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Rule2024-08546

Energy Conservation Program: Energy Conservation Standards for Air-Cooled Commercial Package Air Conditioners and Heat Pumps

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Published

May 20, 2024

Effective

September 17, 2024

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 air-cooled commercial package air conditioners and heat pumps with a rated cooling capacity greater than or equal to 65,000 Btu/h. In this direct final rule, DOE is adopting amended energy conservation standards, based on clear and convincing evidence, for air-cooled commercial package air conditioners and heat pumps with a rated cooling capacity greater than or equal to 65,000 Btu/h, which it has determined satisfy the relevant statutory criteria.

Full Text

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[Federal Register Volume 89, Number 98 (Monday, May 20, 2024)]
[Rules and Regulations]
[Pages 44052-44142]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-08546]

[[Page 44051]]

Vol. 89

Monday,

No. 98

May 20, 2024

Part III

Department of Energy

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10 CFR Part 431

Energy Conservation Program: Energy Conservation Standards for Air-
Cooled Commercial Package Air Conditioners and Heat Pumps; Final Rule

Federal Register / Vol. 89 , No. 98 / Monday, May 20, 2024 / Rules
and Regulations

[[Page 44052]]

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DEPARTMENT OF ENERGY

10 CFR Part 431

[EERE-2022-BT-STD-0015]
RIN 1904-AF34

Energy Conservation Program: Energy Conservation Standards for
Air-Cooled Commercial Package Air Conditioners and Heat Pumps

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

ACTION: Direct final rule.

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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 air-cooled
commercial package air conditioners and heat pumps with a rated cooling
capacity greater than or equal to 65,000 Btu/h. In this direct final
rule, DOE is adopting amended energy conservation standards, based on
clear and convincing evidence, for air-cooled commercial package air
conditioners and heat pumps with a rated cooling capacity greater than
or equal to 65,000 Btu/h, which it has determined satisfy the relevant
statutory criteria.

DATES: The effective date of this rule is September 17, 2024, unless
adverse comment is received by September 9, 2024. If adverse comments
are received that DOE determines may provide a reasonable basis for
withdrawal of the direct final rule, a timely withdrawal of this rule
will be published in the Federal Register. If no such adverse comments
are received, compliance with the amended standards established for
air-cooled commercial package air conditioners and heat pumps with a
rated cooling capacity greater than or equal to 65,000 Btu/h in this
direct final rule is required on and after January 1, 2029.

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-2022-BT-STD-0015. Follow the instructions for submitting
comments. Alternatively, interested persons may submit comments,
identified by docket number EERE-2022-BT-STD-0015, by any of the
following methods:
Email: <a href="/cdn-cgi/l/email-protection#78390808141119161b1d2b0c19161c190a1c0b290d1d0b0c1117160b381d1d561c171d561f170e">[email&#160;protected]</a>. Include the docket
number EERE-2022-BT-STD-0015 in the subject line of the message.
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. If possible,
please submit all items on a compact disc (``CD''), in which case it is
not necessary to include printed copies.
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.
Docket: The docket for this rulemaking, which includes Federal
Register notices, public meeting attendee lists and transcripts,
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-2022-BT-STD-0015">www.regulations.gov/docket/EERE-2022-BT-STD-0015</a>. The docket web page contains instructions on how
to access all documents, including public comments, in the docket.

FOR FURTHER INFORMATION CONTACT:
Mr. Lucas Adin, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Office, EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone:
(202) 287-5904. Email: <a href="/cdn-cgi/l/email-protection#cf8ebfbfa3a6aea1acaa9cbbaea1abaebdabbc9ebaaabcbba6a0a1bc8faaaae1aba0aae1a8a0b9">[email&#160;protected]</a>.
Mr. Eric Stas, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121.
Telephone: (202) 586-4798. Email: <a href="/cdn-cgi/l/email-protection#6d281f040e433e190c1e2d051c43090208430a021b">[email&#160;protected]</a>.
For further information on how to submit a comment or review other
public comments and the docket, contact the Appliance and Equipment
Standards Program staff at (202) 287-1445 or by email:
<a href="/cdn-cgi/l/email-protection#c687b6b6aaafa7a8a5a395b2a7a8a2a7b4a2b597b3a3b5b2afa9a8b586a3a3e8a2a9a3e8a1a9b0">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Direct Final 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 Standards Rulemaking for ACUACs and ACUHPs
3. 2022-2023 ASRAC ACUAC/HP Working Group Recommended Standard
Levels
III. General Discussion
A. General Comments
B. Scope of Coverage
C. Test Procedure and Metrics
D. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
E. Energy Savings
1. Determination of Savings
2. Significance of Savings
F. 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 Equipment
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Equipment Classes
2. Market Post-2023
3. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies
C. Engineering Analysis
1. Efficiency Levels in Terms of Existing Metrics
a. Baseline Efficiency
b. Higher Efficiency Levels
2. Efficiency Levels in Terms of New Metrics
a. IVEC
b. IVHE
3. Energy Modeling
4. Impact of Low-GWP Refrigerants
5. Cost Analysis
a. MPC Estimates
b. MSP Estimates, Manufacturer Markup, and Shipping Costs
6. Cost-Efficiency Results
D. Markups Analysis
1. Distribution Channels
2. Markups and Sales Tax
E. Energy Use Analysis
1. System-Level Calculations
2. Generalized Building Sample
3. Energy Use Adjustment Factors
4. Comments
F. Life-Cycle Cost and Payback Period Analysis
1. Equipment Cost
2. Installation Cost
3. Annual Energy Consumption
4. Energy Prices
5. Maintenance and Repair Costs
6. Equipment Lifetime
7. Discount Rates
8. Energy Efficiency Distribution in the No-New-Standards Case
9. Payback Period Analysis

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G. Shipments Analysis
1. New Shipments
2. Replacement Shipments
3. Stock Calculation
4. Comments
H. National Impact Analysis
1. Equipment Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model and Key Inputs
a. Manufacturer Production Costs
b. Shipments Projections
c. Capital and Product Conversion Costs
d. Manufacturer Markup Scenarios
3. 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 Dioxide
b. Social Cost of Methane and Nitrous Oxide
c. Sensitivity Analysis Using EPA's New SC-GHG Estimates
2. Monetization of Other Emissions Impacts
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
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 Equipment
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
8. Summary of Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs Considered for ACUACs and ACUHPs
Standards
2. Annualized Benefits and Costs of the Standards
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866, 13563, and 14094
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act of 1995
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. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VII. Approval of the Office of the Secretary

I. Synopsis of the Direct Final Rule

The Energy Policy and Conservation Act, Public Law 94-163, as
amended (``EPCA''),\1\ authorizes DOE to regulate the energy efficiency
of a number of consumer products and certain industrial equipment. (42
U.S.C. 6291-6317, as codified) Title III, Part C \2\ of EPCA
established the Energy Conservation Program for Certain Industrial
Equipment. (42 U.S.C. 6311-6317) This covered equipment includes small,
large, and very large commercial package air conditioning and heating
equipment. (42 U.S.C. 6311(1)(B)-(D)) Such equipment includes as
equipment categories air-cooled commercial unitary air conditioners
with a rated cooling capacity greater than or equal to 65,000 Btu/h
(``ACUACs'') and air-cooled commercial unitary heat pumps with a rated
cooling capacity greater than or equal to 65,000 Btu/h (``ACUHPs''),
which are the subject of this rulemaking.\3\ The current energy
conservation standards are found in the Code of Federal Regulations
(``CFR'') at 10 CFR 431.97(b).
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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 C was re-designated Part A-1.
\3\ While ACUACs and ACUHPs with rated cooling capacity less
than 65,000 Btu/h are included in the broader category of commercial
unitary air conditioners and heat pumps (``CUACs and CUHPs''), they
are not addressed in this direct final rule. The standards for
ACUACs and ACUHPs with rated cooling capacity less than 65,000 Btu/h
have been addressed in a separate rulemaking (see Docket No. EERE-
2022-BT-STD-0008). Accordingly, all references within this direct
final rule to ACUACs and ACUHPs exclude equipment with rated cooling
capacity less than 65,000 Btu/h.
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In accordance with the authority provided by 42 U.S.C. 6295(p)(4)
and 42 U.S.C. 6316(b)(1), DOE is issuing this direct final rule
amending the energy conservation standards for ACUACs and ACUHPs.\4\
The amended standards levels outlined in this document reflect the
culmination of a negotiated rulemaking that included the following
notices and stakeholder comments thereon: May 2020 energy conservation
standards request for information (``May 2020 ECS RFI'') (85 FR 27941
(May 12, 2020); May 2022 test procedure (``TP'')/ECS RFI (87 FR 31743
(May 25, 2022)); and the 2022 Appliance Standards and Rulemaking
Federal Advisory Committee (``ASRAC'') commercial unitary air
conditioners and heat pumps working group negotiations, hereinafter
referred to as ``the 2023 ECS Negotiations'' (87 FR 45703 (July 29,
2022). Participants in the 2023 ECS Negotiations included stakeholders
representing manufacturers, energy-efficiency and environmental
advocates, States, and electric utility companies. See section II.B.2
of this document for a detailed history of the current rulemaking.
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\4\ See 42 U.S.C. 6316(b) (applying 42 U.S.C. 6295(p)(4)) to
energy conservation standard rulemakings involving a variety of
industrial equipment, including ACUACs and ACUHPs.
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The consensus reached by the ACUAC/HP ASRAC Working Group
(hereinafter referred to as ``the ACUAC/HP Working Group'') on amended
energy conservation standards (``ECS'') is outlined in the ASRAC
Working Group Term Sheet (hereinafter referred to as ``the ACUAC/HP
Working Group ECS Term Sheet''). (ASRAC Working Group Term Sheet,
Docket No. EERE-2022-BT-STD-0015, No. 87) In accordance with the direct
final rule provisions at 42 U.S.C. 6295(p)(4), DOE has determined that
the recommendations contained in the ACUAC/HP Working Group ECS Term
Sheet are compliant with 42 U.S.C. 6313(a)(6)(B). As required by EPCA,
DOE is also simultaneously publishing a notice of proposed rulemaking
(``NOPR'') that contains identical standards to those adopted in this
direct final rule. Consistent with the statute, DOE is providing a 110-
day public comment period on the direct final rule. (42 U.S.C.
6295(p)(4)(B); 42 U.S.C. 6316(b)(1))) If DOE determines that any
adverse comments received provide a reasonable basis for withdrawal of
the direct final rule under 42 U.S.C. 6313(a)(6)(B) or any other
applicable law, DOE will withdraw the direct final rule and continue
the rulemaking under the NOPR. (42 U.S.C. 6295(p)(4)(C); 42 U.S.C.
6316(b)(1)) See section II.A of this document for more details on DOE's
statutory authority.
The amended standards that DOE is adopting in this direct final
rule are the efficiency levels recommended in the ACUAC/HP Working
Group ECS Term Sheet (shown in Table I.1) as measured according to
DOE's amended test procedure for commercial unitary air conditioners
and heat pumps codified at title 10 of the Code of Federal Regulations
(``CFR''), part 431, subpart F, appendix A1 (``appendix A1'').

[[Page 44054]]

The amended standards recommended in the Joint Agreement are
represented as trial standard level (``TSL'') 3 in this document
(hereinafter the ``Recommended TSL'') and are described in section V.A
of this document. These standards apply to all equipment listed in
Table I.1 and manufactured in, or imported into the United States
starting on January 1, 2029.
[GRAPHIC] [TIFF OMITTED] TR20MY24.070

A. Benefits and Costs to Consumers

Table I.2 summarizes DOE's evaluation of the economic impacts of
the adopted standards on consumers of ACUACs and ACUHPs, as measured by
the average life-cycle cost (``LCC'') savings and the simple payback
period (``PBP'').\5\ The average LCC savings are positive for all
equipment classes, and the PBP is less than the average lifetime of the
equipment, which is estimated to be 21-30 years, depending on equipment
class (see sections IV.F and V.B.1 of this document).
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\5\ 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.9 of this document). The simple PBP, which is
designed to compare specific efficiency levels, is measured relative
to the baseline equipment (see section IV.C of this document).
[GRAPHIC] [TIFF OMITTED] TR20MY24.071

DOE's analysis of the impacts of the adopted 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 reference year through
the end of the analysis period (2024-2058). Using a real discount rate
of 5.9 percent, DOE estimates that the INPV for manufacturers of ACUACs
and ACUHPs in the case without amended standards is $2,653.0 million in
2022$. Under the adopted standards, DOE estimates the change in INPV to
range from -7.3. percent to -3.0 percent, which is approximately -
$193.9 million to -$79.5 million. In order to bring this equipment into
compliance with amended standards, it is estimated that industry will
incur total conversion costs of $288.0 million.
DOE's analysis of the impacts of the adopted standards on
manufacturers is

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described in sections IV.J and V.B.2 of this document.

C. National Benefits and Costs 6
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\6\ All monetary values in this document are expressed in 2022
dollars and, where appropriate, are discounted to 2022 unless
explicitly stated otherwise.
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DOE's analyses indicate that the adopted energy conservation
standards for ACUACs and ACUHPs would save a significant amount of
energy. Relative to the case without amended standards, the lifetime
energy savings for ACUACs and ACUHPs purchased in the 30-year period
that begins in the anticipated year of compliance with the amended
standards (2029-2058), amount to 5.5 quadrillion British thermal units
(``Btu''), or quads.\7\ This represents a savings of 10.0 percent
relative to the energy use of this equipment in the case without
amended standards (referred to as the ``no-new-standards case'').
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\7\ 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.2 of this document.
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The cumulative net present value (``NPV'') of total consumer
benefits of the standards for ACUACs and ACUHPs ranges from $4.39
billion (at a 7-percent discount rate) to $15.30 billion (at a 3-
percent discount rate). This NPV expresses the estimated total value of
future operating-cost savings minus the estimated increased equipment
and installation costs for ACUACs and ACUHPs purchased in 2029-2058.
In addition, the adopted standards for ACUACs and ACUHPs are
projected to yield significant environmental benefits. DOE estimates
that the adopted standards will result in cumulative emission
reductions (over the same period as for energy savings) of 108.7
million metric tons (``Mt'') \8\ of carbon dioxide
(``CO<INF>2</INF>''), 25.3 thousand tons of sulfur dioxide
(``SO<INF>2</INF>''), 185.1 thousand tons of nitrogen oxides
(``NO<INF>X</INF>''), 845.6 thousand tons of methane
(``CH<INF>4</INF>''), 0.8 thousand tons of nitrous oxide
(``N<INF>2</INF>O''), and 0.2 tons of mercury (``Hg'').\9\ The
estimated cumulative reduction in CO<INF>2</INF> emissions through 2030
amounts to 0.32 Mt, which is equivalent to the emissions resulting from
the annual electricity use of more than 0.23 million homes.
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\8\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO<INF>2</INF> are presented in short tons.
\9\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy
Outlook 2023 (``AEO 2023''). AEO 2023 reflects, to the extent
possible, laws and regulations adopted through mid-November 2022,
including the Inflation Reduction Act. See section IV.K of this
document for further discussion of AEO 2023 assumptions that affect
air pollutant emissions.
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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''). DOE used interim SC-GHG values (in terms of benefit
per ton of GHG avoided) developed by an Interagency Working Group on
the Social Cost of Greenhouse Gases (``IWG'').\10\ 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 $4.9
billion. DOE does not have a single central SC-GHG point estimate, and
it emphasizes the value of considering the benefits calculated using
all four sets of SC-GHG estimates. DOE is presenting monetized benefits
of GHG emissions reductions in accordance with the applicable Executive
Orders, and DOE would reach the same conclusion presented in this rule
in the absence of the estimated benefits from reductions in GHG
emissions.
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\10\ To monetize the benefits of reducing GHG 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 IWG. (``February 2021 SC-GHG TSD'') (available at:
<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>)
(last accessed Dec. 4, 2023).
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DOE also estimated the monetized health benefits of SO<INF>2</INF>
and NO<INF>X</INF> emissions reductions associated with energy savings,
using benefit-per-ton estimates from the U.S. Environmental Protection
Agency,\11\ as discussed in section IV.L of this document. DOE
estimates the present value of the health benefits would be $3.0
billion using a 7-percent discount rate, and $8.8 billion using a 3-
percent discount rate.\12\ DOE is currently only monetizing health
benefits from changes in ambient fine particulate matter
(``PM<INF>2.5</INF>'') concentrations from two precursors
(SO<INF>2</INF> and NO<INF>X</INF>), and from changes in ambient ozone
from one precursor (for NO<INF>X</INF>), 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.
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\11\ U.S. EPA, Estimating the Benefit per Ton of Reducing
Directly Emitted PM<INF>2.5</INF>, PM<INF>2.5</INF> Precursors and
Ozone Precursors from 21 Sectors (available at: <a href="http://www.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-21-sectors">www.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-21-sectors</a>) (last
accessed Dec. 4, 2023).
\12\ 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 (``E.O.'') 12866.
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Table I.3 summarizes the monetized benefits and costs expected to
result from the amended standards for ACUACs and ACUHPs. 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.
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[GRAPHIC] [TIFF OMITTED] TR20MY24.073

BILLING CODE 6450-01-C
The benefits and costs of the considered 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 equipment purchase prices and
installation costs, plus (3) the value of climate and health benefits
of emission reductions, all annualized.\13\
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\13\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2024, 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 2024. 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.
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The national operating cost savings are domestic private U.S.
consumer monetary savings that occur as a result of purchasing the
covered equipment and are measured for the lifetime of ACUACs and
ACUHPs shipped in 2029-2058. The health benefits associated with
reduced emissions achieved as a result of the adopted standards are
also calculated based on the lifetime of ACUACs and ACUHPs shipped in
2029-2058. Total benefits for both the 3-percent and 7-percent cases
are presented using the average GHG social costs with 3-percent
discount rate.\14\ Estimates of SC-GHG values are presented for all
four discount rates in section V.B of this document.
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\14\ As discussed in section IV.L.1 of this document, DOE agrees
with the IWG that using consumption-based discount rates (e.g., 3
percent) is appropriate when discounting the value of climate
impacts. Combining climate effects discounted at an appropriate
consumption-based discount rate with other costs and benefits
discounted at a capital-based rate (e.g., 7 percent) is reasonable
because of the different nature of the types of benefits being
measured.
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Table I.4 presents the total estimated monetized benefits and costs
associated with the adopted standard, expressed in terms of annualized
values. The results under the primary estimate are as follows.
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the adopted standards is $493.2 million per year in
increased equipment costs, while the estimated annual benefits are
$1,371.6 million in reduced equipment operating costs, $279.2 million
in climate benefits, and $507.9 million in health benefits. In this
case, the net benefit would amount to $1.7 billion per year.
Using a 7-percent discount rate for consumer benefits and costs and
health benefits from reduced NOx 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 adopted in this rule is
$481.3 million per year in increased equipment costs, while the
estimated annual benefits are $944.7 million in reduced equipment
operating costs, $279.2 million in climate benefits, and $317.2 million
in health benefits. In this case, the net benefit amounts to $1.1
billion per year.
BILLING CODE 6450-01-P

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[GRAPHIC] [TIFF OMITTED] TR20MY24.075

BILLING CODE 6450-01-C
DOE's analysis of the national impacts of the adopted standards is
described in sections IV.H, IV.K, and IV.L of this document.

D. Conclusion

DOE has determined that the ACUAC/ACUHP Working Group statement
containing recommendations with respect to energy conservation
standards for ACUACs and ACUHPs was submitted jointly by interested
persons that are fairly representative of relevant points of view, in
accordance with 42 U.S.C. 6295(p)(4)(A).\15\ After considering the
analysis and weighing the benefits and burdens, DOE has determined that
the recommended standards are in accordance with 42 U.S.C.
6313(a)(6)(B), which contains criteria for adopting a uniform national
standard more stringent than the levels contained in the American
Society of Heating, Refrigerating, and Air-Conditioning Engineers
(``ASHRAE'') Standard 90.1, as amended,\16\ for the equipment
considered in this document. Specifically, the Secretary has
determined, supported by clear and convincing evidence, that the
adoption of the recommended standards would result in the significant
conservation of energy and is technologically feasible and economically
justified. In determining whether the recommended standards are
economically justified, the Secretary has determined that the benefits
of the recommended standards exceed the burdens. Namely, the Secretary
has concluded that the recommended standards, when considering the
benefits of energy savings, positive NPV of consumer benefits, emission
reductions, the estimated monetary value of the emissions reductions,
and positive average LCC savings, would yield benefits outweighing the
negative impacts on some consumers and on manufacturers, including the
conversion costs that could result in a reduction in INPV for
manufacturers.
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\15\ See 42 U.S.C. 6316(b) (applying 42 U.S.C. 6295(p)(4) to
energy conservation standard rulemakings involving a variety of
industrial equipment, including ACUACs and ACUHPs.
\16\ As discussed in section II.B.2, ASHRAE 90.1-2019 updated
the minimum efficiency levels for ACUACs and ACUHPs to align with
those adopted by DOE in the January 2016 Direct Final Rule--i.e.,
ASHRAE 90.1-2019 includes minimum efficiency levels that are aligned
with the current Federal energy conservation standards. The most
recent version of ASHRAE Standard 90.1, ASHRAE 90.1-2022, includes
the same minimum efficiency levels for ACUACs and ACUHPs as ASHRAE
90.1-2019.
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Using a 7-percent discount rate for consumer benefits and costs and
NO<INF>X</INF> and SO<INF>2</INF> emissions reduction benefits, and a
3-percent discount rate case for GHG social costs, the estimated cost
of the standards for ACUACs and ACUHPs is $481.3 million per year in
increased equipment costs, while the estimated annual benefits are
$944.7 million in reduced equipment operating costs, $279.2 million in
climate benefits, and $317.2 million in health benefits. The net
benefit amounts to $1.1 billion per year. DOE notes that the net
benefits are substantial even in the absence of climate benefits,\17\
and DOE would adopt the same standards in the absence of such benefits.
---------------------------------------------------------------------------

\17\ The information on climate benefits is provided in
compliance with Executive Order 12866.
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\18\ 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 5.5 quads (FFC), the equivalent of
the primary annual energy use of 59.1 million homes. In addition, they
are projected to reduce CO<INF>2</INF> emissions by 108.7 Mt. Based on
these findings, DOE has determined the energy savings from the standard
levels adopted in this direct final rule are ``significant'' within the
meaning of 42 U.S.C. 6313(a)(6)(A)(ii)(II). A more detailed discussion
of the basis for these conclusions is contained in the remainder of
this document and the accompanying TSD.
Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is
issuing this direct final rule amending the energy conservation
standards for ACUACs and ACUHPs. Consistent with this authority, DOE is
also publishing elsewhere in this issue of the Federal Register a NOPR
proposing standards that are identical to those contained in this
direct final rule. (See 42 U.S.C. 6295(p)(4)(A)(i); 42 U.S.C.
6316(b)(1))

[[Page 44060]]

II. Introduction

The following section briefly discusses the statutory authority
underlying this direct final rule, as well as some of the relevant
historical background related to the establishment of energy
conservation standards for ACUACs and ACUHPs.

A. Authority

EPCA, Public Law 94-163, as amended, authorizes DOE to regulate the
energy efficiency of certain consumer products and industrial
equipment. Title III, Part C of EPCA, added by Public Law 95-619, Title
IV, section 441(a) (42 U.S.C. 6311-6317, as codified), established the
Energy Conservation Program for Certain Industrial Equipment, which
sets forth a variety of provisions designed to improve energy
efficiency. This equipment includes ACUACs and ACUHPs, which are a
category of small, large, and very large commercial package air
conditioning and heating equipment and the subject of this rulemaking.
(42 U.S.C. 6311(1)(B)-(D)) EPCA prescribed initial standards for this
equipment. (42 U.S.C. 6313(a)(1)-(2))
Pursuant to EPCA, DOE must amend the energy conservation standards
for certain types of commercial and industrial equipment, including the
equipment at issue in this document, whenever ASHRAE amends the
standard levels or design requirements prescribed in ASHRAE Standard
90.1, ``Energy Standard for Buildings Except Low-Rise Residential
Buildings'' (``ASHRAE Standard 90.1''). DOE must adopt the amended
ASHRAE Standard 90.1 levels for these equipment (hereafter ``ASHRAE
equipment''), unless the Secretary of Energy (``the Secretary'')
determines by rule published in the Federal Register and supported by
clear and convincing evidence that adoption of a more-stringent uniform
national standard would result in significant additional conservation
of energy and is technologically feasible and economically justified.
(42 U.S.C. 6313(a)(6)(A)-(B))
In addition, EPCA contains a review requirement for this same
equipment (the six-year-lookback review), which requires DOE to
consider the need for amended standards every six years. To adopt more-
stringent standards under that provision, DOE must once again have
clear and convincing evidence to show that such standards would be
technologically feasible and economically justified and would save a
significant additional amount of energy. (42 U.S.C. 6313(a)(6)(C)); see
id. 6313(a)(6)(A)(ii)(II) & (a)(6)(B)(i))
In deciding whether a more-stringent standard is economically
justified, under either the provisions of 42 U.S.C. 6313(a)(6)(A) or 42
U.S.C. 6313(a)(6)(C), DOE must determine whether the benefits of the
standard exceed its burdens. DOE must make this determination after
receiving comments on the proposed standard, and by considering, to the
maximum extent practicable, the following seven factors:
(1) The economic impact of the standard on manufacturers and
consumers of equipment subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered equipment in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered equipment that are likely to result from the standard;
(3) The total projected amount of energy savings likely to result
directly from the standard;
(4) Any lessening of the utility or the performance of the covered
equipment likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy conservation; and
(7) Other factors the Secretary of Energy considers relevant.
(42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII))
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 the EPCA specifically include
definitions (42 U.S.C. 6311), energy conservation standards (42 U.S.C.
6313), test procedures (42 U.S.C. 6314), labeling provisions (42 U.S.C.
6315), and the authority to require information and reports from
manufacturers (42 U.S.C. 6316; 42 U.S.C. 6296(a), (b) and (d)).
Federal energy efficiency requirements for covered equipment
established under EPCA generally supersede State laws and regulations
concerning energy conservation testing, labeling, and standards. (42
U.S.C. 6316(a) and (b); 42 U.S.C. 6297) DOE may, however, grant waivers
of Federal preemption in limited instances for particular State laws or
regulations, in accordance with the procedures and other provisions set
forth under EPCA. (42 U.S.C. 6316(b)(2)(D))
Under 42 U.S.C. 6314, EPCA sets forth the criteria and procedures
DOE is required to follow when prescribing or amending test procedures
for covered equipment. EPCA requires that any test procedure prescribed
or amended under this section must be reasonably designed to produce
test results which reflect energy efficiency, energy use, or estimated
annual operating cost of covered equipment during a representative
average use cycle and requires that the test procedure not be unduly
burdensome to conduct. (42 U.S.C. 6314(a)(2)) Manufacturers of covered
equipment must use the Federal test procedures as the basis for: (1)
certifying to DOE that their equipment complies with the applicable
energy conservation standards adopted pursuant to EPCA (42 U.S.C.
6316(b); 42 U.S.C. 6296), and (2) making representations about the
efficiency of that equipment (42 U.S.C. 6314(d)). Similarly, DOE uses
these test procedures to determine whether the equipment complies with
relevant standards promulgated under EPCA. The current DOE test
procedure for ACUACs and ACUHPs appear at title 10 of the Code of
Federal Regulations (``CFR''), part 431, subpart F, appendix A.
EPCA also contains what is known as an ``anti-backsliding''
provision, which prevents the Secretary from prescribing any amended
standard that either increases the maximum allowable energy use or
decreases the minimum required energy efficiency of a covered product.
(42 U.S.C. 6313(a)(6)(B)(iii)(I)) Also, the Secretary may not prescribe
an amended or new standard if interested persons have established by a
preponderance of the evidence that the standard is likely to result in
the unavailability in the United States in any covered equipment type
(or class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States. (42 U.S.C.
6313(a)(6)(B)(iii)(II)(aa))
Finally, the Energy Independence and Security Act of 2007 (``EISA
2007''), Public Law 110-140, amended EPCA, in relevant part, to grant
DOE authority to issue a final rule (i.e., a ``direct final rule'' or
``DFR'') establishing an energy conservation standard upon receipt of a
statement submitted jointly by interested persons that are fairly
representative of relevant points of view (including representatives of
manufacturers of covered products, States, and efficiency advocates),
as determined by the Secretary, that contains recommendations with
respect to an energy or water conservation standard that are in
accordance with the

[[Page 44061]]

provisions of 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as
applicable. (42 U.S.C. 6295(p)(4); 42 U.S.C. 6316(b)(1)) Pursuant to 42
U.S.C. 6295(p)(4), the Secretary must also determine whether a jointly
submitted recommendation for an energy or water conservation standard
satisfies 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable.
The direct final rule must be published simultaneously with a NOPR
that proposes an energy or water conservation standard that is
identical to the standard established in the direct final rule, and DOE
must provide a public comment period of at least 110 days on this
proposal. (42 U.S.C. 6295(p)(4)(A)-(B); 42 U.S.C. 6316(b)(1)) While DOE
typically provides a comment period of 60 days on proposed energy
conservation standards, for a NOPR accompanying a direct final rule,
DOE provides a comment period of the same length as the comment period
on the direct final rule--i.e. 110 days. Based on the comments received
during this period, the direct final rule will either become effective,
or DOE will withdraw it not later than 120 days after its issuance if:
(1) one or more adverse comments is received, and (2) DOE determines
that those comments, when viewed in light of the rulemaking record
related to the direct final rule, may provide a reasonable basis for
withdrawal of the direct final rule under 42 U.S.C. 6295(o), 42 U.S.C.
6313(a)(6)(B), or any other applicable law. (42 U.S.C. 6295(p)(4)(C);
42 U.S.C. 6316(b)(1)) Receipt of an alternative joint recommendation
may also trigger a DOE withdrawal of the direct final rule in the same
manner. (Id.) After withdrawing a direct final rule, DOE must proceed
with the notice of proposed rulemaking published at the same time as
the direct final rule and publish in the Federal Register the reasons
why the direct final rule was withdrawn. (Id.)
DOE has previously explained its interpretation of its direct final
rule authority. In a final rule amending the Department's ``Procedures,
Interpretations and Policies for Consideration of New or Revised Energy
Conservation Standards for Consumer Products'' at 10 CFR part 430,
subpart C, appendix A, DOE noted that it may issue standards
recommended by interested persons that are fairly representative of
relative points of view as a direct final rule when the recommended
standards are in accordance with 42 U.S.C. 6295(o) or 42 U.S.C.
6313(a)(6)(B), as applicable. 86 FR 70892, 70912 (Dec. 13, 2021). But
the direct final rule provision in EPCA does not impose additional
requirements applicable to other standards rulemakings, which is
consistent with the unique circumstances of rules issued as consensus
agreements under DOE's direct final rule authority. Id. DOE's
discretion remains bounded by its statutory mandate to adopt a standard
that results in significant conservation of energy and is
technologically feasible and economically justified--a requirement
found in 42 U.S.C. 6313(a)(6)(B). As such, DOE's review and analysis of
the Joint Agreement is limited to whether the recommended standards
satisfy the criteria in 42 U.S.C. 6313(a)(6)(B).
Additionally, DOE notes that the direct final rule authority in
EPCA is permissive. If DOE determines that recommended standards
satisfy the applicable criteria, the Department ``may issue a final
rule.'' (42 U.S.C. 6295(p)(4)(A)(i)) This discretion is particularly
relevant for ASHRAE equipment where the applicable statutory criteria
require that an amended standard be technologically feasible and
economically justified and result in significant conservation of
energy. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) This is in contrast to the
applicable criteria for covered products and non-ASHRAE equipment,
where, in addition to requiring significant conservation of energy, an
amended standard must also represent the maximum improvement in energy
efficiency that is technologically feasible and economically justified.
Thus, there may be situations where the recommended standards for
ASHRAE equipment satisfy the criteria in 42 U.S.C. 6313(a)(6)(B), but
do not represent that maximum improvement in energy efficiency that is
technologically feasible and economically justified. In those
situations, DOE has discretion on whether to proceed with a direct
final rule or propose its own, more-stringent standard. In order to
inform that decision, DOE conducts its typical walk-down analysis when
evaluating all direct final rules, including those for ASHRAE
equipment. Under that approach, DOE starts from the most stringent
possible standard (``max-tech'') and ``walks-down'' through the TSLs
until arriving at the first TSL that meets all of the statutory
criteria.

B. Background

1. Current Standards
In a direct final rule published in the Federal Register on January
15, 2016 (``January 2016 Direct Final Rule''), DOE prescribed the
current energy conservation standards for ACUACs and ACUHPs
manufactured on and after January 1, 2023. 81 FR 2420. These standards
are set forth in DOE's regulations at 10 CFR 431.97(b) and are repeated
in Table II.1.

[[Page 44062]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.076

2. History of Standards Rulemaking for ACUACs and ACUHPs
Since publication of the January 2016 Direct Final Rule, ASHRAE
published an updated version of ASHRAE Standard 90.1 (``ASHRAE 90.1-
2019''), which updated the minimum efficiency levels for ACUACs and
ACUHPs to align with those adopted by DOE in the January 2016 Direct
Final Rule (i.e., specifying two tiers of minimum levels for ACUACs and
ACUHPs, with a January 1, 2023 compliance date for the second tier).
ASHRAE published another version of ASHRAE Standard 90.1 in January
2023 (``ASHRAE 90.1-2022''), which includes the same minimum efficiency
levels for ACUACs and ACUHPs as those included in ASHRAE Standard 90.1-
2019.
On May 12, 2020, DOE began its six-year-lookback review with for
ACUACs and ACUHPs by publishing in the Federal Register the May 2020
ECS RFI.\19\ 85 FR 27941. The May 2020 ECS RFI sought information to
help DOE inform its decisions, consistent with its obligations under
EPCA. DOE received multiple comments from interested stakeholders in
response to the May 2020 ECS RFI, which prompted DOE to publish the May
2022 TP/ECS RFI in the Federal Register on May 25, 2022, to investigate
additional aspects of the ACUAC and ACUHP TP and standards. 87 FR
31743. In the latter document, DOE identified several issues that it
determined would benefit from further comment. DOE discussed these
topics (including any comments received in response to the May 2020 ECS
RFI that are related to these topics) in the May 2022 TP/ECS RFI. Once
again, DOE received a number of written comments from interested
parties related to standards for CUACs and CUHPs in response to the May
2020 ECS RFI and the May 2022 TP/ECS RFI. DOE considered these comments
in preparation of this direct final rule. Table II.2 and Table II.3
list the stakeholders whose comments were related to standards for
ACUACs and ACUHPs and have been considered in this rulemaking. Relevant
comments, and DOE's responses, are provided in the appropriate sections
of this document.
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\19\ The May 2020 ECS RFI also addressed commercial warm air
furnaces, a separate type of covered equipment which was
subsequently handled in a different rulemaking proceeding (see
Docket No. EERE-2019-BT-STD-0042 in <a href="http://www.regulations.gov">www.regulations.gov</a>).

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[[Page 44063]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.077

[GRAPHIC] [TIFF OMITTED] TR20MY24.078

A parenthetical reference at the end of a comment quotation or
paraphrase provides the location of the item in the public record.\20\
For comments received in response to the May 2020 ECS RFI and May 2022
TP/ECS RFI (which are contained within two different dockets \21\),
parenthetical references in this direct final rule include the full
docket number (rather than just the document number).
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\20\ The parenthetical reference provides a reference for
information located in the relevant docket for this rulemaking,
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).
\21\ Comments submitted in response to the May 2020 ECS RFI are
available in Docket No. EERE-2019-BT-STD-0042. Comments submitted in
response to the May 2022 TP/ECS RFI are available in Docket No.
EERE-2022-BT-STD-0015.
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On July 29, 2022, DOE published in the Federal Register a notice of
intent to establish a working group for commercial unitary air
conditioners and heat pumps to negotiate proposed test procedures and
amended energy conservation standards for this equipment (``July 2022
Notice of Intent''). 87 FR 45703. The ACUAC/HP Working Group was
established under ASRAC in accordance with the Federal Advisory
Committee Act (``FACA'') (5 U.S.C. App 2) and the Negotiated Rulemaking
Act (``NRA'') (5 U.S.C. 561-

[[Page 44064]]

570, Pub. L. 104-320). The purpose of the ACUAC/HP Working Group was to
discuss, and if possible, reach consensus on recommended amendments to
the test procedures and energy conservation standards for ACUACs and
ACUHPs. The ACUAC/HP Working Group consisted of 14 voting members,
including DOE. (See appendix A, Working Group Members, Document No. 65
in Docket No. EERE-2022-BT-STD-0015) On December 15, 2022, the ACUAC/HP
Working Group signed a Term Sheet (``ACUAC/HP Working Group TP Term
Sheet'') of recommendations regarding ACUAC and ACUHP test procedures,
including two new efficiency metrics: integrated ventilation,
economizing, and cooling (``IVEC'') and integrated ventilation and
heating efficiency (``IVHE''). (See Id.)
The ACUAC/HP Working Group met five times to discuss energy
conservation standards for ACUACs and ACUHPs. These meetings took place
on February 22-23, March 21-22, April 12-13, April 26-27, and May 1,
2023. As a result of these efforts, the ACUAC/HP Working Group
successfully reached consensus on recommended energy conservation
standards in terms of the new IVEC and IVHE metrics for CUACs and
CUHPs. On May 1, 2023, the ACUAC/HP Working Group signed the ACUAC/HP
Working Group ECS Term Sheet outlining its recommendations which ASRAC
approved on October 17, 2023. These recommendations are discussed
further in section II.B.3 of this direct final rule.\22\
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\22\ The ACUAC/HP Working Group ECS Term Sheet is available at
<a href="http://www.regulations.gov/document/EERE-2022-BT-STD-0015-0087">www.regulations.gov/document/EERE-2022-BT-STD-0015-0087</a>.
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3. 2022-2023 ASRAC ACUAC/HP Working Group Recommended Standard Levels
This section summarizes the standard levels recommended in the Term
Sheet submitted by the ACUAC/HP Working Group for ACUAC/HP energy
conservation standards and the subsequent procedural steps taken by
DOE. Recommendation #1 of the ACUAC/HP Working Group ECS Term Sheet
recommends standard levels for ACUACs and ACUHPs with a recommended
compliance date of January 1, 2029. (ASRAC Term Sheet, No. 87 at p. 2)
These recommended standard levels are presented in Table II.4.
Recommendation #2 of the ACUAC/HP Working Group ECS Term Sheet
recommends revising existing certification requirements to support the
new metrics and standards presented in Table II.4, specifically
requesting that manufacturers be required to certify the following
information publicly to DOE for each basic model: (1) crankcase heat
wattage for each compressor stage, and (2) 5 [deg]F heating capacity
and COP, if applicable. DOE will address recommendation #2 regarding
certification in a separate rulemaking.
[GRAPHIC] [TIFF OMITTED] TR20MY24.079

After carefully considering the consensus recommendations for
amending the energy conservation standards for ACUACs and ACUHPs
submitted by the ACUAC/HP Working Group and adopted by ASRAC, DOE has
determined that these recommendations are in accordance with the
statutory requirements of 42 U.S.C. 6295(p)(4) and 42 U.S.C. 6316(b)(1)
for the issuance of a direct final rule. The following paragraphs
explain DOE's rationale in making this determination.
First, with respect to the requirement that recommended energy
conservation standards be submitted by interested persons that are
fairly representative of relevant points of view, DOE notes that the
ACUAC/HP Working Group ECS Term Sheet was signed and submitted by a
broad cross-section of interests, including the manufacturers who
produce the subject equipment. To satisfy this requirement, DOE has
generally found that the group submitting a joint statement must, where
appropriate, include larger concerns and small businesses in the
regulated industry/manufacturer community, energy advocates, energy
utilities, consumers, and States. However, the Department has explained
that it will be necessary to evaluate the meaning of ``fairly
representative'' on a case-by-case basis, subject to the circumstances
of a particular rulemaking, to determine whether additional parties
must be part of a joint statement beyond the required ``manufacturers
of covered products, States, and efficiency advocates'' specifically
called out by EPCA at 42 U.S.C. 6295(p)(4)(A). In this case, in
addition to manufacturers, the ACUAC/HP Working Group ECS Term Sheet
also included environmental and energy-efficiency advocacy
organizations, and electric utility companies. Although States were not
direct signatories to the ACUAC/HP Working Group ECS Term Sheet, the
ASRAC Committee approving

[[Page 44065]]

the ACUAC/HP Working Group's recommendations included at least two
members representing States--one representing the State of New York and
one representing the State of California. As a result, DOE has
determined that these recommendations were submitted by interested
persons who are fairly representative of relevant points of view on
this matter, including those specifically identified by Congress:
manufacturers of covered equipment, States, and efficiency advocates.
(42 U.S.C. 6295(p)(4)(A); 42 U.S.C. 6316(b)(1))
Pursuant to 42 U.S.C. 6295(p)(4), the Secretary must also determine
whether a jointly-submitted recommendation for an energy or water
conservation standard satisfies 42 U.S.C. 6295(o) or 42 U.S.C.
6313(a)(6)(B), as applicable. In making this determination, DOE
conducted an analysis to evaluate whether the potential energy
conservation standards under consideration achieve significant energy
savings and are technologically feasible and economically justified.
The evaluation is similar to the comprehensive approach that DOE
typically conducts whenever it considers potential new or amended
energy conservation standards for a given type of product or equipment.
DOE applies the same principles to any consensus recommendations it may
receive to satisfy its statutory obligations. Upon review, the
Secretary determined that the ACUAC/HP Working Group ECS Term Sheet
comports with the standard-setting criteria set forth under 42 U.S.C.
6313(a)(6)(B). Accordingly, the consensus-recommended efficiency levels
were included as the recommended TSL for ACUACs and ACUHPs (see section
V.A of this document for description of all of the considered TSLs).
The details regarding how the consensus-recommended TSL complies with
the standard-setting criteria are discussed and demonstrated in the
relevant sections throughout this document.
In sum, the Secretary has determined that the relevant criteria
under 42 U.S.C. 6295(p)(4) and 42 U.S.C. 6316(b)(1) have been
satisfied, such that it is appropriate to adopt the consensus-
recommended amended energy conservation standards for ACUACs and ACUHPs
through this direct final rule based on the clear and convincing
evidence discussed throughout this final rule. Also, in accordance with
the provisions described in section II.A of this document, DOE is
simultaneously publishing a NOPR proposing that the identical standard
levels contained in this direct final rule be adopted.

III. General Discussion

A. General Comments

In response to the May 2020 ECS RFI, DOE received multiple comments
from stakeholders generally expressing support for DOE evaluating and
amending standards for ACUACs and ACUHPs. (ASAP, ACEEE, et al., EERE-
2019-BT-STD-0042-0023 at p. 1; CA IOUs EERE-2019-BT-STD-0042-0020 at p.
1; NEEA, EERE-2019-BT-STD-0042-0024 at p. 9; PGE, EERE-2019-BT-STD-
0042-0009, pp. 1-2) ASAP, ACEEE, et al. stated that very large energy
savings could result from amended standards for ACUACs and ACUHPs,
citing the max-tech efficiency levels analyzed in the January 2016
Direct Final Rule as well as the range of efficiencies in the current
market. (ASAP, ACEEE, et al., EERE-2019-BT-STD-0042-0023 at pp. 1-2)
PGE also asserted that standards for ACUACs should be substantially
higher than standards for ACUHPs to incentivize increased adoption of
ACUHPs by commercial consumers, particularly in dual season climates
where the commenter claimed that ACUHPs deliver higher efficiency,
reduce peak loads, and reduce greenhouse gas emissions. (PGE, EERE-
2019-BT-STD-0042-0009 at pp. 1-2)
In response to PGE's assertion that standards for ACUACs should be
substantially higher than standards for ACUHPs, DOE notes that at the
recommended TSL, the IVEC values are marginally higher for ACUACs with
all other types of heat than for ACUHPs, as mentioned in section
IV.C.2.a, and are unlikely on their own to incentivize increased
adoption of ACUHPs, as discussed in section IV.G.4. At this time, DOE
does not have evidence or information that would justify adopting
higher standards for ACUACs than ACUHPs by a larger margin than
recommended by the ACUAC/HP Working Group.
DOE also received comments in response to the May 2020 ECS RFI from
several other stakeholders generally expressing views that DOE should
not amend the existing energy conservation standards for ACUACs and
ACUHPs. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 3; Carrier, EERE-2019-
BT-STD-0042-0013 at pp. 8, 18-19; Lennox, EERE-2019-BT-STD-0042-0015 at
p. 1; Trane, EERE-2019-BT-STD-0042-0016 at p. 2) More specifically,
AHRI, Carrier, Lennox, and Trane argued that standards should not be
amended because of the burdens manufacturers already face, including
regulatory changes such as refrigerant regulations, new efficiency
metrics and standards for central air conditioners and heat pumps, and
pending test procedure and standard updates for variable refrigerant
flow equipment. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 2; Carrier,
EERE-2019-BT-STD-0042-0013 at pp. 18-19; Lennox, EERE-2019-BT-STD-0042-
0015 at pp. 3-4, 8; Trane, EERE-2019-BT-STD-0042-0016 at p. 2)
Commenters also asserted that the impacts associated with the 2023
standards could not be assessed at the time of submitting their
comments because the standards had yet to take effect, and therefore,
considering new standards prior to 2023 would be premature. (AHRI,
EERE-2019-BT-STD-0042-0014 at p. 3; Carrier, EERE-2019-BT-STD-0042-0013
at p. 8, Lennox, EERE-2019-BT-STD-0042-0015 at pp. 2-3; Trane, EERE-
2019-BT-STD-0042-0016 at p. 2) Lennox also asserted that future market
uncertainties are compounded by the COVID19 pandemic. (Lennox, EERE-
2019-BT-STD-0042-0015 at p. 2)
DOE acknowledges that at the time of the May 2020 ECS RFI,
compliance was not yet required for the second tier of energy
conservation standards adopted in the January 2016 Direct Final Rule,
which had a compliance date of January 1, 2023. However, the ACUAC/HP
Working Group meetings to negotiate recommended energy conservation
standard levels and the subsequent agreement outlined in the ACUAC/HP
Working Group ECS Term Sheet occurred after January 1, 2023. Further,
the analyses of amended energy conservation standards conducted by DOE
as part of the 2023 ECS Negotiations were based on the ACUAC/HP market
after the 2023 compliance date. DOE notes that despite the concerns
raised regarding cumulative regulatory burden and impacts to the market
due to the COVID 19 pandemic, Carrier, Lennox, and Trane (as members of
the ACUAC/HP Working Group) voted in favor of the recommended standard
levels. Additionally, AHRI subsequently supported efforts for a
negotiated rulemaking to amend standards in comments received in
response to the May 2022 TP/ECS RFI, demonstrating AHRI's position on
this issue changed. (AHRI, EERE-2022-BT-STD-0015-0008 at p. 1)
Therefore, DOE surmises that those commenters' original positions on
this topic changed since the time of the May 2020 ECS RFI.
In response to the May 2020 ECS RFI, AHRI asserted that among
ACUACs and ACUHPs, the only equipment category

[[Page 44066]]

for which DOE is statutorily required to review amended standards under
the six-year-lookback rulemaking is double-duct systems, based on the
fact that the 2023 standards adopted in the January 2016 Direct Final
Rule had not yet come into effect. (AHRI, EERE-2019-BT-STD-0042-0014 at
p. 3) DOE disagrees with AHRI's reading of the statute. The six-year-
lookback provision does not reference compliance dates. (See 42 U.S.C.
6313(a)(6)(C)(1)) The plain language of EPCA requires DOE to evaluate
amended standards for ACUACs and ACUHPs ``every 6 years'' regardless of
compliance dates of any amended standards from previous rulemakings.
(Id.) In this rulemaking, DOE has evaluated the potential for amended
standards for ACUACs and ACUHPs (except for double-duct systems, as
discussed in section III.B of this document) pursuant to its statutory
obligations.
In response to the May 2022 TP/ECS RFI, Lennox highlighted the
preparations manufacturers are undergoing to implement the 2023 energy
conservation standards, as well as the pending transition to lower
global warming potential (``GWP'') refrigerants in 2025. (Lennox, EERE-
2022-BT-STD-0015-0009 at p. 2) Lennox recommended that DOE exercise
caution with energy conservation standard amendments for ACUAC and
ACUHP equipment because manufacturers need time to assess the impacts
of an amended test procedure before DOE assesses amending energy
conservations standards. (Id.) Specifically, Lennox recommended a 180-
day period for manufacturers to assess the test procedure before the
DOE moves forward with energy conservation standards based on the
provisions of 10 CFR part 430, subpart C, appendix A. (Id. at pp. 5-6)
As discussed previously, DOE notes that at the time of the May 2022
TP/ECS RFI, compliance was not yet required with the second tier of
energy conservation standards adopted in the January 2016 Direct Final
Rule. However, the ACUAC/HP Working Group meetings and subsequent
ACUAC/HP Working Group ECS Term Sheet agreement occurred after
compliance became required with the most recent standards (January 1,
2023), and the analyses of amended energy conservation standards
conducted by DOE as part of the 2023 ECS Negotiations were based on the
ACUAC/HP market after the 2023 compliance date. DOE notes that after
the agreement on the ACUAC/HP Working Group TP Term Sheet, industry
members in the ACUAC/HP Working Group conducted simulations to
approximate where many models currently on the market would fall in
terms of the new IVEC and IVHE metrics. These simulations were shared
with a DOE contractor and were used in the 2023 ECS Negotiations. DOE
also notes that Lennox was a member of the ACUAC/HP Working Group and
agreed to the ACUAC/HP Working Group ECS Term Sheet; therefore, DOE
surmises that Lennox's original position on this topic changed since
the time of the May 2022 TP/ECS RFI.

B. Scope of Coverage

This direct final rule applies to ACUACs and ACUHPs with a rated
cooling capacity greater than or equal to 65,000 Btu/h (excluding
double-duct air conditioners and heat pumps), which is the scope of
equipment addressed in the 2023 ECS Negotiations.
In the May 2020 ECS RFI, DOE requested comment on several topics
related to double-duct systems. 85 FR 27941, 27943-27953 (May 12,
2020). DOE received comments regarding double-duct systems from
multiple stakeholders in response to the May 2020 ECS RFI. (Carrier,
EERE-2019-BT-STD-0042-0013, pp. 2, 8, 10; AHRI, EERE-2019-BT-STD-0042-
0014 at pp. 3-8, 11; UCA, EERE-2019-BT-STD-0042-0008, Attachment 2)
Double-duct systems are a sub-category of ACUACs and ACUHPs with a
separate definition (10 CFR 431.92), metrics, and efficiency
requirements (10 CFR 431.97).
As noted, the scope of proposed standards in the ACUAC/HP Working
Group ECS Term Sheet was determined through the 2023 ECS Negotiations
and excludes double-duct air conditioners and heat pumps. Therefore,
comments regarding energy conservation standards for double-duct
systems are outside the scope of consideration for this rulemaking.
Topics related to energy conservation standards for double-duct systems
will be addressed in a separate rulemaking process.
See section IV.A.1 of this document for discussion of the equipment
classes analyzed in this direct final rule.

C. Test Procedure and Metrics

EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6314)
Manufacturers of covered equipment must use these test procedures to
certify to DOE that their equipment complies with applicable energy
conservation standards (42 U.S.C. 6316(b)(1); 42 U.S.C. 6296) and when
making representations about the efficiency of their equipment (42
U.S.C. 6314(d)). Similarly, DOE uses these test procedures to determine
whether the equipment complies with the relevant standards promulgated
under EPCA. (42 U.S.C. 6314(d)) DOE's current energy conservation
standards are expressed in terms of IEER for the cooling efficiency of
ACUACs and ACUHPs, and in terms of COP for the heating efficiency of
ACUHPs. (See 10 CFR 431.97(b))
As previously mentioned, the ACUAC/HP Working Group met several
times and put forth the ACUAC/HP Working Group TP Term Sheet of
recommendations regarding ACUAC and ACUHP test procedures, including
new metrics IVEC and IVHE. DOE recently adopted the IVEC and IVHE
metrics in a final rule amending the test procedure for ACUACs and
ACUHPs.\23\ The newly adopted DOE test procedure for ACUACs and ACUHPs
appears at 10 CFR part 431, subpart F, appendix A1 (appendix A1). This
direct final rule adopts amended energy conservation standards for
ACUACs and ACUHPs denominated in terms of the new IVEC and IVHE
metrics.
---------------------------------------------------------------------------

\23\ The final rule amending the test procedure can be found at
<a href="http://www.regulations.gov">www.regulations.gov</a> under docket number EERE-2023-BT-TP-0014.
---------------------------------------------------------------------------

DOE notes that a change in metrics (i.e., from IEER to IVEC and
from COP to IVHE) necessitates an initial DOE determination that the
new requirement would not result in backsliding when compared to the
current standards. (See 42 U.S.C 6313(a)(6)(B)(iii)(I)) The translation
of the current standards to IVEC and IVHE baselines is discussed
further in section IV.C.2 of this document.

D. 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. See generally 10 CFR 431.4; 10 CFR part 430,
subpart C, appendix A, sections 6(b)(3)(i) and 7(b)(1) (``appendix
A'').
After DOE has determined that particular technology options are

[[Page 44067]]

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 equipment utility or availability; (3) adverse impacts on
health or safety and (4) unique-pathway proprietary technologies.
Section IV.B of this document discusses the results of the screening
analysis for ACUACs and ACUHPs, 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 direct
final rule technical support document (``TSD'').
2. Maximum Technologically Feasible Levels
When DOE adopts a new or amended standard for a type or class of
covered equipment, it determines the maximum improvement in energy
efficiency or maximum reduction in energy use that is technologically
feasible for such equipment. Accordingly, in the engineering analysis,
DOE determined the maximum technologically feasible (``max-tech'')
improvements in energy efficiency for ACUACs and ACUHPs, 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 of this
direct final rule and in chapter 5 of the direct final rule TSD.

E. Energy Savings

1. Determination of Savings
For each TSL, DOE projected energy savings from application of the
TSL to ACUACs and ACUHPs purchased in the 30-year period that begins in
the year of compliance with the amended standards (2029-2058).\24\ The
savings are measured over the entire lifetime of the subject equipment
purchased in the 30-year analysis 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 equipment would likely evolve in the
absence of amended energy conservation standards.
---------------------------------------------------------------------------

\24\ Each TSL is composed of specific efficiency levels for each
equipment class. The TSLs considered for this direct final rule are
described in section V.A of this document. DOE also presents a
sensitivity analysis that considers impacts for equipment shipped in
a nine-year period.
---------------------------------------------------------------------------

DOE used its national impact analysis (``NIA'') computer models to
estimate national energy savings (``NES'') from potential amended
standards for ACUACs and ACUHPs. The NIA computer model (described in
section IV.H of this document) calculates energy savings in terms of
site energy, which is the energy directly consumed by equipment at the
locations where they are used. For electricity, DOE reports 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.\25\
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.2 of this
document.
---------------------------------------------------------------------------

\25\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51282 (August 18, 2011), as
amended at 77 FR 49701 (August 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
To adopt any new or amended standards for covered equipment more
stringent than those set forth in ASHRAE Standard 90.1 or the existing
Federal standard (as applicable in the context of the specific
rulemaking), DOE must have clear and convincing evidence that such
action would result in significant additional energy savings. (See 42
U.S.C. 6313(a)(6)(C)(i); 42 U.S.C. 6313(a)(6)(A)(ii)(II)) \26\
---------------------------------------------------------------------------

\26\ In setting a more-stringent standard for ASHRAE equipment,
DOE must have ``clear and convincing evidence'' that doing so
``would result in significant additional conservation of energy'' in
addition to being technologically feasible and economically
justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) This language indicates
that Congress had intended for DOE to ensure that, in addition to
the savings from the ASHRAE standards, DOE's standards would yield
additional energy savings that are significant. In DOE's view, this
statutory provision shares the requirement with the statutory
provision applicable to covered products and non-ASHRAE equipment
that ``significant conservation of energy'' must be present (42
U.S.C. 6295(o)(3)(B))--and supported with ``clear and convincing
evidence''--to permit DOE to set a more-stringent requirement than
ASHRAE.
---------------------------------------------------------------------------

The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking. For example,
some covered products and equipment have most of their energy
consumption occur during periods of peak energy demand. The impacts of
this equipment on the energy infrastructure can be more pronounced than
equipment 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.
As stated, the standard levels adopted in this direct final rule
are projected to result in national energy savings of 5.59 quads, the
equivalent of the primary annual energy use of 146 million homes. Based
on the amount of FFC savings, the corresponding reduction in emissions,
and the need to confront the global climate crisis, DOE has determined
(based on the methodology described in section IV of this document and
the analytical results presented in section V.B.3.a of this document)
that there is clear and convincing evidence that the energy savings
from the standard levels adopted in this direct final rule are
``significant'' within the meaning of 42 U.S.C. 6313(a)(6)(A)(ii)(II).

F. 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. 6313(a)(6)(B)(ii)(I)-(VII)) The
following sections discuss how DOE has addressed each of those seven
factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
EPCA requires DOE to consider the economic impact of a potential
standard on manufacturers and the consumers of the equipment subject to
the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(I) and (C)(i)) In
determining the impacts of potential new or amended standards 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

[[Page 44068]]

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.
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 equipment 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 equipment
that are likely to result from a standard. (42 U.S.C.
6313(a)(6)(B)(ii)(II)) DOE conducts this comparison in its LCC and PBP
analysis.
The LCC is the sum of the purchase price of a piece of equipment
(including its installation) and the operating cost (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the equipment. The LCC analysis requires a variety of inputs, such as
equipment prices, equipment energy consumption, energy prices,
maintenance and repair costs, equipment lifetime, and discount rates
appropriate for consumers. To account for uncertainty and variability
in specific inputs, such as equipment 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 more-efficient equipment through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered equipment 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 additional conservation of energy is a
separate statutory requirement for adopting an energy conservation
standard, EPCA requires DOE, in determining the economic justification
of a standard, to consider the total projected energy savings that are
expected to result directly from the standard. (42 U.S.C.
6313(a)(6)(B)(ii)(III)) As discussed in section IV.H of this document,
DOE uses the NIA computer models to project national energy savings.
d. Lessening of Utility or Performance of Equipment
In establishing equipment 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 equipment. (42 U.S.C. 6313(a)(6)(B)(ii)(IV)) Based on data
available to DOE, the standards adopted in this document would not
reduce the utility or performance of the equipment 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 of the
United States (``Attorney General''), that is likely to result from a
standard. (42 U.S.C. 6313(a)(6)(B)(ii)(V)) To assist the Department of
Justice (``DOJ'') in making such a determination, DOE will transmit a
copy of this direct final rule and the accompanying TSD to the Attorney
General for review, with a request that the DOJ provide its
determination on this issue. DOE will consider DOJ's comments on the
rule contained in its assessment letter in determining whether to
proceed with the direct final rule. DOE will also publish and respond
to the DOJ's comments in the Federal Register in a separate document.
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. 6313(a)(6)(B)(ii)(VI)) The energy
savings from the adopted 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 adopted standards are likely to result in
environmental benefits in the form of reduced emissions of air
pollutants and GHGs associated with energy production and use. As part
of the analysis of the need for national energy and water conservation,
DOE conducts an emissions analysis to estimate how potential standards
may affect these emissions, as discussed in section IV.K of this
document, and the estimated emissions impacts are reported in section
V.B.6 of this document.\27\ DOE also estimates the economic value of
emissions reductions resulting from the considered TSLs, as discussed
in section IV.L of this document. DOE emphasizes that the SC-GHG
analysis presented in this direct final rule and accompanying TSD was
performed in support of the cost-benefit analyses required by Executive
Order (``E.O.'') 12866, and is provided to inform the public of the
impacts of emissions reductions resulting from this rule. However, the
SC-GHG estimates were not factored into DOE's EPCA analysis of the need
for national energy and water conservation. DOE would reach the same
conclusion presented in this

[[Page 44069]]

rule in the absence of the estimated benefits from reductions in GHG
emissions.
---------------------------------------------------------------------------

\27\ As discussed in section IV.L of this document, for the
purpose of complying with the requirements of E.O. 12866, DOE also
estimates the economic value of emissions reductions resulting from
the considered TSLs. DOE calculates this estimate using a measure of
the social cost (``SC'') of each pollutant (e.g., SC-
CO<INF>2</INF>). Although this estimate is calculated for the
purpose of complying with E.O. 12866, the Seventh Circuit Court of
Appeals confirmed in 2016 that DOE's consideration of the social
cost of carbon in energy conservation standards rulemakings is
permissible under EPCA. Zero Zone v. United States DOE, 832 F.3d
654, 677 (7th Cir. 2016).
---------------------------------------------------------------------------

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. 6313(a)(6)(B)(ii)(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.''

IV. Methodology and Discussion of Related Comments

This section addresses the analyses DOE has performed for this
rulemaking with regard to ACUACs and ACUHPs. Separate subsections
address each component of DOE's analyses. Comments on the methodology
and DOE's responses are presented in each section.
DOE used several analytical tools to estimate the impact of the
standards considered in this document on consumers and manufacturers.
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 are available on the DOE website for this rulemaking:
<a href="http://www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=75">www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=75</a>. Additionally, DOE used output from the
latest version of the Energy Information Administration's (``EIA's'')
Annual Energy Outlook (``AEO'') for the emissions and utility impact
analyses (i.e., AEO 2023).

A. Market and Technology Assessment

DOE develops information in the market and technology assessment
that provides an overall picture of the market for the equipment
concerned, including the purpose of the equipment, the industry
structure, manufacturers, market characteristics, and technologies used
in the equipment. This activity 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 equipment classes; (2) manufacturers and
industry structure; (3) existing efficiency programs; (4) market and
industry trends, and (5) technologies or design options that could
improve the energy efficiency of ACUACs and ACUHPs. The key findings of
DOE's market assessment are summarized in the following sections. See
chapter 3 of the direct final rule TSD for further discussion of the
market and technology assessment.
1. Equipment Classes
When evaluating and establishing energy conservation standards, DOE
divides covered equipment into equipment classes by the type of energy
used, capacity, or other performance-related feature that would justify
a different standard. (42 U.S.C. 6313(a)(6)(B)(iii)(II))
DOE currently defines separate energy conservation standards for
twelve ACUAC and ACUHP equipment classes (excluding double-duct
systems), determined according to the following performance-related
features that provide utility to the consumer: rated cooling capacity,
equipment subcategory (air conditioner versus heat pump), and
supplementary heating type. Table IV.1 lists the current ACUAC and
ACUHP equipment classes. (See also 10 CFR 431.97(b))

[[Page 44070]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.080

In response to the May 2020 ECS RFI, DOE received multiple comments
from stakeholders regarding the equipment classes for ACUACs and
ACUHPs. Several stakeholders recommended that DOE evaluate the capacity
ranges that separate the current ACUAC and ACUHP equipment classes, and
that DOE consider splitting the existing very large equipment classes
(i.e., 240,000 to 760,000 Btu/h) into separate equipment classes
because of the potential for increasing stringency of standards (i.e.,
more models with efficiency significantly above the 2023 standards) for
ACUACs and ACUHPs with capacities at the lower end of the very large
capacity range, as compared to the capacity range of very-large
equipment as a whole. (ASAP, ACEEE, et al., EERE-2019-BT-STD-0042-0023
at pp. 2-3; CA IOUs, EERE-2019-BT-STD-0042-0020 at p. 6; NEEA, EERE-
2019-BT-STD-0042-0024 at pp. 3-5) NEEA specifically recommended
splitting the very large equipment class into two classes: one greater
than or equal to 240,000 Btu/h and less than 384,000 Btu/h, and the
other greater than or equal to 384,000 Btu/h and less than 760,000 Btu/
h. (NEEA, EERE-2019-BT-STD-0042-0024 at pp. 3-4) The CA IOUs
specifically recommended splitting the very large equipment class into
two classes: one greater than or equal to 240,000 Btu/h and less than
400,000 Btu/h, and the other greater than or equal to 400,000 Btu/h and
less than 760,000 Btu/h. (CA IOUs, EERE-2019-BT-STD-0042-0020 at p. 6)
In response, DOE notes that the stakeholders that recommended
splitting the existing very large equipment classes (ASAP, NEEA, and CA
IOUs) had representatives that were members of the ACUAC/HP Working
Group and agreed to the recommendations in the ACUAC/HP Working Group
ECS Term Sheet, which maintained the existing equipment class capacity
boundaries based upon the capacities in the EPCA definitions of small,
large, and very large commercial package air conditioning and heating
equipment. Consequently, DOE concludes that the recommended energy
conservation standards and equipment classes presented in the ACUAC/HP
Working Group ECS Term Sheet represent those stakeholders' latest
recommendations on equipment classes.
Additionally, the ACUAC/HP Working Group ECS Term Sheet combines
all ACUHPs within each capacity range into single equipment classes
regardless of supplementary heating type, which is different from DOE's
existing equipment class structure (which includes separate equipment
classes in each capacity range for: (1) ACUHPs with electric resistance
or no heating; and (2)

[[Page 44071]]

ACUHPs with all other types of heating). DOE is adopting amended energy
conservation standards in terms of the nine equipment classes
recommended in the ACUAC/HP Working Group ECS Term Sheet, presented in
Table IV.2.
[GRAPHIC] [TIFF OMITTED] TR20MY24.081

2. Market Post-2023
In the May 2020 ECS RFI, DOE sought comment on whether currently
available models of ACUACs and ACUHPs (excluding double-duct systems)
with efficiency ratings that meet or exceed the 2023 standard levels
are representative of the designs and characteristics of models that
would be expected to be on the market after the 2023 compliance date.
85 FR 27941, 27948 (May 12, 2020).
AHRI, Carrier, and Trane asserted that the ACUAC and ACUHP markets
at the time of the May 2020 ECS RFI are not representative of the
models that would be expected to be on the market after the 2023
standards take effect. (AHRI, EERE-2019-BT-STD-0042-0014 at pp. 3, 5-6;
Carrier, EERE-2019-BT-STD-0042-0013 at p. 7; Trane, EERE-2019-BT-STD-
0042-0016 at p. 6) More specifically, AHRI commented that it is
impossible to forecast the market impact of the 2023 standards on
ACUACs and ACUHPs, and also asserted that State refrigerant regulations
that drive the industry to use A2L refrigerants will require components
such as compressors to be redesigned to accommodate new refrigerants.
(AHRI, EERE-2019-BT-STD-0042-0014 at pp. 3, 5-6) Goodman also stated
that alternative refrigerants would impact future product design and
characteristics (e.g., requiring factory-installed refrigerant
detection sensors depending on the charge amounts of an alternate
refrigerant). (Goodman, EERE-2019-BT-STD-0042-0017 at p. 3) Carrier
stated the then-current models available on the market that meet the
2023 standards will not be the same products that are offered in 2023
because manufacturers will be working to optimize efficiencies, lower
cost, and implement new entry level products. Carrier added that the
upcoming 2023 standards will also create a need to further optimize
higher-efficiency equipment. Carrier asserted that most products being
sold are currently at the minimum efficiency levels, which leads to an
inability to properly evaluate the economic impact of moving the
markets from the current standards to 2023 standards. (Carrier, EERE-
2019-BT-STD-0042-0013 at p. 7) Trane stated that it would be
redesigning all of its ACUAC and ACUHP model lines in response to the
2023 standards. (Trane, EERE-2019-BT-STD-0042-0016 at p. 6)
Lennox commented that the market impacts of the 2023 standards are
unknown because of uncertainties in assessing the evolving market,
including uncertainties in future shipments, the economic impact on
manufacturers and consumers, and the total projected energy savings.
(Lennox, EERE-2019-BT-STD-0042-0015 at pp. 2-3) However, Lennox also
commented that the ACUAC and ACUHP models on the market are
representative of designs and characteristics of models that would be
expected to be on the market after the 2023 compliance date. (Id. at p.
5) Lennox additionally mentioned that the 2023 standards would cause a
phase out of single-speed technology and constant airflow fans. (Id.)
DOE notes that at the time these comments were received, compliance
was not yet required with the current standards. Compliance was
required with the current standards beginning January 1, 2023. DOE
analyzed the market after January 1, 2023 for its analyses for the 2023
ECS Negotiations and for this direct final rule such that the comments
received in 2020 on this matter are now moot. DOE's analysis of the
market efficiency distribution to develop IEER efficiency levels is
discussed in section of this direct final rule.
3. Technology Options
As part of the market and technology assessment, DOE identifies
technologies that manufacturers could use to improve ACUAC and ACUHP
energy efficiency. Chapter 3 of the direct final rule TSD includes the
detailed list and descriptions of all technology options identified for
this equipment.
In the May 2020 ECS RFI, DOE listed 19 technology options
determined to improve the efficiency of ACUACs and ACUHPs, as measured
by the DOE test procedure, that were presented in the

[[Page 44072]]

January 2016 Direct Final Rule. 85 FR 27941, 27946 (May 12, 2020). DOE
requested comment on the technology options considered in the
development of the January 2016 Direct Final Rule, their applicability
to the current market, and the range of performance characteristics for
each technology option. Id. DOE also sought feedback on other
technology options that it should consider for inclusion in its
analysis. Id.
DOE also sought comment on any changes in market adoption, costs,
and concerns with incorporating the technologies identified into
equipment that may have occurred since the January 2016 Direct Final
Rule. Id. DOE also requested feedback on how manufacturers would
incorporate the technology options from the January 2016 Direct Final
Rule to increase energy efficiency in ACUACs and ACUHPs beyond the
current levels. Id. at 85 FR 27949. This request included information
on the order in which manufacturers would incorporate the different
technologies to incrementally improve the efficiencies of equipment.
Id. DOE also requested feedback on whether the increased energy
efficiency would lead to other design changes that would not occur
otherwise. Id. DOE was also interested in information regarding any
potential impact of design options on a manufacturer's ability to
incorporate additional functions or attributes in response to consumer
demand. Id.
DOE also requested comment on whether certain design options may
not be applicable to (or incompatible with) specific equipment classes.
Id.
Several stakeholders stated that, in general, the technology
options listed in the May 2020 ECS RFI are appropriate and have not
seen any significant changes since the analysis was conducted for the
January 2016 Direct Final Rule. (AHRI, EERE-2019-BT-STD-0042-0014 at p.
4; Lennox, EERE-2019-BT-STD-0042-0015 at p. 5; Trane, EERE-2019-BT-STD-
0042-0016 at p. 3)
Carrier stated that high-efficiency, multi-stage, and variable-
speed compressors, the size of heat exchangers, and more-efficient
condenser fan blades and motors can increase efficiency. Carrier also
stated that microchannel heat exchangers and expansion valves do not
affect efficiency, and that electro-hydrodynamic enhancement has a very
minor effect on efficiency.\28\ (Carrier, EERE-2019-BT-STD-0042-0013 at
p. 4) Carrier stated that it anticipates that the identified technology
options would impact practicability to manufacture, install, and
service, with potential impacts including larger/heavier chassis, roof
curb changes, and modified electrical service to accommodate high-
efficiency components. (Carrier, EERE-2019-BT-STD-0042-0013 at pp. 5-6)
AHRI stated that there may be limited availability of electro-
hydrodynamic enhancements (without elaborating on why) and that direct-
drive fan systems at some voltages may not be available. (AHRI, EERE-
2019-BT-STD-0042-0014 at p. 4)
---------------------------------------------------------------------------

\28\ Carrier used the term electro-hydromatic enhancement, but
DOE assumes Carrier was referring to electro-hydrodynamic
enhancement.
---------------------------------------------------------------------------

NEEA recommended that DOE consider the presence of economizers, fan
speed control, multi-stage compressors, electronically-commutated
motors (``ECMs''), and fan efficiency. (NEEA, EERE-2019-BT-STD-0042-
0024 at p. 7)
Trane stated that achieving the 2023 standard levels will take a
combination of compressor technology and advanced heat exchanger
design. Trane also stated that secondarily, indoor and outdoor fan
technologies would be employed to reach the 2023 standard levels.
(Trane, EERE-2019-BT-STD-0042-0016 at p. 8) Carrier stated that the
technology options identified are currently being used to reach max-
tech efficiency and that more of the advanced features would be used to
meet the 2023 standards. (Carrier, EERE-2019-BT-STD-0042-0013 at p. 11)
Carrier also asserted that additional features or advancements at the
time of their comments would create undue burden in terms of cost and
increased equipment size, resulting in a lack of marketability for
ACUACs and ACUHPs. (Id.)
AHRI suggested that DOE contact manufacturers directly to solicit
feedback on: (1) how manufacturers would incorporate the identified
technology options to increase energy efficiency of ACUACs and ACUHPs
and (2) whether certain design options may not be applicable to
specific equipment classes. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 7)
In response to the May 2020 ECS RFI, the CA IOUs and ASAP, ACEEE,
et al. suggested that DOE consider additional alternative refrigerants
as a technology option. (CA IOUs, EERE-2019-BT-STD-0042-0020 at p. 5;
ASAP, ACEEE, et al., EERE-2019-BT-STD-0042-0023 at pp. 3-4) ASAP,
ACEEE, et al. stated that alternative refrigerants, including R-452B,
R-454B, and R-32, can improve efficiency by at least 5 percent relative
to the current refrigerant R-410A, citing testing conducted by Oak
Ridge National Laboratory (``ORNL'') in partnership with Trane.\29\
(ASAP, ACEEE, et al., EERE-2019-BT-STD-0042-0023 at pp. 1, 3-4) In
response to the May 2022 TP/ECS RFI, ASAP and ACEEE again recommended
DOE consider low-GWP refrigerants as a design option. (ASAP and ACEEE,
EERE-2022-BT-STD-0015-0011 at p. 3)
---------------------------------------------------------------------------

\29\ Available at: <a href="http://www.energy.gov/sites/prod/files/2017/04/f34/10_32226f_Shen_031417-1430.pdf">www.energy.gov/sites/prod/files/2017/04/f34/10_32226f_Shen_031417-1430.pdf</a>.
---------------------------------------------------------------------------

AHRI commented that considering alternative refrigerants as a
technology option is not appropriate and would be unduly burdensome for
manufacturers, recommending screening out alternative refrigerants on
the bases of technological feasibility and practicability to
manufacture, install, and service. (AHRI, EERE-2019-BT-STD-0042-0014 at
pp. 4-5) Carrier suggested that alternate refrigerants should not be
the basis of an energy efficiency increase. (Carrier, EERE-2019-BT-STD-
0042-0013 at p. 7)
As discussed in section IV.C.1 of this document, DOE conducted its
engineering analysis by selecting and analyzing currently-available
models using their rated efficiency in terms of IEER to characterize
the energy use and manufacturing production costs at each efficiency
level. As a result, DOE analyzed equipment designs, including expansion
devices, indoor and outdoor coils, and fans/motors, consistent with
currently available models and the design of the equipment as whole.
Therefore, DOE has concluded that the technology options in this direct
final rule accurately reflect the efficiency improvement and
incremental manufacturing costs associated with these designs.
Comments received in response to the May 2020 ECS RFI were received
three years prior to the compliance date of the current standards and
the 2023 ECS Negotiations. Since that time, the market has updated to
comply with the new standards, and DOE conducted interviews with
manufacturers to solicit feedback on all aspects of its engineering
analysis, including technology options used to increase efficiency of
ACUACs and ACUHPs. Certain technology options were also discussed among
the ACUAC/HP Working Group during the 2023 ECS Negotiations. (EERE-
2022-BT-STD-0015-0088 at pp. 60-64; EERE-2022-BT-STD-0015-0089 at pp.
17-24) Therefore, DOE surmises that the positions of commenters on
certain technology options may have changed since the time of the
drafting of some of the comments received.

[[Page 44073]]

Regarding economizers, while the IVEC metric accounts for the
benefit of economizer cooling and the energy consumed during
economizing via calculations, the metric does not include testing with
economizer operation due to test burden and repeatability concerns. As
such, the IVEC metric does not allow for differentiation in terms of
IVEC efficiency between: (1) systems installed with economizers versus
not installed with economizers, and (2) different types of economizers
offered. Therefore, DOE did not consider economizers as a technology
option for this rulemaking.
There are no models currently on the market that include low-GWP
refrigerants. Therefore, at this time, DOE does not have sufficient
information to consider low-GWP refrigerants as a technology option for
improving efficiency. As such, DOE did not consider low-GWP
refrigerants as a technology option in its analysis. Section IV.C.4 of
this document includes discussion of the impact of low-GWP refrigerants
on efficiency and cost of ACUACs and ACUHPs.
Regarding electro-hydrodynamic enhancement, DOE did not identify
any prototypes or models currently on the market that incorporate this
technology to improve efficiency.
After consideration of the comments received, assessment of
technology options used to improve efficiency in models currently on
the market, and additional information provided during manufacturer
interviews, DOE considered the technology options presented in Table
IV.3 as part of this rulemaking.
[GRAPHIC] [TIFF OMITTED] TR20MY24.082

A detailed discussion of each technology option identified is
contained in chapter 3 of the direct final rule TSD.

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 equipment 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 equipment
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) Adverse impacts on equipment utility or availability. If a
technology is determined to have a significant adverse impact on the
utility of the equipment to subgroups of consumers, or result in the
unavailability of any covered equipment type with performance
characteristics (including reliability), features, sizes, capacities,
and volumes that are substantially the same as equipment generally
available in the United States at the time, it will not be considered
further.
(4) Adverse impact on health or 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.
10 CFR 431.4; 10 CFR part 430, subpart C, appendix A, sections
6(c)(3) and 7(b).
In sum, 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
In the January 2016 Direct Final Rule, DOE screened-out three
technology

[[Page 44074]]

options: electro-hydrodynamic enhanced heat transfer (due to
technological feasibility and practicability to manufacture/install/
service), alternative refrigerants (due to technological feasibility),
and sub-coolers (due to technological feasibility). 81 FR 2420, 2449
(Jan. 15, 2016).
In the May 2020 ECS RFI, DOE presented the three technology options
that were screened out in the January 2016 Direct Final Rule and the
criteria for screening them out. DOE sought feedback on whether the
technology options that were screened out in the January 2016 Direct
Final Rule should continue to be screened out. DOE also sought comment
on what impact the screening criteria would have on consideration of
the technology options that were considered (i.e., not screened out) in
the January 2016 Direct Final Rule. 85 FR 27941, 27947 (May 12, 2020).
Trane agreed with the screening analysis conducted for the January
2016 Direct Final Rule. (Trane, EERE-2019-BT-STD-0042-0016 at p. 5)
Carrier also agreed with continuing to screen out the technology
options that were screened out in the January 2016 Direct Final Rule.
(Carrier, EERE-2019-BT-STD-0042-0013 at p. 6) Carrier further
recommended that an additional screening criterion be added to address
cost of a technology option. (Carrier, EERE-2019-BT-STD-0042-0013 at p.
6)
As discussed in section IV.A.3 of this document, DOE is not
considering alternative refrigerants and electro-hydrodynamic enhanced
heat transfer as technology options, and, thus, the need to screen them
in or out is not relevant. With respect to the third previously-
screened out technology option, DOE is aware of at least one model line
on the market that uses sub-coolers for increased efficiency. DOE does
not find that the third previously-screened out technology meets any of
the criteria for being screened out.
In response to Carrier's comment recommending an additional
screening criterion be added to address cost of a technology option,
the added cost of a technology option is considered in the cost-
efficiency analysis and the downstream economic analyses that evaluate
the impacts to consumers and the Nation as a whole. Additionally, the
product and capital conversion costs manufacturers must bear in order
to implement certain technologies are considered in the manufacturer
impact analysis, discussed further in section IV.J of this document.
DOE did not find that any of the other technology options it
identified met the criteria to be screened-out in this rulemaking.
2. Remaining Technologies
Through a review of each technology, DOE concludes that all of the
identified technologies listed in section IV.A.3 of this document met
all five screening criteria to be examined further as design options in
DOE's direct final rule analysis. In summary, DOE did not screen out
any technology options for this rulemaking.
DOE determined that these technology options are technologically
feasible because they are being used or have previously been used in
commercially-available equipment or working prototypes. DOE also finds
that all of the remaining technology options meet the other screening
criteria (i.e., practicable to manufacture, install, and service; do
not result in adverse impacts on consumer utility, equipment
availability, health, or safety; and do not involve a proprietary
technology that is a unique pathway to meeting a given efficiency
level). For additional details, see chapter 4 of the direct final rule
TSD.

C. Engineering Analysis

The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of ACUACs and ACUHPs.
There are two elements to consider in the engineering analysis: (1) the
selection of efficiency levels to analyze (i.e., the ``efficiency
analysis'') and (2) the determination of equipment cost at each
efficiency level (i.e., the ``cost analysis''). In determining the
performance of higher-efficiency equipment, DOE considers technologies
and design option combinations not eliminated by the screening
analysis. For each equipment class, DOE estimates the baseline cost, as
well as the incremental cost for the equipment at efficiency levels
above the baseline. The output of the engineering analysis is a set of
cost-efficiency ``curves'' that are used in downstream analyses (i.e.,
the LCC and PBP analyses and the NIA).
1. Efficiency Levels in Terms of Existing Metrics
DOE typically uses one of two approaches to develop energy
efficiency levels for the engineering analysis: (1) relying on observed
efficiency levels in the market (i.e., the efficiency-level approach),
or (2) determining the incremental efficiency improvements associated
with incorporating specific design options to a baseline model (i.e.,
the design-option approach). Using the efficiency-level approach, the
efficiency levels established for the analysis are determined based on
the market distribution of existing equipment (in other words, based on
the range of efficiencies and efficiency level ``clusters'' that
already exist on the market). Using the design option approach, the
efficiency levels established for the analysis are determined through
detailed engineering calculations and/or computer simulations of the
efficiency improvements from implementing specific design options that
have been identified in the technology assessment. DOE may also rely on
a combination of these two approaches. For example, the efficiency-
level approach (based on actual equipment on the market) may be
extended using the design option approach to interpolate to define
``gap fill'' levels (to bridge large gaps between other identified
efficiency levels) and/or to extrapolate to the ``max-tech'' level
(particularly in cases where the ``max-tech'' level exceeds the maximum
efficiency level currently available on the market).
In this rulemaking, DOE applied an efficiency-level approach,
analyzing three specific capacities--90,000 Btu/h (7.5-tons), 180,000
Btu/h (15-tons), and 360,000 Btu/h (30-tons)--that served as
representative units for the three equipment capacity ranges--``small''
(>=65,000 to <135,000 Btu/h), ``large'' (>=135,000 to <240,000 Btu/h),
and ``very large'' (>=240,000 to <760,000 Btu/h). DOE selected these
representative capacities consistent with the analysis conducted for
the January 2016 Direct Final Rule after concluding based on assessment
of the current market (and receiving no contrary feedback during the
2023 ECS Negotiation meetings) that these capacities continue to be
representative of models on the market in their respective capacity
ranges. To develop cost-efficiency curves, DOE used the current cooling
efficiency metric (IEER) and later translated each efficiency level to
the new cooling efficiency metric (IVEC) because there were no
publicly-available data for existing models on the market in terms of
the new metric; therefore, the cost to produce these models could not
be linked directly to efficiency in terms of IVEC. Selection of the
efficiency levels in terms of the current efficiency metrics is
discussed in sections IV.C.1.a and IV.C.1.b of this document. Further
discussion on the translation from IEER to IVEC can be found in section
IV.C.2.a of this document. The selection of heating efficiency levels
in terms of the new heating efficiency metric (IVHE) is discussed in
section IV.C.2.b of this document.

[[Page 44075]]

Based on DOE's review of equipment available on the market and
feedback received during manufacturer interviews, DOE understands that
the majority of ACUAC models with electric resistance heating or no
heating are designed on the same basic platform and cabinet size as the
equivalent ACUAC models with all other types of heating and comparable
ACUHP models. Because these models typically have similar designs, DOE
estimated that implementing the same efficiency-improving design
options would result in the same or similar energy savings for
comparable equipment classes. As discussed further in section IV.C.2.a
of this document, ACUACs with all other types of heating typically are
paired with furnaces that impose additional pressure drop that must be
overcome by the indoor fan, thus increasing measured indoor fan power,
so for otherwise comparable models, efficiencies in terms of IEER are
lower for ACUACs with all other types of heating than ACUACs with
electric resistance heating or no heating. Therefore, in order to
develop equivalently stringent efficiency levels for all ACUACs, DOE
first developed higher efficiency levels specifically for ACUACs with
electric resistance heating or no heating. As discussed, these
efficiency levels were developed in terms of IEER, and were
subsequently translated to the new IVEC metric. DOE then translated
these IVEC efficiency levels for ACUACs with electric resistance
heating or no heating into IVEC efficiency levels for ACUACs with all
other types of heating by using furnace pressure drops from product
literature to calculate additional indoor fan power consumed and
ultimately IVEC decrements to represent the reduction in IVEC as a
result of furnace pressure drop. The calculated decrements closely
aligned with the decrements proposed in the ACUAC/HP Working Group ECS
Term Sheet. As further discussed in section IV.C.2 of this document,
DOE did not analyze lower IVEC efficiency levels for ACUHPs as compared
to ACUACs.
a. Baseline Efficiency
For each equipment class, DOE generally selects a baseline model as
a reference point for each class, and measures changes resulting from
potential energy conservation standards against the baseline. The
baseline model in each equipment class represents the characteristics
of equipment typical of that class (e.g., capacity, physical size).
Generally, a baseline model is one that just meets current energy
conservation standards, or, if no standards are in place, the baseline
is typically the most common or least efficient unit on the market.
In the May 2020 ECS RFI, DOE requested feedback on whether the 2023
energy conservation standards for ACUACs and ACUHPs are appropriate
baseline efficiency levels for DOE to apply each equipment class in
evaluating whether to amend energy conservation standards for this
equipment. 85 FR 27941, 27948 (May 12, 2020). AHRI, Lennox, and Goodman
stated that the 2023 standards would be the correct baseline efficiency
to be used in a future DOE analysis. (AHRI, EERE-2019-BT-STD-0042-0014
at p. 6; Lennox, EERE-2019-BT-STD-0042-0015 at p. 6; Goodman, EERE-
2019-BT-STD-0042-0017 at p. 3)
Consistent with stakeholder feedback, DOE used the current energy
conservation standards as the baseline efficiency level in terms of
IEER and COP for each equipment class. The baseline efficiency levels
in terms of IEER and COP considered in this direct final rule are
presented in Table IV.4. As discussed further in section IV.A.1 of this
document, consistent with the ACUAC/HP Working Group ECS Term Sheet,
DOE is combining ACUHPs with all types of heating into a single
equipment class for each capacity range. Therefore, for the baseline
for ACUHP equipment classes, DOE used the current IEER standard for
ACUHPs with all other types of heating.
[GRAPHIC] [TIFF OMITTED] TR20MY24.083

[[Page 44076]]

b. Higher Efficiency Levels
For each equipment class, DOE analyzes several efficiency levels
above baseline. The maximum available efficiency level is the highest
efficiency model currently available on the market. DOE also defines a
``max-tech'' efficiency level to represent the maximum possible
efficiency for a given equipment class.
In the May 2020 ECS RFI, DOE requested comment on what efficiency
levels should be considered as max-tech levels for ACUACs and ACUHPs
for the evaluation of whether amended standards are warranted. 85 FR
27941, 27949 (May 12, 2020).
The CA IOUs and ASAP, ACEEE, et al. suggested DOE should analyze
max-tech efficiency levels higher than what were analyzed in the
January 2016 Direct Final Rule and consider max-tech efficiency levels
that reflect incorporation of all possible technology options. (CA
IOUs, EERE-2019-BT-STD-0042-0020 at pp. 6-7; ASAP, ACEEE, et al., EERE-
2019-BT-STD-0042-0023 at pp. 1-2, 4) The CA IOUs recommended DOE
consider the technology development timeline of emerging technologies
in determining max-tech levels, specifically technology options
currently in the lab-scale prototype stage. (CA IOUs, EERE-2019-BT-STD-
0042-0020 at pp. 6-7)
AHRI, Goodman, and Lennox recommended DOE only consider
commercially-available technologies in determining max-tech efficiency
levels, specifically those that are used in equipment certified to
DOE's Compliance Certification Database (``CCD''). (AHRI, EERE-2019-BT-
STD-0042-0014 at p. 6; Goodman, EERE-2019-BT-STD-0042-0017 at p. 3;
Lennox, EERE-2019-BT-STD-0042-0015 at p. 6) Lennox additionally
commented that the max-tech levels for ACUACs and ACUHPs have increased
by up to eight percent since the January 2016 Direct Final Rule, driven
by manufacturers having optimized designs for the part-load IEER
metric, which is more representative of consumer use than the prior EER
full-load metric, not the advancement of technologies that are employed
by this equipment. (Lennox, EERE-2019-BT-STD-0042-0015 at p. 6)
Trane stated that the analysis for the January 2016 Direct Final
Rule is still relevant and that it supported the process used then for
considering max-tech efficiency levels (including manufacturer
interviews). (Trane, EERE-2019-BT-STD-0042-0016 at p. 7)
Carrier specified what it argued are the max-tech levels for ACUACs
and ACUHPs should be in terms of IEER and COP based on certifications
to the AHRI Directory at the time of its comment submission. (Carrier,
EERE-2019-BT-STD-0042-0013 at pp. 9-10)
Consistent with feedback from stakeholders, DOE identified
incremental efficiency levels based on a review of currently available
models on the market, taking into consideration the efficiency levels
analyzed for the January 2016 Direct Final Rule. DOE relied on
certified IEER data from DOE's CCD and the AHRI Directory, focusing on
models that had sufficient information in public product literature to
develop costs. Review of the market showed that many of the model lines
analyzed for the January 2016 Direct Final Rule are still on the market
today; therefore, DOE concluded that many of the efficiency levels
analyzed for the January 2016 Direct Final Rule were still appropriate
to consider for this rulemaking. DOE started with the efficiency levels
used for the January 2016 Direct Final Rule analysis that were above
the current IEER standards (i.e., standards with compliance date of
January 1, 2023), adjusting IEER values of some efficiency levels as
appropriate based on current market efficiency distributions. DOE also
added efficiency levels, as needed, to better represent the range of
certified IEER ratings for ACUAC models with electric resistance
heating or no heating currently available on the market. This included
adjusted max-tech levels for some classes that have models on the
market with higher rated IEER than the max-tech levels analyzed for the
January 2016 Direct Final Rule, consistent with suggestions by
stakeholders.
Regarding the CA IOU's comment that DOE consider emerging
technologies in determining max-tech levels, as discussed, DOE
developed max-tech levels for the engineering analysis based on model
designs currently on the market. DOE concluded that it lacked
sufficient cost and efficiency information to analyze higher efficiency
levels than currently on the market. DOE notes that the max-tech levels
presented in this DFR reflect those presented in the 2023 ECS
Negotiations, and the CA IOUs were a member of the ACUAC/HP Working
Group and did not object to the analyzed max-tech levels in the 2023
ECS Negotiations.
In response to the May 2020 ECS RFI, Carrier also recommended that
DOE analyze max-tech efficiency separately for equipment that uses
alternate refrigerants once available on the market, as it believes
that safety code compliance will require additional components and
testing that may restrict the use of certain design options. (Carrier,
EERE-2019-BT-STD-0042-0013 at p. 10)
In response, DOE did not analyze max-tech levels for equipment with
alternative refrigerants separately for this rulemaking because DOE is
not aware of any models on the market at this time that include
refrigerants with GWP below the limit of 700 GWP adopted by the
Environmental Protection Agency (``EPA'').\30\ Section IV.C.4 of this
direct final rule includes further discussion on consideration of
lower-GWP refrigerants in the engineering analysis.
---------------------------------------------------------------------------

\30\ On October 24, 2023, the EPA published a final rule in the
Federal Register restricting the use of certain higher-GWP
hydrofluorocarbons (``HFCs'') in aerosols, foams, and refrigeration,
air conditioning, and heat pump products and equipment (``October
2023 EPA Final Rule''). This final rule restricts refrigerants with
a GWP higher than 700 in residential and light commercial air
conditioning and heat pump systems installed on and after January 1,
2025. 88 FR 73098. On December 26, 2023, EPA published an interim
final rule and request for comment in the Federal Register amending
a provision of the October 2023 EPA Final Rule allowing one
additional year, until January 1, 2026, for the installation of new
residential and light commercial air conditioning and heat pump
systems using components manufactured or imported prior to January
1, 2025. 88 FR 88825.
---------------------------------------------------------------------------

The higher efficiency levels for ACUACs with electric resistance
heating or no heating in terms of IEER considered in this direct final
rule are presented in Table IV.5.

[[Page 44077]]

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2. Efficiency Levels in Terms of New Metrics
a. IVEC
DOE considered the efficiency levels in terms of IVEC presented in
Table IV.6 for this direct final rule. The development of these
efficiency levels for each equipment class is discussed in the
following subsections.
[GRAPHIC] [TIFF OMITTED] TR20MY24.085

ACUACs with Electric Resistance Heating or No Heating
As discussed in section II.B.3 of this document, the ACUAC/HP
Working Group recommended the current cooling performance energy
efficiency descriptor, IEER, be replaced with the newly-developed IVEC
metric. While the cost-efficiency curves were developed in terms of the
existing cooling efficiency metric (IEER), DOE translated the IEER
values at each

[[Page 44078]]

efficiency level to IVEC values for use in the other analyses in this
direct final rule, and to allow consideration of potential amended
energy conservation standard levels in terms of the IVEC metric.
With this change in cooling efficiency metric, DOE must ensure that
a new IVEC-based standard would not result in backsliding of energy
efficiency levels when compared to the current IEER standards. (42
U.S.C 6313(a)(6)(B)(iii)(I)) To this end, DOE translated the identified
IEER baseline levels (as discussed in section IV.C.1.a of this
document) to IVEC baseline levels.
During the course of the 2023 ECS Negotiations, industry members in
the ACUAC/HP Working Group provided a DOE contractor with a
confidential, anonymized dataset that included simulated IEER and IVEC
values for more than 100 models currently available on the market. In
this dataset, for each equipment class, there is a range of IVEC values
near the IEER baseline. DOE calculated a weighted-average IVEC baseline
based on the values in this industry-provided dataset to use as the
IVEC baseline for analysis for each equipment class for ACUACs with
electric resistance heating or no heating. Further discussion of DOE's
analysis of baseline IVEC levels is included in chapter 5 of the direct
final rule TSD.
DOE also translated the higher efficiency levels in terms of IEER
to IVEC based on the performance correlations it developed (discussed
further in section IV.C.3 of this document) (i.e., DOE used the
performance correlations to calculate an IVEC value for each IEER
efficiency level). Further discussion of DOE's analysis of higher IVEC
levels is included in chapter 5 of the direct final rule TSD.
ACUACs with All Other Types of Heating
ACUACs with all other types of heating typically are paired with
furnaces that impose additional pressure drop that must be overcome by
the indoor fan, thus increasing measured indoor fan power. Therefore,
the current IEER standards have lower minimum efficiency for ACUACs
with all other types of heating as compared to ACUACs with electric
resistance heating or no heating, and DOE considered a similar furnace
decrement for IVEC efficiency levels (i.e., difference in IVEC levels
between comparable classes to reflect presence of a furnace). The
recommended standard levels in the ACUAC/HP Working Group ECS Term
Sheet include a furnace decrement of 0.5 for IVEC levels for small and
large ACUACs and a furnace decrement of 0.7 for IVEC levels for very
large ACUACs. DOE conducted an analysis of furnace pressure drops based
on public literature for ACUAC models and used estimates of furnace
pressure drop to calculate a furnace IVEC decrement for small, large,
and very large ACUACs. DOE's calculated furnace IVEC decrements are
similar to the decrements of 0.5, 0.5, and 0.7 included in the ACUAC/HP
Working Group ECS Term Sheet for small, large, and very large ACUACs,
respectively. Therefore, with these decrements confirmed, DOE used the
furnace IVEC decrements from the ACUAC/HP Working Group ECS Term Sheet
more broadly to develop IVEC efficiency levels for ACUACs with all
other types of heating across all considered efficiency levels for the
subject equipment. In other words, for each IVEC efficiency level for
ACUACs with electric resistance heating or no heating, DOE subtracted
the corresponding furnace IVEC decrement from the ACUAC/HP Working
Group ECS Term Sheet to determine the corresponding IVEC efficiency
level for ACUACs with all other types of heating. Further discussion of
DOE's analysis of furnace IVEC decrements is included in chapter 5 of
the direct final rule TSD.
ACUHPs
For the IVEC values of ACUHPs, DOE conducted an analysis to
understand the potential decrement in IVEC efficiency ratings between
ACUACs and ACUHPs. Using the January 2016 Direct Final Rule IEER
decrements between ACUACs and ACUHPs (81 FR 2420, 2456 (Jan. 15,
2016)), DOE determined IEER values at each efficiency level for ACUHPs.
The performance correlations developed for each efficiency level of
ACUACs were then adjusted to decrease IEER to reflect the lower ACUHP
IEER values. Changes made to the performance correlations reflect the
design and operating differences between otherwise identical ACUACs and
ACUHPs. For example, compressor performance may be lower in a heat pump
than an air conditioner due to the reversing valve imposing pressure
drop on the suction line (i.e., heat pumps may have reduced capacity at
a similar power input). Compressor performance may also be lower in a
heat pump than an air conditioner due to circuiting not being fully
optimized for cooling operation (i.e., heat pumps may have reduced
capacity with a higher power input in this case). Additionally, a heat
pump is more likely to require a tube and fin condenser coil instead of
a microchannel heat exchanger, which could increase high-side pressure
(resulting in a capacity reduction at increased power input) or
increase condenser fan power. DOE then calculated IVEC values based on
these adjusted correlations for ACUHPs at each efficiency level, and
the Department found no significant difference in IVEC between ACUACs
and ACUHPs with the same supplemental heating type at each efficiency
level using its performance correlations, in contrast to the decrement
used when analyzing IEER efficiency levels for the January 2016 Direct
Final Rule.
DOE understands the lack of decrement found in IVEC between ACUACs
and ACUHPs to be for two reasons: (1) the design differences in ACUHPs
that reduce IEER affect vapor compression system performance, and IVEC
weights this performance less than IEER for several reasons (e.g.,
because IVEC also includes economizer-only cooling operation, higher
external static pressure requirements, and crankcase heater energy
consumption; and (2) the reduction in vapor compression system
performance for an ACUHP mentioned previously is counterbalanced by an
increase in IVEC due to the metric including fewer hours of off-mode
operation (i.e., crankcase heater energy consumption) for ACUHPs than
are included in IVEC for ACUACs.\31\ Further discussion of DOE's
analysis of ACUHP IVEC decrements is included in chapter 5 of the
direct final rule TSD.
---------------------------------------------------------------------------

\31\ The IVEC metric includes all annual crankcase heater
operation, which includes ventilation mode and unoccupied no-load
hours for ACUACs and ACUHPs. For ACUACs, the IVEC metric also
includes crankcase heater operation during the heating season,
because ACUAC compressors do not provide mechanical heating, whereas
ACUHP compressors do provide mechanical heating. Specifically, for
ACUACs, IVEC includes 4,202 hours of crankcase heater operation
during ventilation mode, unoccupied no-load hours, and heating
season hours. For ACUHPs, IVEC includes 338 hours of crankcase
heater operation during ventilation mode and unoccupied no-load
hours.
---------------------------------------------------------------------------

Given the finding of no IVEC decrement between ACUACs and ACUHPs of
the same supplementary heating type, for all efficiency levels except
for the levels recommended in the ACUAC/HP Working Group ECS Term Sheet
(discussed later in this sub-section), DOE did not analyze lower IVEC
efficiency levels for ACUHPs as compared to ACUACs. Because the
standard levels recommended in the ACUAC/HP Working Group ECS Term
Sheet combine ACUHPs into equipment classes that depend only on cooling
capacity, regardless of supplemental heating type, DOE analyzed ACUHPs
without separate classes for different

[[Page 44079]]

supplementary heating types at all efficiency levels. Therefore, for
all efficiency levels (including the baseline) except for the levels
recommended in the ACUAC/HP Working Group ECS Term Sheet (discussed
later in this sub-section), the IVEC efficiency levels for ACUHPs are
the same as the efficiency levels for ACUACs with all other types of
heating.
Despite the finding of no IVEC decrement for ACUHPs as compared to
ACUACs, the ACUAC/HP Working Group ECS Term Sheet includes marginally
lower recommended standards for ACUHPs than ACUACs with all other types
of heat. Therefore, at the recommended efficiency level for each ACUHP
equipment class, DOE analyzed the IVEC value recommended by the ACUAC/
HP Working Group for that class, instead of using the corresponding
IVEC level for ACUACs with all other types of heating.
As previously discussed, the additional pressure drop of a furnace
and indoor fan energy required to overcome that pressure drop results
in lower IVEC for otherwise identical models with furnaces. This
pressure drop is the reason that DOE's current standards apply a
decrement such that ACUHPs with all other types of heating and have
lower IEER standards than ACUHPs with electric resistance heating or no
heating. Based on review of models currently on the market and feedback
from manufacturer interviews, DOE understands that most manufacturers
offer ACUHPs with and without furnaces (i.e., considered in either the
``all other types of heating'' class or the ``electric resistance
heating or no heating'' class), and ACUHP models with furnaces are
typically otherwise identical to ACUHP models without the furnace.
Therefore, DOE understands that manufacturers do not design separate
baseline ACUHP models to precisely meet the IEER standards for both
``electric resistance heating or no heating'' and ``all other types of
heating''; rather, they design a single ACUHP model such that it meets
the applicable standard with or without a furnace present. If the
presence of a furnace for an ACUHP model impacts the IEER rating for a
model by an amount that differs from the decrement present in the IEER
standards, using a single ACUHP design to meet both standards
inherently means that one model will have an IEER value above the
applicable standard, but DOE understands that manufacturers do not
undertake the product development effort to design separate slightly
less efficient ACUHP models to take advantage of this small IEER gap.
Based on feedback from manufacturer interviews, DOE expects this to
continue in the future, even in the context of more-stringent
standards.
Therefore, considering ACUHP equipment classes including models of
all supplementary heating types (which is the equipment class structure
recommended in the ACUAC/HP Working Group ECS Term Sheet), DOE assumed
that manufacturers would design ACUHPs to meet the applicable IVEC
efficiency level with a furnace present; by removing the furnace, the
otherwise identical ACUHP models with electric resistance or no heating
would naturally achieve a higher IVEC. Therefore, in the analyses
following the engineering analysis, DOE assumed that all ACUHP IVEC
efficiency levels would be met by ACUHPs with furnaces, and that ACUHPs
without furnaces (but otherwise identical to the models with furnaces)
would have higher IVEC values. Therefore, to determine the IVEC values
achieved by ACUHPs without furnaces, DOE added the previously discussed
furnace decrements to the ACUHP efficiency levels (which nominally
apply to all ACUHPs regardless of supplementary heating type). As a
result, DOE concluded that combining ACUHP equipment classes for all
types of heating into single equipment classes for each capacity range
would generally result in the same market dynamics and energy savings
as having ACUHP equipment classes separated by supplementary heating
type (i.e., with the IVEC standard levels for ACUHPs with electric
resistance or no heating being higher than the IVEC standard levels for
ACUHPs with all other types of heating, with the difference being equal
to the previously discussed furnace IVEC decrements). In other words,
when comparing IVEC efficiency levels between ACUACs and ACUHPs, DOE's
analysis for this direct final rule considers the ACUHP levels to be
comparable to the levels for ACUACs with all other types of heating
(because the ACUHP levels would need to be met by ACUHP models with
furnaces), rather than the ACUHP levels being comparable to the levels
for ACUACs with electric resistance or no heating.
b. IVHE
The ACUAC/HP Working Group also recommended the current heating
performance energy efficiency descriptor, COP, be replaced with the
newly-developed IVHE metric. With this change in heating efficiency
metric, DOE must ensure that a new IVHE-based standard would not result
in backsliding of energy efficiency levels when compared to the current
COP standards. (42 U.S.C 6313(a)(6)(B)(iii)(I)) To this end, DOE first
established a baseline at the current energy conservation standard in
terms of COP for each of the ACUHP equipment classes, and then
translated the COP baseline for each class to an IVHE baseline. As
discussed previously, DOE used the current COP energy conservations
standards as the COP baseline for all ACUHP equipment classes.
During the 2023 ECS Negotiations and in confidential interviews
conducted with manufacturers, two industry members in the ACUAC/HP
Working Group provided a DOE contractor with simulated COP and IVHE
values. DOE used this data set, as well as DOE's own test data, to
determine an IVHE baseline for each ACUHP equipment class.
Specifically, DOE identified an IVHE baseline representative of models
with simulated COP at or near the current applicable COP standard level
for each ACUHP equipment class.
Although, as mentioned, two industry members in the ACUAC/HP
Working Group provided DOE contractors with simulated COP and IVHE
values, this dataset was significantly smaller than the previously
discussed IVEC dataset. Therefore, DOE has concluded that it lacks
sufficient IVHE data to identify IVHE efficiency levels more stringent
than the levels recommended in the ACUAC/HP Working Group ECS Term
Sheet. In particular, many ACUHP models currently on the market with
multiple stages of mechanical cooling offer only one stage of
mechanical heating. DOE recognizes that the IVHE metric (which includes
part-load operation) will incentivize development of multiple stages of
mechanical heating in ACUHPs. However, at this time, there are limited
IVHE data available for ACUHP models with multiple stages of mechanical
heating; therefore, it is unclear which IVHE levels above the
recommended IVHE levels are attainable across the range of capacities.
Consequently, for all efficiency levels above the recommended
efficiency levels, DOE assigned the recommended IVHE levels--i.e., for
all IVEC levels above the recommended IVEC levels for ACUHPs, DOE did
not analyze an increase in IVHE levels above the recommended IVHE
levels.
For efficiency levels between the IVHE baseline and the recommended
IVHE levels, DOE used its own test data and confidential data provided
by certain industry members to identify incremental IVHE levels
corresponding to the incremental IVEC levels.
Commercial buildings where ACUHPs are currently installed tend to
be

[[Page 44080]]

dominated by cooling hours as compared to heating hours (e.g., there
are 4,220 hours with a cooling demand in the IVEC metric and only 1,745
hours with a heating demand in the IVHE metric). Further, as discussed,
at this time, there are limited IVHE data available to quantify IVHE
improvements from design options that impact only heating efficiency.
Therefore, the evaluation of amended energy conservation standards for
ACUHPs is focused on the analysis of higher cooling efficiency. While
many design options employed to achieve higher cooling efficiency
levels could inherently result in higher heating efficiency, DOE did
not analyze design options that improve only heating efficiency.
DOE considered the efficiency levels in terms of IVHE presented in
Table IV.7 for this direct final rule.
[GRAPHIC] [TIFF OMITTED] TR20MY24.086

3. Energy Modeling
As done for the January 2016 Direct Final Rule (see 81 FR 2420,
2458-2459 (Jan. 15, 2016)), DOE developed component wattage profiles
and performance correlations for each efficiency level in this
rulemaking (discussed further in section IV.E of this document). This
served two purposes. First, and as discussed in section IV.E of this
document, these component wattage profiles and performance correlations
developed for this direct final rule were used in the energy use
analysis, along with hourly building cooling loads and generalized
building samples, to estimate the energy savings associated with each
efficiency level. Second, as discussed in section IV.C.2.a of this
document, the developed performance correlations, along with industry
data, were used to develop IVEC values that translated the IEER
efficiency levels to the IVEC metric.
As previously mentioned in section IV.C.1.b of this document, many
of the efficiency levels analyzed for the January 2016 Direct Final
Rule were still appropriate to consider for this rulemaking. For this
rulemaking, DOE repurposed component wattage profiles and performance
correlations from the January 2016 Direct Final Rule analysis for some
of those efficiency levels also included in the January 2016 Direct
Final Rule. Some IEER efficiency levels for this direct final rule have
an IEER value that is close to but not exactly the same as an IEER
efficiency level analyzed in the January 2016 Direct Final Rule. In
those cases, DOE adjusted the calculations used to develop the
component wattage profiles and performance correlations for that
efficiency level from the January 2016 Direct Final Rule analysis so
that the resulting IEER would match the IEER value of the new target
IEER efficiency level.
For new efficiency levels added in the analysis for this direct
final rule that are not close to an IEER efficiency level from the
January 2016 Direct Final Rule, DOE selected currently-available models
with rated IEER close to the IEER efficiency level to use as the basis
for new component wattage profiles and performance correlations. DOE
used publicly-available product literature for the selected models to
collect relevant compressor, evaporator fan, condenser fan, and
capacity data. This information was used to create component wattage
profiles and performance correlations as a function of temperature for
the new efficiency levels.
These component wattage profiles and performance correlations were
then used to calculate an IVEC value for each efficiency level. As
discussed in section IV.C.2.a of this document, the IVEC values
resulting from these component wattage profiles and performance
correlations were used to develop the incremental IVEC efficiency
levels corresponding to each incremental IEER efficiency level. More
details regarding the methodology for creating the component wattage
profiles and performance correlations for each efficiency level and
equipment class are presented in chapter 5 of the direct final rule
TSD.
DOE did not conduct similar energy modeling for ACUHP
representative units since ACUHP shipments represent a very small
portion of industry shipments compared to ACUACs shipments (10 percent
versus 90 percent). Further, as discussed, in section IV.C.2.a of this
document, DOE found no IVEC decrement between ACUACs and ACUHPs of the
same supplementary heating type, and, therefore, DOE did not analyze
lower IVEC efficiency levels for ACUHPs as compared to ACUACs for all
efficiency levels, except for the levels recommended in the ACUAC/HP
Working Group ECS Term Sheet. In addition, because ACUHPs represent a
small portion of shipments, DOE noted, based on equipment teardowns and
an extensive review of equipment literature, that manufacturers
generally use the same basic design/platform for equivalent ACUAC and
ACUHP models. DOE also considered the same design changes for the ACUHP
equipment classes that were considered for the ACUAC equipment classes
within a given capacity range. For these reasons, DOE focused energy
modeling on ACUAC equipment. Although not considered in the LCC and PBP
analyses, DOE did analyze ACUHP equipment in the NIA. From this
analysis, DOE believes the energy modeling conducted for ACUAC
equipment provides a good estimate of ACUHP cooling performance and
provides the necessary information to estimate the magnitude of the
national energy savings from increases in ACUHP equipment efficiency.

[[Page 44081]]

4. Impact of Low-GWP Refrigerants
On October 24, 2023, EPA published in the Federal Register
regulations to restrict the use of HFC refrigerants in specific sectors
or subsectors (``October 2023 EPA Final Rule''). 88 FR 73098. This
includes establishing a GWP limit of 700 for refrigerants used in light
commercial air conditioning and heat pump systems (which includes
ACUACs and ACUHPs) installed January 1, 2025 or later. Id. at 88 FR
73206, 73208. On December 26, 2023, EPA published an interim final rule
and request for comment in the Federal Register amending a provision of
the October 2023 EPA Final Rule allowing one additional year, until
January 1, 2026, for the installation of new residential and light
commercial air conditioning and heat pump systems using components
manufactured or imported prior to January 1, 2025. 88 FR 88825. ACUACs
and ACUHPs available on the market today use R-410A, which has a GWP
that exceeds this 700 GWP limit. This will require manufacturers to
shift away from the use of R-410A to low-GWP refrigerants.
In response to the May 2020 ECS RFI, multiple stakeholders
commented regarding the transition to low-GWP refrigerants and their
impacts on ACUACs and ACUHPs, which was well before EPA took final
regulatory action.
On this topic, the CA IOUs recommended that DOE work closely with
the California Air Resources Board, ASHRAE Standing Standard Project
Committee 15--Safety Standard for Refrigeration Systems, and AHRI's
Low-GWP Alternative Refrigeration Evaluation Program to ensure that
equipment meeting low-GWP requirements can meet any new efficiency
standard. (CA IOUs, EERE-2019-BT-STD-0042-0020 at p. 5)
NEEA recommended that DOE consider the impact of alternate
refrigerants on ACUAC efficiency, including the technical feasibility
and economic implications of meeting new and amended standard levels
with alternate refrigerants. (NEEA, EERE-2019-BT-STD-0042-0024 at p. 9)
AHRI stated that changes to the engineering analysis would be
needed if conducting an analysis at present due to the transition to
alternative refrigerants. AHRI stated that the combined costs to add
sensors, controls, and other components for new refrigerants, including
the cost of these refrigerants, will increase the overall cost of the
subject equipment by 10-15 percent over minimum designs of 2018. (AHRI,
EERE-2019-BT-STD-0042-0014 at p. 7)
Trane stated that systems that use A2L refrigerants will need more
controls and sensors for safety reasons, which it predicted will impact
the adoption of the new technologies negatively. (Trane, EERE-2019-BT-
STD-0042-0016 at pp. 4-5) Trane also recommended that DOE consider in
its analysis the effect of new low-GWP refrigerants on cost, design,
and size of units. (Trane, EERE-2019-BT-STD-0042-0016 at p. 7) AHRI,
Carrier, and Trane also collectively mentioned the Federal authority to
regulate refrigerants and the timing of adoption of State building and
safety codes to support mildly flammable (A2L) refrigerants. (AHRI,
EERE-2019-BT-STD-0042-0014 at p. 5; Carrier, EERE-2019-BT-STD-0042-0013
at p. 7; Trane, EERE-2019-BT-STD-0042-0016 at p. 4)
In the May 2022 TP/ECS RFI, DOE requested data on the impact of
low-GWP refrigerants as replacements for R-410A on: (1) the cooling and
heating capacities and compressor power of ACUACs and ACUHPs at various
temperature conditions, including, but not limited to, the temperatures
currently included in the IEER metric; and (2) the size and design of
heat exchangers and compressors used in ACUACs and ACUHPs. 87 FR 31743,
31753 (May 25, 2022). DOE also sought feedback and any additional data
on the cost of implementing low-GWP refrigerants in ACUACs and ACUHPs
beyond the comments received in response to the May 2020 ECS RFI. Id.
In response to DOE's request for data on the impact of low-GWP
refrigerants on capacities, compressor power, and design of heat
exchangers and compressors in the May 2022 TP/ECS RFI, Carrier stated
that replacement refrigerants require optimization and compressor
displacement changes which could also impact performance results, if
not properly compensated for. Carrier provided data for a pure cycle
analysis where equal compressor isentropic efficiency, heat exchanger
efficiency, and system operating conditions were assumed. The analysis
presented by Carrier indicates that new low-GWP refrigerant
alternatives R-32 and R-454B do not result in a significant impact on
measured EER, IEER, and COP at 47 [deg]F and 17 [deg]F. (Carrier, EERE-
2022-BT-STD-0015-0010 Attachment 1 at p. 17) Carrier further commented
that the required displacement changes with the alternative
refrigerants it analyzed, so compressor optimization is required.
Carrier also stated the mass flow rates changed with the alternative
refrigerants it analyzed, so coil redesign may be required. (Id.)
Lennox stated that implementing low-GWP refrigerants will require
extensive product redesign from both a performance and safety standard
perspective for ACUACs and ACUHPs. (Lennox, EERE-2022-BT-STD-0015-0009
at pp. 5-6)
With respect to the cost of implementing low-GWP refrigerants in
ACUACs and ACUHPs, AHRI stated that refrigerant charge generally
increases with increasing efficiency. AHRI added that transporting
factory-charged systems with A2L refrigerants would be more expensive
than shipping existing systems charged with non-flammable refrigerants.
AHRI further commented that the Department of Transportation has not
approved special permits allowing systems with larger charge amounts to
ship in the same manner as those containing non-flammable refrigerants.
AHRI indicated that without special permits, the expectation is that
systems over the charge size threshold of 12 kilograms would need to be
shipped as HAZMAT, which would be more costly. (AHRI, EERE-2022-BT-STD-
0015-0008 at p. 6)
Carrier stated that the likely replacement for R-410A will be A2L
refrigerants with low-flame spread per ASHRAE Standard 34,
``Designation and Safety Classification of Refrigerants.'' (Carrier,
EERE-2022-BT-STD-0015-0010 Attachment 1 at p. 17) Carrier further
stated that per UL 60335-2-40 4th edition, ``Household and Similar
Electrical Appliances--Safety--Part 2-40: Particular Requirements for
Electrical Heat Pumps, Air-Conditioners, and Dehumidifiers,'' and
ASHRAE 15-2022, ``Safety Standard for Refrigeration Systems,''
additional changes would be required for A2L mitigation, including
addition of a refrigerant sensor, additional labeling, testing, and
certification. (Id.) Carrier commented that it is currently conducting
design work and system optimization for the anticipated 2025
implementation date, but that it has not determined final details on
cost impacts. (Id.) Carrier also stated that there is variability in
refrigerant prices due to supply chain issues and it anticipates that
the start of the American Innovation and Manufacturing (``AIM'') Act
regulations would increase those prices. (Id.)
NEEA recommended that the analysis consider the effects on
efficiency of the likely and approved refrigerant options for ACUACs
available domestically and internationally. NEEA specifically
recommended that DOE address the technical feasibility and economic
implications of meeting amended standard levels with equipment that

[[Page 44082]]

uses different refrigerants, similar to the analysis DOE conducted for
the 2016 beverage vending machine energy conservation standards
rulemaking (81 FR 1028 (Jan. 8, 2016)). (NEEA, EERE-2022-BT-STD-0015-
0013 at p. 8)
More generally in response to the May 2022 TP/ECS RFI, NYSERDA
recommended that in evaluating amended energy conservation standards,
DOE should be mindful of the transition to low-GWP refrigerants that
will be more common, even if not required, by 2029. (NYSERDA, EERE-
2022-BT-STD-0015-0007 at p. 3)
In response, DOE notes that these comments were received prior to
the 2023 ECS Negotiations, and in particular, comments received in
response to the May 2020 ECS RFI were received three years prior to the
2023 ECS Negotiations. Therefore, manufacturers' understanding of the
impacts of low-GWP refrigerants may have changed since the time of the
drafting of some of the comments received. DOE conducted multiple
rounds of manufacturer interviews to support the analyses for this
direct final rule. In the first round of manufacturer interviews, DOE
sought feedback on its engineering analysis, and the Department
particularly sought input on the potential impacts of low-GWP
refrigerants. DOE understands that manufacturers are currently still in
the process of developing models that use low-GWP refrigerants and
consequently there are currently no market efficiency data available
for models using low-GWP refrigerants. However, based on feedback
received to this point during the course of the rulemaking (including
manufacturer interviews and Carrier's comment providing preliminary
testing data), DOE has concluded that implementation of low-GWP
refrigerants such as R-32 and R-454B is unlikely to result in a
significant impact on measured efficiency of ACUACs and ACUHPs.
Therefore, DOE conducted its engineering analysis for this direct final
rule using efficiency data for models currently on the market that use
R-410A.
With respect to suggestions that DOE consider the impact of cost of
equipment using A2L refrigerants, DOE acknowledges that design changes
to implement A2L refrigerants could impact the cost of equipment and
that models using A2L refrigerants may require additional controls or
sensors to detect leaks and additional labeling. However, DOE's
research and feedback from manufacturer interviews suggests that based
on information available at this time, these cost differences are not
likely to have a significant impact on the marginal cost to improve
efficiency (i.e., the costs to implement these changes will likely be
similar at each efficiency level). DOE concludes that the switch to A2L
refrigerants will not make a significant difference to the incremental
costs of higher efficiency levels as compared to R-410A. Similarly, to
the extent that shipping costs may increase in some cases for equipment
shipped with A2L refrigerants, DOE does not expect these shipping costs
are likely to have a significant impact on the marginal costs to
consumers. Therefore, DOE conducted its cost analysis, including
shipping costs, considering models currently on the market that use R-
410A.
5. Cost Analysis
a. MPC Estimates
The cost analysis portion of the engineering analysis is conducted
using one or a combination of cost approaches. The selection of cost
approach depends on a suite of factors, including the availability and
reliability of public information, characteristics of the regulated
equipment, and the availability and timeliness of purchasing the
equipment on the market. The cost approaches are summarized as follows:
<bullet> Physical teardowns: Under this approach, DOE physically
dismantles commercially-available equipment, component-by-component, to
develop a detailed bill of materials for the equipment.
<bullet> Catalog teardowns: In lieu of physically deconstructing
equipment, DOE identifies each component using parts diagrams
(available from manufacturer websites or appliance repair websites, for
example) to develop the bill of materials for the equipment.
<bullet> Price surveys: If neither a physical nor catalog teardown
is feasible (e.g., for tightly integrated products such as fluorescent
lamps, which are infeasible to disassemble and for which parts diagrams
are unavailable), cost-prohibitive, or otherwise impractical (e.g.,
large commercial boilers), DOE conducts price surveys using publicly-
available pricing data published on major online retailer websites and/
or by soliciting prices from distributors and other commercial
channels.
In the May 2020 ECS RFI, DOE sought input on the increase in
manufacturer production cost (``MPC'') associated with incorporating
particular design options and/or with reaching efficiency levels above
the baseline. 85 FR 27941, 27949 (May 12. 2020). Specifically, DOE was
interested in whether and how the costs estimated in the January 2016
Direct Final Rule have changed since the time of that analysis. Id. DOE
also requested information on the investments necessary to incorporate
specific design options, including, but not limited to, costs related
to new or modified tooling (if any), materials, engineering and
development efforts to implement each design option, and manufacturing/
production impacts. Id.
Regarding feedback on MPC associated with each design option and
how costs estimated in the January 2016 Direct Final Rule have changed,
AHRI commented that the work done to quantify MPCs was generally
accurate at the time of the analysis. Regarding the list of design
options to improve efficiency, AHRI asserted that ACUAC progression to
larger heat exchangers was not properly characterized in the January
2016 Direct Final Rule and that increases to outdoor and indoor fan
efficiency were missing. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 7)
DOE notes that AHRI's comment was received three years ago and
prior to the 2023 ECS Negotiations. As discussed, as part of the
analyses supporting the 2023 ECS Negotiations, DOE contractors
conducted engineering interviews with manufacturers (all of which are
AHRI members) and analyzed the market after the January 1, 2023
compliance date. During these discussions, DOE contractors received
feedback on design options used in higher efficiency equipment
(including heat exchangers, indoor fans, and outdoor fans), and the
MPCs developed for this direct final rule analysis reflect the feedback
received in those confidential interviews. Additionally, the cost-
efficiency curves were developed based on ACUAC and ACUHP models
available on the market at the time of the 2023 ECS Negotiations. To
the extent that available models included larger heat exchangers and
increases to outdoor and indoor fan efficiency, the improvement in
efficiency and corresponding cost for these design options are
reflected in the cost-efficiency curves presented in this direct final
rule. Further, the cost-efficiency curves were presented during
multiple meetings during the 2023 ECS Negotiations \32\ and ACUAC/HP
Working Group members had ample opportunity to provide feedback.
---------------------------------------------------------------------------

\32\ See <a href="http://www.regulations.gov/document/EERE-2022-BT-STD-0015-0077">www.regulations.gov/document/EERE-2022-BT-STD-0015-0077</a>
and <a href="http://www.regulations.gov/document/EERE-2022-BT-STD-0015-0080">www.regulations.gov/document/EERE-2022-BT-STD-0015-0080</a> for
presentations during the 2023 ECS Negotiations with cost efficiency
curves.
---------------------------------------------------------------------------

In the present case, DOE conducted the cost analysis using a
combination of physical teardowns and catalog

[[Page 44083]]

teardowns of models to assess how manufacturing costs change with
increased equipment efficiency. The resulting bill of materials
(``BOM'') provides the basis for the MPC estimates. For each equipment
class, DOE initially estimated the MPCs for models using physical and
catalog teardowns for each manufacturer that included sufficient
information in their equipment literature to conduct the cost
estimation analysis. As discussed in section IV.C.1 of this document,
DOE specifically focused its analysis on 7.5-ton, 15-ton, and 30-ton
ACUAC models with electric resistance heating or no heating.
To collect additional information regarding design options and
costs associated with equipment at different efficiency levels, DOE
provided design details and cost estimates, broken out by production
factors (materials, labor, depreciation, and overhead) and also by
major subassemblies (e.g., indoor/outdoor heat exchangers and fan
assemblies, controls, sealed system) and components (e.g., compressors,
fan motors), for each model analyzed in its physical and catalog
teardowns to the manufacturers of the models. DOE refined its analysis
based on all data and feedback provided by manufacturers in
confidential manufacturer interviews.
As previously discussed, DOE did not consider any design changes
specific to improving heating efficiency, and the cost-efficiency
analysis was focused on cooling mode operation. Further, as discussed,
because market efficiency data in terms of the new IVEC metric are not
available beyond the limited dataset provided to DOE contractors during
the Negotiations, the cost-efficiency analysis was conducted based on
IEER, and then IVEC values were developed to translate the IEER
efficiency levels to IVEC.
DOE analyzed costs (using physical teardowns and catalog teardowns)
across the full range of manufacturers and equipment offerings for
which DOE identified sufficient data to conduct the manufacturing cost
estimation analysis. Therefore, DOE's cost estimates reflect the
various design pathways that each manufacturer uses to increase
efficiency in their current model offerings. The following paragraphs
provide additional detail on DOE's methodology for developing MPC
estimates, and further detail is included in chapter 5 of the direct
final rule TSD. Generally, the methodology used for this direct final
rule is consistent with the methodology used in the January 2016 Direct
Final Rule analysis. 81 FR 2420, 2464 (Jan. 15, 2016).
For small and large equipment classes (represented by 7.5-ton and
15-ton capacities, respectively), DOE developed cost-efficiency curves
(i.e., relationship between rated IEER and MPC estimate) for each
manufacturer individually, and then aggregated the manufacturer-
specific cost curves into an industry-average cost-efficiency curve.
For efficiency levels for which there were no analyzed models from a
given manufacturer with rated IEER values that exactly match the
efficiency level, DOE's primary method to determine the MPCs for those
efficiency levels for that manufacturer was to interpolate or
extrapolate results. For example, to determine the MPC at 7.5-ton
Efficiency Level 1 (15.4 IEER) for one manufacturer, DOE interpolated
between the results for models rated at 14.8 IEER and 15.6 IEER. For
cases in which a manufacturer does not offer a model near a given
efficiency level at the representative capacity but offers models at
that efficiency level at a similar capacity, DOE estimated the costs of
similar capacity models at the target efficiency level and then scaled
those costs up or down to reflect the capacity difference and estimate
what the cost would be for that model to achieve that efficiency level
at the representative capacity. For example, to determine the MPC at
7.5-ton Efficiency Level 5 (19.9 IEER) for one manufacturer, DOE scaled
down the cost of an 8.5-ton model with a rated IEER of 19.9 to reflect
DOE's estimate of the cost of a 7.5-ton model with comparable
efficiency, by developing a cost per efficiency times capacity
relationship for that specific model line. There were certain
efficiency levels for which some manufacturers did not offer models at
or near the target efficiency level, even including capacities slightly
different than the representative capacity. For these levels (for
example, the 15-ton Efficiency Level 4 (20.1 IEER)), DOE calculated the
relative percentage increase in cost relative to baseline for a
manufacturer with a commercially-available model at that level, and
then applied that percentage increase to the baseline cost for the
other manufacturers to estimate MPCs at that level for each
manufacturer.
For the very large equipment class represented by 30-ton
representative units, DOE identified fewer manufacturers offering
equipment in this capacity range. After collecting information for all
models with sufficient data available to develop cost estimates, DOE
concluded that there are insufficient models available to develop
separate cost curves for each manufacturer and then combine into an
industry-average cost-efficiency curve as was done for the small and
large equipment classes. Therefore, DOE developed a single industry-
wide cost curve for very large equipment including models from all
identified manufacturers. Additionally, DOE's review of equipment
available on the market showed that there are two platform types of
equipment for 30-ton models (and the very large equipment class more
broadly): (1) models with smaller cabinets for light commercial
applications, and (2) models with larger cabinets for industrial-type
applications. DOE concluded that there are insufficient models with the
larger cabinet size spanning the range of efficiency levels being
considered (both at the low and high ends of the efficiency range) to
develop cost estimates based on the larger cabinet size. Therefore, DOE
developed incremental MPCs based on the smaller cabinet platform.
As discussed, DOE's cost analysis focused on ACUAC models with
electric resistance heating or no heating. In the economic analyses for
this rulemaking, the MPCs developed for ACUACs with electric resistance
heating or no heating were applied for all ACUACs, including ACUACs
with all other types of heating. As previously discussed, DOE has found
that ACUACs with electric resistance heating or no heating model lines
and ACUACs with all other types of heating model lines generally differ
only in the type of supplemental heating and are otherwise identical;
therefore, the incremental MPCs for ACUACs with electric resistance
heating or no heating and ACUACs with all other types of heating would
be the same. In other words, the cost to achieve higher efficiencies
would not be impacted by the presence of a furnace. DOE also developed
a baseline cost differential between a baseline ACUAC model with
electric resistance heating or no heating as compared to a baseline
ACUHP model, reflecting the cost differentials of heat pump technology.
Consistent with the analysis from the January 2016 Direct Final Rule
and feedback received during manufacturer interviews, DOE applied the
incremental MPC adders determined for ACUACs with electric resistance
or no heating to develop cost curves for ACUHPs. In other words, while
there is an absolute cost differential associated with heat pump
technology, DOE assumed that this cost differential remained constant
across all efficiency levels (e.g., the cost to achieve higher
efficiencies would not be impacted by the presence of a reversing

[[Page 44084]]

valve). The one exception to this approach was developing costs for the
recommended efficiency levels for ACUHPs, because as discussed in
section IV.C.2.a of this document, the IVEC values at those efficiency
levels for ACUHP equipment classes were slightly different than the
IVECs for the comparable efficiency levels for the ACUACs with all
other types of heating., For these recommended ACUHP IVEC levels, DOE
used interpolation to adjust the MPC estimates for the corresponding
ACUAC levels to reflect the slight difference in IVEC levels between
ACUACS and ACUHPS. As discussed in section IV.C.2 of this document, DOE
translated the cost-efficiency relationships based on IEER to IVEC and
IVHE. Further discussion of DOE's methodology for developing MPC
estimates is included in chapter 5 of the direct final rule TSD.
b. MSP Estimates, Manufacturer Markup, and Shipping Costs
To account for manufacturers' non-production costs and profit
margin, DOE applies a multiplier (the manufacturer markup) to the MPC.
The resulting manufacturer selling price (``MSP'') is the price at
which the manufacturer distributes a unit into commerce. DOE developed
an average manufacturer markup by examining the annual Securities and
Exchange Commission (``SEC'') 10-K reports \33\ filed by publicly-
traded manufacturers primarily engaged in commercial package air
conditioning and heating equipment manufacturing and whose combined
product range includes ACUACs and ACUHPs.
---------------------------------------------------------------------------

\33\ U.S. Securities and Exchange Commission, Annual 10-K
Reports (Various Years) (available at: <a href="http://www.sec.gov/edgar/searchedgar/companysearch.html">www.sec.gov/edgar/searchedgar/companysearch.html</a>) (last accessed Oct. 3, 2023).
---------------------------------------------------------------------------

In the May 2020 ECS RFI, DOE requested feedback on whether
manufacturer mark-ups determined in the January 2016 Direct Final Rule
are still appropriate for ACUACs and ACUHPs. 85 FR 27941, 27950 (May
12, 2020). In response, AHRI stated that its members found that the
manufacturer markups from the January 2016 Direct Final Rule are still
appropriate for ACUACs. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 8) AHRI
stated that manufacturer markups for ACUHPs are up to 10 percent higher
than those determined in the January 2016 Direct Final Rule. (Id.)
DOE incorporated AHRI's feedback into its current analysis,
estimating manufacturer markups of 1.30 for small ACUACs, 1.32 for
small ACUHPs, 1.34 for large ACUACs, 1.36 for large ACUHPs, 1.41 for
very large ACUACs, and 1.43 for very large ACUHPs. These markups were
applied to MPC estimates to develop MSP estimates. See section IV.J.2.d
of this document and chapter 12 of the direct final rule TSD for
additional discussion on manufacturer markups.
Because the design options associated with certain incremental
efficiency level involved increases in cabinet sizes, DOE also
estimated the incremental shipping cost at each efficiency level
separate from the MSP. More specifically, DOE estimated the per-unit
shipping costs based on the cabinet dimensions at each efficiency
level, assuming the use of a typical 53-foot flatbed trailer. For
shipping of HVAC equipment, the size threshold of a trailer is
typically met before the weight threshold. DOE used the same approach
used for estimating the cost-efficiency relationship, evaluating
shipping costs for each manufacturer individually then averaging the
results for the small and large equipment classes, and (for the reasons
described for MPC estimates in section IV.C.5.a of this document) a
single industry-wide shipping cost relationship for the very large
equipment class including models from all identified manufacturers.
Further discussion of DOE's methodology for developing shipping cost
estimates is included in chapter 5 of the direct final rule TSD.
6. Cost-Efficiency Results
The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of IVEC versus MSP plus
shipping cost (in dollars), which form the basis for subsequent
analyses. As previously mentioned, DOE's cost analysis focused on
ACUACs with electric resistance heating or no heating, which were also
used to represent the MPCs of ACUACs with all other types of heating.
The incremental MPC estimates for these classes were applied to ACUHPs.
The total MPC, shipping cost, and MSP plus shipping cost for each
efficiency level for the ACUAC equipment classes are listed in Table
IV.8 through Table IV.10. The total MPC, shipping cost, and MSP plus
shipping cost for each efficiency level for the ACUHP equipment classes
(which, as discussed, are based on the same incremental MPC estimates
as for ACUAC equipment classes) can be found in chapter 5 of the direct
final rule TSD.
[GRAPHIC] [TIFF OMITTED] TR20MY24.087

[[Page 44085]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.088

[GRAPHIC] [TIFF OMITTED] TR20MY24.089

See chapter 5 of the direct final rule TSD for additional detail on
the engineering analysis.

D. Markups Analysis

The markups analysis develops appropriate markups (e.g.,
manufacturer markups, retailer markups, distributor markups, contractor
markups) in the distribution chain and sales taxes to convert the MPC/
MSP estimates derived in the engineering analysis to consumer prices,
which are then used in the LCC and PBP analysis. The markups are
multiplicative factors applied to MPCs and MSPs. At each step in the
distribution channel, companies mark up the price of the equipment to
cover business costs and profit margin. Before developing markups, DOE
defines key market participants and identifies distribution channels.
In response to the May 2020 ECS RFI, AHRI commented that it is
researching distribution channels; however, it had no feedback at the
time the comment was written. (AHRI, EERE-2019-BT-STD-0042-0014 at p.
8) Carrier commented that it has not observed large shifts in the
distribution channels, as the industry for the subject equipment
remains mature in the U.S. (Carrier, EERE-2019-BT-STD-0042-0013 at p.
12)
However, AHRI disagreed with DOE's use of incremental markups,
citing an analysis by Everett Shorey from 2014, and recommended that
DOE revert to using the baseline markup for both baseline and
incremental costs. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 8)
DOE responded thoroughly to the Shorey report in the previous
direct final rule. See 81 FR 2420, 2468 (Jan. 15, 2016). In summary,
DOE's incremental markup approach assumes that an increase in
profitability, which is implied by keeping a fixed markup when the
product price goes up, is unlikely to be viable over time in reasonably
competitive markets. DOE recognizes that actors in the distribution
chains are likely to seek to maintain the same markup on appliances in
response to changes in manufacturer sales prices after an amendment to
energy conservation standards. However, DOE believes that retail
pricing is likely to adjust over time as those actors are forces to
readjust their markups to reach a medium-term equilibrium in which per-
unit profit is relatively unchanged before and after standards are
implemented.
DOE acknowledges that markup practices in response to amended
standards are complex and vary across business conditions. However,
DOE's analysis necessarily only considers changes in appliance
offerings that occur in response to amended standards. DOE continues to
maintain that its assumption that standards do not facilitate a
sustainable increase in profitability is reasonable.
PGE commented that ACUACs are purchased in larger volume by
distributors, with larger discounts from manufacturers, and thereby
resulting in lower prices to contractors. PGE stated that raising the
minimum efficiency ratings for ACUACs will have a lesser negative
wholesale pricing impact due to this volume. (PGE, EERE-2019-BT-STD-
0042-0009 at p. 2)
DOE reviewed the distribution channels and overall markups from the
January 2016 Direct Final Rule at the February 9, 2023 public meeting
webinar for this rulemaking (see presentation slides, EERE-2022-BT-STD-
0015-0073 at pp. 20-23), with updated overall markups presented at the
March 21-22, 2023 ACUAC/HP Working Group meeting (see presentation
slides, EERE-2022-BT-STD-0015-0080 at pp. 30-33). There was no
stakeholder discussion regarding the distribution channels or markups
at these meetings. For this reason, DOE continues to use the
distribution channels from the January 2016 Direct Final Rule, as well
as the same overall methodology, but with updated inputs.
1. Distribution Channels
For ACUACs and ACUHPs, the main parties in the distribution channel
are: (1) manufacturers; (2) wholesalers; (3) small or large mechanical
contractors, and (4) consumers. See chapter 6 and appendix 6A of the
direct final rule TSD for a more detailed discussion about parties in
the distribution chain.
For the direct final rule, DOE characterized three distribution

[[Page 44086]]

channels to describe how the ACUAC and ACUHP equipment passes from the
manufacturer to the commercial consumer. The first of these channels,
the replacement distribution channel, estimated to represent 66.0
percent of shipments, was characterized as follows:

Manufacturer [rarr] Wholesaler [rarr] Small or Large Mechanical
Contractor [rarr] Consumer

The second channel, the new construction distribution channel,
estimated to represent 16.5 percent of shipments, was characterized as
follows:

Manufacturer [rarr] Wholesaler [rarr] Small or Large Mechanical
Contractor [rarr] General Contractor [rarr] Consumer

In the third distribution channel, which applies to both the
replacement and new construction markets, estimated to represent 17.5
percent of shipments, the manufacturer sells the equipment directly to
the customer through a national account:

Manufacturer [rarr] Consumer (National Account)
2. Markups and Sales Tax
DOE developed baseline and incremental markups for each actor in
the distribution channels. Baseline markups are applied to the price of
equipment with baseline efficiency, while incremental markups are
applied to the difference in price between baseline and higher-
efficiency models (the incremental cost increase). The incremental
markup is typically less than the baseline markup and is designed to
maintain similar per-unit operating profit before and after new or
amended standards.\34\
---------------------------------------------------------------------------

\34\ Because the projected price of standards-compliant
equipment is typically higher than the price of baseline equipment,
using the same markup for the incremental cost and the baseline cost
would result in higher per-unit operating profit. While such an
outcome is possible, DOE maintains that in markets that are
reasonably competitive it is unlikely that standards would lead to a
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------

Following the same approach applied in the January 2016 Direct
Final Rule, DOE relied on several sources to estimate average baseline
and incremental markups, including: (1) the 2017 Annual Wholesale Trade
Survey for ``Hardware and Plumbing and Heating Equipment and Supplies
Merchant Wholesaler'' \35\ to develop wholesaler markups, and (2) U.S.
Census Bureau's 2017 Economic Census data \36\ for the commercial and
institutional building construction industry to develop mechanical and
general contractor markups. In addition, DOE used the 2005 Air
Conditioning Contractors of America's (``ACCA'') financial analysis for
the heating, ventilation, air conditioning, and refrigeration
(``HVACR'') contracting industry \37\ to disaggregate the mechanical
contractor markups into small and large, replacement and new
construction markets.
---------------------------------------------------------------------------

\35\ U.S. Census Bureau, 2017 Annual Wholesale Trade Survey
(available at: <a href="http://www.census.gov/data/tables/2017/econ/awts/annual-reports.html">www.census.gov/data/tables/2017/econ/awts/annual-reports.html</a>) (last accessed Feb. 7, 2023).
\36\ U.S. Census Bureau, 2017 Economic Census Data (2017)
(available at: <a href="http://www.census.gov/econ/">www.census.gov/econ/</a>) (last accessed Feb. 7, 2023).
\37\ Air Conditioning Contractors of America (ACCA), Financial
Analysis for the HVACR Contracting Industry: 2005 (available at:
<a href="http://www.acca.org/store/">www.acca.org/store/</a>) (last accessed Feb. 7, 2023).
---------------------------------------------------------------------------

In addition to the markups, DOE derived State and local taxes from
data provided by the Sales Tax Clearinghouse.\38\ These data represent
weighted-average taxes that include county and city rates. DOE derived
population-weighted average tax values for each of the regions from the
Energy Information Administration's 2018 Commercial Building Energy
Consumption Survey (``CBECS 2018'') \39\ considered in the analysis.
---------------------------------------------------------------------------

\38\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along
with Combined Average City and County Rates, 2023 (available at:
<a href="http://thestc.com/STrates.stm">thestc.com/STrates.stm</a>) (last accessed Sept. 11, 2023).
\39\ Energy Information Administration (EIA), 2018 Commercial
Building Energy Consumption Survey (available at: <a href="http://www.eia.gov/consumption/commercial">www.eia.gov/consumption/commercial</a>/) (last accessed August 19, 2023).
---------------------------------------------------------------------------

Chapter 6 of the direct final rule TSD provides details on DOE's
development of markups for ACUACs and ACUHPs.

E. Energy Use Analysis

The purpose of the energy use analysis is to determine the annual
energy consumption of ACUACs at different efficiencies for a
representative sample of U.S. commercial buildings, and to assess the
energy savings potential of increased equipment efficiency. DOE did not
analyze ACUHP energy use because, for the reasons explained in section
IV.C.3 of this document, the energy modeling in the engineering
analysis was performed only for ACUAC equipment.
The energy use analysis estimates the range of energy use of ACUACs
in the field (i.e., as they are actually used by consumers). The energy
use analysis provides the basis for other analyses DOE performed,
particularly assessments of the energy savings and the savings in
consumer operating costs that could result from adoption of amended or
new standards.
Chapter 7 of the direct final rule TSDs provides details on DOE's
energy use analysis for ACUACs. DOE developed engineering correlation
data and energy consumption estimates only for the ACUAC equipment
classes that have electric resistance heating or no heating. For
equipment classes with all other types of heating, DOE assumed that the
incremental change in efficiency, and hence, energy savings and energy
cost savings, would be similar to the values calculated for the
equipment classes with electric resistance heating or no heating.
1. System-level Calculations
DOE based the energy use estimates for all equipment classes on
three sets of input data:
(1) The engineering analysis provided data that were used to
calculate the equipment net capacity, compressor, and condenser power
consumption as a function of outdoor air temperature (``OAT''), the
indoor fan power as a function of external static pressure (``ESP''),
and controls power (constant), for each equipment stage at each
efficiency level. The compressor, condenser, indoor fan, and controls
are referred to as the ``system components'' in the discussion that
follows. The ``net capacity'' is defined as the maximum-stage system
capacity minus the heat generated by the indoor fan. DOE assumed that
the ESPs appropriate to each equipment class were those agreed upon in
the ACUAC/HP Working Group TP Term Sheet, plus an increment of 0.1 to
account for the economizer pressure drop (also included in the ACUAC/HP
Working Group TP Term Sheet).
(2) Hourly A/C system data were generated using Energy Plus for 11
commercial building prototypes, 4 building vintages, and 16 climate
zones; as each building prototype includes multiple systems serving
multiple zones, the total number of simulated systems in the 11
commercial building prototypes is 48. Given 4 vintages and 16 climates,
this leads to a total of 3,072 individual systems. DOE used TMY3
weather data as simulation input, with the cities used to represent
each climate zone the same as those used in the ACUAC/ACUHP Test
Procedure. The simulation data account for economizer use. The hourly
data extracted from the simulations for each system included the total
system load (heat removed from the space), the fan fraction (fraction
of the hour that the fan is on), and cooling and heating coil rates.
The coil cooling/heating rates were used only to determine the system
operating mode.
(3) Data from the Commercial Building Energy Consumption Survey
(``CBECS'') 2018 were used to estimate,

[[Page 44087]]

for those buildings using packaged cooling systems, the relative share
of floor space by Census Division and building type. In the 2015
analysis, this description of the relevant features of the building
stock with associated weights was referred to as the Generalized
Building Sample (``GBS'').
DOE prepared the engineering data for input to the energy use
analysis as follows: For each EL and equipment stage, the engineering
correlations were used to calculate the net capacity and component
power consumption for a set of integer temperatures spanning the range
30 [deg]F to 110 [deg]F (which exceeds the maximum temperature in the
TMY3 data). The capacity and power consumption data were then scaled by
the system nominal capacity; the power consumption is, therefore,
defined on a per-unit-of-capacity basis. The system nominal capacity
was defined as the maximum stage capacity at 95 [deg]F.
DOE processed the building simulation data for input to the energy
use calculation as follows: First, the data were scaled to the nominal
system capacity. For this analysis, consistent with assumption used in
the development of the ACUAC/ACUHP Test Procedure, DOE assumed that the
system capacity was equal to 1.15 times the peak hourly load. Next, DOE
assigned one of four operating modes to each hour: (1) off (zero fan
energy use); (2) fan only (fan energy >0 and coil rates = 0); (3)
cooling (cooling coil rate >0), and (4) heating (heating coil rate >0).
For multizone variable air volume (``VAV'') systems, there were a few
hours where both cooling and heating rates are positive; as these hours
were dominated by the cooling load, they were assigned to cooling mode.
DOE combined the building simulation data with the engineering data
to determine the energy use in each hour, and summed this energy use
over all hours to determine the annual summer and winter energy use per
unit of capacity. The summer season was defined as May through
September, and the winter season as all other months in the year. In
each hour, the energy use calculations are adjusted based on the system
operating mode:
<bullet> Fan-only mode: the engineering analysis provided a
specific value for fan power during fan-only operation; during these
hours the energy use is equal to the fan power multiplied by the fan
fraction (to account for the fact that the system may be off during
part of the hour) plus the controls power.
<bullet> Heating mode: as discussed with the ACUAC/HP Working
Group, DOE assumed that the fan would operate at maximum stage during
heating hours; during these hours the energy use is equal to the fan
power multiplied by the fan fraction (to account for the fact that the
system may be off during part of the hour) plus the controls power at
maximum stage.
<bullet> Cooling mode: all equipment designs include multi-stage
compressors, so the calculation must first determine which stages are
operating during the hour. DOE calculated the total heat removed, and
compared this to the net capacity at each stage; the highest stage that
is less than the total load is the lower stage, and the next stage up
is the upper stage. The fraction of load allocated to each stage
determines the fraction of the hour that the system operates in each
stage (equations describing these calculations are provided in chapter
7 of the direct final rule TSD). DOE used the values of component power
for the OAT in the hour to calculate the energy use for the upper and
lower stages. The total energy use is equal to the weighted sum of the
values for the lower and upper stages. If the lower stage was off, DOE
adjusted for cyclic performance using the degradation coefficient and
load factor as calculated according to section 6.2, Part-Load Rating,
of AHRI 340/360-2007, ``2007 Standard for Performance Rating of
Commercial and Industrial Unitary Air-Conditioning and Heat Pump
Equipment.''
<bullet> Off mode: the energy use is equal to the controls power
for the fan-only mode.
DOE converted the system-level energy use data to building-level
energy use data by averaging the energy use over all systems in a
building. To calculate this average, DOE weighted each system based on
the system nominal capacity. DOE also accounted for the possibility
that installation of new equipment would require a conversion curb. DOE
estimated that the presence of a conversion curb would add 0.2 to the
ESP, with a resulting adjustment to fan power and system net capacity.
DOE calculated the energy use two times for each system--once with no
assumed conversion curb, and once with the assumed conversion curb. DOE
then averaged these results to get a single value for each system. The
percent of installations with and without conversion curbs, for each
equipment class and efficiency level, was estimated based on data
collected for the January 2016 Direct Final Rule. These data were
adjusted to account for the current equipment baseline, and the cross-
walk between IEER and IVEC, as discussed during the 2023 ECS
Negotiations. DOE converted the per-unit energy use to a value
appropriate to each representative unit by multiplying the energy use
by the representative unit capacity.
2. Generalized Building Sample
The calculations described in the previous section result in summer
and winter energy use values for each building prototype, vintage, and
climate. To use these data in the LCC, sample weights must be defined
that reflect the relative frequency of each of these attributes in the
building stock. In addition to building prototype, vintage, and
climate, DOE included Census Division (``CD'') and building type as
attributes in the building sample. Census Division is included because
energy prices depend on these regions. Building type is included as
this is the categorization used in CBECS and in the AEO.
DOE used CBECS 2018 to determine the total floor space cooled by
packaged equipment distributed by Census Division and building type as
encoded by Principal Building Activity (``PBA'') in CBECS. DOE mapped
the CBECS PBA definitions to the building type definition used in the
AEO commercial demand module, and the Department used the AEO building
type definitions as categories in the LCC sample. In general, the
mapping of building prototype to building type is straightforward (for
example, office, retail, assembly). For the food sales and educational
building types, there are two building prototypes (i.e., full-service
and quick-service, and primary and secondary schools respectively).
Additional data available in CBECS were used to calculate the
percentage of building type floor space to allocate to each building
prototype.
DOE used four vintage categories: pre-1980, 1980-2003, 2004-2018
and 2019-2029. DOE used CBECS2018 to apportion floor space by vintage
and building type for the first three vintage categories. For the
fourth category, DOE used AEO 2023 commercial floor space projections
to adjust the floor space to the compliance year 2029. DOE used the AEO
to estimate, for the period 2019-2029, the floor space added and
demolished relative to existing floor space in 2018, for each building
type. DOE used these percentages to calculate the existing floor space
by vintage and building type in 2029, then converted the absolute
numbers to percentages.
DOE combined the climate zones (``CZ'') and Census Divisions into a
set of 28 distinct sub-regions, using population data to estimate the
weight for each region. These weights were used to distribute the floor
space by CD

[[Page 44088]]

into floor space by CD-CZ combined sub-regions.
DOE used the building simulation data to estimate the total cooling
capacity per square foot of cooled floor space for each climate zone,
building type and vintage. DOE used the capacity per square foot
numbers to convert total cooled floor space to total installed
capacity. DOE assigned a weight to each combination of attributes in
the building sample based on the percentage of installed capacity.
DOE tailored the sample weights for the small, large, and very
large equipment classes using a filter based on system nominal
capacity. If the system nominal capacity was less than 0.8 times the
representative unit capacity, the system was excluded from the sample
(and from the calculation of building-level energy use).
3. Energy Use Adjustment Factors
Building simulations reflect idealized conditions and may over-
represent or under-represent heating and cooling loads relative to
real-world conditions. In the January 2016 Direct Final Rule, DOE's
analysis relied on building simulation

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