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Suggested Citation:"Attachment F Setting Energy Conservation Standards." National Research Council. 2009. Review of Site (Point-of-Use) and Full-Fuel-Cycle Measurement Approaches to DOE/EERE Building Appliance Energy-Efficiency Standards: Letter Report. Washington, DC: The National Academies Press. doi: 10.17226/12670.
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Suggested Citation:"Attachment F Setting Energy Conservation Standards." National Research Council. 2009. Review of Site (Point-of-Use) and Full-Fuel-Cycle Measurement Approaches to DOE/EERE Building Appliance Energy-Efficiency Standards: Letter Report. Washington, DC: The National Academies Press. doi: 10.17226/12670.
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Suggested Citation:"Attachment F Setting Energy Conservation Standards." National Research Council. 2009. Review of Site (Point-of-Use) and Full-Fuel-Cycle Measurement Approaches to DOE/EERE Building Appliance Energy-Efficiency Standards: Letter Report. Washington, DC: The National Academies Press. doi: 10.17226/12670.
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Suggested Citation:"Attachment F Setting Energy Conservation Standards." National Research Council. 2009. Review of Site (Point-of-Use) and Full-Fuel-Cycle Measurement Approaches to DOE/EERE Building Appliance Energy-Efficiency Standards: Letter Report. Washington, DC: The National Academies Press. doi: 10.17226/12670.
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Page 30
Suggested Citation:"Attachment F Setting Energy Conservation Standards." National Research Council. 2009. Review of Site (Point-of-Use) and Full-Fuel-Cycle Measurement Approaches to DOE/EERE Building Appliance Energy-Efficiency Standards: Letter Report. Washington, DC: The National Academies Press. doi: 10.17226/12670.
×
Page 31
Suggested Citation:"Attachment F Setting Energy Conservation Standards." National Research Council. 2009. Review of Site (Point-of-Use) and Full-Fuel-Cycle Measurement Approaches to DOE/EERE Building Appliance Energy-Efficiency Standards: Letter Report. Washington, DC: The National Academies Press. doi: 10.17226/12670.
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Page 32

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Attachment F Setting Energy Conservation Standards DOE/EERE APPLIANCE STANDARDS PROGRAM AND RULEMAKING PROCESS DOE/EERE Appliance Standards Program To comply with the Energy Policy and Conservation Act (EPCA) of 1975, DOE/EERE established energy-efficiency standards for many appliances used in residential and commercial buildings and powered by oil, natural gas, propane, or electricity. The standards specify tests for measuring energy consumption and the manner in which the appliance is operated. The results are summarized, expressed as a comparative measure of energy efficiency or effectiveness such as the Annual Fuel Utilization Efficiency (AFUE), Seasonal Energy Efficiency Ratio (SEER), or annual energy consumption. The standards prescribe a minimal level of energy efficiency that each appliance must meet to be manufactured in the United States. Each of these standards is justified by the DOE/EERE in terms of technical feasibility, reduction of energy consumption by the appliance, and cost-benefits to consumers in terms of capital and operating costs. The DOE/EERE estimates the national economic and environmental benefits of each standard including the overall reductions in energy consumption and reductions in emissions of carbon dioxide (CO2), oxides of nitrogen (NOx), and sulfur oxides (SOx). The agency also estimates the standards’ economic impacts on the appliance manufacturers and calculates an estimate of the industry net present value (INPV). For purposes of setting appliance efficiency standards, the minimum levels of energy consumption are based on site (point-of-use) measures, while the determination of economic and environmental justification is currently based on extended site energy estimates (from generation plant to appliance for those using electrical power). DOE/EERE Rulemaking Process The DOE/EERE carries out a four-step process to establish the minimum efficiency standard for an appliance. When the minimum efficiency standard is established and becomes effective, all of those appliances manufactured in the United States must meet at least that minimum standard. Each stage of the process entails several analyses and assessments. (Attachment B gives details of the analyses.) The stages include: • A framework workshop to describe the rulemaking process and analyses to be conducted and to receive initial input on some analysis issues. • A workshop to review initial analyses, such as engineering analysis and life cycle cost and payback analysis.1 • Notice of Proposed Rulemaking (NOPR). • The final rule, including the effective date of the rule. 1 This workshop, authorized by the Energy Independence and Security Act of 2007 (Pub. L. 110-140), replaces the Advance Notice of Proposed Rulemaking. 27

For the analyses, the products are divided into different functional categories (e.g., water heating, space cooling, or dishwashing) and into different classes according to their energy source (such as natural gas, propane, oil or electric power) and other performance features such as capacity of the appliance. A separate efficiency requirement is established for each class. Pursuant to section 325 of the Energy Conservation and Policy Act (ECPA) (42 U.S.C. 6295), the U.S. Department of Energy Office of Energy Efficiency and Renewable Energy (DOE/EERE) considers seven factors when setting energy conservation standards, which include the following: To establish the data required in assessing the various impacts and determining the cost and fuel savings, the Office of Energy and Renewable Energy (EERE) conducts several analyses that evolve during the four-step rulemaking process. Seven criteria are used in every rulemaking of this kind: 1. Economic impact on consumers and manufacturers; 2. Lifetime operating cost savings compared to increased cost for the product; 3. Total projected energy savings; 4. Impact on utility and performance 5. Impact of any lessening of competition 6. Need for national energy conservation 7. Other factors the Secretary considers important. Step 1: Advance Notice of Proposed Rule Making (ANOPR) The analyses conducted for the ANOPR2 include: • Market and technology assessment • Screening analysis • Engineering analysis • Preliminary manufacturer impact analysis • Product price determination • Life cycle cost and payback period analyses • Shipment analysis • National impact analysis Key input information used in these analyses includes: national energy use, product process and shipment data. Key output information includes: product classes, technology options, design options, product designs, life cycle costs, payback periods, national energy savings, net present values, conversion capital expenses and direct employment impacts. 2 The Energy Independence and Security Act of 2007 replaces ANOPR with a workshop. 28

Step 2: Notice of Proposed Rulemaking (NOPR) The analyses conducted for the NOPR include: • Revision of ANOPR analyses • Life-cycle cost subgroup analysis • Manufacturer impact analysis • Utility impact analysis • Employment impact analysis • Environmental assessment • Regulatory impact analysis Key inputs for these analyses include: stakeholder comments, demographics, manufacturer prices, manufacturers financial data, utility load factors, national energy savings, national product costs, national operating costs, emission rates and non-regulatory alternatives. Key output data include: Life cycle costs, payback periods, industry cash flow, sub-group cash flow, direct employment impacts, competitive impacts, cumulative regulatory burden, utility impacts, national employment impacts, emission estimates, national energy savings and net present values. Based on DOE/EERE management’s consideration of the outputs, management decides on the “proposed rule,” (i.e., proposed standard level and effective date). Step 3: Final Rule In preparing the Final Rule, the Department considers stakeholder comments on the proposed rule, particularly the comments of the Attorney General with regard to the impacts of the proposed rule on competition, and updates the analysis to accommodate stakeholders’ concerns and comments. The final rule sets the standard level and effective date of the standard. Step 4: Effective Date The effective date of the final rule may be established based on: • The date set by legislation authorizing the development of a standard. • An alternative date established by consensus of the stakeholders. • A date timed to match the requirements of another agency that is related to the standard. Lawsuits filed by individuals or affected parties can delay or advance the process. A stakeholder has in one case obtained an injunction delaying the effective date after the announcement of the Final Rule. In another case, a group of concerned parties sued because of a failure of DOE/EERE to issue a Final Rule. DOE/EERE Practices DOE/EERE establishes separate energy conservation standards for each product class. For instance, gas-fired water heaters have different standards than electric water heaters or oil- 29

fired water heaters. The products are divided into different classes by the type of fuel/energy consumed and other performance related features such as capacity that affect consumer utility in accordance with the requirements of the EPCA. In the rulemaking process, the DOE/EERE uses both site and source energy, but not full- fuel-cycle energy. For example, site energy is used in establishing the cost and energy consumption that is used in the engineering analysis. Cost and energy consumption are the pieces of information that the FTC places on its labels. However, the site energy used in the engineering analysis is converted to source energy that is subsequently used in the analysis of national impact, present value of the energy savings, utility impact analysis and the environmental impact analyses. Sufficient data on a regional level are available to use either source or site measurements in the labeling process; however, placement of the labels in factories precludes the possibility of using regional data on the labels. Information Generated in the Rulemaking Process In its rulemaking, DOE/EERE sets the minimum efficiency requirement for a class of appliances, generates a significant amount of information contained in its analyses, and disseminates some of this information in the labeling programs and in the Federal Register. DOE/EERE performs several analyses that benefit other government agencies, appliance manufacturers, consumers, and the national interest. FEDERAL TRADE COMMISSION ENERGY GUIDE LABEL The Federal Trade Commission (FTC) uses data generated by EERE and the compliance measurements provided by appliance manufacturers to develop Energy Guide labels that inform consumers about the relative performance of an appliance. The labels must be placed on appliances to inform consumers of the appliance’s annual energy efficiency. The labels are for a specific class of appliances and indicate the range of the cost of energy consumed by the models in that class as well as the annual cost of the energy to operate that particular appliance, based on national average energy costs. In the labeling, the FTC uses energy consumption measured at the site. This label is the primary method of conveying information to the public about energy consumption. The Federal Trade Commission is mandated by Section 324 of the Energy Policy and Conservation Act to implement an Energy Guide Rule (16 CFR Part 305), which requires that Energy Guide Labels be established for most appliances. The information on the appliance labels must be based on DOE/EERE test procedures. The statute requires disclosure of annual operating costs and energy consumption. The label must also include a range of comparability for the covered products listed below: • Refrigerators and freezers • Dishwashers • Clothes washers • Water heaters • Furnaces and boilers • Central air conditioners and central air conditioning heat pumps 30

• Room air conditioners • Pool heaters Manufacturers of appliances must submit data to the FTC pertaining to energy use or efficiency of their models annually. The FTC announced a new label designed in 2007 that shows a bar graph of the estimated operating costs and the estimated yearly energy use either in kilowatt-hours or British thermal units depending on the fuel. Site measurements of energy consumption are used on the labels. An example of a label for an electrical appliance is presented in Figure F-1. FIGURE F-1 Sample EnergyGUIDE label from U.S. Federal Trade Commission. Available at http://www.ftc.gov/opa/2007/08/energy.shtm. Accessed September 3, 2008. EPA ROLE IN ENCOURAGING APPLIANCE EFFICIENCY DOE and the U.S. Environmental Protection Agency (EPA) jointly administer the ENERGY STAR3 program and data developed by EERE are used by EPA and DOE to rank appliances in a given class for efficiency. The program typically selects products in the top 25 percent efficiency for all the appliances in a category to display the ENERGY STAR label. The ENERGY STAR program includes more products than those covered under the appliance standards program. It is an effective informational program that aids the consumer in comparing 3 Background information on Energy Star appliances is available at http://www.energystar.gov/index.cfm?c=appliances.pr_appliances. Accessed September 4, 2008. 31

efficiencies of appliances performing the same applications and identifying which are the most efficient ones. The ENERGY STAR program entails defining and labeling cost-effective products that are more efficient than standard. It covers a wide range of products including home appliances, heating and cooling equipment, home electronics, office equipment commercial appliances, lighting, windows, etc. DOE/EERE is responsible for the ENERGY STAR labeling for most of the home appliances (e.g., refrigerators, clothes washers, dishwashers and room air conditioners), residential windows, compact fluorescent lamps and solid-state lamps. EPA is responsible for the ENERGY STAR labels for heating and cooling equipment, home electronics, office equipment commercial appliances, and certain types of lighting. In those cases where there is a choice of fuels, EPA addresses the issue using source energy measurements to define the more efficient products. The ENERGY STAR program extends well beyond the DOE/EERE appliance standards program in that it evaluates more appliances and includes both residential and commercial construction. 32

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Currently, the Department of Energy (DOE) sets appliance efficiency standards using primarily "site" (or point-of-use) measurements, which reflect only the energy consumed to operate the appliance. Site measurements allow consumers to compare energy efficiency among appliances, but offer no information about other energy costs involved. This congressionally mandated report from the National Research Council recommends that DOE consider moving over time to the use of a full-fuel-cycle measure of energy consumption for assessment of national and environmental impacts. Using that metric would provide the public with more comprehensive information about the impacts of energy consumption on the environment, the economy, and other national concerns. This volume discusses these matters and offers several related findings and recommendations together with supporting information.

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