (e.g., market assessment, engineering 
analysis, energy use analysis, life-cycle cost and payback period 
analysis, and national impact analysis). Although this document 
contains several specific topics on which DOE is particularly 
interested in receiving written comment, DOE welcomes suggestions and 
information from the public on any subject within the scope of this 
rulemaking, including topics not raised in this RFI.

DATES: Written comments and information are requested on or before 
November 20, 2014.

ADDRESSES: Interested parties are encouraged to submit comments 
electronically. However, interested persons may submit comments, 
identified by docket number EERE-2014-BT-STD-0042 and/or regulatory 
identification number (RIN) 1904-AD34 by any of the following methods:
    <bullet> Federal eRulemaking Portal: www.regulations.gov. Follow 
the instructions for submitting comments.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#60230f0d370114051228050114090e0752505154333424505054522005054e040f054e070f16"><span class="__cf_email__" data-cfemail="da99b5b78dbbaebfa892bfbbaeb3b4bde8eaebee898e9eeaeaeee89abfbff4beb5bff4bdb5ac">[email protected]</span></a>. Include 
docket number EERE-2014-BT-STD-0042 and/or RIN 1904-AD34 in the subject 
line of the message. Submit electronic comments in WordPerfect, 
Microsoft Word, PDF, or ASCII file format, and avoid the use of special 
characters or any form of encryption.
    <bullet> Postal Mail: Ms. Brenda Edwards, U.S. Department of 
Energy, Building Technologies Program, Mailstop EE-5B, 1000 
Independence Avenue SW., Washington, DC 20585-0121. If possible, please 
submit all items on a compact disc (CD), in which case it is not 
necessary to include printed copies.
    <bullet> Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department 
of Energy, Building Technologies Program, 6th Floor, 950 L'Enfant Plaza 
SW., Washington, DC 20024. Telephone: (202) 586-2945. If possible, 
please submit all items on a CD, in which case it is not necessary to 
include printed copies.
    For detailed instructions on submitting comments and additional 
information on the rulemaking process, see section Public Participation 
of this document.

FOR FURTHER INFORMATION CONTACT: Requests for additional information 
may be sent to Mr. Ron Majette, U.S. Department of Energy, Office of 
Energy Efficiency and Renewable Energy, Building Technologies Program, 
EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121. 
Telephone: (202) 586-7935. Email: <a href="/cdn-cgi/l/email-protection#d785b8b9b6bbb3f99ab6bdb2a3a3b297b2b2f9b3b8b2f9b0b8a1"><span class="__cf_email__" data-cfemail="efbd80818e838bc1a28e858a9b9b8aaf8a8ac18b808ac1888099">[email protected]</span></a>.
    Ms. Sarah Butler, U.S. Department of Energy, Office of the General 
Counsel, GC-71, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Telephone: (202) 586-1777. Email: <a href="/cdn-cgi/l/email-protection#da89bba8bbb2f498afaeb6bfa89ab2abf4beb5bff4bdb5ac"><span class="__cf_email__" data-cfemail="e3b08291828bcda196978f8691a38b92cd878c86cd848c95">[email protected]</span></a>.
    For information on how to submit or review public comments, contact 
Ms. Brenda Edwards, U.S. Department of Energy, Office of Energy 
Efficiency and Renewable Energy, Building Technologies Program, 
Mailstop EE-2J, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Telephone: (202) 586-2945. Email: <a href="/cdn-cgi/l/email-protection#0745756269636629426370667563744762622963686229606871"><span class="__cf_email__" data-cfemail="ca88b8afa4aeabe48faebdabb8aeb98aafafe4aea5afe4ada5bc">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
    A. Authority
    B. Background
    C. Rulemaking Process
II. Planned Rulemaking Analyses
    A. Test Procedure
    B. Market Assessment
    C. Technology Options for Consideration
    D. Engineering Analysis
    E. Markups Analysis
    F. Energy Use Analysis
    G. Life-Cycle Cost and Payback Period Analysis
    H. Shipments Analysis
    I. National Impact Analysis
III. Submission of Comments

I. Introduction

A. Authority

    Title III, Part C \1\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6311-6317, as 
codified), added by Public Law 95-619, Title IV, Sec.  441(a), 
established the Energy Conservation Program for Certain Industrial 
Equipment, which includes provisions covering the commercial water 
heating equipment that are the subject of this notice.\2\ In general, 
this program addresses the energy efficiency of certain types of 
commercial and industrial equipment. Relevant provisions of the Act 
include definitions (42 U.S.C. 6311), energy conservation standards (42 
U.S.C. 6313), test procedures (42 U.S.C. 6314), labeling provisions (42 
U.S.C. 6315), and the authority to require information and reports from 
manufacturers (42 U.S.C. 6316).
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    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part C was re-designated Part A-1.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the American Energy Manufacturing Technical 
Corrections Act of 2012, Public Law 112-210 (Dec. 18, 2012).
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    The initial Federal energy conservation standards and test 
procedures for commercial water heating equipment were added to EPCA as 
an amendment made by the Energy Policy Act of 1992 (EPACT). (42 U.S.C. 
6313(a)(5)) These initial energy conservation standards corresponded to 
the efficiency levels contained in the American Society of Heating, 
Refrigerating and Air-Conditioning Engineers (ASHRAE) Standard 90.1 
(ASHRAE Standard 90.1) in effect on October 24, 1992. The statute 
provided that if the efficiency levels in ASHRAE Standard 90.1 were 
amended after October 24, 1992, the Secretary must establish an amended 
uniform national standard at new minimum levels for each equipment type 
specified in ASHRAE Standard 90.1, unless DOE determines, through a 
rulemaking supported by clear and convincing evidence, that national 
standards more stringent than the new minimum levels would result in 
significant additional energy savings and be technologically feasible 
and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) In 
deciding whether a proposed amended standard is economically justified, 
DOE must, after receiving comments on the proposed standard, determine 
whether the benefits of the proposed standard exceed its burdens by, to 
the greatest extent practicable, considering the following seven 
factors:
    1. The economic impact of the standard on manufacturers and 
consumers of the equipment subject to the standard;
    2. The savings in operating costs throughout the estimated average 
life of the covered equipment in the type (or class) compared to any 
increase in the price, initial charges, or maintenance expenses for the 
covered products that are likely to result from the standard;
    3. The total projected amount of energy savings, or as applicable, 
water savings, likely to result directly from the standard;

[[Page 62901]]

    4. Any lessening of the utility or the performance of the covered 
equipment likely to result from 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 
standard;
    6. The need for national energy and water conservation; and
    7. Other factors the Secretary of Energy (Secretary) considers 
relevant. (42 U.S.C. 6313(a)(6)(B)(ii))
    Section 5(b) of the American Energy Manufacturing Technical 
Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012), amended 
EPCA to include a requirement for DOE to conduct an evaluation of 
whether to amend the standards for certain types of commercial and 
industrial equipment \3\ every six years. (42 U.S.C. 6313(a)(6)(C)(i)) 
AEMTCA also mandated that DOE must publish the first document of an 
expedited rulemaking within 1 year of the date of AEMTCA's enactment 
(i.e., December 18, 2012) to consider amended energy conservation 
standards for any covered equipment of those types as to which more 
than six years had elapsed since the issuance of the most recent final 
rule establishing or amending a standard for the equipment. (42 U.S.C. 
6313(a)(6)(C) (vi)) \4\
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    \3\ This equipment includes small, large, and very large 
commercial package air conditioning and heating equipment, packaged 
terminal air conditioners and heat pumps, warm-air furnaces, 
packaged boilers, storage water heaters, instantaneous water 
heaters, and unfired hot water storage tanks. (42 U.S.C. 6313(a)(6))
    \4\ It is noted that AEMTCA inadvertently assigned two separate 
provisions to 42 U.S.C. 6313(a)(6)(C)(vi). The provision cited above 
is the one most relevant to this RFI.
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    DOE issued the most recent final rule for commercial water heating 
equipment on January 12, 2001 (hereinafter, the ``January 2001 final 
rule''), which adopted the amended energy conservation standards at 
levels equivalent to efficiency levels in ASHRAE Standard 90.1, as it 
was revised in October 1999. 66 FR 3336. Because more than six years 
has passed since issuance of the last final rule for commercial water 
heating equipment, DOE is required to publish either a notice of 
determination that the current standards for these equipment types do 
not need to be amended, or a notice of proposed rulemaking proposing 
amended energy conservation standards for these equipment types. In 
addition, the energy conservation standards for commercial oil-fired 
storage water heaters were increased to a level beyond the current 
federal standards in ASHRAE Standard 90.1-2013. Therefore DOE is 
required to adopt these new standards unless there is clear evidence 
that adopting stricter standards would produce significant additional 
energy savings while being both technologically feasible and 
economically justified.
    To meet the requirements under AEMTCA, DOE is reviewing its 
existing energy conservation standards for the equipment types listed 
in 42 U.S.C. 6313(a) for which at least six years have elapsed since 
the issuance of the most recent final rule, including the commercial 
water heating equipment that is the subject of this notice. This notice 
represents the initiation of the mandatory review process required by 
AEMTCA. DOE seeks input from the public to assist with its 
determination on whether to amend the current standards for commercial 
water heating equipment.

B. Background

    On October 29, 1999, ASHRAE released an updated Standard 90.1-1999, 
which included amended efficiency levels for numerous categories of 
commercial water heaters, hot water supply boilers, and unfired hot 
water storage tanks. DOE evaluated these efficiency levels and 
subsequently adopted energy conservation standards affecting eight 
different water heating equipment categories in a final rule published 
in the January 2001 final rule. 66 FR 3336. However, DOE did not adopt 
the efficiency level contained in ASHRAE Standard 90.1-1999 for 
commercial electric storage water heaters, since the ASHRAE Standard 
90.1-1999 level was less stringent than the standard in EPCA and would 
have increased energy consumption, and under those circumstances, DOE 
could not adopt the new efficiency level. 66 FR at 3350. The current 
Federal energy conservation standards for this equipment including 
those adopted in the January 2001 final rule are shown in Table 1.

                    Table 1--Minimum Efficiency Levels for Commercial Water Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                                                          Energy conservation standard \a\ \b\
                                                                      ------------------------------------------
                                                                          Minimum
                Equipment                             Size                thermal
                                                                        efficiency     Maximum standby loss \c\
                                                                         (percent)
----------------------------------------------------------------------------------------------------------------
Electric storage water heaters..........  All........................         N/A    0.30 + 27/Vm (%/hr).
Gas-fired storage water heaters.........  <=155,000 Btu/hr...........          80    Q/800 + 110(Vr)\1/2\ (Btu/
                                                                                      hr).
                                          >155,000 Btu/hr............          80    Q/800 + 110(Vr)\1/2\ (Btu/
                                                                                      hr).
Oil-fired storage water heaters.........  <=155,000 Btu/hr...........          78    Q/800 + 110(Vr)\1/2\ (Btu/
                                                                                      hr).
                                          >155,000 Btu/hr............          78    Q/800 + 110(Vr)\1/2\ (Btu/
                                                                                      hr).
Gas-fired instantaneous water heaters     <10 gal....................          80    N/A.
 and hot water supply boilers.
                                          >=10 gal...................          80    Q/800 + 110(Vr)\1/2\ (Btu/
                                                                                      hr).
Oil-fired instantaneous water heaters     <10 gal....................          80    N/A.
 and hot water supply boilers.
                                          >=10 gal...................          78    Q/800 + 110(Vr)\1/2\ (Btu/
                                                                                      hr).
----------------------------------------------------------------------------------------------------------------
                Equipment                             Size                     Minimum thermal insulation
----------------------------------------------------------------------------------------------------------------
Unfired hot water storage tank..........  All........................                    R-12.5
----------------------------------------------------------------------------------------------------------------
\a\ Vm is the measured storage volume and Vr is the rated volume, both in gallons. Q is the nameplate input rate
  in Btu/hr.
\b\ For hot water supply boilers with a capacity of less than 10 gallons: (1) The standards are mandatory for
  products manufactured on and after October 21, 2005, and (2) products manufactured prior to that date, and on
  or after October 23, 2003, must meet either the standards listed in this table or the applicable standards in
  subpart E of this part for a ``commercial packaged boiler.''
\c\ Water heaters and hot water supply boilers having more than 140 gallons of storage capacity need not meet
  the standby loss requirement if (1) the tank surface area is thermally insulated to R-12.5 or more, (2) a
  standing pilot light is not used and (3) for gas or oil-fired storage water heaters, they have a fire damper
  or fan assisted combustion.


[[Page 62902]]

    DOE reviewed and adopted amended test procedures for commercial 
water heating equipment in a direct final rule published on October 21, 
2004. 69 FR 61974. These test procedure amendments incorporated by 
reference certain sections of the American National Standards Institute 
Standard (ANSI) Z21.10.3-1998 (ANSI Z21.10.3-1998), ``Gas Water Heaters 
Volume III Storage Water Heaters, with Input Ratings Above 75,000 Btu 
per Hour, Circulating and Instantaneous.'' Id. On May 16, 2012, DOE 
published a final rule in the Federal Register to update the test 
procedures for certain commercial water heating equipment by adopting 
and incorporating by reference the most recent version of the relevant 
industry test procedure, ANSI Z21.10.3-2011. 77 FR 28928. These updates 
did not materially alter the procedure.
    The divisions between residential and commercial water heaters were 
first established in EPCA. The current specifications for residential 
water heaters are shown below in Table 2, as specified in 10 CFR 430.2. 
A water heater exceeding any of the limits expressed below for input, 
volume, input/volume, or max temperature is classified as commercial 
water heating equipment.

                         Table 2--Classification of Residential Water Heating Equipment
----------------------------------------------------------------------------------------------------------------
                                                                                   Input/volume      Max temp
                 Type                             Input            Volume (gal)    (BTU/(h*gal))     ([deg]F)
----------------------------------------------------------------------------------------------------------------
Gas Storage...........................  <75,000 BTU/h...........          20-100          <4,000            <180
Oil Storage...........................  <105,000 BTU/h..........             <50          <4,000            <180
Electric Storage......................  <12 kW..................          20-120          <4,000            <180
Gas Instantaneous.....................  50,000-200,000 BTU/h....              <2         >=4,000            <180
Oil Instantaneous.....................  <210,000 BTU/h..........  ..............         >=4,000            <180
Electric Instantaneous................  <12 kW..................  ..............         >=4,000            <180
Heat Pump \a\.........................  <12 kW..................            <120  ..............            <180
----------------------------------------------------------------------------------------------------------------
\a\ To be classified as residential, heat pump water heaters must also not exceed a current rating 24 A or 250
  V.

C. Rulemaking Process

    In addition to the specific statutory criteria discussed in section 
I.A that DOE must follow in prescribing amended standards for covered 
equipment, DOE uses a specific process to assess the appropriateness of 
amending the standards that are currently in place for a given type of 
equipment. For commercial water heating equipment, DOE plans to conduct 
its analyses in stages, with a positive result leading to a subsequent 
stage of the analysis. Under this approach, DOE will first evaluate 
whether more-stringent standards are technologically feasible and 
whether such standards would result in significant additional energy 
savings. If either of these criteria is not met, DOE will conduct no 
further analysis, because the statutory criteria for adoption of the 
more-stringent standard could not be met. However, if this initial 
assessment is positive, DOE will conduct in-depth technical analyses of 
the costs and benefits of the potential amended standards to determine 
whether such amended standards would be economically justified. The 
analyses undertaken at this stage would include: (1) Engineering 
analysis; (2) energy use analysis; (3) markups analysis; (4) life-cycle 
cost and payback period analysis; and (5) national impacts analysis. 
If, after conducting those analyses, DOE determines that there is a 
high likelihood that more-stringent standards would be economically 
justified, DOE will conduct downstream analyses including: (1) 
Manufacturer impacts analysis; (2) emission impacts analysis; (3) 
utility impacts analysis; (4) employment impacts analysis; and (5) 
regulatory impacts analysis. DOE will also conduct several other 
analyses that support those previously listed, including the market and 
technology assessment, the screening analysis (which contributes to the 
engineering analysis), and the shipments analysis (which contributes to 
the national impact analysis). As detailed throughout this RFI, DOE is 
publishing this notice as the first step in the analytical process and 
is requesting input and data from interested parties to aid in the 
development of the technical analyses.
    DOE anticipates moving from this RFI directly to publication of 
either a determination that the commercial water heating equipment 
standards do not need to be amended or a notice of proposed rulemaking 
for amended standards.

II. Planned Rulemaking Analyses

    In this section, DOE summarizes the rulemaking analyses and 
identifies a number of issues on which it seeks input and data in order 
to aid in the development of the technical and economic analyses to 
determine whether amended energy conservation standards may be 
warranted. In addition, DOE welcomes comments on other issues relevant 
to the conduct of this rulemaking that may not specifically be 
identified in this notice.

A. Test Procedures

    DOE's existing test procedures for commercial water heating 
equipment are specified at 10 CFR 431.106, and reference ANSI Z21.10.3-
2011. The test procedures provide methods for determining the thermal 
efficiency and standby loss of gas-fired, oil-fired, and electric 
storage and instantaneous water heaters. AEMTCA amended EPCA to require 
that DOE publish a final rule establishing a uniform efficiency 
descriptor and accompanying test methods for covered residential water 
heaters and commercial water heating equipment by December 18, 2013 
(i.e., within one year of the enactment of AEMTCA). (42 U.S.C. 
6295(e)(5)(B)) The final rule must replace the current energy factor 
(for residential water heaters) and thermal efficiency and standby loss 
(for commercial water heaters) metrics with a uniform efficiency 
descriptor. (42 U.S.C. 6295(e)(5)(C)) AEMTCA allowed DOE to provide an 
exclusion from the uniform efficiency descriptor for specific 
categories of otherwise covered water heaters that do not have 
residential uses, that can be clearly described, and that are 
effectively rated using the current thermal efficiency and standby loss 
descriptors. (42 U.S.C. 6295(e)(5)(F))
    DOE published a final rule for test procedures for residential 
water heaters and certain commercial water heaters on July 11, 2014 
that, among other things, established the Uniform Energy Factor (UEF), 
a revised version of the current residential Energy Factor metric, as 
the uniform efficiency descriptor required by AEMTCA. 79 FR 40542. The 
uniform efficiency descriptor only applies to commercial water heaters 
that meet the definition of ``residential-duty commercial water 
heater,'' which is

[[Page 62903]]

defined as any gas-fired, electric, or oil storage or instantaneous 
commercial water heater that meets the following conditions:
    (1) For models requiring electricity, uses single-phase external 
power supply;
    (2) Is not designed to provide outlet hot water at temperatures 
greater than 180[emsp14][deg]F; and
    (3) Is not excluded by any of the specified limitations regarding 
rated input and storage volume established in Table 3 (below). Id. at 
40546
    The input and volume limitations for the definition of a 
residential-duty commercial water heater are shown below by equipment 
class.

  Table 3--Classification of Residential-Duty Commercial Water Heating
                                Equipment
------------------------------------------------------------------------
                                           Indicator of non-residential
           Water heater type                       application
------------------------------------------------------------------------
Gas-fired Storage......................  Rated input >105 kBtu/h; Rated
                                          storage volume >120 gallons.
Oil-fired Storage......................  Rated input >140 kBtu/h; Rated
                                          storage volume >120 gallons.
Electric Storage.......................  Rated input >12 kW; Rated
                                          storage volume >120 gallons.
Heat Pump with Storage.................  Rated input >12 kW; Rated
                                          current >24 A at a rated
                                          voltage of not greater than
                                          250 V; Rated storage volume
                                          >120 gallons.
Gas-fired Instantaneous................  Rated input >200 kBtu/h; Rated
                                          storage volume >2 gallons.
Electric Instantaneous.................  Rated input >58.6 kW; Rated
                                          storage volume >2 gallons.
Oil-fired Instantaneous................  Rated input >210 kBtu/h; Rated
                                          storage volume >2 gallons.
------------------------------------------------------------------------

    Commercial water heaters not meeting the definition of residential-
duty commercial water heater were deemed to be sufficiently 
characterized by the current thermal efficiency and standby loss 
metrics.
    This rulemaking, therefore, includes commercial water heating 
equipment covered by the uniform efficiency descriptor, as well as 
water heaters that will continue to be covered by the existing thermal 
efficiency and standby loss metrics. DOE plans to conduct analyses for 
this rulemaking using the UEF for residential-duty commercial water 
heaters. For residential-duty commercial water heaters, DOE will 
develop a conversion factor (as required by AEMTCA) that will be used 
to translate the existing thermal efficiency and standby loss ratings 
into UEF for its analyses. The conversion factor will be developed as 
part of a separate rulemaking. DOE plans to conduct analyses for all 
other types of commercial water heaters (i.e., other than the 
residential-duty commercial water heaters) using the existing thermal 
efficiency and standby loss metrics.
    DOE notes that for unfired storage tanks, the Federal energy 
conservation standard is expressed as an R-value requirement for the 
tank thermal insulation. In an RFI published on February 27, 2014 that 
addresses commercial water heater test procedures (February 2014 RFI), 
DOE sought comment on whether a single test method for R-value should 
be used (and if so, which industry method is most appropriate), or 
whether replacing R-value with standby loss or some other metric as the 
energy efficiency metric for unfired storage tanks would be 
appropriate. 79 FR 10999. Any amended standards for unfired storage 
tanks for this rulemaking will be established in the metric chosen in 
the noted test procedure rulemaking.
    Lastly, DOE may consider including commercial heat pump water 
heaters within the scope of coverage of this rulemaking, as discussed 
below in Section II.B. DOE does not currently have a test procedure for 
determining the energy efficiency of commercial heat pump water 
heaters, but may develop a procedure as described in the February 2014 
RFI. If DOE ultimately adopts a test method for commercial heat pump 
water heaters, then DOE would consider those products in the analyses 
for this rulemaking.

B. Market Assessment

    The market and technology assessment provides information about the 
commercial water heating equipment industry that will be used 
throughout the rulemaking process. For example, this information will 
be used to determine whether the existing equipment class structure 
requires modification based on the statutory criteria for setting such 
classes and to explore the potential for technological improvements in 
the design and manufacturing of such equipment. DOE uses qualitative 
and quantitative information to assess the past and present industry 
structure and market characteristics. DOE will use existing market 
materials and literature from a variety of sources, including industry 
publications, trade journals, government agencies, and trade 
organizations. DOE will also consider conducting interviews with 
manufacturers to assess the overall market for commercial water heating 
equipment.
    The current equipment classes as established in the Code of Federal 
Regulations (CFR) for commercial water heaters are characterized by 
energy source, equipment type (i.e., storage vs. instantaneous and hot 
water supply boilers), and size (i.e., input capacity rating and rated 
storage volume). Unfired hot water storage tanks are also included in a 
separate equipment class. As a starting point, DOE plans to use the 
existing equipment class structure which divides commercial water 
heating equipment into the equipment classes as shown in the table in 
10 CFR 431.110 and summarized below in Table 4.

    Table 4--Equipment Classes for Commercial Water Heating Equipment
------------------------------------------------------------------------
              Equipment                               Size
------------------------------------------------------------------------
Electric storage water heaters.......  All.
Gas-fired storage water heaters......  <=155,000 Btu/h.
                                       >155,000 Btu/h.
Oil-fired storage water heaters......  <=155,000 Btu/h.
                                       >155,000 Btu/h.
Gas-fired instantaneous water heaters  <10 gal.
 and hot water supply boilers.
                                       >=10 gal.
Oil-fired instantaneous water heaters  <10 gal.
 and hot water supply boilers.

[[Page 62904]]

 
                                       >=10 gal.
Unfired hot water storage tank.......  All.
------------------------------------------------------------------------

    DOE plans to create separate equipment classes for residential-duty 
commercial water heaters, as residential-duty commercial water heaters 
will use a different metric for energy conservation standards (see 
section II.A). DOE will consider additional equipment classes for 
capacities or other performance-related features which inherently 
affect efficiency and justify the establishment of a different energy 
conservation standard. DOE will also consider consolidating equipment 
classes, if warranted. DOE notes that both gas-fired and oil-fired 
storage water heaters are divided into equipment classes for equipment 
with an input capacity at or below 155,000 Btu/h and equipment with an 
input capacity above 155,000 Btu/h. However, as shown in Table 1, the 
current energy conservation standard levels are identical for both 
equipment classes. DOE may consider consolidating these equipment 
classes to remove the input capacity designations, if appropriate.
    DOE may also expand the scope of this rulemaking to include covered 
equipment that is not currently regulated, such as electric 
instantaneous water heaters or commercial heat pump water heaters, and 
may consider separate product classes for such equipment. DOE notes 
that EPCA defines ``commercial instantaneous water heaters'' as water 
heaters with an input rating of at least 4,000 Btu/h per gallon of 
stored water. (42 U.S.C. 6311(12)(B)) DOE believes this definition 
could include both commercial electric instantaneous water heaters and 
commercial electric add-on heat pump water heaters. Commercial electric 
heat pump water heaters may include both units that do not contain any 
storage volume and can be externally connected to a storage tank or 
tank water heater (i.e., add-on type) and units that contain an 
integrated heat pump and storage tank (i.e., integrated type). DOE is 
not aware of any integrated type commercial heat pump water heaters 
currently on the market but may consider their inclusion due to their 
possible development in the future.\5\ However, any such units would be 
classified as commercial electric storage water heaters. Commercial 
add-on electric heat pump water heaters may also extract heat for water 
heating from either air (air-source) or water (water-source), both of 
which DOE could consider for new efficiency standards.
---------------------------------------------------------------------------

    \5\ A commercial integrated heat pump water heater is an 
integrated heat pump water heater that surpasses any of the 
limitations for heat pump water heaters expressed in Table 2.
---------------------------------------------------------------------------

    If appropriate, DOE may also consider establishing efficiency 
standards separately for electric instantaneous water heaters using 
electric resistance heat. However, DOE notes that the thermal 
efficiency of electric instantaneous water heaters is already nearly 
100 percent due to the high efficiency of electric resistance heating 
elements, and that a thermal efficiency standard may be unnecessary.
    Issue 1: DOE requests feedback on the current equipment classes and 
seeks information regarding other equipment classes it should consider 
for inclusion in its analysis.
    Issue 2: DOE requests comment on whether the 155,000 Btu/h input 
capacity divisions in the current equipment classes for gas-fired and 
oil-fired storage water heaters are necessary.
    Issue 3: DOE seeks comment on whether to include commercial 
electric instantaneous water heaters and/or commercial heat pump water 
heaters in the scope of this rulemaking.
    Issue 4: DOE seeks comment on whether to include both add-on and 
integrated commercial heat pump water heater types in the scope of this 
rulemaking.
    Issue 5: DOE seeks comment on whether to include both air-source 
and water-source commercial heat pump water heater types in the scope 
of this rulemaking.

C. Technology Options for Consideration

    DOE uses information about existing and past technology options and 
prototype designs to help identify technologies that manufacturers 
could use to meet and/or exceed energy conservation standards. In 
consultation with interested parties, DOE intends to develop a list of 
technologies to consider in its analysis. Initially, this list will 
include all those technologies considered to be technologically 
feasible and will serve to establish the maximum technologically 
feasible design. DOE is currently considering the specific technologies 
and design options listed below.

<bullet> Heat traps
<bullet> Improved insulation \6\
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    \6\ This includes increasing jacket insulation, insulating the 
tank bottom or using a plastic tank (electric only), advanced 
insulation types, foam insulation, and pipe and fitting insulation.
---------------------------------------------------------------------------

<bullet> Power and direct venting
<bullet> Fully condensing technology \7\
---------------------------------------------------------------------------

    \7\ This includes storage, instantaneous, and hybrid heaters, as 
well as pulse combustion.
---------------------------------------------------------------------------

<bullet> Improved flue design \8\
---------------------------------------------------------------------------

    \8\ This includes using high-efficiency flue baffles, multiple 
flues, submerged combustion chambers, and optimized flue geometry.
---------------------------------------------------------------------------

<bullet> Sidearm heating and two-phase thermosiphon technology
<bullet> Electronic ignition systems
<bullet> Improved heat pump water heaters \9\
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    \9\ This includes absorption heat pump water heaters, carbon 
dioxide heat pump water heaters, advanced compressors, and using 
centrifugal fans.
---------------------------------------------------------------------------

<bullet> Thermophotovoltaic and thermoelectric generators
<bullet> Improved controls \10\
---------------------------------------------------------------------------

    \10\ This includes incorporating timer controls, modulating 
controls, and intelligent and wireless controls and communication.
---------------------------------------------------------------------------

<bullet> Self-cleaning
<bullet> Improved burners \11\
---------------------------------------------------------------------------

    \11\ This includes incorporating variable firing-rate burners, 
low-stage firing burners, and modulating burners.

    Issue 6: DOE seeks information related to these or other 
efficiency-improving technologies. Specifically, DOE is interested in 
comments regarding their applicability to the current market and how 
these technologies improve efficiency of commercial water heating 
equipment.

D. Engineering Analysis

    The engineering analysis estimates the cost-efficiency relationship 
of equipment at different levels of increased energy efficiency. This 
relationship serves as the basis for the cost-benefit calculations for 
commercial customers, manufacturers, and the nation. In determining the 
cost-efficiency relationship, DOE will estimate the increase in 
manufacturer cost associated with increasing the efficiency of 
equipment above the baseline to the maximum technologically feasible 
(``max-tech'') efficiency level for each equipment

[[Page 62905]]

class. The baseline model is used as a reference point for each 
equipment class in the engineering analysis and the life-cycle cost and 
payback-period analyses. DOE considers equipment that just meets the 
current minimum energy conservation standard as baseline equipment. For 
equipment that does not have an existing minimum energy conservation 
standard, DOE considers the least efficient equipment on the market as 
baseline equipment. DOE will establish a baseline for each equipment 
class using the applicable metric(s): Thermal Efficiency and Standby 
Loss, or Uniform Energy Factor.
    Issue 7: DOE requests comment on approaches that it should consider 
when determining a baseline for equipment classes being transitioned to 
the uniform descriptor, including information regarding the merits and/
or deficiencies of such approaches.
    Issue 8: DOE requests information on max-tech efficiency levels 
achievable in the current market and associated technologies.
    In order to create the cost-efficiency relationship, DOE 
anticipates that it will structure its engineering analysis using both 
a reverse-engineering (or cost-assessment) and catalog teardown 
approach. A reverse-engineering or cost-assessment approach relies on a 
teardown analysis of representative units at the baseline efficiency 
level and higher efficiency levels up to the maximum technologically 
feasible designs. A teardown analysis (or physical teardown) determines 
the production cost of a piece of equipment by disassembling the 
equipment ``piece-by-piece'' and estimating the material and labor cost 
of each component. A catalog teardown approach uses published 
manufacturer catalogs and supplementary component data to estimate the 
major physical differences between a piece of equipment that has been 
physically disassembled and another piece of similar equipment. These 
two methods would be used together to help DOE estimate the 
manufacturer production cost of equipment at various efficiency levels.
    Issue 9: DOE requests feedback on the planned approach for the 
engineering analysis and on the appropriate representative capacities 
and characteristics for each equipment class.
1. Analyzing Standby Loss Standards
    For each equipment class examined, the baseline, or current 
standard is determined, and then several intermediate efficiency levels 
are analyzed incrementally up to the max-tech level, which corresponds 
to the most efficient unit on the market. For the analysis of amended 
thermal efficiency standards and uniform efficiency descriptor 
standards, DOE expects this will be a straightforward process. However, 
selecting efficiency levels for analysis of amended standby loss (SL) 
standards for gas and oil storage heaters is more complex for several 
reasons.
    First, the standard for standby loss (BTU/hr) oil and gas storage 
water heaters is a multivariable equation depending upon both rated 
input (Q, BTU/hr) and volume (V, gal), as shown below.
[GRAPHIC] [TIFF OMITTED] TP21OC14.001


As discussed later in this section, DOE plans to analyze representative 
units for the engineering analysis that have the most common attributes 
of a given equipment class. As a result, DOE will select equipment for 
analysis with storage volumes and input ratings at discrete 
representative values within the range of products available on the 
market. DOE will then need to expand its analysis of efficiency levels 
at the representative volume(s) and input(s) for the market, and these 
levels must be extrapolated to apply to the range of volumes and inputs 
covered by the standard. Because the current standard depends on both 
volume and input without an intercept, it is only possible to change 
the slopes for each variable when modifying the standard to fit the 
analyzed efficiency levels. This could be undesirable if shifting the 
standard up or down (maintaining the slopes) would better fit the 
distribution of units outside the representative input and volume. 
Analysis performed thus far by DOE using an approach of varying the 
volume slope to change the relationship between SL and input for units 
at the representative volume appears to yield viable results.
    One method to avoid issues stemming from adjusting a multi-variable 
standard is to remove one of the variables from the equation and 
establish discrete bins for that variable. Within each of these bins, 
the SL standard would be a single-variable equation, allowing for 
manipulation of either the slope or intercept. While bins could be 
created for input or volume, preliminary analysis indicates that 
creating bins for volume with standards based on input within each bin 
would yield better trends for establishing new standard levels.
    Issue 10: DOE requests comment on approaches to selecting 
efficiency levels for its analysis of amended SL energy conservation 
standards for gas and oil storage heaters, including the possibility of 
establishing discrete bins for one of the variables and establishing SL 
standards based on one instead of two variables.
    The second issue is that the SL is calculated using the amount of 
fuel consumed over a given time period, and therefore the heat loss as 
measured in the SL is partially dependent on the thermal efficiency 
(TE) of the water heater. Because TE for commercial gas storage heaters 
can vary from 80-99%, TE can account for a difference of up to 19% of 
SL values (only 4% for oil storage heaters). Removing this dependency 
on TE would allow more accurate and representative standards for non-
condensing and condensing water heaters. DOE notes that preliminary 
analysis has shown a large discrepancy in SL range for non-condensing 
and condensing water heaters; condensing water heater have units with 
values in a similar range to non-condensing models, but the range also 
extends to much lower SL values. Further analysis is required to 
determine to what degree the technologies that allow these 
significantly lower values are inherent to condensing heaters (i.e. 
less heat lost in flue due to condensation), as otherwise these 
technologies could be considered for non-condensing units as well. One 
possible way to mitigate the impact of TE on SL would be to incorporate 
the thermal efficiency into the standby loss standard, as a third 
variable. Another approach would be to analyze SL levels for condensing 
(92-99% TE) and non-condensing (80-84% TE) gas storage models 
separately, so that non-condensing models have a proportionately less 
strict standard, accounting for the lower average TE.
    Issue 11: DOE requests comment whether to account for the impact of 
thermal efficiency on standby loss and on approaches to separate the 
effect of thermal efficiency from standby loss for gas storage heaters. 
This includes the possibility of separate standards for non-condensing 
and condensing units, as well as adding thermal efficiency to the 
current SL standard.

E. Markups Analysis

    To carry out the life-cycle cost (LCC) and payback period (PBP) 
calculations, DOE needs to determine the cost to the commercial 
customer of baseline equipment that satisfies the currently applicable 
standards, and the cost of the more-efficient unit the customer would 
purchase under potential amended standards. This is done by applying a 
markup multiplier to the manufacturer's

[[Page 62906]]

selling price to estimate the commercial customer's price.
    Markups depends on the distribution channels for a product (i.e., 
how the equipment passes from the manufacturer to the customer). For 
commercial water heating equipment, various distribution channels are 
characterized.
    Two different markets exist for commercial water heating systems: 
(1) New construction and (2) replacements. DOE plans to characterize 
the replacement distribution channels for commercial water heating 
systems as follows:

Manufacturer [rarr] Wholesaler [rarr] Mechanical contractor [rarr] 
Customer

    In the case of new construction, DOE plans to characterize the 
distribution channel as follows:

Manufacturer [rarr] Wholesaler [rarr] Mechanical contractor [rarr] 
General contractor [rarr] Customer

    In addition, DOE plans to consider distribution channels where the 
manufacturer sells the equipment directly to a commercial consumer 
through a national account or the commercial consumer purchases the 
equipment directly through a wholesaler as follows:

Manufacturer [rarr] Wholesaler [rarr] Customer
or

Manufacturer [rarr] Customer

    The latter channels reflect those cases where the installation can 
be accomplished by site personnel.
    DOE also plans to consider cases when the contractor's sale of the 
equipment includes a start-up/check-out contract, in which cases the 
equipment markup is included in the contract costs.
    Issue 12: DOE seeks input from stakeholders on whether the 
distribution channels described above are appropriate for commercial 
water heaters and are sufficient to describe the distribution market.
    Issue 13: DOE seeks input on the percentage of equipment being 
distributed through the different distribution channels, and whether 
the share of equipment through each channel varies based on equipment 
capacity or water heater class.
    To develop markups for the parties involved in the distribution of 
the equipment, DOE would utilize several sources including: (1) The 
Heating, Air-Conditioning & Refrigeration Distributors International 
(HARDI) 2013 Profit Report \12\ to develop wholesaler markups, (2) the 
2005 Air Conditioning Contractors of America's (ACCA) financial 
analysis for the heating, ventilation, air-conditioning, and 
refrigeration (HVACR) contracting industry \13\ to develop mechanical 
contractor markups, and (3) U.S. Census Bureau's 2007 Economic Census 
data \14\ for the commercial and institutional building construction 
industry to develop general contractor markups.
---------------------------------------------------------------------------

    \12\ Heating, Air Conditioning & Refrigeration Distributors 
International 2013 Profit Report, (Available at: http://www.hardinet.org/Profit-Report) (Last accessed July 8, 2014).
    \13\ Air Conditioning Contractors of America (ACCA), Financial 
Analysis for the HVACR Contracting Industry: 2005, (Available at: 
https://http://www.acca.org/store/product.php?pid=142) (Last 
accessed April 10, 2013).
    \14\ U.S. Census Bureau, 2007 Economic Census Data. (2007) 
(Available at: http://www.census.gov/econ/) (Last accessed April 10, 
2013).
---------------------------------------------------------------------------

    Issue 14: DOE seeks recent data and recommendations regarding data 
sources to establish the markups for the parties involved with the 
distribution of the equipment.

F. Energy Use Analysis

    The purpose of the energy use analysis is to assess the energy 
requirements of commercial water heating products described in the 
engineering analysis for a representative sample of building types that 
utilize the product, and to assess the energy-savings potential of 
increased product efficiencies. DOE uses the annual energy consumption 
and energy-savings potential in the LCC and PBP analysis to establish 
the operating costs savings at various product efficiency levels. DOE 
will estimate the annual energy consumption of commercial water heaters 
at specified energy efficiency levels across a range of applications, 
building types, and climate zones. The annual energy consumption 
includes use of natural gas, liquefied petroleum gas (LPG), oil, or 
electricity for hot water production, as well as use of electricity for 
the auxiliary components.
    DOE intends to base the energy use analysis on building 
characteristics from the Energy Information Administration's (EIA) 2003 
Commercial Building Energy Consumption Survey (CBECS) \15\ for the 
subset of building types that use the type of commercial water heating 
equipment covered by the standards. DOE also plans to look at the use 
of commercial water heaters in residential applications, such as multi-
family buildings. Therefore, DOE plans to include characteristics from 
EIA's 2009 Residential Energy Consumption Survey (RECS) \16\ for the 
subset of building types in RECS that use commercial water heating 
equipment covered by this standard.
---------------------------------------------------------------------------

    \15\ Energy Information Administration (EIA). 2003 Commercial 
Building Energy Consumption Survey (CBECS). (Available at: http://www.eia.gov/consumption/commercial/) (Last accessed April 10, 2013). 
Note CBECS 2012 building characteristics have been released in 
preliminary form by EIA and will be reviewed for possible 
incorporation into this analysis, however, the full release of CBECS 
2012 data is not expected until winter 2015.
    \16\ Energy Information Administration (EIA). 2009 Residential 
Energy Consumption Survey (RECS). (Available at: http://www.eia.gov/consumption/residential/) (Last accessed April 10, 2013).
---------------------------------------------------------------------------

    Both CBECS and RECS survey data include information on the physical 
characteristics of building units, water heating equipment used, fuels 
used, energy consumption and expenditures, and other building 
characteristics.\17\ DOE will also consult the American Society of 
Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) \18\ and 
Electric Power Research Institute (EPRI) \19\ handbooks, which contain 
data on the typical types and sizes (both input capacity and rated 
volume) of commercial water heaters used for different building types 
and applications, and can be used to compare to, supplement, and 
corroborate the CBECS and RECS data. Based on these data, DOE will 
develop a representative population of buildings for each commercial 
water heater equipment class.
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    \17\ Neither CBECS nor RECS provide data on whether the water 
heater used in the building is a commercial water heater covered in 
this rulemaking (i.e., water heating could also be provided by a 
commercial boiler, residential boiler, or residential water heater). 
Therefore, DOE intends to develop a methodology for adjusting its 
building sample to reflect buildings that use a commercial water 
heater covered in this rulemaking.
    \18\ American Society of Heating, Refrigerating and Air-
Conditioning Engineers, Inc. (ASHRAE). ASHRAE Handbook of HVAC 
Applications: Chapter 50 (Service Water Heating) (2011) pgs. 50.1 to 
50.32.
    \19\ Electric Power Research Institute (EPRI). Commercial Water 
Heating Applications Handbook. (1992) CU-6666.
---------------------------------------------------------------------------

    Based on the data in the ASHRAE and EPRI Handbooks, as well as data 
from National Renewable Energy Laboratory (NREL),\20\ and Lawrence 
Berkeley National Laboratory (LBNL) \21\ regarding typical energy use 
profiles and other commercial building usage characteristics, DOE will 
develop representative hot water usage, water heating usage profile, 
water volumetric loads, and hot water usage temperatures for various 
applications for each

[[Page 62907]]

commercial water heater and building type combination being analyzed. 
This approach will capture the variability in water heating use due to 
factors such as building activity, schedule, occupancy, water supply 
temperature, tank losses, cycling losses, and distribution system 
piping losses.
---------------------------------------------------------------------------

    \20\ National Renewable Energy Laboratory (NREL). U.S. 
Department of Energy Commercial Reference Building Models of the 
National Building Stock. February 2011. (Available at: http://www.nrel.gov/docs/fy11osti/46861.pdf) (Last accessed April 10, 
2013).
    \21\ Huang, J., Akbari, H., Rainer, L, Ritschard, R. 481 
Prototypical Commercial Buildings for 20 Urban Market Areas, LBL-
29798, April 1991 (Available at: https://publications.lbl.gov/islandora/object/ir%3A94368) (Last accessed October 03, 2014).
---------------------------------------------------------------------------

    DOE plans to consider market changes or future efficiency standards 
in equipment technologies that reduce water heating loads in commercial 
applications, such as more efficient commercial dishwashers and 
commercial clothes washers. In addition, DOE intends to review other 
data sets (e.g., the technology penetration curves used in the National 
Energy Modeling System (NEMS),\22\ data from the End-Use Load and 
Consumer Assessment Program (ELCAP),\23\ and 2009 Commercial Building 
Stock Assessment for the Northwest),\24\ to determine whether a 
significant fraction of the current building population is not 
represented by CBECS 2003.
---------------------------------------------------------------------------

    \22\ For more information on NEMS, refer to the U.S. Department 
of Energy, Energy Information Administration (EIA) documentation. A 
useful summary is National Energy Modeling System: An Overview 2003, 
DOE/EIA-0581 (2003). Each year, EIA uses NEMS to produce an energy 
forecast for the United States, the Annual Energy Outlook (AEO). For 
this analysis, DOE intends to use the version of NEMS based on AEO 
2013. (Available at: http://www.eia.gov/forecasts/aeo/).
    \23\ Bonneville Power Administration. End-Use Load and Consumer 
Assessment Program (ELCAP) Data from 1986 to 1989. 2012. (Available 
at: http://rtf.nwcouncil.org/ELCAP/) (Last accessed April 10, 2013).
    \24\ Northwest Energy Efficiency Alliance (NEEA). Commercial 
Building Stock Assessment. 2009. (Available at: http://neea.org/resource-center/regional-data-resources/commercial-building-stock-assessment) (Last accessed April 10, 2013).
---------------------------------------------------------------------------

    Issue 15: DOE requests comment on the overall method to determine 
water heating energy use and if other factors should be considered in 
developing the energy use or energy use methodology.
    Issue 16: DOE seeks input on the current distribution of equipment 
efficiencies in the building population for different equipment 
classes.
    Issue 17: DOE seeks input on typical types and sizes (including 
fuel type, input capacity and rated volume) of commercial water 
heaters, including gas condensing and heat pump water heaters, used for 
different building types and applications.
    Issue 18: DOE seeks input on representative hot water usage, water 
heating usage profile, water volumetric load profiles or aggregate 
loads, and representative hot water usage temperatures for various 
commercial water heater applications.
    Issue 19: DOE seeks input and sources of data or recommendations 
for tools to support sizing of water heater typical commercial water 
heater and multifamily residential applications.
    Issue 20: DOE seeks input on the fraction and types of buildings 
that use recirculation loops associated with commercial water heaters 
and the impact of recirculation loops on water heater performance.
    Issue 21: DOE requests comment on the fraction of commercial or 
residential boilers used in commercial water heating applications.
    Issue 22: DOE requests comment on the fraction and classes of 
commercial water heaters which are used in residential-duty 
applications as well as other commercial water heaters that may serve 
residential multi-family buildings. DOE also requests input on the 
fraction of residential water heaters that are used for commercial 
applications.

G. Life-Cycle Cost and Payback Period Analysis

    The purpose of the LCC and PBP analysis is to analyze the effects 
of potential amended energy conservation standards on customers of 
commercial water heater equipment by determining how a potential 
amended standard affects their operating expenses (usually decreased) 
and their total installed costs (usually increased).
    DOE intends to analyze the potential for variability by performing 
the LCC and PBP calculations on a representative sample of individual 
commercial buildings. DOE plans to utilize the sample of buildings 
developed for the energy use analysis and the corresponding simulations 
results.\25\ Within a given building, one or more commercial water 
heater units may serve the building's water heating needs, depending on 
the hot water requirements of the building. As a result, DOE intends to 
express the LCC and PBP results for each of the individual commercial 
water heaters installed in the building. DOE plans to model uncertainty 
in many of the inputs to the LCC and PBP analysis using Monte Carlo 
simulation and probability distributions. As a result, the LCC and PBP 
results will be displayed as distributions of impacts compared to the 
base case (without amended standards) conditions.
---------------------------------------------------------------------------

    \25\ DOE plans to utilize the building types defined in CBECS 
2003 as well as residential buildings that use commercial water 
heaters such as multi-family buildings. Definitions of CBECS 
building types can be found at http://www.eia.gov/emeu/cbecs/building_types.html.
---------------------------------------------------------------------------

    Issue 23: DOE requests comment on the overall method that it 
intends to use to conduct the LCC and PBP analysis for commercial water 
heaters.
    Inputs to the LCC and PBP analysis are categorized as: (1) Inputs 
for establishing the purchase expense, otherwise known as the total 
installed cost, and (2) inputs for calculating the operating expense.
    The primary inputs for establishing the total installed cost are 
the baseline customer price, standard-level customer price increases, 
and installation costs. Baseline customer prices and standard-level 
customer price increases will be determined by applying markups to 
manufacturer selling price estimates. The installation cost is added to 
the customer price to arrive at a total installed cost. DOE intends to 
develop installation costs using the most recent RS Means data 
available.
    Issue 24: DOE seeks input on the approach and data sources it 
intends to use to develop installation costs, specifically, its 
intention to use the most recent RS Means Mechanical Cost Data.\26\
---------------------------------------------------------------------------

    \26\ RS Means. 2014 Mechanical Cost Data. (Available at: http://rsmeans.reedconstructiondata.com/60023.aspx) (Last accessed April 
10, 2014).
---------------------------------------------------------------------------

    The primary inputs for calculating the operating costs are 
equipment energy consumption and demand, equipment efficiency, energy 
prices and forecasts, maintenance and repair costs, equipment lifetime, 
and discount rates. Both equipment lifetime and discount rates are used 
to calculate the present value of future operating expenses.
    The equipment energy consumption is the site energy use associated 
with providing water heating to the building. DOE intends to utilize 
the energy use calculation methodology described in Section II.F to 
establish equipment energy use.
    DOE will identify an approach to account for the gas, propane, oil 
and electricity prices paid by consumers for the purposes of 
calculating operating costs, savings, net present value, and payback 
period. DOE intends to consider determining gas, oil, and electricity 
prices based on geographically available fuel cost data such as state 
level data, with consideration for the variation in energy costs paid 
by different building types. This approach calculates energy expenses 
based on actual energy prices that customers are paying in different 
geographical areas of the country. As a potential additional source, 
DOE may consider data to compare provided in EIA's Form 861 data \27\ 
to calculate

[[Page 62908]]

commercial electricity prices, EIA's Natural Gas Navigator \28\ to 
calculate commercial natural gas prices, and EIA's State Energy Data 
Systems (SEDS) \29\ to calculate liquefied petroleum gas (LPG) and fuel 
oil prices. Future energy prices will likely be projected using trends 
from the EIA's 2013 Annual Energy Outlook (AEO).\30\
---------------------------------------------------------------------------

    \27\ Energy Information Administration (EIA), Survey form EIA-
861--Annual Electric Power Industry Report. (Available at: http://www.eia.gov/electricity/data/eia861/index.html) (Last accessed April 
15, 2013).
    \28\ Energy Information Administration (EIA), Natural Gas 
Navigator. (Available at: http://tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm) (Last accessed April 15, 2013).
    \29\ Energy Information Administration (EIA), State Energy Data 
System (SEDS). (Available at: http://www.eia.gov/state/seds/) (Last 
accessed April 15, 2013).
    \30\ Energy Information Administration (EIA). 2013 Annual Energy 
Outlook (AEO) Full Version. (Available at: http://www.eia.gov/forecasts/aeo/). (Last accessed April 15, 2013).
---------------------------------------------------------------------------

    Issue 25: DOE seeks comment and sources on its approach for 
developing gas, oil, and electricity prices.
    Maintenance costs are expenses associated with ensuring continued 
operation of the covered equipment over time. DOE intends to develop 
maintenance costs for its analysis using the most recent RS Means data 
available.\31\ DOE plans also to consider the cases when the equipment 
is covered by service and/or maintenance agreements.
---------------------------------------------------------------------------

    \31\ RS Means. 2013 Facilities Maintenance & Repair Cost Data. 
(Available at: http://rsmeans.reedconstructiondata.com/60303.aspx) 
(Last accessed April 10, 2013).
---------------------------------------------------------------------------

    Issue 26: DOE seeks input on the approach and data sources it 
intends to use to develop maintenance costs, specifically, its 
intention to use the most recent RS Means Facilities Maintenance & 
Repair Cost Data, as well as to consider the cost of service and/or 
maintenance agreements.
    Repair costs are expenses associated with repairing or replacing 
components of the covered equipment that have failed. DOE intends to 
assess whether repair costs vary with equipment efficiency as part of 
its analysis.
    Issue 27: DOE seeks comment as to whether repair costs vary as a 
function of equipment efficiency. DOE also requests any data or 
information on developing repair costs.
    Equipment lifetime is the age at which a unit of covered equipment 
is retired from service. The average equipment lifetime for commercial 
water heaters is estimated by various sources to be between 7 and 25 
years based on application and equipment 
type.<SUP>32 33 34 35 36 37 38</SUP>  Based on these data, DOE plans to 
determine average lifetime for each commercial water heater product 
class as the primary input for developing a Weibull probability 
distribution to characterize commercial water heater lifetime.\39\
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    \32\ National Renewable Energy Laboratory (NREL). U.S. 
Department of Energy Commercial Reference Building Models of the 
National Building Stock. February 2011. (Available at: http://www.nrel.gov/docs/fy11osti/46861.pdf) (Last accessed April 10, 
2013). Pg. 38.
    \33\ RS Means. 2013 Facilities Maintenance & Repair Cost Data. 
(Available at: http://rsmeans.reedconstructiondata.com/60303.aspx) 
(Last accessed April 10, 2013). pgs. 184-188.
    \34\ Mark Ellis & Associates. ``National Appliance and Equipment 
Energy Efficiency Program, Analysis of Potential for Minimum Energy 
Performance Standards for Miscellaneous Water Heaters. Prepared for 
the Australian Greenhouse Office. (2001) (Available at: 
www.energyrating.com.au/library/pubs/tech-ewhmisc2001.pdf) (Last 
accessed April 18, 2013).
    \35\ Ryan Firestone and Danielle Gidding. ``Energy Savings from 
Electric Water Heaters in Commercial Applications.'' Prepared for 
Bonneville Power Administration. Prepared by Navigant Consulting and 
Bonneville Power Administration. (Presented June 1, 2010) (Available 
at: rtf.nwcouncil.org/meetings/2010/0601/WaterHeatersinCommercialApplications_v05.ppt) (Last accessed: April 
18. 2013). Slide 31.
    \36\ Gas Foodservice Equipment Network. ``Straight Talk About 
Tankless Water Heaters, Can They Really Keep You in Hot Water?'' 
Cooking for Profit. (December 15, 2007) (Available at: http://www.crescentcity-fl.com/Gas%20Documents/Dec%2007%20GFEN%20%20final_Tankless.pdf) (Last accessed: April 18, 
2013).
    \37\ Federal Energy Management Program (FEMP). FEMP Designated 
Product: Commercial Gas Water Heaters. 2012. (Available at: http://www1.eere.energy.gov/femp/technologies/eep_com_gaswaterheaters.html) 
(Last accessed: April 18, 2013).
    \38\ Note that for some commercial water heaters the usage and 
application would be similar to a residential water heater. For 
these situations the Weibull distribution derived for DOE's 2010 
residential water heater standards rulemaking could be applicable. 
(More information about the derivation the residential water heater 
lifetime is available at: http://www.regulations.gov/#!docketDetail;D=EERE-2006-STD-0129).
    \39\ If the data is available, DOE also plans to take into 
account differences in commercial water heater lifetime based on 
usage and application of the water heater.
---------------------------------------------------------------------------

    Issue 28: DOE seeks comment on its approach of using a Weibull 
probability distribution to characterize equipment lifetime. DOE also 
requests equipment lifetime data and information on whether equipment 
lifetime varies based on equipment characteristics, equipment 
application, or efficiency level considerations.
    The discount rate is the rate at which future expenditures are 
discounted to establish their present value. DOE intends to derive the 
discount rates by estimating the cost of capital of companies that 
purchase commercial water heater equipment.
    DOE's analysis includes measures of LCC and PBP impacts of 
potential standard levels relative to a base case that reflects the 
likely market in the absence of amended standards. DOE plans to develop 
market-share efficiency data (i.e., the distribution of equipment 
shipments by efficiency) for the equipment classes DOE is considering, 
for the year in which compliance with any amended standards would be 
required.
    DOE also plans to assess the applicability of the ``rebound 
effect'' in the energy consumption for commercial water heaters. A 
rebound effect occurs when a piece of equipment that is made more 
efficient is used more intensively, so that the expected energy savings 
from the efficiency improvement may not fully materialize. However, at 
this time, DOE is not aware of any information about the rebound effect 
for this equipment type.
    Issue 29: DOE requests data on current efficiency market shares (of 
shipments) by equipment class, and also input on similar historic data.
    Issue 30: DOE also requests information on expected future trends 
in efficiency for commercial water heaters classes, including the 
relative market share of condensing versus non-condensing equipment in 
the market in the absence of new efficiency standards.
    Issue 31: DOE seeks comments and data on any rebound effect that 
may be associated with more efficient commercial water heaters.

H. Shipment Analysis

    DOE uses shipment projections by equipment class to calculate the 
national impacts of standards on energy consumption, net present value 
(NPV) of customer benefits, and future manufacturer cash flows.
    DOE intends to develop a shipments model for commercial water 
heater equipment based on historical AHRI shipments data for commercial 
gas and electric storage water heaters.\40\ DOE currently does not have 
any historical shipments information for other product classes 
described in the engineering analysis.
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    \40\ Air-Conditioning, Heating, and Refrigeration Institute 
(AHRI). Commercial Storage Water Heaters Historical Data: 1992-2011. 
(Available at: http://www.ahrinet.org/site/494/Resources/Statistics/Historical-Data/Commercial-Storage-Water-Heaters-Historical-Data) 
(Last accessed July 3, 2014).
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    Issue 32: DOE seeks historical shipments data for commercial water 
heaters by product class, particularly for product classes other than 
commercial gas and electric storage water heaters.
    The shipments model will consider three market segments: (1) New 
commercial buildings acquiring equipment; (2) existing buildings 
replacing old equipment; and (3) existing buildings acquiring new 
equipment for the first time. Two stock

[[Page 62909]]

categories are also considered: (1) Equipment that has received only 
normal maintenance repairs; and (2) equipment that has had its useful 
life extended through additional repairs. To determine whether a 
customer would choose to repair rather than replace their commercial 
water heater equipment, the shipments model explicitly accounts for the 
combined effects of changes in purchase price, annual operating cost, 
and the value of commercial floor space on the purchase versus repair 
decision. Changes to the purchase price and operating costs due to 
amended energy conservation standards are the drivers for shipment 
estimates for the standards cases relative to the base case (i.e., the 
case without amended standards).
    DOE intends to utilize the U.S. Census Bureau data \41\ to 
establish historical new construction floor space, as well as 
historical stock floor space. The Annual Energy Outlook will be used to 
forecast both new construction and stock floor space. Using these and 
historical equipment saturation data from CBECS, DOE will estimate 
shipments to the three market segments identified above. The utility 
function to estimate the repair versus replacement decision will be 
based on income per square foot data from the Building Owners and 
Managers Association (BOMA) Commercial Building Survey reports,\42\ 
equipment purchase price index (PPI) data estimated from the Bureau of 
Labor Statistics,\43\ and operating cost data derived from the LCC and 
PBP analysis.
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    \41\ U.S. Census Bureau. Statistical Abstract of the United 
States: 2011, Table No 933--Construction Contracts--Value of 
Construction and Floor Space of Buildings by Class of Construction. 
(Available at: https://www.census.gov/compendia/statab/2011/cats/construction_housing/construction_indices_and_value.html) (Last 
accessed April 10, 2013).
    \42\ Building Owners and Managers Association International 
(BOMA). Experience Exchange Report (2013) (Available at: https://www.bomaeer.com/) (Last accessed April 10, 2013).
    \43\ U.S. Department of Labor, Bureau of Labor Statistics. 
Producers Price Index: Industry: Refrigeration and Heating Equipment 
(Available at: http://www.bls.gov/ppi/home.htm) (Last accessed April 
10, 2013).
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    Issue 33: DOE seeks input on the approach and data sources it 
intends to use in developing the shipments model and shipments 
forecasts for this analysis.

I. National Impact Analysis

    The purpose of the national impact analysis (NIA) is to estimate 
aggregate impacts of potential energy conservation standards at the 
national level. Impacts that DOE reports include the national energy 
savings (NES) from potential standards and the net present value (NPV) 
of the total customer benefits.
    To develop the NES, DOE calculates annual energy consumption for 
the base case and the standards cases. DOE calculates the annual energy 
consumption using per-unit annual energy use data multiplied by 
projected shipments.
    To develop the NPV of customer benefits from potential energy 
conservation standards, DOE calculates annual energy expenditures and 
annual equipment expenditures for the base case and the standards 
cases. DOE calculates annual energy expenditures from annual energy 
consumption by incorporating projected energy prices. DOE calculates 
annual equipment expenditures by multiplying the price per unit times 
the projected shipments. The difference each year between energy bill 
savings, increased maintenance and repair costs, and increased 
equipment expenditures is the net savings or net costs.
    A key component of DOE's estimates of NES and NPV are the equipment 
energy efficiencies forecasted over time for the base case and for each 
of the standards cases. For the base case trend, DOE will consider 
whether historical data show any trend and whether any trend can be 
reasonably extrapolated beyond current efficiency levels. In 
particular, DOE is interested in historical and future shipments of 
equipment with step changes in efficiency, such as condensing gas 
equipment or HPWHs.
    Issue 34: DOE requests comment and any available data on 
historical, current, and future market share of equipment with step 
changes in efficiency, such as gas condensing equipment and HPWHs, as 
compared to less efficient equipment, such as non-condensing gas water 
heaters and electric water heaters, respectively, for each equipment 
class.
    For the various standards cases, to estimate the impact that 
amended energy conservation standards may have in the year compliance 
becomes required, DOE would likely use a ``roll-up'' scenario. Under 
the ``roll-up'' scenario, DOE assumes: (1) Equipment efficiencies in 
the base case that do not meet the new or amended standard level under 
consideration would ``roll up'' to meet that standard level; and (2) 
equipment shipments at efficiencies above the standard level under 
consideration would not be affected. After DOE establishes the 
efficiency distribution for the assumed compliance date of a standard, 
it may consider future projected efficiency growth using available 
trend data.
    DOE intends to determine whether there is a rebound effect 
associated with more efficient commercial water heaters. If data 
indicate that there is a rebound effect, DOE will account for the 
rebound effect in its calculation of NES.

III. Public Participation

    DOE will accept comments, data, and information regarding this RFI 
and other matters relevant to DOE's consideration of amended energy 
conservations standard for commercial water heating equipment no later 
than the date provided in the DATES section at the beginning of this 
RFI. Interested parties may submit comments using any of the methods 
described in the ADDRESSES section at the beginning of this RFI. After 
the close of the comment period, DOE will begin collecting data, 
conducting the analyses, and reviewing the public comments. These 
actions will be taken to aid in the development of a NOPR for 
commercial water heating equipment if DOE decides to amend the 
standards for commercial water heaters.
    Instructions: All submissions received must be identified by docket 
number EERE-2014-BT-STD-0042 and/or regulatory identification number 
(RIN) 1904-AD34. No telefacsimilies (faxes) will be accepted.
    Docket: The docket is available for review at www.regulations.gov, 
including Federal Register notices, public meeting attendees' lists and 
transcripts, comments, and other supporting documents/materials. All 
documents in the docket are listed in the www.regulations.gov index. 
However, not all documents listed in the index may be publicly 
available, such as information that is exempt from public disclosure.
    A link to the docket Web page can be found at: http://www.regulations.gov/#!docketDetail;D=EERE-2014-BT-STD-0042. This Web 
page contains a link to the docket for this notice on the 
www.regulations.gov Web site. The www.regulations.gov Web page contains 
simple instructions on how to access all documents, including public 
comments, in the docket.
    For information on how to submit a comment, review other public 
comments and the docket, or participate in the public meeting, contact 
Ms. Brenda Edwards at (202) 586-2945 or by email: 
<a href="/cdn-cgi/l/email-protection#8ccefee9e2e8eda2c9e8fbedfee8ffcce9e9a2e8e3e9a2ebe3fa"><span class="__cf_email__" data-cfemail="3f7d4d5a515b5e117a5b485e4d5b4c7f5a5a115b505a11585049">[email protected]</span></a>.
    DOE considers public participation to be a very important part of 
the process for developing test procedures. DOE actively encourages the 
participation and interaction of the public during the comment period 
in each stage of the rulemaking process. Interactions with and between 
members of the public

[[Page 62910]]

provide a balanced discussion of the issues and assist DOE in the 
rulemaking process. Anyone who wishes to be added to the DOE mailing 
list to receive future notices and information about this rulemaking 
should contact Ms. Brenda Edwards at (202) 586-2945, or via email at 
<a href="/cdn-cgi/l/email-protection#89cbfbece7ede8a7ccedfee8fbedfac9ececa7ede6eca7eee6ff"><span class="__cf_email__" data-cfemail="7f3d0d1a111b1e513a1b081e0d1b0c3f1a1a511b101a51181009">[email protected]</span></a>.

    Issued in Washington, DC, on October 10, 2014.
Kathleen B. Hogan,
Deputy Assistant Secretary for Energy Efficiency, Energy Efficiency and 
Renewable Energy.
[FR Doc. 2014-24983 Filed 10-20-14; 8:45 am]
BILLING CODE 6450-01-P


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