CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS

1.1 PURPOSE OF THE DOCUMENT......................................................................................... 1

1.2 SUMMARY OF THE NATIONAL BENEFITS................................................................... 1

1.3 OVERVIEW OF STANDARDS FOR PTACS AND PTHPS .............................................. 5

1.4 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS ........................ 6

1.5 STRUCTURE OF THE DOCUMENT................................................................................... 8

LIST OF TABLES

Table 1.2.1 Summary of National Economic Benefits and Costs of Proposed Energy 

Conservation Standards for PTACs and PTHPs*............................................................................... 2

Table 1.2.2. Annualized Benefits and Costs of Proposed Energy Conservation Standards for 

PTACs and PTHPs ............................................................................................................................... 4

Table 1.4.1. Analyses Under the Process Rule*................................................................................. 8

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CHAPTER 1. INTRODUCTION

1.1 PURPOSE OF THE DOCUMENT 

This technical support document (TSD) is a stand-alone report that provides the technical 

analyses and results supporting the information presented in the notice of proposed rulemaking 

(NOPR) for packaged terminal air conditioners (PTACs) and packaged terminal heat pumps 

(PTHPs). This TSD reports on the activities and analyses conducted in support of the NOPR.

1.2 SUMMARY OF THE NATIONAL BENEFITS

DOE’s analyses indicate that the proposed standards would save a significant amount of 

energy. The lifetime savings for PTACs and PTHPs purchased in the 30-year period that begins 

in the year of compliance with amended standards (2019–2048) amount to 0.06 quadrillion 

British thermal units (quads). The annual energy savings in 2030 (1.49 thousandths of a quad) 

are equivalent to 0.08 thousandths of a percent of total U.S. commercial primary energy 

consumption in 2013.a

The cumulative net present value (NPV) of total customer costs and savings of the

proposed standards for PTACs and PTHPs ranges from $10.7 million (at a 7-percent discount 

rate) to $69.0 million (at a 3-percent discount rate). This NPV expresses the estimated total value

of future operating-cost savings minus the estimated increase in equipment costs for equipment 

purchased in 2019–2048. 

In addition, the proposed standards would have significant environmental benefits. The 

energy savings would result in cumulative emission reductions of 4.3 million metric tons (Mt)b

of carbon dioxide (CO2), 16 thousand tons of methane, 9.7 thousand tons of sulfur dioxide (SO2), 

and 4.4 thousand tons of nitrogen oxides (NOx). c The cumulative reduction in CO2 emissions 

through 2030 amounts to 0.73 Mt.

The value of the CO2 reductions is calculated using a range of values per metric ton of 

CO2 (otherwise known as the Social Cost of Carbon, or SCC) developed by a recent Federal 

interagency process.d The derivation of the SCC values is discussed in Chapter 14. Using

discount rates appropriate for each set of SCC values, DOE estimates the present monetary value 

of the CO2 emissions reduction is between $28.1 million and $412.1 million. DOE also estimates 

a

 Based on U.S. Department of Energy, Energy Information Administration, Annual Energy Outlook 2013. 

b

 A metric ton is equivalent to 1.1 short tons. Results for NOX and Hg are presented in short tons. c

 DOE calculated emissions reductions relative to the Annual Energy Outlook 2013 (AEO 2013) Reference case, 

which generally represents current legislation and environmental regulations for which implementing regulations 

were available as of December 31, 2012. The reduction in mercury (Hg) emissions is very small. 

d

 Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866. 

Interagency Working Group on Social Cost of Carbon, United States Government. May 2013; revised November 

2013. http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf. 

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the present monetary value of the NOx emissions reduction is $2.20 million at a 7-percent 

discount rate and $5.43 million at a 3-percent discount rate. 

Table 1.2.1 summarizes the national economic costs and benefits expected to result from

the proposed standards for PTACs and PTHPs.

Table 1.2.1 Summary of National Economic Benefits and Costs of Proposed Energy 

Conservation Standards for PTACs and PTHPs*

Category Present Value

million 2013$ Discount Rate

Benefits

Operating Cost Savings 101.5 7%

241.9 3%

CO2 Reduction Monetized Value ($12.0/t case)** 28.1 5%

CO2 Reduction Monetized Value ($40.5/t case)** 133.0 3%

CO2 Reduction Monetized Value ($62.4/t case)** 212.3 2.5%

CO2 Reduction Monetized Value ($119/t case)** 412.1 3%

NOX Reduction Monetized Value (at $2,684/ton)** 2.20 7%

5.43 3%

Total Benefits† 236.6 7%

380.2 3%

Costs

Incremental Installed Costs 90.8 7%

172.9 3%

Total Net Benefits

Including EmissionsReduction Monetized Value† 145.9 7%

207.3 3%

* This table presents the costs and benefits associated with PTACs and PTHPs shipped in 2019−2048. These results 

include benefits to customers which accrue after 2048 from the equipment purchased in 2019−2048. The results 

account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which 

may be incurred in preparation for the rule. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the 

updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% 

discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 

3% discount rate. The SCC time series used by DOE incorporate an escalation factor 

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to average SCC with 3-

percent discount rate ($40.5/t case). 

The benefits and costs of today’s proposed standards, for equipment sold in 2019-2048, 

can also be expressed in terms of annualized values. The annualized monetary values are the sum 

of (1) the annualized national economic value of the benefits from customer operation of 

equipment that meets the proposed standards (consisting primarily of operating cost savings from 

using less energy, minus increases in equipment purchase and installation costs, which is another 

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way of representing customer NPV), and (2) the annualized monetary value of the benefits of 

emission reductions, including CO2 emission reductions. e

 

Although combining the values of operating savings and CO2 emission reductions 

provides a useful perspective, two issues should be considered. First, the national operating 

savings are domestic U.S. customer monetary savings that occur as a result of market 

transactions while the value of CO2 reductions is based on a global value. Second, the 

assessments of operating cost savings and CO2 savings are performed with different methods that 

use different time frames for analysis. The national operating cost savings is measured for the 

lifetime of PTACs and PTHPs shipped in 2019–2048. The SCC values, on the other hand, reflect 

the present value of some future climate-related impacts resulting from the emission of one ton 

of carbon dioxide in each year. These impacts continue well beyond 2100.

Estimates of annualized benefits and costs of the proposed standards are shown in Table 

1.2.2. The results under the primary estimate are as follows. Using a 7-percent discount rate for 

benefits and costs other than CO2 reduction, for which DOE used a 3-percent discount rate along 

with the average SCC series that uses a 3-percent discount rate, the cost of the standards 

proposed in today’s rule is $8.38 million per year in increased equipment costs, while the 

benefits are $9.4 million per year in reduced equipment operating costs, $7.2 million in CO2

reductions, and $0.20 million in reduced NOx emissions. In this case, the net benefit amounts to 

$8.4 million per year. Using a 3-percent discount rate for all benefits and costs and the average 

SCC series, the estimated cost of the standards proposed in today’s rule is $9.36 million per year 

in increased equipment costs, while the benefits are $13.1 million per year in reduced operating 

costs, $7.2 million in CO2 reductions, and $0.29 million in reduced NOx emissions. In this case, 

the net benefit amounts to $11.2 million per year.

e DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized values. 

First, DOE calculated a present value in 2013, the year used for discounting the NPV of total customer costs and 

savings, for the time-series of costs and benefits using discount rates of three and seven percent for all costs and 

benefits except for the value of CO2 reductions. For the latter, DOE used a range of discount rates, as shown in 

Table 1.2.1. From the present value, DOE then calculated the fixed annual payment over a 30-year period (2019 

through 2048) that yields the same present value. The fixed annual payment is the annualized value. Although DOE 

calculated annualized values, this does not imply that the time-series of cost and benefits from which the annualized 

values were determined is a steady stream of payments. 

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Table 1.2.2. Annualized Benefits and Costs of Proposed Energy Conservation Standards 

for PTACs and PTHPs

TSL 3 Discount Rate

Primary 

Estimate*

Low Net 

Benefits 

Estimate*

High Net 

Benefits 

Estimate*

million 2013$/year

Benefits

Operating Cost Savings

7% 9.4 9.0 9.9

3% 13.1 12.5 13.9

CO2 Reduction Monetized 

Value ($12.0/t case)** 5% 2.0 2.0 2.0

CO2 Reduction Monetized 

Value ($40.5/t case)** 3% 7.2 7.2 7.2

CO2 Reduction Monetized 

Value ($62.4/t case)** 2.5% 10.7 10.7 10.7

CO2 Reduction Monetized 

Value ($119/t case)** 3% 22.3 22.3 22.3

NOX Reduction Monetized 

Value (at $2,684/ton)**

7% 0.20 0.20 0.20

3% 0.29 0.29 0.29

Total Benefits†

7% plus CO2 range 11.6 to 31.9 11.2 to 31.5 12.1 to 32.4

7% 16.8 16.4 17.3

3% plus CO2 range 15.4 to 35.7 14.8 to 35.0 16.2 to 36.5

3% 20.6 19.9 21.4

Costs

Incremental Equipment Costs

7% 8.38 8.18 10.61

3% 9.36 9.06 12.29

Net Benefits

Total†

7% plus CO2 range 3.2 to 23.5 3.0 to 23.3 1.5 to 21.8

7% 8.4 8.2 6.7

3% plus CO2 range 6.0 to 26.3 5.7 to 26.0 3.9 to 24.2

3% 11.2 10.9 9.1

* This table presents the annualized costs and benefits associated with PTACs and PTHPs shipped in 2019−2048. 

These results include benefits to customers which accrue after 2048 from the equipment purchased in 2019−2048. 

The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some 

of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits Estimates 

utilize projections of energy prices from the AEO2013 Reference case, Low Estimate, and High Estimate, 

respectively. All three estimates use a constant rate for projected equipment price trends. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the 

updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% 

discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 

3% discount rate. The SCC time series used by DOE incorporate an escalation factor. 

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† Total Benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average 

SCC with 3-percent discount rate ($40.5/t case). In the rows labeled “7% plus CO2 range” and “3% plus CO2 range,” 

the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the 

full range of CO2 values.

1.3 OVERVIEW OF STANDARDS FOR PTACS AND PTHPS

Title III, Part Cf

of the Energy Policy and Conservation Act of 1975 (“EPCA” or “the 

Act”), Pub. L. 94-163 (42 U.S.C. 6311-6317, as codified), added by Pub. L. 95-619, Title IV, 

§441(a), established the Energy Conservation Program for Certain Industrial Equipment, which 

includes the PTAC and PTHP equipment that are the subject of this notice.g

 In general, this 

program addresses the energy efficiency of certain types of commercial and industrial 

equipment. Relevant provisions of the Act include definitions (42 U.S.C. 6311), energy 

conservation standards (42 U.S.C. 6313), test procedures (42 U.S.C. 6314), labelling provisions 

(42 U.S.C. 6315), and the authority to require information and reports from manufacturers (42 

U.S.C. 6316).

EPCA contains mandatory energy conservation standards for commercial heating, airconditioning, and water-heating equipment. (42 U.S.C. 6313(a)) Specifically, the statute sets 

standards for small, large, and very large commercial package air-conditioning and heating 

equipment, packaged terminal air conditioners (PTACs) and packaged terminal heat pumps 

(PTHPs), warm-air furnaces, packaged boilers, storage water heaters, instantaneous water 

heaters, and unfired hot water storage tanks. Id. Section 340 of EPCA defines a “packaged 

terminal air conditioner” as “a wall sleeve and a separate unencased combination of heating and 

cooling assemblies specified by the builder and intended for mounting through the wall. It 

includes a prime source of refrigeration, separable outdoor louvers, forced ventilation, and 

heating availability by builder's choice of hot water, steam, or electricity.” (42 U.S.C. 

6311(10)(A)) EPCA defines a “packaged terminal heat pump” as “a packaged terminal air 

conditioner that utilizes reverse cycle refrigeration as its prime heat source and should have 

supplementary heat source available to builders with the choice of hot water, steam, or electric 

resistant heat.” (42 U.S.C. 6311(10)(B)) 

Section 5(b) of the American Energy Manufacturing Technical Corrections Act of 2012 

(Pub. L. No. 112-210 (Dec. 18, 2012) (AEMTCA) amended Section 342(a)(6) of EPCA. Among 

other things, AEMTCA modified the manner in which DOE must amend the energy efficiency

standards for certain types of commercial and industrial equipment. DOE is typically obligated 

either to adopt those standards developed by the American Society of Heating, Refrigerating, and 

Air-Conditioning Engineers (ASHRAE) – or to adopt levels more stringent than the ASHRAE 

levels if there is clear and convincing evidence in support of doing so (42 U.S.C. 6313(a)(6)(A)). 

AEMTCA added to this process a requirement that DOE initiate a rulemaking to consider 

amending the standards for any covered equipment as to which more than 6 years has elapsed 

since the issuance of the most recent final rule establishing or amending a standard for the 

f

 For editorial reasons, upon codification in the U.S. Code, Part C was re-designated Part A-1. g

 All references to EPCA in this document refer to the statute as amended through the American Energy 

Manufacturing Technical Corrections Act of 2012, Pub. L. 112-210 (Dec. 18, 2012). 

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equipment as of the date of AEMTCA’s enactment, December 18, 2012. (42 U.S.C. 

6313(a)(6)(C)(vi)) 

DOE most recently issued amended standards for PTACs and PTHPs on October 7, 2008, 

which codified amended standards for PTACs and PTHPs and divided PTACs and PTHPs into 

two equipment classes – standard size and non-standard size. 73 FR 58772 (Oct. 7, 2008) On 

October 29, 2010, ASHRAE released ASHRAE Standard 90.1-2010 (formally the American 

National Standards Institute (ANSI)/ASHRAE/Illuminating Engineering Society of North 

America (IES) Standard 90.1-2010), which increased the efficiency levels for standard size 

PTACs and PTHPs to be equal to DOE standards, effective as of October 8, 2012. Hence, DOE 

did not consider revision of PTAC and PTHP standards at that time.

Because ASHRAE did not update its efficiency levels for PTACs and PTHPs in 

ANSI/ASHRAE/IES Standard 90.1-2010, DOE began this rulemaking by analyzing amended 

standards consistent with the procedures defined under 42 U.S.C. 6313(a)(6)(C). However, 

before DOE could finalize this NOPR, ASHRAE acted on October 9, 2013 to adopt 

ANSI/ASHRAE/IES Standard 90.1-2013, and this revision did contain amended standard levels 

for PTACs, thereby triggering DOE’s statutory obligation under 42 U.S.C. 6313(a)(6)(A) to 

promulgate an amended uniform national standard at those levels unless DOE determines that 

there is clear and convincing evidence supporting the adoption of energy conservation standards 

more stringent than the ASHRAE levels. Consequently, DOE prepared an analysis of the energy 

savings potential of amended standards at the ANSI/ASHRAE/IES Standard 90.1-2013 levels (as 

required by 42 U.S.C. 6313(a)(6)(A)(i)) and updated this NOPR and accompanying analyses to 

reflect appropriate statutory provision, timelines, and compliance dates. Because PTHPs are 

defined as a subset of PTACs, the publication of ANSI/ASHRAE/IES Standard 90.1-2013 also 

triggered DOE to consider whether clear and convincing evidence supports a more-stringent 

standard than the ASHRAE levels for PTHPs, though the ASHRAE levels for PTHPs were not 

explicitly revised. 

Under this new framework, DOE must now either adopt the amended ASHRAE levels 

within 18 months after publication of the ASHRAE amendments (by April 9, 2015, with a 

compliance date of two years after the effective date of the applicable efficiency requirements in 

amended Standard 90.1) or promulgate more-stringent standards not later than 30 months after 

publication of the ASHRAE amendments (by April 9, 2016, with a compliance date four years 

after publication of a final rule). 42 U.S.C. 6313(a)(6)(A)(ii)

1.4 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS

Under EPCA, when DOE is studying new or amended standards, it must consider, to the 

greatest extent practicable, the following seven factors:

1) the economic impact of the standard on the manufacturers and consumers of the 

equipment subject to the standard; 

2) the savings in operating costs throughout the estimated average life of the equipment

compared to any increases in the initial cost or maintenance expense; 

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3) the total projected amount of energy savings likely to result directly from the imposition 

of the standard; 

4) any lessening of the utility or the performance of the covered equipment likely to result 

from the imposition of the standard; 

5) the impact of any lessening of competition, as determined in writing by the Attorney 

General, that is likely to result from the imposition of the standard; 

6) the need for national energy conservation; and 

7) other factors the Secretary considers relevant. (42 U.S.C. 6313(a)(6)(B))

Other statutory requirements are set forth in 42 U.S.C. 6313(a)(6)(A)–(C). 

DOE considers interested party participation to be a very important part of the process for 

setting energy conservation standards. Through formal public notifications (i.e., Federal Register

notices), DOE actively encourages the participation and interaction of all interested parties 

during the comment period in each stage of the rulemaking. Beginning with the framework 

document and during subsequent comment periods, interactions among interested parties provide 

a balanced discussion of the information that is required for the standards rulemaking.

 Before DOE determines whether or not to adopt a proposed energy conservation 

standard, it must first solicit comments on the proposed standard. Any new or amended standard 

must be designed to achieve significant additional conservation of energy and be technologically 

feasible and economically justified. To determine whether economic justification exists, DOE

must review comments on the proposal and determine that the benefits of the proposed standard 

exceed its burdens to the greatest extent practicable, weighing the seven factors listed above. 

 The energy conservation standards rulemaking process involves two formal public 

notices, which DOE publishes in the Federal Register. The first notice is the NOPR, which 

presents the analyses of the impacts of potential amended energy conservation standards on 

customers, manufacturers, and the Nation; DOE’s weighting of these impacts of amended energy 

conservation standards; and the proposed energy conservation standards for the equipment. The 

second notice is the final rule, which presents a discussion of the comments received in response 

to the NOPR; the revised analyses; DOE’s weighting of these impacts; the amended energy 

conservation standards DOE is adopting for each equipment class; and the effective dates of the 

amended energy conservation standards.

Table 1.4.1 lists the analyses conducted throughout the rulemaking process.

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Table 1.4.1. Analyses Under the Process Rule* 

Preliminary Analyses NOPR Final Rule

Market and technology 

assessment

Life-cycle cost sub-group analysis Revised NOPR analyses

Screening analysis Manufacturer impact analysis

Engineering analysis Utility impact analysis

Energy use determination Emissions analysis

Markups for equipment price 

determination

Employment impact analysis

Life-cycle cost and payback 

period analysis

Regulatory impact analysis

Shipments analysis

National impact analysis

* In the current rulemaking, DOE conducted the analyses listed under Preliminary Analyses as part of the NOPR 

analysis.

On February 22, 2013, DOE published a notice of public meeting and availability of the 

framework document regarding energy conservation standards for packaged terminal air 

conditioners and heat pumps standards. 78 FR 12252. This notice is available at: 

http://www.regulations.gov/#!documentDetail;D=EERE-2012-BT-STD-0029-0001. The public 

meeting sought input on DOE’s planned analytical approach and identified several issues of 

particular interest to DOE for this rulemaking proceeding.

As part of the information gathering and sharing process, DOE organized and held 

interviews with manufacturers of the equipment considered in this rulemaking as part of the 

engineering analysis. DOE had four objectives for these interviews: (1) solicit manufacturer 

feedback on the draft inputs to the engineering analysis; (2) solicit feedback on topics related to 

the manufacturer impact analysis; (3) provide an opportunity to express manufacturers’ concerns 

to DOE; and (4) foster cooperation between manufacturers and DOE. DOE incorporated the 

information gathered during the engineering interviews with manufacturers into its engineering 

analysis (Chapter 5 of the NOPR TSD) and the manufacturer impact analysis (Chapter 12 of the 

NOPR TSD). 

1.5 STRUCTURE OF THE DOCUMENT

This NOPR TSD outlines the analytical approaches used in this rulemaking. The TSD 

consists of seventeen chapters and appendices.

Chapter 1 Introduction: provides an overview of the appliance standards program 

and how it applies to the PTAC and PTHP rulemaking, and outlines the 

structure of the document.

Chapter 2 Analytical Framework: describes the rulemaking process.

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Chapter 3 Market and Technology Assessment: characterizes the PTAC and PTHP 

market and the technologies available for increasing equipment efficiency.

Chapter 4 Screening Analysis: identifies design options that improve efficiency of 

the covered equipment and determines which technology options are 

viable for consideration in the engineering analysis.

Chapter 5 Engineering Analysis: discusses the methods used for developing the 

relationship between increased manufacturer price and increased 

efficiency.

Chapter 6 Markups Analysis: discusses the methods used for establishing markups 

for converting manufacturer prices to customer equipment costs.

Chapter 7 Energy Use Analysis: discusses the process used for generating energyuse estimates for the covered equipment as a function of standard levels.

Chapter 8 Life-Cycle Cost and Payback Period Analysis: discusses the methods 

used to analyze effects of standards on individual customers and users of 

the equipment and compares the LCC and PBP of equipment with and 

without higher efficiency standards.

Chapter 9 Shipments Analysis: estimates shipments of the equipment over the 30-

year analysis period that is used in performing the national impact analysis 

(NIA), including how shipments may vary under alternative standard 

levels.

Chapter 10 National Impact Analysis: assesses the national energy savings, and the 

national net present value of total customer costs and savings, expected to 

result from specific, potential energy conservation standards.

Chapter 11 Life-Cycle Cost Subgroup Analysis: discusses the effects of potential 

standards on different subgroups of customers. 

Chapter 12 Manufacturer Impact Analysis: discusses the effects of amended energy 

conservation standards on the finances and profitability of equipment 

manufacturers.

Chapter 13 Emissions Impact Analysis: discusses the effects of standards on three 

pollutants—sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury—as 

well as CO2 emissions.

Chapter 14 Monetization of Emissions Reductions Benefits: discusses the basis for 

estimated monetary values used for the reduced emissions of CO2 and 

NOx that are expected to result from each of the TSLs considered.

Chapter 15 Utility Impact Analysis: discusses selected effects of potential standards 

on electric utilities.

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Chapter 16 Employment Impact Analysis: discusses the effects of amended energy 

conservation standards on national employment. 

Chapter 17 Regulatory Impact Analysis: discusses the impact of non-regulatory 

alternatives to efficiency standards.

Appendix 6A Detailed Data for Equipment Price Markups

Appendix 7A Detailed Unit Energy Consumption Data

Appendix 10A Full-Fuel-Cycle Multipliers

Appendix 10B NIA Sensitivity Analysis for Alternative Product Price Trend 

Scenarios

Appendix 12A Government Regulatory Impact Model (GRIM) Overview

Appendix 14A Social Cost of Carbon for Regulatory Impact Analysis Under 

Executive Order 12866

Appendix 14B Technical Update of Social Cost of Carbon for Regulatory Impact 

Analysis Under Executive Order 12866

Appendix 17A Regulatory Impact Analysis: Supporting Materials

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