CHAPTER 6. SHIPMENTS ANALYSIS

TABLE OF CONTENTS

**6. 1**  **INT RODUCTION** 

**........................................................................................................... 6­1** 

**6. 2**  **FORMULATION OF**  **SHIPMENTS MODEL................................................................ 6­2** 

**6. 2.1**  **Stock Events......................................................................................................**  **6­3**

**6. 2.1.1**  **Replacing Equipment......................................................................**  **6­3**

**6. 2.1.2**  **New Equipment** 

**.............................................................................. 6­3** 

**6. 3**  **DAT A**  **INPUTS**

**............................................................................................................... 6­4** 

**6. 3.1**  **Historical Shipments......................................................................................... 6­4** 

**6. 3.2**  **Equipment Class**  **Breakdown............................................................................ 6­4**

**6. 3.3**  **Equipment Life**  **and Survival**  **Function............................................................. 6­4** 

**6. 3.3.1**  **Building Growth**  **Forecasts**

**............................................................. 6­5** 

**6. 4**  **RE SULTS** 

**........................................................................................................................ 6­6** 

**REFERENCES**

**............................................................................................................................ 6­7** 

LIST OF TABLES

**Table 6.3.1**  **AEO 2008**  **Forecast of**  **Total Building**  **Floor Space.............................................**  **6­5**

**Table 6.4.1**  **Forecasted Shipments**  **of New**  **and Replacement**  **Commercial Boiler** 

**Equipment, 2012**  **Through 2042** 

**.......................................................................... 6­6** 

LIST OF FIGURES

**Figure 6.1.1**  **Flow Chart**  **Showing Inputs**  **to the**  **Shipments Model.......................................... 6­1** 

**Figure 6.3.1**  **Graph of**  **Weibull Function** 

**.................................................................................. 6­5** 

**6­ i** CHAPTER 6. SHIPMENTS ANALYSIS

6. 1 INTRODUCTION

**Estimates of**  **commercial boiler**  **equipment (CBE)**  **shipments are**  **a necessary**  **input to** 

**national energy**  **savings (NES)**  **and net**  **present value**  **(NPV) calculations.**  **This chapter**  **describes**

**the U.S.**  **Department of**  **Energy’s (DOE’s)**  **methodology for**  **projecting annual**  **shipments of**  **CBE**

**and presents**  **results.**

**The Shipments**  **Model results**  **are driven**  **primarily by**  **base year**  **(2007) shipment**  **data for** 

**the 10**  **classes of**  **commercial boiler**  **equipment under**  **consideration (see**  **TSD chapter**  **4). The** 

**flow chart**  **presented in**  **Figure 6.1.1**  **outlines the**  **structure of**  **the Shipments**  **Model, which** 

**assumes that,**  **in each**  **year, the**  **existing commercial**  **boiler equipment**  **stock either**  **ages by**  **1 year** 

**or breaks.**  **Broken equipment**  **is replaced**  **and new**  **equipment can**  **be shipped**  **into new** 

**commercial floor**  **space.**

Figure 6.1.1 **Flow Chart**  **Showing Inputs**  **to the**  **Shipments Model** 

**The Shipments**  **Model is**  **in a**  **Microsoft Excel**  **spreadsheet format**  **embedded in**  **the**

**National Impacts**  **Model spreadsheet**  **that is**  **accessible on**  **the DOE**  **website at** 

**http://www1. eere.energy.gov/buildings/appliance_standards/commercial/ashrae_products_docs_** 

**meeting.html.**

**This chapter**  **explains the**  **Shipments Model**  **and its**  **derivation in**  **detail. Section**  **6.2**

**discusses the**  **formulation of**  **the model,**  **section 6.3**  **describes the**  **data input**  **to the**  **model, and** 

**section 6.4**  **presents the**  **results for**  **the base­case**  **energy conservation**  **standard level**  **scenario and** 

**discusses the**  **development of**  **higher standard**  **level scenarios.**  **The energy**  **conservation standards** 

**for commercial**  **boiler equipment**  **will set**  **the maximum**  **allowable rated**  **energy consumption**  **for**

**all equipment**  **within an**  **equipment class.** 

**Shipment forecasts**  **were determined**  **for the**  **baseline level**  **and all**  **higher efficiency**  **levels**

**(reflecting potential**  **higher standard**  **levels) for**  **which NES**  **and NPV**  **are required.**  **DOE is** 

**6­1 considering**  **up to**  **four efficiency**  **levels plus**  **one baseline**  **efficiency level**  **for each**  **of the** 

**10 equipment**  **classes.**

6. 2 FORMULATION OF SHIPMENTS MODEL

**The Shipments**  **Model is**  **a description**  **of commercial**  **boiler equipment**  **stock flows**  **as a** 

**function of**  **year and**  **equipment age**  **in the**  **stock. While**  **there are**  **10 equipment**  **classes, no** 

**coupling is**  **assumed between**  **them, so**  **the equations**  **describe each**  **type of**  **equipment**

**independently.**

**This section**  **begins with**  **a definition**  **of the**  **different commercial**  **boiler equipment**  **stock**

**categories. DOE**  **formulates the**  **equations as**  **updates of**  **the distribution**  **of stock**  **in year**  t **as a** 

**function of**  **age** a **to year**  t+1

**.**

**DOE used**  **industry­provided data**  **of base­year**  **(2007) shipments**  **to calculate**  **current**

**shipments by**  **equipment class.**  **It used**  **the lifetime**  **of the**  **equipment and**  **a corresponding** 

**survival function**  **to estimate**  **a replacement**  **rate for**  **existing stock.**  **DOE then**  **used this** 

**information combined**  **with estimates**  **from the**  **DOE Energy**  **Information Administration’s** 

**1 (EIA’s)**  Annual Energy Outlook 2008 **(hereafter referred**  **to as**  **AEO 2008)**  **for surviving**  **and new** 

**commercial floor**  **space in**  **2007, along**  **with an**  **assumption of**  **constant boiler**  **saturation rates** 

**across sin**  **the stock**  **and in**  **new construction,**  **to determine**  **the percentage**  **of shipments**  **to existing** 

**buildings and**  **to new**  **construction. Then,**  **DOE forecasted**  **new sales**  **as a**  **function of**  **new**

**construction by**  **multiplying new**  **building floor**  **space by**  **the share**  **of new**  **shipments (1­** 

**replacement ratio).**  **Sales of**  **new and**  **replacement equipment**  **are recorded**  **by the**  **year sold,**  **and**

**each annual**  **vintage is**  **depreciated over**  **the estimated**  **life of**  **the equipment.**  **At the**  **beginning of**  **a**

**new year,**  **DOE determines**  **the fraction**  **of stock**  **that has**  **failed based**  **on the**  **survival function** 

**(see section**  **6.3.3) and**  **uses an**  **assumed replacement**  **rate to**  **find replacement**  **sales for**  **that year.** 

**Total sales**  **for that**  **year are**  **replacement sales**  **plus new**  **stock. Sales**  **in each**  **year are**  **allocated to** 

**the 10**  **equipment classes**  **in proportion**  **to their**  **relative base­year**  **shipments. DOE**  **assumed that** 

**all units**  **experience a**  **normal rate**  **of repairs**  **and that**  **this is**  **included in**  **the average**  **lifetime of**  **the**

**equipment.**

**In view**  **of industry**  **practice, available**  **information suggests**  **that the**  **average lifetime**  **of a** 

**unit is**  **30 years**  **(see TSD**  **chapters 2**  **and 5).**  **The age**  **of base­year**  **stock for**  **each equipment**  **class**

**was developed**  **by application**  **of a**  **survival function**  **(based on**  **a Weibull**  **distribution with**  **a mean** 

**life of**  **30 years)**  **to an**  **assumed constant**  **level of**  **shipments into**  **the building**  **population over**  **a**

**45­year period.**  **This results**  **in a**  **steady­state long­term**  **distribution of**  **the vintages**  **of the** 

**equipment in**  **the building**  **population for**  **2007. The**  **total stock**  **of age**  a **in a**  **given year**  t **is**

**represented by** 

U

**(t, a)** 

**=** U 0 **(t,a)** Eq. 6.1

**and the**  **average age**  **of the**  **stock in**  **year** y **is defined**  **as**

StockA ge **(t)**

**= ∑** 

**a** U **( t,**  **a) x**  **a /**  **∑(** U **( t,a))**  Eq. 6.2

**where**

a **= age**  **of stock,** 

**6­2**t **= year,** 

U

**(** t,a **)**

**= total**  **stock of**  **age** a **in a**  **given year**  y

**,** U

**0 (**  t,a **)**

**= stock**  **of existing**  **units.**

**The shipments**  **of new**  **stock in**  **a given**  **year are**  Uship(t)

**. By**  **definition, the**  **age of**  **the**

**equipment is**  **zero in**  **the year**  **that it**  **is shipped,**  **so that**  Uship(t)

= U(t,0)

**.**

6. 2.1 Stock Events

**In the**  **transition from**  **year** t **to year**  t+1

**, two**  **things could**  **happen to**  **the stock**  **of**

**commercial boiler**  **equipment:**

**1. existing**  **equipment could**  **fail and**  **be replaced,**  **or**

**2. the**  **stock could**  **simply age**  **by 1**  **year.**

**In the**  **model, early**  **replacements (**  i.e.

**, existing**  **equipment that**  **is replaced**  **before the** 

**expected end**  **of service**  **life) are**  **not considered,**  **and all**  **failed equipment**  **is assumed**  **to be** 

**replaced by**  **a similar**  **replacement boiler**  **(** e.g.

**, no**  **change of**  **equipment is**  **assumed). The**  **model is** 

**capable of**  **forecasting total**  **shipments with**  **replacement rates**  **different than**  **100 percent,**  **but this** 

**was not**  **implemented because**  **of lack**  **of data.**  **The following**  **sections present**  **the equations**  **used**

**to represent**  **each possible**  **event.**

6. 2.1.1 Replacing Equipment

**DOE determines**  **the probability**  **that commercial**  **boiler equipment**  **of age**  a **from stock**  U **0**

**will break**  **or will**  **be replaced**  **using a**  **Weibull survival**  **distribution function**  PB **1** (a), **with a**  **scale**

**parameter of**  **33.1 and**  **a shape**  **parameter of**  **4 such**  **that** PB **1** (a)=W(4,33.1) **results in**  **a 30­year** 

**average lifetime**  **with a**  **minimum lifetime**  **of about**  **8 years,**  **and a**  **maximum lifetime**  **of about** 

**50 years**  **(consistent with**  **industry comments).**  **Similarly, the**  **probability that**  **equipment of**  **age** a

**from stock**  U 1 **will fail**  **is given**  **by the**  **same function**  PB **1** (a)

**. These**  **probabilities do**  **not depend** 

**on the**  **model year**  t

**. DOE**  **defines the**  **quantities of**  **replaced equipment**  **as**

UB **(t, a)** 

**=** PB 0 **(a) x**  UB 0 **(t,a)** Eq. 6.3

**where**

UB **0 (**  t,a **)**

**= stock**  **of existing**  **units,**

PB **0 (**  a **)**

**= probability**  **that stock**  **of existing**  **units will**  **fail, or**  **will be**  **replaced,**

U

**0 (**  t,a **)**

**= stock**  **of existing**  **units,**

a **= age**  **of stock,** 

t **= year.** 

6. 2.1.2 New Equipment

**New commercial**  **boiler equipment**  **will be**  **purchased to**  **replace the**  **units described** 

**above. Available**  **information suggests**  **that the**  **purchase of**  **new equipment**  **that would**  **go into** 

**new buildings**  **is driven**  **by total**  **building floor**  **space. DOE**  **uses AEO**  **2008 projections**  **through**

**2030 to**  **create a**  **building floor**  **space index.**  **DOE uses**  **these floor**  **space projections**  **to create**  **an**

**6­3 index**  **that is**  **used to**  **estimate future**  **boiler sales**  **by inflating**  **base­year sales.**  **The total**  **of new** 

**equipment shipments**  **is the**  **estimated total**  **shipments for**  **2007 multiplied**  **by the**  **index of**  **new**

**construction of**  **square feet**  **of buildings**  **for each**  **future year.** 

**DOE has**  **no information**  **about the**  **variation in**  **the market**  **saturation of**  **commercial boiler** 

**equipment by**  **building type**  **or over**  **time. Therefore,**  **in the**  **model, the**  **purchase of**  **new**

**equipment is**  **driven by**  **the construction**  **of new**  **floor space**  **and the**  **replacement of**  **broken or** 

**removed equipment**  **on a**  **one­for­one basis.** 

6. 3 DATA INPUTS

6. 3.1 Historical Shipments

**Historical shipments**  **are necessary**  **to calibrate**  **a shipments**  **model to**  **the existing**  **market.**

**DOE has**  **no data**  **for historical**  **shipments of**  **commercial boilers**  **and therefore**  **developed a**  **model**

**that relies**  **on 2007**  **shipments to**  **make its**  **predictions. All**  **remaining stock**  **from historical** 

**shipments is**  **assumed to**  **be distributed**  **across vintages**  **based on**  **the survival**  **function and**  **an**

**assumption of**  **constant boiler**  **shipments over**  **time into**  **the building**  **population.**

6. 3.2 Equipment Class Breakdown

**DOE organized**  **commercial boiler**  **equipment into**  **either gas­ or**  **oil­fired equipment** 

**classes according**  **to the**  **boiler’s input**  **capacity size,**  **output, input,**  **and draft**  **type based**  **on the** 

**ASHRAE 90.1­2007**  **equipment classes** 

**. Following**  **these guidelines,**  **DOE used**  **the following**  **10**

**equipment classes:** 

• **Small gas­fired**  **hot water**  **boilers;**

• **Small gas­fired**  **steam, all**  **except natural**  **draft;**

• **Small gas­fired**  **steam, natural**  **draft boilers;** 

• **Small oil­fired**  **hot water**  **boilers;**

• **Small oil­fired**  **steam boilers;** 

• **Large gas­fired**  **hot water**  **boilers;**

• **Large gas­fired**  **steam all**  **except natural**  **draft boilers;** 

• **Large gas­fired**  **steam natural**  **draft boilers;** 

• **Large oil­fired**  **hot water**  **boilers; and** 

• **Large oil­fired**  **steam boilers.** 

6. 3.3 Equipment Life and Survival Function

**DOE determined**  **the average**  **lifetime for**  **commercial boilers**  **to be**  **30 years.**  **DOE**

**developed a**  **survival function**  **based on**  **a Weibull**  **distribution (see**  **Figure 6.3.1)**  **that generated**  **a**

**minimum lifetime**  **of commercial**  **boiler equipments**  **of about**  **8 years,**  **and a**  **maximum lifetime**  **of**

**about 50**  **years. As**  **commercial boiler**  **equipment enters**  **and ages**  **through the**  **total stock,**  **each**

**6­4 boiler**  **has percentage**  **chances of**  **surviving to**  **the next**  **year or**  **failing (1­survival**  **probability)**

**based on**  **its failure**  **rate for**  **the general**  **population according**  **to its**  **vintage.**

Survival Function for Boiler Equipment

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110%

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Equipment AgePercentageRemaining

Figure 6.3.1 Survival **Function for**  **Commercial Packaged**  **Boilers (Weibull­based)** 

6. 3.3.1 Building Growth Forecasts

**The amount**  **of commercial**  **floor space**  **is the**  **main driver**  **for commercial**  **boiler**

**equipment shipments**  **and is**  **appropriately one**  **of the**  **basic inputs**  **into the**  **Shipments Model.** 

**DOE took**  **the projected**  **floor space**  **construction after**  **the year**  **2003 from**  **the National** 

**Energy Modeling**  **System (NEMS)**  **projection published**  **in the**  **AEO 2008.**  **AEO 2008**  **lists the** 

**projections for**  **years 2004**  **to 2030.**  **Beyond 2030,**  **DOE extrapolated**  **a 10­year**  **trend of**  **AEO**

**projected data**  **between 2020**  **and 2030**  **to estimate**  **future growth**  **in commercial**  **building stock** 

**from 2030**  **through 2042.** 

**The total**  **of new**  **floor space**  **is the**  **estimated total**  **floor space**  **for 2007**  **multiplied by**  **an**

**index of**  **new construction**  **of floor**  **space for**  **buildings for**  **each future**  **year (see**  **Table 6.3.1).**  **The**

**index is**  **based on**  **the estimated**  **growth in**  **each year**  **from 2012**  **through 2042,**  **divided by**  **the**

**2007 estimated**  **growth value.** 

Table 6.3.1 **AEO 2008**  **Forecast of**  **Total Building**  **Floor Space** 

Year Total Building Floor Space

(Million Square Feet) Fl oor Space Index

(2007 Base Year)

**2009**

**2010**

**2015**

**2020**

**2025**

**2030**

**Annual Growth**  **Factor,**

**2030 through**  **2042 77,807** 

**78,799**

**83,913**

**89,250**

**94,832**

**100,756**

**1.013% 1.026** 

**1.039**

**1.107**

**1.177**

**1.251**

**1.329**

**6­5**6.4 RESULTS

**Table 6.4.1**  **shows the**  **forecasted shipments**  **for new**  **and replacement**  **commercial**

**packaged boilers**  **from 2012**  **through 2042**  **as calculated**  **with the**  **Shipments Model.** 

Table 6.4.1 **Forecasted Shipments**  **of New**  **and Replacement**  **Commercial Boiler**  **Equipment,**

**2012 Through**  **2042 (Base**  **Case)**

Equipment Class Units Shipped by Year by Equipment Class

2012 2015 2020 2025 2030 2035 2040 2042 Cumulative

**Small, Gas­fFired,**  **Hot Water**  **6,853 7,112**  **7,494 7,922**  **8,848 10,343**  **12,239 12,984**  **276,874**

**Small, Gas­Fired,**  **Steam, All** 

**Except Natural**  **Draft 2,322**  **2,410 2,539**  **2,684 2,998**  **3,505 4,147**  **4,399 93,817** 

**Small, Gas­Fired,**  **Steam, Natural** 

**Draft 3,568**  **3,703 3,902**  **4,125 4,607**  **5,385 6,372**  **6760 144,158** 

**Small, Oil­Fired,**  **Hot Water**  **1,926 1,999**  **2,106 2,226**  **2,486 2,906**  **3,439 3,648**  **77,799**

**Small, Oil­Fired,**  **Steam 3,228**  **3,350 3,530**  **3,732 4,168**  **4,872 5,765**  **6,116 130,428** 

**Large, Gas­Fired,**  **Hot Water**  **1,104 1,146**  **1,208 1,277**  **1,426 1,667**  **1,972 2092**  **44,620**

**Large, Gas­Fired,**  **Steam, All** 

**Except Natural**  **Draft 2,011**  **2,087 2,199**  **2,324 2,596**  **3,034 3,591**  **3,809 81,232** 

**Large, Gas­Fired,**  **Steam, Natural** 

**Draft 2577**  **2,674 2,818**  **2,979 3,327**  **3,889 4,602**  **4,882 104,114** 

**Large, Oil­Fired,**  **Hot Water**  **538 558**  **588 622**  **695 812**  **961 1,019**  **21,738**

**Large, Oil­Fired,**  **Steam 4,248**  **4,408 4,645**  **4,910 5,485**  **6,411 7,586**  **8,048 171,616** 

**Total 28,376**  **29,449 31,030**  **32,801 36,637**  **42,824 50,675**  **53,758 1,146,397** 

**As equipment**  **purchase price**  **increases with**  **lower energy**  **consumption levels,**  **a drop**  **in**

**shipments could**  **be expected**  **relative to**  **the base**  **case. Although**  **there is**  **a provision**  **in the** 

**spreadsheet for**  **a change**  **in shipments**  **as the**  **efficiency level**  **increases (or**  **energy consumption** 

**level decreases),**  **DOE has**  **no information**  **with which**  **to calibrate**  **such a**  **relationship. Therefore,** 

**for the**  **Notice of**  **Proposed Rulemaking**  **analysis, DOE**  **presumes that**  **the shipments**  **do not** 

**change in**  **response to**  **higher efficiency**  **levels being**  **considered as**  **possible standard**  **levels.**

**Results from**  **this model**  **provide an**  **indication of**  **future stock**  **growth for**  **the years**  **2012**

**through 2042,**  **but, because**  **of the**  **nature of**  **the model**  **and the**  **lack of**  **shipments data,**  **the model** 

**does not**  **retroactively match**  **the shipments**  **in 2007**  **(approximately 36,000**  **units, reported**  **in TSD** 

**chapter 2).**  **However, over**  **the period**  **for which**  **shipments were**  **analyzed the**  **average shipments** 

**per year**  **were 36,980**  **boilers per**  **year. The**  **average shipments**  **over the**  **period from**  **2012 through** 

**2042 was**  **2­percent higher**  **than the**  **2007 shipment**  **estimates.**

**6­6**REFERENCES

**1. U.**  **S. Department**  **of Energy/Energy**  **Information Administration.**  **2008.** Annual Energy

Outlook 2008

**. DOE/EIA­0383(2008),**  **DOE/EIA, Washington,**  **D.C.**

**6­7**ACRONYMS AND ABBREVIATIONS

**AE O**  **Annual Energy**  **Outlook**

**CRE commercial**  **boiler equipment** 

**DOE U.S.**  **Department of**  **Energy**

**EIA Energy**  **Information Administration** 

**NEMS National**  **Energy Modeling**  **System**

**NES national**  **energy savings** 

**NOPR Notice**  **of Proposed**  **Rulemaking**

**NPV net**  **present value** 

**6­8**