DOE/EA-XXXX

REGULATORY IMPACT ANALYSIS FOR PROPOSED

ENERGY CONSERVATION STANDARDS FOR COMMERCIAL

UNITARY AIR CONDITIONERS AND HEAT PUMPS

July 2004

U.S. Department of Energy

Assistant Secretary

Office of Energy Efficiency & Renewable Energy

Building Technologies Program

Appliances and Commercial Equipment Standards

Washington, DC 20585
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REGULATORY IMPACT ANALYSIS FOR COMMERCIAL UNITARY AIR

CONDITIONERS AND HEAT PUMPS

TABLE OF CONTENTS

1.0 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RIA-1

2.0 METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RIA-1

LIST OF TABLES

Table 1.1 Non-Regulatory Alternatives to Standards . . . . . . . . . . . . . . . . . . . . . . . . . RIA-1
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REGULATORY IMPACT ANALYSIS FOR COMMERCIAL UNITARY AIR

CONDITIONERS AND HEAT PUMPS

1.0 INTRODUCTION

Under the Process Rule, the Department is committed to continually explore nonregulatory alternatives to standards. DOE will prepare a draft regulatory analysis pursuant to

E.O. 12866, “Regulatory Planning and Review,” which will be subject to review under the

Executive Order by the Office of Information and Regulatory Affairs (OIRA). 58 FR 51735. 

The Department identified six major alternatives to standards as representing feasible policy

options to achieve customer product energy efficiency. It will evaluate each alternative in terms

of its ability to achieve significant energy savings at a reasonable cost, and will compare the

effectiveness of each one to the effectiveness of the rule. 

The non-regulatory means of achieving energy savings that DOE proposes to analyze are

listed in Table 1.1. The technical support document (TSD) in support of DOE’s Notice of

Proposed Rulemaking (NOPR) will include a complete quantitative analysis of each alternative,

the methodology for which is discussed in brief below. 

Table 1.1 Non-Regulatory Alternatives to Standards

-No new regulatory action

-Consumer tax credits

-Manufacturer tax credits

-Performance standards

-Rebates

-Voluntary energy efficiency targets

-Early replacement

-Bulk government purchases

2.0 METHODOLOGY

The Department will use the national energy savings (NES) Spreadsheet Model to

calculate the NES and the net present value (NPV) corresponding to each alternative to the

proposed standards. The NES Spreadsheet Model is discussed extensively in Chapter 10 of the

TSD. To compare each alternative quantitatively to the proposed conservation standards, it will

be necessary to quantify the effect of each alternative on the purchase and use of energy-efficient

consumer products. Once each alternative is properly quantified, DOE will make the appropriate

revisions to the inputs in the NES Spreadsheet Model. Key inputs that DOE may revise in the

NES Spreadsheet Model are: 
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C energy prices and escalation factors;

C implicit market discount rates for trading off purchase price against operating expense

when choosing equipment efficiency;

C customer purchase price, operating cost, and income elasticities;

C customer price versus efficiency relationships; and

C equipment stock data (purchase of new equipment or turnover rates for inventories). 

The key measures of the impact of each alternative will be: 

C Commercial Energy Use (EJ = 1018 joule): Cumulative energy use of the equipment

from the effective date of the new standard to the year 2035. The Department will report

electricity consumption as primary energy.

C National energy savings: Cumulative national energy use from the base case projection

less the alternative policy case projection.

C Net present value: The value of future operating cost savings from equipment bought in

the period from the effective date of the new standard to the year 2035. The Department

calculates the NPV as the difference between the present value of equipment and

operating expenditures (including energy) in the base case, and the present value of

expenditures in each alternative policy case. The Department discounts future operating

and equipment expenditures to 2001 using a seven percent real discount rate. It

calculates operating expenses (including energy) for the life of the equipment.