Impact of Proposed Increases to Motor Efficiency Performance Standards, Proposed Federal Motor Tax Incentives and Suggested New Directions Forward

R. Neal Elliott

October 2007

This report is an update of an ACEEE white paper of the same titled released in June 2007.

Executive Summary

Motors use more than half the electricity in the United States and over two-thirds of the electricity in the industrial sector. Over the past 20 years, motor efficiency standards have succeeded in transforming the motor marketplace, resulting in significant energy savings and carbon reductions. As a result of the standards that were enacted as part of the Energy Policy Act of 1992 (EPAct-92), the U.S. now has a motor standard foundation that leads the world. 

As a result of these standards efforts, motor manufacturers and the motor efficiency community created the voluntary labeling program NEMA Premium® that defined the next step in efficiency. Seven years of promoting Premium motors has resulted in significant market acceptance of these products, representing a significant programmatic success with most large industrial consumers. The federal government has also embraced these products.  However, the shift of the motor marketplace to Premium appears to have stalled in recent years as the programs have been unable to significantly impact the original equipment or many of the less sophisticated motor purchasers. As a result, motor manufacturers working through the National Electrical Manufacturers Association (NEMA) and ACEEE, with the support of the Northeast Energy Efficiency Partnership (NEEP) and Pacific Gas & Electric Company (PG&E), have negotiated an agreement to increase the minimum efficiency performance standards (MEPS) for motors covered by EPAct-92 and an expansion of the coverage to many other motors not covered by current law.

This agreement has been incorporated into the energy legislation that has been passed by both houses of Congress and is awaiting the conference to resolve the differences between the two bills. The ultimate fate of the overall energy legislation remains uncertain at the time of this writing; none of the uncertainty exists because of these motor provisions. While minor technical differences exist between the House and Senate legislation, both fully embody the standards agreement, and no significant changes to the agreement are anticipated to emerge from the legislative conference.

Scope of Increased and Expanded Motor Standard Proposals

The proposal would raise the minimum efficiency level for 1–200 horsepower (HP) motors covered by EPAct-92 to the NEMA Premium® level (NEMA 2006a, Table 12-12) except for fire pump motors that remain at the EPAct-92 level (NEMA 2006a, Table 12-12). In addition, the proposal expands the scope of covered 1–200 HP motors to include:

• U-frame motors
• Design C motors
• Close-coupled pump motors
• Footless motors
• Vertical solid shaft normal thrust (tested  in a horizontal configuration)
• 8-pole motors
• All poly-phase motors with voltages up to 600 volts other than 230/460 volts (230/460 volt motors are covered by EPAct-92)

The required efficiency level for these motors is the “energy-efficient” level specified by NEMA MG-1, Table 12-11. This extends MEPS coverage to over 90% of motors 1–200 HP, with the balance as special purpose motors not readily adaptable to minimum standards. Manufacturers expressed serious technical reservations about raising these additional motors to the NEMA Premium® level because of customer requirements for reduced voltage starting in many of these categories, as well as difficulties with meeting premium levels for Design C and 8-pole motors.

The provision also calls for extending MEPS coverage for NEMA Design B motors from 201–500 HP at the NEMA (2006a), Table 12-11 (energy-efficient) level. Manufacturers expressed concerns about meeting energy-efficient levels for other categories of motors (e.g., Design A and C) due to concerns about motor in-rush current restrictions that many customers request for these motors. Design B motors represent about three-quarters of the 201–500 HP motors.

All of these standards would go into effect 36 months from the date of enactment of the federal legislation.

Companion Motor Tax Incentives

Proposed motor efficiency performance standards will raise the efficiency of poly-phase, integral horsepower induction motors in coming years. Because these motors will last more than 20 years in service, accelerating the production and purchase of these more efficient motors in advance of the standards will yield significant long-term energy savings. A tax credit was proposed as part of the original agreement to encourage end-use customers to invest in the new premium efficiency models rather than pre-buying the older, less efficient motors in anticipation of changes in energy standards, which is expected to increase costs of motors. The credit would have also encouraged taxpayers to replace motors in need of repair with new motors, rather than repairing and extending the life of older motors. 

The standards are estimated to save 9,781 GWh per year and reduce peak demand by 1,341 MW, the equivalent of three new coal power plants, with an associated annual reduction of 2 million metric tonnes of CO2e emissions. We cannot, however, declare victory and go home when these new standards go into effect. Much work remains to change motor management practices to insure that inefficient motors are replaced with new, efficient products. Without this effort, repairs could extend the lives of older motors indefinitely, missing the opportunity to realize the energy and carbon savings that would result from moving the motor stock to a higher level of efficiency.  In addition to changing the standard, motor efficiency programs must also ensure that the correctly-sized motors are installed for applications and that motor systems are sized and operated such that they are optimized to meet the load required, thus saving even more energy.

The proposed tax incentives would play an important role in transitioning the motor market to Premium motors, while at the same time creating an opportunity to transition motor efficiency programs to focus on the remaining efficiency challenges that remain in the motor marketplace. It is important to act now, however, so that the tax incentives and the new program direction are in place once the standards are enacted.

Unfortunately, while the provision was introduced in legislation by Sen. Lincoln (D-AR) and Sen. Smith (R-OR), the provision was not included by the House Ways and Means Committee in the House-passed Energy Bill (HR-2661-EH). The Senate Energy bill, HR-6 ES, did not include tax provisions, and the likelihood of motor tax provisions emerging from the conference is not good.  Motor efficiency advocates continue to seek other legislative vehicles for this proposal.

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25 pp., 2007, $20.00, IE073