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Proposed Rule2022-10011

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

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Published

May 19, 2022

Issuing agencies

Energy Department

Abstract

The Energy Policy and Conservation Act, as amended ("EPCA"), prescribes energy conservation standards for certain commercial and industrial equipment, including commercial water heaters, hot water supply boilers, and unfired hot water storage tanks (hereinafter referred to as "commercial water heating (CWH) equipment"). EPCA requires the U.S. Department of Energy ("DOE") to periodically determine whether more-stringent standards for CWH equipment would be technologically feasible and economically justified, and would result in significant energy savings. In this notice of proposed rulemaking ("NOPR"), DOE proposes to amend the standards for certain classes of CWH equipment for which DOE has tentatively determined there is clear and convincing evidence to support more-stringent standards. Additionally, DOE is proposing to codify standards for electric instantaneous CWH equipment from EPCA into the Code of Federal Regulations ("CFR"). DOE also announces a public meeting to receive comment on these proposed standards and the associated analyses and results.

Full Text

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<title>Federal Register, Volume 87 Issue 97 (Thursday, May 19, 2022)</title>
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[Federal Register Volume 87, Number 97 (Thursday, May 19, 2022)]
[Proposed Rules]
[Pages 30610-30728]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10011]

[[Page 30609]]

Vol. 87

Thursday,

No. 97

May 19, 2022

Part III

Department of Energy

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10 CFR Part 431

Energy Conservation Program: Energy Conservation Standards for
Commercial Water Heating Equipment; Proposed Rule

Federal Register / Vol. 87 , No. 97 / Thursday, May 19, 2022 /
Proposed Rules

[[Page 30610]]

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DEPARTMENT OF ENERGY

10 CFR Part 431

[EERE-2021-BT-STD-0027]
RIN 1904-AD34

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

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

ACTION: Notice of proposed rulemaking and announcement of public
meeting.

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SUMMARY: The Energy Policy and Conservation Act, as amended (``EPCA''),
prescribes energy conservation standards for certain commercial and
industrial equipment, including commercial water heaters, hot water
supply boilers, and unfired hot water storage tanks (hereinafter
referred to as ``commercial water heating (CWH) equipment''). EPCA
requires the U.S. Department of Energy (``DOE'') to periodically
determine whether more-stringent standards for CWH equipment would be
technologically feasible and economically justified, and would result
in significant energy savings. In this notice of proposed rulemaking
(``NOPR''), DOE proposes to amend the standards for certain classes of
CWH equipment for which DOE has tentatively determined there is clear
and convincing evidence to support more-stringent standards.
Additionally, DOE is proposing to codify standards for electric
instantaneous CWH equipment from EPCA into the Code of Federal
Regulations (``CFR''). DOE also announces a public meeting to receive
comment on these proposed standards and the associated analyses and
results.

DATES:
Comments: DOE will accept comments, data, and information regarding
this NOPR no later than July 18, 2022.
Comments regarding the likely competitive impact of the proposed
standard should be sent to the Department of Justice contact listed in
the ADDRESSES section on or before July 18, 2022.
Meeting: DOE will hold a public meeting via webinar on June 23,
2022, from 1:00 p.m. to 5:00 p.m. See section VII, ``Public
Participation,'' for webinar registration information, participant
instructions and information about the capabilities available to
webinar participants.

ADDRESSES: Interested persons are encouraged to submit comments using
the Federal eRulemaking Portal at <a href="http://www.regulations.gov">www.regulations.gov</a>. Follow the
instructions for submitting comments. Alternatively, interested persons
may submit comments, identified by docket number EERE-2021-BT-STD-0027
and/or regulatory information number (RIN) 1904-AD34, by any of the
following methods:
(1) Federal eRulemaking Portal: <a href="http://www.regulations.gov">www.regulations.gov</a>. Follow the
instructions for submitting comments.
(2) Email: Mail to: CommWater <a href="/cdn-cgi/l/email-protection#e3ab868297869190d1d3d1d2b0b7a7d3d3d1d4a38686cd878c86cd848c95">[email&#160;protected]</a>.
Include the docket number EERE-2021-BT-STD-0027 in the subject line of
the message.
No telefacsimiles (faxes) will be accepted. For detailed
instructions on submitting comments and additional information on the
rulemaking process, see section VII of this document.
Although DOE has routinely accepted public comment submissions
through a variety of mechanisms, including the Federal eRulemaking
Portal, email, postal mail and hand delivery/courier, the Department
has found it necessary to make temporary modifications to the comment
submission process in light of the ongoing coronavirus 2019 (``COVID-
19'') pandemic. DOE is currently suspending receipt of public comments
via postal mail and hand delivery/courier. If a commenter finds that
this change poses an undue hardship, please contact Appliance Standards
Program staff at (202) 586-1445 to discuss the need for alternative
arrangements. Once the COVID-19 pandemic health emergency is resolved,
DOE anticipates resuming all of its regular options for public comment
submission, including postal mail and hand delivery/courier.
Docket: The docket for this rulemaking, which includes Federal
Register notices, comments, and other supporting documents/materials,
is available for review at <a href="http://www.regulations.gov">www.regulations.gov</a>. All documents in the
docket are listed in the <a href="http://www.regulations.gov">www.regulations.gov</a> index. However, some
documents listed in the index, such as those containing information
that is exempt from public disclosure, may not be publicly available.
The docket webpage can be found at <a href="http://www.regulations.gov/docket/EERE-2021-BT-STD-0027">www.regulations.gov/docket/EERE-2021-BT-STD-0027</a>. The docket webpage contains instructions on how to
access all documents, including public comments, in the docket. See
section VII, ``Public Participation,'' for information on how to submit
comments through <a href="http://www.regulations.gov">www.regulations.gov</a>.
Written comments regarding the burden-hour estimates or other
aspects of the collection-of-information requirements contained in this
proposed rule may be submitted to Office of Energy Efficiency and
Renewable Energy following the instructions at <a href="http://www.reginfo.gov">www.reginfo.gov</a>.
EPCA requires the Attorney General to provide DOE a written
determination of whether the proposed standard is likely to lessen
competition. The U.S. Department of Justice (``DOJ'') Antitrust
Division invites input from market participants and other interested
persons with views on the likely competitive impact of the proposed
standard. Interested persons may contact the Division at
<a href="/cdn-cgi/l/email-protection#a7c2c9c2d5c0de89d4d3c6c9c3c6d5c3d4e7d2d4c3c8cd89c0c8d1">[email&#160;protected]</a> on or before the date specified in the DATES
section. Please indicate in the ``Subject'' line of your email the
title and Docket Number of this proposed rulemaking.

FOR FURTHER INFORMATION CONTACT:
Ms. Julia Hegarty, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Office, EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone:
(240) 597-6737. Email: <a href="/cdn-cgi/l/email-protection#ffbe8f8f93969e919c9aac8b9e919b9e8d9b8cc39edf978d9a99c2" mailto:Questions@ee.doe.gov">[email&#160;protected]</a>">ApplianceStandards<a href="/cdn-cgi/l/email-protection#d889adbdabacb1b7b6ab98bdbdf6bcb7bdf6bfb7ae">[email&#160;protected]</a></a>.
Mr. Matthew Ring, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121.
Telephone: (202) 586-2555. Email: <a href="/cdn-cgi/l/email-protection#5f123e2b2b373a28710d3631381f372e713b303a71383029">[email&#160;protected]</a>.
DOE has submitted the collection of information contained in the
proposed rule to OMB for review under the Paperwork Reduction Act, as
amended. (44 U.S.C. 3507(d)) Comments on the information collection
proposal shall be directed to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attention: Sofie Miller, OIRA
Desk Officer by email: <a href="/cdn-cgi/l/email-protection#23504c454a460d460d4e4a4f4f4651634c4e410d464c530d444c55">[email&#160;protected]</a>.
For further information on how to submit a comment, or review other
public comments and the docket, contact the Appliance and Equipment
Standards Program staff at (202) 287-1445 or by email:
<a href="/cdn-cgi/l/email-protection#6b2a1b1b07020a05080e381f0a050f0a190f18570a4b03190e0d56" mailto:Questions@ee.doe.gov">[email&#160;protected]</a>">ApplianceStandards<a href="/cdn-cgi/l/email-protection#3c6d49594f485553524f7c595912585359125b534a">[email&#160;protected]</a></a>.

SUPPLEMENTARY INFORMATION: DOE proposes to update previously approved
incorporations by reference of the following industry standards in part
431:
ASTM C177-13, ``Standard Test Method for Steady-State Heat Flux
Measurements and Thermal Transmission Properties by Means of the
Guarded-Hot-Plate Apparatus,'' approved September 15, 2013.
ASTM C518-15, ``Standard Test Method for Steady-State Thermal
Transmission Properties by Means of the Heat Flow Meter Apparatus,''
approved September 1, 2015.

[[Page 30611]]

Copies of ASTM C177-13 and ASTM C518-15 can be obtained from ASTM
International, 100 Barr Harbor Drive, P.O. Box C700, West Conshohocken,
PA 19428-2959, (610) 832-9585, or go to <a href="http://www.astm.org">www.astm.org</a>.
For a further discussion of these standards, see section VI.M of
this document.

Table of Contents

I. Synopsis of the Proposed Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. Background and Rulemaking History
C. Deviation From Appendix A
III. General Discussion
A. Test Procedures
B. Scope of Rulemaking
1. Residential-Duty Commercial Water Heaters
2. Oil-Fired Commercial Water Heating Equipment
3. Unfired Hot Water Storage Tanks
4. Electric Instantaneous Water Heaters
5. Commercial Heat Pump Water Heaters
6. Electric Storage Water Heaters
7. Instantaneous Water Heaters and Hot Water Supply Boilers
C. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Commercial Consumers
b. Savings in Operating Costs Compared to Increase in Price
(Life-Cycle Costs)
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
F. Revisions to Notes in Regulatory Text
G. Certification, Compliance, and Enforcement Issues
H. General Comments
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Definitions
2. Equipment Classes
a. Residential-Duty Electric Instantaneous Water Heaters
b. Storage-Type Instantaneous Water Heaters
c. Condensing Gas-Fired Water Heating Equipment
d. Tankless Water Heaters and Hot Water Supply Boilers
e. Gas-Fired and Oil-Fired Storage Water Heaters
f. Grid-Enabled Water Heaters
g. Input Capacity for Instantaneous Water Heaters and Hot Water
Supply Boilers
3. Review of the Current Market for CWH Equipment
4. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies
C. Engineering Analysis
1. Efficiency Analysis
2. Cost Analysis
3. Representative Equipment for Analysis
4. Efficiency Levels for Analysis
a. Thermal Efficiency Levels
b. Standby Loss Levels
c. Uniform Energy Efficiency Levels
5. Standby Loss Reduction Factors
6. Teardown Analysis
7. Manufacturing Production Costs
8. Manufacturer Markup and Manufacturer Selling Price
9. Shipping Costs
D. Markups Analysis
1. Distribution Channels
2. Comments on Withdrawn May 2016 CWH ECS NOPR
3. Markups Used in This NOPR
E. Energy Use Analysis
F. Life-Cycle Cost and Payback Period Analysis
1. Approach
2. Life-Cycle Cost Inputs
a. Equipment Cost
b. Installation Costs
c. Annual Energy Consumption
d. Energy Prices
e. Maintenance Costs
f. Repair Costs
g. Product Lifetime
h. Discount Rate
i. Energy Efficiency Distribution in the No-New-Standards Case
3. Payback Period
G. Shipments Analysis
1. Commercial Gas-Fired and Electric Storage Water Heaters
2. Residential-Duty Gas-Fired Storage and Instantaneous Water
Heaters
3. Available Products Database and Equipment Efficiency Trends
4. Shipments to Residential Consumers
5. NOPR Shipments Model
H. National Impact Analysis
1. Equipment Efficiency Trends
2. Fuel and Technology Switching
3. National Energy Savings
4. Net Present Value Analysis
I. Consumer Subgroup Analysis
1. Residential Sector Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model and Key Inputs
a. Manufacturer Production Costs
b. Shipments Projections
c. Product and Capital Conversion Costs
d. Manufacturer Markup Scenarios
K. Emissions Analysis
1. Air Quality Regulations Incorporated in DOE's Analysis
L. Monetizing Emissions Impacts
1. Monetization of Greenhouse Gas Emissions
a. Social Cost of Carbon
b. Social Cost of Methane and Nitrous Oxide
2. Monetization of Other Air Pollutants
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
b. Impacts on Direct Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
8. Summary of National Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs Considered for CWH Equipment
Standards
2. Annualized Benefits and Costs of the Proposed Standards
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
B. Review Under the Regulatory Flexibility Act
1. Description of Reasons Why Action Is Being Considered
2. Objectives of, and Legal Basis for, Rule
3. Description on Estimated Number of Small Entities Regulated
4. Description and Estimate of Compliance Requirements
5. Duplication, Overlap, and Conflict With Other Rules and
Regulations
6. Significant Alternatives to the Rule
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act of 1969
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. Information Quality
M. Materials Incorporated by Reference
VII. Public Participation
A. Participation in the Webinar
B. Procedure for Submitting Prepared General Statements for
Distribution
C. Conduct of the Webinar
D. Submission of Comments
E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

[[Page 30612]]

I. Synopsis of the Proposed Rule

Title III, Part C \1\ of EPCA,\2\ established the Energy
Conservation Program for Certain Industrial Equipment. (42 U.S.C. 6311-
6317) Such equipment includes CWH equipment, the subject of this NOPR.
(42 U.S.C. 6311(1)(K))
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\1\ For editorial reasons, upon codification in the U.S. Code,
Part C was re-designated Part A-1.
\2\ All references to EPCA in this document refer to the statute
as amended through the Energy Act of 2020, Public Law 116-260 (Dec.
27, 2020).
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Pursuant to EPCA, DOE must consider amending the energy efficiency
standards for certain types of commercial and industrial equipment,
including the equipment at issue in this document, whenever the
American Society of Heating, Refrigerating, and Air-Conditioning
Engineers (``ASHRAE'') amends the standard levels or design
requirements prescribed in ASHRAE Standard 90.1, ``Energy Standard for
Buildings Except Low-Rise Residential Buildings,'' (``ASHRAE Standard
90.1''), and at a minimum, every six 6 years. (42 U.S.C. 6313(a)(6)(A)-
(C))
In accordance with these and other statutory provisions discussed
in this document, DOE proposes amended energy conservation standards
for certain classes of CWH equipment. The proposed standards, which are
expressed in terms of thermal efficiency, standby loss, and uniform
energy factor (``UEF''), are shown in Table I.1 and Table I.2. These
proposed standards, if adopted, would apply to all CWH equipment listed
in Table I.1 and Table I.2, manufactured in, or imported into the
United States starting on the date 3 years after the publication of the
final rule for this rulemaking. DOE is also proposing to codify
standards for electric instantaneous CWH equipment from EPCA into the
CFR. Finally, DOE is proposing several changes to the footnotes to
tables of energy conservation standards at 10 CFR 431.110 to clarify
existing regulations for CWH equipment. The proposed standards for
electric instantaneous CWH equipment and changes to the footnotes are
also shown in Table I.1.

Table I.1--Proposed Energy Conservation Standards for Commercial Water Heating Equipment Except for Residential-
Duty Commercial Water Heaters
----------------------------------------------------------------------------------------------------------------
Energy conservation standards *
-----------------------------------------
Minimum
Equipment Size thermal Maximum standby loss
efficiency [dagger]
(%)
----------------------------------------------------------------------------------------------------------------
Gas-fired storage water heaters.......... All........................ 95 0.86 x [Q/800 + 110(Vr)\1/
2\] (Btu/h).
Electric instantaneous water heaters <10 gal.................... 80 N/A.
[Dagger].
>=10 gal................... 77 2.30 + 67/Vm (%/h).
Gas-fired instantaneous water heaters and <10 gal.................... 96 N/A.
hot water supply boilers.
>=10 gal................... 96 Q/800 + 110(Vr)\1/2\ (Btu/
h).
----------------------------------------------------------------------------------------------------------------
* Vm is the measured storage volume, and Vr is the rated volume, both in gallons. Q is the rated input rate in
Btu/h, as determined pursuant to 10 CFR 429.44.
[dagger] Water heaters and hot water supply boilers having more than 140 gallons of storage capacity need not
meet the standby loss requirement if: (1) The tank surface area is thermally insulated to R-12.5 or more, (2)
a standing pilot light is not used, and (3) for gas or oil-fired storage water heaters, they have a flue
damper or fan-assisted combustion.
[Dagger] Energy conservation standards for electric instantaneous water heaters are included in EPCA. (42 U.S.C.
6313(a)(5)(D)-(E)) The compliance date for these energy conservation standards is January 1, 1994. In this
NOPR, DOE proposes to codify these standards for electric instantaneous water heaters in its regulations at 10
CFR 431.110. Further discussion of standards for electric instantaneous water heaters is included in section
III.B.4 of this NOPR.

Table I.2--Proposed Amended Energy Conservation Standards for Gas-Fired Residential-Duty Commercial Water
Heaters
----------------------------------------------------------------------------------------------------------------
Uniform energy factor
Equipment Specification * Draw pattern ** [dagger]
----------------------------------------------------------------------------------------------------------------
Gas-fired Residential-Duty Storage... >75 kBtu/h and......... Very Small............. 0.5374-(0.0009 x Vr).
<=105 kBtu/h and....... Low.................... 0.8062-(0.0012 x Vr).
<=120 gal and.......... Medium................. 0.8702-(0.0011 x Vr).
<=180 [deg]F........... High................... 0.9297-(0.0009 x Vr).
----------------------------------------------------------------------------------------------------------------
* Additionally, to be classified as a residential-duty water heater, a commercial water heater must meet the
following conditions: (1) If requiring electricity, use single-phase external power supply; and (2) the water
heater must not be designed to heat water at temperatures greater than 180 [deg]F.
** Draw pattern is a classification of hot water use of a consumer water heater or residential-duty commercial
water heater, based upon the first-hour rating. The draw pattern is determined using the Uniform Test Method
for Measuring the Energy Consumption of Water Heaters in appendix E to subpart B of 10 CFR part 430.
[dagger] Vr is the rated storage volume (in gallons), as determined pursuant to 10 CFR 429.44.

A. Benefits and Costs to Consumers

Table I.3 presents DOE's evaluation of the economic impacts of the
proposed standards on consumers of CWH equipment, as measured by the
average life-cycle cost (``LCC'') savings and the simple payback period
(``PBP'').\3\ The average LCC savings are positive for all equipment
classes, and the PBP is less than the average lifetime of CWH
equipment, which is estimated to range from 10 years for commercial
gas-fired storage water heaters to 25 years for instantaneous water
heaters and hot water supply boilers (see section IV.F.2.g of this
document).
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\3\ The average LCC savings refer to consumers that are affected
by a standard and are measured relative to the efficiency
distribution in the no-new-standards case, which depicts the market
in the compliance year in the absence of new or amended standards
(see section IV.F.2.i of this document). The simple PBP, which is
designed to compare specific efficiency levels, is measured relative
to the baseline product (see section IV.F.3 of this document).

[[Page 30613]]

Table I.3--Impacts of Proposed Energy Conservation Standards on
Consumers of CWH Equipment
------------------------------------------------------------------------
Simple
Average LCC payback
Equipment savings period
(2020$) (years)
------------------------------------------------------------------------
Commercial Gas-Fired Storage and Storage- 301 5
Type Instantaneous.....................
Residential-Duty Gas-Fired Storage...... 90 9
Gas-Fired Instantaneous Water Heaters 599 9
and Hot Water Supply Boilers...........
--Instantaneous, Gas-Fired Tankless. 63 9
--Instantaneous Water Heaters and 1,047 9
Hot Water Supply Boilers...........
------------------------------------------------------------------------

DOE's analysis of the impacts of the proposed standards on
consumers is described in section IV.F of this document.

B. Impact on Manufacturers

The industry net present value (``INPV'') is the sum of the
discounted cash flows to the industry from the base year through the
end of the analysis period (2020-2055). Using a real discount rate of
9.1 percent, DOE estimates that the INPV for manufacturers of CWH
Equipment in the case without amended standards is $183.1 million in
2020$. Under the proposed standards, the change in INPV is estimated to
range from -12.8 percent to -5.9 percent, which is approximately
equivalent to a decrease of $23.4 million to a decrease of $10.8
million, respectively. In order to bring products into compliance with
amended standards, it is estimated that the industry would incur total
conversion costs of $34.6 million.
DOE's analysis of the impacts of the proposed standards on
manufacturers is described in section IV.J of this document. The
analytic results of the manufacturer impact analysis (``MIA'') are
presented in section V.B.2 of this document.

C. National Benefits and Costs 4
---------------------------------------------------------------------------

\4\ All monetary values in this document are expressed in 2020
dollars.
---------------------------------------------------------------------------

DOE's analyses indicate that the proposed energy conservation
standards for CWH equipment would save a significant amount of energy.
Relative to the case without amended standards, the lifetime energy
savings for CWH Equipment purchased in the 30-year period that begins
in the anticipated year of compliance with the amended standards (2026-
2055) amount to 0.70 quadrillion British thermal units (``Btu''), or
quads.\5\ This represents a savings of 4.9 percent relative to the
energy use of these products in the case without amended standards
(referred to as the ``no-new-standards case'').
---------------------------------------------------------------------------

\5\ The quantity refers to full-fuel-cycle (``FFC'') energy
savings. FFC energy savings include the energy consumed in
extracting, processing, and transporting primary fuels (i.e., coal,
natural gas, petroleum fuels), and, thus, presents a more complete
picture of the impacts of energy efficiency standards. For more
information on the FFC metric, see section IV.H.3 of this document.
---------------------------------------------------------------------------

The cumulative net present value (``NPV'') of total consumer
benefits of the proposed standards for CWH equipment ranges from $0.48
billion (at a 7-percent discount rate) to $1.49 billion (at a 3-percent
discount rate). This NPV expresses the estimated total value of future
operating-cost savings minus the estimated increased product and
installation costs for CWH equipment purchased in 2026-2055.
In addition, the proposed standards for CWH equipment are projected
to yield significant environmental benefits. DOE estimates that the
proposed standards would result in cumulative emission reductions (over
the same period as for energy savings) of 38 million metric tons
(``Mt'') \6\ of carbon dioxide (``CO<INF>2</INF>''), -0.02 thousand
tons of sulfur dioxide (``SO<INF>2</INF>''), 95 thousand tons of
nitrogen oxides (``NO<INF>X</INF>''), 471 thousand tons of methane
(``CH<INF>4</INF>''), 0.07 thousand tons of nitrous oxide
(``N<INF>2</INF>O''), and -0.001 tons of mercury (``Hg'').\7\
---------------------------------------------------------------------------

\6\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO<INF>2</INF> are presented in short tons.
\7\ DOE calculated emissions reductions relative to the no-new-
standards case, which reflects key assumptions in the Annual Energy
Outlook 2021 (``AEO2021''). AEO2021 represents current Federal and
State legislation and final implementation of regulations as of the
time of its preparation. See section IV.K for further discussion of
AEO2021 assumptions that effect air pollutant emissions.
---------------------------------------------------------------------------

DOE estimates climate benefits from a reduction in greenhouse gases
using four different estimates of the ``social cost of carbon'' (``SC-
CO<INF>2</INF>''), the social cost of methane (``SC-CH<INF>4</INF>''),
and the social cost of nitrous oxide (``SC-N<INF>2</INF>O''). Together
these represent the social cost of greenhouse gases (``SC-GHG''). DOE
used interim estimates of SC-GHG values developed by an Interagency
Working Group on the Social Cost of Greenhouse Gases (IWG).\8\ The
derivation of these values is discussed in section IV.L.1. of this
document. For presentational purposes, the climate benefits associated
with the average SC-GHG at a 3-percent discount rate is $1.96 billion.
DOE does not have a single central SC-GHG point estimate and it
emphasizes the importance and value of considering the benefits
calculated using all four SC-GHG estimates.\9\
---------------------------------------------------------------------------

\8\ See Interagency Working Group on Social Cost of Greenhouse
Gases, Technical Support Document: Social Cost of Carbon, Methane,
and Nitrous Oxide. Interim Estimates Under Executive Order 13990,
Washington, DC February 2021. <a href="http://www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf">www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf</a>?so
urce=email.
\9\ On March 16, 2022, the Fifth Circuit Court of Appeals (No.
22-30087) granted the Federal Government's emergency motion for stay
pending appeal of the February 11, 2022, preliminary injunction
issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a
result of the Fifth Circuit's order, the preliminary injunction is
no longer in effect, pending resolution of the Federal Government's
appeal of that injunction or a further court order. Among other
things, the preliminary injunction enjoined the defendants in that
case from ``adopting, employing, treating as binding, or relying
upon'' the interim estimates of the social cost of greenhouse
gases--which were issued by the Interagency Working Group on the
Social Cost of Greenhouse Gases on February 26, 2021--to monetize
the benefits of reducing greenhouse gas emissions. In the absence of
further intervening court orders, DOE will revert to its approach
prior to the injunction and present monetized benefits where
appropriate and permissible under law.
---------------------------------------------------------------------------

DOE also estimates the health benefits from SO<INF>2</INF> and
NO<INF>X</INF> emissions reduction.\10\ DOE estimates the present value
of the health benefits would be $0.99 billion using a 7-percent
discount rate, and $2.62 billion using a 3-percent discount. DOE is
currently only monetizing fine particulate matter
(``PM<INF>2.5</INF>'') and (for NO<INF>X</INF>) ozone precursor health
benefits, but will continue to assess the ability to monetize other
effects such as health benefits from reductions in direct
PM<INF>2.5</INF> emissions.
---------------------------------------------------------------------------

\10\ DOE estimated the monetized value of SO<INF>2</INF> and
NO<INF>X</INF> emissions reductions associated with site and
electricity savings using benefit per ton estimates from the
scientific literature. See section IV.L.2 of this document for
further discussion.
---------------------------------------------------------------------------

Table I.4 summarizes the economic benefits and costs expected to
result from the proposed standards for CWH equipment. In the table,
total benefits for both the 3-percent and 7-percent cases are presented
using the average GHG social costs with 3-percent discount rate. DOE
does not have a

[[Page 30614]]

single central SC-GHG point estimate and it emphasizes the importance
and value of considering the benefits calculated using all four SC-GHG
estimates. The estimated total net benefits using each of the four SC-
GHG estimates are presented in section V.B.6. of this document.

Table I.4--Summary of Economic Benefits and Costs of Proposed Energy
Conservation Standards for CWH Equipment
[TSL 3]
------------------------------------------------------------------------
Billion 2020$
------------------------------------------------------------------------
3% Discount Rate
------------------------------------------------------------------------
Consumer Operating Cost Savings......................... 2.4
Climate Benefits *...................................... 2.0
Health Benefits **...................................... 2.6
Total Benefits [dagger]................................. 7.0
Consumer Incremental Product Costs [Dagger]............. 1.0
Net Benefits............................................ 6.1
------------------------------------------------------------------------
7% Discount Rate
------------------------------------------------------------------------
Consumer Operating Cost Savings......................... 1.0
Climate Benefits * (3% discount rate)................... 2.0
Health Benefits **...................................... 1.0
Total Benefits [dagger]................................. 4.0
Consumer Incremental Product Costs [Dagger]............. 0.6
Net Benefits............................................ 3.4
------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with
commercial water heaters shipped in 2026-2055. These results include
benefits to consumers which accrue after 2055 from the products
shipped in 2026-2055. Numbers may not add due to rounding.
* Climate benefits are calculated using four different estimates of the
social cost of carbon (SC-CO2), methane (SC-CH4), and nitrous oxide
(SC-N2O) (model average at 2.5 percent, 3 percent, and 5 percent
discount rates; 95th percentile at 3 percent discount rate), as shown
in Table V.37 through Table V.39. Together these represent the global
social cost of greenhouse gases (SC-GHG). For presentational purposes
of this table, the climate benefits associated with the average SC-GHG
at a 3 percent discount rate are shown, but the Department does not
have a single central SC-GHG point estimate. See section IV.L of this
document for more details.
** Health benefits are calculated using benefit-per-ton values for NOX
and SO2. DOE is currently only monetizing PM2.5 and (for NOX) ozone
precursor health benefits, but will continue to assess the ability to
monetize other effects such as health benefits from reductions in
direct PM2.5 emissions. The health benefits are presented at real
discount rates of 3 and 7 percent. See section IV.L of this document
for more details.
[dagger] Total and net benefits include consumer, climate, and health
benefits. For presentation purposes, total and net benefits for both
the 3-percent and 7-percent cases are presented using the average SC-
GHG with 3-percent discount rate, but the Department does not have a
single central SC-GHG point estimate. DOE emphasizes the importance
and value of considering the benefits calculated using all four SC-GHG
estimates. See Table V.42 for net benefits using all four SC-GHG
estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No.
22-30087) granted the federal government's emergency motion for stay
pending appeal of the February 11, 2022, preliminary injunction issued
in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result
of the Fifth Circuit's order, the preliminary injunction is no longer
in effect, pending resolution of the federal government's appeal of
that injunction or a further court order. Among other things, the
preliminary injunction enjoined the defendants in that case from
``adopting, employing, treating as binding, or relying upon'' the
interim estimates of the social cost of greenhouse gases--which were
issued by the Interagency Working Group on the Social Cost of
Greenhouse Gases on February 26, 2021--to monetize the benefits of
reducing greenhouse gas emissions. In the absence of further
intervening court orders, DOE will revert to its approach prior to the
injunction and present monetized benefits where appropriate and
permissible under law.
[Dagger] Costs include incremental equipment costs as well as
installation costs.

The benefits and costs of the proposed standards can also be
expressed in terms of annualized values. The monetary values for the
total annualized net benefits are (1) the reduced consumer operating
costs, minus (2) the increase in product purchase prices and
installation costs, plus (3) the value of the benefits of GHG,
NO<INF>X</INF>, and SO<INF>2</INF> emission reductions, all
annualized.\11\
---------------------------------------------------------------------------

\11\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2021, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(e.g., 2030), and then discounted the present value from each year
to 2021. The calculation uses discount rates of 3 and 7 percent for
all costs and benefits except for the value of CO<INF>2</INF>
reductions, for which DOE used case-specific discount rates, as
shown in Table I.3. Using the present value, DOE then calculated the
fixed annual payment over a 30-year period, starting in the
compliance year, that yields the same present value.
---------------------------------------------------------------------------

The national operating savings are domestic private U.S. consumer
monetary savings that occur as a result of purchasing the covered
products and are measured for the lifetime of CWH equipment shipped in
2026-2055. The climate benefits associated with reduced GHG emissions
achieved as a result of the proposed standards are also calculated
based on the lifetime of CWH equipment shipped in 2026-2055.
Estimates of annualized benefits and costs of the proposed
standards are shown in Table I.5. The results under the primary
estimate are as follows.
Using a 7-percent discount rate for consumer benefits and costs and
health benefits from reduced SO<INF>2</INF> and NO<INF>X</INF>
emissions, and the 3-percent discount rate case for climate benefits
from reduced GHG emissions, the estimated cost of the standards
proposed in this rulemaking is $59 million per year in increased
equipment costs, while the estimated annual benefits are $110 million
in reduced equipment operating costs, $113 million in climate benefits,
and $104 million in health benefits. In this case, the net benefit
would amount to $267 million per year.
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the proposed standards is $55 million per year in
increased equipment costs, while the estimated annual benefits are $140
million in reduced operating costs, $113 million in climate benefits,
and $150 million in health benefits. In this case, the net benefit
would amount to $349 million per year.

[[Page 30615]]

Table I.5--Annualized Benefits and Costs of Proposed Energy Conservation Standards for CWH Equipment
[TSL 3]
----------------------------------------------------------------------------------------------------------------
Million 2020$/year
-----------------------------------------------
Category Low-net- High-net-
Primary benefits benefits
estimate estimate estimate
----------------------------------------------------------------------------------------------------------------
3% Discount Rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 140.3 130.3 151.7
Climate Benefits *.............................................. 112.8 107.2 117.8
Health Benefits **.............................................. 150.4 143.5 170.0
Total Benefits [dagger]......................................... 404 381 439
Consumer Incremental Product Costs [Dagger]..................... 54.7 52.6 56.6
Net Benefits.................................................... 349 328 383
----------------------------------------------------------------------------------------------------------------
7% Discount Rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 109.6 103.3 116.7
Climate Benefits * (3% discount rate)........................... 112.8 107.2 117.8
Health Benefits **.............................................. 104.3 100.4 117.2
Total Benefits [dagger]......................................... 327 311 352
Consumer Incremental Product Costs [Dagger]..................... 59.2 57.5 60.9
Net Benefits.................................................... 267 253 291
----------------------------------------------------------------------------------------------------------------
Note: This table presents the annualized costs and benefits associated with CWH equipment shipped in 2026-2055.
These results include benefits to consumers which accrue after 2055 from the products purchased in 2026-2055.
* Climate benefits are calculated using four different estimates of the social cost of carbon (SC-CO2), methane
(SC-CH4), and nitrous oxide (SC-N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates;
95th percentile at 3 percent discount rate). Together these represent the global social cost of greenhouse
gases (SC-GHG). For presentational purposes of this table, the climate benefits associated with the average SC-
GHG at a 3 percent discount rate are shown, but the Department does not have a single central SC-GHG point
estimate, and it emphasizes the importance and value of considering the benefits calculated using all four SC-
GHG estimates. See section IV.L of this document for more details.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
PM2.5 and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other
effects such as health benefits from reductions in direct PM2.5 emissions. The health benefits are presented
at real discount rates of 3 and 7 percent. See section IV.L of this document for more details.
[dagger] Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total
and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
percent discount rate, but the Department does not have a single central SC-GHG point estimate. DOE emphasizes
the importance and value of considering the benefits calculated using all four SC-GHG estimates. On March 16,
2022, the Fifth Circuit Court of Appeals (No. 22-30087) granted the federal government's emergency motion for
stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21-cv-
1074-JDC-KK (W.D. La.). As a result of the Fifth Circuit's order, the preliminary injunction is no longer in
effect, pending resolution of the federal government's appeal of that injunction or a further court order.
Among other things, the preliminary injunction enjoined the defendants in that case from ``adopting,
employing, treating as binding, or relying upon'' the interim estimates of the social cost of greenhouse
gases--which were issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February
26, 2021--to monetize the benefits of reducing greenhouse gas emissions. In the absence of further intervening
court orders, DOE will revert to its approach prior to the injunction and present monetized benefits where
appropriate and permissible under law.
[Dagger] Costs include incremental equipment costs as well as installation costs.

DOE's analysis of the national impacts of the proposed standards is
described in sections IV.H, IV.K, and IV.L of this document.

D. Conclusion

DOE has tentatively concluded that, based on clear and convincing
evidence as presented in the following sections, the proposed standards
are technologically feasible and economically justified, and would
result in the significant additional conservation of energy.
Specifically, with regards to technological feasibility, CWH equipment
achieving these standard levels are already commercially available for
all equipment classes covered by this proposal. As for economic
justification, DOE's analysis shows that the benefits of the proposed
standard exceed, to a great extent, the burdens of the proposed
standards. Using a 7-percent discount rate for consumer benefits and
costs and NO<INF>X</INF> and SO<INF>2</INF> reduction benefits, and a
3-percent discount rate case for GHG social costs, the estimated cost
of the proposed standards for CWH equipment is $59.2 million per year
in increased equipment costs, while the estimated annual benefits are
$109.6 million in reduced equipment operating costs, $112.8 million in
GHG reductions, $104.6 million in reduced NO<INF>X</INF> emissions, and
-$0.30 million in (increased) SO<INF>2</INF> emissions. The net benefit
amounts to $267.4 million per year.
As previously mentioned, the proposed standards would result in
estimated national energy savings of 0.70 quad, the equivalent of the
electricity use of 7.0 million homes in one year. In determining
whether energy savings are significant, DOE considers the specific
circumstances surrounding a given rulemaking.\12\ In making this
determination, DOE looks at, among other things, the FFC effects of the
proposed standards. These effects include the energy consumed in
electricity production (depending on load shape), in distribution and
transmission, and in extracting, processing, and transporting primary
fuels (i.e., coal, natural gas, petroleum fuels), and thus present a
more complete picture of the impacts of energy conservation standards,
including greenhouse gas emissions. Accordingly, taking into account
the significance of cumulative FFC national energy savings, the
cumulative FFC emissions

[[Page 30616]]

reductions, and the need to confront the global climate crisis, among
other factors, DOE has initially determined the energy savings for the
TSL proposed in this rulemaking are ``significant'' within the meaning
of EPCA. Finally, DOE notes that a more detailed discussion of the
basis for these tentative conclusions is contained in the remainder of
this document and the accompanying TSD. Based on available facts, data,
and DOE's own analyses, DOE has preliminarily determined that it is
highly probable an amended standard would result in a significant
additional amount of energy savings, and is technologically feasible
and economically justified.
---------------------------------------------------------------------------

\12\ Procedures, Interpretations, and Policies for Consideration
in New or Revised Energy Conservation Standards and Test Procedures
for Consumer Products and Commercial/Industrial Equipment, 86 FR
70892, 70901 (Dec. 13, 2021).
---------------------------------------------------------------------------

DOE also considered more-stringent energy efficiency levels as
potential standards, and is still considering them in this rulemaking.
However, DOE has tentatively concluded that the potential burdens of
the more-stringent energy efficiency levels would outweigh the
projected benefits.
Based on consideration of the public comments DOE receives in
response to this document and related information collected and
analyzed during the course of this rulemaking effort, DOE may adopt
energy efficiency levels presented in this document that are either
higher or lower than the proposed standards, or some combination of
level(s) that incorporate the proposed standards in part.

II. Introduction

The following section briefly discusses the statutory authority
underlying this NOPR, as well as some of the historical background
relevant to the establishment of the amended standards for CWH
equipment.

A. Authority

EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and industrial equipment. Title III, Part C of
EPCA, added by Public Law 95-619, Title IV, section 441(a) (42 U.S.C.
6311-6317, as codified), established the Energy Conservation Program
for Certain Industrial Equipment, which sets forth a variety of
provisions designed to improve energy efficiency. This equipment
includes the classes of CWH equipment that are the subject of this
NOPR. (42 U.S.C. 6311(1)(K)) EPCA prescribed energy conservation
standards for CWH equipment. (42 U.S.C. 6313(a)(5)) Additionally, DOE
must consider amending the energy efficiency standards for certain
types of commercial and industrial equipment, including CWH equipment,
whenever ASHRAE amends the standard levels or design requirements
prescribed in ASHRAE/IES Standard 90.1, and at a minimum, every 6
years. (42 U.S.C. 6313(a)(6)(A)-(C))
The energy conservation program for covered products under EPCA
consists essentially of four parts: (1) Testing, (2) labeling, (3) the
establishment of Federal energy conservation standards, and (4)
certification and enforcement procedures. Relevant provisions of EPCA
specifically include definitions (42 U.S.C. 6311), energy conservation
standards (42 U.S.C. 6313), test procedures (42 U.S.C. 6314), labeling
provisions (42 U.S.C. 6315), and the authority to require information
and reports from manufacturers (42 U.S.C. 6316).
Federal energy conservation requirements for covered equipment
established under EPCA generally supersede State laws and regulations
concerning energy conservation testing, labeling, and standards. (42
U.S.C. 6316(a) and (b); 42 U.S.C. 6297) DOE may, however, grant waivers
of Federal preemption for particular State laws or regulations, in
accordance with the procedures and other provisions set forth under
EPCA. (See 42 U.S.C. 6316(b)(2)(D))
Subject to certain criteria and conditions, DOE is required to
develop test procedures to measure the energy efficiency, energy use,
or estimated annual operating cost of covered equipment. (42 U.S.C.
6314) Manufacturers of covered equipment must use the Federal test
procedures as the basis for (1) certifying to DOE that their equipment
complies with the applicable energy conservation standards adopted
pursuant to EPCA (42 U.S.C. 6316(b); 42 U.S.C. 6296), and (2) making
representations about the efficiency of that equipment (42 U.S.C.
6314(d)). Similarly, DOE uses these test procedures to determine
whether the equipment complies with relevant standards promulgated
under EPCA. The DOE test procedures for CWH equipment appear at part
431, subpart G.
ASHRAE Standard 90.1 sets industry energy efficiency levels for
small, large, and very large commercial package air-conditioning and
heating equipment, packaged terminal air conditioners, packaged
terminal heat pumps, warm air furnaces, packaged boilers, storage water
heaters, instantaneous water heaters, and unfired hot water storage
tanks (collectively ``ASHRAE equipment''). For each type of listed
equipment, EPCA directs that if ASHRAE amends Standard 90.1, DOE must
adopt amended standards at the new ASHRAE efficiency level, unless DOE
determines, supported by clear and convincing evidence,\13\ that
adoption of a more stringent level would produce significant additional
conservation of energy and would be technologically feasible and
economically justified. (42 U.S.C. 6313(a)(6)(A)(ii) (The threshold for
``clear and convincing'' evidence is discussed in more detail in
section III.H.) Under EPCA, DOE must also review energy efficiency
standards for CWH equipment every 6 years and either: (1) Issue a
notice of determination that the standards do not need to be amended as
adoption of a more stringent level is not supported by clear and
convincing evidence; or (2) issue a notice of proposed rulemaking
including new proposed standards based on certain criteria and
procedures in subparagraph (B) of 42 U.S.C. 6313(a)(6). (42 U.S.C.
6313(a)(6)(C))
---------------------------------------------------------------------------

\13\ The clear and convincing threshold is a heightened
standard, and would only be met where the Secretary has an abiding
conviction, based on available facts, data, and DOE's own analyses,
that it is highly probable an amended standard would result in a
significant additional amount of energy savings, and is
technologically feasible and economically justified. American Public
Gas Association v. U.S. Dep't of Energy, No. 20-1068, 2022 WL
151923, at *4 (D.C. Cir. January 18, 2022) (citing Colorado v. New
Mexico, 467 U.S. 310, 316, 104 S.Ct. 2433, 81 L.Ed.2d 247 (1984)).
---------------------------------------------------------------------------

In deciding whether a more-stringent standard is economically
justified, under either the provisions of 42 U.S.C. 6313(a)(6)(A) or 42
U.S.C. 6313(a)(6)(C), DOE must determine whether the benefits of the
standard exceed its burdens. DOE must make this determination after
receiving comments on the proposed standard, and by considering, to the
maximum extent practicable, the following seven factors:
(1) The economic impact of the standard on manufacturers and
consumers of products subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered equipment that are likely to result from the standard;
(3) The total projected amount of energy savings likely to result
directly from the standard;
(4) Any lessening of the utility or the performance of the covered
product likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy conservation; and
(7) Other factors the Secretary of Energy considers relevant.

[[Page 30617]]

(42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII))
Further, EPCA establishes a rebuttable presumption that an energy
conservation standard is economically justified if the Secretary finds
that the additional cost to the consumer of purchasing a product that
complies with the standard will be less than three times the value of
the energy (and, as applicable, water) 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)) However, while this rebuttable presumption analysis
applies to most commercial and industrial equipment (42 U.S.C.
6316(a)), it is not a required analysis for ASHRAE equipment (42 U.S.C.
6316(b)(1)). Nonetheless, DOE included the analysis of rebuttable
presumption in its economic analysis and presents the results in
section V.B.1.c of this document.
EPCA also contains what is known as an ``anti-backsliding''
provision, which prevents the Secretary from prescribing any amended
standard that either increases the maximum allowable energy use or
decreases the minimum required energy efficiency of a covered product.
(42 U.S.C. 6313(a)(6)(B)(iii)(I)) Also, 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 in any covered product type (or
class) of 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.
6313(a)(6)(B)(iii)(II)(aa))

B. Background and Rulemaking History

As previously noted, EPCA established initial Federal energy
conservation standards for CWH equipment that generally corresponded to
the levels in ASHRAE Standard 90.1-1989. On October 29, 1999, ASHRAE
released Standard 90.1-1999, which included new efficiency levels for
numerous categories of CWH equipment. DOE evaluated these new standards
and subsequently amended energy conservation standards for CWH
equipment in a final rule published in the Federal Register on January
12, 2001. 66 FR 3336 (``January 2001 final rule''). DOE adopted the
levels in ASHRAE Standard 90.1-1999 for all classes of CWH equipment,
except for electric storage water heaters. For electric storage water
heaters, the standard in ASHRAE Standard 90.1-1999 was less stringent
than the standard prescribed in EPCA and, consequently, would have
increased energy consumption.
Under those circumstances, DOE could not adopt the new efficiency
level for electric storage water heaters in ASHRAE Standard 90.1-1999.
66 FR 3336, 3350. In the January 2001 final rule, DOE also adopted the
efficiency levels contained in the Addendum to ASHRAE Standard 90.1-
1989 for hot water supply boilers, which were identical to the
efficiency levels for instantaneous water heaters. 66 FR 3336, 3356.
On October 21, 2004, DOE published a direct final rule in the
Federal Register (``October 2004 direct final rule'') that recodified
the existing energy conservation standards, so that they are located
contiguous with the test procedures that were promulgated in the same
notice. 69 FR 61974. The October 2004 final rule also updated
definitions for CWH equipment at 10 CFR 431.102.
The American Energy Manufacturing Technical Corrections Act
(``AEMTCA''), Public Law 112-210 (Dec. 18, 2012), amended EPCA to
require that DOE publish a final rule establishing a uniform efficiency
descriptor and accompanying test methods for covered consumer water
heaters and some CWH equipment. (42 U.S.C. 6295(e)(5)(B)) EPCA further
required that the final rule must replace the energy factor (for
consumer water heaters) and thermal efficiency and standby loss (for
some commercial water heaters) metrics with a uniform efficiency
descriptor. (42 U.S.C. 6295(e)(5)(C)) Pursuant to 42 U.S.C. 6295(e), on
July 11, 2014, DOE published a final rule for test procedures for
residential and certain commercial water heaters (``July 2014 final
rule'') that, among other things, established UEF, a revised version of
the current residential energy factor metric, as the uniform efficiency
descriptor required by AEMTCA. 79 FR 40542, 40578. In addition, the
July 2014 final rule defined the term ``residential-duty commercial
water heater,'' an equipment category that is subject to the new UEF
metric and the corresponding UEF test procedures. 79 FR 40542, 40586-
40588 (July 11, 2014). Conversely, CWH equipment that does not meet the
definition of a residential-duty commercial water heater is not subject
to the UEF metric or corresponding UEF test procedures. Id. Further
details on the UEF metric and residential-duty commercial water heaters
are discussed in section III.A of this document.
In a NOPR published on April 14, 2015 (``April 2015 NOPR''), DOE
proposed, among other things, conversion factors from thermal
efficiency and standby loss to UEF for residential-duty commercial
water heaters. 80 FR 20116, 20143. Subsequently, in a final rule
published on December 29, 2016 (the ``December 2016 conversion factor
final rule''), DOE specified standards for residential-duty commercial
water heaters in terms of UEF. However, while the metric was changed
from thermal efficiency and/or standby loss, the stringency was not
changed. 81 FR 96204, 96239 (Dec. 29, 2016).
In ASHRAE Standard 90.1-2013, ASHRAE increased the thermal
efficiency level for commercial oil-fired storage water heaters,
thereby triggering DOE's statutory obligation to promulgate an amended
uniform national standard at those levels, unless DOE were to determine
that there is clear and convincing evidence supporting the adoption of
more-stringent energy conservation standards than the ASHRAE
levels.\14\ In a final rule published on July 17, 2015 (``July 2015
ASHRAE equipment final rule''), among other things, DOE adopted the
standard for commercial oil-fired storage water heaters at the level
set forth in ASHRAE Standard 90.1-2013, which increased the standard
from 78 to 80 percent thermal efficiency with compliance required
starting on October 9, 2015. 80 FR 42614 (July 17, 2015). Since that
time ASHRAE has issued 2 updated versions of Standard 90.1, 90.1-2016
and 90.1-2019. However, DOE was not triggered to review amended
standards for commercial water heaters by any updates in ASHRAE
Standard 90.1-2016 or ASHRAE Standard 90.1-2019. Overall, DOE has not
been triggered to review the standards for the equipment subject to
this rulemaking based on an update

[[Page 30618]]

to the efficiency levels in ASHRAE Standard 90.1 since the 1999 edition
because ASHRAE has not updated the efficiency levels for such equipment
since 1999. The current standards for all CWH equipment classes are set
forth in DOE's regulations at 10 CFR 431.110, except for electric
instantaneous water heaters that are not residential-duty, which are
included in EPCA (the history of the standards for electric
instantaneous water heaters is discussed in section III.B.4 of this
document). (42 U.S.C. 6313(a)(5)(D)-(E)) Table II.1 shows the current
standards for all CWH equipment classes, except residential-duty
commercial water heaters, which are shown in Table II.2 of this
document.
---------------------------------------------------------------------------

\14\ ASHRAE Standard 90.1-2013 also appeared to change the
standby loss levels for four equipment classes (gas-fired storage
water heaters, oil-fired storage water heaters, gas-fired
instantaneous water heaters, and oil-fired instantaneous water
heaters) to efficiency levels that surpassed the Federal energy
conservation standard levels. However, upon reviewing the changes
DOE concluded that all changes to standby loss levels for these
equipment classes were editorial errors because they were identical
to SI (International System of Units; metric system) formulas rather
than I-P (Inch-Pound; English system) formulas. As a result, DOE did
not conduct an analysis of the potential energy savings from amended
standby loss standards for this equipment in response to the ASHRAE
updates. DOE did not receive any comments on this issue. 80 FR 1171,
1185 (January 8, 2015). The standby loss levels for these equipment
classes were reverted to the previous levels in ASHRAE Standard
90.1-2016 and have not been updated since then.

Table II.1--Current Federal Energy Conservation Standards for CWH Equipment Except for Residential-Duty
Commercial Water Heaters
----------------------------------------------------------------------------------------------------------------
Energy conservation standards *
---------------------------------------------
Minimum thermal
efficiency
Product Size (equipment Maximum standby loss
manufactured on (equipment manufactured
and after October on and after October 29,
9, 2015) ** *** 2003) ** [dagger]
(%)
----------------------------------------------------------------------------------------------------------------
Electric storage water heaters......... All...................... N/A 0.30 + 27/Vm (%/h).
Gas-fired storage water heaters........ <=155,000 Btu/h.......... 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
>155,000 Btu/h........... 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
Oil-fired storage water heaters........ <=155,000 Btu/h.......... *** 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
>155,000 Btu/h........... *** 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
Electric instantaneous water heaters <10 gal.................. 80 N/A.
[Dagger].
>=10 gal................. 77 2.30 + 67/Vm (%/h).
Gas-fired instantaneous water heaters <10 gal.................. 80 N/A.
and hot water supply boilers.
>=10 gal................. 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
Oil-fired instantaneous water heater <10 gal.................. 80 N/A.
and hot water supply boilers.
>=10 gal................. 78 Q/800 + 110(Vr)\1/2\ (Btu/
h).
----------------------------------------------------------------------------------------------------------------
Minimum thermal insulation
----------------------------------------------------------------------------------------------------------------
Unfired hot water storage tank......... All...................... R-12.5
----------------------------------------------------------------------------------------------------------------
* Vm is the measured storage volume, and Vr is the rated volume, both in gallons. Q is the nameplate input rate
in Btu/h.
** For hot water supply boilers with a capacity of less than 10 gallons: (1) The standards are mandatory for
products manufactured on and after October 21, 2005 and (2) products manufactured prior to that date, and on
or after October 23, 2003, must meet either the standards listed in this table or the applicable standards in
subpart E of this part for a ``commercial packaged boiler.''
*** For oil-fired storage water heaters: (1) The standards are mandatory for equipment manufactured on and after
October 9, 2015 and (2) equipment manufactured prior to that date must meet a minimum thermal efficiency level
of 78 percent.
[dagger] Water heaters and hot water supply boilers having more than 140 gallons of storage capacity need not
meet the standby loss requirement if: (1) The tank surface area is thermally insulated to R-12.5 or more, (2)
a standing pilot light is not used, and (3) for gas or oil-fired storage water heaters, they have a fire
damper or fan-assisted combustion.
[Dagger] Energy conservation standards for electric instantaneous water heaters are included in EPCA. (42 U.S.C.
6313(a)(5)(D)-(E)) The compliance date for these energy conservation standards is January 1, 1994. In this
NOPR, DOE proposes to codify these standards for electric instantaneous water heaters in its regulations at 10
CFR 431.110. Further discussion of standards for electric instantaneous water heaters is included in section
III.B.4 of this NOPR.

Table II.2--Current Energy Conservation Standards for Residential-Duty Commercial Water Heaters
----------------------------------------------------------------------------------------------------------------
Uniform energy
Equipment Specification * Draw pattern ** factor Compliance date
----------------------------------------------------------------------------------------------------------------
Gas-fired Storage............ >75 kBtu/h and Very Small....... 0.2674-(0.0009 December 29, 2016.
<=105 kBtu/h x Vr).
and <=120 gal.
Low.............. 0.5362-(0.0012
x Vr).
Medium........... 0.6002-(0.0011
x Vr).
High............. 0.6597-(0.0009
x Vr).
Oil-fired storage............ >105 kBtu/h and Very Small....... 0.2932-(0.0015
<=140 kBtu/h x Vr).
and <=120 gal.
Low.............. 0.5596-(0.0018
x Vr).
Medium........... 0.6194-(0.0016
x Vr).
High............. 0.6740-(0.0013
x Vr).
Electric instantaneous....... >12 kW and Very Small....... 0.80...........
<=58.6 kW and
<= 2 gal.
Low.............. 0.80...........
Medium........... 0.80...........
High............. 0.80...........
----------------------------------------------------------------------------------------------------------------
* Additionally, to be classified as a residential-duty water heater, a commercial water heater must meet the
following conditions: (1) If requiring electricity, use single-phase external power supply; and (2) the water
heater must not be designed to heat water at temperatures greater than 180 [deg]F.
** Draw pattern is a classification of hot water use of a consumer water heater or residential-duty commercial
water heater, based upon the first-hour rating. The draw pattern is determined using the Uniform Test Method
for Measuring the Energy Consumption of Water Heaters in appendix E to subpart B of 10 CFR part 430.

[[Page 30619]]

On October 21, 2014, DOE published a request for information
(``RFI'') as an initial step for reviewing the energy conservation
standards for CWH equipment. 79 FR 62899 (``October 2014 RFI''). The
October 2014 RFI solicited information from the public to help DOE
determine whether more-stringent energy conservation standards for CWH
equipment would result in a significant amount of additional energy
savings, and whether those standards would be technologically feasible
and economically justified. 79 FR 62899, 62899-62900. DOE received a
number of comments from interested parties in response to the October
2014 RFI.
On May 31, 2016, DOE published a NOPR and notice of public meeting
in the Federal Register (``May 2016 CWH ECS NOPR'') that addressed all
of the comments received in response to the RFI and proposed amended
energy conservation standards for CWH equipment. 81 FR 34440. The May
2016 CWH ECS NOPR and the technical support document (``TSD'') for that
NOPR are available at <a href="http://www.regulations.gov/docket?D=EERE-2014-BT-STD-0042">www.regulations.gov/docket?D=EERE-2014-BT-STD-0042</a>.
On June 6, 2016, DOE held a public meeting at which it presented
and discussed the analyses conducted as part of this rulemaking (e.g.,
engineering analysis, LCC, PBP, and MIA). In the public meeting, DOE
presented the results of the analysis and requested comments from
stakeholders on various issues related to the rulemaking in response to
the May 2016 CWH ECS NOPR.
DOE received a number of comments from interested parties in
response to the May 2016 CWH ECS NOPR. Table II.3 identifies these
commenters. Although DOE withdrew the May 2016 CWH ECS NOPR (as
discussed in the following paragraphs), DOE considered comments
received in response to that document to the extent relevant to the
preparation of this NOPR.

Table II.3--Interested Parties Providing Written and Oral Comments on the May 2016 CWH ECS NOPR
----------------------------------------------------------------------------------------------------------------
Name Abbreviation Commenter type *
----------------------------------------------------------------------------------------------------------------
Appliance Standards Awareness Project, Alliance Joint Advocates.................. EA
to Save Energy, Northeast Energy Efficiency
Partnership, American Council for an Energy-
Efficient Economy, EarthJustice.
Northwest Energy Efficiency Alliance............. NEEA............................. EA
Air-Conditioning, Heating and Refrigeration AHRI............................. TA
Institute.
The U.S. Chamber of Commerce, the American The Associations................. TA
Chemistry Council, the American Coke and Coal
Chemicals Institute, the American Forest & Paper
Association, the American Fuel & Petrochemical
Manufacturers, the American Petroleum Institute,
the Brick Industry Association, the Council of
Industrial Boiler Owners, the National
Association of Manufacturers, the National
Mining Association, the National Oilseed
Processors Association, and the Portland Cement
Association.
Industrial Energy Consumers of America........... IECA............................. TA
American Gas Association and American Public Gas AGA and APGA..................... UA
Association.
Edison Electric Institute........................ EEI.............................. UA
National Propane Gas Association................. NPGA............................. IR
National Rural Electric Cooperative Association, Joint Utilities.................. IR
American Public Power Association, Edison
Electric Institute.
Plumbing-Heating-Cooling Contractors National PHCC............................. IR
Association.
A.O. Smith Corporation........................... A.O. Smith....................... M
Bock Water Heaters, Inc.......................... Bock............................. M
Bradford White Corporation....................... Bradford White................... M
HTP, Inc......................................... HTP.............................. M
Raypak, Inc...................................... Raypak........................... M
Rheem Corporation................................ Rheem............................ M
California Energy Commission..................... CEC.............................. OS
Environmental Defense Fund, Institute for Policy Joint Organizations.............. OS
Integrity at New York University School of Law,
Natural Resources Defense Council, and Union of
Concerned Scientists.
Pacific Gas and Electric Company, Southern CA IOUs.......................... U
California Gas Company, San Diego Gas and
Electric, and Southern California Edison.
Spire Inc........................................ Spire............................ U
Anonymous........................................ Anonymous........................ I
Johnnie Temples.................................. Johnnie Temples.................. I
PVI Industries, Inc.............................. PVI.............................. M
NegaWatt Consulting.............................. NegaWatt......................... OS
Bradley Corporation.............................. Bradley.......................... M
----------------------------------------------------------------------------------------------------------------
* TA: trade association, EA: efficiency/environmental advocate, IR: industry representative, M: manufacturer,
OS: other stakeholder, U: utility or utilities filing jointly, UA: utility association, and I: individual.

A parenthetical reference at the end of a comment quotation or
paraphrase provides the location of the item in the public record.\15\
---------------------------------------------------------------------------

\15\ The parenthetical reference provides a reference for
information located in the docket. (Docket No. EERE-2014-BT-STD-
0042, which is maintained at <a href="http://www.regulations.gov/#!docketDetail">www.regulations.gov/#!docketDetail</a>;D=EERE-2014-BT-STD-0042). The references are arranged
as follows: (commenter name, comment docket ID number, page of that
document).
---------------------------------------------------------------------------

On December 23, 2016, DOE published a notice of data availability
(``NODA'') for energy conservation standards for CWH equipment
(``December 2016 CWH ECS NODA''). 81 FR 94234. The December 2016 CWH
ECS NODA presented the thermal efficiency and standby loss levels
analyzed in the May 2016 CWH ECS NOPR for residential-duty gas-fired
storage water heaters in terms of UEF, using the updated conversion
factors for gas-fired and oil-fired storage water heaters adopted in
the December 2016 conversion factor final rule (81 FR 94234, 94237).
On January 15, 2021, in response to a petition for rulemaking
submitted by the American Public Gas Association, Spire, Inc., the
Natural Gas Supply Association, the American Gas Association, and the
National Propane Gas Association (83 FR 54883; Nov. 1, 2018) DOE
published a final interpretive

[[Page 30620]]

rule (``the January 2021 final interpretive rule'') determining that,
in the context of residential furnaces, commercial water heaters, and
similarly-situated products/equipment, use of non-condensing technology
(and associated venting) constitute a performance-related ``feature''
under EPCA that cannot be eliminated through adoption of an energy
conservation standard. 86 FR 4776. Correspondingly, DOE withdrew the
May 2016 CWH ECS NOPR. 86 FR 3873 (Jan. 15, 2021).
However, DOE has subsequently published a final interpretive rule
that returns to the previous and long-standing interpretation (in
effect prior to the January 15, 2021 final interpretive rule), under
which the technology used to supply heated air or hot water is not a
performance-related ``feature'' that provides a distinct consumer
utility under EPCA. 86 FR 73947 (Dec. 29, 2021).
In conducting the analysis for this NOPR, DOE evaluates condensing
technologies and associated venting systems (i.e., trial standard
levels (``TSLs'') 2, 3, and 4) in its analysis of potential energy
conservation standards. Any adverse impacts on utility and availability
of non-condensing technology options are considered in DOE's analyses
of these TSLs.
As illustrated by the preceding discussion, the rulemaking for CWH
equipment has been subject to multiple rounds of public comment,
including public meetings, and extensive records have been developed in
the relevant dockets. (See Docket Number EERE-2014-BT-STD-0042,
respectively). Consequently, the information obtained through those
earlier rounds of public comment, information exchange, and data
gathering have been considered in this rulemaking and DOE is building
upon the existing record through further analysis and further notice
and comment.

C. Deviation From Appendix A

On January 11, 2022, DOE published a test procedure NOPR for
consumer water heaters and residential-duty commercial water heaters.
87 FR 1554. In accordance with section 3(a) of 10 CFR part 430, subpart
C, appendix A (``appendix A''), DOE notes that it is deviating from the
provision in appendix A specifying that test procedures be finalized at
least 180 days before new or amended standards are proposed for the
same equipment. 10 CFR part 430, subpart C, appendix A, section
8(d)(2). DOE is opting to deviate from this step because the proposed
test procedure amendments for residential-duty commercial water heaters
are not expected to impact the current efficiency ratings. Further, the
test procedure final rule for consumer water heaters and residential-
duty commercial water heaters is expected to publish before a final
rule in this proposed rulemaking. If DOE determines that the test
procedure amendments for residential-duty commercial water heaters do
in fact impact the efficiency ratings, DOE will review the implications
of those changes before finalizing amended standards for residential-
duty commercial water heaters.
Issue 1: DOE requests comment on its assumption that the proposed
test procedure amendments for residential-duty commercial water heaters
are not expected to impact the efficiency ratings.

III. General Discussion

DOE developed this proposed rule after considering comments, data,
and information from interested parties that represent a variety of
interests. This proposed rule addresses issues raised by commenters to
the extent relevant to the preparation of this NOPR.

A. Test Procedures

DOE's current test procedures for CWH equipment are specified at 10
CFR 431.106 and provide mandatory methods for determining the thermal
efficiency, standby loss, and UEF, as applicable, of CWH equipment.
As noted previously, on October 21, 2004, DOE published the October
2004 direct final rule, which adopted amended test procedures for CWH
equipment. 69 FR 61974. These test procedure amendments incorporated by
reference certain sections of ANSI Z21.10.3-1998, ``Gas Water Heaters,
Volume III, Storage Water Heaters with Input Ratings above 75,000 Btu
per Hour, Circulating and Instantaneous.'' Id. at 69 FR 61983. On May
16, 2012, DOE published a final rule for certain commercial heating,
air-conditioning, and water heating equipment in the Federal Register
that, among other things, updated the test procedures for certain CWH
equipment by incorporating by reference ANSI Z21.10.3-2011. 77 FR
28928. These updates did not materially alter DOE's test procedure for
CWH equipment.
On May 9, 2016, DOE published a NOPR that proposed to amend the
test procedures for certain CWH equipment (``May 2016 CWH TP NOPR'').
81 FR 28588. In the May 2016 CWH TP NOPR, DOE proposed several changes,
including (1) updating references of industry test standards to
incorporate by reference the most recent versions of the industry
standards; (2) updating the requirements for ambient conditions,
measurement locations, and measurement intervals for the thermal
efficiency and standby loss test procedures; (3) amending the test
procedure set-up requirements for storage water heaters, storage-type
instantaneous water heaters, instantaneous water heaters, and hot water
supply boilers; (4) developing a test method for determining the
standby loss of unfired hot water storage tanks; (5) updating
provisions for setting the tank thermostat for storage and storage-type
instantaneous water heaters prior to the thermal efficiency and standby
loss tests; (6) clarifying the thermal efficiency and standby loss test
procedures with regard to stored energy loss and manipulation of
settings during efficiency testing; (7) defining ``storage-type
instantaneous water heater'' and modifying several definitions for
certain consumer water heaters and CWH equipment included at 10 CFR
430.2 and 10 CFR 431.102, respectively; (8) updating DOE's procedures
for determining storage volume and standby loss of instantaneous water
heaters and hot water supply boilers (other than storage-type
instantaneous water heaters); (9) developing a new test procedure for
commercial heat pump water heaters and incorporating by reference
certain sections, figures, and tables from ASHRAE 118.1-2012; (10)
establishing a procedure for determining the fuel input rate of gas-
fired and oil-fired CWH equipment and clarifying DOE's certification
and enforcement regulations regarding fuel input rate; and (11)
establishing default values for certain testing parameters for oil-
fired CWH equipment.
On November 10, 2016, DOE published a final rule amending the test
procedures for certain CWH equipment (``November 2016 CWH TP final
rule''). 81 FR 79261. In the November 2016 CWH TP final rule, DOE
generally adopted the proposals set forth in the May 2016 CWH TP NOPR,
except that it did not adopt the following proposals: (1) Ambient
humidity requirements, (2) tightened ambient room temperature allowable
range (75 [deg]F <plus-minus> 5 [deg]F), and (3) requirements that the
certified fuel input rate be equal to the mean of the measured values
of fuel input rate in a sample. In that final rule, DOE also amended
its regulations for gas supply and outlet pressure of gas-fired CWH
equipment, modified the definition for ``storage-type instantaneous
water heater,'' and updated the requirements for establishing steady-
state operation. DOE received many industry comments

[[Page 30621]]

in response to DOE's proposed standby loss test procedure for unfired
hot water storage tanks, and in the November 2016 CWH TP final rule,
DOE stated that it was still considering these comments and would
address the comments and its proposed test procedure for unfired hot
water storage tanks in a separate rulemaking notice. 81 FR 79261, 79277
(Nov. 10, 2016).
In addition, as discussed in section II.B, AEMTCA amended EPCA to
require that DOE publish a final rule establishing a uniform efficiency
descriptor and accompanying test methods for covered consumer water
heaters and certain CWH equipment. (42 U.S.C. 6295(e)(5)(B)) The AEMTCA
amendments required DOE, in the final rule, to replace the current
energy factor (for consumer water heaters) and thermal efficiency and
standby loss (for commercial water heaters) metrics with a uniform
efficiency descriptor. (42 U.S.C. 6295(e)(5)(C)) However, under the
AEMTCA amendments, DOE may provide an exclusion from the uniform
efficiency descriptor for specific categories of covered water heaters
that do not have residential uses, that can be clearly described, and
that are effectively rated using the current thermal efficiency and
standby loss descriptors. (42 U.S.C. 6295(e)(5)(F))
The AEMTCA amendments to EPCA further require that, along with
developing a uniform descriptor, DOE develop a mathematical conversion
factor to translate the results based upon use of the efficiency metric
under the test procedure in effect on December 18, 2012, to the new
energy descriptor. (42 U.S.C. 6295(e)(5)(E)(i)) In addition, pursuant
to 42 U.S.C. 6295(e)(5)(E)(ii) and (iii), the conversion factor must
not affect the minimum efficiency requirements for covered water
heaters, including residential-duty commercial water heaters.
Furthermore, such conversions must not lead to a change in measured
energy efficiency for covered residential and residential-duty
commercial water heaters manufactured and tested prior to the final
rule establishing the uniform efficiency descriptor. Id.
In the July 2014 test procedure final rule, DOE, among other
things, established the UEF metric, a revised version of the current
residential energy factor metric, as the uniform efficiency descriptor
required by AEMTCA. 79 FR 40542, 40578-40579 (July 11, 2014).
The uniform efficiency descriptor established in the July 2014
final rule applies to all commercial water heaters that meet the
definition of ``residential-duty commercial water heater.'' This term
was initially defined in the July 2014 final rule, and later revised in
the November 2016 CWH TP final rule. 81 FR 79261, 79288-79289 (Nov. 10,
2016). Residential-duty commercial water heater is defined in 10 CFR
431.102 as any gas-fired storage, oil-fired storage, or electric
instantaneous commercial water heater that meets the following
conditions:
(1) For models requiring electricity, uses single-phase external
power supply;
(2) Is not designed to provide outlet hot water at temperatures
greater than 180 [deg]F; and
(3) Does not meet any of the criteria shown in Table III.1, which
reflects the table in 10 CFR 431.102.

Table III.1--Rated Input and Storage Volume Ranges for Non-Residential-
Duty Commercial Water Heaters
------------------------------------------------------------------------
Indicator of non-residential
Water heater type application
------------------------------------------------------------------------
Gas-fired storage...................... Rated input >105 kBtu/h; Rated
storage volume >120 gallons.
Oil-fired storage...................... Rated input >140 kBtu/h; Rated
storage volume >120 gallons.
Electric instantaneous................. Rated input >58.6 kW; Rated
storage volume >2 gallons.
------------------------------------------------------------------------

CWH equipment not meeting the definition of ``residential-duty
commercial water heater'' was deemed to be sufficiently characterized
by the current thermal efficiency and standby loss metrics. DOE
provided a method for converting existing thermal efficiency and/or
standby loss ratings for residential-duty commercial water heaters to
UEF in the December 2016 conversion factor final rule. DOE also adopted
UEF standard levels for the equipment, and DOE's methodology for
translating the standards ensured equivalent stringency between the
then-existing standards (in terms of thermal efficiency and standby
loss metrics) and the converted standards (in terms of UEF). 81 FR
96204, 96219-96223 (Dec. 29, 2016).
Compliance with the UEF metric has been mandatory since December
29, 2016, and manufacturers have been required to determine UEF based
on UEF test data, rather than using equations to convert from thermal
efficiency and standby loss, since December 29, 2017. Therefore, in
this NOPR, DOE analyzes residential-duty gas-fired storage water
heaters in terms of UEF and does not utilize any UEF conversion
factors.

B. Scope of Rulemaking

1. Residential-Duty Commercial Water Heaters
As discussed in the July 2014 final rule, DOE regulates
residential-duty commercial water heaters as commercial water heaters.
79 FR 40542, 40544 (July 11, 2014) However, as discussed in section
III.B.2 of this document, DOE is not considering amended standards for
residential-duty oil-fired storage water heaters because DOE has
initially found that the market for this equipment has not changed
appreciably since standards were last amended. However, the same is not
true for residential-duty gas-fired storage water heaters. DOE has
tentatively determined that the market for residential-duty gas-fired
storage water heaters has appreciably changed since the July 2014 final
rule. DOE is considering amended energy conservation standards for
residential-duty commercial gas-fired storage water heaters in the
current rulemaking, which addresses commercial water heaters generally.
As discussed in sections II.B and III.A of this document, DOE
established that residential-duty commercial water heaters are covered
by the new UEF metric in the July 2014 final rule. 79 FR 40542, 40586
(July 11, 2014). The analyses of residential-duty equipment for the
withdrawn May 2016 CWH ECS NOPR were conducted in terms of the thermal
efficiency and standby loss metrics because there were insufficient
efficiency data in terms of UEF available when DOE undertook the
analyses for the withdrawn May 2016 CWH ECS NOPR. 81 FR 34440, 34453.
Those results were subsequently converted to the UEF metric in the
December 2016 NODA. 81 FR 94234. However, data in terms of UEF have
since become available; therefore, DOE updated the analysis of
residential-duty equipment to be in terms of UEF for this NOPR. Details
about the UEF levels analyzed in this NOPR are discussed in sections
IV.C.4.c and IV.C.6 of this document.
2. Oil-Fired Commercial Water Heating Equipment
ASHRAE Standard 90.1-2013 raised the thermal efficiency level for
commercial oil-fired storage water heaters from 78 percent to 80
percent. In the July 2015 ASHRAE equipment final rule, DOE adopted the
ASHRAE Standard 90.1 efficiency level of 80 percent having determined
that there was insufficient potential for energy savings to justify
further increasing the standard. 80 FR 42614 (July 17, 2015). This
standard applied to both residential-duty commercial oil storage

[[Page 30622]]

water heaters as well as non-residential-duty commercial oil storage
water heaters at the time, although equivalent standards in terms of
UEF were developed and adopted for residential-duty commercial gas
storage water heaters in the December 2016 Conversion Factor Final
Rule. 81 FR 96204 (Dec. 29, 2016).
In considering amended efficiency standards for commercial oil-
fired storage water heaters (including residential-duty oil-fired
storage water heaters) in the withdrawn May 2016 CWH ECS NOPR, DOE
initially determined that circumstances did not change appreciably
between the publication of the July 2015 ASHRAE equipment final rule
and the May 2016 CWH ECS NOPR, and, therefore, DOE did not analyze
amended efficiency standards for this equipment in the May 2016 CWH ECS
NOPR. 81 FR 34440, 34453. DOE has not received any new or additional
information on this issue to suggest that DOE should consider amended
standards for commercial oil-fired storage water heaters or
residential-duty oil-fired storage water heaters and therefore DOE
maintains the approach from the withdrawn May 2016 CWH ECS NOPR.
For this NOPR, DOE considered whether amended standby loss
standards for commercial oil-fired water heaters would be warranted.
DOE has initially determined that a change in the maximum standby loss
level would likely effect less of a change in energy consumption of
oil-fired storage water heaters than would a change in the thermal
efficiency due to the magnitude of energy consumed in active mode as
compared to standby losses. Therefore, DOE has tentatively determined
that an amended standby loss standard would likely result in only a
negligible amount of additional energy savings. Thus, DOE has not
analyzed amended standby loss standards for commercial oil-fired
storage water heaters in this rulemaking.
DOE also considered oil-fired instantaneous water heaters and hot
water supply boilers and only identified a small number of oil-fired
tank-type instantaneous units currently on the market that would meet
DOE's definition of oil-fired tank-type instantaneous commercial water
heaters. DOE estimates that there are very few annual shipments for
this equipment class. Therefore, DOE has initially determined that the
energy savings possible from amended standards for such equipment is
negligible, and thus, would not impact the results of the analyses
conducted for this NOPR. Therefore, DOE did not analyze amended
standards for commercial oil-fired instantaneous water heaters and hot
water supply boilers for this NOPR.
Based on the discussion in the preceding paragraphs, and because
DOE has not received new information to contradict its previous
findings, DOE tentatively concludes that the potential energy savings
resulting from amended standards for commercial oil-fired water heating
equipment would be negligible. Any such energy savings from amended
standards for commercial oil-fired water heating equipment would not
appreciably change the absolute energy savings estimated for CWH
equipment; i.e., would not impact the determination of whether amended
energy conservation standards for CWH equipment would result in
significant energy savings. Thus, DOE has continued to exclude
commercial oil-fired water heating equipment from the analysis
conducted for this NOPR.
3. Unfired Hot Water Storage Tanks
Unfired hot water storage tanks are a class of CWH equipment. On
August 9, 2019, DOE published an RFI initiating an effort to determine
whether to amend the current uniform national standard for unfired hot
water storage tanks. 84 FR 39220. Subsequently, on June 10, 2021 DOE
published a notice of proposed determination and request for comment
proposing not to amend energy conservation standards for unfired hot
water storage tanks. 86 FR 30796. Because amended energy conservation
standards for unfired hot water storage tanks are being considered as
part of that proceeding, they were not considered further for this
NOPR.
4. Electric Instantaneous Water Heaters
EPCA prescribes energy conservation standards for several classes
of CWH equipment manufactured on or after January 1, 1994. (42 U.S.C.
6313(a)(5)) DOE codified these standards in its regulations for CWH
equipment at 10 CFR 431.110. However, when codifying these standards
from EPCA, DOE inadvertently omitted the standards put in place by EPCA
for electric instantaneous water heaters. Specifically, for
instantaneous water heaters with a storage volume of less than 10
gallons, EPCA prescribes a minimum thermal efficiency of 80 percent.
For instantaneous water heaters with a storage volume of 10 gallons or
more, EPCA prescribes a minimum thermal efficiency of 77 percent and a
maximum standby loss, in percent/hour, of 2.30 + (67/measured volume
(in gallons)). (42 U.S.C. 6313(a)(5)(D) and (E)) Although DOE's
regulations at 10 CFR 431.110 do not currently include energy
conservation standards for electric instantaneous water heaters, these
standards prescribed in EPCA are applicable. Therefore, in this NOPR,
DOE is proposing to codify these standards in its regulations at 10 CFR
431.110.
DOE is also proposing to allow use of a calculation-based method
for determining storage volume of electric instantaneous water heaters
that is the same as the method for gas-fired and oil-fired
instantaneous water heaters and hot water supply boilers found at 10
CFR 429.72(e) (added at 81 FR 79261, 79320 (Nov. 10, 2016)). DOE has
initially concluded that the same rationale for including these
provisions for gas-fired and oil-fired instantaneous water heaters and
hot water supply boilers also applies to electric instantaneous water
heaters (i.e., it may be difficult to completely empty the
instantaneous water heater in order to obtain a dry weight measurement,
which is needed in a weight-based test for an accurate representation
of the storage volume). Therefore, DOE is proposing to include electric
instantaneous water heaters in these provisions in order to provide
manufacturers with flexibility as to how the storage volume is
determined.
DOE notes that because electric instantaneous water heaters
typically use electric resistance heating elements, which are highly
efficient, the thermal efficiency of these units already approaches 100
percent. DOE has also tentatively determined that there are no options
for substantially increasing the rated thermal efficiency of this
equipment, and the impact of setting thermal efficiency energy
conservation standards for these products would be negligible.
Similarly, the stored water volume is typically low, resulting in
limited potential for reducing standby losses for most electric
instantaneous water heaters. As a result, amending the standards for
electric instantaneous water heaters established in EPCA would result
in minimal energy savings. Even if DOE were to account for the energy
savings potential of amended standards for electric instantaneous water
heaters, the contribution of any potential energy savings from amended
standards for these units would be negligible and not appreciably
impact the energy savings analysis for CWH equipment. Therefore, DOE
did not analyze amended energy conservation standards for electric
instantaneous water heaters.

[[Page 30623]]

5. Commercial Heat Pump Water Heaters
In the withdrawn May 2016 CWH ECS NOPR, DOE did not consider energy
conservation standards for commercial heat pump water heaters because
DOE's proposed test procedure for commercial heat pump water heaters
was not finalized, and there were insufficient data with the proposed
test procedure for units currently on the market. DOE expressed its
intent to consider energy conservation standards for commercial heat
pump water heaters in a future rulemaking. 81 FR 34440, 34454-34455
(May 31, 2016). Further, DOE noted that all commercial heat pump water
heaters it had identified on the market were ``add-on'' heat pumps
designed to be paired with a storage tank in the field, and DOE had not
identified any commercial water heater models that integrate a storage
tank and heat pump. DOE did not consider commercial integrated heat
pump water heaters as a design option for electric storage water
heaters because DOE did not identify any such units on the market. 81
FR 34440, 34454 and 34469.
In the November 2016 CWH TP final rule, DOE adopted a test
procedure for commercial heat pump water heaters. 81 FR 79261, 79301-
79304. However, DOE has initially concluded that there are still
limited data using this test procedure for units currently on the
market due to limited units on the market. Since the November 2016 CWH
TP DOE is aware of only one commercial integrated heat pump water
heater model currently on the market. Therefore, DOE did not consider
energy conservation standards for commercial heat pump water heaters in
this NOPR. As stated in the withdrawn May 2016 CWH ECS NOPR, DOE plans
to analyze standards for commercial heat pump water heaters in a future
rulemaking, at which time DOE will consider the appropriate equipment
class structure for commercial electric water heaters, including
commercial heat pump water heaters. Section IV.A.2.f of this NOPR
includes discussion of DOE's consideration of grid-enabled water
heaters.
6. Electric Storage Water Heaters
In this rulemaking, DOE is not analyzing thermal efficiency
standards for electric storage water heaters. Electric storage water
heaters are not currently subject to a thermal efficiency standard
under 10 CFR 431.110. Electric storage water heaters typically use
electric resistance heating elements, which are highly efficient. The
thermal efficiency of these units already approaches 100 percent. DOE
did not consider commercial integrated heat pump water heaters as the
maximum technologically feasible (``max-tech'') for electric storage
water heaters at this time. DOE found only one such model on the
market, at a single storage volume and heating capacity. Given the wide
range of capacities and stored water volumes in products currently on
the market, which are required to meet hot water loads in commercial
buildings, it is unclear based on this single model whether heat pump
water heater technology would be suitable to meet the range of load
demands on the market.
Issue 2: DOE requests comment and information on whether integrated
heat pump water heaters are capable of meeting the same hot water loads
as commercial electric storage water heaters that use electric
resistance elements.
Although DOE did not consider an integrated heat pump water heater
as a design option for electric storage water heaters, DOE proposed
amended standby loss standards for electric storage water heaters in
the withdrawn May 2016 CWH ECS NOPR based on increased insulation
thickness. 81 FR 34440, 34443 (May 31, 2016). In response to the
withdrawn May 2016 CWH ECS NOPR, DOE received several comments opposing
the proposed amended standby loss standard for electric storage water
heaters. Summaries of these comments and DOE's responses are included
in section IV.C.4.b of this NOPR. After consideration of industry
comments and closer examination of the market, DOE recognizes that the
only technology option that DOE analyzed in the engineering analysis as
providing standby loss reduction for electric storage water heaters
(i.e., increasing tank foam insulation thickness to 3 inches) is
already currently included in some models rated at or near the current
standby loss standard. Consequently, DOE did not analyze any technology
options for reducing standby loss below (i.e., more stringent than) the
current standard, and therefore, this NOPR does not propose to amend
the standby loss standard for electric storage water heaters. Section
IV.C.4.b of this NOPR includes further discussion of standby loss
levels for electric storage water heaters and DOE's decision not to
amend standby loss standards for electric storage water heaters.
7. Instantaneous Water Heaters and Hot Water Supply Boilers
Other than storage-type instantaneous water heaters, DOE did not
include instantaneous water heaters and hot water supply boilers in its
analysis of potential amended standby loss standards.\16\ Instantaneous
water heaters and hot water supply boilers (other than storage-type
instantaneous water heaters) with greater than 10 gallons of water
stored have a standby loss requirement under 10 CFR 431.110. However,
DOE did not analyze more stringent standby loss standards for these
units because it has initially determined that such amended standards
would result in minimal energy savings. DOE identified only 81 out of
468 models on the market of instantaneous water heaters or hot water
supply boilers with greater than or equal to 10 gallons of water stored
(other than storage-type instantaneous water heaters), and 32 of the
identified models have less than 15 gallons of water stored. Even if
DOE were to account for the energy savings potential of amended standby
loss standards for instantaneous water heaters and hot water supply
boilers (other than storage-type instantaneous water heaters) with
greater than 10 gallons of water stored CWH equipment, the contribution
of any potential energy savings from amended standards for these units
would be negligible and not appreciably impact the energy savings
analysis for CWH equipment.
---------------------------------------------------------------------------

\16\ DOE adopted a definition for ``storage-type instantaneous
water heater'' in the November 2016 CWH TP final rule. 81 FR 79261,
79289-79290 (Nov. 10, 2016). Storage-type instantaneous water
heaters are discussed in section IV.A.2.b of this NOPR.
---------------------------------------------------------------------------

DOE has initially determined that instantaneous water heaters
(other than storage-type instantaneous water heaters) and hot water
supply boilers with less than 10 gallons of water stored would not have
significantly different costs and benefits as compared to instantaneous
water heaters (other than storage-type instantaneous water heaters) and
hot water supply boilers with greater than or equal to 10 gallons of
water stored. Therefore, DOE analyzed both equipment classes of
instantaneous water heaters and hot water supply boilers (less than 10
gallons and greater than or equal to 10 gallons stored volume) together
for thermal efficiency standard levels in this NOPR.
DOE also initially determined that establishing standby loss
standards for instantaneous water heaters and hot water supply boilers
with less than or equal to 10 gallons water stored would result in
minimal energy savings. Even if DOE were to account for the energy
savings potential of amended standby loss standards for instantaneous
water

[[Page 30624]]

heaters and hot waters supply boilers with less than or equal to 10
gallons of water stored, the contribution any potential energy savings
from amended standards for these units would be negligible and not
appreciably impact the energy savings analysis for CWH equipment. For
instantaneous water heaters and hot water supply boilers (other than
storage-type instantaneous water heaters), DOE has not found and did
not receive any information or data suggesting that DOE should analyze
amended standby loss standards or separately analyze amended thermal
efficiency standards for each stored volume range (less than 10
gallons, and greater than or equal to 10 gallons stored volume).

C. Technological Feasibility

1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the products or equipment that is the subject of the
rulemaking. As the first step in such an analysis, DOE develops a list
of technology options for consideration in consultation with
manufacturers, design engineers, and other interested parties. DOE then
determines which of these means for improving efficiency are
technologically feasible. DOE considers technologies incorporated in
commercially-available equipment or in working prototypes to be
technologically feasible.
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
Practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; and (3) adverse impacts on
health or safety. See generally 10 CFR 431.4; 10 CFR part 430, subpart
C, appendix A, sections 6(c)(3)(ii)-(v) and 7(b)(2)-(5). Additionally,
it is DOE's policy not to include in its analyses any proprietary
technology that is a unique pathway to achieving a certain efficiency
level. Section IV.B of this document discusses the results of the
screening analysis for CWH equipment, particularly the designs DOE
considered, those it screened out, and those that are the basis for the
standard levels considered in this proposed rulemaking. For further
details on the screening analysis for this proposed rulemaking, see
chapter 4 of the NOPR TSD.
2. Maximum Technologically Feasible Levels
When DOE proposes to adopt an amended standard for a type or class
of covered equipment, it determines the maximum improvement in energy
efficiency or maximum reduction in energy use that is technologically
feasible for such equipment. Accordingly, in the engineering analysis,
DOE determined the max-tech improvements in energy efficiency for CWH
equipment, using the design parameters for the most efficient products
available on the market. The max-tech levels that DOE determined for
this proposed rulemaking are described in section IV.C.4 of this NOPR
and chapter 5 of the NOPR TSD.

D. Energy Savings

1. Determination of Savings
For each TSL, DOE projected energy savings from the application of
the TSL to CWH equipment purchased in the 30-year period that begins in
the first full year of compliance with potential standards (2026-2055
for gas-fired CWH equipment).\17\ The savings are measured over the
entire lifetime of CWH equipment purchased in the previous 30-year
period. DOE quantified the energy savings attributable to each TSL as
the difference in energy consumption between each standards case and
the no-new-standards case. The no-new-standards case represents a
projection of energy consumption that reflects how the market for a
product would likely evolve in the absence of amended energy
conservation standards.
---------------------------------------------------------------------------

\17\ DOE also presents a sensitivity analysis that considers
impacts for equipment shipped in a 9-year period.
---------------------------------------------------------------------------

DOE used its national impacts analysis (``NIA'') spreadsheet model
to estimate national energy savings (``NES'') from potential amended
standards for CWH equipment. The NIA spreadsheet model (described in
section IV.H of this document) calculates energy savings in terms of
site energy, which is the energy directly consumed by equipment at the
locations where they are used. For electricity, DOE reports NES in
terms of primary energy savings, which is the savings in the energy
that is used to generate and transmit the site electricity. For natural
gas, the primary energy savings are considered to be equal to the site
energy savings because they are supplied to the user without
transformation from another form of energy.
DOE also calculates NES in terms of full-fuel cycle (``FFC'')
energy savings. The FFC metric includes the energy consumed in
extracting, processing, and transporting primary fuels (e.g., coal,
natural gas, petroleum fuels), and thus presents a more complete
picture of the impacts of energy conservation standards.\18\ DOE's
approach is based on the calculation of an FFC multiplier for each of
the energy types used by covered equipment.\19\ For more information on
FFC energy savings, see section IV.H.3 of this document.
---------------------------------------------------------------------------

\18\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as
amended at 77 FR 49701 (Aug. 17, 2012).
\19\ Natural gas and electricity were the energy types analyzed
in the FFC calculations.
---------------------------------------------------------------------------

2. Significance of Savings
To adopt any new or amended standards for covered equipment, DOE
must determine that such action would result in significant energy
savings. (See 42 U.S.C. 6313(a)(6)(C)(i); 42 U.S.C.
6313(a)(6)(A)(ii)(II)) \20\
---------------------------------------------------------------------------

\20\ In setting a more stringent standard for ASHRAE equipment,
DOE must have ``clear and convincing evidence'' that doing so
``would result in significant additional conservation of energy'' in
addition to being technologically feasible and economically
justified. 42 U.S.C. 6313(a)(6)(A)(ii)(II). This language indicates
that Congress had intended for DOE to ensure that, in addition to
the savings from the ASHRAE standards, DOE's standards would yield
additional energy savings that are significant. In DOE's view, this
statutory provision shares the requirement with the statutory
provision applicable to covered products and non-ASHRAE equipment
that ``significant conservation of energy'' must be present (42
U.S.C. 6295(o)(3)(B))--and supported with ``clear and convincing
evidence''--to permit DOE to set a more stringent requirement than
ASHRAE.
---------------------------------------------------------------------------

The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking.\21\ For
example, the United States has now rejoined the Paris Agreement and
will exert leadership in confronting the climate crisis.\22\
Additionally, some covered products and equipment have most of their
energy consumption occur during periods of peak energy demand. The
impacts of these products on the energy infrastructure can be more
pronounced than products with relatively constant demand. In evaluating
the significance of energy savings, DOE considers differences in
primary energy and FFC effects for different covered products and
equipment when determining whether energy savings are significant.

[[Page 30625]]

Primary energy and FFC effects include the energy consumed in
electricity production (depending on load shape), in distribution and
transmission, and in extracting, processing, and transporting primary
fuels (i.e., coal, natural gas, petroleum fuels), and thus present a
more complete picture of the impacts of energy conservation standards.
---------------------------------------------------------------------------

\21\ The numeric threshold for determining the significance of
energy savings established in a final rule published on February 14,
2020 (85 FR 8626, 8670), was subsequently eliminated in a final rule
published on December 13, 2021 (86 FR 70755).
\22\ See Executive Order 14008, 86 FR 7619 (Feb. 1, 2021)
(``Tackling the Climate Crisis at Home and Abroad'').
---------------------------------------------------------------------------

Accordingly, DOE evaluates the significance of energy savings on a
case-by-case basis, taking into account the significance of cumulative
FFC national energy savings, the cumulative FFC emissions reductions,
and the need to confront the global climate crisis, among other
factors. As stated, the proposed standards would result in estimated
national energy savings of 0.70 quad, the equivalent of the electricity
use of 7.0 million homes in one year. DOE has initially determined,
based on the methodology described in section IV.E and the analytical
results presented in section V.B.3.a, that there is clear and
convincing evidence that the energy savings for the TSL proposed in
this rulemaking are ``significant'' within the meaning of 42 U.S.C.
6313(a)(6)(A)(ii)(II).

E. Economic Justification

1. Specific Criteria
EPCA provides seven factors to be evaluated in determining whether
a potential energy conservation standard for CWH equipment is
economically justified. (42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII) and
(C)(i)) The following sections discuss how DOE has addressed each of
those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Commercial Consumers
EPCA requires DOE to consider the economic impact of a standard on
manufacturers and the commercial consumers of the products subject to
the standard. (42 U.S.C. 6313(a)(6)(B)(I) and (C)(i)) In determining
the impacts of a potential amended standard on manufacturers, DOE
typically conducts an MIA. For the MIA, DOE first uses an annual cash-
flow approach to determine the quantitative impacts. This step
incorporates both a short-term impact assessment (based on the cost and
capital requirements during the period between when a regulation is
issued and when entities must comply with the regulation) and a long-
term impact assessment (over a 30-year period).\23\ The industry-wide
impacts analyzed include: (1) INPV, which values the industry on the
basis of expected future cash flows; (2) cash flows by year; (3)
changes in revenue and income; and (4) other measures of impact, as
appropriate. Second, DOE analyzes and reports the impacts on different
types of manufacturers (manufacturer subgroups), including impacts on
small manufacturers. Third, DOE considers the impact of standards on
domestic manufacturer employment and manufacturing capacity, as well as
the potential for new and amended standards to result in plant closures
and loss of capital investment. Finally, DOE takes into account
cumulative impacts of various DOE regulations and other regulatory
requirements on manufacturers.
---------------------------------------------------------------------------

\23\ DOE also presents a sensitivity analysis that considers
impacts for equipment shipped in a 9-year period, which is a proxy
for the timeline in EPCA for the review of certain energy
conservation standards and potential revision of and compliance with
such revised standards.
---------------------------------------------------------------------------

For individual commercial consumers, measures of economic impact
include the changes in LCC and PBP associated with new or amended
standards. These measures are discussed further in the following
section. For commercial consumers in the aggregate, DOE also calculates
the national net present value of the economic impacts applicable to a
particular rulemaking. DOE also evaluates the LCC impacts of potential
standards on identifiable subgroups of commercial consumers that may be
affected disproportionately by a national standard.
b. Savings in Operating Costs Compared to Increase in Price (Life-Cycle
Costs)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of CWH equipment compared to any
increase in the price of the equipment that is likely to result from
the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(II); 42 U.S.C.
6313(a)(6)(C)(i)) DOE conducts this comparison in its LCC and PBP
analysis.
The LCC is the sum of the purchase price of a piece of equipment
(including installation cost and sales tax) and the operating expense
(including energy, maintenance, and repair expenditures) discounted
over the lifetime of the equipment. To account for uncertainty and
variability in specific inputs, such as equipment lifetime and discount
rate, DOE uses distributions of values, with probabilities attached to
each value. For its analysis, DOE assumes that commercial consumers
will purchase the covered equipment in the first full year of
compliance with amended standards.
The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient equipment through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
The LCC savings are calculated relative to a no-new-standards case
that reflects projected market trends in the absence of amended
standards. DOE identifies the percentage of commercial consumers
estimated to receive LCC savings or experience an LCC increase, in
addition to the average LCC savings associated with a particular
standard level. DOE's LCC analysis is discussed in further detail in
section IV.F of this NOPR.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for adopting an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(III)) As
discussed in section IV.H of this NOPR and chapter 10 of the NOPR TSD,
DOE uses the NIA spreadsheet to project NES.
d. Lessening of Utility or Performance of Products
In establishing classes of equipment, and in evaluating design
options and the impact of potential standard levels, DOE must consider
any lessening of the utility or performance of the considered equipment
likely to result from the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(IV))
Based on data available to DOE, the standards proposed in this document
would not reduce the utility or performance of the products under
consideration in this rulemaking. As discussed in section IV.A.2.c, DOE
considered whether different venting technologies should be considered
a necessary feature.
Although the standards proposed in this NOPR would, if adopted,
effectively eliminate non-condensing technology (and associated
venting), DOE has recently published a final interpretive rule that
returns to the previous and long-standing interpretation (in effect
prior to the January 15, 2021 final interpretive rule), under which the
technology used to supply heated air or hot water is not a performance-
related ``feature'' that provides a distinct utility under EPCA. 86 FR
73947 (Dec. 29, 2021). Therefore, for the purpose of the analysis
conducted for this rulemaking DOE is not precluded from setting

[[Page 30626]]

energy conservation standards that preclude non-condensing technology
and did not analyze separate equipment classes for non-condensing and
condensing CWH equipment in this NOPR.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the Attorney General, that is
likely to result from a proposed standard. (See 42 U.S.C.
6313(a)(6)(B)(ii)(V)) DOE will transmit a copy of this proposed rule to
the Attorney General with a request that the DOJ provide its
determination on this issue. DOE will publish and respond to the
Attorney General's determination in the final rule. DOE invites comment
from the public regarding the competitive impacts that are likely to
result from this proposed rule. In addition, stakeholders may also
provide comments separately to DOJ regarding these potential impacts.
See the ADDRESSES section for information to send comments to DOJ.
f. Need for National Energy Conservation
DOE also considers the need for national energy conservation in
determining whether a new or amended standard is economically
justified. (42 U.S.C. 6313(a)(6)(B)(ii)(VI)) The energy savings from
the proposed standards are likely to provide improvements to the
security and reliability of the Nation's energy system. DOE conducts a
utility impact analysis to estimate how standards may affect the
Nation's needed power generation capacity, as discussed in section IV.M
of this document.
DOE maintains that environmental and public health benefits
associated with the more efficient use of energy are important to take
into account when considering the need for national energy
conservation. The proposed standards are likely to result in
environmental benefits in the form of reduced emissions of air
pollutants and GHGs associated with energy production and use. As part
of the analysis of the need for national energy and water conservation,
DOE conducts an emissions analysis to estimate how potential standards
may affect these emissions, as discussed in section IV.K of this
document; the estimated emissions impacts are reported in section V.B.6
of this document.\24\ DOE also estimates the economic value of
emissions reductions resulting from the considered TSLs, as discussed
in section IV.L of this document. DOE emphasizes that the SC-GHG
analysis presented in this NOPR and TSD was performed in support of the
cost-benefit analyses required by Executive Order 12866, and is
provided to inform the public of the impacts of emissions reductions
resulting from this proposed rule. The SC-GHG estimates were not
factored into DOE's EPCA analysis of the need for national energy and
water conservation.
---------------------------------------------------------------------------

\24\ As discussed in section IV.L of this document, for the
purpose of complying with the requirements of Executive Order 12866,
DOE also estimates the economic value of emissions reductions
resulting from the considered TSLs. DOE calculates this estimate
using a measure of the social cost (``SC'') of each pollutant (e.g.,
SC-CO<INF>2</INF>). Although this estimate is calculated for the
purpose of complying with Executive Order 12866, the Seventh Circuit
Court of Appeals confirmed in 2016 that DOE's consideration of the
social cost of carbon in energy conservation standards rulemakings
is permissible under EPCA. Zero Zone v. Dept of Energy, 832 F.3d
654, 678 (7th Cir. 2016).
---------------------------------------------------------------------------

g. 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. 6313(a)(6)(B)(ii)(VII)
and (C)(i)) DOE did not consider other factors for this document.
2. Rebuttable Presumption
EPCA creates a rebuttable presumption that an energy conservation
standard is economically justified if the additional cost to the
consumer of a product that meets the standard is less than three times
the value of the first year's energy savings resulting from the
standard, as calculated under the applicable DOE test procedure. DOE's
LCC and PBP analyses generate values used to calculate the effects that
potential amended energy conservation standards would have on the PBP
for commercial consumers. These analyses include, but are not limited
to, the 3-year PBP contemplated under the rebuttable-presumption test.
In addition, DOE routinely conducts an economic analysis that
considers the full range of impacts to commercial consumers,
manufacturers, the Nation, and the environment, as required under 42
U.S.C. 6313(a)(6)(B)(ii) and 42 U.S.C. 6313(a)(6)(C)(i). The results of
this analysis serve as the basis for DOE's evaluation of the economic
justification for a potential standard level (thereby supporting or
rebutting the results of any preliminary determination of economic
justification). The rebuttable presumption payback calculation is
discussed in section V.B.1.c of this document.

F. Revisions to Notes in Regulatory Text

In the withdrawn May 2016 CWH ECS NOPR, DOE proposed to modify the
three notes to the table of energy conservation standards in 10 CFR
431.110. 81 FR 34440, 34458 (May 31, 2016). First, DOE proposed to
modify the note to the table of energy conservation standards denoted
by subscript ``a'' to maintain consistency with DOE's procedure and
enforcement provisions for determining fuel input rate of gas-fired and
oil-fired CWH equipment that were proposed in the May 2016 CWH TP NOPR
(81 FR 28588, 28622 (May 9, 2016)). Among these changes, DOE proposed
that the fuel input rate certified to DOE, which must be equal to the
mean of the measured values of fuel input rate in a sample, be used to
determine equipment classes and calculate the standby loss standard.
Therefore, in the withdrawn May 2016 CWH ECS NOPR, DOE proposed to
replace the term ``nameplate input rate'' with the term ``fuel input
rate.'' 81 FR 34440, 34458 (May 31, 2016).
DOE also proposed to remove the note to the table of energy
conservation standards denoted by subscript ``b.'' This note clarifies
the compliance date for energy conservation standards for hot water
supply boilers with capacity less than 10 gallons. Specifically, the
note says that the standards in the table are mandatory for such
equipment beginning on October 21, 2005, but that between October 23,
2003 and October 21, 2005 manufacturers may either comply with the
standards listed in the table for hot water supply boilers with less
than 10 gallons of storage or with the standards in subpart E of 10 CFR
part 431 for a ``commercial packaged boiler.'' DOE determined that this
note is no longer needed because the specific compliance dates for hot
water supply boilers with less than 10 gallons of storage is well in
the past, with all such equipment being required to meet the standards
in the table in 10 CFR 431.110 since October 21, 2005. Id.
DOE also proposed to modify the note to the table of energy
conservation standards denoted by subscript ``c,'' which establishes
design requirements for water heaters and hot water supply boilers
having more than 140 gallons of storage capacity that do not meet the
standby loss standard. DOE proposed to replace the phrase ``fire
damper'' with the phrase ``flue damper,'' because ``flue damper'' was
more consistent with commonly used terminology and likely the intended
meaning, and that ``fire

[[Page 30627]]

damper'' was a typographical error.\25\ The intent of this design
requirement was to require that any water heaters or hot water supply
boilers greater than 140 gallons that do not meet the standby loss
standard must have some device that physically restricts heat loss
through the flue, either a flue damper or blower that sits atop the
flue. Id.
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\25\ In the January 2001 final rule, DOE used the terminology
``flue damper'' in the footnote to the standards table. 66 FR 3356.
The October 2004 final rule, which recodified the existing standards
to be contiguous with newly adopted test procedures, changed the
footnote terminology to ``fire damper'' without providing rationale.
69 FR 61985. Further, ASHRAE Standard 90.1 has consistently used the
term ``flue damper'' to describe the requirements. Therefore, DOE
concluded the change in the October 2004 final rule was likely
inadvertent.
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In response to the withdrawn May 2016 CWH ECS NOPR, A.O. Smith and
Rheem opposed DOE's proposal to replace the term ``nameplate input
rate'' with ``fuel input rate.'' A.O. Smith argued that because input
rate is one of the characteristics that define a product's DOE
classification, a fixed number such as the nameplate rated input is
necessary. A.O. Smith stated that manufacturers are required by safety
standards to display the rated input on product labels and operating
instructions. A.O. Smith also argued that the only role for rated input
during efficiency testing is to ensure the unit is firing on rate, and
that rated input has no effect on measurement of energy efficiency.
A.O. Smith added that replacing the term with ``fuel input rate'' does
not help consumers but will add regulatory burden to manufacturers.
Rheem disagreed with the method for determining ``fuel input rate''
proposed in the May 2016 CWH TP NOPR and believes that the term
``nameplate input rate'' is clear and consistent for all water heaters
and is should remain in subscript ``a.'' Rheem stated that it would
only support a change to the term ``fuel input rate'' if the method of
determining fuel input rate remains unchanged from how it is currently
performed in industry. (A.O. Smith, No. 39 at pp. 6-7; Rheem, No. 43 at
p. 8)
In the November 2016 CWH TP final rule, DOE did not adopt its
proposed certification provisions for fuel input rate. DOE stated that
the safety certification process during the design and development of
CWH equipment is sufficient for determining the rated input for CWH
equipment. Additionally, DOE adopted the term ``rated input'' to mean
the maximum rate at which CWH equipment is rated to use energy as
specified on the nameplate and adopted the term ``fuel input rate'' to
mean the rate at which any particular unit of CWH equipment consumes
energy during testing. 81 FR 79261, 79304-79306 (Nov. 10, 2016). To
maintain consistency with the November 2016 CWH TP final rule, DOE is
no longer proposing to adopt its proposal in the May 2016 CWH ECS NOPR
to replace the term ``nameplate input rate'' with the term ``fuel input
rate.'' Instead, DOE is proposing to replace the term ``nameplate input
rate'' with the term ``rated input.'' DOE notes that this change simply
ensures consistency in nomenclature throughout DOE's regulations for
CWH equipment. Similar to the term ``nameplate input rate,'' the term
``rated input'' also refers to the input rate specified on the
nameplate of CWH equipment. Additionally, in this NOPR, DOE continues
to propose the other revisions initially proposed in the May 2016 CWH
ECS NOPR to subscript ``b'' and ``c'' of 10 CFR 431.110 for the reasons
previously stated.
Issue 3: DOE requests comment on its proposed revisions to notes to
the table of energy conservation standards in 10 CFR 431.110.

G. Certification, Compliance, and Enforcement Issues

In the withdrawn May 2016 CWH ECS NOPR, DOE proposed to add
requirements to its certification, compliance, and enforcement
regulations at 10 CFR 429.44 that the rated value of storage volume
must equal the mean of the measured storage volume of the units in the
sample. 81 FR 34440, 34458 (May 31, 2016). DOE notes that there are
currently no requirements from the Department limiting the amount of
difference that is allowable between the tested (i.e., measured)
storage volume and the ``rated'' storage volume that is specified by
the manufacturer for CWH equipment other than residential-duty
commercial water heaters. In the July 2014 test procedure final rule,
DOE established a requirement for consumer water heaters and
residential-duty commercial water heaters that requires the rated
volume to be equal to the mean of the measured volumes in a sample. 79
FR 40542, 40565 (July 11, 2014).
From examination of reported measured storage volume data in the
AHRI Directory, DOE observed that many units are rated at storage
volumes above the measured storage volume. DOE's maximum standby loss
equations for gas-fired and oil-fired CWH equipment are based on the
rated storage volume, and the maximum standby loss standard increases
as rated storage volume increases. Consequently, DOE proposed to
require that the rated storage volume must be equal to the mean of the
values measured using DOE's test procedure. In addition, DOE proposed
to specify that for DOE-initiated testing, the mean of the measured
storage volumes must be within 5 percent of the rated volume in order
to use the rated storage volume in calculation of maximum standby loss.
If the mean of the measured storage volume is more than 5 percent
different than the rated storage volume, then DOE proposed to use the
mean of the measured values in calculation of maximum standby loss. DOE
notes that similar changes were made to DOE's certification,
compliance, and enforcement regulations for residential and
residential-duty water heaters in the July 2014 final rule. 79 FR
40542, 40565 (July 11, 2014). In the May 2016 CWH ECS NOPR, DOE
requested comment on its proposed changes to the certification,
compliance, and enforcement regulations requiring the rated volume to
be equal to the mean of the measured volumes in a sample.
AHRI, Bock, A.O. Smith, and Bradford White opposed DOE's proposed
changes to 10 CFR 429.44(b)(1)(ii)(C), which would make the rated
volume equal to the mean of measured storage volumes within the sample.
(AHRI, No. 40 at p. 37; Bock, No. 33 at p. 3; A.O. Smith, No. 39 at p.
7; Bradford White, No. 42 at p. 3) AHRI, Bock, A.O. Smith, Bradford
White, and Rheem stated that the relationship of measured volume and
rated volume is already addressed by the applicable water heater safety
standards. (AHRI, No. 40 at p. 37; Bock, No. 33 at p. 3; A.O. Smith,
No. 39 at p. 7; Bradford White, No. 42 at p. 3; Rheem, No. 43 at p. 9)
Bock stated that safety certification with ANSI Z21.10.3-2015 requires
that rated storage volume be within <plus-minus>5 percent of the
measured volume. Therefore, Bock argued that DOE should use rated
volume for the calculation of maximum standby loss, and the certifying
agency, ANSI, should resolve any discrepancy beyond a threshold of 5
percent between rated and measured volume with the manufacturer. (Bock,
No. 33 at p. 3)
AHRI, Rheem, Bradford White, and A.O. Smith commented that DOE's
proposed changes regarding certification of rated volume are
unnecessary. (AHRI, No. 40 at p. 37; Rheem, No. 43 at p. 9; Bradford
White, No. 42 at p. 3; A.O. Smith, No. 39 at p. 7) AHRI commented that
there is no evidence that the current practice of determining rated
volume has caused any problems in the field or in the compliance of CWH
equipment with the existing energy conservation standards. (AHRI, No.
40 at p. 37) AHRI and Rheem suggested that it is also

[[Page 30628]]

outside of DOE's authority to redefine how rated volume is determined
because it is not an energy conservation metric. (AHRI, No. 40 at p.
37; Rheem, No. 43 at p. 10) AHRI stated that it filed a petition with
DOE which was published in the Federal Register on November 7, 2014 (79
FR 66338) in response to a similar provision included in the July 2014
final rule for consumer water heaters and residential-duty commercial
water heaters. Specifically, AHRI's petition sought the repeal of
provisions that required the rated volume to be equal to the mean of
the measured volumes in a sample for consumer water heaters and
residential-duty commercial water heaters. AHRI stated in the petition
that these amendments in effect increase the stringency of the
applicable minimum standards for residential water heaters, are
unnecessary to develop a uniform energy descriptor, do not coincide
with industry practice, and would impose significant burden on
manufacturers in terms of additional testing and rewriting of market
literature. (AHRI, No. 40 at p. 37) Rheem added that to define rated
storage volume in the manner proposed in the May 2016 CWH ECS NOPR
provides no measurable benefits nor addresses any known complaints, and
it only would serve to infringe on industry standards and customary
practice in the marketplace (i.e., requiring rated volume to be equal
to the mean of measured volumes, rather than allowing a 5-percent
tolerance when determining rated volume as included in ANSI Z21.10.3-
2015). (Rheem, No. 43 at p. 10)
AHRI argued that according to 42 U.S.C. 6314(a)(4)(A), DOE is
required to adopt ``generally accepted industry test procedures''
unless that procedure either does not adequately measure energy or is
unduly burdensome. AHRI stated that establishing certification and
enforcement regulations for the rated volume of storage water heaters
is contrary to the policy established by Office of Management and
Budget (``OMB'') Circular No. A-119 and Executive Order 13563, in that
DOE has provided no evidence or compelling arguments that voluntary
consensus standards requirements for rated volume have failed to serve
the agency's needs. (AHRI, No. 40 at p. 38)
Rheem stated that while rated storage volume is used as a variable
in the standby loss equations for gas-fired and oil-fired CWH
equipment, thermal efficiency is the desired energy efficiency value
for these classes of CWH equipment in the industry and marketplace.
Rheem commented that thermal efficiency is not dependent on storage
volume. Conversely, Rheem stated that standby loss is the desired
energy efficiency metric for electric storage water heaters, but the
current maximum standby loss equation uses measured storage volume and
not rated storage volume. Therefore, Rheem argued that rated storage
volume is not a critical input to determining the desired energy
efficiency values by commercial consumers of CWH equipment. (Rheem, No.
43 at p. 10)
After considering the comments, DOE is not proposing to change the
requirements regarding certification of storage volume in this NOPR.
Additionally, in the withdrawn May 2016 CWH ECS NOPR DOE proposed
changes to the equations for maximum standby losses that would be
consistent with the proposed changes to DOE's certification,
compliance, and enforcement regulations. DOE received several comments
on these proposals. (A.O. Smith, No. 39 at p. 7; Bradford White, No. 42
at pp. 3-4; AHRI, Public Meeting Transcript, No. 20 at p. 14; Rheem,
No. 43 at pp. 10-11) However, because DOE is no longer proposing
changes to the storage volume determination of CWH equipment in this
NOPR, DOE is also no longer proposing to change the equations to
calculate maximum standby losses.
DOE is not proposing to establish equipment-specific certification
requirements for electric instantaneous water heaters in this NOPR. DOE
may propose to establish certification requirements for electric
instantaneous water heaters in future rulemakings.

H. General Comments

As discussed in section II.A of this NOPR, pursuant to EPCA, DOE
must determine, supported by clear and convincing evidence, that
amended standards for CWH equipment would result in significant
additional conservation of energy and be technologically feasible and
economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II); 42 U.S.C.
6313(a)(6)(C)(i)) The statutory criteria require more than just a
consideration of a standard level that provides the maximum improvement
in energy savings for CWH equipment. In making the determination of
economic justification of an amended standard, DOE must determine
whether the benefits of the proposed standard exceed the burdens of the
proposed standard by considering, to the maximum extent practicable,
the seven criteria described in EPCA (see 42 U.S.C.
6313(a)(6)(B)(ii)(I)-(VII)). A discussion of DOE's consideration of the
statutory factors is contained in section V of this NOPR.
The clear and convincing threshold is a heightened standard, and
would only be met where the Secretary has an abiding conviction, based
on available facts, data, and DOE's own analyses, that it is highly
probable an amended standard would result in a significant additional
amount of energy savings, and is technologically feasible and
economically justified. See American Public Gas Association v. U.S.
Dep't of Energy, No. 20-1068, 2022 WL 151923, at *4 (D.C. Cir. January
18, 2022) (citing Colorado v. New Mexico, 467 U.S. 310, 316, 104 S.Ct.
2433, 81 L.Ed.2d 247 (1984)).
In response to the withdrawn May 2016 CWH ECS NOPR, DOE received
comments and information regarding the assumptions that it used for
inputs in the rulemaking analyses. DOE considered these comments in
appropriate analyses conducted in this NOPR and modified its
assumptions and inputs as necessary to account for the information or
feedback provided by industry representatives. For example, DOE
received comments from stakeholders about the achievable standby loss
levels of gas-fired and electric storage water heaters. DOE used the
suggestions provided in these comments and updated its analyzed standby
loss levels to better reflect models currently on the market and the
technology options that are used to reduce standby loss. Based on
comments from stakeholders regarding the standby loss of electric
storage water heaters, DOE concluded that the only technology option
analyzed in the withdrawn NOPR would not reduce standby loss for all
models on the market across the range of storage volumes. Therefore,
DOE did not analyze amended energy conservation standards for electric
storage water heaters for this NOPR.
Several stakeholders commented that DOE's analysis incorrectly
estimates the energy use of CWH equipment (AHRI, No. 40 at p. 1; A.O.
Smith, No. 39 at p. 3; IECA, No. 24 at p. 1; Spire, No. 45 at pp. 12-
13) and costs to commercial consumers (AHRI, No. 40 at p. 1; A.O.
Smith, No. 39 at p. 3; IECA, No. 24 at p. 1; Bock, No. 33 at p. 2), and
underestimates the market share of higher-efficiency (i.e., condensing)
gas-fired CWH equipment currently on the market (AHRI, No. 40 at p. 1;
Bock, No. 33 at p. 2). AHRI further argued that DOE's analysis
overestimates the future shipments of CWH equipment. (AHRI, No. 40 at
p. 1) IECA argued that DOE substantially overstated the potential
benefits of the proposed standards and

[[Page 30629]]

understated the negative impact on U.S. manufacturing jobs. (IECA, No.
24 at p. 1)
In response, DOE notes that for this NOPR, it refined the total
shipment estimates and no-new-standards-case efficiency distributions
in its analyses by integrating additional shipment data provided by
AHRI in response to the withdrawn NOPR. DOE also updated its energy use
analysis by incorporating data from CBECS 2012, as suggested by
stakeholders.\26\ After thoroughly considering the stakeholder's
comments regarding installation costs of condensing gas-fired CWH
equipment, DOE re-evaluated its installation costs to align more
closely with field applications. Furthermore, DOE reiterates that it
conducts a rigorous analysis on impacts of amended standards on
manufacturers, including impact on direct employment. Section IV of
this NOPR provides details on DOE's updates to its various analyses.
---------------------------------------------------------------------------

\26\ DOE is aware that a new version of CBECS (CBECS 2018) will
likely be available for the next rulemaking phase, and DOE will
evaluate its applicability for the commercial water heater energy
analysis in that phase.
---------------------------------------------------------------------------

Spire argued that significant energy savings cannot be based on the
claim that the aggregate additional energy savings for all proposed
standards are significant. Spire asserted that DOE's obligation is to
consider each standard individually on the basis of clear and
convincing evidence. Spire further argued that DOE failed to consider
how fuel switching would affect the energy savings and emissions
reductions estimated in the withdrawn NOPR. (Spire, No. 45 at p. 5) AGA
and APGA recommended that DOE disaggregate the analyses of each
equipment class and treat each of its economic justification criteria
separately. AGA and APGA further argued that DOE's consideration of
each TSL by comparing the commercial consumer LCC results against
monetized emission reductions is entirely subjective and leads to
uncertainty as to what DOE considers to constitute ``economic
justification.'' (AGA and APGA, No. 35 at p. 4)
In response to the comments from Spire and AGA and APGA, as
described in section V.A of this NOPR, DOE groups various efficiency
levels for each equipment class into TSLs in order to examine the
combined impact that amended standards for all analyzed equipment
classes would have on an industry. This approach also allows DOE to
capture the effects on manufacturers of amended standards for all
classes, better reflecting the burdens for manufacturers that produce
equipment across several equipment classes. As discussed in section
IV.H.2 of this NOPR, DOE also considered the effects of fuel switching
by comparing total installed costs and operating costs of competing CWH
equipment types. From this analysis, DOE has tentatively concluded that
this NOPR will not incentivize fuel switching in the CWH market.
DOE disputes the notion that its consideration of TSLs is
subjective. Rather, through a detailed and thorough analysis, DOE
considered the benefits and burdens of amended standards for CWH
equipment to commercial consumers, the Nation, and manufacturers, in
accordance with the criteria described in EPCA (see 42 U.S.C.
6313(a)(6)(B)(ii)(I)-(VII)). Contrary to the assertion of AGA and APGA,
DOE's economic justification is not based on comparing the commercial
consumer LCC results against monetized emissions reductions. In fact,
DOE considers a variety of economic factors, including commercial
consumer LCC results, NPV of commercial consumer benefits, and
manufacturer INPV. DOE presents monetized benefits in accordance with
the applicable Executive Orders and DOE would reach the same tentative
conclusions presented in this NOPR in the absence of the social cost of
greenhouse gases, including the Interim Estimates presented by the
Interagency Working Group.

IV. Methodology and Discussion of Related Comments

This section addresses the analyses DOE has performed for this
proposed rulemaking with regard to CWH equipment. Separate subsections
address each component of DOE's analyses.
In overview, DOE used several analytical tools to estimate the
impact of the standards considered in this document. The first tool is
a spreadsheet that calculates the LCC and PBP of potential amended or
new energy conservation standards. The NIA uses a second spreadsheet
set that provides shipments forecasts and calculates NES and NPV
resulting from potential new or amended energy conservation
standards.\27\ These spreadsheet tools are available on the DOE website
for this proposed rulemaking: <a href="http://www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=36">www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=36</a>.
---------------------------------------------------------------------------

\27\ DOE routinely uses a third spreadsheet tool, the Government
Regulatory Impact Model (``GRIM''), to assess manufacturer impacts
of potential new or amended standards as part of the MIA. However,
as discussed in section III.E.1.a of this document, the MIA was not
updated for the SNOPR.
---------------------------------------------------------------------------

Additionally, DOE estimated the impacts on electricity demand and
air emissions from utilities due to the amended energy conservation
standards for CWH equipment. DOE used a version of the U.S. Energy
Information Administration's (``EIA's'') National Energy Modeling
System (``NEMS'') for the electricity and air emissions analyses. The
NEMS model simulates the energy sector of the U.S. economy. EIA uses
NEMS \28\ to prepare its Annual Energy Outlook (``AEO''), a widely
known baseline energy forecast for the United States. The version of
NEMS used for appliance standards analysis, which makes minor
modifications to the AEO version, is called NEMS-BT.\29\ NEMS-BT
accounts for the interactions among the various energy supply and
demand sectors and the economy as a whole.
---------------------------------------------------------------------------

\28\ For more information on NEMS, refer to EIA. The National
Energy Modeling System: An Overview. 2018. EIA: Washington, DC. DOE/
EIA-0581(2018). Available at <a href="http://www.eia.gov/outlooks/aeo/">www.eia.gov/outlooks/aeo/</a>.
\29\ EIA approves the 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 as used here. (BT stands for DOE's Building Technologies
Office.)
---------------------------------------------------------------------------

A. Market and Technology Assessment

For the market and technology assessment for CWH equipment, DOE
gathered information that provides an overall picture of the market for
the equipment concerned, including the purpose of the equipment, the
industry structure, manufacturers, market characteristics, and
technologies used in the equipment. This activity included both
quantitative and qualitative assessments based primarily on publicly-
available information. The subjects addressed in the market and
technology assessment for this rulemaking include the following: (1) A
determination of equipment classes, (2) manufacturers and industry
structure, (3) types and quantities of CWH equipment sold, (4) existing
efficiency programs, and (5) technologies that could improve the energy
efficiency of CWH equipment. The key findings of DOE's market
assessment are summarized below. Chapter 3 of the NOPR TSD provides
further discussion of the market and technology assessment.
1. Definitions
EPCA includes the following categories of CWH equipment as

[[Page 30630]]

covered industrial equipment: Storage water heaters, instantaneous
water heaters, and unfired hot water storage tanks. EPCA defines a
``storage water heater'' as a water heater that heats and stores water
internally at a thermostatically-controlled temperature for use on
demand. This term does not include units that heat with an input rating
of 4,000 Btu per hour or more per gallon of stored water. EPCA defines
an ``instantaneous water heater'' as a water heater that heats with an
input rating of at least 4,000 Btu per hour per gallon of stored water.
Lastly, EPCA defines an ``unfired hot water storage tank'' as a tank
that is used to store water that is heated external to the tank. (42
U.S.C. 6311(12)(A)-(C))
DOE first codified the following more specific definitions for CWH
equipment at 10 CFR 431.102 in the October 2004 direct final rule. 69
FR 61974, 61983. Several of these definitions were subsequently amended
in the November 2016 CWH TP final rule. 81 FR 79261, 79287-79288 (Nov.
10, 2016).
Specifically, DOE now defines ``hot water supply boiler'' in 10 CFR
431.102 as a packaged boiler that is industrial equipment and that (1)
has an input rating from 300,000 Btu/h to 12,500,000 Btu/h and of at
least 4,000 Btu/h per gallon of stored water; (2) is suitable for
heating potable water; and (3) meets either or both of the following
conditions: (i) It has the temperature and pressure controls necessary
for heating potable water for purposes other than space heating; or
(ii) the manufacturer's product literature, product markings, product
marketing, or product installation and operation instructions indicate
that the boiler's intended uses include heating potable water for
purposes other than space heating.
DOE also defines an ``instantaneous water heater'' in 10 CFR
431.102 as a water heater that uses gas, oil, or electricity,
including: (1) Gas-fired instantaneous water heaters with a rated input
both greater than 200,000 Btu/h and not less than 4,000 Btu/h per
gallon of stored water; (2) oil-fired instantaneous water heaters with
a rated input both greater than 210,000 Btu/h and not less than 4,000
Btu/h per gallon of stored water; and (3) electric instantaneous water
heaters with a rated input both greater than 12 kW and not less than
4,000 Btu/h per gallon of stored water.
DOE defines a ``storage water heater'' in 10 CFR 431.102 as a water
heater that uses gas, oil, or electricity to heat and store water
within the appliance at a thermostatically-controlled temperature for
delivery on demand including: (1) Gas-fired storage water heaters with
a rated input both greater than 75,000 Btu/h and less than 4,000 Btu/h
per gallon of stored water; (2) oil-fired storage water heaters with a
rated input both greater than 105,000 Btu/h and less than 4,000 Btu/h
per gallon of stored water; and (3) electric storage water heaters with
a rated input both greater than 12 kW and less than 4,000 Btu/h per
gallon of stored water.
Lastly, DOE defines an ``unfired hot water storage tank'' in 10 CFR
431.102 as a tank used to store water that is heated externally, and
that is industrial equipment.
2. Equipment Classes
When evaluating and establishing energy conservation standards, DOE
generally divides covered equipment into equipment classes by the type
of energy used or by capacity or other performance-related features
that justify a different standard. In determining whether a
performance-related feature justifies a different standard, DOE
considers such factors as the utility to the commercial consumers of
the feature and other factors DOE determines are appropriate.
CWH equipment classes are divided based on the energy source,
equipment category (i.e., storage vs. instantaneous and hot water
supply boilers), and size (i.e., input capacity and rated storage
volume). Unfired hot water storage tanks are also included as a
separate equipment class, but as discussed in section III.B.3 of this
proposed rulemaking are being considered as part of a separate
proceeding and therefore were not analyzed for this NOPR. Table IV.1
shows the current equipment classes and energy conservation standards
for CWH equipment other than residential-duty commercial water heaters,
and Table IV.2 shows DOE's current equipment classes and energy
conservation standards for residential-duty commercial water heaters.

Table IV.1--Current Equipment Classes and Energy Conservation Standards for CWH Equipment Except for Residential-
Duty Commercial Water Heaters
----------------------------------------------------------------------------------------------------------------
Energy conservation standards *
---------------------------------------------
Minimum thermal
efficiency Maximum standby loss
Equipment class Size (equipment (equipment manufactured
manufactured on on and after Oct. 29,
and after Oct. 9, 2003) ** [dagger]
2015) ** *** (%)
----------------------------------------------------------------------------------------------------------------
Electric storage water heaters......... All...................... N/A 0.30 + 27/Vm (%/h).
Gas-fired storage water heaters........ <=155,000 Btu/h.......... 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
>155,000 Btu/h........... 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
Oil-fired storage water heaters........ <=155,000 Btu/h.......... *** 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
>155,000 Btu/h........... *** 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
Electric instantaneous water heaters <10 gal.................. 80 N/A.
[Dagger].
>=10 gal................. 77 2.30 + 67/Vm (%/h).
Gas-fired instantaneous water heaters <10 gal.................. 80 N/A.
and hot water supply boilers. >=10 gal................. 80 Q/800 + 110(Vr)\1/2\ (Btu/
h).
Oil-fired instantaneous water heater <10 gal.................. 80 N/A
and hot water supply boilers. >=10 gal................. 78 Q/800 + 110(Vr)\1/2\ (Btu/
h).
----------------------------------------------------------------------------------------------------------------
Minimum thermal insulation
----------------------------------------------------------------------------------------------------------------
Unfired hot water storage tank......... All...................... R-12.5
----------------------------------------------------------------------------------------------------------------
* Vm is the measured storage volume, and Vr is the rated volume, both in gallons. Q is the nameplate input rate
in Btu/h.

[[Page 30631]]

** For hot water supply boilers with a capacity of less than 10 gallons: (1) The standards are mandatory for
products manufactured on and after October 21, 2005 and (2) products manufactured prior to that date, and on
or after October 23, 2003, must meet either the standards listed in this table or the applicable standards in
subpart E of part 431 for a ``commercial packaged boiler.''
*** For oil-fired storage water heaters: (1) The standards are mandatory for equipment manufactured on and after
October 9, 2015 and (2) equipment manufactured prior to that date must meet a minimum thermal efficiency level
of 78 percent.
[dagger] Water heaters and hot water supply boilers having more than 140 gallons of storage capacity need not
meet the standby loss requirement if: (1) The tank surface area is thermally insulated to R-12.5 or more, (2)
a standing pilot light is not used, and (3) for gas or oil-fired storage water heaters, they have a fire
damper or fan-assisted combustion.
[Dagger] Energy conservation standards for electric instantaneous water heaters are included in EPCA. In this
NOPR, DOE codifies these standards for electric instantaneous water heaters in its regulations at 10 CFR
431.110. Further discussion of standards for electric instantaneous water heaters is included in section
III.B.4 of this document.

Table IV.2--Current Equipment Classes and Energy Conservation Standards for Residential-Duty Commercial Water
Heaters
----------------------------------------------------------------------------------------------------------------
Equipment Specification * Draw pattern ** Uniform energy factor
----------------------------------------------------------------------------------------------------------------
Gas-fired Storage.................... >75 kBtu/h and......... Very Small............. 0.2674-(0.0009 x Vr).
<=105 kBtu/h and....... Low.................... 0.5362-(0.0012 x Vr).
<=120 gal and.......... Medium................. 0.6002-(0.0011 x Vr).
<=180 [deg]F........... High................... 0.6597-(0.0009 x Vr).
Oil-fired storage.................... >105 kBtu/h and........ Very Small............. 0.2932-(0.0015 x Vr).
<=140 kBtu/h and....... Low.................... 0.5596-(0.0018 x Vr).
<=120 gal and.......... Medium................. 0.6194-(0.0016 x Vr).
<=180 [deg]F........... High................... 0.6740-(0.0013 x Vr).
Electric instantaneous............... >12 kW and............. Very Small............. 0.80.
<=58.6 kW and.......... Low.................... 0.80.
<=2 gal and............ Medium................. 0.80.
<=180 [deg]F........... High................... 0.80.
----------------------------------------------------------------------------------------------------------------
* To be classified as a residential-duty water heater, a commercial water heater must, if requiring electricity,
use single-phase external power supply, and not be designed to heat water at temperatures greater than 180
[deg]F.
** Draw pattern is a classification of hot water use of a consumer water heater or residential-duty commercial
water heater, based upon the first-hour rating. The draw pattern is determined using the Uniform Test Method
for Measuring the Energy Consumption of Water Heaters in appendix E to subpart B of 10 CFR part 430.

As discussed in section IV.A.2.e, DOE proposed in the May 2016 CWH
ECS NOPR to consolidate commercial gas-fired and oil-fired storage
water heater equipment classes that are currently divided by input
rates of 155,000 Btu/h. 81 FR 34440, 34462 In the May 2016 CWH ECS
NOPR, DOE sought comment on the overall proposed equipment class
structure for CWH equipment. 81 FR 34440, 34460 (May 31, 2016). The
following subsections include clarifications in response to the various
comments received.
a. Residential-Duty Electric Instantaneous Water Heaters
Residential-duty electric instantaneous water heaters are a
separate equipment class within DOE's regulations for CWH equipment. In
the December 2016 conversion factor final rule, DOE established
equipment classes and energy conservation standards for residential-
duty commercial water heaters, including residential-duty electric
instantaneous water heaters. 81 FR 96204, 96239 (Dec. 29, 2016).
However, DOE notes that it did not analyze amended energy conservation
standards for this equipment class in this NOPR, as further discussed
in section III.B.4 of this NOPR.
b. Storage-Type Instantaneous Water Heaters
Based on a review of equipment on the market, DOE has found that
gas-fired storage-type instantaneous water heaters are very similar to
gas-fired storage water heaters, but with a higher ratio of input
rating to tank volume. This higher input-volume ratio is achieved with
a relatively larger heat exchanger paired with a relatively smaller
tank. Increasing either the input capacity or storage volume increases
the hot water delivery capacity of the water heater. However, through a
review of product literature, DOE did not identify any significant
design differences that would warrant different energy conservation
standard levels (for either thermal efficiency or standby loss) between
models in these two equipment classes. Therefore, DOE grouped the two
equipment classes together in the May 2016 CWH ECS NOPR analyses and
proposed the same standard levels for each equipment class.
In the withdrawn May 2016 CWH TP NOPR, DOE noted that the ``gas-
fired instantaneous water heaters and hot water supply boilers with a
storage volume greater than or equal to 10 gallons'' equipment class
encompasses both instantaneous water heaters and hot water supply
boilers with large volume heat exchangers, as well as instantaneous
water heaters with storage tanks (but with at least 4,000 Btu/h of
input per gallon of water stored). 81 FR 28588, 28607 (May 9, 2016).
Therefore, in the May 2016 CWH TP NOPR, DOE proposed to define
``storage-type instantaneous water heater'' as an instantaneous water
heater that includes a storage tank with a submerged heat exchanger(s)
or heating element(s). Id. at 81 FR 28637. However, based on industry
feedback, in the November 2016 CWH TP final rule, DOE decided not to
include the criterion regarding submerged heat exchanger(s) or heating
element(s) in the definition. Instead, DOE defined ``storage-type
instantaneous water heater'' as an instantaneous water heater that
includes a storage tank with a storage volume greater than or equal to
10 gallons. 81 FR 79261, 79289-79290 (Nov. 10, 2016).
In response to the May 2016 CWH ECS NOPR, DOE received various
comments regarding the difference (or lack of difference) between
storage-type instantaneous water heaters and storage water heaters and
questioning whether storage-type instantaneous equipment should be
considered in DOE's analysis. (Rheem, No. 43 at p. 11; Bock, No. 33 at
p. 3; A.O. Smith, No. 39 at p. 7; Bradford White, No. 42 at p. 4) As
stated, the definition for storage-type instantaneous water heaters was
finalized in the November 2016 CWH TP final rule. 81 FR 79261, 79289-

[[Page 30632]]

79290 (Nov. 10, 2016). For this NOPR DOE has continued to analyze
amended energy conservation standards for storage-type instantaneous
water heaters in a manner consistent with storage water heaters, as was
done in the withdrawn May 2016 CWH ECS NOPR. The potential standard
levels considered in this document reflect the similarity of these
types of equipment, with the same standard levels considered for both
storage water heaters and storage-type instantaneous water heaters.
c. Condensing Gas-Fired Water Heating Equipment
DOE has recently considered whether non-condensing technology (and
associated venting) constitutes a performance-related ``feature'' that
provides a distinct consumer utility under EPCA which may not be
eliminated by an energy conservation standard. On January 15, 2021, in
response to a petition for rulemaking submitted by the American Public
Gas Association, Spire, Inc., the Natural Gas Supply Association, the
American Gas Association, and the National Propane Gas Association (83
FR 54883; Nov. 1, 2018), DOE published the January 2021 final
interpretive rule determining that, in the context of residential
furnaces, commercial water heaters, and similarly-situated products/
equipment, use of non-condensing technology (and associated venting)
constitute a performance-related ``feature'' under EPCA that cannot be
eliminated through adoption of an energy conservation standard. 86 FR
4776. Correspondingly, DOE withdrew the May 2016 CWH ECS NOPR. 86 FR
3873 (Jan. 15, 2021).
However, DOE has subsequently published a final interpretive rule
that returns to the previous and long-standing interpretation (in
effect prior to the January 15, 2021 final interpretive rule), under
which the technology used to supply heated air or hot water is not a
performance-related ``feature'' that provides a distinct consumer
utility under EPCA. 86 FR 73947 (Dec. 29, 2021). For the purpose of the
analysis conducted for this rulemaking DOE did not analyze separate
equipment classes for non-condensing and condensing CWH equipment in
this NOPR.
d. Tankless Water Heaters and Hot Water Supply Boilers
In the withdrawn May 2016 CWH ECS NOPR, DOE discussed the
differences in design and application between equipment within the
``gas-fired instantaneous water heaters and hot water supply boilers''
equipment class with storage volume less than 10 gallons. 81 FR 34440,
34461-34462 (May 31, 2016). Specifically, DOE identified gas-fired
instantaneous water heaters and hot water supply boilers that are
``tankless water heaters'' and those that are ``hot water supply
boilers.'' Id. From examination of equipment literature and discussion
with manufacturers, DOE stated that tankless water heaters are
typically used without a storage tank, flow-activated, wall-mounted,
and capable of higher temperature rises. Hot water supply boilers,
conversely, are typically used with a storage tank and recirculation
loop, thermostatically-activated, and not wall-mounted. However,
despite these differences, tankless water heaters and hot water supply
boilers share basic similarities: Both kinds of equipment supply hot
water in commercial applications with at least 4,000 Btu/h per gallon
of stored water, and both include heat exchangers through which
incoming water flows and is heated by combustion flue gases that flow
around the heat exchanger tubes. DOE analyzed tankless water heaters
and hot water supply boilers as two separate kinds of representative
equipment for the instantaneous water heaters and hot water supply
boilers equipment class for the May 2016 CWH ECS NOPR. Id.
In response to the May 2016 CWH ECS NOPR, DOE received several
comments related to whether tankless water heaters and hot water supply
boilers should be treated as separate equipment classes in DOE's energy
conservation standards for CWH equipment and whether proposing the same
standards incentivizes any switching in shipments from one equipment
class to the other. In addition, responses to the withdrawn May 2016
NOPR indicated that some stakeholders were confused by the terminology
used in that NOPR and the types of equipment that were considered as
representative of this class. (AHRI, No. 40 at pp. 6-8 and Raypak, No.
41 at pp. 6-7; Rheem, No. 43 at p. 12; Bradford White, No. 42 at p. 4)
In the withdrawn May 2016 CWH ECS NOPR analysis, DOE used the term
``hot water supply boiler'' to generally refer not only to hot water
supply boilers, but also to instantaneous water heaters that have
similar designs and applications as hot waters supply boilers (i.e.,
instantaneous water heaters other than tankless water heaters and
storage-type instantaneous water heaters). DOE recognizes that this
terminology may have led to confusion for some stakeholders. Therefore,
in this NOPR, DOE refers to this representative equipment within the
equipment class of ``gas-fired instantaneous water heaters and hot
water supply boilers'' as ``gas-fired circulating water heaters and hot
water supply boilers.'' The term ``circulating water heater'' is a
commonly used term in industry, and its use is intended to resolve
confusion for stakeholders regarding the equipment included in DOE's
analyses. DOE is not proposing to define the term ``circulating water
heater'' in DOE's regulations, but rather uses the term within this
rulemaking notice and the NOPR TSD to clarify the name of
representative equipment for the analysis of gas-fired instantaneous
water heaters in response to the comments received on the May 2016 CWH
ECS NOPR. DOE reiterates that within this NOPR, the term ``circulating
water heaters and hot water supply boilers'' refers to both
instantaneous water heaters (other than tankless water heaters and
storage-type instantaneous water heaters) and hot water supply boilers.
With respect to the issue of whether separate equipment classes are
necessary, DOE acknowledges that there are certain design differences
between tankless water heaters and circulating water heaters and hot
water supply boilers. For this NOPR, DOE maintained its approach of
analyzing ``tankless water heaters'' and ``circulating water heaters
and hot water supply boilers'' as two separate kinds of representative
equipment in the gas-fired instantaneous water heaters equipment class,
and presents analytical results separately for the two types of
representative equipment in section V of this NOPR, although DOE is not
proposing to restructure the equipment classes.
e. Gas-Fired and Oil-Fired Storage Water Heaters
In the withdrawn May 2016 CWH ECS NOPR, DOE proposed to consolidate
commercial gas-fired and oil-fired storage water heater equipment
classes that are currently divided by input rates of 155,000 Btu/h. DOE
proposed the following two equipment classes without an input rate
distinction: (1) Gas-fired storage water heaters and (2) oil-fired
storage water heaters. 81 FR 34440, 34462 (May 31, 2016). The input
rate of 155,000 Btu/h was first used as a dividing criterion for
storage water heaters in the Energy Policy Act of 1992 (``EPAct 1992'')
amendments to EPCA, which mirrored the standard levels and equipment
classes in ASHRAE Standard 90.1-1989. (42 U.S.C. 6313(a)(5)(B)-(C))
ASHRAE has since updated its efficiency levels for oil-fired and gas-
fired storage water heaters in ASHRAE

[[Page 30633]]

Standard 90.1-1999 by consolidating equipment classes that were
previously divided by an input rate of 155,000 Btu/h. Pursuant to
requirements in EPCA, DOE adopted the increased standards in ASHRAE
Standard 90.1-1999, but did not correspondingly consolidate the
equipment classes above and below 155,000 Btu/h. As a result, DOE's
current standards are identical for the equipment classes that are
divided by input rate of 155,000 Btu/h.
For this NOPR, DOE is maintaining its proposal to realign the
equipment class structure to eliminate the input rate division at
155,000 Btu/h for commercial gas-fired storage water heaters and oil-
fired storage water heaters, consistent with the equipment class
structure in the latest version of ASHRAE Standard 90.1.
f. Grid-Enabled Water Heaters
DOE currently only prescribes a standby loss standard for
commercial electric storage water heaters, and in this NOPR DOE is not
proposing to amend the standby loss level for electric storage water
heaters. In the withdrawn May 2016 CWH ECS NOPR DOE had proposed an
amended standby loss standard for electric storage water heaters, which
DOE determined would be most commonly met by increasing insulation
thickness, and which would not differentially affect grid-enabled
technology. Therefore, in the May 2016 CWH ECS NOPR, DOE tentatively
concluded that a separate equipment class for grid-enabled commercial
electric storage water heaters was not warranted. 81 FR 34440 (May 31,
2016). DOE did not receive comments regarding its tentative conclusion
in the May 2016 CWH ECS NOPR. Because DOE is not proposing to amend the
standard for commercial electric storage water heaters, and because DOE
maintains that a grid-enabled water heater would not be differentially
impacted by a standby loss standard, DOE is not proposing to establish
a separate equipment class for grid-enabled electric storage water
heaters in this NOPR.
g. Input Capacity for Instantaneous Water Heaters and Hot Water Supply
Boilers
In response to the May 2016 CWH ECS NOPR, DOE received comments
suggesting that DOE should split up the equipment class for gas-fired
instantaneous water heaters and hot water supply boilers by input
capacity, similar to DOE's current energy conservation standards for
commercial packaged boilers. (Raypak, No. 41 at p. 7) However, DOE
notes that it adopted the current equipment class structure for
commercial packaged boilers, including the division by input capacity,
from ASHRAE 90.1. As discussed in section IV.A.2.c of this document,
EPCA established a specific and separate statutory scheme for
establishing and amending energy conservation standards applicable to
ASHRAE equipment, including CWH equipment. (See 42 U.S.C. 6313(a)(6))
DOE must adopt the level set forth in ASHRAE Standard 90.1 unless the
Department has clear and convincing evidence to adopt a more-stringent
standard. (See 42 U.S.C. 6313(a)(6)). ASHRAE 90.1 does not divide the
equipment classes for commercial gas-fired instantaneous water heaters
and hot water supply boilers by input capacity. Therefore, DOE has not
analyzed separate classes for gas-fired instantaneous water heaters and
hot water supply boilers equipment class by input capacity.
3. Review of the Current Market for CWH Equipment
In order to gather information needed for the market assessment for
CWH equipment, DOE consulted a variety of sources, including
manufacturer literature, manufacturer websites, the AHRI Directory of
Certified Product Performance,\30\ the CEC Appliance Efficiency
Database,\31\ and DOE's Compliance Certification Database.\32\ DOE used
these sources to compile a database of CWH equipment that served as
resource material throughout the analyses conducted for this
rulemaking. This database contained the following counts of unique
models: 768 commercial gas-fired storage water heaters, 94 residential-
duty commercial gas-fired storage water heaters, 167 commercial gas-
fired storage-type instantaneous water heaters (tank-type water heaters
with greater than 4,000 Btu/h per gallon of stored water), 19 gas-fired
tankless water heaters, 449 gas-fired circulating water heaters and hot
water supply boilers, 115 commercial oil-fired storage water heaters, 2
residential-duty commercial oil-fired storage water heaters, and 36
commercial oil-fired storage-type instantaneous water heaters. No oil-
fired tankless water heaters or hot water supply boilers were found on
the market. Chapter 3 of the NOPR TSD provides more information on the
CWH equipment currently available on the market, including a full
breakdown of these units into their equipment classes and graphs
showing performance data.
---------------------------------------------------------------------------

\30\ Last accessed on March 4, 2021 and available at
<a href="http://www.ahridirectory.org">www.ahridirectory.org</a>.
\31\ Last accessed on March 4, 2021 and available at
<a href="http://cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx">cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx</a>.
\32\ Last accessed on February 26, 2021 and available at
<a href="http://www.regulations.doe.gov/certification-data/">www.regulations.doe.gov/certification-data/</a>.
---------------------------------------------------------------------------

4. Technology Options
As part of the market and technology assessment, DOE uses
information about commercially-available technology options and
prototype designs to help identify technologies that manufacturers
could use to improve energy efficiency for CWH equipment. This effort
produces an initial list of all the technologies that are
technologically feasible. This assessment provides the technical
background and structure on which DOE bases its screening and
engineering analyses. Chapter 3 of the NOPR TSD includes descriptions
of all technology options identified for this equipment.
Because thermal efficiency, standby loss, and UEF are the relevant
performance metrics in this rulemaking, DOE did not consider
technologies that have no significant effect on these metrics. However,
DOE does not discourage manufacturers from using these other
technologies because they might reduce annual energy consumption in the
field. The following list includes the technologies that DOE did not
consider because they would not significantly affect efficiency as
measured by the DOE test procedure. Chapter 3 of the NOPR TSD provides
details and reasoning for the exclusion from further consideration of
each technology option, as listed here:
<bullet> Plastic tank.
<bullet> Direct vent.
<bullet> Timer controls.
<bullet> Intelligent and wireless controls.
<bullet> Modulating combustion.
<bullet> Self-cleaning.
DOE also did not consider technologies as options for increasing
efficiency if they are included in baseline equipment, as determined
from an assessment of units on the market. DOE's research suggests that
electromechanical flue dampers and electronic ignition are technologies
included in baseline equipment for commercial gas-fired storage water
heaters; therefore, they were not included as technology options for
that equipment class. However, electromechanical flue dampers and
electronic ignition were not identified on baseline units for
residential-duty gas-fired storage water heaters, and these options
were, therefore, considered for increasing efficiency of residential-
duty gas-fired storage water heaters. DOE also considered insulation of
fittings around pipes and ports in the

[[Page 30634]]

tank to be included in baseline equipment; therefore, such insulation
was not considered as a technology option for the analysis.
The technology options that were considered for improving the
energy efficiency of CWH equipment for this NOPR are as follows:
<bullet> Improved insulation (including increasing jacket
insulation, insulating tank bottom, advanced insulation types, and foam
insulation).
<bullet> Mechanical draft (including induced draft (also known as
power vent) and forced draft).
<bullet> Condensing heat exchanger (for all gas-fired equipment
classes and including optimized flue geometry).
<bullet> Condensing pulse combustion.
<bullet> Improved heat exchanger design (including increased
surface area and increased baffling).
<bullet> Sidearm heating and two-phase thermosiphon technology.
<bullet> Electronic ignition systems.
<bullet> Improved heat pump water heaters (including gas absorption
heat pump water heaters).
<bullet> Premix burner (including submerged combustion chamber for
gas-fired storage water heaters and storage-type instantaneous water
heaters).
<bullet> Electromechanical flue damper.
<bullet> Modulating combustion.

B. Screening Analysis

DOE uses the following screening criteria to determine which
technology options are suitable for further consideration in an energy
conservation standards rulemaking:
<bullet> Technological feasibility. DOE will consider technologies
incorporated in commercial products or in working prototypes to be
technologically feasible. Technologies that are not incorporated in
commercial equipment or in working prototypes are not considered in
this NOPR.
<bullet> Practicability to manufacture, install, and service. If
mass production and reliable installation and servicing of a technology
in commercial products could be achieved on the scale necessary to
serve the relevant market at the time of the compliance date of the
standard, then DOE will consider that technology practicable to
manufacture, install, and service.
<bullet> Adverse impacts on product utility or product
availability. If DOE determines a technology would have a significant
adverse impact on the utility of the product to significant subgroups
of commercial 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, it will not consider this technology further.
<bullet> Adverse impacts on health or safety. If DOE determines
that a technology will have significant adverse impacts on health or
safety, it will not consider this technology further.
<bullet> Unique-pathway proprietary technologies. If a design
option utilizes proprietary technology that represents a unique pathway
to achieving a given efficiency level, that technology will not be
considered further.
10 CFR 431.4; 10 CFR part 430, subpart C, appendix A, sections 6(c)(3)
and 7(b).
1. Screened-Out Technologies
Technologies that pass through the screening analysis are
subsequently examined in the engineering analysis for consideration in
DOE's downstream cost-benefit analysis. Based upon a review under the
above factors, DOE screened out the design options listed in Table IV.3
for the reasons provided. Chapter 4 of the NOPR TSD contains additional
details on the screening analysis, including a discussion of why each
technology option was screened out.

Table IV.3--Summary of Screened-Out Technology Options
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reasons for exclusion
---------------------------------------------------------------------------------
Applicable equipment Practicability Adverse Adverse Unique-
Excluded technology option classes * Technological to manufacture, impacts on impacts on pathway
feasibility install, and product health or proprietary
service utility safety technology
--------------------------------------------------------------------------------------------------------------------------------------------------------
Advanced insulation types................ All storage water heaters.. X X
Condensing pulse combustion.............. All gas-fired equipment X
classes.
Sidearm heating.......................... All gas-fired storage...... X
Two-phase thermosiphon technology........ All gas-fired storage...... X
Gas absorption heat pump water heaters... Gas-fired instantaneous X
water heaters.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* All mentions of storage water heaters in this column refer to both storage water heaters and storage-type instantaneous water heaters.

In this NOPR, DOE has tentatively concluded that none of the
identified technology options are proprietary. However, in the
engineering analysis, DOE included the manufacturer production costs
associated with multiple designs of condensing heat exchangers used by
a range of manufacturers and these represent the vast majority of the
condensing gas-fired storage water heater market to account for
intellectual property rights surrounding specific designs of condensing
heat exchangers.
2. Remaining Technologies
After screening out or otherwise removing from consideration
certain technologies, the remaining technologies are passed through for
consideration in the engineering analysis. Table IV.4 presents
identified technologies for consideration in the engineering analysis.
Chapter 3 of the NOPR TSD contains additional details on the technology
assessment and the technologies analyzed.

[[Page 30635]]

Table IV.4--Technology Options Considered for Engineering Analysis
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increased heat Electro-
Equipment Mechanical Condensing heat exchanger area, Electronic Premix burner mechanical flue
draft exchanger baffling ignition damper
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial gas-fired storage water heaters and X X X X
storage-type instantaneous water heaters.........
Residential-duty gas-fired storage water heaters.. X X X X X X
Gas-fired instantaneous water heaters and hot X X X X
water supply boilers.............................
--------------------------------------------------------------------------------------------------------------------------------------------------------

C. Engineering Analysis

The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of CWH equipment. There
are two elements to consider in the engineering analysis: The selection
of efficiency levels to analyze (i.e., the ``efficiency analysis'') and
the determination of product cost at each efficiency level (i.e., the
``cost analysis''). In determining the performance of higher-efficiency
equipment, DOE considers technologies and design option combinations
not eliminated by the screening analysis. For each equipment category,
DOE estimates the baseline cost, as well as the incremental cost for
the equipment at efficiency levels above the baseline. The output of
the engineering analysis is a set of cost-efficiency ``curves'' that
are used in downstream analyses (i.e., the LCC and PBP analyses and the
NIA).
1. Efficiency Analysis
DOE typically uses one of two approaches to develop energy
e

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