Attachment E
Written Material Provided Directly to the Committee

EDISON ELECTRIC INSTITUTE RESPONSE TO COMMITTEE QUERIES

April 9, 2008

EDISON ELECTRIC INSTITUTE

701 Pennsylvania Avenue, N.W Washington D.C. 20004-2119 202-508-5010

Mr. Duncan Brown

Senior Program Officer

Board on Energy and Environmental Systems

National Academies of Sciences

500 Fifth Street NW Room Keck 908 Washington, DC 20001

RE: Query from Committee on Point of Use and Full Fuel Cycle Measurement

Dear Mr. Brown:

The Edison Electric Institute (EEI), as an interested participant in the setting of standards and in this case appliance efficiency standards, appreciates the opportunity to submit answers to your questions that were sent via e-mail on March 28, 2008.

  1. (a) If source energy as opposed to site energy was used by DOE when efficiency standards were set for appliances, might the efficiency standard set for electric and gas water heaters - assuming as now the standards are set separately - change and be higher? (b) If yes, why might the standard change? (c) If it does change, what might the change be in the appliance that was manufactured (e.g., more insulation or what?)

The efficiency standards set for the separate classes of electric and gas water heaters would be no different under a source-based metric than it is under the current site based metric. DOE currently uses a mix of site and source energy metrics when setting appliance energy efficiency standards. If source energy as opposed to site energy was used when setting efficiency standards for electric and gas water heaters, the standards values derived from the rigorous DOE process would not change based on the use of site or source energy. They could change only if DOE abandoned its required use of economic analysis (consumer cost effectiveness) in the process.


The current procedure sets standards based on (1) the level of efficiency that is technically achievable, and (2) the level of efficiency that is cost effective from the manufacturers' and consumers' point of view. When performing its economic analysis, DOE uses the cost impacts of efficiency measures at the retail price (or "site" price, as it were), rather than the wholesale manufacturing cost (a "source" cost, in a way). The efficiency levels set are not based on the metric used or the perception that it is too high or too low. They are set based on the level that is most cost-effective for consumers based on life-cycle costs.


For instance, the efficiency of an electric resistance water heater is 90+ percent today, and there is very little opportunity for improvement in this class of water heater. If the metric used today for electric resistance units assigned a value of "1" to the efficiency of an electric water heater, are manufacturers going to suddenly discover a way to improve the efficiency of their products in



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Attachment E Written Material Provided Directly to the Committee EDISON ELECTRIC INSTITUTE RESPONSE TO COMMITTEE QUERIES April 9, 2008 EDISON ELECTRIC INSTITUTE 701 Pennsylvania Avenue, N.W Washington D.C. 20004-2119 202-508-5010 Mr. Duncan Brown Senior Program Officer Board on Energy and Environmental Systems National Academies of Sciences 500 Fifth Street NW Room Keck 908 Washington, DC 20001 RE: Query from Committee on Point of Use and Full Fuel Cycle Measurement Dear Mr. Brown: The Edison Electric Institute (EEI), as an interested participant in the setting of standards and in this case appliance efficiency standards, appreciates the opportunity to submit answers to your questions that were sent via e-mail on March 28, 2008. 1) (a) If source energy as opposed to site energy was used by DOE when efficiency standards were set for appliances, might the efficiency standard set for electric and gas water heaters - assuming as now the standards are set separately - change and be higher? (b) If yes, why might the standard change? (c) If it does change, what might the change be in the appliance that was manufactured (e.g., more insulation or what?) The efficiency standards set for the separate classes of electric and gas water heaters would be no different under a source-based metric than it is under the current site based metric. DOE currently uses a mix of site and source energy metrics when setting appliance energy efficiency standards. If source energy as opposed to site energy was used when setting efficiency standards for electric and gas water heaters, the standards values derived from the rigorous DOE process would not change based on the use of site or source energy. They could change only if DOE abandoned its required use of economic analysis (consumer cost effectiveness) in the process. The current procedure sets standards based on (1) the level of efficiency that is technically achievable, and (2) the level of efficiency that is cost effective from the manufacturers' and consumers' point of view. When performing its economic analysis, DOE uses the cost impacts of efficiency measures at the retail price (or "site" price, as it were), rather than the wholesale manufacturing cost (a "source" cost, in a way). The efficiency levels set are not based on the metric used or the perception that it is too high or too low. They are set based on the level that is most cost-effective for consumers based on life-cycle costs. For instance, the efficiency of an electric resistance water heater is 90+ percent today, and there is very little opportunity for improvement in this class of water heater. If the metric used today for electric resistance units assigned a value of "1" to the efficiency of an electric water heater, are manufacturers going to suddenly discover a way to improve the efficiency of their products in 21

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order to raise the rating? Will they find a way to achieve efficiency levels greater than 100 percent in resistance water heaters? Of course not. Whether the value of the metric is 1 or 99, the ability of resistance water heater manufacturers to improve their efficiency does not change. Therefore changing the measurement metric of a standard by itself will make no difference in the efficiency of the water heater. Similarly, changing the efficiency metric with gas (or oil-fired) water heaters will make no difference in the manufactured efficiency levels. With gas equipment, the efficiency ceiling for non-condensing units has been the cost effectiveness of the units. While improvements are technically achievable, it has not been deemed cost effective to do so. Changing the metric assigned to the efficiency rating does not change that fact. Gas water heater manufacturers are still faced with the same economic hurdles. DOE has enough information available now to require higher levels of efficiency where possible and cost effective. Manufacturers are continually looking to improve their product, and with the higher energy costs higher efficiency becomes a greater competitive advantage. Changing the efficiency metric does not change any of that ability or incentive. If the standard were to change, the other required decision factors would still have to be considered, regardless of using site or source energy. In the case of water heaters, there are significant additional costs for raising the standard higher, such as difficulty fitting water heaters through doorways and other clearances due to increased insulation levels. Insulation materials are also more costly, because of the elimination of low cost, high performance materials that contained ozone- depleting chemicals. If the standard did change slightly, electric water heaters could potentially use better, more costly insulation materials, while gas water heaters could do the same. However, if the standard changed significantly, such that there would be elimination of entire classes of products (e.g., non-condensing gas water heaters). It is likely that the DOE manufacturer impact analysis would detail the negative effects on manufacturers, and the US Justice Department would be obligated to detail the negative impact on competition, such that the standard would likely not be implemented. 2) (a) If no change in the efficiency standard would be made by changing from site to source energy when standards are established, what are the two most important results of the change from the perspective of the consumer? What would the consumer see that is different? (Different labels?) (b) From society's perspective, how would things be different if no change would be made in the efficiency standard using source instead of site energy? It is difficult to provide a succinct answer without seeing a final version of the following: the source energy metric; the label provided by the appliance manufacturer; and the FTC Energy Guide label. The most important result of the change from the consumer's perspective would be the difficulty in comparing the efficiency of the current water heater using site energy to a new water heater based on source energy. At present, when consumers shop for water heaters, they can compare various models using metrics that they are familiar with, such as kWh's of electricity used per year, therms or cubic feet of gas used per year, gallons of oil consumed per year, and annual operating costs. Consumers are familiar with these terms because these terms are the basis of consumer utility bills as well as other guides that consumers use. Changing the label to a metric based on a new unfamiliar term and concept will not result in increased energy efficiency, but rather in consumer confusion. The result will be a loss in consumer credibility in the standards process and a loss in the "societal" investment made by the Department of Energy and the Federal Trade Commission over the last 20 years in educating consumers about smart energy choices. 22

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Changing from "all-site" efficiency measures to "all-source" efficiency measures on consumer labeling such as the FTC Appliance Guide would mean that all information would be communicated based on societal impacts, without easy linkage to consumer behavior, local energy use, or local energy costs. If the perceived performance doesn't match the perception of what the label tells the consumer, the credibility of the label will rapidly decline, making the label less valuable and moving the consumer to some other source that they trust. This would result in (1) less useful information for comparing their actual energy usage to the information on the label, and (2) a focus on societal benefits rather than individual consumer benefits which are typically the key driver of choice in buying the new appliance. From a societal perspective, it would reduce the usefulness of the label, by rendering the information in a form less usable to consumers. It could also lead to increased overall energy usage if the result was for more consumers to delay purchases, make the less efficient selection based on confusion over source estimates or retain equipment by repairing rather than replacing older and less efficient appliances. EEI sincerely appreciates the opportunity to submit these comments. It remains our recommendation that DOE retain the current system to set appliance energy efficiency standards which uses a mix of site measurements and source estimates. Respectfully submitted, Steve Rosenstock, P.E. Manager, Energy Solutions Edison Electric Institute 701 Pennsylvania Avenue N.W. Washington, D.C. 20004-2696 cc: Rick Tempchin, EE1 Donald Brundage, Southern Company Services Steve Kennedy, Georgia Power Company Charles Foster, Esq. AMERICAN GAS ASSOCIATION RESPONSE TO COMMITTEE QUESTIONS AGA responses to questions from the National Academies Committee on Point of Use and Full Fuel Cycle Measurement sent on March 28th, 2008: 1) (a) If source energy as opposed to site energy was used by DOE when efficiency standards were set for appliances, might the efficiency standard set for electric and gas water heaters - assuming as now the standards are set separately - change and be higher? (b) If yes, why might the standard change? (c) If it does change, what might the change be in the appliance that was manufactured (e.g. more insulation or what? ) AGA Response: If source energy as opposed to site energy was used by DOE when efficiency standards are set for appliances, the measurements of energy efficiency would change but the actual energy efficiency of those appliances would most likely not change. DOE’s test procedures and energy descriptors would remain the same, but a new descriptor would be added to allow source calculation methods. Additions of source energy descriptors to current descriptors and DOE test methods will not alter the standards. However, with a clearer understanding of full fuel cycle efficiency opportunities provided by this additional information, together with energy savings remaining the primary 23

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consideration of the standards process, these additions are likely to change and improve energy efficiency outcomes within the DOE appliance program. Consumer education would be enhanced if source procedures were employed. This new calculation method would more accurately reflect the amount of overall energy consumed by the appliance and thus allows consumers to compare appliances on a common basis. In addition, source methodology provides information that can be used to identify the carbon footprint and other environmental impacts associated with each appliance. 2) (a) If no change in the efficiency standard would be made by changing from site to source energy when standards are established, what are the two most important results of the change from the perspective of the consumer? What would the consumer see that is different? (different labels?) (b) From society's perspective, how would things be different if no change would be made in the efficiency standard using source instead of site energy? AGA Response Changing from site to source energy methodologies when standards are established can yield important benefits to consumers. These include: 1. Providing a more accurate determination of overall energy use by appliances that will allow true comparisons between fuels and equipment types. If the DOE results are made available to the public (e.g., appliance labels), consumers will be able to make an “apples to apples” comparison when a common energy unit measurement (Btu) is used, as opposed to the confusing fuel-specific measurements (cubic feet, kilowatts, etc.) now in use. Thus the consumer will be better able to choose an appliance if overall energy efficiency is important to them. It should be noted that changes to the Federal Trade Commission (FTC) Energy Guide Labeling program were proposed by AGA. FTC in its final rulemaking called for under EPACT 2005 admitted that it currently had the authority to implement consumer information on source energy and emission but pointed to the lack of DOE calculation methodologies as the basis for making this change to the Energy Guide labels.1 DOE can provide an immediate remedy to this lack of calculation methodologies by either documenting and recommending procedures it currently uses within the Energy Information Administration for source energy calculations, coupled with existing DOE test procedures, or recommending to FTC use of the EPA ENERGY STAR Portfolio Manager calculations for source energy and carbon dioxide emissions: http://www.energystar.gov/index.cfm?c=evaluate_performance.pt_neprs_learn 2. Making DOE test results available, which could aid consumers to make a “green” choice when purchasing appliances. Using DOE results that employ source methods, organizations and individuals will be better able to determine the environmental impacts of their purchase options. Having DOE test results in used to determine a typical carbon footprint that appears on the appliance label will aid the consumer in making an informed choice, particularly if carbon reduction goals become law. DOE test procedures represent the only reliable and consistent means of comparing appliances and energy efficiency. While questions about specific test procedures persist, the current DOE rulemaking 1 Office of the Federal Register, National Archives and Records Administration, “Federal Trade Commission: Rule Concerning Disclosures Regarding Energy Consumption and Water Use of Certain Home Appliances and other Products Required Under the Energy Policy and Conservation Act (“Appliance Labeling Rule”),” Federal Register, Volume 72, Issue 167, August 29, 2007, pp. 49948-49997. 24

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process for addressing test procedures represents a reasonable opportunity to make changes where needed. From society’s perspective, changing from site to source calculations, even with no change in the efficiency standards, would provide much needed guidance for other groups to employ this measurement technique. The use of source methodology by DOE would set a precedent that should encourage other organizations (International Code Council, the American Society of Heating, Refrigeration, and Air Conditioning Engineers, Federal Trade Commission, etc.) to incorporate source methodologies into their codes, standards, and consumer education activities. If current voluntary efforts to reduce carbon become mandatory through future government actions, source methodologies will be the only way to accurately depict environmental impacts of energy use. Even if appliance efficiency standards do not change, the use by DOE of source methods will allow consumers to make a more educated decision when purchasing appliances and will also pave the way for other organizations to employ source methods in their energy/environmental activities. LETTER FROM THE ASSOCIATION OF HOME APPLIANCE MANUFACTURERS Dr. James W. Dally, Chair and Council Members Committee on Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards National Academy of Sciences 500 5th Street NW Washington, DC 20001 RE: AHAM Comments on National Academy of Sciences Project on Energy Efficiency Standards: Alternative Approaches to Measurement Dear Dr. Dally and NAS Council Members: On behalf of the Association of Home Appliance Manufacturers (AHAM), I would like to provide written comments on the National Academy of Sciences project titled "Energy Efficiency Standards: Alternative Approaches to Measurement". AHAM is a not-for-profit trade association representing manufacturers of major, portable and floor care home appliances, and suppliers to the industry. In 1975, the Energy Policy and Conservation Act (EPCA) established test procedures, targets and labeling requirements for household appliances. This was followed by the National Energy Conservation and Policy Act (NECPA) in 1978, which provided DOE with authorization to set standards for 13 of these household appliances. Standards were set using point-of-use energy measurement, or the energy used by the appliance at the electrical outlet. Over the past 30 years, the household appliance industry has risen to the challenge of producing products that consume less energy and provide equal or better performance for the consumer. For example, since 1980 when these regulations became effective: • Clothes washer energy use per cycle has decreased 69%, while tub capacity has increased 20%; • Refrigerator-freezer energy use per year has decreased 61%, although volumes have increased nearly 12%; • Dishwasher energy use per cycle has decreased 47%. These significant improvements in energy use by appliances are achievable because household appliance manufacturers have a clearly defined energy goal for product design and a representative 25

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test procedure for product evaluation. Designing to a point-of-use energy requirement allows the manufacturer to wholly manage the energy use of their product and provides incentive for research and development that go above and beyond current regulations. Furthermore, appliance energy information has become an important factor in purchasing decisions for consumers in the past five years. Through a combination of appliance efficiency standards, Energy Guide labels, Energy Star and other market awareness efforts, including tax incentives to manufacturers to deliver energy savings beyond that required by regulation, consumers are taking steps to further reduce energy consumption of appliances. The product specific information addressed by the abovementioned information programs is critical to this progress and should be maintained. AHAM requests that the Committee maintain the current DOE procedure for defining appliance energy standards using point-of-use energy as the basis. As noted above, this approach has incentivized manufacturers and results in substantial improvements in product energy efficiency. As mentioned earlier, AHAM believes that consumers are also motivated by point-of-use energy values, as these are values they can control. AHAM acknowledges that addressing inefficiencies in the fuel cycle, for all fuels, is paramount to further reducing energy inefficiencies and greenhouse gas emissions; however, home appliance manufacturers are not responsible for fuel cycle efficiencies and therefore cannot directly address energy use at this level. Only the utilities can be held accountable for the fuel source in their generating plants. Again, DOE's current approach, where point-of-use energy values are used to set regulations and full fuel cycle energy use is estimated through impact analysis, provides a realistic foundation for addressing both concerns. We thank you for the opportunity to provide these comments. Please feel free to contact me with any comments or questions that you may have. Sincerely, Debra K. Brunk, Ph.D. Director, Technical Services Cc: Joe McGuire, AHAM President David Calabrese, AHAM Vice President, Government Relations Charles Samuels, AHAM Legal Counsel 26