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Proposed Rule2023-15306

Energy Conservation Program: Energy Conservation Standards for Consumer Water Heaters

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Published

July 28, 2023

Issuing agencies

Energy Department

Abstract

The Energy Policy and Conservation Act, as amended ("EPCA"), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including consumer water heaters. EPCA also requires the U.S. Department of Energy ("DOE" or "the Department") to periodically determine whether more- stringent standards would be technologically feasible and economically justified, and would result in significant energy savings. In this notice of proposed rulemaking ("NOPR"), DOE proposes amended energy conservation standards for consumer water heaters, and also announces a public meeting to receive comments on these proposed standards and associated analyses and results.

Full Text

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[Federal Register Volume 88, Number 144 (Friday, July 28, 2023)]
[Proposed Rules]
[Pages 49058-49177]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-15306]

[[Page 49057]]

Vol. 88

Friday,

No. 144

July 28, 2023

Part III

Department of Energy

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10 CFR Parts 429 and 430

Energy Conservation Program: Energy Conservation Standards for Consumer
Water Heaters; Proposed Rule

Federal Register / Vol. 88, No. 144 / Friday, July 28, 2023 /
Proposed Rules

[[Page 49058]]

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DEPARTMENT OF ENERGY

10 CFR Parts 429 and 430

[EERE-2017-BT-STD-0019]
RIN 1904-AD91

Energy Conservation Program: Energy Conservation Standards for
Consumer Water Heaters

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 various consumer products
and certain commercial and industrial equipment, including consumer
water heaters. EPCA also requires the U.S. Department of Energy
(``DOE'' or ``the Department'') to periodically determine whether more-
stringent standards would be technologically feasible and economically
justified, and would result in significant energy savings. In this
notice of proposed rulemaking (``NOPR''), DOE proposes amended energy
conservation standards for consumer water heaters, and also announces a
public meeting to receive comments on these proposed standards and
associated analyses and results.

DATES: Comments: DOE will accept comments, data, and information
regarding this NOPR no later than September 26, 2023.
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 August 28, 2023.
Meeting: DOE will hold a public meeting via webinar on September
13, 2023, from 1:00 p.m. to 4:00 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> under docket
number EERE-2017-BT-STD-0019. Follow the instructions for submitting
comments. Alternatively, interested persons may submit comments,
identified by docket number EERE-2017-BT-STD-0019, by any of the
following methods:
(1) Email: <a href="/cdn-cgi/l/email-protection#a4e7cbcad7d1c9c1d6f3c5d0c1d6ecc1c5d0c1d6d796949593f7f0e09494959de4c1c18ac0cbc18ac3cbd2">[email&#160;protected]</a>. Include the
docket number EERE-2017-BT-STD-0019 in the subject line of the message.
(2) Postal Mail: Appliance and Equipment Standards Program, U.S.
Department of Energy, Building Technologies Office, Mailstop EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone:
(202) 287-1445. If possible, please submit all items on a compact disc
(``CD''), in which case it is not necessary to include printed copies.
(3) Hand Delivery/Courier: Appliance and Equipment Standards
Program, U.S. Department of Energy, Building Technologies Office, 950
L'Enfant Plaza SW, 6th Floor, Washington, DC 20024. Telephone: (202)
287-1445. If possible, please submit all items on a CD, in which case
it is not necessary to include printed copies.
No telefacsimiles (``faxes'') will be accepted. For detailed
instructions on submitting comments and additional information on this
process, see section IV of this document.
Docket: The docket for this activity, 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, not all
documents listed in the index may be publicly available, such as
information that is exempt from public disclosure.
The docket web page can be found at <a href="http://www.regulations.gov/docket/EERE-2017-BT-STD-0019">www.regulations.gov/docket/EERE-2017-BT-STD-0019</a>. The docket web page contains instructions on how
to access all documents, including public comments, in the docket. See
section VII of this document for information on how to submit comments
through <a href="http://www.regulations.gov">www.regulations.gov</a>.
EPCA requires the Attorney General to provide to DOE a written
determination of whether the proposed standard is likely to lessen
competition. The U.S. Department of Justice 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#7d1813180f1a04530e091c13191c0f190e3d080e191217531a120b">[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. Email:
<a href="/cdn-cgi/l/email-protection#1a5b6a6a76737b74797f496e7b747e7b687e694b6f7f696e737574695a7f7f347e757f347d756c">[email&#160;protected]</a>.
Ms. Melanie Lampton, U.S. Department of Energy, Office of the
General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC
20585-0121. Telephone: (240) 751-5157. Email:
<a href="/cdn-cgi/l/email-protection#175a727b76797e72395b767a67637879577f663973787239707861">[email&#160;protected]</a>.
For further information on how to submit a comment, review other
public comments and the docket, or participate in the public meeting,
contact the Appliance and Equipment Standards Program staff at (202)
287-1445 or by email: <a href="/cdn-cgi/l/email-protection#e0a190908c89818e8385b394818e8481928493b195859394898f8e93a08585ce848f85ce878f96">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

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
1. Current Standards
2. History of the Current Standards Rulemaking for Consumer
Water Heaters
C. Deviation From Appendix A
III. General Discussion
A. Scope of Coverage
B. Test Procedure
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 Consumers
b. Savings in Operating Costs Compared to Increase in Price (LCC
and PBP)
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. Interested Party Recommendations
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Product Classes
a. Circulating Water Heater and Low-Temperature Water Heaters
b. Storage-Type and Instantaneous-Type Product Classes
c. Gas-Fired Water Heaters
d. Electric Storage Water Heaters
2. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies

[[Page 49059]]

C. Engineering Analysis
1. Product Classes With Current UEF-Based Standards
a. Efficiency Analysis
b. Design Options
c. Cost Analysis
d. Shipping Costs
e. Cost-Efficiency Results
2. Product Classes Without Current UEF-Based Standards
3. Manufacturer Selling Price
D. Markups Analysis
E. Energy Use Analysis
1. Building Sample
2. Consumer Water Heater Sizing and Draw Pattern
3. Consumer Water Heater Energy Use Determination
4. Heat Pump Water Heater Energy Use Determination
F. Life-Cycle Cost and Payback Period Analysis
1. Product Cost
2. Installation Cost
a. Basic Installation Costs and Inputs
b. Gas-Fired and Oil-Fired Water Heater Installation Costs
c. Condensate Withdrawal for Higher Efficiency Design Options
d. Heat Pump Water Heater Installation Costs
3. Annual Energy Consumption
4. Energy Prices
5. Maintenance and Repair Costs
6. Product Lifetime
7. Discount Rates
8. Energy Efficiency Distribution in the No-New-Standards Case
9. Accounting for Product Switching Under Potential Standards
10. Payback Period Analysis
G. Shipments Analysis
1. Impact of Potential Standards on Shipments
a. Impact of Consumer Choice for Electric Storage Water Heaters
b. Impact of Repair vs. Replace
H. National Impact Analysis
1. Product Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
I. Consumer Subgroup Analysis
1. Low-Income Households
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
3. Manufacturer Interviews
a. Level of Investment Associated With Concurrent Technology
Shifts
b. Lowboy Electric Storage Water Heaters
4. Discussion of MIA Comments
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 Emissions Impacts
M. Trial Standard Levels
N. Utility Impact Analysis
O. Employment Impact Analysis
V. Analytical Results and Conclusions
A. 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. Direct Impacts on 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 Economic Impacts
B. Conclusion
1. Benefits and Burdens of TSLs Considered for Consumer Water
Heater Standards
2. Annualized Benefits and Costs of the Proposed Standards
C. Test Procedure Applicability
1. Efficiency Determinations Using High Temperature Testing
2. Circulating Water Heaters
a. Storage Tank for Circulating Heat Pump Water Heaters
b. Product-Specific Enforcement Provisions for Circulating Water
Heaters
3. Determination of Storage Volume for Water Heaters Less Than 2
Gallons
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866, 13563 and 14094
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 Including
Differences in Cost, if Any, for Different Groups of Small Entities
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
VII. Public Participation
A. Attendance at the Public Meeting
B. Procedure for Submitting Prepared General Statements for
Distribution
C. Conduct of the Public Meeting Webinar
D. Submission of Comments
E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Synopsis of the Proposed Rule

The Energy Policy and Conservation Act,\1\ as amended, Public Law
94-163 (42 U.S.C. 6291-6317, as codified) authorizes DOE to regulate
the energy efficiency of a number of consumer products and certain
industrial equipment. Title III, Part B of EPCA \2\ established the
Energy Conservation Program for Consumer Products Other Than
Automobiles. (42 U.S.C. 6291-6309) These products include consumer
water heaters, the subject of this proposed rulemaking.
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\1\ 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), which reflect the last statutory amendments that impact
Parts A and A-1 of EPCA.
\2\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
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Pursuant to EPCA, any new or amended energy conservation standard
must be designed to achieve the maximum improvement in energy
efficiency that DOE determines is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new
or amended standard must result in a significant conservation of
energy. (42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later
than 6 years after issuance of any final rule establishing or amending
a standard, DOE must publish either a notice of determination that
standards for the product do not need to be amended, or a notice of
proposed rulemaking including new proposed energy conservation
standards (proceeding to a final rule, as appropriate). (42 U.S.C.
6295(m))
In accordance with these and other statutory provisions discussed
in this document, DOE proposes new and amended energy conservation
standards for consumer water heaters. The proposed standards, which are
expressed in terms of uniform energy factor (``UEF''), are shown in
Table I.1. These proposed standards, if adopted, would apply to all
consumer water heaters listed in Table I.1 manufactured in, or imported
into, the United States starting on the date 5 years after the

[[Page 49060]]

publication of the final rule for this proposed rulemaking.

Table I.1--Proposed Energy Conservation Standards for Consumer Water Heaters
----------------------------------------------------------------------------------------------------------------
Effective storage
volume and input
Product class rating * (if Draw pattern Uniform energy factor
applicable)
----------------------------------------------------------------------------------------------------------------
Gas-fired Storage Water Heater.... <20 gal.............. Very Small............... 0.2062-(0.0020 x Veff)
Low...................... 0.4893-(0.0027 x Veff)
Medium................... 0.5758-(0.0023 x Veff)
High..................... 0.6586-(0.0020 x Veff)
>=20 gal and <=55 gal Very Small............... 0.3925-(0.0020 x Veff)
Low...................... 0.6451-(0.0019 x Veff)
Medium................... 0.7046-(0.0017 x Veff)
High..................... 0.7424-(0.0013 x Veff)
>55 gal and <=100 gal Very Small............... 0.6470-(0.0006 x Veff)
Low...................... 0.7689-(0.0005 x Veff)
Medium................... 0.7897-(0.0004 x Veff)
High..................... 0.8072-(0.0003 x Veff)
>100 gal............. Very Small............... 0.1482-(0.0007 x Veff)
Low...................... 0.4342-(0.0017 x Veff)
Medium................... 0.5596-(0.0020 x Veff)
High..................... 0.6658-(0.0019 x Veff)
Oil-fired Storage Water Heater.... <=50 gal............. Very Small............... 0.2909-(0.0012 x Veff)
Low...................... 0.5730-(0.0016 x Veff)
Medium................... 0.6478-(0.0016 x Veff)
High..................... 0.7215-(0.0014 x Veff)
>50 gal.............. Very Small............... 0.1580-(0.0009 x Veff)
Low...................... 0.4390-(0.0020 x Veff)
Medium................... 0.5389-(0.0021 x Veff)
High..................... 0.6172-(0.0018 x Veff)
Very Small Electric Storage Water <20 gal.............. Very Small............... 0.5925-(0.0059 x Veff)
Heater. Low...................... 0.8642-(0.0030 x Veff)
Medium................... 0.9096-(0.0020 x Veff)
High..................... 0.9430-(0.0012 x Veff)
Small Electric Storage Water >=20 gal and <=35 gal Very Small............... 0.8808-(0.0008 x Veff)
Heater.
Low...................... 0.9254-(0.0003 x Veff)
Electric Storage Water Heaters.... >20 and <=55 gal Very Small............... 2.30
(excluding small Low...................... 2.30
electric storage
water heaters).
Medium................... 2.30
High..................... 2.30
>55 gal and <=120 gal Very Small............... 2.50
Low...................... 2.50
Medium................... 2.50
High..................... 2.50
>120 gal............. Very Small............... 0.3574-(0.0012 x Veff)
Low...................... 0.7897-(0.0019 x Veff)
Medium................... 0.8884-(0.0017 x Veff)
High..................... 0.9575-(0.0013 x Veff)
Tabletop Water Heater............. <20 gal.............. Very Small............... 0.5925-(0.0059 x Veff)
Low...................... 0.8642-(0.0030 x Veff)
>=20 gal and <=120 Very Small............... 0.6323-(0.0058 x Veff)
gal.
Low...................... 0.9188-(0.0031 x Veff)
Instantaneous Gas-fired Water <2 gal and <=50,000 Very Small............... 0.64
Heater. Btu/h.
Low...................... 0.64
Medium................... 0.64
High..................... 0.64
<2 gal and >50,000 Very Small............... 0.89
Btu/h.
Low...................... 0.91
Medium................... 0.91
High..................... 0.93
>=2 gal and <=200,000 Very Small............... 0.2534-(0.0018 x Veff)
Btu/h.
Low...................... 0.5226-(0.0022 x Veff)
Medium................... 0.5919-(0.0020 x Veff)
High..................... 0.6540-(0.0017 x Veff)
Instantaneous Oil-fired Water <2 gal and <=210,000 Very Small............... 0.61
Heater. Btu/h.
Low...................... 0.61
Medium................... 0.61
High..................... 0.61
>=2 gal and <=210,000 Very Small............... 0.2780-(0.0022 x Veff)
Btu/h.
Low...................... 0.5151-(0.0023 x Veff)
Medium................... 0.5687-(0.0021 x Veff)
High..................... 0.6147-(0.0017 x Veff)
Instantaneous Electric Water <2 gal............... Very Small............... 0.91
Heater.
Low...................... 0.91

[[Page 49061]]

Medium................... 0.91
High..................... 0.92
>=2 gal.............. Very Small............... 0.8086-(0.0050 x Veff)
Low...................... 0.9123-(0.0020 x Veff)
Medium................... 0.9252-(0.0015 x Veff)
High..................... 0.9350-(0.0011 x Veff)
Grid-Enabled Water Heater......... >75 gal.............. Very Small............... 1.0136-(0.0028 x Veff)
Low...................... 0.9984-(0.0014 x Veff)
Medium................... 0.9853-(0.0010 x Veff)
High..................... 0.9720-(0.0007 x Veff)
Gas-fired Circulating Water Heater <=200,000 Btu/h...... Very Small............... 0.8000-(0.0011 x Veff)
Low...................... 0.8100-(0.0011 x Veff)
Medium................... 0.8100-(0.0011 x Veff)
High..................... 0.8100-(0.0011 x Veff)
Oil-fired Circulating Water Heater <=210,000 Btu/h...... Very Small............... 0.6100-(0.0011 x Veff)
Low...................... 0.6100-(0.0011 x Veff)
Medium................... 0.6100-(0.0011 x Veff)
High..................... 0.6100-(0.0011 x Veff)
Electric Circulating Water Heater. <=12 kW; for heat Very Small............... 0.9100-(0.0011 x Veff)
pump type units <=24
A at <=250 V.
Low...................... 0.9100-(0.0011 x Veff)
Medium................... 0.9100-(0.0011 x Veff)
High..................... 0.9200-(0.0011 x Veff)
----------------------------------------------------------------------------------------------------------------
* Effective storage volume is the representative value of storage volume as determined in accordance with the
DOE test procedure at appendix E to subpart B of 10 CFR part 430 and applicable sampling plans.

A. Benefits and Costs to Consumers

Table I.2 presents DOE's evaluation of the economic impacts of the
proposed standards on consumers of consumer water heaters, 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
product classes, and the PBP is less than the average lifetime of
consumer water heaters, which is estimated to be 15 years for storage
and 20 years for instantaneous water heaters (see section IV.F 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.8 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.9 of this document).

Table I.2--Impacts of Proposed Energy Conservation Standards on
Consumers of Consumer Water Heaters
------------------------------------------------------------------------
Effective
storage volume Average LCC Simple
Product class and input savings payback
rating (if (2022$) (years)
applicable)
------------------------------------------------------------------------
Gas-fired Storage Water >=20 gal and 52 7.9
Heater. <=55 gal.
Oil-fired Storage Water <=50 gal....... 165 6.4
Heater.
Electric Storage Water >=20 gal and 1,868 3.0
Heaters *. <=55 gal
(excluding
Small ESWHs).
>55 gal and 501 0.2
<=120 gal.
Instantaneous Gas-fired <2 gal and 135 5.9
Water Heater. >50,000 Btu/h
and <200,000
Btu/h.
------------------------------------------------------------------------
* DOE is not proposing amended standards for small electric storage
water heaters (i.e., electric storage water heaters greater than or
equal to 20 gallons but less than 35 gallons in effective storage
volume, with first-hour ratings less than 51 gallons), so those
products are not impacted by the proposed rule.

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 (2023-2059). Using a real discount rate of
9.6 percent, DOE estimates that the INPV for manufacturers of consumer
water heaters in the case without amended standards is $2,554.7 million
in 2022$. Under the proposed standards, the change in INPV is estimated
to range from negative 8.1 percent to positive 6.5 percent, which is a
loss of $207.3 million to a gain of $165.5 million. In order to bring
products into compliance with amended standards, it is estimated that
the industry would incur total conversion costs of $228.1 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 2022
dollars.
---------------------------------------------------------------------------

DOE's analyses indicate that the proposed energy conservation
standards for consumer water heaters would save a significant amount of
energy. Relative

[[Page 49062]]

to the case without amended standards, the lifetime energy savings for
consumer water heaters purchased in the 30-year period that begins in
the anticipated year of compliance with the amended standards (2030-
2059) amount to 27 quadrillion British thermal units (``Btu''), or
quads.\5\ This represents a savings of 21 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 includes 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.1 of this document.
---------------------------------------------------------------------------

The cumulative net present value (``NPV'') of total consumer
benefits of the proposed standards for consumer water heaters are $56
billion at a 7-percent discount rate and $161 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 consumer water heaters purchased in 2030-2059.
In addition, the proposed standards for consumer water heaters 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, 2030-2059) of
501 million metric tons (``Mt'') \6\ of carbon dioxide
(``CO<INF>2</INF>''), 143 thousand tons of sulfur dioxide
(``SO<INF>2</INF>''), 988 thousand tons of nitrogen oxides
(``NO<INF>X</INF>''), 4,541 thousand tons of methane
(``CH<INF>4</INF>''), 4.6 thousand tons of nitrous oxide
(``N<INF>2</INF>O''), and 1.0 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 2023 (``AEO2023''). AEO2023 represents current federal and
state legislation and final implementation of regulations as of the
time of its preparation. See section IV.K of this document for
further discussion of AEO2023 assumptions that effect air pollutant
emissions. The AEO 2023 reflects the impact of the Inflation
Reduction Act.
---------------------------------------------------------------------------

DOE estimates the value of climate benefits from a reduction in
greenhouse gases (``GHG'') using four different estimates of the social
cost of CO<INF>2</INF> (``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
GHG (``SC-GHG'').'').\8\ DOE used interim SC-GHG values developed by an
Interagency Working Group on the Social Cost of Greenhouse Gases
(``IWG'').\9\ The derivation of these values is discussed in section
IV.L of this document. For presentational purposes, the climate
benefits associated with the average SC-GHG at a 3-percent discount
rate are estimated to be $25 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 sets of SC-
GHG estimates.
---------------------------------------------------------------------------

\8\ To monetize the benefits of reducing greenhouse gas
emissions this analysis uses the interim estimates presented in the
Technical Support Document: Social Cost of Carbon, Methane, and
Nitrous Oxide Interim Estimates Under Executive Order 13990
published in February 2021 by the Interagency Working Group on the
Social Cost of Greenhouse Gases (IWG).
\9\ See Interagency Working Group on Social Cost of Greenhouse
Gases, Technical Support Document: Social Coast of Carbon, Methane,
and Nitrous Oxide. Interim Estimates Under Executive Order 13990,
Washington, DC, February 2021 (``February 2021 SC-GHG TSD'').
<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>.
---------------------------------------------------------------------------

DOE estimated the monetary health benefits of SO<INF>2</INF> and
NO<INF>X</INF> emissions reductions using benefit per ton estimates
from the scientific literature, as discussed in section IV.L of this
document. DOE estimated the present value of the health benefits would
be $17 billion using a 7-percent discount rate, and $49 billion using a
3-percent discount rate.\10\ DOE is currently only monetizing (for
SO<INF>2</INF> and NO<INF>X</INF>) PM<INF>2.5</INF> precursor health
benefits 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 estimates the economic value of these emissions
reductions resulting from the considered TSLs for the purpose of
complying with the requirements of Executive Order 12866.
---------------------------------------------------------------------------

Table I.3 summarizes the economic benefits and costs expected to
result from the proposed standards for consumer water heaters. There
are other important unquantified effects, including certain
unquantified climate benefits, unquantified public health benefits from
the reduction of toxic air pollutants and other emissions, unquantified
energy security benefits, and distributional effects, among others.

Table I.3--Summary of Monetized Benefits and Costs of Proposed Energy
Conservation Standards for Consumer Water Heaters
[TSL 2]
------------------------------------------------------------------------
Billion 2022$
------------------------------------------------------------------------
3% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings......................... 198
Climate Benefits *...................................... 25
Health Benefits **...................................... 49
Total Monetized Benefits [dagger]....................... 271
Consumer Incremental Product Costs [Dagger]............. 36
Net Monetized Benefits.................................. 235
Change in Producer Cashflow (INPV [dagger][dagger])..... (0.2)-0.2
------------------------------------------------------------------------
7% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings......................... 75
Climate Benefits * (3% discount rate)................... 25
Health Benefits **...................................... 17
Total Monetized Benefits [dagger]....................... 117
Consumer Incremental Product Costs [Dagger]............. 19
Net Monetized Benefits.................................. 98

[[Page 49063]]

Change in Producer Cashflow (INPV [dagger][dagger])..... (0.2)-0.2
------------------------------------------------------------------------
Note: This table presents the monetized costs and benefits associated
with consumer water heaters shipped in 2030-2059. These results
include benefits to consumers which accrue after 2059 from the
products shipped in 2030-2059.
* 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) (see
section IV.L of this document). Together these represent the global 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 DOE does not have a single central SC-GHG point estimate.
To monetize the benefits of reducing greenhouse gas emissions this
analysis uses the interim estimates presented in the Technical Support
Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim
Estimates Under Executive Order 13990 published in February 2021 by
the Interagency Working Group on the Social Cost of Greenhouse Gases
(IWG).
** Health benefits are calculated using benefit-per-ton values for NOX
and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5
precursor health benefits 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. See section IV.L of this document for more details.
[dagger] Total and net benefits include those consumer, climate, and
health benefits that can be quantified and monetized. 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 DOE does not have a single central SC-GHG point estimate.
DOE emphasizes the importance and value of considering the benefits
calculated using all four sets of SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as
installation costs.
[dagger][dagger] Operating Cost Savings are calculated based on the life
cycle costs analysis and national impact analysis as discussed in
detail below. See sections IV.F and IV.H. DOE's NIA includes all
impacts (both costs and benefits) along the distribution chain
beginning with the increased costs to the manufacturer to manufacture
the product and ending with the increase in price experienced by the
consumer. DOE also separately conducts a detailed analysis on the
impacts on manufacturers (the MIA). See section IV.J. In the detailed
MIA, DOE models manufacturers' pricing decisions based on assumptions
regarding investments, conversion costs, cashflow, and margins. The
MIA produces a range of impacts, which is the rule's expected impact
on the industry net present value (INPV). The change in industry NPV
is the present value of all changes in industry cash flow, including
changes in production costs, capital expenditures, and manufacturer
profit margins. Change in INPV is calculated using the industry
weighted average cost of capital value of 9.6% that is estimated in
the manufacturer impact analysis (see chapter 12 of the NOPR TSD for a
complete description of the industry weighted average cost of
capital). For consumer water heaters, those values are -$207 million
and $166 million. DOE accounts for that range of likely impacts in
analyzing whether a TSL is economically justified. See section V.A of
this document. DOE is presenting the range of impacts to the industry
net present value under two markup scenarios: the Preservation of
Gross Margin scenario, which is the manufacturer markup scenario used
in the calculation of Consumer Operating Cost Savings in this table,
and the Preservation of Operating Profit Markup scenario, where DOE
assumed manufacturers would not be able to increase per-unit operating
profit in proportion to increases in manufacturer production costs.
DOE includes the range of estimated INPV in the above table, drawing
on the MIA explained further in Section IV.J, to provide additional
context for assessing the estimated impacts of this proposal to
society, including potential changes in production and consumption,
which is consistent with OMB's Circular A-4 and E.O. 12866. If DOE
were to include the industry net present value into the net benefit
calculation for this proposed rule, the net benefits would be $235
billion at 3-percent discount rate and $98 billion at 7-percent
discount rate. DOE seeks comment on this approach.

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 monetized value of climate and health
benefits of emission reductions, all annualized.\11\
---------------------------------------------------------------------------

\11\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2022, 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 2022. 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 cost 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 consumer water
heaters shipped in 2030-2059. The benefits associated with reduced
emissions achieved as a result of the proposed standards are also
calculated based on the lifetime of consumer water heaters shipped in
2030-2059. Total benefits for both the 3-percent and 7-percent cases
are presented using the average GHG social costs with 3-percent
discount rate. Estimates of SC-GHG values are presented for all four
discount rates in section IV.L.1 of this document.
Table I.4 presents the total estimated monetized benefits and costs
associated with the proposed standard, expressed in terms of annualized
values. 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 NO<INF>X</INF> and SO<INF>2</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 rule is $2,235 million per year in increased equipment
costs, while the estimated annual benefits are $7,876 million in
reduced equipment operating costs, $1,429 million in monetized climate
benefits, and $1,805 million in monetized health benefits. In this
case, the net monetized benefit would amount to $8,875 million per
year.
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the proposed standards is $2,420 million per year in
increased equipment costs, while the estimated annual benefits are
$11,357 million in reduced operating costs, $1,429 million in monetized
climate benefits, and $2,798 million in monetized health benefits. In
this case, the net monetized benefit would amount to $13,164 million
per year.

[[Page 49064]]

Table I.4--Annualized Benefits and Costs of Proposed Energy Conservation Standards for Consumer Water Heaters
[TSL 2]
----------------------------------------------------------------------------------------------------------------
Billion 2022$/year
-----------------------------------------------
Low-net- High-net-
Primary benefits benefits
estimate estimate estimate
----------------------------------------------------------------------------------------------------------------
3% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 11.357 10.633 12.096
Climate Benefits *.............................................. 1.429 1.412 1.446
Health Benefits **.............................................. 2.798 2.764 2.832
Total Monetized Benefits [dagger]............................... 15.584 14.809 16.374
Consumer Incremental Product Costs [Dagger]..................... 2.420 2.488 2.356
Net Monetized Benefits.......................................... 13.164 12.321 14.018
Change in Producer Cashflow (INPV [dagger][dagger])............. (0.021)-0.017 (0.021)-0.017 (0.021)-0.017
----------------------------------------------------------------------------------------------------------------
7% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 7.876 7.380 8.382
Climate Benefits * (3% discount rate)........................... 1.429 1.412 1.446
Health Benefits **.............................................. 1.805 1.784 1.825
Total Monetized Benefits [dagger]............................... 11.110 10.576 11.653
Consumer Incremental Product Costs [Dagger]..................... 2.235 2.290 2.183
Net Monetized Benefits.......................................... 8.875 8.286 9.470
Change in Producer Cashflow (INPV [dagger][dagger])............. (0.021)-0.017 (0.021)-0.017 (0.021)-0.017
----------------------------------------------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with consumer water heaters shipped in 2030-2059.
These results include benefits to consumers which accrue after 2059 from the products shipped in 2030-2059.
The Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy prices from the
AEO2023 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition,
incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the
Low Net Benefits Estimate, and a high decline rate in the High Net Benefits Estimate. The methods used to
derive projected price trends are explained in sections IV.F.1 and IV.F.4 of this document. Note that the
Benefits and Costs may not sum to the Net Benefits due to rounding.
* To monetize the benefits of reducing greenhouse gas emissions this analysis uses the interim estimates
presented in the Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim
Estimates Under Executive Order 13990 published in February 2021 by the Interagency Working Group on the
Social Cost of Greenhouse Gases (IWG). Climate benefits are calculated using four different estimates of the
global SC-GHG (see section IV.L of this document). 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 sets of SC-GHG estimates.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
(for SO2 and NOX) PM2.5 precursor health benefits 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. See section IV.L of this document for more details.
[dagger] Total 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.
[Dagger] Costs include incremental equipment costs as well as installation costs.
[dagger][dagger] Operating Cost Savings are calculated based on the life cycle costs analysis and national
impact analysis as discussed in detail below. See sections IV.F and IV.H of this document. DOE's NIA includes
all impacts (both costs and benefits) along the distribution chain beginning with the increased costs to the
manufacturer to manufacture the product and ending with the increase in price experienced by the consumer. DOE
also separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J. In
the detailed MIA, DOE models manufacturers' pricing decisions based on assumptions regarding investments,
conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule's expected
impact on the industry net present value (INPV). The change in industry NPV is the present value of all
changes in industry cash flow, including changes in production costs, capital expenditures, and manufacturer
profit margins. Change in INPV is calculated using the industry weighted average cost of capital value of 9.6%
that is estimated in the manufacturer impact analysis (see chapter 12 of the NOPR TSD for a complete
description of the industry weighted average cost of capital). For consumer water heaters, those values are -
$21 million and $17 million. DOE accounts for that range of likely impacts in analyzing whether a TSL is
economically justified. See section V.A of this document. DOE is presenting the range of impacts to the
industry net present value under two markup scenarios: the Preservation of Gross Margin scenario, which is the
manufacturer markup scenario used in the calculation of Consumer Operating Cost Savings in this table, and the
Preservation of Operating Profit Markup scenario, where DOE assumed manufacturers would not be able to
increase per-unit operating profit in proportion to increases in manufacturer production costs. DOE includes
the range of estimated INPV in the above table, drawing on the MIA explained further in Section IV.J, to
provide additional context for assessing the estimated impacts of this proposal to society, including
potential changes in production and consumption, which is consistent with OMB's Circular A-4 and E.O. 12866.
If DOE were to include the industry net present value into the net benefit calculation for this proposed rule,
the net benefits would range from $13.143 billion to $13.181 billion at 3-percent discount rate and range from
$8.854 billion to $8.892 billion at 7-percent discount rate. DOE seeks comment on this approach.

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 the proposed standards represent
the maximum improvement in energy efficiency that is technologically
feasible and economically justified, and would result in the
significant conservation of energy. Specifically, with regards to
technological feasibility, products achieving these proposed standard
levels are already commercially available for all product classes
covered by this proposal. As for economic justification, DOE's analysis
shows that the benefits of the proposed standards exceed 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 consumer water heaters is $2,235 million per
year in increased product costs, while the

[[Page 49065]]

estimated annual benefits are $7,876 million in reduced product
operating costs, $1,429 million in monetized climate benefits and
$1,805 million in monetized health benefits. The net monetized benefit
amounts to $8,875 million per year.
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.\12\ For
example, some covered products and equipment have substantial 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. Accordingly, DOE evaluates
the significance of energy savings on a case-by-case basis.
---------------------------------------------------------------------------

\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).
---------------------------------------------------------------------------

As previously mentioned, the standards are projected to result in
estimated national energy savings of 27 quad FFC. In addition, they are
projected to reduce CO<INF>2</INF> emissions by 501 Mt, the equivalent
of the annual CO<INF>2</INF> emissions of 2.1 million homes over 30
years. Based on these findings, DOE has initially determined the energy
savings from the proposed standard levels are ``significant'' within
the meaning of 42 U.S.C. 6295(o)(3)(B). A more detailed discussion of
the basis for these tentative conclusions is contained in the remainder
of this document and the accompanying technical support document
(``TSD'').
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 proposed rule, as well as some of the relevant
historical background related to the establishment of standards for
consumer water heaters.

A. Authority

EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and certain industrial equipment. Title III, Part
B of EPCA established the Energy Conservation Program for Consumer
Products Other Than Automobiles. These products include consumer water
heaters, the subject of this document. (42 U.S.C. 6292(a)(4))
EPCA prescribed energy conservation standards for these products
(42 U.S.C. 6295(e)(1)), and directed DOE to conduct two cycles of
rulemakings \13\ to determine whether to amend these standards. (42
U.S.C. 6295(e)(4)) EPCA further provides that, not later than 6 years
after the issuance of any final rule establishing or amending a
standard, DOE must publish either a notice of determination that
standards for the product do not need to be amended, or a NOPR
including new proposed energy conservation standards (proceeding to a
final rule, as appropriate). (42 U.S.C. 6295(m)(1))
---------------------------------------------------------------------------

\13\ DOE completed the first of these rulemaking cycles on
January 17, 2001, by publishing in the Federal Register a final rule
amending the energy conservation standards for consumer water
heaters. 66 FR 4474. Subsequently, DOE completed the second
rulemaking cycle to amend the standards for consumer water heaters
by publishing a final rule in the Federal Register on April 16,
2010. 75 FR 20112.
---------------------------------------------------------------------------

The energy conservation program 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. 6291), test procedures (42 U.S.C. 6293),
labeling provisions (42 U.S.C. 6294), energy conservation standards (42
U.S.C. 6295), and the authority to require information and reports from
manufacturers (42 U.S.C. 6296).
Federal energy efficiency requirements for covered products
established under EPCA generally supersede State laws and regulations
concerning energy conservation testing, labeling, and standards. (42
U.S.C. 6297(a)-(c)) 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. 6297(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 each covered product. (42 U.S.C.
6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products
must use the prescribed DOE test procedure as the basis for certifying
to DOE that their products comply with the applicable energy
conservation standards adopted under EPCA and when making
representations to the public regarding the energy use or efficiency of
those products. (42 U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly,
DOE must use these test procedures to determine whether the products
comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The
DOE test procedures for consumer water heaters appear at title 10 of
the Code of Federal Regulations (``CFR'') part 430, subpart B, appendix
E (``appendix E'').
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including consumer water
heaters. Any new or amended standard for a covered product must be
designed to achieve the maximum improvement in energy efficiency that
the Secretary of Energy determines is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A) and 42 U.S.C.
6295(o)(3)(B)) Furthermore, DOE may not adopt any standard that would
not result in the significant conservation of energy. (42 U.S.C.
6295(o)(3))
Moreover, DOE may not prescribe a standard: (1) for certain
products, including consumer water heaters, if no test procedure has
been established for the product, or (2) if DOE determines by rule that
the standard is not technologically feasible or economically justified.
(42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard
is economically justified, DOE must determine whether the benefits of
the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must
make this determination after receiving comments on the proposed
standard, and by considering, to the greatest extent practicable, the
following seven statutory factors:

(1) The economic impact of the standard on manufacturers and
consumers of the 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 products that are likely to result from the
standard;
(3) The total projected amount of energy (or as applicable,
water) savings likely to result directly from the standard;

[[Page 49066]]

(4) Any lessening of the utility or the performance of the
covered products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary of Energy (``Secretary'')
considers relevant.

(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
Further, EPCA establishes a rebuttable presumption that a standard
is economically justified if the Secretary finds that the additional
cost to the consumer of purchasing a product complying with an energy
conservation standard level will be less than three times the value of
the energy savings that the consumer will receive during the first year
as a result of the standard, as calculated under the applicable test
procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
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. 6295(o)(1)) 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.
6295(o)(4))
Additionally, EPCA specifies requirements when promulgating an
energy conservation standard for a covered product that has two or more
subcategories. DOE must specify a different standard level for a type
or class of product that has the same function or intended use if DOE
determines that products within such group: (A) consume a different
kind of energy from that consumed by other covered products within such
type (or class); or (B) have a capacity or other performance-related
feature which other products within such type (or class) do not have
and such feature justifies a higher or lower standard. (42 U.S.C.
6295(q)(1)) In determining whether a performance-related feature
justifies a different standard for a group of products, DOE must
consider such factors as the utility to the consumer of the feature and
other factors DOE deems appropriate. Id. Any rule prescribing such a
standard must include an explanation of the basis on which such higher
or lower level was established. (42 U.S.C. 6295(q)(2))
Finally, pursuant to the amendments contained in the Energy
Independence and Security Act of 2007 (``EISA 2007''), Public Law 110-
140, any final rule for new or amended energy conservation standards
promulgated after July 1, 2010, is required to address standby mode and
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE
adopts a standard for a covered product after that date, it must, if
justified by the criteria for adoption of standards under EPCA (42
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into
a single standard, or, if that is not feasible, adopt a separate
standard for such energy use for that product. (42 U.S.C.
6295(gg)(3)(A)-(B)) DOE's current test procedures for consumer water
heaters address standby mode and off mode energy use. In this
rulemaking, DOE is proposing to apply the UEF metric (which addresses
standby mode and off mode energy use) to all product classes of
consumer water heaters, including those product classes for which there
are no currently applicable UEF-based standards.

B. Background

1. Current Standards
As directed by EPCA (42 U.S.C. 6295(e)(4)), DOE conducted two
cycles of rulemakings to determine whether to amend the statutory
standards for consumer water heaters found in 42 U.S.C. 6295(e)(1). The
most recent rulemaking from April 2010 resulted in amended standards
using the energy factor (``EF'') metric originally prescribed by EPCA
with a requirement for compliance starting on April 16, 2015. 75 FR
20112 (the ``April 2010 Final Rule''). Later amendments to EPCA
directed DOE to establish a uniform efficiency metric for consumer
water heaters (see 42 U.S.C. 6295(e)(5)(B)).\14\ The Federal test
procedure was revised to use a new metric, UEF, in a final rule
published on July 11, 2014. 79 FR 40542. In a final rule published in
the Federal Register on December 29, 2016, the existing EF-based energy
conservation standards were then translated from EF to UEF using a
``conversion factor'' method for water heater basic models that were in
existence at the time. 81 FR 96204 (``December 2016 Conversion Factor
Final Rule'').
---------------------------------------------------------------------------

\14\ The requirement for a consumer water heater test procedure
using uniform energy factor as a metric, as well as the requirement
for DOE to undertake a conversion factor rulemaking to translate
existing consumer water heater standards denominated in terms of EF
to ones denominated in terms of UEF, were part of the amendments to
EPCA contained in the American Energy Manufacturing Technical
Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012).
---------------------------------------------------------------------------

These standards are set forth in DOE's regulations at 10 CFR
430.32(d) and are repeated in Table II.1.

Table II.1--Current UEF-Based Federal Energy Conservation Standards for Consumer Water Heaters
----------------------------------------------------------------------------------------------------------------
Rated storage volume
Product class and input rating (if Draw pattern * Uniform energy factor **
applicable)
----------------------------------------------------------------------------------------------------------------
Gas-fired Storage Water Heater.... >=20 gal and <=55 gal Very Small................ 0.3456-(0.0020 x Vr)
Low....................... 0.5982-(0.0019 x Vr)
Medium.................... 0.6483-(0.0017 x Vr)
High...................... 0.6920-(0.0013 x Vr)
>55 gal and <=100 gal Very Small................ 0.6470-(0.0006 x Vr)
Low....................... 0.7689-(0.0005 x Vr)
Medium.................... 0.7897-(0.0004 x Vr)
High...................... 0.8072-(0.0003 x Vr)
Oil-fired Storage Water Heater.... <=50 gal............. Very Small................ 0.2509-(0.0012 x Vr)
Low....................... 0.5330-(0.0016 x Vr)
Medium.................... 0.6078-(0.0016 x Vr)
High...................... 0.6815-(0.0014 x Vr)
Electric Storage Water Heaters.... >=20 gal and <=55 gal Very Small................ 0.8808-(0.0008 x Vr)
Low....................... 0.9254-(0.0003 x Vr)

[[Page 49067]]

Medium.................... 0.9307-(0.0002 x Vr)
High...................... 0.9349-(0.0001 x Vr)
>55 gal and <=120 gal Very Small................ 1.9236-(0.0011 x Vr)
Low....................... 2.0440-(0.0011 x Vr)
Medium.................... 2.1171-(0.0011 x Vr)
High...................... 2.2418-(0.0011 x Vr)
Tabletop Water Heater............. >=20 gal and <=120 Very Small................ 0.6323-(0.0058 x Vr)
gal.
Low....................... 0.9188-(0.0031 x Vr)
Medium.................... 0.9577-(0.0023 x Vr)
High...................... 0.9884-(0.0016 x Vr)
Instantaneous Gas-fired Water <2 gal and >50,000 Very Small................ 0.80
Heater. Btu/h.
Low....................... 0.81
Medium.................... 0.81
High...................... 0.81
Instantaneous Electric Water <2 gal............... Very Small................ 0.91
Heater.
Low....................... 0.91
Medium.................... 0.91
High...................... 0.92
Grid-enabled Water Heater......... >75 gal.............. Very Small................ 1.0136-(0.0028 x Vr)
Low....................... 0.9984-(0.0014 x Vr)
Medium.................... 0.9853-(0.0010 x Vr)
High...................... 0.9720-(0.0007 x Vr)
----------------------------------------------------------------------------------------------------------------
* The draw pattern dictates the frequency and duration of hot water draws during the 24-hour simulated use test,
and is an indicator of delivery capacity of the water heater. Draw patterns are assigned based on the first
hour rating (``FHR''), for non-flow-activated water heaters, or maximum GPM rating (``Max GPM''), for flow-
activated water heaters. For the specific FHR and Max GPM ranges which correspond to each draw pattern, see
section 5.4.1 of appendix E to subpart B of 10 CFR part 430.
** Vr is the rated storage volume (in gallons), as determined pursuant to 10 CFR 429.17.

In the December 2016 Conversion Factor Final Rule, DOE declined to
develop conversion factors and UEF-based standards for consumer water
heaters of certain sizes (by rated storage volume or input rating) and
of certain types (i.e., oil-fired instantaneous water heaters) where
models did not exist on the market at the time to inform the analysis
of the standards conversion. 81 FR 96204, 96210-96211. For consumer
water heaters that did not receive converted UEF-based standards, DOE
provided its interpretation that the original statutory standards--
found at 42 U.S.C. 6295(e)(1) and expressed in terms of the EF metric--
still applied; however, DOE would not enforce those statutorily-
prescribed standards until such a time conversion factors are developed
for these products and they can be converted to UEF. Id. Thus, the EF-
based standards specified by EPCA apply to any consumer water heaters
which do not have UEF-based standards found at 10 CFR 430.32(d). These
EF-based standards are set forth at 42 U.S.C. 6295(e)(1) and are
repeated in Table II.2.

Table II.2--EF-Based Federal Energy Conservation Standards for Consumer
Water Heaters
------------------------------------------------------------------------
Product class Energy factor *
------------------------------------------------------------------------
Gas water heaters................ 0.62-(0.0019 x Vr)
Oil water heaters................ 0.59-(0.0019 x Vr)
Electric water heaters........... 0.95-(0.00132 x Vr)
------------------------------------------------------------------------
* Vr is the rated storage volume (in gallons), as determined pursuant to
10 CFR 429.17.

2. History of the Current Standards Rulemaking for Consumer Water
Heaters
On May 21, 2020, DOE initiated the current rulemaking by publishing
in the Federal Register a request for information (``May 2020 RFI''),
soliciting public comment on various aspects of DOE's planned analyses
to help DOE determine whether to amend energy conservation standards
for consumer water heaters. 85 FR 30853 (May 21, 2020). DOE
subsequently published a notice requesting feedback on its preliminary
analysis and technical support document (``preliminary TSD'') on March
1, 2022 (the ``March 2022 Preliminary Analysis'') with a 60-day comment
period. 87 FR 11327 (Mar. 1, 2022). The comment period was extended by
14 days in a notice published on May 4, 2022. 87 FR 26303. DOE received
comments in response to the preliminary analysis notice and
accompanying technical support document from the interested parties
listed in Table II.3.
On October 21, 2022, DOE received a set of recommendations on
amended energy conservation standards for consumer water heaters from a
coalition of public- and private-sector organizations, including water
heater manufacturers, energy efficiency organizations, environmental
groups, and consumer organizations--collectively the Joint
Stakeholders. This coalition's submission is herein referred to as the
``Joint Recommendation.'' The Joint Recommendation addressed standards
for electric storage water heaters, gas-fired storage water heaters,

[[Page 49068]]

and gas-fired instantaneous water heaters and is discussed in further
detail in section III.F of this document.

Table II.3--Preliminary Analysis and Joint Recommendation Comments
----------------------------------------------------------------------------------------------------------------
Comment No. in the
Commenter(s) Abbreviation docket * Commenter type
----------------------------------------------------------------------------------------------------------------
American Council for an Energy- Joint Stakeholders.......... 49...................... Efficiency
Efficient Economy, Appliance Organizations,
Standards Awareness Project, Manufacturers,
Bradford White Corporation, Consumer Advocacy
Consumer Federation of America, Organization.
Natural Resources Defense Council,
Northwest Energy Efficiency
Alliance, Rheem Manufacturing
Company.
Air-Conditioning, Heating and AHRI........................ 20, 31, 42.............. Trade Association.
Refrigeration Institute.
Anonymous.......................... Anonymous................... 19...................... Individual.
Atmos Energy Corporation........... Atmos....................... 27, 38.................. Utility.
Bradford White Corporation......... BWC......................... 32...................... Manufacturer.
California Investor-Owned Utilities CA IOUs..................... 31, 39, 52.............. Utility
(Pacific Gas and Electric Company, Association.
Southern California Edison, San
Diego Gas & Electric Company).
Center for Energy and Environment.. CEE......................... 50...................... Efficiency
Organization.
Benjamin Cirker.................... Cirker...................... 30...................... Individual.
Edison Electric Institute.......... EEI......................... 31, 43.................. Utility
Association.
The American Gas Association, Gas Association Commenters.. 26, 41, 54.............. Utility
American Public Gas Association, Association.
National Propane Gas Association,
Spire Inc., Spire Missouri Inc.,
and Spire Alabama Inc..
GE Appliances...................... GEA......................... 46...................... Manufacturer.
Gas End-Use Advocacy Group......... GEAG........................ 36...................... Utility
Association.
Appliance Standards Awareness Joint Advocates............. 34...................... Efficiency
Project, American Council for an Organization.
Energy-Efficient Economy,
California Energy Commission,
Consumer Federation of America,
National Consumer Law Center,
Natural Resources Defense Council
and Northeast Energy Efficiency
Partnerships.
Northwest Energy Efficiency NEEA, ACEEE, and NWPCC...... 47...................... Efficiency
Alliance, American Council for an Organization.
Energy-Efficient Economy,
Northwest Power and Conservation
Council.
Northwest Energy Efficiency NEEA........................ 31...................... Efficiency
Alliance. Organization.
Natural Resources Defense Council NRDC and RMI................ 37...................... Efficiency
and Rocky Mountain Institute. Organization.
National Rural Electric Cooperative NRECA....................... 33...................... Utility
Association. Association.
New York State Energy Research and NYSERDA..................... 35, 51.................. Efficiency
Development Authority. Organization.
ONE Gas Inc........................ ONE Gas..................... 28, 44.................. Utility.
Plumbing-Heating-Cooling PHCC........................ 40...................... Trade Association.
Contractors Association.
Rheem Manufacturing Company........ Rheem....................... 45...................... Manufacturer.
Rinnai America Corporation......... Rinnai...................... 55...................... Manufacturer.
Southern Company................... Southern Company............ 31...................... Manufacturer.
Southwest Energy Efficiency Project SWEEP....................... 53...................... Efficiency
Organization.
Eriks Mota Vasquez................. Vasquez..................... 17...................... Individual.
----------------------------------------------------------------------------------------------------------------
*Comment No. 31 denotes comments recorded in the transcript of the public meeting held on April 12, 2022.

A parenthetical reference at the end of a comment quotation or
paraphrase provides the location of the item in the public record.\15\
To the extent that interested parties have provided written comments
that are substantively consistent with any oral comments provided
during the April 12, 2022 public meeting, DOE cites the written
comments throughout this final rule. Any oral comments provided during
the webinar that are not substantively addressed by written comments
are summarized and cited separately throughout this final rule.
---------------------------------------------------------------------------

\15\ The parenthetical reference provides a reference for
information located in the docket of DOE's rulemaking to develop
energy conservation standards for consumer water heaters. (Docket
No. EERE-2017-BT-STD-0019, which is maintained at
<a href="http://www.regulations.gov">www.regulations.gov</a>). The references are arranged as follows:
(commenter name, comment docket ID number, page of that document).
---------------------------------------------------------------------------

C. Deviation From Appendix A

In accordance with section 3(a) of 10 CFR part 430, subpart C,
appendix A (``appendix A''), DOE has deviated from the provision in
appendix A regarding the pre-NOPR stages for an energy conservation
standards rulemaking (specifically, the publication of a framework
document). As initially discussed in the March 2022 Preliminary
Analysis, DOE opted to deviate from this step by publishing a
preliminary analysis without a framework document. A framework document
is intended to introduce and summarize the various analyses DOE
conducts during the rulemaking process and requests initial feedback
from interested parties. Prior to the notification of the preliminary
analysis DOE published an RFI in which DOE identified and sought
comment on the analyses conducted in support of the most recent energy
conservation standards rulemakings for water heaters. 87 FR 11327,
11330.
For this NOPR, DOE further notes that it is deviating from the
provision in appendix A regarding the NOPR stage for an energy
conservation standards rulemaking. Section 6(f)(2) of appendix A
specifies that the length of the public comment period for a NOPR will
be not less than 75 calendar. For this NOPR, DOE has opted instead to
provide a 60-day comment period. DOE is opting to deviate from the 75-
day comment period because stakeholders have already been afforded
multiple opportunities to provide comments on this rulemaking. As noted
previously, DOE requested comment on its planned technical and economic
analyses in the May 2020 RFI and provided stakeholders with a 45-day
comment period. 85 FR 30853. Additionally, DOE initially provided a 60-
day comment period for stakeholders to provide input on the analyses
presented in the preliminary TSD. 87 FR 11327. Subsequently, in
response to requests from stakeholders, DOE re-opened the comment
period for an additional 14 days to provide additional time for
stakeholders to provide input on the preliminary analysis. 87 FR 26303
(May 4, 2022). The analytical assumptions and approaches used for the
analyses conducted for this NOPR are similar to those used for the
preliminary analysis. Therefore, DOE believes a 60-day comment period
is appropriate and will provide interested parties with a meaningful
opportunity to comment on the proposed rule.
Section 8(d)(1) of appendix A requires that new or amended test
procedures

[[Page 49069]]

which impact measured energy use or efficiency are finalized at least
180 days prior to the close of comment period for a NOPR proposing new
or amended energy conservation standards. However, in a final rule
published on December 13, 2021, discussing the provisions of appendix
A, DOE noted that this 180-day period may not always be necessary. 86
FR 70892, 70896. The comment period for this NOPR will close on
September 26, 2023, which is X days after the date of finalization of
the most recent consumer and residential-duty commercial water heaters
test procedure final rule, June 21, 2023 (this test procedure final
rule is discussed in section III.B of this document). As described in
that test procedure final rule, the amendments adopted therein will not
alter the measured efficiency of consumer water heaters, or require
retesting or recertification solely as a result of DOE's adoption of
the amendments to the test procedures. 88 FR 40406, 40412. As such, the
test provisions required by the most recent test procedure final rule
are expected to be generally understood by stakeholders and would not
impact the analysis of this standards rulemaking.

III. General Discussion

DOE developed this proposal after considering oral and written
comments, data, and information from interested parties that represent
a variety of interests. The following discussion provides a general
overview of the approach taken to develop this proposal, with specific
discussion of the methodology and comments received in section IV of
this document.

A. Scope of Coverage

This NOPR covers those consumer products that meet the definition
of ``water heater,'' as codified at 10 CFR 430.2 and as described by
EPCA at 42 U.S.C. 6291(27).
Generally, DOE defines a ``water heater,'' consistent with EPCA's
definition, as a product which utilizes oil, gas, or electricity to
heat potable water for use outside the heater upon demand, including:
(a) Storage type units which heat and store water at a
thermostatically controlled temperature, including gas storage water
heaters with an input of 75,000 Btu per hour or less, oil storage water
heaters with an input of 105,000 Btu per hour or less, and electric
storage water heaters with an input of 12 kilowatts or less;
(b) Instantaneous type units which heat water but contain no more
than one gallon of water per 4,000 Btu per hour of input, including gas
instantaneous water heaters with an input of 200,000 Btu per hour or
less, oil instantaneous water heaters with an input of 210,000 Btu per
hour or less, and electric instantaneous water heaters with an input of
12 kilowatts or less; and
(c) Heat pump type units, with a maximum current rating of 24
amperes at a voltage no greater than 250 volts, which are products
designed to transfer thermal energy from one temperature level to a
higher temperature level for the purpose of heating water, including
all ancillary equipment such as fans, storage tanks, pumps, or controls
necessary for the device to perform its function.

10 CFR 430.2; (42 U.S.C. 6291(27))
In addition, at 10 CFR 430.2, DOE further defines several specific
categories of consumer water heaters, as follows:
<bullet> ``Electric instantaneous water heater'' means a water
heater that uses electricity as the energy source, has a nameplate
input rating of 12 kW or less, and contains no more than one gallon of
water per 4,000 Btu per hour of input.
<bullet> ``Electric storage water heater'' means a water heater
that uses electricity as the energy source, has a nameplate input
rating of 12 kW or less, and contains more than one gallon of water per
4,000 Btu per hour of input.
<bullet> ``Gas-fired instantaneous water heater'' means a water
heater that uses gas as the main energy source, has a nameplate input
rating less than 200,000 Btu per hour, and contains no more than one
gallon of water per 4,000 Btu per hour of input.
<bullet> ``Gas-fired storage water heater'' means a water heater
that uses gas as the main energy source, has a nameplate input rating
of 75,000 Btu per hour or less, and contains more than one gallon of
water per 4,000 Btu per hour of input.
<bullet> ``Grid-enabled water heater'' means an electric resistance
water heater that--
[scir] Has a rated storage tank volume of more than 75 gallons;
[scir] Is manufactured on or after April 16, 2015;
[scir] Is equipped at the point of manufacture with an activation
lock; and
[scir] Bears a permanent label applied by the manufacturer that--
[ssquf] Is made of material not adversely affected by water;
[ssquf] Is attached by means of non-water-soluble adhesive; and
[ssquf] Advises purchasers and end-users of the intended and
appropriate use of the product with the following notice printed in
16.5 point Arial Narrow Bold font: ``IMPORTANT INFORMATION: This water
heater is intended only for use as part of an electric thermal storage
or demand response program. It will not provide adequate hot water
unless enrolled in such a program and activated by your utility company
or another program operator. Confirm the availability of a program in
your local area before purchasing or installing this product.''
<bullet> ``Oil-fired instantaneous water heater'' means a water
heater that uses oil as the main energy source, has a nameplate input
rating of 210,000 Btu/h or less, and contains no more than one gallon
of water per 4,000 Btu per hour of input.
<bullet> ``Oil-fired storage water heater'' means a water heater
that uses oil as the main energy source, has a nameplate input rating
of 105,000 Btu/h or less, and contains more than one gallon of water
per 4,000 Btu per hour of input.
In the June 2023 Test Procedure Final Rule, DOE amended 10 CFR
430.2 (effective on July 21, 2023), adding the following definitions
for circulating, low-temperature, and tabletop water heaters:
<bullet> ``Circulating water heater'' means an instantaneous or
heat pump-type water heater that does not have an operational scheme in
which the burner, heating element, or compressor initiates and/or
terminates heating based on sensing flow; has a water temperature
sensor located at the inlet or the outlet of the water heater or in a
separate storage tank that is the primary means of initiating and
terminating heating; and must be used in combination with a
recirculating pump and either a separate storage tank or water
circulation loop in order to achieve the water flow and temperature
conditions recommended in the manufacturer's installation and operation
instructions.
<bullet> ``Low-temperature water heater'' means an electric
instantaneous water heater that is not a circulating water heater and
cannot deliver water at a temperature greater than or equal to the set
point temperature specified in section 2.5 of appendix E to subpart B
of this part when supplied with water at the supply water temperature
specified in section 2.3 of appendix E to subpart B of part 430 and the
flow rate specified in section 5.2.2.1 of appendix E to subpart B of
part 430.
<bullet> ``Tabletop water heater'' means a water heater in a
rectangular box enclosure designed to slide into a kitchen countertop
space with typical dimensions of 36 inches high, 25 inches deep, and 24
inches wide.
As stated in section I of this NOPR, EPCA prescribed energy
conservation standards for all consumer water heaters (i.e., those that
meet the definition of

[[Page 49070]]

``water heater'' above). For the purposes of this NOPR, DOE is
considering all consumer water heaters, as defined by EPCA. This
includes consumer water heaters for which there are no current UEF-
based standards codified at 10 CFR 430.32(d).
However, during this rulemaking, DOE has received inquiries from
interested parties regarding the coverage, under current energy
conservation standards, of hot water dispensing products. These
products are generally used for food preparation (e.g., brewing tea)
and are installed in place of portable kettles. A small water-heating
tank is connected to a sink's cold water supply to heat the water up to
near-boiling temperatures. The hot water is piped out of the tank
through a separate hot water faucet\16\ specifically for use with this
product. These products have very limited storage volume--often less
than one gallon. All of the models that DOE has identified are all
electric and run on less than 2 kilowatts of power. Note that these
products are not to be confused with low-temperature electric
instantaneous water heaters or point-of-use electric storage water
heaters, both of which generally provide temperatures near or below 125
[deg]F, the nominal delivery temperature in the appendix E test
procedure that corresponds to normal household hot water temperatures
for washing applications. Hot water dispensing products provide water
at scalding-hot temperatures such as 160 [deg]F to 210 [deg]F.
---------------------------------------------------------------------------

\16\ ``Low-pressure water dispenser'' means a terminal fitting
that dispenses drinking water at a pressure of 105 kPA (15 psi) or
less. (10 CFR 430.2) Low-pressure water dispensers operate at lower
water pressures than conventional kitchen faucets (by definition)
and are used for the purpose of gently filling a relatively small
vessel (e.g., a glass).
---------------------------------------------------------------------------

DOE does not currently have energy conservation standards that
cover hot water dispensing products and DOE's test procedure is not
representative of an average use cycle for these products. Hot water
dispensing products operate in a unique manner compared to the other
consumer water heaters such as much higher temperatures, have smaller
storage capacities, and can provide hot potable water at lower flow
rates than typical consumer electric water heaters. While DOE has the
authority to set standards for products that meet the definition of a
consumer water heater (42 U.S.C. 6292(a)(4)), this rulemaking is not
currently considering standards for hot water dispensing products.
See section IV.A.1 of this document for discussion of the product
classes analyzed in this NOPR.

B. Test Procedure

EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293)
Manufacturers of covered products must use these test procedures to
certify to DOE that their product complies with energy conservation
standards and to quantify the efficiency of their product. DOE's
current energy conservation standards for consumer water heaters are
expressed in terms of UEF. (See 10 CFR 430.32(d)).
DOE recently amended the test procedure for these products at
appendix E to subpart B of 10 CFR 430 in the consumer and residential-
duty commercial water heater test procedure final rule published on
June 21, 2023 (``June 2023 TP Final Rule'') pursuant to the 7-year
review requirement as specified by EPCA. (42 U.S.C. 6293(b)(1)(A) and
42 U.S.C. 6314(a)(1)(A)) In the June 2023 TP Final Rule, DOE added
definitions and where necessary additional test procedure provisions
for circulating water heaters, low-temperature water heaters, and
tabletop water heaters, as well as provisions for high temperature
testing. DOE also established effective storage volume as a metric and
provided additional optional ambient test conditions for heat pump
water heaters. The test procedure for consumer water heaters
incorporates by reference current versions of industry standards ASHRAE
41.1, ASHRAE 41.6, ASHRAE 118.2, ASTM D2156, and ASTM E97 and
harmonizes various aspects of the test procedure with industry test
procedures ASHRAE 118.2-2022 and NEEA Advanced Water Heating
Specification v8.0. The effective date of the June 2023 TP Final Rule
is July 21, 2023, 30 days after the date of its publication in the
Federal Register. Changes to the test procedure made by the June 2023
TP Final Rule are mandatory for consumer water heater testing starting
December 18, 2023, 180 days after publication. Subsequent references in
this NOPR to the ``appendix E test procedure'' refer to the test
procedure which will go in effect on July 21, 2023.
DOE received comments in response to the March 2022 Preliminary
Analysis regarding the consumer water heater test procedure that were
relevant to the test procedure rulemaking.
Cirker provided comments suggesting that, based on personal in-home
monitoring of three heat pump water heaters, different designs exhibit
different performance (i.e., delivery temperature, delivery capacity,
and energy consumption) under winter conditions, when the consumer uses
a higher setpoint temperature, has a lower ambient temperature, and a
lower supply water temperature. Cirker suggested that DOE include a
method to determine the efficiency and first hour rating of heat pump
water heaters under cold climate conditions. (Cirker, No. 30 at pp. 1-
2)
In the June 2023 TP Final Rule, DOE adopted additional test
conditions--including those simulating cold climates--for manufacturers
to be able to make voluntary optional representations for heat pump
water heaters. 88 FR 40406.
NYSERDA commented that rated storage volume is no longer an
appropriate representation of the capacity of a storage water heater
volume due to the use of mixing valves and higher tank temperatures,
suggesting that first hour rating (``FHR'') be used instead. (NYSERDA,
No. 35 at p. 6) DOE agreed that increasing the temperature of the water
stored in a water heater above the nominal delivery temperature is a
way to increase the capacity of the water heater, as the hotter water
can be tempered with cool water using a mixing valve to provide a
larger volume of hot water than when the water is stored at the
relatively cooler nominal temperature. For water heaters that are
capable of storing water at such an elevated temperature, the effective
storage volume metric represents a measure of the true storage capacity
of the water heater based on the maximum temperature at which it can
store water, as compared to storing water at the nominal temperature of
125 degrees Fahrenheit (``[deg]F'') specified in appendix E. DOE
agreed, therefore, that rated storage volume alone is not an adequate
representation of the storage capacity of water heaters that are
capable of heating and storing water at high temperatures (i.e., at a
temperature well above the typical setpoint temperature of 125 [deg]F),
and established effective storage volume to better represent the
storage capacity of such water heaters in the June 2023 TP Final Rule.
88 FR 40406. DOE specified in appendix E that effective storage volume
is determined by multiplying the measured storage volume by a scaling
factor which represents the ratio of the thermal energy stored in the
tank when at its maximum storage temperature as compared to the thermal
energy stored in the tank when at the nominal temperature of 125
[deg]F. Id.
The appendix E test procedure, as amended by the June 2023 TP Final
Rule, does not require water heaters to test in the highest heat mode
(i.e., the

[[Page 49071]]

high temperature test method). In the June 2023 TP Final Rule, DOE
deferred the implementation of high temperature testing provisions to
this energy conservation standards rulemaking. 88 FR 40406, 40448.
DOE further agrees with NYSERDA that storage volume is not an
adequate representation of the storage capacity of water heaters that
are capable of heating and storing water at high temperatures (i.e., at
a temperature well above the typical setpoint temperature of 125
[deg]F). In the June 2023 TP Final Rule, DOE established effective
storage volume as a metric to better represent the storage capacity of
such water heaters. 88 FR 40406. Consequently, DOE is now addressing
the implementation of effective storage volume provisions in this NOPR.
In this NOPR, DOE is proposing that high temperature test provisions be
required for electric storage water heaters that have a permanent
(i.e., non-temporary) mode or setting to heat and store water above 135
[deg]F and that do not meet the definition of ``heat pump-type'' water
heater (i.e., this proposal applies to storage water heaters utilizing
only electric resistance technology). Further, these provisions would
not apply to water heaters that either store water at an elevated
temperature only for a temporary period or to water heaters that are
capable of storing at elevated temperatures only in response to
instructions from a utility or third-party demand response program. DOE
expects that, especially in the case of small electric storage water
heaters, these products will be installed at an elevated temperature
setpoint with a mixing valve in order to match the performance of
larger water heaters. The high temperature test provisions are
therefore expected to be representative of the average use cycle of
electric resistance water heaters.
DOE's proposal is detailed further in section V.C.1 of this
document.
BWC commented in response to the March 2022 Preliminary Analysis
regarding product classes for products that do not currently have UEF-
based standards, stating that DOE refrain from considering them until
the test procedure rulemaking is finalized and DOE determines whether
these product classes will be necessary. BWC also noted that a study of
the simulated use test completed by Davis Energy Group, Inc. suggests
that EF ratings for instantaneous gas-fired water heaters are inflated
in comparison to those for gas-fired storage water heaters. BWC
acknowledged that this effect should be smaller for UEF ratings, but
still urged DOE to consider its potential impact. (BWC, No. 32 at p. 6)
In response to BWC, DOE disagrees that its test procedure provides
an unfair advantage to gas-fired instantaneous models over gas-fired
storage models. DOE's 24-hour simulated use test, as defined at
appendix E, is designed to emulate typical in-field usage patterns for
consumer water heaters and includes periods of standby during which no
water is being withdrawn from the water heater. Storage water heaters
maintain a significant volume of stored water, which loses heat to the
cooler surrounding air. This results in the water heater consuming
energy to heat the stored water to offset these standby losses, in
addition to the energy required to heat the water from the supply water
temperature to the setpoint temperature. By contrast, because
instantaneous-type water heaters do not typically maintain a
significant volume of stored water, the standby losses they experience
are generally much lower and do not require additional energy to
offset. Instantaneous-type water heaters may therefore achieve higher
UEF ratings compared to storage-type water heaters. However, DOE
reiterates that this difference in efficiency is not a result of an
unfair test procedure, but rather a result of the differences in design
between gas-fired storage and gas-fired instantaneous water heaters and
is indeed representative of an average use cycle or period of use. See
section IV.A.1 of this document for discussion regarding whether
storage-type and instantaneous-type product classes should be combined
together under uniform standards.
The June 2023 TP Final Rule additionally expanded coverage of the
appendix E test procedure to additional consumer water heaters under
the scope of coverage of standards. As discussed in that final rule,
DOE revised the test procedure to provide additional instructions for
testing circulating water heaters and low-temperature water heaters for
UEF. 88 FR 40406. A circulating water heater is defined at 10 CFR 430.2
as an instantaneous or heat pump-type water heater that does not have
an operational scheme in which the burner, heating element, or
compressor initiates and/or terminates heating based on sensing flow;
has a water temperature sensor located at the inlet or the outlet of
the water heater or in a separate storage tank that is the primary
means of initiating and terminating heating; and must be used in
combination with a recirculating pump and either a separate storage
tank or water circulation loop in order to achieve the water flow and
temperature conditions recommended in the manufacturer's installation
and operation instructions. A low-temperature water heater is defined
at 10 CFR 430.2 as an electric instantaneous water heater that is not a
circulating water heater and cannot deliver water at a temperature
greater than or equal to the set point temperature specified in section
2.5 of appendix E when supplied with water at the supply water
temperature specified in section 2.3 of appendix E and the flow rate
specified in section 5.2.2.1 of appendix E.
Treatment of circulating water heaters and low temperature water
heaters as potential product classes is discussed in section IV.A.1.a
of this document.
In response to the March 2022 Preliminary Analysis, Rinnai provided
comments indicating that gas-fired instantaneous water heaters with
integrated recirculating pumps may have an additional benefit to water
conservation. (Rinnai, No. 55 at pp. 1-2) However, while DOE may
consider the energy use associated with increased or decreased water
use, DOE does not have the authority to establish water conservation
standards for circulating water heaters or instantaneous water heaters.
(See 42 U.S.C. 6291(6))

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 are 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 those means for improving efficiency are
technologically feasible. DOE considers technologies incorporated in
commercially-available products or in working prototypes to be
technologically feasible. Sections 6(b)(3)(i) and 7(b)(1) of appendix A
to 10 CFR part 430 subpart C.
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; (3) adverse impacts on

[[Page 49072]]

health or safety; and (4) unique-pathway proprietary technologies.
Sections 6(b)(3)(ii)-(v) and 7(b)(2)-(5) of appendix A. Section IV.B of
this document discusses the results of the screening analysis for
consumer water heaters, particularly the designs DOE considered, those
it screened out, and those that are the basis for the standards
considered in this rulemaking. For further details on the screening
analysis for this 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 product, it must determine the maximum improvement in energy
efficiency or maximum reduction in energy use that is technologically
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the
engineering analysis, DOE determined the maximum technologically
feasible (``max-tech'') improvements in energy efficiency for consumer
water heaters using the design parameters for the most efficient
products available on the market or in working prototypes. The max-tech
levels that DOE determined for this rulemaking are described in section
IV.C.1.a of this proposed rule and in chapter 5 of the NOPR TSD.

D. Energy Savings

1. Determination of Savings
For each trial standard level (``TSL''), DOE projected energy
savings from application of the TSL to consumer water heaters purchased
in the 30-year period that begins in the year of compliance with the
proposed standards (2030-2059).\17\ The savings are measured over the
entire lifetime of consumer water heaters 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\ Each TSL is composed of specific efficiency levels for each
product class. The TSLs considered for this NOPR are described in
section V.A of this document. DOE conducted a sensitivity analysis
that considers impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------

DOE used its national impact analysis (``NIA'') spreadsheet model
to estimate national energy savings (``NES'') from potential amended or
new standards for consumer water heaters. 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
products at the locations where they are used. For electricity, DOE
reports national energy savings 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. DOE also
calculates NES in terms of FFC energy savings. The FFC metric includes
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 conservation
standards.\18\ DOE's approach is based on the calculation of an FFC
multiplier for each of the energy types used by covered products or
equipment. For more information on FFC energy savings, see section
IV.H.1 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).
---------------------------------------------------------------------------

2. Significance of Savings
To adopt any new or amended standards for a covered product, DOE
must determine that such action would result in significant energy
savings. (42 U.S.C. 6295(o)(3)(B))
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.\19\ For
example, 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. 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. DOE has initially
determined the energy savings from the proposed standard levels are
``significant'' within the meaning of 42 U.S.C. 6295(o)(3)(B).
---------------------------------------------------------------------------

\19\ 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 70892, 70906).
---------------------------------------------------------------------------

E. Economic Justification

1. Specific Criteria
As noted previously, EPCA provides seven factors to be evaluated in
determining whether a potential energy conservation standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The
following sections discuss how DOE has addressed each of those seven
factors in this proposed rulemaking.
a. Economic Impact on Manufacturers and Consumers
In determining the impacts of a potential amended standard on
manufacturers, DOE conducts an MIA, as discussed in section IV.J of
this document. DOE first uses an annual cash-flow approach to determine
the quantitative impacts. This step includes both a short-term
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 assessment over a 30-year
period. 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, 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 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.
For individual 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 consumers
in the aggregate, DOE also calculates the national net present value of
the consumer costs and benefits expected to result from particular
standards. DOE also evaluates the impacts of potential standards on
identifiable subgroups of consumers that may be affected
disproportionately by a standard.
An anonymous commenter indicated that the benefits of making water
heaters more energy-efficient would likely outweigh the costs. The
commenter stated that many households have either

[[Page 49073]]

very old water heaters or water heaters that consume a significant
amount of energy, and that energy conservation standards can be helpful
in guiding customer choices. (Anonymous, No. 19)
b. Savings in Operating Costs Compared to Increase in Price (LCC and
PBP)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP
analysis.
The LCC is the sum of the purchase price of a product (including
its installation) and the operating expense (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC analysis requires a variety of inputs, such as
product prices, product energy consumption, energy prices, maintenance
and repair costs, product lifetime, and discount rates appropriate for
consumers. To account for uncertainty and variability in specific
inputs, such as product lifetime and discount rate, DOE uses a
distribution of values, with probabilities attached to each value.
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 product 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.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with new
or amended standards. The LCC savings for the considered efficiency
levels are calculated relative to the case that reflects projected
market trends in the absence of new or amended standards. DOE's LCC and
PBP analysis is discussed in further detail in section IV.F of this
document.
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. 6295(o)(2)(B)(i)(III)) As
discussed in section III.D of this document, DOE uses the NIA
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Products
In establishing product classes and in evaluating design options
and the impact of potential standard levels, DOE evaluates potential
standards that would not lessen the utility or performance of the
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(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.
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. (42 U.S.C.
6295(o)(2)(B)(i)(V)) EPCA also directs the Attorney General to
determine the impact, if any, of any lessening of competition likely to
result from a proposed standard and to transmit such determination to
the Secretary within 60 days of the publication of a proposed rule,
together with an analysis of the nature and extent of the impact. (42
U.S.C. 6295(o)(2)(B)(ii)) DOE will transmit a copy of this proposed
rule to the Attorney General with a request that the Department of
Justice (``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 and water
conservation in determining whether a new or amended standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy
savings from the proposed standards are likely to provide improvements
to the security and reliability of the Nation's energy system.
Reductions in the demand for electricity also may result in reduced
costs for maintaining the reliability of the Nation's electricity
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 greenhouse gases (``GHGs'') associated with energy
production and use. 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.X of this document. DOE also estimates the economic value of
emissions reductions resulting from the considered TSLs, as discussed
in section IV.L of this document.
g. Other Factors
In determining whether an energy conservation standard is
economically justified, DOE may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To
the extent DOE identifies any relevant information regarding economic
justification that does not fit into the other categories described
previously, DOE could consider such information under ``other
factors.''
2. Rebuttable Presumption
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), 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 proposed
energy conservation standards would have on the payback period for
consumers. These analyses include, but are not limited to, the 3-year
payback period contemplated under the rebuttable-presumption test. In
addition, DOE routinely conducts an economic analysis that considers
the full range of impacts to consumers, manufacturers, the Nation, and
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The
results of this analysis serve as the basis for DOE's evaluation of the
economic justification

[[Page 49074]]

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
IV.X of this proposed rule.

F. Interested Party Recommendations

As discussed in section II.B.2 of this document, DOE received a
Joint Stakeholder Recommendation for amended standards pertaining to
electric storage water heaters, gas-fired storage water heaters, and
gas-fired instantaneous water heaters. Specifically, the Joint
Stakeholder Recommendation recommended that DOE adopt the standards
shown in Table III.1 through Table III.3. (Joint Stakeholders, No. 49
at pp. 9-10)

Table III.1--Joint Stakeholder Recommendation Levels for Electric Storage Water Heaters
----------------------------------------------------------------------------------------------------------------
DOE rated storage volume
First hour -----------------------------------------------------------------------
Draw pattern rating (FHR) >=20 to <=30 >30 to <=35 >35 to <=55 >55 to 120
gallons gallons gallons gallons
----------------------------------------------------------------------------------------------------------------
Low................... >=18 to <51 Current Standard Height <=36 2.3 UEF......... 2.5 UEF
gallons. *. inches: Current
Standard *.
------------------
Height >36
inches: 2.0 UEF.
-----------------------------------------------------------------------------
Medium................ >=51 to <75 2.0 UEF......... 2.0 UEF.........
gallons.
-----------------------------------------
High.................. >=75 gallons....
----------------------------------------------------------------------------------------------------------------
* Current Standard: UEF = 0.9254-0.0003 x Vr, where Vr is the DOE rated storage volume.

Table III.2--Joint Recommendation Recommended Levels for Gas-Fired
Storage Water Heaters
------------------------------------------------------------------------
First hour rating DOE rated storage volume
Draw pattern (FHR) >=20 to <=55 gallons
------------------------------------------------------------------------
Low.................... >=18 to <51 UEF = 0.6451-0.0019 * Vr
gallons.
Medium................. >=51 to <75 UEF = 0.7046-0.0017 * Vr
gallons.
High................... >=75 gallons..... UEF = 0.7424-0.0013 * Vr
------------------------------------------------------------------------
Note: Vr = DOE rated storage volume. These recommended levels are for
gas-fired storage water heaters including standard, low NOX, and ultra-
low NOX burners. The levels shown are equivalent to DOE's preliminary
TSD Efficiency Level 2 (EL2).

Table III.3--Joint Recommendation Recommended Levels for Gas-Fired
Instantaneous Water Heaters
------------------------------------------------------------------------
Draw pattern Recommended efficiency level
------------------------------------------------------------------------
Medium............................... 0.91 UEF
High................................. 0.93 UEF
------------------------------------------------------------------------
Note: These recommended levels are for gas-fired instantaneous water
heaters with a DOE rated storage volume of <2 gallons and an input
rating of >50,000 BTU per hour. The levels shown are equivalent to
DOE's preliminary TSD Efficiency Level 2 (EL2).

In support of the recommended levels, the Joint Stakeholders stated
that, if adopted, the recommendation would transition the majority of
electric water heaters to heat pump technology and make incremental
steps to improve gas-fired water heater efficiency. The Joint
Stakeholders also stated that the recommended levels would provide
significant reductions in national water heating energy use and their
associated greenhouse gas emissions, save consumers money on their
utility bills, provide manufacturers more business certainty with room
to innovate, and offer manufacturers, consumers, and professional
installers flexibility for certain applications where heat pump
technology is not currently a viable replacement option. (Joint
Stakeholders, No. 49 at p. 1 and pp. 5-6)
DOE has included an analysis of the benefits and burdens of the
Joint Stakeholder Recommendation as part of its analyses of amended
energy conservation standards for this NOPR. The Joint Stakeholder
Recommendation is discussed in further detail, as applicable,
throughout section IV of this document. Following the submission by the
Joint Stakeholders, three other commenters, SWEEP, CEE and NYSERDA,
submitted comments in support of the efficiency level proposals
recommended by the Joint Stakeholders. (SWEEP, No. 53 at p. 1; CEE, No.
50 at p. 1; NYSERDA, No. 51 at pp. 1-2)
The CA IOUs provided a recommendation similar to the Joint
Stakeholder Recommendation, suggesting that all electric storage water
heaters between 20 and 120 gallons in rated storage volume would have
to meet heat pump standards roughly equivalent to Efficiency Level
(``EL'') 2 analyzed in the March 2022 Preliminary Analysis, except for
products 20-30 gallons in the low draw pattern (based on FHR). The CA
IOUs justified their recommendation by stating that it sought to
maximize the share of the future residential water heater market that
will be high-efficiency, while allowing less-efficient products to fill
applications that are challenging for currently available heat pump
water heaters. (CA IOUs, No. 52 at p. 6-7) The CA IOUs' recommendation
is shown in Table III.4.

[[Page 49075]]

Table III.4--CA IOUs Recommended Levels for Electric Storage Water Heaters
----------------------------------------------------------------------------------------------------------------
Rated storage volume
Draw pattern First hour rating -----------------------------------------------------------
(FHR) >=20 to <=30 gallons >30 to <=120 gallons
----------------------------------------------------------------------------------------------------------------
Low............................. >=18 to <51 0.93 UEF 3.30 UEF
gallons.
----------------------------------------------------------------------------------------------------------------
Medium.......................... >=51 to <75 3.35 UEF
gallons.
----------------------------------------------------------------------------------------------------------------
High............................ >=75 gallons...... 3.47 UEF
----------------------------------------------------------------------------------------------------------------

The Gas Association Commenters submitted a request for DOE to
follow the normal notice and comment procedure for proposing standards
prior to a final rule, rather than promulgating a direct final rule in
response to the Joint Stakeholder Recommendation and the CA IOUs
recommendation. The Gas Association Commenters suggested that DOE
publish an advance notice of proposed rulemaking (``ANOPR'') prior to a
NOPR in order to solicit feedback. The Gas Association Commenters also
argued that DOE does not have the grounds for utilizing the direct
final rule process based on the provisions in EPCA and relevant
precedent. (Gas Association Commenters, No. 54 at pp. 2-3)
To this, DOE notes that it is proposing standards for consumer
water heaters and seeking public comment. As for issuing an ANOPR to
solicit feedback, DOE has already solicited public comment through the
May 2020 RFI and the March 2022 Preliminary Analysis. Further, the
March 2022 Preliminary Analysis details the analytical methods and
preliminary results DOE has used in this NOPR. As such, DOE does not
believe an ANOPR is necessary or appropriate.
NYSERDA agreed with DOE's analysis that supports heat pump water
heater (``HPWH'') technology. NYSERDA noted that the HPWH market has
seen significant improvement in cost and efficiency in the last decade,
and they are pleased to see this reflected through DOE's analysis as
part of this rulemaking. (NYSERDA, No. 35 at p.2) NYSERDA also
recommended that all products use condensing and heat pump technology
as justified and appropriate based on DOE's final analysis. (NYSERDA,
No. 35 at p. 6) In response, DOE notes that most energy conservation
standard levels proposed for electric storage water heaters in this
NOPR effectively require the use of heat pump technology. However, DOE
cannot and does not establish standards to explicitly require certain
technologies. All standards proposed by DOE must be both
technologically feasible and economically justified, and the standards
proposed in this NOPR are consistent with that requirement.
Rheem urged DOE to propose and then finalize an EL for gas-fired
storage water heaters that requires electricity and is achievable with
a Category I venting solution to moderate the installation costs
associated with this rulemaking, as well as the next, in anticipation
of future electrification efforts. Rheem argued that doing so would
ensure that 120 V electrical power already exists at the water heater
for the next replacement and provide consumers with the option of
choosing a drop-in 120 V heat pump water heater replacement or high
efficiency condensing water heater. (Rheem, No. 45 at p. 4) In
addition, Rheem stated that it did not recommend amending the standard
for gas-fired instantaneous water heaters to EL 3. (Rheem, No. 45 at p.
7) Rinnai recommended that gas-fired storage water heater standards be
set at 0.80 UEF \20\ because this efficiency level appears to be
feasible and could result in significant energy savings because gas-
fired storage water heaters may comprise 42 percent of the overall
market. Rinnai stated that EL 2 would continue to allow lower
efficiency products to be used in the market. (Rinnai, No. 55 at p. 1)
---------------------------------------------------------------------------

\20\ In the March 2022 Preliminary Analysis, 0.80 was the UEF
value for EL 4 for a representative 48-gallon gas-fired storage
water heater in the high draw pattern.
---------------------------------------------------------------------------

After weighing the benefits and burdens of various potential
standard levels, DOE is proposing to amend the standards to those in
trial standard level 2, which consists of efficiency level 2 for both
gas-fired storage water heaters and gas-fired instantaneous water
heaters. Additional discussion of DOE's rationale is discussed in
section V.C of this document.
One Gas and the Gas Association Commenters strongly endorse use of
non-regulatory alternatives as a means for addressing energy efficiency
and greenhouse gas emissions from gas-fired consumer appliances such as
the current review of ENERGY STAR for consumer water heaters. One Gas
also recognizes that the non-regulatory alternatives available to the
Department provide it with the most efficient and effective means of
addressing most market failure causes, such as purchase decisions not
being made available to consumers inhabiting a dwelling. (ONE Gas, No.
44 at p. 8; Gas Association Commenters, No. 41, attachment 6, at p. 11)
A full discussion of the non-regulatory alternatives considered by DOE
is presented in chapter 17 of the TSD for this proposed rule. DOE is
required to establish amended energy conservation standards for
consumer water heaters if an amended standard would result in
significant conservation of energy and would be both technologically
feasible and economically justified.
BWC strongly discourages DOE from considering regional standards or
specifications as part of their analysis. While these are employed in
certain parts of the U.S., they encompass non-energy efficiency related
elements but do not account for all product types or approach things
from a national perspective. (BWC, No.32 at p.6) DOE is not proposing
any regional standards in this NOPR.

IV. Methodology and Discussion of Related Comments

This section addresses the analyses DOE has performed for this
rulemaking with regard to consumer water heaters. Separate paragraphs
address each component of DOE's analyses.
DOE used several analytical tools to estimate the impact of the
standards proposed in this document. The first tool is a spreadsheet
that calculates the LCC savings and PBP of potential amended or new
energy conservation standards. The national impacts analysis uses a
second spreadsheet set that provides shipments projections and
calculates national energy savings and net present value of total
consumer costs and savings expected to result from potential energy
conservation standards. DOE uses the third spreadsheet tool, the
Government Regulatory Impact Model (``GRIM''), to assess manufacturer
impacts of potential standards. These three spreadsheet tools

[[Page 49076]]

are available on the DOE website for this proposed rulemaking:
<a href="http://www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=32">www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=32</a>. Additionally, DOE used output from the
latest version of the Energy Information Administration's (``EIA's'')
Annual Energy Outlook (``AEO''), a widely known energy projection for
the United States, for the emissions and utility impact analyses.

A. Market and Technology Assessment

DOE develops information in the market and technology assessment
that provides an overall picture of the market for the products
concerned, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly-available
information. The subjects addressed in the market and technology
assessment for this rulemaking include (1) a determination of the scope
of the rulemaking and product classes, (2) manufacturers and industry
structure, (3) existing efficiency programs, (4) shipments information,
(5) market and industry trends; and (6) technologies or design options
that could improve the energy efficiency of consumer water heaters. The
key findings of DOE's market assessment are summarized in the following
sections. See chapter 3 of the NOPR TSD for further discussion of the
market and technology assessment.
In the preliminary analysis, DOE sought comment on whether the
manufacturer model counts from publicly available databases accurately
reflect manufacturer market shares on a model- or sales-weighted basis.
In response, AHRI and Rheem indicated that manufacturer model counts in
publicly available databases do not accurately reflect manufacturer
market shares. (AHRI, No. 31 at p. 16; Rheem, No. 45 at pp. 3-4) AHRI
commented that the model count in a certification directory does not
reflect sales volume and will provide an inaccurate view of the market.
AHRI added that a manufacturer with a large number of models does not
necessarily have a larger market share compared to a manufacturer with
a smaller number of models. (AHRI, No. 42 at p. 2) DOE agrees with
these comments and therefore did not consider database model counts
alone to be representative of manufacturer market share in this NOPR's
analyses. DOE considered market research \21\ as well as market share
feedback from confidential interviews with manufacturers to determine
more accurate values. Additional details can be found in chapter 3 of
the TSD.
---------------------------------------------------------------------------

\21\ Market shares data were found from Statista report
Residential water heater market share by vendor in the United States
from 2018 to 2021, available online at: <a href="http://www.statista.com/statistics/700257/us-residential-water-heater-market-share/">www.statista.com/statistics/700257/us-residential-water-heater-market-share/</a> (Last accessed May
1, 2023).
---------------------------------------------------------------------------

During a public meeting held on April 12, 2022, related to this
rulemaking, NEEA noted that UEF ratings have increased over the last
decade in products ranging from 40 to 80 gallons. (NEEA, No. 31, p. 7-
8) DOE agrees that UEF ratings have generally increased over the last
decade, and the latest efficiency distribution data were used to inform
this NOPR analysis.
1. Product Classes
When evaluating and establishing energy conservation standards, DOE
shall establish separate standards for a group of covered products
(i.e., establish a separate product class) if DOE determines that
separate standards are justified based on the type of energy used, or
if DOE determines that the group of covered products has a capacity or
other performance-related feature that other products do not have and
such feature justifies a different standard. (42 U.S.C. 6295(q)) In
making a determination whether a performance-related feature justifies
a different standard, DOE must consider such factors as the utility of
the feature to the consumer and other factors DOE determines are
appropriate. (Id.)
EPCA, as amended by the National Appliance Energy Act (NAECA; Pub.
L. 100-12), established initial energy conservation standards,
expressed as EF, that were based on three product classes
differentiated by fuel type: (1) gas-fired, (2) oil-fired, and (3)
electric. (42 U.S.C. 6295(e)(1)) These standards applied to consumer
water heaters manufactured on or after January 1, 1990.
DOE subsequently amended these EF standards twice, most recently in
the April 2010 Final Rule. 75 FR 20112. In the April 2010 Final Rule,
DOE further divided consumer water heaters into product classes based
on fuel type (gas-fired, oil-fired, or electric), product type
(storage, instantaneous, tabletop), storage volume, and input rate.
The Energy Efficiency Improvement Act of 2015 (``EEIA 2015'') (Pub.
L. 114-11), enacted on April 30, 2015, added a definition of ``grid-
enabled water heater'' and a standard in terms of EF for such products
to EPCA's energy conservation standards. (42 U.S.C. 6295(e)(6)(A)(ii))
DOE codified the definition for grid-enabled water heater and the
associated energy conservation standards in a final rule published on
August 11, 2015. 80 FR 48004.
Most recently, the December 2016 Conversion Factor Final Rule
translated the EF-based standards to UEF-based standards for certain
classes of consumer water heaters, which are shown in Table IV.1.
Although the classes of consumer water heaters with UEF-based standards
have limitations on the stored volume and (if applicable) fuel input
rate, as discussed in that final rule, the standards established in
EPCA do not place any limitation on the storage volume of consumer
water heaters and do not define a minimum fuel input rate for gas-fired
instantaneous water heaters. Therefore, the original standards
established by EPCA in terms of EF remain applicable to all products
without UEF-based standards. 81 FR 96204, 96209-96211.
The 36 product classes for which DOE has currently established UEF-
based standards are summarized in Table IV.1. The product classes
without UEF-based standards, for which EF-based standards from EPCA
apply, are shown in Table IV.2.

Table IV.1--Consumer Water Heater Product Classes With Current UEF-Based
Standards
------------------------------------------------------------------------
Rated storage
volume and input
Product type rating (if Draw patterns
applicable)
------------------------------------------------------------------------
Gas-Fired Storage Water Heater.. >=20 gal and <=55 Very Small, Low,
gal. Medium, High.
Gas-Fired Storage Water Heater.. >55 gal and <=100 Very Small, Low,
gal. Medium, High.
Oil-Fired Storage Water Heater.. <=50 gal.......... Very Small, Low,
Medium, High.
Electric Storage Water Heater... >=20 gal and <=55 Very Small Low,
gal. Medium, High.
Electric Storage Water Heater... >55 gal and <=120 Very Small, Low,
gal. Medium, High.

[[Page 49077]]

Tabletop Water Heater........... >=20 gal and <=120 Very Small, Low,
gal. Medium, High.
Instantaneous Gas-Fired Water <2 gal and >50,000 Very Small, Low,
Heater. Btu/h. Medium, High.
Instantaneous Electric Water <2 gal............ Very Small, Low,
Heater. Medium, High.
Grid-Enabled Water Heater....... >75 gal........... Very Small, Low,
Medium, High.
------------------------------------------------------------------------

Table IV.2--Consumer Water Heater Product Classes Without Current UEF-
Based Standards
------------------------------------------------------------------------
Rated storage volume and input
Product class rating (if applicable)
------------------------------------------------------------------------
Gas-fired Storage...................... <20 gal.
>100 gal.
Oil-fired Storage...................... >50 gal.
Electric Storage....................... <20 gal.
>120 gal
Tabletop............................... <20 gal.
>120 gal.
Gas-fired Instantaneous................ <2 gal and <=50,000 Btu/h.
>=2 gal.
Oil-fired Instantaneous................ <2 gal.
>=2 gal.
Electric Instantaneous................. >=2 gal.
------------------------------------------------------------------------

In the March 2022 Preliminary Analysis, DOE used the conversion
factor calculations applied in the December 2016 Conversion Factor
Final Rule to translate EPCA's EF-based standards to equivalent UEF-
based standards for the product classes in Table IV.2. The methodology
and assumptions used for this conversion are described in detail in the
preliminary TSD and in the NOPR TSD (see chapter 5). DOE is proposing
to adopt UEF-based standards for these classes, which is further
discussed in section IV.C.2 of this document.
a. Circulating Water Heater and Low-Temperature Water Heaters
As discussed in section III.B of this document, in the June 2023 TP
Final Rule, DOE established definitions for ``circulating water
heater'' and ``low temperature water heater'' in 10 CFR 430.2, and also
established test procedures to determine the UEF of these types of
water heaters. 88 FR 40406. DOE has identified three potential classes
of circulating water heater based on fuel type, which are shown in
Table IV.3. The input ratings associated with each product class are
derived from the instantaneous water heater definitions in EPCA for
each fuel type. (42 U.S.C. 6291(27))

Table IV.3--Proposed Classes of Circulating Water Heaters
------------------------------------------------------------------------
Product class Characteristics
------------------------------------------------------------------------
Gas-fired Circulating Water A circulating water heater with a nominal
Heater. input of 200,000 Btu/h or less; contains
no more than one gallon of water per
4,000 Btu/h of input.
Oil-fired Circulating Water A circulating water heater with a nominal
Heater. input of 210,000 Btu/h or less; contains
no more than one gallon of water per
4,000 Btu/h of input.
Electric Circulating Water A circulating water heater with an input
Heater. of 12 kW or less; contains no more than
one gallon of water per 4,000 Btu/h of
input (including heat pump-only units
with power inputs of no more than 24 A
at 250 V).
------------------------------------------------------------------------

DOE is proposing to add these terms (``gas-fired circulating water
heater,'' ``oil-fired circulating water heater,'' and ``electric
circulating water heater'') to the definitions found at 10 CFR 430.2.
As discussed in the June 2023 TP Final Rule, DOE has determined
that circulating water heaters with input ratings below 200,000 Btu/h
(for gas-fired), 210,000 Btu/h (for oil-fired), or 12 kW (for electric)
meet the definitional criteria for instantaneous consumer water
heaters. As such, these products are subject to the applicable energy
conservation standards; however, DOE previously provided an enforcement
policy for circulating water heaters.\22\ Because an amended test
procedure that includes new provisions for testing circulating water
heaters was recently finalized in the June 2023 TP Final Rule, DOE is
proposing to establish updated UEF standards that reflect the new test
method as discussed further in section IV.C.2 of this document. DOE did
not consider amended standards for such products as part of this NOPR
analysis in order to allow manufacturers time to test their products
according to the updated test method and to develop sufficient data
upon which to base future rulemaking analysis. As discussed in section
V of this document,

[[Page 49078]]

DOE proposes to update the standards for other types of gas-fired
instantaneous water heaters. Therefore, DOE also proposes to establish
separate classes for circulating water heaters in order to maintain the
standards at their current stringency.
---------------------------------------------------------------------------

\22\ Prior to the June 2023 TP Final Rule, DOE became aware of
gas-fired instantaneous water heaters meeting the definition of
consumer water heaters which operated differently than those DOE had
previously considered in test procedure rulemakings. On September 5,
2019, DOE issued an enforcement policy for consumer water heaters
meeting the definition of gas-fired ``circulating water heater'' as
described in said enforcement policy in which DOE stated that it
would not seek civil penalties for failing to certify these
products, or if these products failed to comply with applicable
standards, on or before December 31, 2021. The June 2023 TP Final
Rule has since addressed this issue by establishing test procedures
to determine UEF ratings for circulating water heaters.
---------------------------------------------------------------------------

AHRI expressed concern regarding DOE's coverage of gas-fired
circulating water heaters as consumer products, stating that most are
used in commercial applications. AHRI requested that DOE reinstate the
enforcement policy on circulating water heaters, which was issued on
September 5, 2019, and expired on December 31, 2021. (AHRI, No. 42 at
pp. 5-6)
As discussed, DOE has previously determined that these products are
appropriately classified under EPCA as consumer water heaters. In
addition, as discussed in the June 2023 TP Final Rule, DOE has
identified circulating water heaters compatible with residential
applications, and the establishment of a test method to determine the
UEF of these products removes the need for any further enforcement
policy. 88 FR 40406.
DOE requests comment on its proposed deferral of consideration of
amended, more-stringent standards for circulating water heaters.
Regarding low temperature water heaters, DOE notes that they are
covered as electric instantaneous water heaters. As discussed in
section III.A of this document, DOE is not considering updated
standards for electric instantaneous water heaters for this NOPR.
Therefore, although low temperature water heaters are tested in a
slightly different manner as other electric instantaneous water
heaters, DOE is proposing to maintain low temperature water heaters
within the broader electric instantaneous water heater product class
and is not proposing a separate class for them at this time.
b. Storage-Type and Instantaneous-Type Product Classes
In the March 2022 Preliminary Analysis, DOE addressed comments
received in response to the May 2020 RFI that suggested that DOE should
consider eliminating the separate product classes for instantaneous
water heaters. For the preliminary analysis, DOE analyzed separate
classes for instantaneous water heaters, but sought feedback from
stakeholders on whether storage-type and instantaneous-type water
heaters product classes should be combined. (See section 2.3 of the
preliminary TSD.)
In response, AHRI, BWC, and Rheem urged DOE not to combine storage
and instantaneous product classes, commenting that this would be
inconsistent with EPCA. (AHRI, No. 31 at p. 15; AHRI, No. 42 at p. 2;
BWC, No. 32 at p. 1; Rheem, No. 45 at p. 2) AHRI stated that storage
and instantaneous water heaters each provide unique utility to
consumers due to their smaller footprint, and storage water heaters
provide unique utility in that they allow consumers to participate in
demand-response programs. AHRI asserted that combining the two product
classes could decrease consumer utility if standards were set such that
either storage or instantaneous water heaters were precluded from the
market. (AHRI, No. 42 at p. 2) BWC requested that DOE not merge the
storage and instantaneous product classes of gas-fired water heaters
because they have different installation requirements and are useful in
different situations. (BWC, No. 32 at p. 1) BWC stated that
instantaneous water heaters are typically wall-hung, reducing the
required floor space, and models are available for installation
outdoors. BWC stated that storage water heaters, unlike instantaneous
water heaters, maintain a volume of water available use immediately
once a draw commences (whereas instantaneous water heaters take
additional time to heat the water). BWC asserted that storage water
heaters also provide hot water utility for applications which require
large ``dump loads'' such as large tubs or multiple, concurrent, hot
water draws by baths, showers, laundry, and/or dishes. Lastly, BWC also
noted that storage water heaters can be utilized in demand response
programs to store hot water for use when utility rates are high. (Id.)
Rheem suggested that combining storage and instantaneous product
classes will lead to UEF standards that are not technologically
feasible for some volume and input ranges because the standard cannot
be lowered. Rheem also stated that combining storage and instantaneous
water heaters into the same products class could result in one type of
water heater being regulated out of existence or prevent DOE from
amending standards to the maximum technologically feasible and
economically justified level. (Rheem, No. 45 at p. 2) Rheem stated that
the ability to store heated water is a performance-related feature that
justifies a separate analysis for storage and instantaneous due to
differences in operation, installation, and application. Rheem cited
electric instantaneous as an example of a product ideal for hand-
washing and low continuous flow point-of-use applications, while
electric storage water heaters are better suited for higher flow rates
with shorter draws such as to fill a bathtub or supply a shower. Rheem
also noted that electric instantaneous water heaters require
significant electrical panel capacity to serve an entire home, whereas
electric storage water heaters use a much lower panel capacity.
Finally, Rheem noted that the ability of storage water heaters to
operate in thermal storage programs further differentiates their
utility from instantaneous water heaters. (Id.)
DOE has tentatively determined that the existing separate product
classes for storage and instantaneous water heaters--both electric and
gas-fired--should be maintained. Storage and instantaneous water
heaters offer distinct utilities to a consumer. For example,
instantaneous water heaters provide a continuous supply of hot water,
up to the maximum flow rate, while storage water heaters are often
better suited to handle large initial demands for hot water as opposed
to continuous draws. The ability of an instantaneous water heater to
supply hot water continuously is directly attributed to its input rate
and storage volume (i.e., the input rate to storage volume ratio).
Statutorily, consumer storage water heaters are limited to ratios of no
more than 4,000 Btu/h per gallon and consumer instantaneous water
heaters are greater than 4,000 Btu/h per gallon. 42 U.S.C. 6291(27)(B).
Therefore, instantaneous water heaters possess an inherently distinct
capacity to provide a continuous supply of hot water to the consumer.
Additionally, storage water heaters have associated standby energy
losses that instantaneous water heaters do not. Due to these
differences in consumer utility and operational characteristics, DOE
has tentatively determined that different product classes and standards
for storage and instantaneous water heaters are necessary.
c. Gas-Fired Water Heaters
In response to the March 2022 Preliminary Analysis, several
interested parties provided recommendations for the product classes for
gas-fired water heaters.
Atmos urged DOE to consider the impact that not distinguishing
between condensing and non-condensing water heaters will have on
whether Category I venting \23\ water heaters remain on the

[[Page 49079]]

market. (Atmos, No. 38 at p. 5) The Gas Association Commenters urged
DOE to reconsider the conclusions reached in the December 2021 Venting
Interpretive Final Rule,\24\ specifically with regard to gas-fired
instantaneous water heaters, for which a condensing-level standard may
be economically justifiable. The Gas Association Commenters Indicated
that a condensing-level standard would lead to product unavailability
for atmospherically vented gas-fired water heaters. (Gas Association
Commenters, No. 41 at pp. 3-4)
---------------------------------------------------------------------------

\23\ A Category I vented appliance is defined by the National
Fire Protection Association (NFPA) and the American National
Standards Institute (ANSI) in chapter 3 of NFPA 54-2021/ANSI Z223.1,
the National Fuel Gas Code, as ``an appliance that operates with a
nonpositive vent static pressure and with a vent gas temperature
that avoids excessive condensate production in the vent.''
\24\ On December 29, 2021, DOE published a final interpretive
rule (``December 2021 Venting Interpretive Final Rule'') reinstating
its long-standing interpretation that the heat exchanger technology
and associated venting 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.
---------------------------------------------------------------------------

ONE Gas recommended DOE maintain its breakout of the gas-fired
storage water heater analysis in the preliminary TSD by Category I,
III, and IV \25\ products and consider subdividing analysis of Category
I into subcategories that require electric power (such as for induced
draft and power damper models) and those that do not, as this split in
the analysis would support compliance with 42 U.S.C. 6295(q)(1). ONE
Gas also requested that DOE clarify why gas-fired products which
require electricity to operate are not considered to ``consume a
different kind of energy.'' (ONE Gas, No. 44 at p. 8) The Gas
Association Commenters urged DOE to consider separate product classes
for gas-fired water heaters that do not require an external electrical
power supply, which they claimed could be eliminated by amended energy
conservation standards achievable only by condensing products. The Gas
Association Commenters added that all products which do not require
electricity have a standing pilot and are noncondensing, and hence
would become unavailable. These commenters also indicated that such
products have a unique utility to be able to operate during outages or
entirely off the grid. (Gas Association Commenters, No. 41 at p. 4)
---------------------------------------------------------------------------

\25\ The National Fuel Gas Code, NFPA 54-2021/ANSI Z223.1,
defines a category III vented appliance as ``an appliance that
operates with a positive vent static pressure and with a vent gas
temperature that avoids excessive condensate production in the
vent.'' It defines a category IV vented appliance as ``an appliance
that operates with a positive vent static pressure and with a vent
gas temperature that can cause excessive condensate production in
the vent.''
---------------------------------------------------------------------------

As discussed at the beginning of this section, DOE shall establish
separate product classes for a covered product based on: (1) fuel
source; and (2) whether a type of product offers a unique capacity or
other performance-related feature that justifies a different standard.
(See 42 U.S.C. 6295(q)(1))
In response to commenters' suggestions that DOE further consider
whether to distinguish between non-condensing and condensing water
heaters (or associated venting) for the purposes of establishing a
separate product class, DOE reiterates its position stated in the March
2022 preliminary analysis that, consistent with the December 2021
Venting Interpretive Final Rule, non-condensing technology does not
constitute a performance-related ``feature'' that provides a distinct
utility to consumers as prescribed by EPCA at 42 U.S.C. 6295(q)(1).
(See chapter 2 of the preliminary analysis TSD; 86 FR 73947.) In short,
the type of technology (non-condensing or condensing) or venting used
by the appliance, does not provide any utility to the consumer that is
accessible to the layperson, which is based upon the consumer's
operation of or interaction with the appliance. Therefore, there is no
difference in the utility derived from the appliance based on these
factors. 86 FR 73947, 73951, 73953. As explained in the Venting
Interpretive Final Rule, DOE considers any additional costs associated
with venting as part of its determination that an energy conservation
standard is economically justified. Id. at 86 FR 73960. Because neither
non-condensing operation, nor atmospheric, category I venting (which is
associated with non-condensing operation) meet the requirements to be
considered a performance-related ``feature'' as outlined at 42 U.S.C.
6295(q)(1), DOE is not proposing separate product classes specifically
to preserve this capability in gas-fired water heaters. DOE similarly
finds that other venting categories (e.g., category IV venting) are
also not a performance-related feature under EPCA.
Regarding the recommendations that DOE separate product classes
based on whether or not a gas-fired water heater uses auxiliary
electricity, DOE has long held that use of auxiliary electric power in
gas-fired products does not constitute ``consuming a different kind of
energy'' from those that do not use auxiliary electric power under
EPCA. EPCA defines ``energy'' as meaning electricity, or fossil
fuels.\26\ (42 U.S.C. 6291(3)) EPCA initially separated water heaters
by fuel type into only gas-fired, oil-fired, and electric water heaters
product classes. (42 U.S.C. 6295(e)(1)) Although commenters have
suggested that products that use both gas and electricity could be
thought of as being gas-fired water heaters and electric water heaters,
the usage of electricity in gas-fired water heaters is only a means to
power auxiliary components and not to heat the water. Therefore, DOE
has historically considered these products to be only gas-fired water
heaters.
---------------------------------------------------------------------------

\26\ The definition of ``energy'' also provides that the
Secretary may, by rule, include other fuels within the meaning of
the term ``energy'' if he determines that such inclusion is
necessary or appropriate to carry out the purposes of this chapter.
(42 U.S.C. 6291(3))
---------------------------------------------------------------------------

As for whether use of auxiliary electricity constitutes a unique
performance-related feature, DOE notes that, in an April 8, 2009 final
rule, DOE declined to define separate product classes for gas cooking
products that do not require electricity because DOE was unable to
identify any unique utility associated with gas cooking products
equipped with standing pilot ignition, compared to those with
electronic ignition. While DOE considered that the ability to operate
in the case of an atypical event such as the loss of line power was of
benefit to consumers, DOE determined that battery-powered electronic
ignition systems could provide ignition in the absence of line power
and noted that such ignition systems already had been implemented in
other products including portable gas-fired instantaneous water
heaters. As such, consumer water heaters with standing pilot lights are
not unique in the ability to operate during outages or entirely off the
grid. Thus, DOE has tentatively determined that a separate product
class for consumer water heaters with standing pilot lights is not
warranted under 42 U.S.C. 6295(q)(1).
d. Electric Storage Water Heaters
In the March 2022 Preliminary Analysis, DOE tentatively determined
not to separate heat pump electric storage water heaters from the
electric storage water heater product class. DOE noted that to the
extent that heat pump electric storage water heaters use electricity to
heat, they meet EPCA's definition of an electric storage-type water
heater (see 42 U.S.C. 6291(27)(A)) and are subject to the current
standards for electric storage water heaters at 10 CFR 430.32(d). (See
chapter 2 of the preliminary TSD.) This position is also consistent
with the April 2010 Final Rule. In that rule, DOE found that heat pump
water electric storage water heaters did not meet the requirements for
establishing a separate product class. 75 FR 20112, 20135. As stated
previously, DOE establishes separate product classes based on two
criteria: (1) fuel source; and (2) whether a type

[[Page 49080]]

of product offers a unique capacity or other performance-related
feature that justifies a different standard. (See 42 U.S.C. 6295(q)(1))
In the April 2010 Final Rule, DOE noted that both heat pump electric
storage water heaters and electric resistance storage water heaters use
electricity as the fuel source. 75 FR 20112, 20135. As for capacity,
DOE observed that heat pump electric storage water heaters were being
offered as direct replacements for electric resistance storage water
heaters. Id. DOE also noted that rated storage volumes and first hour
ratings of heat pump electric storage water heaters were comparable to
electric resistance storage water heaters. Id. Finally, DOE did not
identify any other performance-related features that were unique to
either heat pump electric storage water heaters or electric resistance
storage water heaters. Id.
EEI disagreed with DOE's decision in the preliminary analysis not
to create a separate product class for heat pump electric storage water
heaters and expressed concern over expanding heat pump-level standards
to more electric storage water heaters than they currently apply to.
(EEI, No. 31 at p. 35)
Cirker also commented that DOE should consider separating out
product classes for electric resistance storage water heaters from heat
pump electric storage water heaters on the basis of personal experience
with three heat pump water heaters installed within the commenter's
home exhibiting a wider range of performance characteristics,
including, at times, lower delivery capacity. (Cirker, No. 30 at p. 1)
Based on its current market assessment, DOE has tentatively
determined that the conclusions reached in the April 2010 Final Rule
remain valid. Heat pump electric storage water heaters and electric
resistance water heaters use electricity as the fuel source. They both
offer similar capacities as evidenced by first hour ratings certified
to DOE, which range between 29 gallons and 80 gallons for electric
resistance storage water heaters and between 41 gallons and 95 gallons
for heat pump electric storage water heaters. Finally, DOE has not
identified any unique performance-related features offered by either
heat pump electric storage water heaters or electric resistance storage
water heaters. As discussed in the Venting Interpretive Final Rule, DOE
considers performance-related features to be those aspects of the
appliance with which the consumer interacts during operation of the
product. 86 FR 73947, 73955.
For consumer water heaters, which are products that traditionally
do not receive daily consumer interaction, storage capacity and
delivery capacity are the main performance features that impact
consumer utility. Water heater capacity reflects that amount of hot
water available to the consumer for use, and this also impacts the
efficiency of the product. Hence, DOE has currently-established
standards which take into account capacity ranges for consumer water
heaters. On the other hand, the technology used to heat the water, heat
pump or electric resistance, is not something a consumer would interact
with during operation of the water heater. As a result, DOE maintains
its position from the April 2010 Final Rule and the March 2022
Preliminary Analysis that heat pump electric storage water heaters and
electric resistance storage water heaters do not warrant separate
product classes.
Plug-In and Split-System Heat Pump Electric Storage Water Heaters
While DOE has tentatively determined that heat pump electric
storage water heaters do not warrant their own product class, NYSERDA
also recommended that DOE create additional definitions and product
classes for plug-in (120 volt (V)/15 ampere (A)) and split-system heat
pump electric storage water heaters to allow these products to enter
the market and increase market share. (NYSERDA, No. 35 at pp. 6-7)
NEEA, ACEEE, and NWPCC also urged DOE to consider plug-in heat pump
water heaters in its analysis and to consider whether a separate
standard for them would be warranted, given that they are expected to
be commercially available by the end of 2022. (NEEA, ACEEE, and NWPCC,
No. 47 at p. 7) The CA IOUs requested DOE create a separate product
class (or lower efficiency levels if a separate product class is not
possible) for split-system heat pump water heaters and plug-in heat
pump water heaters because of their unique ability to serve
installation scenarios that would be difficult or impossible for
unitary (240 V) heat pump water heaters. (CA IOUs, No. 39 at p. 2)
In response to these comments, DOE first notes that it did not
consider plug-in heat pump water heaters in the March 2022 Preliminary
Analysis as they were not commercially available in the U.S. market at
the time. (See Chapter 2 of the preliminary TSD). While there are now a
limited number of plug-in heat pump water heaters available in the U.S.
market, DOE still does not have sufficient information to determine how
use of plug-in voltage (120 V) and current (15 A) affects performance
and efficiency. As a result, even if DOE were to make a determination
that use of plug-in voltage and current constitutes a unique
performance-related feature, the Department would be unable to make the
necessary finding that a higher or lower efficiency standard is
justified for these types of water heaters. DOE may consider
establishing a separate product class for plug-in heat pump electric
storage water heaters in a future rulemaking.
With respect to establishing a separate product class for split-
system heat pump electric storage water heaters, DOE notes the analysis
is very similar to what was discussed for heat pump electric storage
water heaters. Split-system heat pump water heaters use the same fuel
source, electricity, as other electric storage water heaters. DOE also
has not identified any unique performance-related features offered by
split-system heat pump water heaters that would warrant a separate
product class consideration at this time. And, as DOE stated
previously, the type of technology used to heat the water, in this case
a split-system heat pump, is not something a consumer would interact
with during operation of the water heater.
Grid-Enabled Water Heaters
NYSERDA urged DOE to further define grid-enabled water heaters for
consistency on connectedness. (NYSERDA, No. 35 at p. 7) In response,
DOE notes that grid-enabled water heaters are defined in EPCA. (see 42
U.S.C. 6295(e)(6)(A)(ii)) DOE has not found it necessary at this time
to further define connectivity.
Small Electric Storage Water Heaters and Tabletop Water Heaters
Current product classes for electric storage water heaters are
based on rated storage volume (capacity) and draw pattern. See 10 CFR
430.32(d). There are product classes for electric storage water heaters
with storage volumes greater than 20 gallons and less than or equal to
55 gallons, and product classes for electric storage water heaters with
storage volumes greater than 55 gallons and less than or equal to 120
gallons. As discussed in section III.F of this document, DOE received a
Joint Stakeholder Recommendation for amended water heater standards,
that included recommended standard levels for electric storage water
heaters. In particular, the Joint Stakeholder Recommendation suggested
setting different standards for smaller electric storage water heaters.
In response, DOE notes that the efficiency of an electric storage
water heaters is typically increased by adding

[[Page 49081]]

insulation to the water heater or by incorporating a new technology
into the design, such as a heat pump. When implementing these
technology options, the water heater's outer dimensions typically are
increased to maintain the same internal tank size (and hold the same
volume of water). DOE reviewed its existing product classes for
electric storage water heaters with storage volumes less than or equal
to 55 gallons and greater than 20 gallons to determine whether further
subdividing these product classes is warranted. DOE's market data for
electric storage water heaters suggests there is a certain category of
electric storage water heaters that are limited in their physical size
due to the places they are typically installed. Some of these water
heaters are commonly referred to as ``lowboy'' water heaters and have
restrictions on their physical size to facilitate installation in crawl
spaces, in attics, and under staircases, which have finite space
constraints that define physical size limitations for the water heater.
The physical size limitation of the unit restricts the amount of hot
water that can be provided to the household.
In order to determine how to best characterize these ``small water
heaters,'' DOE looked at the amount of hot water they produce and their
effective storage volumes. DOE found that most ``small electric storage
water heaters'' in the market today offer an effective storage volume
greater than or equal to 20 gallons and less than or equal to 35
gallons and deliver first-hour ratings less than 51 gallons. Due to
their low capacities ``small electric storage water heaters'' fall into
the very small or low usage draw patterns.
Thus, DOE tentatively concludes that this restriction is a
performance-related feature affecting energy efficiency that would
warrant a separate product class. In addition, the physical size
limitation constrains the technology options that can be considered to
increase the efficiency of these water heaters. For example, the
maximum technologically feasible efficiency level for electric storage
water heater utilizes heat pump water heater technology. For those
water heaters that are physically space-constrained, the max-technology
efficiency level must be a split-system heat pump water heater since
integrating the heat pump into the top of the tank is physically
prohibited by the constraints of the installation. This is discussed
further in sections IV.C.1.a and IV.C.1.b of this NOPR.
In this proposed rulemaking, DOE has analyzed splitting the
existing 20-55 gallon product classes for electric storage water
heaters by establishing new ``small electric storage water heater''
product classes.
The proposed electric storage product classes would be: (1)
electric storage water heaters with an effective storage volume greater
than or equal to 20 gallons and less than or equal to 35 gallons, with
first-hour ratings less than 51 gallons (``small electric storage water
heaters''); and (2) electric storage water heaters with an effective
storage volume greater than or equal to 20 gallons and less than or
equal to 55 gallons (excluding small electric storage water heaters).
The electric storage product classes analyzed in this NOPR are
summarized below in Table IV.4.

Table IV.4--Electric Storage Water Heater Product Classes
------------------------------------------------------------------------

------------------------------------------------------------------------
Current Product Class Structure
------------------------------------------------------------------------
>=20 gallons, <=55 gallons, All draw patterns....... >55 gallons, <=120
gallons, All draw
patterns.
------------------------------------------------------------------------
New Product Class Structure Being Considered
------------------------------------------------------------------------
Small Electric Storage Water >=20 gallons, <=55 >55 gallons, <=120
Heaters >=20 gallons, <=35 gallons, All draw gallons, All draw
gallons, Very small and low patterns, patterns.
draw patterns *. excluding ``small
electric storage
water heaters''.
------------------------------------------------------------------------
* These products are collectively referred to as ``small electric
storage water heaters.''

Tabletop water heaters, which typically have around 35 gallons of
rated storage volume, also have very particular dimensions in order to
be used as a kitchen workspace. DOE is not proposing to amend the
standards for tabletop water heaters in this rulemaking based on the
market assessment for these products (see section IV.C.1.a for
details). There are only two basic models of tabletop water heaters on
the market currently. Because of the similarities between tabletop
water heaters and small electric storage water heaters, DOE is
proposing to create alignment between the standards for these types of
products. Specifically, in this NOPR, DOE proposes to amend the
definition of ``tabletop water heater'' to specify that the tabletop
designation of electric storage water heaters is only applicable to
products in the very small or low draw pattern. As a result of this
proposal (if finalized), any tabletop water heaters in the medium and
high draw patterns would henceforth be considered in the broader
electric storage water heater product classes. Out of the two basic
models of tabletop water heaters certified to DOE, one is in the low
draw pattern and will not be affected by the proposal. The other is in
the medium draw pattern. DOE expects that this medium draw pattern
tabletop model can be redesigned to meet the low draw pattern
requirements with limited product conversion cost to the manufacturer.
DOE requests comment on its proposal to limit the tabletop water
heater designation to products in the very small and low draw patterns.
2. Technology Options
As described in section III.C.1 of this document, DOE conducts a
technology assessment to identify a complete list of technologies for
consumer water heaters (``technology options'') with the potential to
improve the UEF ratings of products. Section IV.B of this document
describes the process by which technology options are screened in a
separate screening analysis that aims to determine which technology
options could feasibly be adopted based on five screening criteria.
Finally, in the engineering analysis (section IV.C of this document),
DOE selects the technology options that are most likely to constitute
the design pathway to higher efficiency levels in a standards-case
scenario (thereafter referred to as ``design options''). Thus, after
DOE identifies a comprehensive list of technologies for the technology
assessment, the subsequent analysis focuses only on those technologies
that are the most likely to be implemented in response to amended
standards.
In the preliminary market analysis and technology assessment, DOE

[[Page 49082]]

identified numerous technology options that would be expected to
improve the efficiency of consumer water heaters, as measured by the
DOE test procedure. These technology options were presented in chapter
3 of the preliminary TSD. DOE requested feedback on the technology
options identified and on whether there are additional technologies
available that may improve consumer water heater performance.
In response to the March 2022 Preliminary Analysis, the Joint
Advocates requested that DOE evaluate 120 V/15 A heat pump water
heaters because their commercial availability is expected to increase
throughout 2022. (Joint Advocates, No. 34 at pp. 2-3) Rheem commented
that there will be 120 V electric water heaters, including heat pump
water heaters, on the market during the 30-year analysis timeframe.
(Rheem, No. 45 at p. 4) In response, DOE has included 120 V HPWHs in
its technology assessment for electric storage heat pump water heaters
in this NOPR. However, as described further in chapter 3 of the NOPR
TSD, there are currently very few models of 120 V heat pump water
heaters available on the market, and DOE has not analyzed these designs
directly in the engineering analysis due to the lack of information on
these models and whether these designs would constitute the most cost-
effective pathway to improved energy efficiency for electric storage
water heaters. DOE's initial findings on the potential efficiency of
120 V heat pump water heaters are detailed in chapter 3 of the NOPR
TSD.
DOE requests comment on the outlook for the emergence of 120 V heat
pump water heaters, information regarding how their design and
operation may differ from 240 V heat pump water heaters, and data on
performance characteristics and efficiencies.
Rheem recommended DOE add an inlet damper to the list of technology
options but indicated that this technology option may not be suitable
for the entire gas-fired storage water heater product class. Rheem
stated that it has concerns that the technology may have limitations
for some installation applications. (Rheem, No. 45 at p. 3) Based on
its independent research and discussions with manufacturers, DOE
understands the technology in question to be gas-actuated flue dampers,
which are installed at the air intake inlet (hence the term used by the
commenter, ``inlet damper''). The Joint Advocates urged DOE to evaluate
gas-actuated, non-powered dampers, which require no external power
source and instead use a self-powered gas valve to generate the power
needed to operate, for gas-fired storage water heaters as a potentially
lower-cost alternative to other damper technology options. (Joint
Advocates, No. 34 at p. 2) As discussed further in chapter 3 of the
NOPR TSD, DOE agrees with Rheem and the Joint Advocates that gas-
actuated flue dampers are a viable technology option for gas-fired
storage water heaters and has therefore included them in its updated
analyses for this NOPR.
AHRI and BWC opposed DOE's inclusion of modulating burners as a
technology option for gas-fired storage, oil-fired storage, and gas-
fired instantaneous water heaters because modulating burners are, to
their knowledge, used only in gas-fired instantaneous water heaters in
the consumer market. (AHRI, No. 42 at p. 3; BWC, No. 32 at p. 3) BWC
added that adjusting the fuel-to-air ratio is typically done only in
commercial applications (with the possible exception of consumer gas-
fired instantaneous water heaters) as it is very sophisticated and
costly. (BWC, No. 32 at p. 3)
In response to comments from AHRI and BWC, DOE notes that it is
technologically feasible to use modulating burners in fossil fuel-fired
products, and therefore, it has been included in the list of technology
options available for consumer water heaters. However, in the
engineering analysis of the March 2022 Preliminary Analysis, which
constructs the main design option pathway for efficiency improvements,
DOE had tentatively determined that modulating burners were likely to
be used as part of the technology pathway for increasing UEF only in
instantaneous-type gas-fired water heaters, as commenters have
suggested. Accordingly, in this NOPR, as in the March 2022 Preliminary
Analysis, DOE has analyzed modulating burners only for gas-fired
instantaneous water heaters in the engineering analysis (see section
IV.C.1.a of this document for additional discussion).
The technology options found in this NOPR for improving UEF in
consumer water heaters, are listed in Table IV.5 and described in
chapter 3 of the NOPR TSD.

Table IV.5--Potential Technologies for Increasing Efficiency
------------------------------------------------------------------------
Technology option
-------------------------------------------------------------------------
Heat traps.
Improved insulation:
Increased thickness.
Insulation on tank bottom.
Less conductive tank materials (e.g., plastic).
Foam insulation.
Pipe and fitting insulation.
Advanced insulation types:
Aerogel.
Vacuum panels.
Inert gas-filled panels.
Electronic ignition systems:
Direct spark ignition.
Intermittent pilot ignition.
Hot surface ignition.
Improved burners:
Pulse combustion.
Pressurized combustion.
Side-arm heating.
Two-phase thermosiphon technology.
Modulating burners.
Reduced burner size (slow recovery).
Heat exchanger improvements:
Increased heat exchanger surface area.

[[Page 49083]]

Enhanced flue baffle.
Submerged combustion chamber.
Multiple flues.
Alternative flue geometry (Helical).
U-Tube.
Condensing technology.
Induced-draft (negative vent pressure) heat exchanger.
Direct-fired heat exchange.
Improved venting:
Flue damper:
Externally-powered.
Thermopile-operated (non-powered).
Gas-actuated (non-powered).
Buoyancy-operated (non-powered).
Concentric direct venting.
Power vent.
Improved heat pump water heater components:
Compressor improvements:
Increased capacity.
Increased efficiency.
Variable-speed drive.
Fan improvements:
High-efficiency fan motors.
High-efficiency fan blades.
Expansion device improvements.
Increased evaporator surface area.
Increased condenser surface area.
Gas-fired absorption heat pump water heaters.
Gas-fired adsorption heat pump water heaters.
Carbon dioxide heat pump water heaters.
Thermophotovoltaic and thermoelectric generators.
Improved controls:
Modulating controls.
------------------------------------------------------------------------

B. Screening Analysis

DOE uses the following five screening criteria to determine which
technology options are suitable for further consideration in an energy
conservation standards rulemaking:
(1) Technological feasibility. Technologies that are not
incorporated in commercial products or in commercially viable, existing
prototypes will not be considered further.
(2) Practicability to manufacture, install, and service. If it is
determined that mass production of a technology in commercial products
and reliable installation and servicing of the technology could not be
achieved on the scale necessary to serve the relevant market at the
time of the projected compliance date of the standard, then that
technology will not be considered further.
(3) Impacts on product utility. If a technology is determined to
have a significant adverse impact on the utility of the product to
subgroups of consumers, or results 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 be considered further.
(4) Safety of technologies. If it is determined that a technology
would have significant adverse impacts on health or safety, it will not
be considered further.
(5) Unique-pathway proprietary technologies. If a technology has
proprietary protection and represents a unique pathway to achieving a
given efficiency level, it will not be considered further, due to the
potential for monopolistic concerns.
Sections 6(b)(3) and 7(b) of appendix A.
In summary, if DOE determines that a technology, or a combination
of technologies, fails to meet one or more of the listed five criteria,
it will be excluded from further consideration in the engineering
analysis. The reasons for eliminating any technology are discussed in
the following sections.
The subsequent sections include comments from interested parties
pertinent to the screening criteria, DOE's evaluation of each
technology option against the screening analysis criteria, and whether
DOE determined that a technology option should be excluded (``screened
out'') based on the screening criteria.
1. Screened-Out Technologies
The following paragraphs describe the technologies that DOE
eliminated for failure to meet one of the following five factors: (1)
technological feasibility; (2) practicability to manufacture, install,
and service; (3) impacts on equipment utility or equipment
availability; (4) adverse impacts on health or safety; and (5) unique-
pathway proprietary technologies.
In the preliminary analysis, DOE eliminated the following
technology options from further consideration based on the above
criteria: advanced insulation types, condensing pulse combustion, side-
arm heating, two-phase thermosiphon technology, reduced burner size
(slow recovery), direct-fired heat exchange, dual fuel heat pumps,
buoyancy-operated flue dampers, gas-fired absorption and adsorption
heat pump water heaters, and U-tube flues. Each of these technology
options and the reasons for which they were screened out are discussed
in detail in the preliminary TSD.
BWC commented that some technology options listed in Table 2.3.3

[[Page 49084]]

of the preliminary TSD cannot necessarily be easily implemented in
residential products without significant investments. (BWC, No. 32 at
p. 2) BWC did not specify which technologies were the subject of their
comment.
AHRI suggested DOE's consideration of internationally available
technologies as feasible for this rulemaking is inappropriate because
internationally available technologies conform to different standards
than those used in the United States, which does not guarantee that
these technologies can be certified in the United States. (AHRI, No. 42
at p. 3)
As previously discussed, DOE evaluates all technology options
identified in the technology assessment, including those that may be
internationally available, according to the screening criteria
enumerated in sections 6(b)(3) and 7(b) of appendix A to 10 CFR part
430 subpart C. If a specific technology option passes all the screening
criteria, it is retained as a design option for the engineering
analysis. DOE notes that all of the remaining technology options that
were not proposed to be screened out are already available in the
United States.
BWC suggested that it is too early for DOE to consider gas-fired
heat pump water heaters in its analysis, noting that they are not
currently available in the consumer market and the technology has not
been demonstrated to be easily and cost-effectively manufactured at
large scale to meet the demands of the consumer water heater market.
(BWC, No. 32 at p. 3) The Joint Advocates, however, urged DOE to
evaluate gas-fired heat pump water heaters as the max-tech level for
gas-fired storage water heaters because gas-fired heat pump technology
is commercially available in other product types, has been used in some
demonstrations for water heaters, and may soon be commercially
available for water heaters. (Joint Advocates, No. 34 at p. 2)
In response to these comments, DOE notes that it is not statutorily
restricted to technologies that are currently on the market when
conducting its analyses and considering standards; however, DOE is
required to screen out technologies which are not practicable to
manufacture at the scale necessary to serve the relevant market at the
time of the projected compliance date of any amended standards (see
section 6(b)(3)(i)-(ii) of appendix A and section IV.B of this
document). Because there are no commercially available gas-fired heat
pump water heaters on the market yet, DOE has no data or information
that would suggest that gas-fired heat pump technology will be
practicable to manufacture at the necessary scale upon the compliance
date expected for this rulemaking. Therefore, DOE proposes to screen
out this technology option from further consideration.
AHRI requested that DOE remove millivolt-powered (i.e., thermopile-
operated) flue dampers in the screening analysis because they are not
used in consumer products. (AHRI, No. 42 at p. 3) Rheem recommended
that the thermopile-operated flue damper technology option be screened
out due to technological feasibility, agreeing with AHRI that this
technology option is not incorporated in commercialized products.
(Rheem, No. 45 at p. 3) BWC also urged DOE not to consider millivolt-
powered dampers as a technology option for consumer water heaters as
they are not used domestically in consumer products. (BWC, No. 32 at p.
2)
DOE reviewed product literature for water heaters which have
thermopile-operated flue dampers. These water heaters convert thermal
energy from a standing pilot light into electricity to operate a
damper, but such thermopiles are found only in commercial water
heaters, which typically have substantially higher input rate standing
pilot lights. Manufacturers generally agreed during interviews that the
standing pilot lights in consumer water heaters are not large enough to
power flue dampers. Consequently, DOE screened this

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