CHAPTER 11. NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

11.1 INTRODUCTION............................................................................................................. 11­1

11.1.1 General Approach .............................................................................................. 11­2

11.1.2 NES and NPV Input Summary .......................................................................... 11­3

11.2 NATIONAL ENERGY SAVINGS................................................................................... 11­4

11.2.1 NES Definition................................................................................................... 11­4

11.2.2 NES Inputs......................................................................................................... 11­5

11.2.2.1 Annual Unit Energy Consumption.................................................... 11­5

11.2.2.2 Shipments.......................................................................................... 11­8

11.2.2.3 Equipment Stock............................................................................... 11­8

11.2.2.4 National Annual Energy Consumption............................................. 11­9

11.2.2.5 Site­to­Source Conversion Factor..................................................... 11­9

11.3 NET PRESENT VALUE ................................................................................................ 11­10

11.3.1 Net Present Value Definition........................................................................... 11­10

11.3.2 Net Present Value Inputs ................................................................................. 11­11

11.3.2.1 Total Annual Installed Cost ............................................................ 11­11

11.3.2.2 Total Annual Operating Cost Savings ............................................ 11­12

11.3.2.3 Discount Factor............................................................................... 11­13

11.3.2.4 Present Value of Costs.................................................................... 11­14

11.3.2.5 Present Value of Savings................................................................ 11­14

11.4 NES AND NPV RESULTS............................................................................................. 11­14

11.4.1 National Energy Savings Results..................................................................... 11­14

11.4.2 Annual Costs and Savings ............................................................................... 11­16

11.4.3 Net Present Value Results................................................................................ 11­17

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LIST OF TABLES

Table 11.1.1 Summary of NES and NPV Model Inputs......................................................... 11­3

Table 11.2.1 Risk Premiums by Risk Class (j) in the NEMS Commercial Model................. 11­6

Table 11.2.2 Shipment­Weighted Market Shares by Efficiency Level for PTACs, Base

Case.................................................................................................................... 11­7

Table 11.2.3 Shipment­Weighted Market Shares by Efficiency Level for PTHPs, Base

Case.................................................................................................................... 11­7

Table 11.2.4 Annual Unit Energy Consumption by Efficiency Level.................................... 11­8

Table 11.2.5 Shipment­Weighted Average Annual Unit Energy Consumption by

Efficiency Level................................................................................................. 11­8

Table 11.2.6 Marginal Site­to­Source Conversion Factors (Btu/kWh) ................................ 11­10

Table 11.3.1 Average Total Installed Cost per Unit by Trial Standard Level (2006$) ........ 11­11

Table 11.3.2 Shipment­Weighted Average Total Installed Cost per Unit by Trial

Standard Level (2006$).................................................................................... 11­12

Table 11.3.3 Average Annual Repair Cost per Unit (2006$) ............................................... 11­13

Table 11.3.4 Average Annual Maintenance Cost per Unit (2006$) ..................................... 11­13

Table 11.4.1 Cumulative National Energy Savings for PTACs and PTHPs........................ 11­15

Table 11.4.2 Cumulative National Energy Savings for PTACs and PTHPs Based on

Seven­Percent Discount Rate........................................................................... 11­15

Table 11.4.3 Cumulative National Energy Savings for PTACs and PTHPs Based on

Three­Percent Discount Rate ........................................................................... 11­16

Table 11.4.4 Cumulative NPV Results Based on a Seven­Percent Discount Rate

(Billion 2006$)................................................................................................. 11­18

Table 11.4.5 Cumulative NPV Results based on a Three­Percent Discount Rate

(Billion 2006$)................................................................................................. 11­18

LIST OF FIGURES

Figure 11.4.1 National Annual Costs and Savings for Standard Size PTAC, 9,000 Btu/h

Cooling Capacity, TSL 1 ................................................................................. 11­17

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EERE-2007-BT-STD-0012 COMMENT 02
CHAPTER 11. NATIONAL IMPACT ANALYSIS

11.1 INTRODUCTION

The national impacts analysis evaluates the impact of a proposed standard from a national

perspective rather than from the customer perspective represented by the life­cycle cost (LCC)

(see Chapter 8 of this TSD). This chapter describes the U.S. Department of Energy (DOE)’s

methodology for estimating future national energy savings (NES) from amended energy

conservation standards for packaged terminal air conditioners (PTACs) and packaged terminal

heat pumps (PTHPs) as well as the national economic impact using the net present value (NPV)

metric. DOE determined both the NPV and NES for each trial standard level (TSL) that it

considered for all the equipment classes of PTAC and PTHP equipment. DOE considered up to

seven TSLs for each equipment class. The detailed discussion on the TSLs can be found in

Chapter 9 of this TSD.

For each TSL, DOE calculated the NPV, as well as the NES, as the difference between a

base case forecast (without amended standards) and the standards case (with amended

standards). The NES refers to cumulative energy savings from 2012 through 2042. The NPV

refers to cumulative monetary savings. DOE calculated net monetary savings in each year

relative to the base case as the difference between total operating cost savings and increases in

total installed cost. Cumulative savings are the sum of the annual NPV over the specified period.

DOE accounted for operating cost savings until 2062; that is, until all the equipment installed

through 2042 is retired.

Results of the national impact analysis (NIA) described here include: 1) national energy

consumption and savings, 2) monetary value of energy savings to the nation as a result of

standards, 3) increased total installed costs to the Nation as a result of standards, and 4) the net

present value of energy savings (i.e., the difference between the present monetary values of

energy savings and increased total installed costs).

To make the analysis more accessible and transparent to all stakeholders, DOE used an

MS Excel spreadsheet model to calculate the energy savings and the national economic costs and

savings from amended standards. The spreadsheet model is accessible on the Internet at

(http://www.eere.energy.gov/buildings/appliance_standards/commercial/packaged_ac_hp.html).

Details and instructions for using the spreadsheet are discussed in appendix F. A more detailed

set of results is available in appendix G.

Unlike the LCC analysis, the NES spreadsheet does not use distributions for inputs or

outputs. DOE examined sensitivities by applying different scenarios. DOE used the NES

spreadsheet to perform calculations of energy savings and NPV, using the annual energy

consumption and total installed cost data from the LCC analysis. DOE forecasted the energy

savings, energy cost savings, equipment costs, and NPV of benefits for each of equipment

classes from 2012 through 2042. The forecasts provided annual and cumulative values for all

four output parameters as described above.

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11.1.1 General Approach

Over time, in the standards case, equipment that is more efficient gradually replaces less

efficient equipment. This affects the calculation of both the NES and NPV, both of which are a

function of the total number of units in use and their efficiencies, and thus are dependent on

annual shipments and equipment lifetime, including changes in shipments and retirement rates in

response to changes in equipment costs due to standards. Both calculations start by using the

estimate of shipments, and the quantity of units in service, that are derived from the shipments

model.

With regard to estimating the NES, because more efficient PTACs and PTHPs gradually

replace less efficient ones, the energy per unit of capacity used by the PTACs and PTHPs in

service gradually decreases in the standards case relative to the base case. DOE calculated the

NES by subtracting energy use under a standards scenario from energy use in a base­case

scenario.

Unit energy savings for each equipment class are the same weighted­average values as

calculated in the LCC and PBP spreadsheet. To estimate the total energy savings for each TSL,

DOE first calculated the national site energy consumption (i.e., the energy directly consumed by

the units of equipment in operation) for PTACs or PTHPs for each year, beginning with the

expected effective date of the standards (2012), for the base case forecast and the standards case

forecast. Second, DOE determined the annual site energy savings, consisting of the difference in

site energy consumption between the base case and the standards case. Third, DOE converted

the annual site energy savings into the annual amount of energy saved at the source of electricity

generation (the source energy), using a site­to­source conversion factor. Finally, DOE summed

the annual source energy savings from 2012 to 2042 to calculate the total NES for that period.

DOE performed these calculations for each TSL considered in this rulemaking.

To estimate NPV, DOE calculated the net impact as the difference between total

operating cost savings (including electricity, repair, and maintenance cost savings) and increases

in total installed costs (which consists of MSP, sales taxes, distribution chain markups, and

installation cost). DOE calculated the NPV of each TSL over the life of the equipment, using the

following three steps. First, DOE determined the difference between the equipment costs under

the TSL case and the base case in order to obtain the net equipment cost increase resulting from

the TSL. Second, DOE determined the difference between the base case operating costs and the

TSL operating costs, in order to obtain the net operating cost savings from the TSL. Third, DOE

determined the difference between the net operating cost savings and the net equipment cost

increase in order to obtain the net savings (or expense) for each year. DOE then discounted the

annual net savings (or expenses) to the year 2008 for PTACs and PTHPs bought on or after 2012

and summed the discounted values to provide the NPV of a TSL. An NPV greater than zero

shows net savings (i.e., the TSL would reduce customer expenditures relative to the base case in

present value terms). An NPV that is less than zero indicates that the TSL would result in a net

increase in customer expenditures in present value terms.

Although voluntary energy efficiency programs may increase the share of energyefficient equipment prior to the implementation date of any new or amended energy conservation

standards, DOE was not able to obtain information that quantified how such programs affect

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equipment efficiencies on a national basis. Consequently, DOE did not explicitly incorporate the

impact of market­based voluntary energy efficiency programs into the shipment forecasts

detailed in Chapter 10 of this TSD.

11.1.2 NES and NPV Input Summary

The important inputs of national energy consumption for each PTAC and PTHP

equipment class include: 1) shipments of each equipment class, 2) existing stock of each

equipment class 3) national average energy consumption for each equipment class, and 4) site­tosource conversion factor to translate electricity consumption at the site of use into the amount of

energy that must be generated at the power plant (source) and then transmitted to the site where

it is consumed. Chapter 10 provides a detailed description of the shipments model that DOE

used to forecast future purchases of PTAC and PTHP equipment. Table 11.1.1 summarizes the

inputs to the NES spreadsheet model. For each input a brief description of the data source is

given.

Table 11.1.1 Summary of NES and NPV Model Inputs

Inputs Description

Shipments Annual shipments from shipments model (see Chapter 10 of the

TSD).

Effective Date of Standard September 2012

Base Case Efficiencies Distribution of base­case shipments by efficiency level.

Standard Case Efficiencies Distribution of shipments by efficiency level for each standards

case. Standards case annual shipment­weighted market shares

remain constant for base case and each standard level for all

efficiencies above the TSL. All other shipments are at the TSL

efficiency

Annual Energy Use per Unit Annual national weighted­average values are a function of

efficiency level (Chapter 7 of the TSD).

Total Installed Cost per Unit Annual weighted­average values are a function of efficiency

level (Chapter 8 of the TSD).

Repair Cost per Unit Annual weighted­average values increase with manufacturer’s

cost level (Chapter 8 of the TSD).

Maintenance Cost per Unit Annual weighted­average value equals $50 (Chapter 8 of the

TSD)

Escalation of Electricity Prices 2007 EIA AEO forecasts (to 2030) and extrapolation for beyond

2030 (Chapter 8 of the TSD).

Electricity Site­to­Source Conversion

Factor

Conversion factor varies yearly and is generated by EIA’s

NEMS* model. Includes the impact of electric generation,

transmission, and distribution losses.

Discount Rate 3 and 7 percent real.

Present Year Future costs are discounted to year 2008.

* Chapter 14 on the utility impact analysis provides more detail on NEMS.

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11.2 NATIONAL ENERGY SAVINGS

11.2.1 NES Definition

DOE calculates annual national energy savings for a given year (t) as the difference

between two scenarios: a base case (without new or amended standards) and a standards case

(with new or amended standards). Positive values of NES correspond to net annual energy

savings, i.e., annual national energy consumption (AEC) with standards is less than AEC in the

base case.

NESt =AEC base ­ AECstandard Eq. 11.1

Cumulative energy savings are the sum over a defined time period from the

implementation of a standard forward (from 2012 to 2042) of the annual national energy savings.

NES cum = ∑t NES t Eq. 11.2

DOE calculated the AEC by multiplying the number or stock of units of PTAC and

PTHP equipment (by vintage) by the unit energy consumption (also by vintage) as shown by the

following equation:

AEC = ∑v (STOCKV x UECV x src_convt) Eq. 11.3

For the above expressions, DOE defined the following quantities:

AEC = Annual national energy consumption each year in quads, summed over vintages

of PTAC and PTHP equipment stock, STOCKV,

NES = Annual national energy savings (in quads),

STOCKV = Stock of PTAC and PTHP equipment (millions of units) of vintage

V surviving in the year for which DOE calculated annual energy consumption,

Vintages range from 1 year to approximately 20 years, a function of an assumed 10­year

average lifetime for PTAC and PTHP equipment,

UECV = Annual unit energy consumption in kilowatt hours (kWh) of vintage V,

src_convt = Time­dependent conversion factor to convert from site energy (kWh) to

source energy (quads) (Btu/kWh),

V = Year in which the PTAC or PTHP equipment was purchased as a new unit,

t = Year in the forecast (e.g., 2012 to 2042).

The stock of PTAC and PTHP equipment is dependent on annual shipments and the

lifetime of the equipment. DOE believes that the shipment projections under the standards cases

could be lower than those in the base case projection, because the higher installed costs would

cause some customers to forego new equipment purchases. However, DOE has no sufficient

information that would allow a calculation of this effect. For the notice of proposed rulemaking

(NOPR), DOE estimated the total shipments assuming that the projections are the same in both

the base case and standards cases.

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11.2.2 NES Inputs

The inputs for the determination of NES are listed below:

• Annual unit energy consumption (kWh/year) (section 11.2.2.1)

• Shipments (section 11.2.2.2)

• Equipment stock (section 11.2.2.3)

• National annual energy consumption (section 11.2.2.4)

• Site­to­source conversion factor (section 11.2.2.5)

11.2.2.1 Annual Unit Energy Consumption

The annual unit energy consumption (UEC) is the site energy consumed by a PTAC or

PTHP unit per year. The UEC is directly tied to the efficiency of the unit. Thus, knowing the

efficiency of a PTAC or PTHP unit determines the corresponding annual energy consumption.

DOE estimated the annual unit energy consumption for each of PTAC and PTHP equipment

classes, as discussed in the energy use characterization analysis in Chapter 7. As described

below, DOE determined annual forecasted shipment­weighted average equipment efficiencies

that, in turn, enabled a determination of shipment­weighted annual energy consumption values.

First, DOE converted the 2005 PTAC and PTHP equipment shipments by equipment

class into market shares by equipment class, then adapted an economic model that employed a

cost­based method used in the Energy Information Administration (EIA)’s National Energy

Modeling System (NEMS) to estimate market shares for each equipment class by TSL.1 Then,

from those market shares and projections of shipments by equipment class, DOE extrapolated

future trends of PTAC and PTHP equipment efficiency both for a base case scenario (i.e.,

without new standards) and various standards case scenarios (i.e., with new standards). The

difference in equipment efficiency between the base case and standards cases was the basis for

determining the reduction in per­unit annual energy consumption that could result from new

standards.

The market share for each equipment class by TSL is defined as EFF_Level_Share(i,y),

for each equipment class y at TSL i. Because the average lifetime of each equipment class is

presumed to be the same, and because DOE had no information regarding future changes in

market shares between equipment classes, DOE assumed the market share for a particular

equipment class to be constant over time. DOE calculated the EFF_Level_Share(i,y) for each

TSL i using the following formula, based on the relative annualized cost of each TSL.

−v

⎛ r ⎞

IC × ⎜ j + OC ⎟ m (i, y)

⎝

⎜1− (1+ rj )

−n (i. y)

⎠

⎟

EFF _ Level _ Share(i, y) = ∑bj × −v Eq. 11.4

j=1 k ⎛ r ⎞

∑IC(i, y) × ⎜ j

−n + OC(i. y)

⎟

i=1 ⎜

⎝1− (1+ rj ) ⎟

⎠

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where

EFF_Level_Share(i,y) = the market share of equipment class y at TSL i,

IC(i, y) = installed costs of equipment class y at TSL i, i=1 to k.

OC(i,y) = annual operating cost (maintenance, repair, and energy cost) of equipment

class y at TSL i,

rj = private, risk­adjusted discount rate for risk class j. Derived by adding a “time

preference premium” to the risk­free real rate of return in the marketplace (4.39% longterm Treasury bond rate, minus the estimated long­term inflation rate of 2.2% = 2.19%)

bj = market share of equipment users with risk class j, j =1 to m,

v = risk penalty factor (also known as a measure of market heterogeneity)

n = equipment lifetime

The components for IC and OC came from the same inputs as the life­cycle cost analysis

(see Chapter 8, life­cycle cost and payback period analysis). The annualization factor

(rj/(1­(1+rj)

­n) converts installed cost into its annualized equivalent, so that market shares are

based on the relative annualized costs of each TSL, with (generally) higher annualized costs of

higher TSLs leading to lower relative market shares. This is consistent with the approaches used

in the EIA’s NEMS1 and in Canada’s CIMS model2a

. The calibration constants are the private

risk­based discount rates by risk class rj, taken from the NEMS commercial model as shown in

Table 11.2.1, the default value of v = 10, taken from the CIMS model, and the equipment lifetime

of 10 years.

Table 11.2.1 Risk Premiums by Risk Class (j) in the NEMS Commercial Model

Percentage of Users in Class Time Preference Premium Implied Real Discount Rate

1% 0.0% 2.14%

2% 13.6% 15.45%

10% 19.9% 21.61%

15% 30.9% 32.38%

20% 55.4% 56.35%

25% 152.9% 151.75%

27% 1000.0% 980.62%

100%

Source: EIA’s NEMS Commercial Model

Table 11.2.2 and Table 11.2.3 provide estimated base case shipment­weighted market

shares for each of the equipment classes of PTACs and PTHPs, respectively, proposed in this

rulemaking.

a The CIMS Model was originally known as the Canadian Integrated Modeling System, but as the model is now

being applied to other countries, the acronym is now used as its proper name.

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Table 11.2.2 Shipment­Weighted Market Shares by Efficiency Level for PTACs, Base

Case

Equipment Class

Cooling

Capacity

Shipment­Weighted Market Shares by Efficiency Level*

Baseline

(ASHRAE

90.1­1999)

TSL

1,2,4 TSL 3 TSL 5 TSL 6

TSL 7

(Max

Tech)

Standard Size PTAC ≤ 10,000 Btu/h 19.2% 18.0% 17.2% 16.4% 15.6% 13.5%

> 10,000 Btu/h 19.9% 18.5% 17.5% 16.5% 15.5% 12.1%

Non­Standard Size

PTAC All Capacity 19.8% 18.6% 17.8% 16.9% 14.4% 12.5%

* Shares may not add to 100% exactly due to rounding.

Table 11.2.3 Shipment­Weighted Market Shares by Efficiency Level for PTHPs, Base

Case

Equipment Class

Cooling

Capacity

Shipment­Weighted Market Shares by Efficiency Level*

Baseline

(ASHRAE

90.1­1999) TSL 1 TSL 2,3 TSL4,5 TSL 6

TSL 7

(Max

Tech)

Standard Size PTHP ≤ 10,000 Btu/h 18.8% 17.5% 17.0% 16.5% 15.8% 14.4%

> 10,000 Btu/h 19.8% 18.1% 17.5% 16.7% 15.8% 12.1%

Non­Standard Size

PTHP All Capacity 19.1% 18.5% 17.8% 17.2% 14.9% 12.4%

* Shares may not add to 100% exactly due to rounding.

To project changes in weighted average TSLs as amended standards above baseline

efficiency level (i.e., ASHRAE/IESNA Standard 90.1­1999)b are introduced, DOE assumed that

market shares above the minimum permitted efficiency level would be reassigned to the new

minimum level (i.e., the amended standard). This is called a “roll­up” scenario. For example, if

TSL 3 was imposed as the new standard in 2012 on standard size PTAC with a cooling capacity

of 9,000 British thermal units per hours (Btu/h) equipment, then the market shares for baseline

efficiency level, TSL 1 and TSL 2 would be assigned to TSL 3, which would result in a total

market share of 54.4 percent, i.e., by adding 19.2 percent, 18.0 percent, and 17.2 percent from

the first three columns of the first row in Table 11.2.2, beginning in 2012. The market shares for

TSL 5, 6 and 7 would not be affected because the market already has a choice of that equipment

with TSL 3 also available. DOE, thus, assumed that the new standard would not affect the

relative attractiveness of equipment with efficiencies higher than the standard.

As stated earlier, annual energy consumption values are tied directly to the efficiency of

the equipment. Table 11.2.4 provides weighted­average annual energy consumption values for

specific TSLs for all six representative cooling capacities of PTACs and PTHPs.

b ASHRAE/IESNA Standard 90.1­1999 stands for the American Society of Heating, Refrigerating, and AirConditioning Engineers, Inc. (ASHRAE) and the Illuminating Engineering Society of North America (IESNA)

Standard 90.1­1999, “Energy Standard for Buildings Except Low­Rise Residential Buildings” (ASHRAE/IESNA

Standard 90.1­1999).

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Table 11.2.4 Annual Unit Energy Consumption by Efficiency Level

Equipment

Class

Representative

Cooling

Capacity

Annual unit energy consumption (kWh/year/unit)

Baseline

(ASHRAE

90.1­1999)

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6

TSL 7

(Max

Tech)

Standard 9,000 Btu/h 1,045 1,026 1,026 1,013 1,026 1,001 990 962

Size PTAC 12,000 Btu/h 1,317 1,294 1,294 1,279 1,294 1,264 1,251 1,206

Standard 9,000 Btu/h 2,063 2,013 1,984 1,984 1,957 1,957 1,945 1,890

Size PTHP 12,000 Btu/h 2,467 2,406 2,370 2,370 2,356 2,356 2,343 2,250

NonStandard

Size PTAC

11,000 Btu/h 1,658 1,584 1,584 1,559 1,584 1,536 1,487 1,456

NonStandard

Size PTHP

11,000 Btu/h 2,661 2,533 2,508 2,508 2,465 2,465 2,416 2,373

For the annual shipment­weighted efficiency levels specified in the base case and

standards case efficiency scenarios, DOE calculated the shipment­weighted UEC values in Table

11.2.5. For each equipment class, the value shown for a given TSL is the efficiency weighted

average annual unit energy consumption, after taking into account the non­availability of

equipment at the TSL shown below.

Table 11.2.5 Shipment­Weighted Average Annual Unit Energy Consumption by

Efficiency Level

Equipment

Class

Representative

Cooling

Capacity

Shipment­weighted average annual unit energy consumption

(kWh/year/unit)

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6

TSL 7

(Max

Tech)

Standard 9,000 Btu/h 1,005 1,005 1,001 1,005 994 986 962

Size PTAC 12,000 Btu/h 1,269 1,269 1,263 1,269 1,255 1,245 1,206

Standard 9,000 Btu/h 1,971 1,960 1,960 1,946 1,946 1,938 1,890

Size PTHP 12,000 Btu/h 2,362 2,349 2,349 2,341 2,341 2,331 2,250

NonStandard

Size PTAC

11,000 Btu/h 1,541 1,541 1,532 1,541 1,519 1,483 1,456

NonStandard

Size PTHP

11,000 Btu/h 2,479 2,470 2,470 2,446 2,446 2,411 2,373

11.2.2.2 Shipments

DOE forecasted shipments for the base case and all standards cases (see Chapter 10,

shipment analysis).

11.2.2.3 Equipment Stock

In a given year, PTAC and PTHP equipment stock is the total units of PTAC and PTHP

equipment shipped from earlier years which survive in that year. The NES spreadsheet model

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EERE-2007-BT-STD-0012 COMMENT 02
keeps track of the total number of PTAC and PTHP units shipped each year. For purposes of the

NES and NPV analyses, DOE assumed that approximately 10 percent of the existing PTAC and

PTHP units are retired in each year (based on a 10­year average lifetime) and that for units

shipped in 2042, any units still remaining at the end of 2052 will be replaced. DOE assumed that

the existing PTAC and PTHP units are retired by following a Weibull distribution with an

average lifetime of 10 years. The Weibull distribution shows that approximately 8 percent of the

existing PTAC and PTHP units are retired from 2012 to 2019 (i.e. by year 7), then tail off

gradually to less than one percent per year by year 20. Retired units are replaced until 2042. For

units shipped in 2042, any units still remaining at the end of 2062 are replaced.

11.2.2.4 National Annual Energy Consumption

The national AEC is the product of the annual UEC and the stocks of PTAC and PTHP

units of each vintage. This approach accounts for differences in unit energy consumption from

year to year. Equation 11.3 above was used for determining the national annual energy

consumption of PTAC and PTHP equipment.

In determining AEC, DOE initially calculated the annual energy consumption at the site

(i.e., electricity in kWh consumed by the PTAC and PTHP unit). DOE then calculated primary

energy consumption converted from site energy consumption by applying a marginal site­tosource conversion factor to account for losses associated with the generation, transmission, and

distribution of electricity.

11.2.2.5 Site­to­Source Conversion Factor

The site­to­source conversion factor is the multiplier used for converting site energy

consumption, expressed in kWh, into primary or source energy consumption, expressed in quads.

The site­to­source conversion factor accounts for losses in electricity generation, transmission,

and distribution. DOE used annual site­to­source marginal conversion factors based on a

detailed analysis contained in appendix H. Theses factors take into account the fact that energy

savings that would occur as a result of adopting more efficient equipment standard for PTACs

and PTHPs would be most likely to reduce demand for energy from power plants used for

peaking power and load following, and which have heat rates lower than the U.S. average values.

As shown in Table 11.2.6, the conversion factors vary over time, due to projected changes in

electricity generation sources (i.e., the power plant types projected to provide electricity to the

country). Detailed discussion on calculations of marginal site­to­source conversion factors can

be found in appendix H.

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Table 11.2.6 Marginal Site­to­Source Conversion Factors (Btu/kWh)

Year PTACs Year PTHPs

2012 13,661 2012 14,213

2013 13,661 2013 14,213

2014 12,840 2014 13,391

2015 13,353 2015 13,050

2016 12,730 2016 11,716

2017 11,298 2017 10,190

2018 10,276 2018 9,366

2019 9,877 2019 9,641

2020 9,513 2020 8,975

2021 8,892 2021 8,596

2022 8,502 2022 9,212

2023 8,371 2023 9,567

2024 8,344 2024 9,723

2025 7,996 2025 9,141

2026 7,576 2026 8,618

2027 7,023 2027 8,146

2028 6,381 2028 7,665

2029 6,079 2029 7,442

2030­2042 6,079 2030­2042 7,442

11.3 NET PRESENT VALUE

11.3.1 Net Present Value Definition

The NPV is the value in the present of a time series of costs and savings. The NPV is

given by the equation:

NPV = PVS – PVC Eq. 11.5

where

PVS = present value of operating cost savings (including energy, repair, and maintenance

costs),

PVC = present value of increased total installed costs (including equipment and

installation).

The PVS and PVC are determined according to the following expressions:

PVS = ∑t OCS t x DF t Eq. 11.6

PVC =∑t TICt x DF t Eq. 11.7

where:

OCS = total annual operating cost savings,

TIC = total annual installed cost increases,

DF = discount factor,

t = year (PVS is summed over 2012­2062, and PVC is summed over 2012­2062).

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EERE-2007-BT-STD-0012 COMMENT 02
DOE determined the contribution to PVC for each year, from the effective date of the

amended standard (year 2012) to the year 2062, discounted for the NOPR analysis, to the year

2008. All dollar values are reported in constant 2006 dollars. The contribution to PVS was

calculated for each year, from the effective date of the same amended standard (year 2012) to the

year when units purchased in 2042 retire (assumed to be 2062). DOE calculated costs and

savings as the difference between a standards case (i.e., with an amended standard) and a base

case (i.e., without new standards). DOE calculated a discount factor from the 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 net present value is the sum over time of the

discounted net savings, which is equivalent to the approach shown in Eq. 11.5 to Eq. 11.7.

11.3.2 Net Present Value Inputs

The inputs to the NPV calculation are listed below:

• Total Annual Installed Cost (section 11.3.2.1)

• Total Annual Operating Cost Savings (section 11.3.2.2)

• Discount Factor (section 11.3.2.3)

• Present Value of Costs (section 11.3.2.4)

• Present Value of Savings (section 11.3.2.5)

11.3.2.1 Total Annual Installed Cost

The increase in the total annual installed cost is equal to the annual change in the per­unit

total installed cost (difference between base case and standards case) multiplied by the shipments

forecasted in the standard case. The total installed cost includes both the equipment cost and the

installation price. DOE based average equipment costs on average manufacturer selling prices

multiplied by average overall markup values (see Chapter 8, life­cycle cost and payback period

analyses). DOE based average installation prices on nationally representative values for each

equipment class (see Chapter 8). Table 11.3.1 shows the resulting average total installed costs

per unit for each of the equipment classes of PTAC and PTHP equipment by TSLs.

Table 11.3.1 Average Total Installed Cost per Unit by Trial Standard Level (2006$)

Representativ

Average Total Installed Cost per Unit (2006$)

Baseline TSL 7

Equipment e Cooling (ASHRAE TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 (Max

Class Capacity 90.1­1999) Tech)

Standard Size 9,000 Btu/h $1,118 $1,128 $1,128 $1,136 $1,128 $1,144 $1,152 $1,175

PTAC 12,000 Btu/h $1,326 $1,340 $1,340 $1,350 $1,340 $1,361 $1,373 $1,420

Standard Size 9,000 Btu/h $1,234 $1,251 $1,259 $1,259 $1,267 $1,267 $1,275 $1,298

PTHP 12,000 Btu/h $1,439 $1,462 $1,472 $1,472 $1,483 $1,483 $1,495 $1,557

Non­Standard

Size PTAC 11,000 Btu/h $1,441 $1,461 $1,461 $1,471 $1,461 $1,483 $1,518 $1,548

Non­Standard

Size PTHP 11,000 Btu/h $1,563 $1,584 $1,595 $1,595 $1,607 $1,607 $1,641 $1,641

11­11

EERE-2007-BT-STD-0012 COMMENT 02
DOE developed base case and standards case energy efficiency scenarios as discussed in

section 11.2.2.1. For both the base case and standards case energy efficiency scenarios, DOE

calculated annual shipment­weighted average efficiencies. Associated with each annual

shipment­weighted average efficiency value, DOE assigned a total installed cost, based on

shipment­weighted total installed cost for all TSLs. DOE based the relationship between

efficiency and total installed cost for each PTAC and PTHP equipment class on the data in Table

11.3.2. As shown in Table 11.3.2, DOE estimated the shipments­weighted installed cost. DOE

determined forecasted average shipments­weighted total installed costs based on the annual

shipments by TSL.

Table 11.3.2 Shipment­Weighted Average Total Installed Cost per Unit by Trial Standard

Level (2006$)

Equipment

Class

Representative

Cooling

Capacity

Shipment­Weighted Average Total Installed Cost per Unit (2006$)

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6

TSL 7

(Max

Tech)

Standard 9,000 Btu/h $1,142 $1,142 $1,145 $1,142 $1,149 $1,155 $1,175

Size PTAC 12,000 Btu/h $1,360 $1,360 $1,364 $1,360 $1,370 $1,379 $1,420

Standard 9,000 Btu/h $1,266 $1,268 $1,268 $1,273 $1,273 $1,278 $1,298

Size PTHP 12,000 Btu/h $1,484 $1,488 $1,488 $1,494 $1,494 $1,503 $1,557

NonStandard

Size PTAC

11,000 Btu/h $1,485 $1,485 $1,489 $1,485 $1,496 $1,522 $1,548

NonStandard

Size PTHP

11,000 Btu/h $1,606 $1,610 $1,610 $1,616 $1,616 $1,641 $1,641

11.3.2.2 Total Annual Operating Cost Savings

The annual operating cost savings to the Nation are equal to the change in the annual

operating costs (difference between base case and standards case) per unit multiplied by the

shipments forecasted in the standards case. The annual operating cost includes electricity, repair,

and maintenance costs.

Annual Electricity Cost Savings. As described in Chapter 8, DOE calculated annual

electricity costs based on average State­level commercial electricity prices. To calculate annual

energy cost savings for a particular equipment class in a given year, DOE first calculated the

annual energy costs in each forecast year at each TSL from Table 11.2.5 multiplied by 1) the

units of surviving equipment stock in the equipment class in each year, and then 2) by the salesweighted national average electricity prices for the four business types in Chapter 8. To

determine energy cost savings, the national energy costs at each TSL were then subtracted from

the national energy costs at the baseline level.

Annual Repair Costs. DOE based average annual repair costs on the value of the PTAC

and PTHP equipment (see Chapter 8). Table 11.3.3 shows the average per­unit repair costs for

each of the equipment classes of PTACs and PTHPs. The NES spreadsheet provides the

capability to allow repair costs to differ by the price of the PTAC and PTHP equipment, and

therefore by TSL. For the purposes of this NOPR analysis, DOE assumed the repair costs to

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EERE-2007-BT-STD-0012 COMMENT 02
increase in each equipment class as the manufacturer selling price increases, as shown in Table

11.3.3.

Table 11.3.3 Average Annual Repair Cost per Unit (2006$)

Representative

Average Annual Repair Cost per Unit (2006$)

Baseline TSL 7

Equipment Cooling (ASHRAE TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 (Max

Class Capacity 90.1­1999) Tech)

Standard 9,000 Btu/h $15.25 $15.52 $15.52 $15.71 $15.52 $15.92 $16.13 $16.70

Size PTAC 12,000 Btu/h $15.25 $15.56 $15.56 $15.78 $15.56 $16.02 $16.28 $17.29

Standard 9,000 Btu/h $15.25 $15.64 $15.81 $15.81 $15.99 $15.99 $16.18 $16.69

Size PTHP 12,000 Btu/h $15.25 $15.70 $15.90 $15.90 $16.12 $16.12 $16.35 $17.56

NonStandard 11,000 Btu/h $15.25 $15.63 $15.63 $15.84 $15.63 $16.07 $16.74 $17.32

Size PTAC

NonStandard 11,000 Btu/h $15.25 $15.63 $15.81 $15.81 $16.02 $16.02 $16.63 $17.39

Size PTHP

Annual Maintenance Costs. DOE was unable to locate any data on annual preventive

maintenance cost (see Chapter 8), but annual maintenance is believed to be a relatively simple

and inexpensive process for PTAC and PTHP equipment. An annual value of $50 per unit was

assigned to all equipment. Table 11.3.4 shows the resulting annual maintenance costs per unit,

which does not vary with TSL.

Table 11.3.4 Average Annual Maintenance Cost per Unit (2006$)

Equipment Classes Cost per Unit ($2006)

Standard Size PTAC $50

Standard Size PTHP $50

Non­Standard Size PTAC $50

Non­Standard Size PTHP $50

11.3.2.3 Discount Factor

DOE determined present value of monetary values in future years using the discount

factor. The discount factor DF is described by the equation:

1 DF = t−tp Eq. 11.8

(1+ r)

where:

r = discount rate,

t = year the monetary value is accrued,

tP = year in which the present value is being determined.

DOE estimated national impacts with both a three percent and a seven percent real

(adjusted for inflation) discount rate as the average real rate of return on private investment in the

U.S. economy. These discount rates are used in accordance with the Office of Management and

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EERE-2007-BT-STD-0012 COMMENT 02
Budget (OMB)’s guidance to Federal agencies on the development of regulatory analysis (OMB

Circular A­4, September 17, 2003), and section E., “Identifying and Measuring Benefits and

Costs,” therein. DOE defined the present year as 2008 for the NOPR analysis.

11.3.2.4 Present Value of Costs

The present value of increased installed costs is the annual installed cost increase in each

year (i.e., the difference between the standards case and base case), discounted to the present,

and summed for the time period over which DOE is considering the installation of PTAC and

PTHP equipment (i.e., from the effective date of standards, 2012, to the year 2042, the last year

in which installations occur).

The increase in total installed cost refers to both equipment cost and installation cost

associated with the higher energy efficiency of PTAC and PTHP units purchased in the standards

case compared to the base case. DOE calculated the difference in installed cost as the difference

in between total installed costs with and without the standard case scenarios. Total installed cost

in each case was calculated as the unit installed costs of equipment at each TSL, times the

number of units of each TSL shipped in each year with and without the standard.

11.3.2.5 Present Value of Savings

The present value of operating cost savings is the annual operating cost savings (i.e., the

difference between the base case and standards case) discounted to the year 2008, the year of the

publication of the NOPR for this rulemaking, and summed over the period from the effective

date, 2012, to the time when the last unit installed in 2042 is retired from service (assumed to be

2062). Savings are decreases in operating costs (including electricity, repair, and maintenance

costs) associated with the higher energy efficiency of PTAC and PTHP units purchased in the

standards case compared to the base case. Total annual operating cost savings is the savings per

unit multiplied by the number of units of each vintage surviving in a particular year. Equipment

consumes energy over its entire lifetime, and for units purchased in 2042, the PVS includes the

cost of energy consumed until the unit is retired from service.

11.4 NES AND NPV RESULTS

The NES spreadsheet model provides estimates of the NES and NPV due to various trial

standard levels. The inputs to the NES spreadsheet have been discussed earlier in sections 11.2.2

(NES Inputs) and 11.3.2 (NPV Inputs).

11.4.1 National Energy Savings Results

The following section provides NES results for each energy consumption level

considered for the four equipment classes of packaged terminal air conditioner and heat pumps.

Results are cumulative to 2042 and are shown as primary energy savings in quads. Inputs to the

NES spreadsheet model are based on weighted­average values, yielding results which are

discrete point values, rather than a distribution of values as in the life­cycle cost (LCC) analysis.

Table 11.4.1 shows the NES results for the trial standard levels analyzed for each

equipment class of PTACs and PTHPs. DOE based all the results on electricity price forecasts

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EERE-2007-BT-STD-0012 COMMENT 02
from the 2007 EIA Annual Energy Outlook (AEO2007) Reference Case. In addition, Table

11.4.2 and Table 11.4.3 also show the magnitude of the energy savings if the savings are

discounted at rates of 7 percent and 3 percent, respectively.

DOE reports both undiscounted and discounted values of energy savings. There is

evidence that each TSL that is more stringent than the corresponding level in ASHRAE/IESNA

Standard 90.1­1999 results in additional energy savings, ranging from 0.008 quads to 0.086

quads for TSLs 1 through 7.

Table 11.4.1 Cumulative National Energy Savings for PTACs and PTHPs

Equipment Class

Cumulative Energy Savings (2012­2042) (quads)

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7

Standard Size

PTAC 0.002 0.002 0.005 0.002 0.009 0.013 0.029

Standard Size

PTHP 0.005 0.010 0.010 0.015 0.015 0.018 0.047

Non­Standard

Size PTAC 0.001 0.001 0.001 0.001 0.002 0.003 0.004

Non­Standard

Size PTHP 0.001 0.001 0.001 0.002 0.002 0.004 0.005

Total 0.008 0.014 0.017 0.019 0.027 0.038 0.086

Table 11.4.2 Cumulative National Energy Savings for PTACs and PTHPs Based on

Seven­Percent Discount Rate

Equipment Class

Cumulative Energy Savings (2012­2042) (quads)

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7

Standard Size

PTAC 0.001 0.001 0.001 0.001 0.002 0.004 0.008

Standard Size

PTHP 0.001 0.003 0.003 0.004 0.004 0.005 0.012

Non­Standard

Size PTAC 0.000 0.000 0.000 0.000 0.000 0.001 0.001

Non­Standard

Size PTHP 0.000 0.000 0.000 0.001 0.001 0.001 0.001

Total 0.002 0.004 0.004 0.005 0.007 0.010 0.023

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EERE-2007-BT-STD-0012 COMMENT 02
Table 11.4.3 Cumulative National Energy Savings for PTACs and PTHPs Based on

Three­Percent Discount Rate

Equipment Class

Cumulative Energy Savings (2012­2042) (quads)

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7

Standard Size

PTAC 0.001 0.001 0.003 0.001 0.005 0.007 0.016

Standard Size

PTHP 0.003 0.005 0.005 0.008 0.008 0.010 0.025

Non­Standard

Size PTAC 0.000 0.000 0.001 0.000 0.001 0.002 0.002

Non­Standard

Size PTHP 0.000 0.001 0.001 0.001 0.001 0.002 0.003

Total 0.005 0.008 0.009 0.010 0.014 0.021 0.046

11.4.2 Annual Costs and Savings

As a prelude to providing the NPVs for each trial standard level in each equipment class,

this section presents the annual equipment cost (or total installed cost) increases and annual

operating cost savings at the national level.

Figure 11.4.1 shows the changes over time of the non­discounted annual equipment price

increases and the non­discounted operating cost savings at TSL 1 for standard size PTAC with a

cooling capacity of 9,000 Btu/h. The total net annual impact is the discounted value of the

difference between annual equipment purchases and annual operating costs at a seven percent

discount rate. Appendix G shows comparable figures for other TSLs and other equipment

classes. The annual equipment price change is the increase in equipment price for equipment

purchased each year over the period 2012–2042. The annual operating cost savings is the

savings in operating costs for equipment purchased, and which have not been retired, for each

year over the time period 2012­2062. DOE determined the annual costs and savings presented in

each figure based on the AEO2007 Reference Case. The NPV is the difference between the

cumulative annual discounted savings and the cumulative annual discounted costs.

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EERE-2007-BT-STD-0012 COMMENT 02
Net Savings

­0.0004

­0.0003

­0.0002

­0.0001

0.0000

0.0001

0.0002

0.0003

0.0004

0.0005

2012 2016 2020 2024 2028 2032 2036 2040 2044 2048 2052 2056 2060

Year

Billion 2006$

Undiscounted Total Annual Operating Savings

Undiscounted Annual Equipment Purchase Savings

Discounted Total Net Annual Impact

Figure 11.4.1 National Annual Costs and Savings for Standard Size PTAC, 9,000 Btu/h

Cooling Capacity, TSL 1

Figure 11.4.1 initially shows smaller annual operating cost savings compared to the

increased equipment price costs (shown on the figure as operating savings). For all trial standard

levels, operating cost savings increase with time through 2042, as more and more equipment

meeting the efficiency standard comprises the packaged terminal air conditioner and heat pump

stock. The savings then decrease as the equipment retires and is not replaced.

11.4.3 Net Present Value Results

The following section provides NPV results for the trial standard levels considered for

the equipment classes of PTACs and PTHPs. Results are cumulative and are shown as the

discounted value of these savings in dollar terms. The present value of increased total installed

costs is the total installed cost increase (i.e., the difference between the trial standard case and

base case), discounted to 2008, and summed over the time period in which DOE evaluates the

impact of standards (i.e., from the effective date of standards, 2012, to the year 2062).

Table 11.4.4 shows the NPV results for the TSLs considered for PTAC and PTHPs based

upon a seven percent discount rate. DOE based all results on electricity price forecasts from the

AEO2007 Reference Case. Detailed results showing the breakdown of the NPV into national

equipment costs and national operating costs are provided in appendix G.

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EERE-2007-BT-STD-0012 COMMENT 02
Table 11.4.4 Cumulative NPV Results Based on a Seven­Percent Discount Rate

(Billion 2006$)

Equipment Class

Cumulative NPV – 7% Discount Rate (billion 2006$)*

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7

Standard Size

PTAC ($0.001) ($0.001) ($0.003) ($0.001) ($0.009) ($0.018) ($0.068)

Standard Size

PTHP $0.004 $0.011 $0.011 $0.012 $0.012 $0.006 ($0.005)

Non­Standard

Size PTAC $0.001 $0.001 $0.002 $0.001 $0.003 $0.003 $0.003

Non­Standard

Size PTHP $0.002 $0.003 $0.003 $0.004 $0.004 $0.005 $0.004

Total $0.007 $0.014 $0.013 $0.017 $0.010 ($0.004) ($0.067)

* Values in parentheses indicate negative NPV.

Table 11.4.5 provides the NPV results based on the three percent discount rate and

electricity price forecasts from the AEO2007 Reference Case. As with the NPV results based

upon a seven percent discount rate, detailed results showing the breakdown of the NPV into

national equipment costs and national operating costs based upon a three percent discount rate

are provided in appendix G.

Table 11.4.5 Cumulative NPV Results based on a Three­Percent Discount Rate

(Billion 2006$)

Equipment Class

Cumulative NPV – 3% Discount Rate (billion 2006$)*

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7

Standard Size

PTAC $0.002 $0.002 $0.001 $0.002 ($0.003) ($0.013) ($0.085)

Standard Size

PTHP $0.015 $0.036 $0.036 $0.044 $0.044 $0.037 $0.058

Non­Standard

Size PTAC $0.004 $0.004 $0.006 $0.004 $0.008 $0.013 $0.014

Non­Standard

Size PTHP $0.006 $0.007 $0.007 $0.012 $0.012 $0.015 $0.016

Total $0.026 $0.049 $0.050 $0.061 $0.061 $0.052 $0.003

* Values in parentheses indicate negative NPV.

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EERE-2007-BT-STD-0012 COMMENT 02
REFERENCES

1. Energy Information Administration (EIA). National Energy Modeling System Commercial

Model (2004 Version).

2. ERG/MKJ. Energy Research Group & M.K. Jaccard & Associates. 2000. Integration of

GHG Emissions Reduction Options using CIMS.

<<http://www.emrg.sfu.ca/reports/Rollup.pdf>> (05 June 2001).

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