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Energy Conservation Program: Energy Conservation Standards for Standby Mode and Off Mode for Microwave Ovens
Score: 38 / 60
RULE SUMMARY
Per the requirements established in the Energy Policy and Conservation Act (EPCA), which prescribes energy-conservation standards for various consumer products and commercial and industrial equipment, and the Energy Independence and Security Act of 2007, the DOE proposes energy-use standards for microwave ovens in the standby and off modes. Specifically, the rule would prescribe the maximum allowable energy use when a product is in standby or off mode. For microwave-only ovens and countertop combination microwave ovens the maximum allowable energy use will be 1 watt. For built-in and over-the-range combination microwave ovens, the maximum allowable energy use will be 2.2 watts. DOE estimates a 0.06 percent reduction in projected household energy use as a result of the proposed rule.
For the rule's Regulatory Impact Analysis, go to Regulations.gov.
| Per the requirements established in the Energy Policy and Conservation Act (EPCA), which prescribes energy-conservation standards for various consumer products and commercial and industrial equipment, and the Energy Independence and Security Act of 2007, the DOE proposes energy-use standards for microwave ovens in the standby and off modes. Specifically, the rule would prescribe the maximum allowable energy use when a product is in standby or off mode. For microwave-only ovens and countertop combination microwave ovens the maximum allowable energy use will be 1 watt. For built-in and over-the-range combination microwave ovens, the maximum allowable energy use will be 2.2 watts. DOE estimates a 0.06 percent reduction in projected household energy use as a result of the proposed rule. |
COMMENTARY
The determination of the baseline—the analysis assumes that the proportion of consumers with various energy-efficient microwave ovens will remain constant—is a major drawback of this analysis. It would be relatively simple to examine the historical trends in consumer purchases and extend these trends. Further, to assume that manufacturers will not seek to improve in efficiency, particularly as governments in other countries increase their standards, is not realistic. This is another rule that finds that the most stringent standard maximizes NPV, but then fails to select the most stringent standard. The proposed rule states, "After carefully considering the analysis and weighing the benefits and burdens of TSL 4 [0.02 watts for class-1 microwave ovens and 0.04 watts for class 2], the Secretary has reached the following initial conclusion: At TSL 4, the benefits of energy savings, NPV of consumer benefit, positive consumer LCC impacts, and emissions reductions would be outweighed by the potential burden on consumers from loss of product utility and the large capital conversion costs that could result in a reduction in NPV for manufacturers." Upon further reflection, this suggests that either the agency does not want to upset the producers, the agency is not confident in its ability to calculate NPV, or the agency had a preferred standard before the analysis and simply wanted to look at a much more stringent standard so that its preferred standard would look "reasonable."
MONETIZED COSTS & BENEFITS (AS REPORTED BY AGENCY)
| Dollar Year | 2010 (millions of dollars) | |
| Time Horizon (Years) | 2014-2043 (30 yrs) | |
| Discount Rates | 3% | 7% |
| Expected Costs (Annualized) | 21.6 | 20.3 |
| Expected Benefits (Annualized) | 243.0 | 204.0 |
| Expected Costs (Total) | Not Reported by Agency | Not Reported by Agency |
| Expected Benefits (Total) | Not Reported by Agency | Not Reported by Agency |
| Net Benefits (Annualized) | 221.0 | 184.0 |
| Net Benefits (Total) | Not Reported by Agency | Not Reported by Agency |
METHODOLOGY
There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.
| Criterion | Score |
|---|---|
Openness | |
| 1. How easily were the RIA , the proposed rule, and any supplementary materials found online? The proposed rule was easy to find on Regulations.gov using RIN and the keywords "microwave oven." Searches on the Department of Energy webpage using the RIN and the regulation title produced no relevant returns. | 3/5 |
| 2. How verifiable are the data used in the analysis? The data used in the analysis are fairly well documented, and, in some cases, are provided in the appendix to the technical-support document. Thus much of the data are verifiable and well cited, though some of the DOE's own research on energy use during standby would take a considerable amount of work to verify. When data based on manufacturer interviews are provided, the interview procedure and questions are well described. | 4/5 |
| 3. How verifiable are the models and assumptions used in the analysis? Assumptions are clearly stated throughout the analysis. In many cases, a citation is provided to support the assumptions, but in most of these cases the citation is to another DOE analysis. A small number of assumptions are without support. | 4/5 |
| 4. Was the analysis comprehensible to an informed layperson? Acronyms are used throughout; however, all were defined at least once, and in some cases multiple times. Results and conclusions would be clear to a layperson. The complexity of the models employed reduces the accessibility of the analysis to the informed layperson. The underlying support documents require some engineering background because technical jargon is common. | 3/5 |
Analysis | |
| 5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them? | 4/5 |
| Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life? The more-stringent standards are intended to reduce energy use, which would improve environmental (air) quality and energy reliability. It is questionable whether the average household would notice the savings. For example, for microwave-only and countertop combination microwave ovens (product class 1), the estimated average life-cycle cost (LCC) savings in 2010 dollars is $13 (or a payback period of 1.1 years), and all consumers of these products would have positive economic impacts. For built-in and over-the-range combination microwave ovens (product class 2), the estimated average LCC savings in 2010 dollars is $4, and most consumers of this product would have positive economic impacts. There would also be a corresponding reduction in emission levels of pollutants associated with electricity production. | 5/5 |
| Does the analysis identify how these outcomes are to be measured? The rule does estimate the reduction in energy usage and the corresponding lower electricity bill associated with the new regulation. The analysis provides estimates of the suggested pollution reduction (including CO2 and NOX) and assigns monetary values to such reductions. The analysis does report a positive net present value from reduced CO2 emissions for the entire range of values (in 2010 dollars) of the social cost of CO2 emissions. However, "the national operating cost savings is measured for the lifetime of products shipped in 2014–2043. The SCC values, on the other hand, reflect the present value of future climate related impacts resulting from the emission of one ton of CO2 in each year" (p. 8569). So, if the changes in microwave-oven construction and configuration lower the expected life cycle of microwaves, resulting in a greater microwave-oven failure rate, the net benefit may be reduced. The identification of "energy-cost savings" and "energy savings" double counts the impact. | 3/5 |
| Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes? The basic idea is that the DOE has identified a method to save energy, and if it is adopted, people will save energy. More specifically, more-efficient microwave ovens will require less energy in standby and off modes. However, it is not clear why consumers of energy are not willing to demand such energy-savings measures, if the measures are as effective in reducing costs as the rule claims. | 4/5 |
| Does the analysis present credible empirical support for the theory? The analysis does reference some scientific studies from other federal agencies and groups of agencies. Original empirical support for the energy-reduction claims is provided as part of the energy-use analysis. | 3/5 |
| Does the analysis adequately assess uncertainty about the outcomes? The DOE developed a consumer sample for microwave ovens with standby and off modes from EIA's 2005 Residential Energy Consumption Survey (RECS). It used this sample to establish the variability and uncertainty in microwave-oven electricity use. The variability in electricity pricing was characterized by incorporating regional energy prices" (p. 8544). The analysis also addresses the uncertainty in the calculation of the value of CO2 pollution reductions. | 3/5 |
| 6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve? | 3/5 |
| Does the analysis identify a market failure or other systemic problem? The proposed rule cites four main reasons that consumers fail to purchase microwave ovens that have lower energy use when off or in standby mode: lack of consumer information about appliance efficiency, asymmetric information, high cost of information, and the external benefits of environmental quality and energy security. | 4/5 |
| Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal? (1) There is a lack of consumer information and/or information-processing capability about energy-efficiency opportunities in the home-appliance market. (2) There is asymmetric information (one party to a transaction has more and better information than the other) and/or high transaction costs (costs of gathering information and effecting exchanges of goods and services). (3) There are external benefits resulting from improved energy efficiency of microwave ovens that are not captured by the users of such equipment. These benefits include externalities related to environmental protection and energy security, such as reduced emissions of greenhouse gases, that are not reflected in energy prices. | 4/5 |
| Does the analysis present credible empirical support for the theory? The report does not present any evidence in support of their lack-of-information, asymmetric-information, or high-transaction-cost theories. | 1/5 |
| Does the analysis adequately assess uncertainty about the existence or size of the problem? The analysis does not assess uncertainty about the information problems (or their extent). Some consideration is given to the uncertainty surrounding the value of CO2-emissions reductions, but this is primarily due to lack of agreement in the field concerning how to value such reductions. The rule also looks at various parts of the distribution of microwave-standby energy use. That the US energy network is overstretched (or will be in the future) is assumed. | 1/5 |
| 7. How well does the analysis assess the effectiveness of alternative approaches? | 4/5 |
| Does the analysis enumerate other alternatives to address the problem? The rule proposes and fully analyzes four new maximum-total-standby power levels for two separate classifications of microwaves: Microwave-Only Ovens and Countertop Combination Microwave Ovens; and Built-in and Over-the-Range Combination Microwave Ovens. The technical-support document also mentions financial-incentive policies (rebates and tax credits) and voluntary-energy-efficiency targets. However, these latter two possibilities are analyzed to a much lesser degree and are only mentioned in the technical-support documents. | 5/5 |
| Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)? All options fully analyzed are performance based. For Microwave-Only Ovens and Countertop Combination Microwave Ovens the rule looks at four total-maximum-standby power-usage levels: 2 watts, 1.5 watts, 1 watt, and 0.02 watts. For Built-in and Over-the-Range Combination Microwave Ovens, the rule looks at four total-maximum-standby power-usage levels: 3.7 watts, 2.7 watts, 2.2 watts, and 0.04 watts. In chapter 17 of the TSB, a number of non-performance-based alternatives are considered: incentive-based, voluntary, etc. However, incentive-based and voluntary options are explored to a much lesser degree. | 4/5 |
| Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved? The proposed rule fully evaluates how the four proposed total-maximum-standby energy levels (performance standards) affect a number of items: consumer prices, consumers' electricity bill, producer costs, total electricity demand, and emissions. A number of alternative methods, such as incentive-based, voluntary, etc., are mentioned but not fully analyzed. | 4/5 |
| Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future? The proposed rule looks at the energy use of a variety of microwave ovens and uses the averages found for Microwave-Only Ovens and Countertop Combination Microwave Ovens (4 watts) and Built-in and Over-the-Range Combination Microwave Ovens (4.3 watts) as baselines throughout the study. No further manufacturing improvements in energy efficiency are anticipated without the regulation. | 2/5 |
| 8. How well does the analysis assess costs and benefits? | 4/5 |
| Does the analysis identify and quantify incremental costs of all alternatives considered? "DOE estimated the incremental cost associated with reductions in baseline standby power of built-in and over-the-range combination microwave ovens. DOE performed engineering teardowns and control board cost analyses to determine the cost of the baseline control board used in these units. DOE estimated the cost associated with each standby power level by using quotes from various component suppliers to determine the cost of the components used in each design option" (p. 8,543). The analysis assumes away any change in repair and maintenance costs. | 4/5 |
| Does the analysis identify all expenditures likely to arise as a result of the regulation? All reasonable expected costs imposed on the producers as a result of the new standards appear to be addressed, as the DOE consulted with numerous manufacturers and received substantial feedback concerning the expected costs. The DOE also looks at the effect on consumer prices. | 4/5 |
| Does the analysis identify how the regulation would likely affect the prices of goods and services? The DOE estimates the effect of the regulation on the price of new microwaves. It also estimates that the reduction in electricity demand will have "no detectable change on the average user price of electricity in the United States" (p. 8,550). While the elasticity of demand for microwave ovens (both short-run and long-run) is discussed, it does not appear that it was used to infer the impact on their prices. | 3/5 |
| Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation? The analysis does include the relative short-run price elasticity of demand of −0.34. The rule also mentions that customers may delay their purchases of new microwaves. Because the rule is looking at energy use while in standby mode, the only types of behavioral change that the rule may be missing are customers who postpone their purchases of new microwaves due to higher initial prices and appliance owners who already cut power to appliances while not in use. | 4/5 |
| If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis? The rule does report a range of estimates for each of the four alternative standards for each class of microwave oven. Sensitivity analysis is performed to allow for different equipment-price trends based on four learning-rate sensitivities. | 4/5 |
| Does the analysis identify the alternative that maximizes net benefits? Yes. The calculations provided in the table suggest that TSL 4—the most stringent standard—provides the highest net benefit. However, given that one goal is to preserve consumer utility of the product and that such a standard would reduce consumer utility (an unmeasured opportunity cost), they opt for TSL 3, which is the remaining alternative with the highest net benefit. | 5/5 |
| Does the analysis identify the cost-effectiveness of each alternative considered? For each of the standards, calculations of net benefits and the payback periods are presented. See table V.23. | 4/5 |
| Does the analysis identify all parties who would bear costs and assess the incidence of costs? The analysis adequately identified those who will bear costs associated with the new standards; however, the incidence of these costs is not sufficiently addressed. For example, without a discussion of elasticities, it is not determined how much of the additional manufacturing costs will be passed on to consumers. The rule does look at the elderly and poor. The analysis also estimates the fraction of consumers for whom the life-cycle costs will decrease (net benefit), increase (net cost), or exhibit no change (no impact) relative to the baseline product forecast. | 4/5 |
| Does the analysis identify all parties who would receive benefits and assess the incidence of benefits? The value of reduced emissions is a benefit to society as a whole. Reduced energy costs benefit all energy consumers, although the benefit of a more reliable energy network is not monetized. The analysis also estimates the fraction of consumers for whom the life-cycle costs will decrease (net benefit), increase (net cost), or exhibit no change (no impact) relative to the base-case product forecast. | 4/5 |
Use | |
| 9. Does the proposed rule or the RIA present evidence that the agency used the analysis? Yes, if no more than allowing the agency to reject an extremely low total-standby limit. | 3/5 |
| 10. Did the agency maximize net benefits or explain why it chose another alternative? The agency does not choose the alternative that maximizes monetized net benefits. "After carefully considering the analysis and weighing the benefits and burdens of TSL 4 [0.02 watts for class-1 microwave ovens and 0.04 watts for class 2], the Secretary has reached the following initial conclusion: At TSL 4, the benefits of energy savings, NPV of consumer benefit, positive consumer LCC impacts, and emissions reductions would be outweighed by the potential burden on consumers from loss of product utility and the large capital conversion costs that could result in a reduction in NPV for manufacturers." Upon further reflection, this suggests that either the agency does not want to upset the producers, the agency is not confident in its ability to calculate NPV, or the agency had a preferred standard before the analysis and simply wanted to look at a much-more-stringent standard so that its preferred standard would look "reasonable." | 4/5 |
| 11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future? No measures are discussed for future tracking of the rule's goals. By implication, they could be held to the goal of measuring energy savings. | 1/5 |
| 12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so? No indication of future assessment is given, although retrospective analysis of energy savings is always available. | 1/5 |
| Total | 38 / 60 |
Additional details
- Agency
- Department of Energy
- Regulatory Identification Number
- 1904-AC07
- Rule Publication Date
- 02/14/2012
- Comment Closing Date
- 04/16/2012
- Dollar Year
- 2010 (millions of dollars)
- Time Horizon (Years)
- 2014-2043 (30 yrs)