[Federal Register: August 25, 2008 (Volume 73, Number 165)]
[Proposed Rules]
[Page 50071-50137]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25au08-18]
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Part II
Department of Energy
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10 CFR Part 431
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Energy Conservation Program for Commercial and Industrial Equipment;
Proposed Rule
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DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket No. EE-2006-STD-0126]
RIN 1904-AB59
Energy Conservation Program for Commercial and Industrial
Equipment: Energy Conservation Standards for Commercial Ice-Cream
Freezers; Self-Contained Commercial Refrigerators, Commercial Freezers,
and Commercial Refrigerator-Freezers Without Doors; and Remote
Condensing Commercial Refrigerators, Commercial Freezers, and
Commercial Refrigerator-Freezers
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Notice of proposed rulemaking and notice of public meeting.
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SUMMARY: The Energy Policy and Conservation Act prescribes energy
conservation standards for certain commercial and industrial equipment,
and requires the Department of Energy (DOE) to administer an energy
conservation program for this equipment. In this notice, DOE is
proposing new energy conservation standards for commercial ice-cream
freezers; self-contained commercial refrigerators, commercial freezers,
and commercial refrigerator-freezers without doors; and remote
condensing commercial refrigerators, commercial freezers, and
commercial refrigerator-freezers. DOE is also announcing a public
meeting on its proposed standards.
DATES: DOE will hold a public meeting on Tuesday, September 23, 2008,
from 9 a.m. to 5 p.m. in Washington, DC. DOE must receive requests to
speak at the public meeting no later than 4 p.m., Tuesday, September 9,
2008 DOE must receive a signed original and an electronic copy of
statements to be given at the public meeting no later than 4 p.m.,
Tuesday, September 16, 2008.
DOE will accept comments, data, and information regarding the
notice of proposed rulemaking (NOPR) before and after the public
meeting, but no later than October 24, 2008. See Section VII, ``Public
Participation,'' of this NOPR for details.
ADDRESSES: The public meeting will be held at the U.S. Department of
Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue, SW.,
Washington, DC 20585-0121. Please note that foreign nationals visiting
DOE Headquarters are subject to advance security screening procedures,
requiring a 30-day advance notice. If you are a foreign national and
wish to participate in the public meeting, please inform DOE as soon as
possible by contacting Ms. Brenda Edwards at (202) 586-2945 so that the
necessary procedures can be completed.
Any comments submitted must identify the NOPR for commercial
refrigeration equipment, and provide docket number EE-2006-STD-0126
and/or RIN number 1904-AB59. Comments may be submitted using any of the
following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: commercialrefrigeration.rulemaking@ee.doe.gov.
Include docket number EE-2006-STD-0126 and/or RIN 1904-AB59 in the
subject line of the message.
Postal Mail: Ms. Brenda Edwards, U.S. Department of
Energy, Building Technologies Program, Mailstop EE-2J, 1000
Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202)
586-2945. Please submit one signed original paper copy.
Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department
of Energy, Building Technologies Program, 950 L'Enfant Plaza, SW., 6th
Floor, Washington, DC 20024. Please submit one signed original paper
copy.
For detailed instructions on submitting comments and additional
information on the rulemaking process, see Section VII, ``Public
Participation,'' of this document.
Docket: For access to the docket to read background documents or
comments received, visit the U.S. Department of Energy, Resource Room
of the Building Technologies Program, 950 L'Enfant Plaza, SW., 6th
Floor, Washington, DC 20024, (202) 586-2945, between 9 a.m. and 4 p.m.,
Monday through Friday, except Federal holidays. Please call Ms. Brenda
Edwards at the above telephone number for additional information
regarding visiting the Resource Room.
Please Note: DOE's Freedom of Information Reading Room (Room 1E-
190 at the Forrestal Building) no longer houses rulemaking
materials.
FOR FURTHER INFORMATION CONTACT: Mr. Charles Llenza, U.S. Department of
Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue,
SW., Washington, DC 20585-0121, (202) 586-2192,
Charles.Llenza@ee.doe.gov.
Ms. Francine Pinto, Esq., U.S. Department of Energy, Office of
General Counsel, GC-72, 1000 Independence Avenue, SW., Washington, DC
20585-0121, (202) 586-9507, Francine.Pinto@hq.doe.gov.
SUPPLEMENTARY INFORMATION:
I. Summary of the Proposed Rule
II. Introduction
A. Overview
B. Authority
C. Background
1. Current Standards
2. History of Standards Rulemaking for Commercial Refrigeration
Equipment
III. General Discussion
A. Test Procedures
B. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
C. Energy Savings
1. Determination of Savings
2. Significance of Savings
D. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Commercial Customers
b. Life-Cycle Costs
c. Energy Savings
d. Lessening of Utility or Performance of Equipment
e. Impact of Any Lessening of Competition
f. Need of the Nation to Conserve Energy
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Comments
A. Market and Technology Assessment
1. Definitions Related to Commercial Refrigeration Equipment
a. Air Curtain Angle Definition
b. Door Angle Definition
2. Equipment Classes
B. Engineering Analysis
1. Approach
2. Equipment Classes Analyzed
3. Analytical Models
a. Cost Model
b. Energy Consumption Model
c. Design Options
4. Baseline Models
5. Engineering Analysis Results
C. Markups to Determine Equipment Price
D. Energy Use Characterization
E. Life-Cycle Cost and Payback Period Analyses
1. Manufacturer Selling Price
2. Increase in Selling Price
3. Markups
4. Installation Costs
5. Energy Consumption
6. Electricity Prices
7. Electricity Price Trends
8. Repair Costs
9. Maintenance Costs
10. Lifetime
11. Discount Rate
12. Payback Period
F. Shipments Analysis
G. National Impact Analysis
1. Base Case and Standards Case Forecasted Efficiencies
2. Annual Energy Consumption, Total Installed Cost, Maintenance
Cost, and Repair Costs
3. Escalation of Electricity Prices
4. Electricity Site-to-Source Conversion
H. Life-Cycle Cost Sub-Group Analysis
I. Manufacturer Impact Analysis
1. Overview
a. Phase 1, Industry Profile
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b. Phase 2, Industry Cash-Flow Analysis
c. Phase 3, Sub-Group Impact Analysis
2. Government Regulatory Impact Model Analysis
3. Manufacturer Interviews
a. Key Issues
4. Government Regulatory Impact Model Key Inputs and Scenarios
a. Base Case Shipments Forecast
b. Standards Case Shipments Forecast
c. Markup Scenarios
d. Equipment and Capital Conversion Costs
J. Utility Impact Analysis
K. Employment Impact Analysis
L. Environmental Assessment
V. Analytical Results
A. Trial Standard Levels
1. Miscellaneous Equipment
B. Economic Justification and Energy Savings
1. Economic Impacts on Commercial Customers
a. Life-Cycle Cost and Payback Period
b. Rebuttable Presumption Payback
c. Life-Cycle Cost Sub-Group Analysis
2. Economic Impacts on Manufacturers
a. Industry Cash-Flow Analysis Results
b. Cumulative Regulatory Burden
c. Impacts on Employment
d. Impacts on Manufacturing Capacity
e. Impacts on Sub-Groups of Manufacturers
3. National Impact Analysis
a. Amount and Significance of Energy Savings
b. Net Present Value
c. Impacts on Employment
4. Impact on Utility or Performance of Equipment
5. Impact of Any Lessening of Competition
6. Need of the Nation to Conserve Energy
7. Other Factors
C. Proposed Standard
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
B. Review Under the Regulatory Flexibility Act/Initial
Regulatory Flexibility Analysis
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
A. Attendance at Public Meeting
B. Procedure for Submitting Requests to Speak
C. Conduct of Public Meeting
D. Submission of Comments
E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary
I. Summary of the Proposed Rule
The Energy Policy and Conservation Act, as amended (EPCA),
specifies that any new or amended energy conservation standard the U.S.
Department of Energy (DOE) prescribes for the equipment covered by this
notice shall be designed to ``achieve the maximum improvement in energy
efficiency * * * which the Secretary determines is technologically
feasible and economically justified.'' (42 U.S.C. 6295(o)(2)(A) and
6316(e)(1)) Furthermore, the new or amended standard must ``result in
significant conservation of energy.'' (42 U.S.C. 6295(o)(3)(B) and
6316(e)(1)) In accordance with these and other statutory criteria
discussed in this notice, DOE proposes to adopt new energy conservation
standards for commercial ice-cream freezers; self-contained commercial
refrigerators, commercial freezers, and commercial refrigerator-
freezers without doors; and remote condensing commercial refrigerators,
commercial freezers, and commercial refrigerator-freezers.\1\ The
proposed standards, shown in Table I-1, would apply to all commercial
refrigeration equipment manufactured on or after January 1, 2012, and
offered for sale in the United States. 42 U.S.C. 6313(c)(4)(A).
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\1\ These types of equipment are referred to collectively
hereafter as ``commercial refrigeration equipment.''
\2\ For this rulemaking, equipment class designations consist of
a combination (in sequential order separated by periods) of: (1) an
equipment family code (VOP = vertical open, SVO = semivertical open,
HZO = horizontal open, VCT = vertical transparent doors, VCS =
vertical solid doors, HCT = horizontal transparent doors, HCS =
horizontal solid doors, or SOC = service over counter); (2) an
operating mode code (RC = remote condensing or SC = self-contained);
and ( 3) a rating temperature code (M = medium temperature (38
[deg]F), L = low temperature (0 [deg]F), or I = ice-cream
temperature (-15 [deg]F)). For example, ``VOP.RC.M'' refers to the
``vertical open, remote condensing, medium temperature'' equipment
class. See discussion below and chapter 3 of the TSD, market and
technology assessment, for a more detailed explanation of the
equipment class terminology.
Table I-1--Proposed Standard Levels
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Proposed standard level
Equipment class \2\ * ** Equipment class Proposed standard level
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VOP.RC.M............................. 0.82 x TDA + 4.07...... VCT.RC.I............... 0.71 x TDA + 3.05
SVO.RC.M............................. 0.83 x TDA + 3.18...... HCT.RC.M............... 0.16 x TDA + 0.13
HZO.RC.M............................. 0.35 x TDA + 2.88...... HCT.RC.L............... 0.34 x TDA + 0.26
VOP.RC.L............................. 2.28 x TDA + 6.85...... HCT.RC.I............... 0.4 x TDA + 0.31
HZO.RC.L............................. 0.57 x TDA + 6.88...... VCS.RC.M............... 0.11 x V + 0.26
VCT.RC.M............................. 0.25 x TDA + 1.95...... VCS.RC.L............... 0.23 x V + 0.54
VCT.RC.L............................. 0.6 x TDA + 2.61....... VCS.RC.I............... 0.27 x V + 0.63
SOC.RC.M............................. 0.51 x TDA + 0.11...... HCS.RC.M............... 0.11 x V + 0.26
VOP.SC.M............................. 1.74 x TDA + 4.71...... HCS.RC.L............... 0.23 x V + 0.54
SVO.SC.M............................. 1.73 x TDA + 4.59...... HCS.RC.I............... 0.27 x V + 0.63
HZO.SC.M............................. 0.77 x TDA + 5.55...... SOC.RC.L............... 1.08 x TDA + 0.22
HZO.SC.L............................. 1.92 x TDA + 7.08...... SOC.RC.I............... 1.26 x TDA + 0.26
VCT.SC.I............................. 0.73 x TDA + 3.29...... VOP.SC.L............... 4.37 x TDA + 11.82
VCS.SC.I............................. 0.38 x V + 0.88........ VOP.SC.I............... 5.55 x TDA + 15.02
HCT.SC.I............................. 0.56 x TDA + 0.43...... SVO.SC.L............... 4.34 x TDA + 11.51
SVO.RC.L............................. 2.28 x TDA + 6.85...... SVO.SC.I............... 5.52 x TDA + 14.63
VOP.RC.I............................. 2.9 x TDA + 8.7........ HZO.SC.I............... 2.44 x TDA + 9
SVO.RC.I............................. 2.9 x TDA + 8.7........ SOC.SC.I............... 1.76 x TDA + 0.36
HZO.RC.I............................. 0.72 x TDA + 8.74...... HCS.SC.I............... 0.38 x V + 0.88
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* ``TDA'' is the total display area of the case, as measured in the Air-Conditioning and Refrigeration Institute
(ARI) Standard 1200-2006, Appendix D.
** ``V'' is the volume of the case, as measured in ARI Standard 1200-2006, Appendix C.
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DOE's analyses indicate that the proposed energy conservation
standards, trial standard level (TSL) 4 (see Section V.A for a detailed
description of TSLs), would save a significant amount of energy--an
estimated 0.83 quadrillion British thermal units (Btu), or quads, of
cumulative energy over 30 years (2012-2042). The economic impacts on
commercial consumers (i.e., the average life-cycle cost (LCC) savings)
are positive for all equipment classes.
The cumulative national net present value (NPV) of the proposed
standards at TSL 4 from 2012 to 2042 ranges from $1.1 billion (at a
seven percent discount rate) to $3.24 billion (at a three percent
discount rate), in 2007$. This is the estimated total value of future
operating cost savings minus the estimated increased equipment costs,
discounted to 2007$. The benefits and costs of the standard can also be
expressed in terms of annualized 2007$ values over the forecast period
2012 through 2062. Using a 7 percent discount rate for the annualized
cost analysis, the cost of the standard is estimated to be $109 million
per year in increased equipment and installation costs while the
annualized benefits are expected to be $214 million per year in reduced
equipment operating costs. Using a 3 percent discount rate, the
annualized cost of the standard is expected to be $92 million per year
while the annualized benefits of today's standard are expected to be
$234 million per year. See Section V.B.3 for additional details. If DOE
adopts the proposed standards, it expects manufacturers will lose 8 to
35 percent of the industry net present value (INPV), which is
approximately $40 to $180 million.
DOE estimates that the proposed standards will have environmental
benefits leading to reductions in greenhouse gas emissions (i.e.,
cumulative (undiscounted) emission reductions) of 44 million tons (Mt)
of carbon dioxide (CO2) from 2012 to 2042.\3\ Most of the
energy saved is electricity. In addition, DOE expects the energy
savings from the proposed standards to eliminate the need for
approximately 640 megawatts (MW) of generating capacity by 2042. These
results reflect DOE's use of energy price projections from the U.S.
Energy Information Administration (EIA)'s Annual Energy Outlook 2007
(AEO 2007).\4\
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\3\ Additionally, the standards would result in 17 thousand tons
(kt) of nitrogen oxides (NOX) emissions reductions or
generate a similar amount of NOX emissions allowance
credits in areas where such emissions are subject to regulatory or
voluntary emissions caps.
\4\ DOE intends to use EIA's AEO 2008 to generate the results
for the final rule. The AEO2008 Early Release contains reference
case energy price forecasts which show higher commercial electricity
prices at the national level compared with the AEO 2007 on a real
(inflation adjusted) basis. If these early release energy prices
remain unchanged in the final release, then incorporation of the AEO
2008 forecasts would likely result in reduced payback periods and
greater life-cycle cost savings and greater national net present
value for the proposed standards.
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DOE proposes that TSL 4 represents the maximum improvement in
energy efficiency that is technologically feasible and economically
justified. DOE proposes that the benefits to the Nation of TSL 4
(energy savings, commercial consumer average LCC savings, national NPV
increase, and emission reductions) outweigh the costs (loss of
manufacturer INPV) and is therefore proposing TSL 4 as the energy
conservation standards for commercial refrigeration equipment in this
NOPR. TSL 4 is technologically feasible because the technologies
required to achieve these levels already exist.
In this NOPR, DOE proposes that TSL 5 is not economically justified
because, under the current circumstances, DOE believes that the
benefits to the Nation of TSL 5 (energy savings, commercial consumer
average LCC savings, and emission reductions) do not outweigh the costs
(national NPV decrease and loss of manufacturer INPV). DOE's analyses
indicate that TSL 5 would save a greater amount of energy than TSL 4--
an estimated 1.21 quadrillion quads of cumulative energy over 30 years
(2012-2042). At TSL 5, while the economic impacts on commercial
consumers (i.e., LCC savings and NPV) are still positive for the
majority of equipment classes, the impacts on commercial customers for
five classes (VOP.RC.M, VOP.SC.M, SVO.RC.M, SVO.SC.M, and SOC.RC.M) are
negative. The life-cycle cost savings are negative for three classes
and NPV results for each of these five classes are negative.
The cumulative NPV at TSL 5, from 2012 to 2042, ranges from -$200
million (at a seven percent discount rate) to $1.16 billion (at a three
percent discount rate), in 2007$. Using a 7 percent discount rate, the
annualized cost of the standard is estimated to be $285 million per
year in increased equipment and installation costs while the annualized
benefits are expected to be $266 million per year in reduced equipment
operating costs. Using a 3 percent discount rate, the annualized cost
of the standard is expected to be $241 million per year while the
annualized benefits are expected to be $292 million per year. See
Section V.B.3 for additional details. At TSL 5, DOE expects
manufacturers will lose 3 to 56 percent of the industry net present
value INPV, which is approximately $18 to $285 million.
DOE based its estimates of the economic impacts referenced above on
current costs for energy improving technologies used in commercial
refrigeration equipment. A key technology for energy savings benefits
in most commercial refrigeration equipment is the use of solid state
lighting (i.e., light emitting diodes or LEDs). At current LED prices,
the life-cycle cost savings at TSL 5 are substantially lower than TSL 3
and TSL 4 for several equipment classes. For example, the average per
unit LCC savings for the VOP.RC.M equipment class is $1,551 at TSL 3,
but this number falls by $1,785 to -$234 when moving to TSL 5. When
accounting for the projected volume of sales for these equipment
classes in 2012, the net effect of moving from TSL 3 to TSL 5 is a
decrease in LCC savings of $130 million per year. To achieve the same
or greater LCC savings at TSL 5 as other efficiency levels (e.g., TSL 3
or 4), for all equipment classes, average LED costs would need to
decrease by almost 45 percent.
While considerable information is available that suggests LED costs
are likely to decline more than assumed in DOE's analysis, DOE believes
it must have a higher degree of confidence of further cost reductions
than assumed in today's proposed rule. In this NOPR, DOE projected
future LED costs based on DOE's Multi-Year Program Plan,\5\ which are
consistent with historical LED price reductions between 2000 and 2007.
The Multi-Year Program Plan projects that LED chip costs will continue
to decrease at a compound annual growth rate (CAGR) of approximately -
27 percent between 2007 and 2012, which represents a price reduction of
80 percent over that time period. Since LED chips are only a portion of
the total LED system (other components include power supply and the LED
fixture), the 80 percent reduction in chip costs contributes to an
estimated decrease in total LED system cost of approximately 50 percent
by 2012, assuming the costs of the power supply and LED fixtures do not
change significantly. Such a decrease in cost
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would be sufficient for TSL 5 to achieve LCC savings equal to or
greater than other TSLs.
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\5\ U.S. Department of Energy, Solid-State Lighting Research and
Development, Multi-Year Program Plan FY'09-FY'14. This document was
prepared under the direction of a Technical Committee from the Next
Generation Lighting Initiative Alliance (NGLIA). Information about
the NGLIA and its members is available at http://www.nglia.org.
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DOE examined whether the projected LED costs presented in the
Multi-Year Program Plan and used in this NOPR are consistent with
publicly available empirical historical cost data. DOE reviewed
available price data for the LED market and found that between 2000 and
2007, white-light LEDs had a CAGR ranging from approximately -18 to -31
percent. DOE's LED cost projection (i.e., -27 percent CAGR) falls
within the range of CAGRs observed. DOE expanded its examination by
comparing this projected trend to the red-light LED market, which is a
related technology, with cost information spanning approximately three
decades (i.e., 1973 to 2005). DOE found that the CAGR of red-light LED
costs was -22 percent over this longer time span. The trend in red-
light LED costs derived from empirical data over this longer time
period is of a similar magnitude to DOE's projected costs for white-
light LEDs. Due to the technological similarities between red-light
LEDs and white-light LEDs, DOE believes that the historical cost
reductions for red-light LEDs are indicative of future cost reductions
for white-light LEDs. Furthermore, the white-light LED market is
undergoing a massive expansion and growth phase, with significant
investment, new products and innovative applications for LED
technology, including illumination of commercial refrigeration
equipment. See Section V.C of this NOPR and Appendix B of the technical
support document (TSD) for more detail on the cost projection and DOE's
validation of those estimates. DOE seeks comment on the extent to which
these price trends are indicative of what can be expected for
commercial refrigeration equipment LED lighting from 2007 to 2012 and
the extent to which the cost reduction observed for red-light LEDs is
relevant to DOE's cost projections for white-light LEDs. DOE also seeks
comment on the extent to which stakeholders expect projected LED cost
reductions would occur, the timing of the projected LED cost
reductions, and the certainty of the projected LED cost reductions.
Finally, considering the rapid development of LED technology and the
steady reductions in cost, DOE seeks comment on the extent to which
manufacturers would adopt LED technology into the design of commercial
refrigeration equipment in the absence of standards.
DOE also performed sensitivity analyses of the effect of projected
cost reductions in LED lighting systems on LCC and NPV. Incorporation
of DOE LED lighting system cost projections of a 50 percent decline by
2012 shift the calculated NPV, for 2012-2042, from -$200 million to a
positive $1.62 billion at a seven percent discount rate, for TSL 5. See
Section V.C of this NOPR or Chapter 8 of the TSD for additional
details.
TSL 5 is estimated to have environmental benefits leading to
reductions in greenhouse gas emissions of 63 Mt of CO2 from
2012 to 2042. Additionally, TSL 5 would result in 23 kt of
NOX emissions reductions or generate a similar amount of
NOX emissions allowance credits in areas where such
emissions are subject to emissions caps. Most of the energy saved is
electricity. In addition, DOE expects the energy savings from the
proposed standards to eliminate the need for approximately 930 MW of
generating capacity by 2042.
Although DOE has tentatively rejected TSL 5 because, under the
current circumstances, it tentatively found that the benefits to the
Nation do not outweigh the costs, and therefore does not consider TSL 5
economically justified, DOE expects that LED costs will decline
substantially over the next 4-5 years and could have a dramatic effect
on the economic impacts described above. Therefore, DOE requests data
or information that could provide a greater level of confidence that
the projected LED cost reductions will occur and DOE will assess that
data in determining whether to further consider TSL 5 in its final rule
analysis.
II. Introduction
A. Overview
DOE proposes to set energy conservation standards for commercial
refrigeration equipment at the levels shown in Table I-1. The proposed
standards would apply to equipment manufactured on or after January 1,
2012, and offered for sale in the United States. DOE has tentatively
found that the standards would save a significant amount of energy (see
Section III.C.2) and result in a cleaner environment. In the 30-year
period after the new standard becomes effective, the Nation would
tentatively save 0.83 quads of primary energy. These energy savings
also would tentatively result in significantly reduced emissions of air
pollutants and greenhouse gases associated with electricity production,
by avoiding the emission of 44 Mt of CO2 and 17 kt of
NOX. In addition, DOE expects the standard to prevent the
construction of the new power plants that would be necessary to produce
approximately 640 MW by 2042. In total, DOE tentatively estimates the
net present value to the Nation of this standard to be $1.1 billion
from 2012 to 2042 in 2007$.
Commercial customers would see benefits from the proposed
standards. Although DOE expects the price of the higher efficiency
commercial refrigeration equipment to be approximately 11 percent
higher than the average price of this equipment today, weighted by
shipments across equipment classes, the energy efficiency gains would
result in lower energy costs, saving customers about 26 percent per
year on their energy bills. Based on DOE's LCC analysis, DOE
tentatively estimates that the mean payback period for the higher
efficiency commercial refrigeration equipment would be between a low of
1.4 to a high of 6.1 years. In addition, when the net results of these
price increases and energy cost savings are summed over the lifetime of
the higher efficiency equipment, customers could save approximately
$690 to $3800, depending on equipment class, compared to their
expenditures on today's baseline commercial refrigeration equipment.
B. Authority
Title III of EPCA sets forth a variety of provisions designed to
improve energy efficiency. Part A of Title III (42 U.S.C. 6291-6309)
provides for the Energy Conservation Program for Consumer Products
Other Than Automobiles. Part A-1 of Title III (42 U.S.C. 6311-6317)
establishes a similar program for certain types of commercial and
industrial equipment.\6\ The Energy Policy Act of 2005 (EPACT 2005),
Pub. L. 109-58, included an amendment to Part A-1 requiring that DOE
prescribe energy conservation standards for the commercial
refrigeration equipment that is the subject of this rulemaking. (EPACT
2005, Section 136(c); 42 U.S.C. 6313(c)(4)(A)) Hence, DOE publishes
today's notice of proposed rulemaking (NOPR) pursuant to Part A-1,
which provides definitions, test procedures, labeling provisions,
energy conservation standards, and the authority to require information
and reports from manufacturers. The test procedures for commercial
refrigeration equipment appear at Title 10 Code of Federal Regulations
(CFR) Sections 431.63 and 431.64.
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\6\ This part was originally titled Part C, however, it was
renamed Part A-1 after Part B of Title III was repealed by EPACT
2005.
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EPCA provides criteria for prescribing new or amended standards for
covered equipment. As indicated above, any
[[Page 50076]]
new or amended standard for commercial refrigeration equipment must be
designed to achieve the maximum improvement in energy efficiency that
is technologically feasible and economically justified.\7\ (42 U.S.C.
6295(o)(2)(A) and 6316(e)(1)) But EPCA precludes DOE from adopting any
standard that would not result in significant conservation of energy.
(42 U.S.C. 6295(o)(3) and 6316(e)(1)) Moreover, DOE may not prescribe a
standard for certain equipment if no test procedure has been
established for that equipment, or if DOE determines by rule that the
standard is not technologically feasible or economically justified, and
that such standard will not result in significant conservation of
energy. (42 U.S.C. 6295(o)(3) and 6316(e)(1)) EPCA also provides that,
in deciding whether a standard is economically justified, DOE must
determine whether the benefits of the standard exceed its burdens after
receiving comments on the proposed standard. (42 U.S.C.
6295(o)(2)(B)(i) and 6316(e)(1)) To the greatest extent practicable,
DOE must consider the following seven factors:
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\7\ This notice concerns types of ``covered equipment'' as that
term is defined in EPCA, (42 U.S.C. 6311(1)(E)) in Part A-1, Certain
Industrial Equipment. Therefore, when DOE quotes from, paraphrases
or describes general provisions in Part A, for instance, 42 U.S.C.
6295(o), it substitutes the term ``equipment'' for ``product'' when
the latter term appears in those provisions. (See 42 U.S.C. 6316
(a)(3))
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(I) The economic impact of the standard on manufacturers and
consumers of the equipment subject to the standard;
(II) 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 equipment that are likely to result from the imposition of the
standard;
(III) The total projected amount of energy savings likely to result
directly from the imposition of the standard;
(IV) Any lessening of the utility or the performance of the covered
equipment likely to result from the imposition of the standard;
(V) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
imposition of the standard;
(VI) The need for national energy conservation; and
(VII) Other factors the Secretary considers relevant.
Id.
Furthermore, the Secretary may not prescribe an amended or new
standard if interested persons have established by a preponderance of
the evidence that the standard is likely to result in the
unavailability in the United States of any equipment type (or class)
with performance characteristics (including reliability), features,
sizes, capacities, and volumes that are substantially the same as those
generally available in the United States. (42 U.S.C. 6295 (o)(4) and
6316(e)(1)) In addition, there is a rebuttable presumption that a
standard level is economically justified if the Secretary finds that
``the additional cost to the consumer of purchasing equipment complying
with an energy conservation standard level will be less than three
times the value of the energy * * * savings during the first year that
the consumer will receive as a result of the standard, as calculated
under the applicable test procedure * * *.'' (42 U.S.C.
6295(o)(2)(B)(iii) and 6316(e)(1)) The rebuttable presumption test is
an alternative path to establishing economic justification.
Section 325(q)(1) of EPCA addresses the situation where DOE sets a
standard for a type or class of covered equipment that has two or more
groups of covered equipment. DOE must specify a different standard
level than that which applies generally to such equipment ``for any
group of covered equipment which have the same function or intended
use, if * * * equipment within such group--(A) consume a different kind
of energy from that consumed by other covered equipment within such
type (or class); or (B) have a capacity or other performance-related
feature which other equipment within such type (or class) do not have
and such feature justifies a higher or lower standard'' than applies or
will apply to the other equipment. (42 U.S.C. 6295(q)(1) and
6316(e)(1)) In determining whether a performance-related feature
justifies a different standard for a group of equipment, DOE must
``consider such factors as the utility to the consumer of such a
feature'' and other factors DOE deems appropriate. Any rule prescribing
such a standard must include an explanation of the basis on which a
higher or lower level was established. (42 U.S.C. 6295(q)(2) and
6316(e)(1))
Finally, Federal energy conservation requirements for commercial
equipment generally supersede State laws or regulations concerning
energy conservation testing, labeling, and standards for such
equipment. (42 U.S.C. 6316(a)-(b)) For the commercial refrigeration
equipment covered by this rulemaking, Federal energy conservation
requirements will supersede all such State laws or regulations
beginning on the date of publication of the Federal standards, except
that any state or local standard issued before that time will be
superseded only when the Federal standards take effect. (42 U.S.C.
6316(e)(3)) Furthermore, DOE can grant waivers of preemption to any
State laws or regulations that are superseded in accordance with the
procedures and other provisions of Section 327(d) of the Act. (42
U.S.C. 6297(d) and 6316(e)(3))
C. Background
1. Current Standards
There are no national energy conservation standards for the
commercial refrigeration equipment covered by this rulemaking. EPACT
2005 did amend EPCA to establish energy conservation standards that
will apply to certain other types of commercial refrigerators,
freezers, and refrigerator-freezers when manufactured on or after
January 1, 2010. (42 U.S.C. 6313(c)(2)-(3)) Those standards are not at
issue in this rulemaking.
2. History of Standards Rulemaking for Commercial Refrigeration
Equipment
On August 8, 2005, Section 136(c) of EPACT 2005 amended EPCA, in
part to direct DOE to issue energy conservation standards for the
equipment covered by this rulemaking, which standards would apply to
equipment manufactured on or after January 1, 2012. (42 U.S.C.
6313(c)(4)(A)) Section 136(a)(3) of EPACT 2005 also amended EPCA, by
adding definitions for terms relevant to this equipment. (42 U.S.C.
6311(9)) In defining the term ``commercial refrigerator, freezer, and
refrigerator-freezer,'' EPCA states that this refrigeration equipment
is connected to either a self-contained condensing unit or to a remote
condensing unit. 42 U.S.C. 6311(9)(A)(vii). Subsequently, EPCA defines
the terms ``remote condensing unit'' and ``self-contained condensing
unit.'' 42 U.S.C. 6311(9)(E)-(F). These are the two condenser
configurations of equipment covered by this rulemaking.
On December 19, 2006, the Energy Independence and Security Act of
2007 (EISA 2007) was signed into law by the President. This legislation
affected some of the products for which DOE had rulemakings underway.
However, it did not create any additional requirements for commercial
refrigeration equipment.
As an initial step to comply with EPCA's mandate to issue standards
for commercial refrigeration equipment, and to commence this
rulemaking, on April 25, 2006, DOE published notice of a public meeting
and of the availability
[[Page 50077]]
of its Framework Document for this rulemaking. 71 FR 23876. The
Framework Document described the procedural and analytical approaches
that DOE anticipated using to evaluate energy conservation standards
for commercial refrigeration equipment, and identified various issues
to be resolved in conducting the rulemaking. DOE held a public meeting
on May 16, 2006 to present the contents of the Framework Document,
describe the analyses it planned to conduct during the rulemaking,
obtain public comment on these subjects, and inform and facilitate
interested persons' involvement in the rulemaking. DOE also gave
interested persons an opportunity, after the public meeting, to submit
written statements in response to the Framework Document. DOE received
five statements.
On July 26, 2007, DOE published an advance notice of proposed
rulemaking (ANOPR) concerning energy conservation standards for
commercial refrigeration equipment. 72 FR 41161. In the ANOPR, DOE
described and sought comment on its proposed equipment classes for this
rulemaking, and on the analytical framework, models, and tools (e.g.,
LCC and national energy savings (NES) spreadsheets) that DOE used to
analyze the impacts of energy conservation standards for commercial
refrigeration equipment. In conjunction with the ANOPR, DOE also
published on its Web site the complete ANOPR TSD. The TSD included the
results of DOE's preliminary (1) engineering analysis, (2) markups
analysis to determine equipment price, (3) energy use characterization,
(4) LCC and payback period (PBP) analyses, (5) NES and national impact
analyses (NIA), and (6) manufacturer impact analysis (MIA). In the
ANOPR, DOE requested comment on these results, and on a range of other
issues. These issues included equipment classes, definitions for air-
curtain angle and door angle, case lighting operating hours, operation
and maintenance practices, equipment lifetime, LCC baseline levels, NIA
base case, base case and standards case forecasts, differential impact
of new standards on future shipments, selection of standard levels for
post-ANOPR analysis, the equation that expresses the energy
conservation standards, and the nature of standards for commercial
refrigerator-freezers.
DOE held a public meeting in Washington, DC on August 23, 2007, to
present the methodology and results of the ANOPR analyses, and to
solicit both oral and written comments from the interested persons who
attended. Public comment focused on DOE's assumptions, approach, and
equipment class breakdown, and are addressed in detail in this NOPR.
III. General Discussion
A. Test Procedures
On December 8, 2006, DOE published a final rule in which it adopted
American National Standards Institute (ANSI)/Air-Conditioning and
Refrigeration Institute (ARI) Standard 1200-2006, Performance Rating of
Commercial Refrigerated Display Merchandisers and Storage Cabinets, as
the DOE test procedure for this equipment. 71 FR 71340, 71369-70; 10
CFR 431.63-431.64. ANSI/ARI Standard 1200-2006 contains rating
temperature specifications of 38 [deg]F (2 [deg]F) for
commercial refrigerators and refrigerator compartments, 0 [deg]F
(2 [deg]F) for commercial freezers and freezer
compartments, and -5 [deg]F (2 [deg]F) for commercial ice-
cream freezers. The standard also requires performance tests to be
conducted according to the American Society of Heating, Refrigerating,
and Air-Conditioning Engineers (ASHRAE) Standard 72-2005, Method of
Testing Commercial Refrigerators and Freezers. In this final rule, DOE
also adopted a -15 [deg]F (2 [deg]F) rating temperature for
commercial ice-cream freezers. 71 FR 71370. In addition, DOE adopted
ANSI/Association of Home Appliance Manufacturers (AHAM) Standard HRF-1-
2004, Energy, Performance and Capacity of Household Refrigerators,
Refrigerator-Freezers and Freezers, for determining compartment volumes
for this equipment. 71 FR 71369-70.
B. Technological Feasibility
1. General
DOE considers design options technologically feasible if industry
already uses these options or if research has progressed to the
development of a working prototype. ``Technologies incorporated in
commercially available equipment or in working prototypes will be
considered technologically feasible.'' 10 CFR Part 430, Subpart C,
Appendix A, Section 4(a)(4)(i).
In each standards rulemaking, DOE conducts a screening analysis,
which it bases on information it has gathered regarding all current
technology options and prototype designs. In consultation with
interested parties, DOE develops a list of design options for
consideration in the rulemaking. All technologically feasible design
options are candidates in this initial assessment. Early in the
process, DOE eliminates from consideration any design option (a) that
is not practicable to manufacture, install, or service; (b) that will
have adverse impacts on equipment utility or availability; or (c) for
which there are health or safety concerns that cannot be resolved.
Chapter 4 of the TSD accompanying this notice contains a description of
the screening analysis for this rulemaking.
In the ANOPR, DOE eliminated five of the technologies considered in
the market and technology assessment: (1) Air-curtain design, (2)
thermoacoustic refrigeration, (3) magnetic refrigeration, (4) electro-
hydrodynamic heat exchangers, and (5) copper rotor motors. Because all
five of these technologies are in the research stage, DOE believes that
they would not be practicable to manufacture, install and service on
the scale necessary to serve the relevant market at the time of the
effective date of the standard. In addition, because these technologies
are in the research stage, DOE cannot assess whether they would have
any adverse impacts on utility to significant subgroups of consumers,
result in the unavailability of any types of equipment, or present any
significant adverse impacts on health or safety. Therefore, DOE did not
consider these technologies as design options for improving the energy
efficiency of commercial refrigeration equipment. DOE believes that all
the efficiency levels discussed in today's notice are technologically
feasible because there is equipment either in the market or in working
prototypes at all of the efficiency levels analyzed. See Chapter 4 of
the TSD for further discussion of the screening analysis.
2. Maximum Technologically Feasible Levels
In deciding whether to adopt a new standard for a type or class of
commercial refrigeration equipment, DOE must ``determine the maximum
improvement in energy efficiency or maximum reduction in energy use
that is technologically feasible'' for such equipment. (42 U.S.C.
6295(p)(1) and 6316(e)(1)) If such standard is not designed to achieve
such efficiency or use, the Secretary shall state the reasons such is
the case in the proposed rule. Id. For this rulemaking, DOE determined
that the values in Table III-1 represent the energy use levels that
would achieve the maximum reductions in energy use that are
technologically feasible at this time for commercial refrigeration
equipment. DOE identified these ``max-tech'' levels for the equipment
classes analyzed as part of the engineering analysis (Chapter 5 of the
TSD). For each equipment class, DOE applied the most efficient design
options available
[[Page 50078]]
for energy-consuming components. These levels are set forth in TSL 5.
Table III-1--``Max-Tech'' Energy Use Levels
----------------------------------------------------------------------------------------------------------------
``Max-Tech'' level ``Max-Tech'' level
Equipment class kilowatt hours per day Equipment class kilowatt hours per day
(kWh/day) (kWh/day)
----------------------------------------------------------------------------------------------------------------
VOP.RC.M............................. 0.68 x TDA + 4.07...... VCT.RC.I............... 0.71 x TDA + 3.05
SVO.RC.M............................. 0.69 x TDA + 3.18...... HCT.RC.M............... 0.16 x TDA + 0.13
HZO.RC.M............................. 0.35 x TDA + 2.88...... HCT.RC.L............... 0.34 x TDA + 0.26
VOP.RC.L............................. 2.28 x TDA + 6.85...... HCT.RC.I............... 0.4 x TDA + 0.31
HZO.RC.L............................. 0.57 x TDA + 6.88...... VCS.RC.M............... 0.11 x V + 0.26
VCT.RC.M............................. 0.25 x TDA + 1.95...... VCS.RC.L............... 0.23 x V + 0.54
VCT.RC.L............................. 0.6 x TDA + 2.61....... VCS.RC.I............... 0.27 x V + 0.63
SOC.RC.M............................. 0.39 x TDA + 0.11...... HCS.RC.M............... 0.11 x V + 0.26
VOP.SC.M............................. 1.57 x TDA + 4.71...... HCS.RC.L............... 0.23 x V + 0.54
SVO.SC.M............................. 1.58 x TDA + 4.59...... HCS.RC.I............... 0.27 x V + 0.63
HZO.SC.M............................. 0.77 x TDA + 5.55...... SOC.RC.L............... 0.83 x TDA + 0.22
HZO.SC.L............................. 1.92 x TDA + 7.08...... SOC.RC.I............... 0.97 x TDA + 0.26
VCT.SC.I............................. 0.73 x TDA + 3.29...... VOP.SC.L............... 3.95 x TDA + 11.82
VCS.SC.I............................. 0.38 x V + 0.88........ VOP.SC.I............... 5.02 x TDA + 15.02
HCT.SC.I............................. 0.56 x TDA + 0.43...... SVO.SC.L............... 3.98 x TDA + 11.51
SVO.RC.L............................. 2.28 x TDA + 6.85...... SVO.SC.I............... 5.06 x TDA + 14.63
VOP.RC.I............................. 2.9 x TDA + 8.7........ HZO.SC.I............... 2.44 x TDA + 9
SVO.RC.I............................. 2.9 x TDA + 8.7........ SOC.SC.I............... 1.35 x TDA + 0.36
HZO.RC.I............................. 0.72 x TDA + 8.74...... HCS.SC.I............... 0.38 x V + 0.88
----------------------------------------------------------------------------------------------------------------
C. Energy Savings
1. Determination of Savings
DOE used the NES spreadsheet to estimate energy savings. The
spreadsheet forecasts energy savings over the period of analysis for
TSLs relative to the base case. DOE quantified the energy savings
attributable to an energy conservation standard as the difference in
energy consumption between the trial standards case and the base case.
The base case represents the forecast of energy consumption in the
absence of new mandatory efficiency standards. The NES spreadsheet
model is described in Section IV.G of this notice and in Chapter 11 of
the TSD accompanying this notice.
The NES spreadsheet model calculates the energy savings in site
energy or kilowatt hours (kWh). Site energy is the energy directly
consumed at building sites by commercial refrigeration equipment. DOE
expresses national energy savings in terms of the source energy
savings, which are the energy savings used to generate and transmit the
energy consumed at the site. Chapter 11 of the TSD contains a table of
factors used to convert kWh to Btu. DOE derives these conversion
factors, which change with time, from DOE's EIA's AEO2007.
2. Significance of Savings
For commercial refrigeration equipment, EPCA prohibits DOE from
adopting a standard that would not result in significant additional
energy savings. (42 U.S.C. 6295(o)(3)(B) and 6316(e)(1)) While the term
``significant'' is not defined in the Act, the U.S. Court of Appeals,
in Natural Resources Defense Council v. Herrington, 768 F.2d 1355, 1373
(D.C. Cir. 1985), indicated that Congress intended significant energy
savings in this context to be savings that were not ``genuinely
trivial.'' The estimated energy savings for all of the trial standard
levels considered in this rulemaking are nontrivial, and therefore DOE
considers them significant within the meaning of Section 325 of the
Act.
D. Economic Justification
1. Specific Criteria
As noted earlier, EPCA provides seven factors to be evaluated in
determining whether an energy conservation standard is economically
justified. The following sections discuss how DOE has addressed each
factor thus far in this rulemaking. (42 U.S.C. 6295(o)(2)(B)(i) and
6316(e)(1))
a. Economic Impact on Manufacturers and Commercial Customers
DOE uses an annual cash-flow approach in determining the
quantitative impacts of a new or amended standard on manufacturers.
This includes both a short-term assessment based on the cost and
capital requirements between the announcement of a regulation and when
the regulation comes into effect, and a long-term assessment. Impacts
analyzed include INPV, cash flows by year, and changes in revenue and
income. Next, DOE analyzes and reports the impacts on different types
of manufacturers, with particular attention to impacts on small
manufacturers. DOE then considers the impact of standards on domestic
manufacturer employment, manufacturing capacity, plant closures, and
loss of capital investment. Finally, DOE takes into account the
cumulative impact of regulations on manufacturers.
For commercial consumers, measures of economic impact are generally
the changes in installed cost and annual operating costs, i.e., the
LCC. Chapter 6 of the TSD presents the LCC of the equipment at each
TSL. The LCC is one of the seven factors to be considered in
determining the economic justification for a new or amended standard.
(42 U.S.C. 6295(o)(2)(B)(i)(II) and 6316(e)(1)) It is discussed in the
paragraphs that follow.
b. Life-Cycle Costs
The LCC is the sum of the purchase price, including the
installation and operating expense (i.e., operating energy,
maintenance, and repair expenditures) discounted over the lifetime of
the equipment. To determine the purchase price including installation,
DOE estimated the markups that distributors and contractors add to the
manufacturer selling price (MSP); DOE also estimated installation costs
from an analysis of commercial refrigeration equipment installation
costs for each equipment class. DOE determined that preventative
maintenance costs do not depend on efficiency but that repair costs
increase
[[Page 50079]]
with efficiency and that the cost of replacement lighting fixtures
(``lighting maintenance'') increased with higher efficiency. See
Sections IV.E.8 and IV.E.9 for more detail. In estimating operating
energy costs, DOE used average effective commercial electricity prices
at the State level from the EIA publication, State Energy Consumption,
Price, and Expenditure Estimates. DOE modified the 2006 average
commercial electricity prices to reflect the average electricity prices
for each of the four types of businesses examined in this analysis. The
LCC analysis compares the LCCs of equipment designed to meet possible
energy conservation standards with the LCCs of equipment likely to be
installed in the absence of standards. The LCC analysis also identifies
a range of energy price forecasts for the electricity prices used in
the economic analyses and provides results showing the sensitivity of
the LCC results to these price forecasts.
Recognizing that each commercial building that uses commercial
refrigeration equipment is unique, DOE analyzed variability and
uncertainty by performing the LCC and PBP calculations for two
prototype commercial buildings (i.e., stores) and four types of
businesses (two types of businesses for each prototype store). The
first store prototype is a large grocery store, which encompasses
supermarkets and wholesaler/retailer multi-line stores such as big-box
stores, warehouse stores, and supercenters. The second prototype is a
small store, which encompasses convenience stores and small specialty
stores such as meat markets; wine, beer, and liquor stores; and
convenience stores associated with gasoline stations. Various types of
commercial refrigeration equipment can serve a given type of store's
refrigeration needs. DOE gives the LCC savings as a distribution, with
a mean value and a range. DOE developed average discount rates for each
of four business types analyzed, ranging from 5.1 to 8.4 percent for
the calculations, and assumed that the customer purchases the equipment
in 2012. Chapter 8 of the TSD contains the details of the LCC
calculations.
c. Energy Savings
While significant energy conservation is a separate statutory
requirement for imposing an energy conservation standard, EPCA requires
DOE, in determining the economic justification of such a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III) and
6316(e)(1)) DOE used the NES spreadsheet results in its consideration
of total projected savings. Section IV.G.1 of this notice discusses the
savings figures.
d. Lessening of Utility or Performance of Equipment
In establishing equipment classes, evaluating design options, and
assessing the impact of potential standard levels, DOE tried to avoid
having new standards for commercial refrigeration equipment lessen the
utility or performance of the equipment under consideration in this
rulemaking. (42 U.S.C. 6295(o)(2)(B)(i)(IV) and 6316(e)(1)) None of the
proposed trial standard levels considered in this rulemaking involve
changes in equipment design or unusual installation requirements that
would reduce the utility or performance of the equipment. See Chapter 4
and Chapter 16 of the TSD for more detail.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider any lessening of competition likely to
result from standards. It directs the Attorney General to determine in
writing the impact, if any, of any lessening of competition likely to
result from imposition of a proposed standard. (42 U.S.C.
6295(o)(2)(B)(i)(V) and (ii); and 6316(e)(1)) DOE has transmitted a
written request to the Attorney General soliciting a written
determination on this issue.
f. Need of the Nation to Conserve Energy
The non-monetary benefits of the proposed standard are likely to be
reflected in improvements to the security and reliability of the
Nation's energy system. Reductions in the overall demand for energy
will reduce the Nation's reliance on foreign sources of energy and
increase reliability of the Nation's electricity system. DOE conducts a
utility impact analysis to show the reduction in installed generation
capacity. Reduced power demand (including peak power demand) generally
improves the security and reliability of the energy system.
The proposed standard also is likely to result in improvements to
the environment. In quantifying these improvements, DOE has defined a
range of primary energy conversion factors and associated emission
reductions based on the generation that energy conservation standards
displaced. DOE reports the environmental effects from each trial
standard level for this equipment in the environmental assessment in
the TSD. (42 U.S.C. 6295(o)(2)(B)(i)(VI) and 6316(e)(1))
g. Other Factors
EPCA allows the Secretary of Energy, in determining whether a
standard is economically justified, to consider any other factors the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII) and
6316(e)(1)) Under this provision, DOE considered LCC impacts on
identifiable groups of customers, such as customers of different
business types, who may be disproportionately affected by any national
energy conservation standard level. In particular, DOE examined the LCC
impact on independent small grocery/convenience store businesses where
both higher discount rates and lack of access to national account
equipment purchases might disproportionately affect those business
types when compared to the overall commercial refrigeration equipment
market.
2. Rebuttable Presumption
Another criterion for determining whether a standard level is
economically justified is the following rebuttable presumption test:
If the Secretary finds that the additional cost to the consumer
of purchasing equipment complying with an energy conservation
standard level will be less than three times the value of the energy
* * * savings during the first year that the consumer will receive
as a result of the standard, as calculated under the applicable test
procedure, there shall be a rebuttable presumption that such
standard level is economically justified. A determination by the
Secretary that such criterion is not met shall not be taken into
consideration in the Secretary's determination of whether a standard
is economically justified. (42 U.S.C. 6295(o)(2)(B)(iii) and
6316(e)(1))
If the initial price of equipment increases due to a conservation
standard, and the consumer would recover the increase in energy savings
in less than three years through reduced energy costs resulting from
the standard, then DOE presumes that such standard is economically
justified. This presumption of economic justification can be rebutted
upon a proper showing. The rebuttable presumption payback calculation
is discussed in Sections III.D.2 and V.B.1.b of this NOPR.
IV. Methodology and Discussion of Comments
DOE used two spreadsheet tools to determine the impact of energy
conservation standards on the Nation. The first spreadsheet calculates
LCCs and payback periods of potential new energy conservation
standards. The second provides shipments forecasts
[[Page 50080]]
and then calculates national energy savings and net present value
impacts of potential new energy conservation standards. DOE also
assessed manufacturer impacts, largely through use of the Government
Regulatory Impact Model (GRIM).
Additionally, DOE estimated the impacts of energy conservation
standards for commercial refrigeration equipment on utilities and the
environment. DOE used a version of EIA's National Energy Modeling
System (NEMS) for the utility and environmental analyses. The NEMS
model simulates the energy economy of the United States and has been
developed over several years by the EIA primarily for the purpose of
preparing the Annual Energy Outlook (AEO). The NEMS produces a widely
known baseline forecast for the Nation through 2025 that is available
on the DOE Web site. The version of NEMS used for efficiency standards
analysis is called NEMS-BT,\8\ and is based on the AEO2007 version with
minor modifications. The NEMS offers a sophisticated picture of the
effect of standards, since its scope allows it to measure the
interactions between the various energy supply and demand sectors and
the economy as a whole.
---------------------------------------------------------------------------
\8\ The EIA approves use of the name NEMS to describe only an
AEO version of the model without any modification to code or data.
Because the present analysis entails some minor code modifications
and runs the model under various policy scenarios that deviate from
AEO assumptions, the name NEMS-BT refers to the model used here. For
more information on NEMS, refer to The National Energy Modeling
System: An Overview 1998. DOE/EIA-0581 (98), February, 1998. BT is
DOE's Building Technologies Program. NEMS-BT was formerly called
NEMS-BRS.
---------------------------------------------------------------------------
A. Market and Technology Assessment
When beginning an energy conservation standards rulemaking, DOE
develops information that provides an overall picture of the market for
the equipment concerned, including the purpose of the equipment, the
industry structure, and market characteristics. This activity includes
both quantitative and qualitative assessments based primarily on
publicly available information. The subjects addressed in the market
and technology assessment for this rulemaking (Chapter 3 of the TSD)
include equipment classes, manufacturers, quantities, and types of
equipment sold and offered for sale, retail market trends, and
regulatory and non-regulatory programs.
1. Definitions Related to Commercial Refrigeration Equipment
a. Air Curtain Angle Definition
For equipment without doors, an air curtain divides the
refrigerated compartment from the ambient space. DOE stated in the
ANOPR that the orientation of the air curtain affects the energy
consumption of both remote condensing and self-contained equipment, and
that equipment without doors can be broadly categorized by the angle of
the air curtain. DOE considered defining the air-curtain angle as ``the
angle between a vertical line and the line formed by the points at the
center of the discharge air grille and the center of the return air
grille, when viewed in cross-section.'' DOE presented this definition
in the ANOPR, 72 FR 41173, and for discussion at the ANOPR public
meeting, and requested feedback.
ARI and Edison Electric Institute (EEI) recommended that DOE
slightly modify its definition of air-curtain angle to ``the angle
formed between a vertical line and the line formed by the points at the
inside edge of the discharge air opening and the inside edge of the
return air opening, when viewed in cross-section.'' For equipment
without doors and without a discharge air grille or discharge air
honeycomb, the air curtain should be defined as ``the angle between a
vertical line extended down from the highest point on the
manufacturer's recommended load limit line and the same load limit
line.'' (ARI, No. 18 at p. 2 and EEI, No. 15 at p. 2) DOE recognizes
that these proposed definitions are consistent with industry-approved
standards and is therefore including the suggested modifications to the
definition for air-curtain angle in today's proposed rule.
b. Door Angle Definition
For equipment with doors, DOE stated in the ANOPR that the
orientation of the doors affects the energy consumption, and that
equipment with doors can be broadly categorized by the angle of the
door. DOE considered defining door angle as ``the angle between a
vertical line and the line formed by the plane of the door, when viewed
in cross-section.'' 72 FR 41174. DOE also presented this definition for
discussion at the ANOPR public meeting and requested feedback.
While stakeholders agreed with DOE's proposed definition of door
angle flat doors, it was not clear how DOE would define the door angle
for curved doors such as those found on service over-the-counter cases.
True stated that curved door angle should be defined by forming a plane
between ``the end plane and the end peak in-section.'' (Public Meeting
Transcript, No. 13.5 at p. 59) Southern California Edison (SCE)
suggested defining door angle for curved doors in the way air-curtain
angle is defined, by the angle formed between the vertical and a line
drawn between the top and bottom edges. (Public Meeting Transcript, No.
13.5 at p. 59) DOE is proposing its original definition of door angle
for cases with flat doors. For cases with curved doors, DOE is not
clear what True's intent was in defining door angle, and no
clarification was made in True's written comments. DOE believes the
approach suggested by SCE is appropriate because it accounts for the
complex geometry of curved doors while still remaining consistent with
the existing definition for air-curtain angle. Therefore, DOE is
proposing to define door angle as ``the angle formed between a vertical
line and the straight line drawn by connecting the top and bottom
points where the display area glass joins the cabinet, when the
equipment is viewed in cross-section.''
2. Equipment Classes
When establishing energy conservation standards, DOE generally
divides covered equipment into equipment classes by the type of energy
used, capacity, or other performance-related features that affect
efficiency. Different energy conservation standards may apply to
different equipment classes. (42 U.S.C. 6295(q) and 6316(e)(1))
Commercial refrigerators, commercial freezers, and commercial
refrigerator-freezers can be divided into various equipment classes
categorized largely by physical characteristics that affect energy
efficiency. Some of these characteristics delineate the categories of
equipment covered by this rulemaking.\9\ Most affect the merchandise
that the equipment can be used to display, and how the customer can
access that merchandise. Key physical characteristics that affect
energy efficiency are the operating temperature, the presence or
absence of doors (i.e., closed cases or open cases), the type of doors
used (i.e., transparent
[[Page 50081]]
or solid), the angle of the door or air-curtain (i.e., horizontal,
semivertical, or vertical) and the type of condensing unit (i.e.,
remote or self-contained). As discussed in the ANOPR, 72 FR 41173-77,
and below, DOE has developed equipment classes in this rulemaking by
(1) dividing commercial refrigerators, commercial freezers, and
commercial refrigerator-freezers into equipment families, (2)
subdividing these families based on condensing unit configurations and
rating temperature designations, and (3) identifying the resulting
classes that are within each of the three equipment categories covered
by this rulemaking.
---------------------------------------------------------------------------
\9\ ``Commercial refrigerators, commercial freezers, and
commercial refrigerator-freezers'' is a type of covered commercial
equipment. For purposes of discussion only in this proceeding, DOE
uses the term ``categories'' to designate groupings of ``commercial
refrigeration equipment.'' The categories of equipment are: Self-
contained commercial refrigerators, commercial freezers, and
commercial refrigerator-freezers without doors; remote condensing
commercial refrigerators, commercial freezers, and commercial
refrigerator-freezers; and commercial ice-cream freezers. DOE will
analyze specific equipment classes that fall within these general
categories and set appropriate standards.
---------------------------------------------------------------------------
DOE divided covered equipment into eight equipment families, which
are shown in Table IV-1. Following the ANOPR, DOE did not receive any
comments that it believes warranted changes to the eight equipment
families proposed in the ANOPR and therefore, the eight families are
unchanged. The two issues related to equipment family designations are
discussed below.
Table IV-1--Equipment Family Designations
------------------------------------------------------------------------
Equipment family Description
------------------------------------------------------------------------
Vertical Open (VOP)............... Equipment without doors and an air-
curtain >= 0[deg] and < 10[deg]
from the vertical.
Semivertical Open (SVO)........... Equipment without doors and an air-
curtain angle >= 10[deg] and <
80[deg] from the vertical.
Horizontal Open (HZO)............. Equipment without doors and an air-
curtain angle >= 80[deg] from the
vertical.
Vertical Closed Transparent (VCT). Equipment with hinged or sliding
transparent doors and a door angle
< 45[deg].
Horizontal Closed Transparent Equipment with hinged or sliding
(HCT). transparent doors and a door angle
>= 45[deg].
Vertical Closed Solid (VCS)....... Equipment with hinged or sliding
solid (opaque) doors and a door
angle < 45[deg].
Horizontal Closed Solid (HCS)..... Equipment with hinged or sliding
solid (opaque) doors and a door
angle >= 45[deg].
Service Over Counter (SOC)........ Equipment with sliding or hinged
doors intended for use by sales
personnel and fixed or hinged glass
for displaying merchandise.
------------------------------------------------------------------------
Within each of the eight equipment families is equipment that has
one of the two condensing unit configurations, which are shown in Table
IV-2. Because these are the only two condensing unit configurations
used in commercial refrigeration equipment, and since DOE did not
receive any comments on these configurations following the ANOPR, DOE
did not make any changes.
Table IV-2--Condensing Unit Configuration
------------------------------------------------------------------------
Condensing unit configuration Description
------------------------------------------------------------------------
Remote Condensing (RC)............ Condensing unit is remotely located
from the refrigerated equipment and
consists of one or more refrigerant
compressors, refrigerant
condensers, condenser fans and
motors, and factory-supplied
accessories.
Self-Contained (SC)............... Condensing unit is an integral part
of the refrigerated equipment and
consists of one or more refrigerant
compressors, refrigerant
condensers, condenser fans and
motors, and factory-supplied
accessories.
------------------------------------------------------------------------
DOE is also organizing equipment classes based on the three
operating temperature ranges shown in Table IV-3. Based on the
temperature at which the equipment is designed to operate, it will fall
into one of these operating temperature ranges. This is identified as
Issue 3 under ``Issues on Which DOE Seeks Comment'' in Section VII.E of
this NOPR.
Each temperature range coincides with a rating temperature used in
the test procedure final rule for the different equipment types. 10 CFR
431.64. Following the ANOPR, DOE did not receive any comments regarding
the rating temperature designations proposed in the ANOPR, and
therefore DOE did not make any changes to the rating temperature
designations.
Table IV-3--Rating Temperature Designations
------------------------------------------------------------------------
Rating
Operating temperature ([deg]F) temperature Description
([deg]F)
------------------------------------------------------------------------
>= 32 (M)...................... 38 Medium temperature
(refrigerators).
< 32 and > -5 (L).............. 0 Low temperature
(freezers).
<= -5 (I)...................... -15 Ice-cream temperature
(ice-cream freezers).
------------------------------------------------------------------------
In the ANOPR, DOE responded to several comments and presented a
discussion (Section II.A.2) of the air-curtain angle ranges used to
delineate vertical, semivertical, and horizontal equipment families
without doors (VOP, SVO, and HZO). 72 FR 41173-74. In comments received
following the Framework document publication, some stakeholders felt
that the air-curtain angle ranges used in the data provided by ARI
might encourage manufacturers to redesign equipment to take advantage
of less stringent standards. Specifically, the stakeholders were
concerned that manufacturers of VOP.RC.M equipment (a high-volume
equipment class) would make slight alterations in their designs that
would shift the equipment to the SVO.RC.M equipment class. If this
shift occurred for a large number of models, and if standards for
SVO.RC.M equipment were significantly less stringent than standards for
VOP.RC.M equipment, a significant amount of energy savings would be
avoided. In other words, energy savings will be less than if that
equipment was not modified and remained under the vertical
classification. DOE responded to these
[[Page 50082]]
comments in the ANOPR, concurring with stakeholders' concerns, and
requesting any relevant data or feedback regarding the ranges of air-
curtain angle proposed in the ANOPR. No further comments were received
on this issue following the ANOPR. DOE is proposing standards for the
SVO.RC.M equipment class that are virtually equivalent to standards for
the VOP.RC.M equipment class (see the proposed rule language of this
NOPR). As a result, DOE believes that the proposed standards eliminate
motivation for market shifts between these equipment classes. However,
to assure that no changes to the air-curtain ranges for the VOP, SVO,
and HZO equipment families are warranted, DOE seeks comment on the
possibility of market shifts between equipment classes based on the
proposed standards.
As discussed in the ANOPR, 72 FR 41174 and during the ANOPR public
meeting, DOE stated that it was considering defining two equipment
families each for equipment with solid and transparent doors, based on
door angles of 0[deg] to 45[deg] (vertical) and 45[deg] to 90[deg]
(horizontal). EEI stated that DOE should consider revising its
definition of door angle, because it is unclear whether a door angle of
45[deg] to be vertical or horizontal. (Public Meeting Transcript, No.
13.5 at p. 58) DOE agrees with EEI that its previous designation did
not specify what equipment family a unit with a 45[deg] door angle
would fall under. Therefore, DOE has tentatively decided that it will
designate vertical equipment with transparent or solid doors as
``equipment with hinged or sliding doors and a door angle less than
45[deg],'' and horizontal equipment with transparent or solid doors as
``equipment with hinged or sliding doors and a door angle greater than
or equal to 45[deg].''
DOE is considering 38 of the 48 equipment classes shown in Table
IV-4.\10\ The equipment classes are organized by equipment family,
compressor operating mode, and rating temperature. The right-hand
column in Table IV-4 with the heading ``Equipment Class Designation''
identifies each of the 48 equipment classes with a particular set of
letters. The first three letters for each class represent its equipment
family. The next two letters represent the condensing unit
configuration. The last letter represents the rating temperature. Table
IV-1 through Table IV-3 set forth the meaning of the equipment class
lettering designations.
---------------------------------------------------------------------------
\10\ Table IV-4 identifies 48 classes of commercial
refrigerators, commercial freezers, and commercial refrigerator-
freezers. Of the 48 classes, 10 classes are identified by asterisks.
EPCA has already established energy conservation standards for these
10 classes, (42 U.S.C. 6313(c)(2)-(3)) which are not covered under
this rulemaking.
Table IV-4--Commercial Refrigeration Equipment Classes
----------------------------------------------------------------------------------------------------------------
Condensing unit Operating temperature Equipment class
Equipment family configuration ([deg]F) designation
----------------------------------------------------------------------------------------------------------------
Vertical Open........................ Remote................. >= 32.................. VOP.RC.M
< 32 and > -5.......... VOP.RC.L
<= -5.................. VOP.RC.I
Self-Contained......... >= 32.................. VOP.SC.M
< 32 and > -5.......... VOP.SC.L
<= -5.................. VOP.SC.I
Semivertical Open.................... Remote................. >= 32.................. SVO.RC.M
< 32 and > -5.......... SVO.RC.L
<= -5.................. SVO.RC.I
Self-Contained......... >= 32.................. SVO.SC.M
< 32 and > -5.......... SVO.SC.L
<= -5.................. SVO.SC.I
Horizontal Open...................... Remote................. >= 32.................. HZO.RC.M
< 32 and > -5.......... HZO.RC.L
<= -5.................. HZO.RC.I
Self-Contained......... >= 32.................. HZO.SC.M
< 32 and > -5.......... HZO.SC.L
<= -5.................. HZO.SC.I
Vertical Closed Transparent.......... Remote................. >= 32.................. VCT.RC.M
< 32 and > -5.......... VCT.RC.L
<= -5.................. VCT.RC.I
Self-Contained......... >= 32.................. VCT.SC.M*
< 32 and > -5.......... VCT.SC.L*
<= -5.................. VCT.SC.I
Horizontal Closed Transparent........ Remote................. >= 32.................. HCT.RC.M
< 32 and > -5.......... HCT.RC.L
<= -5.................. HCT.RC.I
Self-Contained......... >= 32.................. HCT.SC.M*
< 32 and > -5.......... HCT.SC.L*
<= -5.................. HCT.SC.I
Vertical Closed Solid................ Remote................. >= 32.................. VCS.RC.M
< 32 and > -5.......... VCS.RC.L
<= -5.................. VCS.RC.I
Self-Contained......... >= 32.................. VCS.SC.M*
< 32 and > -5.......... VCS.SC.L*
<= -5.................. VCS.SC.I
Horizontal Closed Solid.............. Remote................. >= 32.................. HCS.RC.M
< 32 and > -5.......... HCS.RC.L
<= -5.................. HCS.RC.I
Self-Contained......... >= 32.................. HCS.SC.M*
< 32 and > -5.......... HCS.SC.L*
<= -5.................. HCS.SC.I
[[Page 50083]]
Service Over Counter................. Remote................. >= 32.................. SOC.RC.M
< 32 and > -5.......... SOC.RC.L
<= -5.................. SOC.RC.I
Self-Contained......... >= 32.................. SOC.SC.M*
< 32 and > -5.......... SOC.SC.L*
<= -5.................. SOC.SC.I
----------------------------------------------------------------------------------------------------------------
* These equipment classes are covered by standards established in EPCA and are not covered under this
rulemaking. (42 U.S.C. 6313(c)(2)-(3))
EPCA contains standards for self-contained commercial
refrigerators, commercial freezers and commercial refrigerator-freezers
with doors (42 U.S.C. 6313(c)(2)-(3)); this equipment is not included
in this rulemaking. Equipment classes already covered by EPCA, and
therefore not included in this rulemaking, are indicated with asterisks
in Table IV-4. DOE has based the designations of these possible
equipment classes on the classification methodology presented in Table
IV-1 through Table IV-3.
Table IV-5 presents the equipment classes covered under this
rulemaking, organized by the three equipment categories.
Table IV-5--Commercial Refrigeration Equipment Classes by Category
----------------------------------------------------------------------------------------------------------------
Operating
Equipment category Condensing unit Equipment family temperature Equipment class
configuration ([deg]F) designation
----------------------------------------------------------------------------------------------------------------
Remote Condensing Commercial Remote............ Vertical Open..... >= 32............. VOP.RC.M
Refrigerators, Commercial < 32 and > -5..... VOP.RC.L
Freezers, and Commercial
Refrigerator-Freezers.
Semivertical Open. >= 32............. SVO.RC.M
< 32 and > -5..... SVO.RC.L
Horizontal Open... >= 32............. HZO.RC.M
< 32 and > -5..... HZO.RC.L
Vertical Closed >= 32............. VCT.RC.M
Transparent. < 32 and > -5..... VCT.RC.L
Horizontal Closed >= 32............. HCT.RC.M
Transparent. < 32 and > -5..... HCT.RC.L
Vertical Closed >= 32............. VCS.RC.M
Solid. < 32 and > -5..... VCS.RC.L
Horizontal Closed >= 32............. HCS.RC.M
Solid. < 32 and > -5..... HCS.RC.L
Service Over >= 32............. SOC.RC.M
Counter. < 32 and > -5..... SOC.RC.L
Self-Contained Commercial Self-Contained.... Vertical Open..... >= 32............. VOP.SC.M
Refrigerators, Commercial < 32 and > -5..... VOP.SC.L
Freezers, and Commercial
Refrigerator-Freezers without
Doors.
Semivertical Open. >= 32............. SVO.SC.M
< 32 and > -5..... SVO.SC.L
Horizontal Open... >= 32............. HZO.SC.M
< 32 and > -5..... HZO.SC.L
Commercial Ice-Cream Freezers... Remote............ Vertical Open..... <= -5............. VOP.RC.I
Semivertical Open. SVO.RC.I
Horizontal Open... HZO.RC.I
Vertical Closed VCT.RC.I
Transparent.
Horizontal Closed HCT.RC.I
Transparent.
Vertical Closed VCS.RC.I
Solid.
Horizontal Closed HCS.RC.I
Solid.
Service Over SOC.RC.I
Counter.
Self-Contained.... Vertical Open..... VOP.SC.I
Semivertical Open. SVO.SC.I
Horizontal Open... HZO.SC.I
Vertical Closed VCT.SC.I
Transparent.
Horizontal Closed HCT.SC.I
Transparent.
Vertical Closed VCS.SC.I
Solid.
Horizontal Closed HCS.SC.I
Solid.
Service Over SOC.SC.I
Counter.
----------------------------------------------------------------------------------------------------------------
B. Engineering Analysis
The engineering analysis develops cost-efficiency relationships to
show the manufacturing costs of achieving increased efficiency. DOE has
identified the following three methodologies to generate the
manufacturing costs needed for the engineering analysis: (1) The design
option approach, which
[[Page 50084]]
provides the incremental costs of adding design options to a baseline
model that will improve its efficiency; (2) the efficiency-level
approach, which provides the relative costs of achieving increases in
energy efficiency levels without regard to the particular design
options used to achieve such increases; and (3) the cost-assessment (or
reverse engineering) approach, which provides ``bottom-up''
manufacturing cost assessments for achieving various levels of
increased efficiency based on detailed cost data for parts and
material, labor, shipping/packaging, and investment for models that
operate at particular efficiency levels.
1. Approach
In the ANOPR engineering analysis, the primary methodology was an
efficiency-level approach, supplemented by a design option approach.
DOE analyzed only the 15 equipment classes with shipment volumes
greater than 100 per year. The basis of the approach was four industry-
supplied cost-efficiency curves for the four equipment classes shipped
most frequently (i.e., VCT.RC.L, VOP.RC.M, SVO.RC.M, and HZO.RC.L). See
Section 0 for shipment data. DOE developed these classes using an
efficiency-level approach. DOE supplemented these industry-supplied
curves with 15 curves it developed using a design option approach. Four
of DOE's curves were intended only for comparison with the industry-
supplied curves, as verification of the industry data. The other 11
curves formed the basis of analysis for the other 11 analyzed equipment
classes. The ANOPR provides more details on this approach. 72 FR 41180.
During the ANOPR public meeting and subsequent comment period,
stakeholders raised concerns over using industry-supplied data as the
basis of the engineering analysis. ARI stated that the intent was to
use the industry curves only to validate DOE's design option analysis,
not to use them directly in the analysis. (Public Meeting Transcript,
No. 13.5 at p. 91) The American Council for an Energy Efficient Economy
(ACEEE) stated that rulemakings have always used industry curves when
they were available. (Public Meeting Transcript, No. 13.5 at p. 91) ARI
stated that the industry data represents an average and covers the
range of available equipment, but not all manufacturers' equipment
would span the whole range. ARI also stated that as few as three
manufacturers submitted data for some of the cost-efficiency curves,
while in the best cases there were up to seven. ARI explained that
three manufacturers might not represent the entire industry. (Public
Meeting Transcript, No. 13.5 at pp. 94-95) Hussmann stated that it
doesn't know, for example, how many shelf lights other manufacturers
included in the data they submitted to ARI, and therein lies some of
the danger of using an industry average. (Public Meeting Transcript,
No. 13.5 at p. 95) Regarding the HZO.RC.L equipment class, EEI stated
that DOE's data does not appear to have the same range as ARI's data.
(Public Meeting Transcript, No. 13.5 at p. 93) Copeland also questioned
whether the cost-efficiency curves from industry made sense [because
they did not appear to be ordered in terms of increasing payback].
(Public Meeting Transcript, No. 13.5 at p. 149) ACEEE noted that the
analytically derived price points for several equipment classes are
significantly higher than the industry-supplied data at high
efficiency, and suggested that DOE reexamine this data. (ACEEE, No. 16
at p. 2) ARI stated that DOE's design option approach appears to be
technically sound, and that the ARI cost-efficiency curves are only
available for a limited number of equipment classes. For consistency,
ARI recommended that DOE base its analysis solely on DOE's analytically
derived curves. (ARI, No. 18 at p. 6)
As mentioned above, DOE used the four cost-efficiency curves \11\
provided by ARI as the basis for its ANOPR engineering analysis. DOE
was not aware of ARI's intent that they be used only to validate DOE's
own analysis, or of ARI's concerns that the data may have been
insufficient for some classes. DOE agrees with stakeholders that using
the analytically derived curves (a design option approach) for all
equipment classes would be more consistent and provide more
transparency. Although the efficiency-level and design option
approaches have been used together in other rulemakings, DOE recognizes
the challenges in using the industry-supplied data as the primary
engineering analysis approach in this rulemaking. The ARI data cannot
be disaggregated for public review, since doing so would disclose
sensitive manufacturer information. This prevents a rigorous
investigation of any discrepancies or irregularities in data submitted
by the manufacturers. At the ANOPR public meeting, Hussmann mentioned
lighting levels as one example of a design feature that could cause
discrepancies among data from different manufacturers. In the design
option approach, data on design features that affect performance (such
as lighting) are available for interested persons to review and comment
on, along with other assumptions and calculations. The aggregation of
industry data seems to have resulted in cost-efficiency curves that
lack the marked cost increases at higher levels of efficiency that are
typical of the cost-efficiency relationship. The industry-supplied
curves tended to be ``flatter'' than those developed by DOE, and in
some cases appear to have efficiency levels that were not in order of
increasing payback, as noted by Copeland. DOE believes the flatness of
the industry curves may account for some of the discrepancies in
pricing between the industry-supplied and analytically derived data, as
noted by ACEEE.
---------------------------------------------------------------------------
\11\ These four curves applied to the following four equipment
classes: VCT.RC.L, VOP.RC.M, SVO.RC.M, and HZO.RC.L. These represent
the equipment classes with the highest shipment volumes.
---------------------------------------------------------------------------
The extent of the industry-supplied data was also cause for
concern. ARI's statement that not all manufacturers' equipment would
span the whole range of efficiency levels is consistent with EEI's
concern that the data derived using DOE's design option approach did
not span the same range as the industry data. Because of overlapping
ranges of efficiency of manufacturers' data, the overall cost-
efficiency data reported by ARI spans a range that in some cases is
greater than the range covered by DOE's design option data. DOE
realizes this could raise a concern that its analysis is incomplete,
for example by neglecting design options that could account for
additional increases in efficiency, and thus an increase in the span of
efficiencies covered. However, based on the comments received, DOE
believes the extra range in the ARI data is instead largely due to
inconsistencies in the manufacturer data submitted to ARI, such as
lighting levels. A smaller portion of the extra range may also be
attributable to subtle aspects of design and manufacturing (e.g.,
airflow and air-curtain design) that have an insignificant impact on
performance and that cannot be modeled accurately in the design option
approach. DOE appreciates the feedback from ARI that the design option
approach appears sound, and believes that the design option data is
more accurate in depicting the cost-efficiency relationship for
commercial refrigeration equipment.
For the NOPR engineering analysis, DOE analyzed the same 15
equipment classes as in the ANOPR analysis, but used only a design
option approach. That approach is identical to the one used in the
ANOPR, involving consultation with outside experts,
[[Page 50085]]
review of publicly available cost and performance information, and
modeling of equipment cost and energy consumption, but DOE applied it
to all 15 equipment classes analyzed. The industry-supplied data
developed using an efficiency-level approach is used only as a check on
DOE's data. DOE believes this approach is more reliable, and affords
the public full transparency of assumptions and results and the ability
to perform independent analyses for verification. See Chapter 5 of the
TSD for more detail.
2. Equipment Classes Analyzed
For the NOPR, DOE did not make any changes to the equipment classes
directly analyzed in the ANOPR engineering analysis. Because of the
large number of equipment classes in this rulemaking, DOE did not
directly analyze all equipment classes using the design option
approach. DOE maintained the same equipment class prioritization used
in the ANOPR. Equipment classes with more than 100 units shipped per
year (``primary'' classes), as well as the VOP.RC.L \12\ equipment
class, were directly analyzed. Table IV-6 lists these equipment
classes, which represent approximately 98 percent of the shipments of
commercial refrigeration equipment reported by ARI.
---------------------------------------------------------------------------
\12\ The VOP.RC.L equipment class was reported as having zero
shipments in the ARI shipment data, but was included in the analysis
based on recommendations from manufacturers. During interviews
conducted for the NOPR, manufacturers reported to DOE their
individual shipment numbers for the VOP.RC.L class. Regardless of
the actual shipment volume, DOE believes there are significantly
more than 100 annual shipments of the VOP.RC.L equipment class.
Table IV-6--Equipment Classes Directly Analyzed in the Engineering
Analysis
------------------------------------------------------------------------
Equipment class Description
------------------------------------------------------------------------
VOP.RC.M..................... Vertical Refrigerator without Doors with
a Remote Condensing Unit, Medium
Temperature.
VOP.RC.L..................... Vertical Freezer without Doors with a
Remote Condensing Unit, Low Temperature.
SVO.RC.M..................... Semi-Vertical Refrigerator without Doors
with a Remote Condensing Unit, Medium
Temperature.
HZO.RC.M..................... Horizontal Refrigerator without Doors
with a Remote Condensing Unit, Medium
Temperature.
HZO.RC.L..................... Horizontal Freezer without Doors with a
Remote Condensing Unit, Low Temperature.
VCT.RC.M..................... Vertical Refrigerator with Transparent
Doors with a Remote Condensing Unit,
Medium Temperature.
VCT.RC.L..................... Vertical Freezer with Transparent Doors
with a Remote Condensing Unit, Low
Temperature.
SOC.RC.M..................... Service Over Counter Refrigerator with a
Remote Condensing Unit, Medium
Temperature.
VOP.SC.M..................... Vertical Refrigerator without Doors with
a Self-Contained Condensing Unit, Medium
Temperature.
SVO.SC.M..................... Semi-Vertical Refrigerator without Doors
with a Self-Contained Condensing Unit,
Medium Temperature.
HZO.SC.M..................... Horizontal Refrigerator without Doors
with a Self-Contained Condensing Unit,
Medium Temperature.
HZO.SC.L..................... Horizontal Freezer without Doors with a
Self-Contained Condensing Unit, Low
Temperature.
VCT.SC.I..................... Vertical Ice-Cream Freezer with
Transparent Doors with a Self-Contained
Condensing Unit, Ice-Cream Temperature.
VCS.SC.I..................... Vertical Ice-Cream Freezer with Solid
Doors with a Self-Contained Condensing
Unit, Ice-Cream Temperature.
HCT.SC.I..................... Horizontal Ice-Cream Freezer with
Transparent Doors with a Self-Contained
Condensing Unit, Ice-Cream Temperature.
------------------------------------------------------------------------
3. Analytical Models
In the design option approach, DOE used models to develop estimates
of cost and energy consumption for each equipment class at each
efficiency level. DOE used a cost model to estimate the manufacturer
production cost (MPC) in dollars, and an energy consumption model to
estimate the daily energy consumption in kWh for each of the 15 primary
equipment classes analyzed.
a. Cost Model
Development of the cost model involved the disassembly of a self-
contained refrigerator with transparent doors, an analysis of the
materials and manufacturing processes, and the development of a
parametric spreadsheet model flexible enough to cover all equipment
classes. The manufacturing cost model estimated MPC and reported it in
aggregated form to maintain confidentiality of sensitive cost data. DOE
obtained input from stakeholders on the MPC estimates and assumptions
to confirm accuracy. The cost model was used for 7 of the 15 examined
equipment classes and the results were extended to 6 of the remaining
examined equipment classes. The cost of the remaining two equipment
classes was estimated using available manufacturer list price (MLP)
information discounted to MPC. Details of the cost model are provided
in chapter 5 of the TSD.
Following the ANOPR, no comments were received regarding DOE's cost
model, and therefore no significant changes were made to the
methodology used in the NOPR analysis. One change was made to the
manufacturer markup assumption, which is discussed below.
One key element of DOE's cost model concerned features and
structural elements common in commercial refrigeration equipment, but
that would not affect the energy use of the equipment. Development of
this part of the cost model involved disassembling a self-contained
refrigerator with transparent doors, analyzing the materials and
manufacturing processes, and developing a parametric spreadsheet model
flexible enough to cover all equipment classes. The other key part of
the cost model estimated the costs of particular features or design
options that would affect the energy use of the equipment. DOE obtained
input from stakeholders on the MPC estimates and assumptions to confirm
their accuracy. DOE used the cost model for 7 of the 15 examined
equipment classes and extended the results to 6 of the remaining
examined equipment classes. DOE estimated the cost of the remaining two
equipment classes using available manufacturer list price (MLP)
information reduced to MPC. Chapter 5 of the TSD provides details of
the cost model.
A manufacturer markup is applied to the MPC estimates to arrive at
the MSP. This is the price of equipment sold at which the manufacturer
can recover both production and non-production costs and can earn a
profit. DOE calculated the manufacturer markup as the market share
weighted average value for the industry. For the ANOPR, DOE developed
this manufacturer markup by examining several major commercial
refrigeration equipment manufacturers' gross margin information from
annual reports and the Securities and Exchange Commission (SEC) 10-K
reports. The manufacturers DOE analyzed account for approximately 80
percent of the market, and each company is a subsidiary of a more
diversified parent company that manufactures equipment other than
commercial refrigeration equipment. Because the 10-K reports do
[[Page 50086]]
not provide gross margin information at the subsidiary level, the
estimated markups represent the average markups that the parent company
applies over its entire range of equipment offerings and does not
necessarily represent the manufacturer markup of the subsidiary.
The ANOPR analysis indicated that the average manufacturer markup
is 1.39. However, DOE adjusted the markups to be more representative of
the industry following discussions with manufacturers during the MIA
interviews (Chapter 13). An aggregation of the MIA interview responses
gives a market share weighted average manufacturer markup value of
1.32. For the NOPR, DOE used this revised manufacturer markup with the
MPC values from the engineering analysis to arrive at the MSP values
used in the GRIM.
As explained in the ANOPR, DOE received industry-supplied curves
from ARI in the form of daily energy consumption versus MLP, both
normalized by total display area (TDA). Since DOE developed its
analytically derived curves in the form of calculated daily energy
consumption (CDEC) versus MSP, it was necessary for DOE to estimate an
industry list price markup so that it could make comparisons between
the two sets of curves. The industry list price markup is a markup to
the selling price that provides the list price. To make comparisons
between the analytically derived and industry-supplied cost-efficiency
curves, DOE discounted the industry data with the list price markup and
normalized the analytically derived curves by TDA.
Manufacturers typically offer a discount from the MLP, which
depends on factors such as the relationship with the customer and the
volume and type of equipment being purchased. For the estimate of list
price markup, DOE relied on information gathered on self-contained
commercial refrigeration equipment, since list price information is
readily available and typically published by manufacturers of this
equipment. A review of the data shows that the list price markup is
typically 2.0 (i.e., manufacturers will typically sell their equipment
for 50 percent off the published list price). DOE further verified the
estimate by obtaining list price quotes from several remote condensing
equipment manufacturers. During manufacturer interviews, some
commercial refrigeration equipment manufacturers agreed with the 2.0
markup estimate, while others stated the estimate was somewhat high.
Although the list price markup can vary significantly by manufacturer
and by customer, DOE believes the estimated list price markup of 2.0 is
representative of the industry. DOE applied this markup to all
equipment classes.
DOE did not receive any additional comments or information
indicating that revision of the cost model used in the ANOPR analysis
is warranted. Therefore DOE has adhered to that model in the NOPR
analysis.
b. Energy Consumption Model
The energy consumption model estimates the daily energy consumption
of commercial refrigeration equipment at various performance levels
using a design options approach. The model is specific to the
categories of equipment covered under this rulemaking, but is
sufficiently generalized to model the energy consumption of all covered
equipment classes. For a given equipment class, the model estimates the
daily energy consumption for the baseline and the energy consumption of
several levels of performance above the baseline. The model is used to
calculate each performance level separately.
In developing the energy consumption model, DOE made general
assumptions about the analysis methodology and specific numerical
assumptions regarding load components and design options. DOE based its
energy consumption estimates on new equipment tested in a controlled-
environment chamber in accordance with ANSI/ARI Standard 1200-2006, the
DOE test procedure for commercial refrigeration equipment, which
references the ANSI/ASHRAE Standard 72-2005 test method.\13\ Once
Federal standards for this equipment become operative, manufacturers
will be required to test units with this test method, which specifies a
certain ambient temperature, humidity, light level, and other
requirements. This test method, however, contains no specification as
to the operating hours of the display case lighting, and DOE's energy
consumption model considers the operating hours to be 24 hours per day
(i.e., that lights are on continuously). This assumption is consistent
with the lighting operating time assumption used in the energy use
characterization (see Section IV.D). Chapter 5 of the TSD discusses
further the assumptions used in the energy consumption model.
---------------------------------------------------------------------------
\13\ The test procedures are found at 10 CFR 431.64.
---------------------------------------------------------------------------
The energy consumption model calculates CDEC as having two major
components: Compressor energy consumption and component energy
consumption (expressed as kWh/day). Component energy consumption is the
sum of the direct electrical energy consumption of fan motors,
lighting, defrost and drain heaters, anti-sweat heaters, and pan
heaters. Compressor energy consumption is calculated from the total
refrigeration load (expressed in Btu/h) and one of two compressor
models: One version for remote condensing equipment and one for self-
contained equipment. The total refrigeration load is a sum of the
component load and the non-electric load. The component load is the sum
of the heat emitted by evaporator fan motors, lighting, defrost and
drain heaters, and anti-sweat heaters inside and adjacent to the
refrigerated space (condenser fan motors and pan heaters are outside of
the refrigerated space and do not contribute to the component heat
load). The non-electric load is the sum of the heat contributed by
radiation through glass and openings, heat conducted through walls and
doors, and sensible and latent loads from warm, moist air infiltration
through openings. Chapter 5 of the TSD discusses component energy
consumption, compressor energy consumption, and load models.
DOE made one change to the methodology of calculating the radiation
load for cases without doors (VOP, SVO, and HZO equipment families). In
the ANOPR analysis, the view factor \14\ from the interior of the case
to the walls of the test chamber was estimated as 0.025. This value was
kept as a constant for all cases and sizes in the ANOPR analysis, but
it is clear this value should change somewhat as the geometry and the
overall size of the case changes. For the NOPR, DOE calculated the view
factor separately for each equipment class depending on the geometry
specific to the baseline design specifications of that class. The view
factor from the case to the room is calculated as the ratio of TDA
(i.e., the area of the plane separating the case from the room) to the
test chamber wall surface area.
---------------------------------------------------------------------------
\14\ A view factor is the proportion of all radiation that
leaves one surface and strikes another.
---------------------------------------------------------------------------
Stakeholders raised questions regarding DOE's method of calculating
the infiltration load \15\ for commercial refrigeration equipment.
Carrier asserted that DOE's method of using defrost water to model
infiltration has limitations. Carrier pointed out that as the case is
run at higher suction temperatures, the coil has a tendency to run as a
wet coil and does not retain much of the moisture on its exterior.
Typically on manufacturer specification sheets, defrost meltwater is
only the
[[Page 50087]]
water that comes out during a defrost period, and Carrier noted that
there may be additional water that would come off the coil between
defrost periods. Carrier believes DOE may be underestimating the
infiltration load using information from the specification sheets, and
estimated that the infiltration load is typically around 75 percent of
total cooling water. Carrier questioned whether or not DOE compared its
estimates with the calculated infiltration loads. (Public Meeting
Transcript, No. 13.5 at p. 83) Hussmann stated that when it publishes
data for defrost meltwater, it does so for the sole purpose of sizing
sewer lines and not for estimating the infiltration load. (Public
Meeting Transcript, No. 13.5 at p. 85)
---------------------------------------------------------------------------
\15\ The mass of warm ambient store air that displaces the cold
air inside of the case.
---------------------------------------------------------------------------
In the ANOPR analysis, DOE calculated infiltration load using
empirical defrost meltwater data obtained from manufacturers' detailed
specification sheets. DOE assumed that defrost meltwater could be
correlated with infiltration load, given certain known parameters such
as ambient relative humidity. This methodology was calibrated with
detailed refrigeration load data obtained from Southern California
Edison for several large-volume equipment classes. DOE agrees with the
assessment made by stakeholders and has altered its methodology
accordingly. In the NOPR engineering design specifications, defrost
meltwater (in pounds per hour, lbs/hr) is replaced with infiltrated air
(also in lbs/hr) for all equipment classes. DOE estimated infiltrated
air by using manufacturers' detailed specification sheets, recognizing
that infiltration load is the only load component that cannot be
directly calculated. Using physical parameters about each case, the
other load components (internal load, conduction load, radiation load)
are calculated. DOE subtracted these load components from the listed
total refrigeration load, and it is assumed that the remaining load is
due to infiltration. Chapter 5 of the TSD provides more details of the
change to this methodology.
At the public meeting, stakeholders expressed concern over the
refrigerants DOE used in the analysis. EEI asked if hydrofluorocarbon
(HFC) refrigerants were already assumed to be in use in the baseline.
(Public Meeting Transcript, No. 13.5 at p. 97) ARI stated that most of
the data it provided to DOE was based on such refrigerants and no
changes are expected in that regard. (Public Meeting Transcript, No.
13.5 at p. 97) In its analysis, DOE assumed that HFC refrigerants are
already fully in use for commercial refrigeration equipment. For all
remote condensing equipment, in accordance with the DOE test procedure
in ANSI/ARI Standard 1200-2006, DOE assumes the use of a compressor
using an HFC refrigerant (i.e., R-404A). Likewise, all of the
compressors DOE used in modeling self-contained equipment use either R-
404A or R-134A, another HFC refrigerant.
c. Design Options
In the market and technology assessment for the ANOPR, DOE defined
an initial list of technologies that have the potential to reduce the
energy consumption of commercial refrigeration equipment. In the
screening analysis for the ANOPR, DOE screened out some of these
technologies based on four screening criteria: Technological
feasibility; practicability to manufacture, install and service;
impacts on equipment utility or availability; and impacts on health or
safety. 72 FR 41179-80. The remaining technologies became inputs to the
ANOPR engineering analysis as design options. However, for reasons
described in the ANOPR, DOE did not incorporate all of these
technologies as design options in the energy consumption model. 72 FR
41182-83. Stakeholders commented that some of these technologies should
be included in the NOPR engineering analysis, and recommended
additional design options DOE should consider. Comments pertaining to
each suggested technology and DOE's response are provided below. As a
general comment about design options, ACEEE stated that some design
options that were screened out should be considered for further
analysis and that prevalence in the marketplace is not necessarily a
good reason to screen out a design option. (Public Meeting Transcript,
No. 13.5 at p. 62) DOE screened out five technologies in the ANOPR
screening analysis. These are air-curtain design, thermoacoustic
refrigeration, magnetic refrigeration, electro-hydrodynamic heat
exchangers, and copper rotor motors. All five of these design options
were screened out because they are in the research stage and would not
be practical to manufacture, install, and service. Since the
publication of the ANOPR, DOE is not aware of any significant changes
to the status of these technologies, and has not included them in the
NOPR analysis.
ACEEE recommended that variable-speed compressors be included in
the analysis. (ACEEE, No. 16 at p. 2) EEI also suggested that DOE
consider the use of variable-speed drives for compressors. (EEI, No. 15
at p. 2) Variable-speed compressors could potentially improve the
efficiency of commercial refrigeration equipment classes that are self-
contained units without doors and self-contained ice-cream freezers.
Variable-speed compressors can reduce energy consumption under real-
world conditions by matching cooling capacity to the refrigeration
load, which can change due to variations in ambient conditions and
product loading. This load matching allows for a more constant
temperature inside the case, eliminating the large fluctuations in
temperature that are typical of single-speed compressors. The stability
in temperature allows manufacturers to design equipment with higher
evaporator temperatures, improving compressor efficiency. However, the
energy-saving benefit of variable-speed compressors is not clear under
ANSI/ASHRAE Standard 72-2005, because it is a steady-state test for
commercial refrigeration equipment. Further, DOE is not aware of any
test data showing the energy savings benefit of variable speed
compressors in the types of equipment covered in this rule. Certain
test data does exist for walk-ins and residential refrigerators, but
DOE does not believe that this data can be used to predict the
performance of variable-speed compressors in commercial refrigeration
equipment. Therefore, DOE did not include variable-speed compressors as
a design option in its engineering analysis.
ACEEE recommended that variable-speed evaporator fans be included
in the analysis. (ACEEE, No. 16 at p. 2) San Diego Gas & Electric
Company (SDGE) also recommended that DOE include in its analysis the
energy savings, cost-effectiveness, and feasibility of such fans for
enclosed refrigeration equipment served by remote refrigeration
compressors. (SDGE, No. 22 at p. 2) SCE recommended that DOE consider
the cost-effectiveness of variable-speed evaporator fans for this
equipment. SCE asserted that variable-speed fan control was a very
effective and cost-effective means of increasing refrigerated warehouse
efficiency and should be applicable to commercial refrigeration
equipment as well. SCE stated that this reduces the energy consumption
of the fan and the amount of load that the refrigerant must reject. SCE
also noted that its work in support of California building and
appliance standards showed variable-speed controls on evaporator fans
had approximately one-year simple paybacks in both refrigerated
warehouses and small walk-in coolers. (Public Meeting Transcript, No.
13.5 at p. 69 and SCE, No. 19 at p. 3) EEI also
[[Page 50088]]
suggested that DOE consider the use of variable-speed drives for
evaporator fans and compressors. (EEI, No. 15 at p. 2)
Variable-speed evaporator fans can operate at speeds that match
changing conditions in the case. DOE recognizes that the use of these
fans provides some opportunity for energy savings, because the buildup
and removal of frost creates differing pressure drops across the
evaporator coil. Theoretically, less fan power is required when the
coil is free of frost. Additionally, when an evaporator fan operates at
variable speeds, the coil would operate at a more stable temperature
during the period of frost build-up. However, the effectiveness of the
air curtain in equipment without doors is very sensitive to changes in
airflow, so fan motor controllers would likely disrupt air curtains.
DOE believes the likely disturbance to the air curtain, which would
lead to higher infiltration loads and higher overall energy
consumption, would negate the use of evaporator fan motor controllers
in equipment without doors, even if there were some reduction in fan
energy use. In addition, the ANSI/ASHRAE Standard 72-2005 test method
is a steady-state test for commercial refrigeration equipment, so
similar to variable-speed compressors, the energy-saving benefit of
variable-speed fans is not clear. Therefore, DOE did not include
variable-speed fans as a design option in its engineering analysis.
ACEEE recommended that remote ballast location be included in the
analysis. (ACEEE, No. 16 at p. 2) Fluorescent lamp ballasts generate
heat, and their relocation outside the refrigerated space can reduce
energy consumption by lessening the refrigeration load on the
compressor. However, for the majority of commercial refrigeration
equipment currently manufactured, ballasts are already located in
electrical trays outside of the refrigerated space, in either the base
or top of the equipment. The notable exceptions are the equipment
classes in the VCT equipment family, where ballasts are most often
located on the interior of each door mullion. Most commercial
refrigeration equipment manufacturers purchase doors for VCT units that
are preassembled with the entire lighting system in place rather than
configured for separate ballasts. DOE believes that most commercial
refrigeration equipment manufacturers choose these kinds of doors
because it would be labor intensive and time consuming to relocate
these ballasts at the factory, and because of the additional cost and
labor of wiring separate ballasts. Manufacturers have indicated that
the potential energy savings are also small, since modern electronic
ballasts are very efficient and typically contribute only a few watts
(W) each to the refrigeration load. Because (1) lamp ballasts are
already located externally on most equipment; (2) most units that have
internally located lamp ballasts use preassembled lighting systems; and
(3) potential energy savings are small, DOE did not consider remote
relocation of ballasts as a design option in its engineering analysis.
ACEEE recommended that improved insulation be included in the
analysis. (ACEEE, No. 15 at p. 2) Potential improvements to insulation
material used in commercial refrigeration equipment cabinets include
better polyurethane foams and vacuum panels. In consultation with
insulation material manufacturers, DOE determined that there are no
significant differences in ``grades'' of insulation material, so
equipment manufacturers are already using the best commercially
available foam materials in their equipment. Vacuum panels are an
alternative form of insulation; however, they may degrade in
performance in time as small leaks develop. Based on knowledge of
typical manufacturing practices, DOE also believes it would be
impractical to use vacuum panels to construct commercial refrigeration
equipment, because they cannot be penetrated by fasteners, and do not
provide the rigidity of ``foamed-in-place'' polyurethane insulation
panels. Thicker insulation is another possible option, but could be
problematic because it would likely result in either a reduced volume
for the refrigerated space or an increase in the overall size of the
equipment cabinet. Reducing the volume of the refrigerated space could
affect the utility of the equipment, and because the outer dimensions
of commercial refrigeration equipment are often limited (e.g., by
interior dimensions of shipping containers), it is often not practical
to increase the overall size of the cabinet. For all these reasons, DOE
did not consider insulation thickness increases or improvements as a
design option in its ANOPR engineering analysis.
However, DOE did add increases in insulation thickness as a design
option in the NOPR engineering analysis, because it now believes this
is a cost-effective option in several equipment types, most notably
self-contained ice-cream freezers with doors. DOE understands that in
equipment classes where conduction makes up a significant portion of
the total refrigeration load, a modest increase in insulation thickness
can lead to small, but significant energy savings. In relatively large
units, which make up the largest portion of the shipments of commercial
refrigeration equipment, even if such added insulation results in
reduction of the refrigerated volume, any such reduction would not be
substantial. DOE does not foresee any impact on the availability of
this type of equipment from the use of increased insulation that would
trigger EPCA's prohibition at 42 U.S.C. 6295(o)(4) and 6316(e)(1). As
to smaller units, DOE assumes that their outer dimensions are less
constrained than the dimensions of larger units, and that therefore
manufacturers could accommodate a small increase in insulation
thickness, and maintain the amount of refrigerated volume, by making a
small increase in the overall size of the cabinet. Therefore, in the
NOPR, DOE modeled a \1/2\-inch increase in insulation thickness for all
equipment classes. When implemented as a design option, this increase
in thickness was added to the baseline value of insulation thickness
and DOE recalculated the conduction load. DOE based the cost of
increasing the insulation thickness on a sunk cost per unit,
considering foam fixture engineering and tooling costs, production line
lifetime, and number of fixtures and units produced. Chapter 5 of the
TSD provides details of the assumptions DOE used to calculate the
additional cost of insulation thickness increases.
ACEEE recommended that DOE include defrost cycle control in the
analysis. (ACEEE, No. 16 at p. 2) Defrost cycle control can reduce
energy consumption by reducing the frequency and duration of defrost
periods. The majority of equipment currently manufactured already uses
partial defrost cycle control in the form of cycle termination control.
However, defrost cycle initiation is still scheduled at regular
intervals. Full defrost cycle control would involve detecting frost
buildup and initiating defrost. As described in the market and
technology assessment (Chapter 3 of the TSD), this could be
accomplished through an optical sensor or by sensing the temperature
differential across the evaporator coil. However, both methods are
unreliable due to problems with fouling of the coil from dust and other
surface contaminants. This becomes more of an issue as the display case
ages. Because of these issues, DOE did not consider defrost cycle
control as a design option in its engineering analysis.
SCE asserted that doors should be considered a design option for
open
[[Page 50089]]
units, and that open units without doors should be held to energy
consumption standards at levels warranted for units with doors. (Public
Meeting Transcript, No. 13.5 at p. 44) SCE advocates, in essence, that
manufacture of new, open commercial refrigeration equipment be
discontinued and replaced by manufacture of equipment with doors. It
stated that this would be a cost-effective way of saving substantial
amounts of energy. (SCE, No. 19 at p. 2) Although SCE did not state it
explicitly, DOE understands that its main argument for advocating that
doors be considered for open cases is that doors should be regarded as
a design option and not a feature, such that there are not separate
equipment classes for equipment with and without doors.
DOE acknowledges SCE's position. Substantial, cost-effective energy
savings might well result from standards that would, in effect, require
the manufacture of commercial refrigeration equipment with doors
instead of without. DOE has not considered such standards in this
proceeding, however, nor has it studied their potential energy savings
or economic justification (including the extent of their impact on
product utility), because it believes EPCA precludes their adoption.
First, DOE believes that, for commercial refrigeration equipment, the
existence or lack of doors (i.e., whether the case is open or closed)
does affect the utility of the equipment to its owner and user, and
therefore is a ``feature'' as that term is used in 42 U.S.C. 6295(o)(4)
and 6316(e)(1). Because a standard based on combining open and closed
equipment classes would result in the unavailability of open cases, as
described above, such a standard would violate EPCA's prohibition
against any standard that would ``result in the unavailability'' of
equipment with ``features * * * that are substantially the same'' as
those currently available in the United States. (42 U.S.C. 6295(o)(4)
and 6316(e)(1)) Second, EPCA prescribes energy conservation standards
for self-contained equipment with doors, and mandates that DOE issue
standard levels for ``self-contained commercial refrigerators,
freezers, and refrigerator-freezers without doors.'' (42 U.S.C.
6313(c)(2)-(4)) The latter equipment is one of the subjects of this
rulemaking. Hence, the plain language of EPCA covers standards for
commercial refrigeration equipment with and without doors. DOE must
follow this legislative mandate. For these reasons, DOE did not
consider doors as a design option for open equipment in its engineering
analysis. The design options DOE considered in the NOPR engineering
analysis are:
Higher efficiency lighting and ballasts for the VOP, SVO,
HZO, and SOC equipment families (horizontal fixtures);
Higher efficiency lighting and ballasts for the VCT
equipment family (vertical fixtures);
Higher efficiency evaporator fan motors;
Increased evaporator surface area;
Increased insulation thickness;
Improved doors for the VCT equipment family, low
temperature;
Improved doors for the VCT equipment family, medium
temperature;
Improved doors for the HCT equipment family, ice-cream
temperature;
Improved doors for the SOC equipment family, medium
temperature;
Higher efficiency condenser fan motors (for self-contained
equipment only);
Increased condenser surface area (for self-contained
equipment only); and
Higher efficiency compressors (for self-contained
equipment only).\16\
---------------------------------------------------------------------------
\16\ Improvements to the condensing unit are not considered for
remote condensing equipment, since the test procedure and standard
apply only to the cabinet and not the condensing unit.
---------------------------------------------------------------------------
At the public meeting and during the comment period, stakeholders
raised concerns about some of the design option data DOE used in its
analysis and about DOE's depiction of some of the design options.
Several stakeholders were concerned with the lighting design option
data. Zero Zone stated that DOE's estimate of the incremental increase
in cost for light emitting diode (LED) lighting was too low. (Public
Meeting Transcript, No. 13.5 at p. 89) ARI seemed to agree with Zero
Zone's assessment, stating that DOE appears to have significantly
underestimated the incremental cost for LED lighting by about 50
percent.
DOE revised its cost assumption for LED lighting used in the VOP,
SVO, HZO, and SOC equipment families (horizontal four-foot fixtures)
and the VCT equipment family (vertical 5-foot fixtures). For the ANOPR,
DOE based LED lighting costs on an LED retrofit case study, but DOE
revised some of its assumptions for the NOPR based on conversations
with manufacturers of LED chips and LED fixtures. Specifically, DOE
revised its assumptions on the relative weight of the costs of LED
chips, power supplies, and the balance of fixtures (which includes
labor). These changes cause the original equipment manufacturer (OEM)
cost (i.e., the cost to commercial refrigeration equipment
manufacturers) of LED fixtures to increase for both horizontal and
vertical fixtures. DOE believes the cost estimates for LED fixtures are
now more accurate and are consistent with the costs commercial
refrigeration equipment manufacturers would experience in today's
market at mass-production volumes. Further discussion of the
assumptions used to calculate LED fixture costs are provided in Chapter
5 of the TSD.
Although DOE found that current LED costs are higher than
originally estimated in the ANOPR analysis, through a closer
examination of cost data for currently available LEDs, DOE recognizes
that LED technology has historically exceeded DOE's efficiency and cost
targets. In this NOPR, DOE conducted a sensitivity study that analyzed
future LED costs based on DOE's Multi-Year Program Plan,\17\ which are
consistent with historical LED price reductions between 2000 and 2007
(see Appendix B of the TSD). The Multi-Year Program Plan projects that
LED chip costs will continue to decrease at a compound annual growth
rate (CAGR) of approximately -27 percent between 2007 and 2012, which
represents a price reduction of 80 percent over that time period. Also
in agreement, EIA's NEMS uses a technology characterization for LED
light sources, which show that LED chip costs are expected to decline
by approximately 71 percent for the same time period. Since LED chips
are only a portion of the total LED system (other components include
power supply and the LED fixture), the 80 percent reduction in chip
costs contributes to an estimated decrease in total LED system cost of
approximately 50 percent by 2012, assuming the costs of the power
supply and LED fixtures do not change significantly.
---------------------------------------------------------------------------
\17\ U.S. Department of Energy, Solid-State Lighting Research
and Development, Multi-Year Program Plan FY'09-FY'14. This document
was prepared under the direction of a Technical Committee from the
Next Generation Lighting Initiative Alliance (NGLIA). Information
about the NGLIA and its members is available at http://
www.nglia.org.
---------------------------------------------------------------------------
DOE examined whether the projected LED costs presented in the
Multi-Year Program Plan and used in this NOPR are consistent with
publicly available empirical historical cost data. DOE reviewed
available price data for the LED market and found that between 2000 and
2007, white-light LEDs had a CAGR ranging from approximately -18 to -31
percent. DOE's LED cost projection (i.e., -27 percent CAGR) falls
within the range of CAGRs observed.
[[Page 50090]]
DOE expanded its examination by comparing this projected trend to
the red-light LED market, which is a related technology, with price
information spanning approximately three decades (i.e., 1973 to 2005).
DOE found that the CAGR of red-light LED costs was -22 percent over
this longer time span. The trend in red-light LED costs derived from
empirical data over this longer time period is of a similar magnitude
to DOE's projected costs for white-light LEDs. Due to the technological
similarities between red-light LEDs and white-light LEDs, DOE believes
that the historical cost reductions for red-light LEDs are indicative
of future cost reductions for white-light LEDs. Furthermore, the white-
light LED market is undergoing a massive expansion and growth phase,
with significant investment, new products and innovative applications
for LED technology, including illumination of commercial refrigeration
equipment. See Section V.C of this NOPR and Appendix B of the TSD for
more detail on the cost projection and DOE's validation of those
estimates. DOE seeks comment on the extent to which these price trends
are indicative of what can be expected for commercial refrigeration
equipment LED lighting from 2007 to 2012 and the extent to which the
cost reduction observed for red-light LEDs is relevant to DOE's cost
projections for white-light LEDs. Also, in order to consider that LED
costs are to decline more than assumed in this analysis, DOE will need
more information than currently available on the extent, timing, and
certainty of such further price reductions. Finally, DOE seeks comment
on the extent to which manufacturers would adopt LED technology into
the design of commercial refrigeration equipment in the absence of
standards considering the rapid development of LED technology and the
steady reductions in cost. See Section VII.E.1 for details.
The design option data for doors on VCT equipment were another area
of concern for stakeholders. Zero Zone stated that the incremental
increase in cost for high-efficiency doors (particularly cooler doors)
seemed too high. (Public Meeting Transcript, No. 13.5 at p. 89) ACEEE
also indicated that DOE's costs for high-efficiency doors are too high.
(ACEEE, No. 16 at p. 2) ARI stated that it does not believe that the
door used in DOE's analysis (one that uses no energy) is available in
the market today. According to ARI, high-efficiency door models
currently in the market have no heat in the door, but the frame
installed in the case uses at least 40 W per door. ARI also stated that
this option is not available to manufacturers in all applications
because it is not intended for stores that operate outside a condition
of 75 [deg]F dry bulb and 55 percent relative humidity, which requires
higher wattage anti-condensate heaters in the doors/frames. (ARI, No.
18 at p. 6) Zero Zone made similar comments, stating that building
humidity could be an issue in the use and functionality of higher
efficiency doors without heaters. Zero Zone also recommended that DOE
revise its analysis and use 40 W per door for the high-efficiency
medium temperature frame, and that high-efficiency doors should be
dropped from the analysis because they can result in condensate and
water on the floor, such that they are not safe to use in a number of
stores. (Public Meeting Transcript, No. 13.5 at p. 119 and Zero Zone,
No. 17 at p. 2)
DOE did not revise its costs for doors on VCT equipment. After
reviewing the information collected for the ANOPR analysis, DOE
concluded that its preliminary cost estimates were reasonable.
Notwithstanding the stakeholder observations just set forth, none of
them provided any specific additional data that would warrant revision
of DOE's cost assessments, and DOE is not aware of such data. However,
DOE revised the values for the anti-sweat heater power for glass doors
for VCT.RC.L and VCT.RC.I equipment in the NOPR engineering analysis.
Based on discussion with manufacturers and data from manufacturer
specification sheets, the anti-sweat heater power for both the baseline
and high-efficiency doors was increased (from 160 W to 200 W for
baseline doors and from 60 W to 110 W for high-efficiency doors). DOE
also revised the anti-sweat heater power for glass doors for VCT.RC.M
equipment in the NOPR engineering analysis based on comments and data
received from manufacturer specification sheets. DOE increased the
anti-sweat heater power for both the baseline doors (from 60 W to 100
W) and high-efficiency doors (from 0 W to 50 W). See Chapter 5 of the
TSD for more detail.
Regarding the compressor design options, Emerson noted that
possible efficiency improvements for compressors in self-contained
units may be too optimistic. True believes that because the test
procedure is not steady-state (due to door openings), variable-speed
compressors may be an effective design option. (Public Meeting
Transcript, No. 13.5 at p. 75) However, True also noted that few
variable-speed compressors are available in the appropriate power
range, but that their development is continuing. (Public Meeting
Transcript, No. 13.5 at p. 76) Emerson also believes that high-
efficiency compressors may not be readily available and that it may be
particularly hard to find compressors capable of this level of
increased efficiency for low temperature equipment. (Public Meeting
Transcript, No. 13.5 at p. 65) For the NOPR, DOE revised the
assumptions it used to estimate the changes in cost and efficiency for
high-efficiency, single-speed compressors. Based on discussions with
manufacturers and other experts, DOE concluded that the assumptions
used in the ANOPR analysis (a 10 percent increase in cost results in a
20 percent reduction in energy use) overstated the actual efficiency
gains that are possible for today's compressors. Therefore, DOE now
assumes that a five percent increase in cost would result in a 10
percent reduction in compressor energy use. Per-dollar efficiency gains
are equivalent with these new assumptions, but the overall magnitude of
power reduction and the cost premium are reduced. This change affects
only the self-contained equipment classes analyzed in the engineering
analysis.
Additionally, in the NOPR analysis, DOE revised the capacity values
used to select self-contained compressors in the energy consumption
model. DOE's energy consumption model selects the most appropriate
compressor by comparing each compressor's capacity to the total
refrigeration load in the case multiplied by the compressor oversize
factor. Because compressor capacity is dependent on the conditions the
compressor is tested at (compressor manufacturers provide capacity data
over a range of conditions), it is important to select the compressor
capacity based on the same conditions used to calculate total
refrigeration load. For the ANOPR analysis, DOE listed capacity at
standard ASHRAE rating conditions. However, the standard rating
conditions used in the ASHRAE 540-2004 standard differ from the
operating conditions used in the model, and each set of conditions
results in different capacity values.\18\ Because the standard
conditions and modeled
[[Page 50091]]
conditions differed, the model typically overestimated the capacity of
the selected compressors. To compensate, DOE adjusted the compressor
oversize factor to an unrealistic level (typically 1) in order for the
ANOPR model to select the correct compressor. For the NOPR, DOE used
capacities based on the same conditions used to calculate total
refrigeration load and revised the oversize factor (typically 1.4 in
the NOPR model) for all self-contained equipment classes to maintain
the selection of the correct compressor size. See Chapter 5 of the TSD
for more detail.
---------------------------------------------------------------------------
\18\ ASHRAE Standard 540-2004 lists standard rating conditions
for hermetic refrigeration compressors. For medium-temperature
equipment, compressors are rated at 20 [deg]F suction dewpoint, 120
[deg]F discharge dewpoint, 40 [deg]F return gas, and 0 [deg]F
subcooling. For low-temperature equipment, compressors are rated at
-10 [deg]F suction dewpoint, 120 [deg]F discharge dewpoint, 40
[deg]F return gas, and 0 [deg]F subcooling. For ice-cream-
temperature equipment, compressors are rated at -25 [deg]F suction
dewpoint, 105 [deg]F discharge dewpoint, 40 [deg]F return gas, and 0
[deg]F subcooling.
---------------------------------------------------------------------------
In the analysis for the ANOPR, the calculation of LED energy use
assumed that the LED lighting fixtures at the ends of VCT cases were
identical to those between doors. With fluorescent fixtures,
manufacturers install the same lamp regardless of whether it is at the
end of the case (attached to an end mullion) or between doors (attached
to an interior mullion). This causes excess light at the ends of the
case. The light output of a single lamp between two doors is directed
in both directions (i.e., behind two doors), whereas lamps at the ends
direct light only on the contents behind the end door. LED fixtures are
inherently scalable, so manufacturers can install an LED fixture in the
end mullion that uses fewer LEDs than fixtures in interior mullions. In
the NOPR analysis, the calculation assumes single-row LED fixtures are
used in the end mullions and that these fixtures use roughly 75 percent
of the energy of double-row fixtures in interior mullions. See Chapter
5 of the TSD for more detail.
4. Baseline Models
As mentioned above, the engineering analysis estimates the
incremental costs for equipment with efficiency levels above the
baseline in each equipment class. DOE was not able to identify a
voluntary or industry standard that provided a minimum baseline
efficiency requirement for commercial refrigeration equipment.
Therefore, it was necessary for DOE to determine baseline
specifications for each equipment class to define the energy
consumption and cost of the typical, baseline equipment. These
specifications include dimensions, number of components, temperatures,
nominal power ratings, and other case features that affect energy
consumption, as well as a basic case cost (the cost of a piece of
equipment not including the major efficiency-related components such as
lights, fan motors, and evaporator coils).
DOE established baseline specifications for each equipment class
modeled in the engineering analysis by reviewing available manufacturer
data, selecting several representative units from available
manufacturer data, and then aggregating the physical characteristics of
the selected units. This process created a unit representative of
commercial refrigeration equipment currently being offered for sale in
each equipment class, with average characteristics for physical
parameters (e.g., volume, TDA), and minimum performance of energy-
consuming components (e.g., fans, lighting). DOE used the cost model to
develop the basic case cost for each equipment class. See Appendix B of
the TSD for these specifications.
Zero Zone expressed concern over DOE's method for calculating the
internal case volume. Zero Zone suggested that DOE update its analysis
to use ARI Standard 1200 for calculating the internal volume of a case.
This standard calculates internal volume using the internal height and
depth of the case from the inside of the door to the rear wall or rear
duct. This is typically how the industry calculates internal volume.
(Zero Zone, No. 17 at p. 1)
In its engineering analysis, DOE followed the methodology in ANSI/
ARI Standard 1200-2006 when calculating the refrigerated volume
parameter used in the baseline design specifications. DOE used the
internal height and depth of the case from inside of the door to the
rear wall. No subtractions were made for shelving or other protrusions
within the case interior envelope.
At the public meeting, Zero Zone expressed concern over the
lighting technology for the baseline models in each equipment class.
Zero Zone stated that T12 lighting is no longer used in closed cases,
and that T8 lighting is now the baseline for those cases. (Public
Meeting Transcript, No. 13.5 at p. 88) Further, Zero Zone reiterated in
writing that the baseline lighting for cases with a vertical
transparent door should be T8. (Zero Zone, No. 17 at p. 3) DOE has
changed the baseline specifications and is now using T8 lighting in the
analysis of baseline models.
Stakeholders raised concerns over the accuracy of some of the data
used for the baseline models. Zero Zone stated that the TDA for
VCT.RC.L and VCT.RC.M cases may be incorrect, and that the sum of the
TDA for each door did not equal the TDA of the entire case for these
two equipment classes. (Zero Zone, No. 17 at p. 3)
In the NOPR analysis, DOE made several revisions to the baseline
specifications. Appendix B of the TSD shows changes to baseline design
specifications relative to the ANOPR analysis. DOE revised the TDA for
VCT.RC.L and VCT.RC.M equipment so that the sum of the display area of
the doors matches the TDA of the case. The baseline models used in the
NOPR analysis are more representative of actual equipment than those
DOE used in the ANOPR analysis, but in some situations, the changes to
baseline characteristics affected the baseline energy consumption
significantly compared to the ANOPR. Four equipment classes (HZO.RC.M,
HZO.SC.M, HZO.SC.L, and VCS.SC.I) had changes that resulted in a
significant increase in the baseline energy consumption, and one
equipment class (SOC.RC.M) had changes that resulted in a decrease in
the baseline energy consumption. See Appendix B of the TSD for more
detail.
For the ANOPR analysis, DOE calculated a baseline energy usage of
0.16 kWh/ft\2\ for the HZO.RC.M equipment class. During manufacturer
interviews, some manufacturers stated that this seemed unreasonably
low. DOE reviewed the data it presented in the ANOPR TSD, as to the
energy consumption of equipment on the market and realized that its
figure for baseline energy usage for HZO.RC.M cases was well below the
amounts indicated by the market data. DOE identified problems with the
ANOPR design specifications for the HZO.RC.M equipment class, namely a
lack of electric defrost and a mismatch between the size of the case
(TDA) and the amount of infiltration load. For the NOPR analysis, DOE
revised its baseline design specifications for this equipment to
include electric defrost based on discussions with manufacturers during
the MIA interviews and a review of market data. Although electric
defrost is not always required on HZO.RC.M cases, about two-thirds of
such equipment on the market use electric defrost. Based on
manufacturer interviews, DOE understands there are lower infiltration
loads (on a per-TDA basis) in horizontal open cases because of the
natural ``well'' of cold air that tends to sit inside the case. In
contrast, for a vertical or semivertical open case, the cold air tends
to spill out of the opening under the influence of gravity. With a
lower infiltration load for a given TDA, there is less heat available
to melt frost from the evaporator coil using off-cycle defrost. Thus,
most HZO.RC.M case designs necessitate the use of electric resistance
heating for defrost. DOE also revised the specifications for
[[Page 50092]]
the HZO.RC.M equipment class to include a higher infiltration load (in
accordance with the updated infiltration methodology), and updated
dimensions. In the ANOPR analysis, DOE used defrost meltwater to
estimate the infiltration load. In accordance with the updated
infiltration methodology, DOE used refrigeration load data to calculate
the baseline infiltration load, which was higher than the load
estimated using meltwater data in the ANOPR analysis (Chapter 5 for
details). DOE also revised the dimensions of the HZO.RC.M class to
reflect a somewhat smaller case size that was more representative of
cases currently on the market. This change involved reducing the TDA,
volume, wall area, and case interior surface area, all of which DOE
matched to the infiltration load and other case components. See
Appendix B of the TSD for more detail.
For the HZO.SC.M and HZO.SC.L equipment classes, DOE made changes
similar to those described in the preceding paragraph. These two
equipment classes are in the same equipment family as the HZO.RC.M
equipment class, so they share similarities to that class (e.g., having
the same cabinet). Because of a lack of detailed data for the HZO.SC.M
and HZO.SC.L equipment classes, DOE based its baseline specifications
on the HZO.RC.M equipment class, making reasonable adjustments for
design features specific to self-contained equipment. In particular,
self-contained equipment has a lower compressor energy efficiency ratio
(EER), and an added drain pan heater to evaporate defrost meltwater.
Similar to the HZO.RC.M class, the change in infiltration load
calculation led to a higher infiltration load for the HZO.SC.M class.
DOE also added electric defrost to the HZO.SC.M class and increased the
anti-sweat heater load. For the HZO.SC.L class, electric defrost was
already included, since it is necessary for low-temperature equipment.
However, DOE revised the infiltration load in accordance with the
change in methodology and increased the anti-sweat heater load. See
Appendix B of the TSD for more detail.
Discussions during the manufacturer interviews revealed that in the
ANOPR analysis, the baseline energy usage for the VCS.SC.I equipment
class was unrealistically low. Therefore, in the NOPR analysis, DOE
made revisions that increased energy usage in the baseline equipment
for this class. DOE was unable to verify the accuracy of the baseline
specifications in the ANOPR analysis, because of a lack of publicly
available performance data for this class. For the NOPR, DOE revised
its baseline assumptions to reflect a two-door case instead of the
three-door model analyzed in the ANOPR. DOE believes this change more
accurately reflects the current market for VCS.SC.I cases and is more
in line with the electric defrost power level. DOE increased
infiltration load somewhat relative to the ANOPR specifications and
added anti-sweat power. See Appendix B of the TSD for more detail.
5. Engineering Analysis Results
The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of CDEC (in kWh) versus MSP
(in dollars), both normalized by TDA (or volume for the VCS.SC.I
equipment class). DOE created 15 cost-efficiency curves in the
engineering analysis.
Table IV-7 presents data for these curves. See Chapter 5 of the TSD
for additional detail on the engineering analysis and comparisons of
DOE's analytically derived curves to industry-supplied curves. See
Appendix B of the TSD for complete cost-efficiency results.
BILLING CODE 6450-01-P
[[Page 50093]]
[GRAPHIC] [TIFF OMITTED] TP25AU08.000
BILLING CODE 6450-01-C
C. Markups to Determine Equipment Price
This section explains how DOE developed the distribution channel
markups it used (Chapter 6 of the TSD). DOE used these markups, along
with sales taxes, installation costs, and the MSPs developed in the
engineering analysis, to arrive at the final installed equipment prices
for baseline and higher efficiency commercial refrigeration equipment.
As explained in the ANOPR, 72 FR 41184, and as shown in Table IV-8, DOE
defined three distribution channels for commercial refrigeration
equipment to describe how the equipment passes from the manufacturer to
the customer.
[[Page 50094]]
Table IV-8--Distribution Channel Market Shares for Commercial Refrigeration Equipment
[In percent]
----------------------------------------------------------------------------------------------------------------
Channel 1 Channel 2 Channel 3
-----------------------------------------------
Manufacturer Manufacturer, Manufacturer,
---------------- wholesaler wholesaler,
---------------- contractor
Customer ---------------
Customer Customer
----------------------------------------------------------------------------------------------------------------
Remote Condensing Equipment..................................... 70 15 15
Self-Contained Equipment........................................ 30 35 35
----------------------------------------------------------------------------------------------------------------
For the ANOPR analysis, DOE estimated shares of 86 percent, 7
percent, and 7 percent for the manufacturer, manufacturer/wholesaler,
and manufacturer/wholesaler/contractor channels, respectively, for all
commercial refrigeration equipment, based on market estimates from
consultants. At the ANOPR public meeting, ARI and Carrier commented
that the breakdown should be changed to 70 percent, 15 percent, and 15
percent among the three channels, respectively, for remote condensing
equipment and 30 percent, 35 percent, and 35 percent, respectively, for
self-contained equipment. (Public Meeting Transcript, No. 13.5 at p.
122; ARI, No. 18 at p. 7) No other alternative estimates were provided
of shipments through these distribution channels. Therefore, in the
NOPR, DOE decided to modify the breakdown and it recalculated the
overall markups using the same procedure described in the ANOPR (72 FR
41184), but based upon the industry comments from ARI and Carrier. The
new overall baseline and incremental markups for sales to supermarkets
within each distribution channel are shown in Table IV-9, Table IV-10,
Table IV-11, and Table IV-12, respectively. Chapter 6 of the TSD
provides additional details on markups.
Table IV-9--Baseline Markups by Distribution Channel Including Sales Tax for Self-Contained Equipment in
Supermarkets
----------------------------------------------------------------------------------------------------------------
Mechanical National
contractor account
Wholesaler (includes (manufacturer- Overall
wholesaler) direct)
----------------------------------------------------------------------------------------------------------------
Distributor(s) Markup........................... 1.436 2.182 1.218 1.631
Sales Tax....................................... 1.068 1.068 1.068 1.068
Overall Markup.................................. 1.533 2.330 1.300 1.742
----------------------------------------------------------------------------------------------------------------
Table IV-10--Baseline Markups by Distribution Channel Including Sales Tax for Remote Condensing Equipment in
Supermarkets
----------------------------------------------------------------------------------------------------------------
Mechanical National
contractor account
Wholesaler (includes (manufacturer- Overall
wholesaler) direct)
----------------------------------------------------------------------------------------------------------------
Distributor(s) Markup........................... 1.436 2.182 1.218 1.395
Sales Tax....................................... 1.068 1.068 1.068 1.068
Overall Markup.................................. 1.533 2.330 1.300 1.490
----------------------------------------------------------------------------------------------------------------
Table IV-11--Incremental Markups by Distribution Channel Including Sales Tax for Self-Contained Equipment in
Supermarkets
----------------------------------------------------------------------------------------------------------------
Mechanical National
contractor account
Wholesaler (includes (manufacturer- Overall
wholesaler) direct)
----------------------------------------------------------------------------------------------------------------
Distributor(s) Markup........................... 1.107 1.362 1.054 1.180
Sales Tax....................................... 1.068 1.068 1.068 1.068
Overall Markup.................................. 1.182 1.454 1.125 1.260
----------------------------------------------------------------------------------------------------------------
[[Page 50095]]
Table IV-12--Incremental Markups by Distribution Channel Including Sales Tax for Remote Condensing Equipment in
Supermarkets
----------------------------------------------------------------------------------------------------------------
Mechanical National
contractor account
Wholesaler (includes (manufacturer- Overall
wholesaler) direct)
----------------------------------------------------------------------------------------------------------------
Distributor(s) Markup........................... 1.107 1.362 1.054 1.108
Sales Tax....................................... 1.068 1.068 1.068 1.068
Overall Markup.................................. 1.182 1.454 1.125 1.183
----------------------------------------------------------------------------------------------------------------
D. Energy Use Characterization
The energy use characterization estimates the annual energy
consumption of commercial refrigeration equipment systems (including
the remote condensing units). This estimate is used in the subsequent
LCC and PBP analyses (Chapter 8 of the TSD) and NIA (Chapter 11 of the
TSD). DOE estimated the energy consumption of the 15 equipment classes
analyzed in the engineering analysis (Chapter 5 of the TSD) using the
relevant test procedure. DOE then validated these energy consumption
estimates with annual whole-building simulation modeling of selected
equipment classes and efficiency levels. One of the key assumptions in
both the engineering analysis and the whole-building simulation in the
ANOPR analysis was that the display case lighting operated 24 hours per
day. DOE conducted a limited sensitivity analysis to explore how
variation in display case lighting operating hours affected the energy
savings. The sensitivity analysis showed that energy savings fell as
lighting operating hours were reduced for all equipment classes that
used display case lighting. The magnitude of this effect depended on
the equipment class.
At the ANOPR public meeting, SCE stated that it was studying
display case lighting and will gladly share results of the study with
DOE as soon as the study is done. (Public Meeting Transcript, No. 13.5
at p. 117) Hussman stated that with today's low-temperature cabinets,
store owners won't turn those lights off because they may not come back
on when they are so cold. (Public Meeting Transcript, No. 13.5 at p.
118) Hill Phoenix stated that turning off fluorescent lights at night
can lead to maintenance issues because of moisture infiltration, so it
is typical to leave the lights on all night. LEDs don't have that
problem. They agreed that 24-hour lighting is not a bad assumption.
(Public Meeting Transcript, No. 13.5 at p. 118) Another manufacturer,
Zero Zone, also agreed that 24 hours is a valid assumption for case
lighting operating hours. (Zero Zone, No. 17 at p. 4) ARI recommended
that the DOE analysis be based on 24 hours-per-day operation as this
represents the worst-case scenario and many stores are open for 24
hours. (ARI, No. 18 at p. 4) Based on these comments, DOE decided to
leave the assumption of display case lighting operating hours of 24
hours per day unchanged for the NOPR analysis. Additional detail on the
energy use characterization can be found in Chapter 7 of the TSD.
DOE also requested comments on other operational factors that might
be encountered in the field that would differ from that found in the
relevant test procedure, the relative frequency of these factors, and
how it could account for them in its energy analysis. DOE received a
comment from the Chinese delegation to the World Trade Organization
stating that it should consider all kinds of on-site factors in
operation and maintenance practices of the commercial refrigerating
equipment when evaluating the optional standard class of the equipment.
(China, No. 20 at pp. 3-4) No specifics on what these factors might be
or how to take them into account were provided, however. Chapter 7 of
the TSD provides additional detail on the energy use characterization.
E. Life-Cycle Cost and Payback Period Analyses
In response to the requirements of Section 325(o)(2)(B)(i) of EPCA,
DOE conducted LCC and PBP analyses to evaluate the economic impacts of
possible new commercial refrigeration equipment standards on individual
customers. This section describes the LCC and PBP analyses and the
spreadsheet model DOE used for analyzing the economic impacts of
possible standards on individual commercial customers. Details of the
spreadsheet model, and of all the inputs to the LCC and PBP analyses,
are in TSD Chapter 8. DOE conducted the LCC and PBP analyses using a
spreadsheet model developed in Microsoft Excel for Windows 2003.
The LCC is the total cost for a unit of commercial refrigeration
equipment, over the life of the equipment, including purchase and
installation expense and operating costs (energy expenditures and
maintenance). To compute the LCC, DOE summed the installed price of the
equipment and its lifetime operating costs discounted to the time of
purchase. The PBP is the change in purchase expense due to a given
energy conservation standard divided by the change in first-year
operating cost that results from the standard. DOE expresses PBP in
years. Otherwise stated, the payback period is the number of years it
would take for the customer to recover the increased costs of a higher-
efficiency product through energy savings. DOE measures the changes in
LCC and in PBP associated with a given energy use standard level
relative to a base case forecast of equipment energy use. The base case
forecast reflects the market in the absence of mandatory energy
conservation standards.
The data inputs to the PBP calculation are the purchase expense
(otherwise known as the total installed customer cost or first cost)
and the annual operating costs for each selected design. The inputs to
the equipment purchase expense were the equipment price and the
installation cost, with appropriate markups. The inputs to the
operating costs were the annual energy consumption, the electricity
price, and the repair and maintenance costs. The PBP calculation uses
the same inputs as the LCC analysis but, since it is a simple payback,
the operating cost is for the year the standard takes effect, assumed
to be 2012. For each efficiency level analyzed, the LCC analysis
required input data for the total installed cost of the equipment, the
operating cost, and the discount rate.
Table IV-13 summarizes the inputs and key assumptions used to
calculate the customer economic impacts of various energy consumption
levels. Equipment price, installation cost, and baseline and standard
design selection affect the installed cost of the equipment. Annual
energy use, electricity costs, electricity price trends, and repair and
maintenance costs affect
[[Page 50096]]
the operating cost. The effective date of the standard, the discount
rate, and the lifetime of equipment affect the calculation of the
present value of annual operating cost savings from a proposed
standard. Table IV-13 also shows how DOE modified these inputs and key
assumptions for the NOPR, relative to the ANOPR.
Table IV-13--Summary of Inputs and Key Assumptions Used in the LCC and
PBP Analyses
------------------------------------------------------------------------
Input Description Changes for NOPR
------------------------------------------------------------------------
Baseline Manufacturer Price charged by Data reflects
Selling Price. manufacturer to updated engineering
either a wholesaler analysis.
or large customer
for baseline
equipment.
Standard-Level Manufacturer Incremental change Data reflects
Selling Price Increases. in manufacturer updated engineering
selling price for analysis.
equipment at each
of the higher
efficiency standard
levels.
Markups and Sales Tax....... Associated with Markups updated
converting the based on revised
manufacturer distribution
selling price to a channel shipment
customer price estimates.
(Chapter 6 of TSD).
Installation Price.......... Cost to the customer Installation prices
of installing the for remote
equipment. This condensing and self-
includes labor, contained equipment
overhead, and any revised based on
miscellaneous ANOPR comments.
materials and
parts. The total
installed cost
equals the customer
equipment price
plus the
installation price.
Equipment Energy Consumption Site energy use Data reflects
associated with the updated engineering
use of commercial analysis for each
refrigeration efficiency level.
equipment, which
includes only the
use of electricity
by the equipment
itself.
Electricity Prices.......... Average commercial Electricity prices
electricity price updated to 2007$
($/kWh) in each using Electricity
State and for four EIA Monthly
classes of Electricity
commercial Database for base
customers, as commercial
determined from EIA electricity prices;
data for 2003$ and AEO2007 to
converted to 2006$. convert 2006 prices
to 2007 prices.
Electricity Price Trends.... Used the AEO2006 Used the AEO2007
reference case to reference case to
forecast future forecast future
electricity prices. electricity prices.
Maintenance Costs........... Labor and material No change in
costs associated methodology. Lamp
with maintaining replacement costs
the commercial reflect updated
refrigeration engineering
equipment (e.g., analysis costs and
cleaning heat are in 2007$.
exchanger coils,
checking
refrigerant charge
levels, lamp
replacement).
Repair Costs................ Labor and material Repair costs in NOPR
costs associated reflect estimates
with repairing or of individual
replacing component life and
components that cost to replace.
have failed. Based Repair costs
on a fixed increase with
percentage of increasing
baseline equipment component costs.
costs.
Equipment Lifetime.......... Age at which the Average equipment
commercial life for small
refrigeration grocery and
equipment is convenience stores
retired from adjusted to 15
service (estimated years.
to be 10 years).
Discount Rate............... Rate at which future Updated to 2007
costs are version of the
discounted to Damodaran website
establish their with very little
present value to change to discount
commercial rates.
refrigeration
equipment users.
Rebound Effect.............. A rebound effect was No change.
not taken into
account in the LCC
analysis.
------------------------------------------------------------------------
The following sections contain brief discussions of the methods
underlying each input and key assumption in the LCC analysis. Where
appropriate, DOE also summarizes comments on these inputs and
assumptions and explains how it took these comments into consideration.
1. Manufacturer Selling Price
The baseline MSP is the price charged by manufacturers to either a
wholesaler/distributor or very large customer for equipment meeting
existing energy use (or baseline) levels. The MSP includes a markup
that converts the MPC to MSP. DOE obtained the baseline MSPs through
industry-supplied efficiency-level data supplemented with a design
option analysis. Refer to Chapter 5 of the TSD for details.
DOE developed MSPs for equipment classes consisting of eight
possible equipment families, two possible condensing unit
configurations (remote condensing and self-contained), and three
possible operating temperature ranges. Not all covered equipment
classes have significant actual shipments (Chapter 3 of the TSD). DOE
carried out the LCC and PBP analyses on the 15 primary equipment
classes identified earlier. DOE estimated the MSP for each primary
equipment class between the baseline efficiency level and for four to
seven additional more-efficient levels. Refer to Chapter 5 of the TSD
for details.
DOE was not able to identify data on relative shipments for
equipment classes by efficiency level, and DOE did not find equivalent
data in the literature or studies. DOE designated the equipment with
the highest energy use as Level 1, and selected this as the baseline
equipment.
In the ANOPR analysis, DOE requested feedback on whether the Level
1 baseline is valid for the LCC analysis, and if not, what changes
should be made to provide a more realistic baseline level. DOE also
asked whether a distribution of efficiencies should be used to
establish the baseline for the LCC analysis. 72 FR 41193, 41208. DOE
received comments on the engineering analysis and the use of the
analytically derived curves versus the industry-supplied curves. DOE
modified the engineering analysis, which resulted in a modified Level 1
baseline. See Section IV.B for details.
ARI stated that it would try to provide energy efficiency
distribution data to DOE, but was unable to provide that data in time
for the NOPR. (Public Meeting Transcript, No. 13.5 at p. 143) EEI
stated that Electric Power Research Institute (EPRI) end use studies
might provide some data that could be used to establish distributions.
(Public Meeting Transcript, No. 13.5 at p. 141) ACEEE suggested that
DOE check with the Northwest Energy Efficiency Alliance for possible
energy efficiency distribution data. (Public Meeting Transcript, No.
13.5 at p. 142) However, ARI agreed with DOE's approach to use the
Level 1 data established in the engineering analysis as the appropriate
baseline for DOE's LCC analysis. DOE was able to explore some of the
data available with the Northwest Energy Efficiency Alliance; however,
the
[[Page 50097]]
available data generally provides only frequency of use of specific
design features and not energy use. Based on this, DOE chose to
continue to use the Level 1 energy efficiency level as the baseline
efficiency level for the LCC analysis. See Chapter 8 of the TSD.
2. Increase in Selling Price
The standard level MSP increase is the change in MSP associated
with producing equipment at lower energy consumption levels associated
with higher standards. DOE developed MSP increases associated with
decreasing equipment energy consumption (or higher efficiency) levels
through a combination of energy consumption level and design-option
analyses. See Chapter 5 of the TSD for details. DOE developed MSP
increases as a function of equipment energy consumption for each of the
15 equipment classes. Although the engineering analysis produced up to
11 energy consumption levels, depending on equipment class, the LCC and
PBP analyses used only up to eight selected energy consumption levels.
3. Markups
As discussed earlier, overall markups are based on one of three
distribution channels and the calculation of baseline and incremental
markups. The distribution channels defined in the ANOPR were also used
for the NOPR analysis, but DOE modified the relative fractions of
shipments through each distribution channel based on stakeholder input.
See Section IV.C, Markups to Determine Equipment Price, for details.
4. Installation Costs
In the ANOPR, DOE derived installation costs for commercial
refrigeration equipment from data provided in RS Means Mechanical Cost
Data.\19\ RS Means provides estimates on the person-hours required to
install commercial refrigeration equipment and the labor rates
associated with the type of crew required to install the equipment. DOE
developed separate installation costs for self-contained and remote
condensing equipment. DOE considered the installation costs to be
fixed, independent of the cost or efficiency of the equipment. Although
the LCC spreadsheet allows for alternative scenarios, DOE did not find
a basis for changing its basic premise for the ANOPR analysis.
---------------------------------------------------------------------------
\19\ RS Means Company, Inc. 2005. Mechanical Cost Data 28th
Annual Edition. Kingston, Massachusetts.
---------------------------------------------------------------------------
DOE received comments on the RS Means installation costs. Zero Zone
commented that the installation costs seem low, and that it tracks
installation costs and would provide installation cost data to DOE.
(Public Meeting Transcript, No. 13.5 at p. 133) Separately, Zero Zone
provided installation costs of $2,000 and $750, respectively, for
remote condensing and self-contained equipment. DOE has decided to use
these cost data in the NOPR analysis. Zero Zone also stated that a
high-efficiency case installation isn't going to cost significantly
more than a standard case unless there are more controls to tune and
adjust. SCE stated that if the installation cost doesn't change with
the equipment efficiency, then it doesn't affect the relative life-
cycle cost. (Public Meeting Transcript, No. 13.5 at p. 117)
The total installed cost is the sum of the equipment price and the
installation cost. DOE derived the customer equipment price for any
given standard level by multiplying the baseline MSP by the baseline
markup and adding to it the product of the incremental MSP and the
incremental markup. Because MSPs, markups, and the sales tax can take
on a variety of values depending on location, the resulting total
installed cost for a particular standard level will not be a single-
point value, but a distribution of values. See Chapter 8 of the TSD.
5. Energy Consumption
The electricity consumed by the commercial refrigeration equipment
was based on the engineering analysis estimates as described previously
in Section IV.B. No change was made to the ANOPR methodology.
6. Electricity Prices
Electricity prices are necessary to convert the electric energy
savings into energy cost savings. Because of the wide variation in
electricity consumption patterns, wholesale costs, and retail rates
across the country, it is important to consider regional differences in
electricity prices. DOE used average commercial electricity prices at
the State level from the EIA Monthly Electricity Database.\20\ The 2006
prices were then converted to 2007$ using AEO2007.
---------------------------------------------------------------------------
\20\ EIA form 826. Annual 1991 through 2006, Jan-Feb 2007.
http://www.eia.doe.gov/cneaf/electricity/page/data.html. Accessed
May 29, 2007.
---------------------------------------------------------------------------
Different kinds of businesses typically use electricity in
different amounts at different times of the day, week, and year, and
therefore face different effective prices. To make this adjustment, DOE
used the 2003 Commercial Building Energy Consumption Survey (CBECS)
data to identify the average prices the four kinds of businesses in
this analysis paid compared with the average prices all commercial
customers paid. The ratios of prices paid by the four types of
businesses to the national average commercial prices seen in the 2003
CBECS were used as multiplying factors to increase or decrease the
average commercial 2006 price data previously developed. Once the
electricity prices for the four types of businesses were adjusted, the
resulting prices were used in the analysis.
To obtain a weighted-average national electricity price, the prices
paid by each business in each State was weighted by the estimated sales
of frozen and refrigerated food products, which also serves as the
distribution of commercial refrigeration equipment units in each State,
to each prototype building. The State/business type weights are the
probabilities that a given commercial refrigeration equipment unit
shipped will be operated with a given electricity price. For evaluation
purposes, the prices and weights can be depicted as a cumulative
probability distribution. The effective electricity prices range from
approximately 5 cents per kWh to approximately 22 cents per kWh.
During the ANOPR public meeting, EEI concurred with the DOE
analysis that shows grocery stores and food markets having lower
electric prices than typical commercial facilities. (EEI, No. 15 at p.
3) DOE continued to use the same approach to develop electric prices
for the NOPR analysis; however, DOE updated electric costs to 2007$.
The section below describes the development and use of State-average
electricity prices by building type; Chapter 8 of the TSD provides more
detail.
7. Electricity Price Trends
The electricity price trend provides the relative change in
electricity prices for future years to 2030. Estimating future
electricity prices is difficult, especially considering that many
States are attempting to restructure the electricity supply industry.
DOE applied the AEO2007 reference case as the default scenario and
extrapolated the trend in values from 2020 to 2030 of the forecast to
establish prices in 2030 to 2042. This method of extrapolation is in
line with methods the EIA uses to forecast fuel prices for the Federal
Energy Management Program (FEMP). DOE provided a sensitivity analysis
of the life-cycle cost savings and PBP results to future electricity
price scenarios using both the AEO2007 high-growth and low-growth
forecasts in
[[Page 50098]]
Chapter 8 of the TSD. ACEEE suggested that the NOPR economic analysis
be recalculated using AEO2008 price forecasts. (ACEEE, No. 16 at p. 2)
However, the AEO2008 was not available when DOE was completing the NOPR
analysis. DOE used the most recent AEO forecast available (AEO2007)
when it performed the LCC analysis for the NOPR.
8. Repair Costs
The equipment repair cost is the cost to the customer of replacing
or repairing components in commercial refrigeration equipment that have
failed. For the ANOPR analysis, DOE calculated the annualized repair
cost for baseline efficiency equipment using the following expression:
RC = k x EQP/LIFE
Where
RC = repair cost in dollars
k = fraction of equipment price (estimated to be 0.5)
EQP = baseline equipment price in dollars, and
LIFE = average lifetime of the equipment in years (estimated to
be 10 years for large grocery and multi-line retail chains and 15
years for small grocery and convenience stores)
DOE placed replacement of lighting components (lamps and ballasts)
under maintenance expenses since the typical lamp life is known and
commonly considered a maintenance item by customers of commercial
refrigeration equipment.
Because data were not available for how repair costs vary with
equipment efficiency, DOE held repair costs constant as the default
scenario for the ANOPR LCC and PBP analyses. DOE received several
comments on the use of constant repair costs for higher efficiency
equipment. Carrier stated that while it had no data to support this,
higher efficiency design options--like adding controls--could cost more
to repair, and it encouraged DOE to find more accurate repair costs
that would correlate with more sophisticated controls. (Public Meeting
Transcript, No. 13.5 at p. 135) Carrier felt that making repair costs
proportional was better than making them flat. ARI stated that the
assumption that repair costs are constant and do not vary with
equipment efficiency is incorrect. (ARI, No. 18 at p. 7) Industry
experience indicates that higher efficiency equipment is more expensive
to repair because it uses more sophisticated and more expensive
components. If actual cost data are not available, ARI recommended that
DOE assume the repair cost to increase as a function of equipment cost.
True stated that many routine maintenance items are affected by higher
efficiency fan motors and lighting systems. (Public Meeting Transcript,
No. 13.5 at p. 136) Hill Phoenix stated that higher maintenance costs
would be incurred with almost any new technology. (Public Meeting
Transcript, No. 13.5 at p. 136) However, True Manufacturing also stated
that no data exists as to whether components such as energy efficient
motors would have the same lifetime or costs as existing components.
(Public Meeting Transcript, No. 13.5 at p. 138) ACEEE stated that it
would caution against a straight ratio of repair cost to initial
purchase cost; for controls this might be appropriate, but it shouldn't
affect repair costs for heat exchangers. (Public Meeting Transcript,
No. 13.5 at p. 137) ACEEE suggested that any measures requiring
increased repair costs be treated on a measure-by-measure basis.
(ACEEE, No. 16 at p. 3)
To address comments on repair costs, DOE contacted users and
manufacturers of commercial refrigeration equipment to determine
typical repair frequency for components used in commercial
refrigeration equipment. Based on this review, DOE estimated
replacement frequencies for five key components that appear to
represent the most common repairs, and for which higher efficiency and
more costly components were used in the engineering analysis for higher
efficiency commercial refrigeration equipment. DOE then annualized the
expected costs for these components at each efficiency level and added
these component costs to the baseline repair cost estimates. This
resulted in repair costs that increase with higher efficiency
equipment. Refer to Chapter 8 of the TSD for details.
9. Maintenance Costs
DOE estimated the annualized maintenance costs for commercial
refrigeration equipment from data in RS Means Facilities Maintenance &
Repair Cost Data.\21\ RS Means provides estimates on the person-hours,
labor rates, and materials required to maintain commercial
refrigeration equipment on a semi-annual basis. DOE used a single
figure of $160/year (2007$) for preventive maintenance for all classes
of commercial refrigeration equipment based on data from RS Means.
Because data were not available to indicate whether, and if so, how,
maintenance costs vary with equipment efficiency, DOE held preventive
maintenance costs constant even as equipment efficiency increased. Lamp
replacement and other lighting maintenance activities are required
maintenance for commercial refrigeration equipment, which DOE
considered to be separate from preventive maintenance, and were not
itemized in the preventive maintenance activities described by RS
Means. Different commercial refrigeration equipment classes have
different numbers of lamps (and ballasts), and many of the efficiency
options DOE considered in the engineering analysis involved changes to
the lighting configuration (lamp, ballast, or use of LED lighting
systems). Because the lighting configurations can vary by energy
consumption level, DOE estimated the relative maintenance costs for
lighting for each case type for which a design-option analysis was
performed. DOE estimated the frequency of failure and replacement of
individual lighting components, estimated the cost of replacement in
the field, and developed an annualized maintenance cost based on the
sum of the total lighting maintenance costs (in 2007$) over the
estimated life of the equipment divided by the estimated life of the
equipment.
---------------------------------------------------------------------------
\21\ RS Means Company, Inc. 2006. Means Costworks 2006: Facility
Maintenance & Repair Cost Data. Kingston, Massachusetts.
---------------------------------------------------------------------------
DOE based costs for fluorescent lamp and ballast replacements on a
review of the OEM costs used in the engineering analysis, RS Means
estimates, cost data from Grainger, Inc., and previous studies. DOE
estimated the costs of field replacement using labor cost hours from RS
Means Electrical Cost Data \22\ for typical lamp or ballast replacement
for other lighting fixtures using a 150-percent multiplier on OEM costs
for lamps and ballasts (provided in the engineering analysis
spreadsheets) to reflect retail pricing. See Chapter 8 of the TSD for
details.
---------------------------------------------------------------------------
\22\ RS Means Company, Inc. 2005. 2005 RS Means Electrical Cost
Data. Kingston, Massachusetts.
---------------------------------------------------------------------------
Fluorescent lamp and ballast technology is mature, so DOE made no
change in inflation-adjusted costs for these components. However,
because of rapid technological improvement, costs for LED lamps are
declining. DOE estimated the cost for field replacement of LED lighting
fixtures (believed to occur approximately 6 years after the effective
date of the standard, or 2018) at 140 percent of the OEM cost of LED
lighting fixtures (2007 MPC cost in 2007$), plus installation. This
estimate includes installation labor and all retail markups for
replacement fixtures. This estimate of replacement LED costs was based
on 2007 OEM prices for LED fixtures, but with additional contractor
markups for replacement fixtures similar to that used for fluorescent
light ballasts and lamps (150 percent of OEM
[[Page 50099]]
costs). In addition, because of the rapid development of LED technology
and the projected OEM cost reductions for LED systems, DOE performed an
LCC sensitivity analysis that examined the impact of reducing the cost
of the LED replacement fixtures in 2018 by 50 percent of the cost used
in the base analysis.\23\ DOE recognizes that both life and cost
estimates for LED replacement are projections and seeks comment on how
it can best estimate the price for replacement LED fixture costs in the
LCC analysis. This is identified as Issue 1 under ``Issues on Which DOE
Seeks Comment'' in Section VII.E of this NOPR. Chapter 8 of the TSD
provides details on the development of maintenance costs.
---------------------------------------------------------------------------
\23\ DOE anticipates a reduction in installed cost of LED
systems over time. The projected reduction in price for LED systems
is provided and discussed in Sections V.C and IV.B.3.c of this NOPR
and Appendix B of the TSD.
---------------------------------------------------------------------------
10. Lifetime
DOE defines lifetime as the age when a commercial refrigeration
equipment unit is retired from service. In its ANOPR analysis, DOE
based equipment lifetime on discussions with industry experts and other
stakeholders, as well as a review of estimates in the subject
literature. DOE concluded that a typical lifetime of 10 years is
appropriate for commercial refrigeration equipment. In commenting on
the ANOPR analysis, ARI stated that, on average, equipment lifetime is
approximately 10 years. ARI noted, however, that properly installed and
maintained equipment typically has a useful life longer than end-use
customers retain it due to retail store customer business models and
competitive demands to upgrade and remodel stores. (ARI, No. 18 at p.
5) Zero Zone stated that door cases may be changed in store remodels
every 10 years at larger chains, but small independent chains will use
cases for 20 years. (Zero Zone, No. 17 at p. 4) True stated that most
self-contained equipment has a life expectancy of 7 to 12 years,
although it regularly services equipment that is 25 years old. (Public
Meeting Transcript, No. 13.5 at p. 98) For the NOPR analysis, DOE used
an average life of 10 years for large grocery and multi-line retailers,
but modified the lifetime in the LCC analysis to use a longer average
15-year life for the small grocery and convenience store business
types, consistent with stakeholder comments and equipment life
estimates from industry experts regarding smaller stores and
independent grocers and chains. See Chapter 3 of the TSD for more
detail.
Commercial refrigeration equipment units are typically replaced
when stores are renovated, which is before the units would have
physically worn out. Therefore, there is a used equipment market for
commercial refrigeration equipment. Due to the difficulty of
incorporating used equipment into grocery store display case line-ups,
the salvage value to the original purchaser is very low. Therefore, the
ANOPR LCC analysis did not take the used equipment market into account.
This methodology was also maintained in the NOPR LCC analysis.
11. Discount Rate
The discount rate is the rate at which future expenditures are
discounted to establish their present value. DOE derived the discount
rates for the LCC analysis by estimating the cost of capital for
companies that purchase commercial refrigeration equipment. The cost of
capital is commonly used to estimate the present value of cash flows to
be derived from a typical company project or investment. Most companies
use both debt and equity capital to fund investments, so their cost of
capital is the weighted average of the cost to the company of equity
and debt financing.
DOE estimated the cost of equity financing by using the Capital
Asset Pricing Model (CAPM). The CAPM, among the most widely used models
to estimate the cost of equity financing, considers the cost of equity
to be proportional to the amount of systematic risk associated with a
company. The cost of equity financing tends to be high when a company
faces a large degree of systematic risk, and it tends to be low when
the company faces a small degree of systematic risk.
To estimate the weighted average cost of capital (WACC) (including
the weighted average cost of debt and equity financing) of commercial
refrigeration equipment purchasers, DOE used a sample of companies
involved in grocery and multi-line retailing drawn from a database of
7,319 U.S. companies on the Damodaran Online website. The WACC approach
taken to determine discount rates takes into account the current tax
status of the individual firms on an overall corporate basis. DOE did
not evaluate the marginal effects of increased costs (and thus
depreciation due to higher cost equipment on the overall tax status).
DOE used a sample of 17 companies to represent the purchasers of
commercial refrigeration equipment. For each company in the sample, DOE
derived the cost of debt, percent debt financing, and systematic
company risk from information provided by Damodaran Online. DOE
estimated the cost of debt financing from the long-term Government bond
rate (4.39 percent) and the standard deviation of the stock price. The
cost of capital for small, independent grocers; convenience store
franchisees; gasoline station owner-operators; and others with more
limited access to capital is more difficult to determine. Individual
credit-worthiness varies considerably, and some franchisees have access
to the financial resources of the franchising corporation. However,
personal contacts with a sample of commercial bankers yielded an
estimate for the small operator weighted cost of capital of about 200
to 300 basis points (2 percent to 3 percent) above the rates for large
grocery chains. A central value equal to the weighted average of large
grocery chains, plus 250 basis points (2.5 percent), was used for small
operators. Deducting expected inflation from the cost of capital
provides the estimates of the real discount rate by ownership category.
The average after-tax discount rate, weighted by the percentage shares
of total purchases of commercial refrigeration equipment, is 5.87
percent for large grocery stores, 5.11 percent for multi-line
retailers, and 8.37 percent for convenience stores and convenience
stores associated with gasoline stations. DOE received no comments on
the discount rates developed in the ANOPR but took advantage of the
availability of 2007 financial data to update the discount rate
assumptions in the NOPR. See Chapter 8 of the TSD.
12. Payback Period
The PBP is the amount of time it takes the customer to recover the
incrementally higher purchase cost of more energy efficient equipment
as a result of lower operating costs. Numerically, the PBP is the ratio
of the increase in purchase cost (i.e., from a less efficient design to
a more efficient design) to the decrease in annual operating
expenditures. This type of calculation is known as a ``simple'' PBP,
because it does not take into account changes in operating cost over
time or the time value of money, that is, the calculation is done at an
effective discount rate of zero percent.
The equation for PBP is:
PBP = [Delta]IC/[Delta]OC
Where
PBP = payback period in years,
[Delta]IC = difference in the total installed cost between the
more efficient standard level equipment (energy consumption levels
2, 3, etc.) and the baseline (energy consumption level 1) equipment,
and
[Delta]OC = difference in annual operating costs.
[[Page 50100]]
The data inputs to the PBP analysis are the total installed cost of
the equipment to the customer for each energy consumption level and the
annual (first-year) operating costs for each energy consumption level.
The inputs to the total installed cost are the equipment price and the
installation cost. The inputs to the operating costs are the annual
energy cost, the annual repair cost, and the annual maintenance cost.
The PBP uses the same inputs as the LCC analysis, except that
electricity price trends and discount rates are not required. Since the
PBP is a ``simple'' (undiscounted) payback, the required electricity
cost is only for the year in which a new energy conservation standard
is to take effect--in this case, 2012. The electricity price used in
the PBP calculation of electricity cost was the price projected for
2012, expressed in 2007$, but not discounted to 2007. Discount rates
are not used in the PBP calculation.
PBP is one of the economic indicators that DOE uses when assessing
economic impact to a customer. PBP does not take into account the time
value of money explicitly (e.g., through a discount factor), the life
of the efficiency measure, or changing fuel costs over time. In
addition, because PBP takes into account the cumulative energy and
first-cost impact of a set of efficiency measures, it can be sensitive
to the baseline level assumed. In addition, what is deemed an
acceptable payback period can vary. By contrast, when examining LCC
savings by efficiency levels, there is generally a maximum LCC savings
point (minimum LCC efficiency level) indicative of maximum economic
benefit to the customer. The selection of the baseline efficiency level
does not affect the identification of the minimum LCC efficiency level,
although a baseline efficiency is used when calculating net LCC savings
or costs. DOE considers both LCC and PBP as related to the seven
factors discussed in Section II.B to determine whether a standard is
economically justified and whether the benefits of an energy
conservation standard will exceed its burdens to the greatest extent
practicable. However, because LCC uses an explicit discount rate, takes
into account changing energy prices, and does not require selection of
a baseline efficiency level, it is considered by DOE to be a better
indicator of the likely economic impacts on consumers.
F. Shipments Analysis
One of the more important components of any estimate of the future
impact of a standard is equipment shipments. DOE developed forecasts of
shipments for the base case and standards cases and includes those
forecasts in the NES spreadsheet. The shipments portion of the
spreadsheet forecasts shipments of commercial refrigeration equipment
from 2012 to 2042. DOE developed shipments forecasts for the 15 primary
equipment classes by accounting for the shipments to replace the
existing stock of commercial refrigeration equipment, commercial
refrigeration shipments into new commercial floor spaces, and old
equipment removed through demolitions. Chapter 10 of the TSD provides
additional details on the shipments forecasts.
The results of the shipments analysis are driven primarily by
historical shipments data for the 15 equipment classes of commercial
refrigeration equipment, DOE estimates of average equipment life,
relative shipment estimates to each of the four business types, the
existing total floor space in food sales buildings, and the anticipated
growth in food sales floor space estimated in EIA's NEMS. The model
estimates that, in each year, the existing stock of commercial
refrigeration equipment either ages by one year or is worn out and
replaced. In addition, new equipment can be shipped into new commercial
floor space, and old equipment can be removed through demolitions. DOE
chose to preserve the capability to analyze all efficiency levels
analyzed in the LCC in the NIA.
The shipments analysis is a description of commercial refrigeration
equipment stock flows as a function of year and age. While there are 15
equipment classes, the shipment analysis treats each category of
equipment independently such that future shipments in any one class are
unaffected by shipments in any other equipment classes and the relative
fraction of shipments in each product class compared to all commercial
refrigeration equipment shipments is assumed to be constant over time.
DOE recognizes that a retailer of refrigerated or frozen food can
choose to use different classes of commercial refrigeration equipment
to sell the same food product as long as the equipment is in the
required temperature range (i.e. refrigerator, freezer, or ice-cream
temperature range). The decision to adopt one equipment class over
another within the same temperature range will depend on first costs,
operating costs, and the perceived ability to merchandise product. In
addition, relative sales refrigerated versus frozen foods could change
in the future. However, DOE had no information with which to develop
and calibrate a shipments model incorporating these factors.
DOE formulated the equations used in the analysis as updates of the
distribution of stock in any given year, as a function of age, to the
following year using the following steps:
1. DOE first converted the equipment units to linear feet of
display space cooled by those units by taking the national statistics
on sales of equipment and calculating equipment capacity per linear
foot of retail grocery building display space.
2. DOE used this calculation of existing stock, and the average age
of the equipment, as a basis for calculating replacement sales.
3. DOE subtracted replacement sales from historical total sales
statistics to calculate new sales of commercial refrigeration
equipment.
4. DOE forecasted new sales as a function of new construction of
retail food sales space.
5. DOE recorded sales of new and replacement equipment by the year
sold, and depreciated each annual vintage over the estimated life of
the equipment.
6. DOE allocated sales in each year to the 15 equipment classes in
proportion to their relative historical sales.
In response to DOE's presentation of the ANOPR shipment analysis,
the public made two primary comments. True stated that while food sales
buildings are probably representative of remote condensing equipment,
as much as 25 percent of the self-contained market goes into unusual
conditions, but that the majority does end up in some sort of food-
sales type application. (Public Meeting Transcript, No. 13.5 at p. 165)
However, in a follow-up conversation, True agreed that for self-
contained equipment without doors, which is the majority of the self-
contained equipment covered in this rulemaking, the amount of equipment
not shipped to food sales buildings represents a very small fraction of
the total market. DOE concluded that it was therefore unnecessary to
include other business types or building categories for the analysis of
self-contained equipment to be valid and representative.
Other stakeholders commented on the assumption of zero shipments in
the ANOPR for the VOP.RC.L equipment class based on the submitted ARI
shipment data. (Public Meeting Transcript, No. 13.5 at p. 164) ARI, in
turn, stated that zero values in its data submittal to DOE may
represent an equipment class where only one or two manufacturers have
shipments. These data were excluded to maintain confidentiality.
(Public Meeting
[[Page 50101]]
Transcript, No. 13.5 at p. 52) To address these issues, DOE estimated
the shipments for the VOP.RC.L equipment class at five percent of the
similarly designed VOP.RC.M equipment class based on information
provided in manufacturer interviews.
Finally, DOE received comments on the impact of the used equipment
market on shipments in the presence of new equipment standards. True
stated that DOE should consider how long existing low-efficiency
equipment will be in service. (Public Meeting Transcript, No. 13.5 at
p. 98) As you drive the cost higher, the life expectancy of existing
equipment increases. ACEEE countered, however, that the issue of used
equipment has come up in other rulemakings. Customers may use existing
equipment longer, but the average was only one or two years more, which
has a small impact on the energy savings projected through 2042. It may
be more of a factor in the manufacturer impact analysis, because that
could affect sales in at least the first year. (Public Meeting
Transcript, No. 13.5 at p. 102)
True stated that the used equipment market is often ignored. As you
drive costs of capital up, you drive the need for low-end users to buy
used equipment and that the higher the cost per unit, the more the used
equipment market thrives. True stated that this is very significant in
the restaurant industry, where studies suggest that 90 percent of all
new non-chain restaurants fail within the first year. Most of these
businesses are buying used equipment. (Public Meeting Transcript, No.
13.5 at p. 202-207) EEI suggested that, if possible, DOE should
investigate the use of used versus new equipment in restaurants, and
make sure that new standards do not increase the purchase of older,
less efficient equipment. (EEI, No. 15 at p. 2)
Follow-up conversations with True lead DOE to believe that it is
unnecessary to take the restaurant business type into account since it
is not a large market for the equipment covered under this rulemaking.
DOE determined that it would not try to account for life extension in
the NIA. While DOE recognizes that there may be some initial life
extension for existing markets for some customers, no data are
available to forecast the frequency and amount of life extension that
might occur within the industry. DOE agrees with ACEEE that this would
result in a relatively small impact on energy savings and, given that
it would also reduce expenditures for new equipment, would have an even
smaller impact on calculated NPV. For the NOPR analysis, DOE did not
assume an initial decrease in sales and life extension for commercial
refrigeration equipment covered in this rulemaking.
Table IV-14 shows the results of the shipments analysis for the 15
commercial refrigeration equipment classes for the base case (baseline
efficiency level or Level 1). As equipment purchase price increases
with higher efficiency levels, a drop in shipments can be expected
relative to the base case. However, as annual energy consumption is
reduced, there is potentially a countering effect of increased
equipment sales due to more frequent installations and use of
commercial refrigeration equipment by retailers (a potential rebound
effect). Although there is a provision in the spreadsheet for a change
in projected shipments in response to efficiency level increases (or
energy consumption level decreases), DOE has no information with which
to calibrate such a relationship. No such data was provided in comments
on the ANOPR analysis. Therefore, for the NOPR analysis, DOE assumed
that the overall shipments do not change in response to the changing
TSLs. Additional details on the shipments analysis can be found in
Chapter 10 of the TSD.
Table IV-14--Forecasted Shipments for Commercial Refrigeration Equipment, 2012-2042, (Base Case)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Thousands of linear feet shipped by year and equipment class
Equipment class ----------------------------------------------------------------------------------------------------
2012 2015 2020 2025 2030 2035 2040 2042 Cumulative
--------------------------------------------------------------------------------------------------------------------------------------------------------
VOP.RC.M........................................... 451 436 451 464 497 531 582 604 15,270
VOP.RC.L........................................... 23 22 23 23 25 27 29 30 763
VOP.SC.M........................................... 30 29 30 31 33 36 39 41 1,027
VCT.RC.M........................................... 32 31 32 33 35 38 42 43 1,091
VCT.RC.L........................................... 448 433 448 461 494 527 578 600 15,167
VCT.SC.I........................................... 11 11 11 11 12 13 14 15 374
VCS.SC.I........................................... 3 3 3 3 3 3 4 4 93
SVO.RC.M........................................... 344 332 344 354 379 405 444 460 11,647
SVO.SC.M........................................... 45 44 45 47 50 53 59 61 1,537
SOC.RC.M........................................... 87 84 87 89 96 102 112 116 2,936
HZO.RC.M........................................... 53 51 53 54 58 62 68 71 1,790
HZO.RC.L........................................... 166 161 166 171 183 196 214 222 5,627
HZO.SC.M........................................... 4 4 4 4 4 5 5 5 132
HZO.SC.L........................................... 8 8 8 8 9 10 10 11 274
HCT.SC.I........................................... 36 35 36 37 39 42 46 48 1,214
--------------------------------------------------------------------------------------------------------------------------------------------------------
G. National Impact Analysis
The NIA assesses future NES and the national economic impacts of
different efficiency levels. The analysis measures economic impacts
using the NPV metric (i.e., future amounts discounted to the present)
of total commercial customer costs and savings expected to result from
new standards at specific efficiency levels.
To make the analysis more accessible and transparent to the public,
DOE used an Excel spreadsheet model to calculate the energy savings and
the national economic costs and savings from new standards. Excel is
the most widely used spreadsheet calculation tool in the United States
and there is general familiarity with its basic features. Thus, DOE's
use of Excel as the basis for the spreadsheet models provides
interested persons with access to the models within a familiar context.
In addition, the TSD and other documentation that DOE provides during
the rulemaking help explain the models and how to use them, and
interested persons can review DOE's analyses by changing various input
quantities within the spreadsheet.
Unlike the LCC analysis, the NES spreadsheet does not use
distributions for inputs or outputs. DOE examined sensitivities by
applying different scenarios. DOE used the NES spreadsheet to perform
calculations of national energy savings and NPV using
[[Page 50102]]
the annual energy consumption and total installed cost data from the
LCC analysis and estimates of national shipments for each of the 15
primary commercial refrigeration equipment classes. DOE forecasted the
energy savings, energy cost savings, equipment costs, and NPV of
benefits for all primary commercial refrigeration equipment classes
from 2012 through 2062. The forecasts provided annual and cumulative
values for all four output parameters.
DOE calculated the NES by subtracting energy use under a standards
scenario from energy use in a base case (no new standards) scenario.
Energy use is reduced when a unit of commercial refrigeration equipment
in the base case efficiency distribution is replaced by a more
efficient piece of equipment. Energy savings for each equipment class
are the same national average values as calculated in the LCC and
payback period spreadsheet. However, these results are normalized on a
per-unit-length basis by equipment class and applied to the total
annual estimated shipments in terms of line-up length of all equipment
with the class. Table IV-15 shows key inputs to the NIA. Chapter 11 of
the TSD provides additional information about the NES spreadsheet.
Table IV-15--Summary of National Energy Savings and Net Present Value
Inputs
------------------------------------------------------------------------
Input data Description Changes for NOPR
------------------------------------------------------------------------
Shipments................... Annual shipments Shipments model
from shipments modified to use a
model (Chapter 10, distribution of
Shipments Analysis). equipment lifetimes
based on a 10-year
average life in
large grocery and
multi-line retail,
and a 15-year
average life in
small grocery and
convenience stores.
Estimates for
shipments for the
VOP.RC.L equipment
class were added
and are provided.
Effective Date of Standard.. 2012................ No change.
Base Case Efficiencies...... Distribution of base No change in
case shipments by methodology to
efficiency level. derive base case
shipments by
efficiency level.
Standards Case Efficiencies. Distribution of No change in
shipments by methodology to
efficiency level derive shipments by
for each standards efficiency level in
case. Standards each standards
case annual market case.
shares by
efficiency level
remain constant
over time for the
base case and each
standards case.
Annual Energy Consumption Annual weighted- No change in
per Linear Foot. average values are methodology. Energy
a function of consumption
energy consumption estimates reflect
level, which are updates to NOPR
established in the engineering
engineering analysis.
analysis (Chapter 5
of the TSD).
Converted to a per
linear foot basis.
Total Installed Cost per Annual weighted- No change in
Linear Foot. average values are methodology.
a function of Installed costs
energy consumption reflect updates to
level (Chapter 8 of NOPR LCC.
the TSD). Converted
to a per linear
foot basis.
Repair Cost per Linear Foot. Annual weighted- No change in
average values are methodology. Repair
constant with costs reflected
energy consumption updates to NOPR
level (Chapter 8 of LCC.
the TSD). Converted
to a per linear
foot basis.
Maintenance Cost per Linear Annual weighted- No change in
Foot. average value methodology, but
equals $156 annual weighted-
(Chapter 8 of the average value
TSD), plus lighting updated to $160 in
maintenance cost. 2007$.
Converted to a per
linear foot basis.
Escalation of Electricity EIA AEO2006 EIA AEO2007
Prices. forecasts (to 2030) forecasts (to 2030)
and extrapolation and extrapolation
for beyond 2030 for beyond 2030
(Chapter 8 of the (Chapter 8 of the
TSD). TSD).
Electricity Site-to-Source Conversion varies Conversion factor
Conversion. yearly and is varies yearly and
generated by DOE/ is generated by
EIA's NEMS* program EIA's NEMS model.
(a time series Includes the impact
conversion factor; of electric
includes electric generation,
generation, transmission, and
transmission, and distribution
distribution losses.
losses).
Discount Rate............... 3 and 7 percent real No change.
Present Year................ Future costs are Future costs are
discounted to year discounted to year
2007. 2008.
Rebound Effect.............. A rebound effect No change.
(due to changes in
shipments resulting
from standards) was
not considered in
the NIA.
------------------------------------------------------------------------
1. Base Case and Standards Case Forecasted Efficiencies
A key component of DOE's estimates of NES and NPV are the energy
efficiencies for shipped equipment that it forecasts over time for the
base case (without new standards) and for each standards case. The
forecasted efficiencies represent the distribution of energy efficiency
of the equipment under consideration that is shipped over the forecast
period (i.e., from the assumed effective date of a new standard to 30
years after the standard becomes effective).
The annual per-unit energy consumption is the site energy consumed
by a commercial refrigeration equipment unit per year. The annual
energy consumption is directly tied to the efficiency of the unit.
Thus, knowing the efficiency of a commercial refrigeration equipment
unit determines the corresponding annual energy consumption. DOE
determined annual forecasted market shares by efficiency level that, in
turn, enabled determination of shipment-weighted annual energy
consumption values.
Because no data were available on market shares broken down by
efficiency level, DOE determined market shares by efficiency level for
commercial refrigeration based on its own analysis. DOE first converted
2005 shipment information by equipment class into market shares by
equipment class, and then adapted a cost-based method similar to that
used in the NEMS to estimate market shares for each equipment class by
efficiency level. This cost-based method relied on cost data developed
in the engineering and life-cycle cost analyses, as well as economic
purchase criteria data taken directly from NEMS. From those market
shares and projections of shipments by equipment class, DOE developed
the future efficiency scenarios for a base
[[Page 50103]]
case (i.e., without new standards) and for various standards cases
(i.e., with new standards). DOE did not have data to calibrate this
approach to actual market shipments by efficiency level. DOE requested
comment on this approach to generating market shares by efficiency
level in the ANOPR.
Commenting on the distribution of market efficiency, ARI stated
that experience with other equipment tells us that the majority of the
shipments are usually at the lower end of the curve of the highest
efficiency. ARI was surprised that DOE had only 25 percent or 30
percent of the shipments at that efficiency level. They also cautioned
DOE that the industry-supplied curves are cost curves and do not mean
that such equipment is on the market today. As Section IV.E, Life-Cycle
Cost, discusses, ARI offered to try to provide data on the distribution
of efficiencies in current equipment but was not able to do so. (Public
Meeting Transcript, No. 13.5 at p. 143) Other stakeholders, such as EEI
and ACEEE, suggested possible avenues that DOE could examine but did
not have data DOE could use to establish a distribution of
efficiencies. (Public Meeting Transcript, No. 13.5 at p. 141-142; p.
173) Because of the lack of data on market shipments by efficiency
level, DOE chose to continue to use the ANOPR approach to estimate
shipments by efficiency level.
DOE developed base case efficiency forecasts based on the estimated
market shares by equipment class and efficiency level. Because there
are no historical data to indicate how equipment efficiencies or
relative equipment class preferences have changed over time, DOE
predicted that forecasted market shares would remain frozen at the 2012
efficiency level until the end of the forecast period (30 years after
the effective date, 2042). DOE requested comments on this assumption.
Copeland commented that since DOE plans to update the forecast in
five years, no one can really figure out what that distribution of
efficiency in the future looks like. (Public Meeting Transcript, No.
13.5 at p. 175) EEI suggested DOE make further contacts with national
accounts that use commercial refrigeration equipment. No suggestions
for improving this assumption were received. For the NOPR, DOE
continued to use the assumption of flat market shares by efficiency
level for the forecast period.
For its determination of standards case forecasted efficiencies,
DOE used a ``roll-up'' scenario to establish the market shares by
efficiency level for 2012, the year that standards become effective.
Information available to DOE suggests that equipment shipments with
efficiencies in the base case that did not meet the standard level
under consideration would roll up to meet the new standard level, and
that all equipment efficiencies in the base case that were above the
standard level under consideration would not be affected. Emerson
commented that a standard brings some compression in the distribution
of efficiencies. (Public Meeting Transcript, No. 13.5 at p. 175)
However, ARI stated the roll-up scenario best represents what is likely
to happen when energy conservation standards take effect. (ARI, No. 18
at p. 5) DOE continued to use the roll-up scenario for the NOPR
analysis.
Finally, DOE recognizes that baseline efficiency trends can change
if equipment costs are different than those projected. For example, if
LED prices drop more than assumed in the engineering analysis, consumer
demand for equipment with LEDs could change. DOE seeks comment on
whether shipments of equipment with LEDs would change if LED costs drop
and if so, the extent and timing of such shipment changes. See Section
VII.E.1.
2. Annual Energy Consumption, Total Installed Cost, Maintenance Cost,
and Repair Costs
The difference in shipments by equipment efficiency level between
the base and standards cases was the basis for determining the
reduction in per-unit annual energy consumption that could result from
new standards. The commercial refrigeration equipment stock in a given
year is the total linear footage of commercial refrigeration equipment
shipped from earlier years that survive in the given year. The NES
spreadsheet model keeps track of the total linear footage of commercial
refrigeration equipment units shipped each year and estimates the total
commercial refrigeration equipment stock for each year. The annual
energy consumption by efficiency level for each equipment category
comes from the LCC analysis and is converted to a per-linear-foot basis
by dividing by the length of the specific equipment analyzed in the
engineering analysis. Similarly, the total installed cost, maintenance
cost, and repair costs for each efficiency level for each equipment
class analyzed in the LCC are converted to a per linear foot basis.
Using the total estimated shipments and total estimated stock by
equipment category and efficiency level, DOE calculates the annual
energy consumption for the commercial refrigeration equipment stock in
each year, the maintenance and repair costs associated with the
equipment stock, and the total installed costs associated with new
shipments in each year based on the standards scenario and associated
distribution of shipments by efficiency level.
3. Escalation of Electricity Prices
DOE uses the most recent AEO reference case to forecast energy
prices for standard rulemakings. For the ANOPR, DOE used the AEO2006
reference case forecasts to estimate future electricity prices. ACEEE
commented that it would like DOE to use the AEO2008 forecasts for the
NOPR analysis. (ACEEE, No. 16 at p. 2) However, this forecast was not
available when DOE completed the NOPR analysis. DOE used the AEO2007
reference case forecasts for future electricity prices, extended out to
the end of the analysis period. DOE extrapolated the trend in values
from 2020 to 2030 of the forecast to establish prices for the remainder
of the analysis period. DOE intends to update its analysis for the
final rule to reflect the AEO 2008 electricity price forecasts when
final versions of these price forecasts are available. An AEO Revised
Early Release for the AEO 2008 reference case only has indicated that
the reference case electricity prices are higher in real (inflation
adjusted) terms and if this holds true in the final release it would
generally result in more favorable economics for higher efficiency
standard levels (i.e. shorter payback periods, greater life-cycle cost
savings, and greater national net present value).
4. Electricity Site-to-Source Conversion
The site-to-source conversion factor is a multiplier used for
converting site energy consumption, expressed in kWh, into primary or
source energy consumption, expressed in quadrillion Btu (quads). The
site-to-source conversion factor accounts for losses in electricity
generation, transmission, and distribution. For the ANOPR, DOE used
site-to-source conversion factors based on U.S. average values for the
commercial sector, calculated from AEO2006, Table A5. The average
conversion factors vary over time, due to projected changes in
electricity generation sources (i.e., the power plant types projected
to provide electricity to the country). For the NOPR, DOE developed
marginal site-source conversion factors that relate the national
electrical energy savings at the point of use to the fuel savings at
the power plant. These factors use the NEMS model and the examination
of the corresponding energy savings from
[[Page 50104]]
standards scenarios considered in DOE's utility analysis (Chapter 14 of
the TSD). The conversion factors vary over time, due to projected
changes in electricity generation sources (i.e., the power plant types
projected to provide electricity to the country) and power plant
dispatch scenarios. Average U.S. conversion factors were used in the
ANOPR because the utility analysis which is used to determine marginal
conversion factors appropriate to efficiency standards for commercial
refrigeration equipment occurs in the NOPR stage of DOE's analysis.
To estimate NPV, DOE calculated the net impact each year as the
difference between total operating cost savings (including electricity,
repair, and maintenance cost savings) and increases in total installed
costs (including MSP, sales taxes, distribution channel markups, and
installation cost). DOE calculated the NPV of each TSL over the life of
the equipment using three steps. First, DOE determined the difference
between the equipment costs under the TSL and the base case to
calculate the net equipment cost increase resulting from the TSL.
Second, DOE determined the difference between the base case operating
costs and the TSL operating costs to calculate the net operating cost
savings from the TSL. Third, DOE determined the difference between the
net operating cost savings and the net equipment cost increase to
calculate the net savings (or expense) for each year. DOE then
discounted the annual net savings (or expenses) for commercial
refrigeration equipment purchased on or after 2012 to 2008, and summed
the discounted values to determine the NPV of a TSL. An NPV greater
than zero shows net savings (i.e., the TSL would reduce overall
customer expenditures relative to the base case in present value
terms). An NPV less than zero indicates that the TSL would result in a
net increase in customer expenditures in present value terms.
H. Life-Cycle Cost Sub-Group Analysis
In analyzing the potential impact of new or amended standards on
commercial customers, DOE evaluates the impact on identifiable groups
(i.e., sub-groups) of customers, such as different types of businesses
that may be disproportionately affected by a National standard level.
For this rulemaking, DOE identified independent small grocery and
convenience stores as a commercial refrigeration equipment customer
sub-group that could be disproportionately affected, and examined the
impact of proposed standards on this group.
DOE determined the impact on this commercial refrigeration
equipment customer sub-group using the LCC spreadsheet model. DOE
conducted the LCC and PBP analyses for commercial refrigeration
equipment customers. The standard LCC and PBP analyses (described in
Section IV.E) includes various types of businesses that use commercial
refrigeration equipment. The LCC spreadsheet model allows for the
identification of one or more sub-groups of businesses, which can then
be analyzed by sampling only each such sub-group. The results of DOE's
LCC sub-group analysis are summarized in Section V.B.1.c and described
in detail in Chapter 12 of the TSD.
I. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate the financial impact of energy
conservation standards on manufacturers of commercial refrigeration
equipment, and to assess the impact of such standards on employment and
manufacturing capacity. The MIA has both quantitative and qualitative
aspects. The quantitative part of the MIA relies on the GRIM, an
industry-cash-flow model customized for this rulemaking. The GRIM
inputs are information regarding the industry cost structure,
shipments, and revenues. This includes information from many of the
analyses described above, such as manufacturing costs and prices from
the engineering analysis and shipments forecasts. The key GRIM output
is the industry net present value (INPV). The model estimates the
financial impact of energy conservation standards by comparing changes
in INPV between the base case and the various trial standard levels.
Different sets of assumptions (scenarios) will produce different
results. The qualitative part of the MIA addresses factors such as
equipment characteristics, characteristics of particular firms, and
market and equipment trends, and includes assessment of the impacts of
standards on sub-groups of manufacturers. Chapter 13 of the TSD
outlines the complete MIA.
DOE conducted the MIA for commercial refrigeration equipment in
three phases. Phase 1, Industry Profile, consisted of preparing an
industry characterization, including data on market share, sales
volumes and trends, pricing, employment, and financial structure. Phase
2, Industry Cash Flow Analysis, focused on the industry as a whole. In
this phase, DOE used the GRIM to prepare an industry cash-flow
analysis. Using publicly available information developed in Phase 1,
DOE adapted the GRIM's generic structure to perform an analysis of
commercial refrigeration equipment energy conservation standards. In
Phase 3, Sub-Group Impact Analysis, DOE conducted interviews with
manufacturers representing the majority of domestic commercial
refrigeration equipment sales. This group included large and small
manufacturers, providing a representative cross-section of the
industry. During these interviews, DOE discussed engineering,
manufacturing, procurement, and financial topics specific to each
company and obtained each manufacturer's view of the industry. The
interviews provided valuable information DOE used to evaluate the
impacts of an energy conservation standard on manufacturer cash flows,
manufacturing capacities, and employment levels. For more detail on the
manufacturer impact analysis, refer to Chapter 13 of the TSD.
a. Phase 1, Industry Profile
In Phase 1 of the MIA, DOE prepared a profile of the commercial
refrigeration equipment industry based on the market and technology
assessment prepared for this rulemaking. Before initiating the detailed
impact studies, DOE collected information on the present and past
structure and market characteristics of the commercial refrigeration
equipment industry. The information DOE collected at that time included
market share, equipment shipments, markups, and cost structure for
various manufacturers. The industry profile includes further detail on
equipment characteristics, estimated manufacturer market shares, the
financial situation of manufacturers, trends in the number of firms,
the market, and equipment characteristics of the commercial
refrigeration equipment industry.
The industry profile included a top-down cost analysis of
commercial refrigeration equipment manufacturers that DOE used to
derive cost and preliminary financial inputs for the GRIM (e.g.,
revenues; material, labor, overhead, and depreciation expenses;
selling, general, and administrative expenses (SG&A); and research and
development (R&D) expenses). DOE also used public sources of
information to further calibrate its initial characterization of the
industry, including U.S. Securities and Exchange Commission (SEC) 10-K
reports, Standard & Poor's (S&P) stock reports, and corporate annual
reports.
b. Phase 2, Industry Cash-Flow Analysis
Phase 2 of the MIA focused on the financial impacts of energy
conservation
[[Page 50105]]
standards on the industry. Higher energy conservation standards can
affect a manufacturer's cash flow in three distinct ways, resulting in:
(1) A need for increased investment; (2) higher production costs per
unit; and (3) altered revenue by virtue of higher per-unit prices and
changes in sales values. To quantify these impacts in Phase 2 of the
MIA, DOE used the GRIM to perform a cash-flow analysis of commercial
refrigeration equipment manufacturers. In performing these analyses,
DOE used the financial values derived during Phase 1 and the shipment
scenarios used in the NES analyses.
c. Phase 3, Sub-Group Impact Analysis
Using average cost assumptions to develop an industry-cash-flow
estimate is not adequate for assessing differential impacts among sub-
groups of manufacturers. For example, small manufacturers, niche
equipment manufacturers, or manufacturers exhibiting a cost structure
that largely differs from the industry average could be more negatively
affected. DOE used the results of the industry characterization
analysis (in Phase 1) to group manufacturers that exhibit similar
characteristics.
During the interview process, DOE discussed the potential sub-
groups and sub-group members it identified for the analysis. DOE
encouraged the manufacturers to recommend sub-groups or characteristics
that are appropriate for the sub-group analysis. DOE identified small
commercial refrigeration equipment manufacturers as a potential
manufacturing sub-group. DOE found that small business manufacturers
generally have the same concerns as large manufacturers regarding
energy conservation standards. In addition, DOE found no significant
differences in the R&D emphasis or marketing strategies between small
business manufacturers and large manufacturers. Therefore, for the
equipment classes comprised primarily of small business manufacturers,
DOE believes the GRIM analysis, which models each equipment class
separately, is representative of the small business manufacturers
affected by standards.
2. Government Regulatory Impact Model Analysis
As mentioned above, DOE uses the GRIM to quantify changes in cash
flow that result in a higher or lower industry value. The GRIM analysis
uses a standard annual cash-flow analysis that incorporates
manufacturer prices, manufacturing costs, shipments, and industry
financial information. The GRIM models changes in costs, distribution
of shipments, investments, and associated margins that would result
from new regulatory conditions (in this case, standard levels). The
GRIM spreadsheet uses a number of inputs to arrive at a series of
annual cash flows, beginning with the base year of the analysis, 2007,
and continuing to 2042. DOE calculated INPVs by summing the stream of
annual discounted cash flows during this period.
DOE used the GRIM to calculate cash flows using standard accounting
principles and compare changes in INPV between a base case and
different TSLs (the standards cases). Essentially, the difference in
INPV between the base case and a standards case represents the
financial impact of the energy conservation standards on manufacturers.
DOE collected this information from a number of sources, including
publicly available data and interviews with manufacturers (Chapter 13
of the TSD).
3. Manufacturer Interviews
As part of the MIA, DOE discussed potential impacts of energy
conservation standards with manufacturers responsible for a majority of
commercial refrigeration equipment sales. The manufacturers interviewed
manufacture close to 90 percent of the commercial refrigeration
equipment on the market. These interviews were in addition to those DOE
conducted as part of the engineering analysis. The interviews provided
valuable information that DOE used to evaluate the impacts of energy
conservation standards on manufacturers' cash flows, manufacturing
capacities, and employment levels.
a. Key Issues
Manufacturers identified the following key issues for DOE to
consider in developing energy conservation standards:
Meeting Standards. Manufacturers expressed concern that
they would have difficulty meeting certain efficiency levels for
certain equipment classes. First, some manufacturers stated that they
could not meet or would have extreme difficulty meeting any of the
possible efficiency levels presented during interviews for self-
contained equipment (e.g., horizontal open units). One manufacturer
stated that due to the small number of parts in the self-contained
equipment, efficiency improvements are constrained to these parts and
are therefore limited. The same manufacturer stated that it already
implements the most efficient options on the market that are available
within its price range. For some manufacturers, self-contained
equipment represents only a small portion of their business. These
manufacturers make more remote condensing equipment and simply convert
the design into self-contained units. Second, some manufacturers stated
that they could not meet efficiency levels 3 and 4 for medium-
temperature equipment (e.g., SOC.RC.M, VCT.RC.M, VOP.RC.M), and that
they would need advances in technology to achieve these levels by 2012.
One manufacturer stated that it does not manufacture any equipment in
the VOP.RC.M equipment class that meets DOE's baseline level.
Customer Needs. Manufacturers are concerned that increased
equipment efficiency will come at the expense of equipment
functionality, utility, and customizability. The commercial
refrigeration equipment industry is focused on customers' need to sell
products, and customers place a higher priority on marketing and
displaying their goods than they do on energy efficiency. Customers
demand high levels of customization to differentiate themselves from
other retail stores. They do not want to lose any functionality or
utility in their equipment, such as display area, that affects their
ability to sell products. Often, the desire of customers for easy
product access requires equipment that is less energy efficient. They
also do not want to lose any flexibility in design choices, such as
lighting options. For example, some customers specify certain lighting
configurations (e.g., color rendering, color temperature, light
distribution) to maximize the sale of products such as fresh meat,
produce, or dairy. Manufacturers believe that setting standards at the
maximum level will affect their customers' ability to merchandise
products by limiting the flexibility to choose from among different
designs, which they expect would commoditize the industry and lead to
reduced profit margins. Having some allowance in the efficiency
thresholds would allow tradeoffs in design selection that would ease
the reconciliation of energy savings with the ability to sell products.
Customer Awareness. Manufacturers expressed concern that
their retail customers are not sufficiently aware of pending energy
conservation standards and the impacts these standards may have on
their purchasing decisions. The supermarket industry is a low-margin
industry, which places much emphasis on low-first-cost equipment.
Manufacturers believe that many customers may not be able to handle an
increase in equipment
[[Page 50106]]
price effectively since they operate with a fixed budget, or a fixed
amount of capital available for purchasing commercial refrigeration
equipment. Manufacturers stated that customers with a fixed capital
budget would tend to extend refurbishment periods and cut back on
equipment growth to deal with the increase in price of higher
efficiency equipment, which manufacturers say will reduce annual sales
of commercial refrigeration equipment. Manufacturers expect that
smaller stores and even small regional chains will feel significant
financial pressure when faced with the increase in prices. Single
family-owned stores and local stores in large cities may have no
capital budget with which to replace existing cases with cases that are
30 percent to 50 percent higher in price. Manufacturers stated that a
reduction in sales would lead to employee layoffs since labor is
proportional to units sold, not equipment price. Manufacturers also
stated that customers have usually been unwilling to adopt energy
efficiency improvements unless there is a 12-month payback period or
less.
Equipment Classes. Manufacturers expressed concern
regarding how equipment they manufacture would be categorized in DOE's
equipment classes. Manufacturers stated that certain pieces of low-
volume equipment they manufacture do not easily fit into DOE's
equipment classes, and other pieces of equipment are excluded from
coverage. For example, custom pieces of equipment, especially hybrid or
combination units, do not easily fall within the DOE equipment classes
since they could be classified in more than one category. A self-
contained case with a service over counter upper portion and an open
lower portion could be classified as a self-contained service over
counter unit as well as a self-contained open unit. Another example is
wedges--transition pieces placed at the corners of a case lineup. These
do not have a reasonable TDA and therefore do not have meaningful
energy consumption levels when normalized to TDA. Some manufacturers
stated that low-volume equipment that cannot meet energy conservation
standards may be discontinued because the cost to increase the
efficiency will not be worth the benefit gained. Manufacturers also
expressed concern regarding secondary coolant systems, which may
provide a loophole. Manufacturers estimate that secondary coolant
systems represent about 10 percent of the market currently and consume
about five percent more energy than their direct expansion equivalent.
Some manufacturers stated that customers might purchase these lower
efficiency secondary coolant systems instead of the direct expansion
equipment that are subject to standards. This concerns manufacturers
since it would defeat the purpose of regulatory action.
Component Manufacturers. Manufacturers expressed concern
that they have little control over the options available and the price
they pay for components used to manufacture commercial refrigeration
equipment. Commercial refrigeration equipment manufacturers purchase
many of the components needed to build the equipment and therefore rely
heavily on component manufacturers to deliver parts, such as doors,
motors, fans, and lights. However, commercial refrigeration equipment
manufacturers state that higher efficiency components may not be
readily available to meet standards. For example, the high-efficiency
compressors needed for self-contained equipment to meet energy
conservation standards may not be readily available. Manufacturers said
that the compressors they purchase for commercial refrigeration are
left over from the white goods (home appliances) industry since that
industry has a much higher sales volume compared to commercial
refrigeration equipment. Also, manufacturers stated that component
suppliers set their own pricing, and manufacturers have no control over
this. Manufacturers are concerned about what prices they would have to
pay for higher efficiency components in the future.
4. Government Regulatory Impact Model Key Inputs and Scenarios
a. Base Case Shipments Forecast
The GRIM estimates manufacturer revenues based on total unit
shipment forecasts and the distribution of these values by efficiency
level. Changes in the efficiency mix at each standard level are a key
driver of manufacturer finances. For this analysis, the GRIM used the
NES shipments forecasts from 2007 to 2042. Total shipments forecasted
by the NES for the base case in 2012 are shown in Table IV-16 and
further discussed in this section of today's Notice.
Table IV-16--Total NES-Forecasted Shipments in 2012 (Number of Units)
------------------------------------------------------------------------
Total industry
Equipment class shipments
------------------------------------------------------------------------
VOP.RC.M............................................. 37,607
VOP.RC.L............................................. 1,880
VOP.SC.M............................................. 7,585
VCT.RC.M............................................. 2,533
VCT.RC.L............................................. 35,184
VCT.SC.I............................................. 2,571
VCS.SC.I............................................. 637
SVO.RC.M............................................. 28,685
SVO.SC.M............................................. 11,357
SOC.RC.M............................................. 7,231
HZO.RC.M............................................. 4,408
HZO.RC.L............................................. 13,859
HZO.SC.M............................................. 976
HZO.SC.L............................................. 2,024
HCT.SC.I............................................. 10,487
------------------------------------------------------------------------
In the shipments analysis, DOE also estimated the distribution of
efficiencies in the base case for commercial refrigeration equipment
(Chapter 10 of the TSD). Table IV-17 shows one example of the
distribution of efficiencies in the base case for the VOP.RC.M
equipment class. The distribution of efficiencies in the base case for
other equipment classes are shown in Chapter 10 of the TSD.
Table IV-17--GRIM Distribution of Shipments in the Base Case for VOP.RC.M
--------------------------------------------------------------------------------------------------------------------------------------------------------
TSL (CDEC/TDA--kWh/day/ft\2\) Baseline 1.09 TSL 1 0.98 TSL 2 0.95 TSL 3 0.89 TSL 4 * 0.89 TSL 5 0.76
--------------------------------------------------------------------------------------------------------------------------------------------------------
Distribution of Shipments (%)..................... 17.6 36.3 16.6 14.0 14.0 15.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For VOP.RC.M, TSL 4 is set at the same efficiency level as TSL 3. Therefore, the shipment distribution is the same for both of these TSLs.
b. Standards Case Shipments Forecast
For each standards case, DOE assumed that shipments at efficiencies
below the projected standard levels were most likely to roll up to
those efficiency levels in response to an energy conservation standard.
This scenario assumes that demand for high-efficiency equipment is a
function of its
[[Page 50107]]
price without regard to the standard level. See Chapter 12 of the TSD
for additional details.
c. Markup Scenarios
To understand how baseline and more efficient equipment are
differentiated, DOE reviewed manufacturer catalogs and information
gathered by manufacturers. To estimate the manufacturer price of the
equipment sold, DOE applied markups to the production costs. For the
analysis, DOE considered different markup scenarios, based on
manufacturer input, for commercial refrigeration equipment. Scenarios
were used to bound the range of expected equipment prices following new
energy conservation standards. For each equipment class, DOE used the
markup scenarios that best characterized the prevailing markup
conditions and described the range of market responses manufacturers
expect as a result of new energy conservation standards. DOE learned
from interviews with manufacturers that the majority of manufacturers
only offer one equipment line. A single equipment line means that there
is no markup used to differentiate baseline equipment from premium
equipment.
After discussions with manufacturers, DOE believes its adoption of
standards for commercial refrigeration equipment would likely result in
one of two distinct markup scenarios: Preservation-of-gross-margin-
percentage or preservation-of-operating-profit. Under the preservation-
of-gross-margin-percentage scenario, DOE applied a single uniform gross
margin percentage markup across all efficiency levels. As production
cost increases with efficiency, this scenario implies that the absolute
dollar markup will increase. DOE assumed the non-production cost
markup--which includes SG&A expenses, R&D expenses, interest, and
profit--to be 1.32. Manufacturers believe it is optimistic to assume
that as their production costs increase in response to an efficiency
standard, they would be able to maintain the same gross margin
percentage markup. Therefore, DOE assumes that this scenario represents
a high bound to industry profitability under an energy conservation
standard.
Gross margin is defined as revenues less cost of goods sold. The
implicit assumption behind this markup scenario is that the industry
can maintain its gross margin from the baseline (in absolute dollars)
after the standard. The industry would do so by passing through its
increased production costs to customers without passing through its
increased R&D and selling, general, and administrative expenses so the
gross profit per unit is the same in absolute dollars. DOE implemented
this scenario in the GRIM by setting the production cost markups for
each TSL to yield approximately the same gross margin in the standards
cases in the year standard are effective (2012) as is yielded in the
base case.
d. Equipment and Capital Conversion Costs
New efficiency standards typically cause manufacturers to incur
one-time conversion costs to bring their production facilities and
equipment designs into compliance with the new regulation. For the
purpose of the MIA, DOE classified these one-time conversion costs into
three major groups. Capital conversion expenditures are one-time
investments in property, plant, and equipment to adapt or change
existing production facilities so that new equipment designs can be
fabricated and assembled under the new regulation. Equipment conversion
expenditures are one-time investments in research, development,
testing, and marketing focused on creating equipment designs that
comply with the new efficiency standard. Stranded assets are equipment
or tooling that become obsolete as a result of new regulation.
During the MIA interviews, DOE asked manufacturers for their
estimates of the conversion costs they would incur due to new energy
conservation standards. DOE then used the costs provided by each
manufacturer and their respective market shares to develop estimates
for the conversion costs of the entire industry at varying TSLs.
Chapter 13 of the TSD summarizes these estimates.
J. Utility Impact Analysis
The utility impact analysis estimates the effects of reduced energy
consumption due to improved equipment efficiency on the utility
industry. This utility analysis consists of a comparison between
forecast results for a case comparable to the AEO2007 reference case
and forecasts for policy cases incorporating each of the commercial
refrigeration equipment TSLs.
DOE analyzed the effects of proposed standards on electric utility
industry generation capacity and fuel consumption using a variant of
the EIA's NEMS. NEMS, which is available on the DOE website, is a
large, multi-sector, partial-equilibrium model of the U.S. energy
sector. EIA uses NEMS to produce its AEO, a widely recognized baseline
energy forecast for the United States. DOE used a variant known as
NEMS-BT. The NEMS-BT is run similarly to the AEO2007 NEMS, except that
commercial refrigeration equipment energy usage is reduced by the
amount of energy (by fuel type) saved due to the TSLs. DOE obtained the
inputs of national energy savings from the NES spreadsheet model. For
the final rule, DOE intends to report utility analysis results using a
version of NEMS-BT based on the AEO2008 NEMS.
DOE conducted the utility analysis as policy deviations from the
AEO2007, applying the same basic set of assumptions. In the utility
analysis, DOE reported the changes in installed capacity and generation
by fuel type that result for each TSL, as well as changes in end-use
electricity sales. Chapter 14 of the TSD provides details of the
utility analysis methods and results.
K. Employment Impact Analysis
Employment impact is one of the factors that DOE considers in
selecting a standard. Employment impacts include direct and indirect
impacts. Direct employment impacts are any changes in the number of
employees for commercial refrigeration equipment manufacturers, their
suppliers, and related service firms. Indirect impacts are those
changes of employment in the larger economy that occur due to the shift
in expenditures and capital investment caused by the purchase and
operation of more efficient commercial refrigeration equipment. The MIA
in this rulemaking addresses only the direct employment impacts on
manufacturers of commercial refrigeration equipment. Chapter 15 of the
TSD describes other, primarily indirect, employment impacts.
Indirect employment impacts from commercial refrigeration equipment
standards consist of the net jobs created or eliminated in the national
economy, other than in the manufacturing sector being regulated, as a
consequence of (1) reduced spending by end users on electricity (offset
to some degree by the increased spending on maintenance and repair);
(2) reduced spending on new energy supply by the utility industry; (3)
increased spending on the purchase price of new commercial
refrigeration equipment; and (4) the effects of those three factors
throughout the economy. DOE expects the net monetary savings from
standards to be redirected to other forms of economic activity. DOE
also expects these shifts in spending and economic activity to affect
the demand for labor.
In developing this proposed rule, DOE estimated indirect national
employment impacts using an input/output model of
[[Page 50108]]
the U.S. economy, called ImSET (Impact of Sector Energy Technologies),
developed by DOE's Building Technologies Program. ImSET is a personal-
computer-based, economic-analysis model that characterizes the
interconnections among 188 sectors of the economy as national input/
output structural matrices, using data from the U.S. Department of
Commerce's 1997 Benchmark U.S. input-output table. The ImSET model
estimates changes in employment, industry output, and wage income in
the overall U.S. economy resulting from changes in expenditures in
various sectors of the economy. DOE estimated changes in expenditures
using the NES spreadsheet. ImSET then estimated the net national
indirect employment impacts of potential commercial refrigeration
equipment efficiency standards on employment by sector. In comments on
the ANOPR, Zero Zone asked if DOE was going to contact second tier
suppliers (e.g., door suppliers, fluorescent lighting suppliers, shaded
pole motor suppliers) regarding employment impacts. (Public Meeting
Transcript, No. 13.5 at pp. 230-231) ARI noted that this had been done
in the central air conditioning rulemaking. (Public Meeting Transcript,
No. 13.5 at p. 231)
DOE stated that the ImSET tool would not be able to address this in
detail, but that it has been done within the MIA for other equipment.
In the public meeting, DOE commented that there would be impacts from
standards, but the effective date is different from the issuance date
partly to allow time for adjustments in manufacturing.
The ImSET input/output model suggests that the proposed commercial
refrigeration equipment efficiency standards could increase the net
demand for labor in the economy and the gains would most likely be very
small relative to total national employment. DOE therefore concludes
that the proposed commercial refrigeration equipment standards are only
likely to produce employment benefits that are sufficient to fully
offset any adverse impacts on employment in the commercial
refrigeration equipment industry. For more details on the employment
impact analysis, see Chapter 15 of the TSD.
L. Environmental Assessment
DOE has prepared a draft Environmental Assessment (EA) pursuant to
the National Environmental Policy Act and the requirements of 42 U.S.C.
6295(o)(2)(B)(i)(VI) and 6316(e)(1)(A), to determine the environmental
impacts of the proposed standards. Specifically, DOE estimated the
reduction in power plant emissions of CO2, NOX,
and mercury (Hg) using the NEMS-BT computer model. However, the
Environmental Assessment (Chapter 16 of the TSD) does not include the
estimated reduction in power plant emissions of SO2 because,
DOE has determined that due to the presence of national caps on
SO2 emissions as addressed below, any such reduction
resulting from an energy conservation standard would not affect the
overall level of SO2 emissions in the United States.
The NEMS-BT is run similarly to the AEO2007 NEMS, except that
commercial refrigeration equipment energy use is reduced by the amount
of energy saved (by fuel type) due to the TSLs. DOE obtained the inputs
of national energy savings from the NES spreadsheet model. For the
environmental analysis, the output is the forecasted physical
emissions. The net benefit of the standard is the difference between
emissions estimated by NEMS-BT and the AEO2007 Reference Case. The
NEMS-BT tracks CO2 emissions using a detailed module that
provides results with broad coverage of all sectors and inclusion of
interactive effects. For the final rule, DOE intends to revise the
emissions analysis using the AEO2008 NEMS model using the process
outlined above.
The Clean Air Act Amendments of 1990 set an emissions cap on
SO2 for all power generation. The attainment of this target,
however, is flexible among generators and is enforced through the use
of emissions allowances and tradable permits. As a result, accurate
simulation of SO2 trading tends to imply that the effect of
energy conservation standards on physical emissions will be near zero
because emissions will always be at, or near, the ceiling. Thus, it is
unlikely that there will be an SO2 environmental benefit
from electricity savings as long as there is enforcement of the
emissions ceilings.
Although there may not be an actual reduction in SO2
emissions from electricity savings, there still may be an economic
benefit from reduced demand for SO2 emission allowances.
Electricity savings decrease the generation of SO2 emissions
from power production, which can decrease the need to purchase or
generate SO2 emissions allowance credits, and decrease the
costs of complying with regulatory caps on emissions.
Like SO2, future emissions of NOX and Hg
would have been subject to emissions caps under the Clean Air
Interstate Act and Clean Air Mercury Rule. As discussed later, these
rules have been vacated by a Federal court. DOE calculated a forecast
of reductions for these emissions under an uncapped scenario. DOE
assumes that the uncapped emissions reduction estimate would have
corresponded generally to the generation of emissions allowance credits
under an emissions cap scenario.
V. Analytical Results
A. Trial Standard Levels
DOE selected between four and eight energy consumption levels for
each commercial refrigeration equipment class in the LCC analysis.
Based on the results of the LCC analysis, DOE selected five trial
standard levels above the baseline level for each equipment class for
the NOPR stage of the rulemaking. The range of TSLs selected includes
the most energy efficient combination of design options with a positive
NPV at the seven percent discount rate, and the combination of design
options with the minimum LCC. Additionally, TSLs were selected that
filled large gaps between the baseline and the level with the minimum
LCC.
Because of the size variation within each equipment class and the
use of daily energy consumption as the efficiency metric, DOE presented
a methodology to express efficiency standards in terms of a normalizing
metric. This allows for a single energy conservation standard to be
used for a broad range of equipment sizes within a given equipment
class. DOE proposed the use of TDA as the normalizing metric for
equipment with display capability. For equipment classes without
display capability (e.g., equipment with solid doors), DOE proposed the
use of internal volume as the normalizing metric. See Chapter 9 of the
TSD for more detail.
True commented that all self-contained units (including any open
units) should be tested using volume as a normalizing factor to provide
a straight comparison between open and closed-door self-contained
units. (Public Meeting Transcript, No. 13.5 at pp. 202-207) DOE
understands the usefulness of comparing self-contained equipment with
and without doors on the basis of volume. However, the self-contained
equipment covered in this rulemaking is frequently installed in
supermarkets and convenience stores, where its primary purpose is to
display and merchandise food. The most common application of remote
condensing equipment is also in supermarkets and convenience stores.
Therefore, DOE believes that, with respect to the purpose of equipment,
the self-contained equipment covered in this rulemaking is more similar
to remote condensing equipment than
[[Page 50109]]
other self-contained equipment (i.e., equipment with doors). DOE
discussed this issue with manufacturers, and determined that TDA is the
most appropriate normalization metric for the self-contained equipment
covered in this rulemaking, since that is the metric used for remote
condensing equipment.
DOE expressed the ANOPR efficiency levels in terms of a normalized
energy consumption using these normalization factors. DOE proposed
equations for final standards that would have maximum energy
consumption for equipment whose display area is directly proportional
to TDA. DOE also suggested that for equipment normalized to volume, it
might be necessary to develop equations that use offset factors to
account for a potential non-linear variation of energy consumption with
volume. At the ANOPR public meeting and during the comment period,
stakeholders expressed concerns about the size of equipment DOE
analyzed as the representative model for each equipment class. Zero
Zone stated that its analysis indicates that using a two-door case as
the baseline (for the VCT.RC.L class) is more reasonable because of the
end effects in those cases. Zero Zone reported a 10 percent increase in
energy consumption per door for a two-door case with the same design
features as a five-door case. A two-door case consumes more energy per
door than a five-door case because of the lighting and end effects.
Zero Zone noted that if the standard is based on a five-door case, it
will penalize any smaller cabinet, and could eliminate smaller cases
from production due to their size. (Public Meeting Transcript, No. 13.5
at p. 87) At the public meeting, Zero Zone stated that it would give
some thought to what should be used for a representative model--a two-
door case, or some combination of two-door and five-door cases. Zero
Zone also noted that not all manufacturers make all case sizes. (Public
Meeting Transcript, No. 13.5 at p. 88) Later, in a written comment,
Zero Zone recommended that DOE base its analysis on the smaller case
models instead of the larger case models to avoid accidentally
outlawing smaller cases. (Zero Zone, No. 17 at p. 3) ARI commented that
it generally agrees with the approach proposed by DOE for
characterizing energy conservation standards for commercial
refrigeration equipment, and offered to work with DOE in developing
appropriate offset factors. (ARI, No. 18 at p. 6)
For the NOPR, DOE developed offset factors as a way to adjust the
energy efficiency requirements for smaller-sized equipment in each
equipment class analyzed. These offset factors account for certain
components of the refrigeration load (such as the conduction end
effects) that remain constant even when equipment sizes vary. These
constant loads affect smaller cases disproportionately. The offset
factors are intended to approximate these constant loads and provide a
fixed end point, corresponding to a zero TDA or zero volume case, in an
equation that describes the relationship between energy consumption and
the corresponding TDA or volume metric. See Chapter 5 of the TSD for
further details on the development of these offset factors for each
equipment class. This is identified as Issue 4 under ``Issues on Which
DOE Seeks Comment'' in Section VII.E of this NOPR.
DOE preserved the general methodology and themes it used for the
selection of efficiency levels in the ANOPR in establishing specific
efficiency levels for equipment classes. These levels are based on the
results of the updated LCC analysis and make up the TSLs used in the
NOPR. Table V-1 shows the TSL levels DOE selected for energy use for
the equipment classes analyzed. TSL 5 is the max-tech level for each
equipment class. TSL 4 is the maximum efficiency level with a positive
NPV at the seven percent discount rate, except for VOP.RC.M, where the
minimal difference in energy efficiency between the minimum life-cycle
cost level as determined by the LCC analysis and the maximum efficiency
level with positive NPV prompted DOE to select the minimum life-cycle
cost level in preference to the maximum level with positive NPV. TSL 4
is a combination of the efficiency levels selected for TSL 3 and TSL 5.
For a given equipment class, the efficiency levels selected for TSL 4
are either equivalent to that of TSL 3 or that of TSL 5. TSL 3 is the
efficiency level that provides the minimum life-cycle cost as
determined by the LCC analysis. TSL 2 and TSL 1 represent lower
efficiency levels that fill in the gap between the current baseline and
the levels determined to have the minimum LCC.
Table V-2 shows the same TSL levels in terms of proposed equations
that establish a maximum daily energy consumption (MEC) limit through a
linear equation of the form:
MEC = A x TDA + B (for equipment using TDA as a normalizing metric) or
MEC = A x V + B (for equipment using volume as a normalizing metric)
Coefficients A and B are uniquely derived for each equipment class
based on the calculated offset factor B (see Chapter 5 of the TSD for
offset factors) and the equation slope A, which would be used to
describe the efficiency requirements for equipment of different sizes
within the same equipment class. Chapter 9 of the TSD explains the
methodology DOE used for selecting trial standard levels and developing
the coefficients shown in Table V-2.
BILLING CODE 6450-01-P
[[Page 50110]]
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BILLING CODE 6450-01-C
In addition to the 15 primary equipment classes analyzed, DOE
intends to establish standards for the remaining 23 secondary equipment
classes of commercial refrigeration equipment covered in this
rulemaking that were not directly analyzed in the engineering analysis
due to low annual shipments (less than 100 units per year). DOE's
approach involves extension multipliers developed using both the 15
primary equipment classes analyzed and a set of focused matched-pair
analyses. In addition, DOE believes that standards for certain primary
equipment classes can be directly applied to other similar secondary
equipment classes.
[[Page 50111]]
Chapter 5 of the TSD discusses the development of the extension
multipliers and the set of focused matched-pair analyses.
Using this approach, DOE developed an additional set of TSLs for
these secondary equipment classes that corresponds to each of the
equations shown in Table V-2 at each TSL. Table V-3 shows this
additional set of corresponding TSL levels. The levels shown in Table
V-3 do not necessarily reflect the minimum life-cycle cost or max-tech
efficiency levels for these equipment classes, and do not reflect TSLs
that DOE has analyzed in its impact analyses. The primary purpose of
presenting these levels in this section is to provide interested
persons with the range of efficiency standards that DOE is considering
for these secondary equipment classes. This is identified as Issue 5
under ``Issues on Which DOE Seeks Comment'' in Section VII.E of this
NOPR.
[GRAPHIC] [TIFF OMITTED] TP25AU08.003
1. Miscellaneous Equipment
In the ANOPR, DOE proposed as part of its commercial refrigeration
equipment test procedure that all equipment be tested at one of three
rating temperatures: 38 [deg]F for refrigerators, 0 [deg]F for
freezers, and -15 [deg]F for ice-cream freezers. Zero Zone, Hill
Phoenix, Carrier/Tyler Refrigeration, and True expressed concern
because they produce equipment that is not designed to operate at these
designated rating temperatures. (Public Meeting Transcript, No. 13.5 at
pp. 28-33) ARI stated that DOE should not require all equipment to be
tested at these three rating temperatures alone. Doing so may require
manufacturers to produce equipment that is less efficient solely for
the purpose of meeting a specific rating condition, thus defeating the
intent of the regulation. (ARI, No. 18 at p. 4) Hill Phoenix and True
stated that the equipment they manufacture that is unable to meet these
rating temperatures is only one percent to two percent of their
shipments. Hill Phoenix added that, if possible, it would prefer to
avoid the excessive paperwork of applying for waivers for equipment
that cannot meet the three rating temperatures in the test procedure.
(Public Meeting Transcript, No. 13.5 at p. 33)
Zero Zone recommended developing regulations that apply to the
special circumstances of the rating temperature (Zero Zone, No. 17 at
p. 2) and that DOE should consider developing additional rating
temperatures. (Public Meeting Transcript, No. 13.5 at p. 28) ACEEE
suggested that DOE develop a method to interpolate the standard based
on the
[[Page 50112]]
standards at the three official rating temperatures. (ACEEE, No. 16 at
p. 2) ARI recommended that any equipment specifically designed to hold
temperatures higher than the rating temperature should be tested at its
application temperature, but must still meet the energy standard for
its respective equipment class. (ARI, No. 18 at p. 4)
The DOE test procedure for commercial refrigeration equipment
specifies three rating temperatures, 38 [deg]F, 0 [deg]F, and -15
[deg]F, that are required to be used in the testing of this equipment,
each applied to designated equipment classes. 71 FR 71357. Since all of
this equipment must be tested at one of these three rating
temperatures, any manufacturer that is unable to test such equipment at
its designated rating temperature, must request a test procedure waiver
from DOE pursuant to the provisions described in 10 CFR 431.401. If the
equipment is unable to meet the maximum daily energy consumption (MDEC)
limit for its designated equipment class, a manufacturer can petition
DOE's Office of Hearing and Appeals (OHA) for exception relief from the
energy conservation standard pursuant to OHA's authority under section
504 of the DOE Organization Act (42 U.S.C. 7194), as implemented at
subpart B of 10 CFR part 1003. OHA grants such relief on a case-by-case
basis if it determines that a manufacturer has demonstrated that
meeting the standard would cause hardship, inequity, or unfair
distributions of burdens. DOE believes that the majority of equipment
covered by this rulemaking can be tested using the three specified
rating temperatures (38 [deg]F, 0 [deg]F and -15 [deg]F) provided in
the test procedure.
Certain types of equipment meet the definition of ``commercial
refrigeration equipment'' (Section 136(a)(3) of EPACT 2005), but do not
fall directly into any of the 38 equipment classes defined in the
market and technology assessment. One of these types is hybrid cases,
where two or more compartments are in different equipment families and
are contained in one cabinet. Another is refrigerator-freezers, which
have two compartments in the same equipment family but with different
operating temperatures. Hybrid refrigerator-freezers, where two or more
compartments are in different equipment families and have different
operating temperatures, may also exist. Another is wedge cases, which
form miter transitions (a corner section between two refrigerated
display merchandisers) between standard display case lineups. DOE is
proposing language that will allow manufacturers to determine
appropriate standard levels for these types of equipment.
An example of a pure hybrid case (one with two or more compartments
in different equipment families and at the same temperature) is a unit
with one open and one closed medium-temperature compartment, such as
those seen in coffee shops that merchandise baked goods and beverages.
These hybrid cases may be either self-contained or remote condensing,
and may be cooled by one or more condensing units. They may also have
one evaporator cooling both compartments or one evaporator feeding each
compartment separately.
An example of a refrigerator-freezer is a unit with doors where one
compartment operates at medium temperature and one compartment operates
at low temperature. Remote condensing commercial refrigerator-freezers
(with and without doors) and self-contained commercial refrigerator-
freezers without doors may operate in one of two ways. First, they may
operate as separate chilled and frozen compartments with evaporators
fed by two sets of refrigerant lines or two compressors. Second, they
may operate as separate chilled and frozen compartments fed by one set
of low-temperature refrigerant lines (with evaporator pressure
regulator (EPR) valves or similar devices used to raise the evaporator
pressure) or one compressor.
An example of a hybrid refrigerator-freezer is a unit with one open
compartment at medium temperature and one closed compartment at low
temperature. As with pure hybrid cases, these cases may be either self-
contained or remote condensing, and may be cooled by one or more
condensing units. In the case of remote condensing equipment, they may
operate as separate chilled and frozen compartments with evaporators
fed by two sets of refrigerant lines or two compressors. Or they may
operate as separate chilled and frozen compartments fed by one set of
low-temperature refrigerant lines (with EPR valves or similar devices
used to raise the evaporator pressure of one compartment) or one
compressor.
During the ANOPR public meeting, stakeholders commented on how to
handle these types of cases. True suggested that for self-contained
refrigerator-freezer equipment, DOE should use a weighted average of
the minimum standard requirements for the freezer and refrigerator.
This is the present standard used in California and Canada, and [EPACT]
2005 for self-contained equipment with doors: 1.63 times freezer volume
plus the refrigerated volume gives you a number [adjusted volume].
(Public Meeting Transcript, No. 13.5 at p. 215) Copeland followed up on
the True comment on refrigerator-freezers, suggesting that a
refrigerator-freezer standard for remote cases should be simple, and
that they should be treated as if they have two separate compressors.
(Public Meeting Transcript, No. 13.5 at p. 215) Zero Zone stated that a
manufacturer could build equipment with one or two separate suction
lines. If it is built with one, measure the suction pressure for that
one and base the EER on that suction pressure, without concern for what
is happening upstream of the case. (Public Meeting Transcript, No. 13.5
at p. 215)
DOE has reviewed the comments and is proposing the following
language for requiring manufacturers to meet standards for hybrid
cases, refrigerator-freezers, and hybrid refrigerator/freezers:
For commercial refrigeration equipment with two or more
compartments (hybrid refrigerators, hybrid freezers, hybrid
refrigerator-freezers, and non-hybrid refrigerator/freezers), the MDEC
for each model shall be the sum of the MDEC values for all of its
compartments. For each compartment, measure the TDA or volume of that
compartment, and determine the appropriate equipment class based on
that compartment's equipment family, condensing unit configuration, and
designed operating temperature. The MDEC limit for each compartment
shall be the calculated value obtained by entering that compartment's
TDA or volume into the standard equation in subsection (d)(1) for that
compartment's equipment class. Measure the calculated daily energy
consumption (CDEC) or total daily energy consumption (TDEC) for the
entire case as follows:
[cir] For remote condensing commercial hybrid refrigerators, hybrid
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, where two or more independent condensing units each
separately cool only one compartment, measure the total refrigeration
load of each compartment separately according to the ANSI/ASHRAE
Standard 72-2005 test procedure. Calculate compressor energy
consumption (CEC) for each compartment using Table 1 in ANSI/ARI
Standard 1200-2006 using the saturated evaporator temperature for that
compartment. The calculated daily energy consumption (CDEC) for the
entire case shall be the sum of the CEC for each compartment, fan
energy
[[Page 50113]]
consumption (FEC), lighting energy consumption (LEC), anti-condensate
energy consumption (AEC), defrost energy consumption (DEC), and
condensate evaporator pan energy consumption (PEC) (as measured in
ANSI/ARI Standard 1200-2006).
[cir] For remote condensing commercial hybrid refrigerators, hybrid
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, where two or more compartments are cooled collectively by one
condensing unit, measure the total refrigeration load of the entire
case according to the ANSI/ASHRAE Standard 72-2005 test procedure.
Calculate a weighted saturated evaporator temperature for the entire
case by (i) multiplying the saturated evaporator temperature of each
compartment by the volume of that compartment (as measured in ANSI/ARI
Standard 1200-2006), (ii) summing the resulting values for all
compartments, and (iii) dividing the resulting total by the total
volume of all compartments. Calculate the CEC for the entire case using
Table 1 in ANSI/ARI Standard 1200-2006, using the total refrigeration
load and the weighted average saturated evaporator temperature. The
CDEC for the entire case shall be the sum of the CEC, FEC, LEC, AEC,
DEC, and PEC.
[cir] For self-contained commercial hybrid refrigerators, hybrid
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, measure the total daily energy consumption (TDEC) for the
entire case according to the ANSI/ASHRAE Standard 72-2005 test
procedure.
For remote-condensing and self-contained wedge cases,
measure the CDEC or TDEC according to the ANSI/ASHRAE Standard 72-2005
test procedure. The MDEC for each model shall be the amount derived by
incorporating into the standards equation in subsection (d)(1) for the
appropriate equipment class a value for the TDA that is the product of
(1) the vertical height of the air-curtain (or glass in a transparent
door) and (2) the largest overall width of the case, when viewed from
the front. This is identified as Issue 6 under ``Issues on Which DOE
Seeks Comment'' in Section VII.E of this NOPR.
B. Economic Justification and Energy Savings
1. Economic Impacts on Commercial Customers
a. Life-Cycle Cost and Payback Period
To evaluate the economic impact of the TSLs on customers, DOE
conducted an LCC analysis for each level. More efficient commercial
refrigeration equipment would affect customers in two ways: Annual
operating expense would decrease and purchase price would increase. DOE
analyzed the net effect by calculating the LCC. Inputs used for
calculating the LCC include total installed costs (i.e., equipment
price plus installation costs), annual energy savings, average
electricity costs by customer, energy price trends, repair costs,
maintenance costs, equipment lifetime, and discount rates.
DOE's LCC and PBP analyses provided five outputs for each TSL that
are reported in Table V-4 through Table V-18. The first three outputs
are the proportion of commercial refrigeration equipment purchases
where the purchase of a standard-compliant piece of equipment would
create a net LCC increase, no impact, or a net LCC savings for the
customer. DOE used the estimated distribution of shipments by
efficiency level for each equipment class to determine the affected
customers. The fourth output is the average net LCC savings from
standard-compliant equipment. The fifth output is the average PBP for
the customer investment in standard-compliant equipment. The payback
period is the number of years it would take for the customer to recover
through energy savings the increased costs of higher efficiency
equipment compared with the purchase of baseline efficiency equipment.
Table V-4--Summary LCC and PBP Results for VOP.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 63
Equipment with No Change in LCC (%)....... 65 47 30 30 2
Equipment with Net LCC Savings (%)........ 35 53 70 70 34
Mean LCC Savings ($)...................... 1,201 1,143 1,551 1,551 -234
Mean Payback Period (years)............... 0.9 1.5 2.2 2.2 9.7
----------------------------------------------------------------------------------------------------------------
Table V-5--Summary LCC and PBP Results for VOP.RC.L Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 0
Equipment with No Change in LCC (%)....... 68 52 22 8 8
Equipment with Net LCC Savings (%)........ 32 48 78 92 92
Mean LCC Savings ($)...................... 3,132 4,005 4,089 3,364 3,364
Mean Payback Period (years)............... 0.8 1.2 1.3 3.0 3.0
----------------------------------------------------------------------------------------------------------------
Table V-6--Summary LCC and PBP Results for VOP.SC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 19
Equipment with No Change in LCC (%)....... 65 32 17 17 3
Equipment with Net LCC Savings (%)........ 35 68 83 83 78
Mean LCC Savings ($)...................... 758 1,065 1,342 1,342 703
[[Page 50114]]
Mean Payback Period (years)............... 0.8 1.8 2.7 2.7 5.9
----------------------------------------------------------------------------------------------------------------
Table V-7--Summary LCC and PBP Results for VCT.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 19 19
Equipment with No Change in LCC (%)....... 79 57 25 7 7
Equipment with Net LCC Savings (%)........ 21 43 75 74 74
Mean LCC Savings ($)...................... 286 581 1,107 867 867
Mean Payback Period (years)............... 0.9 1.4 4.6 6.1 6.1
----------------------------------------------------------------------------------------------------------------
Table V-8--Summary LCC and PBP Results for VCT.RC.L Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 0
Equipment with No Change in LCC (%)....... 60 40 28 8 8
Equipment with Net LCC Savings (%)........ 40 60 72 92 92
Mean LCC Savings ($)...................... 676 3,594 3,662 3,546 3,546
Mean Payback Period (years)............... 1.2 2.6 2.6 3.7 3.7
----------------------------------------------------------------------------------------------------------------
Table V-9--Summary LCC and PBP Results for VCT.SC.I Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 0
Equipment with No Change in LCC (%)....... 52 37 15 7 7
Equipment with Net LCC Savings (%)........ 48 63 85 93 93
Mean LCC Savings ($)...................... 2,305 3,806 3,841 3,818 3,818
Mean Payback Period (years)............... 1.1 1.7 2.4 2.5 2.5
----------------------------------------------------------------------------------------------------------------
Table V-10--Summary LCC and PBP Results for VCS.SC.I Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 0
Equipment with No Change in LCC (%)....... 76 49 11 11 11
Equipment with Net LCC Savings (%)........ 24 51 89 89 89
Mean LCC Savings ($)...................... 640 1,191 1,565 1,565 1,565
Mean Payback Period (years)............... 0.4 0.6 1.4 1.4 1.4
----------------------------------------------------------------------------------------------------------------
Table V-11--Summary LCC and PBP Results for SVO.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 62
Equipment with No Change in LCC (%)....... 62 42 24 24 4
Equipment with Net LCC Savings (%)........ 38 58 76 76 34
Mean LCC Savings ($)...................... 810 782 1,106 1,106 -170
Mean Payback Period (years)............... 0.8 1.5 2.1 2.1 9.7
----------------------------------------------------------------------------------------------------------------
[[Page 50115]]
Table V-12--Summary LCC and PBP Results for SVO.SC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 17
Equipment with No Change in LCC (%)....... 67 34 19 19 4
Equipment with Net LCC Savings (%)........ 33 66 81 81 79
Mean LCC Savings ($)...................... 527 756 988 988 516
Mean Payback Period (years)............... 0.7 1.6 2.6 2.6 5.9
----------------------------------------------------------------------------------------------------------------
Table V-13--Summary LCC and PBP Results for SOC.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 71
Equipment with No Change in LCC (%)....... 83 66 32 32 5
Equipment with Net LCC Savings (%)........ 17 34 68 68 24
Mean LCC Savings ($)...................... 363 759 819 819 -673
Mean Payback Period (years)............... 0.6 0.9 1.9 1.9 12.6
----------------------------------------------------------------------------------------------------------------
Table V-14--Summary LCC and PBP Results for HZO.RC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 0
Equipment with No Change in LCC (%)....... 80 60 39 19 19
Equipment with Net LCC Savings (%)........ 20 40 61 81 81
Mean LCC Savings ($)...................... 376 792 942 917 917
Mean Payback Period (years)............... 0.6 0.9 1.4 1.8 1.8
----------------------------------------------------------------------------------------------------------------
Table V-15--Summary LCC and PBP Results for HZO.RC.L Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 0
Equipment with No Change in LCC (%)....... 59 39 19 19 19
Equipment with Net LCC Savings (%)........ 41 61 81 81 81
Mean LCC Savings ($)...................... 593 927 971 971 971
Mean Payback Period (years)............... 1.1 1.5 1.8 1.8 1.8
----------------------------------------------------------------------------------------------------------------
Table V-16--Summary LCC and PBP Results for HZO.SC.M Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 0
Equipment with No Change in LCC (%)....... 73 45 21 10 10
Equipment with Net LCC Savings (%)........ 27 55 79 90 90
Mean LCC Savings ($)...................... 312 551 759 721 721
Mean Payback Period (years)............... 0.4 1.1 2.0 2.5 2.5
----------------------------------------------------------------------------------------------------------------
Table V-17--Summary LCC and PBP Results for HZO.SC.L Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 0
Equipment with No Change in LCC (%)....... 73 45 21 10 10
Equipment with Net LCC Savings (%)........ 27 55 79 90 90
Mean LCC Savings ($)...................... 610 1,094 1,585 1,559 1,559
Mean Payback Period (years)............... 0.4 0.9 1.6 1.9 1.9
----------------------------------------------------------------------------------------------------------------
[[Page 50116]]
Table V-18--Summary LCC and PBP Results for HCT.SC.I Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase (%)....... 0 0 0 0 0
Equipment with No Change in LCC (%)....... 64 46 30 14 14
Equipment with Net LCC Savings (%)........ 36 54 70 86 86
Mean LCC Savings ($)...................... 192 692 710 693 693
Mean Payback Period (years)............... 0.7 1.5 1.6 2.1 2.1
----------------------------------------------------------------------------------------------------------------
For three equipment classes (VOP.RC.M, SVO.RC.M, and SOC.RC.M) TSL
5 resulted in a negative LCC savings compared with the purchase of
baseline equipment. For all other equipment classes, TSL 5 showed
positive LCC savings. DOE noted that for equipment classes with
lighting, the inclusion of LED lighting at TSL 5 had a significant
impact on the calculated LCC savings. For equipment classes without
lighting (i.e., VCS.SC.I, HZO.RC.L, HZO.SC.M, HZO.SC.L, HCT.SC.I), the
LCC savings at TSL 5 was either identical to that of TSL 3, or less
(between $17 and $38 over the life of the equipment). However, for
equipment classes with lighting the difference in the LCC calculated
between TSL 3 and TSL 5 varied from $23 for VCT.SC.I to $1785 for
VOP.RC.M. When compared to TSL 3, the estimated reduction in LCC
savings for TSL 5 was most pronounced for the three medium temperature
equipment classes identified above as having negative LCC compared to
the baseline (VOP.RC.M, SOC.RC.M, and SVO.RC.M), varying between $1276
and $1785 dollars. For three additional equipment classes (VOP.RC.L,
SVO.SC.M, and VOP.SC.M), when compared to TSL 3, the difference in LCC
was greater than $500. DOE noted that these are all medium temperature
cases with the exception of VOP.RC.L, which is a small sales volume
unit, similar in design to a medium temperature VOP.RC.M case.
The inclusion of LED lighting systems result in an incremental
increase in installed price. It also increases annualized lighting
maintenance cost, since LED lights were assumed to be replaced after
50,000 hours or 5.7 years of steady operation. DOE performed two
sensitivity analyses of the effect of projected cost reductions in LED
lighting systems on LCC. These analyses involved five equipment
classes: VOP.RC.M, VOP.SC.M, SVO.RC.M, SVO.SC.M, and SOC.RC.M. In the
first sensitivity analysis, DOE determined the reduction in LED fixture
cost, applied to the installed price in 2012, that would be necessary
to reduce the average LCC for TSL 5 to a level equivalent to the LCC
savings at TSL 3, the maximum LCC level. DOE determined that for these
five equipment classes, a LED cost reduction ranging from 37 percent to
44 percent, depending on equipment class, would provide an LCC at TSL 5
equivalent to that at TSL 3.
In the second sensitivity analysis, DOE presumed that the cost for
replacement LED fixtures in 2018 would be reduced by 50 percent of the
cost assumed in the base LCC analysis, and then calculated the
reduction in LED fixture cost necessary by 2012 to reduce the average
LCC for TSL 5 to a level that provided equivalent LCC savings as TSL 3.
DOE determined that for these five equipment classes an LED cost
reduction ranging from 29 percent to 40 percent, depending on equipment
class, would provide a LCC at TSL 5 equivalent to that at TSL 3.
Based on these analyses, DOE concluded that a reduction in LED
fixture costs of approximately 45 percent would be sufficient to result
in the maximum LCC savings for all five equipment classes at TSL 5. DOE
estimated that this reduction in LED fixture costs would also increase
LCC savings for all other equipment classes with installed lighting at
TSL 5. DOE estimates that for all equipment classes to achieve their
maximum LCC savings at TSL 5, LED fixture costs must decrease by at
least 45 percent. DOE concluded that a reduction in LED costs of less
than 45 percent could result in only certain commercial refrigeration
equipment classes achieving their maximum LCC savings at TSL 5.
b. Rebuttable Presumption Payback
As discussed above, EPCA provides a rebuttable presumption that an
energy conservation standard is economically justified if the increased
purchase cost for the equipment that meets the standard is less than
three times the value of the first year energy savings resulting from
the standard. DOE calculated a rebuttable presumption payback period
for each TSL to determine if DOE could presume that a standard at that
level is economically justified. Rather than using distributions for
input values, DOE used discrete values and, as required by EPCA, based
the calculation on the DOE commercial refrigeration equipment test
procedure assumptions. As a result, DOE calculated a single rebuttable
presumption payback value for each standard level, and not a
distribution of payback periods.
To evaluate the rebuttable presumption, DOE estimated the
additional customer price of a more efficient, standard-compliant unit
using the average customer markup, and compared this cost to the value
of the energy saved during the first year of operation of the equipment
as determined by ANSI/ARI Standard 1200-2006. DOE interprets that the
increased cost of purchasing a standard-compliant unit includes the
cost of installing the equipment for use by the purchaser. DOE
calculated the rebuttable presumption PBP, or the ratio of the value of
the increased installed price above the baseline efficiency level to
the first year's energy cost savings. When this PBP is less than three
years, the rebuttable presumption is satisfied; when this PBP is equal
to or more than three years, the rebuttable presumption is not
satisfied.
Rebuttable presumption PBPs were calculated based on single-point
national average values for installed costs and energy prices
appropriate to commercial refrigeration equipment. Equipment prices are
based on a shipment-weighted average distribution markup for remote
condensing equipment or self-contained equipment, as applied to the MSP
for each equipment class. The installed cost is based on the national
average equipment price and the national average installation cost for
remote condensing or self-contained equipment as appropriate. Average
first-year energy costs were calculated as the product of the annual
energy consumption used in the LCC and the shipment-weighted national-
average electricity price, which was calculated using the shipment
weights for the four business types
[[Page 50117]]
using commercial refrigeration equipment.
The equation for the rebuttable PBP is:
PBP = [Delta]IC/[Delta]EC
Where
PBP = payback period in years,
[Delta]IC = difference in the total installed cost between the more
efficient standard level equipment (energy consumption levels 2, 3,
etc.) and the baseline (energy consumption level 1) equipment, and
[Delta]EC = difference in annual energy costs.
PBPs are expressed in years. PBPs greater than the life of the
equipment means that the increased total installed cost of the more
efficient equipment is not recovered in reduced operating costs for the
more efficient equipment. The rebuttable presumption PBPs differ from
the other PBPs calculated in the LCC analysis (see Section IV.E.12 of
this NOPR) because they do not include maintenance or repair costs and
they are based on single point values instead of distributions for
installation costs or energy costs. The baseline efficiency level for
the rebuttable presumption calculation is the baseline established in
the engineering analysis.
Table V-19 shows the nationally averaged rebuttable presumption
paybacks calculated for all equipment classes and efficiency levels.
The highest efficiency level with a rebuttable presumption payback of
less than three years is also shown in Table V-19 for each equipment
class. For eight equipment classes, the rebuttable presumption criteria
were satisfied at all TSLs. At TSL 4, the rebuttable presumption
criteria are satisfied for 13 equipment classes. At TSL 3, the
rebuttable presumption criteria are satisfied for 14 equipment classes.
At TSL 2, the rebuttable presumption criteria were satisfied for all
equipment classes. However, while DOE has examined the rebuttable
presumption PBPs, DOE has not determined economic justification for any
of the standard levels analyzed based on the ANOPR rebuttable
presumption analysis. The economic justification for each TSL for each
equipment class will take into account the more detailed analysis of
the economic impacts of increased efficiency pursuant to Section
325(o)(2)(B)(i) of EPCA. (42 U.S.C. 6295(o)(2)(B)(i) and 6316(e)(1)).
Table V-19--Rebuttable Presumption Payback Periods by Efficiency Level and Equipment Class
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rebuttable presumption payback period (years) Highest TSL
Equipment type -------------------------------------------------------------------------------- with PBP < 3
Level 1 Level 2 Level 3 Level 4 Level 5 Years
--------------------------------------------------------------------------------------------------------------------------------------------------------
VOP.RC.M................................................ 0.8 1.1 1.7 1.7 5.9 4
VOP.RC.L................................................ 0.7 1.1 1.2 2.5 2.5 5
VOP.SC.M................................................ 0.8 1.5 2.3 2.3 4.5 4
VCT.RC.M................................................ 0.8 1.2 4.1 5.4 5.4 2
VCT.RC.L................................................ 1.0 2.4 2.4 3.3 3.3 3
VCT.SC.I................................................ 1.0 1.6 2.2 2.3 2.3 5
VCS.SC.I................................................ 0.4 0.6 1.3 1.3 1.3 5
SVO.RC.M................................................ 0.8 1.1 1.7 1.7 5.9 4
SVO.SC.M................................................ 0.6 1.3 2.2 2.2 4.5 4
SOC.RC.M................................................ 0.5 0.8 1.4 1.4 7.1 4
HZO.RC.M................................................ 0.5 0.8 1.2 1.6 1.6 5
HZO.RC.L................................................ 1.0 1.3 1.6 1.6 1.6 5
HZO.SC.M................................................ 0.4 1.0 1.9 2.3 2.3 5
HZO.SC.L................................................ 0.3 0.8 1.5 1.7 1.7 5
HCT.SC.I................................................ 0.7 1.4 1.5 2.0 2.0 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
c. Life-Cycle Cost Sub-Group Analysis
Using the LCC spreadsheet model, DOE estimated the impact of the
TSLs on the following customer sub-group: small businesses. For the
retail food sales business, the Small Business Association (SBA)
defines as small businesses supermarkets and other grocery stores and
convenience stores with less than $25 million in total annual sales.
For specialty stores (e.g., meat markets, bakeries, fish and seafood
markets), this limit is set at less than $6.5 million in annual sales.
According to the Food Marketing Institute, the average supermarket had
sales of approximately $15 million in 2006, so a small business could
be represented by one to two average-size supermarkets or a chain of
smaller grocery or convenience stores. The Food Marketing Institute
defines independent stores as a retailer with one to ten stores, so
most small supermarkets or grocery businesses as defined by SBA would
be classified as independent grocery stores by the industry. A somewhat
larger chain of convenience stores could still be classified as a small
business.
DOE estimated the LCC and PBP for small food sales businesses
defined by SBA by presuming that most small business customers could be
represented by the analysis performed for small grocery and convenience
store owners. DOE assumed, however, that the smaller, independent
grocery and convenience store chains may not have access to national
accounts, but would instead purchase equipment primarily through
distributors and grocery wholesalers. DOE modified the distribution
channels for remote condensing and self-contained equipment to these
small businesses as follows:
For remote condensing equipment, 15 percent of the sales
were assumed to pass through a manufacturer-to-distributor-to-
contractor-to-customer channel, and 85 percent were assumed to be
purchased through a manufacturer-to-distributor-to-customer channel.
For self-contained equipment, 35 percent of sales were
assumed to pass through a manufacturer-to-distributor-to-contractor-to-
customer channel, and 65 percent were assumed to be purchased through a
manufacturer-to-distributor-to-customer channel.
In both cases, the distribution chain markups were calculated
accordingly. Table V-20 shows the mean LCC savings from proposed energy
conservation standards for the small business sub-group, and Table V-21
shows the mean payback period (in years) for this sub-group. More
detailed discussion on the LCC sub-group analysis and results can be
found in Chapter 12 of the TSD.
[[Page 50118]]
Table V-20--Mean Life-Cycle Cost Savings for Commercial Refrigeration Equipment Purchased by LCC Sub-Group
(Small Business) (2007$) *
----------------------------------------------------------------------------------------------------------------
Equipment class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
VOP.RC.M........................ 1,536 1,524 2,096 2,096 564
VOP.RC.L........................ 3,995 5,158 5,301 4,688 4,688
VOP.SC.M........................ 968 1,413 1,840 1,840 1,308
VCT.RC.M........................ 366 757 1,689 1,625 1,625
VCT.RC.L........................ 876 4,842 4,941 5,042 5,042
VCT.SC.I........................ 2,957 4,981 5,155 5,151 5,151
VCS.SC.I........................ 805 1,511 2,031 2,031 2,031
SVO.RC.M........................ 1,036 1,044 1,492 1,492 400
SVO.SC.M........................ 669 994 1,346 1,346 953
SOC.RC.M........................ 461 973 1,107 1,107 (175)
HZO.RC.M........................ 476 1,013 1,221 1,202 1,202
HZO.RC.L........................ 766 1,206 1,274 1,274 1,274
HZO.SC.M........................ 393 708 1,005 974 974
HZO.SC.L........................ 766 1,394 2,069 2,052 2,052
HCT.SC.I........................ 244 898 925 919 919
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative savings.
Table V-21--Mean Payback Period for Commercial Refrigeration Equipment Purchased by LCC Sub-Group (Small
Business) (Years)
----------------------------------------------------------------------------------------------------------------
Equipment class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
VOP.RC.M........................ 0.8 1.3 2.0 2.0 8.5
VOP.RC.L........................ 0.7 1.1 1.2 2.7 2.7
VOP.SC.M........................ 0.8 1.6 2.4 2.4 5.2
VCT.RC.M........................ 0.8 1.3 4.2 5.6 5.6
VCT.RC.L........................ 1.1 2.4 2.4 3.4 3.4
VCT.SC.I........................ 1.0 1.6 2.1 2.2 2.2
VCS.SC.I........................ 0.4 0.6 1.3 1.3 1.3
SVO.RC.M........................ 0.8 1.3 1.9 1.9 8.5
SVO.SC.M........................ 0.6 1.4 2.3 2.3 5.2
SOC.RC.M........................ 0.5 0.8 1.7 1.7 10.8
HZO.RC.M........................ 0.5 0.8 1.2 1.6 1.6
HZO.RC.L........................ 1.0 1.4 1.7 1.7 1.7
HZO.SC.M........................ 0.4 1.0 1.8 2.3 2.3
HZO.SC.L........................ 0.3 0.8 1.5 1.7 1.7
HCT.SC.I........................ 0.6 1.3 1.4 1.9 1.9
----------------------------------------------------------------------------------------------------------------
For commercial refrigeration equipment, the LCC and PBP impacts for
small businesses are similar to those of all customers as a whole.
While the discount rate for small grocery stores is higher than that
for commercial refrigeration equipment customers as a whole and
equipment prices are higher due to the higher markups, these small
business customers appear to retain commercial refrigeration equipment
over longer periods, and generally, smaller stores tend to pay higher
electrical prices. The average LCC savings for the small business sub-
group is slightly higher than that calculated for the average
commercial refrigeration equipment customer, and the average PBP is
slightly shorter than the national average. DOE tentatively concluded
that the small food sales businesses as defined by SBA will not
experience economic impacts significantly different or more negative
than those impacts on food sales businesses as a whole.
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of amended energy
conservation standards on commercial refrigeration equipment
manufacturers (Chapter 13 of the TSD).
a. Industry Cash-Flow Analysis Results
Table V-22 and Table V-23 show the MIA results for each TSL using
both markup scenarios described above for commercial refrigeration
equipment.\24\
---------------------------------------------------------------------------
\24\ The MIA estimates the impacts on commercial refrigeration
equipment manufacturers of equipment in the entire range of
equipment classes (i.e., the MIA results in Table V-22 and Table V-
23 take into consideration the impacts on manufacturers of equipment
from all equipment classes).
Table V-22--Manufacturer Impact Analysis for the Commercial Refrigeration Equipment Industry Under the Preservation of Gross Margin Percentage Markup
Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario with a rollup shipment scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
Efficiency level
Units Base case -------------------------------------------------------------------------------
1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.............................. 2007$ Millions...... 510 510 517 493 471 493
[[Page 50119]]
Change in INPV.................... 2007$ Millions...... .............. (0) 6 (17) (40) (18)
(%)................. .............. 0.00% 1.22% -3.30% -7.76% -3.49%
Energy Conservation Standards 2007$ Millions...... .............. 0.5 2.8 20.6 40.4 51.6
Equipment Conversion Expenses.
Energy Conservation Standards 2007$ Millions...... .............. 0.8 5.0 36.3 71.2 90.8
Capital Investments.
Total Investment Required..... 2007$ Millions...... .............. 1.3 7.8 57.0 111.6 142.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V-23--Manufacturer Impact Analysis for the Commercial Refrigeration Equipment Industry Under the Preservation of Operating Profit Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of operating profit markup scenario with a rollup shipment scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
Efficiency level
Units Base case -------------------------------------------------------------------------------
1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.............................. 2007$ Millions...... 510 447 423 382 330 226
Change in INPV.................... 2007$ Millions...... .............. (63) (88) (129) (180) (285)
(%)................. .............. -12.34% -17.16% -25.20% -35.32% -55.77%
Energy Conservation Standards 2007$ Millions...... .............. 0.5 2.8 20.6 40.4 51.6
Equipment Conversion Expenses.
Energy Conservation Standards 2007$ Millions...... .............. 0.8 5.0 36.3 71.2 90.8
Capital Investments.
Total Investment Required..... 2007$ Millions...... .............. 1.3 7.8 57.0 111.6 142.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
At TSL 1, the impact on INPV and cash flow varies greatly depending
on the manufacturers and their ability to pass on MPC increases to the
customer. DOE estimated the impacts in INPV at TSL 1 to range from
approximately no impact to -$63 million, which is a change in INPV of
zero percent to -12.34 percent. At this level, the industry cash flow
is $50.9 million, which is nearly the same as the base case value of
$51.4 million in the year leading up to the standards. Since DOE
estimates that more than 80 percent of the equipment being sold is
already at or above this level, manufacturers that currently meet TSL 1
will not have to make additional modifications to their equipment lines
to conform to the energy conservation standards. DOE expects the lower
end of the impacts to be reached, because manufacturers will be able to
fully recover the increase in manufacturer production cost from
customers. Therefore, DOE expects that industry revenues and costs will
not be significantly negatively affected at TSL 1.
At TSL 2, the impact on INPV and cash flow continues to vary
depending on the manufacturers and their ability to pass on MPC
increases to the customer. DOE estimated the impacts in INPV at TSL 2
to range from approximately $6 million to -$88 million, which is a
change in INPV of 1.22 percent to -17.16 percent. At this level, the
industry cash flow decreases by approximately 6 percent, to $48.2
million, compared to the base case value of $51.4 million in the year
leading up to the standards. DOE estimates that roughly 45 percent of
the equipment being sold is already at or above this level. The
required higher level of efficiency will cause some manufactures to
modify their equipment lines to conform to the energy conservation
standards. DOE does not expect industry revenues and costs to be
affected significantly as long as manufacturers fully recover the
increase in manufacturer production cost from customers. The positive
INPV value is
[[Page 50120]]
explained by the assumption that MSP increases due to higher costs of
the equipment, so that manufacturers fully recover and even surpass the
investments needed to achieve this level.
At TSL 3, DOE estimated the impacts in INPV to range from
approximately -$17 million to -$129 million, which is a change in INPV
of -3.3 percent to -25.2 percent. At this level, the industry cash flow
decreases by approximately 45.5 percent, to $28 million, compared to
the base case value of $51.4 million in the year leading up to the
standards. Based on information submitted by industry, the majority of
manufacturers would require a complete redesign of their equipment, and
therefore DOE expects that commercial refrigeration equipment
manufacturers will have some difficulty fully passing on larger MPC
increases to customers. Manufacturers expect that the actual impacts
will be closer to the higher end of the range of impacts (i.e., a drop
of 25.2 percent in INPV).
At TSL 4, DOE estimated the impacts on INPV to range from -$40
million to -$180 million, which is a change in INPV of approximately -
7.76 percent to -35.32 percent. At this level, the industry cash flow
decreases by approximately 88.4 percent to $5.5 million, compared to
the base case value of $51.4 million in the year leading up to the
standards. TSL 4 was created as a combination of TSL 3 (minimum LCC)
and TSL 5 (max-tech). Manufacturers were not directly asked about this
combination TSL during interviews. However, DOE estimated the range of
impacts at TSL 4 based on the expected impacts manufacturers reported
for TSL 3 and TSL 5. Since manufacturers expect that the actual impacts
will be closer to the higher range of impacts at TSL 3 and TSL 5, DOE
expects that the actual impacts for TSL 4 will also be at the higher
range (i.e., a drop of 35.32 percent in INPV).
At TSL 5 (max-tech), DOE estimated the impacts in INPV to range
from -$18 million to -$285 million, which is a change in INPV of
approximately -3.49 percent to -55.77 percent. At this level, the
industry cash flow decreases by approximately 114 percent to -$7.2
million, compared to the base case value of $51.4 million in the year
leading up to the standards. At higher TSLs, manufacturers have more
difficulty fully passing on larger MPC increases to customers, and
therefore manufacturers expect that the actual impacts will be closer
to the higher end of the range of impacts (i.e., a drop of 55.77
percent in INPV). Currently, there is only one model being manufactured
at these efficiency levels for most equipment classes, and some
equipment classes have no equipment at these levels. At TSL 5, DOE
recognizes that there is a risk of very large negative impacts if
manufacturers' expectations are accurate about reduced profit margins.
During the interviews, manufacturers expressed great concern at the
possibility of requiring an entire equipment line to be manufactured at
the max-tech levels.
b. Cumulative Regulatory Burden
While any one regulation may not impose a significant burden on
manufacturers, the combined effects of several impending regulations
may have serious consequences for some manufacturers, groups of
manufacturers, or an entire industry. Assessing the impact of a single
regulation may overlook this cumulative regulatory burden.
In addition to the energy conservation regulations on commercial
refrigeration equipment, several other Federal regulations and pending
regulations apply to commercial refrigeration equipment and other
equipment produced by the same manufacturers or parent companies. DOE
recognizes that each regulation can significantly affect manufacturers'
financial operations. Multiple regulations affecting the same
manufacturer can quickly strain manufacturers' profits and possibly
cause an exit from the market. An example of these additional
regulations is the U.S. Environmental Protection Agency (EPA)-mandated
phaseout of hydrochlorofluorocarbons (HCFCs) and the potential
residential central air conditioners and heat pumps Federal energy
conservation standard. Table V-24 provides the timetables for these
mandatory or potential regulations. DOE believes that the cumulative
burden of the HCFC phaseout is minimal because much of the commercial
refrigeration equipment industry has already initiated the transition
to HFC refrigerants. As shown in Section IV.B.3 above, ARI stated that
the data it provided to DOE was based on HFC refrigerants, and DOE
therefore used HFC refrigerants in its analysis. DOE is aware of the
industry's transition to HFC refrigerants, but requests comment on any
cumulative regulatory burdens from the combined effects of impending
regulations that may affect manufacturers.
Table V-24--Federal Regulation Timetables
------------------------------------------------------------------------
Key affected
Regulation appliance Effective date
------------------------------------------------------------------------
Potential DOE energy conservation Central air 06/2011.
standards. conditioners and
heat pumps
(residential).
Potential DOE energy conservation Room air 06/2011
standards. conditioners.
EPA phaseout of HCFC refrigerant Room and 01/2010
on new equipment. residential
central air
conditioners, and
commercial air
conditioners.
EPA phaseout of HCFC blowing Commercial 01/2010.
agents on new equipment. refrigeration
equipment.
------------------------------------------------------------------------
Production of foam insulation uses a blowing agent. The EPA
strategy for meeting U.S. obligations under the Montreal Protocol
requires the United States to phase out the production and use of HCFC
blowing agents. HCFC-22 and HCFC-142b will be phased out on January 1,
2010. This affects equipment manufacturing in the United States after
this date and causes manufacturers to switch to other blowing agents
with no ozone depletion potential.
DOE recognizes that some parent companies of commercial
refrigeration equipment manufacturers could also be affected by the
potential energy conservation standards for central air conditioners
and heat pumps and for room air conditioners. Additional investments
necessary to meet these potential standards could have significant
impacts on manufacturers of commercial refrigeration equipment. DOE
seeks comment on the magnitude of impacts for cumulative regulatory
burden on manufacturers for potential energy conservation standards for
central air conditioners and heat pumps and for room air conditioners.
c. Impacts on Employment
DOE used the GRIM to assess the impacts of energy conservation
standards on commercial refrigeration equipment employment. DOE used
statistical data from the U.S. Census Bureau's 2006 Annual Survey of
Manufacturers, the results of the
[[Page 50121]]
engineering analysis, and interviews with manufacturers to estimate the
inputs necessary to calculate industry-wide labor expenditures and
employment levels.
Currently the vast majority of commercial refrigeration equipment
is manufactured in the U.S. Based on the GRIM results and interviews
with manufacturers, DOE expects that there would be positive direct
employment impacts among domestic commercial refrigeration equipment
manufacturers for TSL 1 through TSL 5. This conclusion ignores the
possible relocation of domestic jobs to lower-labor-cost countries
which may occur independently of new standards or may be influenced by
the level of investments required by new standards. Because the labor
impacts in the GRIM do not take relocation into account, the labor
impacts would be different if manufacturers chose to relocate to lower
cost countries. Manufactures stated that, although there are no current
plans to relocate production facilities, at higher TSLs there would be
increased pressure to cut costs, which could result in relocation.
Chapter 13 of the TSD further discusses the employment impacts and
exhibits the actual changes in employment levels by TSL.
The conclusions in this section are independent of any conclusions
regarding employment impacts from the broader U.S. economy estimated in
the Employment Impact Analysis. These impacts are documented in Chapter
15 of this TSD.
d. Impacts on Manufacturing Capacity
According to the majority of commercial refrigeration equipment
manufacturers, new energy conservation standards will not significantly
affect manufacturers' production capacity. Any necessary redesign of
commercial refrigeration equipment will not change the fundamental
assembly of the equipment. However, manufacturers anticipate some minor
changes to tooling. Thus, DOE believes manufacturers will be able to
maintain manufacturing capacity levels and continue to meet market
demand under new energy conservation standards.
e. Impacts on Sub-Groups of Manufacturers
As discussed above, using average cost assumptions to develop an
industry cash-flow estimate is not adequate for assessing differential
impacts among sub-groups of manufacturers. Small manufacturers, niche
equipment manufacturers, or manufacturers exhibiting a cost structure
that differs largely from the industry average could be affected
differently. DOE used the results of the industry characterization to
group manufacturers exhibiting similar characteristics.
DOE evaluated the impact of new energy conservation standards on
small businesses, as defined by the SBA for the commercial
refrigeration equipment industry, as manufacturing enterprises with 750
or fewer employees. DOE shared the interview guides with small
commercial refrigeration equipment manufacturers and tailored specific
questions for them. During DOE's interviews, small manufacturers
suggested that the impacts of standards on them would not differ from
impacts on larger companies within the industry (Chapter 13 of the
TSD).
3. National Impact Analysis
a. Amount and Significance of Energy Savings
To estimate the energy savings through 2042 due to new energy
conservation standards, DOE compared the energy consumption of
commercial refrigeration equipment under the base case to energy
consumption of commercial refrigeration equipment under a new standard.
The energy consumption calculated in the NIA is source energy, taking
into account energy losses in the generation and transmission of
electricity as discussed in Section IV.J.
DOE tentatively determined the amount of energy savings at each of
the 5 TSLs being considered for the 15 primary equipment class analyzed
and aggregated the results. Table V-25 shows the forecasted aggregate
national energy savings for all 15 equipment classes at each TSL. The
table also shows the magnitude of the estimated energy savings if the
savings are discounted at seven percent and three percent. Each TSL
considered in this rulemaking would result in significant energy
savings, and the amount of savings increases with higher energy
conservation standards (Chapter 11 of the TSD).
Table V-25--Summary of Cumulative National Energy Savings for Commercial Refrigeration Equipment (Energy Savings
for Units Sold from 2012 to 2042)
----------------------------------------------------------------------------------------------------------------
Primary national energy savings (quads) (sum
----------------------------------------------------------------- of all equipment classes)
-----------------------------------------------
Trial standard level Undiscounted 3% Discounted 7% Discounted
----------------------------------------------------------------------------------------------------------------
1............................................................... 0.141 0.073 0.034
2............................................................... 0.545 0.284 0.132
3............................................................... 0.715 0.372 0.173
4............................................................... 0.832 0.433 0.201
5............................................................... 1.208 0.630 0.292
----------------------------------------------------------------------------------------------------------------
DOE reports both undiscounted and discounted values of energy
savings. Each TSL analyzed results in additional energy savings,
ranging from an estimated 0.141 quads to 1.208 quads for TSLs 1 through
5 (undiscounted).
b. Net Present Value
The net present value analysis is a measure of the cumulative
benefit or cost of standards to the Nation. In accordance with the
Office of Management and Budget (OMB)'s guidelines on regulatory
analysis (OMB Circular A-4, Section E, September 17, 2003), DOE
calculated an estimated NPV using both a seven percent and a three
percent real discount rate. The seven percent rate is an estimate of
the average before-tax rate of return to private capital in the U.S.
economy, and reflects the returns to real estate and small business
capital as well as corporate capital. DOE used this discount rate to
approximate the opportunity cost of capital in the private sector,
since recent OMB analysis has found the average rate of return to
capital to be near this rate. In addition, DOE used the three percent
rate to capture the potential effects of standards on private
consumption (e.g., through higher prices for equipment and purchase of
reduced amounts of energy).
[[Page 50122]]
This rate represents the rate at which society discounts future
consumption flows to their present value. This rate can be approximated
by the real rate of return on long-term Government debt (e.g., the
yield on Treasury notes minus the annual rate of change in the Consumer
Price Index), which has averaged about three percent on a pre-tax basis
for the last 30 years.
Table V-27 shows the estimated cumulative NPV for commercial
refrigeration equipment resulting from the sum of the NPV calculated
for each of the 15 primary equipment classes analyzed. Table V-27
assumes the AEO2007 reference case forecast for electricity prices. At
a seven percent discount rate, TSL 1-4 show positive cumulative NPVs.
The highest NPV is provided by TSL 3 at $1.20 billion. TSL 4 provided
$1.10 billion, close to that of TSL 3. TSL 5 showed a negative NPV at -
$200 million, the result of negative NPV observed in five equipment
classes (VOP.RC.M, VOP.SC.M, SVO.RC.M, SVO.SC.M, and SOC.RC.M). DOE
determined through a sensitivity analysis that a 50 percent reduction
in LED fixture costs, applied to equipment sold during the analysis
period starting in 2012, would yield a NPV of $1.62 billion for TSL
5.\25\
---------------------------------------------------------------------------
\25\ DOE anticipates a reduction in installed cost of LED
systems over time. The projected reduction in price for LED systems
is provided and discussed in Sections V.C and IV.B.3.c of this NOPR
and Appendix B of the TSD.
---------------------------------------------------------------------------
At a three percent discount rate, all TSLs showed a positive NPV,
with the highest NPV provided at TSL 3 (i.e., $3.25 billion). TSL 4
provided a near equivalent NPV at $3.24 billion. TSL 5 provided a NPV
of $1.16 billion dollars. Three equipment classes (VOP.RC.M, SVO.RC.M,
and SOC.RC.M) were estimated to have negative NPVs at a three percent
discount rate at TSL 5. DOE determined through a sensitivity analysis
that a 50 percent reduction in LED fixture costs, applied to all
equipment sold during the analysis period starting in 2012, would
result in the greatest NPV at TSL 5 with $4.76 billion.
DOE also determined that a six percent reduction in LED system
costs by 2012 would be sufficient to provide a positive NPV at TSL 5 in
aggregate across all equipment classes at a seven percent discount
rate. DOE recognizes that the aggregate six percent reduction in LED
system costs could be attained by 2012 because of the rapid development
of LED technology. In addition, DOE expects that a 50 percent reduction
in LED system costs is possible in 2012, given the projections
discussed previously, and considers a 50 percent reduction likely to
occur by 2018 as examined in the LCC LED replacement cost sensitivity
analysis.
Table V-26 shows the estimated NPV results at TSL 5, for projected
LED system cost reductions of six percent and 50 percent.
Table V-26--Summary of Net Present Value Results With LED System Cost
Sensitivity*
------------------------------------------------------------------------
TSL 5 TSL 5
Including 6% Including 50%
TSL 5 LED system LED system
cost reduction cost reduction
------------------------------------------------------------------------
NPV (2007$ billion):
7% Discount Rate......... (0.20) 0.03 1.62
3% Discount Rate......... 1.16 1.62 4.76
------------------------------------------------------------------------
* Parentheses indicate negative (-) values.
In addition to the reference case, DOE examined the NPV under the
AEO2007 high-growth and low-growth electricity price forecasts. The
results of this examination can be found in Chapter 11 of the TSD.
Table V-27--Summary of Cumulative Net Present Value for Commercial
Refrigeration Equipment--AEO2007 Reference Case
------------------------------------------------------------------------
NPV* (billion 2007$)
------------------------------------------------------------------------
7% discount 3% discount
Trial standard level rate rate
------------------------------------------------------------------------
1...................................... 0.33 0.82
2...................................... 0.98 2.59
3...................................... 1.20 3.25
4...................................... 1.10 3.24
5...................................... (0.20) 1.16
------------------------------------------------------------------------
* Numbers in parentheses indicate negative NPV, i.e., a net cost.
c. Impacts on Employment
DOE develops general estimates of the indirect employment impacts
of proposed standards on the economy. As discussed above, DOE expects
energy conservation standards for commercial refrigeration equipment to
reduce energy bills for commercial customers, and the resulting net
savings to be redirected to other forms of economic activity. DOE also
realizes that these shifts in spending and economic activity could
affect the demand for labor. To estimate these effects, DOE used an
input/output model of the U.S. economy using Bureau of Labor Statistics
(BLS) data (as described in Section IV.K; see Chapter 15 of the TSD for
details).
This input/output model suggests the proposed commercial
refrigeration equipment energy conservation standards are likely to
slightly increase the net demand for labor in the economy. Neither the
BLS data nor the input/output model used by DOE includes the quality or
wage level of the jobs. As shown in Table V-28, DOE estimates that net
indirect employment impacts from a proposed commercial refrigeration
equipment standard are likely to be very small. The net increase in
jobs is so small that it would be
[[Page 50123]]
imperceptible in national labor statistics and might be offset by
other, unanticipated effects on employment.
Table V-28--Net National Change in Indirect Employment, Jobs in 2042
----------------------------------------------------------------------------------------------------------------
Net national change in jobs
Trial standard level ---------------------------------------------------
2012 2022 2032 2042
----------------------------------------------------------------------------------------------------------------
1........................................................... 0 324 448 505
2........................................................... -6 1,270 1,744 1,970
3........................................................... -15 1,680 2,312 2,606
4........................................................... -94 2,204 3,047 3,434
5........................................................... -315 3,317 4,607 5,187
Maximum Job Impact.......................................... -315 3,317 4,607 5,187
----------------------------------------------------------------------------------------------------------------
4. Impact on Utility or Performance of Equipment
In performing the engineering analysis, DOE considered design
options that would not lessen the utility or performance of the
individual classes of equipment. (42 U.S.C. 6295(o)(2)(B)(i)(IV) and
6316(e)(1)) As presented in the screening analysis (Chapter 4 of the
TSD), DOE did not consider design options that reduce the utility of
the equipment. Because no design options were considered that reduce
utility, DOE tentatively concluded that none of the efficiency levels
proposed for commercial refrigeration equipment reduce the utility or
performance of the equipment.
5. Impact of Any Lessening of Competition
EPCA directs DOE to consider any lessening of competition that is
likely to result from standards. It directs the Attorney General to
determine in writing the impact, if any, of any lessening of
competition likely to result from a proposed standard. (42 U.S.C.
6295(o)(2)(B)(i)(V) and 6316(e)(1)) To assist the Attorney General in
making such a determination, DOE has provided the Department of Justice
(DOJ) with copies of this Notice and the TSD for review. During MIA
interviews, domestic manufacturers indicated that foreign manufacturers
have entered the commercial refrigeration equipment market over the
past several years. Manufacturers also stated that while there has been
significant consolidation with supermarket chains, little or no
consolidation has occurred among commercial refrigeration manufacturers
in recent years. DOE believes that these trends will continue to happen
in this market regardless of the proposed standard level chosen.
6. Need of the Nation to Conserve Energy
An improvement in the energy efficiency of commercial refrigeration
equipment is likely to improve the security of the Nation's energy
system by reducing overall demand for energy, and thus reduce the
Nation's reliance on foreign sources of energy. Reduced demand may also
improve the reliability of the electricity system, particularly during
peak-load periods. As a measure of this reduced demand, DOE expects the
proposed standards (TSL 4) to prevent the need for the construction of
new power plants totaling approximately 643 MW of electricity
generation capacity in 2042.
Enhanced energy efficiency also produces environmental benefits.
The expected energy savings from higher commercial refrigeration
equipment standards will reduce the emissions of air pollutants and
greenhouse gases associated with energy production and fossil fuel
usage. Table V-29 shows estimated cumulative CO2,
NOX, and Hg emissions reductions for all the commercial
refrigeration equipment classes over the forecast period. The expected
energy savings from commercial refrigeration equipment standards will
reduce the emissions of greenhouse gases associated with energy
production, and it may reduce the cost of maintaining nationwide
emissions standards and constraints.
Table V-29--Summary of Emissions Reductions for Commercial Refrigeration Equipment
(cumulative reductions for equipment, 2012 to 2042)
----------------------------------------------------------------------------------------------------------------
Trial Standard Levels
----------------------------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Emissions Reductions...........................
CO2 (Mt)....................................... 7.37 28.47 37.37 43.50 63.17
NOX (kt)....................................... 2.74 10.58 13.88 16.16 23.47
Hg (t)......................................... 0.09 0.36 0.47 0.54 0.80
----------------------------------------------------------------------------------------------------------------
Mt = million metric tons.
kt = thousand tons.
t = tons.
The estimated cumulative CO2, NOX, and Hg
emission reductions for the proposed standard are 43.5 Mt, 16.16 kt,
and 0.54 t, respectively, for all 15 equipment classes over the period
from 2012 to 2042. However, TSL 5 provides the greatest reduction of
emissions of all the TSLs considered. In the environmental assessment
(Chapter 16 of the TSD), DOE reports estimated annual changes in
CO2, NOX, and Hg emissions attributable to each
TSL. As discussed in Section IV.L, DOE does not report SO2
emissions reduction from power plants because reductions from an energy
conservation standard would not affect the overall level of
SO2 emissions in the United States due to the emissions caps
for SO2.
The NEMS-BT modeling assumed that NOX would be subject
to the Clean Air Interstate Rule (CAIR) issued by the U.S.
Environmental Protection Agency
[[Page 50124]]
on March 10, 2005.\26\ 70 FR 25162 (May 12, 2005). On July 11, 2008,
the U.S. Court of Appeals for the District of Columbia Circuit (D.C.
Circuit) issued its decision in North Carolina v. Environmental
Protection Agency,\27\ in which the court vacated the CAIR. If left in
place, the CAIR would have permanently capped emissions of
NOX in 28 eastern States and the District of Columbia. As
with the SO2 emissions cap, a cap on NOX
emissions would have meant that equipment energy conservation standards
are not likely to have a physical effect on NOX emissions in
States covered by the CAIR caps. While the caps would have meant that
physical emissions reductions in those States would not have resulted
from the energy conservation standards we are proposing today, the
standards might have produced an environmental-related economic impact
in the form of lower prices for emissions allowance credits, if large
enough. DOE notes that the estimated total reduction in NOX
emissions, including projected emissions or corresponding allowance
credits in States covered by the CAIR cap was between 0.004 and 0.034
percent of the nationwide NOX emissions as a whole,
percentages that DOE estimated were too small to affect allowance
prices for NOX under the CAIR.
---------------------------------------------------------------------------
\26\ See http://www.epa.gov/cleanairinterstaterule/.
\27\ Case No. 05-1244, 2008 WL 2698180 at *1 (D.C. Cir. July 11,
2008).
---------------------------------------------------------------------------
Even though the D.C. Circuit vacated the CAIR, DOE notes that the
D.C. Circuit left intact EPA's 1998 NOX SIP Call rule, which
capped seasonal (summer) NOX emissions from electric
generating units and other sources in 23 jurisdictions and gave those
jurisdictions the option to participate in a cap and trade program for
those emissions. See 63 Fed. Reg. 57356, 57359 (Oct. 27, 1998).\28\
Accordingly, DOE is considering whether changes are needed to its plan
for addressing the issue of NOX reduction. DOE invites
public comment on how the agency should address this issue, including
how it might value NOX emissions for States now that the
CAIR has been vacated.\29\
---------------------------------------------------------------------------
\28\ In the NOX SIP Call rule, EPA found that sources
in the District of Columbia and 22 ``upwind'' states (States) were
emitting NOX (an ozone precursor) at levels that
significantly contributed to ``downwind'' states not attaining the
ozone NAAQS or at levels that interfered with states in attainment
maintaining the ozone NAAQS. In an effort to ensure that
``downwind'' states attain or continue to attain the ozone NAAQS,
EPA established a region-wide cap for NOX emissions from
certain large combustion sources and set a NOX emissions
budget for each State. Unlike the cap that CAIR would have
established, the NOX SIP Call Rule's cap only constrains
seasonal (summer time) emissions. In order to comply with the
NOX SIP Call Rule, States could elect to participate in
the NOX Budget Trading Program. Under the NOX
Budget Trading Program, each emission source is required to have one
allowance for each ton of NOX emitted during the ozone
season. States have flexibility in how they allocate allowances
through their State Implementation Plans but States must remain
within the EPA-established budget. Emission sources are allowed to
buy, sell and bank NOX allowances as appropriate. It
should be noted that, on April 16, 2008, EPA determined that Georgia
is no longer subject to the NOX SIP Call rule.
\29\ In anticipation of CAIR replacing the NOX SIP
Call Rule, many States adopted sunset provisions for their plans
implementing the NOX SIP Call Rule. The impact of the
NOX SIP Call Rule on NOX emissions will
depend, in part, on whether these implementation plans are
reinstated.
---------------------------------------------------------------------------
With regard to mercury emissions, DOE is able to report an estimate
of the physical quantity changes in mercury emissions associated with
an energy conservation standard. Based on the NEMS-BT modeling, Hg
emissions show a slight decrease in the period from 2012 to 2042. These
changes in Hg emissions, as shown in Table V-29, are extremely small
with a range of between 0.02 and 0.14 percent of national base case
emissions depending on TSL.
The NEMS-BT model assumed that mercury emissions would be subject
to EPA's Clean Air Mercury Rule \30\ (CAMR), which would have
permanently capped emissions of mercury for new and existing coal-fired
plants in all States by 2010. Similar to SO2 and
NOX, DOE assumed that under such a system, energy
conservation standards would result in no physical effect on these
emissions, but might result in an environmental-related economic
benefit in the form of a lower price for emissions allowance credits,
if large enough. DOE estimated that the change in Hg emissions from
standards would not be large enough to influence allowance prices under
CAMR.
---------------------------------------------------------------------------
\30\ 70 FR 28606 (May 18, 2005).
---------------------------------------------------------------------------
On February 8, 2008, the D.C. Circuit issued its decision in New
Jersey v. Environmental Protection Agency,\31\ in which the Court,
among other actions, vacated the CAMR referenced above. Accordingly,
DOE is considering whether changes are needed to its plan for
addressing the issue of mercury emissions in light of the D.C.
Circuit's decision. DOE invites public comment on addressing mercury
emissions in this rulemaking.
---------------------------------------------------------------------------
\31\ No. 05-1097, 2008 WL 341338, at *1 (D.C. Cir. Feb. 8,
2008).
---------------------------------------------------------------------------
DOE is considering taking into account a monetary benefit of
CO2 emission reductions associated with this rulemaking.
During the preparation of its most recent review of the state of
climate science, the Intergovernmental Panel on Climate Change (IPCC)
identified various estimates of the present value of reducing carbon-
dioxide emissions by one ton over the life that these emissions would
remain in the atmosphere. The estimates reviewed by the IPCC spanned a
range of values. In the absence of a consensus on any single estimate
of the monetary value of CO2 emissions, DOE used an estimate
identified by the study cited in Summary for Policymakers prepared by
Working Group II of the IPCC's Fourth Assessment Report to estimate the
potential monetary value of the CO2 reductions likely to
result from the standards under consideration in this rulemaking.
The estimated year-by-year reductions in CO2 emissions
were converted into monetary values ranging from the $0 and $14 per
ton. These monetary estimates were based on an assumption of no benefit
to an average benefit value reported by the IPCC and the values include
a range of discount factors used in their development.\32\ Based on
DOE's consideration of the IPCC report, DOE escalated the average
benefit value per ton in real 2007$ at 2.4 percent per year. The
resulting estimates of the potential range of benefits associated with
the reduction of CO2 emissions are reflected in Table V-30.
---------------------------------------------------------------------------
\32\ According to the IPCC, the mean social cost of carbon (SCC)
reported in studies published in peer-reviewed journals was US$43
per ton of carbon. This translates into about $12 per ton of carbon
dioxide. The social costs estimated represented the discounted
present value of increasing (or decreasing) current emissions of
carbon dioxide (or an equivalent greenhouse gas) by one ton. The
literature review (Tol 2005) from which this mean was derived did
not report the year in which these dollars are denominated. However,
since the underlying studies spanned several years on either side of
2000, the estimate is often treated as year 2000 dollars. Updating
that estimate to 2007 dollars yields a SCC of $14 per ton of carbon
dioxide. Tol concluded that when only peer-reviewed studies
published in recognized journals are considered, ``* * * climate
change impacts may be very uncertain but is unlikely that the
marginal damage costs of carbon dioxide emissions exceed $50 per
tonne carbon [about $14 per metric ton of CO2 or about
$12.66 per short ton][emphasis added].'' He also concluded that the
costs may be substantially lower than $50 per tonne of C. Tol's
survey showed that 10 percent of the SCC estimates were actually
negative, so that a lower bound of zero is not unreasonable.
[[Page 50125]]
Table V-30--Preliminary Estimates of Savings From CO2 Emissions Reductions Under Considered Commercial
Refrigeration Equipment Trial Standard Levels
----------------------------------------------------------------------------------------------------------------
Value of estimated CO2 Value of estimated CO2
Estimated total emission reductions based emission reductions based
TSL CO2 (Mt) emission on IPCC range (million $) on IPCC range (million $)
reductions at 7% discount rate at 3% Discount Rate
----------------------------------------------------------------------------------------------------------------
1.................................. 7.37 0 to 43.................... 0 to 93
2.................................. 28.47 0 to 166................... 0 to 361
3.................................. 37.37 0 to 218................... 0 to 473
4.................................. 43.50 0 to 253................... 0 to 551
5.................................. 63.17 0 to 368................... 0 to 800
----------------------------------------------------------------------------------------------------------------
DOE relied on the average of the IPCC reported estimate as an upper
bound on the benefits resulting from reducing each metric ton of U.S.
CO2 emissions. It is important to note that estimate of the
$14 per ton of CO2 represents an average value of worldwide
impacts from potential climate impacts caused by CO2
emissions, and is not confined to impacts likely to occur within the
U.S. In contrast, most of the other estimates of costs and benefits of
increasing the efficiency of commercial refrigeration equipment
discussed in this proposal include only the economic values of impacts
that would be experienced in the U.S. Consequently, as DOE considers a
monetary value for CO2 emission reductions, the value might
be restricted to a representation of those cost/benefits likely to be
experienced in the United States. Currently, there are no estimated
values for the U.S. benefits likely to result from CO2
emission reductions. However, DOE expects that, if such values were
developed, DOE would use those U.S. benefit values, and not world
benefit values, in its analysis. DOE further expects that, if such
values were developed, they would be lower than comparable global
values. DOE invites public comment on the above discussion of
CO2.
DOE also investigated the potential monetary impact resulting from
the impact of today's efficiency standards on SO2,
NOX, and mercury (Hg) emissions. As previously stated, DOE's
analysis assumed the presence of nationwide emission caps on
SO2 and caps on NOX emissions in the 28 states
covered by the CAIR caps. In the presence of emission caps, DOE
concluded that no physical reductions in total sector emissions would
occur, however DOE's estimates for reduction of these emissions could
correspond to incremental changes in the prices of emissions allowances
in cap-and-trade emissions markets rather than to physical emissions
reductions. For SO2, the changes in annual emissions from
today's rule would be less than 0.03 percent of the annual
SO2 allowances, a change that DOE estimated is too small to
influence allowance prices. Similarly, for NOX, in the 28
CAIR states, the emissions savings from today's rule would be less than
0.018 percent of NOX allowances, also a change that DOE also
estimated is too small to influence allowance prices.
In DOE's analysis, for 22 non-CAIR states, emissions of
NOX from electricity generation were not controlled by a
regulatory cap. By 2012, DOE projected that the NOX
emissions in the non-CAIR states would be about 25 percent of the
national total.\33\ Mercury emissions are also not controlled by a
regulatory cap. For these two emissions, DOE estimated the national
monetized benefits of emissions reductions from today's rule based on
environmental damage estimates from the literature. Non-CAIR emissions
would not be controlled by an emissions cap so those emissions would
actually be reduced by the PTAC-PTHP energy savings. Available
estimates suggest a very wide range of monetary values for
NOX emissions, ranging from $370 per ton to $3,800 per ton
of NOX from stationary sources, measured in 2001 dollars
\34\ or a range of $432 per ton to $4,441 per ton in 2007 dollars. The
basic science linking mercury emissions from power plants to impacts on
humans is considered highly uncertain. However, DOE located two
estimates of the environmental damages of mercury based on two
estimates of the adverse impact of childhood exposure to methyl mercury
on IQ for American children, and subsequent loss of lifetime economic
productivity resulting from these IQ losses. The high end estimate is
based on an estimate of the current aggregate cost of the loss of IQ
that results from exposure of American children of U.S. power plant
origin of $1.3 billion per year in year 2000$, which works out to $32.6
million per ton emitted per year (2007$).\35\ The low-end estimate was
$664,000 per ton emitted in 2004$ or $729,000 per ton in 2007$), which
DOE derived from a published evaluation of mercury control using
different methods and assumptions from the first study, but also based
on the present value of the lifetime earnings of children exposed.\36\
The resulting estimates of the potential range of the present value
benefits associated with the reduction of NOX in the 22 non-
CAIR states and national reductions in Hg emissions are reflected in
Table V.31 and Table V.32
---------------------------------------------------------------------------
\33\ U.S. NOX emissions have been trending downward
steadily since 1995, falling from 31.5 million tons in 1995 to 15.2
million in 2006 (EIA 2007). Although non-CAIR states' emissions have
also fallen, the emissions in the CAIR states have fallen more
rapidly; thus, the CAIR states' percentage of the total has also
fallen from 87.4% in 1997 to 80.9% in 2006. For purposes of this
analysis, DOE assumed that the CAIR states, percentage of emissions
continues to decline until it reaches 75 percent in 2012. Seventy-
five percent of emissions reductions are allocated to the CAIR
states thereafter. Consequently non-CAIR state emissions would be
about 25% of the total. [Reference: EIA (Energy Information
Administration). 2007. Estimated Emissions for U.S. Electric Power
Industry by State, 1990-2006. State Historical Tables for 2006.
Released: October 26, 2007. Next Update: October 2008 http://
www.eia.doe.gov/cneaf/electricity/epa/emission_state.xls].
\34\ 2006 Report to Congress on the Costs and Benefits of
Federal Regulations and Unfunded Mandates on State, Local, and
Tribal Entities. Office of Management and Budget Office of
Information and Regulatory Affairs, Washington, DC.
\35\ Trasande, L., et al., ``Applying Cost Analyses to Drive
Policy that Protects Children'' 1076 ANN. N.Y. ACAD. SCI. 911
(2006).
\36\ Ted Gayer and Robert Hahn, Designing Environmental Policy:
Lessons from the Regulation of Mercury Emissions, Regulatory
Analysis 05-01. AEI-Brookings Joint Center For Regulatory Studies,
Washington, DC, 31 pp., 2004. A version of this paper was published
in the Journal of Regulatory Economics in 2006. The estimate was
derived by back-calculating the annual benefits per ton from the net
present value of benefits reported in the study.
[[Page 50126]]
Table V.31--Preliminary Estimates of Monetary Savings From Reductions of Hg (Nation) and NOX (Non-CAIR States)
by Trial Standard Level at a 7% Discount Rate
----------------------------------------------------------------------------------------------------------------
Value of Value of
Estimated estimated NOX Estimated estimated Hg
cumulative NOX emission cumulative Hg emission
Standard size TSL (kt) emission reductions (tons) reductions
reductions * (million emission (million
2007$) reductions* 2007$)
----------------------------------------------------------------------------------------------------------------
1............................................... 2.74 $0.1-$0.6 0.09 $0.0-$0.1
2............................................... 10.58 0.2-2.3 0.36 0.0-0.5
3............................................... 13.88 0.3-3.0 0.47 0.0-0.6
4............................................... 16.16 0.3-3.5 0.54 0.0-0.7
5............................................... 23.47 0.5-5.1 0.80 0.0-1.0
----------------------------------------------------------------------------------------------------------------
* Values in Table V.31 may not appear to sum to the cumulative values in Table V-29 due to rounding.
Table V.32--Preliminary Estimates of Monetary Savings From Reductions of Hg (Nation) and NOX (Non-CAIR States)
by Trial Standard Level at a 3% Discount Rate
----------------------------------------------------------------------------------------------------------------
Value of Value of
Estimated estimated NOX Estimated estimated Hg
cumulative NOX emission cumulative Hg emission
Standard size TSL (kt) emission reductions (tons) reductions
reductions * (million emission (million
2007$) reductions 2007$)
----------------------------------------------------------------------------------------------------------------
1............................................... 2.74 $0.1-$1.5 0.09 $0.0-$1.0
2............................................... 10.58 0.5-5.6 0.36 0.1-3.9
3............................................... 13.88 0.7-7.4 0.47 0.1-5.1
4............................................... 16.16 0.8-8.6 0.54 0.1-5.9
5............................................... 23.47 1.2-12.5 0.80 0.2-8.6
----------------------------------------------------------------------------------------------------------------
* Values in Table V.32 may not appear to sum to the cumulative values in Table V-29 due to rounding.
As discussed above, with the D.C. Circuit vacating the CAIR, DOE is
considering how it should address the issue of NOX reduction
and corresponding monetary valuation. DOE invites public comment on how
the agency should address this issue, including how to value
NOX emissions for States in the absence of the CAIR.
7. Other Factors
EPCA allows the Secretary of Energy, in determining whether a
standard is economically justified, to consider any other factors that
the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)
and 6316(e)(1)) Under this provision, DOE considered LCC impacts on
identifiable groups of customers, such as customers of different
business types, who may be disproportionately affected by any national
energy conservation standard level. DOE also considered the reduction
in generated capacity that could result from the imposition of any
national energy conservation standard level.
C. Proposed Standard
EPCA specifies that any new or amended energy conservation standard
for any type (or class) of covered equipment shall be designed to
achieve the maximum improvement in energy efficiency that the Secretary
determines is technologically feasible and economically justified. (42
U.S.C. 6295(o)(2)(A) and 6316(e)(1)) In determining whether a standard
is economically justified, the Secretary must determine whether the
benefits of the standard exceed its burdens. (42 U.S.C.
6295(o)(2)(B)(i) and 6316(e)(1)) The new or amended standard must
``result in significant conservation of energy.'' (42 U.S.C.
6295(o)(3)(B) and 6316(e)(1))
DOE considered the impacts of standards at each of five trial
standard levels, beginning with the most efficient level (TSL 5) and
worked down to a level where DOE determined the benefits of potential
standards outweighed the burdens of potential standards. To aid the
reader as DOE discusses the benefits and/or burdens of each TSL, Table
V-33 presents a summary of quantitative analysis results for each TSL
based on the assumptions and methodology discussed above. This table
presents the results or, in some cases, a range of results, for each
TSL. The range of values reported in this table for industry impacts
represents the results for the different markup scenarios that DOE used
to estimate manufacturer impacts.
Table V-33--Summary of Results Based Upon the AEO2007 Reference Case Energy Price Forecast*
----------------------------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Primary Energy Saved (quads).... 0.141 0.545 0.715 0.832 1.208
7% Discount Rate................ 0.034 0.132 0.173 0.201 0.292
3% Discount Rate................ 0.073 0.284 0.372 0.433 0.603
Generation Capacity Reduction 0.109 0.421 0.552 0.643 0.934
(GW) **........................
NPV (2007$ billion):
7% Discount Rate............ 0.33 0.98 1.20 1.10 (0.20)
3% Discount Rate............ 0.82 2.59 3.25 3.24 1.16
Industry Impacts:
Industry NPV (2007$ million) 0-(63) 6-(88) (17)-(129) (40)-(180) (18)-(285)
Industry NPV (% Change)..... 0-(12) 1-(17) (3)-(25) (8)-(35) (3)-(56)
Cumulative Emissions Impacts:
[dagger]
[[Page 50127]]
CO2 (Mt).................... 7.37 28.47 37.37 43.50 63.17
NOX (kt).................... 2.74 10.58 13.88 16.16 23.47
Hg (t)...................... 0.09 0.36 0.47 0.54 0.80
Life-Cycle Cost:
Net Savings (%)............. 17-48 34-68 61-89 68-93 24-93
Net Increase (%)............ 0 0 0 0-19 0-71
No Change (%)............... 52-83 32-66 11-39 7-32 2-19
Mean LCC Savings (2007$).... 192-3132 551-4005 710-4089 693-3818 (673)-3818
Mean PBP (yrs).............. 0.4-1.2 0.6-2.6 1.3-4.6 1.4-6.1 1.4-12.6
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the amount
indicated.
** Change in installed generation capacity by the year 2042 based on AEO2007 Reference Case.
[dagger] CO2 emissions impacts include physical reductions at power plants. NOX emissions impacts include
physical reductions at power plants as well as production of emissions allowance credits where NOX emissions
are subject to emissions caps.
First, DOE considered TSL 5, the most efficient level for all
equipment classes. TSL 5 would likely save an estimated 1.208 quads of
energy through 2042, an amount DOE considers significant. Discounted at
seven percent, the projected energy savings through 2042 would be 0.292
quads. For the Nation as a whole, DOE projects that TSL 5 would result
in a net decrease of $200 million in NPV, using a discount rate of
seven percent. Five equipment classes (VOP.RC.M, VOP.SC.M, SVO.RC.M,
SVO.SC.M, and SOC.RC.M) show negative NPV at TSL 5. The emissions
reductions at TSL 5 are 63.17 Mt of CO2 and up to 23.47 kt
of NOX. DOE also estimates that under TSL 5, total
generating capacity in 2042 will decrease compared to the base case by
0.934 gigawatts (GW).
At TSL 5, DOE projects that the average commercial refrigeration
equipment customer will experience a reduction in LCC compared to the
baseline for 12 of the 15 equipment classes analyzed, while three
equipment classes (VOP.RC.M, SVO.RC.M, SOC.RC.M) experienced an
increase in LCC. These three equipment classes are among the five
identified above that DOE showed had negative NPV. The two additional
classes, SVO.SC.M and VOP.SC.M, had positive LCC savings at TSL 5, but
at substantially reduced values compared to those shown at TSL 4 or TSL
3. LCC savings for all 15 equipment classes vary from negative (-$673)
to positive $3,818. At TSL 5, DOE estimates the fraction of customers
experiencing LCC increases will vary between 0 and 71 percent depending
on equipment class. The mean payback period for the average commercial
refrigeration equipment customer at TSL 5 compared to the baseline
level is projected to be between 1.4 and 12.6 years, depending on
equipment class.
At higher TSLs, manufacturers have a more difficult time fully
passing on larger increases in MPC to customers, and therefore
manufacturers expect the higher end of the range of impacts to be
reached at TSL 5 (i.e., a drop of 55.77 percent in INPV). At TSL 5,
there is the risk of very large negative impacts on the industry if
manufacturers' profit margins are reduced. Manufacturers expressed
great concern at the possibility of having to manufacture an entire
equipment line at the max-tech levels, because customers put a much
higher priority on marketing and displaying their goods than they do on
energy efficiency. For this reason, manufacturers fear that they will
be unable to recover the additional cost incurred from producing the
most efficient equipment possible. See Section IV.I for additional
manufacturer concerns.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 5, DOE tentatively concludes that the estimated
benefits of energy savings and related benefits would not outweigh the
potential $200 million net economic cost to the Nation (at the seven
percent discount rate), as well as the economic burden on consumers and
the potential negative impact on manufacturers through reduction in
INPV.
As discussed above, DOE proposes to reject TSL 5 because DOE finds
that the benefits to the Nation of TSL 5 (energy savings, commercial
consumer average LCC savings, and emission reductions) do not outweigh
the costs (national NPV decrease and loss of manufacturer INPV), and,
therefore, DOE proposes that TSL 5 is not economically justified. This
proposal reflects DOE's tentative conclusion that there remains too
much uncertainty regarding the timing and extent of anticipated
reductions in LED costs to justify standards at the TSL 5 level. While
considerable information is available that suggests LED costs are
likely to decline more than assumed in DOE's analysis (see discussion
in sections IV.B.3.c, V.B.1.a, and V.B.3.b), DOE believes that it must
have a higher degree of confidence that the timing and extent of such
further cost reductions will warrant higher standards before it imposes
such requirements. DOE is soliciting public comments on these and other
issues, and will reconsider this tentative conclusion during the
development of its final rule. (See Section VII.E.1.)
As mentioned above, if LED system costs achieve the 50 percent
reduction projection by 2012, the estimated NPV at TSL 5 would be a
positive $1.62 billion at a seven percent discount rate and $4.76
billion at the three percent discount rate, and is likely to result in
a net benefit. DOE requests comment on whether the benefits of TSL 5
would outweigh the burdens of TSL 5, considering the potential impacts
of future LED cost projections. This is identified as Issue 7 under
``Issues on Which DOE Seeks Comment'' in Section VII.E of this NOPR.
DOE also seeks comment on the extent to which stakeholders expect
projected LED cost reductions would occur, the timing of the projected
LED cost reductions, and the certainty of the projected LED cost
reductions. Also, considering the rapid development of LED technology
and the steady reductions in cost, DOE seeks comment on the extent to
which manufacturers would adopt LED technology into the design of
commercial refrigeration equipment in the absence of standards.
DOE then considered TSL 4, which provides for all equipment classes
the maximum efficiency levels that the analysis showed to have positive
NPV to the Nation. TSL 4 would likely save an estimated 0.832 quads of
energy through 2042, an amount DOE considers significant. Discounted at
seven percent, the projected energy savings through 2042 would be 0.201
quads. For the
[[Page 50128]]
Nation as a whole, DOE projects that TSL 4 would result in a net
increase of $1.10 billion in NPV, using a discount rate of seven
percent. The estimated emissions reductions at TSL 4 are 43.50 Mt of
CO2 and up to 16.16 kt of NOX. Total generating
capacity in 2042 is estimated to decrease compared to the base case by
0.643 GW under TSL 4.
At TSL 4, DOE projects that the average commercial refrigeration
equipment customer will experience a reduction in LCC compared to the
baseline for all 15 equipment classes analyzed, ranging from $693 to
$3,818 depending on equipment class. The mean payback period for the
average commercial refrigeration equipment customer at TSL 4 is
projected to be between 1.4 and 6.1 years compared to the purchase of
baseline equipment.
As is the case with TSL 5, DOE believes the majority of
manufacturers would need to completely redesign most equipment offered
for sale, and therefore DOE expects that commercial refrigeration
manufacturers will have some difficulty fully passing on larger MPC
increases to customers. Similar to TSL 5, manufacturers expect the
higher end of the range of impacts to be reached at TSL 4 (i.e., a drop
of 35.3 percent in INPV). However, compared to the baseline, all 15
equipment classes showed significant positive life-cycle cost savings
on a national average basis and few customers experienced an increase
in LCC with a standard at TSL 4 compared with purchasing baseline
equipment. The payback periods calculated for all equipment classes
were lower than the life of the equipment.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 4, DOE proposes that TSL 4 represents the maximum
improvement in energy efficiency that is technologically feasible and
economically justified and that the estimated benefits to the Nation
outweigh the costs. DOE proposes that TSL 4 is technologically feasible
because the technologies required to achieve these levels are already
in existence. Therefore, DOE is proposing TSL 4 as the energy
conservation standards for commercial refrigeration equipment in this
NOPR.
However, for the reasons discussed above, DOE also requests
comments on whether it should adopt TSL 5 for all or some of the
equipment classes.
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
DOE has determined that today's regulatory action is an
``economically significant'' action under Section 3(f)(1) of Executive
Order 12866, ``Regulatory Planning and Review.'' 58 FR 51735 (October
4, 1993). The Executive Order requires that each agency identify in
writing the specific market failure or other specific problem that it
intends to address that warrants new agency action, as well as assess
the significance of that problem to determine whether any new
regulation is warranted. Executive Order 12866, Sec. 1(b)(1).
In the ANOPR for this rulemaking, DOE requested feedback and data
on a number of issues related to Executive Order 12866 and the
existence of a market failure in the commercial refrigeration equipment
industry. This request included (1) Data on, and suggestions for
testing the existence and extent of, potential market failures to
complete an assessment in the proposed rule of the significance of any
failures; (2) data on the efficiency levels of existing commercial
refrigeration equipment in use by store type; (3) comment on the
Federal ENERGYSTAR program and its penetration into the commercial
refrigeration equipment market as a resource on the availability and
benefits of energy efficient refrigeration units; (4) data on owner-
occupied buildings versus leased/non-owner occupied buildings for given
store types and their associated use of high-efficiency equipment; and
(5) comment on the weight that should be given to these factors in
DOE's determination of the maximum efficiency level at which the total
benefits are likely to exceed the total burdens resulting from a DOE
standard. Following publication of the ANOPR and subsequent public
comment period, DOE did not receive any feedback related to these
requests.
Much of the industry segment that uses commercial refrigeration
equipment tends to be large grocery stores, multi-line retailers, small
grocery stores, or convenience stores. DOE believes that these owners
may lack corporate direction on energy policy. The transaction costs
for these owners to research, purchase, and install optimum efficiency
equipment options are too high to make such action commonplace. DOE
believes that there is a lack of information about energy efficiency
opportunities in the commercial refrigeration equipment market
available to these owners. Unlike residential heating and air
conditioning equipment, commercial refrigeration equipment is not
included in energy labeling programs such as the Federal Trade
Commission's energy labeling program. Furthermore, the energy use of
this equipment depends on usage. Information is not readily available
for the owners to make a decision on whether improving the energy
efficiency of commercial refrigeration equipment is cost-effective. DOE
seeks data on the efficiency levels of existing commercial
refrigeration equipment in use by owners, electricity price, and
equipment class. Being part of the food merchandising industry, energy
efficiency and energy cost savings are not the primary drivers of the
business, as is selling food products to shoppers. This may incur
transaction costs, thus preventing access to capital to finance energy
efficiency investment.
Today's action also required a regulatory impact analysis (RIA)
and, under the Executive Order, was subject to review by the Office of
Information and Regulatory Affairs (OIRA) in the OMB. DOE presented to
OIRA for review the draft proposed rule and other documents prepared
for this rulemaking, including the RIA, and has included these
documents in the rulemaking record. They are available for public
review in the Resource Room of the Building Technologies Program, 950
L'Enfant Plaza, SW., 6th Floor, Washington, DC 20024, (202) 586-9127,
between 9 a.m. and 4 p.m., Monday through Friday, except Federal
holidays.
The RIA is contained in the TSD prepared for the rulemaking. The
RIA consists of (1) a statement of the problem addressed by this
regulation and the mandate for Government action; (2) a description and
analysis of the feasible policy alternatives to this regulation; (3) a
quantitative comparison of the impacts of the alternatives; and (4) the
national economic impacts of the proposed standard.
The RIA calculates the effects of feasible policy alternatives to
commercial refrigeration equipment standards and provides a
quantitative comparison of the impacts of the alternatives. DOE
evaluated the alternatives in terms of their ability to achieve
significant energy savings at reasonable cost, and compared it to the
effectiveness of the proposed rule. DOE analyzed these alternatives
using a series of regulatory scenarios as input to the NES/shipments
model for commercial refrigeration equipment, which DOE modified to
provide inputs for these voluntary measures.
DOE identified the following major policy alternatives for
achieving
[[Page 50129]]
increased commercial refrigeration equipment energy efficiency:
No new regulatory action.
Commercial customer rebates.
Commercial customer tax credits.
DOE evaluated each alternative's ability to achieve significant
energy savings at reasonable cost (Table VI-1), and compared it to the
effectiveness of the proposed rule.
Table VI-1--Non-Regulatory Alternatives to Standards
----------------------------------------------------------------------------------------------------------------
Net present value\**\ (billion
Energy 2007$)
Policy alternatives savings\*\ -------------------------------
(quads) 7% discount 3% discount
rate rate
----------------------------------------------------------------------------------------------------------------
No New Regulatory Action........................................ 0 0 0
Commercial Customer Rebates..................................... 0.099 0.139 0.315
Commercial Customer Tax Credits[dagger]......................... 0.084 0.178 0.381
Today's Standards at TSL 4...................................... 0.832 1.10 3.24
----------------------------------------------------------------------------------------------------------------
\*\ Energy savings are in source quads.
\**\ Net present value is the value in the present of a time series of costs and savings. DOE determined the net
present value from 2012 to 2062 in billions of 2007$.
[dagger] These are example values for TSL 3.
The net present value amounts shown in Table VI-1 refer to the NPV
for commercial customers. The following paragraphs discuss each policy
alternative listed in Table VI-1. (See Chapter 17 of the TSD,
Regulatory Impact Analysis, for further details.)
No new regulatory action. The case in which no regulatory action is
taken for commercial refrigeration equipment constitutes the base case
(or No Action) scenario. By definition, no new regulatory action yields
zero energy savings and a net present value of zero dollars.
Commercial Customer Rebates. DOE modeled the impact of the customer
rebate policy by determining the increased customer participation rate
due to the rebates (i.e., the percent increase in customers purchasing
high-efficiency equipment). DOE modeled a national rebate program after
existing utility rebate programs that provide incentives for
incorporating high-efficiency technologies into commercial
refrigeration equipment. The reduction in retail cost of the higher
efficiency cases was calculated and the methodology developed for the
NIA used to assess relative shipments by efficiency level was used to
assess relative shipments by efficiency level under the rebate
scenario. DOE applied the resulting increase in market share of
efficient units to the NES spreadsheet model to estimate the resulting
NES and NPV for the rebate scenario with respect to the base case.
Commercial Customer Tax Credits. DOE assumed a commercial or
industrial customer Federal tax credit patterned after the tax credits
created in EPACT 2005. EPACT 2005 provided tax credits to customers who
purchase and install specific products such as energy efficient
windows, insulation, doors, roofs, and heating and cooling equipment.
DOE presumed the presence of a certification or other program that
could be used to identify high-efficiency commercial refrigeration
equipment by energy consumption, and assumed TSL 3 as a likely
candidate level for a tax credit incentive, given that it was the
minimum LCC level. DOE then reviewed the incremental customer price
increase to reach TSL 3 from the baseline for all 15 equipment classes.
For 12 of the equipment classes, the incremental cost was between 6.1
and 21.3 percent. For three equipment classes (SOC.RC.M, HZO.RC.M,
HZO.RC.L), the incremental cost was less than five percent. In its tax
credit analysis, DOE assumed a flat tax credit equal to five percent of
the customer price for equipment sold at TSL 3 or higher for each
primary equipment class, with the exception of SOC.RC.M, HZO.RC.M, and
HZO.RC.L. DOE assumed a 100 percent application rate for the tax credit
from commercial refrigeration equipment customers and reduced the
retail equipment price by five percent for TSL 3, TSL 4, and TSL 5 for
the 12 equipment classes. The reductions in retail cost of commercial
refrigeration equipment at these levels was calculated and the
methodology developed for the NIA used to assess relative shipments by
efficiency level under the tax credit scenario. DOE applied the
resulting increase in market share of efficient units to the NES
spreadsheet model to estimate the resulting NES and NPV for the tax
credit scenario with respect to the base case. To see results for tax
credits for equipment meeting or exceeding TSL 5, see the Regulatory
Impact Analysis of the TSD.
Performance Standards. Each of the non-regulatory alternatives must
be gauged against the performance standards DOE is proposing in this
proposed rule. DOE also considered, but did not analyze, the potential
of bulk Government purchases and early replacement incentive programs
as alternatives to the proposed standards. In the case of bulk
Government purchases, commercial refrigeration equipment is a very
small part of the total market and the volume of high-efficiency
equipment purchases that the Federal Government might make would have
very limited impact on improving the overall market efficiency of
commercial refrigeration equipment. In the case of replacement
incentives, several policy options exist to promote early replacement,
including a direct national program of customer incentives, incentives
paid to utilities to promote an early replacement program, market
promotions through equipment manufacturers, and replacement of
Federally owned equipment. Previous analysis by DOE of methods to
promote early replacement for other covered equipment have suggested
that the energy savings realized through a one-time early replacement
of existing stock equipment has not resulted in energy savings
commensurate to the cost to run and administer the program. As a
consequence, DOE did not analyze this option in detail.
As Table VI-1 indicates, none of the alternatives DOE examined
would save as much energy as today's proposed rule. Also, several of
the alternatives would require new enabling legislation, since
authority to carry out those alternatives does not exist. The tax
credit scenario would also require the development of a database of
commercial refrigeration equipment that would meet or exceed the TSL 3
efficiency level in order to determine compliance with the tax credit.
[[Page 50130]]
B. Review Under the Regulatory Flexibility Act/Initial Regulatory
Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis (IRFA) for
any rule that by law must be proposed for public comment, unless the
agency certifies that the rule, if promulgated, will not have a
significant economic impact on a substantial number of small entities.
As required by Executive Order 13272, ``Proper Consideration of Small
Entities in Agency Rulemaking'' 67 FR 53461 (August 16, 2002), DOE
published procedures and policies on February 19, 2003, to ensure that
the potential impacts of its rules on small entities are properly
considered during the rulemaking process. 68 FR 7990. DOE has made its
procedures and policies available on the Office of General Counsel's
Web site, http://www.gc.doe.gov.
Small businesses, as defined by the Small Business Administration
(SBA) for the commercial refrigeration equipment manufacturing
industry, are manufacturing enterprises with 750 employees or fewer.
DOE used the small business size standards published on January 31,
1996, as amended by the SBA to determine whether any small entities
would be required to comply with the rule. 61 FR 3286 and codified at
13 CFR Part 121. The size standards are listed by North American
Industry Classification System (NAICS) code and industry description.
Commercial refrigeration equipment manufacturing is classified under
NAICS 333415.
Prior to issuing this notice of proposed rulemaking, DOE
interviewed two small businesses affected by the rulemaking. DOE also
obtained information about small business impacts while interviewing
manufacturers that exceed the small business size threshold of 750
employees.
DOE reviewed ARI's listing of its commercial refrigeration
equipment manufacturer members and surveyed the industry to develop a
list of all domestic manufacturers. DOE also asked stakeholders and ARI
representatives within the industry if they were aware of any other
small business manufacturers. DOE then examined publicly available data
and contacted manufacturers, when needed, to determine if they meet the
SBA's definition of a small manufacturing facility and if their
manufacturing facilities are located within the United States. Based on
this analysis, DOE identified nine small manufacturers of commercial
refrigeration equipment. DOE conducted on-site interviews with two
small manufacturers who agreed to be interviewed to determine if there
are differential impacts on these companies that may result from new
energy conservation standards.
DOE found that, in general, small manufacturers have the same
concerns as large manufacturers regarding new energy conservation
standards. DOE summarized the key issues for commercial refrigeration
equipment manufacturers in Section IV.I.3.a of today's notice. Both
manufacturers echoed the same concerns regarding new energy
conservation standards as the larger manufacturers, including
investments needed to meet standards, meeting customer needs, equipment
sales, and coverage of niche equipment. Specifically, DOE found no
significant differences in the R&D emphasis or marketing strategies
between small business manufacturers and large manufacturers.
Therefore, for the equipment classes manufactured primarily by the
small businesses, DOE believes the GRIM analysis, which models each
equipment class separately, is representative of the small businesses
affected by standards. The qualitative and quantitative GRIM results
are summarized in Section V.B.2 of today's notice.
DOE reviewed the standard levels considered in today's notice of
proposed rulemaking under the provisions of the Regulatory Flexibility
Act and the procedures and policies published on February 19, 2003.
Based on this review, DOE has prepared an IRFA for this rulemaking. The
IRFA describes potential impacts on small businesses associated with
commercial refrigeration equipment design and manufacturing.
The potential impacts on commercial refrigeration equipment
manufacturers are discussed in the following sections. DOE has
transmitted a copy of this IRFA to the Chief Counsel for Advocacy of
the Small Business Administration for review.
1. Reasons for the Proposed Rule
Part A-1 of Title III of EPCA addresses the energy efficiency of
certain types of commercial and industrial equipment. (42 U.S.C. 6311-
6317) EPACT 2005, Pub. L. 109-58, included an amendment to Part A-1
requiring that DOE prescribe energy conservation standards for the
commercial refrigeration equipment that is the subject of this
rulemaking. (EPACT 2005, Section 136(c); 42 U.S.C. 6313(c)(4)(A))
Hence, DOE is proposing in today's notice, energy conservation
standards for commercial ice-cream freezers; self-contained commercial
refrigerators, commercial freezers, and commercial refrigerator-
freezers without doors; and remote condensing commercial refrigerators,
commercial freezers, and commercial refrigerator-freezers.
2. Objectives of, and Legal Basis for, the Proposed Rule
EPCA provides that any new or amended standard for commercial
refrigeration equipment must be designed to achieve the maximum
improvement in energy efficiency that is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A) and 6316(e)(1)) But
EPCA precludes DOE from adopting any standard that would not result in
significant conservation of energy. (42 U.S.C. 6295(o)(3) and
6316(e)(1)) Moreover, DOE may not prescribe a standard for certain
equipment if no test procedure has been established for that equipment,
or if DOE determines by rule that the standard is not technologically
feasible or economically justified, and that such standard will not
result in significant conservation of energy. (42 U.S.C. 6295(o)(3) and
6316(e)(1)) EPCA also provides that, in deciding whether a standard is
economically justified, DOE must determine whether the benefits of the
standard exceed its burdens after receiving comments on the proposed
standard. (42 U.S.C. 6295(o)(2)(B)(i) and 6316(e)(1)) To determine
whether economic justification exists, DOE reviews comments received
and conducts analysis to determine whether the economic benefits of the
proposed standard exceed the burdens to the greatest extent
practicable, taking into consideration seven factors set forth in 42
U.S.C. 6295(o)(2)(B) and 6316(e)(1) (see Section II.B of this
preamble).
EPCA also states that the Secretary may not prescribe an amended or
new standard if interested persons have established by a preponderance
of the evidence that the standard is likely to result in the
unavailability in the United States of any equipment type (or class)
with performance characteristics (including reliability), features,
sizes, capacities, and volumes that are substantially the same as those
generally available in the United States. (42 U.S.C. 6295(o)(4) and
6316(e)(1)) Further information concerning the background of this
rulemaking is provided in Chapter 1 of the TSD.
[[Page 50131]]
3. Description and Estimated Number of Small Entities Regulated
DOE reviewed ARI's listing of commercial refrigeration equipment
manufacturer members and surveyed the industry to develop a list of
every manufacturer. DOE also asked stakeholders and ARI representatives
within the industry if they were aware of any other small business
manufacturers. DOE then looked at publicly available data and contacted
manufacturers, where needed, to determine if they meet the SBA's
definition of a small business manufacturing facility and have their
manufacturing facilities located within the U.S. Based on this
analysis, DOE estimates that there are nine small commercial
refrigeration equipment manufacturers. See Chapter 13 of the TSD for
further discussion about the methodology used in DOE's manufacturer
impact analysis and its analysis of small-business impacts.
4. Description and Estimate of Compliance Requirements
Potential impacts on manufacturers, including small businesses,
come from impacts associated with commercial refrigeration equipment
design and manufacturing. The margins and/or market share of
manufacturers, including small businesses, in the commercial
refrigeration equipment industry could be negatively impacted in the
long term by the standard levels under consideration in this notice of
proposed rulemaking, specifically TSL 4. The level of research and
development needed to meet energy conservation standards increases with
more stringent energy conservation standards. DOE expects that small
manufacturers will have more difficulty funding the required research
and development necessary to meet energy conservation standards than
larger manufacturers. Therefore, at proposed TSL 4, as opposed to lower
TSLs, small manufacturers would have less flexibility in choosing a
design path. However, as discussed under subsection 6 (Significant
alternatives to the rule) below, DOE expects that the differential
impact on small commercial refrigeration equipment manufacturers
(versus large businesses) would be smaller in moving from proposed TSL
1 to proposed TSL 2 than it would be in moving from proposed TSL 4 to
proposed TSL 5. The rationale for DOE's expectation is best discussed
in a comparative context and is therefore elaborated upon in subsection
6 (Significant alternatives to the rule). As discussed in the
introduction to this IRFA, DOE expects that the differential impact
associated with commercial refrigeration equipment design and
manufacturing on small businesses would be negligible.
5. Duplication, Overlap, and Conflict With Other Rules and Regulations
DOE is not aware of any rules or regulations that duplicate,
overlap, or conflict with the rule being considered today.
6. Significant Alternatives to the Rule
The primary alternatives to the proposed rule considered by DOE are
the other TSLs besides the one being considered today, proposed TSL 4.
In addition to the other TSLs considered, the TSD associated with this
proposed rule includes a report referred to in Section VI.A in the
preamble as the regulatory impact analysis (RIA-discussed earlier in
this report and in detail in the TSD). This report discusses the
following policy alternatives: (1) No new regulatory action, (2)
commercial customer rebates, and (3) commercial customer tax credits.
The energy savings of these regulatory alternatives are one to two
orders of magnitude smaller than those expected from the standard
levels under consideration. The range of economic impacts of these
regulatory alternatives is an order of magnitude smaller than the range
of impacts expected from the standard levels under consideration.
The commercial refrigeration equipment industry is highly
customized. Customers demand high levels of customization from
commercial refrigeration equipment manufacturers to differentiate
themselves from other retail stores. They do not want to lose any
functionality or utility in their equipment, such as display area,
because this affects their ability to merchandise products. Often, the
customer's desire for easy consumer access requires equipment that is
less energy efficient. They also do not want to lose any flexibility in
design choices, such as lighting options. All manufacturers, including
small businesses, would have to develop designs to enable compliance to
higher TSLs. Product redesign costs tend to be fixed and do not scale
with sales volume. Thus, small manufacturers would be at a relative
disadvantage at higher TSLs because research and development efforts
would be on the same scale as those for larger companies, but these
expenses would be recouped over smaller sales volumes.
At proposed TSL 5, the max-tech level, manufacturers stated their
concerns over the ability to be able to produce equipment by the future
effective date of the standard. At proposed TSL 5, DOE estimates that
the majority of manufacturers would be negatively impacted. Based on
manufacturer interviews, some manufacturers stated that they could not
meet proposed TSL 5 for medium-temperature equipment, and that they
would need technological innovation to achieve these levels by 2012.
Manufacturers believe that setting standards at the maximum level will
affect their customers' ability to merchandise products by limiting the
flexibility in choosing design options. For example, at TSL 5
specifically, the use of LED lighting technology may be necessary to
meet the proposed levels for many equipment classes. Manufacturers
expect that having limited choices in design options would commoditize
the industry and reduce profit margins. This concern was echoed by all
manufacturers, not just small business manufacturers.
For the proposed standard, TSL 4, and for alternative TSLs, TSL 1
through 3, DOE expects that impacts to small manufacturers would be
less than the impacts described above for TSL 5. At lower TSLs, the
differential impacts to small manufacturers are diminished because
research and development efforts are less at lower TSLs. Chapter 12 of
the TSD contains additional information about the impact of this
rulemaking on manufacturers. As mentioned above, the other policy
alternatives (no new regulatory action, commercial customer rebates,
and commercial customer tax credits) are described in Section VI.A of
the preamble and in the Regulatory Impact Analysis, Chapter 17 of the
TSD. Since the impacts of these policy alternatives are lower than the
impacts described above for TSL 5, DOE expects that the impacts to
small manufacturers would also be less than the impacts described above
for the proposed standard levels. DOE requests comment on the impacts
to small business manufacturers for these and any other possible
alternatives to the proposed rule. DOE will consider any comments
received regarding impacts to small business manufacturers for all the
alternatives identified, including those in the RIA, for the Final
Rule.
C. Review Under the Paperwork Reduction Act
This rulemaking will impose no new information or record keeping
requirements. Accordingly, OMB clearance is not required under the
[[Page 50132]]
Paperwork Reduction Act. (44 U.S.C. 3501 et seq.)
D. Review Under the National Environmental Policy Act
DOE is preparing an environmental assessment of the impacts of the
proposed rule. DOE is preparing an environmental assessment of the
impacts of the proposed rule. The assessment will include an
examination of the potential effects of emission reductions likely to
result from the rule in the context of global climate change as well as
other types of environmental impacts. DOE anticipates completing a
Finding of No Significant Impact (FONSI) before publishing the final
rule on commercial refrigeration equipment, pursuant to the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), the
regulations of the Council on Environmental Quality (40 CFR Parts 1500-
1508), and DOE's regulations for compliance with the National
Environmental Policy Act (10 CFR Part 1021).
E. Review Under Executive Order 13132
Executive Order 13132, Federalism, 64 FR 43255 (August 4, 1999)
imposes certain requirements on agencies formulating and implementing
policies or regulations that preempt State law or that have federalism
implications. The Executive Order requires agencies to examine the
constitutional and statutory authority supporting any action that would
limit the policymaking discretion of the States and carefully assess
the necessity for such actions. The Executive Order also requires
agencies to have an accountable process to ensure meaningful and timely
input by State and local officials in the development of regulatory
policies that have federalism implications. On March 14, 2000, DOE
published a statement of policy describing the intergovernmental
consultation process it will follow in the development of such
regulations. 65 FR 13735. DOE has examined today's proposed rule and
has determined that it would not have a substantial direct effect on
the States, on the relationship between the National Government and the
States, or on the distribution of power and responsibilities among the
various levels of government. EPCA governs and prescribes Federal
preemption of State regulations as to energy conservation for the
equipment that is the subject of today's proposed rule. States can
petition DOE for exemption from such preemption to the extent, and
based on criteria, set forth in EPCA. (42 U.S.C. 6297(d) and
6316(b)(2(D)) No further action is required by Executive Order 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
Civil Justice Reform (61 FR 4729, February 7, 1996) imposes on Federal
agencies the general duty to adhere to the following requirements: (1)
Eliminate drafting errors and ambiguity; (2) write regulations to
minimize litigation; and (3) provide a clear legal standard for
affected conduct rather than a general standard and promote
simplification and burden reduction. Section 3(b) of Executive Order
12988 specifically requires that Executive agencies make every
reasonable effort to ensure that the regulation (1) clearly specifies
the preemptive effect, if any; (2) clearly specifies any effect on
existing Federal law or regulation; (3) provides a clear legal standard
for affected conduct while promoting simplification and burden
reduction; (4) specifies the retroactive effect, if any; (5) adequately
defines key terms; and (6) addresses other important issues affecting
clarity and general draftsmanship under any guidelines issued by the
Attorney General. Section 3(c) of Executive Order 12988 requires
Executive agencies to review regulations in light of applicable
standards in Section 3(a) and Section 3(b) to determine whether they
are met or it is unreasonable to meet one or more of them. DOE has
completed the required review and determined that, to the extent
permitted by law, this proposed rule meets the relevant standards of
Executive Order 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
DOE reviewed this regulatory action under Title II of the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4) (UMRA), which requires each
Federal agency to assess the effects of Federal regulatory actions on
State, local and Tribal governments and the private sector. Today's
final rule may impose expenditures of $100 million or more on the
private sector. It does not contain a Federal intergovernmental
mandate.
Section 202 of UMRA authorizes an agency to respond to the content
requirements of UMRA in any other statement or analysis that
accompanies the proposed rule. 2 U.S.C. 1532(c). The content
requirements of section 202(b) of UMRA relevant to a private sector
mandate substantially overlap the economic analysis requirements that
apply under section 325(o) of EPCA and Executive Order 12866. The
Supplementary Information section of the notice of final rulemaking and
the ``Regulatory Impact Analysis'' section of the TSD for this final
rule respond to those requirements.
Under section 205 of UMRA, the Department is obligated to identify
and consider a reasonable number of regulatory alternatives before
promulgating a rule for which a written statement under section 202 is
required. DOE is required to select from those alternatives the most
cost-effective and least burdensome alternative that achieves the
objectives of the rule unless DOE publishes an explanation for doing
otherwise or the selection of such an alternative is inconsistent with
law. As required by sections 325(o), 345(a) and 342(c)(4)(A) of EPCA
(42 U.S.C. 6295(o), 6316(a) and 6313(c)(4)(A)), today's proposed rule
would establish energy conservation standards for commercial
refrigeration equipment that are designed to achieve the maximum
improvement in energy efficiency that DOE has determined to be both
technologically feasible and economically justified. A full discussion
of the alternatives considered by DOE is presented in the ``Regulatory
Impact Analysis'' section of the TSD for today's final rule.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any rule that may affect family well-being.
This rule would not have any impact on the autonomy or integrity of the
family as an institution. Accordingly, DOE has concluded that it is not
necessary to prepare a Family Policymaking Assessment.
I. Review Under Executive Order 12630
DOE has determined, under Executive Order 12630, Governmental
Actions and Interference with Constitutionally Protected Property
Rights, 53 FR 8859 (March 18, 1988), that this regulation would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
The Treasury and General Government Appropriations Act, 2001 (44
U.S.C. 3516 note) provides for agencies to review most disseminations
of information to the public under guidelines established by each
agency pursuant to general guidelines issued by
[[Page 50133]]
OMB. The OMB's guidelines were published at 67 FR 8452 (February 22,
2002), and DOE's guidelines were published at 67 FR 62446 (October 7,
2002). DOE has reviewed today's Notice under the OMB and DOE guidelines
and has concluded that it is consistent with applicable policies in
those guidelines.
K. Review Under Executive Order 13211
Executive Order 13211, Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use, 66 FR 28355
(May 22, 2001) requires Federal agencies to prepare and submit to the
OIRA, OMB, a Statement of Energy Effects for any proposed significant
energy action. A significant energy action is defined as any action by
an agency that promulgated or is expected to lead to promulgation of a
final rule, and that (1) is a significant regulatory action under
Executive Order 12866, or any successor order; and (2) is likely to
have a significant adverse effect on the supply, distribution, or use
of energy, or (3) is designated by the Administrator of OIRA as a
significant energy action. For any proposed significant energy action,
the agency must give a detailed statement of any adverse effects on
energy supply, distribution, or use should the proposal be implemented,
and of reasonable alternatives to the action and their expected
benefits on energy supply, distribution, and use.
Today's regulatory action would not have a significant adverse
effect on the supply, distribution, or use of energy and, therefore, is
not a significant energy action. Accordingly, DOE has not prepared a
Statement of Energy Effects.
L. Review Under the Information Quality Bulletin for Peer Review
On December 16, 2004, the OMB, in consultation with the Office of
Science and Technology (OSTP), issued its Final Information Quality
Bulletin for Peer Review (Bulletin). 70 FR 2664 (January 14, 2005). The
Bulletin establishes that certain scientific information shall be peer
reviewed by qualified specialists before it is disseminated by the
Federal Government, including influential scientific information
related to agency regulatory actions. The purpose of the bulletin is to
enhance the quality and credibility of the Government's scientific
information. Under the Bulletin, the energy conservation standards
rulemaking analyses are ``influential scientific information.'' The
Bulletin defines ``influential scientific information'' as ``scientific
information the agency reasonably can determine will have, or does
have, a clear and substantial impact on important public policies or
private sector decisions.'' 70 FR 2667 (January 14, 2005).
In response to OMB's Bulletin, DOE conducted formal, in-progress
peer reviews of the energy conservation standards development process
and analyses and has prepared a Peer Review Report pertaining to the
energy conservation standards rulemaking analyses. The Energy
Conservation Standards Rulemaking Peer Review Report dated February
2007 has been disseminated and is available at http://
www.eere.energy.gov/buildings/appliance_standards/ peer_review.html.
VII. Public Participation
A. Attendance at Public Meeting
The time, date and location of the public meeting are provided in
the DATES and ADDRESSES sections at the beginning of this document.
Anyone who wants to attend the public meeting must notify Ms. Brenda
Edwards at (202) 586-2945. As explained in the ADDRESSES section,
foreign nationals visiting DOE headquarters are subject to advance
security screening procedures.
B. Procedure for Submitting Requests To Speak
Any person who has an interest in today's Notice, or who is a
representative of a group or class of persons that has an interest in
these issues, may request an opportunity to make an oral presentation.
Please hand-deliver requests to speak to the address shown under the
heading ``Hand Delivery/Courier'' in the ADDRESSES section of this
NOPR, between 9 a.m. and 4 p.m., Monday through Friday, except Federal
holidays. Also, requests may be sent by mail to the address shown under
the heading ``Postal Mail'' in the ADDRESSES section of this NOPR, or
by e-mail to Brenda.Edwards@ee.doe.gov.
Persons requesting to speak should briefly describe the nature of
their interest in this rulemaking and provide a telephone number for
contact. DOE asks persons selected to be heard to submit a copy of
their statements at least two weeks before the public meeting, either
in person, by postal mail, or by e-mail as described in the preceding
paragraph. Please include an electronic copy of your statement on a
computer diskette or compact disk when delivery is by postal mail or in
person. Electronic copies must be in WordPerfect, Microsoft Word,
Portable Document Format (PDF), or text (American Standard Code for
Information Interchange (ASCII)) file format. At its discretion, DOE
may permit any person who cannot supply an advance copy of his or her
statement to participate, if that person has made alternative
arrangements with the Building Technologies Program. In such
situations, the request to give an oral presentation should ask for
alternative arrangements.
C. Conduct of Public Meeting
DOE will designate a DOE official to preside at the public meeting
and may also use a professional facilitator to aid discussion. The
meeting will not be a judicial or evidentiary-type public hearing, but
DOE will conduct it in accordance with 5 U.S.C. 553 and Section 336 of
EPCA. (42 U.S.C. 6306) A court reporter will be present to record and
transcribe the proceedings. DOE reserves the right to schedule the
order of presentations and to establish the procedures governing the
conduct of the public meeting. After the public meeting, interested
parties may submit further comments about the proceedings, and any
other aspect of the rulemaking, until the end of the comment period.
The public meeting will be conducted in an informal, conference
style. DOE will present summaries of comments received before the
public meeting, allow time for presentations by participants, and
encourage all interested parties to share their views on issues
affecting this rulemaking. Each participant will be allowed to make a
prepared general statement (within time limits determined by DOE)
before discussion of a particular topic. DOE will permit other
participants to comment briefly on any general statements.
At the end of all prepared statements on a topic, DOE will permit
participants to clarify their statements briefly and comment on
statements made by others. Participants should be prepared to answer
questions by DOE and by other participants concerning these issues. DOE
representatives may also ask questions of participants concerning other
matters relevant to the public meeting. The official conducting the
public meeting will accept additional comments or questions from those
attending, as time permits. The presiding official will announce any
further procedural rules or modification of the above procedures that
may be needed for proper conduct of the public meeting.
DOE will make the entire record of this proposed rulemaking,
including the transcript from the public meeting, available for
inspection at the U.S. Department of Energy, Resource Room of the
Building Technologies Program, 950 L'Enfant Plaza, SW., 6th Floor,
[[Page 50134]]
Washington, DC 20024, (202) 586-2945, between 9 a.m. and 4 p.m., Monday
through Friday, except Federal holidays. Any person may purchase a copy
of the transcript from the transcribing reporter.
D. Submission of Comments
DOE will accept comments, data, and information regarding all
aspects of this NOPR before or after the public meeting, but no later
than the date provided at the beginning of this notice of proposed
rulemaking. Please submit comments, data, and information
electronically to the following e-mail address:
commercialrefrigeration.rulemaking@ee.doe.gov. Submit electronic
comments in WordPerfect, Microsoft Word, PDF, or ASCII file format and
avoid the use of special characters or any form of encryption. Comments
in electronic format should be identified by the docket number EE-2006-
STD-0126 and/or RIN 1904-AB59, and whenever possible carry the
electronic signature of the author. Absent an electronic signature,
comments submitted electronically must be followed and authenticated by
submitting a signed original paper document. No telefacsimiles (faxes)
will be accepted.
Under 10 CFR 1004.11, any person submitting information that he or
she believes to be confidential and exempt by law from public
disclosure should submit two copies: One copy of the document including
all the information believed to be confidential, and one copy of the
document with the information believed to be confidential deleted. DOE
will make its own determination about the confidential status of the
information and treat it according to its determination.
Factors of interest to DOE when evaluating requests to treat
submitted information as confidential include (1) a description of the
items; (2) whether and why such items are customarily treated as
confidential within the industry; (3) whether the information is
generally known by, or available from, other sources; (4) whether the
information has previously been made available to others without
obligation concerning its confidentiality; (5) an explanation of the
competitive injury to the submitting person which would result from
public disclosure; (6) when such information might lose its
confidential character due to the passage of time; and (7) why
disclosure of the information would be contrary to the public interest.
E. Issues on Which DOE Seeks Comment
DOE is particularly interested in receiving comments and views of
interested parties concerning:
1. LED Price Projections
TSL 5 has an estimated -$200 million burden on the Nation. DOE
recognizes that anticipated reductions in LED lighting costs by the
effective date of the rule could shift the NPV, at the seven percent
discount rate, for TSL 5 from a negative NPV (-$200 million) to a
positive NPV. DOE calculated that a reduction in LED system cost of six
percent would be sufficient to ensure a slightly positive aggregate NPV
at TSL 5, at the seven percent discount rate, when compared with the
base case. DOE fully expects that the aggregate six percent reduction
in LED system costs could be attained and even exceeded by 2012 because
of the rapid development of LED technology. Furthermore, if LED system
costs achieve the 50 percent reduction projection, the NPV at a seven
percent discount rate for TSL 5 would be substantially positive. DOE
requests data or information on projected LED cost reductions and basis
for such projections. DOE also seeks comment on its consideration of
projected LED prices. DOE also seeks comment on the extent to which
stakeholders expect projected LED cost reductions would occur, the
timing of the projected LED cost reductions, and the certainty of the
projected LED cost reductions. Also, considering the rapid development
of LED technology and the steady reductions in cost, DOE seeks comment
on the extent to which manufacturers would adopt LED technology into
the design of commercial refrigeration equipment in the absence of
standards. DOE recognizes that LED system replacement costs assumed in
its LCC analysis would also be affected by projected LED cost
reductions and seeks comment on how it can best predict the cost for
LED fixture replacements in the LCC analysis. (See Section V.C of this
NOPR for further details.)
2. Base Case Efficiency
DOE recognizes that baseline efficiency trends can change if
equipment costs are different than those projected. For example, if LED
prices drop more than assumed in the engineering analysis, consumer
demand for LED-equipped equipment could change. DOE seeks comment on
whether shipments of LED-equipped equipment would change if LED costs
drop and if so, the extent and timing of such shipment changes. See
Section IV.G.1.
3. Operating Temperature Ranges
One factor in determining which equipment class a commercial
refrigeration equipment unit belongs to is its designed operating
temperature. DOE is organizing equipment classes based on three
operating temperature ranges. Medium temperature equipment operates at
or above 32 [deg]F, low temperature equipment operates at temperatures
below 32 [deg]F and greater than 5 [deg]F, and ice-cream temperature
equipment operates at or below -15 [deg]F. DOE seeks comment on the
temperatures selected to categorize equipment classes. (See Section
IV.A.2 of this NOPR for further details.)
4. Offset Factors
For the NOPR, DOE developed offset factors as a way to adjust the
energy efficiency requirements for smaller-sized equipment in each
equipment class analyzed. These offset factors account for certain
components of the refrigeration load (such as the conduction end
effects) that remain constant even when equipment sizes vary. These
constant loads affect smaller cases disproportionately. The offset
factors are intended to approximate these constant loads and provide a
fixed end point, corresponding to a zero TDA or zero volume case, in an
equation that describes the relationship between energy consumption and
the corresponding TDA or volume metric. DOE seeks comment on the use of
offset factors and the methodology used to calculate them. (See Section
V.A of this NOPR and Chapter 5 of the TSD for further details.)
5. Extension of Standards
DOE developed an extension approach to applying the standards
developed for these 15 primary equipment classes to the remaining 23
secondary classes. This approach involves extension multipliers
developed using both the 15 primary equipment classes analyzed and a
set of focused matched-pair analyses. DOE believes that standards for
certain primary equipment classes can be directly applied to other
similar secondary equipment classes. DOE seeks comment on its approach
to extending the results of the engineering analysis to the 23
secondary equipment classes. (See Section V.A of this NOPR and Chapter
5 of the TSD for further details.)
6. Standards for Hybrid Cases and Wedges
There are certain types of equipment that meet the definition of
commercial refrigeration equipment (Section 136(a)(3) of EPACT 2005),
but do not fall easily into any of the 38 equipment classes defined in
the market and technology assessment. One of these types is hybrid
cases, where two or
[[Page 50135]]
more compartments are in different equipment families and contained in
one cabinet. Another is refrigerator-freezers, which have two
compartments in the same equipment family but with different operating
temperatures. There may also exist hybrid refrigerator-freezers, where
two or more compartments are in different equipment families and have
different operating temperatures. Another is wedge cases, which form
miter transitions between standard display case lineups. DOE seeks
comment on proposed language that will allow manufacturers to determine
appropriate standard levels for these types of equipment. (See Section
0 of this NOPR for further details.)
7. Standard Levels
If, based on comment, DOE were to revise the LED system costs as
described above (section V.C) the economic impacts of TSL 5 would
change. DOE seeks comments on its consideration of TSL 5 and whether
the benefits would outweigh the burdens.
VIII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this proposed
rule.
Issued in Washington, DC, on August 12, 2008.
Alexander A. Karsner,
Assistant Secretary, Energy Efficiency and Renewable Energy.
List of Subjects in 10 CFR Part 431
Administrative practice and procedure, Energy conservation,
Household appliances.
For the reasons set forth in the preamble, Chapter II of Title 10,
Code of Federal Regulations, Part 431 is proposed to be amended to read
as set forth below.
PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND
INDUSTRIAL EQUIPMENT
1. The authority citation for part 431 continues to read as
follows:
Authority: 42 U.S.C. 6291-6317.
2. Section 431.62 of subpart C is amended by adding in alphabetical
order new definitions for ``air-curtain angle,'' ``commercial hybrid
refrigerator, freezer, and refrigerator-freezer,'' ``door angle,''
``horizontal closed,'' horizontal open'', ``semivertical open,''
``vertical closed,'' ``vertical open,'' and ``wedge case'' to read as
follows:
Sec. 431.62 Definitions concerning commercial refrigerators, freezers
and refrigerator-freezers.
Air-curtain angle means:
(1) For equipment without doors and without a discharge air grille
or discharge air honeycomb, the angle between a vertical line extended
down from the highest point on the manufacturer's recommended load
limit line and the load limit line itself, when the equipment is viewed
in cross-section; and
(2) For all other equipment without doors, the angle formed between
a vertical line and the straight line drawn by connecting the point at
the inside edge of the discharge air opening with the point at inside
edge of the return air opening, when the equipment is viewed in cross-
section.
* * * * *
Commercial hybrid refrigerator, freezer, and refrigerator-freezer
means a commercial refrigerator, freezer, or refrigerator-freezer that
has two or more chilled and/or frozen compartments that are (1) in two
or more different equipment families, (2) contained in one cabinet and
(3) sold as a single unit.
* * * * *
Door angle means:
(1) For equipment with flat doors, the angle between a vertical
line and the line formed by the plane of the door, when the equipment
is viewed in cross-section; and
(2) For equipment with curved doors, the angle formed between a
vertical line and the straight line drawn by connecting the top and
bottom points where the display area glass joins the cabinet, when the
equipment is viewed in cross-section.
* * * * *
Horizontal Closed means equipment with hinged or sliding doors and
a door angle greater than or equal to 45[deg].
Horizontal Open means equipment without doors and an air-curtain
angle greater than or equal to 80[deg] from the vertical.
* * * * *
Semivertical Open means equipment without doors and an air-curtain
angle greater than or equal to 10[deg] and less than 80[deg] from the
vertical.
* * * * *
Vertical Closed means equipment with hinged or sliding doors and a
door angle less than 45[deg].
Vertical Open means equipment without doors and an air-curtain
angle greater than or equal to 0[deg] and less than 10[deg] from the
vertical.
Wedge case means a commercial refrigerator, freezer, or
refrigerator-freezer that forms the transition between two regularly-
shaped display cases.
3. Section 431.66 of subpart C is amended by adding new paragraphs
(a)(3) and (d) to read as follows:
Sec. 431.66 Energy conservation standards and their effective dates.
(a) * * *
(3) The term ``TDA'' means the total display area (ft\2\) as
defined in the Air-Conditioning and Refrigeration Institute Standard
1200-2006.
* * * * *
(d) Each commercial refrigerator, freezer, and refrigerator-freezer
with a self-contained condensing unit and without doors; commercial
refrigerator, freezer, and refrigerator-freezer with a remote
condensing unit; and commercial ice-cream freezer, manufactured on or
after January 1, 2012, shall have a daily energy consumption (in
kilowatt hours per day) that does not exceed the levels specified:
(1) For equipment other than hybrid equipment, refrigerator-
freezers or wedge cases:
BILLING CODE 6450-01-P
[[Page 50136]]
[GRAPHIC] [TIFF OMITTED] TP25AU08.004
BILLING CODE 6450-01-C
(2) For commercial refrigeration equipment with two or more
compartments (hybrid refrigerators, hybrid freezers, hybrid
refrigerator-freezers, and non-hybrid refrigerator freezers), the
maximum daily energy consumption (MDEC) for each model shall be the sum
of the MDEC values for all of its compartments. For each compartment,
measure the TDA or volume of that compartment, and determine the
appropriate equipment class based on that compartment's equipment
family, condensing unit configuration, and designed operating
temperature. The MDEC value for each compartment shall be the amount
derived by entering that compartment's TDA or volume into the standard
equation in paragraph (d)(1) of this section for that compartment's
equipment class. Measure the calculated daily energy consumption (CDEC)
or total daily energy consumption (TDEC) for the entire case:
(i) For remote condensing commercial hybrid refrigerators, hybrid
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, where two
[[Page 50137]]
or more independent condensing units each separately cool only one
compartment, measure the total refrigeration load of each compartment
separately according to the ANSI/ASHRAE Standard 72-2005 test
procedure. Calculate compressor energy consumption (CEC) for each
compartment using Table 1 in ANSI/ARI Standard 1200-2006 using the
evaporator temperature for that compartment. The calculated daily
energy consumption (CDEC) for the entire case shall be the sum of the
CEC for each compartment, fan energy consumption (FEC), lighting energy
consumption (LEC), anti-condensate energy consumption (AEC), defrost
energy consumption (DEC), and condensate evaporator pan energy
consumption (PEC) (as measured in ANSI/ARI Standard 1200-2006).
(ii) For remote condensing commercial hybrid refrigerators, hybrid
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, where two or more compartments are cooled collectively by one
condensing unit, measure the total refrigeration load of the entire
case according to the ANSI/ASHRAE Standard 72-2005 test procedure.
Calculated a weighted saturated evaporator temperature for the entire
case by (A) multiplying the saturated evaporator temperature of each
compartment by the volume of that compartment (as measured in ANSI/ARI
Standard 1200-2006), (B) summing the resulting values for all
compartments, and (C) dividing the resulting total by the total volume
of all compartments. Calculate the CEC for the entire case using Table
1 in ANSI/ARI Standard 1200-2006, using the total refrigeration load
and the weighted average saturated evaporator temperature. The CDEC for
the entire case shall be the sum of the CEC, FEC, LEC, AEC, DEC, and
PEC.
(iii) For self-contained commercial hybrid refrigerators, hybrid
freezers, hybrid refrigerator-freezers, and non-hybrid refrigerator-
freezers, measure the total daily energy consumption (TDEC) for the
entire case according to the ANSI/ASHRAE Standard 72-2005 test
procedure.
(3) For remote-condensing and self-contained wedge cases, measure
the CDEC or TDEC according to the ANSI/ASHRAE Standard 72-2005 test
procedure. The MDEC for each model shall be the amount derived by
incorporating into the standards equation in paragraph (d)(1) of this
section for the appropriate equipment class a value for the TDA that is
the product of (i) the vertical height of the air-curtain (or glass in
a transparent door) and (ii) the largest overall width of the case,
when viewed from the front.
[FR Doc. E8-19063 Filed 8-22-08; 8:45 am]
BILLING CODE 6450-01-P