CHAPTER 10

. NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

10.1 INTRODUCTION ......................................................................................................... 10-3

10.1.1 Trial Standard Levels ......................................................................................... 10-3

10.2 FORECASTED EFFICIENC IES FOR BASE AND STANDARDS CASES .............. 10-4

10.3 NATIONAL ENERGY SAVINGS ............................................................................... 10-6

10.3.1 Approach ............................................................................................................ 10-6

10.3.2 Inputs.................................................................................................................. 10-7

10.3.2.1 Shipments ......................................................................................... 10-8

10.3.2.2 Equipment Stock .............................................................................. 10-8

10.3.2.3 Annual Energy Consumption per Unit ............................................ 10-8

10.3.2.4 National Annual Energy Savings ..................................................... 10-9

10.3.2.5 Site

- to

- Power Plant Energy Use Factor ......................................... 10-10

10.3.2.6 Full

- Fuel

- Cycle Energy ................................................................. 10-11

10.4 NET PRESENT VALUE ............................................................................................. 10-12

10.4.1 Approach .......................................................................................................... 10-12

10.4.2 Inputs................................................................................................................ 10-13

10.4.2.1 Average Annual Per-Unit Equipment Cost.................................... 10-14

10.4.2.2 Average Annual Per-Unit Operating Cost ..................................... 10-14

10.4.2.3 Total Annual Increases in Equipment Cost ................................... 10-15

10.4.2.4 Total Annual Savings in Operating Cost ....................................... 10-15

10.4.2.5 Discount Factor .............................................................................. 10-16

10.4.2.6 Present Value of Costs ................................................................... 10-16

10.4.2.7 Present Value of Savings ............................................................... 10-16

10.5 RESULTS OF NES AND N PV CALCULATIONS ................................................... 10-17

10.5.1 Summary of Inputs ........................................................................................... 10-17

10.5.2 Results of National Energy Savings Calculations ........................................... 10-17

10.5.3 Results of Net Present Value Calculations ...................................................... 10-19

10.6 ANNUALIZED NATIONAL COSTS AND BENEFITS ........................................... 10-21

10.6.1 Calculation Method .......................................................................................... 10-21

10.6.2 Results for the Proposed Standards.................................................................. 10-22

LIST OF TABLES

Table 10.1.1 Trial Standard Levels for SPVUs ...................................................................... 10-4

Table 10.2.1 Base Case and Standards Case Efficiency Distributions for Equipment Classes <65,000 Btu/h (2019) ............................................................................ 10-5

Table 10.2.2 Base Case and Standards Case Efficiency Distribution for SPVACs ≥65,000 Btu/h and <135,000 Btu/h (2019) ........................................................ 10-5

Table 10.3.1 Shipment-Weighted Average Annual Energy Consumption in 2019 ................ 10-9

10 -iTable 10.3.2 Upstream Energy Multipliers (Based on AEO 2013) ...................................... 10-12

Table 10.4.1 Shipment-Weighted Average Equipment Cost in 2019 for Base Case and

Trial Standards Levels ..................................................................................... 10-14

Table 10.4.2 Shipment-Weighted Average Repair and Maintenance Cost in 2019 for

Base Case and Trial Standards Levels ............................................................. 10-15

Table 10.5.1 Inputs to Calculation of National Energy Savings and Net Present Value ...... 10-17

Table 10.5.2 Cumulative National Primary Energy Savings for SPVU Trial Standard

Levels ............................................................................................................... 10-18

Table 10.5.3 Cumulative National FFC Energy Savings for SPVU Trial Standard

Levels ............................................................................................................... 10-18

Table 10.5.4 Cumulative National Primary Energy Savings for SPVU Trial Standard Levels (EPCA Baseline) .................................................................................. 10-19

Table 10.5.5 Cumulative National FFC Energy Savings for SPVU Trial Standard Levels (EPCA Baseline) .................................................................................. 10-19

Table 10.5.6 Cumulative Net Present Value for SPVU Trial Standard Levels .................... 10-20

Table 10.5.7 Cumulat ive Net Present Value for SPVU Trial Standard Levels (EPCA Baseline) .......................................................................................................... 10-20

Table 10.6.1 Annualized Benefits and Costs of Proposed Standards for SPVUs ................. 10-23

LIST OF FIGURES

Figure 10.2.2 Projected Shipment- Weighted EERs as a Function of Standard Level for All Equipment Classes <65,000 Btu/h ............................................................... 10-6 Figure 10.3.1 Annual site electric savings over time for one phase SPVACs less than 65,000 Btu/h (TSL 2) ....................................................................................... 10-10 Figure 10.3.2 Site

- to

- Power Plant Energy Use Factor for SPVU .......................................... 10-11

10

- iiCHAPTER 10. NATIONAL IMPACT ANALYSIS

10.1 INTRODUCTION

This chapter describes the method the U.S. Department of Energy (DOE) used to

estimat e the national impacts of tria l standard levels (T SLs) for five equipment classes of

SPVUs . DOE evaluated the following impacts: (1) national energy savings (NES) attributable to

each possible standard, (2) monetary value of those energy savings to customers of the considered equipment , (3) increased total installed cost of the equipment because of standards, and (4) net present value (NPV) of energy savings (the difference between the operational

savin gs and increased total installed cost)

.

DOE determin ed both the NES and NPV for all the efficiency levels considered for

amended standards for SPVUs

. DOE performed all calculations for each considered equipment

class using a Microsoft Excel spreadsheet model, which is accessible on the Internet

. <www.eere.energy.gov/buildings/appliance_standards/ > The spreadsheet, which implement s the

National I mpact Analysis (NIA) model , combines the calculations for determining the NES and

NPV for each considered equipment class with input from the shipments model.

Chapter 9 provides a detailed description of the shipments models that DOE used to project fut ure purchases of the considered equipment.

10.1.1 Trial Standard Levels

DOE developed trial standard levels (TSLs) that combine efficiency levels for each equipment class. Table 10.1.1 shows the efficiency EERs for each equipment class in each TSL. TSL 1 consists of efficiency level 1 for equipment classes less than 65,000 Btu/h. TSL 2 consists of efficiency level 2 for eq uipment classes less than 65,000 Btu/h. TSL 3 consists of efficiency level 3 for equipment classes less than 65,000 Btu/h. TSL 4 consists of efficiency level 4 (max

- tech) for equipment classes less than 65,000 Btu/h. For SPVACs between 65,000 and 135,000 Btu/h, there are no models on the market above the ASHRAE level, and for SPVHPs between 65,000 and 135,000 Btu/h and SPVUs greater than or equal to 135,000 Btu/h and less than 240,000 Btu/h, there are no models on the market at all, and, therefore, DOE h ad no basis with which to develop higher efficiency levels or conduct analyses. As a result, for each TSL, the EER (and COP) for these equipment classes is shown as the ASHRAE standard level of 10.0 EER (and 3.0 COP for heat pumps).

10-3Table 10.1.1 Trial Standard Levels for SPVUs

Equipment Class ASHRAE Trial Standard Levels EER(/COP)

1 2 3 4

SPVAC < 65,000 Btu/h 10.0 10.5 11.0 11.75 12.3

SPVHP < 65,000 Btu/h 10.0/

3.0 10.5/

3.2 11.0/

3.3 11.75/

3.9 12.3/

3.9

SPVAC ≥ 65,000 Btu/h and

< 135,000 Btu/h 10.0 10.0 10.0 10.0 10.0

SPVHP ≥ 65,000 Btu/h and

< 135,000 Btu/h 10.0/

3.0 10.0/

3.0 10.0/

3.0 10.0/

3.0 10.0/

3.0

SPVAC ≥135 ,000 Btu/h and

<240 ,000 Btu/h 10.0 10.0 10.0 10.0 10.0

SPVHP ≥135 ,000 Btu/h and

<240 ,000 Btu/h 10.0/

3.0 10.0/

3.0 10.0/

3.0 10.0/

3.0 10.0/

3.0

10.2 FORECASTED EFFICIENC IES FOR BASE AND STANDARDS C ASE S

A key factor in estimating NES and NPV is the trend in energy efficiency forecasted for the base case (without new standards) and each of the standards cases. Chapter 8 described how

DOE estimated base case efficiency distribution s for 2015, the year that compliance with the ASHRAE level would be required, or 2019 , the year that compliance with any higher standard would be required. To estimate a trend post- 2015 or 2019 , DOE applied the same rate of gro wth in efficiency as it did to get to 2019, which is also the same rate of growth used in the 2004 rulemaking for commercial unitary air conditioners, which is approximately 1 EER every 35

years. 1

To determine efficiency distribution s for cases in which a trial standard applies, DOE

used a “roll

- up” scenario for 2015 (ASHRAE level) or 2019 (higher levels) . DOE assumed that equipment in the base case that did not meet the standard under consideration would roll up to

meet the new standard in 2015 or 2019. Shares of equipment that met or exceeded the standard would not be affected. The resulting efficiency distributions are shown in Table 10.2.1 and Table

10.2.2 , along with the shipments-weighted EER, or SW EER , for each TSL.

10-4Table 10.2.1 Base Case and Standards Case Efficiency Distribution s for Equipment

C lasses <65,000 Btu/h (2019)

Trial Standard Level

EER Base Case ASHRAE * 1 2 3 4

9.0 69.3%

10.0 28.1% 74.4%

10.5 1.5% 24.5% 98.9%

11.0 1.0% 1.0% 1.0% 99.9%

11.75 0.1% 0.1% 0.1% 0.1% 100%

12.3 0.0% 0.0% 0.0% 0.0% 0.0% 100%

SW EER 9.33 10.13 10.51 11.00 11.75 12.30 Note: The compliance date for the ASHRAE standard is 2015, so the roll-up occurs in that year and the growth rate continues between 2015 and 2019; as a result the

roll -up is not fully apparent in this table.

Table 10.2.2 Base Case and Standards Case Efficiency Distribution for SPVACs ≥65,000 Btu/h and <135,000 Btu/h (2019)

Trial Standard Level

EER Base Case ASHRAE 1

- 4

9.0 71.1%

10.0 28.9% 100% 100%

SW EER 9.22 10.0 10.0

To estimate a trend post-2019 for each standards case , DOE applied the same rate of growth in efficiency as it used for the base case. Figure 10.2.2 shows the SW EER for the base case and each TSL for all equipment classes <65,000 Btu/h. A similar figure could be created for the equal to or greater than 65,000 Btu/h equipment class.

10-5Figure 10.2.2 P rojected Shipment

- Weighted EERs as a Function of Standard

Level for All Equipment Classes <65,000 Btu/h

10.3 NATIONAL ENERGY SAVI NGS

DOE calculated the national energy savings associated with the difference between the

base case and the case associated with each TSL for SPVUs

.

10.3.1 Approach

DOE calculated the national annual site energy savings (AES) by multiplying the number or stock of each equipment class (by vintage) by the delta unit energy consumption between a

base case and a standards case (UEC; also by vintage). DOE then calculated the national annual primary energy savings (NES) as a sum of the gas AES and the electric AES multiplied by a site

to -power plant conversion factor. The calculation s are represented by th e following equations.

AA AAAA yy = � SSSSSSSS
vv × ( UU

_ bb bbbbbb vv − UU

_ ss ss

vv ) 8 9 10 11 12 13

2012 2017 2022 2027 2032 2037 2042Shipment Weighted EER

Year

Base Case TSL1 TSL2 TSL3 TSL4 TSL5

10-6NN yy = � AAAAAA

_ ee ee yy × PPPPPP yy � + AAAAAA

_ gg yy

D OE defined the quantities for the above expressions as follows.

AE S

y = national annual site energy savings (gas or electric) in a given year; STOCK V = stock of equipment (units) of vintage V that survive in the year for which DOE calculated annual energy savings;

UEC V = annual unit energy consumption for a given vintage;

NES y = national annual primary energy savings in a given year;

PPF y = power plant primary energy use factor for annual electricity consumption for a given year;

V = year in which the unit was purchased new (vintage); and

y = year in the projection.

The stock of equipment depends on annual shipmen ts and the lifetime of the equipment.

As described in chapter 9, DOE assumed equipment shipments under the base case and standards cases would be equivalent

Cumulative energy savings are the sum of annual national primary energy savings throughout the forecast period, which extend s from th e assumed effective date of new standards (2015 or 2019) to the date at which all equipment shipped within 30 years of the effective date of new standards (through 2044 or 2048 ) are retired (2068 or 2072 ). The calculat ion is represented by the following equation

. 

# ∑

= y cumulative 

### NES NES

10.3.2 Inputs

The inputs to the calculation of national energy savings ( NES ) are:

• shipments;

• equipment stock ( STOCK );

• annual energy consumption per unit ( UE C);

• n ational annual energy savings ( A ES ); and

• power plant primary energy use factor.

10-710.3.2.1 Shipments

DOE projecte d shipments of each equipmen t class under the base case and all standards cases. DOE assumes that shipments are the same in all cases . T he method DOE used to ca lculate and generat e the shipments forecasts for each equipment clas s is described in detail in Chapter 9, Shipments Analysis.

10.3.2.2 Equipment Stock

The equipment stock in a given year is the number of units shipped from earlier years that

survive in th at year. The NIA model track s the number of units shipped each year . DOE assumes that units have an increasing probability of retiring as they age. The probability of survival as a function of years since purchase is the survival function. C hapter 9 provides additional details on

the survival function that DOE used

.

10.3.2.3 Annual Energy Consumption per Unit

DOE used the shipment- weighted EERs presented in section 10.2 for the base case and

standards cases

, along with the data on annual energy consumption presented i n chapters 7 and 8, to estimate the shipmen t- weighted average annual per -unit energy consumption under the base

and standards cases. The average annual per -unit electricity consumption projected for 2019 for each equipment class is shown in Table 10 .3.1, along with the additional gas use associated with

each TSL.

10-8Table 10.3.1 Shipment

- Weighted Average Annual Energy Consumption in 2019

Base

Case ASHRAE Trial Standard Level

1 2 3 4

SPVAC <65,000 Btu/h

SW EER 9.33 10.13 10.51 11.00 11.75 12.30

Electricity Use (kWh) 6

, 654 6

, 107 5

, 920 5

, 693 5

, 387 5

, 185

Additional Gas Use (MMBtu) 0.0166 0.0541 0.0541 0.0541 0.0541 0.0541

SPVHP <65,000 Btu/h

SW EER 9.33 10.13 10.51 11.00 11.75 12.30

Electricity Use (kWh) 20

, 740 20

, 261 19

, 917 19

, 628 18

, 775 18

, 633

Additional Gas Use (MMBtu) - - - - - -

SPVAC ≥65,000 Btu/h and <135,000 Btu/h

SW EER 9.22 10.00 10.00 10.00 10.00 10.00

Electricity Use (kWh) 13

, 312 12

, 251 12

, 251 12

, 251 12

, 251 12

, 251

Additional Gas Use (MMBtu) - - - - - -

10.3.2.4 National Annual Energy Savings

The national annual site energy savings (AE S ) is the product of the number of units of each vintage and the delta annual energy consumption per unit between the base case and the standards case, also by vintage. This method of calculation accounts for differences in unit

energy consumption from year to year. The equation for determining the national annual site

energy savings , which was presented in section 10.3.1, is repeated below

. Figure 10.3.1 shows an example of how electric AES changes over time , using one phase SPVACs less than 65,000

Btu/h at TSL 2.

AA AAAA yy = � SSSSSSSS
vv × ( UU

_ bb bbbbbb vv − UU

_ ss ss

vv )

10-9Figure 10.3.1 Annual site electric savings over time for one phase SPVACs less than 65,000 Btu/h (TSL 2)

In determining national annual primary energy savings, DOE first calculated national annual site energy savings for both electricity and gas, and then applied a conversion factor for electricity , described below, to calculate primary energy savings, as in the following equation.

NN yy = � AAAAAA

_ ee ee yy × PPPPPP yy � + AAAAAA

_ gg yy

10.3.2.5 Site

- to

- Power Plant Energy Use Factor

DOE calculate s primary energy savings (power plant consumption) by applying a factor to account for losses associated with the generation, transmission, and distribution of electr ici ty

. DOE derived annual average site

- to -power plant factors based on the version of the National Energy Modeling System (NEMS) that corresponds to EIA’s Annual Energy Outlook 2013 ( AEO

2013 ). 2 T he factors change over time in response to projected changes in the types of power plants projected to provid e electricity to the n ation . Figure 10.3.2 shows the site

- to -power plant

factors from 2016 to the end of the projection period. For years after 20 40 (the last year in the

AEO ), DOE held the value constant. 0.0 0.1 0.1 0.2 0.2 0.3 0.3 0.4 0.4

2019 2024 2029 2034 2039 2044 2049 2054 2059 2064 2069Annual Site Electricity Savings (Twh)

Year

10-10Figure 10.3.2 Site

- to

- Power P lant Energy Use Factor for SPVU

10.3.2.6 Full

- Fuel

- Cycle Energy

The full- fuel

- cycle (FFC) measure includes point -of- use (site) energy, the energy losses associated with generation, transmission, and distribution of electricity, and the energy consumed in extracting, processing, and transporting or distributing primary fuels. DOE’s traditional approach encompasses site energy and the energy losses associated with generation, transmission, and distribution of electricity. To complete the full

- fuel

- cycle by encompassing the energy consumed in extracting, processing, and transporting or distributing primary fuels, which

we refer to as “upstream” activities, DOE developed FFC multipliers using the data and projections generated by the National Energy Modeling System (NEMS) and published in AEO

2013 . The AEO provides extensive information about the energy system, including projections of future oil, natural gas and coal supply, energy use for oil and gas field and refinery operations, and fuel consumption and emissions related to electric power production. This inform ation can be used to define a set of parameters representing the energy intensity of energy production

. The method used to calculate FFC energy multipli ers is described in appendix 10 A.

Table 10.3.2 shows the FFC energy multipliers used for SPVU for selected years. The multipliers are applied to site energy. For years after 2040 (the last year in the AEO), DOE

maintained the 2040 value. 0.0076 0.0078 0.0080 0.0082 0.0084 0.0086 0.0088 0.0090 0.0092

2016 2021 2026 2031 2036 2041 2046 2051 2056 2061 2066Primary Energy (Quad)/Site TWh

Year

10-11Table 10.3.2 Upstream Energy M ultipliers (Based on AEO 2013)

Fuel 2015 2020 2 025 2030 2035 2040 Electricity 1.042 1.041 1.040 1.040 1.041 1.041

Natural Gas 1. 103 1.103 1.100 1.099 1.098 1.097

10.4 NET PRESENT VALUE

DOE calculated the net present value (NPV) of the increased equipment cost and reduced operating cost associated with the difference between the base case and each potential standards

case for the SPVU equipment classes

.

10.4.1 Approach

The NPV is the value in the present of a time-series of costs and savings. The NPV is described by the equation:

PVCPVS NPV

_ =

Where :

PVS = present value of savings in operating cost, and

PVC = present value of increased total equipment cost to customers.

DOE determined the PVS and PVC according to the following expressions.



# ∑

yy 

### DFOCS PVS ×=



# ∑

yy 

### DF TIC PVC ×=

Where:

OCS y = total annual savings in operating cost each year ; TIC y = total annual increases in equipment cost each year ;
DF y = discount factor in each year ; and

y = year in the forecast.

DOE calculated the total annual customer savings in o perating cost as a sum of: (1) the annual site electric savings multiplied by an electric price (for the given year); (2) the annual

additional gas use multiplied by a gas price (for the given year); and (3) the sum over all vintages of the product of the number or stock of a given equipment class (by vintage) and its per -unit repair and maintenance cost savings (also by vintage). DOE calculated the tota l annual increases in customer equipment cost by multiplying the number or shipments of the given equipment

10-12class ( for a given year ) by its per -unit increase in customer equipment co st ( for a given year ).

The calculation of total annual operating cost savings and total annual equipment cost increases

are represented by the following equations.

yy = ( AAAAAA

_ ee ee yy × yy ) + � AAAAAA

_ gg yy × GG yy � + � SS SSSSSS
vv × UUUUUU
vv

TT yy = SS yy × UU yy

W here:

EP y = electricity price for a given year;

GP y = gas price for a given year;

STOCK V = stock of equipment of vintage V that survive in the year for which DOE calculated annual energy consumption;

U

RM CS V = annual per -unit savings in repair and maintenance cost for stock of a given vintage;

SHIP y = annual shipments of equipment in a given year ; and

UTIC y = annual per -unit increase in installed equipmen t cost in a given year

.

DOE determined the total inc reased equipment cost for each year from the compliance

date of a potential standard to 2044 or 2048. DOE determined the present value of operating cost savings for each year from the effective date of the standard to the year when all units purchased by 2044 or 2048 have been retire d. DOE calculated costs and savings as the difference between a

standards case and a base case without new standards.

DOE develop ed a discount factor from the national discount rate and the number of years between the present ( i.e. , year to which the sum is being discounted) and the year in which the costs and savings occur. The NPV is the sum over time of the discounted net savings.

10.4.2 Inputs

The inputs to calculation of the net present value ( NPV ) are:

• a verage annual per -unit equipmen t cost;

• average annual per -unit operating cost;

• total annual increases in equipmen t cost;

• total annual savings in operating cost;

• discount factor;

• present value of costs; and

• present value of savings.

10-1310.4.2.1 Average Annual Per

- Unit Equipment Cost

T he average annual equipment cost is directly dependent on efficiency. DOE therefore

used the SW EER s presented in section 10.2 for the base case and each standards case, along

with the equipment cost s at various efficiency levels (presented in c hapter 8 ), to estimate the shipment- weighted average annual equipment cost under the base and standards cases

. Table

10.4.1 shows the shipment- weighted average customer equipment cost based on the SW EER s that correspond to the base case and each standards case in 2019. Note that installation cost does not change with efficiency, so these values reflect the equipment cost only and not the total

installed cost.

Table 10.4.1 Shipment

- Weighted Average Equipmen t Cost in 2019 for Base Case and

Trial Standards Level s

Base

Case ASHRAE Trial Standard Levels

1 2 3 4

SPVAC <65 ,000 Btu/h

SW EER 9.33 10.13 10.51 11.00 11.75 12.30

Equipment Cost 201 3 $ $3,126 $3,581 $3,688 $3,831 $4,293 $5,155

SPVHP <65,000 Btu/h

SW EER 9.33 10.13 10.51 11.00 11.75 12.30

Equipment Cost 201 3 $ $3,633 $4,155 $4,279 $4,443 $4,972 $5,958

SPVAC ≥65 ,000 Btu/h and <135,000 Btu/h

SW EER 9.22 10.00 10.00 10.00 10.00 10.00

Equipment Cost 201 3 $ $4,085 $4,653 $4,653 $4,653 $4,653 $4,653

As discussed in chapter 8, DOE used a constant price assumption for the default equipment cost forecast in the NIA. In order to investigate the impact of different equipmen t price forecasts on the customer net present value (NPV) for the considered efficiency levels for SPVUs, DOE also considered two alternative price trends. One of these used an exponential fit on the deflated price index for “ all other miscellaneous refrigeration and air -conditioning equipment”, and the other is based on the “chained price index — industrial equipment ” that was

forecasted for AEO201 3 . Details on how these alternative price trends were developed are in appendix 10B, which also presents the results of the sensitivity analysis.

10.4.2.2 Average Annual Per

- Unit Operating Cost

The average annual per- unit repair and maintenance cost is directly dependent on efficiency. DOE therefore used the SW EER s presented in section 10.2 for the base case and each standards case, along with the repair and maintenance costs at various efficiency levels ( presented in chap ter 8), to estimate the shipment- weighted average annual repair and

maintenance cost under the base and standards cases . As described in chapter 8, only repair costs

10-14actually increase with efficiency, but repair and maintenance costs are combined in the NI A.

Table 10.4.2 shows the shipment- weighted average customer repair and maintenance cost based

on the SW EER s that correspond to the base case and each standards c ase in 2019.

Table 10.4.2 Shipment

- Weighted Average Repair and Maintenance Cost in 2019 for Base

Case and Trial Standards Levels

Base

Case ASHRAE Trial Standard Level

1 2 3 4

SPVAC <65 ,000 Btu/h

SW EER 9.33 10.13 10.51 11.00 11.75 12.30

Repair & Maint . Cost 201 3 $ $470 $478 $480 $483 $491 $507

SPVHP <65,000 Btu/h

SW EER 9.33 10.13 10.51 11.00 11.75 12.30

Repair & Maint. Cost 201 3 $ $508 $517 $519 $521 $530 $546

SPVAC ≥65,000 Btu/h and <135,000 Btu/h

SW EER 9.22 10.00 10.00 10.00 10.00 10.00

Repair & Maint. Cost 201 3 $ $511 $522 $522 $522 $522 $522

DOE’s method of calculation does not produce per-unit energy cost, the other component of operating cost, but rather national annual energy cost savings are derived as discussed in

section 10.4.2.4.

10.4.2.3 Total Annual Increases in Equipmen t Cost

The total annual increase in equipmen t cost for any given standards case is the product of the average cost increase per unit due to the standard and the number of units shipped in a given

year . The equation for determining the total annual increase in equipment cost for a given

standards case , which was shown in section 10.4.1, is repeated here

.

TT yy = SS yy × UU yy

10.4.2.4 Total Annual Savings in Operating Cost

DOE calculated the tota l annual customer savings in operating cost as a sum of: (1) the national annual site electric savings m ultiplied by an electric price for the given year; (2) the national annual gas sav ings multiplied by a gas price for the given year; and (3) the sum ove r all vintages of the equipment of the number or stock of a given equipment class (by vintage) and its

per -unit repair and maintenance cost savings (also by vintage ). This method accounts for

differences in annual savings in operating c ost from year to year. As described in chapter 8, DOE projected energy prices based on EIA’s AEO 201 3

. For SPVUs , gas cost impacts ( small increases in gas usage associated with the standard ) are negative. The equation for determining the total

10-15annual savings in operating cost for a given standards case , which was presented in section 10.4.1, is repeated here

.

yy = ( AAAAAA

_ ee ee yy × yy ) + � AAAAAA

_ gg yy × GG yy � + � SS SSSSSS
vv × UUUUUU
vv

10.4.2.5 Discount Factor

DOE multiplie d monetary values in future yea rs by a discount factor to determine the present value. The discount factor (DF) is described by the equation:

)(

_ )1( 1

yp

y r DF

+ =

Where :

r

= discount rate,

y = year in which the monetary value exists , and

y

P

= year in which the present value is being determined.

Although DOE use s customer discount rates to determine the life

- cycle cost (chapter 8),

it uses national discount rates to calculate national NPV

. DOE estimated NPV using both a 3- percent and a 7- percent real discount rate

, in accordanc e with the Office of Management and Budget ’s guidance to Federal agencies on the development of regulatory analysis, particularly

section E therein: Identifying and Measuring Benefits and Costs

. 3 DOE defined the present year

as 2013.

10.4.2.6 Present Value of Costs

The present value of increased equipment costs is the annual total cost increase in each year (the difference between a standards case and the base case), discounted to the present and summed throughout the period in which DOE is co nsidering the installation of equipment ( that is, from the compliance date of standards, 2015 or 2019, to 2044 or 2048 ). DOE calculated

annual increases in installed cost as the difference in total equipmen t cost for new units purchased each year, multiplied by the shipments.

10.4.2.7 Present Value of Savings

The present value of savings in operating cost is the annual savings on operating cost (the

difference between the base case and a standards case) , discounted to the present and summed

from the effective date to the time when the last unit installed by 2044 or 2048 is retired from

service. Savings are decreases in energy cost less the increases in repair costs associated with the higher energy efficiency of products purchased in the stan dards c ase compared to the base case.

10-1610.5 RESULTS OF NES AND NPV CALCULATIONS

The N ational Impact Analysis (N IA ) model pro duces estimates of the NES and NPV

attributable to a given candidate standard level. The inputs to the NIA model were discussed in sections 10.3.2 (inputs to NES) and 10.4.2 (inputs to NPV ). DOE generated the NES and NPV results using a Microsoft Excel spreadsheet, which is accessible on the Internet

< http://energy.gov/eere/buildings/appliance- and -equipment-standards- program >. In addition, DOE calculated FFC energy savings using a separate spreadsheet.

10.5.1 Summary of Input s

Table 10.5.1 summarizes the inputs to the NIA model . A brief description of the data is provided for each input.

Table 10.5.1 Inputs to Calculati on of National Energy Savings and Net Present Value

Input Description
Shipments Annual shipments from shipments model . (Se e c hapter 9.)

Compliance date of standard 201 5 (ASHRAE) or 2019 (higher)

Base

- c ase f orecasted efficiencies See s ection 10.2.

Standards

- case efficiencies See s ection 10.2.

Annual e nergy consumption per unit Annual weighted

- average values are a function of the efficiency distribution . (See s ection 10.3.2.1.)

Total i nstalled cost per unit Annual weighted

- average values are a function of the efficiency distribution. Only equipment costs increase with efficiency level. (See s ection 10.4.2.1.)

Repair and m aintenance cost per unit Annual weighted

- average values are a function of the efficiency distribution. Only repair costs increase with efficiency level. (See chapter 8 for repair and maintenance

costs. )

Forecast of energy prices Energy prices : EIA AEO20 1 3 forecasts (to 20 40 ) and extrapolation thereafter . (See c hapter 8 )

. Average e nergy site

- to

- power plant

conversion factor A time

- series conversion factor that includes electric generation, transmission, and distribution losses. Conversion

, which changes yearly

, is based on AEO 201 3

. Discount rate s 3 % and 7 % real.

Present year Future costs and savings are discounted to 20 1 4

.

10.5.2 Results of National Energy Savings Calculations

The following sections provide NES calculation results for the efficiency levels analyzed for the considered equipment . NE S results , which are cumulative from 2015 or 2019 to 2068 or 2072 (the year in which all units shipped through 2044 or 2048 are retired)

, are primary energy

10-17savings. DOE based the inputs to the NIA model on weighted- average values, yielding results that are discrete point values, rather than a distribution of values as in the life

- cycle cost and payback period a nalys es. Table 10.5.2 shows the NES results for the TSLs analyzed for the five equipment classes

. Table 10.5.3 shows the FFC results for the TSLs analyzed for the five equipment classes. Although DOE does not set separate standards for one phase and three phase SPVUs, results are presented separately for these classes because of the difference in shipments, as shown in chapter 9.

Table 10.5.2 Cumulative National Primary Energy Savings for SPVU Trial Standard

Levels

Equipment Class ASHRAE Trial Standard Level

1 2 3 4 quads * SPVAC <65,000 Btu/h 1 Phase 0.10 0.04 0.09 0.15 0.16 SPVAC <65,000 Btu/h 3 Phase 0.04 0.02 0.04 0.07 0.07 SPVHP <65,000 Btu/h 1 Phase 0.05 0.02 0.07 0.10 0.11 SPVHP <65,000 Btu/h 3 Phase 0.02 0.01 0.03 0.05 0.05 SPVAC ≥65,000 Btu/h to <135,000 Btu/h 0.01

- - - - All Classes 0.22 0.09 0.22 0.36 0.39
* All energy savings from TSLs above the ASHRAE Standard 90.1

- 201 3 level are calculated with

those ASHRAE levels as a baseline.

Table 10.5.3 Cumulative National FFC Energy Savings for SPVU Trial Standard Levels

Equipment Class ASHRAE Trial Standard Level

1 2 3 4 quads * SPVAC <65,000 Btu/h 1 Phase 0.10 0.04 0.09 0.15 0.16 SPVAC <65,000 Btu/h 3 Phase 0.05 0.02 0.04 0.07 0.07 SPVHP <65,000 Btu/h 1 Phase 0.05 0.02 0.07 0.10 0.11 SPVHP <65,000 Btu/h 3 Phase 0.02 0.01 0.03 0.05 0.05
SPVAC ≥65,000 Btu/h to <135,000 Btu/h 0.01

- - - - All Classes 0.22 0.09 0.23 0.37 0.39
* All energy savings from TSLs above the ASHRAE Standard 90.1

- 201 3 level are calculated with

those ASHRAE levels as a baseline.

For informational purposes only, Table 10.5.4 and Table 10.5.5 show the primary and FFC energy savings for the TSLs analyzed compared to a base case including the current Federal

minimum standards (i.e., EPCA Baseline)

.

10-18Table 10.5.4 Cumulative National Primary Energy Savings for SPVU Trial Standard Levels ( EPCA Baseline )

Equipment Class ASHRAE Trial Standard Level

1 2 3 4 quads * SPVAC <65,000 Btu/h 1 Phase 0.10 0.14 0.19 0.25 0.26 SPVAC <65,000 Btu/h 3 Phase 0.04 0.06 0.09 0.11 0.12 SPVHP <65,000 Btu/h 1 Phase 0.05 0.07 0.12 0.15 0.16 SPVHP <65,000 Btu/h 3 Phase 0.02 0.03 0.05 0.07 0.07 SPVAC ≥65,000 Btu/h to <135,000 Btu/h 0.01 0.01 0.01 0.01 0.01

All Classes 0.22 0.32 0.45 0.59 0.62

Table 10.5.5 Cumulative National FFC Energy Savings for SPVU Trial Standard Levels ( EPCA Baseline )

Equipment Class ASHRAE Trial Standard Level

1 2 3 4 quads * SPVAC <65,000 Btu/h 1 Phase 0.10 0.14 0.19 0.25 0.27 SPVAC <65,000 Btu/h 3 Phase 0.05 0.06 0.09 0.11 0.12 SPVHP <65,000 Btu/h 1 Phase 0.05 0.08 0.12 0.16 0.16

SPVHP <65,000 Btu/h 3 Phase 0.02 0.04 0.06 0.07 0.07 SPVAC ≥65,000 Btu/h to <135,000 Btu/h 0.01 0.01 0.01 0.01 0.01

All Classes 0.22 0.33 0.46 0.60 0.63

10.5.3 Results of Net Present Value Calculations

This section provides net present value (NPV) calculation results for the potential efficiency standards for SPVU equipment classes. Results, which are cumulative, are shown as the discounted value of the savings in dollar terms. Results are provided for e ach potential efficiency standard. DOE based the inputs to the NIA model on weighted

- average values, yielding results that are discrete point values, rather than a distribution of values as in the life

cycle cost and payback period analysis. Table 10.5.6 presents the NPV associated with the potential standards for SPVUs . As with the NES results, NPV results are presented as a function

of equipment class and TSL. For informational purposes only, Table 10.5.7 presents the results compared to a base case including the current federal minimum standards (i.e., EPCA baseline).

10-19Table 10.5.6 Cumulative Net Present Value for SPVU Trial Standard Levels

Equipment Class Discount Rate (%) Trial Standard Level

1 2 3 4

billion 201 3 $
SPVAC <65,000

Btu/h 1 Phase 3 0.09 0.09 (0.44) (0.72)

7 0.03 0.01 (0.26) (0.45)
SPVAC <65,000

Btu/h 3 Phase 3 0.04 0.04 (0.20) (0.32)

7 0.01 0.00 (0.12) (0.20)
SPVHP <65,000

Btu/h 1 Phase 3 0.09 0.22 0.10 (0.04)

7 0.03 0.07 0.01 (0.08)
SPVHP <65,000

Btu/h 3 Phase 3 0.04 0.10 0.04 (0.02)

7 0.01 0.03 0.00 (0.04)
SPVAC ≥65,000 Btu/h to <135,000

Btu/h 3

- - - -

7

- - - -

All Classes 3 0.26 0.44 (0.50) (1.10)

7 0.09 0.11 (0.37) (0.78)

* All NPVs from TSLs above the ASHRAE Standard 90.1

- 201 3 level are calculated with those ASHRAE levels

as a baseline.

Table 10.5.7 Cumulative Net Present Value for SPVU Trial Standard Levels ( EPCA

Baseline )

Equipment Class Discount Rate (%) Trial Standard Level

1 2 3 4

billion 201 3 $
SPVAC <65,000

Btu/h 1 Phase 3 0.36 0.36 (0.18) (0.46)

7 0.09 0.07 (0.20) (0.39)
SPVAC <65,000

Btu/h 3 Phase 3 0.16 0.16 (0.08) (0.20)

7 0.04 0.03 (0.09) (0.18)
SPVHP <65,000

Btu/h 1 Phase 3 0.24 0.36 0.24 0.11

7 0.06 0.10 0.04 (0.05)
SPVHP <65,000

Btu/h 3 Phase 3 0.11 0.17 0.11 0.05

7 0.03 0.05 0.02 (0.02)
SPVAC ≥65,000 Btu/h to <135,000

Btu/h 3 0.02 0.02 0.02 0.02

7 0.01 0.01 0.01 0.01

All Classes 3 0.89 1.07 0.13 (0.48)

7 0.23 0.26 (0.22) (0.63)

10-2010.6 ANNUALIZED NATIONAL COSTS AND BENEFITS

The benefits and costs of the proposed standards for SPVUs can be expressed in terms of annualized values over the analysis period. The annualized monetary values are the sum of (1) the annualized national economic value of the benefits from operating equipment that meet the proposed standards (consisting primarily of operating cost savings from using less energy, minus increases in equipment purchase costs, which is another way of representing customer NPV), and (2) the monetary value of the benefits of emission reductions, including CO 2 emission

reductions. The emissions reductions for each TSL are described in chapter 1 3, and the derivation of the monetary value of the benefits of emission reductions is described in chapter 14

of this TSD. The value of the CO 2 reductions, otherwise known as the Social Cost of Carbon (SCC), is calculated using a range of values per metric ton of CO 2 developed by a recent interagency process. The derivation of the time series of SCC values is discussed in Appendix

14-A of this TSD.

Although combining the values of operating savings and CO 2 reductions provides a useful perspective, two issues should be considered. First, the national operating savings are

domestic U.S. customer monetary savings that occur as a result of market transactions while the

value of CO 2 reductions is based on a global value. Second, the assessments of operating cost savings and CO 2 savings are performed with different methods that use quite different time frames for analysis. The national operating cost savings is measured for the lifetime of equipment sh ipped in the 30-year analysis period. The SCC values, on the other hand, reflect the present value of future climate -related impacts resulting from the emission of one ton of carbon dioxide in each year. These impacts go well beyond 2100.

10.6.1 Calculation Metho d

DOE uses a two

- step calculation process to convert each time

- series of costs and benefits into annualized values. First, DOE calculates a present value in the “present” year used in discounting the NPV of total customer costs and savings. a For this calc ulation, DOE uses discount rates of three and seven percent for all costs and benefits except for the value of CO 2 reductions. For the latter, DOE uses the discount rate appropriate for each SCC time- series (see chapter 1 4 for discussion).

PPPP
xx = � ( xx ( )

∙ ( 1 + rr xx ) yy NPV − tt )

tt = yy 1 , yy T

Where:

xx ( ) = Time -series under evaluation,

PPPP
xx = Present value of the time

- series xx
,

a For the value of emissions reductions, DOE uses a time series tha t corresponds to the time period used in calculating the operating cost savings (i.e., through the final year in which products shipped are still operating).

10-21yy 1 = First year in the analysis period,

yy T = Last year in the analysis period,

yy NPV = Year to which the NPV of customer s’ costs and savings are being discounted,

rr xx = Discount rate used to discount the annual values of time- series xx to year

yy NPV

.

In the second step, DOE calculates, from the present values, the fixed annual payments

over a 30- year period, starting in the fir st year of the analysis period (i.e., the compliance year), which yields the same present values with discount rates of three and seven percent. This requires projecting the present values in the “present” year ahead to the compliance year. The fixed annual payments are the annualized values.

AAAAAA
xx

, rr = PPPP
xx ∙ ff yy 1 − yy NPV , rr ∙ 30

, rr = PPPP
xx ∙ ( 1 + rr ) yy 1 − yy NPV

∙ rr ∙ ( 1 + rr ) 30

( 1 + rr ) 30

− 1

Where:

AAAAAA
xx

, rr = Annualized value of the time- series xx
, ff

nn

, rr = Factor to project a value years ahead b with rr discount rate,

30

, rr = Factor to annualize present values over a 30-year period with rr discount

rate.

A lthough DOE calculates annualized values, this does not imply that the time- series of

cost and benefits from which the annualized values were dete rmined would be a steady stream of

payments.

10.6.2 Results for the Proposed Standards

The NOPR associated with this TSD states that DOE is proposing amended energy conservation standards that correspond to TSL 3. Estimates of annualized benefits and costs for the proposed standards are shown in Table 10.6.1

.

The Primary, Low Net Benefits, and High Net Benefits Estimates utilize forecasts of energy prices from the AEO20 13 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental equipment costs reflect no change in the Primary estimate, rising equipment prices in the Low Net Benefits estimate, and declining equipment prices in the High Net Benefits estimate.

b n is the number of years between the “present” year and the compliance year.

10-22Table 10.6.1 Annualized Benefits and Costs of Proposed Standards for SPVUs

Discount Rate Primary

Estimate* Low Net

Benefits

Estimate* High Net

Benefits

Estimate*

million 201 3 $/year

Benefits

Operating Cost Savings 7% 38 36 39

3% 58 55 61

CO 2 Reduction Monetized Value ($12.0/t case)** 5% 7.7 7.6 7.7

CO 2 Reduction Monetized Value ($40.5/t case)** 3% 29 28 29

CO 2 Reduction Monetized Value ($62.4/t case)** 2.5% 43 42 43

CO 2 Reduction Monetized Value $119/t case)** 3% 89 88 89

NO X Reduction at $2,684/ton** 7% 0.57 0.56 0.57

3% 0.97 0.97 0.98

Total Benefits† 7% plus CO 2
range 46 to 127 44 to 125 48 to 129

7% 67 65 69

3% plus CO 2
range 67 to 148 63 to 144 70 to 151

3% 88 84 91

Costs

Incremental Equipment Costs 7% 29 40 28

3% 37 53 36

Net Benefits/Costs

Total† 7% plus CO 2
range 17 to 98 4 to 85 19 to 101

7% 38 25 40

3% plus CO 2
range 30 to 111 11 to 91 34 to 115

3% 51 31 55

* This table presents the annualized costs and benefits associated with SPVUs shipped in 20 19 −20 48. These

results include benefits to consumers which accrue after 204 8 from the products purchased in 201 9- 204 8. Costs incurred by manufacturers, some of which may be incurred in prep aration for the rule, are not directly included, but are indirectly included as part of incremental equipment costs

. The Primary, Low Benefits, and High Benefits Estimates utilize projections of energy prices and building growth from the AEO 201 3

Referenc e case, Low Estimate, and High Estimate, respectively

. In addition, incremental equipment costs reflect constant real prices for the Primary Estimate, an increase for projected equipment price trends for the Low Benefits Estimate, and a decline for projec ted equipment price trends for the High Benefits Estimate

.

10-23** The CO 2 values represent global monetized values of the SCC, in 201 3 $, in 2015 under several scenarios. The values of $12.0, $40.5, and $62.4 per metric ton are the averages of SCC distribut ions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $119/t represents the 95 th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an

escalation factor. The va lue for NO X (in 2013$) is the average of the low and high values used in DOE’s analysis.

† Total benefits for both the 3

- percent and 7

- percent cases are derived using the series corresponding to SCC
value of $40.5/t. In the rows labeled “7% plus CO 2 rang e” and “3% plus CO 2 range,” the operating cost and

NO X benefits are calculated using the labeled discount rate, and those values are added to the full range of

CO 2 values.

10-24REFERENCES

1. U.S. Department of Energy. 2004. Technical Support Document: Energy Efficiency Program for Commercial and Industrial Equipment: Commercial Unitary Air Conditioners and Heat Pumps. Washington, D.C. www.regulat ions.gov/#!documentDetail;D=EERE-2006- STD -0103-0078

2. U.S. Department of Energy–Energy Information Administration. 2013. Annual Energy

Outlook 2013 . U.S. DOE –EIA: Washington, D.C. DOE/EIA-0383(2013 ).

3. Off ice of Management and Budget. OMB Circular A-4, Regulatory Analysis . 2003.

OMB: Washington, D.C. September 17, 2003. www.whitehouse.gov/omb/circulars_a004_a-4/

10-25