UPDATE: On June 18, the working group reached consensus and provided recommendations for energy conservation standards, test procedures, and metrics. Read the group's recommendations here. 

The U.S. Department of Energy (DOE) recently released two separate notices of proposed rulemakings (NOPRs) for commercial warm air furnaces (CWAF) and commercial unitary air conditioners (CUAC). The proposed efficiency standards were met with industry backlash and concern, and, on March 2, the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) and American Council for an Energy-Efficient Economy (ACEEE) wrote a joint letter and sent it to members of the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC) requesting that ASRAC “consider a negotiated rulemaking for commercial package air conditioners and commercial furnaces” at its March 19 meeting. Less than a week after that meeting, ASRAC issued a notice of intent to establish the Commercial Package Air Conditioners and Heat Pumps and Commercial Warm Air Furnaces Working Group to negotiate energy conservation standards for CWAF and CUAC equipment.

The working group directly involves industry stakeholders — which includes HVAC manufacturers as well as AHRI, ACCA, and energy-efficiency advocacy organizations — in the rulemaking process. But, while many in the industry are pleased the DOE has taken the opportunity to work together to develop its final rule, exactly how much of the working group’s recommendation the regulatory agency will adopt remains to be seen.

INDUSTRY CONCERNS

When promulgating rules, the DOE is required to develop standards that are technologically feasible, economically justified, and result in significant energy savings. The argument industry leaders have against the DOE’s proposed standards for CUAC and CWAF products is that complying with the standards would require a significant investment of both time and money by manufacturers.

“Typically, for commercial products, the DOE adopts the ASHRAE levels that are developed through a consensus process; with this proposed rule, the DOE did not,” said Karen Meyers, vice president of government affairs, Rheem Mfg. Co. “Instead, the DOE is proposing federal minimum efficiency levels that are significantly higher than ASHRAE 90.1-2013.”

“The new standards, as proposed, will significantly increase efficiency levels and require a major redesign to commercial air conditioning systems to meet these levels,” explained Karl Zellmer, vice president of sales, air conditioning business, Emerson Climate Technologies Inc. “More than 95 percent of current systems in the AHRI directory would not meet the new standard, which implies this is a major design effort for the whole industry.”

Jill Hootman, manager of product planning, HVAC/unitary, Trane, said Ingersoll Rand, which is participating in the working group alongside Emerson and other manufacturers, is already redesigning its affected CUAC products to comply with ASHRAE 90.1-2013, which is effective in 2016, in order to achieve the new minimum integrated energy efficiency ratio (IEER) levels. However, the DOE’s proposed standards “surpass these levels and adopt EL3 [Efficiency Level 3] in this rulemaking, which will require another major redesign of all equipment models,” she said. In addition, the CWAF rulemaking “overlaps these products and may necessitate a third major redesign in a very short timeframe.” Additional design changes may also be required as the industry works toward transitioning to lower-GWP (global warming potential) refrigerants.

“Successive redesigns could slow the rate of technological innovation as manufacturers focus on maintaining compliance with minimum efficiency levels,” Hootman continued. “There are some concerns that small manufacturers will not be able to remain competitive given the pace and resources required to comply, which could limit distribution of many of their product offerings and their ability to remain economically viable as shipment levels decrease. Due to these factors, Ingersoll Rand encourages the DOE to do a manufacturer impact analysis that calculates the Industry Net Present Value [INPV].”

Rheem’s Meyers agrees, stating: “Federal minimum efficiency levels should make sense and offer a reasonable payback period for the purchaser of the equipment. Otherwise, many building owners will elect to repair old, inefficient equipment instead of replacing the equipment that will offer energy savings.”

The HVAC industry is also dealing with more than 15 regulatory changes at the moment, which is “an unprecedented amount of regulatory activity,” Zellmer added. “In response to this regulatory activity, we have developed several new products delivering improved efficiency. We have also expanded our Copeland Scroll™ modulation offering including variable speed and tandems to help our OEM customers meet increased part-load efficiency levels.”

Rusty Tharp, director of regulatory affairs, Goodman Mfg. Co., also pointed to the uptick in regulatory burden on manufacturers. “It goes without saying that, as the number of DOE rulemakings increase, existing minimum efficiencies increase, and new test procedures and energy conservation standards are promulgated, we find ourselves devoting significantly more resources toward regulatory matters.”

John Hurst, vice president of government affairs and communications at Lennox Intl. Inc., which is also participating in the working group, said, while Lennox supports reasonable energy-efficiency standards that improve minimum energy-efficiency, rules that are rushed or fail to engage all stakeholders have a higher likelihood of being “flawed.”

“The end result is costly litigation and delays,” Hurst said. “Some rules have been remanded by the courts for a complete new rulemaking process. Our desire is to advance the nation’s energy goals, which Lennox continues to do with many of our industry-leading products. Innovation and the market drive these advancements, not government regulations. We are primarily concerned with negative impacts on our customers or end users and the corresponding market disruption. We are working with other stakeholders to minimize the negative impacts.”

A NEW WAY OF DOING THINGS

Traditionally, federal regulatory agencies have utilized the notice-and-comment process for developing new regulations. In a negotiated rulemaking, however, stakeholders meet directly with representatives from the DOE to discuss and ultimately develop consensus recommendations, which are then submitted to ASRAC. If approved by ASRAC, the recommendations are passed on to the DOE, which publishes the recommendations as a NOPR in the Federal Register for comment. After reviewing any comments, the DOE then publishes the recommendation as a final rule. Late last year, the process was used to develop and submit to DOE a regional standards enforcement plan for split-system and single package central air conditioners sold and installed throughout the U.S., though the DOE has yet to release its NOPR.

Karim Amrane, senior vice president, regulatory and international policy, AHRI, said the institute partnered with ACEEE to request a negotiated rulemaking out of concern for the organization’s manufacturer members and distribution channel partners.

“Usually, the DOE will not negotiate once the [NOPR] is out, but, in this case, there were enough concerns raised about the analyses that the DOE agreed to get stakeholders around the table and go over these issues rather than going on with a final rule,” Amrane said. “The DOE put the committee together to address these concerns through a consensus process, which we’ve been doing since April.”

ACCA, which is also a voting member of the ASRAC working group, is participating to make sure its contractor members are represented, as well. “We feel it’s important the contractors’ viewpoints are expressed during these negotiations for the same reason we file comments to the rulemaking,” said Charlie McCrudden, senior vice president of government relations, ACCA. “We want to make sure the outcomes of these rules don’t impact installation practices, the utility, or the performance of the equipment and that they don’t increase costs that go overlooked on this equipment.”

For HVACR manufacturers, including Trane, Lennox Intl. Inc., Emerson Climate Technologies Inc., Carrier Corp., Goodman Mfg. Co., and Rheem Mfg. Co., the process is a valuable opportunity to be directly involved in the rulemaking process rather than merely submitting comments during public comment periods.

“Carrier feels it’s vital all stakeholders have open conversations to intelligently increase efficiency beyond just rating levels while being considerate of the concerns of all industry and working group stakeholders,” said Chris Opie, director, commercial marketing, Carrier Corp. “We are well-positioned to provide insights and to help improve modeling accuracy so decision makers have the best information. With the knowledgeable input from all concerned stakeholders, meaningful improvement targets can be established to provide return on investment for consumers while achieving sustainability goals.”

“We believe it is our responsibility to play an active role in sharing input into any new updates to energy conservation standards that impact our customers or technology,” Hootman said, adding that Trane is faced with the same regulatory burden that other HVAC manufacturers are also tackling, especially in the unitary business. “The regulations being put into place require us to prioritize investments and ensure we are always designing and upgrading products that not only comply with industry regulations but also make buildings more comfortable, safe, and efficient.”

Hurst said Lennox, like other stakeholders, supports the negotiated rulemaking process.

“For regulations impacting Lennox International, we will continue to be an active participant, whether the rulemaking is a negotiated rulemaking or the traditional notice-and-comment process; however, we clearly prefer the collaborative approach,” he said. “Regulations achieve the greatest public benefit when stakeholders work together to create consensus-driven standards. We are confident the ASRAC working group, and the negotiated rulemaking process, will yield the best outcome because it allows for an open dialogue to understand various stakeholder issues and grants the ability to work through the issues in the form of a discussion.”

Goodman also favors the negotiated rulemaking method, Tharp said. “We, as well as the industry in general, have found the negotiated rulemaking process is much more efficient and provides effective outcomes when all stakeholders come to the table with a mind truly focused on give-and-take. We encourage the DOE to use the negotiated rulemaking procedure as much as possible.”

STAYING INVOLVED

Regardless of the rulemaking process being utilized, stakeholders agree the industry must be as involved as possible.

“Trane believes it is critical that the company is integrated into the processes by participating at public meetings, making public comments, and taking part in negotiations with the DOE,” Hootman said. “Company leaders believe participation in the process is crucial and makes for the best outcome for not only Trane customers, but the people who occupy the buildings and the greater industry at large.”

Opie also said there is growing awareness within the HVAC industry of the opportunity presented by improving building energy efficiency from operating cost reduction and improved employee productivity standpoints. “With smart policies, we can have a catalyst for further investment in building efficiency solutions.”

Emerson will continue to support the industry’s transition to higher efficiency levels, though the company wants to be sure these proposed standards are both economically justified and allow adequate time for a smooth, planned transition, Zellmer said. “Emerson’s invested in, and will continue to invest in, both engineering development and capital tooling to provide a complete line of new Copeland Scroll compressors for commercial air conditioning applications. These new compressors will help our customers meet efficiency standards at the lowest applied cost.”

The working group, which has been meeting regularly since April, is due to make its recommendations to ASRAC on June 15. In a recent interview, Amrane said he was hopeful a consensus would emerge by the deadline. “The group meets almost every week; it’s intense,” he said.

Ultimately, the HVACR industry only stands to benefit by taking advantage of any and all opportunities to be involved with rulemakings that affect the industry.

“The DOE is planning to promulgate 23 new standards affecting our industry between 2015 and 2018,” Hurst said. “The regulatory pace continues to accelerate, and all stakeholders should consider the opportunity cost of having industry resources focused on regulations versus innovation.”

Regardless of which direction is taken, Goodman and the rest of the industry will continue to make efforts for our voices to be heard, Tharp said. “As the saying goes, ‘every vote counts.’”

For more information on the working group, visit http://bit.ly/RTUWorkingGroup

Publication date: 6/15/2015

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