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** 

**11­i**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** 

**11­ii**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.** 

**11­1**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**  **energy**

**efficient 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** 

**11­2 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) site­to** 

**source 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.** 

**11­3**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.** 

NES

t =AEC base ­ AEC standard 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 **(** STOCK V **x** UEC V **x** src_conv t **)** 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,**  STOCK V

**,**

NES

**= Annual**  **national energy**  **savings (in**  **quads),**

STOCK V **= 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,**

UEC V **= Annual**  **unit energy**  **consumption in**  **kilowatt hours**  **(kWh) of**  **vintage** V

**,**

src_conv t **= 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.** 

**11­4**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** + r j **)**

− n **(** i

**.** y **)** ⎠ ⎟

EFF

**_** Level

**_** Share **(** i

**,** y **)**

= 

# ∑ b

j ×

− v Eq. 11.4

j

= **1** k ⎛

r ⎞ 

# ∑ IC **(** i

**,** y **)** × ⎜ j

− n + OC **(** i

**.** y **)** ⎟

i

= **1** ⎜ ⎝ **1**

− **(1** + r j **)** ⎟ ⎠

**11­5 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,

r j = **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% long** 

**term Treasury**  **bond rate,**  **minus the**  **estimated long­term**  **inflation rate**  **of 2.2%** 

**= 2.19%)** 

b

j = **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** 

(r

j /(1­(1+r j ) ­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 NEMS**  **1 and**  **in Canada’s**  **CIMS model**  **2 a** 

**. The**  **calibration constants**  **are the**  **private**

**risk­based discount**  **rates by**  **risk class**  r j , **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.** 

**11­6**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 Air** 

**Conditioning 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)

**.**

**11­7**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** 

**Non**

**Standard**

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

**Non**

**Standard**

**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**

**Non**

**Standard**

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

**Non**

**Standard**

**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** 

**11­8 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 site­to** 

**source 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.**

**11­9**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 

### TIC

t **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).** 

**11­10 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 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**

**Non**

**Standard**

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

**Non**

**Standard**

**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 sales** 

**weighted 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** 

**11­12 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** 

**Non**

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

**Size PTAC** 

**Non**

**Standard 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,**

t P **= 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**

**11­13 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**

**11­14 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** 

**11­15**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.** 

**11­16 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.**

**11­17**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.** 

**11­18**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).** 

**11­19**