Commercial Refrigeration Equipment (CRE)

Commercial Refrigeration: Regulatory History

August 2005
EPACT 2005 amended the Energy Policy and
Conservation Act of 1975 (EPCA) to: February 2012
• Prescribe standards for self-contained commercial DOE published CRE Test
refrigerators, freezers, and refrigerator freezers with Procedure Final Rule—with
doors. IBRs for American Society of
• Direct DOE to set standards by January 1, 2009 for Heating, Refrigerating and
remote condensing equipment, open cases, and ice- Air-Conditioning Engineers
cream freezers. (ASHRAE) 72-2005, Air-
• Direct DOE to determine whether to amend the Conditioning, Heating, and September 2013
standards set both by the 2009 DOE rulemaking and Refrigeration Institute DOE issued a notice
by EPACT 2005 and, if necessary, perform a rulemaking (AHRI) 1200-2006, and AHRI codifying the AEMTCA
and publish amended standards by January 1, 2013. 1200-2010. amendment into the CFR.

January 2009 December 2012

DOE published a Final Rule (74 FR The American Energy Manufacturing
1092) establishing energy Technical Corrections Act (AEMTCA)
conservation standards (ECS) for amended EPCA to prescribe standards for
the equipment types specified in service over counter, self-contained,
42 U.S.C. 6313(c)(5). medium temperature equipment.

2
 Commercial Refrigeration: Regulatory History

March 2014
DOE published a Final Rule
(79 FR 17726) to establish
ECS for additional May-June 2014
equipment types per 42 Multiple stakeholders March 2017
U.S.C. 6313(c)(5)(B), and filed petitions for New CRE standards and
amended ECS for previously review of the 2014 test procedure went into
covered equipment types standards and test effect.
per 42 U.S.C. 6313(c)(6)(A). procedure rules.

April 2014 August 2016

DOE published CRE Test U.S. Court of Appeals for the 7th Circuit
Procedure Final Rule (79 FR upheld DOE’s 2014 energy conservation
22278) to reorganize the 2012 standard and test procedure rules for CRE.
test procedures and improve
clarity and accuracy of results.

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 Commercial Refrigeration: Market Overview
DOE defines commercial refrigerators, freezers, and refrigerator-freezers as
refrigeration equipment that:
(1) Is not a consumer product (as defined in §430.2 of part 430)
(2) Is not designed and marketed exclusively for medical, scientific, or research
purposes
(3) Operates at a chilled, frozen, combination chilled and frozen, or variable
temperature
(4) Displays or stores merchandise and other perishable materials horizontally, semi-
vertically, or vertically
(5) Has transparent or solid doors, sliding or hinged doors, a combination of hinged,
sliding, transparent, or solid doors, or no doors
(6) Is designed for pull-down temperature applications or holding temperature
applications
(7) Is connected to a self-contained condensing unit or to a remote condensing unit

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 Commercial Refrigeration: Market Overview
When beginning an ECS rulemaking, DOE develops information that
provides a picture of the market for the equipment, including its purpose,
the industry structure, and market characteristics.
• Major business types that use CRE:
– Food retail: Supermarkets, supercenters, convenience stores, small grocery
stores, and specialty stores such as meat markets
– Food service: Limited-service and full-service restaurants and other
foodservice businesses such as caterers and cafeterias
• DOE estimates 1.2 million units of commercial refrigeration equipment were
shipped in 2019.
• Due to their use in food service and food retail operations that require product be
constantly kept cold, commercial refrigeration equipment generally operates 24
hours per day, 365 days per year. Average energy consumption per unit is
approximately 4,560 kWh/yr.
• At the time of the prior ECS Final Rule in 2014, CRE used 0.6 quads per year of
primary energy, which accounted for approximately 4.0% of commercial building
electricity use and 0.6% of total U.S. energy use.

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 Commercial Refrigeration: Market Failures
Pursuant to complying with Executive Order 12866, DOE identified market
failures to justify the 2014 Final Rule’s revision of CRE energy conservation
standards.
Section 1(b)(1) of Executive Order 12866, ‘‘Regulatory Planning and Review,’’ 58 FR
51735 (October 4, 1993), requires each agency to identify the problem that it intends
to address, including, where applicable, the failures of private markets or public
institutions that warrant new agency action, as well as to assess the significance of
that problem.
DOE identified the following problems:
• There may be a lack of consumer information and/or information processing
capability about energy efficiency opportunities in the CRE market.
• There is asymmetric information among parties to a transaction and high costs of
gathering information.
• There are external benefits resulting from energy efficiency that are not captured
by the users of the equipment, e.g. benefits related to environmental protection,
such as reduced emissions of greenhouse gasses.

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 EPCA Provisions for Equipment Classes
EPCA includes a provision for the establishment of separate equipment
classes and separate standards based on performance-related features and
the utility of such features to consumers.
• Product classes are established if DOE determines that covered products within
such group:
(A) Consume a different kind of energy from that consumed by other covered
products within such type (or class)
(B) Have a capacity or other performance-related feature which other products
within such type (or class) do not have and such feature justifies a higher or
lower standard from that which applies (or will apply) to other products
within such type (or class).
• In making a determination of whether a performance-related feature justifies the
establishment of a higher or lower standard, DOE must consider such factors as the
utility to the consumer of such a feature, and such other factors DOE deems
appropriate. (42 U.S.C. 6295(q)(1))

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 CRE Equipment Classes
CRE standards are established for 49 equipment classes (79 FR 17725) divided
by equipment family name, condensing unit, and temperature.
Equipment Family Name Abbreviation Condensing Unit Designation Abbreviation
Vertical Open VOP Remote Condensing RC
Semi-Vertical Open SVO Self-Contained SC
Horizontal Open HZO
Vertical Closed Transparent VCT
Temperature Rating
Horizontal Closed Transparent HCT Abbreviation
Designation Temperature
Vertical Closed Solid VCS
Medium 38°F M
Horizontal Closed Solid HCS
Low 0°F L
Service Over Counter SOC
Ice-Cream -15°F I
Pull-Down PD

Example 1: VOP.RC.M stands for Example 2: HCT.SC.I stands for

Vertical Open equipment Horizontal Closed Transparent
connected to a remote condensing equipment that is self-contained
unit and operating at medium operating at ice-cream
temperature (38oF). temperature (-15oF).

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 Existing CRE Standards
Each equipment class has a unique equation specifying the standard as a
function of an equipment size descriptor.
• Equipment size expressed in terms of:
– Total display area (TDA) for all equipment classes covered by 2009 DOE Final
Rule with transparent or open display areas
– Volume (V) for all equipment classes previously covered by EPACT 2005
standards and for all equipment classes covered by 2009 DOE Final Rule
with no transparent or open display areas

• Form of standards equations

MDEC
specifying​ maximum daily energy
consumption (MDEC):
Slope = A
MDEC = A × V + B
or
Offset factor = B
MDEC = A × TDA + B

V or TDA

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 CRE Technology Options
DOE identifies technologies that can be used to improve equipment
efficiency as part of the Market and Technology Assessment.
• Thermal load reduction through thicker insulation, improved insulation, better
doors, and reduced interior component power input.
• Component power reduction: lighting, fans, anti-sweat heaters.
• Refrigeration system improvements: compressors, heat exchangers.
• DOE identifies technologies through general research, discussion with
manufacturers and other experts, review of equipment literature, and reverse
engineering of equipment.

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 DOE Process to Preserve Product Utility, Performance
Screening factors described in the Process Rule elaborate on the statutory
criteria provided in 42 U.S.C. 6295 and in part seek to eliminate problematic
technology options early in the process of revising an energy efficiency
standard.
• “Procedures, Interpretations and Policies for Consideration of New or Revised
Energy Conservation Standards for Consumer Products,” 10 CFR Part 430 (the
Process Rule) sets forth procedures to guide DOE in the consideration and
promulgation of new or revised appliance efficiency standards under EPCA.
• The Screening Analysis eliminates design options that have adverse impacts on
product utility or availability. Standards based on such design options are not
considered technologically feasible.
• Specifically, technologies that would result in an adverse impact on the utility of
the product to significant subgroups of consumers or would result in the
unavailability of any covered product type with performance characteristics
(including reliability), features, sizes, capacities, and volumes that are substantially
the same as products generally available in the United States at the time, will not
be considered further. (Process Rule, section 5, paragraph (b)(3).)

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 CRE Technology Options Screened Out/Removed
Technologies were screened out or otherwise removed for reasons including
utility concerns, inconclusive evidence, and insignificant improvement as
measured by the test procedure.
Options that do not reduce Daily Energy
Consumption (DEC) as measured by the Description
test procedure
Higher Efficiency Expansion Valves Valves can be optimized for single-condition test.

Variable-Speed Condenser Fan Motors and

Insignificant benefit for single-condition test.
Condenser Fan Motor Controllers

Anti-Sweat Heater Controllers Insignificant benefit for constant-humidity test.

Available information suggested little opportunity for efficiency
Liquid-Suction Heat Exchangers
improvement due in part to added pressure drop.
Options screened out Applicable screening criteria
Practicability to manufacture, install, and service: Viable
Air Curtain Design
advanced air curtain designs not identified.
Practicability to manufacture, install, and service: Reliable sensor
Defrost Cycle Control
technologies not identified.
Practicability to manufacture, install, and service: Inconclusive
Antifog Films for Transparent Doors long-term performance, film degradation over equipment
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lifetime.
 CRE Technology Options Screened Out/Removed
Options not considered in the
Description
Engineering Analysis
Ballasts either already located remotely or purchased as part of
Remote Ballast Location
transparent doors.
Variable-Speed Evaporator Non-uniform cabinet temperature distribution, reduced air curtain
Fans/Controllers performance.
Higher-Efficiency Fan Blades Specific examples that can reduce shaft load not identified.
Concerns about utility impacts of required face area and likely reduction
Low Pressure Differential Evaporators
in heat transfer performance in spite of fan power reduction.
Defrost Mechanisms Remote condensing test procedure does not include hot gas defrost,
(Hot Gas Defrost) insufficient demonstration of the technology for self-contained.

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 CRE Utility and Performance Issues
Stakeholders raised concerns regarding utility impacts of specific technology
options. DOE screened out some technology options based on these
comments but not others.
• Variable-speed evaporator fans: DOE did not consider variable-speed evaporator
fans due to concerns about maintaining consistent product temperatures.
• Insulation thickness increase: DOE considered insulation thicknesses greater than
baseline thickness but consistent with equipment observed in the market.
• Evaporator size: DOE considered a range of evaporator size and design details
consistent with evaporators observed in the market.

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 Goal of Engineering Analysis
Our goal is to develop cost-efficiency curves that describe the relationship
between efficiency level and cost.
• Efficiency levels are discrete energy
efficiency tiers that serve as potential
standard levels.
• Each efficiency level has an associated
manufacturer production cost (MPC).
• Higher efficiency levels typically
correspond to higher costs.
• To determine the relationships between
efficiency levels and MPCs, DOE has
multiple methodologies.
• Selection of methodology is generally Cost-Efficiency Curve
dependent on the information available
and characteristics of the regulated
product.

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 CRE Engineering: Representative Equipment Classes
Choose
Representative Of the 49 CRE equipment classes, DOE directly analyzed 25
Equipment equipment classes.
Remote Condensing Self-Contained
Equipment Family
Ice-Cream Low Medium Ice-Cream Low Medium
Define Baseline
Models VOP x   x x 
Without
SVO x x  x x 
Doors
HZO x   x  
Analyze
More Efficient VCT x     
Designs VCS x x x   
With HCT x x x   
Doors HCS x x x x  
Calculate
MPCs SOC x x  x x 
PD * * * * * 
 Equipment class directly analyzed
Generate Cost x Equipment class not directly analyzed
Curves * Pull-down class is defined only for Self-Contained Medium Temperature
HCS = Horizontal Closed Solid SVO = Semi-Vertical Open
HCT = Horizontal Closed Transparent VCS = Vertical Closed Solid
HZO = Horizontal Open VCT = Vertical Closed Transparent
PD = Pull-Down VOP = Vertical Open
SOC = Service Over Counter

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 CRE Engineering: Baseline Models
Choose
Representative DOE determined components and designs that would typically
Equipment be used for baseline equipment.
Equipment Class
Define Baseline Component HZO.SC.L VCT.RC.M VCT.SC.L VCS.SC.M
Models
Lighting LED T8 Electronic
Evaporator Enhanced Standard Standard Standard
Analyze
More Efficient Brushless Brushless
Evap Fan Motor Shaded Pole Shaded Pole
Designs DC DC

High Perfor-
Doors (VCT) Standard
Calculate mance
MPCs
Condenser Enhanced Standard Standard Standard
Cond Fan Brushless
Generate Cost Shaded Pole Shaded Pole
Motor DC
Curves
High-
Single-Speed Single-Speed
Compressor Efficiency
Hermetic Hermetic
Hermetic

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 CRE Engineering: Design Option Approach
Choose
Representative CRE used a design option approach to determine efficiency
Equipment improvement levels (VCS.SC.M example).
Efficiency Daily Energy
Design Option Added
Define Baseline Level Use (kWh)
Models
1 Baseline 6.31
Permanent Split Capacitor Evaporator Fan
2 5.29
Analyze Motor
More Efficient 3 Brushless Direct Current Evaporator Fan Motor
Designs 4.03
4 Brushless Direct Current Condenser Fan Motor 3.84
5 Enhanced-UA Condenser Heat Exchanger 3.69
Calculate
MPCs 6 Additional 0.5 Inches of Insulation 3.48
7 High-Efficiency Reciprocating Compressor 3.45
8 Enhanced Evaporator Heat Exchanger 3.43
Generate Cost
Curves 9 Vacuum Insulated Panels (max. tech) 3.03

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 CRE Engineering: Design Option Approach
DOE calculated the incremental energy savings of each design option in the
analysis that accounts for cabinet thermal load, refrigeration system
performance, and component power input.
Design Option Design Option Added Above
Level Baseline
Level 1 Baseline

Production Cost
Manufacturer
Level 2 Level 1 + PSC Evap. Fan Motor

Energy Consumption
Calculation
Level 2 Level 1
Product Energy Use

Level 1 Energy Level 2 Energy Level 2 Incremental

Consumption Consumption Energy Savings

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 Performance Analysis: Heat Load Calculations
Load calculations are based on the geometry and design parameters of the unit
modeled, as well as on the conditions of the DOE test procedure, and include:
Fan power rejected
Lighting power emitted into case as heat.
into case as heat. Key parameters: fan input
Key parameters: lighting power, number of fans, run
wattage per fixture, number of time.
fixtures, run time.
Conduction through walls.
Key parameters: insulation R-
value, wall area, temperature
differential.
Anti-sweat heat
emitted into case
Warm air infiltration from
(70% of input power).
door openings.
Key parameters: temperature
Heat gain through glass. differential, humidity, infiltrated
Key parameters: case and air mass.
ambient temperatures, door U-
factor, glass area. • Case geometries and design parameters based on
manufacturer literature.
DOE TP conditions: 75°F, 55% relative • Thermal performance of case and components based on
humidity, 8-hour door opening period manufacturer and supplier literature and interviews.

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 Performance Analysis: Refrigeration System
Refrigeration system performance was calculated based on heat exchanger
effectiveness and compressor performance. Component energy use was
summed to determine daily energy consumption.
Refrigeration System Performance Daily Energy Consumption
Evaporator: Evaporating Summation for
temperature required to transfer Energy-Using Components:
system capacity or cabinet load
based on design detail. Compressor:
Thermal Load / EER

Remote Condensing: Evaporator Fan

Test procedure defines compressor
Energy Efficiency Ratio (EER) based Condenser Fan
on evaporating temperature.
Lighting

Self-Contained Condensing: Anti-Sweat Heaters

Compressor performance data
provides capacity and power input Condensate Pan Heaters
based on evaporating and condensing
temperatures. Condensing
Defrost Heaters
temperature based on heat rejection
load and design detail.

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 CRE Engineering: MPCs
Choose
Representative DOE used teardown analysis to estimate the cost of CRE
Equipment equipment including the design options implemented.
• Costs for the core case of the refrigerated cabinets, including all
Define Baseline non-energy-consuming components, were developed from
Models teardowns of units currently on the market.
• Costs for energy-consuming components and design options were
Analyze developed through research of industry literature, supplier price
More Efficient
Designs quotes, and manufacturer interviews.
• Estimates of manufacturer markup were developed with data
from the manufacturer interview process.
Calculate
MPCs • Design option costs were applied to core case costs at each
modeled efficiency level to yield MPC values. Markups and
outbound freight were added to yield manufacturer selling price
Generate Cost (MSP) values.
Curves

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 Engineering Analysis: Product Teardowns
DOE uses a reverse engineering methodology to determine
costs of representative equipment and the components that Selection of
Units
drive efficiency.
• Unit teardown requires recording size, weight,
Physical
method of manufacture, and manufacturing Teardown
details for each component as the unit is
Raw
disassembled to generate a bill of materials Materials
(BOM). Bill of Materials
• DOE incorporates raw materials prices,
component costs, fabrication techniques, Fabrication Purchased
Processes Parts
manufacturing line equipment, and
production volumes estimates to develop
Assembly
MPCs. Processes
Finished
• Teardown Analysis generates manufacturing, Materials

material, labor, and overhead costs. Manufacturing

Cost

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 CRE Engineering: Price-Efficiency Relationship
Choose The final output of the Engineering Analysis is a set of cost-
Representative
Equipment efficiency curves, one for each analyzed equipment class, depicting
equipment cost and performance at each efficiency level modeled.

Define Baseline
Models

Analyze
More Efficient
Designs

Calculate
MPCs
Calculated Daily
Manufacturer Selling
Design Option Energy Design Option Added
Price
Level Consumption
Generate Cost kWh/day $ Above the Baseline
Curves Level 1 57.90 5,436 Baseline
Level 2 55.28 5,471 Level 1 + Permanent Split Cap. Evap. Fan Motor
Level 3 51.99 5,546 Level 2 + Brushless DC Evap. Fan Motor
Level 4 50.52 5,587 Level 3 + Super T8 Lighting
Level 5 46.84 5,763 Level 4 + Night Curtains
Level 6 38.02 7,003 Level 5 + LED Lighting with Occupancy Sensors
Level 7 37.76 7,081 Level 6 + Additional 1/2" Insulation
Level 8 36.10 7,681 Level 7 + Enhanced-UA Evaporator Coil
24 Level 9 35.65 10,324 Level 8 + Vacuum Insulated Panels
 CRE Engineering: Scaling Results
Choose DOE estimates performance for equipment classes not directly
Representative
Equipment analyzed.
• DOE developed an extension approach to apply standards developed for the
21 representative primary equipment classes to the remaining 28 secondary
Define Baseline equipment classes.
Models
• DOE’s matched-pair analyses compared calculated energy consumption levels
for pieces of equipment with similar designs but one major construction or
Analyze operational difference that corresponds to a change in the equipment family,
More Efficient
Designs condenser configuration, or operating temperature.
• DOE developed a set of multipliers to account for differences between
performance of directly analyzed and remaining equipment classes.
Calculate
MPCs
Examples of matched pairs used for extension analysis based on
ratio of self-contained to remote condensing performance:
Generate Cost
Curves Primary Equipment Class Secondary Equipment Class
SOC.RC.I SOC.SC.I
HCT.RC.I HCT.SC.I
VCS.RC.I VCS.SC.I
HCS.RC.I HCS.SC.I

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 CRE Engineering: Utility and Performance Issues
Utility/Performance Concern DOE Action/Response
• DOE screened out technologies that could
result in adverse impacts—e.g. variable-speed
Food Safety: Manufacturers expressed concern
evaporator fans.
that more efficient equipment would
• Medium temperature analysis assumes 38 °F
have trouble maintaining food safety in
cabinet temperature, which provides margin
extreme, but not uncommon, conditions.
vs. the 41 °F requirement in the NSF 7 food
safety rating procedure.
General Customer Utility: Manufacturers
DOE modified the analysis in the Final Rule
expressed concern that amended standards
phase to address specific utility concerns—e.g.,
would limit their ability to optimize their
adding condensate pan heater energy use for
equipment for specific merchandise and to
some classes.
meet customer requirements
The phaseout was not final at the time of the
Refrigerants: Commenters raised the issue that
rulemaking and adequate information
the U.S. Environmental Protection Agency (EPA)
regarding alternative refrigerants was not
was considering phasing out R-404A and R-
available. Hence, DOE based its final rule
134a refrigerants commonly used in CRE and
analysis on these most commonly used
used as the basis for the DOE analysis.
refrigerants.

26
 CRE Engineering: Utility and Performance Issues
Utility/Performance Concern DOE Action/Response
• DOE analysis costs for vacuum panels include
Vacuum Panels: Stakeholders raised significant redesign costs and labor costs.
questions about vacuum panels regarding Information is based on discussions with
impact on cabinet structural rigidity and manufacturers in addition to other sources.
integrity over the life of the CRE units. • Max. tech efficiency levels using vacuum
panels rejected due to high cost.
Triple-Pane Glass: Stakeholders raised
concerns regarding use of triple-pane glass for
• DOE removed triple-pane glass from the
transparent doors, citing the potential for a
analysis for certain classes, primarily medium-
cabinet to tip when the door is opened and
temperature classes.
also the potential for reduced visibility of the
merchandise on display.

27
 Life Cycle Cost (LCC): Overview

28
 Energy Use Model
The system energy usage is calculated as the sum of the refrigeration
system and auxiliary component energy consumption.
• Reduction in thermal loads (conduction through doors and walls, radiation
through openings, heat and moisture addition due to warm air infiltration, and
electricity use of internal components such as fans, lighting etc.) results in lower
loads on the refrigeration system.
• The energy use of auxiliary components such as lighting, fans, and anti-sweat
heaters is based on component power input and run time.
• The Engineering Analysis provides an estimate of daily energy use, which is
multiplied by 365 to calculate annual energy use for input to the LCC.

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 Markups Background
Assumptions
• Product cost will increase while the other costs incurred in the distribution channel
remain constant after standards. The product costs to the distributor are referred
to as cost of goods sold (CGS).
• Firms are facing a relatively competitive market.
• When product costs increase following the standard and demand is relatively
inelastic, firms are not likely to have medium/long run sustained higher
profitability as a windfall resulting from standards.

Possible Markup Scenarios

• Fixed markup: Markup multiplier applied to CGS remains constant and equal to
baseline markup.
• Incremental markup: Markup multiplier applied to incremental increase in CGS
induced by increased efficiency is smaller than baseline markup.

Dale, L., et al., 2004, An Analysis of Price Determination and Markups in the Air-
Conditioning and Heating Equipment Industry. LBNL-52791

30
 Markup Scenarios and Implications

Fixed Markup Scenario Incremental Markup Scenario

MUpost-std=2.0

MUpost-std=1.625

MUpre-std=2.0 MUpre-std=2.0

Product cost increases then per-unit profit Product cost increases then per-unit profit
increases proportionally—not viable in a increases moderately—reasonable outcome in a
competitive market over time. relatively competitive market over time.

31
 Markups Approach
DOE has reviewed literature, analyzed industry data, and conducted
interviews. Based on this research, DOE notes:
• Wholesale prices may not always increase following a new standard, so there is no
reason to suppose that retail markups changed.
• Appliance retailers could gain sales by reducing the markup to maintain pre-standard
per-unit profits.
• HVAC contractors will attempt to use the same markup after the increase in input cost
occurs but will eventually lower their markup based on market pressures.

DOE concludes that:

• The theory behind the concept of incremental markups has not been disproved.
• Industry data and consultant inputs justify not using fixed markup to measure the
medium- to long-term impact of standards on consumer prices.

Hence, DOE has adopted the incremental markup approach.

32
 CRE Distribution Channel Markups
DOE applies distribution chain markups to the MSP to determine the retail
price paid by consumers. These markups are in addition to the
manufacturer markup calculated in the Engineering Cost Analysis.
• DOE uses baseline and incremental markups.
– Baseline markups are applied to the MSP in the base case.
– Incremental markups are applied to the difference in MSP between the base
standards case.
• For CRE, DOE analyzed three distribution channels:
– National accounts (direct to consumer)
– Wholesaler
– Contractor/installer (equipment purchased from wholesaler)
• Each distribution channel is given a weight representing the percentage of total
shipments that are distributed for this channel.
• Based on stakeholder input, separate distribution channel weights were calculated
for display cases (glass-door or no door) and solid-door equipment.

33
 CRE Distribution Channel Markups
Distribution Channel Weights
Ntl. Acct Wholesaler Contractor
Equipment Type
Channel Channel Channel
Display Cases - VOP, SVO, HZO, VCT, HCT, SOC, and PD 70% 15% 15%
Solid-Door Equipment - VCS and HCS 30% 60% 10%

Baseline and Incremental Markups

Weighted-Average Markup
Ntl. Acct Wholesaler Contractor
Display Solid-Door
Channel Channel Channel*
Cases Equipment
Baseline 1.18 1.36 2.00 1.33 1.37
Incremental 1.05 1.10 1.31 1.10 1.11
* Includes wholesaler markup

34
 Product Price Forecasts: Lighting Technology Price Trends
• DOE incorporated the price projections for LED lighting into the projected
equipment price for the National Impacts Analysis (NIA).
• These reduce the cost of lighting for certain equipment under some efficiency
levels for the period of 2017 to 2030.
LED Price Deflators Used in the Final Rule Analysis: 2010-2046

Normalized Normalized Normalized Normalized

Year Year
to 2013 to 2017 to 2013 to 2017

2010 3.00 5.65 2021 0.36 0.68

2011 1.80 3.39 2022 0.34 0.63
2012 1.29 2.42 2023 0.31 0.59
2013 1.00 1.89 2024 0.29 0.55
2014 0.82 1.54 2025 0.27 0.52
2015 0.69 1.31 2026 0.26 0.49
2016 0.60 1.13 2027 0.25 0.46
2017 0.53 1.00 2028 0.23 0.44
2018 0.48 0.90 2029 0.22 0.42
2019 0.43 0.81 2030 0.21 0.40
2020 0.39 0.74 2031-2046* 0.21 0.40
* DOE did not have data available to project prices beyond 2030. Therefore, for years 2031-2046,
the deflator was held constant.

Navigant Consulting, Inc. "Energy Savings Potential of Solid-State Lighting in

General Illumination Applications 2010 to 2030." Building Technologies Program,
Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy,
Feb. 2010
35
 Consumer Choice Model: Approach
• To evaluate potential consumer selection of equipment efficiencies,
DOE used a logit-type consumer choice model based on the technology
choice model used in the U.S. Energy Information Administration’s
(EIA’s) National Energy Modeling System (NEMS) commercial demand
module
• The NEMS model divides the purchaser population into seven classes
with different levels of sensitivity to first cost and discounting of
operating cost savings.
• The technology choice model is used to develop base case efficiency
distributions for each product class in the base case for the LCC.
• For the base case LCC efficiency distribution, there was a limited set of
efficiencies available in the market; DOE mapped the market share
percentages calculated using the logit model to this list of available
products.

36
 Consumer Choice Model: Base Case Efficiency Distribution

Upper Figure
Distribution by
efficiency level
(EL) for each
equipment
class

Lower Figure
Share of total
market by
equipment
class

37
 Example LCC Results (by Efficiency Level)
The LCC is calculated for each efficiency level (EL) and each product class. The left table
shows the population-mean LCC savings by EL. The right-hand table shows the EL chosen for
the amended standard TSL 3.
Equipment Mean Life-Cycle Cost Savings (2012$) Equipment Chosen EL
Class EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 Class TSL 3
VOP.RC.M EL 1
VOP.RC.M 922 482 -5 -4,203
VOP.RC.L EL 1
VOP.RC.L 53 -148 -6,701
VOP.SC.M -54 -1,384 VOP.SC.M Baseline
VCT.RC.M 542 323 41 -4,937 VCT.RC.M EL 1
VCT.RC.L 647 526 93 -6,036 VCT.RC.L EL 2
VCT.SC.M -10 214 226 209 163 74 -1,541 VCT.SC.M EL 3
VCT.SC.L 2,503 5,200 4,709 4,996 5,001 4,979 2,812 VCT.SC.L EL 5
VCT.SC.I 18 4 -68 -2,834 VCT.SC.I EL 1
VCS.SC.M 223 518 365 363 313 305 -1,428 VCS.SC.M EL 4
VCS.SC.L 588 513 550 565 507 495 -1,640 VCS.SC.L EL 5
VCS.SC.I 41 114 111 113 -2,710 VCS.SC.I EL 4
SVO.RC.M 564 48 -19 -2,691 SVO.RC.M EL 1
SVO.SC.M 6 -51 -917 SVO.SC.M Baseline
SOC.RC.M -128 -223 -287 -2,268 SOC.RC.M Baseline
SOC.SC.M -144 -209 -274 -2,204 SOC.SC.M Baseline
HZO.RC.M -2,180 HZO.RC.M Baseline
HZO.RC.L -4,249 HZO.RC.L Baseline
HZO.SC.M 55 -4 -1,154 HZO.SC.M EL 1
HZO.SC.L HZO.SC.L Baseline
HCT.SC.M 36 66 165 101 91 43 -599 HCT.SC.M EL 4
HCT.SC.L 415 428 435 293 286 248 -613 HCT.SC.L EL 4
HCT.SC.I -1,240 HCT.SC.I Baseline
HCS.SC.M 12 17 15 5 -52 -568 HCS.SC.M EL 3
HCS.SC.L 31 50 64 58 33 -590 HCS.SC.L EL 3
PD.SC.M 8 163 165 150 97 32 -1,252 PD.SC.M EL 3

38
 Evolution of Product Market in the Base Case
The changing mix of product efficiency levels over time can be
summarized by calculating the stock average energy use, in kilowatt-
hours per year per linear foot of equipment.

39
 Subgroup Analysis
• DOE analyzed an LCC subgroup consisting of small businesses, identified based on
size standards from the Small Business Administration (SBA). The SBA established
size standards for types of economic activity, or industry, under the North
American Industry Classification System (NAICS).
• DOE analyzed 2007 economic census data to estimate the percentage of
businesses by category that are small according to SBA criteria.
• Categories are grocery/supermarket, convenience stores, gasoline stations with
convenience stores, full-service restaurants, and limited-service restaurants.
• The principal differences in LCC inputs for small businesses are:
– Higher cost of capital
– Higher electricity prices
– Longer equipment lifetimes
• DOE performed a detailed subgroup analysis for gasoline station convenience
stores (representing of food sales) and full-service restaurants (representing food
service).

40
 Subgroup Analysis Example Results
LCC Savings and PBP for the adopted TSL3 for food service restaurants
• For some equipment classes the standard level was left at the baseline
• Similar results obtained for food sales

Mean LCC Savings (2013$) Mean PBP (years)

Equipment Class
Small Businesses All Businesses Small Businesses All Businesses
VOP.SC.M -- -- -- --
VCT.SC.M $330 $226 4.5 5.3
VCT.SC.L $6,254 $5,001 0.9 1.1
VCT.SC.I $34 $18 5.8 7.2
VCS.SC.M $652 $363 1.2 1.4
VCS.SC.L $999 $507 2.0 2.5
VCS.SC.I $321 $113 3.9 5.0
SOC.SC.M -- -- -- --
SVO.SC.M -- -- -- --
HZO.SC.M $92 $55 5.7 6.9
HZO.SC.L -- -- -- --
HCT.SC.M $137 $101 4.7 5.8
HCT.SC.L $487 $293 2.0 2.5
HCT.SC.I -- -- -- --
HCS.SC.M $48 $15 4.2 5.5
HCS.SC.L $127 $64 2.1 2.5
PD.SC.M $280 $165 4.7 5.6

41
 Emissions Analysis
DOE estimates the cumulative emissions reductions resulting from
amended ECS. DOE considers full-fuel cycle (FFC) emissions. Thus, both
power plant emissions and upstream emissions are included in the
analysis (includes fugitive methane emissions).

Cumulative Emissions Reduction for Potential Standards for CRE (30-year)

Trial Standard Level
1 2 3 4 5
CO2 (million metric tons) 13.0 23.1 50.4 54.9 70.0
NOx (thousand tons) 19.1 34.2 74.5 81.1 103.4
Hg (tons) 0.0 0.1 0.1 0.1 0.1
N2O (thousand tons) 0.3 0.5 1.1 1.2 1.5
CH4 (thousand tons) 62.8 112.1 244.2 265.9 339.2
SO2 (thousand tons) 16.6 29.6 64.4 70.1 89.4

42
 NEMS
• Model DOE/EIA uses to generate the Annual Energy Outlook (AEO)
• Provides a detailed projection of energy supply and demand for 25-year period
• Incorporates only those policies that have been adopted in the year of publication

• EIA publishes multiple

scenarios each year
• In alternate years, a
restricted set appear
– Low/high economic growth
– Low/high oil & gas
resource
– Low/high oil & gas price
• Scenario data used to
estimate marginal quantities
used in the emissions
analysis

Integrating Module of the NEMS Documentation 2014.

www.eia.gov/forecasts/aeo/nems/documentation/integrating/pdf/m057(2014).pdf

43
 AEO-Based Approach
• The data published with the AEO are used to develop a series of coefficients that
are combined to estimate emissions reduction scenarios generated by EIA.
• DOE uses the changes in generation, fuel consumption, and emissions between
different scenarios to estimate marginal variations.
• On the supply side (electricity generation) DOE estimates:
– Marginal heat rates by fuel type: Ratio of changes in fuel consumption to changes in
generation
– Marginal emissions intensity by fuel type and pollutant species: Ratio of the change in
pollutant mass output to change in fuel consumption
• Changes to demand are estimated in the NIA.
• The relationship between demand by end-use and generation supply by fuel type
is modeled based on the end-use load shapes included with the NEMS code.
– End-use demand is allocated to three periods: peak, off-peak, and shoulder
• Generation by fuel type is mapped to these periods using the following rules:
– Petroleum fuels consumed only during on-peak
– Coal and nuclear allocated to all periods
– Remaining peak demand is served by natural gas and renewables
– Remaining gas and renewables allocated to shoulder and off-peak

44
 End-Use Fuel Share Weights
• DOE calculates a set of fuel share weights, defining the fraction of annual end-use
demand that is served by generation of a given fuel type.
• These are time dependent.

45
 Marginal Emissions Intensities
• Marginal emissions intensities are calculated by averaging across different
scenarios.
• The table below compares marginal values to grid-average values for AEO2019.
Emissions Rate for Coal-fired Generation
CO2 MMsT:Quad Hg sT:Quad Nox MMsT:Quad SO2 MMsT:Quad
Period
Grid Average Marginal Grid Average Marginal Grid Average Marginal Grid Average Marginal
2021-2025 104.7 105.4 0.38 0.44 0.062 0.115 0.085 0.070
2026-2030 104.7 104.6 0.38 0.41 0.060 0.079 0.089 0.091
2031-2035 104.7 104.5 0.38 0.39 0.058 0.071 0.092 0.088
2036-2040 104.7 104.5 0.37 0.37 0.058 0.070 0.095 0.094
2041-2045 104.7 104.4 0.37 0.36 0.057 0.071 0.096 0.095
2046-2050 104.6 104.5 0.37 0.35 0.057 0.080 0.101 0.104
Emissions Rate for Natural Gas-fired Generation
CO2 MMsT:Quad Hg sT:Quad Nox MMsT:Quad SO2 MMsT:Quad
Period
Grid Average Marginal Grid Average Marginal Grid Average Marginal Grid Average Marginal
2021-2025 58.5 58.5 0.019 0.035
2026-2030 58.5 58.5 0.018 0.024
2031-2035 58.4 58.5 0.017 0.021
2036-2040 58.4 58.4 0.017 0.021
2041-2045 58.4 58.4 0.017 0.021
2046-2050 58.4 58.4 0.017 0.024

46
 Power Sector Emissions Impact Factors
• The supply-side analysis provides marginal emissions intensities in units of
pollutant mass per unit of electricity generated by fuel type.
• The load shape analysis provides the percentage of demand served by generation
fuel type, by sector, and by end-use.
• These are combined to define emissions impact factors.
• The impact factors represent the reduction in emissions by pollutant species per
unit of demand reduction by sector and end-use.
– These factors are time series.
• The impact factors are combined with the annual electricity demand reductions
calculated in the NIA to estimate total emissions reductions.

Coughlin, Katie, 2014. Utility Sector Impacts of Reduced Electricity Demand. LBNL-6864E.

Coughlin, Katie, et al, 2013. Modeling the Capacity and Emissions Impacts of Reduced Electricity
Demand. LBNL-6092E.

Coughlin, Katie, 2013. Projections of Full-Fuel-Cycle Energy and Emissions Metrics. LBNL-6025E.

47
 Full-Fuel Cycle (FFC) Analysis
• DOE also accounts for the energy and
emissions that occur in the upstream
portion of the fuel production chain.
• This includes extraction, refining, and
transportation of fossil fuels.
• The upstream energy use is accounted
for using FFC multipliers:
– ~1.1 for natural gas
– ~1.2 for oil
– ~1.04 for grid electricity
• Emissions from upstream fuel and
electricity use are added to the power
sector emissions to define the FFC
emissions reductions associated with
a reduction in energy demand.

48
 FFC Site vs. Upstream Emissions
• Emissions intensities are calculated for grid electricity and oil and natural gas.
• For oil and gas, upstream emissions are added to the site combustion emissions.
• For grid electricity, upstream emissions are added to power sector emissions.
• Chart shows percentage of total emissions from upstream in orange.

49
 Emissions Monetization
• DOE uses the most current Social Cost of Carbon (SCC) values developed by
interagency process.
• SCC is intended to be a monetary measure of the incremental damage resulting
from greenhouse gas (GHG) emissions, including but not limited to agricultural
productivity loss, human health effects, property damage from rising sea level,
and changes in the ecosystem.
• The most recent (2013) U.S. government interagency estimates of the SCC for
emissions in 2015 are $12.90, $40.80, $62.2, and $117.0 per metric ton avoided
(2012 dollars). The SCC in constant dollars increases over time.
• DOE also monetizes the NOx emissions reductions resulting from amended
standards. The medium estimate is $2,639 per ton of NOx.

50
 Shipments Analysis: Methodology
• DOE estimates shipments
based on a stock turnover
model.
• DOE shipments forecast
treats CRE as an inelastic
good
• Projections of future
shipments are based on AEO
projections of floor space for
food sales and food service
businesses.
• The model calculates total
shipments of open/closed
cases for replacements and
for new installations.
• Market share is allocated to
each equipment class based
on market reports, data
submitted for previous
rulemakings, and stakeholder
input.

51
 NIA: Results
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
Primary Energy Savings (quads) 1.18 2.04 2.84 3.27 4.14
FFC Primary Energy Savings (quads) 1.19 2.07 2.89 3.32 4.21
Primary Energy Savings [9-yr] (quads) 0.29 0.50 0.71 0.81 1.03
Full-Fuel-Cycle Energy Savings [9-yr] (quads) 0.29 0.51 0.72 0.83 1.04
Value of CO2 reductions (billion 2012$)1 0.4 to 6.0 0.7 to 10.1 1.0 to 14.0 1.2 to 16.2 1.5 to 20.4

NPV (billion 2012$) 2:

7% Discount Rate 2.52 4.14 4.93 3.64 (28.39)
3% Discount Rate
5.73 9.50 11.74 9.70 (49.20)

NPV [9 year] (billion 2012$) 2:

7% Discount Rate 1.13 1.87 2.19 1.54 (13.86)
3% Discount Rate
1.83 3.06 3.72 2.93 (17.80)
Indirect Employment Impacts in 2022 (Jobs) 1,500 2,600 to 2,700 3,700 to 3,800 4,100 to 4,300 2900 to 4400
NPV (billion 2012$) 2: Breakdown TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Incremental Product Cost, 7% Discount Rate (0.68) (1.42) (2.77) (4.58) (29.98)
Operating Cost Savings, 7% Discount Rate 3.20 5.56 7.70 8.22 1.59
Incremental Product Cost, 3% Discount Rate (1.21) (2.51) (4.89) (8.07) (53.06)
Operating Cost Savings, 3% Discount Rate 6.94 12.01 16.63 17.77 3.86

1 Values for CO2 emissions are: $11.8 to $117 per metric ton in 2015 (2012$).
2 Values in parentheses are negative.
52
 Manufacturer Impact Analysis (MIA)
The MIA fulfils legislative and procedural requirements to determine if a
proposed standard is economically justified.

EPCA
Consider the economic impact of standards on manufacturers and the impacts of any
lessening of competition in the industry.

Process Rule
The Process Rule describes the process to be used in developing the MIA and the factors
to be considered in the analysis. The analysis of manufacturer impacts will include:
• Estimated impacts on cash flow
• Assessment of impacts on manufacturers of specific categories of products and
small manufacturers
• Assessment of impacts on manufacturers of multiple product-specific federal
regulatory requirements, including efficiency standards for other products and
regulations of other agencies
• Impact on manufacturing capacity, plant closures, and loss of capital investment

53
 MIA: Methodology
The MIA relies on inputs from earlier analyses, public financial information, and
manufacturer interviews to evaluate quantitative and qualitative impacts on
industry.

Develop Financial DOE develops financial metrics based on SEC filings and public
Metrics financials.

DOE conducts onsite interviews with manufacturers to get feedback on

Conduct financial metrics and costs, as well as understand key industry concerns.
Manufacturer
Interviews
DOE models the financial impact of new or amended standards on the
industry using the Government Regulatory Impact Model (GRIM). Key
Financial
Modeling inputs include shipment forecasts, MPCs, financial metrics, and
conversion cost estimates.

CRB & Additional DOE evaluates cumulative regulatory burden (CRB), capacity constraints,
Impacts competitive impacts, and small business impacts.

54
 MIA: GRIM
The financial impacts of potential standards are calculated using the GRIM.
The GRIM was developed with funding from and the participation of GAMA, ARI, and
AHAM. It is a discounted cash flow analysis modeled at the industry level.

Key Inputs
• MPCs and MSPs from the Engineering Analysis
• Product shipments from the Shipments Analysis
• Financial information from the Market & Technology Assessment
• Conversion costs from manufacturer interviews and the Engineering Analysis

Key outputs/measures of impact:

• Computations of cash flow for both no-standards case (absence of standards) and
standards cases
• Short-term impacts characterized by free cash flows (FCF) between the
announcement year and standards years
• Long-term impacts characterized by the change in Industry Net Present Value (INPV)

55
 MIA: GRIM Flowchart

56
 MIA: CRE GRIM Results
Summary of MIA Results
Base Trial Standard Level
Units
Case 1 2 3 4 5

INPV 2013$ Millions 2,660 2,636 – 2,650 2,617 – 2,653 2,495 – 2,566 2,339 – 2,470 1,515 – 2,476

(1,144.8) –
2013$ Millions - (23.9) – (9.9) (42.9) – (8.7) (165.0) – (93.9) (320.9) – (189.4)
(184.4)
Change in
INPV (0.90) (1.61) (6.20) (12.07) (43.04)
(%) - to to to to to
(0.37) (0.33) (3.53) (7.12) (6.93)
Total
Conversion 2013$ Millions - 24.1 35.6 184.0 354.9 781.8
Costs

Upper Bound
• The upper bound to industry profitability is the preservation of gross margin markup scenario.

Lower Bound
• The lower bound to industry profitability is the preservation of operating profit markup scenario.

57
 MIA: CRE FCF
Industry FCF drops after the publication year of the Final Rule, as
manufacturers begin making investments to comply with amended standards.

Publication Year Standard Year

58
 MIA: CRE Cumulative Regulatory Burden (CRB)
Manufacturers note concerns about potential CRB from other appliance
standards, other DOE regulations, other federal regulations, and from non-
federal regulations.
Overlapping Appliance Standards Based on Compliance Date
Industry
Manufacturers Approx. Industry
Federal Energy Number of Conversion
from Today’s Standards Conversion
Conservation Standard Manufacturers Costs / Product
Rule Year Costs
Revenue
Walk-in Coolers & Freezers
$71 Million
78 FR55781 63 9 2016 1.0%
(2012$)
(September 11, 2013)

Other DOE Regulations

Certification, Compliance, and Enforcement (CC&E) Final Rule: DOE issued a March 2011
CC&E Final Rule that revised certification regulations. DOE recognized that sampling
requirements can create burden for certain CRE manufacturers who build one-of-a kind
customized units and have a large number of basic models. In the Final Rule, DOE is allowing
CRE manufacturers to rate their basic models using Alternative Efficiency Determination
Methods (AEDMs), reducing the need for physical testing and reducing burden on
manufacturers.

59
 MIA: CRE Cumulative Regulatory Burden
Other Federal Regulations
Hydrofluorocarbon (HFC) refrigerant phase-out: Stakeholders raised concerns about a potential
federal phaseout of HFC refrigerants. Their concerns focused on the higher cost and potential lower
efficiency of alternative refrigerants. At the time of the Final Rule, there were no regulations
mandating the phase-out of HFCs for CRE applications. It is DOE’s policy that it does not include the
impacts of pending legislation or unfinalized regulations in its analyses, as any impact would be
speculative. Furthermore, at the time of the analysis, there was inadequate publicly available data on
the design, construction, and operation of equipment featuring alternative refrigerants to facilitate
analysis of equipment performance needed for standard-setting purposes.

ENERGY STAR: Stakeholders also cited burden from ENERGY STAR, stating that complying with
multiple regulations and certification programs from different organizations results in cumulative
burden. DOE notes that ENERGY STAR is a voluntary program and participation is not mandated. The
Department does not consider voluntary programs in its estimate of cumulative regulatory burden.

Non-Federal Regulations
In general, DOE focuses on federal regulations in its analysis of CRB. However, the Department
reviewed various state regulations submitted by stakeholders:
• California Code of Regulations, Title 24
• California Air Resources Board (CARB) Refrigerant Management Program

60
 MIA: Competitive Impacts
As required by EPCA, DOE requested DOJ to provide a written determination of
the impact, if any, of any lessening of competition likely to result from the
amended standards, together with an analysis of the nature and extent of such
impact. 42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii).
• The DOJ’s determination focuses on assessing whether the rulemaking would have
anti-competitive impacts.
• DOJ participated in drafting questions used in manufacturer interviews. The questions
pertain to an assessment of the likeliness of increased concentration levels and other
market conditions that could lead to uncompetitive pricing behavior, including:
– Asymmetrical cost increases to some manufacturers
– Increased proportion of fixed costs potentially increasing business risks
– Barriers to market entry (proprietary technologies, etc.)
• In response to the CRE Notice of Proposed Rule Making (NPRM), DOJ concluded that
“the proposed energy conservation standards for commercial refrigeration equipment
are unlikely to have a significant adverse impact on competition.”

61
 MIA: Small Business Impacts, Reg. Flexibility Analysis
DOE analyzes the impacts on small businesses in the Regulatory Flexibility
Analysis, as required by the Regulatory Flexibility Act.1 (5 USC § 601)
• Threshold Analysis:
– Will the rule have a significant economic impact on a substantial number of
small entities?
• Initial Regulatory Flexibility Analysis for proposed rules:
– Description and estimate number of small entities
– Estimate of compliance requirements for small entities
– Significant alternatives
– Public comment
• Final Regulatory Flexibility Analysis for final rules:
– Summary of significant issues raised by public comments
– Updated description and estimate number of small entities
– Updated estimate of compliance requirements for small entities
– Steps taken to minimize adverse impacts

1 Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164

62
 MIA: Regulatory Flexibility Analysis
Identify small manufacturers: DOE identifies all manufacturers and then
Identify Small determines which domestic manufacturers meet the SBA definition for small,
Manufacturers which is a maximum headcount or revenue based on industry.
Estimate compliance costs: DOE generally does not have access to the business
Estimate details necessary to forecast individual company viability. DOE investigates:
Compliance • Small manufacturers’ market share and sales volumes
Costs
• Number of models or product families requiring redesign
• Design differences between niche market and general market products
Consider • Manufacturing processes differences due to lower production volumes
Alternatives
In alignment with SBA guidance, DOE assesses small business impacts relative to
company revenues. Guidelines used are:
Public • Investments < 1% of revenues are not significant
Comment
• 1% < investments < 3% of revenues may be significant
• Investments > 3% of revenues are significant
Consider alternatives: DOE considers no-standard and alternative stringencies.
DOE may also evaluate consumer rebates, consumer tax credits, manufacturer tax
credits, and voluntary energy efficiency targets.

63
 MIA: Regulatory Flexibility Analysis
DOE analyzed the impacts on small businesses as part of the Regulatory
Flexibility Analysis in the CRE Final Rule.
• The SBA had a size threshold of 750 employees or fewer for the industry category
“Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial
Refrigeration Equipment Manufacturing” at the time of analysis.
• Based on public information, DOE identified 45 domestic manufacturers of covered
equipment:
– 13 large manufacturers
– 32 small manufacturers
• Small manufacturers accounted for approximately 26% of CRE shipments. Most of
these companies had less than 1% market share. However, there were exceptions
(e.g., Continental has 4% market share in the food service CRE sector).

64
 MIA: Regulatory Flexibility Analysis
DOE noted potential challenges for small manufacturers of CRE.
At TSL 3, the adopted level, the conversion costs are significant for small manufacturers.

Total Conversion Cost as a Percentage of Annual Revenue

Trial Standard Level Average Small Manufacturer Average Large Manufacturer
TSL 1 1% 1%
TSL 2 2% 1%
TSL 3 11% 2%
TSL 4 26% 3%
TSL 5 70% 9%
The RegFlex states that small firms would likely be at a disadvantage relative to larger firms in meeting the
amended ECS for CRE. The small businesses face disadvantages in terms of access to capital, the cost of re-
tooling production lines and investing in redesigns, and pricing for key components. (79 FR 17725)

DOE evaluates significant alternatives in the Regulatory Impact Analysis (RIA): (1) no change in standard; (2)
consumer rebates; (3) consumer tax credits; (4) manufacturer tax credits; (5) voluntary energy efficiency
targets; and (6) bulk government purchases. DOE determined that the energy savings of these alternatives are
significantly smaller than those that would be expected to result from adoption of the amended standard
levels. Accordingly, DOE is declining to adopt these alternatives.

To minimize negative impact, manufacturers with less than $8M revenue may seek temporary exemption for all
or part of an ECS. (42 USC § 6295). To date, this exemption has not been granted.

65
 Indirect Employment Effects
• Purpose: To estimate the net jobs created or eliminated nationally as a
consequence of amended ECS. This includes direct and indirect employment
impacts.
• Method:
– Uses the Impact of Sector Energy Technologies (ImSET) model for the
evaluation of indirect employment impacts.
– The changes in equipment and energy expenditures are taken from the
National Energy Savings Analysis.
• Output: Net short-term changes in employment (jobs, in thousands)
– Values for the adopted TSL3
2017: 74-108
2021: 719-749

66
 Use of Proprietary Data
MIA
• DOE subscribed to market research that provides estimate revenues and
headcounts for private companies.
• DOE contractors engaged in manufacturer interviews to discuss company
financials, production costs, production volumes, past and future investment in
PP&E, and technical constraints, which are all forms of sensitive business
information.
Shipments Analysis
• DOE made use of AHRI shipments data that had been submitted in 2005; no
additional data were submitted for the 2014 rule.
• DOE adjusted estimates of total shipments based on comments from
manufacturers (on the record) in public meetings.
• DOE purchased market reports on food service and food sales equipment to
estimate the market shares for different equipment classes.

67
 Backup

68
 Emissions Impacts (30-year)
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

CO2 reductions (million metric tons) 59 102 142 163 207

Value of CO2 reductions (billion 2012$)1 0.4 to 6.0 0.7 to 10.1 1.1 to 14.0 1.2 to 16.2 1.5 to 20.4

CO2 reductions 2017 — 2030 (million metric tons) 20 34 48 56 70

NOx reductions (thousand tons) 39 68 94 108 137

Value of NOx reductions at 3% discount rate (million

43 75 104 120 152
2012$)
Value of NOx reductions at 7% discount rate (million
14 24 33 37 48
2012$)2

SO2 reductions (thousand tons) 86 149 207 238 302

Hg reductions (tons) 0.10 0.18 0.25 0.28 0.36

N2O reductions (thousand tons) 1.4 2.4 3.3 3.8 4.8

CH4 reductions (thousand tons) 315 547 762 876 1109

1 Values for CO2 emissions are: $11.8 t0 to $117 per metric ton (2012$).
2 Values for NOx emissions are: $2,639 per ton (2012$).

69
 Regulatory Impact Analysis
Purpose
• To investigate the national impacts of non-regulatory alternatives to mandatory
amended energy conservation standards.
• The non-regulatory alternatives that may be considered include no new
regulatory action, early replacement, prescriptive standards, customer tax
credits, manufacturer tax credits, customer rebates, voluntary efficiency targets,
and bulk government procurement.

Method
• The NIA spreadsheet model is modified to consider different scenarios.
• The variables that may be modified include energy prices and escalation factors,
implicit market discount rates, customer purchase price and operating cost,
income elasticities, and equipment stock data.

Output
• National energy savings (NES) and net present value (NPV) for the non-regulatory
alternatives
• Impact of non-regulatory alternatives on purchase price and use of energy
efficient equipment
70
 Regulatory Impact Analysis: Results
DOE identified five major non-regulatory alternatives that could
potentially achieve similar improvements in CRE energy efficiency, and
compared the NES and NPV of these alternatives to the values calculated
for the proposed standards.

Cumulative Net Present Value

Cumulative
(billion 2012$)
Policy Alternative Primary NES
(quads) 7% Discount 3% Discount
Rate Rate
No New Regulatory Action 0 0 0
Consumer Rebates 0.86 1.83 4.20
Consumer Tax Credits 0.52 1.09 2.52
Manufacturer Tax Credits 0.26 0.55 1.26
Voluntary Energy Efficiency Targets 0.44 0.75 1.90
Bulk Government Purchases 0.08 0.15 0.37
Proposed Standards (TSL 3) 2.89 4.93 11.74

71