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Energy Conservation Program: Energy Conservation Standards for Distribution Transformers
Score: 36 / 60
RULE SUMMARY
The Energy Policy and Conservation Act of 1975 (EPCA), as amended, prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including low-voltage dry-type distribution transformers, and directs the U.S. Department of Energy to prescribe standards for various other products and equipment, including other types of distribution transformers. EPCA also requires DOE to determine whether more-stringent, amended standards would be technologically feasible and economically justified, and would save a significant amount of energy. In this notice, DOE proposes amended energy conservation standards for distribution transformers. The notice also announces a public meeting to receive comment on these proposed standards and associated analyses and results.
COMMENTARY
The proposed rulemaking reflects a determination to apply energy efficiency standards and appears to press on regardless of data deficiencies.
MONETIZED COSTS & BENEFITS (AS REPORTED BY AGENCY)
| Dollar Year | 2010 | |
| Time Horizon (Years) | 2016-45 | |
| Discount Rates | 3% | 7% |
| Expected Costs (Annualized) | $289-$351 million | $285-$338 million |
| Expected Benefits (Annualized) | $1207-$1331 million; Plus CO2 range: $1021-$1829 million | $846-$911 million; Plus CO2 range: $660-$1409 million |
| Expected Costs (Total) | ||
| Expected Benefits (Total) | ||
| Net Benefits (Annualized) | $855-$1043 million; Plus CO2 range: $670-$1540 million | $507-$626 million; Plus CO2 range: $327-$1128 million |
| Net Benefits (Total) |
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? Federal Register search finds the notice of proposed rulemaking and public meeting. TSD is not found on regulations.gov but is easily found on the website of the Office of Energy Efficiency and Renewable Energy; the reader has to know to look on its home page to find the TSD. | 3/5 |
| 2. How verifiable are the data used in the analysis? Data are clearly sourced. Data sometimes assumptive—e.g., lack of impact on consumers. | 4/5 |
| 3. How verifiable are the models and assumptions used in the analysis? Models and assumptions are clearly discussed and cited, though models are complex. | 4/5 |
| 4. Was the analysis comprehensible to an informed layperson? TSD is over 1,000 pages long and is not an easy read for an informed layperson. | 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? Proposed regulation improves citizens' quality of life by lowering operating costs of consumers of distribution transformers (electric utilities in case of liquid-immersed transformers, and utilities and building owners in case of dry-type transformers). Environmental benefits are identified following energy savings due to reduced greenhouse gas emissions. | 4/5 |
| Does the analysis identify how these outcomes are to be measured? Cost savings are identified as industry net present values of total consumer costs and savings over 30 years (2016-2045), plus the value of CO2 reductions calculated using a range of values per metric ton. | 4/5 |
| Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes? Theory is that proposed rule reduces energy output equivalent to 2.40 gigawatts of generating capacity by 2045. Consumers save money on net because operating cost savings from using less energy are larger than the increase in equipment purchase and installation costs. | 4/5 |
| Does the analysis present credible empirical support for the theory? An engineering analysis is based on past evidence and projections from a model of energy savings, additional costs, and benefits to the environment. However, draws heavily on comments submitted by commercial and other interests. | 3/5 |
| Does the analysis adequately assess uncertainty about the outcomes? DOE used Monte Carlo simulation, which captures input variability without testing all possible input combinations. Some atypical situations may not be captured. | 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? | 1/5 |
| Does the analysis identify a market failure or other systemic problem? No clear identification of a market failure or systemic problem other than indirect assumption that regulation is required in order to receive net benefit gain from regulation. Does briefly discuss asymmetric information problem. | 2/5 |
| Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal? Analysis implicitly assumes higher net benefit would not occur in absence of regulation, but no direct discussion of this issue. DOE does, however, state that enhanced energy efficiency, where economically justified, improves the nation’s energy security, strengthens the economy, and reduces the environmental impacts or costs of energy production. Reduced electricity demand due to energy conservation standards is also likely to reduce the cost of maintaining the reliability of the electricity system, particularly during peak-load periods. | 1/5 |
| Does the analysis present credible empirical support for the theory? Little attempt is made, though there is mention of social cost of carbon. | 1/5 |
| Does the analysis adequately assess uncertainty about the existence or size of the problem? No clear attempt to assess uncertainty, but some discussion. | 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? Examines seven trial standard levels (TSLs) that exhibit different levels of efficiency. DOE considered several non-regulatory alternatives (tax credits, voluntary targets, early replacement, and bulk government purchases). | 4/5 |
| 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)? Broad. | 4/5 |
| Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved? None examined would save as much energy or have an NPV as high as the adopted standards. | 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? DOE quantified energy savings for each TSL as difference in energy consumption between ‘‘standards case’’ and ‘‘base case.’’ Base case represents forecast of energy consumption in absence of amended mandatory efficiency standards. | 2/5 |
| 8. How well does the analysis assess costs and benefits? | 3/5 |
| Does the analysis identify and quantify incremental costs of all alternatives considered? DOE conducts LCC and PBP analyses to evaluate the economic impacts on individual customers of potential energy conservation standards for distribution transformers. | 4/5 |
| Does the analysis identify all expenditures likely to arise as a result of the regulation? Lifecycle cost and payback period analysis considers total customer expense over the life of a product, consisting of purchase and installation costs plus operating costs (expenses for energy use, maintenance, and repair). | 4/5 |
| Does the analysis identify how the regulation would likely affect the prices of goods and services? To capture customer response to transformer price increase, DOE estimated customer price elasticity of demand. Regards impacts on final consumers to be unlikely. | 4/5 |
| Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation? DOE recognizes that voluntary or other non-regulatory efforts by manufacturers, utilities, and other interested parties can substantially affect energy efficiency or reduce energy consumption. But DOE bases its assessment on the actual impacts of any such initiatives to date. Recognizes cross price elasticity issues but simply points out data insufficient to do calculation. | 1/5 |
| If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis? Two discount rates are used to estimate incremental installed costs along with low, high, and primary estimates (based on forecasts of energy prices). | 3/5 |
| Does the analysis identify the alternative that maximizes net benefits? Shows net benefits of proposed standard but not those of alternatives. | 3/5 |
| Does the analysis identify the cost-effectiveness of each alternative considered? For proposed standard but not for alternatives. | 3/5 |
| Does the analysis identify all parties who would bear costs and assess the incidence of costs? DOE considered differences exerted on small vs. large manufacturers since impacts relatively larger on small because of much lower production volumes and relatively fixed nature of the R&D and capital investments required. DOE does not expect any plant closures or significant loss of employment. | 3/5 |
| Does the analysis identify all parties who would receive benefits and assess the incidence of benefits? Consumers of transformers are identified and all citizens are believed to receive environmental benefits. No attempt to further distinguish incidence. | 2/5 |
Use | |
| 9. Does the proposed rule or the RIA present evidence that the agency used the analysis? Proposed rule is justified by the TSD. However, the analysis does not go very deeply into alternatives. Agency gives short shrift to problems surrounding its analysis. | 3/5 |
| 10. Did the agency maximize net benefits or explain why it chose another alternative? The proposed rule is justified by net benefit analysis, but DOE does not choose a particular regulation on basis of maximizing net benefits from a comprehensive list of alternatives. | 4/5 |
| 11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future? None clearly discussed. It is conceivable it can track changes in energy costs but is problematic since so many other factors affect energy use. Similar problems in assessing environmental benefits. | 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? Though not directly discussed, DOE has access to data on sales of different equipment, etc., that can be used to monitor sales of energy efficient appliances in future. | 2/5 |
| Total | 36 / 60 |
Additional details
- Agency
- Department of Energy
- Regulatory Identification Number
- 1904–AC04
- Rule Publication Date
- 02/10/2012
- Comment Closing Date
- 04/10/2012
- Dollar Year
- 2010
- Time Horizon (Years)
- 2016-45