EE-RM/STD48W40

EE-Rf/SDm - cj -7 o

TECHNICAL SUPPORT DOCUMENT:

ENERGY EFFICIENCY STANDARDS

FOR CONSUMER PRODUCTS:

RESIDENTIAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS

Including:

Regulatory Impact Analysis

January 2001

U.S. Department of Energy

Assistant Secretary,

Energy Efficiency & Renewable Energy

Office of Building Research and Standards

Washington, DC 20585

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 

TECHNICAL SUPPORT DOCUMENT: 

ENERGY EFFICIENCY STANDARDS 

FOR CONSUMER PRODUCTS: 

RESIDENTIAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS 

Including: 

Regulatory Impact Analysis 

January 2001 

U.S. Department of Energy 

Assistant Secretary, 

Energy Efficiency & Renewable Energy 

Office of Building Research and Standards 

Washington, DC 20585 
EE-RM/STD-98-440 -2.

This Document was prepared for the Department of Energy

by staff members of

Arthur D. Little, Inc.

and

Ernest Orlando Lawrence Berkeley National Laboratory

Energy Analysis Department

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *" 2~ 

This Document was prepared for the Department of Energy 

by staff members of 

Arthur D. Little, Inc. 

and 

Ernest Orlando Lawrence Berkeley National Laboratory 

Energy Analysis Department 
PREFACE EE-RM/STD-98-440 ~

A Technical Support Document (TSD) supports the rulemaking analyses by describing the

assumptions and methodology and discussing the engineering and economic results to a greater

breadth and depth than the more abbreviated information published in a Federal Register

announcement of a rulemaking action.

For the residential central air conditioners and central air-conditioning heat pumps

rulemaking, a preliminary TSD was posted to the Department's web site in November, 1999, in

support of a Supplemental Advanced Notice of Proposed Rulemaking, published in the Federal

Register on November 24, 1999. (64 FR 66306). A revised TSD was posted to the Department's

web site in October, 2000 in support of the Notice of Proposed Rulemaking (NOPR) published in

the Federal Register on October 5, 2000. (65 FR 59590).

Because the TSD for the Final Rule is similar to that for the NOPR, the Department decided

that the TSD for the Final Rule will consist of the October, 2000, version of the TSD plus the

following new or revised sections:

Preface

Revised Table of Contents

Appendix I: Errata Appendix

Appendix J: Supplemental Appendix

Appendix K: List of Acronyms and Abbreviations

(

EE-RM-STD-98-440 COMMENT 208

PREFACE EE-RM/STD-98-440 t ~ 0 ~ 

A Techirical Support Docwnent (TSD) supports the rulemaking analyses by describing the 

asswnptions and methodology and discussing the engineering and economic results to a greater 

breadth and depth than the more abbreviated information published in a Federal Register 

announcement of a rulemaking action. 

For the residential central air conditioners and central air-conditioning heat pwnps 

rulemaking, a preliminary TSD was posted to the Department's web site in November, 1999, in 

support of a Supplemental Advanced Notice of Proposed Rulemaking, published in the Federal 

Register on November 24, 1999. (64 FR 66306). A revised TSD was posted to the Department's 

web site in October, 2000 in support of the Notice of Proposed Rulemaking (NOPR) published in 

the Federal Register on October 5, 2000. (65 FR 59590). 

Because the TSD for the Final Rule is similar to that for the NOPR, the Department decided 

that the TSD for the Final Rule will consist of the October, 2000, version of the TSD plus the 

following new or revised sections: 

• Preface 

• Revised Table of Contents 

• Appendix I: Errata Appendix 

• Appendix J: Supplemental Appendix 

• Appendix K: List of Acronyms and Abbreviations 
EE-RM/STD-98-440 't 2'^

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION ............................................... 1-1

1.1 Purpose of Document ............................................. 1-1

1.2 Overview of Appliance Standards ................................... 1-1

1.3 Overview of Central Air Conditioner and Heat Pump Standards .......... 1-2

1.4 Structure of the Document ......................................... 1-5

CHAPTER 2: ANALYTICAL FRAMEWORK .................................... 2-1

2.1 Background .................................................... 2-3

2.2 Preliminary Market and Technology Assessment ....................... 2-3

2.2.1 Market Assessment ........................................ 2-3

2.2.2 Technology Assessment ..................................... 2-4

2.2.3 Preliminary Base Case Shipments Forecast ...................... 2-4

2.3 Screening Analysis ............................................... 2-5

2.3.1 Product Classes ........................................... 2-5

2.3.2 Baseline Units ............................................ 2-5

2.3.3 Technology Screening ...................................... 2-5

2.4 Engineering Analysis ............................................. 2-6

2.4.1 Efficiency Improvement Potential ............................. 2-6

2.4.1.1 Efficiency Level Approach ............................ 2-7

2.4.1.2 Reverse Engineering Approach ......................... 2-8

2.4.1.3 Design Option Approach .............................. 2-8

2.4.1.4 Outside Regulatory Changes affecting the Engineering

Analysis ........................................... 2-9

2.4.2 Manufacturer Costs ........................................ 2-9

2.4.2.1 Characterizing Uncertainty ............................ 2-9

2.4.2.2 Variability in Costs between Manufacturers ............... 2-9

2.4.3.3 Proprietary Design .................................. 2-10

2.5 Life-Cycle Cost (LCC) and Payback Analysis ........... .............. 2-10

2.5.1 LCC Spreadsheet Model ................................... 2-10

2.5.2 Equipment Prices ......................................... 2-11

2.6 Preliminary National Impacts Analysis ............................. 2-11

2.6.1 National Energy Savings (NES) Spreadsheet Model .............. 2-12

2.6.2 Shipm ents ............................................... 2-12

2.6.3 Net National Employment Impacts ........................... 2-13

2.7 Consumer Analysis ............................................ 2-13

2.7.1 Purchase Price Increases ................................... 2-14

2.7.2 Consumer Participation .................................... 2-14

2.8 Manufacturer Impact Analysis ..................................... 2-14

2.8.1 Industry Characterization ................................... 2-15

2.8.2 Industry Cash Flow ............... ...................... . 2-16

i

EE-RM-STD-98-440 COMMENT 208

EE-RMISTD-98-440 t 2 cJ ~ 

TABLE OF CONTENTS 

CHAPTER 1: INTRODUCTION ............................................... 1-1 

1.1 Purpose of Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1-1 

1.2 Overview of Appliance Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1-1 

1.3 Overview of Central Air Conditioner and Heat Pump Standards ........... 1-2 

1.4 Structure of the Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1-5 

CHAPTER 2: ANALYTICA):., FRAMEWORK .................................... 2-1 

·2.1 Background .................................................... 2-3 

2.2 Preliminary Market and Technology Assessment ....................... 2-3 

2.2.1 Market Assessment ........................................ 2-3 

2.2.2 Technology Assessment ..................................... 2-4 

2.2.3 Preliminary Base Case Shipments Forecast ...................... 2-4 

2.3 Screening Analysis ............................................... 2-5 

2.3.1 Product Classes ........................................... 2-5 

2.3.2 Baseline Units ............................................ 2-5 

2.3.3 Technology Screening ...................................... 2-5 

2.4 Engineering AIialysis ............................................. 2-6 

2.4.1 Efficiency Improvement Potential ............................. 2-6 

2.4.1.1 Efficiency Level Approach ............................ 2-7 

2.4.1.2 Reverse Engineering Approach ......................... 2-8 

2.4.1.3 Design Option Approach .............................. 2-8 

2.4.1.4 Outside Regulatory Changes affecting the Engineering 

Analysis ........................................... 2-9 

2.4.2 Manufacturer Costs ........................................ 2-9 

2.4.2.1 Characterizing Uncertainty ............................ 2-9 

2.4.2.2 Variability in Costs between Manufacturers ............... 2-9 

2.4.3.3 Proprietary Design .................................. 2-10 

2.5 Life-Cycle Cost (LCC) and Payback Analysis ......................... 2-10 

2.5.1 LCC Spreadsheet Model ................................... 2-10 

2.5.2 Equipment Prices ......................................... 2-11 

2.6 Preliminary National Impacts Analysis .............................. 2-11 

2.6.1 National Energy Savings (NES) Spreadsheet Model .............. 2-12 

2.6.2 Shipments ............................................... 2-12 

2.6.3 Net National Employment Impacts ........................... 2-13 

2.7 Consumer Analysis ............................................. 2-13 

2.7.1 Purchase Price Increases ................................... 2-14 

2.7.2 Consumer Participation .................................... 2-14 

2.8 Manufacturer Impact Analysis ..................................... 2-14 

2.8.1 Industry Characterization ................................... 2-15 

2.8.2 Industry Cash Flow ....................................... 2-16 
EE-RM/STD-98-440 '2 0

g

2.8.3 Manufacturer Sub-Group Analysis ........................... 2-16

2.8.4 Interview Process .................... ..................... 2-17

2.9 Competitive Impact Assessment ................................... 2-17

2.10 Utility Analysis ........................ ;....................... 2-18

2.11 Environmental Analysis .......................................... 2-18

2.12 Regulatory Impact Analysis ....................................... 2-19

CHAPTER 3: SCREENING OF DESIGN OPTIONS ............................... 3-1

CHAPTER 4: ENGINEERING ANALYSIS ...................................... 4-1

4.1 Description of Baseline Unit ....................................... 4-3

4.2 Manufacturing Costs ............................................. 4-4

4.2.1 Visits to Manufacturers and Component Suppliers . .............. 4-4

4.2.2 Selecting Representative Equipment ...................... 4-5

4.2.3 Disassembly and Inspection of Sample Equipment . .............. 4-6

4.2.4 Modeling the Production Facility ............................. 4-7

4.2.5 Compensating for the Commoditization Effect of Efficiency

Standards on Baseline Equipment ............................. 4-8

4.2.6 Estimating Parts, Assembly, and Overhead Costs . .............. 4-9

4.2.7 Generating Production Cost Results .......................... 4-10

4.2.8 Outbound Freight ......................................... 4-13

4.2.9 Industry Review .......................................... 4-13

4.2.9.1 ARIResults ....................................... 4-13

4.2.9.2 Second ARI Review ................................ 4-13

4.2.10 Comparison Between Reverse Engineering and ARI Relative Costs .. 4-14

4.2.11 Validation of ARI Results .................................. 4-17

4.3 Markups ...................................................... 4-17

4.3.1 Description of Distribution Chain ............................ 4-17

4.3.2 Determination of the Manufacturer Markup . ................ 4-18

4.3.3 Determination of Distributor Markup ......................... 4-20

4.3.4 Determination of Builder Markup ................... ......... 4-21

4.3.5 Determination of Dealer Markup ............................. 4-21

4.3.6 Determination of Sales Tax ................................. 4-21

4.3.7 Overall Markup .......................................... 4-22

4.4 Max Tech ..................................................... 4-23

4.4.1 The Vapor Compression Cycle .................... 4-23

4.4.2 Technically Feasible Efficiencies .......................... 4-24

4.4.2.1 Carnot Efficiency .................................. 4-24

4.4.2.2 Practical Barriers to Carot Cycle Equipment ............ 4-24

4.4.2.3 Irreversibilities .................................... 4-24

4.4.2.4 Practical Barriers to Eliminating Irreversibilities .......... 4-25

4.4.2.5 Parasitics ......................................... 4-26

4.4.2.6 Practical Barriers to Eliminating Parasitic Losses ......... 4-26

11

EE-RM-STD-98-440 COMMENT 208

.0 

EE-RM/STD-98-440 t Q. 0 ~ 

2.8.3 Manufacturer Sub-Group Analysis ........................... 2-16 

2.8.4 Interview Process ......................................... 2-17 

2.9 Competitive Impact Assessment ................................... 2-17 

2.10 Utility Analysis ........................ :....................... 2-18 

2.11 Environmental Analysis .......................................... 2-18 

2.12 Regulatory Impact Analysis ....................................... 2-19 

CHAPTER 3: SCREENING OF DESIGN OPTIONS ............................... 3-1 

CHAPTER 4: ENGINEERING ANALYSIS ...................................... 4-1 

4.1 Description of Baseline Unit ....................................... 4-3 

4.2 Manufacturing Costs ............................................. 4-4 

4.2.1 Visits to Manufacturers and Component Suppliers ................ 4-4 

4.2.2 Selecting Representative Equipment ........................... 4-5 

4.2.3 Disassembly and Inspection of Sample Equipment ................ 4-6 

4.2.4 Modeling the Production Facility ............................. 4-7 

4.2.5 Compensating for the Commoditization Effect of Efficiency 

Standards on Baseline Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-8 

4.2.6 Estimating Parts, Assembly, and Overhead Costs ................. 4-9 

4.2.7 Generating Production Cost Results .......................... 4-10 

4.2.8 Outbound Freight ......................................... 4-13 

4.2.9 Industry Review .......................................... 4-13 

4.2.9.1 ARI Results ....................................... 4-13 

4.2.9.2 Second ARI Review ................................ 4-13 

4.2.10 Comparison Between Reverse Engineering and ARI Relative Costs .. 4-14 

4.2.11 Validation of ARI Results .................................. 4-17 

4.3 Markups ...................................................... 4-17 

4.3.1 Description of Distribution Chain ............................ 4-17 

4.3.2 Determination of the Manufacturer Markup .................... 4-18 

4.3.3 Determination of Distributor Markup ......................... 4-20 

4.3.4 Determination of Builder Markup ............................ 4-21 

4.3.5 Determination of Dealer Markup ............................. 4-21 

4.3.6 Determination of Sales Tax ................................. 4-21 

4.3.7 Overall Markup .......................................... 4-22 

4.4 Max Tech ..................................................... 4-23 

4.4.1 The Vapor Compression Cycle .............................. 4-23 

4.4.2 Technically Feasible Efficiencies ............................ 4-24 

4.4.2.1 Carnot Efficiency .................................. 4-24 

4.4.2.2 Practical Barriers to Carnot Cycle Equipment ............ 4-24 

4.4.2.3 Irreversibilities .................................... 4-24 

4.4.2.4 Practical Barriers to Eliminating Irreversibilities .......... 4-25 

4.4.2.5 Parasitics ......................................... 4-26 

4.4.2.6 Practical Barriers to Eliminating Parasitic Losses ......... 4-26 

11 
EE-RM/STD-98-440 20 '

4.4.2.7 Max Tech ...................... ............. 4-27

4.4.3 Commercially Practical Efficiencies .......................... 4-27

4.4.4 Prospects for Near-Term Efficiency Gains ..................... 4-28

4.4.5 Not-in-kind Cooling Technologies ........................... 4-29

4.5 Emerging Technologies . ......................................... 4-29

4.5.1 Technological Advances to be Considered ..................... 4-30

4.5.1.1 Variable Speed Motor Controls ....................... 4-30

4.5.1.2 Advanced Compressors ................. .......... .. 4-31

4.5.1.3 Microchannel Heat Exchangers ....................... 4-32

4.5.2 Potential Cost Impacts of Emerging Technologies . ....... ....... 4-33

4.5.3 Potential of Emerging Technologies to Benefit Niche Products ..... 4-37

4.5.4 Issues Associated with Proprietary Technologies . .............. 4-37

4.6 Product Classifications ........................................... 4-37

4.6.1 The Case for Eliminating or Combining Existing Classes ......... 4-37

4.6.1.1 Heat Pump versus Cooling-only ....................... 4-37

4.6.1.2 Split versus Packaged ............................... 4-38

4.6.2 The Case for Creating Additional Classes ...................... 4-39

4.6.2.1 Classes for Different Cooling and Heating Capacities ...... 4-39

4.6.2.2 Classes for Niche Products ........................... 4-42

4.6.2.2.1 Ductless Splits ............................. 4-42

4.6.2.2.2 High Velocity, Small Duct .................... 4-43

4.6.2.2.3 Vertical Packaged, Wall Mounted .............. 4-43

4.6.2.2.4 Through-the-wall Condenser .................. 4-43

4.6.2.2.5 Through-the-wall Packaged ................... 4-44

4.6.2.3 Description of Niche Product Constraints . ....... ....... 4-44

4.6.2.3.1 Small Cabinet Size .......................... 4-44

4.6.2.3.2 Poor Airflow Configuration ................... 4-44

4.6.2.3.3 High Static Pressure ......................... 4-45

4.6.2.3.4 Low Evaporator Discharge Temperature ......... 4-45

4.6.2.4 Remedies for Niche Product Constraints ................ 4-45

4.6.2.4.1 More Efficient Components ................... 4-45

4.6.2.4.2 Larger Cabinet Size ......................... 4-46

4.6.2.4.3 Large Cabinet Size .......................... 4-46

4.6.2.4.4 Modifications for Testing .................... 4-46

4.6.2.4.5 Redefinition ............................... 4-46

4.6.2.5 Justification for New Classes Based on Niche Products ..... 4-47

4.6.3 Possible Loopholes Created by Product Class Definitions ......... 4-48

4.7 Alternative Refrigerants .......................................... 4-49

4.8 Other Analyses in the Engineering Analysis .......................... 4-50

4.8.1 Definition of the Relationship between SEER and HSPF in

Heat Pumps ................... ..................... . 4-50

4.8.2 Repair versus Replace ..................................... 4-53

4.9 Establishing a Minimum EER (95°F) Requirement .................... 4-54

iii

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ '2 0 ~ 

4.4.2.7 Max. Tech ........................................ 4-27 

4.4.3 Commercially Practical Efficiencies .......................... 4-27 

4.4.4 Prospects for Near-Term Efficiency Gains ..................... 4-28 

4.4.5 Not-in-kind Cooling Technologies ........................... 4-29 

4.5 Emerging Technologies .......................................... 4-29 

4.5.1 Technological Advances to be Considered ..................... 4-30 

4.5.1.1 Variable Speed Motor Controls ....................... 4-30 

4.5.1.2 Advanced Compressors ............................. 4-31 

4.5.1.3 Microchannel Heat Exchangers ....................... 4-32 

4.5.2 Potential Cost Impacts of Emerging Technologies ............... 4-33 

4.5.3 Potential of Emerging Technologies to Benefit Niche Products ..... 4-37 

4.5.4 Issues Associated with Proprietary Technologies ................ 4-37 

4.6 Product Classifications ........................................... 4-37 

4.6.1 The Case for Eliminating or Combining Existing Classes ......... 4-37 

4.6.1.1 Heat Pump versus Cooling-only ....................... 4-37 

4.6.1.2 Split versus Packaged ............................... 4-38 

4.6.2 The Case for Creating Additional Classes ...................... 4-39 

4.6.2.1 Classes for Different Cooling and Heating Capacities ...... 4-39 

4.6.2.2 Classes for Niche Products ........................... 4-42 

4.6.2.2.1 Ductless Splits ............................. 4-42 

4.6.2.2.2 High Velocity, Small Duct .................... 4-43 

4.6.2.2.3 Vertical Packaged, Wall Mounted .............. 4-43 

4.6.2.2.4 Through-the-wall Condenser .................. 4-43 

4.6.2.2.5 Through-the-wall Packaged ................... 4-44 

4.6.2.3 Description of Niche Product Constraints ............... 4-44 

4.6.2.3.1 Small Cabinet Size .......................... 4-44 

4.6.2.3.2 Poor Airflow Configuration ................... 4-44 

4.6.2.3.3 High Static Pressure ......................... 4-45 

4.6.2.3.4 Low Evaporator Discharge Temperature ......... 4-45 

4.6.2.4 Remedies for Niche Product Constraints ................ 4-45 

4.6.2.4.1 More Efficient Components ................... 4-45 

4.6.2.4.2 Larger Cabinet Size ......................... 4-46 

4.6.2.4.3 Large Cabinet Size .......................... 4-46 

4.6.2.4.4 Modifications for Testing .................... 4-46 

4.6.2.4.5 Redefinition ............................... 4-46 

4.6.2.5 Justification for New Classes Based on Niche Products ... : . 4-47 

4.6.3 Possible Loopholes Created by Product Class Definitions ......... 4-48 

4.7 Alternative Refrigerants .......................................... 4-49 

4.8 Other Analyses in the Engineering Analysis .......................... 4-50 

4.8.1 Definition of the Relationship between SEER and HSPF in 

Heat Pumps ............................................. 4-50 

4.8.2 Repair versus Replace ..................................... 4-53 

4.9 Establishing a Minimum EER (95°F) Requirement .................... 4-54 

III 
EE.RM/STD-98-440 120

4.9.1 Current Relationship between SEER and EER .................. 4-55

4.9.2 The Effect of Refrigerant Choice on EER and SEER ............. 4-57

4.9.3 Options for Possible EER Standards .......................... 4-57

4.9.4 EER-SEER Relationship in Current Equipment ................. 4-58

CHAPTER 5: LIFE-CYCLE COST and PAYBACK PERIOD ANALYSIS .............. 5-1

5.1 Introduction .................................................... 5-1

5.1.1 General Approach for LCC and PBP Analysis .............. 5-1

5.1.2 Overview of LCC, PBP, and Rebuttable PBP Inputs ........... 5-2

5.1.3 Use of Residential Energy Consumption Survey (RECS) in LCC and

PBP Analysis ............................................. 5-5

5.1.4 Commercial Building Analysis . .................. 5-7

5.2 Life-Cycle Cost (LCC) ............................................ 5-8

5.2.1 D efinition ................................................ 5-8

5.2.2 Total Installed Cost Inputs ................................... 5-9

5.2.2.1 Baseline Manufacturer Cost .......................... 5-10

5.2.2.2 Standard-level Manufacturer Cost Multipliers ............ 5-11

5.2.2.3 Manufacturer Markup ............................... 5-12

5.2.2.4 Distributor M arkup ................................. 5-13

5.2.2.5 Dealer M arkup .................................... 5-14

5.2.2.6 Builder M arkup .................................... 5-16

5.2.2.7 Sales Tax ......................................... 5-16

5.2.2.8 Installation Cost ................................... 5-17

5.2.2.9 Weighted-Average Total Installed Costs ................. 5-18

5.2.3 Operating Cost Inputs ..................................... 5-20

5.2.3.1 Baseline Annual Space-Cooling Energy Use ............. 5-25

5.2.3.2 Standard-Level Annual Space-Cooling Energy Use ........ 5-37

5.2.3.3 Baseline Annual Space-Heating Energy Use ............. 5-40

5.2.3.4 Standard-Level Annual Space-Heating Energy Use ........ 5-50

5.2.3.5 Average Electricity Price ............................ 5-54

5.2.3.6 Marginal Electricity Price ............................ 5-58

5.2.3.7 Electricity Price Trend .............................. 5-65

5.2.3.8 Repair Cost ....................................... 5-66

5.2.3.9 M aintenance Cost .................................. 5-68

5.2.3.10 Lifetime and Compressor Replacement Cost .......... 5-69

5.2.3.11 Discount Rate .................................... 5-71

5.2.3.12 Effective Date of Standard . ................ 5-76

5.2.3.13 Base Case Design ................................. 5-76

5.2.3.14 Standard Case Design ......... ............... 5-77

5.2.4 LCC Results ............................................. 5-77

5.2.4.1 LCC Breakdown based upon Average Input Values ....... 5-77

5.2.4.2 Baseline LCC Distributions .......................... 5-80

5.2.4.3 Change in LCC Results .............................. 5-83

iv

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 1t.o<O~ 

4.9.1 Current Relationship between SEER and EER .................. 4-55 

4.9.2 The Effect of Refrigerant Choice on EER and SEER ............. 4-57 

4.9.3 Options for Possible EER Standards .......................... 4-57 

4.9.4 EER-SEER Relationship in Current Equipment ................. 4-58 

CHAPTER 5: LIFE-CYCLE COST and PAYBACK PERIOD ANALYSIS .............. 5-1 

5.1 Introduction. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1 

5.1.1 General Approach for LCC and PBP Analysis ................... 5-1 

5.1.2 Overview of LCC, PBP, and Rebuttable PBP Inputs ............... 5-2 

5.1.3 Use of Residential Energy Consumption Survey (RECS) in LCC and 

PBP Analysis .............................................. 5-5 

5.1.4 Commercial Building Analysis ............................... 5-7 

5.2 Life-Cycle Cost (LCC) ............................................ 5-8 

5.2.1 Definition ................................................ 5-8 

5.2.2 Total Installed Cost Inputs ................................... 5-9 

5.2.2.1 Baseline Manufacturer Cost .......................... 5-10 

5.2.2.2 Standard-level Manufacturer Cost Multipliers ............ 5-11 

5.2.2.3 Manufacturer Markup ............................... 5-12 

5.2.2.4 Distributor Markup ................................. 5-13 

5.2.2.5 Dealer Markup .................................... 5-14 

5.2.2.6 Builder Markup .................................... 5-16 

5.2.2.7 Sales Tax ......................................... 5-16 

5.2.2.8 Installation Cost ................................... 5-17 

5.2.2.9 Weighted-Average Total Installed Costs ................. 5-18 

5.2.3 Operating Cost Inputs ..................................... 5-20 

5.2.3.1 Baseline Annual Space-Cooling Energy Use ............. 5-25 

5.2.3.2 Standard-Level Annual Space-Cooling Energy Use ........ 5-37 

5.2.3.3 Baseline Annual Space-Heating Energy Use ............. 5-40 

5.2.3.4 Standard-Level Annual Space-Heating Energy Use ........ 5-50 

5.2.3.5 Average Eleetricity Price ............................ 5-54 

5.2.3.6 Marginal Electricity Price ............................ 5-58 

5.2.3.7 Electricity Price Trend .............................. 5-65 

5.2.3.8 Repair Cost ....................................... 5-66 

5.2.3.9 Maintenance Cost .................................. 5-68 

5.2.3.10 Lifetime and Compressor Replacement Cost ............ 5-69 

5.2.3 .11 Discount Rate .................................... 5-71 

5.2.3.12 Effective Date of Standard .......................... 5-76 

5.2.3.13 Base Case Design ................................. 5-76 

5.2.3.14 Standard Case Design .............................. 5-77 

5.2.4 LCC Results ............................................. 5-77 

5.2.4.1 LCC Breakdown based upon Average Input Values ....... 5-77 

5.2.4.2 Baseline LCC Distributions .......................... 5-80 

5.2.4.3 Change in LCC Results .............................. 5-83 

IV 
EE-RM/STD-98-440 ~ 2 Dy

5.2.4.4 LCC Results based on +2% Threshold .................. 5-88

5.2.4.5 LCC Scenarios .................................... 5-93

5.3 Distribution of Payback Period ................................... 5-103

5.3.1 M etric ................................................. 5-103

5.3.2 Inputs ................................................. 5-103

5.3.3 Payback Period Results ................................... 5-103

5.4 Rebuttable Payback Period ...................................... 5-109

5.4.1 M etric ................................................. 5-109

5.4.2 Inputs ................................................. 5-110

5.4.3 Rebuttable Payback Period Results .......................... 5-110

5.5 User Instructions for Spreadsheets ................................. 5-114

CHAPTER 6: SHIPMENTS ANALYSIS ........................................ 6-1

6.1 Introduction .................................................... 6-1

6.1.1 Definition of Market Segments and Ownership Categories ......... 6-1

6.1.2 Shipment Model Features ................................... 6-4

6.1.3 Review of Other Published Research .................. ....... 6-5

6.2 M ethod ........................................................ 6-6

6.2.1 Definitions .......................... ..................... 6-6

6.2.1.1 Stock ............................................. 6-6

6.2.1.2 Events ............................................ 6-6

6.2.1.3 D ecisions .............................. .. ..... ... 6-7

6.2.2 Purchases from New Housing ................................ 6-7

6.2.2.1 Definition ......................................... 6-7

6.2.2.2 Approach .......................................... 6-7

6.2.2.3 Current Assumptions ................................ 6-9

6.2.3 Existing Housing with a Regular CAC-HP ..................... 6-10

6.2.3.1 Definition ........................................ 6-10

6.2.3.2 Approach ......................................... 6-10

6.2.3.3 Current Assumptions ...................... ......... 6-16

6.2.4 Remodeled Households .................................... 6-16

6.2.4.1 Definition ........................................ 6-16

6.2.4.2 Approach ........................................ 6-17

6.2.4.3 Current Assumptions ...................... ......... 6-18

6.2.5 Housing with an Extended-Life CAC-HP ...................... 6-18

6.2.5.1 Definition ........................................ 6-18

6.2.5.2 Approach ......................................... 6-18

6.2.5.3 Current Assumptions ...................... ......... 6-20

6.2.6 Accounting Equations ............................ ......... 6-20

6.3 Model ........................................................ 6-22

6.3.1 Logit Probability of Purchase Model .......................... 6-22

6.3.1.1 Logit Equation ..................................... 6-22

6.3.2 Determination of Market Shares ............................. 6-24

v

EE-RM-STD-98-440 COMMENT 208

f:E-RM/STD-98-440 *' '2 o'{ 

5.2.4.4 LCC Results based on ±2% Threshold .................. 5-88 

5.2.4.5 LCC Scenarios .................................... 5-93 

5.3 Distribution of Payback Period ................................... 5-103 

5.3.1 Metric ................................................. 5-103 

5.3.2 Inputs ................................................. 5-103 

5.3.3 Payback Period Results ................................... 5-103 

5.4 Rebuttable Payback Period ...................................... 5-109 

5.4.1 Metric ................................................. 5-109 

5.4.2 Inputs ................................................. 5-110 

5.4.3 Rebuttable Payback Period Results .......................... 5-110 

5.5 User Instructions for Spreadsheets ................................. 5-114 

CHAPTER 6: SHIPMENTS ANALYSIS ........................................ 6-1 

6.1 Introduction .................................................... 6-1 

6.1.1 Definition of Market Segments and Ownership Categories ......... 6-1 

6.1.2 Shipment Model Features ................................... 6-4 

6.1.3 Review of Other Published Research .......................... 6-5 

6.2 Method ........................................................ 6-6 

6.2.1 Definitions ............................................... 6-6 

6.2.1.1 Stock ............................................. 6-6 

6.2.1.2 Events ............................................ 6-6 

6.2.1.3 Decisions .......................................... 6-7 

6.2.2 Purchases from New Housing ................................ 6-7 

6.2.2.1 Definition ......................................... 6-7 

6.2.2.2 Approach .......................................... 6-7 

6.2.2.3 Current Assumptions ................................ 6-9 

6.2.3 Existing Housing with a Regular CAC-HP ..................... 6-10 

6.2.3.1 Definition ........................................ 6-10 

6.2.3.2 Approach ......................................... 6-10 

6.2.3.3 Current Assumptions ............................... 6-16 

6.2.4 Remodeled Households .................................... 6-16 

6.2.4.1 Definition ........................................ 6-16 

6.2.4.2 Approach ......................................... 6-17 

6.2.4.3 Current Assumptions ............................... 6-18 

6.2.5 Housing with an Extended-Life CAC-HP ...................... 6-18 

6.2.5.1 Definition ........................................ 6-18 

6.2.5.2 Approach ......................................... 6-18 

6.2.5.3 Current Assumptions ............................... 6-20 

6.2.6 Accounting Equations ..................................... 6-20 

6.3 Model ........................................................ 6-22 

6.3.1 Logit Probability of Purchase Model .......................... 6-22 

6.3.1.1 Logit Equation ....... '" ........................... 6-22 

6.3.2 Determination of Market Shares ............................. 6-24 

v 
EE-RM/STD-98-440 - O 0 

6.3.2.1 Eligible Market Share for AC ......................... 6-24

6.3.2.2 Market Share for CAC versus HP ...................... 6-25

6.3.2.3 Market Share of Split vs. Package systems ............... 6-25

6.3.2.4 Regional Market Shares ............................. 6-26

6.3.3 Price . .................................................. 6-26

6.3.2.1 Average Price Accounting ........................... 6-26

6.3.2.2 Historical Operating Cost Estimates .................... 6-27

6.3.2.3 Post-Standard Price Scenarios ........................ 6-27

6.3.4 Model Calibration ........................................ 6-28

6.3.2.1 Remodels for Early Replacments ...................... 6-28

6.3.2.2 Market Discount Rate ............................... 6-28

6.3.2.3 Price/Income Elasticity .............................. 6-28

6.3.2.4 Evaluation of Fuel Switching Elasticity ................. 6-29

6.3.2.5 Regional Shift Effects ............................... 6-29

6.4 Results ..................................................... 6-30

6.4.1 Trial Standard Levels ...................................... 6-30

6.4.2 Shipment Results ................ ....................... 6-31

6.4.2.1 Sensitivity to AEO2000 Forecasts ..................... 6-33

6.4.3 Shipment Scenarios ....................................... 6-34

6.4.3.1 Manufacturer Cost Scenario .......................... 6-34

6.4.3.2 Lifetime Scenario .................................. 6-35

6.4.4 Sales and Shipments Impacts of Efficiency-Induced Price Changes .. 6-36

6.4.5 Impacts on Mean Age, Mean Lifetime, Early Replacements, and

Total Repairs of CAC-HP .................................. 6-39

CHAPTER 7: NATIONAL IMPACTS ANALYSIS ................................ 7-1

7.1 Introduction .................................................... 7-1

7.1.1 Methodology and Definitions ................... ............. 7-1

7.2 National Energy Savings (NES) ..................................... 7-2

7.2.1 NES Definition ............................................ 7-2

7.2.2 NES Inputs .............................................. 7-3

7.2.2.1 National Annual Energy Consumption (AEC) ............. 7-3

7.2.2.2 National Energy Savings (NES) ........................ 7-4

7.2.2.3 Source Conversion Factor ............................. 7-4

7.2.2.4 Stock of Air Conditioners and Heat Pumps by Vintage

(STOCKv) ......................................... 7-6

7.2.2.5 Annual Energy per Unit (UEC) ......................... 7-7

7.2.2.6 Shipments ........................................ 7-12

7.2.3 Results ................................................ . 7-12

7.3 Net Present Value (NPV) ......................................... 7-12

7.3.1 NPV Definition ..................... ..................... 7-12

7.3.2 NPV Inputs ............................................. 7-13

7.3.2.1 Discount Factor .................................... 7-14

vi

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ 2. 0 ~ 

6.3.2.1 Eligible Market Share for AC ......................... 6-24 

6.3.2.2 Market Share for CAC versus HP ...................... 6-25 

6.3.2.3 Market Share of Split vs. Package systems ............... 6-25 

6.3.2.4 Regional Market Shares ............................. 6-26 

6.3.3 Price ................................................... 6-26 

6.3.2.1 Average Price Accounting ........................... 6-26 

6.3.2.2 Historical Operating Cost Estimates .................... 6-27 

6.3.2.3 Post-Standard Price Scenarios ........................ 6-27 

6.3.4 Model Calibration ........................................ 6-28 

6.3.2.1 Remodels for Early Replacments ...................... 6-28 

6.3.2.2 Market Discount Rate ............................... 6-28 

6.3.2.3 PricelIncome Elasticity .............................. 6-28 

6.3.2.4 Evaluation of Fuel Switching Elasticity ................. 6-29 

6.3.2.5 Regional Shift Effects ............................... 6-29 

6.4 Results ....................................................... 6-30 

6.4.1 Trial Standard Levels ...................................... 6-30 

6.4.2 Shipment Results ......................................... 6-31 

6.4.2.1 Sensitivity to AE02000 Forecasts ..................... 6-33 

6.4.3 Shipment Scenarios ....................................... 6-34 

6.4.3.1 Manufacturer Cost Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . 6-34 

6.4.3.2 Lifetime Scenario .................................. 6-35 

6.4.4 Sales and Shipments Impacts of Efficiency-Induced Price Changes .. 6-36 

6.4.5 Impacts on Mean Age, Mean Lifetime, Early Replacements, and 

Total Repairs ofCAC-HP .................................. 6-39 

CHAPTER 7: NATIONAL IMPACTS ANALySIS ................................ 7-1 

7.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-1 

7.1.1 Methodology and Definitions ................................ 7-1 . 

7.2 National Energy Savings (NES) ..................................... 7-2 

7.2.1 NES Definition ............................................ 7-2 

7.2.2 NES Inputs .............. , ................................ 7-3 

7.2.2.1 National Annual Energy Consumption (AEC) ............. 7-3 

7.2.2.2 National Energy Savings (NES) ........................ 7-4 

7.2.2.3 Source Conversion Factor ............................. 7-4 

7.2.2.4 Stock of Air Conditioners and Heat Pumps by Vintage 

(STOCKv) ......................................... 7-6 

7.2.2.5 Annual Energy per Unit (UEC) ......................... 7-7 

7.2.2.6 Shipments ........................................ 7-12 

7.2.3 Results ................................................. 7-12 

7.3 Net Present Value (NPV) ........................................ , 7-12 

7.3.1 NPV Definition .......................................... 7-12 

7.3.2 NPV Inputs .............................................. 7-13 

7.3.2.1 Discount Factor .................................... 7-14 

vi 
EE-RM/STD-98-440 0°

7.3.2.2 Present Value of Costs (PVC) ......................... 7-14

7.3.2.3 Present Value of Savings (PVS) ....................... 7-15

7.3.2.4 Total Equipment Cost ............................... 7-16

7.3.2.5 Total Operating Cost Savings ......................... 7-17

7.4 NES and NPV Results ........................................... 7-18

7.4.1 Assumptions ............................................. 7-19

7.4.2 Trial Standard Levels ...................................... 7-21

7.4.3 NES Results ............................................. 7-22

7.4.3.1 NES Sensitivity to AEO2000 Forecasts ................. 7-23

7.4.4 Annual Costs and Savings .................................. 7-25

7.4.5 NPV Results ............................................. 7-28

7.4.5.1 NPV Sensitivity to AEO2000 Forecasts ................. 7-30

7.4.6 NES and NPV Scenarios .................................. 7-33

7.4.6.1 Manufacturer Cost Scenario .......................... 7-33

7.4.6.2 Lifetime Scenario .................................. 7-38

7.4.6.3 Discount Rate Scenario ..................... ......... 7-41

7.4.7 NES and NPV Results as shown in Spreadsheet Model ........... 744

7.5 User Instructions for Spreadsheet .................................. 7-46

CHAPTER 8: MANUFACTURER IMPACT ANALYSIS .......................... 8-1

8.1 Manufacturer Impact Analysis Methodology ........................... 8-1

8.1.1 Phase 1: Industry Profile .................................... 8-1

8.1.2 Phase 2: Industry Cash Flow Analysis .......................... 8-2

8.1.3 Phase 3: Sub-Group Impact Analysis .......................... 8-2

8.1.3.1 Major Manufacturer Sub-Groups . ...................... 8-2

8.1.3.2 Small Manufacturer Sub-Group ........................ 8-3

8.1.3.3 Compressor Supplier Sub-Group ....................... 8-3

8.2 Industry Profile .................................................. 8-3

8.2.1 Product Classes ........................................... 8-4

8.2.2 Market Shares and Distribution .............................. 8-4

8.2.3 Sales ........... ...................................... 8-5

8.2.4 Price Trends ........................................... 8-6

8.3 GRIM Inputs and Assumptions ..................................... 8-8

8.3.1 Sources of GRIM Inputs .................................... 8-8

8.3.2 Overview of the GRIM ................................... 8-10

8.3.3 Financial Parameters ............................... 8-11

8.3.4 Corporate Discount Rate ................................... 8-12

8.3.5 Shipm ents ............................................... 8-14

8.3.6 Production Costs .......................... . ........ 8-15

8.3.7 M arkups ................................................ 8-16

8.3.8 Conversion Costs ................................. 8-17

8.3.8.1 Capital Expenditures ................................ 8-19

8.3.8.2 Non-capital Expenditures ............................ 8-21

vii

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 'tf"2 01' 

7.3.2.2 Present Value of Costs (PVC) ......................... 7-14 

7.3.2.3 Present Value of Savings (PVS) ....................... 7-15 

7.3.2.4 Total Equipment Cost ............................... 7-16 

7.3.2.5 Total Operating Cost Savings ......................... 7-17 

7.4 NES and NPV Results .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-18 

7.4.1 Assumptions ............................................. 7-19 

7.4.2 Trial Standard Levels ...................................... 7-21 

7.4.3 NES Results ............................................. 7-22 

7.4.3.1 NES Sensitivity to AE02000 Forecasts ................. 7-23 

7.4.4 Annual Costs and Savings .................................. 7-25 

7.4.5 NPV Results ............................................. 7-28 

7.4.5.1 NPV Sensitivity to AE02000 Forecasts ................. 7-30 

7.4.6 NES and NPV Scenarios ................................... 7-33 

7.4.6.1 Manufacturer Cost Scenario .......................... 7-33 

7.4.6.2 Lifetime Scenario .................................. 7-38 

7.4.6.3 Discount Rate Scenario .............................. 7-41 

7.4.7 NES and NPV Results as shown in Spreadsheet Model ........... 7-44 

7.5 User Instructions for Spreadsheet .................................. 7-46 

CHAPTER 8: MANUFACTURER IMPACT ANALYSIS .......................... 8-1 

8.1 Manufacturer Impact Analysis Methodology ........................... 8-1 

8.1.1 Phase 1: Industry Profile .................................... 8-1 

8.1.2 Phase 2: Industry Cash Flow Analysis .......................... 8-2 

8.1.3 Phase 3: Sub-Group Impact Analysis .......................... 8-2 

8.1.3.1 Major Manufacturer Sub-Groups ....................... 8-2 

8.1.3.2 Small Manufacturer Sub-Group ........................ 8-3 

8.1.3.3 Compressor Supplier Sub-Group ....................... 8-3 

8.2 Industry Profile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-3 

8.2.1 Product Classes ........................................... 8-4 

8.2.2 Market Shares and Distribution .............................. 8-4 

8.2.3 Sales ................................................... 8-5 

8.2.4 Price Trends ............................................. 8-6 

8.3 GRIM Inputs and Assumptions ..................................... 8-8 

8.3.1 Sources of GRIM Inputs .................................... 8-8 

8.3.2 Overview of the GRIM .................................... 8-10 

8.3.3 Financial Parameters ...................................... 8-11 

8.3.4 Corporate Discount Rate ................................... 8-12 

8.3.5 Shipments .......................... _ .................... 8-14 

8.3.6 Production Costs ......................................... 8-15 

8.3.7 Markups ................................................ 8-16 

8.3.8 Conversion Costs ......................................... 8-17 

8.3.8.1 Capital Expenditures ............. '" ..... '" ........ 8-19 

8.3.8.2 Non-capital Expenditures ............................ 8-21 

Vll 
EE-RM/STD-98- 4 4 0 $ 'a

8.4 Industry Financial Impacts ........................................ 8-22

8.4.1 Scenarios ............................................... 8-23

8.4.2 Trial Standard Levels ............... . .................... 8-24

8.4.3 Manufacturer Subgroups ................................... 8-25

8.4.4 Impacts on Industry Net Present Value (INPV) . ............... 8-26

8.4.5 Impacts on Return on Invested Capital (ROIC) . ............... 8-29

8.4.6 Impacts on Annual Cash Flow ............................... 8-30

8.4.7 Impacts by Efficiency Level ................................. 8-32

8.4.8 Efficiency Scenario Assessment ............................. 8-35

8.5 Subgroup Impacts .............................................. 8-41

8.5.1 Major Manufacturer Subgroups -- Lower Operating Cost and Higher

Operating Cost ............................. .............. 8-42

8.5.1.1 Differences in Assumptions between the Subgroups ....... 8-42

8.5.1.2 Net Present Value Impacts ........................... 8-44

8.5.1.2.1 Lower Operating Cost Subgroup NPV Results ... 8-45

8.5.1.2.2 Higher Operating Cost Subgroup NPV Results ... 8-46

8.5.1.3 Impacts on Return on Invested Capital (ROIC) ........... 8-47

8.5.1.4 Impacts on Annual Cash Flow ........................ 8-49

8.5.1.4.1 Lower Operating Cost Subgroup Cash Flow

Results .................................. 8-49

8.5.1.4.2 Higher Operating Cost Subgroup Cash Flow

Results .................................. 8-51

8.5.1.5 Summary of Impacts on Major Manufacturer Subgroups .... 8-53

8.5.2 Niche Product Manufacturer Subgroup ........................ 8-54

8.5.3 Compressor Supplier Subgroup .............................. 8-55

8.6 Other Impacts ................................... ............... 8-56

8.6.1 Employment ............................................. 8-56

8.6.2 Production Capacity ....................................... 8-57

8.6.3 Exports ................................................. 8-57

8.7 Cumulative Regulatory Burden .................................... 8-58

8.7.1 Federal Regulations on Central Air Conditioners and other Products

Produced by the Same Manufacturers ......................... 8-58

8.7.2 Pending Regulations and Regulations at the State Level ........... 8-62

8.8 Conclusions ............................. .............. ........ 8-63

8.8.1 Trial Standard Level 1 (TSL 1) .............................. 8-63

8.8.2 Trial Standard Level 2 (TSL 2) .............................. 8-63

8.8.3 Trial Standard Level 3 (TSL 3) .............................. 8-64

8.8.4 Trial Standard Level 4 (TSL 4) .............................. 8-64

CHAPTER 9: COMPETITIVE IMPACT ANALYSIS ............................... 9-1

9.1 Introduction ....................................... 9-1

9.2 M ethodology ................................................... 9-1

9.3 R esults ........................................................ 9-1

viii

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 1t '? 0 ~ 

8.4 Industry Financial Impacts ........................................ 8-22 

8.4.1 Scenarios ............................................... 8-23 

8.4.2 Trial Standard Levels ..................................... 8-24 

8.4.3 Manufacturer Subgroups ................................... 8-25 

8.4.4 Impacts on Industry Net Present Value (INPV) ................. 8-26 

8.4.5 Impacts on Return on Invested Capital (ROlC) ................. 8-29 

8.4.6 Impacts on Annual Cash Flow ............................... 8-30 

8.4.7 Impacts by Efficiency Level. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-32 

8.4.8 Efficiency Scenario Assessment ............................. 8-35 

8.5 Subgroup Impacts .............................................. 8-41 

8.5.1 Major Manufacturer Subgroups -- Lower Operating Cost and Higher 

Operating Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-42 

8.5.1.1 Differences in Assumptions between the Subgroups ....... 8-42 

8.5.1.2 Net Present Value Impacts ........................... 8-44 

8.5.1.2.1 Lower Operating Cost Subgroup NPV Results ... 8-45 

8.5.1.2.2 Higher Operating Cost Subgroup NPV Results ... 8-46 

8.5.1.3 Impacts on Return on Invested Capital (ROlC) ........... 8-47 

8.5.1.4 Impacts on Annual Cash Flow ........................ 8-49 

8.5.1.4.1 Lower Operating Cost Subgroup Cash Flow 

Results .................................. 8-49 

8.5.1.4.2 Higher Operating Cost Subgroup Cash Flow 

Results .................................. 8-51 

8.5.1.5 Summary of Impacts on Major Manufacturer Subgroups .... 8-53 

8.5.2 Niche Product Manufacturer Subgroup ........................ 8-54 

8.5.3 Compressor Supplier Subgroup .............................. 8-55 

8.6 Other Impacts .................................................. 8-56 

8.6.1 Employment............................................. 8-56 

8.6.2 Production Capacity ....................................... 8-57 

8.6.3 Exports ................................................. 8-57 

8.7 Cumulative Regulatory Burden .................................... 8-58 

8.7.1 Federal Regulations on Central Air Conditioners and other Products 

Produced by the Same Manufacturers ......................... 8-58 

8.7.2 Pending Regulations and Regulations at the State Level ........... 8-62 

8.8 Conclusions ................................................... 8-63 

8.8.1 Trial Standard Levell (TSL 1) .............................. 8-63 

8.8.2 Trial Standard Level 2 CTSL 2) .............................. 8-63 

8.8.3 Trial Standard Level 3 (TSL 3) .............................. 8-64 

8.8.4 Trial Standard Level 4 (TSL 4) .............................. 8-64 

CHAPTER 9: COMPETITIVE IMPACT ANALYSIS ............................... 9-1 

9.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-1 

9.2 Methodology ................................................... 9-1 

9.3 Results ........................................................ 9-1 

Vlll 
EE-RM/STD-98-440 ~ 2 °O

CHAPTER 10: CONSUMER SUB-GROUP ANALYSIS ........................... 10-1

10.1 Introduction ................................................... 10-1

10.2 Sub-Group Analysis Defined ...................................... 10-1

10.2.1 Inputs to the Life-Cycle Cost and Payback Period Sub-Group

Analysis ................................................ 10-1

10.2.2 Life-Cycle Cost and Payback Period Consumer Sub-Group Results . 10-2

CHAPTER 11: UTILITY IMPACTS ANALYSIS ................................. 11-1

11.1 Summary ..................................................... 11-1

11.2 Purpose of the Analysis .......................................... 11-1

11.3 Assumptions ....................................... 11-2

11.4 M ethods ...................................................... 11-3

11.5 Results ....................................................... 11-4

11.5.1 Central Air Conditioner and Heat Pump Standard Level Results .... 11-4

11.5.2 Economic Growth Cases ................................... 11-4

CHAPTER 12: NET NATIONAL EMPLOYMENT IMPACT ANALYSIS ............. 12-1

APPENDIX A: APPROACH FOR UNCERTAINTY AND VARIABILITY ............ A-1

A.1 Introduction ................................................... A-i

A .2 U ncertainty .................................................... A -i

A.3 Variability .................................................... A-i

A.4 Approaches to Uncertainty and Variability ........................... A-2

A.5 Probability Analysis and the Use of Crystal Ball ....................... A-2

APPENDIX B: DETAILED REVERSE ENGINEERING COST ESTIMATES AND

EQUIPMENT DATA ............ ......................... B-1

APPENDIX C: TECHNICAL DESCRIPTION OF THE REVERSE ENGINEERING COST

ESTIMATION METHODOLOGY ................................ C-1

C.1 Introduction .................................................... C-l

C.2 Tear-Downs .................................................... C-l

C.2.1 Split Air Conditioner Tear-down ............................. C-1

C.2.2 Packaged Heat Pump Tear-Down ............................. C-2

C.2.3 Confirming the Tear-Down Results ........................... C-2

C.3 Selecting Additional Equipment Samples ....................... C-4

C.4 Creating the Bill-of-Materials ...................................... C-4

C.5 Additional Production Cost Data ................................... C-6

C.5.1 Labor and Factory Overhead ................................. C-6

C.5.2 Depreciation ............................................. C-6

C.5.3 Parts and M aterials .................................. ...... C-8

C.5.4 Coil Fabrication Costs ...................................... C-9

C.6 Structure of the Cost Models .................................... C-9

ix

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 t·~ O~· 

CHAPTER 10: CONSUMER SUB-GROUP ANALYSIS ........................... 10-1 

10.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10-1 

10.2 Sub-Group Analysis Defmed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10-1 

10.2.1 Inputs to the Life-Cycle Cost and Payback Period Sub-Group 

Analysis ................................................ 10-1 

10.2.2 Life-Cycle Cost and Payback Period Consumer Sub-Group Results . 10-2 

CHAPTER 11: UTILITY IMPACTS ANALYSIS ................................. 11-1 

11.1 Summary ..................................................... 11-1 

11.2 Purpose of the Analysis .......................................... 11-1 

11.3 Assumptions ........... : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 11-2 

11.4 Methods ...................................................... 11-3 

11.5 Results ....................................................... 11-4 

11.5.1 Central Air Conditioner and Heat Pump Standard Level Results .... 11-4 

11.5.2 Economic Growth Cases ................................... 11-4 

CHAPTER 12: NET NATIONAL EMPLOYMENT IMPACT ANALySIS ............. 12-1 

APPENDIX A: APPROACH FOR UNCERTAINTY AND V ARlABILITY ............ A-I 

A:l Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. A-I 

A.2 Uncertainty .................................................... A-I 

A.3 Variability .................................................... A-I 

AA Approaches to Uncertainty and Variability ........................... A-2 

A.5 Probability Analysis and the Use of Crystal Ball. . . . . . . .. . . . . . . . . . . . . .. A-2 

APPENDIX B: DETAILED REVERSE ENGINEERING COST ESTIMATES AND 

EQUIPMENT DATA .......................................... B-1 

APPENDIX C: TECHNICAL DESCRIPTION OF THE REVERSE ENGINEERING COST 

ESTIMATION METHODOLOGY ................................ C-l 

C.l Introduction .................................................... C-I 

C.2 Tear-Downs ....... " ., ......................................... C-l 

C.2.1 Split Air Conditioner Tear-down ............................. C-l 

C.2.2 Packaged Heat Pump Tear-Down ............................. C-2 

C.2.3 Confmning the Tear-Down Results ........................... C-2 

C.3 Selecting Additional Equipment Samples ............................ C-4 

CA Creating the Bill-of-Materials ...................................... C-4 

C.5 Additional Production Cost Data ................................... C-6 

C.5.1 Labor and Factory Overhead ................................. C-6 

C.5.2 Depreciation ............................................. C-6 

C.5.3 Parts and Materials ........................................ C-8 

C.5A Coil Fabrication Costs ...................................... C-9 

C.6 Structure of the Cost Models ...................................... C-9 

ix 
EE-RM/STD-98-440 , 2 0

C.6.1 M ain Cost M odel ............................. ............ C-9

C.6.1.1 Global Controls Sheet .............................. C-10

C.6.1.2 Manufacturer Data Sheet ............................ C-l 1

C.6.1.3 Purchased Parts Sheet .............................. C-12

C.6.1.4 Bill-of-Materials Sheet ............................. C-13

C.6.1.5 Equipment Data Sheet .............................. C-13

C.6.2 Coil Model ............................................ C-14

APPENDIX D: ESTIMATION OF THE DISTRIBUTOR/WHOLESALER AND

DEALER/CONTRACTOR MARKUPS ON INCREMENTAL CENTRAL

AIR CONDITIONER AND HEAT PUMP COSTS ................... D-l

D.1 Introduction .......................... ......................... D-l

D.2 Comparison of Supplemental ANOPR and NOPR Markup Calculations .... D-2

D.3 Average, Disaggregated, and Incremental Markups . ....... ......... D-4

D.4 Analysis of Financial Statements ................................... D-6

D.4.1 Distributors ............................................. D-6

D.4.2 Dealers/Contractors .............................. ......... D-7

D.5 Econometric Analysis of U.S. Census Bureau Data . .............. D-7

D.5.1 Distributor Markups ....................................... D-8

D.5.2 Dealer Markups ........................................ D-10

D.6 Sensitivity of Test of Marginal Markup Measurements ................ D-11

D.7 Summary of Results ........................................... D-1

D.8 Conclusion ................................................... D-14

APPENDIX E: LIFE-CYCLE COST RESULTS AND DETERMINATION OF 30-YEAR

AVERAGE COOLING DEGREE DAY AND HEATING DEGREE DAY

DATA ...................................... ............ . E-l

E. 1 Life-Cycle Cost Results ........................................... E-1

E. .1 Split System Air Conditioner Results .......................... E-2

E.1.2 Split System Heat Pump Results .............................. E-6

E. 1.3 Single Package Air Conditioner Results ....................... E-10

E.1.4 Single Package Heat Pump Results ........................... E-14

E.2 Determination of 30-year Average Cooling Degree Day and Heating Degree

Day Data ..................................................... E-18

APPENDIX F: NATIONAL ENERGY SAVINGS AND NATIONAL NET PRESENT

VALUE RESULTS ............................................. F-l

F.1 Split System Central Air Conditioners ............................... F-2

F.2 Split System Heat Pumps .......................................... F-6

F.3 Single Package System Central Air Conditioners ...................... F-10

F.4 Single Package System Heat Pumps ................................ F-14

x

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 12 D~ 

C.6.1 Main Cost Model ......................................... C-9 

C.6.1.1 Global Controls Sheet .............................. C-IO 

C.6.1.2 Manufacturer Data Sheet ............................ C-ll 

C.6.1.3 Purchased Parts Sheet .............................. C-12 

C.6.1.4 Bill-of-Materials Sheet ............................. C-13 

C.6.l.S Equipment Data Sheet .............................. C-13 

C.6.2 Coil Model ............................................. C-14 

APPENDIX D: ESTIMATION OF THE DISTRIBUTORIWHOLESALER AND 

DEALER/CONTRACTOR MARKUPS ON INCREMENTAL CENTRAL 

AIR CONDIT10NER AND HEAT PUMP COSTS ................... D-l 

D.l lntroduction ................................................... D-l 

D.2 Comparison of Supplemental ANOPR and NOPR Markup Calculations . . .. D-2 

D.3 Average, Disaggregated, and lncremental Markups .................... D-4 

DA Analysis of Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. D-6 

DA.l Distributors ............................................. D-6 

D.4.2 Dealers/Contractors ....................................... D-7 

D.5 Econometric Analysis of U.S. Census Bureau Data .................... D-7 

D.S.l Distributor Markups ....................................... D-8 

D.S.2 Dealer Markups ......................................... D-I0 

D.6 Sensitivity of Test of Marginal Markup Measurements ................ D-l1 

D.7 Summary of Results ............................................ D-l1 

D.8 Conclusion ................................................... D-14 

APPENDIX E: LIFE-CYCLE COST RESULTS AND DETERMINATION OF 30-YEAR 

AVERAGE COOLING DEGREE DAY AND HEATING DEGREE DAY 

DATA ....................................................... E-l 

E.l Life-Cycle Cost Results ........................................... E-l 

E.1.1 Split System Air Conditioner Results .......................... E-2 

E.l.2 Split System Heat Pump Results .............................. E-6 

E.l.3 Single Package Air Conditioner Results ....................... E-I0 

E.1.4 Single Package Heat Pump Results ........................... E-14 

E.2 Determination of 30-year Average Cooling Degree Day and Heating Degree 

Day Data ..................................................... E-18 

APPENDIX F: NATIONAL ENERGY SAVINGS AND NATIONAL NET PRESENT 

VALUE RESULTS ............................................. F-l 

F.l Split System Central Air Conditioners ............................... F-2 

F.2 Split System Heat Pumps .......................................... F-6 

F.3 Single Package System Central Air Conditioners ...................... F-lO 

FA Single Package System Heat Pumps ................................ F-14 

x 
EE-RM/STD-98-440 ,'2 0

APPENDIX G: GOVERNMENT REGULATORY IMPACT MODEL (GRIM) ......... G-l

G.1 Introduction and Purpose ......................................... G-1

G.2 Model Description .............................................. G-1

G.3 Sample Income Statement . ...................................... G-5

APPENDIX H: INTERPOLATION OF UTILITY AND ENVIRONMENTAL RESULTS

FROM NEMS-BRS OUTPUT ................................... H-1

APPENDIX I: ERRATA APPENDIX ........................................... -1

I.1 Errata to Chapter 4 ............................................... I-1

1.2 Errata to Chapter 5 ............................................... I-1

1.3 Errata to Chapter 6 ............................................... I-2

APPENDIX J: SUPPLEMENTAL APPENDIX ................................... J-1

J.1 Supplemental Tables to Chapter 5 .................................. J-1

J.2 Supplemental Tables and Figures to Chapter 7 ........................ J-13

J.3 Supplemental Tables to Chapter 8 .................................. J-26

J.4 Supplemental Tables to Chapter 10 ................................. J-32

J.5 Supplemental Tables to Chapter 11 ................................. J-34

J.6 Supplemental Tables and Figures to Chapter 12 ....................... J-47

J.7 Supplemental Figures to Appendix E ............................... J-50

J.8 Supplemental Tables and Figures to Appendix F ...................... J-66

APPENDIX K: LIST OF ACRONYMS AND ABBREVIATIONS ................... K-1

REGULATORY IMPACT ANALYSIS

1. Introduction ................................................. RIA-1

2. M ethodology ................................................ RIA-1

2.1 No New Regulatory Action ............................... RIA-1

2.2 Informational Action .................................... RIA-1

2.2.1 Consumer Product Labeling ......................... RIA-2

2.2.2 Public Education ................................. RIA-2

2.3 Prescriptive Standards ................................... RIA-2

2.4 Financial Incentives ....... ........................ ...... RIA-3

2.4.1 Tax Credits to Consumers .......................... RIA-3

2.4.2 Tax Credits to Manufacturers ...................... RIA-3

2.4.3 Consumer Rebates ................................ RIA-4

2.4.4 Low Income Subsidy .............................. RIA-4

2.5 Voluntary Efficiency Targets .............................. RIA-4

2.6 Mass Government Purchases .............................. RIA-5

3. Results ..................................................... RIA -5

xi

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 f'2 0 '& 

APPENDIX G: GOVERNMENT REGULATORY IMPACT MODEL (GRIM) ......... G-I 

G.I Introduction and Purpose ....................................... " G-I 

G.2 Model Description .............................................. G-I 

G.3 Sample Income Statement ........................................ G-5 

APPENDIX H: INTERPOLATION OF UTILITY AND ENVIRONMENTAL RESULTS 

FROM NEMS-BRS OUTPUT ................................... H-I 

APPENDIX I: ERRATA APPENDIX ........................................... I-I 

1.1 Errata to Chapter 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. I-I 

1.2 Errata to Chapter 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. I-I 

1.3 Errata to Chapter 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1-2 

APPENDIX J: SUPPLEMENTAL APPENDIX ................................... J-I 

J.I Supplemental Tables to Chapter 5 .................................. J-I 

J.2 Supplemental Tables and Figures to Chapter 7 ........................ J-13 

J.3 Supplemental Tables to Chapter 8 .................................. J-26 

J.4 Supplemental Tables to Chapter 10 ................................. J-32 

J.5 Supplemental Tables to Chapter 11 ................................. J-34 

J.6 Supplemental Tables and Figures to Chapter 12 ....................... J-47 

J.7 Supplemental Figures to Appendix E ............................... J-50 

J.8 Supplemental Tables and Figures to Appendix F ...................... J-66 

APPENDIX K: LIST OF ACRONYMS AND ABBREVIATIONS ................... K-I 

REGULATORY IMPACT ANALYSIS 

1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. RIA-I 

2. Methodology ................................................. RIA-I 

2.1 No New Regulatory Action ............................... RIA-I 

2.2 Informational Action .................................... RIA-I 

2.2.1 Consumer Product Labeling. . . . . . . . . . . . . . . . . . . . . . . .. RIA-2 

2.2.2 Public Education ................................. RIA-2 

2.3 Prescriptive Standards ................................... RIA-2 

2.4 Financial Incentives ........... : . . . . . . . . . . . . . . . . . . . . . . . .. RIA-3 

2.4.1 Tax Credits to Consumers .......................... RIA-3 

2.4.2 Tax Credits to Manufacturers ....................... RIA-3 

2.4.3 Consumer Rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. RIA-4 

2.4.4 Low Income Subsidy .............................. RIA-4 

2.5 Voluntary Efficiency Targets. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. RIA-4 

2.6 Mass Government Purchases .............................. RIA-5 

3. Results ..................................................... RIA-5 

Xl 
EE-RM/STD-98-440 -i o

LIST OF TABLES

Table 1.1 Central Air Conditioner and Heat Pump Analyses under Process Rule ...... 1-4

Table 2.1 Non-Regulatory Alternatives to Standards ........................... 2-20

Table 4.1 NAECA Minimum Efficiencies for Unitary Products

18,000 BTU/hr - 65,000 BTU/hr .................................... 4-3

Table 4.2 Sources of Design Information ..................................... 4-5

Table 4.3 Breakdown of Equipment Subjected to Cost Estimation Analysis .......... 4-6

Table 4.4 Production Facility Specifications ................................... 4-7

Table 4.5 Examples of Product Attributes Related to Efficiency ................... 4-9

Table 4.6 Production Cost Assumptions ..................................... 4-10

Table 4.7 Revised Reverse Engineering Production Cost Estimates for 3-ton

Unitary Equipment .............................................. 4-12

Table 4.8 Revised Reverse Engineering Production Cost Multipliers for 3-ton

Unitary Equipment ......... .......... ............... 4-12

Table 4.9 Comparison of Revised Reverse Engineering Cost Estimates and ARI

Relative Unitary Production Costs - 3-ton ............................ 4-16

Table 4.10 Manufacturer Gross Margins and Markups ........................... 4-19

Table 4.11 Distributor Median Gross Margins and Markups ...................... 4-20

Table 4.12 Distributor Markups used in the Analysis for each Standard Level ........ 4-20

Table 4.13 Distribution of 1994 Unitary Shipments at Various Sales Tax Rates ....... 4-22

Table 4.14 Average Markups on Baseline Residential Air Conditioners ............. 4-22

Table 4.15 Sources of Irreversibility in a Conventional Refrigerator ................ 4-25

Table 4.16 Key Assumptions used to Derive Emerging Technology System

Cost Estim ates ................................................. 4-34

Table 4.17 Potential Impact of Emerging Technologies on the Production Cost of 3-ton

Split Air Conditioners with Fancoils by 2007 ......................... 4-35

Table 4.18 Estimated Likelihood of Commercial Dominance in Baseline Equipment

by 2006 Under Various Standard Levels ............................. 4-36

Table 4.19 Estimated Likelihood of Commercial Dominance in Premium Equipment

by 2006 Under Various Standard Levels ............................. 4-36

Table 4.20 Available Packaged Systems Models Rated at and below 10 SEER ........ 4-39

Table 4.21 Shipments of Residential Unitary Condensers by Capacity (1996) ......... 4-41

Table 4.22 Characteristics of Niche Products .................................. 4-42

Table 4.23 Assessment of Factors that Influence the Decision to Establish Separate

Classes for Niche Products ....................................... 4-48

Table 4.24 Comparison of Proposed HSPF Standard Levels with Median HSPF's of

Equipment Listed in the ARI Unitary Directory ....................... 4-52

Table 4.25 Prevalence of HSPF Ratings by SEER Level for 3-ton Split Heat Pumps

with Impacts of Suggested HSPF Standards .......................... 4-53

xii

EE-RM-STD-98-440 COMMENT 208

Table 1.1 

Table 2.1 

Table 4.1 

Table 4.2 

Table 4.3 

Table 4.4 

Table 4.5 

Table 4.6 

Table 4.7 

Table 4.8 

Table 4.9 

Table 4.10 

Table 4.11 

Table 4.12 

Table 4.13 

Table 4.14 

Table 4.15 

Table 4.16 

Table 4.17 

Table 4.18 

Table 4.19 

Table 4.20 

Table 4.21 

Table 4.22 

Table 4.23 

Table 4.24 

Table 4.25 

EE·RM/STD·98-440 1t2o~ 

LIST OF TABLES 

Central Air Conditioner and Heat Pump Analyses under Process Rule ...... 1-4 

Non-Regulatory Alternatives to Standards ........................... 2-20 

NAECA Minimum Efficiencies for Unitary Products 

18,000 BTUIhr - 65,000 BTUIhr .................................... 4-3 

Sources of Design Information ..................................... 4-5 

Breakdown of Equipment Subjected to Cost Estimation Analysis .......... 4-6 

Production Facility Specifications ................................... 4-7 

Examples of Product Attributes Related to Efficiency ................... 4-9 

Production Cost Assumptions ..................................... 4-10 

Revised Reverse Engineering Production Cost Estimates for 3-ton 

Unitary Equipment .............................................. 4-12 

Revised Reverse Engineering Production Cost Multipliers for 3-ton 

Unitary Equipment .............................................. 4-12 

Comparison of Revised Reverse Engineering Cost Estimates and ARl . 

Relative Unitary Production Costs - 3-ton ............................ 4-16 

Manufacturer Gross Margins and Markups . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-19 

Distributor Median Gross Margins and Markups ...................... 4-20 

Distributor Markups used in the Analysis for each Standard Level ........ 4-20 

Distribution of 1994 Unitary Shipments at Various Sales Tax Rates ....... 4-22 

Average Markups on Baseline Residential Air Conditioners ............. 4-22 

Sources of Irreversibility in a Conventional Refrigerator ................ 4-25 

Key Assumptions used to Derive Emerging Technology System 

Cost Estimates ................................................. 4-34 

Potential Impact of Emerging Technologies on the Production Cost of3-ton 

Split Air Conditioners with Fancoils by 2007 ......................... 4-35 

Estimated Likelihood of Commercial Dominance in Baseline Equipment 

by 2006 Under Various Standard Levels ............................. 4-36 

Estimated Likelihood· of Commercial Dominance in Premium Equipment 

by 2006 Under Various Standard Levels ............................. 4-36 

Available Packaged Systems Models Rated at and below 10 SEER ........ 4-39 

Shipments of Residential Unitary Condensers by Capacity (1996) ......... 4-41 

Characteristics of Niche Products .................................. 4-42 

Assessment of Factors that Influence the Decision to Establish Separate 

Classes for Niche Products ....................................... 4-48 

Comparison of Proposed HSPF Standard Levels with Median HSPF's of 

Equipment Listed in the ARl Unitary Directory ....................... 4-52 

Prevalence ofHSPF Ratings by SEER Level for 3-ton Split Heat Pumps 

with Impacts of Suggested HSPF Standards .......................... 4-53 

xii 
EE-RM/STD-98-440 2 0

Table 4.26 Equipment Life Extension Resulting in Increased National Energy

Consumption .................................................. 4-54

Table 4.27 Distribution of Energy Efficiency Ratios (EERs) in Residential Unitary

Products ...................................................... 4-59

Table 5.1 Inputs for Total Installed Costs .................................... 5-10

Table 5.2 Baseline Manufacturing Costs ..................................... 5-10

Table 5.3 ARI Standard-Level Manufacturer Cost Multipliers . ............. 5-11

Table 5.4 Cumulative Probability Distribution of Distributor/Wholesaler Markups ... 5-14

Table 5.5 Cumulative Probability Distribution of Dealer/Contractor Markups ....... 5-15

Table 5.6 Baseline Installation Costs ........................................ 5-18

Table 5.7 Costs and Markups for Determination of Weighted-Average Total Installed

C osts ......................................................... 5-19

Table 5.8 Weighted-Average Total Installed Costs for Central Air Conditioners

and Heat Pum ps ................................................ 5-20

Table 5.9 Inputs for Operating Costs ........................................ 5-25

Table 5.10 Census Division and Four Large State 30-year Average CDD .......... 5-28

Table 5.11 Shipments Weighted SEERs of Unitary Air Conditioners and Heat Pumps .. 5-32

Table 5.12 Space-Cooling FLEOHs for Commercial Buildings utilizing ResidentialSize Space-Cooling Equipment (hours) .............................. 5-34

Table 5.13 Baseline Annual Space-Cooling Energy Use for Commercial Buildings

utilizing Residential-Size Space-Cooling Equipment (kWh/yr) .......... 5-35

Table 5.14 Fraction of Building Stock utilizing Residential-Size Space-Cooling

Equipment .................................................... 5-36

Table 5.15 Residential Central Air Conditioner and Heat Pump Annual Space-Cooling

Energy Use Scaled to SEER ...................................... 5-39

Table 5.16 Commercial Building Central Air Conditioner and Heat Pump Annual

Space-Cooling Energy Use Scaled to SEER .......................... 5-39

Table 5.17 Overall Central Air Conditioner and Heat Pump Annual

Space-Cooling Energy Use Scaled to SEER . ................ 5-40

Table 5.18 Census Division and Four Large State 30-year Average HDD ........... 5-43

Table 5.19 Shipment Weighted HSPFs of Unitary Heat Pumps ................... 5-46

Table 5.20 Space-Heating FLEOHs for Commercial Buildings utilizing ResidentialSize Space-Cooling Equipment (hours) ............................. 5-48

Table 5.21 Baseline Annual Space-Heating Energy Use for Commercial Buildings

utilizing Residential-Size Space-Heating Equipment (kWh/yr) ........... 5-49

Table 5.22 Fraction of Building Stock utilizing Residential-Size Space-Heating

Equipm ent .................................................... 549

Table 5.23 Residential Heat Pump Weighted-Average Annual Space-Heating Energy

Use Scaled to HSPF ............................................. 5-52

Table 5.24 Commercial Building Heat Pump Weighted-Average Annual Space-Heating

Energy Use Scaled to HSPF ....................................... 5-53

xiii

EE-RM-STD-98-440 COMMENT 208

Table 4.26 

Table 4.27 

Table 5.1 

Tabie 5.2 

Table 5.3 

Table 5.4 

Table 5.5 

Table 5.6 

Table 5.7 

Table 5.8 

Table 5.9 

Table 5.10 

Table 5.11 

Table 5.12 

Table 5.13 

Table 5.14 

Table 5.15 

Table 5.16 

Table 5.17 

Table 5.18 

Table 5.19 

Table 5.20 

Table 5.21 

Table 5.22 

Table 5.23 

Table 5.24 

EE-RM/STD-98-440 * :( 0 ~ 

Equipment Life Extension Resulting in Increased National Energy 

Consumption .................................................. 4-54 

Distribution of Energy Efficiency Ratios (EERs) in Residential Unitary 

Products ...................................................... 4:"59 

Inputs for Total Installed Costs .................................... 5-10 

Baseline Manufacturing Costs ..................................... 5-10 

. ARI Standard-Level Manufacturer Cost Multipliers .................... 5-11 

Cumulative Probability Distribution of DistributorlWholesaler Markups ... 5-14 

Cumulative Probability Distribution of Dealer/Contractor Markups ....... 5-15 

Baseline Installation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-18 

Costs and Markups for Determination of Weighted-Average Total Installed 

Costs ......................................................... 5-19 

Weighted-Average Total Installed Costs for Central Air Conditioners 

and Heat Pumps ................................................ 5-20 

Inputs for Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-25 

Census Division and Four Large State 30-year Average CDD ............ 5-28 

Shipments Weighted SEERs of Unitary Air Conditioners and Heat Pumps .. 5-32 

Space-Cooling FLEOHs for Commercial Buildings utilizing ResidentialSize Space-Cooling Equipment (hours) .............................. 5-34 

Baseline Annual Space-Cooling Energy Use for Commercial Buildings 

utilizing Residential-Size Space-Cooling Equipment (kWhlyr) ........... 5-35 

Fraction of Building Stock utilizing Residential-Size Space-Cooling 

Equipment .................................................... 5-36 

Residential Central Air Conditioner and Heat Pump Annual Space-Cooling 

Energy Use Scaled to SEER ...................................... 5-39 

Commercial Building Central Air Conditioner and Heat Pump Annual 

Space-Cooling Energy Use Scaled to SEER .......................... 5-39 

Overall Central Air Conditioner and Heat Pump Annual 

Space-Cooling Energy Use Scaled to SEER .......................... 5-40 

Census Division and Four Large State 30-year Average HDD ............ 5-43 

Shipment Weighted HSPFs of Unitary Heat Pumps .................... 5-46 

Space-Heating FLEOHs for Commercial Buildings utilizing ResidentialSize Space-Cooling Equipment (hours) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5-48 

Baseline Annual Space-Heating Energy Use for Commercial Buildings 

utilizing Residential-Size Space-Heating Equipment (kWhlyr) ........... 5-49 

Fraction of Building Stock utilizing Residential-Size Space-Heating 

Equipment .................................................... 5-49 

Residential Heat Pump Weighted-Average Annual Space-Heating Energy 

Use Scaled to HSPF ............................................. 5-52 

Commercial Building Heat Pump Weighted-Average Annual Space-Heating 

Energy Use Scaled to HSPF ....................................... 5-53 

xiii 
EE-RM/STD-98-440 - 0

Table 5.25 Overall Heat Pump Weighted-Average Annual Space-Heating Energy

Use Scaled to HSPF ............................................. 5-53

Table 5.26 Characterization and Summary of Commercial Electric Utility Sample ..... 5-57

Table 5.27 Prototypical Household Characteristics and Building Load Seasonal

Breakdowns ................................................... 5-61

Table 5.28 Central Air Conditioner and Heat Pump Average Repair Costs ........... 5-67

Table 5.29 Central Air Conditioner and Heat Pump Mean and Median Lifetimes ...... 5-69

Table 5.30 Compressor Replacement Costs ................................... 5-71

Table 5.31 Finance Method Shares .......................................... 5-72

Table 5.32 Annual Interest Rates for Various Financial Assets .................... 5-74

Table 5.33 Real Interest Rates associated with each Finance Method ................ 5-76

Table 5.34 Baseline LCC: Mean, Median, Minimum, and Maximum Values ......... 5-83

Table 5.35 Summary of LCC Results for Split Air Conditioners ................... 5-86

Table 5.36 Summary of LCC Results for Split Heat Pumps ....................... 5-86

Table 5.37 Summary of LCC Results for Single Package Air Conditioners ........... 5-87

Table 5.38 Summary of LCC Results for Single Package Heat Pumps ............... 5-87

Table 5.39 Baseline Life-Cycle Costs and Threshold for Significant Impacts ......... 5-88

Table 5.40 LCC Results for Split System Central Air Conditioners ................. 5-89

Table 5.41 LCC Results for Split System Heat Pumps ........................... 5-90

Table 5.42 LCC Results for Single Package Central Air Conditioners ............... 5-91

Table 5.43 LCC Results for Single Package Heat Pumps ......................... 5-92

Table 5.44 ARI Shipment-Weighted Mean and Revised Reverse Engineering Mean

Manufacturer Cost Multipliers .............. ..................... 5-93

Table 5.45 LCC Results for Split System A/C - LCC Scenario with Reverse

Engineering Manufacturer Costs ................................... 5-94

Table 5.46 LCC Results for Split System Heat Pump - LCC Scenario with Reverse

Engineering Manufacturer Costs ................................... 5-95

Table 5.47 LCC Results for Single Package A/C - LCC Scenario with Reverse

Engineering Manufacturer Costs ................................... 5-96

Table 5.48 LCC Results for Single Package HP - LCC Scenario with Reverse

Engineering Manufacturer Costs ................................... 5-97

Table 5.49 LCC Results for Split System A/C - LCC Scenario with 14 year

average Lifetime ............................. .............. 5-99

Table 5.50 LCC Results for Split System Heat Pump - LCC Scenario with 14 year

average Lifetim e................................... .......... 5-100

Table 5.51 LCC Results for Single Package A/C - LCC Scenario with 14 year

average Lifetime ......... .... ...................... ......... 5-101

Table 5.52 LCC Results for Single Package HP - LCC Scenario with 14 year

average Lifetime .............................................. 5-102

Table 5.53 Summary of Payback Period Results for Split Air Conditioners .......... 5-105

Table 5.54 Summary of Payback Period Results for Split Heat Pumps ............. 5-106

Table 5.55 Summary of Payback Results for Single Package Air Conditioners ....... 5-107

Table 5.56 Summary of Payback Period Results for Single Package Heat Pumps ..... 5-108

xiv

EE-RM-STD-98-440 COMMENT 208

Table 5.25 

Table 5.26 

Table 5.27 

Table 5.28 

Table 5.29 

Table 5.30 

Table 5.31 

Table 5.32 

Table 5.33 

Table 5.34 

Table 5.35 

Table 5.36 

Table 5.37 

Table 5.38 

Table 5.39 

Table 5.40 

Table 5.41 

Table 5.42 

Table 5.43 

Table 5.44 

Table 5.45 

Table 5.46 

Table 5.47 

Table 5.48 

Table 5.49 

Table 5.50 

Table 5.51 

Table 5.52 

Table 5.53 

Table 5.54 

Table 5.55 

Table 5.56 

EE-RM/STD-98-440 :f '2 O~· 

Overall Heat Pwnp Weighted-Average Annual Space-Heating Energy 

Use Scaled to HSPF ............................................. 5-53 

Characterization and Summary of Commercial Electric Utility Sample ..... 5-57 

Prototypical Household Characteristics and Building Load Seasonal 

Breakdowns ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-61 

Central Air Conditioner and Heat Pump Average Repair Costs ........... 5-67 

Central Air Conditioner and Heat Pump Mean and Median Lifetimes ...... 5-69 

Compressor Replacement Costs ................................... 5-71 

Finance Method Shares .......................................... 5-72 

Annual Interest Rates for Various Financial Assets .................... 5-74 

Real Interest Rates associated with each Finance Method ................ 5-76 

Baseline LCC: Mean, Median, Minimwn, and Maximwn Values ......... 5-83 

Summary ofLCC Results for Split Air Conditioners ................... 5-86 

Summary of LCC Results for Split Heat Pumps ....................... 5-86 

Summary ofLCC Results for Single Package Air Conditioners ........... 5-87 

Summary ofLCC Results for Single Package Heat Pumps ............... 5-87 

Baseline Life-Cycle Costs and Threshold for Significant Impacts ......... 5-88 

LCC Results for Split System Central Air Conditioners .. . . . . . . . . . . . . . . . 5-89 

LCC Results for Split System Heat Pumps ........................... 5-90 

LCC Results for Single Package Central Air Conditioners . . . . . . . . . . . . . . . 5-91 

LCC Results for Single Package Heat Pumps ......................... 5-92 

ARI Shipment-Weighted Mean and Revised Reverse Engineering Mean 

Manufacturer Cost Multipliers ..................................... 5-93 

LCC Results for Split System AlC - LCC Scenario with Reverse 

Engineering Manufacturer Costs ................................... 5-94 

LCC Results for Split System Heat Pwnp - LCC Scenario with Reverse 

Engineering Manufacturer Costs ................................... 5-95 

LCC Results for Single Package AlC - LCC Scenario with Reverse 

Engineering Manufacturer Costs ................................... 5-96 

LCC Results for Single Package HP - LCC Scenario with Reverse 

Engineering Manufacturer Costs ................................... 5-97 

LCC Results for Split System AlC - LCC Scenario with 14 year 

average Lifetime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-99 

LCC Results for Split System Heat Pump - LCC Scenario with 14 year 

average Lifetime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-100 

LCC Results for Single Package AlC - LCC Scenario with 14 year 

average Lifetime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5-101 

LCC Results for Single Package HP - LCC Scenario with 14 year 

average Lifetime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5-102 

Summary of Payback Period Results for Split Air Conditioners .......... 5-105 

Summary of Payback Period Results for Split Heat Pumps ............. 5-106 

Summary of Payback Results for Single Package Air Conditioners ....... 5-107 

Summary of Payback Period Results for Single Package Heat Pwnps ..... 5-108 

xiv 
EE-RM/STD-98-440 Q D 0

Table 5.57 Efficiency Level Market Shares for 1994 ........................... 5-110

Table 5.58 Summary of Rebuttable PBPs and Inputs for Split System

Air Conditioners .................... .......................... 5-112

Table 5.59 Summary of Rebuttable PBPs and Inputs for Split System

Heat Pum ps .................................................. 5-113

Table 5.60 Summary of Rebuttable PBPs and Inputs for Single Package

Air Conditioners ............................................... 5-113

Table 5.61 Summary of Rebuttable PBPs and Inputs for Single Package

Heat Pumps .................................................. 5-113

Table 6.1 Reasons for Replacing Heat Pumps ............................. 6-12

Table 6.2 Shipments Impact from Reverse Engineering Manufacturer Cost Scenario .. 6-35

Table 6.3 Shipments Impact from 14-year average Lifetime Scenario .............. 6-36

Table 7.1 National Energy Saving Inputs ..................................... 7-3

Table 7.2 Site-to-Source Conversion Factors .................................. 7-6

Table 7.3 Annual Energy Use and Efficiencies for Residential and Commercial

Equipm ent Stock ................................................ 7-9

Table 7.4 Assumed Product Class Efficiency Distributions for the years 1992

through 2006 .................................................. 7-10

Table 7.5 Post-Standard Product Class Efficiency Distributions: 11 SEER

Standard-Level ................................................. 7-11

Table 7.6 Post-Standard Product Class Efficiency Distributions: 12 SEER

Standard-Level ................. ................................ 7-11

Table 7.7 Post-Standard Product Class Efficiency Distributions: 13 SEER

Standard-Level ................................................. 7-12

Table 7.8 Net Present Value Inputs ......................................... 7-14

Table 7.9 Mean Purchase Prices for Central Air Conditioners and Heat Pumps ....... 7-17

Table 7.10 NES Model Inputs and Assumptions ................................ 7-20

Table 7.11 Cumulative NES Results based on AE02000 Reference Case (2006-2030) . 7-22

Table 7.12 Cumulative NES Results based on AEO2000 Low Growth

Case (2006-2030) ............................................... 7-23

Table 7.13 Cumulative NES Results based on AEO2000 High Growth

Case (2006-2030) ............................................... 7-24

Table 7.14 Cumulative NPV Results based on AEO2000 Reference Case (2006-2030) . 7-29

Table 7.15 Cumulative NPV Results based on AEO2000 Low Growth

Case (2006-2030) ............................................... 7-30

Table 7.16 Cumulative NPV Results based on AEO2000 High Growth

Case (2006-2030) ............................................... 7-32

Table 7.17 Cumulative NPV Results (2006-2030): Reverse Engineering Manufacturer

Cost Scenario .................................................. 7-36

Table 7.18 Cumulative NPV Results (2006-2030): 14-year Average Lifetime Scenario . 7-39

Table 7.19 Cumulative NPV Results (2006-2030): 3% Discount Rate Scenario ....... 7-42

xv

EE-RM-STD-98-440 COMMENT 208

Table 5.57 

Table 5.58 

Table 5.59 

Table 5.60 

Table 5.61 

Table 6.1 

Table 6.2 

Table 6.3 

Table 7.1 

Table 7.2 

Table 7.3 

Table 7.4 

Table 7.5 

Table 7.6 

Table 7.7 

Table 7.8 

Table 7.9 

Table 7.10 

Table 7.11 

Table 7.12 

Table 7.13 

Table 7.14 

Table 7.15 

Table 7.16 

Table 7.17 

Table 7.18 

Table 7.19 

EE.RM/STD-98-440 :t2 D ~ 

Efficiency Level Market Shares for 1994 ........................... 5·11 0 

Summary of Rebuttable PBPs and Inputs for Split System 

Air Conditioners ............................................... 5·112 

Summary of Rebuttable PBPs and Inputs for Split System 

Heat Pumps .................................................. 5-113 

Summary of Rebuttable PBPs and Inputs for Single Package 

Air Conditioners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-113 

Summary of Rebuttable PBPs and Inputs for Single Package 

Heat Pumps .................................................. 5·113 

Reasons for Replacing Heat Pumps ................................. 6-12 

Shipments Impact from Reverse Engineering Manufacturer Cost Scenario .. 6-35 

Shipments Impact from 14-year average Lifetime Scenario .............. 6-36 

National Energy Saving Inputs ..................................... 7-3 

Site-to-Source Conversion Factors .................................. 7-6 

Annual Energy Use and Efficiencies for Residential and Commercial 

Equipment Stock ................................................ 7-9 

Assumed Product Class Efficiency Distributions for the years 1992 

through 2006 .................................................. 7-10 

Post-Standard Product Class Efficiency Distributions: 11 SEER 

Standard-Level ................................................. 7-11 

Post-Standard Product Class Efficiency Distributions: 12 SEER 

Standard-Level ................................................. 7-11 

Post-Standard Product Class Efficiency Distributions: 13 SEER 

Standard-Level ................................................. 7-12 

Net Present Value Inputs ......................................... 7-14 

Mean Purchase Prices for Central Air Conditioners and Heat Pumps . . . . . . . 7-17 

NBS Model Inputs and Assumptions ................................ 7-20 

Cumulative NBS Results based on AE02000 Reference Case (2006-2030) . 7-22 

Cumulative NES Results based on AE02000 Low Growth 

Case (2006-2030) ............................................... 7-23 

Cumulative NES Results based on AE02000 High Growth 

Case (2006-2030) ............................................... 7-24 

Cumulative NPV Results based on AE02000 Reference Case (2006-2030) . 7-29 

Cumulative NPV Results based on AE02000 Low Growth 

Case (2006-2030) ............................................... 7-30 

Cumulative NPV Results based on AE02000 High Growth 

Case (2006-2030) ............................................... 7-32 

Cumulative NPV Results (2006-2030): Reverse Engineering Manufacturer 

Cost Scenario .................................................. 7-36 

Cumulative NPV Results (2006-2030): 14-year Average Lifetime Scenario . 7-39 

Cumulative NPV Results (2006-2030): 3% Discount Rate Scenario ....... 7-42 

xv 
EE-RM/STD-98-440 4 '20

Table 8.1 Market Shares (%) in the Residential Unitary Industry (1987 - 1999) ....... 8-5

Table 8.2 Historical Comparison of Unitary Air Conditioner Producer Price Index

(PPI) and the U.S. Gross National Product Deflator . .............. 8-7

Table 8.3 GRIM Financial Parameters Based on 1994-1998 Weighted Company

Financial Data ................................................ 8-12

Table 8.4 Cost of Debt Calculation ......................................... 8-13

Table 8.5 Cost of Equity Calculation ........................................ 8-14

Table 8.6 Product Costs Used in the GRIM Analysis ........................... 8-16

Table 8.7 Manufacturer Markups Used in the GRIM ........................... 8-17

Table 8.8 Summary of Industry-wide Conversion Cost Assumptions used in the GRIM

($ million) .................................................... 8-18

Table 8.9 Capital Expenditures used in the GRIM (million 1999$) ................ 8-20

Table 8.10 Industry-wide Capital Expenditures by Product Class used in the GRIM

(million 19994) ................................................ 8-21

Table 8.11 Non-capital Expenses used in the GRIM ............................. 8-22

Table 8.12 Scenarios Evaluated in the MIA ................................... 8-24

Table 8.13 SEER Requirements for Product Classes in the Trial Standard Levels

Evaluated in the M IA ............................................ 8-24

Table 8.14 Changes in Industry Net Present Value - Industry Relative Cost,

18 Year Life, NAECA Efficiency .................................. 8-26

Table 8.15 Changes in Industry Net Present Value - Industry Relative Cost,

18 Year Life, Roll-up Efficiency ................................... 8-27

Table 8.16 Changes in Industry Net Present Value - Industry Relative Cost,

18 Year Life, Shift Efficiency Mix ................................. 8-27

Table 8.17 Changes in Industry Net Present Value - Industry Relative Cost,

14 Year Life, NAECA Efficiency Mix ........................... 8-28

Table 8.18 Changes in Industry Net Present Value - Reverse Engineering Relative

Cost, 18 Year Life, NAECA Efficiency Mix .......................... 8-29

Table 8.19 Impacts on Industry's Return on Invested Capital in 2011 . ............ 8-30

Table 8.20 Consumer Payback for Efficiency Upgrades of Split Air Conditioners

Under a 10 SEER Standard using Industry Mean Relative Costs and a

"Flat"M arkup ................................................. 8-36

Table 8.21 Consumer Payback (years) for Efficiency Upgrades of Split Air

Conditioners Under a New Standard Levels using Industry Mean

Relative Costs ................................................ 8-37

Table 8.22 Consumer Payback (years) for Efficiency Upgrades of Split Air

Conditioners Under a New Standard Levels using Reverse Engineering

C osts ......................................................... 8-37

Table 8.23 Required Decrease in Split Air Conditioner Price Differentials Under New

Standard Levels to Reproduce the Consumer Paybacks Realized under the

10 SEER Standard Level - Industry Mean Relative Production Costs ...... 8-38

xvi

EE-RM-STD-98-440 COMMENT 208

Table 8.1 

Table 8.2 

Table 8.3 

Table 8.4 

Table 8.5 

Table 8.6 

Table 8.7 

Table 8.8 

Table 8.9 

Table 8.10 

Table 8.11 

Table 8.12 

Table 8.13 

Table 8.14 

Table 8.15 

Table 8.16 

Table 8.17 

Table 8.18 

Table 8.19 

Table 8.20 

Table 8.21 

Table 8.22 

Table 8.23 

EE-RM/STD-98-440 1( 02 0 t 

Market Shares (%) in the Residential Unitary Industry (1987 - 1999) ....... 8-5 

Historical Comparison of Unitary Air Conditioner Producer Price Index 

(PPI) and the U.S. Gross National Product Deflator ..................... 8-7 

GRIM Financial Parameters Based on 1994-1998 Weighted Company 

Financial Data .......................................... " ...... 8-12 

Cost of Debt Calculation ......................................... 8-13 

Cost of Equity Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-14 

Product Costs Used in the GRIM Analysis ..................... : ..... 8-16 

Manufacturer Markups Used in the GRIM ........................... 8-17 

Summary of Industry-wide Conversion Cost Assumptions used in the GRIM 

($ million) .................................................... 8-18 

Capital Expenditures used in the GRIM (million 1999$) ................ 8-20 

Industry-wide Capital Expenditures by Product Class used in the GRIM 

(million 19994) ................................ 0 0 •••••••••••••• 8-21 

Non-capital Expenses used in the GRIM ............................. 8-22 

Scenarios Evaluated in the MIA ................................... 8-24 

SEER Requirements for Product Classes in the Trial Standard Levels 

Evaluated in the MIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-24 

Changes in Industry Net Present Value - Industry Relative Cost, 

18 Year Life, NAECA Efficiency .................................. 8-26 

Changes in Industry Net Present Value - Industry Relative Cost, 

18 Year Life, Roll-up Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-27 

Changes in Industry Net Present Value - Industry Relative Cost, 

18 Year Life, Shift Efficiency Mix ................................. 8-27 

Changes in Industry Net Present Value - Industry Relative Cost, 

14 Year Life, NAECA Efficiency Mix .............................. 8-28 

Changes in Industry Net Present Value - Reverse Engineering Relative 

Cost, 18 Year Life, NAECA Efficiency Mix .......................... 8-29 

Impacts on Industry's Return on Invested Capital in 2011 ............... 8-30 

Consumer Payback for Efficiency Upgrades of Split Air Conditioners 

Under a 10 SEER Standard using Industry Mean Relative Costs and a 

"Flat" Markup ................................................. 8-36 

Consumer Payback (years) for Efficiency Upgrades of Split Air 

Conditioners Under a New Standard Levels using Industry Mean 

Relative Costs ................................................. 8-37 

Consumer Payback (years) for Efficiency Upgrades of Split Air 

Conditioners Under a New Standard Levels using Reverse Engineering 

Costs ......................................................... 8-37 

Required Decrease in Split Air Conditioner Price Differentials Under New 

Standard Levels to Reproduce the Consumer Paybacks Realized under the 

10 SEER Standard Level- Industry Mean Relative Production Costs ...... 8-38 

xvi 
EE-RM/STD-98-440 :'2 o

Table 8.24 Required Decrease in Split Air Conditioner Price Differentials Under New

Standard Levels to Reproduce the Consumer Paybacks Realized under the

10 SEER Standard Level - Reverse Engineering Mean Relative

Production Costs ............................................... 8-39

Table 8.25 Maximum Decrease in Split Air Conditioner (fancoil) Production Cost

Differentials Under New Standard Levels using Emerging Technologies ... 8-40

Table 8.26 Operating Cost Assumptions for the Two Major Manufacturer Subgroups .. 8-43

Table 8.27 Equipment Price Assumptions for Lower Operating Cost (LOC) and Higher

Operating Cost (HOC) Subgroups Under a 10 SEER Standard ........... 8-43

Table 8.28 Profit (EBIT) per Unit Sold (2000) ................................. 8-44

Table 8.29 Changes in Net Present Value - Lower Operating Cost Subgroup - NAECA

Efficiency Scenario ............................................. 8-45

Table 8.30 Changes in Net Present Value - Lower Operating Cost Subgroup - Roll-up

Efficiency Scenario ............................................. 8-45

Table 8.31 Changes in Net Present Value - Lower Operating Cost Subgroup - Shift

Efficiency Scenario ............................................. 8-46

Table 8.32 Changes in Net Present Value - Higher Operating Cost Subgroup - NAECA

Efficiency Scenario ............................................. 8-46

Table 8.33 Changes in Net Present Value - Higher Operating Cost Subgroup - Roll-up

Efficiency Scenario ............................................. 8-47

Table 8.34 Changes in Net Present Value - Higher Operating Cost Subgroup - Shift

Efficiency Scenario ............................................. 8-47

Table 8.35 Changes in ROIC in 2011 - Lower Operating Cost Subgroup ............ 8-48

Table 8.36 Changes in ROIC in 2011 - Higher Operating Cost Subgroup ............ 8-48

Table 8.37 Projected Change in Cumulative Labor Expenditures in the Air Conditioner

Industry2000 -2030 ............................................ 8-56

Table 8.38 Summary of Major Regulations on Central Air Conditioner Manufacturers . 8-59

Table 8.39 Market Shares of Major Air Conditioner Manufacturers in Regulated

Products ...................................................... 8-60

Table 8.40 Estimated Investments Required to Meet Impending Federal Regulations

($ m illion) .................................................... 8-61

Table 10.1 1997 RECS Definitions of Low-Income Households at 100% of Poverty

L ine ... ...................................................... 10-1

Table 10.2 Comparison of Input Values for All Households and Low-Income

H ouseholds .................................. ................. 10-2

Table 10.3 Split A/C: LCC Result Comparisons between Low-Income Households and

Overall Sample.. ........................................ 10-3

Table 10.4 Split Heat Pump: LCC Result Comparisons between Low-Income Households

and Overall Sample ............................................. 10-3

Table 10.5 Package A/C: LCC Result Comparisons between Low-Income Households

and Overall Sample ............................................. 10-3

xvii

EE-RM-STD-98-440 COMMENT 208

Table 8.24 

Table 8.25 

Table 8.26 

Table 8.27 

Table 8.28 

Table 8.29 

Table 8.30 

Table 8.31 

Table 8.32 

Table 8.33 

Table 8.34 

Table 8.35 

Table 8.36 

Table 8.37 

Table 8.38 

Table 8.39 

Table 8.40 

Table 10.1 

Table 10.2 

Table 10.3 

Table 10.4 

Table 10.5 

EE-RM/STD-98-440 ~ ':2 O~ 

Required Decrease in Split Air Conditioner Price Differentials Under New 

Standard Levels to Reproduce the Consumer Paybacks Realized under the 

10 SEER Standard Level- Reverse Engineering Mean Relative 

Production Costs ............................................... 8-39 

Maximum Decrease in Split Air Conditioner (fancoil) Production Cost 

Differentials Under New Standard Levels using Emerging Technologies .,. 8-40 

Operating Cost Assumptions for the Two Major Manufacturer Subgroups .. 8-43 

Equipment Price Assumptions for Lower Operating Cost (LOC) and Higher 

Operating Cost (HOC) Subgroups Under a 10 SEER Standard ........... 8-43 

Profit (EBIT) per Unit Sold (2000) ................................. 8-44 

Changes in Net Present Value - Lower Operating Cost Subgroup - NAECA 

Efficiency Scenario ............................................. 8-45 

Changes in Net Present Value - Lower Operating Cost Subgroup - Roll-up 

Efficiency Scenario ............................................. 8-45 

Changes in Net Present Value - Lower Operating Cost Subgroup - Shift 

Efficiency Scenario ............................................. 8-46 

Changes in Net Present Value - Higher Operating Cost Subgroup - NAECA 

Efficiency Scenario ............................................. 8-46 

Changes in Net Present Value - Higher Operating Cost Subgroup - Roll-up 

Efficiency Scenario ............................................. 8-47 

Changes in Net Present Value - Higher Operating Cost Subgroup - Shift 

Efficiency Scenario ............................................. 8-47 

Changes in ROlC in 2011 - Lower Operating Cost Subgroup ............ 8-48 

Changes in ROlC in 2011 - Higher Operating Cost Subgroup . . . . . . . . . . . . 8-48 

Projected Change in Cumulative Labor Expenditures in the Air Conditioner 

Industry 2000 - 2030 ............................................ 8-56 

Summary of Major Regulations on Central Air Conditioner Manufacturers . 8-59 

Market Shares of Major Air Conditioner Manufacturers in Regulated 

Products ....................................................... 8-60 

Estimated Investments Required to Meet Impending Federal Regulations 

($ million) .................................................... 8-61 

1997 RECS Definitions of Low-Income Households at 100% of Poverty 

Line ......................................................... 10-1 

Comparison of Input Values for All Households and Low-Income 

Households. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10-2 

Split AlC: LCC Result Comparisons between Low-Income Households and 

Overall Sample. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10-3 

Split Heat Pump: LCC Result Comparisons between Low-Income Households 

and Overall Sample ............................................. 10-3 

Package AlC: LCC Result Comparisons between Low-Income Households 

and Overall Sample ............................................. 10-3 

xvii 
EE-RM/STD-98-440 : 20

Table 10.6 Package Heat Pump: LCC Result Comparisons between Low-Income

Households and Overall Sample ................................. .. 10-4

Table 11.1 AE02000 Reference Case Forecast ................................. 11-5

Table 11.2 Standard Level 1 Forecast ........................................ 11-6

Table 11.3 Standard Level 2 Forecast ........................................ 11-7

Table 11.4 Standard Level 3 Forecast ........................................ 11-8

Table 11.5 Standard Level 4 Forecast ........................................ 11-9

Table 11.6 Standard Level 5 Forecast ....................................... 11-10

Table 11.7 Standard Level 3 Roll-up Forecast ................................. 11-11

Table 11.8 Standard Level 3 Shift Forecast ................................... 11-12

Table 11.9 Standard Level 3 Low Economic Forecast .......................... 11-13

Table 11.10 Standard Level 3 High Economic Forecast .......................... 11-14

Table 12.1 Net National Change in Jobs ...................................... 12-2

Table B.1 Split Air Conditioners (cased coil) - 3 Ton ............................ B-2

Table B.2 Split Air Conditioners (fancoil) - 3 Ton .............................. B-3

Table B.3 Split Heat Pumps - 3 Ton .......................................... B-4

Table B.4 Packaged Air Conditioners - 3 Ton ................................. B-5

Table B.5 Packaged Heat Pumps - 3 Ton ...................................... B-6

Table C. 1 Predicted versus Listed Equipment Weight ............................ C-3

Table C.2 Manufacturing Processes Captured in the Bills-of-Material ............... C-6

Table D. Comparison of NOPR Markups and Supplemental ANOPR Markups ...... D-2

Table D.2 Total Installed Price Comparison - Split Air Conditioners ............... D-2

Table D.3 Distributor Markups derived from Census Data ....................... D-9

Table D.4 Contractor Markups derived from Census Data ...................... D-10

Table D.5 Contractor and Distributor Marginal Markups derived from Census Data .. D- 1

Table D.6 Price Markup Comparisons ...................................... D-12

Table D.I Disaggregated Costs for ARW Wholesalers/Distributors ............... D-15

Table D.II Disaggregated Costs for HVACR Contractors ....................... D-16

Table D.mI U.S. Census Data for Air-Conditioning Wholesalers/Distributors ........ D-17

Table D.IV U.S. Census Data for HVAC Contractors ........................... D-18

Table E. Census Division 1 (New England): Calculation of 30-year Average

CDD and HDD ................................................. E-19

Table E.2 Census Division 2 (Mid Atlantic minus New York): Calculation of 30-year

Average CDD and HDD ......................................... E-20

Table E.3 Census Division 3 (East North Central): Calculation of 30-year Average

CDD and HDD ................................................. E-21

xviii

EE-RM-STD-98-440 COMMENT 208

Table 10.6 

Table 11.1 

Table 11.2 

Table 11.3 

Table llA 

Table II.S 

Table 11.6 

Table 11.7 

Table 11.8 

Table 11.9 

Table 11.10 

Table 12.1 

Table B.l 

Table B.2 

Table B.3 

Table B.4 

Table B.S 

Table C.l 

Table C.2 

Table D.l 

Table D.2 

Table D.3 

Table DA 

Table D.5 

Table D.6 

Table D.I 

Table D.lI 

Table D.II1 

Table D.IV 

Table E.I 

Table E.2 

Table E.3 

EE-RM/STD-9S-440 ~ 2 0 ~ 

Package Heat Pump: LCC Result Comparisons between Low-Income 

-Households and Overall Sample ................................... 10-4 

AE02000 Reference Case Forecast ............................... " II-S 

Standard Levell Forecast ........................................ 11-6 

Standard Level 2 Forecast ...................................... " 11-7 

Standard Level .3 Forecast ........................................ 11-8 

Standard Level 4 Forecast ........................................ 11-9 

Standard LevelS Forecast ....................................... 11-10 

Standard Level.3 Roll-up Forecast ................................. 11-11 

Standard Level 3 Shift Forecast ................................... 11-12 

Standard Level 3 Low Economic Forecast .......................... 11-13 

Standard Level 3 High Economic Forecast .......................... 11-14 

Net National Change in Jobs .................................... " 12-2 

Split Air Conditioners (cased coil) - 3 Ton .............. ; ............. B-2 

Split Air Conditioners (fancoil) - 3 Ton .............................. B-3 

Split Heat Pumps - 3 Ton .......................................... B-4 

Packaged Air Conditioners - 3 Ton .................................. B-S 

Packaged Heat Pumps - 3 Ton ...................................... B-6 

Predicted versus Listed Equipment Weight ............................ C-3 

Manufacturing Processes Captured in the Bills-of-Material ............... C-6 

Comparison ofNOPR Markups and Supplemental ANOPR Markups .... " D-2 

Total Installed Price Comparison - Split Air Conditioners ............. " D-2 

Distributor Markups derived from Census Data ....................... D-9 

Contractor Markups derived from Census Data ...................... D-I0 

Contractor and Distributor Marginal Markups derived from Census Data .. D-ll 

Price Markup Comparisons ...................................... D-12 

Disaggregated Costs for AR W WholesalerslDistributors ................ D-IS 

Disaggregated Costs for HV ACR Contractors ....................... D-16 

U.S. Census Data for Air-Conditioning WholesalerslDistributors ........ D-17 

U.S. Census Data for HV AC Contractors ........................... D-18 

Census Division 1 (New England): Calculation of30-year Average 

CDD andHDD ................................................. E-19 

Census Division 2 (Mid Atlantic minus New York): Calculation of 30-year 

Average CDD and HDD ......................................... E-20 

Census Division 3 (East North Central): Calculation of 30-year Average 

CDD and HDD ................................................. E-21 

xviii 
EE-RM/STD-98-440 -x,) , 

Table E.4 Census Division 4 (West North Central): Calculation of 30-year Average

CDD and HDD ................................................. E-22

Table E.5 Census Division 5 (South Atlantic minus Florida): Calculation of 30-year

Average CDD and HDD ......................................... E-23

Table E.6 Census Division 6 (East South Central): Calculation of 30-year Average

CDD and HDD ................................................. E-24

Table E.7 Census Division 7 (West South Central minus Texas): Calculation of 30-year

Average CDD and HDD ......................................... E-25

Table E.8 Census Division 8 (Mountain): Calculation of 30-year Average

CDD and HDD ................................................. E-26

Table E.9 Census Division 9 (Pacific minus California): Calculation of 30-year Average

CDD and HDD ................................................. E-27

Table E.10 New York State: Calculation of 30-year Average CDD and HDD ......... E-28

Table E. 11 Forida State: Calculation of 30-year Average CDD and HDD ............ E-29

Table E.12 Texas State: Calculation of 30-year Average CDD and HDD ............. E-30

Table E.13 California State: Calculation of 30-year Average CDD and HDD ......... E-31

Table F.1.1 Split A/C, 11 SEER: Energy Savings ......... . ............... F-2

Table F.1.2 Split A/C, 11 SEER: Costs and Net Present Value ...................... F-2

Table F.2.1 Split A/C, 12 SEER: Energy Savings ......... . ............... F-3

Table F.2.2 Split A/C, 12 SEER: Costs and Net Present Value ......... .......... F-3

Table F.3.1 Split A/C, 13 SEER: Energy Savings ............................... F-4

Table F.3.2 Split A/C, 13 SEER: Costs and Net Present Value ..................... F-4

Table F.4.1 Split A/C, 18 SEER: Energy Savings ................................ F-5

Table F.4.2 Split A/C, 18 SEER: Costs and Net Present Value ...................... F-5

Table F.5.1 Split HP, 11 SEER: Energy Savings ................................. F-6

Table F.5.2 Split HP, 11 SEER: Costs and Net Present Value ....................... F-6

Table F.6.1 Split HP, 12 SEER: Energy Savings ................................. F-7

Table F.6.2 Split HP, 12 SEER: Costs and Net Present Value ....................... F-7

Table F.7.1 Split HP, 13 SEER: Energy Savings ................................. F-8

Table F.7.2 Split HP, 13 SEER: Costs and Net Present Value ....................... F-8

Table F.8.1 Split HP, 18 SEER: Energy Savings ................................. F-9

Table F.8.2 Split HP, 18 SEER: Costs and Net Present Value ....................... F-9

Table F.9.1 Pack. A/C, 11 SEER: Energy Savings ............................... F-10

Table F.9.2 Pack. A/C, 11 SEER: Costs and Net Present Value .................... F-10

Table F.10.1 Pack. A/C, 12 SEER: Energy Savings ............... ......... F-11

Table F.10.2 Pack. A/C, 12 SEER: Costs and Net Present Value .................... F-11

Table F.11.1 Pack. A/C, 13 SEER: Energy Savings ............................... F-12

Table F.11.2 Pack. A/C, 13 SEER: Costs and Net Present Value .................... F-12

Table F. 12.1 Pack. A/C, 18 SEER: Energy Savings ............................... F-13

Table F.12.2 Pack. A/C, 18 SEER: Costs and Net Present Value .................... F-13

Table F.13.1 Pack. HP, 11 SEER: Energy Savings ................................ F-14

Table F.13.2 Pack. HP, 11 SEER: Costs and Net Present Value ..................... F-14

xix

EE-RM-STD-98-440 COMMENT 208

Table E.4 

Table E.5 

Table E.6 

Table E.7 

Table E.8 

Table E.9 

Table E.10 

Table E.11 

Table E.12 

Table E.13 

Table F.1.I 

Table F.1.2 

Table F.2.1 

Table F.2.2 

Table F.3.1 

Table F.3.2 

Table F.4.I 

Table F.4.2 

Table F.5.1 

Table F.5.2 

Table F.6.I 

Table F.6.2 

Table F.7.I 

Table F.7.2 

Table F.8.I 

Table F.8.2 

Table F.9.1 

Table F.9.2 

Table F.lD.1 

Table F.lD.2 

Table F.I1.1 

Table F.11.2 

Table F.I2.1 

Table F.12.2 

Table F.B.1 

Table F.B.2 

EE-RMjSTD-98-440 ~..-2. D ~ 

Census Division 4 (West North Central): Calculation of30-year Average 

CDD and HDD .................................................. E-22 

Census Division 5 (South Atlantic minus Florida): Calculation of30-year 

Average CDD and HDD ......................................... E-23 

Census Division 6 (East South Central): Calculation of30-year Average 

CDD and HDD .................................................. E-24 

Census Division 7 (West South Central minus Texas): Calculation of30-year 

Average CDD and HDD ......................................... E-25 

Census Division 8 (Mountain): Calculation of30-year Average 

CDD and HDD ................................................. E-26 

Census Division 9 (Pacific minus California): Calculation of30-year Average 

CDD and HDD ................................................. E-27 

New York State:: Calculation of 30-year Average CDD and HDD ......... E-28 

Forida State: Calculation of30-year Average CDD and HDD ............ E-29 

Texas State: Calculation of30-year Average CDD and HDD ............. E-30 

California State: Calculation of30-year Average CDD and HDD ......... E-31 

Split AlC, 11 SEER: Energy Savings ................................ F-2 

Split AlC, 11 SEER: Costs and Net Present Value ...................... F-2 

Split AlC, 12 SEER: Energy Savings ................................ F-3 

Split AlC, 12 SEER: Costs and Net Present Value ...................... F-3 

Split AlC, 13 SEER: Energy Savings ................................ F-4 

Split AlC, 13 SEER: Costs and Net Present Value ...................... F-4 

Split AlC, 18 SEER: Energy Savings ................................ F-5 

Split AlC, 18 SEER: Costs and Net Present Value ...................... F-5 

Split HP, 11 SEER: Energy Savings ................................. F-6 

Split HP, 11 SEER: Costs and Net Present Value ....................... F-6 

Split HP, 12 SEER: Energy Savings ................................. F-7 

Split HP, 12 SEER: Costs and Net Present Value ....................... F-7 

Split HP, 13 SEER: Energy Savings ................................. F-8 

Split HP, 13 SEER: Costs and Net Present Value ....................... F-8 

Split HP, 18 SEER: Energy Savings ................................. F-9 

Split HP, 18 SEER: Costs and Net Present Value ....................... F-9 

Pack. AlC, 11 SEER: Energy Savings ............................... F-lD 

Pack. AlC, 11 SEER: Costs and Net Present Value .................... F-lD 

Pack. AlC, 12 SEER: Energy Savings ............................... F-ll 

Pack. AlC, 12 SEER: Costs and Net Present Value .................... F-ll 

Pack. AlC, 13 SEER: Energy Savings ............................... F-12 

Pack. AlC, 13 SEER: Costs and Net Present Value .................... F-12 

Pack. AlC, 18 SEER: Energy Savings ............................... F-13 

Pack. AlC, 18 SEER: Costs and Net Present Value .................... F-13 

Pack. HP, 11 SEER: Energy Savings ................................ F-14 

Pack. HP, 11 SEER: Costs and Net Present Value ..................... F-14 

xix 
EE-RM/STD-98-440 A 2.0°

Table F.14.1 Pack. HP, 12 SEER: Energy Savings ................................ F-15

Table F.14.2 Pack. HP, 12 SEER: Costs and Net Present Value ..................... F-15

Table F.15.1 Pack. HP, 13 SEER: Energy Savings ................................ F-16

Table F.15.2 Pack. HP, 13 SEER: Costs and Net Present Value ..................... F-16

Table F.16.1 Pack. HP, 18 SEER: Energy Savings ................................ F-17

Table F.16.2 Pack. HP, 18 SEER: Costs and Net Present Value ..................... F-17

Table H.1 Set of Multipliers for Each Standard Level Pattern ..................... H-2

Table 5.3S Reverse Engineering Standard-Level Manufacturer Cost Multipliers ........ J-1

Table 5.8S Weighted-Average Total Installed Costs for Central Air Conditioners and Heat

Pumps based on Reverse Engineering Manufacturing Costs ............... J-1

Table 5.28S Central Air Conditioner and Heat Pump Average Repair Costs based on

Reverse Engineering Manufacturing Costs ............................ J-2

Table 5.35S Summary of LCC Results for Split Air Conditioners based on Reverse

Engineering Manufacturing Costs ................................... J-5

Table 5.36S Summary of LCC Results for Split Heat Pumps based on Reverse

Engineering Manufacturing Costs ................................... J-5

Table 5.37S Summary of LCC Results for Single Package Air Conditioners based on

Reverse Engineering Manufacturing Costs ............................ J-6

Table 5.38S Summary of LCC Results for Single Package Heat Pumps based on Reverse

Engineering Manufacturing Costs ................................... J-6

Table 5.53S Summary of Payback Period Results for Split Air Conditioners based on Reverse

Engineering Manufacturing Costs ................................... J-7

Table 5.54S Summary of Payback Period Results for Split Heat Pumps based on Reverse

Engineering Manufacturing Costs ................................... J-8

Table 5.55S Summary of Payback Results for Single Package Air Conditioners based on

Reverse Engineering Manufacturing Costs ............................ J-9

Table 5.56S Summary of Payback Period Results for Single Package Heat Pumps based on

Reverse Engineering Manufacturing Costs ........................... J-10

Table 5.58S Summary of Rebuttable PBPs and Inputs for Split System

Air Conditioners based on Reverse Engineering Manufacturing Costs ...... J-l 1

Table 5.59S Summary of Rebuttable PBPs and Inputs for Split System

Heat Pumps based on Reverse Engineering Manufacturing Costs ......... J-l 1

Table 5.60S Summary of Rebuttable PBPs and Inputs for Single Package

Air Conditioners based on Reverse Engineering Manufacturing Costs ...... J-11

Table 5.61S Summary of Rebuttable PBPs and Inputs for Single Package

Heat Pumps based on Reverse Engineering Manufacturing Costs ......... J-12

Table 7.11S Cumulative NES Results based on Reverse Engineering Manufacturing

Costs and AEO2000 Reference Case (2006-2030) ..................... J-13

Table 7.12S Cumulative NES Results based on Reverse Engineering Manufacturing

Costs and AE02000 Low Growth Case (2006-2030) ................... J-14

xx

EE-RM-STD-98-440 COMMENT 208

Table F.l4.1 

Table F.14.2 

Table F.15.1 

Table F.15.2 

Table F.16.l 

Table F.16.2 

Table H.I 

Table 5.3S 

Table 5.8S 

Table 5.28S 

Table 5.35S 

Table 5.36S 

Table 5.37S 

Table 5.38S 

Table 5.53S 

Table 5.54S 

Table 5.55S 

Table 5.56S 

Table 5.58S 

Table 5.59S 

Table 5.60S 

Table 5.61S 

Table 7.11S 

Table 7.] 2S 

EE-RM/STD-98-440 ~.2. o~ 

Pack. HP, 12 SEER: Energy Savings ................................ F-15 

Pack. HP, 12 SEER: Costs and Net Present Value ..................... F-15 

Pack. HP, 13 SEER: Energy Savings ................................ F-16 

Pack. HP, 13 SEER: Costs and Net Present Value ..................... F-16 

Pack. HP, 18 SEER: Energy Savings ................................ F-17 

Pack. HP, 18 SEER: Costs and Net Present Value ..................... F-17 

Set of Multipliers for Each Standard Level Pattern . . . . . . . . . . . . . . . . . . . .. H-2 

Reverse Engineering Standard-Level Manufacturer Cost Multipliers ........ 1-1 

Weighted-Average Total Installed Costs for Central Air Conditioners and Heat 

Pumps based on Reverse Engineering Manufacturing Costs. . . . . . . . . . . . . .. 1-1 

Central Air Conditioner and Heat Pump Average Repair Costs based on 

Reverse Engineering Manufacturing Costs ............................ 1-2 

Summary of LCC Results for Split Air Conditioners based on Reverse 

Engineering Manufacturing Costs ................................... 1-5 

Summary of LCC Results for Split Heat Pumps based on Reverse 

Engineering Manufacturing Costs ................................... 1-5 

Summary ofLCC Results for Single Package Air Conditioners based on 

Reverse Engineering Manufacturing Costs ............................ 1-6 

Summary of LCC Results for Single Package Heat Pumps based on Reverse 

Engineering Manufacturing Costs ................................... 1-6 

Summary of Payback Period Results for Split Air Conditioners based on Reverse 

Engineering Manufacturing Costs ................................... 1-7 

Summary of Payback Period Results for Split Heat Pumps based on Reverse 

Engineering Manufacturing Costs ................................... 1-8 

Summary of Payback Results for Single Package Air Conditioners based on 

Reverse Engineering Manufacturing Costs ............................ 1-9 

Summary of Payback Period Results for Single Package Heat Pumps based on 

Reverse Engineering Manufacturing Costs ........................... 1-10 

Summary of Rebuttable PBPs and Inputs for Split System 

Air Conditioners based on Reverse Engineering Manufacturing Costs ...... 1-11 

Summary of Rebuttable PBPs and Inputs for Split System 

Heat Pumps based on Reverse Engineering Manufacturing Costs ......... 1-11 

Summary of Rebuttable PBPs and Inputs for Single Package 

Air Conditioners based on Reverse Engineering Manufacturing Costs ...... 1-11 

Summary of Rebuttable PBPs and Inputs for Single Package 

Heat Pumps based on Reverse Engineering Manufacturing Costs ......... 1-12 

Cumulative NES Results based on Reverse Engineering Manufacturing 

Costs and AE02000 Reference Case (2006-2030) ..................... 1-13 

Cumulative NES Results based on Reverse Engineering Manufacturing 

Costs and AE02000 Low Growth Case (2006-2030) ................... 1-14 

xx 
EE-RM/STD-98-440 n - 2 

Table 7.13S Cumulative NES Results based on Reverse Engineering Manufacturing

Costs and AEO2000 High Growth Case (2006-2030) ................... J-15

Table 7.14S Cumulative NPV Results based on Reverse Engineering Manufacturing

Costs and AEO2000 Reference Case (2006-2030) ..................... J-16

Table 7.15S Cumulative NPV Results based on Reverse Engineering Manufacturing

Costs and AEO2000 Low Growth Case (2006-2030) ................... J-18

Table 7.16S Cumulative NPV Results based on Reverse Engineering Manufacturing

Costs and AEO2000 High Growth Case (2006-2030) ................... J-20

Table 7.19S Cumulative NPV Results based on Reverse Engineering Manufacturing

Costs, NAECA Efficiency Scenario (2006-2030): 3% Discount Rate

Scenario ....................................................... J-22

Table 7.19A Cumulative NPV Results based on Reverse Engineering Manufacturing

Costs, Roll-up Efficiency Scenario (2006-2030): 3% Discount Rate

Scenario ...................................................... J-24

Table 8.14S Changes in Industry Net Present Value - Reverse Engineering Cost,

NAECA Efficiency Mix ................................. ......... J-26

Table 8.15S Changes in Industry Net Present Value - Reverse Engineering Cost,

Roll-up Efficiency Mix .......................................... J-26

Table 8.16S Changes in Industry Net Present Value - Reverse Engineering Cost,

Shift Efficiency Mix ............................................. J-27

Table 8.29S Changes in Net Present Value - Lower Operating Cost Subgroup, Reverse

Engineering Relative Cost, NAECA Efficiency Scenario ................ J-27

Table 8.30S Changes in Net Present Value - Lower Operating Cost Subgroup, Reverse

Engineering Relative Cost, Roll-up Efficiency Scenario ................. J-28

Table 8.31S Changes in Net Present Value - Lower Operating Cost Subgroup, Reverse

Engineering Relative Cost, Shift Efficiency Scenario ................... J-28

Table 8.32S Changes in Net Present Value - Higher Operating Cost Subgroup, Reverse

Engineering Relative Cost, NAECA Efficiency Scenario ................ J-29

Table 8.33S Changes in Net Present Value - Higher Operating Cost Subgroup, Reverse

Engineering Relative Cost, Roll-up Efficiency Scenario ................. J-29

Table 8.34S Changes in Net Present Value - Higher Operating Cost Subgroup, Reverse

Engineering Relative Cost, Shift Efficiency Scenario ................... J-30

Table 8.35S Changes in ROIC in 2011 - Lower Operating Cost Subgroup ............ J-30

Table 8.36S Changes in ROIC in 2011 - Higher Operating Cost Subgroup ............ J-31

Table 10.3S Split A/C: LCC Result Comparisons between Low-Income Households

and Overall Sample based on Reverse Engineering Manufacturing Costs ... J-32

Table 10.4S Split Heat Pump: LCC Result Comparisons between Low-Income

Households and Overall Sample based on Reverse Engineering

Manufacturing Costs ............... ...................... ...... J-32

Table 10.5S Package A/C: LCC Result Comparisons between Low-Income Households

and Overall Sample based on Reverse Engineering Manufacturing Costs ... J-32

xxi

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 if '2 u~ 

Table 7.13S Cwnulative NES Results based on Reverse Engin~ering Manufacturing 

Costs and AE02000 High Growth Case (2006-2030) ................... J-15 

Table 7.14S Cwnulative NPV Results based on Reverse Engineering Manufacturing 

Costs and AE02000 Reference Case (2006-2030) ..................... 1-16 

Table 7.15S Cwnulative NPV Results based on Reverse Engineering Manufacturing 

Costs and AE02000 Low Growth Case (2006-2030) ................... 1-18 

Table 7.16S Cwnulative NPV Results based on Reverse Engineering Manufacturing 

Costs and AE02000 High Growth Case (2006-2030) .................. , 1-20 

Table 7.19S Cwnulative NPV Results based on Reverse Engineering Manufacturing 

Costs, NAECA Efficiency Scenario (2006-2030): 3% Discount Rate 

Scenario ........................................................ 1-22 

Table 7.19A Cwnulative NPV Results based on Reverse Engineering Manufacturing 

Costs, Roll-up Efficiency Scenario (2006-2030): 3% Discount Rate 

Table 8.14S 

Table 8.15S 

Table 8.16S 

Table 8.29S 

Table 8.30S 

Table 8.31S 

Table 8.32S 

Table 8.33S 

Table 8.34S 

Table 8.35S 

Table 8.36S 

Table IO.3S 

Table IO.4S 

Table 1O.5S 

Scenario ...................................................... 1-24 

Changes in Industry Net Present Value - Reverse Engineering Cost, 

NAECA Efficiency Mix .......................................... 1-26 

Changes in Industry Net Present Value - Reverse Engineering Cost, 

Roll-up Efficiency Mix .......................................... 1-26 

Changes in Industry Net Present Value - Reverse Engineering Cost, 

Shift Efficiency Mix ............................................. 1-27 

Changes in Net Present Value - Lower Operating Cost Subgroup, Reverse 

Engineering Relative Cost, NAECA Efficiency Scenario ................ 1-27 

Changes in Net Present Value - Lower Operating Cost Subgroup, Reverse 

Engineering Relative Cost, Roll-up Efficiency Scenario ................. 1-28 

Changes in Net Present Value - Lower Operating Cost Subgroup, Reverse 

Engineering Relative Cost, Shift Efficiency Scenario ................... 1-28 

Changes in Net Present Value - Higher Operating Cost Subgroup, Reverse 

Engineering Relative Cost, NAECA Efficiency Scenario ................ 1-29 

Changes in Net Present Value - Higher Operating Cost Subgroup, Reverse 

Engineering Relative Cost, Roll-up Efficiency Scenario ................. 1-29 

Changes in Net Present Value - Higher Operating Cost Subgroup, Reverse 

Engineering Relative Cost, Shift Efficiency Scenario ................... 1-30 

Changes in ROIC in 2011- Lower Operating Cost Subgroup ............ 1-30 

Changes in ROIC in 2011- Higher Operating Cost Subgroup ............ 1-31 

Split NC: LCC Result Comparisons between Low-Income Households 

and Overall Sample based on Reverse Engineering Manufacturing Costs .. , 1-32 

Split Heat Pwnp: LCC Result Comparisons between Low-Income 

Households and Overall Sample based on Reverse Engineering 

Manufacturing Costs ............................................ 1-32 

Package NC: LCC Result Comparisons between Low-Income Households 

and Overall Sample based on Reverse Engineering Manufacturing Costs ... 1-32 

XXI 
EE-RM/STD-98-440 A - C2.

Table 10.6S Package Heat Pump: LCC Result Comparisons between Low-Income

Households and Overall Sample based on Reverse Engineering

Manufacturing Costs ............................................ J-33

Table 11.2S Standard Level 1 Forecast based on Reverse Engineering Manufacturing

Costs, NAECA Efficiency Scenario ................................ J-34

Table 11.3S Standard Level 2 Forecast based on Reverse Engineering Manufacturing

Costs, NAECA Efficiency Scenario ......... ....................... J-35

Table 11.4S Standard Level 3 Forecast based on Reverse Engineering Manufacturing

Costs, NAECA Efficiency Scenario ................................ J-36

Table 11.5S Standard Level 4 Forecast based on Reverse Engineering Manufacturing

Costs, NAECA Efficiency Scenario .............. ................ J-37

Table 11.6S Standard Level 5 Forecast based on Reverse Engineering Manufacturing

Costs, NAECA Efficiency Scenario ............................. ... J-38

Table 11.7S Standard Level 4 Roll-up Forecast based on Reverse Engineering

Manufacturing Costs .... ....................................... J-39

Table 11.8S Standard Level 4 Shift Forecast based on Reverse Engineering

M anufacturing Costs ................... ......................... J-40

Table 11.9S Standard Level 4 Low Economic Forecast based on Reverse Engineering

Manufacturing Costs, NAECA Efficiency Scenario .................... J-41

Table 11.10S Standard Level 4 High Economic Forecast based on Reverse Engineering

Manufacturing Costs, NAECA Efficiency Scenario ......... ........... J-42

Table 11.7A Standard Level 4 Roll-up Forecast based on Reverse Engineering

Manufacturing Costs ...................................... ...... J-43

Table 11.8A Standard Level 4 Shift Forecast based on Reverse Engineering

Manufacturing Costs .................... ....................... -44

Table 11.9A Standard Level 4 Low Economic Forecast based on ARI Mean

Manufacturing Costs, NAECA Efficiency Scenario .................... J-45

Table 11.1 A Standard Level 4 High Economic Forecast based on ARI Mean

Manufacturing Costs, NAECA Efficiency Scenario .................... J-46

Table 12.1S Net National Change in Jobs .................................... ... J-47

Table F. 1.1S Split A/C, 11 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs ............................. ............... J-66

Table F. 1.2S Split A/C, 11 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-66

Table F.2.1S Split A/C, 12 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs .................... ....................... J-67

Table F.2.2S Split A/C, 12 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs ............... ................. J-67

Table F.3.1S Split A/C, 13 SEER: Energy Savings based on Reverse Engineering

M anufacturing Costs ................................. ........... J-68

Table F.3.2S Split A/C, 13 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-68

xxii

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 f '2.. 0 q 

Table 10.6S Package Heat Pump: LCC Result Comparisons between Low-Income 

Households and Overall Sample based on Reverse Engineering 

Manufacturing Costs ............................................ J-33 

Table II.2S Standard Levell Forecast based on Reverse Engineering Manufacturing 

Costs, NAECA Efficiency Scenario ................................ J-34 

Table 11.3S Standard Level 2 Forecast based on Reverse Engineering Manufacturing 

Costs, NAECA Efficiency Scenario ................................ J-35 

Table II.4S Standard Level 3 Forecast based on Reverse Engineering Manufacturing 

Costs, NAECA Efficiency Scenario ................................ J-36 

Table 11.5S Standard Level 4 Forecast based on Reverse Engineering Manufacturing 

Costs, NAECA Efficiency Scenario ................................ J-37 

Table 11.6S Standard Level 5 Forecast based on Reverse Engineering Manufacturing 

Costs, NAECA Efficiency Scenario ................................ J-38 

Table 11.7S Standard Level 4 Roll-up Forecast based on Reverse Engineering 

Manufacturing Costs ............................................ J-39 

Table 11.8S Standard Level 4 Shift Forecast based on Reverse Engineering 

Manufacturing Costs ................... : ......................... J-40 

Table 11.9S Standard Level 4 Low Economic Forecast based on Reverse Engineering 

Manufacturing Costs, NAECA Efficiency Scenario .................... J-41 

Table 11.10S Standard Level 4 High Economic Forecast based on Reverse Engineering 

Manufacturing Costs, NAECA Efficiency Scenario .................... J-42 

Table 11.7 A Standard Level 4 Roll-up Forecast based on Reverse Engineering 

Manufacturing Costs ............................................ J-43 

Table 11.8A Standard Level 4 Shift Forecast based on Reverse Engineering 

Manufacturing Costs ............................................. J-44 

Table 11.9A Standard Level 4 Low Economic Forecast based on ARl Mean 

Manufacturing Costs, NAECA Efficiency Scenario .................... J-45 

Table 11. lOA Standard Level 4 High Economic Forecast based on ARl Mean 

Manufacturing Costs, NAECA Efficiency Scenario .................... J-46 

Table 12.1S Net National Change in Jobs ...................................... J-47 

Table F. 1.1 S Split AlC, 11 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J-66 

Table F.1.2S Split AlC, 11 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J-66 

Table F.2.1S Split AlC, 12 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J-67 

Table F.2.2S Split AlC, 12 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs ................................ :. J-67 

Table F.3.1S Split AlC, 13 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J-68 

Table F.3.2S Split AlC, 13 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J-68 

XXll 
EE-RM/STD-98-440 '2 "a

Table F.4.1 S Split A/C, 18 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs .................... ....................... J-69

Table F.4.2S Split A/C, 18 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-69

Table F.5.1S Split HP, 11 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs ............................................ J-70

Table F.5.2S Split HP, 11 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-70

Table F.6.1S Split HP, 12 SEER: Energy Savings based on Reverse Engineering

M anufacturing Costs ............................................ J-71

Table F.6.2S Split HP, 12 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .......... .......... ... . J-71

Table F.7.1 S Split HP, 13 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs ...................... ..................... J-72

Table F.7.2S Split HP, 13 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-72

Table F.8.1S Split HP, 18 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs ............................................ J-73

Table F.8.2S Split HP, 18 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-73

Table F.9.1S Pack. A/C, 11 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs ............................................ J-74

Table F.9.2S Pack. A/C, 11 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-74

Table F. 10.1S Pack. A/C, 12 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs .................... ....................... J-75

Table F.10.2S Pack. A/C, 12 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-75

Table F. 11.1S Pack. A/C, 13 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs .................... ....................... J-76

Table F. 11.2S Pack. A/C, 13 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-76

Table F.12.1S Pack. A/C, 18 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs .................... ....................... J-77

Table F.12.2S Pack. A/C, 18 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs ................................ J-77

Table F. 13.1S Pack. HP, 11 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs ................ .................... ......... J-78

Table F.13.2S Pack. HP, 11 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-78

Table F.14.1S Pack. HP, 12 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs ............................. ............... J-79

xxiii

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * 2. D't; 

Table FA.1S Split AlC, 18 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J-69 

Table FA.2S Split AlC, 18 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J-69 

Table F.S.IS Split HP, 11 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J-70 

Table F.S.2S Split HP, 11 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J -70 

Table F.6.1S Split HP, 12 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J -71 

Table F.6.2S Split HP, 12 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J -71 

Table F.7.1S Split HP, 13 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J-72 

Table F.7.2S Split HP, 13 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .............................. . . .. J-72 

Table F.8.lS Split HP, 18 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ..................... , ...................... J-73 

Table F.8.2S Split HP, 18 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J-73 

Table F.9.1S Pack. AlC, 11 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J -74 

Table F.9.2S Pack. AlC, 11 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J-74 

Table F.lO.1S Pack. AlC, 12 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J-75 

Table F.1O.2S Pack. AlC, 12 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J -7 S 

Table F.l1.1S Pack. AlC, 13 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ........................... '" .............. J-76 

Table F.11.2S Pack. AlC, 13 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J-76 

Table F.12.1S Pack. AlC, 18 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J -77 

Table F.12.2S Pack. AlC, 18 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs ............. . . . . . . . . . . . . . . . . . . . .. J -77 

Table F.13.1S Pack. HP, 11 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................. J-78 

Table F.13.2S Pack. HP, 11 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J-78 

Table F.14.1S Pack. HP, 12 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J-79 

xxiii 
EE-RM/STD-98-440 '

2 '

Table F. 14.2S Pack. HP, 12 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-79

Table F.15.1S Pack. HP, 13 SEER: Energy Savings based on Reverse Engineering

M anufacturing Costs ............................................ J-80

Table F.15.2S Pack. HP, 13 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................................. J-80

Table F. 16.1S Pack. HP, 18 SEER: Energy Savings based on Reverse Engineering

Manufacturing Costs ............................................ J-81

Table F.16.2S Pack. HP, 18 SEER: Costs and Net Present Value based on Reverse

Engineering Manufacturing Costs .................. ............... J-81

Table RIA. 1 Regulatory Alternative Results .................................. RIA-6

xxiv

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ "2 0 ~ 

Table F.14.2S Pack. HP, 12 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J·79 

Table F.1S.lS Pack. HP, 13 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J -80 

Table F.lS.2S Pack. HP, 13 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J-80 

Table F.16.lS Pack. HP, 18 SEER: Energy Savings based on Reverse Engineering 

Manufacturing Costs ............................................ J -81 

Table F.16.2S Pack. HP, 18 SEER: Costs and Net Present Value based on Reverse 

Engineering Manufacturing Costs .................................. J":81 

Table RIA. I Regulatory Alternative Results .................................. RIA-6 

XXIV 
EE-RM/STD-98-440 :2 e

LIST OF FIGURES

Figure 2.1 Central Air Conditioner and Heat Pump Rulemaking Framework .......... 2-2

Figure 2.2 Flow diagram of the manufacturer impact analysis methodology .......... 2-15

Figure 4.1 Phases of the Engineering Analysis ....................... ........... 4-2

Figure 4.2 Relationship of Production Cost Estimates in New Reverse Engineering

Approach ................... ............... ............... . 4-11

Figure 4.3 Historical Compressor EER Improvements ........................... 4-28

Figure 4.4 Distribution of Split Air Conditioner Models by Capacity and Efficiency ... 4-40

Figure 4.5 Relationship Between HSPF and SEER in Available 3-ton

Split Heat Pumps ........................................ . 4-51

Figure 4.6 Effects of Compressor and Fan Modulation on the EER-SEER

Relationship in Existing 3-ton Split Air Conditioning Systems ........... 4-56

Figure 5.1 Flow Diagram of LCC, PBP, and Rebuttable PBP Inputs ................ 5-5

Figure 5.2 Distribution of Manufacturer Markups .............................. 5-12

Figure 5.3 Sales Tax Distribution for the Replacement/Retrofit Market ............. 5-17

Figure 5.4 Probability Distribution of Split A/C Installation Cost .................. 5-18

Figure 5.5 Flow Diagram for the Determination of the Standard-Level Annual

Space-Cooling Energy Cost for Households .......................... 5-22

Figure 5.6 Flow Diagram for the Determination of the Standard-Level Annual

Space-Heating Energy Cost for Households .......................... 5-22

Figure 5.7 Flow Diagram for the Determination of the Standard-Level Annual

Space-Cooling Energy Cost for Commercial Buildings ................. 5-23

Figure 5.8 Flow Diagram for the Determination of the Standard-Level Annual

Space-Heating Energy Cost for Commercial Buildings ................. 5-23

Figure 5.9 Percent of Households with Central Air Conditioners by Weather-Adjusted

Annual Space-Cooling Energy Consumption ......................... 5-29

Figure 5.10 Percent of Households with Heat Pumps by Weather-Adjusted

Annual Space-Cooling Energy Consumption ......................... 5-30

Figure 5.11 Distribution of Age Indices for RECS Households with a Central A/C ..... 5-31

Figure 5.12 Distribution of Age Indices for RECS Households with a Heat Pump ...... 5-31

Figure 5.13 Percent of Commercial Buildings by Baseline Annual Space-Cooling Energy

Consumption .................................................. 5-36

Figure 5.14 Percent of Households with Heat Pumps by Weather-Adjusted Annual SpaceHeating Energy Consumption .................... ................. 5-44

Figure 5.15 Distribution of Age Indices for RECS Households with a Heat Pump ...... 5-45

Figure 5.16 Percent of Commercial Buildings by Baseline Annual Space-Heating Energy

Consumption .................................................. 5-50

Figure 5.17 Percent of Households with Central Air Conditioners by Average

Electricity Prices ............................................... 5-55

XXV

EE-RM-STD-98-440 COMMENT 208

Figure 2.1 

Figure 2.2 

Figure 4.1 

Figure 4.2 

Figure 4.3 

Figure 4.4 

Figure 4.5 

Figure 4.6 

Figure 5.1 

Figure 5.2 

Figure 5.3 

Figure 5.4 

Figure 5.5 

Figure 5.6 

Figure 5.7 

Figure 5.8 

Figure 5.9 

Figure 5.10 

Figure 5.11 

Figure 5.12 

Figure 5.13 

Figure 5.14 

Figure 5.15 

Figure 5.16 

Figure 5.17 

EE-RM/STD-98-440 t-Z O~ 

LIST OF FIGURES 

Central Air Conditioner and Heat Pump Rulemaking Framework .......... 2-2 

Flow diagram of the manufacturer impact analysis methodology . . . . . . . . . . 2-15 

Phases of the Engineering Analysis .................................. 4-2 

Relationship of Production Cost Estimates in New Reverse Engineering 

Approach ................................................... ,. 4-11 

Historical Compressor EER Improvements ........................... 4-28 

Distribution of Split Air Conditioner Models by Capacity and Efficiency ... 4-40 

Relationship Between HSPF and SEER in Available 3-ton 

Split Heat Pumps ............................................... 4-51 

Effects of Compressor and Fan Modulation on the EER-SEER 

Relationship in Existing 3-ton Split Air Conditioning Systems ........... 4-56 

Flow Diagram of LCC, PBP, and Rebuttable PBP Inputs ................ 5-5 

Distribution of Manufacturer Markups .............................. 5-12 

Sales Tax Distribution for the ReplacementlRetrofit Market ............. 5-17 

Probability Distribution of Split AlC Installation Cost .................. 5-18 

Flow Diagram for the Determination of the Standard-Level Annual 

Space-Cooling Energy Cost for Households .......................... 5-22 

Flow Diagram for the Determination of the Standard-Level Annual 

Space-Heating Energy Cost for Households .......................... 5-22 

Flow Diagram for the Determination of the Standard-Level Annual 

Space-Cooling Energy Cost for Commercial Buildings ................. 5-23 

Flow Diagram for the Determination of the Standard-Level Annual 

Space-Heating Energy Cost for Commercial Buildings ................. 5-23 

Percent of Households with Central Air Conditioners by Weather~Adjusted 

Annual Space-Cooling Energy Consumption ......................... 5-29 

Percent of Households with Heat Pumps by Weather-Adjusted 

Annual Space-Cooling Energy Consumption ......................... 5-30 

Distribution of Age Indices for RECS Households with a Central AlC ..... 5-31 

Distribution of Age Indices for RECS Households with a Heat Pump ...... 5-31 

Percent of Commercial Buildings by Baseline Annual Space-Cooling Energy 

Consumption .................................................. 5-36 

Percent of Households with Heat Pumps by Weather-Adjusted Annual SpaceHeating Energy Consumption ..................................... 5-44 

Distribution of Age Indices for RECS Households with a Heat Pump ...... 5-45 

Percent of Commercial Buildings by Baseline Annual Space-Heating Energy 

Consumption .................................................. 5-50 

Percent of Households with Central Air Conditioners by Average 

Electricity Prices ............................................... 5-55 

xxv 
EE-RM/STD-98-440 + 2 0

Figure 5.18 Percent of Households with Heat Pumps by Average Electricity Prices ..... 5-55

Figure 5.19 Percent of Commercial Buildings with Space-Conditioning Equipment by

Average Electricity Prices ........................................ 5-58

Figure 5.20 Percent of Households with Central Air Conditioners by Marginal

Electricity Prices ............................................... 5-63

Figure 5.21 Percent of Households with Heat Pumps by Marginal Electricity Prices .... 5-64

Figure 5.22 Percent of Commercial Buildings with Space-Cooling Equipment by

Marginal Electricity Prices ........................................ 5-65

Figure 5.23 Electricity Price Trends .......................................... 5-66

Figure 5.24 Distribution of Annual Maintenance Costs ........................... 5-68

Figure 5.25 Retirement Function for Central Air Conditioners and Heat Pumps ........ 5-70

Figure 5.26 Distribution of New Home Mortgage Nominal Interest Rates ............ 5-73

Figure 5.27 Distribution of Second Mortgage Nominal Interest Rates ................ 5-73

Figure 5.28 Distribution of Credit Card Nominal Interest Rates .................... 5-74

Figure 5.29 Split A/C: Mean Installed Consumer Costs ........................... 5-78

Figure 5.30 Split A/C: Mean Annual Operating Costs ............................ 5-78

Figure 5.31 Split A/C: Mean Life-Cycle Costs .................................. 5-78

Figure 5.32 Split HP: Mean Installed Consumer Costs ............................ 5-78

Figure 5.33 Split HP: Mean Annual Operating Costs ............................. 5-78

Figure 5.34 Split HP: Mean Life-Cycle Costs ................................... 5-78

Figure 5.35 Pack A/C: Mean Installed Consumer Costs ........................... 5-79

Figure 5.36 Pack A/C: Mean Annual Operating Costs ............................ 5-79

Figure 5.37 Pack A/C: Mean Life-Cycle Costs .................................. 5-79

Figure 5.38 Pack HP: Mean Installed Consumer Costs ........................... 5-79

Figure 5.39 Pack HP: Mean Annual Operating Costs ............................. 5-79

Figure 5.40 Pack HP: Mean Life-Cycle Costs .................................. 5-79

Figure 5.41 Split A/C: Percent of Buildings by Life-Cycle Cost, Baseline ............ 5-81

Figure 5.42 Split HP: Percent of Buildings by Life-Cycle Cost, Baseline ............. 5-82

Figure 5.43 Package A/C: Percent of Buildings by Life-Cycle Cost, Baseline .......... 5-82

Figure 5.44 Package HP: Percent of Buildings by Life-Cycle Cost, Baseline .......... 5-83

Figure 5.45 Frequency Chart of LCC Differences for 11 SEER Efficiency Level ....... 5-84

Figure 5.46 Cumulative Chart of LCC Differences for 11 SEER Efficiency Level ...... 5-85

Figure 5.47 Average LCCs for Split System Central Air Conditioners ............... 5-89

Figure 5.48 Percent of Split System Central A/C Consumers with Net Costs, No

Significant Impacts, and Net Savings ............................... 5-89

Figure 5.49 Average LCCs for Split System Heat Pumps ......................... 5-90

Figure 5.50 Percent of Split System Heat Pump Consumers with Net Costs, No

Significant Impacts, and Net Savings ............................... 5-90

Figure 5.51 Average LCCs for Single Package Central Air Conditioners ............. 5-91

Figure 5.52 Percent of Single Package Central A/C Consumers with Net Costs, No

Significant Impacts, and Net Savings ............................... 5-91

Figure 5.53 Average LCCs for Single Package Heat Pumps ....................... 5-92

xxvi

EE-RM-STD-98-440 COMMENT 208

Figure 5.18 

Figure 5.19 

Figure 5.20 

Figure 5.21 

Figure 5.22 

Figure 5.23 

Figure 5.24 

Figure 5.25 

Figure 5.26 

Figure 5.27 

Figure 5.28 

Figure 5.29 

Figure 5.30 

Figure 5.31 

Figure 5.32 

Figure 5.33 

Figure 5.34 

Figure 5.35 

Figure 5.36 

Figure 5.37 

Figure 5.38 

Figure 5.39 

Figure 5.40 

Figure 5.41 

Figure 5.42 

Figure 5.43 

Figure 5.44 

Figure 5.45 

Figure 5.46 

Figure 5.47 

Figure 5.48 

Figure 5.49 

Figure 5.50 

Figure 5.51 

Figure 5.52 

Figure 5.53 

EE-RM/STD-98-440 * '2 0 ~ 

Percent of Households with Heat Pumps by Average Electricity Prices ..... 5-55 

Percent of Commercial Buildings with Space-Conditioning Equipment by 

Average Electricity Prices ........................................ 5-58 

Percent of Households with Central Air Conditioners by Marginal 

Electricity Prices ............................................... 5-63 

Percent of Households with Heat Pumps by Marginal Electricity Prices .... 5-64 

Percent of Commercial Buildings with Space-Cooling Equipment by 

Marginal Electricity Prices ........................................ 5-65 

Electricity Price Trends .......................................... 5-66 

Distribution of Annual Maintenance Costs ........................... 5-68 

Retirement Function for Central Air Conditioners and Heat Pumps . . . . . . .. 5-70 

Distribution of New Home Mortgage Nominal Interest Rates ............ 5-73 

Distribution of Second Mortgage Nominal Interest Rates . . . . . . . . . . . . . . . . 5-73 

Distribution of Credit Card Nominal Interest Rates .................... 5-74 

Split AlC: Mean Installed Consumer Costs ........................... 5-78 

Split AlC: Mean Annual Operating Costs ............................ 5-78 

Split AlC: Mean Life-Cycle Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-78 

Split HP: Mean Installed Consumer Costs ............................ 5-78 

Split HP: Mean Annual Oper~ting Costs ............................. 5-78 

Split HP: Mean Life-Cycle Costs ................................... 5-78 

Pack AlC: Mean Installed Consumer Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-79 

Pack AlC: Mean Annual Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5-79 

Pack AlC: Mean Life-Cycle Costs .................................. 5-79 

Pack HP: Mean Installed Consumer Costs ........................... 5-79 

Pack HP: Mean Annual Operating Costs ............................. 5-79 

Pack HP: Mean Life-Cycle Costs .................................. 5-79 

Split AlC: Percent of Buildings by Life-Cycle Cost, Baseline ............ 5-81 

Split HP: Percent of Buildings by Life-Cycle Cost, Baseline ............. 5-82 

Package AlC: Percent of Buildings by Life-Cycle Cost, Baseline . . . . . . . . . . 5,.82 

Package HP: Percent of Buildings by Life-Cycle Cost, Baseline .......... 5-83 

Frequency Chart of LCC Differences for 11 SEER Efficiency Level . . . . . .. 5-84 

Cumulative Chart of LCC Differences for 11 SEER Efficiency Level ...... 5-85 

Average LCCs for Split System Central Air Conditioners ............... 5-89 

Percent of Split System Central AlC Consumers with Net Costs, No 

Significant Impacts, and Net Savings ............................... 5-89 

Average LCCs for Split System Heat Pumps ......................... 5-90 

Percent of Split System Heat Pump Consumers with Net Costs, No 

Significant Impacts, and Net Savings ............................... 5-90 

Average LCCs for Single Package Central Air Conditioners ............. 5-91 , 

Percent of Single Package Central AlC Consumers with Net Costs, No 

Significant Impacts, and Net Savings ............................... 5-91 

Average LCCs for Single Package Heat Pumps ....................... 5-92 

XXVl 
EE-RM/STD-98-440 t2 .

Figure 5.54 Percent of Single Package Heat Pump Consumers with Net Costs, No

Significant Impacts, and Net Savings ............................... 5-92

Figure 5.55 Average LCCs for Split A/C - LCC Scenario with Rev Eng Manufacturer

C osts .................................... ..................... 5-94

Figure 5.56 Percent of Split A/C Consumers with Net Costs, No Significant Impacts,

and Net Savings - LCC Scenario with Rev Eng Manufacturer Costs ....... 5-94

Figure 5.57 Average LCCs for Split HP - LCC Scenario with Rev Eng Manufacturer

Costs ......................................................... 5-95

Figure 5.58 Percent of Split HP Consumers with Net Costs, No Significant Impacts,

and Net Savings - LCC Scenario with Rev Eng Manufacturer Costs ....... 5-95

Figure 5.59 Average LCCs for Single Package A/C - LCC Scenario with Rev Eng

Manufacturer Costs ............................................. 5-96

Figure 5.60 Percent of Single Package A/C Consumers with Net Costs, No Significant

Impacts, and Net Savings - LCC Scenario with Rev Eng Manufacturer

C osts ......................................................... 5-96

Figure 5.61 Average LCCs for Single Package HP - LCC Scenario with Rev Eng

Manufacturer Costs ............................................. 5-97

Figure 5.62 Percent of Single Package HP Consumers with Net Costs, No Significant

Impacts, and Net Savings - LCC Scenario with Rev Eng Manufacturer

C osts ............................................ ............ 5-97

Figure 5.63 Average LCCs for Split A/C - LCC Scenario with 14 year average Lifetime 5-99

Figure 5.64 Percent of Split A/C Consumers with Net Costs, No Significant Impacts,

and Net Savings - LCC Scenario with 14 year average Lifetime .......... 5-99

Figure 5.65 Average LCCs for Split HP -LCC Scenario with 14 year average Lifetime . 5-100

Figure 5.66 Percent of Split HP Consumers with Net Costs, No Significant Impacts,

and Net Savings - LCC Scenario with 14 year average Lifetime ......... 5-100

Figure 5.67 Average LCCs for Single Package A/C - LCC Scenario with 14 year

average Lifetim e ............................................... 5-101

Figure 5.68 Percent of Single Package A/C Consumers with Net Costs, No Significant

Impacts, and Net Savings - LCC Scenario with 14 year average Lifetime .. 5-101

Figure 5.69 Average LCCs for Single Package HP -LCC Scenario with 14 year

average Lifetim e ............................................... 5-102

Figure 5.70 Percent of Single Package HP Consumers with Net Costs, No Significant

Impacts, and Net Savings -LCC Scenario with 14 year average Lifetime .. 5-102

Figure 5.71 Frequency Chart of Payback Periods for 11 SEER Efficiency Level for

Split Air Conditioners .......................................... 5-104

Figure 5.72 Split A/C: Median and Mean Payback Periods ....................... 5-105

Figure 5.73 Split HP: Median and Mean Payback Periods ........................ 5-106

Figure 5.74 Package A/C: Median and Mean Payback Periods .................... 5-107

Figure 5.75 Package HP: Median and Mean Payback Periods ..................... 5-108

Figure 6.1 Flow Diagram for CAC/HP Shipments Model ......................... 6-3

Figure 6.2 Decision Tree for New Housing Purchases ............................ 6-8

xxvii

EE-RM-STD-98-440 COMMENT 208

Figure 5.54 

Figure 5.55 

Figure 5.56 

Figure 5.57 

Figure 5.58 

Figure 5.59 

Figure 5.60 

Figure 5.61 

Figure 5.62 

Figure 5.63 

Figure 5.64 

Figure 5.65 

Figure 5.66 

Figure 5.67 

Figure 5.68 

Figure 5.69 

Figure 5.70 

Figure 5.71 

Figure 5.72 

Figure 5.73 

Figure 5.74 

Figure 5.75 

Figure 6.1 

Figure 6.2 

EE-RM/STD-98-440 ~ '2 [) ~ 

Percent of Single Package Heat Pump Consumers with Net Costs, No 

Significant Impacts, and Net Savings ............................... 5-92 

Average LCCs for Split AlC - LCC Scenario with Rev Eng Manufacturer 

Costs ......................................................... 5-94 

Percent of Split AlC Consumers with Net Costs, No Significant Impacts, 

and Net Savings - LCC Scenario with Rev Eng Manufacturer Costs . . . . . . . 5-94 

Average LCCs for Split HP - LCC Scenario with Rev Eng Manufacturer 

Costs ......................................................... '5-95 

Percent of Split HP Consumers with Net Costs, No Significant Impacts, 

and Net Savings - LCC Scenario with Rev Eng Manufacturer Costs ....... 5-95 

Average LCCs for Single Package AlC - LCC Scenario with Rev Eng 

Manufacturer Costs ............................................. 5-96 

Percent of Single Package AlC Consumers with Net Costs, No Significant 

Impacts, and Net Savings - LCC Scenario with Rev Eng Manufacturer 

Costs ......................................................... 5-96 

Average LCCs for Single Package HP - LCC Scenario with Rev Eng 

Manufacturer Costs ............................................. 5-97 

Percent of Single Package HP Consumers with Net Costs, No Significant 

Impacts, and Net Savings - LCC Scenario with Rev Eng Manufacturer 

Costs ......................................................... 5-97 

Average LCCs for Split AlC - LCC Scenario with 14 year average Lifetime 5-99 

Percent of Split AlC Consumers with Net Costs, No Significant Impacts, 

and Net Savings - LCC Scenario with 14 year average Lifetime .......... 5-99 

Average LCCs for Split HP -LCC Scenario with 14 year average Lifetime. 5-100 

Percent of Split HP Consumers with Net Costs, No Significant Impacts, 

and Net Savings - LCC Scenario with 14 year average Lifetime ......... 5-100 

Average LCCs for Single Package AlC - LCC Scenario with 14 year 

average Lifetime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-101 

Percent of Single Package AlC Consumers with Net Costs, No Significant 

Impacts, and Net Savings - LCC Scenario with 14 year average Lifetime .. 5-101 

Average LCCs for Single Package HP -LCC Scenario with 14 year 

average Lifetime ............................................... 5-102 

Percent of Single Package HP Consumers with Net Costs, No Significant 

Impacts, and Net Savings -LCC Scenario with 14 year average Lifetime .. 5-102 

Frequency Chart of Payback Periods for 11 SEER Efficiency Level for 

Split Air Conditioners .......................................... 5-104 

Split AlC: Median and Mean Payback Periods ....................... 5-105 

Split HP: Median and Mean Payback Periods . . . . . . . . . . . . . . . . . . . . . . .. 5-106 

Package AlC: Median and Mean Payback Periods .................... 5-107 

Package HP: Median and Mean Payback Periods ..................... 5-108 

Flow Diagram for CACIHP Shipments Model ......................... 6-3 

Decision Tree for New Housing Purchases ............................ 6-8 

xxvii 
EE-RM/STD-98-440 20<A

Figure 6.3 Market Share of Heat Pumps relative to Total Central Air Conditioner

and Heat Pump Sales ............................................ 6-10

Figure 6.4 Decision Tree for Replacement and Repair of Regular CAC-HP Units

in Existing Housing ............................................. 6-11

Figure 6.5 Probability Function that an Existing CAC-HP has a Problem ............ 6-13

Figure 6.6 Survival Probability Function for CAC-HP Units ...................... 6-14

Figure 6.7 Relative Probability of Regular Replacement, Repair, Early Replacement

and No Action as a Function of CAC-HP Age for 1987 ................. 6-15

Figure 6.8 Decision Tree for Remodeled Housing .............................. 6-17

Figure 6.9 Decision Tree for Housing With Extended Life Units .................. 6-19

Figure 6.10 Survival Probability Function for Extended Life Units .................. 6-19

Figure 6.11 Central AC System Saturations in New Single Family Housing and

Housing Stock: Comparison of Data and Logit Function Fits ............. 6-25

Figure 6.12 Combined Central Air Conditioner and Heat Pump Shipments Forecast

based on NAECA Efficiency Scenario and AEO2000 Reference Case ..... 6-32

Figure 6.13 Combined Central Air Conditioner and Heat Pump Shipments Forecast

based on Roll-up Efficiency Scenario and AEO2000 Reference Case ...... 6-32

Figure 6.14 Combined Central Air Conditioner and Heat Pump Shipments Forecast

based on Shift Efficiency Scenario and AEO2000 Reference Case ........ 6-33

Figure 6.15 Sensitivity of Base Case Shipments, NAECA Efficiency Scenario to

AEO 2000 Forecasts ............................................ 6-34

Figure 6.16 Impacts of Increased Efficiency for the Year 2006 and Average Impacts

Over the Period 2006 to 2030 for Split A/C Sales and Shipments ......... 6-37

Figure 6.17 Impacts of Increased Efficiency for the Year 2006 and Average Impacts

Over the Period 2006 to 2030 for Split Heat Pump Sales and Shipments .... 6-38

Figure 6.18 Impacts of Increased Efficiency for the Year 2006 and Average Impacts

Over the Period 2006 to 2030 for Package A/C Sales and Shipments ...... 6-38

Figure 6.19 Impacts of Increased Efficiency for the Year 2006 and Average Impacts

Over the Period 2006 to 2030 for Package Heat Pump Sales and Shipments . 6-39

Figure 6.20 Average Relative Impacts on Mean Age, Mean Lifetime, Early Replacements,

and Total Repairs Over the Period 2006 to 2030 for Split A/C ............ 6-40

Figure 6.21 Average Relative Impacts on Mean Age, Mean Lifetime, Early Replacements,

and Total Repairs Over the Period 2006 to 2030 for Split Heat Pumps ..... 6-41

Figure 6.22 Average Relative Impacts on Mean Age, Mean Lifetime, Early Replacements,

and Total Repairs Over the Period 2006 to 2030 for Package A/C ......... 6-41

Figure 6.23 Average Relative Impacts on Mean Age, Mean Lifetime, Early Replacements,

and Total Repairs Over the Period 2006 to 2030 for Package Heat Pumps .. 6-42

Figure 7.1 Retirement Function for Central Air Conditioners and Heat Pumps ......... 7-7

Figure 7.2 Cumulative NES Results based on AEO2000 Reference Case (2006 - 2030) 7-23

Figure 7.3 Cumulative NES Results based on AEO2000 Low Growth

Case (2006 - 2030) ............... ................ ............. 7-24

xxviii

EE-RM-STD-98-440 COMMENT 208

Figure 6.3 

Figure 6.4 

Figure 6.5 

Figure 6.6 

Figure 6.7 

Figure 6.8 

Figure 6.9 

Figure 6.10 

Figure 6.11 

Figure 6.12 

Figure 6.13 

Figure 6.14 

Figure 6.15 

Figure 6.16 

Figure 6.17 

Figure 6.18 

Figure 6.19 

Figure 6.20 

Figure 6.21 

Figure 6.22 

Figure 6.23 

Figure 7.1 

Figure 7.2 

Figure 7.3 

EE-RM/STD-98-440 .:tt'Z O<t 

Market Share of Heat Pumps relative to Total Central Air Conditioner 

and Heat Pump Sales ............................................ 6-10 

Decision Tree for Replacement and Repair of Regular CAC-HP Units 

in Existing Housing ........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-11 

Probability Function that an Existing CAC-HP has a Problem ............ 6-13 

Survival Probability Function for CAC-HP Units ...................... 6-14 

Relative Probability of Regular Replacement, Repair, Early Replacement 

and No Action as a Function ofCAC-HP Age for 1987 ................. 6-15 

Decision Tree for Remodeled Housing .............................. 6-17 

Decision Tree for Housing With Extended Life Units .................. 6-19 

Survival Probability Function for Extended Life Units .................. 6-19 

Central AC System Saturations in New Single Family Housing and 

Housing Stock: Comparison of Data and Logit Function Fits ............. 6-25 

Combined Central Air Conditioner and Heat Pump Shipments Forecast 

based on NAECA Efficiency Scenario and AE02000 Reference Case ..... 6-32 

Combined Central Air Conditioner and Heat Pump Shipments Forecast 

based on Roll-up Efficiency Scenario and AE02000 Reference Case ...... 6-32 

Combined Central Air Conditioner and Heat Pump Shipments Forecast 

based on Shift Efficiency Scenario and AE02000 Reference Case ........ 6-33 

Sensitivity of Base Case Shipments, NAECA Efficiency Scenario to 

AEO 2000 Forecasts ............................................ 6-34 

Impacts 0 f Increased Efficiency for the Year 2006 and Average Impacts 

Over the Period 2006 to 2030 for Split AlC Sales and Shipments ......... 6-37 

Impacts of Increased Efficiency for the Year 2006 and Average Impacts 

Over the Period 2006 to 2030 for Split Heat Pump Sales and Shipments .... 6-38 

Impacts of Increased Efficiency for the Year 2006 and Average Impacts 

Over the Period 2006 to 2030 for Package AlC Sales and Shipments ...... 6-38 

Impacts of Increased Efficiency for the Year 2006 and Average Impacts 

Over the Period 2006 to 2030 for Package Heat Pump Sales and Shipments . 6-39 

Average Relative Impacts on Mean Age, Mean Lifetime, Early Replacements, 

and Total Repairs Over the Period 2006 to 2030 for Split AlC ............ 6-40 

Average Relative Impacts on Mean Age, Mean Lifetime, Early Replacements, 

and Total Repairs Over the Period 2006 to 2030 for Split Heat Pumps ..... 6-41 

Average Relative Impacts on Mean Age, Mean Lifetime, Early Replacements, 

and Total Repairs Over the Period 2006 to 2030 for Package AlC ......... 6-41 

Average Relative Impacts on Mean Age, Mean Lifetime, Early Replacements, 

and Total Repairs Over the Period 2006 to 2030 for Package Heat Pumps .. 6-42 

Retirement Function for Central Air Conditioners and Heat Pumps . . . . . . . . . 7-7 

Cumulative NES Results based on AE02000 Reference Case (2006 - 2030) 7-23 

Cumulative NES Results based on AE02000 Low Growth 

Case (2006 - 2030) .............................................. 7-24 

xxviii 
EE-RM/STD-98-440 a-.'2.6

Figure 7.4 Cumulative NES Results based on AEO2000 High Growth

Case (2006 - 2030) .............................................. 7-25

Figure 7.5 National Annual Costs and Savings for TSL 1, NAECA Efficiency Scenario,

AEO2000 Reference Case ....................................... 7-26

Figure 7.6 National Annual Costs and Savings for TSL 2, NAECA Efficiency Scenario,

AEO2000 Reference Case ........................................ 7-26

Figure 7.7 National Annual Costs and Savings for TSL 3, NAECA Efficiency Scenario,

AEO2000 Reference Case ........................ ............ 7-27

Figure 7.8 National Annual Costs and Savings for TSL 4, NAECA Efficiency Scenario,

AEO2000 Reference Case ........................................ 7-27

Figure 7.9 National Annual Costs and Savings for TSL 5, NAECA Efficiency Scenario,

AEO2000 Reference Case ........................................ 7-28

Figure 7.10 Cumulative Total Equipment and Operating Costs based on AEO2000

Reference Case (2006 - 2030) ..................... ................ 7-29

Figure 7.11 Cumulative NPVs relative to ±2% of Total National Base Case Costs

based on AEO2000 Reference Case (2006 - 2030) ..................... 7-30

Figure 7.12 Cumulative Total Equipment and Operating Costs based on AEO2000

Low Growth Case (2006 - 2030) ................................... 7-31

Figure 7.13 Cumulative NPVs relative to ±2% of Total National Base Case Costs

based on AEO2000 Low Growth Case (2006 - 2030) ................... 7-31

Figure 7.14 Cumulative Total Equipment and Operating Costs based on AEO2000

High Growth Case (2006 - 2030) ................................... 7-32

Figure 7.15 Cumulative NPVs relative to ±2% of Total National Base Case Costs

based on AEO2000 High Growth Case (2006 - 2030) .................. 7-33

Figure 7.16 Split A/C: Comparison of Manufacturer Cost Multipliers ............... 7-35

Figure 7.17 Split HP: Comparison of Manufacturer Cost Multipliers ................ 7-35

Figure 7.18 Pack. A/C: Comparison of Manufacturer Cost Multipliers ............... 7-35

Figure 7.19 Pack. HP: Comparison of Manufacturer Cost Multipliers ............... 7-35

Figure 7.20 Cumulative Total National Operating and Equipment Costs based

on Reverse Manufacturer Cost Scenario (2006 - 2030).................. 7-36

Figure 7.21 Cumulative National NPVs based on Reverse Manufacturer

Cost Scenario (2006 - 2030) ...................................... 7-37

Figure 7.22 Cumulative NES Results based on Reverse Engineering Manufacturer

Cost Scenario (2006 - 2030) ...................................... 7-38

Figure 7.23 Cumulative Total National Operating and Equipment Costs based

on 14-year Average Lifetime Scenario (2006 - 2030) ................... 7-39

Figure 7.24 Cumulative National NPVs based on 14-year Average Lifetime

Scenario (2006 - 2030) ........................................... 7-40

Figure 7.25 Cumulative NES Results based on 14-year Average Lifetime

Scenario (2006 - 2030) ............... .................... 7-41

Figure 7.26 Cumulative Total National Operating and Equipment Costs based

on 3% Discount Rate Scenario (2006 - 2030) ......................... 7-42

Figure 7.27 Cumulative National NPVs based on 3% Discount Rate Scenario

(2006 - 2030) ................................................ 7-43

xxix

EE-RM-STD-98-440 COMMENT 208

Figure 7.4 

Figure 7.5 

Figure 7.6 

Figure 7.7 

Figure 7.8 

Figure 7.9 

Figure 7.10 

Figure 7.11 

Figure 7.12 

Figure 7.13 

Figure 7.14 

Figure 7.15 

Figure 7.16 

Figure 7.17 

Figure 7.18 

Figure 7.19 

Figure 7.20 

Figure 7.21 

Figure 7.22 

Figure 7.23 

Figure 7.24 

Figure 7.25 

Figure 7.26 

Figure 7.27 

EE-RM/STD-98_440 -* <-2. {J ~ 

Cumulative NES Results based on AE02000 High Growth 

Case (2006 - 2030) .............................................. 7-25 

National Annual Costs and Savings for TSL 1, NAECA Efficiency Scenario, 

AE02000 Reference Case ........................................ 7-26 

National Annual Costs and Savings for TSL 2, NAECA Efficiency Scenario, 

AE02000Reference Case ........................................ 7-26 

National Annual Costs and Savings for TSL 3, NAECA Efficiency Scenario, 

AE02000 Reference Case ........................................ 7-27 

National Annual Costs and Savings for TSL 4, NAECA Efficiency Scenario, 

AE02000 Reference Case ........................................ 7-27 

National Annual Costs and Savings for TSL 5, NAECA Efficiency Scenario, 

AE02000 Reference Case ........................................ 7-28 

Cumulative Total Equipment and Operating Costs based on AE02000 

Reference Case (2006 - 2030) ..................................... 7-29 

Cumulative NPVs relative to ±2% of Total National Base Case Costs 

based on AE02000 Reference Case (2006 - 2030) ..................... 7-30 

Cumulative Total Equipment and Operating Costs based on AE02000 

Low Growth Case (2006 - 2030) ................................... 7-31 

Cumulative NPVs relative to ±2% of Total National Base Case Costs 

based on AE02000 Low Growth Case (2006 - 2030) ................... 7-31 

Cumulative Total Equipment and Operating Costs based on AE02000 

High Growth Case (2006 - 2030) ................................... 7-32 

Cumulative NPVs relative to ±2% of Total National Base Case Costs 

based on AE02000 High Growth Case (2006 - 2030) .................. 7-33 

Split AlC: Comparison of Manufacturer Cost Multipliers ............... 7-35 

Split HP: Comparison of Manufacturer Cost Multipliers ................ 7-35 

Pack. AlC: Comparison of Manufacturer Cost Multipliers ............... 7-35 

Pack. HP: Comparison of Manufacturer Cost Multipliers ................ 7-35 

Cumulative Total National Operating and Equipment Costs based 

on Reverse Manufacturer Cost Scenario (2006 - 2030) .................. 7-36 

Cumulative National NPVs based on Reverse Manufacturer 

Cost Scenario (2006 - 2030) ...................................... 7-37 

Cumulative NES Results based on Reverse Engineering Manufacturer 

Cost Scenario (2006 - 2030) ...................................... 7-38 

Cumulative Total National Operating and Equipment Costs based 

on 14-year Average Lifetime Scenario (2006 - 2030) ................... 7-39 

Cumulative National NPVs based on 14-year Average Lifetime 

Scenario (2006 - 2030) ........................................... 7-40 

Cumulative NES Results based on 14-year Average Lifetime 

Scenario (2006 - 2030) ........................................... 7-41 

Cumulative Total National Operating and Equipment Costs based 

on 3% Discount Rate Scenario (2006 - 2030) ......................... 7-42 

Cumulative National NPVs based on 3% Discount Rate Scenario 

(2006 - 2030) .................................................. 7-43 

XXIX 
EE-RM/STD-98-440 -i0

Figure 7.28 Cumulative NES Results based on 3% Discount Rate Scenario

(2006 - 2030) .................................................. 7-44

Figure 7.29 NES for Split System A/C based on a 12 SEER Efficiency-Level ......... 7-45

Figure 7.30 NPV for Split System A/C based on a 12 SEER Efficiency-Level ......... 7-45

Figure 7.31 Annual Values of a 12 SEER Efficiency-Level for Split A/C ............. 7-46

Figure 8.1 Value of All Unitary Shipments ($ million), 1991-1998 .................. 8-6

Figure 8.2 Using the GRIM to Conduct the Cash Flow Analysis ................... 8-11

Figure 8.3 Industry Net Cash Flow - Shift Efficiency Scenario .................... 8-31

Figure 8.4 Industry Net Cash Flow - NAECA Efficiency Scenario ................. 8-31

Figure 8.5 Industry Net Cash Flow - Roll-up Efficiency Scenario .................. 8-32

Figure 8.6 Contribution of Products at Each Efficiency Level to Industry Profits

(EBIT) under Trial Standards - NAECA Efficiency Scenario ............ 8-33

Figure 8.7 Contribution of Products at Each Efficiency Level to Industry Profits

(EBIT) under Trial Standards - Roll-up Efficiency Scenario ............. 8-34

Figure 8.8 Contribution of Products at Each Efficiency Level to Industry Profits

(EBIT) under Trial Standards - Shift Efficiency Scenario ............... 8-34

Figure 8.9 Net Cash Flows for the Lower Operating Cost Subgroup - NAECA

Efficiency Scenario ............................................. 8-50

Figure 8.10 Net Cash Flows for the Lower Operating Cost Subgroup - Roll-up

Efficiency Scenario ............................................. 8-50

Figure 8.11 Net Cash Flows for the Lower Operating Cost Subgroup - Shift

Efficiency Scenario ............................................. 8-51

Figure 8.12 Net Cash Flows for the Higher Operating Cost Subgroup - NAECA

Efficiency Scenario ............................................. 8-52

Figure 8.13 Net Cash Flows for the Higher Operating Cost Subgroup - Roll-up

Efficiency Scenario ............................................. 8-52

Figure 8.14 Net Cash Flows for the Higher Operating Cost Subgroup - Shift

Efficiency Scenario ............................................. 8-53

Figure 10.1 Split A/C: Comparison of Median and Mean Payback Periods between

Low-Income Households and the Overall Sample ...................... 10-5

Figure 10.2 Split HP: Comparison of Median and Mean Payback Periods between

Low-Income Households and the Overall Sample ...................... 10-5

Figure 10.3 Package A/C: Comparison of Median and Mean Payback Periods between

Low-Income Households and the Overall Sample ...................... 10-5

Figure 10.4 Package HP: Comparison of Median and Mean Payback Periods between

Low-Income Households and the Overall Sample ...................... 10-5

Figure 12.1 Net National Employment Impacts ............ ................. 12-1

Figure 12.2 Employment Impacts of Consumer Savings .......................... 12-4

Figure 12.3 Employment Impacts of Changes in Equipment Cost ................... 12-5

Figure 12.4 Employment Impacts of Utility Savings ............................. 12-6

xxx

EE-RM-STD-98-440 COMMENT 208

Figure 7.28 

Figure 7.29 

Figure 7.30 

Figure 7.31 

Figure 8.1 

Figure 8.2 

Figure 8.3 

Figure 8.4 

Figure 8.5 

Figure 8.6 

Figure 8.7 

Figure 8.8 

Figure 8.9 

Figure 8.10 

Figure 8.11 

Figure 8.12 

Figure 8.13 

Figure 8.14 

EE-RM/STD-98-440 :f'2D~ 

Cumulative NES Results based on 3% Discount Rate Scenario 

(2006 - 2030) .................................................. 7-44 

NES for Split System AlC based on a 12 SEER Efficiency-Level ......... 7-45 

NPV for Split System AlC based on a 12 SEER Efficiency-Level ......... 7-45 

Annual Values of a 12 SEER Efficiency-Level for Split AlC ............. 7-46 

Value of All Unitary Shipments ($ million), 1991-1998 .................. 8-6 

Using the GRIM to Conduct the Cash Flow Analysis ................... 8-11 

Industry Net Cash Flow - Shift Efficiency Scenario .................... 8-31 

Industry Net Cash Flow - NAECA Efficiency Scenario ................. 8-31 

Industry Net Cash Flow - Roll-up Efficiency Scenario .................. 8-32 

Contribution of Products at Each Efficiency Level to Industry Profits 

(EBIT) under Trial Standards - NAECA Efficiency Scenario ............ 8-33 

Contribution of Products at Each Efficiency Level to Industry Profits 

(EBIT) under Trial Standards - Roll-up Efficiency Scenario ............. 8-34 

Contribution of Products at Each Efficiency Level to Industry Profits 

(EBIT) under Trial Standards - Shift Efficiency Scenario ............... 8-34 

Net Cash Flows for the Lower Operating Cost Subgroup - NAECA 

Efficiency Scenario ............................................. 8-50 

Net Cash Flows for the Lower Operating Cost Subgroup - Roll-up 

Efficiency Scenario ............................................. 8-50 

Net Cash Flows for the Lower Operating Cost Subgroup - Shift 

Efficiency Scenario ............................................. 8-51 

Net Cash Flows for the Higher Operating Cost Subgroup - NAECA 

Efficiency Scenario ............................................. 8-52 

Net Cash Flows for the Higher Operating Cost Subgroup - Roll-up 

Efficiency Scenario ............................................. 8-52 

Net Cash Flows for the Higher Operating Cost Subgroup - Shift 

Efficiency Scenario ............................................. 8-53 

Figure 10.1 Split AlC: Comparison of Median and Mean Payback Periods between 

Low-Income Households and the Overall Sample ...................... 10-5 

Figure 10.2 Split HP: Comparison of Median and Mean Payback Periods between 

Low-Income Households and the Overall Sample ...................... 10-5 

Figure 10.3 Package AlC: Comparison of Median and Mean Payback Periods between 

Low-Income Households and the Overall Sample ...................... 10-5 

Figure 10.4 Package HP: Comparison of Median and Mean Payback Periods between 

Figure 12.1 

Figure 12.2 

Figure 12.3 

Figure 12.4 

Low-Income Households and the Overall Sample ...................... 10-5 

Net National Employment Impacts ................................. 12-1 

Employment Impacts of Consumer Savings .......................... 12-4 

Employment Impacts of Changes in Equipment Cost ................... 12-5 

Employment Impacts of Utility Savings ............................. 12-6 

xxx 
EE-RM/STD-98-440 ~ '2 <

Figure A.la Normal Probability Distribution ................................... A-3

Figure A. lb Triangular Probability Distribution ................................. A-3

Figure A. lc Uniform Probability Distribution ................................... A-3

Figure B.1 Characteristics of Split Air Conditioner Samples - Compressor Type ....... B-7

Figure B.2 Characteristics of Split Air Conditioner Samples - TXV ................. B-7

Figure B.3 Characteristics of Split Air Conditioner Samples - Refrigerant Management.. B-8

Figure B.4 Characteristics of Split Air Conditioner Samples - Tube Rifling ........... B-8

Figure B.5 Characteristics of Split Air Conditioner Samples - Indoor Fan Control ...... B-9

Figure B.6 Characteristics of Split Air Conditioner Samples - Fans .................. B-9

Figure B.7 Characteristics of Split Air Conditioner Samples - Capacity and Charge .... B-10

Figure B.8 Characteristics of Split Air Conditioner Samples - Weight ............... B-10

Figure B.9 Characteristics of Split Air Conditioner Samples - Cabinet Volume ....... B-11

Figure B. 10 Characteristics of Split Air Conditioner Samples - Fin Density .......... B-11

Figure B. 11 Characteristics of Split Air Conditioner Samples - Tube Rows and

Face Area ..................................................... B-12

Figure B.12 Characteristics of Split Heat Pump Samples - Compressor Type .......... B-12

Figure B.13 Characteristics of Split Heat Pump Samples - TXV .................... B-13

Figure B.14 Characteristics of Split Heat Pump Samples - Refrigerant Management .... B-13

Figure B.15 Characteristics of Split Heat Pump Samples - Tube Rifling ............. B-14

Figure B.16 Characteristics of Split Heat Pump Samples - Fan Control ............... B-14

Figure B.17 Characteristics of Split Heat Pump Samples - Fans ..................... B-15

Figure B.18 Characteristics of Split Heat Pump Samples - Capacity and Charge ........ B-15

Figure B.19 Characteristics of Split Heat Pump Samples - Weight .................. B-16

Figure B.20 Characteristics of Split Heat Pump Samples - Cabinet Volume .......... B-16

Figure B.21 Characteristics of Split Heat Pump Samples - Fin Density ............... B-17

Figure B.22 Characteristics of Split Heat Pump Samples - Tube Rows and Face Area ... B-17

Figure B.23 Characteristics of Package Air Conditioner Samples - Compressor Type .... B-18

Figure B.24 Characteristics of Package Air Conditioner Samples - TXV .............. B-18

Figure B.25 Characteristics of Package Air Conditioner Samples -

Refrigerant Management ......................................... B-19

Figure B.26 Characteristics of Package Air Conditioner Samples - Tube Rifling ....... B-19

Figure B.27 Characteristics of Package Air Conditioner Samples - Fan Control ........ B-20

Figure B.28 Characteristics of Package Air Conditioner Samples - Fans .............. B-20

Figure B.29 Characteristics of Package Air Conditioner Samples - Capacity and Charge . B-21

Figure B.30 Characteristics of Package Air Conditioner Samples - Weight ........... B-21

Figure B.31 Characteristics of Package Air Conditioner Samples - Volume ........... B-22

Figure B.32 Characteristics of Package Air Conditioner Samples - Fin Density ........ B-22

Figure B.33 Characteristics of Package Air Conditioner Samples - Coils ............. B-23

Figure B.34 Characteristics of Package Heat Pump Samples - Compressor Type ....... B-23

Figure B.35 Characteristics of Package Heat Pump Samples - TXV ................. B-24

Figure B.36 Characteristics of Package Heat Pump Samples - Refrigerant Management .. B-24

Figure B.37 Characteristics of Package Heat Pump Samples - Tube Rifling ........... B-25

Figure B.38 Characteristics of Package Heat Pump Samples - Fan Control ............ B-25

xxxi

EE-RM-STD-98-440 COMMENT 208

Figure A.la 

Figure A.lb 

Figure A.1c 

Figure B.l 

Figure B.2 

Figure B.3 

Figure B.4 

Figure B.5 

Figure B.6 

Figure B.7 

Figure B.8 

Figure B.9 

Figure B.I0 

Figure B.ll 

Figure B.12 

Figure B.13 

Figure B.14 

Figure B.15 

Figure B.16 

Figure B.17 

Figure B.18 

Figure B.19 

Figure B.20 

Figure B.21 

Figure B.22 

Figure B.23 

Figure B.24 

Figure B.25 

Figure B.26 

Figure B.27 

Figure B.28 

Figure B.29 

Figure B.30 

Figure B.31 

Figure B.32 

Figure B.33 

Figure B.34 

Figure B.35 

Figure B.36 

Figure B.37 

Figure B.38 

EE-RM/STD-98-440 *' '2. <:) ~ 

Nonnal Probability Distribution ................................... A-3 

Triangular Probability Distribution ......... . . . . . . . . . . . . . . . . . . . . . . .. A-3 

Unifonn Probability Distribution ................................... A-3 

Characteristics of Split Air Conditioner Samples - Compressor Type ....... B-7 

Characteristics of Split Air Conditioner Samples - TXV ................. B-7 

Characteristics of Split Air Conditioner Samples - Refrigerant Management .. B-8 

Characteristics of Split Air Conditioner Samples - Tube Rifling ........... B-8 

Characteristics of Split Air Conditioner Samples - Indoor Fan Control ...... B-9 

Characteristics of Split Air Conditioner Samples - Fans .................. B-9 

Characteristics of Split Air Conditioner Samples - Capacity and Charge .... B-I0 

Characteristics of Split Air Conditioner Samples - Weight ............... B-10 

Characteristics of Split Air Conditioner Samples - Cabinet Volume ....... B-11 

Characteristics of Split Air Conditioner Samples - Fin Density ........... B-ll 

Characteristics of Split Air Conditioner Samples - Tube Rows and 

Face Area ..................................................... B-12 

Characteristics of Split Heat Pump Samples - Compressor Type .......... B-12 

Characteristics of Split Heat Pump Samples - TXV .................... B-13 

Characteristics of Split Heat Pump Samples - Refrigerant Management .... B-13 

Characteristics of Split Heat Pump Samples - Tube Rifling .............. B-14 

Characteristics of Split Heat Pump Samples - Fan Control ............... B-14 

Characteristics of Split Heat Pump Samples - Fans ..................... B-15 

Characteristics of Split Heat Pump Samples - Capacity and Charge ........ B-15 

Characteristics of Split Heat Pump Samples - Weight .................. B-16 

Characteristics of Split Heat Pump Samples - Cabinet Volume ........... B-16 

Characteristics of Split Heat Pump Samples - Fin Density ............... B-17 

Characteristics of Split Heat Pump Samples - Tube Rows and Face Area ... B-17 

Characteristics of Package Air Conditioner Samples - Compressor Type .... B-18 

Characteristics of Package Air Conditioner Samples - TXV .............. B-18 

Characteristics of Package Air Conditioner Samples -

Refrigerant Management ......................................... B-19 

Characteristics of Package Air Conditioner Samples - Tube Rifling ....... B-19 

Characteristics of Package Air Conditioner Samples - Fan Control ........ B-20 

Characteristics of Package Air Conditioner Samples - Fans .............. B-20 

Characteristics of Package Air Conditioner Samples - Capacity and Charge. B-21 

Characteristics of Package Air Conditioner Samples - Weight ............ B-21 

Characteristics of Package Air Conditioner Samples - Volume ........... B-22 

Characteristics of Package Air Conditioner Samples - Fin Density ........ B-22 

Characteristics of Package Air Conditioner Samples - Coils ............. B-23 

Characteristics of Package Heat Pump Samples - Compressor Type ....... B-23 

Characteristics of Package Heat Pump Samples - TXV ................. B-24 

Characteristics of Package Heat Pump Samples - Refrigerant Management .. B-24 

Characteristics of Package Heat Pump Samples - Tube Rifling ........... B-25 

Characteristics of Package Heat Pump Samples - Fan Control ............ B-25 

XXXI 
EE-RM/STD-98-440 2 g0 

Figure B.39 Characteristics of Package Heat Pump Samples - Fans .................. B-26

Figure B.40 Characteristics of Package Heat Pump Samples - Capacity and Charge ..... B-26

Figure B.41 Characteristics of Package Heat Pump Samples - Weight ................ B-27

Figure B.42 Characteristics of Package Heat Pump Samples - Volume ............... B-27

Figure B.43 Characteristics of Package Heat Pump Samples - Fin Density ............ B-28

Figure B.44 Characteristics of Package Heat Pump Samples - Coils ................. B-28

Figure C.1 Sample structured bill of materials .................................. C-5

Figure C.2 Sample Fabrication and Assembly Summary Table ..................... C-8

Figure C.3 Overall M odel Structure .......................................... C-9

Figure C.4 Sample of Global Controls Sheet ................................... C-10

Figure C.5 Sample table showing major sub-assembly and plant overhead costs ....... C-10

Figure C.6 Sample Data Fields from Manufacturing Data Sheet ................... C- 1

Figure C.7 Sample Raw Material Data Tables and Part Price List from the

Purchased Parts Sheet .......................................... C-13

Figure C.8 Sample from Equipment Data Sheet ................................ C-14

Figure C.9 Flow Diagram for Coil Model ............ ........................ C-14

Figure C.10 Coil model output fields ....................................... C-15

Figure C. 11 Coil manufacturing costs calculated in the coil model .................. C-16

Figure D.1 Base and Incremental Costs and Markups for Split System Air Conditioners

at the Wholesaler Level ...................................... .... D-6

Figure D.2 Comparison of Wholesaler/Distributor Markups ...................... D-13

Figure D.3 Comparison of Dealer/Contractor Markups .......................... D-14

Figure E.1 Split A/C, 11 SEER: Frequency Chart of LCC Difference ................ E-2

Figure E.2 Split A/C, 11 SEER: Cumulative Chart of LCC Difference ............... E-2

Figure E.3 Split A/C, 12 SEER: Frequency Chart of LCC Difference ................ E-3

Figure E.4 Split A/C, 12 SEER: Cumulative Chart of LCC Difference ............... E-3

Figure E.5 Split A/C, 13 SEER: Frequency Chart of LCC Difference ................ E-4

Figure E.6 Split A/C, 13 SEER: Cumulative Chart of LCC Difference ............. E-4

Figure E.7 Split A/C, 18 SEER: Frequency Chart of LCC Difference ............ .. E-5

Figure E.8 Split A/C, 18 SEER: Cumulative Chart of LCC Difference ............... E-5

Figure E.9 Split Heat Pump, 11 SEER: Frequency Chart of LCC Difference ........... E-6

Figure E.10 Split Heat Pump, 11 SEER: Cumulative Chart of LCC Difference .......... E-6

Figure E. 11 Split Heat Pump, 12 SEER: Frequency Chart of LCC Difference ........... E-7

Figure E.12 Split Heat Pump, 12 SEER: Cumulative Chart of LCC Difference .......... E-7

Figure E.13 Split Heat Pump, 13 SEER: Frequency Chart ofLCC Difference ........... E-8

Figure E.14 Split Heat Pump, 13 SEER: Cumulative Chart of LCC Difference .......... E-8

Figure E.15 Split Heat Pump, 18 SEER: Frequency Chart of LCC Difference ........... E-9

Figure E. 16 Split Heat Pump, 18 SEER: Cumulative Chart of LCC Difference .......... E-9

Figure E. 17 Single Package A/C, 11 SEER: Frequency Chart of LCC Difference ....... E-10

Figure E.18 Single Package A/C, 11 SEER: Cumulative Chart of LCC Difference ...... E-10

Figure E.19 Single Package A/C, 12 SEER: Frequency Chart of LCC Difference ....... E-l I

xxxii

EE-RM-STD-98-440 COMMENT 208

Figure B.39 

Figure B.40 

Figure B.41 

Figure B.42 

Figure B.43 

Figure B.44 

Figure C.I 

Figure C.2 

Figure C.3 

Figure C.4 

Figure e.S 

Figure C.6 

Figure C.7 

Figure e.8 

Figure e.9 

Figure C.10 

Figure e.ll 

Figure D.I 

Figure D.2 

Figure D.3 

Figure E.1 

Figure E.2 

Figure E.3 

Figure E.4 

Figure E.S 

Figure E.6 

Figure E.7 

Figure E.8 

Figure E.9 

Figure E.lO 

Figure E.11 

Figure E.12 

Figure E.13 

Figure E.14 

Figure E.1S 

Figure E.16 

Figure E.17 

Figure E.18 

Figure E.I9 

EE-RM/STD-98.440 *'A O~ 

Characteristics of Package Heat Pump Samples - Fans .................. B-26 

Characteristics of Package Heat Pump Samples - Capacity and Charge ..... B-26 

Characteristics of Package Heat Pump Samples - Weight ................ B-27 

Characteristics of Package Heat Pump Samples - Volume ............... B-27 

Characteristics of Package Heat Pump Samples - Fin Density ............ B-28 

Characteristics of Package Heat Pump Samples - Coils ................. B-28 

Sample structured bill of materials .................................. C-S 

Sample Fabrication and Assembly Summary Table ..................... C-8 

Overall Model Structure .......................................... C-9 

Sample of Global Controls Sheet ................................... ColO 

Sample table showing major sub-assembly and plant overhead costs ....... C-IO 

Sample Data Fields from Manufacturing Data Sheet ................... C-II 

Sample Raw Material Data Tables and Part Price List from the 

Purchased Parts Sheet ........................................... C-13 

Sample from Equipment Data Sheet ................................ C-14 

Flow Diagram for Coil Model ..................................... C-I4 

Coil model output fields ......................................... C-lS 

Coil manufacturing costs calculated in the coil model .................. C-16 

Base and Incremental Costs and Markups for Split System Air Conditioners 

at the Wholesaler Level .......................................... D-6 

Comparison of WholesalerlDistributor Markups. . . . . . . . . . . . . . . . . . . . .. D-13 

Comparison of Dealer/Contractor Markups . . . . . . . . . . . . . . . . . . . . . . . . .. D-I4 

Split AlC, 11 SEER: Frequency Chart ofLCC Difference ................ E-2 

Split AlC, 11 SEER: Cumulative Chart ofLCC Difference ............... E-2 

Split AlC, 12 SEER: Frequency Chart ofLCC Difference ................ E-3 

Split AlC, 12 SEER: Cumulative Chart ofLCC Difference ............... E-3 

Split AlC, 13 SEER: Frequency Chart of LCC Difference ................ E-4 

Split AlC, 13 SEER: Cumulative Chart of LCC Difference ............... E-4 

Split AlC, 18 SEER: Frequency Chart of LCC Difference ................ E-S 

Split AlC, 18 SEER: Cumulative Chart of LCC Difference ............... E-S 

Split Heat Pump, 11 SEER: Frequency Chart of LCC Difference ........... E-6 

Split Heat Pump, 11 SEER: Cumulative Chart ofLCC Difference .......... E-6 

Split Heat Pump, 12 SEER: Frequency Chart ofLCC Difference ........... E-7 

Split Heat Pump, 12 SEER: Cumulative Chart ofLCC Difference .......... E-7 

Split Heat Pump, 13 SEER: Frequency Chart of LCC Difference ........... E-8 

Split Heat Pump, 13 SEER: Cumulative Chart ofLCC Difference .......... E-8 

Split Heat Pump, 18 SEER: Frequency Chart of Lee Difference ........... E-9 

Split Heat Pump, 18 SEER: Cumulative Chart of LCC Difference .......... E-9 

Single Package Ale, 11 SEER: Frequency Chart of LCC Difference ....... E-I0 

Single Package AlC, 11 SEER: Cumulative Chart of LCe Difference ...... E-IO 

Single Package AlC, 12 SEER: Frequency Chart ofLCC Difference ....... E-ll 

xxxii 
EE-Ri,' /STD-98-440 .- 2 0 g

Figure E.20 Single Package A/C, 12 SEER: Cumulative Chart of LCC Difference ...... E- 1

Figure E.21 Single Package A/C, 13 SEER: Frequency Chart of LCC Difference ....... E-12

Figure E.22 Single Package A/C, 13 SEER: Cumulative Chart of LCC Difference ...... E-12

Figure E.23 Single Package A/C, 18 SEER: Frequency Chart of LCC Difference ....... E-13

Figure E.24 Single Package A/C, 18 SEER: Cumulative Chart of LCC Difference ...... E-13

Figure E.25 Single Package Heat Pump, 11 SEER: Frequency Chart of LCC Difference . E-14

Figure E.26 Single Package Heat Pump, 11 SEER: Cumulative Chart of LCC Difference E-14

Figure E.27 Single Package Heat Pump, 12 SEER: Frequency Chart of LCC Difference . E-15

Figure E.28 Single Package Heat Pump, 12 SEER: Cumulative Chart of LCC Difference E-15

Figure E.29 Single Package Heat Pump, 13 SEER: Frequency Chart of LCC Difference . E-16

Figure E.30 Single Package Heat Pump, 13 SEER: Cumulative Chart of LCC Difference E-16

Figure E.31 Single. Package Heat Pump, 18 SEER: Frequency Chart of LCC Difference . E-17

Figure E.32 Single Package Heat Pump, 18 SEER: Cumulative Chart ofLCC Difference E-17

Figure F.1 Split A/C, 11 SEER: Annual Savings and Costs ........................ F-2

Figure F.2 Split A/C, 12 SEER: Annual Savings and Costs ........................ F-3

Figure F.3 Split A/C, 13 SEER: Annual Savings and Costs ........................ F-4

Figure F.4 Split A/C, 18 SEER: Annual Savings and Costs ........................ F-5

Figure F.5 Split HP, 11 SEER: Annual Savings and Costs ......................... F-6

Figure F.6 Split HP, 12 SEER: Annual Savings and Costs ......................... F-7

Figure F.7 Split HP, 13 SEER: Annual Savings and Costs ......................... F-8

Figure F.8 Split HP, 18 SEER: Annual Savings and Costs ......................... F-9

Figure F.9 Package A/C, 11 SEER: Annual Savings and Costs .................... F-10

Figure F.10 Package A/C, 12 SEER: Annual Savings and Costs ...... ............ F-ll

Figure F.11 Package A/C, 13 SEER: Annual Savings and Costs .................... F-12

Figure F.12 Package A/C, 18 SEER: Annual Savings and Costs .................... F-13

Figure F.13 Package HP, 11 SEER: Annual Savings and Costs ..................... F-14

Figure F.14 Package HP, 12 SEER: Annual Savings and Costs ..................... F-15

Figure F.15 Package HP, 13 SEER: Annual Savings and Costs ..................... F-16

Figure F.16 Package HP, 18 SEER: Annual Savings and Costs ..................... F-17

Figure H. la An Example of the Interpolation of a Trial Standard Level: Difference

in Coal Capacity ................................................ H-4

Figure H. lb Close-Up of the Interpolation of Trial Standard Level X2 from X1 ........ H-5

Figure H.2 Example of Trial Standard Level XI: Marginal NO, Emissions ........... H-6

Figure 5.29S Split A/C: Mean Installed Consumer Costs based on Rev Eng Manufacturing

C osts .......................................................... J-3

Figure 5.30S Split A/C: Mean Annual Operating Costs based on Rev Eng Manufacturing

C osts .......................................................... J-3

Figure 5.31 S Split A/C: Mean Life-Cycle Costs based on Rev Eng Manufacturing

Costs ........................... ................... ......... J-3

Figure 5.32S Split HP: Mean Installed Consumer Costs based on Rev Eng Manufacturing

C osts .......................................................... J-3

xxxiii

EE-RM-STD-98-440 COMMENT 208

Figure E.20 

Figure E.21 

Figure E.22 

Figure E.23 

Figure E.24 

Figure E.25 

Figure E.26 

Figure E.27 

Figure E.28 

Figure E.29 

Figure E.30 

Figure E.31 

Figure E.32 

Figure F.1 

Figure F.2 

Figure F.3 

Figure F.4 

Figure F.5 

Figure F.6 

Figure F.7 

Figure F.8 

Figure F.9 

Figure F.10 

Figure F.11 

Figure F.12 

Figure F.13 

Figure F.14 

Figure F.15 

Figure F.16 

Figure H.la 

Figure H.lb 

Figure H.2 

EE·Rll,il/STD-98-440 it'2 a ~ 

Single Package AlC, 12 SEER: Cumulative Chart ofLCC Difference ...... E-l1 

Single Package AlC, 13 SEER: Frequency Chart ofLCC Difference ....... E-12 

Single Package AlC, 13 SEER: Cumulative Chart ofLCC Difference ...... E-12 

Single Package AlC, 18 SEER: Frequency Chart ofLCC Difference ....... E-13 

Single Package AlC, 18 SEER: Cumulative Chart ofLCC Difference ...... E-13 

Single Package Heat Pump, 11 SEER: Frequency Chart ofLCC Difference. E-14 

Single Package Heat Pump, 11 SEER: Cumulative Chart ofLCC Difference E-14 

Single Package Heat Pump, 12 SEER: Frequency Chart ofLCC Difference. E-15 

Single Package Heat Pump, 12 SEER: Cumulative Chart ofLCC Difference E-15 

Single Package Heat Pump, 13 SEER: Frequency Chart of LCC Difference . E-16 

Single Package Heat Pump, 13 SEER: Cumulative Chart ofLCC Difference E-16 

Single. Package Heat Pump, 18 SEER: Frequency Chart of LCC Difference . E-17 

Single Package Heat Pump, 18 SEER: Cumulative Chart of LCC Difference E-17 

Split AlC, 11 SEER: Annual Savings and Costs ........................ F-2 

Split AlC, 12 SEER: Annual Savings and Costs ........................ F-3 

Split AlC, 13 SEER: Annual Savings and Costs ........................ F-4 

Split AlC, 18 SEER: Annual Savings and Costs ........................ F-5 

Split HP, 11 SEER: Annual Savings and Costs ......................... F-6 

Split HP, 12 SEER: Annual Savings and Costs ......................... F-7 

Split HP, 13 SEER: Annual Savings and Costs ......................... F-8 

Split HP, 18 SEER: Annual Savings and Costs ......................... F-9 

Package AlC, II SEER: Annual Savings and Costs .................... F-IO 

Package AlC, 12 SEER: Annual Savings and Costs .................... F-ll 

Package AlC, 13 SEER: Annual Savings and Costs .................... F-12 

Package AlC, 18 SEER: Annual Savings and Costs .................... F-13 

Package HP, II SEER: Annual Savings and Costs ..................... F-14 

Package HP, 12 SEER: Annual Savings and Costs ..................... F-15 

Package HP, 13 SEER: Annual Savings and Costs ..................... F-16 

Package HP, 18 SEER: Annual Savings and Costs ..................... F-17 

An Example of the Interpolation of a Trial Standard Level: Difference 

in Coal Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. H-4 

Close-Up of the Interpolation of Trial Standard Level X2 from XI ........ H-5 

Example of Trial Standard Level Xl: Marginal NOx Emissions ........... H-6 

Figure 5.29S Split AlC: Mean Installed Consumer Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-3 

Figure 5.30S Split AlC: Mean Annual Operating Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-3 

Figure 5.31S Split AlC: Mean Life-Cycle Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-3 

Figure 5.32S Split HP: Mean Installed Consumer Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-3 

xxxiii 
EE-RM/STD-98-440 i2 L

Figure 5.33S Split HP: Mean Annual Operating Costs based on Rev Eng Manufacturing

C osts .......................................................... J-3

Figure 5.34S Split HP: Mean Life-Cycle Costs based on Rev Eng Manufacturing

C osts .......................................................... J-3

Figure 5.35S Pack A/C: Mean Installed Consumer Costs based on Rev Eng Manufacturing

C osts .................................. ............. .......... J-4

Figure 5.36S Pack A/C: Mean Annual Operating Costs based on Rev Eng Manufacturing

C osts .............................................. ........... . J-4

Figure 5.37S Pack A/C: Mean Life-Cycle Costs based on Rev Eng Manufacturing

C osts .................... .......... .... ........................ J-4

Figure 5.38S Pack HP: Mean Installed Consumer Costs based on Rev Eng Manufacturing

C osts .......................................................... J-4

Figure 5.39S Pack HP: Mean Annual Operating Costs based on Rev Eng Manufacturing

C osts .......................................................... J-4

Figure 5.40S Pack HP: Mean Life-Cycle Costs based on Rev Eng Manufacturing

C osts ......................... ............. .................. J-4

Figure 5.72S Split A/C: Median and Mean Payback Periods based on Reverse

Engineering Manufacturing Costs ... .. .............................. J-7

Figure 5.73S Split HP: Median and Mean Payback Periods based on Reverse

Engineering Manufacturing Costs ................................... J-8

Figure 5.74S Package A/C: Median and Mean Payback Periods based on Reverse

Engineering Manufacturing Costs .................................. J-9

Figure 5.75S Package HP: Median and Mean Payback Periods based on Reverse

Engineering Manufacturing Costs ................................. J-10

Figure 7.2S Cumulative NES Results based on Reverse Engineering Manufacturing

Costs and AEO2000 Reference Case (2006 - 2030) .................... J-13

Figure 7.3S Cumulative NES Results based on based on Reverse Engineering

Manufacturing Costs and AEO2000 Low Growth Case (2006 - 2030) ...... J-14

Figure 7.4S Cumulative NES Results based on based on Reverse Engineering

Manufacturing Costs and AEO2000 High Growth Case (2006 - 2030) ..... J-15

Figure 7.1 OS Cumulative Total Equipment and Operating Costs based on Reverse

Engineering Manufacturing Costs and AEO2000 Reference Case

(2006 - 2030) . ........................................... J-16

Figure 7.11S Cumulative NPVs relative to ±2% of Total National Base Case Costs

based on Reverse Engineering Manufacturing Costs and AEO2000 Reference

Case (2006 - 2030) ............................................. J-17

Figure 7.12S Cumulative Total Equipment and Operating Costs based on Reverse

Engineering Manufacturing Costs and AEO2000 Low Growth Case

(2006 - 2030) ........................................... ....... J-18

Figure 7.13S Cumulative NPVs relative to ±2% of Total National Base Case Costs

based on Reverse Engineering Manufacturing Costs and AEO2000

Low Growth Case (2006 - 2030) ................................... J-19

xxxiv

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ 2 o~ 

Figure 5.33S Split HP: Mean Annual Operating Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-3 

Figure 5.34S Split HP: Mean Life-Cycle Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-3 

Figure 5.35S Pack AlC: Mean Installed Consumer Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-4 

Figure 5.36S Pack AlC: Mean Annual Operating Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-4 

Figure 5.37S Pack AlC: Mean Life-Cycle Costs based on Rev Eng Manufacturing 

Costs ..... ; .................................................... J-4 

Figure 5.38S Pack HP: Mean Installed Consumer Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-4 

Figure 5.39S Pack HP: Mean Annual Operating Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-4 

Figure 5.40S Pack HP: Mean Life-Cycle Costs based on Rev Eng Manufacturing 

Costs .......................................................... J-4. 

Figure 5.72S Split AlC: Median and Mean Payback Periods based on Reverse 

Engineering Manufacturing Costs ................................... J-7 

Figure 5.73S Split HP: Median and Mean Payback Periods based on Reverse 

Engineering Manufacturing Costs ................................... J-8 

Figure 5.74S Package AlC: Median and Mean Payback Periods based on Reverse 

Engineering Manufacturing Costs ................................... J-9 

Figure 5.75S Package HP: Median and Mean Payback Periods based on Reverse 

Engineering Manufacturing Costs .................................. J-1O 

Figure 7.2S Cumulative NES Results based on Reverse Engineering Manufacturing 

Costs and AE02000 Reference Case (2006 - 2030) .................... J-13 

Figure 7.3S Cumulative NES Results based on based on Reverse Engineering 

Manufacturing Costs and AE02000 Low Growth Case (2006 - 2030) ...... J-14 

Figure 7.4S Cumulative NES Results based on based on Reverse Engineering 

Manufacturing Costs and AE02000 High Growth Case (2006 - 2030) ..... J-15 

Figure 7.10S Cumulative Total Equipment and Operating Costs based on Reverse 

Engineering Manufacturing Costs and AE02000 Reference Case 

(2006 - 2030) .................................................. J-16 

Figure 7.11S Cumulative NPVs relative to ±2% of Total National Base Case Costs 

based on Reverse Engineering Manufacturing Costs and AE02000 Reference 

Case (2006 - 2030) .............................................. J-17 

Figure 7.12S Cumulative Total Equipment and Operating Costs based on Reverse 

Engineering Manufacturing Costs and AE02000 Low Growth Case 

(2006 - 2030) .................................................. J-18 

Figure 7.13S Cumulative NPVs relative to ±2% of Total National Base Case Costs 

based on Reverse Engineering Manufacturing Costs and AE02000 

Low Growth Case (2006 - 2030) ................................... J-19 

xxxiv 
EE-RM/STD-98-440 " ~D

Figure 7.14S Cumulative Total Equipment and Operating Costs based on Reverse

Engineering Manufacturing Costs and AEO2000 High Growth Case

(2006 - 2030) .................................................. J-20

Figure 7.15S Cumulative NPVs relative to ±2% of Total National Base Case Costs

based on Reverse Engineering Manufacturing Costs and AEO2000

High Growth Case (2006 - 2030) ................................... J-21

Figure 7.26S Cumulative Total National Operating and Equipment Costs based on

Reverse Engineering Manufacturing Costs, NAECA Efficiency Scenario,

and 3% Discount Rate Scenario (2006 - 2030) ........................ J-22

Figure 7.27S Cumulative National NPVs based on Reverse Engineering Manufacturing

Costs, NAECA Efficiency Scenario, and 3% Discount Rate Scenario

(2006- 2030) ......................................... ......... J-23

Figure 7.26A Cumulative Total National Operating and Equipment Costs based on

Reverse Engineering Manufacturing Costs, Roll-up Efficiency Scenario,

and 3% Discount Rate Scenario (2006 - 2030) ........................ J-24

Figure 7.27A Cumulative National NPVs based on Reverse Engineering

Manufacturing Costs, Roll-up Efficiency Scenario, and 3% Discount Rate

Scenario (2006 - 2030) ........................................... J-25

Figure 12.1S Net National Employment Impacts ......................................... J-47

Figure 12.2S Employment Impacts of Consumer Savings ......................... J-48

Figure 12.3S Employment Impacts of Changes in Equipment Cost ................... J-48

Figure 12.4S Employment Impacts of Utility Savings ............................. J-49

Figure E.1S Split A/C, 11 SEER: Frequency Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-50

Figure E.2S Split A/C, 11 SEER: Cumulative Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-50

Figure E.3S Split A/C, 12 SEER: Frequency Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-51

Figure E.4S Split A/C, 12 SEER: Cumulative Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-51

Figure E.5S Split A/C, 13 SEER: Frequency Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-52

Figure E.6S Split A/C, 13 SEER: Cumulative Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ................. .......... J-52

Figure E.7S Split A/C, 18 SEER: Frequency Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-53

Figure E.8S Split A/C, 18 SEER: Cumulative Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-53

Figure E.9S Split Heat Pump, 11 SEER: Frequency Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-54

Figure E.10S Split Heat Pump, 11 SEER: Cumulative Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-54

Figure E. 11 S Split Heat Pump, 12 SEER: Frequency Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-55

xxxv

EE-RM-STD-98-440 COMMENT 208

Figure 7.14S 

Figure 7.15S 

Figure 7.26S 

Figure 7.27S 

Figure 7.26A 

Figure 7.27A 

Figure 12.1 S 

Figure 12.2S 

Figure 12.3S 

Figure 12.4S 

Figure E.IS 

Figure E.2S 

Figure E.3S 

Figure E.4S 

Figure E.5S 

Figure E.6S 

Figure E.7S 

Figure E.8S 

Figure E.9S 

Figure E.IOS 

Figure E.l1 S 

EE·RM/STD·98·440 =*"2 D~ 

Cumulative Total Equipment and Operating Costs based on Reverse 

Engineering Manufacturing Costs and AE02000 High Growth Case 

(2006 - 2030) .................................................. J·20 

Cumulative NPV s relative to ±2% of Total National Base Case Costs 

based on Reverse Engineering Manufacturing Costs and AE02000 

High Growth Case (2006 - 2030) ................................... J-21 

Cumulative Total National Operating and Equipment Costs based on 

Reverse Engineering Manufacturing Costs, NAECA Efficiency Scenario, 

and 3% Discount Rate Scenario (2006 • 2030) ........................ J·22 

Cumulative National NPVs based on Reverse Engineering Manufacturing 

Costs, NAECA Efficiency Scenario, and 3% Discount Rate Scenario 

(2006 • 2030) .................................................. J-23 

Cumulative Total National Operating and Equipment Costs based on 

Reverse Engineering Manufacturing Costs, Roll-up Efficiency Scenario, 

and 3% Discount Rate Scenario (2006·2030) ........................ J·24 

Cumulative National NPVs based on Reverse Engineering 

Manufacturing Costs, Roll-up Efficiency Scenario, and 3% Discount Rate 

Scenario (2006 . 2030) ........................................... J-25 

Net National Employment Impacts ................................. J-47 

Employment Impacts of Consumer" Savings .......................... J-48 

Employment Impacts of Changes in Equipment Cost ................... J-48 

Employment Impacts of Utility Savings ............................. J-49 

Split AlC, 11 SEER: Frequency Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-50 

Split AlC, 11 SEER: Cumulative Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-50 

Split AlC, 12 SEER: Frequency Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-51 

Split AlC, 12 SEER: Cumulative Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-51 

Split AlC, 13 SEER: Frequency Chart of LCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-52 

Split AlC, 13 SEER: Cumulative Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-52 

Split AlC, 18 SEER: Frequency Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-53 

Split AlC, 18 SEER: Cumulative Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ., ......................... J-53 

Split Heat Pump, 11 SEER: Frequency Chart of LCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-54 

Split Heat Pump, 11 SEER: Cumulative Chart of LCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-54 

Split Heat Pump, 12 SEER: Frequency Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-55 

xxxv 
EE-RM/STD-98-440 : o0<

Figure E. 12S Split Heat Pump, 12 SEER: Cumulative Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-55

Figure E. 13S Split Heat Pump, 13 SEER: Frequency Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-56

Figure E.14S Split Heat Pump, 13 SEER: Cumulative Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-56

Figure E.15S Split Heat Pump, 18 SEER: Frequency Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs .......................... J-57

Figure E. 16S Split Heat Pump, 18 SEER: Cumulative Chart of LCC Difference based on

Reverse Engineering Manufacturing Costs ........................... J-57

Figure E.17S Single Package A/C, 11 SEER: Frequency Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-58

Figure E.18S Single Package A/C, 11 SEER: Cumulative Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-58

Figure E.19S Single Package A/C, 12 SEER: Frequency Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-59

Figure E.20S Single Package A/C, 12 SEER: Cumulative Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-59

Figure E.21S Single Package A/C, 13 SEER: Frequency Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-60

Figure E.22S Single Package A/C, 13 SEER: Cumulative Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-60

Figure E.23S Single Package A/C, 18 SEER: Frequency Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-61

Figure E.24S Single Package A/C, 18 SEER: Cumulative Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-61

Figure E.25S Single Package Heat Pump, 11 SEER: Frequency Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-62

Figure E.26S Single Package Heat Pump, 11 SEER: Cumulative Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-62

Figure E.27S Single Package Heat Pump, 12 SEER: Frequency Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-63

Figure E.28S Single Package Heat Pump, 12 SEER: Cumulative Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-63

Figure E.29S Single Package Heat Pump, 13 SEER: Frequency Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-64

Figure E.30S Single Package Heat Pump, 13 SEER: Cumulative Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-64

Figure E.31S Single Package Heat Pump, 18 SEER: Frequency Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-65

Figure E.32S Single Package Heat Pump, 18 SEER: Cumulative Chart of LCC Difference

based on Reverse Engineering Manufacturing Costs .................... J-65

Figure F.1 S Split A/C, 11 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-66

xxxvi

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *,2 0 'i 

Figure E.I2S Split Heat Pump, 12 SEER: Cumulative Chart of LCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... 1-55 

Figure E.13S Split Heat Pump, 13 SEER: Frequency Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-56 

Figure E.14S Split Heat Pump, 13 SEER: Cumulative Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-56 

Figure E.I5S Split Heat Pump, 18 SEER: Frequency Chart ofLCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-57 

Figure E.I6S Split Heat Pump, 18 SEER: Cumulative Chart of LCC Difference based on 

Reverse Engineering Manufacturing Costs ........................... J-57 

Figure E.17S Single Package AlC, 11 SEER: Frequency Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs ................... ' J-58 

Figure E.18S Single Package AlC, 11 SEER: Cumulative Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs .................... 1-58 

Figure E.I9S Single Package AlC, 12 SEER: Frequency Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs .................... J-59 

Figure E.20S Single Package AlC, 12 SEER: Cumulative Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs .................... J-59 

Figure E.21S Single Package AlC, 13 SEER: Frequency Chart ofLCC Difference 

based on Reverse Engineering Manufacturing Costs .................... J-60 

Figure E.22S Single Package AlC, 13 SEER: Cumulative Chart ofLCC Difference 

based on Reverse Engineering Manufacturing Costs .................... J-60 

Figure E.23S Single Package AlC, 18 SEER: Frequency Chart ofLCC Difference 

based on Reverse Engineering Manufacturing Costs . . . . . . . . . . . . . . . . . . .. J -61 

Figure E.24S Single Package AlC, 18 SEER: Cumulative Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs .................... J-61 

Figure E.25S Single Package Heat Pump, 11 SEER: Frequency Chart ofLCC Difference 

based on Reverse Engineering Manufacturing Costs. . . . . . . . . . . . . . . . . . .. J-62 

Figure E.26S Single Package Heat Pump, 11 SEER: Cumulative Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs .................... J-62 

Figure E.27S Single Package Heat Puinp, 12 SEER: Frequency Chart ofLCC Difference 

based on Reverse Engineering Manufacturing Costs .................... J-63 

Figure E.28S Single Package Heat Pump, 12 SEER: Cumulative Chart ofLCC Difference 

based on Reverse Engineering Manufacturing Costs . . . . . . . . . . . . . . . . . . .. J -63 

Figure E.29S Single Package Heat Pump, 13 SEER: Frequency Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs. . . . . . . . . . . . . . . . . . .. J-64 

Figure E.30S Single Package Heat Pump, 13 SEER: Cumulative Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs. . . . . . . . . . . . . . . . . . .. J-64 

Figure E.31 S Single Package Heat Pump, 18 SEER: Frequency Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs .................... J-65 

Figure E.32S Single Package Heat Pump, 18 SEER: Cumulative Chart of LCC Difference 

based on Reverse Engineering Manufacturing Costs .................... J-65 

Figure F.l S Split AlC, 11 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs .................................. J -66 

XXXVI 
EE-RM/STD-98-440 " 2 O

Figure F.2S Split A/C, 12 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs ............................... .. . J-67

Figure F.3S Split A/C, 13 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-68

Figure F.4S Split A/C, 18 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-69

Figure F.5S Split HP, 11 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-70

Figure F.6S Split HP, 12 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-71

Figure F.7S Split HP, 13 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-72

Figure F.8S Split HP, 18 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-73

Figure F.9S Package A/C, 11 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs ......... ......................... J-74

Figure F.1OS Package A/C, 12 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-75

Figure F. 1IS Package A/C, 13 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-76

Figure F.12S Package A/C, 18 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-77

Figure F. 13S Package HP, 11 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-78

Figure F.14S Package HP, 12 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-79

Figure F.15S Package HP, 13 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-80

Figure F.16S Package HP, 18 SEER: Annual Savings and Costs based on Reverse

Engineering Manufacturing Costs .................................. J-81

xxxvii

EE-RM-STD-98-440 COMMENT 208

EE~RM/STD-98~440 -:W ~ O~ 

Figure Fo2S Split AlC, 12 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0000000000000000000000000000000000 J-67 

Figure F.3S Split AlC, 13 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 •• 0 0 0 • 0 0 0 0 0 • 0 0 0 0 J -68 

Figure F.4S Split AlC, 18 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 J -69 

Figure FoSS Split HP, 11 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 J~ 70 

Figure Fo6S Split HP, 12 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 •• 0 ••••••••••••••••••••• 0 J -71 

Figure Fo7S Split HP, 13 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 J ~ 72 

Figure Fo8S Split HP, 18 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 J~ 73 

Figure Fo9S Package AlC, 11 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 • 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 J ~ 7 4 

Figure F.10S Package AlC, 12 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0000000000000000000000000000000000 J-75 

Figure F.11S Package AlC, 13 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0000000000000000000000000000000000 J-76 

Figure Fo12S Package AlC, 18 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 J-77 

Figure FoBS Package HP, 11 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 J-78 

Figure Fo14S Package HP, 12 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 J-79 

Figure F.15S Package HP, 13 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 000000000. 0 0 0 0 0 0 0 00000000000000000 J-80 

Figure Fo16S Package HP, 18 SEER: Annual Savings and Costs based on Reverse 

Engineering Manufacturing Costs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 J-81 

XXXVll 
EE-RM/STD-98-440 2 " g

C' C!ICHAPTER 1: INTRODUCTION

1.1 PURPOSE OF DOCUMENT

This Technical Support Document (TSD) is a "stand-alone" report that provides the technical

analvscs and results in support of the information presented in the Notice of Proposed Rulemaking

(NOPR) for central air conditioners and heat pumps (65 FR 59590. October 5. 2000). This TSD also

complements the reviscd engincering. revised life-cycle cost (LCC). revised national cnergy savings

(NES),' net present valuc (NPV). and manufacturer impact results that were originally posted on the

Dcpartment of Encrgy's web site on June 30. 2000.

1.2 OVERVIEW OF APPLIANCE STANDARDS

Part B of Title Ill of the Energy Policy and Conservation Act, Public Law 94-163. as

amended by the National Energy Conservation Policy Act. Public Law 95-619, the National

Appliance Energy Conservation Act of 1987 (NAECA). Public Law 100-12. the National Appliance

Enervg Conscrvation Amendments of 1988, Public Law 100-357, and the Energy Policy Act of 1992,

Public Law 102-486, (the Act or EPCA). created the Energy Conservation Program for Various

Consumer Products other than Automobiles. 42 U.S.C. 6291-6309. As part of the energy

conservation program for consumer products. the Act provides energy conservation standards for 12

types of "consumcr products'" covered by the Act. and authorizes the Secretary of Energy to

prescribe amended or new energy standards for each type (or class) of covered product. EPCA,

section 325. 42 U.S.C. 6295.

Before the Deparment determines whether to adopt a proposed encrgy conservation standard

it must first solicit comments on the proposed standard. EPCA. Section 325 (p). 42 U.S.C. 6295 (p).

Any new or amended standard must be designed so as to achieve the maximum improvement in

cnergy efficiency that is technologically feasible and economically justified. EPCA. Section

325(o)(2)(A). 42 U.S.C. 6295 (o)(2)(A). To determine whether economic justification exists the

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

standard exceed its burdens by weighing, to the greatest extent practicable, the following seven

factors:

(I The economic impact of the standard on the manufacturers and on the consumers of

the products subject to such standard;

'The 12 products arc: ( I ) refrigerators, rcfrigcrator-ftrcccrs. and freccers: (2) room air conditioners: (3) central

air conditioncrs and central air-conditioning heat pumps: (4) watcr heaters: (5) furnaces; (6) dishwashers; (7) clothes

washcrs: (X) clothes dryers: (9) direct heating equipment: (1() kitchen ranges and ovens: (I I) pool heaters; and (12)

flourescent lanp ballasts.

1-1

EE-RM-STD-98-440 COMMENT 208

EE.RM/STD-98-440 - * 2 D ~ 

CHAPTER 1: 11'TRODUCTIOl' 

1.1 PURPOSE OF DOCUMENT 

This Technical Support Document (TSD) is a "stand-alonc" rcport that providcs thc tcchnical 

analvses and rcsults in support ofthc infonnation presented in the Notiee of Propos cd Rulcmaking 

(NOPR) forccntral air conditioners and heat pumps (65 FR 59590. October 5.2000). This TSD also 

complements the reviscd cngineering. rcvised life-cycle cost (LCC). revised national encrgy sa\ings 

(NES): net present valuc (NPV). and manufacturer impact results that were originally posted on thc 

Dcpartment of Energy's web site on June 30. 2000. 

].2 OVERVIEW OF APPLIANCE STANDARDS 

Part B of Title III of the Energy Policy and Conservation Act. Public Law 94-163. as 

amended by the National Encrgy Conscrvation Policy Act. Public Law 95-6 I 9, thc National 

Appliancc Encrgy Conservation Act of 1987 (NAECA). Public Law 100-12. thc National Appliance 

EnergyConscrvation Amcndments of 1988. Public Law 100-357, and the Energy Policy Act of 1992. 

Public Law 102-4R6, (thc Act or EPCA). created the Energy Conservation Program for Various 

Consumer Products other than Automobiles. 42 U .S.c. 6291-6309. As part of the energy 

conservation prot.-Tfam for consumer products. thc Act provides cnergy conservation standards for 12 

types of "consumer products"" covered by the Act. and authorizes the Secretary of Ener!,.,), to 

prescribe amended or new encrgy standards for each typc (or class) of covered product. EPCA. 

section 325. 42 U.s.c. 6295. 

Before the Department detennines whether to adopt a proposed energy conservation standard 

it must first solicit commcntson thc proposed standard. EPe A. Section 325 (p). 42 U.s.c. 6295 (p). 

Any Ile\v or amended standard must be designed so as to achieve thc maximum improvement in 

energy etriciency that is technologically feasible and economically justified. EPCA. Section 

325(0)(2)(A).42 U.s.c. ()295 (0)(2)(A). To determine whether economic justification exists the 

Department must review comments on the proposal and detennine that the benefits of the proposed 

standard exceed its burdens by weighing. to the greatest extent practicable, the following seven 

factors: 

( I ) The economic impact of the standard on the manufacturers and on the consumers of 

the products subject to such standard: 

"The I::! products arc: ( I ) refrigerators, refrigerator-freezers. and free/ers; (::!) room air conditioners: (J ) centra I 

air conditioners and central air·conditioning heat pumps: (4) water heaters: (5) furnaces: (o) dishwashers: (7) clothes 

washers: (Xl clothes dryers: (9) direct heating equipment: (HI) \.;itehen ranges and ovens: ( II ) pool heaters: and (12) 

Ilourcscelll lamp ballasts. 

I-I 
EE-RM/STD-98-440 ~'2. T

Cgo;:~ '(2) The savings in operating costs throughout the estimated average life of the covered

product in the type (or class) compared to any increase in the price initial charges.

or maintenance expenses for the covered products that are likely to result directly

from the imposition of the standard;

(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 products 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 and water conservation; and

(7) Other factors the Secretary considers relevant.

1.3 OVERVIEW OFCENTRAL AIR CONDITIONER AND HEAT PUM P STANDARDS

NEACA required the Department to publish final rules by January 1. 1994. to determine if

the standards for central air conditioners and central air conditioning heat pumps should be

{-a ramended. The Act provided that any amendment to the standards for the seasonal energy efficiency

ratio (SEER) would apply to products manufactured on or after January 1, 1999. Any amendment

to the standards for the heating seasonal performance factor (HSPF) would apply to products

manufactured on or after January 1. 2002. The Act also requires the Department to publish a

subsequent final rule no later than January 1. 2001.

In 1992, the Department initiated engineering and LCC studies for central air conditioners

and heat pumps based on use of computer simulation models. An ad hoc working group was formed

to advise the Department and to provide engineering and test data to use with the computer models.

The working group. which included representatives from central air conditioner and heat pump

manufacturers, the Air Conditioning & Refrigeration Institute (ARI), Lawrence Berkeley National

Laboratory (LBNL). and Oak Ridge National Laboratory (ORNL). also provided production cost data

for establishing the cost-effectiveness of the various design options selected for study.

On September 8. 1993. the Department published an Advance Notice of Proposed

Rulemaking (ANOPR) (58 FR 172. September 8. 1993) which discussed the number of product

classes and design options, the computer simulation models, and the methodologies which the

Department intended to use in its analysis of increased energy efficiency standards for central air

conditioners and heat pumps. After the ANOPR was issued, the Department continued its analysis

1-2

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 '* 2. O~ 

(2) The sa\ings in operating costs throughout the estimated average life of the covered 

product in the type (or class) compared to any increase in the price. initial charges. 

or maintenance expenses for the covered products that are likely to result directly 

from the imposition of the standard: 

(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 pcrfonnance of the covered products likely to 

result from the imposition of the standard: . 

(5) The impact of any lessening of competition. as detennined in writing by the Attorney 

General. that is likely to result from the imposition of the standard: 

(6) The need for national enefl,,'Y and water conservation; and 

(7) Other factors the Secretary considers relevant. 

1.3 OVERVIEWOFCENTRALAIRCONDITIONERAND HEAT PUMPSTANDARDS 

NEACA required the Department to publish final rules by January I. 1994. to detcnnine if 

the standards for central air conditioners and central air conditioning heat pumps should be 

amended. The Act provided that any amendment to the standards for the seasonal energy etlicieney 

ratio (SEER) would apply to products manufactured on or after January 1. 1999. Any amendment 

to the standards t()r the heating seasonal perfonnance factor (HSPF) would apply to products 

manutactured on or after January I. 2002. The Act also requires the Department to publish a 

subsequent final ru Ie no later than January I. 200 I. 

In 1992. the Department initiated engineering and Lee studies for central air conditioners 

and heat pumps based on usc of computer simulation models. An ad hoc working ~TfOUp wa<; fonned 

to advise the Department and to provide engineering and test data to use with the computer models. 

The working group. which included representatives from central air conditioner and heat pump 

manufacturers. the Air Conditioning & Refrigeration Institute (A RI), Lawrence Berkeley National 

Laboratory (LBNL). and Oak Ridge National Laboratory (ORNL). also provided production cost data 

for establishing the cost-effectiveness of the various design options selected for study. 

On September 8. 1993. the Department publ ished an Advance Notice of Proposed 

Rulemaking (ANOPR) (58 FR 172. September 8.1(93) which discussed the number of product 

classes and design options, the computer simulation models. and the methodologies which the 

Department intended to usc in its analysis of increased energy efficiency standards for central air 

conditioners and heat pumps. After the ANOPR was issued. the Department continued its analysis 

1-2 
EE-RM/STD-98-440 ' 2 0 7

,C 'i of LC'Cs. payback periods. and preliminary NES which were shared with representatives from the

..'-: air-conditioning industry.

In 1995. the Dcpartment abandoned the approach of using computer simulation models as

a result ofconccrns expressed by the industry. The concerns included: the cost/pcrfonnance relations

derived from the computer simulations were not consistent with the experience of the industry: the

assumptions and procedures were flawed: and the industry expressed doubts over the Dcpartmcnt's

experience with selection of appropriate design options.

in October. 1995. a moratorium on proposing. issuing. or prescribing energy conscnation

standards took effect pertaining to standards for central air conditioners and heat pumps. and the

dialogue between the air-conditioning industry and the Department. on the analysis performed. was

suspended.

During consideration of the fiscal year 1996 appropriations. there was considerable debate

about the efficacy of the standards program. The Department of the Interior and Related Agencies

Appropriations Act for Fiscal Year 1996 included the aforementioned moratorium on proposing or

issuing energy conservation appliance standards for the remainder of Fiscal Year 1996. Sect Pub. L.

104-134. Congress advised DCE to correct the standards-setting process and to bring together

stakeholders (such as manufacturers and environmentalists) for assistance. In September 1995. the

Department announced a formal effort to consider further improvements to the process used to

develop appliance efticiencv standards. calling on manufacturers, energy efficiency groups. trade

association. state agencies, utilities and other interested parties to provide input to guide the

Department. OnJ uly 15.1996. the Department published a Final Rule: Procedures for Consideration

of New or Revised Energy Conservation Standards for Consumer Products (hereinafter referred to

as the Process Rule). (61 FR 36974. July 15. 1996).

The Process Rule outlines the procedural improvements identified by the interested parties.

The process improvement effort included a review of the: I) economic models, such as the

Manufacturcr Analysis Model and Residential Energy Model; 2) analytical tools. such as the use of

a Monte Carlo sampling methodology; and 3) prioritization of future rules. The Process Rule

requires the evaluation of uncertainty and variability by doing scenario or probability analysis (as

detailed in the Process Rule. 10 CFR pan 430. Subpan C. Appendix A §§ I(f), 4(d)(2). and

10(f)( )). In addition, an Adv isory Committee on Appliance Energy Efficiency Standards, consisting

of a representative group of these interested panics. was established to make recommendations to

the Secretary regarding the implementation of the Process Rule.

The Process Rule is applicable to the rulemaking to develop new central air conditioner and

heat pump standards. The rulemaking process is dynamic. If timely new data, models or tools that

enhance the development of standards become available. they will be incorporated into the

rulcmaking. For example the Advisory Committee has made several recommendations and the

Department has developed new models for the determination of life-cycle costs (LCC) (Chapter 5),

shipments (Chapter 6). and national energy savings (NES) and net present value (NPV) (Chapter 7).

1-3

.

EE-RM-STD-98-440 COMMENT 208

EE.RM/STD-98-440 * 2. 0 ~ 

of LCCs. payback periods. and preliminary NES which were shared with representatives frolll the 

air-conditioning industry. 

In 1995. the Department abandoned the approach of using computer simulation models as 

a result of concerns expressed by the industry. The concerns included: the costrperfonnance relations 

derived from the computer simulations were not consistent with the experience of the industry: the 

assumptions and procedures were flawed: and the industry expressed doubts overthe Department's 

experience with selection of appropriate design options. 

In October. 1995. a moratorium on proposing. issuing. or prescribing energy conser. ation 

standards took effect pertaining to standards for central air conditioners and heat pumps. and the 

dialoh-'1Je between the air-conditioning industry and the Department. on the analysis perfonned. was 

suspended. 

During consideration of the fiscal year 1996 appropriations. there was considerable debate 

about the efficacy of the standards program. The Department of the Interior and Related Agencies 

Appropriations Act for Fiscal Year 1996 included the aforementioned moratorium on proposing or 

issuing energy conservation appliance standards forthe remainder of Fiscal Year 1996. Sec Pub. L. 

104-134. Congress advised DOE to correct the standards-setting process and to bring together 

stakeholders (such as manufacturers and environmentalists) for assistance. In September 1995. the 

Department announced a formal effort to consider further improvements to the process used to 

develop appliancc efticiency standards. calling on manufacturers. energy efficiency groups. trade 

association. state agencies, utilities and other interested parties to provide input to guide the 

Department. On July 15. 1996. the Department published a Final Rule: Procedures forConsideratiol1 

of New or Revised Energy Conservation Standards for Consumer Products (hereinafter referred to 

as the Process Rule). (61 FR 36974 . .Iuly 15.1996). 

The Process Rule outlines the procedural improvements identified by the interested parties. 

The process improvement effort included a review of the: I) economic models. such as the 

Manufacturer Analysis Model and Residential Energy Model: 2) analytical tools. such as the use of 

a Monte Carlo sampling methodology: and .3) prioritization of future rules. The Process Rule 

requires the evaluation of uncertainty and variability by doing scenario or probability analysis (as 

detailed in the Process Rule. 10 CFR part 430. Subpart C. Appendix A ** l(f). 4(d)(2). and 

I o( f)( I »). In addition. an Adv isory Committee on Appl iance Energy Efficiency Standards. consisting 

of a representative group of these interested parties. was established to make recommendations to 

the Secretary regarding the implementation of the Process Rule. 

The Process Rule is applicable to the rulemaking to develop new central air conditioner and 

heat pump standards. The rulemaking process is dynamic. If timely new data. models or tools that 

enhance the development of standards beeome available, they will be incorporated into the 

rulemaking. For exampJc the Advisory Committee has made several recommendations and the 

Department has developed new models forthe detennination oflitc-cycle costs (LCC) (Chapter 5), 

shipments (Chapter 6), and national energy savings (NES) and net present value (NPV) (Chapter 7). 

1-3 
EE-RM/STD-98-440 " 2-

(" '. IIn addition there arc plans to use new models in this rulemaking for the manufacturer impact analysis (7: E(Chapter 8). net national employment analysis (Chapter 7). utility impact analysis (Chapter 1 ). and

environmental assessment. As just noted. all these models are discussed and prescnted in this TSD.

The Department held a workshop on June 30. 1998 to discuss the analytical framework that

was being proposed for conducting the central air conditioner and heat pump rulemaking. The

analytical framework presented at the workshop described the different analyses (e.g.. the LCC.

payback and national impact analyses) to be conducted (Table 1.I). the methods proposed tor

conducting them. and the relationship among the various analyses.

Table 1.1 Central Air Conditioner and Heat Pump Analyses under Process Rule

AN(PR NOPR Final Rule

Screening Analysis Reviscd Prc-ANOPR Analyses Rcvisc Analyses ( L'C and

(LCC and National Impacts National Impacts Analyses)

Analyscs)

Engineerinii Analysis Consumer Sub-group Analysis

L(( Analysis Industry Cash Flou Analysis

(iRINM)

Prcliminar National Impacts Manufacturcr Impact Analysis

Analysis

Utilit Impact Analysis

Environmental Analysis

On November 24. 1999. DOE published a Supplemental ANOPR. 64 FR 66306. In the

Supplemental ANOPR and during the December 9. 1999, public workshop, interested persons were

provided with an opportunity to comment on several issues. including:

( ) the product classes that the Department planned to analyze;

(2) the analytical framework, models (e.g. the Government Regulatory Impact Model

(GRIM)), and tools (e.g., a Monte Carlo sampling methodology, and the life-cycle cost

(LCC) and national energy savings (NES) spreadsheets) that the Department was

using in performing analyses of the impacts of cnergy conservation standards;

(3) the results of preliminary analyses for the engineering, LCC, payback and NES; and

(I) the candidate energy conservation standard levels that the Department had developed

from these analyses.

1-4

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * 2 0 ~ 

In addition therc are plans to usc ncw models in this rulcmaking fonhc manufacturer impact analysis 

(Chapter 8). net national employment analysis (Chapter 7). utility impact analysis (Chapter II). and 

environmental asscssment. Asjust noted. all these models are discusscd and present('d in this TSD. 

Thc Depanment held a workshop on .Iune 30. 1998 to discuss the analytical framework that 

was being proposed for conducting thc central air conditioner and heat pump rulemaking. Thc 

analytical framework presented at the workshop deseribed the different analyscs (e.g .. the LCe. 

payback and national impact analyses) to be conducted (Table 1.1). the methods proposed for 

conducting them. and the relationship among the various analyses. 

Table 1.1 Central Air Conditioner and Heat Pump Analnes under Process Rule 

ANOPR 

Screening Analysis 

Engineering AIlJlysis 

Lee AnalYSIS 

Prellt1lin<Jry \latinnal Impacts 

AnalvslS 

NOPR 

Revised Prc-A'\IOPR Analyscs 

(LCe and '\Iationallmpae\s 

Analyses) 

Consumer Sub-group Analysis 

Industry Cash flov. Analysis 

(CiRIM) 

Manufacturer Impact Analysis 

Utilit~ Impact Analysis 

Environmental Analvsis 

Final Rule 

Revise :\nJlvses t LCe and 

'\Imional ImpJc\s Analyscs) 

On November 24. 1999. DOE published a Supplemental ANOPR. 64 FR 66306. In the 

Supplemcntal ANOPR and during the Deccmber 9. 1999. public workshop. intcrested persons were 

provided with an opportunity to commcnt on several issues. including: 

( I) the product classes that the Departmcnt planned to analyze: 

(2) the analytical framcwork. models (c.g .. the Govcrnment Rcgulatory Impact Model 

(GRIM ». and tools(c.g .. a Montc Carlosampling methodology. and the life-cycle cost 

(LCC) and national ener!,,), savings (NES) sprcadshccts) that the Departmcnt was 

using in perfonning analyses of thc impacts of enerk,)' conservation standards: 

0) the results of preliminary analyses for the engineering. LCe. payback and NES: and 

( I ) the candidate energy conservation standard levels that the Depanment had developed 

from these analyses. 

1-4 
EE-RM/STD-98-440 - .,

The Department has rcviewed the recommendations made by the Ad isorv Commince on

;C: ~ Appliance Energy Efficicncy Standards on April 21. 1998. (Advisory Committee. No. 96) These

recommendations relate to using the full range of consumer marginal cnergy rates (CMER) in the

LCC' Analysis (rcplacing the use of national average cncrgy prices). defining a range of cncrgy price

futures for each fuel used in the economic analyses and dcfining a range of primary cncrgy conversion

factors and associated emission reductions. based on the electricity generation displaced by energy

efficiency standards for each rulemaking. The Department has incorporated the use of consumer

marginal energy rates and a range of future energy prices for the analysis that was conducted for the

NOPR.

1.4 STRUCTURE OF THE DOCUMENT

This TSD consists of twelve Chapters. eight Appendices. and Environmental Assessment, and

Regulatory Impact Analysis.

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

applies to the central air conditioner and heat pump rulemaking. and outlines the

structure of the document.

Chapter 2 Analytical Framework: describes the new rulcmaking process step-by-step.

Chapter 3 Screening Analysis: characterizes the relevant product markets and existing

if technology options including protot1pe designs.

('hapter 4 Engineering Analysis: contains detailed efficiency and cost information including

methods for determining manufacturer costs. Also discussed are the methods for

establishing mark-ups for converting manufacturer costs to consumer equipment

prices.

Chapter 5 Life-Cycle Cost and Pavback Period Analysis: describes the effects of standards on

individual purchasers and users of the appliances. It compares the life-cycle cost of

appliances and other measures of consumer impact with and without the proposed

standards.

Chapter 6 Shipments Analysis: describes the methodology for forccasting shipments using a

sophisticated accounting model. Decisions that arc economically influenced are

modeled with econometric equations.

Chapter 7 National Energy Savings and Net Present Value Analysis: describes national forecast

of energy consumption and net present value in the absence (or presence) of new

regulations.

1-5

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ 2o~ 

The Department has reviewed the recommendations made by the Advisory Committee on 

Appliance Energy Efficiency Standards on April 21. 1998. (Advisory Committee. No. 96) These 

recommendations relate to using the full range of consumer marginal energy rates (CMER) in the 

Lee Analysis (replacing the use of national average energy prices). defining a range of enerb'), price 

futures for each fuel used in the economic analyses and defining a range of primary energy conversion 

factors and associated emission reductions. based on the electricity generation displaced by energy 

efficiency standards for each rulemaking. The Department has incorporated the lise of consumer 

marginal energy rates and a range of future energy prices for the analysis that was conducted for the 

NOPR. 

1.4 STRUCTURE OF THE DOCUMENT 

This TSD consists of twelve Chapters. eight Appendices. and Environmental Assessment. and 

Regulatory Impact Analysis. 

Chapter I 

Chapter 2 

Chapter 3 

Chapter 4 

Chapter 5 

Chapter 6 

Chapter 7 

Introduction: provides an overview of the appliance standards program and how it 

applies to the central air conditioner and heat pump rulemaking. and outlines the 

structure of the document. 

Anal~1ical Framework: describes the new rulemaking process step-by-step. 

Screening Analysis: characterizes the relevant product markets and existing 

technology options including prolot)1Je designs. 

Engineering Analysis: contains detailed etliciency and cost information including 

methods for determining manufacturer costs. Also discussed are the methods for 

establishing mark-ups for converting manufacturer costs to consumer equipment 

pnces. 

Life-Cycle Cost and Payback Period Analy~is: describes the effects of standards on 

individual purchasers and users of the appliances. It compares the life-cycle cost of 

appliances and other measures of consumer impact with and without the proposed 

standards. 

Shipments Analysis: describe~ the methodology for forecasting shipments using a 

sophisticated accounting model. Decisions that are economically influenced are 

modeled \-... ith econometric equations. 

National Energy Savings and Net Present Value Analysis: describes national forecast 

of energy consumption and net present value in the absence (or presence) of new 

regulations. 

1-5 
E.RM/STD-98-440 ~ 0 i 

C" '( Chapter 8 Manufacturer Impact Analysis: dcscribcs the financial impact on manufactures.

Chapter 9 Competitive Impact Analysis: describes the effect of standards on the competition

betwccn manufacturers.

Chapter 10 Consumer Sub-GroupAnalysis: describes the effect of standards on low-income subgroup of households.

Chapter I 1 Utility Impacts Analysis: determines the decrease in electricity needed and the primary

cncrgy source for electricity generation.

Chapter 12 Net National Employment Impact Analysis: determines the impact of standards on

national employment.

Appendix A Approach for Uncertainty and Variability

Appendix B Detailed Reverse Engineering Cost Estimates and Equipment Data

Appendix C Technical Description of the Reverse Engineering Cost Estimation Mcthodology

Appendix D Estimation of the Distributor/Wholesaler and Dealer/Contractor Markups on

Incremental Central Air Conditioner and Heat Pump Costs

"'({ Appendix E Life-Cycle Cost Results and Detcnnination of 30-year Average Cooling Degree Day

and Heating Degree Day Data

Appendix F National Energy Savings and National Net Present Value Results

Appendix G Government Regulatory Impact Model (GRIM)

Appendix H Interpolation of Utility and Environmental Results from NEMS-BRS Output

Environmcntal Asscssmcnt: determines the reduction in emissions due to higher efficiency standards.

Regulatory Impact Analysis: analysis impact of non-regulatory alternatives to standards.

1-6

(

EE-RM-STD-98-440 COMMENT 208

II.RM/STD-98-440 t 2.. 0 ~ 

Chapter 8 Manufacturer Impact Analysis: describes the financial impact on manufactures. 

Chapter 9 Competitive Impact Analysis: describes the effect of standards on the competition 

between manufacturers. 

Chapter 10 Consumer Sub-GroupAnalysis: describes the effect of standards on low-income subgroup of households. 

Chapter II Utility Impacts Analysis: detennines the decrease in electricity needed and the primary 

energy source for electricity generation. 

Chapter 12 Net National Employment Impact Analysis: detcnnines the impact of standards on 

national emploY1nent. 

Appendix A Approach for Uncenainty and Variability 

Appendix B Detailed Reverse Engineering Cost Estimates and Equipment Data 

Appendix C Technical Description of the Reverse Engineering Cost Estimation Methodolob')' 

Appendix [) Estimation of the Distributor/Wholesaler and Dealer/Contractor Markups on 

Incremental Central Air Conditioner and Heat Pump Costs 

Appendix E Life-Cycle Cost Results and Detennination of30-year Average Cooling Degree Day 

and Heating Degree Day Data 

Appendix F National Energy Savings and National Net Present Value Results 

Appendix Ci Govemment Regulatory Impact Model (GRIM) 

Appendix H interpolation of Utility and Environmental Results from NEMS-BRS Output 

Environmental Assessment: determines the reduction in emissions due to higher efficiency standards. 

Regulatory Impact Analysis: analysis impact of non-regulatory altematives to standards. 

1-6 
EE-RM/STD-98-440 : 2 O

CHAPTER 2: ANALYTICAL FRAMEWORK

In prescribing new or amended energy efficiency appliance standards, the Department must

achieve the maximum improvement in energy efficiency that is technologically feasible and

economicallyjustified. This chapter provides a description of the general analytical framework used

by the Department in developing standards and assessing the impacts for all products. This chapter

also provides a description of those aspects of the framework specific to central air conditioners and

heat pumps. The analytic framework essentially is a description of the methodology, the analytical

tools, and the relationship between the various analyses conducted as part of a rulemaking. A

diagram of the general analytical framework is shown in Figure 2.1.

The analyses performed in the general analytic framework include:

* A Preliminary Market and Technology Assessment to characterize the relevant product

markets and existing technology options including prototype designs. (Subtask 1 in Fig. 2.1)

* A Screening Analysis to review each technology option and determine if it is practicable to

manufacture, install and service, would adversely impact product utility or product

availability, or would have adverse impacts on health and safety. (Subtask 2 in Fig. 2.1)

* An Engineering Analysis to determine the maximum technologically feasible energy

efficiency level and to develop cost-efficiency relationships that show the manufacturer's

cost of achieving increased efficiency. (Subtask 3 in Fig. 2.1)

* A Life-Cycle Cost and Payback Period Analysis to calculate, at the consumer level, the

discounted savings in operating costs (less maintenance and repair costs) throughout the

estimated average life of the covered product compared to any increase in the installed cost

for the product likely to result directly from the imposition of the standard. (Subtask 5 in Fig.

2.1)

* A National Impacts Analysis to assess the aggregate impacts at the national level of

consumer payback, net present value (NPV) of total consumer life-cycle cost, national energy

savings, and national employment. (Subtask 8 in Fig. 2.1)

* A Consumer Analysis to evaluate variations in household characteristics (e.g., energy prices,

appliance use behavior, installation costs) that might cause a standard to impact particular

consumer sub-populations, in particular low-income households, differently than the overall

population. (Subtask 10 in Fig. 2.1)

* A Manufacturer Impact Analysis (MIA) to estimate the financial impact of standards on

manufacturers and to calculate impacts on competition, employment, and manufacturing

capacity. (Subtask 11 in Fig. 2.1)

* A Utility Analysis to estimate the effects of proposed standards on electric utilities. (Subtask

12 in Fig. 2.1)

* An Environmental Analysis to provide estimates of changes in emissions of pollutants (sulfur

and nitrogen oxides and carbon dioxide). (Subtask 13 in Fig. 2.1)

* A Regulatory Impact Analysis to present major alternatives to proposed standards that could

achieve substantially the same regulatory goal at a lower cost. (Subtask 14 in Fig. 2.1)

2-1

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 W 2 O~ 

CHAPTER 2: ANALYTICAL FRAMEWORK 

In prescribing new or amended energy efficiency appliance standards, the Department must 

achieve the maximum improvement in energy efficiency that is technologically feasible and 

economically justified. This chapter provides a description of the general analytical framework used 

by the Department in developing standards and assessing the impacts for all products. This chapter 

also provides a description of those aspects of the framework specific to central air conditioners and 

heat pumps. The analytic framework essentially is a description of the methodology, the analytical 

tools, and the relationship between the various analyses conducted as part of a rulemaking. A 

diagram of the general analytical framework is shown in Figure 2.1. 

The analyses performed in the general analytic framework include: 

• A Preliminary Market and Technology Assessment to characterize the relevant product 

markets and existing technology options including prototype designs. (Subtask 1 in Fig. 2.1) 

• A Screening Analysis to review each technology option and determine if it is practicable to 

manufacture, install and service, would adversely impact product utility or product 

availability, or would have adverse impacts on health and safety. (Subtask 2 in Fig. 2.1) 

• An Engineering Analysis to determine the maximum technologically feasible energy 

efficiency level and to develop cost-efficiency relationships that show the manufacturer's 

cost of achieving increased efficiency. (Subtask 3 in Fig. 2.1) 

• A Life-Cycle Cost and Payback Period Analysis to calculate, at the consumer level, the 

discounted savings in operating costs (less maintenance and repair costs) throughout the 

estimated average life of the covered product compared to any increase in the installed cost 

for the product likely to result directly from the imposition of the standard. (Subtask 5 in Fig. 

2.1) 

• A National Impacts Analysis to assess the aggregate impacts at the national level of 

consumer payback, net present value (NPV) of total consumer life-cycle cost, national energy 

savings, and national employment. (Subtask 8 in Fig. 2.1) 

• A Consumer Analysis to evaluate variations in household characteristics (e.g., energy prices, 

appliance use behavior, installation costs) that might cause a standard to impact particular 

consumer sub-populations, in particular low-income households, differently than the overall 

population. (Subtask lOin Fig. 2.1) 

• A Manufacturer Impact Analysis (MIA) to estimate the financial impact of standards on 

manufacturers and to calculate impacts on competition, employment, and manufacturing 

capacity. (Subtask 11 in Fig. 2.1) 

o A Utility Analysis to estimate the effects of proposed standards on electric utilities. (Subtask 

12 in Fig. 2.1) 

• An Environmental Analysis to provide estimates of changes in emissions of pollutants (sulfur 

and nitrogen oxides and carbon dioxide). (Subtask 13 in Fig. 2.1) 

• A Regulatory Impact Analysis to present major alternatives to proposed standards that could 

achieve substantially the same regulatory goal at a lower cost. (Subtask 14 in Fig. 2.1) 

2-1 
ggRM/STD-98-440 f.l// * i-"----'--,'--- -2 "--------- 7

. AApproaches Kev-InDuts I Analysis Key-Outputs

InOutSy Rneve I ientIy Fiann Preducai l * ir y Boiu Cue

I-.7 - Preliminary Market I Shipnnt ForIt oQuanrtsr- Aa/l Ht toicl Io & Technology I -

OuCiutave Anyl-tn- M.eAr Fm Segnemnaon : Characterization

Exasng Technology OphonS

Identification &

Prototype DassIN I1... Screening Analysis d

D«slin-Optlon Appoah I | i i I

Cotacy-Lvna*ppocn J rac j Cost . i , Ejc.y . Eff.ncy/Pd..oan.c

-, E------pn- Engineering ; i ; g _ Analysis ......................................... : EnergyWater rates

it Maintmn.nc. S-" v Co.e . i ; -- Average Paytc w Rh Uncanainty ! __ _ _ _^ t -------- -^ -------- -j ·* Raoutt1ble Payback

Market S'vy A.ppmlCh

l-; :

,,,, i i eft;*I Enargy ravIgs

............ - * * Water savings

EtpatForacua= i RetellP___ : " li naryNetailloa hPricen Values

----- iom nt '- -

: -*"'P ife-cycle .......... Preliminary National -- ---- Uncrt

Madlto-REM ______ h t -tit-- -- ImPacts Analyses

* HoEuIg p m Bo Cua I

Analyses

*V.untr...y .... ative..... Iniy Cj i u n t U t y

I I . Manufacturer Imp

Elpat1~oncuU eny i·iR·4~~~~~-rInElt DeCoumn I (Industry profile,.

t am; y 0. Fn trl (F)

Exemepe'

0

" -FsMatorye ImpactI An iy ----

NOPIR

FIN ....- ,, A nalyses . ,,,..

I* Stndl Level Clst~ I i I_,~ C mulnB Imes I __aUe

Inr t -------- -- C Sub-group analysis) -

I Co«g((C) .Pnc·B(P). --- t Sueiru pC ash«

. entrl ir Fiure onitioner n et um ulem in Frm or

| 2-2 Analysis 

i t; | nRegulatory Impact Analysis _J

NOPR I

~FINAL RULE || Revi.se Analysis . I.....

Figure 2.1 Central Air Conditioner and Heat Pump Rulemaking Framework

( 2-2 nalysis

.. I

In~~wrvtew$ I i ;-

EE-RM-STD-98-440 COMMENT 208

InGuatryR~1Itw 

Quentitettve Anetva .. 

Coat Modehn Approach 

ANOPR 

Key·lnputs 

identify FinnaJ Productl 

HWOI'1C111 Infannabon 

....... tI Fmn Segmenlllbon 

EUllIng Technology OptIOns 

Prototype D.Slgns 

Cost I 

I 

EtfJe .. ncylPerforrllenee , 

! I 

),;. CJ 0 '\J !1 .. RM/STD-98-440 ~ L.. 0 

Key·Outputs 

• Prehmlnery B ... ease 

• Stupment Forecast 

- •• - .................................... j .......... -L... ____ ~-_--'''''' 

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i. 1, !F~ue!!'..!T!!""'!!.... __ ....;_-.i~,----;:::::==:;-----, : ~=~~ ooc.::::;" DemographlC-l t--~ .... --r-........ =====""---

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: ! : ".nuf.eturerPnce., ::_r----------_ ..... .. t~~~::::::~:::~:~:~:~·::::::::::::T::::3:: • Sr.-ndartS Leve' c .... , . • Efftaency Otstnbubon I 

to, ell c.... f 

Manufacturer Impact 

Analysis 

(Industry profile. 

Industry Cash-Row with Uncertainty 

Interv .... ____ -i ____________ -T_-.i __ Industry cash flow, 

Sub-group analysis) 

'-----_-tJ DOJ Competrbve J r Impact Assessment 

NOPR 

FINAL RULE 

eol! (el. Pnce (PI. 

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Revise Analysis 

Figure 2.1 Central Air Conditioner and Heat Pump Rulemaking Framework 

2-2 
EE-RM/STD-98-440 2-

2.1 BACKGROUND

As described in Chapter 1, in September, 1995, the Department announced a formal effort

to consider further improvements to the process used to develop appliance efficiency standards;

calling on energy efficiency groups, manufacturers, trade associations, state agencies, utilities and

other interested parties to provide input to guide the Department. On July 15, 1996, the Department

published a Final Rule: Procedures for Consideration of New or Revised Energy Conservation

Standards for Consumer Products (hereinafter referred to as the Process Rule). 61 FR 36974. The

Process Rule outlined the procedural improvements identified by the interested parties. The process

improvement effort also included a review of the: 1) economic models; 2) analytical tools; 3)

methodologies; 4) non-regulatory approaches; and 5) prioritization of future rules. The Department

will also take into account uncertainty and variability by doing scenario or probability analysis. A

detailed discussion of variability and uncertainty is provided in Appendix A.

The Department developed the analytical framework for the central air conditioner and heat

pump rulemaking in response to stakeholder concerns regarding the application of the Process Rule.

This analytical framework was presented during a central air conditioner and heat pump workshop

held on June 30, 1998. The following sections provide a general description of the different

analytical components of the rulemaking framework.

2.2 PRELIMINARY MARKET AND TECHNOLOGY ASSESSMENT

A preliminary market and technology assessment characterizing the relevant product markets

and existing technology options including prototype designs was conducted for the Supplemental

ANOPR. Although a market and technology assessment was not developed for the Supplemental

ANOPR on central air conditioners and heat pumps, elements of the assessment were conducted.

Those elements are discussed in this TSD.

2.2.1 Market Assessment

When initiating a standards rulemaking, the Department develops information on the present

and past industry structure and market characteristics of the product(s) concerned. This activity

consists of both quantitative and qualitative efforts to assess the industry and products based on

publicly available information. Issues to be addressed include: 1) manufacturer market share and

characteristics; 2) trends in the number of firms; 3) the financial situation of manufacturers; 4)

existing non-regulatory efficiency improvement initiatives; and 5) trends in product characteristics

and retail markets. The information collected serves as resource material to be used throughout the

rulemaking.

Manufacturer market share and characteristics of the central air conditioner and heat pump

market are outlined in Chapter 4.3, Distribution Markups. As discussed in that section, roughly two

dozen equipment manufacturers, several hundred distributors, and more than 30,000 dealers operate

in the United States. Due to a wave of consolidation over the last 15 years, the top seven

2-3

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ 2. 0 ~ 

2.1 BACKGROUND 

As described in Chapter 1, in September, 1995, the Department announced a formal effort 

to consider further improvements to the process used to develop appliance efficiency standards; 

calling on energy efficiency groups, manufacturers, trade associations, state agencies, utilities and 

other interested parties to provide input to guide the Department. On July 15,1996, the Department 

published a Final Rule: Procedures for Consideration of New or Revised Energy Conservation 

Standards for Consumer Products (hereinafter referred to as the Process Rule). 61 FR 36974. The 

Process Rule outlined the procedural improvements identified by the interested parties. The process 

improvement effort also included a review of the: 1) economic models; 2) analytical tools; 3) 

methodologies; 4) non-regulatory approaches; and 5) prioritization of future rules. The Department 

will also take into account uncertainty and variability by doing scenario or probability analysis. A 

detailed discussion of variability and uncertainty is provided in Appendix A. 

The Department developed the analytical framework for the central air conditioner and heat 

pump rulemaking in response to stakeholder concerns regarding the application of the Process Rule. 

This analytical framework was presented during a central air conditioner and heat pump workshop 

held on June 30, 1998. The following sections provide a general description of the different 

analytical components of the rulemaking framework. 

2.2 PRELIMINARY MARKET AND TECHNOLOGY ASSESSMENT 

A preliminary market and technology assessment characterizing the relevant product markets 

and existing technology options including prototype designs was conducted for the Supplemental 

ANOPR. Although a market and technology assessment was not developed for the Supplemental 

ANOPR on central air conditioners and heat pumps, elements of the assessment were conducted. 

Those elements are discussed in this TSD. 

2.2.1 Market Assessment 

When initiating a standards rulemaking, the Department develops information on the present 

and past industry structure and market characteristics of the product(s) concerned. This activity 

consists of both quantitative and qualitative efforts to assess the industry and products based on 

publicly available information. Issues to be addressed include: 1) manufacturer market share and 

characteristics; 2) trends in the number of frrrns; 3) the fmancial situation of manufacturers; 4) 

existing non-regulatory efficiency improvement initiatives; and 5) trends in product characteristics 

and retail markets. The information collected serves as resource material to be used throughout the 

rulemaking. 

Manufacturer market share and characteristics of the central air conditioner and heat pump 

market are outlined in Chapter 4.3, Distribution Markups. As discussed in that section, roughly two 

dozen equipment manufacturers, several hundred distributors, and more than 30,000 dealers operate 

in the United States. Due to a wave of consolidation over the last 15 years, the top seven 

2-3 
EE.RM/STD-98-440 C 2.

V.( \ manufacturers control 97 percent of the market. Most remaining manufacturers produce such

products as indoor coils or niche product lines. For more details on trends in the retail market, refer

to Section 4.3.

2.2.2 Technology Assessment

Information relative to existing technology options and prototype designs are used as inputs

to the screening analysis. In consultation with interested parties, the Department develops a list of

design options for consideration. All technologically feasible design options are candidates in this

initial assessment.

As described in Chapter 4.3, commonly utilized technologies that improve the efficiency of

central air conditioners and heat pumps include: 1) increased coil face areas and depth, 2) multiple

speed fan motors or blower motors, 3) variable (or multiple) speed or capacity compressors or dual

compressors, 4) thermostatic or electronic expansion valves, 5) improved air flow and fan designs,

and 6) increased efficiency compressors (scroll, advanced reciprocating).

As described in Chapter 4.5, several emerging technologies were reviewed and analyzed for

central air conditioners and heat pumps. These included advanced variable speed controls,

microchannel heat exchangers, and advanced compressors. Although these emerging technologies

were not considered to be commercially available, their potential impact on reducing the cost of 3-

ton split system air conditioners were analyzed.

2.2.3 Preliminary Base Case Shipments Forecast

The Department developed a base case forecast of product shipments in the absence of new

standards for the Supplemental ANOPR. This forecast was revised and updated for this TSD. The

forecast requires an assessment of the impacts of past and existing non-regulatory efforts by

manufacturers, utilities and other interested parties. DOE considers information on the actual

impacts of such initiatives to date, and also considers information presented regarding the possible

impacts that any existing initiatives might have in the future. Such information could include a

demonstration of the steps manufacturers, distribution channels, utilities or others will take to realize

such voluntary efficiency improvements.

The base case shipments forecast is used as input to the national impacts analysis, in which

a forecast of annual shipments and their weighted average energy efficiency is needed to the year

2030. The base case shipments forecast for central air conditioners and heat pumps is detailed in

Chapter 6.

B~~~(.~~~~~~ ~2-4 ~ 

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *2D~ 

manufacturers control 97 percent of the market. Most remaining manufacturers produce such 

products as indoor coils or niche product lines. For more details on trends in the retail market, refer 

to Section 4.3. 

2.2.2 Technology Assessment 

Information relative to existing technology options and prototype designs are used as inputs 

to the screening analysis. In consultation with interested parties, the Department develops a list of 

design options for consideration. All technologically feasible design options are candidates in this 

initial assessment. 

As described in Chapter 4.3, commonly utilized technologies that improve the efficiency of 

central air conditioners and heat pumps include: 1) increased coil face areas and depth, 2) multiple 

speed fan motors or blower motors, 3) variable (or multiple) speed or capacity compressors or dual 

compressors, 4) thermostatic or electronic expansion valves, 5) improved air flow and fan designs, 

and 6) increased efficiency compressors (scroll, advanced reciprocating). 

As described in Chapter 4.5, several emerging technologies were reviewed and analyzed for 

central air conditioners and heat pumps. These included advanced variable speed controls, 

microchannel heat exchangers, and advanced compressors. Although these emerging technologies 

were not considered to be commercially available, their potential impact on reducing the cost of 3-

ton split system air conditioners were analyzed. 

2.2.3 Preliminary Base Case Shipments Forecast 

The Department developed a base case forecast of product shipments in the absence of new 

standards for the Supplemental ANOPR. This forecast was revised and updated for this TSD. The 

forecast requires an assessment of the impacts of past and existing non-regulatory efforts by 

manufacturers, utilities and other interested parties. DOE considers information on the actual 

impacts of such initiatives to date, and also considers information presented regarding the possible 

impacts that any existing initiatives might have in the future. Such information could include a 

demonstration of the steps manufacturers, distribution channels, utilities or others will take to realize 

such voluntary efficiency improvements. 

The base case shipments forecast is used as input to the national impacts analysis, in which 

a forecast of annual shipments and their weighted average energy efficiency is needed to the year 

2030. The base case shipments forecast for central air conditioners and heat pumps is detailed in 

Chapter 6. 

2-4 
EE.RM/STD-98-440 AS0Y

(_ 2.3 SCREENING ANALYSIS

The screening analysis reviews various technologies with regard to whether they: a) are

technologically feasible; b) are impracticable to manufacture, install and service; c) have an adverse

impact on product utility or product availability; and d) have adverse impacts on health and safety.

The screening analysis establishes product classes, baseline units, and efficiency levels (or

combinations of design options) for further analysis. Chapter 3 provides an overview on the

screening of design options for central air conditioners and heat pumps while Chapter 4 provides a

discussion on product classes and baseline equipment.

2.3.1 Product Classes

Product types are divided into classes using the following criteria: a) the type of energy used;

b) capacity; and c) performance-related features that affect consumer utility or efficiency. Different

energy efficiency standards will apply to different product classes. In general, classes are defined

using information obtained in discussions with appliance manufacturers, trade associations, and other

interested parties.

In this TSD the following four product classes are analyzed: 1) split system air conditioners,

2) split system heat pumps, 3) single package air conditioners, and 4) single package heat pumps.

Chapter 4.6, Product Classifications, discusses other product classifications for central air

conditioners and heat pumps.

2.3.2 Baseline Equipment

In order to analyze design options for energy efficiency improvements, the Department

defines a baseline unit. For each product class, the assumed baseline unit is a product that meets the

existing standard. For central air conditioners and heat pumps, such baseline equipment are typically

"lower-cost" units that contain no premium features, e.g., noise reduction, service, or appearance

features. To determine the characteristics of the baseline unit in this screening analysis, the

Department gathers information from trade organizations, manufacturers, and consultants with

expertise in specific product types. A description of baseline central air conditioners and heat pump

equipment is provided in Chapter 4.1, Description of Baseline Unit.

23.3 Technology Screening

An initial list of efficiency enhancement options is developed from the technologies

identified in the technology assessment. Then the Department, in consultation with interested parties,

reviews the list to determine if they are practicable to manufacture, install and service, would

adversely affect product utility or product availability, or would have adverse impacts on health and

safety. Efficiency enhancement options not eliminated in the screening process are considered

further in the Engineering Analysis. Chapter 3 discusses which conventional technologies were

2-5

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ 2 o'l 

2.3 SCREENING ANALYSIS 

The screening analysis reviews various technologies with regard to whether they: a) are 

technologically feasible; b) are impracticable to manufacture, install and service; c) have an adverse 

impact on product utility or product availability; and d) have adverse impacts on health and safety. 

The screening analysis establishes product classes, baseline units, and efficiency levels (or 

combinations of design options) for further analysis. Chapter 3 provides an overview on the 

screening of design options for central air conditioners and heat pumps while Chapter 4 provides a 

discussion on product classes and baseline equipment. 

2.3.1 Product Classes 

Product types are divided into classes using the following criteria: a) the type of energy used; 

b) capacity; and c) performance-related features that affect consumer utility or efficiency. Different 

energy efficiency standards will apply to different product classes. In general, classes are defmed 

using information obtained in discussions with appliance manufacturers, trade associations, and other 

interested parties. 

In this TSD the following four product classes are analyzed: I) split system air conditioners, 

2) split system heat pumps, 3) single package air conditioners, and 4) single package heat pumps. 

Chapter 4.6, Product Classifications, discusses other product classifications for central air 

conditioners and heat pumps. 

2.3.2 Baseline Equipment 

In order to analyze design options for energy efficiency improvements, the Department 

defmes a baseline unit. For each product class, the assumed baseline unit is a product that meets the 

existing standard. For central air conditioners and heat pumps, such baseline equipment are typically 

"lower-cost" units that contain no premium features, e.g., noise reduction, service, or appearance 

features. To determine the characteristics of the baseline unit in this screening analysis, the 

Department gathers information from trade organizations, manufacturers, and consultants with 

expertise in specific product types. A description of baseline central air conditioners and heat pump 

equipment is provided in Chapter 4.1, Description of Baseline Unit. 

2.3.3 Technology Screening 

An initial list of efficiency enhancement options is developed from the technologies 

identified in the technology assessment. Then the Department, in consultation with interested parties, 

reviews the list to determine if they are practicable to manufacture, install and service, would 

adversely affect product utility or product availability, or would have adverse impacts on health and 

safety. Efficiency enhancement options not eliminated in the screening process are considered 

further in the Engineering Analysis. Chapter 3 discusses which conventional technologies were 

2-5 
EE-RM/STD-98-440 " 2 -

considered in the central air conditioner and heat pump Engineering Analysis. Also included is a

list of emerging technologies which could impact future central air conditioner and heat pump

manufacturing costs.

2.4 ENGINEERING ANALYSIS

As presented in Chapter 4, the engineering analysis determines the maximum technologically

feasible energy efficiency level and develops cost-efficiency relationships to show the manufacturer

costs of achieving increased efficiency. The engineering analysis conducted for the Supplemental

ANOPR was revised and updated for this TSD.

2.4.1 Efficiency Improvement Potential

In general, the engineering analysis estimates the efficiency improvement potential of the

individual or combinations of design options not eliminated in the previous screening analysis. The

Department, in consultation with stakeholders, uses the most appropriate means available to

determine energy consumption, including an overall system approach or engineering modeling.

Ranges and uncertainties in performance are established. The energy savings measures developed

in the engineering analysis are combined with end-user costs in the LCC analysis.

( C~~~The engineering analysis involves adding individual or combinations of design options to the

baseline unit. A cost-efficiency relationship is developed to show the manufacturer cost of achieving

increased efficiency. The efficiency levels corresponding to various design option combinations are

determined from manufacturer data submittals and from DOE engineering calculations.

As described in Chapter 1, the Act requires that the Department design any new or amended

standard "to achieve the maximum improvement in energy efficiency that the Secretary determines

is technologically feasible and economically justified." EPCA, §325(o)(2)(A), 42 U.S.C.

§6295(o)(2)(A). The Act also requires the Department, in a proposed rule that sets forth new or

amended standards, to "determine the maximum improvement in energy efficiency... that is

technologically feasible for each type (or class) of covered products...." EPCA Section 325 (p)(2),

42 U.S.C. 6295(p)(2). Therefore an essential role of the engineering analysis consists of identifying

the maximum technologically feasible level. The maximum technologically feasible level is one that

can be reached by the addition of efficiency improvements and/or design options, both commercially

feasible and in prototypes, to the baseline units. The Department believes that the design options

comprising the maximum technologically feasible level must have been physically demonstrated in

at least a prototype form to be considered technologically feasible.

In general, three methodologies can be used to generate the manufacturing costs needed for

the engineering analysis. These methods include: 1) the design-option approach, reporting the

incremental costs of adding design options to a baseline model; 2) the efficiency-level approach,

reporting relative costs of achieving energy efficiency improvements; 3) and the reverse engineering

or cost-assessment approach which requires a "bottoms-up" manufacturing cost assessment based

2-6

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 -f 2 0,& 

considered in the central air conditioner and heat pump Engineering Analysis. Also included is a 

list of emerging technologies which could impact future central air conditioner and heat pump 

manufacturing costs. 

2.4 . ENGINEERING ANALYSIS 

As presented in Chapter 4, the engineering analysis determines the maximum technologically 

feasible energy efficiency level and develops cost-efficiency relationships to show the manufacturer 

costs of achieving increased efficiency. The engineering analysis conducted for the Supplemental 

ANOPR was revised and updated for this TSD. 

2.4.1 Efficiency Improvement Potential 

In general, the engineering analysis estimates the efficiency improvement potential of the 

individual or combinations of design options not eliminated in the previous screening analysis. The 

Department, in consultation with stakeholders, uses the most appropriate means available to 

determine energy consumption, including an overall system approach or engineering modeling. 

Ranges and uncertainties in performance are established. The energy savings measures developed 

in the engineering analysis are combined with end-user costs in the LCC analysis. 

The engineering analysis involves adding individual or combinations of design options to the 

baseline unit. A cost-efficiency relationship is developed to show the manufacturer cost of achieving 

increased efficiency. The efficiency levels corresponding to various design option combinations are 

determined from manufacturer data submittals and from DOE engineering calculations. 

As described in Chapter I, the Act requires that the Department design any new or amended 

standard "to achieve the maximum improvement in energy efficiency that the Secretary determines 

is technologically feasible and economically justified." EPCA, §325(0)(2)(A), 42 U.S.c. 

§6295(0)(2)(A). The Act also requires the Department, in a proposed rule that sets forth new or 

amended standards, to "determine the maximum improvement in energy efficiency... that is 

technologically feasible for each type (or class) of covered products .... " EPCA Section 325 (p )(2), 

42 U.S.C. 6295(P)(2). Therefore an essential role of the engineering analysis consists of identifying 

the maximum technologically feasible level. The maximum technologically feasible level is one that 

can be reached by the addition of efficiency improvements and! or design options, both commercially 

feasible and in prototypes, to the baseline units. The Department believes that the design options 

comprising the maximum technologically feasible level must have been physically demonstrated in 

at least a prototype form to be considered technologically feasible. 

In general, three methodologies can be used to generate the manufacturing costs needed for 

the engineering analysis. These methods include: 1) the design-option approach, reporting the 

incremental costs of adding design options to a baseline model; 2) the efficiency-level approach, 

reporting relative costs of achieving energy efficiency improvements; 3) and the reverse engineering 

or cost-assessment approach which requires a "bottoms-up" manufacturing cost assessment based 

2-6 
EE-RM/STD-98-440 '0u

(Ie ~ on a detailed bill of materials. The Department considers public comments in determining the best

approach for a rulemaking.

If the efficiency-level approach is used, the Department will select appropriate efficiency

levels for data collection on the basis of: 1) energy savings potential identified from engineering

models; 2) observation of existing products on the market; and/or 3) information obtained for the

technology assessment. Stakeholders will be consulted on the efficiency level selection.

The use of a design-option approach provides useful information such as the identification

of potential technological paths manufacturers could use to achieve increased product energy

efficiency. It also allows the use of engineering models to simulate the energy consumption of

different design configurations under various user profiles and applications. However, the

Department recognizes that the manufacturer cost information derived in the design-option approach

does not reflect the variability in design strategies and cost structures that can exist between

manufacturers. Therefore, the Department may derive additional manufacturing cost estimates from

other approaches developed in consultation with interested parties.

The reverse engineering or cost-assessment approach can be used to supplement the

efficiency-level or design option approaches under special circumstances when data is not publically

available because of proprietary reasons, the product is a prototype, and/or the data is not provided

by the manufacturers.

In the rulemaking for central air conditioners and heat pumps, the Department selected the

efficiency level approach as the primary method for conducting the engineering analysis. The

Department also decided to utilize a reverse engineering approach as a "stand alone" analysis for

developing manufacturer costs and validating the costs developed through the efficiency level

approach. Both approaches are discussed in detail in Chapter 4.

2.4.1.1 Efficiency-Level Approach

The efficiency-level approach establishes the relationship between manufacturer cost and

increased efficiency at incremental increases in efficiency levels. This method has the distinct

advantage of being simple and straight forward. Manufacturers typically provide incremental

manufacturer cost data for incremental increases in efficiency. Cost-efficiency curves can be easily

constructed to clearly identify at what point manufacturers are incurring significant costs to raise

efficiency. Additionally, the efficiency-level approach allows manufacturers the ability to supply

detailed cost data without revealing their unique design strategies for achieving increased efficiency

levels.

But the simplicity of the efficiency-level approach is also its primary drawback. Namely,

since technological details are not provided, it is extremely difficult to verify whether the costs

provided for each specific efficiency level are truly representative of the costs for that level. In

addition, prototypical designs become difficult to evaluate and maximum technologically feasible

6~~~(~~~ ~~~~~~~2-7

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * 'Aoq 

on a detailed bill of materials. The Department considers public comments in determining the best 

approach for a rulemaking. 

If the efficiency-level approach is used, the Department will select appropriate efficiency 

levels for data collection on the basis of: 1) energy savings potential identified from engineering 

models; 2) observation of existing products on the market; and/or 3) information obtained for the 

technology assessment. Stakeholders will be consulted on the efficiency level selection. 

The use of a design-option approach provides useful information such as the identification 

of potential technological paths manufacturers could use to achieve increased product energy 

efficiency. It also allows the use of engineering models to simulate the energy consumption of 

different design configurations under various user profiles and applications. However, the 

Department recognizes that the manufacturer cost information derived in the design-option approach 

does not reflect the variability in design strategies and cost structures that can exist between 

manufacturers. Therefore, the Department may derive additional manufacturing cost estimates from 

other approaches developed in consultation with interested parties. 

The reverse engineering or cost-assessment approach can be used to supplement the 

efficiency-level or design option approaches under special circumstances when data is not publically 

available because of proprietary reasons, the product is a prototype, and/or the data is not provided 

by the manufacturers. 

In the rulemaking for central air conditioners and heat pumps, the Department selected the 

efficiency level approach as the primary method for conducting the engineering analysis. The 

Department also decided to utilize a reverse engineering approach as a "stand alone" analysis for 

developing manufacturer costs and validating the costs developed through the efficiency level 

approach. Both approaches are discussed in detail in Chapter 4. 

2.4.1.1 Efficiency-Level Approach 

The efficiency-level approach establishes the relationship between manufacturer cost and 

increased efficiency at incremental increases in efficiency levels. This method has the distinct 

advantage of being simple and straight forward. Manufacturers typically provide incremental 

manufacturer cost data for incremental increases in efficiency. Cost-efficiency curves can be easily 

constructed to clearly identify at what point manufacturers are incurring significant costs to raise 

efficiency. Additionally, the efficiency-level approach allows manufacturers the ability to supply 

detailed cost data without revealing their unique design strategies for achieving increased efficiency 

levels. 

But the simplicity of the efficiency-level approach is also its primary drawback. Namely, 

since technological details are not provided, it is extremely difficult to verify whether the costs 

provided for each specific efficiency level are truly representative of the costs for that level. In 

addition, prototypical designs become difficult to evaluate and maximum technologically feasible 

2-7 
EE-RM/STD-98-440 C° Z0

designs are then difficult to ascertain. As a result, some other type of analysis is likely needed in

order to verify the accuracy of the costs supplied through the efficiency level approach.

2.4.1.2 Reverse Engineering Approach

As discussed above, the efficiency level approach requires verification of the data submitted.

The use of a component-based technology-costing (reverse engineering) approach identifies potential

technological paths manufacturers typically use to achieve increased product energy efficiency.

Under this type of analysis, actual equipment on the market are physically analyzed, i.e., dismantled,

component-by-component to determine what technologies and designs manufacturers employ to

increase efficiency. Independent costing methods and manufacturer and component supplier data are

then used to estimate the costs of the components. This approach has the distinct advantage of using

"real" market equipment to establish the technologies that are used by manufacturers and to establish

the manufacturing cost to produce more efficient units.

The primary disadvantage of reverse engineering is the time and effort required to analyze

"real" equipment. Several models from a diverse range of manufacturers may have to be assessed

in order to ensure that an accurate representation of technological paths for increasing efficiency are

identified. In addition, since only equipment in the market is analyzed, prototypical designs may not

be captured by the analysis, thus making it difficult to establish maximum technologically feasible

designs.

2.4.1.3 Design Option Approach

The design option approach identifies individual or combinations of design options which

increase efficiency. Design option efficiency increases can either be based on manufacturer or

component supplier estimates or through the use of engineering computer simulation models. The

incremental manufacturing costs of adding design options to a baseline model are then established.

Individual or combinations of design options are added to the baseline model in ascending order of

cost-effectiveness. Typically, the payback period is used to establish a design option's costeffectiveness and is determined by the ratio of the change in total consumer cost to the change in

operating cost.

The primary advantage of the design option approach is its ability to analyze individual

technologies. The approach is transparent in that the impact of any single technology on cost and

efficiency is explicit. An additional advantage is its ability to incorporate designs that have been

demonstrated to perform in prototypes but have yet to be utilized in equipment currently available

on the market. Thus, maximum technologically feasible designs are more easily established then in

the efficiency level approach.

Although individual technologies can be assessed, the design option approach can tend to be

complex. Individual technologies may be combined in ways not typically utilized by manufacturers,

especially if prototypical technologies are being analyzed, thus, making it difficult to assess a

2-8

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 i'2. 0 'g 

designs are then difficult to ascertain. As a result, some other type of analysis is likely needed in 

order to verify the accuracy of the costs supplied through the efficiency level approach. 

2.4.1.2 Reverse Engineering Approach 

As discussed above, the efficiency level approach requires verification of the data submitted. 

The use of a component-based technology-costing (reverse engineering) approach identifies potential 

technological paths manufacturers typically use to achieve increased product energy efficiency. 

Under this type of analysis, actual equipment on the market are physically analyzed, i.e., dismantled, 

component-by-component to determine what technologies and designs manufacturers employ to 

increase efficiency. Independent costing methods and manufacturer and component supplier data are 

then used to estimate the costs of the components. This approach has the distinct advantage of using 

"real" market equipment to establish the technologies that are used by manufacturers and to establish 

the manufacturing cost to produce more efficient units. 

The primary disadvantage of reverse engineering is the time and effort required to analyze 

"real" equipment. Several models from a diverse range of manufacturers may have to be assessed 

in order to ensure that an accurate representation of technological paths for increasing efficiency are 

identified. In addition, since only equipment in the market is analyzed, prototypical designs may not 

be captured by the analysis, thus making it difficult to establish maximum technologically feasible 

designs. 

2.4.1.3 Design Option Approach 

The design option approach identifies individual or combinations of design options which 

increase efficiency. Design option efficiency increases can either be based on manufacturer or 

component supplier estimates or through the use of engineering computer simulation models. The 

incremental manufacturing costs of adding design options to a baseline model are then established. 

Individual or combinations of design options are added to the baseline model in ascending order of 

cost-effectiveness. Typically, the payback period is used to establish a design option's costeffectiveness and is determined by the ratio of the change in total consumer cost to the change in 

operating cost. 

The primary advantage of the design option approach is its ability to analyze individual 

technologies. The approach is transparent in that the impact of any single technology on cost and 

efficiency is explicit. An additional advantage is its ability to incorporate designs that have been 

demonstrated to perform in prototypes but have yet to be utilized in equipment currently available 

on the market. Thus, maximum technologically feasible designs are more easily established then in 

the efficiency level approach. 

Although individual technologies can be assessed, the design option approach can tend to be 

complex. Individual technologies may be combined in ways not typically utilized by manufacturers, 

especially if prototypical technologies are being analyzed, thus, making it difficult to assess a 

2-8 
EE-RM/STD-98-440 ' AD

1^,~ ~ design's impact on system cost and efficiency. In order to determine a technology's impact on

system efficiency, computer simulation models are typically employed. But since computer

simulation models exhibit at least some level of inaccuracy, a great deal of time and effort must be

expended to validate the model's results at a variety of operating conditions. Simulation models

demand detailed input that may require manufacturers and component suppliers to reveal proprietary

design strategies. Also, equipment performance data at specified test conditions must be supplied

in order to validate the model's performance.

Another drawback to the design option approach is its imperfect compatibility with the

manufacturing impact analysis. The Department recognizes that the manufacturer cost information

derived in a component-based analysis does not reflect the variability in baseline units, design

strategies and cost structures that can exist between manufacturers. Therefore, for the manufacturing

impact analysis, the Department may need to derive additional manufacturing cost estimates, using

other approaches developed in consultation with interested parties.

2.4.1.4 Outside Regulatory Changes affecting the Engineering Analysis

In conducting an engineering analysis, there sometimes occur regulatory changes outside of

the NAECA efficiency standards process that can impact the manufacture of the product. Some of

these changes can also affect the efficiency of the product as well. The Department attempts to

identify all "outside" issues that can impact the engineering analysis. Current regulatory changes

affecting central air conditioners and heat pumps is the discontinued use of HCFC refrigerants.

k\v~ ;Chapter 4.7, Alternative Refrigerants, provides more detailed information on this topic.

2.4.2 Manufacturer Costs

Manufacturing costs are used as the means of determining retail prices, and are needed for

the manufacturer impact analysis. Manufacturing costs for central air conditioners and heat pumps

are described in detail in Chapter 4.2, Manufacturing Costs.

2.4.2.1 Characterizing Uncertainty

Consistent with the process rule, DOE places a range around the average manufacturing costs

of achieving various efficiency levels. The ranges of costs are used to generate retail prices for the

consumer life-cycle cost analysis, and are used in the industry cashflow analysis.

2.4.2.2 Variability in Costs between Manufacturers

The Department is committed to assessing the differential impacts of standards on different

manufacturers. The results are used as inputs for the sub-group analysis of manufacturing impacts,

which entails calculating cashflows separately for each class of manufacturer.

2-9

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 if 20ct 

design's impact on system cost and efficiency. In order to determine a technology's impact on 

system efficiency, computer simulation models are typically employed. But since computer 

simulation models exhibit at least some level of inaccuracy, a great deal oftime and effort must be 

expended to validate the model's results at a variety of operating conditions. Simulation models 

demand detailed input that may require manufacturers and component suppliers to reveal proprietary 

design strategies. Also, equipment performance data at specified test conditions must be supplied 

in order to validate the model's performance. 

Another drawback to the design option approach is its imperfect compatibility with the 

manufacturing impact analysis. The Department recognizes that the manufacturer cost information 

derived in a component-based analysis does not reflect the variability in baseline units, design 

strategies and cost structures that can exist between manufacturers. Therefore, for the manufacturing 

impact analysis, the Department may need to derive additional manufacturing cost estimates, using 

other approaches developed in consultation with interested parties. 

2.4.1.4 Outside Regulatory Changes affecting the Engineering Analysis 

In conducting an engineering analysis, there sometimes occur regulatory changes outside of 

the NAECA efficiency standards process that can impact the manufacture of the product. Some of 

these changes can also affect the efficiency of the product as well. The Department attempts to 

identify all "outside" issues that can impact the engineering analysis. Current regulatory changes 

affecting central air conditioners and heat pumps is the discontinued use of HCFC refrigerants. 

Chapter 4.7, Alternative Refrigerants, provides more detailed information on this topic. 

2.4.2 Manufacturer Costs 

Manufacturing costs are used as the means of determining retail prices, and are needed for 

the manufacturer impact analysis. Manufacturing costs for central air conditioners and heat pumps 

are described in detail in Chapter 4.2, Manufacturing Costs. 

2.4.2.1 Characterizing Uncertainty 

Consistent with the process rule, DOE places a range around the average manufacturing costs 

of achieving various efficiency levels. The ranges of costs are used to generate retail prices for the 

consumer life-cycle cost analysis, and are used in the industry cashflow analysis. 

2.4.2.2 Variability in Costs between Manufacturers 

The Department is committed to assessing the differential impacts of standards on different 

manufacturers. The results are used as inputs for the sub-group analysis of manufacturing impacts, 

which entails calculating cashflows separately for each class of manufacturer. 

2-9 
EE-RM/STD-98-440 '20°

2.4.2.3 Proprietary Design

In general, the Department considers in its analysis all design options that are commercially

available or present in a working prototype, including proprietary designs. Proprietary designs are

fully considered in the Department's engineering and economic analyses. However, for this

rulemaking, engineering and economic analyses were limited to equipment currently in the market.

2.5 LIFE-CYCLE COST (LCC) AND PAYBACK ANALYSIS

As will be presented in Chapter 5, the Life-Cycle Cost and Payback Period Analysis

calculates the discounted savings in operating costs (less maintenance and repair costs) throughout

the estimated average life of the covered product compared to any increase in the installed cost for

the product likely to result directly from the imposition of a standard. The life-cycle cost and

payback period analysis conducted for the Supplemental ANOPR was revised and updated for this

TSD. In determining economic justification, the Act directs the Department to consider a number

of different factors, including the economic impact of potential standards on consumers. The Act

also establishes a rebuttable presumption that a standard is economically justified if the additional

product costs attributed to the standard are less than three times the value of the first year energy cost

savings that the consumer will receive as a result of the standard. EPCA, §325(o)(2)(B)(iii), 42

U.S.C. §6295 (o)(2)(B)(iii).

To consider these requirements the Department calculates changes in LCC to the consumers

that are likely to result from the proposed standard as well as two different simple payback periods:

a payback period based on probability distributions, and a payback period based on single-point

values and test procedure assumptions which is known as "the rebuttable presumption" payback.

The effect of standards on individual consumers includes a change in operating expense (usually

decreased) and a change in purchase price (usually increased). The net effect is analyzed by

calculating the change in LCC as compared to the base case. Inputs to the LCC calculation include

the installed consumer cost (purchase price plus installation cost), operating expenses (energy, repair,

and maintenance costs), lifetime of the appliance, and a discount rate.

2.5.1 LCC Spreadsheet Model

The LCC analysis is conducted using a spreadsheet model developed in Microsoft Excel

combined with Crystal Ball (a commercially available software program). The Model uses a Monte

Carlo simulation described in Appendix A to perform the analysis, considering uncertainty and

variability. The LCC spreadsheet is organized so that ranges (or probability distributions) can be

entered for each input variable needed to perform the calculations.

Based on the results of the LCC analysis, DOE selects candidate standard levels for a more

detailed analysis. The range of candidate standard levels typically includes: (1) the most energyefficient combination of design options or most energy-efficient level equipment available in the

market; (2) the combination of design options or efficiency levels with the lowest LCC; and (3) the

2-10

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 f'2 og 

2.4.2.3 Proprietary Design 

In general, the Department considers in its analysis all design options that are commercially 

available or present in a working prototype, including proprietary designs. Proprietary designs are 

fully considered in the Department's engineering and economic analyses. However, for this 

rulemaking, engineering and economic analyses were limited to equipment currently in the market. 

2.S LIFE-CYCLE COST (LCC) AND PAYBACK ANALYSIS 

As will be presented in Chapter 5, the Life-Cycle Cost and Payback Period Analysis 

calculates the discounted savings in operating costs (less maintenance and repair costs) throughout 

the estimated average life of the covered product compared to any increase in the installed cost for 

the product likely to result directly from the imposition of a standard. The life-cycle cost and 

payback period analysis conducted for the Supplemental ANOPR was revised and updated for this 

TSD. In determining economic justification, the Act directs the Department to consider a number 

of different factors, including the economic impact of potential standards on consumers. The Act 

also establishes a rebuttable presumption that a standard is economically justified if the additional 

product costs attributed to the standard are less than three times the value of the first year energy cost 

savings that the consumer will receive as a result of the standard. EPCA, §325(0)(2)(B)(iii), 42 

U.S.C. §6295 (0)(2)(B)(iii). 

To consider these requirements the Department calculates changes in LCC to the consumers 

that are likely to result from the proposed standard as well as two different simple payback periods: 

a payback period based on probability distributions, and a payback period based on single-point 

values and test procedure assumptions which is known as "the rebuttable presumption" payback. 

The effect of standards on individual consumers includes a change in operating expense (usually 

decreased) and a change in purchase price (usually increased). The net effect is analyzed by 

calculating the change in LCC as compared to the base case. Inputs to the LCC calculation include 

the installed consumer cost (purchase price plus installation cost), operating expenses (energy, repair, 

and maintenance costs), lifetime of the appliance, and a discount rate. 

2.S.1 LCC Spreadsbeet Model 

The LCC analysis is conducted using a spreadsheet model developed in Microsoft Excel 

combined with Crystal Ball (a commercially available software program). The Model uses a Monte 

Carlo simulation described in Appendix A to perform the analysis, considering uncertainty and 

variability. The LCC spreadsheet is organized so that ranges (or probability distributions) can be 

entered for each input variable needed to perform the calculations. 

Based on the results of the LCC analysis, DOE selects candidate standard levels for a more 

detailed analysis. The range of candidate standard levels typically includes: (1) the most energyefficient combination of design options or most energy-efficient level equipment available in the 

market; (2) the combination of design options or efficiency levels with the lowest LCC; and (3) the 

2-10 
EE-RM/STD-98-440 '. O

combination of design options or efficiency levels with a payback period of not more than three

years. Additionally, candidate standard levels that incorporate noteworthy technologies or fill in

large gaps between efficiency levels of other candidate standards levels may be selected.

Payback is calculated based on the same inputs used for the LCC analysis (with the difference

that the values are based only on the first year the standard takes affect). The output is a probability

distribution of payback periods, including the mean and median payback period as well as the

minimum and maximum payback periods. Additional information is available in the LCC

spreadsheet available on the DOE website.

The payback for purposes of the rebuttable presumption clause is calculated on the LCC

spreadsheet using single-point values rather than probability distributions. For central air

conditioners and heat pumps, payback periods are first calculated based on differences between

equipment designed for a new standard level and equipment typical of that being sold in the year

2006. The paybacks are then weighted and averaged according to the percentage of each equipment

efficiency sold before a new standard is enacted. Input values such as the annual operational hours

per year will correspond to those outlined in the DOE test procedure. The payback is calculated for

the expected effective year of the standard (e.g., 2006).

2.5.2 Equipment Prices

Equipment prices are needed for a base case, absent new standards, and for all efficiency

levels to be considered. Several approaches can be used to obtain these retail prices. Potential

approaches include: 1) conducting a survey of existing prices on the market; 2) surveying

manufacturers and other market experts to predict consumer willingness to pay higher prices; and

3) applying various mark-ups over manufacturing costs. Consistent with the Process Rule, and

building on the estimates generated by various approaches, retail prices would be described within

a range of uncertainty.

Chapter 4.3, Distribution Markups, and Appendix D provide a detailed description of the

approach used for determining industry-average prices and mark-ups for central air conditioners and

heat pumps. Manufacturer and retail or equipment prices are needed to determine how

manufacturing costs and associated margins, associated with standards, are passed-through from

manufacturers to consumers, as this has an impact on both consumers and manufacturers. Consumer

and manufacturer economics are linked and inversely related. For this reason, retail prices used for

the LCC analysis need to be reconciled with manufacturer prices.

2.6 PRELIMINARY NATIONAL IMPACTS ANALYSIS

As discussed in Chapter 7, the national impacts analysis assesses the net present value (NPV)

of total consumer LCC, energy savings and indirect employment impacts. A preliminary assessment

of the aggregate impacts at the national level was conducted for the Supplemental ANOPR. The

national impacts analysis was revised and updated for this TSD. Analyzing impacts of Federal

4~~~~~~~~~~(~2-11

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * 2. O~ 

combination of design options or efficiency levels with a payback period of not more than three 

years. Additionally, candidate standard levels that incorporate noteworthy technologies or fill in 

large gaps between efficiency levels of other candidate standards levels may be selected. 

Payback is calculated based on the same inputs used for the LCC analysis (with the difference 

that the values are based only on the first year the standard takes affect). The output is a probability 

distribution of payback periods, including the mean and median payback period as well as the 

minimum and maximum payback periods. Additional information is available in the LCC 

spreadsheet available on the DOE website. 

The payback for purposes of the rebuttable presumption clause is calculated on the LCC 

spreadsheet using single-point values rather than probability distributions. For central air 

conditioners and heat pumps, payback periods are first calculated based on differences between 

equipment designed for a new standard level and equipment typical of that being sold in the year 

2006. The paybacks are then weighted and averaged according to the percentage of each equipment 

efficiency sold before a new standard is enacted. Input values such as the annual operational hours 

per year will correspond to those outlined in the DOE test procedure. The payback is calculated for 

the expected effective year of the standard (e.g., 2006). 

2.5.2 Equipment Prices 

Equipment prices are needed for a base case, absent new standards, and for all efficiency 

levels to be considered. Several approaches can be used to obtain these retail prices. Potential 

approaches include: 1) conducting a survey of existing prices on the market; 2) surveying 

manufacturers and other market experts to predict consumer willingness to pay higher prices; and 

3) applying various mark-ups over manufacturing costs. Consistent with the Process Rule, and 

building on the estimates generated by various approaches, retail prices would be described within 

a range of uncertainty. 

Chapter 4.3, Distribution Markups, and Appendix D provide a detailed description of the 

approach used for determining industry-average prices and mark -ups for central air conditioners and 

heat pumps. Manufacturer and retail or equipment prices are needed to determine how 

manufacturing costs and associated margins, associated with standards, are passed-through from 

manufacturers to consumers, as this has an impact on both consumers and manufacturers. Consumer 

and manufacturer economics are linked and inversely related. For this reason, retail prices used for 

the LCC analysis need to be reconciled with manufacturer prices. 

2.6 PRELIMINARY NATIONAL IMPACTS ANALYSIS 

As discussed in Chapter 7, the national impacts analysis assesses the net present value (NPV) 

of total consumer LCC, energy savings and indirect employment impacts. A preliminary assessment 

of the aggregate impacts at the national level was conducted for the Supplemental ANOPR. The 

national impacts analysis was revised and updated for this TSD. Analyzing impacts of Federal 

2-11 
EE-RM/STD-98-440 - Z°O

(1i \ menergy-efficiency standards requires a comparison of projected U.S. residential energy consumption

with and without standards. The base case, which is the projected US residential energy

consumption without standards, includes the mix of efficiencies being sold at the time the standard

becomes effective.

As discussed in Chapter 6, sales projections together with efficiency levels of the central air

conditioners and heat pumps are important inputs to determine the energy consumption for the

Nation as a whole under both base case and standards case scenarios. The differences between the

base case and standards case provides the energy and cost savings. Depending on the analysis

method used, the sales under a standards case projection may differ from those under a base case

projection.

The Department estimates national energy consumption for each year beginning with the

expected effective date of the standards. National annual energy savings are calculated as the

difference between two projections: a base case and a standards case. Analysis includes estimated

energy savings by fuel type used for generating electricity. Energy consumption and savings are

estimated based on site energy (kWh of electricity), then the electricity consumption and savings are

converted to source energy.

Measures of impact reported include the net present value (NPV) of total consumer LCC,

national energy savings, and indirect employment impacts. Each of the above are determined for

selected trial standard levels. These calculations are done by the use of a spreadsheet tool called the

National Energy Savings (NES) Spreadsheet Model, which has been developed for all the standard

rulemakings and tailored to each specific appliance rulemaking.

2.6.1 National Energy Savings (NES) Spreadsheet Model

In order to make the analysis more accessible and transparent to all stakeholders, a

spreadsheet model was developed using Microsoft Excel to calculate the national energy savings and

the national economic costs and savings from new standards. Input quantities can be changed within

the spreadsheet. Unlike the LCC analysis, in the NES Spreadsheet, distributions are not used for

inputs or outputs. Sensitivities can be demonstrated by running different scenarios. The NES

spreadsheet model is available on the DOE website.

2.6.2 Shipments

One of the more important components of any estimate of future impacts is shipments.

Forecasts of shipments for the base case and the standard case need to be obtained as an input to the

NES. The Department chose an accounting model method to prepare shipment scenarios for the base

case and several standard cases. Basically, the model keeps track of the stocks and purchases of each

type of central air conditioner and heat pump. Events and consumer decisions influence how the

stock and supply of central air conditioner and heat pump systems flow from one category to another.

Decisions that are economically influenced are modeled with econometric equations.

2-12

EE-RM-STD-98-440 COMMENT 208

EE_RM/STO-98-440 ~ 2 o't 

energy-efficiency standards requires a comparison of projected U.S. residential energy consumption 

with and without standards. The base case, which is the projected US residential energy 

consumption without standards, includes the mix of efficiencies being sold at the time the standard 

becomes effective. 

As discussed in Chapter 6, sales projections together with efficiency levels of the central air 

conditioners and heat pumps are important inputs to determine the energy consumption for the 

Nation as a whole under both base case and standards case scenarios. The differences between the 

base case and standards case provides the energy and cost savings. Depending on the analysis 

method used, the sales under a standards case projection may differ from those under a base case 

projection. 

The Department estimates national energy consumption for each year beginning with the 

expected effective date of the standards. National annual energy savings are calculated as the 

difference between two projections: a base case and a standards case. Analysis includes estimated 

energy savings by fuel type used for generating electricity. Energy consumption and savings are 

estimated based on site energy (kWh of electricity), then the electricity consumption and savings are 

converted to source energy. 

Measures of impact reported include the net present value (NPV) of total consumer LCC, 

national energy savings, and indirect employment impacts. Each of the above are determined for 

selected trial standard levels. These calculations are done by the use of a spreadsheet tool called the 

National Energy Savings (NES) Spreadsheet Model, which has been developed for all the standard 

rulemakings and tailored to each specific appliance rulemaking. 

2.6.1 National Energy Savings (NES) Spreadsheet Model 

In order to make the analysis more accessible and transparent to all stakeholders, a 

spreadsheet model was developed using Microsoft Excel to calculate the national energy savings and 

the national economic costs and savings from new standards. Input quantities can be changed within 

the spreadsheet. Unlike the LCC analysis, in the NES Spreadsheet, distributions are not used for 

inputs or outputs. Sensitivities can be demonstrated by running different scenarios. The NES 

spreadsheet model is available on the DOE website. 

2.6.2 Shipments 

One of the more important components of any estimate of future impacts is shipments. 

Forecasts of shipments for the base case and the standard case need to be obtained as an input to the 

NES. The Department chose an accounting model method to prepare shipment scenarios for the base 

case and several standard cases. Basically, the model keeps track of the stocks and purchases of each 

type of central air conditioner and heat pump. Events and consumer decisions influence how the 

stock and supply of central air conditioner and heat pump systems flow from one category to another. 

Decisions that are economically influenced are modeled with econometric equations. 

2-12 
EE-RM/STD-98-440 , 0 ' 

(I2,~~ IThe model is organized into three classes of elements: stocks, events, and decisions. Stocks

of central air conditioners and heat pumps are divided into ownership categories, and units are

assigned to age categories. Events are things that happen to stocks independent of economic

conditions, i.e., breakdowns requiring repair or replacement. Decisions are consumer reactions to

market conditions, e.g., whether to repair or replace equipment, or buy a house with or without a

central air conditioner or heat pump. Purchase decisions are categorized by market segments.

Decision trees are used to describe consumer choices for purchases and repairs. A logitprobability

model simulates consumer purchase decisions that based on equipment price, operating costs, and

income level. Chapter 6 provides a detailed description of how shipments forecast were conducted.

2.6.3 Net National Employment Impacts

The Process Rule required that employment impacts be considered in selecting a proposed

standard. The Department will estimate the impacts of standards on employment for air conditioner

and heat pump manufacturers, relevant service industries, energy suppliers, and the economy in

general. Employment impacts are separated into indirect and direct impacts. Direct employment

impacts would result if standards lead to a change in the number of employees at manufacturing

plants and related supply and service firms. Direct impacts are discussed in Chapter 8 on the

manufacturer impact analysis. Net national employment impacts are impacts on the national

economy other than in the manufacturing sector being regulated. Net national employment impacts

may result from both expenditures shifting among goods (substitution effect), and income changing,

which will lead to a change in overall expenditure levels (income effect).

Net national employment impacts from standards are defined as net jobs eliminated or

created in the general economy as a consequence of increased spending to purchase central air

conditioners and heat pumps and reduced spending to pay utility costs. New equipment standards

are expected to increase the purchase price, which includes retail price, sales tax and installation.

The same standards are also expected to decrease energy consumption, and therefore reduce

household expenditures for energy. Over time, the increased purchase price may be paid back

through energy savings. The savings in energy expenditures may be spent on other items. Using an

input/output model of the U.S. economy, this analysis seeks to estimate the effects on different

sectors, and the net impact on jobs. National impacts have been estimated for major sectors of the

U.S. economy for this TSD. Public and commercially available data sources and software have been

utilized to estimate employment impacts. All methods and documentation are provided in Chapter

12.

2.7 CONSUMER ANALYSIS

Chapter 10 describes the consumer sub-group analysis which evaluates impacts to consumers

with low-income levels, who may be disproportionately affected by any national energy efficiency

standard level.

2-13

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 f 2.o~ 

The model is organized into three classes of elements: stocks, events, and decisions. Stocks 

of central air conditioners and heat pumps are divided into ownership categories, and units are 

assigned to age categories. Events are things that happen to stocks independent of economic 

conditions, i.e., breakdowns requiring repair or replacement. Decisions are consumer reactions to 

market conditions, e.g., whether to repair or replace equipment, or buy a house with or without a 

central air conditioner or heat pump. Purchase decisions are categorized by market segments. 

Decision trees are used to describe consumer choices for purchases and repairs. A logit probability 

model simulates consumer purchase decisions that based on equipment price, operating costs, and 

income level. Chapter 6 provides a detailed description of how shipments forecast were conducted. 

2.6.3 Net National Employment Impacts 

The Process Rule required that employment impacts be considered in selecting a proposed 

standard. The Department will estimate the impacts of standards on employment for air conditioner 

and heat pump manufacturers, relevant service industries, energy suppliers, and the economy in 

general. Employment impacts are separated into indirect and direct impacts. Direct employment 

impacts would result if standards lead to a change in the number of employees at manufacturing 

plants and related supply and service firms. Direct impacts are discussed in Chapter 8 on the 

manufacturer impact analysis. Net national employment impacts are impacts on the national 

economy other than in the manufacturing sector being regulated. Net national employment impacts 

may result from both expenditures shifting among goods (substitution effect), and income changing, 

which will lead to a change in overall expenditure levels (income effect). 

Net national employment impacts from standards are defined as net jobs eliminated or 

created in the general economy as a consequence of increased spending to purchase central air 

conditioners and heat pumps and reduced spending to pay utility costs. New equipment standards 

are expected to increase the purchase price, which includes retail price, sales tax and installation. 

The same standards are also expected to decrease energy consumption, and therefore reduce 

household expenditures for energy. Over time, the increased purchase price may be paid back 

through energy savings. The savings in energy expenditures may be spent on other items. Using an 

input/output model of the U.S. economy, this analysis seeks to estimate the effects on different 

sectors, and the net impact on jobs. National impacts have been estimated for major sectors of the 

U.S. economy for this TSD. Public and commercially available data sources and software have been 

utilized to estimate employment impacts. All methods and documentation are provided in Chapter 

12. 

2.7 CONSUMER ANALYSIS 

Chapter 10 describes the consumer sub-group analysis which evaluates impacts to consumers 

with low-income levels, who may be disproportionately affected by any national energy efficiency 

standard level. 

2-13 
EE-RM/STD-98-440 t Z 0

In evaluating consumers with low-income levels, the Department has evaluated variations

in regional energy prices, variations in energy use and variations in installation costs that affect the

net present value of a standard. DOE obtains estimates of the variability in each input quantity and

considers this variability in its calculation of consumer impacts.

Variations in energy use for a particular appliance can depend on factors such as: climate,

type of household, number of people in household, etc. Annual energy use can be estimated by a

calculation based on an accepted test procedure or it can be measured directly in the field. The

Department performs sensitivity analyses to consider how differences in energy use will affect

sub-groups of consumers. The impact on low-income consumer sub-groups has been determined

using the LCC spreadsheet model.

2.7.1 Purchase Price Increases

The Department has been sensitive to purchase price increases to avoid negative impacts to

low-income households. Additionally, the Department has assessed the likely impacts of purchase

price increases on product sales.

2.7.2 Consumer Participation

(6.f ~~The Department seeks to inform and involve consumers and consumer representatives in the

process of developing standards. This includes notification of consumer representatives during the

rulemaking process and where appropriate, seeking direct consumer input.

2.8 MANUFACTURER IMPACT ANALYSIS

Chapter 8 describes the manufacturer impact analysis (MIA). This analysis estimates the

financial impact of standards on manufacturers and also calculates the impact of standards on

competition, employment, and manufacturing capacity.

Prior to initiating the detailed MIA, the Department prepared an approach document and

made it available for review. The Department tailored the methodology for central air conditioners

and heat pumps on the basis of stakeholder comments. The document outlines procedural steps and

outlines issues for consideration. Three important elements of the approach consist of the

preparation of an industry cash flow, the development of a process to consider sub-group cash flow,

and the design of a guide to interview manufacturers and others in gathering information.

The policies outlined in the Process Rule required substantial revisions to the analytical

framework to be used in performing manufacturer impact analysis for each rulemaking. In the

approach document, the Department describes and obtains comments on the methodology to be used

in performing the manufacturer impact analyses. The manufacturer impact analyses was conducted

in three phases (see Figure 2.2). Phase 1 consisted of two activities, namely, preparation of an

V~4.~~~~~~ ~~~~2-14

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * '2 O~ 

In evaluating consumers with low-income levels, the Department has evaluated variations 

in regional energy prices, variations in energy use and variations in installation costs that affect the 

net present value of a standard. DOE obtains estimates of the variability in each input quantity and 

considers this variability in its calculation of consumer impacts. 

Variations in energy use for a particular appliance can depend on factors such as: climate, 

type of household, number of people in household, etc. Annual energy use can be estimated by a 

calculation based on an accepted test procedure or it can be measured directly in the field. The 

Department performs sensitivity analyses to consider how differences in energy use will affect 

sub-groups of consumers. The impact on low-income consumer sub-groups has been determined 

using the LCC spreadsheet model. 

2.7.1 Purchase Price Increases 

The Department has been sensitive to purchase price increases to avoid negative impacts to 

low-income households. Additionally, the Department has assessed the likely impacts of purchase 

price increases on product sales. 

2.7.2 Consumer Participation 

The Department seeks to inform and involve consumers and consumer representatives in the 

process of developing standards. This includes notification of consumer representatives during the 

rulemaking process and where appropriate, seeking direct consumer input. 

2.8 MANUFACTURER IMPACT ANALYSIS 

Chapter 8 describes the manufacturer impact analysis (MIA). This analysis estimates the 

financial impact of standards on manufacturers and also calculates the impact of standards on 

competition, employment, and manufacturing capacity. 

Prior to initiating the detailed MIA, the Department prepared an approach document and 

made it available for review. The Department tailored the methodology for central air conditioners 

and heat pumps on the basis of stakeholder comments. The document outlines procedural steps and 

outlines issues for consideration. Three important elements of the approach consist of the 

preparation of an industry cash flow, the development of a process to consider sub-group cash flow, 

and the design of a guide to interview manufacturers and others in gathering information. 

The policies outlined in the Process Rule required substantial revisions to the analytical 

framework to be used in performing manufacturer impact analysis for each rulemaking. In the 

approach document, the Department describes and obtains comments on the methodology to be used 

in performing the manufacturer impact analyses. The manufacturer impact analyses was conducted 

in three phases (see Figure 2.2). Phase 1 consisted of two activities, namely, preparation of an 

2-14 
EE-RM/STD-98-440 2. X

(; industry characterization and identification of issues. The second phase was focused on the larger

industry. In this phase, the Government Regulatory Impact Model (GRIM) has been used to perform

an industry cash flow analysis. Phase 3 involves repeating the process described in Phase 2 (the

industry cash-flow analysis) but on different sub-groups of manufacturers. Phase 3 also entails

calculating additional impacts on competition, employment, and manufacturing capacity.

2.8.1 Industry Characterization

Phase 1 of the MIA consists of collecting pertinent financial and market information. This

activity involves both quantitative and qualitative efforts. Data gathered included market share,

corporate operating ratios, wages, employment, and production cost ratios. These data are

incorporated into the Engineering Analysis in the estimation of equipment production costs and

distribution markups. Sources of information include reports published by industry groups, trade

journals, and the U.S. Bureau of Census, and copies of SEC 10-K filings.

Manufacturer Impact Analyses

PHASE 1: Industry Profile

14--- : Industry Characterization I

Issue Identification i:/"** _____ ., _P PHASE 2: Industry Cash Flow

Manufacturing Costs

- _ .i| Price Forecasts l

ANOPR . . .. I Shipment Forecasts i:

.s: 1ssw fSSS ,fWW~ SI ,Estimate Industry Cash Flow |

PHASE 3: Subgroup Analysis

' 3WS^S'^ 1'SBS a.Estimate ., Manufacturer Costs

Estimate Prices and Shipments

Cash Flow Analysis :

Impacts on Competition

Impacts on Employment

Figre 2.2 Flo =i m Impacts on Manufacturing

Figure 2.2 Flow diagram of the manufacturer impact analysis methodology

hr 2-15

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * 1. O~ 

industry characterization and identification of issues. The second phase was focused on the larger 

industry. In this phase, the Government Regulatory hnpact Model (GRIM) has been used to perform 

an industry cash flow analysis. Phase 3 involves repeating the process described in Phase 2 (the 

industry cash-flow analysis) but on different sub-groups of manufacturers. Phase 3 also entails 

calculating additional impacts on competition, employment, and manufacturing capacity. 

2.8.1 Industry Characterization 

Phase 1 of the MIA consists of collecting pertinent fmancial and market information. This 

activity involves both quantitative and qualitative efforts. Data gathered included market share, 

corporate operating ratios, wages, employment, and production cost ratios. These data are 

incorporated into the Engineering Analysis in the estimation of equipment production costs and 

distribution markups. Sources of information include reports published by industry groups, trade 

journals, and the U.S. Bureau of Census, and copies of SEC 10-K filings. 

ANOPR 

Manufacturer Impact Analyses 

PHASE 1: Industry Profile 

Industry Characterization 

Issue Identification 

PHASE 2: Industry Cash Flow 

I Manufacturing Costs t 

I Price Forecasts . I . 

I Shipment Forecasts 

I Estimate Industry Cash Flow 

PHASE 3: Subgroup Analysis 

Estimate Manufacturer Costs 

Estimate Prices and Shipments 

Cash Flow Analysis 

Figure 2.2 Flow diagram of the manufacturer impact analysis methodology 

2-15 
EE-RM/STD-98-440 ;, © "

(^ \ .2.8.2 Industry Cash Flow

Increased efficiency standards affect manufacturers in three distinct ways, by (1) requiring

additional investment; (2) by raising production costs, and (3) by affecting revenue because of higher

prices and, possibly, lower quantities sold. To quantify these changes the Department performs an

industry cash flow analysis using the Government Regulatory Impact Model (GRIM). Usually this

analysis will use manufacturing costs, shipments forecasts, and price forecasts developed for the

LCC and NES analyses. Financial information, also required as an input to GRIM, has been

developed based on publicly available data and manufacturer information confidentially submitted

to the Department's contractor, Arthur D. Little, Inc .

The GRIM analysis uses a number of factors-annual expected revenues; manufacturer costs

such as cost of sales, selling and general administration costs, taxes, and capital expenditures related

to depreciation, new standards, and maintenance-to arrive at a series of annual cash flows

beginning from before implementation of standards and continuing explicitly for several years after

implementation. The measure of industry net present values are calculated by discounting the annual

cash flows from the period before implementation of standards to some future point in time.

Appendix G provides a description of GRIM's operating principles.

2.8.3 Manufacturer Sub-Group Analysis

Assessment of impacts on sub-groups of manufacturers is Phase 3 of the MIA. Using industry

"average" cost values is not adequate for assessing the variation in impacts among sub-groups of

manufacturers. Smaller manufacturers, niche manufacturers or manufacturers exhibiting a cost

structure largely different from industry averages could be more negatively affected. Ideally, the

Department would consider the impact on every firm individually. In highly concentrated industries

this may be possible. In industries having numerous participants, the Department will use the results

of the industry characterization to group manufacturers exhibiting similar characteristics. The

financial analysis of the "prototypical" firm performed in the Phase 2 industry analysis can serve as

a benchmark against which manufacturer sub-groups can be analyzed.

The manufacturing cost data collected for the engineering analysis has been used to the extent

practical in the sub-group impact analysis. To be useful, however, this data has been disaggregated

to reflect the variability in costs between relevant sub-groups of firms.

The Department has conducted detailed interviews with as many manufacturers as is possible

to gain insight into the potential impacts of standards. During these interviews, the Department has

gathered the information necessary to evaluate cashflows and to assess competitive, employment and

capacity impacts. Firm-specific cumulative burden has been considered.

2-16

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-9S-440 ~1, 0 ~ 

2.8.2 Industry Cash Flow 

Increased efficiency standards affect manufacturers in three distinct ways, by (1) requiring 

additional investment~ (2) by raising production costs, and (3) by affecting revenue because of higher 

prices and, possibly, lower quantities sold. To quantify these changes the Department performs an 

industry cash flow analysis using the Government Regulatory Impact Model (GRIM). Usually this 

analysis will use manufacturing costs, shipments forecasts, and price forecasts developed for the 

LCC and NES analyses. Financial information, also required as an input to GRIM, has been 

developed based on publicly available data and manufacturer information confidentially submitted 

to the Department's contractor, Arthur D. Little, Inc . 

The GRIM analysis uses a number of factors-annual expected revenues~ manufacturer costs 

such as cost of sales, selling and general administration costs, taxes, and capital expenditures related 

to depreciation, new standards, and maintenance-to arrive at a series of annual cash flows 

beginning from before implementation of standards and continuing explicitly for several years after 

implementation. The measure of industry net present values are calculated by discounting the annual 

cash flows from the period before implementation of standards to some future point in time. 

Appendix G provides a description of GRIM's operating principles. 

2.8.3 Manufacturer Sub-Group Analysis 

Assessment of impacts on sub-groups of manufacturers is Phase 3 ofthe MIA. Using industry 

"average" cost values is not adequate for assessing the variation in impacts among sub-groups of 

manufacturers. Smaller manufacturers, niche manufacturers or manufacturers exhibiting a cost 

structure largely different from industry averages could be more negatively affected. Ideally, the 

Department would consider the impact on every firm individually. In highly concentrated industries 

this may be possible. In industries having numerous participants, the Department will use the results 

of the industry characterization to group manufacturers exhibiting similar characteristics. The 

fmancial analysis of the "prototypical" firm performed in the Phase 2 industry analysis can serve as 

a benchmark against which manufacturer sub-groups can be analyzed. 

The manufacturing cost data collected for the engineering analysis has been used to the extent 

practical in the sub-group impact analysis. To be useful, however, this data has been dis aggregated 

to reflect the variability in costs between relevant sub-groups of firms. 

The Department has conducted detailed interviews with as many manufacturers as is possible 

to gain insight into the potential impacts of standards. During these interviews, the Department has 

gathered the information necessary to evaluate cash flows and to assess competitive, employment and 

capacity impacts. Finn-specific cumulative burden has been considered. 

2-16 
EE-RM/STD-98-440 'kD'

(9; L2.8.4 Interview Process

The revised rulemaking process provides for greater public input and for improved analytical

approaches, with particular emphasis on earlier and more extensive information gathering from

interested parties. The three-phase manufacturer impact analysis process draws on multiple

information sources, including structured interviews with manufacturers and a broad cross-section

of interested parties. Interviews were conducted in most phases of the analyses as determined in

Phase 1 of the MIA.

The interview process was a key role in the manufacturer impact analyses, since it provides

an opportunity for manufacturers to privately express their views on important issues. A key

characteristic of the interview process is that it is designed to allow confidential information to be

considered in the rulemaking process.

The industry characterization collects information from relevant industry and market

publications, industry trade organizations, company financial reports, and product literature. This

information aids in the development of detailed and focused questionnaires, as needed, to perform

all phases of the manufacturer impact analyses.

The Phase 3 (sub-group analysis) questionnaire solicits information on the possible impacts

of potential efficiency levels on manufacturing costs, product prices, and sales. Evaluation of the

possible impacts on direct employment, capital assets, and industry competitiveness will also draw

heavily on the information gathered during the interviews. The questionnaires solicits both

qualitative and quantitative information. Supporting information will be requested whenever

applicable.

Interview participants were requested to identify all confidential information provided in

writing or orally. Approximately two weeks following the interview, an interview summary was

provided to give participants the opportunity to confirm the accuracy and protect the confidentiality

of all collected information. All the information transmitted was considered, when appropriate, in

DOE's decision-making process. However, confidential information will not be made available in

the public record.

DOE has collated the completed interview questionnaires and prepared a summary of the

major issues and outcomes.

2.9 COMPETITIVE IMPACT ASSESSMENT

Legislation directs the Department to consider any lessening of competition that is likely to

result from standards. It further directs the Attorney General to gauge the impacts, if any, of any

lessening of competition. DOE has made an effort to gather and report firm-specific financial

information and impacts. The competitive analysis, as discussed in Chapter 9, focuses on assessing

the impacts to smaller, yet significant, manufacturers. The assessment is based on manufacturing

cost data and on information collected from interviews with manufacturers, consistent with Phase

2-17

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 «'2., D ~ 

2.8.4 Interview Process 

The revised rulemaking process provides for greater public input and for improved analytical 

approaches, with particular emphasis on earlier and more extensive information gathering from 

interested parties. The three-phase manufacturer impact analysis process draws on mUltiple 

information sources, including structured interviews with manufacturers and a broad cross-section 

of interested parties. Interviews were conducted in most phases of the analyses as determined in 

Phase 1 of the MIA 

The interview process was a key role in the manufacturer impact analyses, since it provides 

an opportunity for manufacturers to privately express their views on important issues. A key 

characteristic of the interview process is that it is designed to allow confidential information to be 

considered in the rulemaking process. 

The industry characterization collects information from relevant industry and market 

publications, industry trade organizations, company financial reports, and product literature. This 

information aids in the development of detailed and focused questionnaires, as needed, to perform 

all phases of the manufacturer impact analyses. 

The Phase 3 (sub-group analysis) questionnaire solicits information on the possible impacts 

of potential efficiency levels on manufacturing costs, product prices, and sales. Evaluation of the 

possible impacts on direct employment, capital assets, and industry competitiveness will also draw 

heavily on the information gathered during the interviews. The questionnaires solicits both 

qualitative and quantitative information. Supporting information will be requested whenever 

applicable. 

Interview participants were requested to identify all confidential information provided in 

writing or orally. Approximately two weeks following the interview, an interview summary was 

provided to give participants the opportunity to confrrm the accuracy and protect the confidentiality 

of all collected information. All the information transmitted was considered, when appropriate, in 

DOE's decision-making process. However, confidential information will not be made available in 

the public record. 

DOE has collated the completed interview questionnaires and prepared a summary of the 

major issues and outcomes. 

2.9 COMPETITIVE IMP ACT ASSESSMENT 

Legislation directs the Department to consider any lessening of competition that is likely to 

result from standards. It further directs the Attorney General to gauge the impacts, if any, of any 

lessening of competition. DOE has made an effort to gather and report frrm-specific fmancial 

information and impacts. The competitive analysis, as discussed in Chapter 9, focuses on assessing 

the impacts to smaller, yet significant, manufacturers. The assessment is based on manufacturing 

cost data and on information collected from interviews with manufacturers, consistent with Phase 

2-17 
EE-RM/STD-98-440 2°0

3 of the MIA. The Department of Justice (DOJ) has helped in drafting questions to be used in the

manufacturer interviews. These questions pertain to the assessment of the likelihood of increases

in market concentration levels and other market conditions that could lead to anti-competitive pricing

-behavior. The manufacturer interviews have focused on gathering information that helps in

assessing asymmetrical cost increases to some manufacturers, increased proportion of fixed costs

potentially increasing business risks, and potential barriers to market entry (proprietary technologies,

etc.).

2.10 UTILITY ANALYSIS

The utility analysis estimates the effects of proposed standards on electric and gas utilities.

The Department uses a version of Energy Information Administration's (EIA) widely

recognized National Energy Modeling System (NEMS) for the utility and environmental analyses.

NEMS is a large multi-sectoral partial equilibrium model of the U.S. energy sector that has been

developed over several years by the EIA, primarily for the purpose of preparing the Annual Energy

Outlook (AEO). NEMS produces a widely recognized baseline forecast for the U.S. through 2020

and is available in the public domain. The version of NEMS to be used for appliance standards

analysis will be called NEMS-BRS, together with some exogenous calculations.a

Forecasting for the electric utility industry is seriously complicated by the implications of

industry restructuring, which is only partially reflected in the latest AEO (2000).

To analyze the effect of standards, NEMS-BRS is first run exactly as it would be to produce

an AEO forecast, then a second run is conducted with residential energy usage reduced by the

amount of energy (gas, oil, and electricity) saved due to appliance standards for the appliance being

analyzed. The energy savings input is obtained from the NES spreadsheet. Outputs available are

the same as those in the original NEMS model including residential energy prices, generation and

installed capacity (and in the case of electricity, which primary fuel is used for generation).

2.11 ENVIRONMENTAL ANALYSIS

The Department is preparing an Environmental Assessment of the impacts of the proposed

rule and DOE anticipates completing a Finding of No Significant Impact (FONSI) before publishing

the final rule on Energy Conservation Standards for central air conditioners and heat pumps,

a For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information

Administration documentation. A useful summary is NationalEnergy Modeling System: An Overview 1998, DOE/EIA0581(98), February, 1998. DOE/EIA approves use of the name NEMS to describe only an official version of the model

without any modification to code or data. Because our analysis entails some minor code modifications and the model

is run under various policy scenarios that are variations on DOE/EIA assumptions, the name NEMS-BRS refers to the

model as used here (BRS is DOE's Building Research and Standards office, under whose aegis this work has been

performed.

C~~~~~~~~~~( ~2-18

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ '2 0 ~ 

3 of the MIA. The Department of Justice (DOJ) has helped in drafting questions to be used in the 

manufacturer interviews. These questions pertain to the assessment of the likelihood of increases 

in market concentration levels and other market conditions that could lead to anti-competitive pricing 

'behavior. The manufacturer interviews have focused on gathering information that helps in 

assessing asymmetrical cost increases to some manufacturers, increased proportion of fixed costs 

potentially increasing business risks, and potential barriers to market entry (proprietary technologies, 

etc.). 

2.10 UTILITY ANALYSIS 

The utility analysis estimates the effects of proposed standards on electric and gas utilities. 

The Department uses a version of Energy Information Administration's (EIA) widely 

recognized National Energy Modeling System (NEMS) for the utility and environmental analyses. 

NEMS is a large multi-sectoral partial equilibrium model of the U.S. energy sector that has been 

developed over several years by the EIA, primarily for the purpose of preparing the Annual Energy 

Outlook (AEO). NEMS produces a widely recognized baseline forecast for the U.S. through 2020 

and is available in the public domain. The version of NEMS to be used for appliance standards 

analysis will be called NEMS-BRS, together with some exogenous calculations. a 

Forecasting for the electric utility industry is seriously complicated by the implications of 

industry restructuring, which is only partially reflected in the latest AEO (2000). 

To analyze the effect of standards, NEMS-BRS is first run exactly as it would be to produce 

an AEO forecast, then a second run is conducted with residential energy usage reduced by the 

amount of energy (gas, oil, and electricity) saved due to appliance standards for the appliance being 

analyzed. The energy savings input is obtained from the NES spreadsheet. Outputs available are 

the same as those in the original NEMS model including residential energy prices, generation and 

installed capacity (and in the case of electricity, which primary fuel is used for generation). 

2.11 ENVIRONMENTAL ANALYSIS 

The Department is preparing an Environmental Assessment of the impacts of the proposed 

rule and DOE anticipates completing a Finding of No Significant Impact (FONSI) before publishing 

the fmal rule on Energy Conservation Standards for central air conditioners and heat pumps, 

a For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information 

Administration documentation. A useful summary is National Energy Modeling System: An Overview /998, DOEIEIA0581 (98), February, 1998. DOEIEIA approves use of the name NEMS to describe only an official version of the model 

without any modification to code or data. Because our analysis entails some minor code modifications and the model 

is run under various policy scenarios that are variations on DOEIEIA assumptions, the name NEMS-BRS refers to the 

model as used here (BRS is DOE's Building Research and Standards office, under whose aegis this work has been 

performed. 

2-18 
EE-RM/STD-98-440 ~ OA

pursuant to the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.), the

regulations of the Council on Environmental Quality (40 CFR Parts 1500-1508), and the

Department's regulations for compliance with NEPA (10 CFR Part 1021).

The main environmental concern addressed is emissions from fossil fuel-fired electricity

generation. Power plant emissions include oxides of nitrogen (NOx) and sulfur (SO2), as well as

carbon dioxide (CO2). The first two are major causes of acid precipitation, which can affect humans

by reducing the productivity of farms, forests and fisheries, decreasing recreational opportunities and

degrading susceptible buildings and monuments. NOx is also a precursor gas to urban smog and is

particularly detrimental to air quality during hot, still weather. CO2 emissions are believed to

contribute to raising the global temperature via the "greenhouse effect." The long-term

consequences of higher temperatures may include perturbed air and ocean currents, perturbed

precipitation patterns, changes in the gaseous equilibrium between the atmosphere and the biosphere,

and the melting of some of the ice now covering polar lands and oceans, causing a rise in sea level.

The Department uses EIA's widely recognized NEMS for the appliance environmental

analyses. The version of NEMS to be used for appliance standards analysis will be called NEMSBRS, and will be based on the AEO99 version with minor modifications. NEMS-BRS is run

exactly the same as the original NEMS except that residential energy usage is reduced by the amount

of energy (gas, oil, and electricity) saved due to appliance standards for the appliance being analyzed.

The input of energy savings are obtained from the NES spreadsheet. For the environmental analysis,

the output is the forecasted physical emissions. The net benefits of a standard will be the difference

/ Sebetween emissions estimated by the AE02000 version of NEMS-BRS and those it estimates with

a standard in place.

2.12 REGULATORY IMPACT ANALYSIS

DOE has prepared a draft regulatory analysis pursuant to E.O. 12866, "Regulatory Planning

and Review," which will be subject to review under the Executive Order by the Office of

Information and Regulatory Affairs (OIRA)58 FR 51735 (October 4, 1993). Eleven major

alternatives were identified by DOE as representing feasible policy options to achieve consumer

product energy efficiency. Each alternative has been evaluated in terms of ability to achieve

significant energy savings at a reasonable cost and will be compared to the effectiveness of the rule.

Under the Process Rule policies, the Department is committed to continually explore nonregulatory alternatives to standards. Table 2.1 discusses the alternatives analyzed for this

rulemaking.

f~~~~~~~~~( 2~2-19

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 -:W 2. O~ 

pursuant to the National Environmental Policy Act of 1969 (NEPA) (42 U.S.c. 4321 et seq.), the 

regulations of the Council on Environmental Quality (40 CFR Parts 1500-1508), and the 

Department's regulations for compliance with NEPA (10 CFR Part 1021). 

The main environmental concern addressed is emissions from fossil fuel-fired electricity 

generation. Power plant emissions include oxides of nitrogen (NOx) and sulfur (S02)' as well as 

carbon dioxide (C02). The first two are major causes of acid precipitation, which can affect humans 

by reducing the productivity of farms, forests and fisheries, decreasing recreational opportunities and 

degrading susceptible buildings and monuments. NOx is also a precursor gas to urban smog and is 

particularly detrimental to air quality during hot, still weather. CO2 emissions are believed to 

contribute to raising the global temperature via the "greenhouse effect." The long-term 

consequences of higher temperatures may include perturbed air and ocean currents, perturbed 

precipitation patterns, changes in the gaseous equilibrium between the atmosphere and the biosphere, 

and the melting of some of the ice now covering polar lands and oceans, causing a rise in sea level. 

The Department uses EIA' s widely recognized NEMS for the appliance environmental 

analyses. The version ofNEMS to be used for appliance standards analysis will be called NEMSBRS, and will be based on the AE099 version with minor modifications. NEMS-BRS is run 

exactly the same as the original NEMS except that residential energy usage is reduced by the amount 

of energy (gas, oil, and electricity) saved due to appliance standards for the appliance being analyzed. 

The input of energy savings are obtained from the NES spreadsheet. For the environmental analysis, 

the output is the forecasted physical emissions. The net benefits ofa standard will be the difference 

between emissions estimated by the AE02000 version ofNEMS-BRS and those it estimates with 

a standard in place. . 

2.12 REGULATORY IMPACT ANALYSIS 

DOE has prepared a draft regulatory analysis pursuant to E.O. 12866, "Regulatory Planning 

and Review," which will be subject to review under the Executive Order by the Office of 

Information and Regulatory Affairs (OIRA)58 FR 51735 (October 4, 1993). Eleven major 

alternatives were identified by DOE as representing feasible policy options to achieve consumer 

product energy efficiency. Each alternative has been evaluated in terms of ability to achieve 

significant energy savings at a reasonable cost and will be compared to the effectiveness of the rule. 

Under the Process Rule policies, the Department is committed to continually explore nonregulatory alternatives to standards. Table 2.1 discusses the alternatives analyzed for this 

rulemaking. 

2-19 
EE-RM/STD-98-440 2.

Table 2.1 Non-Regulatory Alternatives to Standards

Alternatives Examined

-No new regulatory action

-Consumer product labeling

-Public Education

-Prescriptive Standards

-Consumer tax credits

-Manufacturer tax credits

-Consumer Rebates

-Low Income Subsidy

-Voluntary energy efficiency targets

-Mass Government purchases

-Early Replacement

2-20

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 "* 2, 0 ~ 

Table 2.1 Non-Regulatory Alternatives to Standards 

Alternatives Examined 

-No new regulatory action 

-Consumer product labeling 

-Public Education 

-Prescriptive Standards 

-Consumer tax credits 

-Manufacturer tax credits 

-Consumer Rebates 

-Low Income Subsidy 

-Voluntary energy efficiency targets 

-Mass Government purchases 

-Early Replacement 

2-20 
EE-RM/STD-98-440 t 2C)

CHAPTER 3: SCREENING OF DESIGN OPTIONS

The Process Rule requires that the Department screen design options before beginning the

Engineering Analysis. To be considered as the basis for the rulemaking, design options must satisfy four

screening criteria:

* Must be technically feasible

* Must be practical to mass manufacture, install, and service

* Must not substantially reduce consumer utility

* Must not raise significant safety concerns

We assume that design options available in products currently offered to the mass market meet

those screening criteria. The most widespread of these efficiency-related enhancements are:

* Increased coil face area and depth

* Multiple speed fan motor or blower motor

* Variable (or multiple) speed or capacity compressor or dual compressor

* Thermostatic or electronic expansion valve

* Improved air flow and fan design

* Increased efficiency compressor (scroll, advanced reciprocating)

Several recent and ongoing developments may soon change the cost impact of some of these

enhancements and make them more attractive to manufacturers. Eachofthese emerging technologies also

meets the screening criteria:

* Advanced variable speed motor control (e.g. DC controllers and AC inverters)

* Advanced modulating compressors (e.g. Bristol TS', Copeland Modulated Scroll®)

* Microchannel heat exchangers

We considered the impacts of these emerging technologies separately from our ARI validation

effort.

Finally, the industry currently faces a federally mandated phase out of refrigerant HCFC-22 by

2010. Although researchers continue to investigate several alternative refrigerants, only two seem likely to

achieve significant penetration: 41 OA and 407C. For new products, 41OA is favored. Its higher operating

pressure and thermodynamic properties enable some reductions in component size that partially offset

higher lubricant and refrigerant costs. 407C operates at similar pressures as HCFC-22 but at a lower

efficiency. Both refrigerants pass the screening criteria Again, we did not consider either ofthese within

our ARI validation effort since ARI considered equipment limited to HCFC-22.

3-1

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * 2 0 ,{( 

CHAPTER 3: SCREENING OF DESIGN OPTIONS 

The Process Rule requires that the Department screen design options before begirming the 

Engineering Analysis. To be considered as the basis for the rulemaking, design options must satisfy four 

screening criteria: 

• Must be technically feasible 

• Must be practical to mass manufactt.D"e, install, and service 

• Must not substantially reduce consumer utility 

• Must not raise significant safety concerns 

We assume that design options available in products currently offered to the mass market meet 

those screening criteria The most widespread of these efficiency-related enhancements are: 

• Increased coil face area and depth 

• Multiple speed fan motor or blower motor 

• Variable (or multiple) speed or capacity compressor or dual compressor 

• Thermostatic or electronic expansion valve 

• bnproved air flow and fan design 

• Increased efficiency compressor (scroll, advanced reciprocating) 

Several recent and ongoing developments may soon change the cost impact of some of these 

enhancements and make them more attractive to manufacturers. Each of these emerging technologies also 

meets the screening criteria: 

• Advanced variable speed motor control (e.g. DC controllers and AC inverters) 

• Advanced modulating compressors (e.g. Bristol TS~, Copeland Modulated Scroll®) 

• Microchannel heat exchangers 

We considered the impacts of these emerging technologies separately from our ARI validation 

effort. 

Finally, the industry currently faces a federally mandated phase out of refrigerant HCFC-22 by 

2010. Although researchers continue to investigate several alternative refrigerants, only two seem likely to 

achieve significant penetration: 41 OA and 407C. For new products, 41 OA is favored. Its higher operating 

pressure and thennodynamic properties enable some reductions in component size that partially offset 

higher lubricant and refrigerant costs. 407C operates at similar pressures as HCFC-22 but at a lower 

efficiency. Both refrigerants pass the screening criteria Again, we did not consider either of these within 

our ARI validation effort since ARt considered equipment limited to HCFC-22. 

3-1 
EE-RMSTD-98-440 ct

(i CHAPTER 4: ENGINEERING ANALYSIS

The Engineering Analysis develops the relationship between the efficiency and cost of a

central air conditioner or heat pump. This relationship serves as the basis for the subsequent costbenefit calculations in terms of individual consumers, manufacturers, and the nation. Determining

the cost-efficiency relationship involves analysis of the options available to manufacturers for

increasing the efficiency of the baseline product (i.e, one that just meets the minimum efficiency

standard.)

Residential central air conditioners are somewhat unique among the products regulated by

the Department in that manufacturers: 1) structure their product lines around efficiency levels, 2) sell

significant volumes of higher efficiency equipment, and 3) offer, or have studied, most of the design

options available for increasing product efficiency. These characteristics make it possible to largely

determine the cost-efficiency relationship for central air conditioners and heat pumps by examining

actual products in the marketplace instead of estimating the cost and performance of design options

using theoretical models.

The Department has chosen to take an efficiency level approach to this rulemaking. That is,

analysis is performed in terms of product efficiency levels rather than design options. This method

recognizes that manufacturers may use different paths to meet an efficiency requirement and

estimates the cost of achieving the efficiency level without specifying precisely which path is taken.

Therefore, the Engineering Analysis estimated equipment production costs at each potential

/ efficiency level.

In addition to their effect on equipment production costs, higher efficiency standards can

affect consumers by changing: 1) equipment prices, 2) installation costs, 3) maintenance costs, 4)

repair costs, 5) product life, and 6) energy costs. The Engineering Analysis characterizes all of these

potential effects.

The analysis of equipment production costs proceeded in two distinct phases-the validation

analysis phase and the emerging technology analysis phase-as shown in Figure 4.1. The validation

analysis phase (Section 4.2) included the tasks needed to determine the reasonableness of the cost

data that the Air Conditioning and Refrigeration Institute (ARI) submitted to the Department. The

emerging technology analysis phase then estimated the potential reduction in production costs due

to the utilization of technologies that are currently under development but which have not been

widely deployed.

For the validation analysis, the Department estimated the costs of producing equipment

utilizing today's established technologies under new efficiency standards. Thus, each efficiency level

analyzed assumed that new minimum efficiency standard was set at that level. The Department

believes that current production costs for a higher efficiency product, say a 12 SEER air conditioner,

would decrease if the minimum efficiency were raised to that level. Manufacturers of such products

4-1

EE-RM-STD-98-440 COMMENT 208

EE-RMJSTD-88-440 * 1 D '6 

CHAPTER 4: ENGINEERING ANALYSIS 

The Engineering Analysis develops the relationship between the efficiency and cost of a 

central air conditioner or heat pump. This relationship serves as the basis for the subsequent costbenefit calculations in tenns of individual consumers, manufacturers, and the nation. Determining 

the cost-efficiency relationship involves analysis of the options available to manufacturers for 

increasing the efficiency of the baseline product (i.e, one that just meets the minimum efficiency 

standard.) 

Residential central air conditioners are somewhat unique among the products regulated by 

the Department in that manufacturers: 1) structure their product lines around efficiency levels, 2) sell 

significant volumes of higher efficiency equipment, and 3) offer, or have studied, most of the design 

options available for increasing product efficiency. These characteristics make it possible to largely 

detennine the cost-efficiency relationship for central air conditioners and heat pumps by examining 

actual products in the marketplace instead of estimating the cost and perfonnance of design options 

using theoretical models. 

The Department has chosen to take an efficiency level approach to this rulemaking. That is, 

analysis is perfonned in tenns of product efficiency levels rather than design options. This method 

recognizes that manufacturers may use different paths to meet an efficiency requirement and 

estimates the cost of achieving the efficiency level without specifying precisely which path is taken. 

Therefore, the Engineering Analysis estimated equipment production costs at each potential 

efficiency level. 

In addition to their effect on equipment production costs, higher efficiency standards can 

affect consumers by changing: I) equipment prices, 2) installation costs, 3) maintenance costs, 4) 

repair costs, 5) product life, and 6) energy costs. The Engineering Analysis characterizes all of these 

potential effects. 

The analysis of equipment production costs proceeded in two distinct phases-the validation 

analysis phase and the emerging technology analysis phase-as shown in Figure 4.1. The validation 

analysis phase (Section 4.2) inc:luded the tasks needed to detennine the reasonableness of the cost 

data that the Air Conditioning and Refrigeration Institute (ARI) submitted to the Department. The 

emerging technology analysis phase then estimated the potential reduction in production costs due 

to the utilization of technologies that are currently under development but which have not been 

widely deployed. 

For the validation analysis, the Department estimated the costs of producing equipment 

utilizing today's established technologies under new efficiency standards. Thus, each efficiency level 

analyzed assumed that new minimum efficiency standard was set at that level. The Department 

believes that current production costs for a higher efficiency product, say a 12 SEER air conditioner, 

would decrease if the minimum efficiency were raised to that level. Manufacturers of such products 

4-1 
EE-RM/STD-98-440 " ' 0

would have a greater incentive to cost-optimize their production at that level because of more intense

competition and higher production volumes. ARI's guidelines to their members were to incorporate

the same assumption regarding production at a new efficiency standard. However, some

manufacturers might argue that costs of high-efficiency products may actually increase under new

standards due to capital, engineering, and marketing costs incurred in converting to the new standard.

Today's products Today's products Tomorrow's

under new products under

standards new standards

Established | Established I New

technologies | j technologies I | technologies

Established Am New efficiency h, New efficiency

efficiency standards I standards

standards

Validation Emerging analysis technology analysis

Figure 4.1 Phases of the Engineering Analysis

For the emerging technology analysis, the Department assessed the potential impacts of

technologies that are currently under development on the production costs under new efficiency

standards (Section 4.5). These include new technologies that have never been widely deployed and

existing technologies that can benefit from further technological advance and economies of scale.

The Department expects that these emerging technologies have the potential to lower the cost of

improved efficiency.

In addition to quantifying manufacturing costs and the potential benefits of emerging

technologies, this chapter includes the following subject areas:

* Markups (Section 4.3) * Relationship between HSPF and SEER

* Max Tech (Section 4.4) (Section 4.8.1)

* Product Classifications (Section 4.6) * Repair versus Replace (Section 4.8.2)

* Alternative Refrigerants (Section 4.7) * Establishing an EER-based Standard

(Section 4.9)

4-2

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 At A. O~ 

would have a greater incentive to cost-optimize their production at that level because of more intense 

competition and higher production volumes. ARl's guidelines to their members were to incorporate 

the same assumption regarding production at a new efficiency standard. However, some 

manufacturers might argue that costs of high-efficiency products may actually increase under new 

standards due to capital, engineering, and marketing costs incurred in converting to the new standard. 

Taday's products Today's products 

under new 

standards 

i 

Established, i Established I 

technologies I, i technologies i .. t:[""i., ... J t'" ,........ i 

Established I ~:;:. ';- ! New efficiency 1'1'-' ! 

efficiency I i

l 

standards II 

standards 

~--------~ ~I ________ ~I 

Tomorrows 

products under 

new standards 

New 

technologies i 

New efficiency i 

standards i 

! 

Validation 

analysis 

Emerging 

technology 

analysis 

Figure 4.1 Phases of the Engineering Analysis 

For the emerging technology analysis, the Department assessed the potential impacts of 

technologies that are currently under development on the production costs under new efficiency 

standards (Section 4.5). These include new technologies that have never been widely deployed and 

existing technologies that can benefit from further technological advance and economies of scale. 

The Department expects that these emerging technologies have the potential to lower the cost of 

improved efficiency. 

In addition to quantifying manufacturing costs and the potential benefits of emerging 

technologies, this chapter includes the following subject areas: 

• Markups (Section 4.3) 

• Max Tech (Section 4.4) 

• Product Classifications (Section 4.6) 

• Alternative Refrigerants (Section 4.7) 

• Relationship between HSPF and SEER 

(Section 4.8.1) 

• Repair versus Replace (Section 4.8.2) 

• Establishing an EER-based Standard 

(Section 4.9) 

4-2 
EE-RM/STD-98-440 o A .

4.1 DESCRIPTION OF "BASELINE" UNIT

As mentioned in Chapter 2, NAECA defines four central air conditioning product classes:

1) split central air conditioning systems (cooling-only), 2) split central air conditioning heat pump

systems, 3) single packaged central air conditioning systems (cooling-only), and 4) single packaged

central air conditioning heat pump systems. Cooling efficiency is expressed as a Seasonal Energy

Efficiency Rating (SEER) and heating efficiency is expressed as a Heating Seasonal Performance

Factor (HSPF). NAECA requires products to achieve the minimum efficiencies listed in Table 4.1.

Table 4.1 NAECA Minimum Efficiencies for Single

Phase Unitary Products 18,000 BTU/hr - 65,000 BTU/hr

Split Packaged

Cooling-only 10.0 SEER 9.7 SEER

Heat pump 10.0 SEER 9.7 SEER

6.8 HSPF 6.6 HSPF

More than 75 percent of equipment sold is rated at the minimum allowable efficiency.' "

Products rated at the minimum efficiency level are termed baseline. They compete primarily on price

and share similar physical characteristics. Although the efficiency level approach describes only the

cost of the product at the minimum efficiency level (and higher efficiency levels) without reference

to the underlying design or designs, the sample of baseline models selected for this analysis

displayed the following similar characteristics:

* rifled copper tubes

* lanced aluminum fins

* single speed, single capacity compressor

* expansion orifice

* single speed permanent split capacitor (PSC) fan and blower motors

Equipment at higher efficiency levels may contain enhancements in one or more of these

areas or may contain additional efficiency-related features such as variable speed control and time

delay relays. Appendix B provides a more complete description of design choices displayed in our

equipment samples.

a Numbered references refer to notes at end of the chapter

4-3

c

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 .k" ·2 o~ 

4.1 DESCRIPTION OF "BASELINE" UNIT 

As mentioned in Chapter 2, NAECA defmes four central air conditioning product classes: 

1) split central air conditioning systems (cooling-only), 2) split central air conditioning heat pump 

systems, 3) single packaged central air conditioning systems (cooling-only), and 4) single packaged 

central air conditioning heat pump systems. Cooling efficiency is expressed as a Seasonal Energy 

Efficiency Rating (SEER) and heating efficiency is expressed as a Heating Seasonal Performance 

Factor (HSPF). NAECA requires products to achieve the minimum efficiencies listed in Table 4.1. 

Table 4.1 NAECA Minimum Efficiencies for Single 

Phase Unitary Products 18,000 BTUlhr - 65,000 BTUlhr 

Split Packaged 

Cooling-only 10.0 SEER 9.7 SEER 

Heat pump 10.0 SEER 9.7 SEER 

6.8 HSPF 6.6 HSPF 

More than 75 percent of equipment sold is rated at the minimum allowable efficiency.l a 

Products rated at the minimum efficiency level are termed baseline. They compete primarily on price 

and share similar physical characteristics. Although the efficiency level approach describes only the 

cost of the product at the minimum efficiency level (and higher efficiency levels) without reference 

to the underlying design or designs. the sample of baseline models selected for this analysis 

displayed the following similar characteristics: 

• rifled copper tubes 

• lanced aluminum fms 

• single speed, single capacity compressor. 

• expansion orifice 

• single speed permanent split capacitor (PSC) fan and blower motors 

Equipment at higher efficiency levels may contain enhancements in one or more of these 

areas or may contain additional efficiency-related features such as variable speed control and time 

delay relays. Appendix B provides a more complete description of design choices displayed in our 

equipment samples. 

a Numbered references refer to notes at end of the chapter 

4-3 
EE-RM/STD-98-440 'a OY

4.2 MANUFACTURING COSTS

Manufacturers routinely use reverse engineering to discover their competitors' designs, to

evaluate the cost of adopting those designs themselves, and to attempt to avoid infringing on their

competitor's patents. In the context of this Engineering Analysis, the term "reverse engineering"

solely describes the estimation of production costs by examining actual equipment or designs. The

ample examples of residential unitary equipment in the market provide the opportunity to use reverse

engineering methods as the basis for estimating production costs. In this analysis, the production

costs of 71 equipment models at eight efficiency levels were estimated, assuming each became

baseline equipment under new efficiency standards. These production costs were normalized to the

cost of their respective baseline costs, yielding relative costs analogous to ARI's relative costs. The

cost multipliers were then compared to the ARI relative costs to help to identify any discrepancies

and improve the underlying reverse engineering assumptions.

The production cost estimation process consisted of four tasks:

1. Selecting representative equipment

2. Describing equipment attributes

3. Modeling production processes

4. Determining the cost of materials, components, and assembly operations

Assumptions and data were based upon six sources of information:

* Interviews with manufacturers and suppliers

* Disassembly and analysis of equipment (tear down)

* Manufacturer data submittals

* ARI Product Attribute Database (proprietary)

* Published industry data

* Product literature

Table 4.2 illustrates the relationship between the information sources and the reverse engineering

tasks.

4.2.1 Visits to Manufacturers and Component Suppliers

Between September and November 1998, DOE and ADL employees visited the facilities of

16 manufacturers and component suppliers and participated in presentations, interviews, and tours.

Topics of discussion included product design, manufacturing methods, market dynamics, alternative

refrigerants, product classifications, special issues related to heat pumps, and concerns related to new

standards. Several visits also included tours of manufacturing facilities.

4-4

r'

EE-RM-STD-98-440 COMMENT 208

EE .. RM/STD-98-440 if') O"{ 

4.2 MANUFACTURING COSTS 

Manufacturers routinely use reverse engineering to discover their competitors' designs, to 

evaluate the cost of adopting those designs themselves, and to attempt to avoid infringing on their 

competitor's patents. In the context of this Engineering Analysis, the term "reverse engineering" 

solely describes the estimation of production costs by examining actual equipment or designs. The 

ample examples of residential unitary equipment in the market provide the opportuni ty to use reverse 

engineering methods as the basis for estimating production costs. In this analysis, the production 

costs of 71 equipment models at eight efficiency levels were estimated, assuming each became 

baseline equipment under new efficiency standards. These production costs were normalized to the 

cost of their respective baseline costs, yielding relative costs analogous to ARI's relative costs. The 

cost multipliers were then compared to the ARI relative costs to help to identify any discrepancies 

and improve the underlying reverse engineering assumptions. 

The production cost estimation process consisted of four tasks: 

1. Selecting representative equipment 

2. Describing equipment attributes 

3. Modeling production processes 

4. Determining the cost of materials, components, and assembly operations 

Assumptions and data were based upon six sources of information: 

• Interviews with manufacturers and suppliers 

• Disassembly and analysis of equipment (tear down) 

• Manufacturer data submittals 

• ARI Product Attribute Database (proprietary) 

• Published industry data 

• Product literature 

Table 4.2 illustrates the relationship between the information sources and the reverse engineering 

tasks. 

4.2.1 Visits to Manufacturers and Component Suppliers 

Between September and November 1998, DOE and ADL employees visited the facilities of 

16 manufacturers and component suppliers and participated in presentations, interviews, and tours. 

Topics of discussion included product design, manufacturing methods, market dynamics, alternative 

refrigerants, product classifications, special issues related to heat pumps, and concerns related to new 

standards. Several visits also included tours of manufacturing facilities. 
EE.RM/STD-98-440 ~ '2

Table 4.2 Sources of Design Information

Uses of Information

Equipment Description Process Component

selection of product modeling pricing

attributes

Manufacturer/supplier /

visits/interviews

§ Manufacturer data /

e submissions

e Tear downs 4 l 

a ARI Attribute Data / V

0

Product Literature 4 / 4

The visits served many purposes including gathering information concerning the Engineering

Analysis, introducing company executives to the rulemaking process, and understanding the impact

of a new standard on manufacturers. Ten of these meetings were conducted under an agreement of

confidentiality, and the DOE employees did not retain written materials from any of the meetings.

Meeting notes reside at ADL and are covered by separate non-disclosure agreements.

4.2.2 Selecting Representative Equipment

To select equipment samples for the reverse engineering analysis, we requested that

manufacturers identify equipment in their product lines that would most nearly represent baseline

equipment at each efficiency level through 17 SEER. For example, they named their current

12 SEER model that they would expect would be similar to the 12 SEER model under a 12 SEER

standard. Manufacturers were also asked to describe the efficiency-related attributes of the products

they selected. Four major manufacturers submitted design data for split cooling-only equipment, and

three of those submitted design data for the other classes as well. This submission process yielded

information on 62 models. We selected an additional nine models from catalogs of those and other

4-5

C

EE-RM-STD-98-440 COMMENT 208

EE_RM/STD-98-440 "* '20~ 

Table 4.2 Sources of Desigo Ioformation 

Uses of Information 

Equipment Description Process Component 

selection of product modeling pricing 

attributes 

Manufacturer/supplier ./ ./ ./ 

visits/interviews 

c 

0 Manufacturer data ./ ; 

submissions " 

~ 0 

- Tear downs ./ ./ oS 

'0 

" CD 

u ARI Attribute Data ./ ./ ... 

::I 

0 

(/) 

Product Literature ./ ./ ./ 

The visits served many purposes including gathering information concerning the Engineering 

Analysis, introducing company executives to the rulemaking process, and understanding the impact 

ofa new standard on manufacturers. Ten of these meetings were conducted under an agreement of 

confidentiality, and the DOE employees did not retain written materials from any of the meetings. 

Meeting notes reside at ADL and are covered by separate non-disclosure agreements. 

4.2.2 Selecting Representative Equipment 

To select equipment samples for the reverse engineering analysis, we requested that 

manufacturers identify equipment in their product lines that would most nearly represent baseline 

equipment at each efficiency level through 17 SEER. For example, they named their current 

12 SEER model that they would expect would be similar to the 12 SEER model under a 12 SEER 

standard. Manufacturers were also asked to describe the efficiency-related attributes of the products 

they selected. Four major manufacturers submitted design data for split cooling-only equipment, and 

three of those submitted design data for the other classes as well. This submission process yielded 

information on 62 models. We selected an additional nine models from catalogs of those and other 

4-5 
EE-RM/STD-98-440 ' 20

(SB~ 'manufacturers.b We also used the ARI Product Attribute Database (provided to our contractor under

a non-disclosure agreement) and technical literature to describe the efficiency-related attributes in

those products. Finally, from the group of manufacturer submittals, three units were purchased for

extensive disassembly and inspection. Table 4.3 shows the breakdown of models examined.

Table 4.3 Breakdown of Equipment Subjected to

Cost Estimation Analysis

Models Tear

Examined Downs

Split Air Conditioner 32 1

Split Heat Pump 19 1

Packaged Air 9 0

Conditioner

Packaged Heat Pump 11 1

Total 71 3

4.2.3 Disassembly and Inspection of Sample Equipment

One of the most effective methods for determining the production cost of a piece of

equipment is to disassemble a sample and analyze it thoroughly. This process of disassembly and

inspection is commonly called a tear down. Tear down identifies components, materials, and

fabrication and assembly operations, and is the most accurate and precise method of estimating

production cost short of obtaining the information directly from the manufacturers.

The three 3-ton models torn down were: 1) a 10 SEER split cooling-only condenser and

evaporator combination, 2) a 10 SEER packaged heat pump, and 3) a 12 SEER split heat pump

condenser. The 10 SEER tear downs were meticulous and provided comprehensive knowledge about

those products. After disassembly, each part was identified, weighed, and described in detail. The

12 SEER tear down was less thorough since it was intended only to confirm the results of the cost

estimates for the 12 SEER level.

b Catalog data were collected on two more models, but we eliminated the models from consideration when it

was determined that their costs fell outside of the range of the costs bounded by manufacturer submissions. This ensured

that the sample included only models with cost considered "representative" by manufacturers.

4-6

(

EE-RM-STD-98-440 COMMENT 208

~ '20 'l 

EE_RM/STD-98-440 1\ {J 

manufacturers. b We also used the AR1 Product Attribute Database (provided to our contractor under 

a non-disclosure agreement) and technical literature to describe the efficiency-related attributes in 

those products. Finally, from the group of manufacturer submittals, three units were purchased for 

extensive disassembly and inspection. Table 4.3 shows the breakdown of models examined. 

Table 4.3 Breakdown of Equipment Subjected to 

Cost Estimation Analysis 

Models 

Examined 

Split Air Conditioner 32 

Split Heat Pump 19 

Packaged Air 

Conditioner 

9 

Packaged Heat Pump 11 

Total 71 

§ 

4.2.3 Disassembly and Inspection of Sample Equipment 

Tear 

Downs 

o 

3 

One of the most effective methods for determining the production cost of a piece of 

equipment is to disassemble a sample and analyze it thoroughly. This process of disassembly and 

inspection is commonly called a tear down. Tear down identifies components, materials, and 

fabrication and assembly operations, and is the most accurate and precise method of estimating 

production cost short of obtaining the information directly from the manufacturers. 

The three 3-ton models tom down were: I) a 10 SEER split cooling-only condenser and 

evaporator combination, 2) a 10 SEER packaged heat pump, and 3) a 12 SEER split heat pump 

condenser. The 10 SEER tear downs were meticulous and provided comprehensive knowledge about 

those products. After disassembly, each part was identified, weighed, and described in detail. The 

12 SEER tear down was less thorough since it was intended only to confirm the results of the cost 

estimates for the 12 SEER level. 

b Catalog data were collected on two more models, but we eliminated the models from consideration when it 

was detennined that their costs fell outside of the range of the costs bounded by manufacturer submissions. This ensured 

that the sample included only models with cost considered "representative" by manufacturers. 

4-6 
EE-RM/STD-98-440 t9 ,20

(7g ~ 4.2.4 Modeling the Production Facility

From each detailed tear down, a structured bill-of-materials (BOM) was created. This

structured BOM describes each part and its relationship to the other parts by the order of assembly.

Each fabrication and assembly operation is described in detail, including the type of equipment used

and the cycle time. The result is a thorough and explicit model of the production process. Visits to

equipment plants and detailed discussions with a major supplier of plant equipment contributed to

the assumptions regarding the production facility.

Two prototypical production facilities were created-a split system plant and a packaged

system plant. Table 4.4 lists the specifications for each plant. Notice that the plants are greenfield

facilities. "Greenfield" means that the facility is built new from the ground-up for the sole purpose

of producing the equipment under analysis. This simplification suppresses differences among

manufacturers and focuses on generic differences in plant and process that are related to efficiency.

The results may, therefore, overestimate or underestimate the production costs of a particular

manufacturer, but since they are calibrated to aggregate industry data, they should be accurate for

the industry as a whole. Cost variability introduced by differences in manufacturers is handled

separately as described in Appendix B . The Manufacturer Impact Analysis (Chapter 8) examines

manufacturer variability in greater depth.

Table 4.4 Production Facility Specifications

Designed production capacity 130,000 Production days per year 240

(split A/C) (units per year)

Actual production volume 125,000 Fabrication shifts per day 2

(split A/C and HP)

(units per yr)

Designed production capacity 30,000 Hours per shift 8

(pkg A/C and HP)

(units per yr)

Actual production volume 25,000 Press lot size per day 1

(split HP, pkg A/C and HP)

(units per yr)

Assembly line Dedicated Worker downtime 20%

Coil fabrication lines Non- Equipment downtime 10%

dedicated

4-7

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *' 2.,0 0 

4.2.4 Modeling the Production Facility 

From each detailed tear down, a structured bill-of-materials (BOM) was created. This 

structured BOM describes each part and its relationship to the other parts by the order of assembly. 

Each fabrication and assembly operation is described in detail, including the type of equipment used 

and the cycle time. The result is a thorough and explicit model of the production process. Visits to 

equipment plants and detailed discussions with a major supplier of plant equipment contributed to 

the assumptions regarding the production facility. 

Two prototypical production facilities were created-a split system plant and a packaged 

system plant. Table 4.4 lists the specifications for each plant. Notice that the plants are greenfield 

facilities. "Greenfield" means that the facility is built new from the ground-up for the sole purpose 

of producing the equipment under analysis. This simplification suppresses differences among 

manufacturers and focuses on generic differences in plant and process that are related to efficiency. 

The results may, therefore, overestimate or underestimate the production costs of a particular 

manufacturer, but since they are calibrated to aggregate industry data, they should be accurate for 

the industry as a whole. Cost variability introduced by differences in manufacturers is handled 

separately as described in Appendix B . The Manufacturer Impact Analysis (Chapter 8) examines 

manufacturer variability in greater depth. 

Table 4.4 Production Facility Specifications 

• ! 

Designed production capacity 130,000 Production days per year 240 

(split AlC) (units per year) 

Actual production volume 125,000 Fabrication shifts per day 2 

(split AlC and HP) 

(units per yr) 

Designed production capacity 30,000 Hours per shift 8 

(Pkg AlC and HP) 

(units per yr) 

Actual production volume 25,000 Press lot size per day 

(split HP, pkg AlC and HP) 

(units per yr) 

Assembly line Dedicated Worker downtime 20% 

Coil fabrication lines Non- Equipment downtime 10% 

dedicated 

• 

4-7 
EE-RM/STD-98-440 ' _2_

(CY\ 4.2.5 Compensating for the Commoditization Effect of Efficiency Standards on Baseline

Equipment

Manufacturers must offer low-priced baseline products to attract price-sensitive home

builders, dealers, and homeowners. Since price-sensitive purchasers are not willing to pay a great

deal for added features, most baseline products possess only those attributes needed to meet

minimum expectations of reliability and comfort. This emphasis on low price puts pressure on

manufacturers to reduce production costs on baseline products. The pressure to reduce the production

costs of higher efficiency products is not as great because those purchasers are less sensitive to price.

Since baseline products make up the majority of their production volume, manufacturers

must consider this difference in cost reduction pressure between baseline and non-baseline products

when seeking to optimize their production processes. Consequently, optimal production typically

results in more cost-efficient production of baseline equipment and less cost-efficient production of

non-baseline equipment.

As the efficiency standard rises, models that once exceeded the minimum efficiency level

become the new baseline models. The Department assumes that commoditization of those products

occurs as the market drives out premium products with added features in favor of lower price

models. The elimination of features and the pricing pressures that result from more intense

competition lower the cost of the product. The cost estimates in the reverse engineering analysis are

based on these commoditized versions of today's higher efficiency equipment.

Two assumptions simulate the commoditization effect:

Only those aspects of existing high-efficiency models that are essential for

satisfactory operation and performance ratings were considered.

Each model was assumed to be constructed and configured in the same way as the

baseline equipment evaluated in the tear downs.

In effect, new baseline equipment were created at each efficiency level by substituting into

today's 10 SEER baseline those efficiency-related attributes from today's higher efficiency

equipment. Those efficiency-related attributes are listed in Table 4.5 along with the non-efficiency

attributes that were not considered. The efficiency-related attributes that remained are significant.

The analysis concluded that more than 95 percent of the cost of the baseline system was efficiencyrelated.

4-8

(:

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~2o~ 

4.2.5 Compensating for the Commoditization Effect of Efficiency Standards on Baseline 

Equipment 

Manufacturers must offer low-priced baseline products to attract price-sensitive home 

builders, dealers, and homeowners. Since price-sensitive purchasers are not willing to pay a great 

deal for added featUres, most baseline products possess only those attributes needed to meet 

minimum expectations of reliability and comfort. This emphasis on low price puts pressure on 

manufacturers to reduce production costs on baseline products. The pressure to reduce the production 

costs ofhigher efficiency products is not as great because those purchasers are less sensitive to price. 

Since baseline products make up the majority of their production volume, manufacturers 

must consider this difference in cost reduction pressure between baseline and non-baseline products 

when seeking to optimize their production processes. Consequently, optimal production typically 

results in more cost-efficient production of baseline equipment and less cost-efficient production of 

non-baseline equipment. 

As the efficiency standard rises, models that once exceeded the minimum efficiency level 

become the new baseline models. The Department assumes that commoditization of those products 

occurs as the market drives out premium products with added features in favor of lower price 

models. The elimination of features and the pricing pressures that result from more intense 

competition lower the cost of the product. The cost estimates in the reverse engineering analysis are 

based on these commoditized versions of today' s higher efficiency equipment. 

Two assumptions simulate the commoditization effect: 

• Only those aspects of existing high-efficiency models that are essential for 

satisfactory operation and performance ratings were considered. 

• Each model was assumed to be constructed and configured in the same way as the 

baseline equipment evaluated in the tear downs. 

In effect, new baseline equipment were created at each efficiency level by substituting into 

today's 10 SEER baseline those efficiency-related attributes from today's higher efficiency 

equipment. Those efficiency-related attributes are listed in Table 4.5 along with the non-efficiency 

attributes that were not considered. The efficiency-related attributes that remained are significant. 

The analysis concluded that more than 95 percent of the cost of the baseline system was efficiencyrelated. 

4-8 
EE-RM/STD-98-440 T k2

Table 4.5 Examples of Product Attributes Related to Efficiency

Efficiency-related Attributes Non-efficiency Attributes

Coil features and dimensions Noise suppression

Cabinet size Aesthetic enhancement

Fin configuration Serviceability

enhancement

Compressor type

Accumulator

Controls

Motor type

The analysis did not consider the non-efficiency attributes listed for two reasons. First, the

attributes were not observed in the baseline equipment samples, and pricing pressures will continue

to prevent manufacturers from incorporating non-efficiency attributes into baseline equipment under

new standards. Second, only those differences in incremental cost that relate to incremental

efficiency affect the results of the consumer life cycle cost analysis.

Some may argue that one or more of the designated non-efficiency attributes are, in fact, tied

to efficiency. For example, if higher efficiency products are inherently noisier, purchasers could

require manufacturers to incorporate special noise suppression features even on their baseline

equipment. If that were the case, the reverse engineering analysis would underestimate the cost of

higher efficiency baseline equipment.

4.2.6 Estimating Parts, Assembly, and Overhead Costs

Parts were characterized based on whether manufacturers purchase them from outside

suppliers or fabricate them in-house. For purchased parts, the purchase price was estimated. For

fabricated parts, the price of intermediate materials (e.g. tube, sheet metal) and the cost of

transforming them into finished parts was estimated. Whenever possible, ADL obtained price quotes

directly from suppliers in volumes necessary to produce the equipment volumes shown in Table 4.4.

For higher efficiency equipment, this assumption generally resulted in higher component purchase

volumes and may have resulted in lower component prices than manufacturers currently pay.

4-9

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * '2 0 ~ 

Table 4.5 Examples of Product Attributes Related to Efficiency 

6SiWi! 

Efficiency-related Attributes 

Coil features and dimensions 

Cabinet size 

Fin configuration 

Compressor type 

Accumulator 

Controls 

Motor type 

... 

Non-efficiency Attributes 

Noise suppression 

Aesthetic enhancement 

Serviceability 

enhancement 

The analysis did not consider the non-efficiency attributes listed for two reasons. First, the 

attributes were not observed in the baseline equipment samples, and pricing pressures will continue 

to prevent manufacturers from incorporating non-efficiency attributes into baseline equipment under 

new standards. Second, only those differences in incremental cost that relate to incremental 

efficiency affect the results of the consumer life cycle cost analysis. 

Some may argue that one or more ofthe designated non-efficiency attributes are, in fact, tied 

to efficiency. For example, if higher efficiency products are inherently noisier, purchasers could 

require manufacturers to incorporate special noise suppression features even on their baseline 

equipment. If that were the case, the reverse engineering analysis would underestimate the cost of 

higher efficiency baseline equipment. 

4.2.6 Estimating Parts, Assembly, and Overhead Costs 

Parts were characterized based on whether manufacturers purchase them from outside 

suppliers or fabricate them in-house. For purchased parts, the purchase price was estimated. For 

fabricated parts, the price of intermediate materials (e.g. tube, sheet metal) and the cost of 

transforming them into finished parts was estimated. Whenever possible, ADL obtained price quotes 

directly from suppliers in volumes necessary to produce the equipment volumes shown in Table 4.4. . 

For higher efficiency equipment, this assumption generally resulted in higher component purchase 

volumes and may have resulted in lower component prices than manufacturers currently pay. 

4-9 
EE-RM/STD-98-440 ~ 2 0L

(C1i~ t e After incorporating information on prices and manufacturing processes, estimates of labor

rates, factory overhead, and indirect costs were added. For the most part, estimates were derived

from generally available industry data. Table 4.6 lists the assumptions for those cost elements.

Table 4.6 Production Cost Assumptions

Direct labor rate S 13.33 per hr Utility cost 21.6% of depreciation

Fringe 30% of wage Maintenance cost 4% of depreciation

Indirect labor 50% of direct labor Property tax 0.9% of revenues

Equipment 1-20 years based on Property insurance 0.8% of revenues

Depreciation equipment type

Building depreciation 30 years Freight-in 3% of materials cost

Freight-out $1.66 per cubic foot

4.2.7 Generating Production Cost Results

All data were input into eight Microsoft ExcelTM workbooks - two for each product class.

One workbook in each pair is devoted specifically to estimating the cost of producing coils. The

other estimates the cost of fabricating the remaining components and assembling the equipment. The

workbooks contain proprietary and confidential information and are not publically available. More

complete details of this methodology are presented in Appendix C.

The completed spreadsheets generated the production cost for each of the 71 models

evaluated and the results were published in the Supplemental ANOPR and Preliminary TSD.

Commenters generally supported the reverse engineering approach used to estimate the production

costs of split air conditioners, several noted that heat pumps and packaged equipment received less

rigorous treatment. The incremental production cost estimates for those three product classes were

less consistent than were those for split air conditioners.

To address those concerns and shore-up the estimates for split heat pumps and packaged

equipment, we applied "rules-of-thumb" suggested by Mr. Joseph Pietsch in an independent review.

For systems of equivalent capacity and efficiency ratings, the guidelines are:

1. A split air conditioning fancoil system and cased coil system will share the same outdoor

unit.

2. A split air conditioning fancoil system and split heat pump will share the same indoor unit.

3. A packaged air conditioner and packaged heat pump will share the same cabinet.

4. A split air conditioner and packaged air conditioner will share the same functional parts.

4-10

C

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 -* 2. D ~ 

After incorporating information on prices and manufacturing processes, estimates of labor 

rates, factory overhead, and indirect costs were added. For the most part, estimates were derived 

from generally available industry data. Table 4.6 lists the assumptions for those cost elements. 

Direct labor rate 

Fringe 

Indirect labor 

Equipment 

Depreciation 

Building depreciation 

Table 4.6 Production Cost Assumptions * eM 

$13.33 per hr 

30% of wage 

50% of direct labor 

1-20 years based on 

equipment type 

30 years 

Utility cost 

Maintenance cost 

Property tax 

Propeny insurance 

Freight-in 

Freight-out 

'M 

4.2.7 Generating Production Cost Results 

21.6% of depreciation 

4% of depreciation 

0.9% of revenues 

0.8% of revenues 

3% of materials cost 

$1.66 per cubic foot 

All data were input into eight Microsoft ExcelTM workbooks - two for each product class. 

One workbook in each pair is devoted specifically to estimating the cost of producing coils. The 

other estimates the cost of fabricating the remaining components and assembling the equipment. The 

workbooks contain proprietary and confidential information and are not publically available. More 

complete details of this methodology are presented in Appendix C. 

The completed spreadsheets generated the production cost for each of the 71 models 

evaluated and the results were published in the Supplemental ANOPR and Preliminary TSD. 

Cornmenters generally supported the reverse engineering approach used to estimate the production 

costs of split air conditioners, several noted that heat pumps and packaged equipment received less 

rigorous treatment. The incremental production cost estimates for those three product classes were 

less consistent than were those for split air conditioners. 

To address those concerns and shore-up the estimates for split heat pumps and packaged 

equipment, we applied "rules-of-thumb" suggested by Mr. Joseph Pietsch in an independent review. 

For systems of equivalent capacity and efficiency ratings, the guidelines are: 

1. A split air conditioning fancoil system and cased coil system will share the same outdoor 

unit. 

2. A splitair conditioning fancoil system and split heat pump will share the same indoor unit. 

3. A packaged air conditioner and packaged heat pump will share the same cabinet. 

4. A split air conditioner and packaged air conditioner will share the same functional parts. 

4-10 
EE-RM/STD-98-440 - . 0B

5. A split heat pump and packaged heat pump will share the same functional parts..

6. The cost differential between a split air conditioner with fancoil and a split heat pump, and

a packaged air conditioner and a packaged heat pump, should be consistent across efficiency

levels.

These guidelines are valid only for a particular manufacturer's product line and do not hold

across product lines or across manufacturers. Since the reverse engineering equipment sample

contained several manufacturers and product lines, applying these rules has the effect of minimizing

any variability and bias introduced by the sample set. The approach also allows us to estimate the

production costs of equipment at efficiency levels where we did not have any samples originally. We

assessed only through 15 SEER to cover the range of relative cost estimates provided by ARI.

Figure 4.2 illustrates how the split air conditioner (cased coil) is used to derive the production

cost estimates for the other products. At each stage, common costs are translated to the next product,

and any missing costs are filled in using results from the original reverse engineering analysis

described in the Preliminary TSD.

Split Heat

Pump

Split Air Split Air - ____--

I , Packaged I Conditioner Conditioner Packaged

(cased coil) (fancoil)Heat Pu

Packaged C Air!

Conditioner

Figure 4.2 Relationship of Production Cost Estimates in New Reverse Engineering Approach

Table 4.7 provides the cost estimates resulting from this new approach. Results do not

include any potential cost reduction due to emerging technologies, which are also under revision.

Revised results are generally lower than the original results, particularly at the baseline 10 SEER

level. The most significant change is that the new analysis includes nine additional estimates that

were not presented in the Supplemental ANOPR and Preliminary TSD due to lack of data.

4-11

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 1f 2. 0 '6 

5. A split heat pump and packaged heat pump will share the same functional parts .. 

6. The cost differential between a split air conditioner with fancoil and a split heat pump, and 

a packaged air conditioner and a packaged heat pump, should be consistent across efficiency 

levels. 

These guidelines are valid only for a particular manufacturer's product line and do not hold 

across product lines or across manufacturers. Since the reverse engineering equipment sample 

contained several manufacturers and product lines, applying these rules has the effect of minimizing 

any variability and bias introduced by the sample set. The approach also allows us to estimate the 

production costs of equipment at efficiency levels where we did not have any samples originally. We 

assessed only through 15 SEER to cover the range of relative cost estimates provided by ARl. 

Figure 4.2 illustrates how the split air conditioner (cased coil) is used to derive the production 

cost estimates for the other products. At each stage, common costs are translated to the next product, 

and any missing costs are filled in using results from the original reverse engineering analysis 

described in the Preliminary TSD. 

Split Air 

Conditioner 

(cased coil) 

Split Heat 

i 

t Pump 

I Split Air ~ ~~ ----1,..11 Conditioner i ,--I -------' I Packaged I Heat Pump I (faneoiI) ---.::,.... I-~~.! i Packaged Air! ,--I ------' 

i Conditioner I 

Figure 4.2 Relationship of Production Cost Estimates in New Reverse Engineering Approach 

Table 4.7 provides the cost estimates resulting from this new approach. Results do not 

include any potential cost reduction due to emerging technologies, which are also under revision. 

Revised results are generally lower than the original results, particularly at the baseline 10 SEER 

level. The most significant change is that the new analysis includes nine additional estimates that 

were not presented in the Supplemental ANOPR and Preliminary TSD due to lack of data. 

4-11 
EE-RM/STD-98-440 2 o

Table 4.7 Revised Reverse Engineering Production Cost Estimates for 3-ton Unitary

EqE uipment

Efficiency Split Air Split Air Split Heat Pump Packaged Air Packaged Heat

Level Conditioner Conditioner Conditioner Pump

(SEER) (cased coil) (fancoil)

Original Revised Original Revised Original Revised Original Revised Original Revised

10 $367 $367 $456 $449 $622 $572 $552 $511 $643 $593

11 $412 $412 $550 $519 - $602 - $555 - $638

12 $468 $468 - $563 $690 $648 $627 $595 $708 $668

13 $529 $529 $756 $637 $840 $743 $809 $730 - $820

14 $588 $588 $802 $815 $1,011 $1,023 - $889 - $1,029

15 - - $893 $893 $1,147 $1,107 - $955 - $1,100

Table 4.8 compares the results relative to the 10 SEER unit in each product class. Most

revised results are similar to the original results presented in the Supplemental ANOPR and

Preliminary TSD. The only significant departures are found in split air conditioners with fancoils,

where the new estimates are lower, and in 14 SEER and 15 SEER equipment where the new results

are higher.

(i ''Table 4.8 Revised Reverse Engineering Production Cost Multipliers for 3-ton Unitary

Eq uipment

Efficiency Split Air Split Air Split Heat Pump Packaged Air Packaged Heat

Level Conditioner Conditioner Conditioner Pump

(SEER) (cased coil) (fancoil)

Original Revised Original Revised Original Revised Original Revised Original Revised

10 ?? ?? ?? ? ? ? ?? ?? ?? ?? ??

11 ?? ?? ?? ?? -- ?? - 7?

12 ?? 7? - ?? ? ? ?? ?? ?? ??

13 ?? ?? ?? ?? ?? ?? ?? ?? - ??

14 ?? ? ? ? ? ? ? ? ? - ?? - 7?

15 - - ?? ?? ? ? ?? - 77 - ??

Appendix B provides the detailed cost estimates for each cost element for products at each

efficiency level. The tables indicate which cost elements were derived directly from the reverse

engineering analysis on those products and which were based on Mr. Peitsch's rules of thumb using

costs estimated for other product classes.

4-12

(:

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ 2 0 ~ 

Table 4.7 Revised Reverse Engineering Production Cost Estimates for 3-ton Unitary E . • ClUlpment 

Efficiency Split Air Split Air Split Heat Pump Packaged Air Packaged Heat 

Level Conditioner Conditioner Conditioner Pump 

(SEER) (cased coil) (fancoil) 

Original Revised Original Revised Original Revised Original Revised Original Revised 

10 $367 $367 $456 $449 $622 $572 $552 $511 $643 $593 

11 $412 $412 $550 $519 - $602 - $555 - $638 

12 $468 $468 - $563 $690 $648 $627 $595 $708 $668 

13 $529 $529 $756 $637 $840 $743 $809 $730 - $820 

14 $588 $588 $802 $815 $1,011 $1,023 - $889 - $1,029 

15 - - $893 $893 $1,147 $1,107 - $955 - $1,100 

Table 4.8 compares the results relative to the 10 SEER unit in each product class. Most 

revised results are similar to the original results presented in the Supplemental ANOPR and 

Preliminary TSD. The only significant departures are found in split air conditioners with fancoils, 

where the new estimates are lower, and in 14 SEER and 15 SEER equipment where the new results 

are higher, 

Table 4.8 Revised Reverse Engineering Production Cost Multipliers for 3-ton Unitary 

E· ,'lUlpmen t 

Efficiency Split Air Split Air Split Heat Pump Packaged Air Packaged Heat 

Level Conditioner Conditioner Conditioner Pump 

(SEER) (cased coil) (fancoil) 

Original Revised Original Revised Original Revised Original Revised Original Revised 

10 ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? 

11 ?? ?? ?? ?? - ?? - ?? - ?? 

12 ?? ?? - ?? ?? ?? ?? ?? ?? ?? 

13 ?? ?? ?? ?? ?? ?? ?? ?? - ?? 

14 ?? ?? ?? ?? ?? ?? - ?? - ?? 

15 - - ?? ?? ?? ?? - ?? - ?? 

Appendix B provides the detailed cost estimates for each cost element for products at each 

efficiency level. The tables indicate which cost elements were derived directly from the reverse 

engineering analysis on those products and which were based on Mr. Peitsch' s rules of thumb using 

costs estimated for other product classes. 

4-12 
EE-RM/STD-98-440 ;',

qC', 4.2.8 Outbound Freight

Outbound freight is normally considered a sales expense and not a production cost. However,

in the reverse engineering analysis, outbound freight charges scale as the size of equipment changes,

so outboundfreight charges are included in the production cost results. To avoid double-counting,

outbound freight is later deducted from the recommended manufacturer markup (Section 4.3.2).

4.2.9 Industry Review

Although the cost-efficiency results are a suitable basis for subsequent analyses, the intent

of reverse engineering methodology was to validate industry cost-efficiency projections and

establish the absolute costs of present baseline equipment. This section describes that validation

effort.

4.2.9.1 ARI Results

The Department and ARI agreed on a set of basic assumptions before ARI began collecting

the data from its members. Each member who provided data to ARI estimated its own equipment

cost under each new standard relative to its own current 10 SEER equipment. On March 13, 1999

ARI provided the aggregated results of this survey to the Department consisting of the mean,

minimum, and maximum values at each efficiency level (11 SEER through 15 SEER) in each

product class, all normalized to the baseline. Since each of ARI's members related its costs to its

own baseline, each submittal had a baseline cost of 1.0. The aggregated curve, therefore, displays

no variability in the baseline equipment.

To address the Department's question of whether the relative costs reflected the distribution

of shipments, ARI received permission from its members to provide shipment weighted mean values.

These data, which were provided to the Department on April 26, 1999, were based on 1998

manufacturer shipments and represent 90 percent of the total industry shipments.

4.2.9.2 Second ARI Review

On May 14, 1999 the Department presented the reverse engineering estimates to ARI for all

four classes, having earlier reported results for split air conditioners only. ARI's members also

received a prior version of the tables in Appendix B. The Department pointed out that significant and

unexplained discrepancies still existed, and ARI agreed to review the results again. Certain

manufacturers contacted the Department's contractor (Arthur D. Little, Inc.) to review the results and

assumptions, and after several meetings with those manufacturers to identify and resolve apparent

discrepancies, we finalized our original reverse engineering results.

4-13

C

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~~ u~ 

4.2.8 Outbound Freight 

Outbound freight is nonnally considered a sales expense and not a production cost. However, 

in the reverse engineering analysis, outbound freight charges scale as the size of equipment changes, 

so outboundfreight charges are included in the production cost results. To avoid double-counting, 

outbound freight is later deducted from the recommended manufacturer markup (Section 4.3.2). 

4.2.9 Industry Review 

Although the cost-efficiency results are a suitable basis for subsequent analyses, the intent 

of reverse engineering methodology was to validate industry cost-efficiency projections and 

establish the absolute costs of present baseline equipment. This section describes that validation 

effort. 

4.2.9.1 ARI Results 

The Department and ARI agreed on a set of basic assumptions before ARI began collecting 

the data from its members. Each member who provided data to ARI estimated its own equipment 

cost under each new standard relative to its own current 10 SEER equipment. On March 13, 1999 

ARI provided the aggregated results of this survey to the Department consisting of the mean, 

minimum, and maximum values at each efficiency level (11 SEER through 15 SEER) in each 

product class, all nonnalized to the baseline. Since each of ARI's members related its costs to its 

own baseline, each submittal had a baseline cost of 1.0. The aggregated curve, therefore, displays 

no variability in the baseline equipment. 

To address the Department's question of whether the relative costs reflected the distribution 

of shipments, ARI received pennission from its members to provide shipment weighted mean values. 

These data, which were provided to the Department on April 26, 1999, were based on 1998 

manufacturer shipments and represent 90 percent of the total industry shipments. 

4.2.9.2 Second ARI Review 

On May 14, 1999 the Department presented the reverse engineering estimates to ARI for all 

four classes, having earlier reported results for split air conditioners only. ARI's members also 

received a prior version of the tables in Appendix B. The Department pointed out that significant and 

unexplained discrepancies still existed, and ARI agreed to review the results again. Certain 

manufacturers contacted the Department's contractor (Arthur D. Little, Inc.) to review the results and 

assumptions, and after several meetings with those manufacturers to identifY and resolve apparent 

discrepancies, we fmalized our original reverse engineering results. 

4-13 
EE-RM/STD-98-440 W2' X

(_ *4.2.10 Comparison Between Reverse Engineering and ARI Relative Costs

Table 4.9 compares the relative production costs provided by ARI with those developed in

the reverse engineering analysis. These data show that as efficiency increases, ARl's mean relative

production costs rise more rapidly than do the reverse engineering estimates. For split air

conditioners, the difference is small through 12 SEER, but grows quickly above 12 SEER. For the

other three classes, significant differences begin at 11 SEER. In all cases, the reverse engineering

estimates match or exceed ARI's "minimum" relative costs.

The derivation of reverse engineering relative costs for the split air conditioner class is not

straightforward since fancoil and cased coil units were evaluated separately. Eighty-four (84) percent

of the split air conditioner samples through 13 SEER were cased coil units. At 14 SEER, 57 percent

of the split air conditioner samples were cased coil. Over 14 SEER, there are no cased coil units

represented in the sample set. The relative cost calculations paralleled that equipment selection. In

Table 4.9, split air conditioner relative costs through 13 SEER represent the cost of cased coil

systems relative to the cost of the average cost of a 10 SEER cased coil system. Relative split air

conditioner costs for 15 SEER and above are fancoil system costs relative to the 10 SEERfancoil

system cost. The 14 SEER split air conditioner relative cost represents the average of both the cased

coil and fancoil costs relative to their respective 10 SEER counterparts.

Because the level of detail differs between the reverse engineering and ARI results, it is

difficult to definitively identify the reasons for the discrepancies. Industry representatives have

suggested that three aspects of the reverse engineering results significantly underestimate the

incremental production costs of split air conditioners, and that the three aspects can explain most,

if not all, of the discrepancy between the two sets of relative costs:

* Outdoor unit cabinet materials and labor

* Indoor coil materials

* Refrigerant

After reexamining those components and making adjustments, the reverse engineering results

still fall below ARI's suggested values. ARI did not suggest improvements for split air conditioners

over 14 SEER or for the other classes.

The Department believes that other factors may explain part of the remaining differences.

These factors include:

* Essentialfeatures "Essential" features are defined as any product attributes that

are required to meet minimum standards of operation,

performance, and reliability at a given efficiency rating. The

Department assumes that baseline equipment sold under a

higher efficiency standard will incorporate only essential

4-14

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 '*'2 i), 

4.2.10 Comparison Between Reverse Engineering and ARI Relative Costs 

Table 4.9 compares the relative production costs provided by ARl with those developed in 

the reverse engineering analysis. These data show that as efficiency increases, ARl's mean relative 

production costs rise more rapidly than do the reverse engineering estimates. For split air 

conditioners, the difference is small through 12 SEER, but grows quickly above 12 SEER. For the 

other three classes, significant differences begin at 11 SEER. In all cases, the reverse engineering 

estimates match or exceed ARl's "minimum" relative costs. 

The derivation of reverse engineering relative costs for the split air conditioner class is not 

straightforward since fancoil and cased coil units were evaluated separately. Eighty-four (84) percent 

of the split air conditioner samples through 13 SEER were cased coil units. At 14 SEER, 57 percent 

of the split air conditioner samples were cased coil. Over 14 SEER, there are no cased coil units 

represented in the sample set. The relative cost calculations paralleled that equipment selection. In 

Table 4.9, split air conditioner relative costs through 13 SEER represent the cost of cased coil 

systems relative to the cost of the average cost of a 10 SEER cased coil system. Relative split air 

conditioner costs for 15 SEER and above are fancoil system costs relative to the 10 SEERfancoil 

system cost. The 14 SEER split air conditioner relative cost represents the average of both the cased 

coil and fancoil costs relative to their respective 10 SEER counterparts. 

Because the level of detail differs between the reverse engineering and ARl results, it is 

difficult to definitively identify the reasons for the discrepancies. Industry representatives have 

suggested that three aspects of the reverse engineering results significantly underestimate the 

incremental production costs of split air conditioners, and that the three aspects can explain most, 

if not all, of the discrepancy between the two sets of relative costs: 

• Outdoor unit cabinet materials and labor 

• Indoor coil materials 

• Refrigerant 

After reexamining those components and making adjustments, the reverse engineering results 

still fall below ARI's suggested values. ARl did not suggest improvements for split air conditioners 

over 14 SEER or for the other classes. 

The Department believes that other factors may explain part of the remaining differences. 

These factors include: 

• Essential features "Essential" features are defined as any product attributes that 

are required to meet minimum standards of operation, 

performance, and reliability at a given efficiency rating. The 

Department assumes that baseline equipment sold under a 

higher efficiency standard will incorporate only essential 

4-14 
EE-RM/STD-98-440 -* 2O

features. Industry members might have defined essential

features differently.

* Metalprices The reverse engineering analysis assumed flat 1998 prices, but

some ARI members may assume higher prices more in line with

historic averages.

* R-22 prices Although both the reverse engineering and ARI results are

based on equipment charged with HCFC-22. Some ARI

members may have assumed an inflation in HCFC-22 prices

due to the EPA mandated HCFC-22 phaseout. The reverse

engineering analysis assumed flat 1998 HCFC-22 prices.

* Conversion costs The reverse engineering analysis assumed that a generic

manufacturer builds a moder production facility dedicated to

producing equipment at only one efficiency level. Actual

manufacturers may incur conversion costs that would result in

increasing depreciation relative to increasing product cost.

* Baseline costs Manufacturers with similar incremental costs but different

baseline costs will produce different relative cost curves.

Therefore, the actual incremental costs contained in ARI's

relative cost estimates cannot be determined without knowing

(./"4~~~~~~~~ ~their assumptions of baseline equipment cost. Thus, differences

in baseline equipment cost could explain much of the variation

in the ARI curves as well as disagreements with the reverse

engineering-derived relative costs.

Uncertainty and variability also affect both sets of results. For example, the reverse

engineering analysis was based primarily on a sample of models and design data submitted by

manufacturers. It did not attempt to weigh the samples based on their representation in the

marketplace. Also, some efficiency levels contained relatively few samples, increasing the

uncertainty about whether those samples represent a "typical" model. These uncertainties could

either raise or lower the reverse engineering estimates with respect to ARI's.

4-15

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-9S-440 t 2 o'i 

features. Industry members might have defmed essential 

features differently. 

• Metal prices The reverse engineering analysis assumed flat 1998 prices, but 

some ARI members may assume higher prices more in line with 

historic averages. 

• R-22 prices Although both the reverse engineering and ARI results are 

based on equipment charged with HCFC-22. Some ARI 

members may have assumed an inflation in HCFC-22 prices 

due to the EPA mandated HCFC-22 phaseout. The reverse 

engineering analysis assumed flat 1998 HCFC-22 prices. 

• Conversion costs The reverse engineering analysis assumed that a generic 

manufacturer builds a modem production facility dedicated to 

producing equipment at only one efficiency level. Actual 

manufacturers may incur conversion costs that would result in 

increasing depreciation relative to increasing product cost. 

• Baseline costs Manufacturers with similar incremental costs but different 

baseline costs will produce different relative cost curves. 

Therefore, the actual incremental costs contained in ARI's 

relative cost estimates cannot be determined without knowing 

their assumptions of baseline equipment cost. Thus, differences 

in baseline equipment cost could explain much of the variation 

in the ARI curves as well as disagreements with the reverse 

engineering-derived relative costs. 

Uncertainty and variability also affect both sets of results. For example, the reverse 

engineering analysis was based primarily on a sample of models and design data submitted by 

manufacturers. It did not attempt to weigh the samples based on their representation in the 

marketplace. Also, some efficiency levels contained relatively few samples, increasing the 

uncertainty about whether those samples represent a "typical" model. These uncertainties could 

either raise or lower the reverse engineering estimates with respect to ARI's. 

4-15 
EE-RM/STD-98-440 - 2Y(Y

Table 4.9 Comparison of Revised Reverse Engineering Cost Estimates and ARI

Relative Unitary Production Costs - 3-ton

Standard Level (SEER)

11 12 13 14 15

Rev Eng Most Likely' 1.12 1.28 / 1.44 % 1.68 1.96

Mean 1.16 1.36 1.63 2.03 2.40

ARI Min 1.03 1.09 \ 1.60 1.81

Max 1.30 1.55 1.90 3.00 3.50

Rev Eng Most Likely 1.05 1.13 1.30 1.79 1.94

Mean 1.10 1.24 1.44 1.64 2.09

.ARI Min 1.05 1.11 1.17 1.30 1.75

Max 1.15 1.35 1.66 1.88 2.52

Rev Eng Most Likely 1.09 1.16 1.43 1.74 1.87

Mean 1.19 1.30 1.63 1.87 2.23

ARI Min 1.03 1.15 1.40 1.59 1.89

Max 1.27 1.40 .75 2.00 2.92

Rev Eng Most Likely 1.08 1.13 1.38 1.74 1.86

Mean 1.14 1.28 1.60 1.75 2.13

ARI Min 1.06 1.06 1.45 1.65 1.93

Max 1.25 1.50 1.90 2.30 2.47

"Cost of 1.0 represents base cost for 10 SEER for split systems and 9.7 SEER packaged systems

' 11 SEER - 13 SEER based on cased coil only, with respect to the 10 SEER cased coil system cost.

15 SEER based on fancoil only with respect to the 10 SEER fancoil system cost. 14 SEER represents the

mean of relative cased coil and fancoil system costs with respect to their 10 SEER baselines.

4-16

C:

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ 2. O"L 

Table 4.9 Comparison of Revised Reverse Engineering Cost Estimates and ARI 

Relative Unitary Production Costs ~ 3-ton 

Standard Level (SEER) 

Mean l.16 1.36 2.03 2.40 

ARI Min 1.03 1.09 1.60 1.81 

Max 1.30 1.55 1.90 3.00 3.50 

Rev Eng Most Likely 1.05 l.13 ( 1.30 1.79 1.94 

Mean 1.10 1.24 

" 

1.44 , 1.64 2.09 , 

"- ARI Min 1.05 1.11 1.17 1.30 1.75 

Max 1.15 1.35 1.66 1.88 2.52 

Rev Eng Most Likely 1.09 1.16 1.43 1.74 1.87 

Mean 1.19 1.30 1.63 1.87 2.23 

ARI Min 1.03 1.15 1.40 1.59 1.89 

Max 1.27 1.40 1.75 2.00 2.92 

Rev Eng Most Likely 1.08 1.13 1.38 1.74 1.86 

Mean 1.14 1.28 1.60 1.75 2.13 

ARI . Min 1.06 1.06 1.45 1.65 1.93 

Max 1.25 1.50 1.90 2.30 2.47 

"Cost of 1.0 represents base cost for 10 SEER for split systems and 9.7 SEER packaged systems 

I II SEER - 13 SEER based on cased coil only, with respect to the 10 SEER cased coil system cost. 

15 SEER based on fancoil only with respect to the 10 SEER faneoil system cost. 14 SEER represents the 

mean of relative cased coil and fancoil system costs with respect to their 10 SEER baselines. 

e 

4-16 

• 
ijiM iSTD-98-440 W '°

4.2.11 Validation of ARI Results

In all cases, ARI's mean production cost multipliers exceed those from the reverse

engineering analysis. However, the reverse engineering cost model cannot replicate many of ARI's

maximum values. Also, the analysis cannot explain the wide range between ARI's minimum and

maximum values at the higher efficiency levels. This result seems to conflict with the premise that

new standards will force high-efficiency products to compete on price and keep products within the

same price variation as current baseline equipment. Without further explanation from ARI as to the

assumptions behind their maximum values, the reverse engineering analysis cannot validate ARI's

results completely.

43 MARKUPS

The Life Cycle Cost Analysis requires among its inputs 1) the price consumers pay for

baseline equipment, and 2) the incremental prices they must pay to purchase higher efficiency levels

equipment assuming efficiency standards set at those levels. For the water heater and ballast

rulemakings, the Department relied on market surveys to determine retail prices and has applied

relative cost-efficiency curves to determine incremental prices. That approach works well for

appliances that consumers can purchase directly since retail prices are easy to ascertain. However,

in the central air conditioning market, dealers sell equipment as part of an installation package and

do not list retail equipment prices separately from installation cost. Furthermore, differences in local

markets, weather conditions, demand, and many other factors can all affect the price contractors

charge for air conditioning equipment.

As an alternative to the retail price survey, the Department determined typical markups along

the distribution chain from the manufacturer through the consumer. We also used this approach in

the clothes washer rulemaking. The markup approach makes it possible to estimate a retail price

from the manufacturing cost. Representative markups were determined from the top-down using

publicly available corporate and industry data. This approach is transparent and avoids the confusing

and largely irrelevant differences with which a survey must contend. However, because it depends

on high level information, it risks overlooking details that are important to the analysis.

4.3.1 Description of Distribution Chain

Most residential central air conditioning equipment passes through a two-step distribution

chain: 1) manufacturer to distributor (or wholesaler), and 2) distributor to dealer (or contractor).

Lennox uses one-step distribution (manufacturer to dealer) for its Lennox-brand products and is the

only notable exception. Large retailers (Sears, Home Depot) replace the distributor in the chain for

some manufacturers.

4-17

(:

EE-RM-STD-98-440 COMMENT 208

ifi.RM/STD-98-440 *' 'L 0 ~ 

4.2.11 Validation of ARI Results 

In all cases, ARl's mean production cost multipliers exceed those from the reverse 

engineering analysis. However, the reverse engineering cost model cannot replicate many of ARl's 

maximum values. Also, the analysis cannot explain the wide range between ARl's minimum and 

maximum values at the higher efficiency levels. This result seems to conflict with the premise that 

new standards will force high-efficiency products to compete on price and keep products within the 

same price variation as current baseline equipment. Without further explanation from ARl as to the 

assumptions behind their maximum values, the reverse engineering analysis cannot validate ARl's 

results completely. 

4.3 MARKUPS 

The Life Cycle Cost Analysis requires among its inputs 1) the price consumers pay for 

baseline equipment, and 2) the incremental prices they must pay to purchase higher efficiency levels 

equipment assuming efficiency standards set at those levels. For the water heater and ballast 

rulemakings, the Department relied on market surveys to determine retail prices and has applied 

relative cost-efficiency curves to determine incremental prices. That approach works well for 

appliances that consumers can purchase directly since retail prices are easy to ascertain. However, 

in the central air conditioning market, dealers sell equipment as part of an installation package and 

do not list retail equipment prices separately from installation cost. Furthermore, differences in local 

markets, weather conditions, demand, and many other factors can all affect the price contractors 

charge for air conditioning equipment. 

As an alternative to the retail price survey, the Department determined typical markups along 

the distribution chain from the manufacturer through the consumer. We also used this approach in 

the clothes washer rulemaking. The markup approach makes it possible to estimate a retail price 

from the manufacturing cost. Representative markups were determined from the top-down using 

publicly available corporate and industry data. This approach is transparent and avoids the confusing 

and largely irrelevant differences with which a survey must contend. However, because it depends 

on high level information, it risks overlooking details that are important to the analysis. 

4.3.1 Description of Distribution Chain 

Most residential central air conditioning equipment passes through a two-step distribution 

chain: 1) manufacturer to distributor (or wholesaler), and 2) distributor to dealer (or contractor). 

Lennox uses one-step distribution (manufacturer to dealer) for its Lennox-brand products and is the 

only notable exception. Large retailers (Sears, Home Depot) replace the distributor in the chain for 

some manufacturers. 

4-17 
EE-RM/STD-98-440 -' 20-

Roughly two dozen equipment manufacturers, several hundred distributors, and more than

30,000 dealers operate in the United States. Due to a wave of consolidation over the last 15 years,

the top seven manufacturers control 97 percent of the market share. Most remaining small

manufacturers produce only indoor coils or niche product lines.

Equipment manufacturers sell most of their products directly to distributors (also called

wholesalers.) Distributors sell to dealers at the distributor (wholesale) price. Distributors absorb

short-term imbalances in supply and demand, allowing manufacturers to operate more efficiently and

satisfying consumer needs for fast deliveries. Distributors may specialize in HVAC equipment or

may deal in other products. They are also important sources for after-market parts that boost margins.

Distributors compete on price and service, although geographic boundaries and relationships prevent

margins from being squeezed to commodity levels.

Most dealers compete at the local level. Many carry more than one brand, and most install

the products they sell. Some are engaged in other contracting business, and most do commercial

work. Dealers are consolidating rapidly in the wake of similar trends at the wholesale and

manufacturer levels. There are now several large, national, publicly traded air conditioning dealers.

Lennox has also acquired dealers to complement its vertical integration of its distribution channels.

At each point in the distribution chain, companies mark up the price of the equipment to

cover their business costs and profit margin. In financial statements, gross margin is the effective

markup on a company's cost of sales. It includes all corporate overhead costs; sales, general, and

administration (SG&A); research and development (R&D) and interest expenses; depreciation and

taxes; and profits. In order for sales of a product to contribute positively to company cash flow, its

markup must be greater than the corporate gross margin less the company's operating profit margin.

Individual products may command a lower or higher markup depending on their perceived added

value and the competition they face. The Department generally assumes that gross margins on

baseline residential unitary equipment are lower than the average gross margin of a diversified

company.

4.3.2 Determination of the Manufacturer Markup

Publicly held corporations file annual reports (10-Ks) with the Securities and Exchange

Commission (SEC). There are six sets of 10-K reports for the six publicly traded air conditioner

manufacturers (listed in Table 4.10 as Mfr. A - Mfr. F). Two of the manufacturers listed have since

merged. The six sets of reports served as the basis for the estimation of the manufacturer markup.

The companies represented account for about 85 percent of the unitary market. Manufacturers D, E,

and F engage substantially in business other than the production of air conditioning equipment.

Manufacturer F engages substantially in business not related to building equipment. All companies

sell products other than residential unitary air conditioners, including furnaces, commercial air

conditioners, and after market parts. Many of these other products command higher margins than do

baseline air conditioners.

4-18

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 + 2 0 ~ 

Roughly two dozen equipment manufacturers, several hundred distributors, and more than 

30,000 dealers operate in the United States. Due to a wave of consolidation over the last 15 years, 

the top seven manufacturers control 97 percent of the market share. Most remaining small 

manufacturers produce only indoor coils or niche product lines. 

Equipment manufacturers sell most of their products directly to distributors (also called 

wholesalers.) Distributors sell to dealers at the distributor (wholesale) price. Distributors absorb 

short-tenn imbalances in supply and demand, allowing manufacturers to operate more efficiently and 

satisfying consumer needs for fast deliveries. Distributors may specialize in HV AC equipment or 

may deal in other products. They are also important sources for after-market parts that boost margins. 

Distributors compete on price and service, although geographic boundaries and relationships prevent 

margins from being squeezed to commodity levels. 

Most dealers compete at the local level. Many carry more than one brand, and most install 

the products they sell. Some are engaged in other contracting business, and most do commercial 

work. Deal.ers are consolidating rapidly in the wake of similar trends at the wholesale and 

manufacturer levels. There are now several large, national, publicly traded air conditioning dealers. 

Lennox has also acquired dealers to complement its vertical integration of its distribution channels. 

At each point in the distribution chain, companies mark up the price of the equipment to 

cover their business costs and profit margin. In financial statements, gross margin is the effective 

markup on a company's cost of sales. It includes all corporate overhead costs; sales, general, and 

administration (SG&A); research and development (R&D) and interest expenses; depreciation and 

taxes; and profits. In order for sales of a product to contribute positively to company cash flow, its 

markup must be greater than the corporate gross margin less the company's operating profit margin. 

Individual products may command a lower or higher markup depending on their perceived added 

value and the competition they face. The Department generally assumes that gross margins on 

baseline residential unitary equipment are lower than the average gross margin of a diversified 

company. 

4.3.2 Determination of the Manufacturer Markup 

Publicly held corporations file annual reports (lO-Ks) with the Securities and Exchange 

Commission (SEC). There are six sets of 10-K reports for the six publicly traded air conditioner 

manufacturers (listed in Table 4.10 as Mfr. A - Mfr. F). Two of the manufacturers listed have since 

merged. The six sets of reports served as the basis for the estimation of the manufacturer markup. 

The companies represented account for about 85 percent of the unitary market. Manufacturers D, E, 

and F engage substantially in business other than the production of air conditioning equipment. 

Manufacturer F engages substantially in business not related to building equipment. All companies 

sell products other than residential unitary air conditioners, including furnaces, commercial air 

conditioners, and after market parts. Many of these other products command higher margins than do 

baseline air conditioners. 

4-18 
EE-RMISTD-98-440 '2- D0

Of the six public companies, Manufacturers A and B are most dependent on residential

unitary sales, and we expect their financial statement to be most indicative of the cost structure

associated with the production and sale of residential unitary equipment. Manufacturer C, because

it is also engaged solely in the air conditioning business, is also a good example. Manufacturer A's

five year average is adversely affected by extraordinary restructuring charges in 1995. Manufacturer

B's gross margin is substantially higher than that of its competing firms. The others best represent

typical markups on building products in general.

Table 4.10 lists the corporate gross margin, gross margin adjusted for baseline equipment,

and corresponding markups for each of the six manufacturers. Each firm's profit margin (EBIT,

Earnings Before Interest and Taxes) is replaced with a 2 percent figure to simulate the margin on a

baseline unit. Actual margins may be higher, particularly for firms who specialize in the production

and sale of baseline equipment. Outbound freight was also deducted since it is already included it

in the reverse engineering cost estimates (see Section 4.2.8). Except where noted, figures are listed

for 1997 as well as the averages over the preceding four years.

Table 4.10 Manufacturer Gross Margins and Markups

Year(s) Mfr A Mfr B Mfr C Mfr D Mfr E Mfr F

Fraction of

revenues related

to space 1997 100% 100%/o 100% 25% 60% 25%

conditioning

products

Corporate gross 1997 20.1% 35.3% 19.9%/0 26.7% 26.7% 24.5%

margin 1993-97 17.4% (1999) 21.0% 27.7% 27.7% 24.0%

Gross margin 1997 18.6% 33.1% 19.4% 24.9% 24.9% 19.4%

with 2% EBIT 1993-97 20.6% (1999) 19.5% 25.5% 25.5% 20.1%

Markup 1997 1.23 1.49 1.24 1.33 1.33 1.24

1993-97 1.26 (1999) 1.24 1.34 1.34 1.25

Markup (less 1997 1.17 1.43 1.18 1.25 1.27 1.18

freight-out) 1993-97 1.20 (1999) 1.18 1.26 1.28 1.19

Sources: SEC 10-K reports (1993-1997), 10-Q report (4Q1999)

The Department selected a representative manufacturer markup of 1.23 for use in estimating

the price of baseline equipment. This represents a weighted average of Mfr B's and Mfr C's

calculated markups assuming a 20 percent / 80 percent ratio, respectively.

4-19

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *' '2 D ~ 

Of the six public companies, Manufacturers A and B are most dependent on residential 

unitary sales, and we expect their financial statement to be most indicative of the cost structure 

associated with the production and sale of residential unitary equipment. Manufacturer C, because 

it is also engaged solely in the air conditioning business, is also a good example. Manufacturer A's 

five year average is adversely affected by extraordinary restructuring charges in 1995. Manufacturer 

B's gross margin is substantially higher than that of its competing finns. The others best represent 

typical markups on building products in general. 

Table 4.10 lists the corporate gross margin, gross margin adjusted for baseline equipment, 

and corresponding markups for each of the six manufacturers. Each finn's profit margin (EBIT, 

Earnings Before Interest and Taxes) is replaced with a 2 percent figure to simulate the margin on a 

baseline unit. Actual margins may be higher, particularly for finns who specialize in the production 

and sale of baseline equipment. Outbound freight was also deducted since it is already included it 

in the reverse engineering cost estimates (see Section 4.2.8). Except where noted, figures are listed 

for 1997 as well as the averages over the preceding four years. 

Table 4.10 Manufacturer Gross Margins and Markups M 

Year(s) MfrA MfrB Mfre MfrD MfrE MfrF 

Fraction of 

revenues related 

to space 1997 100% 100% 100% 25% 60% 25% 

conditioning 

products 

Corporate gross 1997 20.1% 35.3% 19.9% 26.7% 26.7% 24.5% 

margin 1993-97 17.4% (1999) 21.0% 27.7% 27.7% 24.0% 

Gross margin 1997 18.6% 33.1% 19.4% 24.9% 24.9"10 19.4% 

with 2% EBIT 1993-97 20.6% (1999) 19.5% 25.5% 25.5% 20.1% 

Markup 1997 1.23 1.49 1.24 1.33 1.33 1.24 

1993-97 1.26 (1999) 1.24 1.34 1.34 1.25 

Markup (less 1997 1.17 1.43 1.18 1.25 1.27 1.18 

freight-out) 1993-97 1.20 (1999) 1.18 1.26 1.28 1.19 

Sources: SEC IO-K reports (1993-1997), 10.0 report (4QI999) 

- The Department selected a representative manufacturer markup of 1.23 for use in estimating 

the price of baseline equipment. This represents a weighted average of Mfr B's and Mfr C's 

calculated markups assuming a 20 percent /80 percent ratio, respectively. 

4-19 
EE-RM/STD-98-440 : A

(9 '54.3.3 Determination of Distributor Markup

Table 4.11 lists the median 1997 gross margin for 14 members of the Air Conditioning and

Refrigeration Wholesalers (ARW) engaged in the sale of air conditioning and heating equipment.

Table 4.11 Distributor Median Gross

Margins and Markups

Gross 1997 27.0%

margin 1993-97 26.9%

Markup 1997 1.37

1993-97 1.37

Source: 1998 Wholesaler PROFIT Survey

Report, Air Conditioning and Refrigeration

The indicated markup of 1.37 represents the typical markup applied to products sold in the

base case. As the cost of an air conditioner increases, we would expect that the markup on the price

difference to be less than the average markup since only a fraction of the distributor's costs scale

with the unit cost of materials.

To determine what the markup on the incremental price difference might be, we examined

the ARW financial reports in closer detail, identifying the financial components that we would

expect to scale with prices changes. The markup suggested by that analysis is 1.11. An examination

of U.S. Census data suggested a value of 1.09. A wide uncertainty band exists around both of these

results, but they are much lower than the average markup of 1.37.

Since the statistical evidence provided a probability distribution, we used those results to

represent the distributor markup on the incremental portion of equipment costs. The basic portion

of equipment costs we assume continues to be marked up at the average value of 1.37. Table 4.12

provides the mean combined markup at each standard level considered.

Table 4.12 Distributor Markups used in the

Analysis for each Standard Level

Standard Level Markup

10 SEER 1.37

11 SEER 1.33

12 SEER 1.30

13 SEER 1.26

4-20

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 :it ~ 8 t 

4.3.3 Determination of Distributor Markup 

Table 4.11 lists the median 1997 gross margin for 14 members of the Air Conditioning and 

Refrigeration Wholesalers (ARW) engaged in the sale of air conditioning and heating equipment. 

Table 4.11 Distributor Median Gross 

Margins and Markups 

Gross 1997 27.0% 

margin 1993-97 26.9% 

Markup 1997 1.37 

1993-97 1.37 

Source: 1998 Wholesaler PROFIT Survey 

Report, Air Conditioning and Refrigeration 

The indicated markup of 1.37 represents the typical markup applied to products sold in the 

base case. As the cost of an air conditioner increases, we would expect that the markup on the price 

difference to be less than the average markup since only a fraction of the distributor's costs scale 

with the unit cost of materials. 

To determine what the markup on the incremental price difference might be, we examined 

the AR W fmancial reports in closer detail, identifying the financial components that we would 

expect to scale with prices cbanges. The markup suggested by that analysis is 1.11. An examination 

of U.S. Census data suggested a value of 1.09. A wide uncertainty band exists around both of these 

results, but they are much lower than the average markup of 1.3 7. 

Since the statistical evidence provided a probability distribution, we used those results to 

represent the distributor markup on the incremental portion of equipment costs. The basic portion 

of equipment costs we assume continues to be marked up at the average value of 1.3 7. Table 4.12 

provides the mean combined markup at each standard level considered. 

Table 4.12 Distributor Markups used in the 

Analysis for each Standard Level 

Standard Level Markup 

10 SEER 1.37 

11 SEER 1.33 

12 SEER 1.30 

13 SEER 1.26 

4-20 
EE-RM/STD-98-440 o.. <

Appendix D presents the detailed derivation of the distributor markups.

4.3.4 Determination of Builder Markup

In new construction, the builder marks up the cost of the property, including the air

conditioning equipment. Based on gross margins estimated by Dunn and Bradstreet2 and Risk

Management Associates (formerly Robert Morris Associates) 3, we chose to apply a uniform range

of markups from 1.20 to 1.32 to the 34 percent of air conditioners and heat pumps that find their way

into new construction. That yields a weighted average markup new and existing construction

together of 1.09. In all cases, we assume that builders purchase their equipment from distributors

rather than directly from the manufacturer.

43.5 Determination of Dealer Markup

Dealers, or contractors, sell equipment to consumers at the dealer price. However, since the

dealer also install the system, the purchaser typically pays an installed price that includes all labor,

materials., and markups required to install the equipment. This flat rate pricing hides the actual dealer

price of the equipment.

Just as with the distributor markup, we estimated the average equipment markup on baseline

equipment, and the markup on changes in the unit cost of the equipment. Analysis of financial

!~( ~ reports published by the Air Conditioning Contractors of America (ACCA)4 suggests that the

average markup on all costs, including labor, for residential air conditioning contractors varies

between 1.41 for new construction and 1.63 for retrofit and replacement, for an overall average of

1.55. However, closer examination of the financial statements suggest that the average contractor

markup on equipment only is closer to 1.28. Examination of U.S. Census Bureau data suggests that

both the average and the marginal markup are 1.27. Details of these analysis are described in

Appendix D.

Since the statistical analysis provides a range of dealer markups, we chose to use it in the

analysis. Thus, we applied a mean dealer markup of 1.27 to all product classes at all standard levels.

4.3.6 Determination of Sales Tax

In many cases, local and state governments apply sales taxes to air conditioner purchases. The

sales tax applied to the dealer price yields the retail price paid by the consumer. Table 4.13 lists the

cumulative and shipment-weighted sales tax rates based on 1997 state sales tax data5, 1997 local

sales tax data 6, and 1994 state unitary shipment data7. The mean sales tax rate is 6.7 percent,

corresponding to a markup of 1.07. We adopted this distribution for the sales tax paid, except for the

34 percent of units sold into the new construction market. In those cases, we assumed that purchasers

4-21

(

EE-RM-STD-98-440 COMMENT 208

EE_RM/STO-98-440 4t L D ~ 

Appendix D presents the detailed derivation of the distributor markups. 

4.3.4 Determination of Builder Markup 

In new construction, the builder marks up the cost of the property, including the air 

conditioning equipment. Based on gross margins estimated by Dunn and Bradstreef and Risk 

Management Associates (formerly Robert Morris Associates)3, we chose to apply a uniform range 

of markups from 1.20 to 1.32 to the 34 percent of air conditioners and heat pumps that fmd their way 

into new construction. That yields a weighted average markup new and existing construction 

together of 1.09. In all cases, we assume that builders purchase their equipment from distributors 

rather than directly from the manufacturer. 

4.3.5 Determination of Dealer Markup 

Dealers, or contractors, sell equipment to consumers at the dealer price. However, since the 

dealer also install the system, the purchaser typically pays an installed price that includes all labor, 

materials" and markups required to install the equipment. This flat rate pricing hides the actual dealer 

price of the equipment. 

Just as with the distributor markup, we estimated the average equipment markup on baseline 

equipment, and the markup on changes in the unit cost of the equipment. Analysis of financial 

reports published by the Air Conditioning Contractors of America (ACCA)4 suggests that the 

average markup on all costs, including labor, for residential air conditioning contractors varies 

. between 1.41 for new construction and 1.63 for retrofit and replacement, for an overall average of 

1.55. However, closer examination of the financial statements suggest that the average contractor 

markup on equipment only is closer to 1.28. Examination ofU .S. Census Bureau data suggests that 

both the average and the marginal markup are 1.27. Details of these analysis are described in 

Appendix D. 

Since the statistical analysis provides a range of dealer markups, we chose to use it in the 

analysis. Thus, we applied a mean dealer markup of 1.27 to all product classes at all standard levels. 

4.3.6 Determination of Sales Tax 

In many cases, local and state governments apply sales taxes to air conditioner purchases. The 

sales tax applied to the dealer price yields the retail price paid by the consumer. Table 4. 13 lists the 

cumulative and shipment-weighted sales tax rates based on 1997 state sales tax dataS

, 1997 local 

sales tax data6

, and 1994 state unitary shipment data? The mean sales tax rate is 6.7 percent, 

corresponding to a markup of 1.07. We adopted this distribution for the sales tax paid, except for the 

34 percent of units sold into the new construction market. In those cases, We assumed that purchasers 

4-21 
EE-RM/STD-98-440 . iD

pay no sales tax on the equipment. This is equivalent to a weighted average sales tax for all products

of 1.04.

Table 4.13 Distribution of 1994 Unitary Shipments at Various Sales Tax Rates

Combined Sales Tax

Rate (nearest whole

percent) 0% 5% 6% 7% 8% 10%

Fraction of Shipments 1% 10% 29% 37% 22% 1%

4.3.7 Overall Markup

Overall markups applied to baseline equipment result from combining the manufacturer,

distributor, builder, dealer, and sales tax markups at each efficiency level. They range from 2.42

under a 10 SEER standard down to 2.23 under a 13 SEER standard. Table 4.14 summarizes the

results. These markups are valid only when outbound freight is considered a production cost

(Section 4.2.8).

Table 4.14 Average Markups on Baseline Residential Air

Conditioners

Manufacturer Markup 1.23

Wholesaler/Distributor

10 SEER 1.37

11 SEER 1.33

12 SEER 1.30

13 SEER 1.26

Dealer/Contractor 1.27

Builder Markup 1.09

Sales Tax 1.04

Overall Markup

10 SEER 2.42

11 SEER 2.35

12 SEER 2.30

13 SEER 2.23

4-22

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * 1 ... D~ 

pay no sales tax on the equipment. This is equivalent to a weighted average sales tax for all products 

of 1.04. 

Table 4.13 Distribution of 1994 Unitary Shipments at Various Sales Tax Rates 

.'4 , 

Combined Sales Tax 

Rate (nearest whole 

percent) 0% 5% 6% 7% 8% 10% 

Fraction of Shipments 1% 10% 29% 37% 22% 1% 

- ...... 

4.3.7 Overall Markup 

Overall markups applied to baseline equipment result from combining the manufacturer, 

distributor, builder, dealer, and sales tax markups at each efficiency level. They range from 2.42 

under a 10 SEER standard down to 2.23 under a 13 SEER standard. Table 4.14 summarizes the 

results. These markups are valid only when outbound freight is considered a production cost 

(Section 4.2.8). 

Table 4.141 Average Markups on Baseline Residential Air 

Conditioners M w 

Manufacturer Markup 1.23 

WholesalerlDistributor 

10 SEER 1.37 

11 SEER 1.33 

12 SEER 1.30 

13 SEER 1.26 

Dealer/Contractor 1.27 

Builder Markup 1.09 

Sales Tax 1.04 

Overall Markup 

10 SEER 2.42 

11 SEER 2.35 

12 SEER 2.30 

13 SEER 2.23 

ij 

4-22 
EE-RM/STD-98-440 ^2 o ,

4.4 MAX TECH

The highest efficiency level that is "technologically feasible and economically justified" is

known as "Max Tech." A product can be technologically feasible without being either commercially

practical or economically justified.

Based on a limited assessment of thermodynamic limitations and potential system

improvements, the Department estimates that the highest technologically feasible level for 3-ton air

conditioners is 30 EER, but that equipment is not commercially practical. The highest commercially

practical efficiency level is estimated to be nearly 16 EER, or 20 SEER. Thus, the Department is

proposing to eliminate from consideration any potential standard level that exceeds a 20 SEER rating

as not commercially practical, and therefore, not economically justified. Furthermore, since we are

not aware of any prototype or production unit that exceeds, or has ever exceeded, 18 SEER, we are

considering 18 SEER to be the Max Tech level. Some niche products and all coil-only products have

a Max Tech that is considerably lower.

We did not estimate the cost of all equipment through 18 SEER, but are confident that their

costs exceed those of the highest efficiency products we evaluated. For example, the cost of a

18 SEER split air conditioner is expected to cost at least as much to produce as a 15 SEER split air

conditioner.

The remainder of this section examines in more detail the factors that determine Max Tech

and the highest efficiency level that is commercially practical.

4.4.1 The Vapor Compression Cycle

Conventional air conditioners utilize a thermodynamic cycle known as the vaporcompression cycle to cool interior air and reject the heat to exterior air. (In heating mode, heat pumps

operate the cycle in reverse, cooling the exterior air and heating the interior air.) Heat is transferred

between the interior and exterior air using a intermediate refrigerant-usually HCFC-22. The

refrigerant passes through the tubes in tube-and-fin heat exchanger "coils" as air passes over the fins.

Within the air conditioner, cold refrigerant gas accepts heat in the evaporator and rejects it

in the condenser.' A compressor pumps refrigerant to the condenser, raising its temperature and

pressure in the process. In the condenser, the hot gas rejects heat to the outside air and condenses into

a liquid. After leaving the condenser, the liquid refrigerant passes through an orifice or expansion

valve and returns to the evaporator at a lower pressure. In the evaporator, the cold gas accepts heat

from the indoor air. Some of the heat comes from water vapor (humidity) as it condenses on the

evaporator coil.

c In heat pumps, the role of the condenser and evaporator reverses in the heating mode, but the names remain

the same.

4-23

EE-RM-STD-98-440 COMMENT 208

EE_RM/STD-98-440 * -2. O~ 

4.4 MAX TECH 

The highest efficiency level that is ''technologically feasible and economically justified" is 

known as "Max Tech." A product can be technologically feasible without being either commercially 

practical or economically justified. 

Based on a limited assessment of thermodynamic limitations and potential system 

improvements, the Department estimates that the highest technologically feasible level for 3-ton air 

conditioners is 30 EER. but that equipment is not commercially practical. The highest commercially 

practical efficiency level is estimated to be nearly 16 EER. or 20 SEER. Thus, the Department is 

proposing to eliminate from consideration any potential standard level that exceeds a 20 SEER rating 

as not commercially practical, and therefore, not economically justified. Furthermore, since we are 

not aware of any prototype or production unit that exceeds, or has ever exceeded, 18 SEER, we are 

considering 18 SEER to be the Max Tech level. Some niche products and all coil-only products have 

a Max Tech that is considerably lower. 

We did not estimate the cost of all equipment through 18 SEER. but are confident that their 

costs exceed those of the highest efficiency products we evaluated. For example, the cost of a 

18 SEER split air conditioner is expected to cost at least as much to produce as a 15 SEER split air 

conditioner. 

The remainder of this section examines in more detail the factors that determine Max Tech 

and the highest efficiency level that is commercially practical. 

4.4.1 The Vapor Compression Cycle 

Conventional air conditioners utilize a thermodynamic cycle known as the vaporcompression cycle to cool interior air and reject the heat to exterior air. (In heating mode, heat pumps 

operate the cycle in reverse, cooling the exterior air and heating the interior air.) Heat is transferred 

between the interior and exterior air using a intermediate refrigerant-usually HCFC-22. The 

refrigerant passes through the tubes in tube-and-fm heat exchanger "coils" as air passes over the fms. 

Within the air conditioner, cold refrigerant gas accepts heat in the evaporator and rejects it 

in the condenser.c A compressor pumps refrigerant to the condenser, raising its temperature and 

pressure in the process. In the condenser, the hot gas rejects heat to the outside air and condenses into 

a liquid. After leaving the condenser, the liquid refrigerant passes through an orifice or expansion 

valve and returns to the evaporator at a lower pressure. In the evaporator, the cold gas accepts heat 

from the indoor air. Some of the heat comes from water vapor (humidity) as it condenses on the 

evaporator coil. 

C In heat pumps, the role of the condenser and evaporator reverses in the heating mode, but the names remain 

the same. 

4-23 
EE-RM/STD-98-440 ',°c 

\ ~( I4.4.2 Technically Feasible Efficiencies

Technical feasibility implies that a system is not only theoretically possible, but is capable

of being designed, constructed, and operated. A technically feasible system may be quite costly or

may exceed constraints such as size or comfort and may, therefore, not be commercially practical.

4.4.2.1 Carnot Efficiency

The ideal efficiency of a vapor compressor cycle can be expressed in terms of its comparison

to the efficiency of a Carnot cycle. The Carnot cycle is an ideal cycle because it is perfectly

reversible. It is impossible for real equipment to achieve Carot efficiency because real processes

are not reversible. For the EER test, the outdoor and indoor air temperatures are 95°F and 80°F

respectively. The efficiency of a Carot cycle operated under those conditions is 123 EER.d

However, in practice, the requirement for dehumidification lowers the evaporator temperature.

Assuming that the air conditioner is designed to lower the indoor wet bulb temperature from 67°F

to 62°F, both at a 77°F indoor dry bulb temperature, the evaporator must cool the indoor air to its

dew point temperature of 52°F. The efficiency of a Carnot cycle operating between 52°F and 95°F

is 41 EER. It is theoretically, but not technically, possible to build a system that approaches this

efficiency rating.

4.4.2.2 Practical Barriers to Carnot Cycle Equipment

The use of an expansion valve or orifice in conventional air conditioners results in

superheated vapor that must be returned to a liquid in the condenser. A Carnot system would replace

the expansion device with a turbine or other mechanical expander that could generate power as the

refrigerant expands. The power generated would then be used to power the compressor. The Carnot

system also would use another compressor to raise the pressure of the refrigerant to its saturation

pressure before it reaches the condenser. The added cost and maintenance associated with the extra

compressor and power transmission equipment is prohibitive for residential applications.

Furthermore, each piece of real equipment would contribute inefficiencies that would reduce the

overall effectiveness of the system.

4.4.2.3 Irreversibilities

As an ideal cycle, the Carnot cycle is comprised of a set of perfectly reversible processes.

Real cycles, on the other hand, contain several imperfections that result in irreversible processes.

These include:

d The formula for determining First Law efficiency in EER is 3.412 *T,1(T7T,) where T, and T,, are the lowest

and highest temperatures in the system in Rankine (0°F = 460 R).

4-24

V,

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 '* 2..0'6 

4.4.2 Technically Feasible Efficiencies 

Technical feasibility implies that a system is not only theoretically possible, but is capable 

of being designed, constructed, and operated. A technically feasible system may be quite costly or 

may exceed constraints such as size or comfort and may, therefore, not be commercially practical. 

4.4.2.1 Carnot Efficiency 

The ideal efficiency of a vapor compressor cycle can be expressed in terms of i ts comparison 

to the efficiency of a Carnot cycle. The Carnot cycle is an ideal cycle because it is perfectly 

reversible. It is impossible for real equipment to achieve Carnot efficiency because real processes 

are not reversible. For the EER test, the outdoor and indoor air temperatures are 95°F and 80°F 

respectively. The efficiency of a Carnot cycle operated under those conditions is 123 EER. d 

However, in practice, the requirement for dehumidification lowers the evaporator temperature. 

Assuming that the air conditioner is designed to lower the indoor wet bulb temperature from 67°F 

to 62°F, both at a 77°F indoor dry bulb temperature, the evaporator must cool the indoor air to its 

dew point temperature of 52°F. The efficiency of a Carnot cycle operating between 52°F and 95°F 

is 41 EER. It is theoretically, but not technically, possible to build a system that approaches this 

efficiency rating. 

4.4.2.2 Practical Barriers to Carnot Cycle Equipment 

The use of an expansion valve or orifice in conventional air conditioners results in 

superheated vapor that must be returned to a liquid in the condenser. A Carnot system would replace 

the expansion device with a turbine or other mechanical expander that could generate power as the 

refrigerant expands. The power generated would then be used to power the compressor. The Carnot 

system also would use another compressor to raise the pressure of the refrigerant to its saturation 

pressure before it reaches the condenser. The added cost and maintenance associated with the extra 

compressor and power transmission equipment is prohibitive for residential applications. 

Furthermore, each piece of real equipment would contribute inefficiencies that would reduce the 

overall effectiveness of the system. 

4.4.2.3 Irreversibilities 

As an ideal cycle, the Carnot cycle is comprised of a set of perfectly reversible processes. 

Real cycles, on the other hand, contain several imperfections that result in irreversible processes. 

These include: 

d The fonnula for detennining First Law efficiency in EER is 3.412 ·TAT JrTL) where TL and TJI are the lowest 

and highest temperatures in the system in Rankine (O°F = 460 R). 

4-24 
EE-RM/STD-98-440 -' r2,D

gt* Pressure drops due to fluid friction as the refrigerant and lubricant flows through the

system

0 Transfer of heat to the environment at points other than the heat exchangers

* Inefficient compression and expansion due to friction heating and heat transfer

between the refrigerant and the compressor or expansion valve

* Compressor motor inefficiency and transfer of heat from the compressor motor to the

refrigerant

The 1997 ASHRAE Handbook- Fundamentals (F-1.13) gives some relative values for

sources ofirreversibility in a 2-ton refrigeration system operating between the temperatures of20°F

and 90°F (Table 4.15).

Table 4.15 Sources of Irreversibility in a

Conventional Refrigerator

Component Fraction of Total

Irreversibility (%)

Evaporator 19

Suction Line 4

Compressor 32

Discharge Line 6

Condenser 17

Liquid Line 0

Expansion Device 23

Source: 1997 ASHRAE Handbook

There is also significant irreversibility associated with the transfer of heat at the heat

exchangers. The Carnot cycle assumes that there is no temperature difference between the heat

exchangers and their surroundings. For this to be possible, the heat exchanger surfaces have to be

infinitely large or the heat transfer coefficient would have to be infinitely high.

4.4.2.4 Practical Barriers to Eliminating Irreversibilities

Manufacturers can do several things to reduce irreversibilities, but because of various

thermodynamic and operating constraints, they cannot eliminate them altogether:

Actual systems must maintain a high enough temperature difference between the

refrigerant and the air to result in sufficient heat transfer within a finite space. The

smaller the heat transfer surface, the higher the required temperature difference. The

4-25

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *' 2.. D"6 

• Pressure drops due to fluid friction as the refrigerant and lubricant flows through the 

system 

o Transfer of heat to the environment at points other than the heat exchangers 

• Inefficient compression and expansion due to friction heating and heat transfer 

between the refrigerant and the compressor or expansion valve 

• Compressor motor inefficiency and transfer of heat from the compressor motor to the 

refrigerant 

The 1997 ASHRAE Handbook- Fundamentals (F-l.13) gives some relative values for 

sources of irreversibility in a 2-ton refrigeration system operating between the temperatures of 20°F 

and 90°F (Table 4.15). 

Table 4.15 Sources of Irreversibility in a 

Conventional Refrigerator 

Component 

Evaporator 

Suction Line 

Compressor 

Discharge Line 

Condenser 

Liquid Line 

Fraction of Total 

Irreversibility (%) 

19 

4 

32 

6 

17 

o 

Expansion Device 23 

Source: 1997 ASHRAE Handbook 

There is also significant irreversibility associated with the transfer of heat at the heat 

exchangers. The Camot cycle assumes that there is no temperature difference between the heat 

exchangers and their surroundings. For this to be possible, the heat exchanger surfaces have to be 

infinitely large or the heat transfer coefficient would have to be infinitely high. 

4.4.2.4 Practical Barriers to Eliminating Irreversibilities 

Manufacturers can do several things to reduce irreversibilities, but because of various 

thermodynamic and operating constraints, they cannot eliminate them altogether: 

• Actual systems must maintain a high enough temperature difference between the 

refrigerant and the air to result in sufficient heat transfer within a fmite space. The 

smaller the heat transfer surface, the higher the required temperature difference. The 

4-25 
EE-RM/STD-98-440 - '2j

impact of this constraint is significant. For example, a temperature difference of25°F

at the condenser and 10°F at the evaporator reduces the maximum attainable cycle

efficiency to 22 EER.

* Refrigerant velocities in actual systems must be high enough to entrain the

compressor lubricant and return it to compressor. This limits tube diameters and

results in unavoidable drops in pressure.

* Cost, size, weight, and maintenance considerations all prevent the substitution of a

mechanical expander for the expansion device in conventional residential systems.

However, such a substitution is technically feasible.

* Insulation of lines and components can be highly effective, but would have only a

slight impact on system efficiency. Cost is the primary constraint, although a highly

insulated system is technically feasible.

* Clearances in the compressor can be reduced to lessen internal circulation between

high and low pressure zones. This is technically feasible to a point, but increases cost.

4.4.2.5 Parasitics

Electric power consumed by components other than the compressor are called parasitics. 4~( ~Equipment parasitics consume system power and affect system EER and SEER ratings, but are not

accounted for in the calculation of the vapor-compression cycle efficiency. Fan motors are the most

significant of these. Controls are another example. Parasitic requirements can account for up to

25 percent of the power consumed in a conventional residential air conditioner.

4.4.2.6 Practical Barriers to Eliminating Parasitic Losses

Again, manufacturers have a few options for reducing parasitic losses, but they cannot

eliminate them:

Fan power can be reduced by improving fan aerodynamics, increasing motor

efficiency, and improving air flow in the equipment cabinet. Aerodynamic and

airflow improvements typically signify slower, larger fans and contoured cabinets.

Size and cost are primary considerations, although significant improvements over

conventional systems are technically feasible.

* Heat exchangers can be designed that impose less air resistence also reduce fan

power (e.g. tubes without fins). However, they may reduce the coil's ability to

effectively transfer heat and cause a countervailing increase in compressor power.

4-26

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-9S-440 "* '2.u~ 

impact of this constraint is significant. For example, a temperature difference of 2 5°F 

at the condenser and 10°F at the evaporator reduces the maximum attainable cycle 

efficiency to 22 EER. 

• Refrigerant velocities in actual systems must be high enough to entrain the 

compressor lubricant and return it to compressor. This limits tube diameters and 

results in unavoidable drops in pressure. 

• Cost, size, weight, and maintenance considerations all prevent the substitution of a 

mechanical expander for the expansion device in conventional residential systems. 

However, such a substitution is technically feasible. 

• Insulation of lines and components can be highly effective, but would have only a 

slight impact on system efficiency. Cost is the primary constraint, although a highly 

insulated system is technically feasible. 

• Clearances in the compressor can be reduced to lessen internal circulation between 

high and low pressure zones. This is technically feasible to a point, but increases cost. 

4.4.2.5 Parasitics 

Electric power consumed by components other than the compressor are called parasitics. 

Equipment parasitics consume system power and affect system EER and SEER ratings, but are not 

accounted for in the calculation of the vapor-compression cycle efficiency. Fan motors are the most 

significant of these. Controls are another example. Parasitic requirements can account for up to 

25 percent of the power consumed in a conventional residential air conditioner. 

4.4.2.6 Practical Barriers to Eliminating Parasitic Losses 

Again, manufacturers have a few options for reducing parasitic losses, but they cannot 

eliminate them: 

• Fan power can be reduced by improving fan aerodynamics, increasing motor 

efficiency, and improving air flow in the equipment cabinet. Aerodynamic and 

airflow improvements typically signify slower, larger fans and contoured cabinets. 

Size and cost are primary considerations, although significant improvements over 

conventional systems are technically feasible. 

• Heat exchangers can be designed that impose less air resistence also reduce fan 

power (e.g. tubes without fins). However, they may reduce the coil's ability to 

effectively transfer heat and cause a countervailing increase in compressor power. 

4-26 
EE-RM/STD-98-440 <"°©

Still, coil designs that are capable of reducing air resistence while maintaining coil

'~C_:~~ ~~effectiveness are technically feasible.

4.4.2.7 Max Tech

Starting with a theoretical efficiency of 41 EER, and assuming that parasitics and

irreversibilities are kept to a minimum while maintaining reasonable constraints on heat exchanger

size, the technically feasible rating for a residential air conditioner is expected to be on the order of

30 EER. However, such a system would not be commercially practical since it would require an

expander and would possess heat exchangers that would make the system too large for residential

service.

4.4.3 Commercially Practical Efficiencies

Given the conventional use of an expansion valve or orifice, condenser and evaporator size

limitations, and projected improvements in compressor and heat exchanger technology, the highest

efficiency level expected to be commercially practical for a 3-ton system is on the order of 16 EER

by 2007. According to the ARI Unitary Directory (Feb - Jul 1998), the highest EER available in that

capacity currently is 14.65 EER. The highest EER available in any size range is 15.15 in a 47,000

BTU (nearly 4 ton) system.

Although EER is a straightforward measure of equipment efficiency at a particular set of test

conditions, the federal efficiency standard is based on the Seasonal Energy Efficiency Rating, or

SEER test. The SEER test attempts to quantify the energy consumed by an air conditioning system

over an entire cooling season in a typical U.S. home as a function of the cooling load. Although the

SEER test procedure differs with the type of system being rated, it favors equipment that performs

most efficiently at an 82°F outdoor ambient temperature-much lower than the 95°F EER testpoint.

The SEER test also considers cyclic losses caused by equipment startup and shutdown.

There is no direct relationship between EER and SEER across product types. However, there

are strong correlations in systems with single capacity, single speed compressors and in systems that

are totally modulating (see Figure 4.6). Assuming a commercially feasible limit of 16 EER, the

relationship would suggest a potential commercially feasible SEER rating of 20 SEER. However,

given that we are not aware of any equipment or prototype that has ever exceeded 18 SEER, we

would identify 18 SEER as the Max Tech level to be used in the rulemaking.

It is important to note that only about half of all air conditioner condensers sold are paired

with fancoils. The other half are paired with cased coils and therefore are not capable of using

evaporator blower energy savings or fan modulation to raise their SEER ratings. For these cased coil

systems, the Max Tech selection would be substantially less than the 18 SEER identified for fancoil

systems. A closer estimate would be approximately 14.5 SEER. However, since fancoil and cased

4-27

(:

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~~~ 0'b 

Still, coil designs that are capable of reducing air resistence while maintaining coil 

effectiveness are technically feasible. 

4.4.2.7 Max Tech 

Starting with a theoretical efficiency of 41 EER, and assuming that parasitics and 

irreversibilities are kept to a minimum while maintaining reasonable constraints on heat exchanger 

size, the technically feasible rating for a residential air conditioner is expected to be on the order of 

30 EER. However, such a system would not be commercially practical since it would require an 

expander and would possess heat exchangers that would make the system too large for residential 

scyrvice. 

4.4.3 Commercially Practical Efficiencies 

Given the conventional use of an expansion valve or orifice, condenser and evaporator size 

limitations, and projected improvements in compressor and heat exchanger technology, the highest 

efficiency level expected to be commercially practical for a 3-ton system is on the order of 16 EER 

by 2007. According to theARl Unitary Directory (Feb -lui 1998), the highest EER available in that 

capacity currently is 14.65 EER. The highest EER available in any size range is 15.15 in a 47,000 

BTU (nearly 4 ton) system. 

Although EER is a straightforward measure of equipment efficiency at a particular set oftest 

conditions, the federal efficiency standard is based on the Seasonal Energy Efficiency Rating, or 

SEER test. The SEER test attempts to quantify the energy consumed by an air conditioning system 

over an entire cooling season in a typical U.S. home as a function of the cooling load. Although the 

SEER test procedure differs with the type of system being rated, it favors equipment that performs 

most efficiently at an 82°F outdoor ambient temperature-much lower than the 95°F EER testpoint. 

The SEER test also considers cyclic losses caused by equipment startup and shutdown. 

There is no direct relationship between EER and SEER across product types. However, there 

are strong correlations in systems with single capacity, single speed compressors and in systems that 

are totally modulating (see Figure 4.6). Assuming a commercially feasible limit of 16 EER, the 

relationship would suggest a potential commercially feasible SEER rating of 20 SEER. However, 

given that we are not aware of any equipment or prototype that has ever exceeded 18 SEER, we 

would identify 18 SEER as the Max Tech level to be used in the rulemaking. 

It is important to note that only about half of all air conditioner condensers sold are paired 

with fancoils. The other half are paired with cased coils and therefore are not capable of using 

evaporator blower energy savings or fan modulation to raise their SEER ratings. For these cased coil 

systems, the Max Tech selection would be substantially less than the 18 SEER identified for fancoil 

systems. A closer estimate would be approximately 14.5 SEER. However, since fancoil and cased 

4-27 
EE-RM/STD-98-440 t 2- 0

C("~. ~coil systems are not considered to be separate product classes, the Max Tech used must be the

highest efficiency attainable by any member of the class. Still, if manufacturers are to be able to sell

cased coil equipment, the standard level must remain below 14.5 SEER.

4.4.4 Prospects for Near-Term Efficiency Gains

The commercially practical efficiencies outlined above exceed the best efficiency of today's

equipment by over 1 EER (6 percent) and 2 SEER (10 percent). That improvement requires advances

in several system components.

The compressor would be the first place to look for efficiency gains, but as Figure 4.3

illustrates, compressor efficiency has been topping out after rapidly increasing over the past two

decades. Compressor manufacturers expect no more than a 3 percent increase in compressor

efficiency by 2007.

\.~~~~ / .--

OA40

I960 19o0 L980 1990 2000 2010

Courtesy of Copeland Corporation (1998)

Figure 4.3 Historical Compressor EER Improvements

According to some manufacturers, fan motors and improved air flow present the greatest

potential for efficiency gains. Conventional permanent split capacitor (PSC) motors operate at

typically 60 percent efficiency. Electrically commutated motors (ECMs) can boost that to more than

85 percent. However, the highest efficiency systems already incorporate ECMs, and there is no

prospect for further efficiency improvement in ECMs the near future. There may be opportunities

to improve internal air flow and slightly reduce fan power consumption in both the indoor and

outdoor units. This would rely on improvements in fan design and cabinet configuration and

contouring.

4-28

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *' 1.- O~ 

coil systems are not considered to be separate product classes, the Max Tech used must be the 

highest efficiency attainable by any member of the class. Still, if manufacturers are to be able to sell 

cased coil equipment, the standard level must remain below 14.5 SEER. 

4.4.4 Prospects for Near-Term Efficiency Gains 

The commercially practical efficiencies outlined above exceed the best efficiency of today' s 

equipment by over 1 EER ( 6 percent) and 2 SEER (1 0 percent). That improvement requires advances 

in several system components. 

The compressor would be the first place to look for efficiency gains, but as Figure 4.3 

illustrates, compressor efficiency has been topping out after rapidly increasing over the past two 

decades. Compressor manufacturers expect no more than a 3 percent increase in compressor 

efficiency by 2007. 

~ 

~ 0.75 Q,I 

~ 0.70 

r.l0,(0 

'-l 

i(l8) 

100 

!o.s; 

.., 

-';0.:0 

c 

~0A5 '-l 

:!OAO 

'-

~ 

/ 

/ 

/ 

/ 

./' 

- 1900 1m NI) 1990 UI) 2010 

\ear 

Counesy of Copeland Corporation (1998) 

Figure 4.3 Historical Compressor EER Improvements 

According to some manufacturers, fan motors and improved air flow present the greatest 

potential for efficiency gains. Conventional pennanent split capacitor (PSC) motors operate at 

typically 60 percent efficiency. Electrically commutated motors (ECMs) can boost that to more than 

85 percent. However, the highest efficiency systems already incorporate ECMs, and there is no 

prospect for further efficiency improvement in ECMs the near future. There may be oppo~ties 

to improve internal air flow and slightly reduce fan power consumption in both the indoor and 

outdoor units. This would rely on improvements in fan design and cabinet configuration and 

contouring. 

4-28 
EE-RM/STD-98-440 C O°

Friction losses related to refrigerant flow restrictions are difficult to reduce without increasing

the flow diameters within the system. However, larger tube sizes reduce heat transfer and impede

oil return. Equipment must meet these types of size and operational constraints in order to be

considered commercially practical. Therefore, no near-term reductions in refrigerant flow resistance

are expected.

Heat exchanger improvements can improve system efficiency by lowering condensing

temperatures, increasing evaporator temperatures, or lowering fan power consumption. Current

round tube, plate fin (RTPF) technology is mature, however, and no significant advances are

expected. Other heat exchanger designs, such as microchannel, can be more effective, and could

raise the EER achievable in residential systems slightly higher than the 16 EER level we identified

as the technological limit.

4.4.5 Not-in-kind Cooling Technologies

Although the vapor compression cycle dominates air conditioning technology, other not-inkind cooling effects exist that are not subject to many factors that constrain the efficiency of

conventional equipment. Four not-in-kind technologies are absorption, evaporative, dessicant and

thermoelectric cooling. None of these is compatible with the definition of central air conditioners

in NAECA', so are not considered further.

(: ~ 4.5 EMERGING TECHNOLOGIES

The reverse engineering cost estimation methodology lends itself to the analysis of products

that are currently available. However, assessing the effects of emerging technologies that have not

found their way into the market requires additional analysis based on those results. Emerging

technologies can be incorporated into a reverse engineering analysis if their effects on the cost and

efficiency of conventional systems are known.

For example, assume that a manufacturer is developing a new high-efficiency compressor,

and that modeling data suggest that replacing a conventional compressor with the advanced

compressor could boost system efficiency from 10 SEER to 11 SEER. Knowing the price of the new

compressor, the cost of the 11 SEER system can be determined by adding the cost of the new

compressor to the cost of the 10 SEER components. If the difference in price between the

conventional and new compressors is less than the difference in manufacturing cost between the

balance of the two systems, the new compressor will lower the cost-efficiency curve at 11 SEER.

c The term "central air conditioner" means a product, other than a packaged terminal air conditioner, which:

(A) is powered by single phase electric current; (B) is air-cooled; (C) is rated below 65,000 Btu per hour; (D) is not

contained within the same cabinet as a furnace the rated capacity of which is above 225,000 Btu per hour; and (E) is a

heat pump or a cooling only unit.

4-29

EE-RM-STD-98-440 COMMENT 208

EE.RM/STD-98-440 ~ L 0'1 

Friction losses related to refrigerant flow restrictions are difficult to reduce without increasing 

the flow diameters within the system. However, larger tube sizes reduce heat transfer and impede 

oil return. Equipment must meet these types of size and operational constraints in order to be 

considered commercially practical. Therefore, no near-term reductions in refrigerant flow resistance 

are expected. 

Heat exchanger improvements can improve system efficiency by lowering condensing 

temperatures, increasing evaporator temperatures, or lowering fan power consumption. Current 

round tube, plate fm (RTPF) technology is mature, however, and no significant advances are 

expected. Other heat exchanger designs, such as microchannel, can be more effective, and could 

raise the EER achievable in residential systems slightly higher than the 16 EER level we identified 

as the technological limit. 

4.4.5 Not-in-kind Cooling Technologies 

Although the vapor compression cycle dominates air conditioning technology, other not-inkind cooling effects exist that are not subject to many factors that constrain the efficiency of 

conventional equipment. Four not-in-kind technologies are absorption, evaporative, dessicant and 

thermoelectric cooling. None of these is compatible with the defmition of central air conditioners 

in NAECN, so are not considered further. 

4.5 EMERGING TECHNOLOGIES 

The reverse engineering cost estimation methodology lends itself to the analysis ofproducts 

that are currently available. However, assessing the effects of emerging technologies that have not 

found their way into the market requires additional analysis based on those results. Emerging 

technologies can be incorporated into a reverse engineering analysis if their effects on the cost and 

efficiency of conventional systems are known. 

For example, assume that a manufacturer is developing a new high-efficiency compressor, 

and that modeling data suggest that replacing a conventional compressor with the advanced 

compressor could boost system efficiency from 10 SEER to 11 SEER. Knowing the price of the new 

compressor, the cost of the 11 SEER system can be determined by adding the cost of the new 

compressor to the cost of the 10 SEER components. If the difference in price between the 

conventional and new compressors is less than the difference in manufacturing cost between the 

balance of the two systems, the new compressor will lower the cost-efficiency curve at 11 SEER. 

e The tenn "central air conditioner" means a product, other than a packaged terminal air conditioner, which: 

(A) is powered by single phase electric current; (B) is air-cooled; (C) is rated below 65,000 Btu per hour; (D) is not 

contained within the same cabinet as a furnace the rated capacity of which is above 225,000 Btu per hour; and (E) is a 

heat pump or a cooling only unit. 

4-29 
EE-RM/STD-98-440 ' 0Z°

This technique can assess the impacts of more than one emerging technology at a time.

Suppose test data show that substituting an advanced heat exchanger into a conventional system can

have the same effect, boosting efficiency from 10 SEER to 11 SEER. Since the compressor and the

heat exchanger are independent, their cost impact on the system can be estimated as the product of

both individual impacts on the system. Components that are not perfectly independent would have

a lesser combined effect.

Although convenient and transparent, this technique is only an estimate of the potential

impact of emerging technologies on the conventional cost-efficiency relationship. When certainty

is essential, the technique cannot substitute for testing or modeling. The emerging technology

analysis can suggest the likely effect on the reverse engineering cost-efficiency curve, but should not

be considered definitive.

4.5.1 Technological Advances to be Considered

Chapter 3 introduced the emerging technologies that pass the NAECA screening criteria:

* Variable speed motor control (DC controllers and AC inverters)

· Advanced compressors (Bristol TS", Copeland Modulating ScrollM)

* Microchannel heat exchangers

This section further explains these technologies and assesses their potential impacts on the

production costs of the conventional systems estimated using reverse engineering.

4.5.1.1 Variable Speed Motor Controls

Because of practical limitations on equipment efficiency as measured by EER, variable speed

(VS) systems dominate the market over 14 SEER, and it is rare to find a system over 13 SEER that

does not incorporate a variable speed indoor blower. In addition to the SEER benefits provided by

VS systems, they are more flexible than single-speed systems and offer consumers added comfort

and lower energy consumption.

VS systems currently use either alternating current (AC) inverters or direct current (DC)

controllers depending on the motor type. For example, a type of permanent magnet DC motor, the

electrically commutated motor, (ECM) is now the typical choice as an indoor fan motor in high

SEER systems. The SEER benefit is a combination of higher motor efficiency (80 percent versus 60

percent) and variable speed capability.

With compressor and fan motor efficiencies already nearing their practical limits,

manufacturers will continue to turn to VS systems for cost effective SEER boosts. Continued

advances in power supply and digital control technologies will make VS systems more reliable and

4-30

A

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 W 1o~ 

This technique can assess the impacts of more than one emerging technology at a time. 

Suppose test data show that substituting an advanced heat exchanger into a conventional system can 

have the same effect, boosting efficiency from 10 SEER to 11 SEER. Since the compressor and the 

heat exchanger are independent, their cost impact on the system can be estimated as the product of 

both individual impacts on the system. Components that are not perfectly independent would have 

a lesser combined effect. 

Although convenient and transparent, this technique is only an estimate of the potential 

impact of emerging technologies on the conventional cost-efficiency relationship. When certainty 

is essential, the technique cannot substitute for testing or modeling. The emerging technology 

analysis can suggest the likely effect on the reverse engineering cost-efficiency curve, but should not 

be considered defInitive. 

4.5.1 Technological Advances to be Considered 

Chapter 3 introduced the emerging technologies that pass the NAECA screening criteria: 

• Variable speed motor control (DC controllers and AC inverters) 

• Advanced compressors (Bristol TS .... , Copeland Modulating ScrollTM) 

• Microchannel heat exchangers 

This section further explains these technologies and assesses their potential impacts on the 

production costs of the conventional systems estimated using reverse engineering. 

4.5.1.1 Variable Speed Motor Controls 

Because of practical limitations on equipment efficiency as measured by EER, variable speed 

(VS) systems dominate the market over 14 SEER, and it is rare to fInd a system over l3 SEER that 

does not incorporate a variable speed indoor blower. In addition to the SEER benefIts provided by 

VS systems, they are more flexible than single-speed systems and offer consumers added comfort 

and lower energy consumption. 

VS systems currently use either alternating current (AC) inverters or direct current (DC) 

controllers depending on the motor type. For example, a type of permanent magnet DC motor, the 

electrically commutated motor, (ECM) is now the typical choice as an indoor fan motor in high 

SEER systems. The SEER benefIt is a combination of higher motor efficiency (80 percent versus 60 

percent) and variable speed capability. 

With compressor and fan motor efficiencies already nearing their practical limits, 

manufacturers will continue to turn to VS systems for cost effective SEER boosts. Continued 

advances in power supply and digital control technologies will make VS systems more reliable and 

4-30 
EE-RM/STD-98-440 : 20 <

less costly. These trends will tend to drive the use of variable speed systems in lower SEER levels

and will lower the cost of systems over 14 SEER. Manufacturers can choose to give up some of the

SEER gains by making high efficiency systems smaller and more marketable.

With all their potential benefits, VS systems have some significant drawbacks that could

prevent manufacturers from favoring them in their mass market products. First, many residential

service technicians have not been exposed to control systems as complex as those found in VS

equipment. Manufacturers are likely to introduce such systems slowly to allow contractors ample

time to hire and train qualified technicians so that VS systems do not gain a reputation for poor

quality and high repair costs. Second, power electronics generate electrical noise. If not properly

filtered, the noise can affect sensitive electronics elsewhere in the power grid and can generate radio

interference. Stricter filtering requirements would add to the cost of VS equipment and may make

them less cost effective.

While VS fan motors are certainly viable, the largest SEER impact comes from incorporating

VS technology into compressors. The current SEER test does not offer VS systems much of a benefit

over two-capacity equipment, so existing VS compressor controls are generally not cost effective.

However, developments in switched reluctance motors (SRMs) and ECMs for hermetic compressors

could ultimately offer a true VS compressor at only a slight premium over a single-speed compressor

equipment.

4.5.1.2 Advanced Compressors

Compressor manufacturers are pursuing advanced designs that can raise EER and SEER

ratings. Most of these efforts are still confidential, but manufacturers have announced two products

that show particular potential. Both the Copeland Modulated ScrollM and the Bristol Twin-Single,

or TSTM, reciprocating compressor will offer original equipment manufacturers (OEMs) the ability

to produce a simple two-capacity system that our analysis suggests will be cost effective in the range

of existing modulating systems.

The TSTM deactivates one of its two pistons when running in reverse. A TSTM system requires

additional compressor motor controls and a two-speed indoor blower motor inverter. York began

offering TSM systems in an upgraded version of its Stellar product line in the summer of 1999.

The other advances in compressor technology come from Copeland who introduced its

Modulated ScrollT technology in early 2000. The Modulated ScrollTM also functions as a twocapacity compressor, and OEMs would use it for the same reasons. Rather than reversing direction,

the Modulating ScrollT bypasses refrigerant internally to achieve a lower capacity at a single speed.

The compressor offers many of the same advantages as Bristol's TSTM and could provide an

alternative in larger, quieter systems where the scrolls have held the advantage over reciprocating

compressors.

4-31

EE-RM-STD-98-440 COMMENT 208

EE.RMjSTD-98-440 % 2. D~ 

less costly. These trends will tend to drive the use of variable speed systems in lower SEER levels 

and will lower the cost of systems over 14 SEER. Manufacturers can choose to give up some of the 

SEER gains by making high efficiency systems smaller and more marketable. 

With all their potential benefits, VS systems have some significant drawbacks that could 

prevent manufacturers from favoring them in their mass market products. First, many residential 

service technicians have not been exposed to control systems as complex as those found in VS 

equipment. Manufacturers are likely to introduce such systems slowly to allow contractors ample 

time to hire and train qualified technicians so that VS systems do not gain a reputation for poor 

quality and high repair costs. Second, power electronics generate electrical noise. If not properly 

filtered, the noise can affect sensitive electronics elsewhere in the power grid and can generate radio 

interference. Stricter filtering requirements would add to the cost ofVS equipment and may make 

them less cost effective. 

While VS fan motors are certainly viable, the largest SEER impact comes from incorporating 

VS technology into compressors. The current SEER test does not offer VS systems much of a benefit 

over two-capacity equipment, so existing VS compressor controls are generally not cost effective. 

However, developments in switched reluctance motors (SRMs) and ECMs for hermetic compressors 

could ultimately offer a true VS compressor at only a slight premium over a single-speed compressor 

equipment. 

4.5.1.2 Advanced Compressors 

Compressor manufacturers are pursuing advanced designs that can raise EER and SEER 

ratings. Most of these efforts are still confidential, but manufacturers have announced two products 

that show particular potential. Both the Copeland Modulated ScrollTM and the Bristol Twin-Single, 

or TSTM, reciprocating compressor will offer original equipment manufacturers (OEMs) the ability 

to produce a simple two-capacity system that our analysis suggests will be cost effective in the range 

of existing modulating systems. 

The TSTM deactivates one of its two pistons when running in reverse. A TSTM system requires 

additional compressor motor controls and a two-speed indoor blower motor inverter. York began 

offering TSTM systems in an upgraded version of its Stellar product line in the summer of 1999. 

The other advances in compressor technology come from Copeland who introduced its 

Modulated ScrollTM technology in early 2000. The Modulated ScrollTM also functions as a twocapacity compressor, and OEMs would use it for the same reasons. Rather than reversing direction, 

the Modulating ScrollTM bypasses refrigerant internally to achieve a lower capacity at a single speed. 

The compressor offers many of the same advantages as Bristol's TSTM and could provide an 

alternative in larger, quieter systems where the scrolls have held the advantage over reciprocating 

compressors. 

4-31 
EE-RM/STD-98-440 2>DD 

(€"' ,,,~:t compressors perform best at PModulating low capacity. At high capacity, they are likely to be

slightly less efficient than their single capacity counterparts. To fully utilize the potential of full

modulation in a complete system, we assume that low cost two speed inverters are used to drive

indoor and outdoor fans when a modulating compressor is used.

4.5.1.3 Microchannel Heat Exchangers

Several companies produce a heat exchanger for the automobile industry known as

microchannel. Unlike a conventional round tube plate fin (RTPF) heat exchanger, the microchannel

has a rectangular cross-section containing several small channels through which refrigerant passes.

Fins pass between the tubes and are brazed to the tubes. All components are aluminum. The resulting

microchannel coil transfers more heat per unit of face area than does an RTPF coil of comparable

capacity. It does so with a lower airside pressure drop, yielding reduced fan power consumption.

These benefits can improve system EER and SEER ratings in residential air conditioners when

compared to a condenser coil of the same face area. Because the microchannel fin arrangement

prevents natural condensate drainage, heat pump and evaporator coil applications are not

forthcoming.

Although the microchannel heat exchanger costs more to produce than a conventional RTPF

coil, the microchannel heat exchanger offers particular opportunities to reduce the size and weight

of the heat exchanger. Those advantages led to the rapid and almost total transition of the automobile

air conditioner market to microchannel technology. Microchannel heat exchangers also offer

significant reductions in refrigerant charge, which suggests that they reduce compressor failures due

to refrigerant slugging. A reduction in refrigerant charge can also be attractive as the price of HCFC22 rises and more expensive alternative refrigerants take its place.

Even after several years of dominance in the automobile market, the microchannel heat

exchanger has not penetrated the building air conditioning markets where size and weight constraints

are not as important. The cost advantages of reducing the size and weight of the condenser or the

capacity of the system have not outweighed the added costs and risk associated with the

microchannel technology in building applications. Several limitations and uncertainties are

particularly hindering the adoption of microchannel heat exchangers. First, microchannel

construction makes condensate removal much more challenging. That poses a serious barrier to the

adoption of the technology in evaporators and in heat pump condensers. Some manufacturers may

decide not to adopt the new technology if they cannot offer it in all of their products. Second, there

are concerns whether residential heat exchangers are proven to perform well under wide variations

in ambient temperatures given that they are considerably larger than automobile heat exchangers and

are configured differently. Third, compressor lubrication is entrained in the refrigerant, and

residential microchannel heat exchangers must display a proven ability to consistently return

lubricant to the compressor to avoid costly damage. Fourthly, manufacturers are concerned that

contractors will not be able to repair coil leaks effectively because of the difficulty of successfully

brazing aluminum in the field.

4-32

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 1f z 0'6 

Modulating compressors perfonn best at low capacity. At high capacity, they are likely to be 

slightly less efficient than their single capacity counterparts. To fully utilize the potential of full 

modulation in a complete system, we assume that low cost two speed inverters are used to drive 

indoor and outdoor fans when a modulating compressor is used. 

4.5.1.3 Microchannel Heat Exchangers 

Several companies produce a heat exchanger for the automobile industry known as 

microchannel. Unlike a conventional round tube plate fm (RTPF) heat exchanger, the microchannel 

, has a rectangular cross-section containing several small channels through which refrigerant passes. 

Fins pass between the tubes and are brazed to the tubes. All components are aluminum. The resulting 

microchannel coil transfers more heat per unit of face area than does an R TPF coil of comparable 

capacity. It does so with a lower airside pressure drop, yielding reduced fan power consumption. 

These benefits can improve system EER and SEER ratings in residential air conditioners when 

compared to a condenser coil of the same face area. Because the microchannel fm arrangement 

prevents natural condensate drainage, heat pump and evaporator coil applications are not 

forthcoming. 

Although the microchannel heat exchanger costs more to produce than a conventional RTPF 

coil, the microchannel heat exchanger offers particular opportunities to reduce the size and weight 

of the heat exchanger. Those advantages led to the rapid and almost total transition of the automobile 

air conditioner market to microchannel technology. Microchannel heat exchangers also offer 

significant reductions in refrigerant charge, which suggests that they reduce compressor failures due 

to refrigerant slugging. A reduction in refrigerant charge can also be attractive as the price ofHCFC22 rises and more expensive alternative refrigerants take its place. 

Even after several years of dominance in the automobile market, the microchannel heat 

exchanger has not penetrated the building air conditioning markets where size and weight constraints 

are not as important. The cost advantages of reducing the size and weight of the condenser or the 

capacity of the system have not outweighed the added costs and risk associated with the 

microchannel technology in building applications. Several limitations and uncertainties are 

particularly hindering the adoption of microchannel heat exchangers. First, microchannel 

construction makes condensate removal much more challenging. That poses a serious barrier to the 

adoption of the technology in evaporators and in heat pump condensers. Some manufacturers may 

decide not to adopt the new technology if they cannot offer it in all of their products. Second, there 

are concerns whether residential heat exchangers are proven to perfonn well under wide variations 

in ambient temperatures given that they are considerably larger than automobile heat exchangers and 

are configured differently. Third, compressor lubrication is entrained in the refrigerant, and 

residential microchannel heat exchangers must display a proven ability to consistently return 

lubricant to the compressor to avoid costly damage. Fourthly, manufacturers are concerned that 

contractors will not be able to repair coil leaks effectively because of the difficulty of successfully 

brazing aluminum in the field. 

4-32 
EE-RM/STD-98-440 0 k2

With the possible exception of condensate removal, none of these barriers seems

insurmountable, but without a clear cost advantage over conventional coils manufacturers have had

little incentive to make determined efforts to address them. Recent activity indicates the attitude may

be changing, however. Several major OEMs have performed limited testing of microchannel heat

exchangers in residential equipment. One small company, Peregrine Industries, offers a residential

condenser line based on microchannel technology for sale in coastal markets8. Thermal

Components, a supplier of heat exchangers, including microchannel, expects several air conditioner

OEMs to produce air conditioners utilizing microchannel condensers beginning later in 2000 and

extending into 2001.9 OEMs may be finding that microchannel heat exchangers offer advantages in

reductions of SKUs, shipping costs, warrantee costs, and condenser size that outweigh any

production cost disadvantage they may have. The transition to microchannel heat exchangers is

therefore a somewhat subjective business decision, and the future of microchannel technology in

residential air conditioner applications is difficult to predict with certainty.

There is unresolved intellectual property litigation surrounding microchannel technology.

It is possible that a few companies or even a single company could be granted exclusive rights to sell

and license microchannel heat exchangers in the United States.

4.5.2 Potential Cost Impacts of Emerging Technologies

Various OEMs and suppliers provided us with guidance of how to estimate the impacts of

each emerging technology on a system. We compiled that information and applied our own

judgement to develop guidelines for estimating the cost of a system utilizing a single emerging

technology at each efficiency level using the cost data generated by the reverse engineering analysis.

Those guidelines are presented :in Table 4.16. Since we intend to present only a roughly accurate

projection of the potential of emerging technologies to reduce system cost, we have not evaluated

prototype designs to verify the accuracy of our estimates, nor have we asked OEMs or suppliers to

verify our assumptions.

4-33

(:

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * :2~'6 

With the possible exception of condensate removal, none of these barriers seems 

insurmountable, but without a clear cost advantage over conventional coils manufacturers have had 

little incentive to make determined efforts to address them. Recent activity indicates the attitude may 

be changing, however. Several major OEMs have performed limited testing of microchannel heat 

exchangers in residential equipment. One small company, Peregrine Industries, offers a residential 

condenser line based on microchannel technology for sale in coastal markets8

• Thermal 

Components, a supplier of heat exchangers, including microchannel, expects several air conditioner 

OEMs to produce air conditioners utilizing microchannel condensers beginning later in 2000 and 

extending into 2001.9 OEMs may be fmding that microchannel heat exchangers offer advantages in 

reductions of SKUs, shipping costs, warrantee costs, and condenser size that outweigh any 

production cost disadvantage they may have. The transition to microchannel heat exchangers is 

therefore a somewhat subjective business decision, and the future of microchannel technology in 

residential air conditioner applications is difficult to predict with certainty. 

There is unresolved intellectual property litigation surrounding microchannel technology. 

It is possible that a few companies or even a single company could be granted exclusive rights to sell 

and license microchannel heat exchangers in the United States. 

4.5.2 Potential Cost Impacts of Emerging Technologies 

Various OEMs and suppliers provided us with guidance of how to estimate the impacts of 

each emerging technology on a system. We compiled that information and applied our own 

judgement to develop guidelines for estimating the cost of a system utilizing a single emerging 

technology at each efficiency level using the cost data generated by the reverse engineering analysis. 

Those guidelines are presented in Table 4.16. Since we intend to present only a roughly accurate 

projection of the potential of emerging technologies to reduce system cost, we have not evaluated 

prototype designs to verify the accuracy of our estimates, nor have we asked OEMs or suppliers to 

verify our assumptions. 

4-33 
EE-RM/STD-98-440 2 i?

Table 4.16 Key Assumptions used to Derive Emer ging Technology System Cost Estimates

Equipment VS Compressor Advanced Modulating Microchannel Heat Next Generation VS

Efficiency Motors Compressors Exchangers Fan Motors

(SEER)

10 -not applied- -not applied- 80% increase in -not appliedoutdoor coil costs, no

coil labor. 20%

decrease in cabinet

size and freight cost,

58% decrease in

refrigerant charge

11 -not applied- -not applied- Similar to 10 SEER -not appliedmodifications

12 -not applied- 10 SEER conventional Similar to 10 SEER -not appliedsystem with: modifications. Used

compressor cost 10 SEER compressor

+10%; outdoor unit price and 10 SEER

electronics + S30; condenser chassis.

indoor unit electronics

+ $25

13 -not applied- 11 SEER conventional Similar to 10 SEER -not appliedsystem with same modifications. Used

changes as 12 SEER 12 SEER compressor

price and 11 SEER r/i~~~~~~~~~~~~~~ ___________condenser chassis.

14 -not applied- 12 SEER conventional Similar to 10 SEER 14 SEER conventional

system with electrical modifications with system with $125

and compressor costs only 60% increase in indoor electronics

of the modified coil cost. Used 12

13 SEER system SEER compressor

price and condenser

chassis and 12 SEER

indoor electrical

materials

15 13 SEER 13 SEER conventional Similar to 14 SEER 15 SEER conventional

compressor system with electrical modifications. system with $125

$130 outdoor unit and compressor costs indoor unit electronics

electronics of the modified

13 SEER system

In cases where the emerging technology would obviously raise the cost of the system, we did

not develop a guideline or estimate the system cost, and "not applied" appears in Table 4.16.

Table 4.17 summarizes our conclusions regarding potential impact of each emerging

technology on a 3-ton split air conditioning system with a fancoil. The reverse engineering results

4-34

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 if' 2D~ 

Table 4.16 Kev Assumptions used to Derive Emenlng Techno ogy Svstem Cost Estimates 

Equipment 

Efficiency 

(SEER) 

to 

11 

12 

13 

14 

15 

VS Compressor 

Motors 

-not applied-

-not applied-

-not applied-

-not applied-

-not applied13 SEER 

compressor 

$130 outdoor unit 

electronics 

Advanced Modulating Microchannel Heat 

Compressors Exchangers 

-not applied- 80% increase in 

outdoor coil costs, no 

coil labor. 20% 

decrease in cabinet 

size and freight cost, 

58% decrease in 

refiigerantcharge 

-not applied- Similar to 10 SEER 

modifications 

10 SEER conventional Similar to 10 SEER 

system with: 

compressor cost 

+ I 0%; outdoor unit 

electronics + $30; 

indoor unit electronics 

+ $25 

modifications. Used 

10 SEER compressor 

price and 10 SEER 

condenser chassis. 

II SEER conventional Similar to 10 SEER 

system with same 

changes as 12 SEER 

12 SEER conventional 

system with electrical 

and compressor costs 

of the modified 

13 SEER system 

modifications. Used 

12 SEER compressor 

price and II SEER 

condenser chassis. 

Similar to to SEER 

modifications with 

only 60% increase in 

coil cost. Used 12 

SEER compressor 

price and condenser 

chassis and 12 SEER 

indoor electrical 

materials 

13 SEER conventional Similarto 14 SEER 

system with electrical 

and compressor costs 

of the modified 

13 SEER system 

modifications. 

Next Generation VS 

Fan Motors 

-not applied-

-not applied-

-not applied-

-not applied14 SEER conventional 

system with $125 

indoor electronics 

15 SEER conventional 

system with $125 

indoor unit electronics 

In cases where the emerging technology would obviously raise the cost of the system, we did 

not develop a guideline or estimate the system cost, and "not applied" appears in Table 4.16. 

Table 4.17 summarizes our conclusions regarding potential impact of each emerging 

technology on a 3-ton split air conditioning system with a fancoil. The reverse engineering results 

4-34 
EE-RM/STD-98-440 1 '°©

|C:~ 1captured in the CA C Cost v3.1 spreadsheet (Appendix B) were used to estimate the cost impacts of

emerging technologies by substituting components at each efficiency level in accordance with the

guidelines in Table 4.16.

We assume that OEMs will adopt a new technology only if it promises to lower the cost of

the system relative to conventional technologies. Therefore, if a technology tends to increase the cost

of a system, the amount of increase is not reported.

Table 4.17 Potential Impact of Emerging Technologies on the Production

Cost of 3-ton Split Air Conditioners with Fancoils by 2007

Efficiency VS Compressor Advanced Microchannel Next

Level Motors Modulating Heat Exchangers generation

Compressors VS Fan

Motors

10 - + - -

11 + + -5%

12 - - -2%

13 + - -1% 0%

14 + -22% -17% -7%

15 -- -23% -21% -5%

{/~ 1 16 ~~ -6% -27% - -5%

17 -6% - -_

+ Tends to raise production costs

- Not enough information to assess cost impacts

No emerging technology identified promises a clear benefit in equipment rated lower than

14 SEER. The incremental costs of applying the technology exceed the savings achieved in the

balance of the system. At 14 SEER and 15 SEER, however, advanced modulating compressors and

microchannel heat exchangers both have the potential to eliminate the need for costly variable speed

fan motor controls as well as reducing cabinet size and refrigerant charge.

Table 4.18 provides an assessment of the likelihood that the product will be the dominant

design choice in baseline equipment at the time a new standard becomes effective (2006) under a

standard level that is most favorable to it. This means that a product will be practical and functional

at price point acceptable for mass market products and will be the most attractive technology

employed. This assessment reflects the level of resistence to the broad adoption of a new technology

given the other viable alternatives.

4-35

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 "* 1.... O<"~ 

captured in the CAC Cost v3.1 spreadsheet (Appendix B) were used to estimate the cost impacts of 

emerging technologies by substituting components at each efficiency level in accordance with the 

guidelines in Table 4.16. 

We assume that OEMs will adopt a new technology only ifit promises to lower the cost of 

the system relative to conventional technologies. Therefore, if a technology tends to increase the cost 

of a system, the amount of increase is not reported. 

Table 4.17 Potential Impact of Emerging Technologies on the Production 

Cost of 3-ton Split Air Conditioners with Fancoils by 2007 

Efficiency VS Compressor Advanced Mic:roc:bannel j\ljext 

Level Motors Modulating Heat Excbangers generation 

Compressors VSFan 

Motors 

10 ... 

11 + + -5% 

12 -2% 

13 + ... -1% 0% 

14 + -22% -17% -7% 

IS .,. -23% -21% -5% 

16 ·6% -27% -5% 

17 ·6% 

+ Tends to raise production costs 

- Not enough infonnation to assess cost impacts 

Me 

No emerging technology identified promises a clear benefit in equipment rated lower than 

14 SEER. The incremental costs of applying the technology exceed the savings achieved in the 

balance of the system. At 14 SEER and 15 SEER, however, advanced modulating compressors and 

microchannel heat exchangers both have the potential to eliminate the need for costly variable speed 

fan motor controls as well as reducing cabinet size and refrigerant charge. 

Table 4.18 provides an assessment of the likelihood that the product will be the dominant 

design choice in baseline equipment at the time a new standard becomes effective (2006) under a 

standard level that is most favorable to it. This means that a product will be practical and functional 

at price point acceptable for mass market products and will be the most attractive technology 

employed. This assessment reflects the level of resistence to the broad adoption of a new technology 

given the other viable alternatives. 

4-35 
EE-RM/STD-98-440 ° ©

Table 4.18 Estimated Likelihood of Commercial Dominance in Baseline Equipment by

2006 Under Various Standard Levels

10 SEER 11 SEER 12 SEER 13 SEER

VS Compressor motors 0% 0% 0% 10%

Advanced modulating compressors 0% 0% 10% 30%

Microchannel heat exchangers 20% 20% 30% 40%

VS Fan Motors 0% 0% 10% 40%

The microchannel heat exchanger, since it offers cabinet size reductions without the added

complexity of controls and without requiring an indoor blower, has the highest potential of being

used in baseline equipment. However, along with other potential drawbacks, not being applicable

to indoor coil and heat pump applications limits its potential use in cooling-only condensers.

As Table 4.19 shows, for premium equipment with efficiency ratings higher than the

baseline, manufacturers will still likely choose a modulating technology option, although it is unclear

whether they would decide to do so rather than offer microchannel heat exchangers.

Table 4.19 Estimated Likelihood of Commercial Dominance in Premium Equipment by

2006 Under Various Standard Levels

10 SEER 11 SEER 12 SEER 13 SEER

VS Compressor motors 10% 10% 10% 10%

Advanced modulating compressors 20% 30% 60% 70%

Microchannel heat exchangers 20% 20% 30% 60%

VS Fan Motors 20% 20% 50% 90%

Finally, we considered the potential impact on system costs that could be achieved by

combining multiple technologies in a single system. Variable speed compressor motors and next

generation variable speed fan motors are not beneficial in a baseline system since a system utilizing

an advanced modulating compressor or microchannel heat exchanger would require neither of these

and would have a cost advantage. Therefore, the combination of the advanced modulating

compressor and the microchannel heat exchanger is likely to be the only combination of emerging

technologies that would be used in practice. Such a system would be a dqal-capacity microchannel

heat exchanger system designed primarily for low-capacity operation, incorporating a modulating

compressor and its associated controls. The low-capacity design reduces coil and cabinet sizes and

costs, but does not reduce the size of the compressor since compressor capacity is established at the

high capacity.

4-36

I

EE-RM-STD-98-440 COMMENT 208

EE-RM/STO-98-440 *;( 0 ~ 

Table 4.18 Estimated Likelihood of Commercial Dominance in Baseline Equipment by 

2006 Under Various Standard Levels 

10 SEER 11 SEER 12 SEER 13 SEER 

VS Compressor motors 0% 0% 0% 10% 

Advanced modulating compressors 0% 0% 10% 30% 

Microchannel heat exchangers 20% 20% 30% 40% 

VS Fan Motors 0% 0% 10% 40% 

The microchannel heat exchanger, since it offers cabinet size reductions without the added 

complexity of controls and without requiring an indoor blower, has the highest potential of being 

used in baseline equipment. However, along with other potential drawbacks, not being applicable 

to indoor coil and heat pump applications limits its potential use in cooling-only condensers. 

As Table 4.19 shows, for premium equipment with efficiency ratings higher than the 

baseline, manufacturers will still likely choose a modulating technology option, although it is unclear 

whether they would decide to do so rather than offer microchannel heat exchangers. 

Table 4.19 Estimated Likelihood of Commercial Dominance in Premium Equipment by 

2006 Under Various Standard Levels 

10 SEER 11 SEER 12 SEER 13 SEER 

VS Compressor motors 10% 10% 10% 10% 

Advanced modulating compressors 20% 30% 60% 70% 

Microchannel heat exchangers 20% 20% 30% 60% 

VS Fan Motors 20% 20% 50% 90% 

Finally, we considered the potential impact on system costs that could be achieved by 

combining multiple technologies in a single system. Variable speed compressor motors and next 

generation variable speed fan motors are not beneficial in a baseline system since a system utilizing 

an advanced modulating compressor or microchannel heat exchanger would require neither of these 

and would have a cost advantage. Therefore, the combination of the advanced modulating 

compressor and the microchannel heat exchanger is likely to be the only combination of emerging 

technologies that would be used in practice. Such a system would be a d4al-capacity microchannel 

heat exchanger system designed primarily for low-capacity operation, incorporating a modulating 

compressor and its associated controls. The low-capacity design reduces coil and cabinet sizes and 

costs, but does not reduce the size of the compressor since compressor capacity is established at the 

high capacity. 

4-36 
EE-RM/STD-98-440 A °

Since both technologies remove the need for variable speed controls or a second or dual

compressor, the combination of the two technologies produces a more costly system than does using

either separately. Therefore, we would not expect hybrid systems to be used except in cases where

space constraints are particularly severe.

4.5.3 Potential of Emerging Technologies to Benefit Niche Products

Emerging technologies can have an even more significant impact on many of the niche

products identified (Section 4.6.2.2). Cabinet size is a major constraint to improving niche product

efficiency, and all of the emerging technologies can improve either EER or SEER ratings without

increasing size. Niche products that face condenser constraints (through the wall packaged

equipment and split condensers) can benefit the most. Fancoil units benefit the least since

microchannel heat exchangers are not applicable because of their condensate removal limitations.

4.5.4 Issues Associated with Proprietary Technologies

Where a company holds exclusive rights to produce and sell an emerging technology, a new

standard that favors that technology can potentially reduce competition. At this point, however, the

Department believes that enough viable competing technologies exist at each efficiency level to

encourage vigorous competition at any potential standard level. The Manufacturing Impact Analysis

(Chapter 8) describes further expected impacts on competition.

4.6 PRODUCT CLASSIFICATIONS

NAECA segmented central air conditioners into four classes: split cooling-only, split heat

pump, packaged cooling-only, and packaged heat pump. The Department assessed whether these

class designations are justified and whether new classes are needed.

4.6.1 The Case for Eliminating or Combining Existing Classes

The four existing product classes are defined based on 1) whether equipment provides

cooling only or also provides electric heating, and 2) whether a system is split or packaged. This

section examines whether those four classes are justified from a technical standpoint.

4.6.1.1 Heat Pump versus Cooling-only

In addition to the features offered by cooling-only air conditioners, heat pumps offer electric

heating. This unique feature and the different energy use that results continue to support separate

4-37

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~ 2- O~ 

Since both technologies remove the need for variable speed controls or a second or dual 

compressor, the combination of the two technologies produces a more costly system than does using 

either separately. Therefore, we would not expect hybrid systems to be used except in cases where 

space constraints are particularly severe. 

4.5.3 Potential of Emerging Technologies to Benefit Niche Products 

Emerging technologies can have an even more significant impact on many of the niche 

products identified (Section 4.6.2.2). Cabinet size is a major constraint to improving niche product 

efficiency, and all of the emerging technologies can improve either EER or SEER ratings without 

increasing size. Niche products that face condenser constraints (through the wall packaged 

equipment and split condensers) can benefit the most. Fancoil units benefit the least since 

microchannel heat exchangers are not applicable because of their condensate removal limitations. 

4.5.4 Issues Associated with Proprietary Technologies 

Where a company holds exclusive rights to produce and sell an emerging technology, a new 

standard that favors that technology can potentially reduce competition. At this point, however, the 

Department believes that enough viable competing technologies exist at each efficiency level to 

encourage vigorous competi tion at any potential standard level. The Manufacturing Impact Analysis 

(Chapter 8) describes further expected impacts on competition. 

4.6 PRODUCT CLASSIFICATIONS 

NAECA segmented central air conditioners into four classes: split cooling-only, split heat 

pump, packaged cooling-only, and packaged heat pump. The Department assessed whether these 

class designations are justified and whether new classes are needed. 

4.6.1 The Case for Eliminating or Combining Existing Classes 

The four existing product classes are defmed based on 1) whether equipment provides 

cooling only or also provides electric heating, and 2) whether a system is split or packaged. This 

section examines whether those four classes are justified from a technical standpoint. 

4.6.1.1 Heat Pump versus Cooling-only 

In addition to the features offered by cooling-only air conditioners, heat pumps offer electric 

heating. This unique feature and the different energy use that results continue to support separate 

4-37 
EE-RM/STD-98-440 'i 0

(';: ~classifications for heat pumps. No manufacturer has expressed a strong desire to eliminate the

separate classifications for heat pumps.

In Section 4.8.1 the relationship between seasonal heating efficiency (HSPF) and seasonal

cooling efficiency (SEER) is examined to determine whether the separate HSPF standard is

warranted.

4.6.1.2 Split versus Packaged

The special installation capabilities for packaged systems also offer utility that differs from

that of split systems. This supports the separate classes for packaged systems. The Department

examined whether the different efficiency standards for packaged systems are justified from a

technical standpoint.

Packaged systems currently face less stringent SEER and HSPF standards than do split

systems. The intent is to compensate packaged equipment for efficiency losses due to heat transfer

between the evaporator and condenser compartments. There are two reasons why packaged

equipment may not require a lower efficiency standard.

First, split systems incur refrigerant line losses that packaged systems do not incur. Some

manufacturers have expressed that line losses and cabinet losses are similar in magnitude, and

therefore, packaged systems do not deserve an efficiency advantage.

Second, no physical constraint prevents a typical packaged systems from attaining the same

minimum efficiency as split systems.' Boosting the efficiency of packaged systems by 0.3 SEER to

match that of split systems is trivial from a design standpoint. Based on the reverse engineering

analysis, the costs of raising packaged system efficiency by 0.3 SEER is expected to be roughly

3 percent. This added cost is not trivial, but we would not expect it to alter the distribution of sales

in the marketplace. In fact, as Table 4.20 shows, most manufacturers do not take advantage of the

lower standard currently. They prefer instead to incur a bit more cost to align their marketing

approach with that of their split systems.

fThere are niche packaged products that do face special size constraints which are considered separately.

4-38

(:

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *'1 o~ 

classifications for heat pumps. No manufacturer has expressed a strong desire to eliminate the 

separate classifications for heat pumps. 

In Section 4.8.1 the relationship between seasonal heating efficiency (HSPF) and seasonal 

cooling efficiency (SEER) is examined to determine whether the separate HSPF standard is 

warranted. 

4.6.1.2 Split versus Packaged 

The special installation capabilities for packaged systems also offer utility that differs from 

that of split systems. This supports the separate classes for packaged systems. The Department 

examined whether the different efficiency standards for packaged systems are justified from a 

technical standpoint. 

Packaged systems currently face less stringent SEER and HSPF standards than do split 

systems. The intent is to compensate packaged equipment for efficiency losses due to heat transfer 

between the evaporator and condenser compartments. There are two reasons why packaged 

equipment may not require a lower efficiency standard. 

First, split systems incur refrigerant line losses that packaged systems do not incur. Some 

manufacturers have expressed that line losses and cabinet losses are similar in magnitude, and 

therefore, packaged systems do not deserve an efficiency advantage. 

Second, no physical constraint prevents a typical packaged systems from attaining the same 

minimum efficiency as split systems.fBoosting the efficiency of packaged systems by 0.3 SEER to 

match that of split systems is trivial from a design standpoint. Based on the reverse engineering 

analysis, the costs of raising packaged system efficiency by 0.3 SEER is expected to be roughly 

3 percent. This added cost is not trivial, but we would not expect it to alter the distribution of sales 

in the marketplace. In fact, as Table 4.20 shows, most manufacturers do not take advantage of the 

lower standard currently. They prefer instead to incur a bit more cost to align their marketing 

approach with that of their split systems. 

f There are niche packaged products that do face special size constraints which are considered separately. 

4-38 
EE-RM/STD-98-440 ea 0

Table 4.20 Available Packaged Systems Models Rated

at and below 10 SEER

SEER PAC PHP

9.70-9.99 15 4

10.0 96 89

Source: ARI Unitary Directory, February-July 1998

At higher efficiency levels, packaged systems possess an advantage over split systems. Since

they are usually roof-mounted, they typically face less stringent footprint and height constraints.

Although weight constraints can be important, packaged systems can attain higher EER ratings than

split systems by using larger evaporator and condenser coils.

No manufacturer has expressed a strong desire either to continue or to eliminate the disparity

between efficiency standards between packaged and split systems.

Packaged systems continue to possess unique utility. However, there is not strong technical

argument why the two classes must continue to have different efficiency standards.

4.6.2 The Case for Creating Additional Classes

Some manufacturers have expressed a desire for the Department to create classes other than

the four that are currently established. This section assesses those proposals.

4.6.2.1 Classes for Different Cooling and Heating Capacities

During the manufacturer interviews, some manufacturers remarked that they have more

difficulty attaining higher efficiencies in low and high capacity systems (below 30,000 BTU/h and

above 48,000 BTU/h) than in mid-capacity systems. This situation could justify the creation of new

product classes based on product capacity and allow the Department to impose a less aggressive

standard on small and large capacity equipment.

According to manufacturers, low capacity equipment has difficulty meeting higher standards

because 1) efficient compressors are more costly to produce in small capacities, and 2) cyclic effects

are more severe. High capacity, high efficiency equipment faces cabinet constraints. Figure 4.4

seems to support these contentions. Each band in the figure represents 20 percent of the split air

4-39

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 "* 2, O~ 

Table 4.20 Available Packaged Systems Models Rated 

at and below 10 SEER 

.. 

SEER PAC PHP 

9.70-9.99 15 4 

10.0 96 89 

Source: ARl Unitary Directory, February-July 1998 

At higher efficiency levels, packaged systems possess an advantage over split systems. Since 

they are usually roof-mounted, they typically face less stringent footprint and height constraints. 

Although weight constraints can be important, packaged systems can attain higher EER ratings than 

split systems by using larger evaporator and condenser coils. 

No manufacturer has expressed a strong desire either to continue or to eliminate the disparity 

between efficiency standards between packaged and split systems. 

Packaged systems continue to possess unique utility. However, there is not strong technical 

argument why the two classes must continue to have different efficiency standards. 

4.6.2 The Case for Creating Additional Classes 

Some manufacturers have expressed a desire for the Department to create classes other than 

the four that are currently established. This section assesses those proposals. 

4.6.2.1 Classes for Different Cooling and Heating Capacities 

During the manufacturer interviews, some manufacturers remarked that they have more 

difficulty attaining higher efficiencies in low and high capacity systems (below 30,000 BTUIh and 

above 48,000 BTUIh) than in mid-capacity systems. This situation could justify the creation of new 

product classes based on product capacity and allow the Department to impose a less aggressive 

standard on small and large capacity equipment. 

According to manufacturers, low capacity equipment has difficulty meeting higher standards 

because 1) efficient compressors are more costly to produce in small capacities, and 2) cyclic effects 

are more severe. High capacity, high efficiency equipment faces cabinet constraints. Figure 4.4 

seems to support these contentions. Each band in the figure represents 20 percent of the split air 

4-39 
EE-RM/STD-98-440 20X

C .( -conditioner models available at each efficiency level. Low and high capacity models become

increasingly scarce at efficiencies higher than 15 SEER.

70

40

a.

10 1 12 13 14 15 16 17 Is

Efficiency Level (SEER)

Source: ARI Unitary Directory. February-July 1998

. 4.4 Distribution of Split Air Conditioner 5Figure Models by Capacity

and Efficiency

Weak demand is another reason system manufacturers do not offer low capacity systems in

higher efficiencies. This is a combination of two market effects. First, as Table 4.21 illustrates, fewer

consumers purchase low capacity equipment in general. Second, since low capacity systems use less

energy, price is more important to consumers relative to efficiency. More stringent efficiency

standards would guarantee strong demand for high efficiency, low capacity equipment. This would

likely stimulate the development of efficient components in smaller sizes and encourage system

manufacturers to incorporate them. Higher standards would also encourage manufacturers to boost

SEER by reducing cyclic losses and expanding their offering of modulating systems.

4-40

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 * 1... 01 

conditioner models available at each efficiency level. Low and high capacity models become 

increasingly scarce at efficiencies higher than 15 SEER. 

10 I 

60 

.:- 50 

e 

.. 

:ii 

~ 

- 40 !: 

0; 

... • 

• 1.1 30 

10 

lo+i--~------~--~--~--------~------------~ 

10 II 13 15 

Efficiency Lnel (SEER) 

Source: ARI Unitary Directory. February·July 1998 

16 17 18 

Figure 4.4 Distribution of Split Air Conditioner Models by Capacity 

and Efficiency 

Weak demand is another reason system manufacturers do not offer low capacity systems in 

higher efficiencies. This is a combination of two market effects. First, as Table 4.21 illustrates, fewer 

consumers purchase low capacity equipment in general. Second, since low capacity systems use less 

energy, price is more important to consumers relative to efficiency. More stringent efficiency 

standards would guarantee strong demand for high efficiency, low capacity equipment. This would 

likely stimulate the development of efficient components in smaller sizes and encourage system 

manufacturers to incorporate them. Higher standards would also encourage manufacturers to boost 

SEER by reducing cyclic losses and expanding their offering of modulating systems. 

4-40 
EE-RM/STD-98-440 Z0'

Table 4.21 Shipments of Residential Unitary Condensers by Capacity

(1996)

Capacity Nominal Quantity Percent

(BTU/hr) Capacity Shipped Shipped in

(tons) Class

Under 22,000 1-1/2 304,748 8%

22,000 to 26,999 2 921.717 23%

27,000 to 32.999 2-1/2 881,477 22%

33,000 to 38,999 3 836,423 21%

39,000 to 43,999 3-1/2 396,722 10%

44,000 to 53,999 4 389,728 10%

54,000 to 64,999 5 323,793 8%

Under 27,000 1-1/2 to 2 314,239 32%

27,000 to 41,999 2-1/2 to 3-1/2 467,573 47%

42,000 to 64,999 3-1/2 to 5 209.339 21%

Under 27,000 1-1/2 to 2 19,983 11%

27,000 to 32,999 2-1/2 35,546 19%

33,000 to 53,999 3 to 4-1/2 96.673 52%

54,000 to 64,999 5 35,497 19%

Under 27,000 1-1/2 to 2 30,204 16%

27,000 to 41,999 2 to 3-1/2 95,624 50%

42,000 to 64,999 3-1/2 to 5 63,939 34%

Source: U.S. Bureau of the Census MA-35M-96

High capacity systems do face cabinet size constraints in single capacity systems. Modulating

systems do not face the same constraints, so weak demand is probably responsible for the lack of

high capacity, high efficiency products. Emerging technologies can also play a role in easing cabinet

constraints (Section 4.6.2.4.3).

Since the absence of products at all efficiency levels results from a lack of demand for those

products and not from any strict physical limitation, the Department finds no compelling technical

justification for defining new product classes based on capacity.

4-41

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 \t 1.D~· 

Table 4.21 Shipments of Residential Unitary Condensers by Capacity 

(1996) 

Capacity 

(BTU/hr) 

Nominal 

Capacity 

(tons) 

Quantity 

Shipped 

Percent 

Shipped in 

Class 

, '~ : 7 ~1~~~~~~~£!~~~;~~~~~:~~~~~~':f~i!:Sp'l i t~~-~i ~I'(f~~h/d'i t'i'~~~~Jis >:.i~~}~~::;3~~!~~~~;~:~~r~(::;~~~t;~!~ 

Under 22,000 1-112 304,748 8% 

22,000 to 26,999 2 921,717 23% 

27,000 to 32,999 2-112 881,477 22% 

33,000 to 38,999 3 836,423 21% 

39,000 to 43,999 3-112 396,722 10% 

44,000 to 53,999 4 389,728 10% 

54,000 to 64,999 5 323,793 8% ,J'S, ~'~'f"~~""~'tV':''''::f,'~'''< >!.",".! ''',,,, .~~~<-~.~., .... l',,~ ":1 '~!t~1 '-~"'( '''.l'~~H''-''~- 'l,c ... ",,,,;;,- ,-~","". , 

f ~"f!~ S:i~''''f~~~~:<;~~::i~~:~,k':\1)~;:)~~ '~t;~,.c ~{.{; Splif'lfc~t' eumps~,4~},('.d~::":'r~~{r~"·~~~}:;f~.?>~11~~!;{.~it:,:j~~~%~~: ' ,"f:\~,'~;'~~'~!'~;f.,;;::;,.,._",,,,,,;,,,%:..,p,~ ;";:<,"'~,,>:-"' <. , ,;! ~,:,,~ "",/i:",.,".;", .. "\~'<;'J."",,- "'\~,..~~..,: 1 ~ 

Under 27,000 1-112 to 2 314,239 32% 

27,000 to 41,999 2-112 to 3-112 467,573 47% 

42,000 to 64,999 3-1I2t05 209,339 21% ,j$-P;fl~t,:; ~":~1/'.::~r J/";'ir\~il'l, ;:.>;; ...... \ '.~"" E- r""~ :t,,',:',; <\. .c~ 1: ,,~ '(. ::'''r'' .'6~:41."":;"i~ "oE';'·,,:t.t;~·: )';~ki"";:'!''tJ~:>::, ",. ;:;fl;:,,,p' < I 

w~~i",;\\~;l~;}tlf.';'~if'(~~~~; ~~:~;,"~ Packaocd .~II" €oi1(Jltloners~''f')¥~ J~-<~t'..'t_::::f·c:·t,.~·~Ilii}t4~{J"i;Jp1f~ 1''-''·'''''-(.'''' ""'~~',,;/" ~ ~ 1- ~ ~'''- ~,~ ,~. + ..... ~~ ~I" ~ " _, ?'~ ,/ ~'~":s-!,,} 't \. ~,,-:./~~. 

Under 27,000 1-112 to 2 19,983 11% 

27,000 to 32,999 2-112 35,546 19% 

33,000 to 53,999 3 to 4-112 96,673 52% 

54,000 to 64,999 5 35,497 19% 

~~~~?:~~~*~~~~~;~~~~7~)~:~.~~~~/'.\}:pa~~~i~1~~~C~:~ 11~~~t~'P.u n1Ii~~~ti~:~~~:~5.~~~!~k~~&~>~~\V:~1!~~ t;~'~ 

Under 27,000 1-1/2 to 2 30,204 16% 

27,000 to 41,999 2 to 3-112 95,624 50% 

42000 to 64 999 3-1/2 to 5 63939 34% 

Source: U.S. Bureau of the Census MA-35M-96 

High capacity systems do face cabinet size constraints in single capacity systems. Modulating 

systems do not face the same constraints, so weak demand is probably responsible for the lack of 

high capacity, high efficiency products. Emerging technologies can also playa role in easing cabinet 

constraints (Section 4.6.2.4.3). 

Since the absence of products at all efficiency levels results from a lack of demand for those 

products and not from any strict physical limitation, the Department finds no compelling technical 

justification for defining new product classes based on capacity. 

4-41 
EE-RM/STD-98-440 : D 8

Q(i 4.6.2.2 Classes for Niche Products

Several manufacturers have asked the Department to establish new classes to protect the

viability of certain niche products under higher efficiency standards. Table 4.22 provides some key

information on these products.

Table 4.22 Characteristics of Niche Products

Niche Product Key Manufacturers Key Physical Constraints Typical Application

Ductless splits Mitsubishi Electronics Small cabinet size Residential retrofit and

Carrier Refrigerant line loss small commercial

Sanyo Fisher

Enviromaster International

High-velocity, small Unico High static pressure Residential retrofit

duct Mestek Low evaporator temperature New high-end homes

Small cabinet size

Vertical packaged, Bard Small cabinet size Factory-built commercial

wall mounted Poor airflow buildings and enclosures

Through-the-wall First Company Small cabinet size Multi-family retrofit

condensing unit National Comfort Products Poor air flow

Enviromaster International

Through-the-wall First Company Small cabinet size New multi-family

packaged unit Skymark Poor air flow

Armstrong (Lennox)

All these products serve niche markets and probably account for less than 3 percent of the

residential unitary market. As such, the efficiency standard established for these products will have

little effect on national energy savings and consumer life cycle cost calculations. However, each is

a unique product with some unique utility. The question is whether the constraints these products

face justify separate classification and different efficiency standards from other products.

4.6.2.2.1 Ductless Splits

Ductless split systems, or mini-splits as they are commonly known, dominate the

international market but hold only about 1 percent of the domestic market. They consist of a single

outdoor unit and an indoor fancoil unit discharging directly into the conditioned space. (Ductless

systems with multiple fancoil units are often called multi-splits.) Mini-splits are attractive in many

applications because tubing and electrical service can often be installed for less cost and in less space

than can the equivalent ducting. This makes them particularly attractive for the retrofit market. They

also offer the possibility of true individual temperature control. Since consumers may consider the

interior units to be more intrusive than a ducted system, manufacturers strive to make them as

4-42

EE-RM-STD-98-440 COMMENT 208

EE.RM/STD.98-440 ~''LD~ 

4.6.2.2 Classes for Niche Products 

Several manufacturers have asked the Department to establish new classes to protect the 

viability of certain niche products under higher efficiency standards. Table 4.22 provides some key 

information on these products. 

Table 4.22 Characteristics of Niche Products 

Niche Product Key Manufacturen Key Physical Constraints Typical Application 

Ductless splits Mitsubishi Electronics Small cabinet size Residential retrofit and 

Carrier Refrigerant line loss small commercial 

Sanyo Fisher 

Enviromaster International 

High-velocity, small Unico High static pressure Residential retrofit 

duct Mestek Low evaporator temperature New high-end homes 

Small cabinet size 

Vertical packaged, Bard Small cabinet size Factory-built commercial 

wall mounted Poor airflow buildings and enclosures 

Through-the-wall First Company SmaIl cabinet size Multi-family retrofit 

condensing unit National Comfort Products Poor air flow 

Enviromaster International 

Through-the-wall First Company SmaIl cabinet size New multi-family 

packaged unit Skymark Poor air flow 

Armstrong (Lennox) 

All these products serve niche markets and probably account for less than 3 percent of the 

residential unitary market. As such, the efficiency standard established for these products will have 

little effect on national energy savings and consumer life cycle cost calculations. However, each is 

a unique product with some unique utility. The question is whether the constraints these products 

face justify separate classification and different efficiency standards from other products. 

4.6.2.2.1 Ductless Splits 

Ductless split systems, or mini-splits as they are commonly known, dominate the 

international market but hold only about 1 percent of the domestic market. They consist of a single 

outdoor unit and an indoor fancoil unit discharging directly into the conditioned space. (Ductless 

systems with multiple fancoil units are often called multi-splits.) Mini-splits are attractive in many 

applications because tubing and electrical service can often be installed for less cost and in less space 

than can the equivalent ducting. This makes them particularly attractive for the retrofit market. They 

also offer the possibility of true individual temperature control. Since consumers may consider the 

interior units to be more intrusive than a ducted system, manufacturers strive to make them as 

4-42 
EE-RM/STD-98-440 W .

compact as possible. This cabinet size constraint combined with efficiency losses due to heat transfer

between refrigerant lines puts pressure on equipment efficiency.

4.6.2.2.2 High Velocity, Small Duct

High velocity, small duct fancoil units target primarily the retrofit market. According to the

manufacturers, the small, easy to install ducts, non-intrusive discharges, and silent operation make

these units attractive for many retrofit situations where consumers' space is a premium, and where

installing a conventional split system is cost prohibitive. Architectural and aesthetic advantages also

make this a viable product for high-end custom homes.

High velocity systems are designed to discharge conditioned air rapidly through round ducts

that can fit inside stud walls. Blowers must, therefore, overcome high static pressures. To mitigate

the burden on the blowers, designers reduce the required air volume by cooling it more than a

conventional system. This increases the cost through added tube rows and larger capacity, but offers

the associated benefit of enhanced humidity removal.

The inefficient fancoil unit in high velocity systems requires them to pair with high efficiency

condensing units (typically 13 - 14 SEER) to attain the 10 SEER NAECA minimum. Mestek's

SpacePak product offers equipment rated at 12.0 SEER.

Contractors typically install fancoil units outside the conditioned space, penalizing efficiency

in the field. However, the manufacturers of high velocity systems claim that the ducts are tight and

durable, and that superior dehumidification will cause occupants to raise their thermostat settings.

Both would lower energy consumption compared to conventional systems of equal SEER ratings.

4.6.2.2.3 Vertical Packaged, Wall Mounted

Manufacturers design these products for installation in mobile or modular structures, which

are almost exclusively commercial applications. However, manufacturers may offer them with

single-phase motors, placing them under NAECA. The difficult air flow configuration (each of the

condenser and evaporator compartments takes air in and exhausts it through the same face) combined

with the attempt to minimize size constrains the ability of these units to attain higher SEERs.

4.6.2.2.4 Through-the-wall Condenser

Through-the-wall condensers were popular in new multistory residential construction in the

1960s and 1970s. Major manufacturers have since abandoned the replacement market, providing an

opportunity for lower volume manufacturers. Most equipment is in the 1-1/2 to 2-1/2 ton capacity

range.

4-43

EE-RM-STD-98-440 COMMENT 208

u..~ 2. ()~ EE-RM/STD-98-440 1\' 

compact as possible. This cabinet size constraint combined with efficiency losses due'to heat transfer 

between refrigerant lines puts pressure on equipment efficiency. 

4.6.2.2.2 High Velocity, Small Duct 

High velocity, small duct fancoil units target primarily the retrofit market. According to the 

manufacturers, the small, easy to install ducts, non-intrusive discharges, and silent operation make 

these units attractive for many retrofit situations where consumers' space is a premium, and where 

installing a conventional split system is cost prohibitive. Architectural and aesthetic advantages also 

make this a viable product for high-end custom homes. 

High velocity systems are designed to discharge conditioned air rapidly through round ducts 

that can fit inside stud walls. Blowers must, therefore, overcome high static pressures, TQ mitigate 

the burden on the blowers, designers reduce the required air volume by cooling it more than a 

conventional system. This increases the cost through added tube rows and larger capacity, but offers 

the associated benefit of enhanced humidity removal. 

The inefficient fancoil unit in high velocity systems requires them to pair with high efficiency 

condensing units (typically 13 - 14 SEER) to attain the 10 SEER NAECA rni,nimum. Mestek's 

SpacePak product offers equipment rated at 12.0 SEER. 

Contractors typically install fancoil units outside the conditioned space, penalizing efficiency 

in the field. However, the manufacturers of high velocity systems claim that the ducts are tight and 

durable, and that superior dehumidification will cause occupants to raise their thermostat settings. 

Both would lower energy consumption compared to conventional systems of equal SEER ratings. 

4.6.2.2.3 Vertical Packaged, Wall Mounted 

Manufacturers design these products for installation in mobile or modular structures, which 

are almost exclusively commercial applications. However, manufacturers may offer them with 

single-phase motors, placing them under NAECA. The difficult air flow configuration (each of the 

condenser and evaporator compartments takes air in and exhausts it through the same face) combined 

with the attempt to minimize size constrains the ability of these units to attain higher SEERs. 

4.6.2.2.4 Through-the-wall Condenser 

Through-the-wall condensers were popular in new multistory residential construction in the 

1960s and 1970s. Major manufacturers have since abandoned the replacement market, providing an 

opportunity for lower volume manufacturers. Most equipment is in the 1-112 to 2-112 ton capacity 

range. 

4-43 
EE-RM/STD-98-440 '2 ga

New through-the-wall condensers must fit within the same wall opening as the original units,

even though original units may be half as efficient as the new ones. Residents or building owners are

particularly sensitive to any increase in price or to the cost of enlarging the wall opening to

accommodate a larger condenser. Since repair is the only other cost effective alternative to

replacement, a new standard that increases cabinet size or results in a significant price increase could

be counterproductive, preventing the turnover of old, inefficient equipment.

4.6.2.2.4 Through-the-wall Packaged

Through-the-wall packaged equipment is similar to packaged terminal air conditioners

(PTACs), but are typically installed in a closet and ducted to the interior space. Like through-the-wall

condensing units, they serve primarily multi-family high rise applications. However, unlike today's

through-the-wall condensing units, through-the-wall packaged units are targeted to new construction

without prior wall opening constraints.

4.6.2.3 Description of Niche Product Constraints

4.6.2.3.1 Small Cabinet Size

Cabinet size constrains efficiency primarily by restricting coil face area and coil

configuration. As face area decreases, the velocity of the moving air increases. This slightly improves

the heat transfer between the air and the coil, but it also increases the pressure drop across the coil

and increases the power consumption of the blower or fan. As face area shrinks, the increased fan

power negates any benefits from improved heat transfer and lowers the efficiency of the system. The

face area limitation is particularly important in the condenser where the similarity between ambient

air temperature and refrigerant temperature requires higher air volumes to transfer the same amount

of heat. In the evaporator, the temptation to increase coil face area to reduce blower power

consumption and increase cycle efficiency is somewhat counteracted by the need to provide adequate

dehumidification.

A cramped cabinet may also make it difficult, or impossible, to install optimal components

or technical upgrades, like controls, that could improve system efficiency.

4.6.2.3.2 Poor Airflow Configuration

The orientation of air intake and discharge and the internal path of the airflow can affect

system efficiency. Most split system outdoor units take in air horizontally around their entire

perimeter and discharge it vertically upward. Restricting the outdoor unit to take in air through only

one face, or to take in and exhaust air through the same face can reduce efficiency by increasing fan

power consumption. Some short-circuiting of exhaust air into the intake may also occur. Indoor units

4-44

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *'2-[)~ 

New through-the-wall condensers must fit within the same wall opening as the original units, 

even though original units may be half as efficient as the new ones. Residents or building owners are 

particularly sensitive to any increase in price or to the cost of enlarging the wall opening to 

accommodate a larger condenser. Since repair is the only other cost effective alternative to 

replacement, a new standard that increases cabinet size or results in a significant price increase could 

be counterproductive, preventing the turnover of old, inefficient equipment. 

4.6.2.2.4 Through-the-wall Packaged 

Through-the-wall packaged equipment is similar to packaged terminal air conditioners 

(PTACs), but are typically installed in a closet and ducted to the interior space. Like through-the-wall 

condensing units, they serve primarily multi-family high rise applications. However, unlike today's 

through-the-wall condensing units, through-the-wall packaged units are targeted to new construction 

without prior wall opening constraints. 

4.6.2.3 Description of Niche Product Constraints 

4.6.2.3.1 Small Cabinet Size 

Cabinet size constrains efficiency primarily by restnctmg coil face area and coil 

configuration. As face area decreases, the velocity of the moving air increases. This slightly improves 

the heat transfer between the air and the coil, but it also increases the pressure drop across the coil 

and increases the power consumption of the blower or fan. As face area shrinks, the increased fan 

power negates any benefits from improved heat transfer and lowers the efficiency of the system. The 

face area limitation is particularly important in the condenser where the similarity between ambient 

air temperature and refrigerant temperature requires higher air volumes to transfer the same amount 

of heat. In the evaporator, the temptation to increase coil face area to reduce blower power 

consumption and increase cycle efficiency is somewhat counteracted by the need to provide adequate 

dehumidification. 

A cramped cabinet may also make it difficult, or impossible, to install optimal components 

or technical upgrades, like controls, that could improve system efficiency. 

4.6.2.3.2 Poor Airflow Configuration 

The orientation of air intake and discharge and the internal path of the airflow can affect 

system efficiency. Most split system outdoor units take in air horizontally around their entire 

perimeter and discharge it vertically upward. Restricting the outdoor unit to take in air through only 

one face, or to take in and exhaust air through the same face can reduce efficiency by increasing fan 

power consumption. Some short-circuiting of exhaust air into the intake may also occur. Indoor units 

4-44 
EE-RM/STD-98-440 ' '"

typically take in air horizontally near the bottom of the unit and discharge it vertically at the top.

Other configurations may boost or harm efficiency. In either the indoor and outdoor unit, sharp

changes in airflow direction can increase blower power consumption and may also result in uneven

airflow over the coil, resulting in only partial coil use.

Packaged units may suffer from the same airflow related problems, with the additional

possibility of heat transfer or air leakage between the evaporator and condenser compartments.

4.6.2.3.3 High Static Pressure

Higher indoor static pressure causes the blower to work harder at a given capacity and

airflow. The Department's test procedure prescribes minimum static pressures, and products that

exceed them may be penalized through higher blower power consumption than is assumed in the test

procedure. This constraint is particularly relevant to manufacturers of high-velocity, small duct

systems, but also affects other niche products as well.

4.6.2.3.4 Low Evaporator Discharge Temperature

Producing a lower than normal air temperature from the evaporator requires either more tube

rows or a slower face velocity. Under cabinet size constraints, these improvements may not be

possible. Furthermore, the additional heat transfer increases the required capacity of the condensing

unit.

4.6.2.4 Remedies for Niche Product Constraints

Most niche manufacturers, although they serve specialized markets, still attempt to keep costs

at a minimum. Since many niche products serve manufactured and multifamily housing markets,

specifiers and consumers may be especially price-conscious. Furthermore, because of the low sales

volumes, many niche manufacturers have no real market incentive to supply higher efficiency

products. Many manufacturers do not pursue advanced designs for those reasons. Standards that

apply evenly to their competitors would allow them to introduce more expensive, but more efficient,

design options without losing market share or reducing profit margins. Several of these design

options can ease the efficiency constraints that niche products face.

4.6.2.4.1 More Efficient Components

Many niche products use motors and compressors with only moderate efficiency or fixed

orifice expansion devices. Those products can upgrade to higher efficiency or variable speed

components without exceeding performance or size constraints, but these modifications would raise

4-45

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~(2;:)~ 

typically take in air horizontally near the bottom of the unit and discharge it vertically at the top; 

Other configurations may boost or harm efficiency. In either the indoor and outdoor unit, sharp 

changes in airflow direction can increase blower power consumption and may also result in uneven 

airflow over the coil, resulting in only partial coil use. 

Packaged units may suffer from the same airflow related problems, with the additional 

possibility of heat transfer or air leakage between the evaporator and condenser compartments. 

4.6.2.3.3 High Static Pressure 

Higher indoor static pressure causes the blower to work harder at a given capacity and 

airllow. The Department's test procedure prescribes minimum static pressures, and products that 

exceed them may be penalized through higher blower power consumption than is assumed in the test 

procedure. This constraint is particularly relevant to manufacturers of high-velocity, small duct 

systems, but also affects other niche products as well. 

4.6.2.3.4 Low Evaporator Discharge Temperature 

Producing a lower than normal air temperature from the evaporator requires either more tube 

rows or a slower face velocity. Under cabinet size constraints, these improvements may not be 

possible. Furthermore, the additional heat transfer increases the required capacity of the condensing 

unit. 

4.6.2.4 Remedies for Niche Product Constraints 

Most niche manufacturers, although they serve specialized markets, still attempt to keep costs 

at a minimum. Since many niche products serve manufactured and multifamily housing markets, 

specifiers and consumers may be especially price-conscious. Furthermore, because of the low sales 

volumes, many niche manufacturers have no real market incentive to supply higher efficiency 

products. Many manufacturers do not pursue advanced designs for those reasons. Standards that 

apply evenly to their competitors would allow them to introduce more expensive, but more efficient, 

design options without losing market share or reducing profit margins. Several of these design 

options can ease the efficiency constraints that niche products face. 

4.6.2.4.1 More Efficient Components 

Many niche products use motors and compressors with only moderate efficiency or fixed 

orifice expansion devices. Those products can upgrade to higher efficiency or variable speed 

components without exceeding performance or size constraints, but these modifications would raise 

4-45 
EE-RM/STD-98-440 'aD.

production costs. Depending on the cross-price elasticity with competing products, any increase in

price could result in a substantial loss of market share.

4.6.2.4.2 Larger Cabinet Size

Through-the-wall and wall mounted packaged equipment and ductless splits do not face a

rigid size constraint. A manufacturer may lose sales when it increases cabinet sizes to attain higher

efficiencies, but no clear thresholds exist above which its products cease to be commercially viable.

Without thresholds, the Manufacturer Impact Analysis is the appropriate analysis for determining

whether a standard level threatens the viability of the product.

4.6.2.4.3 Use of Emerging Technologies

Emerging technologies, especially advanced modulating compressors and microchannel heat

exchangers, are attractive options for niche products whose primary constraint is condenser size.

This would include through-the-wall split and packaged units. It would not included high-velocity

systems or ductless split systems since those systems are constrained by the size of the evaporator,

which is not currently being considered as a viable application for microchannel technology because

of condensate removal concerns. Furthermore, heat pump condensers, since they also require

removal of condensate in the heating mode, are not expected to benefit from microchannel

technology.

4.6.2.4.4 Modifications for Testing

Some niche products may benefit from modifications that allow them to operate under

conditions that differ from the test conditions. For example, manufacturers of high velocity systems

intend their equipment to operate under higher static pressures, lower temperatures, and lower

airflows than those the test procedures prescribe. They can explore whether installing mulitap

blowers or other variable speed or adjustable components could raise their SEER ratings by allowing

them to test under a set of conditions more closely representative of conventional equipment while

still allowing proper installation in the field.

4.6.2.4.5 Redefinition

Vertical packaged, wall mounted equipment currently falls under the definition of residential

products (single phase, less than 65,000 BTU/h), but is intended for commercial application. The Air

Conditioning and Refrigeration Institute has defined the product as commercial equipment. The

Department may decide to classify equipment intended primarily for commercial application as

covered by EPACT efficiency requirements rather than NAECA.

4-46

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *' '2 D~ 

production costs. Depending on the cross-price elasticity with competing products, any increase in 

price could result in a substantial loss of market share. 

4.6.2.4.2 Larger Cabinet Size 

Through-the-wall and wall mounted packaged equipment and ductless splits do not face a 

rigid size constraint. A manufacturer may lose sales when it increases cabinet sizes to attain higher 

efficiencies, but no clear thresholds exist above which its products cease to be commercially viable. 

Without thresholds, the Manufacturer Impact Analysis is the appropriate analysis for determining 

whether a standard level threatens the viability of the product. 

4.6.2.4.3 Use of Emerging Technologies 

Emerging technologies, especially advanced modulating compressors and microchannel heat 

exchangers, are attractive options for niche products whose primary constraint is condenser size. 

This would include through-the-wall split and packaged units. It would not included high-velocity 

systems or ductless split systems since those systems are constrained by the size of the evaporator, 

which is not currently being considered as a viable application for microchannel technology because 

of condensate removal concerns. Furthermore, heat pump condensers, since they also require 

removal of condensate in the heating mode, are not expected to benefit from microchannel 

technology. 

4.6.2.4.4 Modifications for Testing 

Some niche products may benefit from modifications that allow them to operate under 

conditions that differ from the test conditions. For example, manufacturers of high velocity systems 

intend their equipment to operate under higher static pressures, lower temperatures, and lower 

airflows than those the test procedures prescribe. They can explore whether installing mulitap 

blowers or other variable speed or adjustable components could raise their SEER ratings by allowing 

them to test under a set of conditions more closely representative of conventional equipment while 

still allowing proper installation in the field. 

4.6.2.4.5 Redefinition 

Vertical packaged, wall mounted equipment currently falls under the definition of residential 

products (single phase, less than 65,000 BTUIh), but is intended for commercial application. The Air 

Conditioning and Refrigeration Institute has defmed the product as commercial equipment. The 

Department may decide to classify equipment intended primarily for commercial application as 

covered by EPACT efficiency requirements rather than NAECA. 

4-46 
EE-RM/STD-98-440 : ~ '1 ,

4.6.2.5 Justification for New Classes Based on Niche Products

One type of niche product, vertical packaged-wall mounted, is intended for commercial

application with commercial operating characteristics. As such, NAECA may not be the proper

governing regulation. To limit abuse, the Department could consider imposing a labeling

requirement for the class to restrict those products from being installed in residential applications.

For the other niche products, Table 4.23 shows the highest viable cooling efficiency

achievable for each of the candidate products utilizing both conventional and emerging technologies.

Discussions with manufacturers of these products and engineering and marketing judgment are the

basis for the preliminary conclusions. In this case, "viable" means technically feasible, commercially

practical, and able to retain its own unique characteristics and utility. For example, consumers

purchase high velocity systems for their small diameter, easy to install ducts and compact air handler.

As the air handler gets larger and duct branches get more numerous, the product eventually loses its

uniqueness compared to conventional systems and becomes increasingly unviable as a product with

unique utility. It is also important to note that two products having the same viable efficiency level

cannot necessarily achieve that level for similar costs.

Table 4.23 also lists the substitutes available for each product and the sensitivity of

consumers to price increases with respect to price increases in the substitutes. High cross-price

sensitivity means that a consumer will be likely to purchase the substitute if the price difference

between the two products changes even slightly. This will cause consumers to shift to the substitute

product, and could eventually eliminate the subject product from the market. A price differential can

increase when a new efficiency standard results in a more severe price increase in the subject product

than in the substitute. In cases where the substitute faces a less stringent efficiency standard (e.g.

window units, repair), a new efficiency standard could reduce national energy savings by driving

consumers to the less efficient substitutes.

4-47

(:

EE-RM-STD-98-440 COMMENT 208

EE.RM/STD-98-440 *" L 01; 

4.6.2.5 Justification for New Classes Based on Niche Products 

One type of niche product, vertical packaged-wall mounted, is intended for commercial 

application with commercial operating characteristics. As such, NAECA may not be the proper 

governing regulation. To limit abuse, the Department could consider imposing a' labeling 

requirement for the class to restrict those products from being installed in residential applications. 

For the other niche products, Table 4.23 shows the highest viable cooling efficiency 

achievable for each of the candidate products utilizing both conventional and emerging technologies. 

Discussions with manufacturers of these products and engineering and marketing judgment are the 

basis for the preliminary conclusions. In this case, ''viable'' means technically feasible, commercially 

practical, and able to retain its own unique characteristics and utility. For example, consumers 

purchase high velocity systems for their small diameter, easy to install ducts and compact aii handler. 

As the air handler gets larger and duct branches get more numerous, the product eventually loses its 

uniqueness compared to conventional systems and becomes increasingly unviable as a product with 

unique utility. It is also important to note that two products having the same viable efficiency level 

cannot necessarily achieve that level for similar costs. 

Table 4.23 also lists the substitutes available for each product and the sensi~ivity of 

consumers to price increases with respect to price increases in the substitutes. High cross-price 

sensitivity means that a consumer will be likely to purchase the substitute if the price dIfference 

between the two products changes even slightly. This will cause consumers to shift to the substitute 

product, and could eventually eliminate the subject product from the market. A price differential can 

increase when a new efficiency standard results in a more severe price increase in the subject product 

than in the substitute. In cases where the substitute faces a less stringent efficiency standard (e.g. 

window units, repair), a new efficiency standard could reduce national energy savings by driving 

consumers to the less efficient substitutes. 

4-47 
EE'RM/STDO98-440 W OS

Table 4.23 Assessment of Factors that Influence the Decision to Establish Separate

Classes for Niche Products

Niche Product Estimated Highest Viable Substitutes Efficiency of Cross- price

Efficiency Level (SEER) (ranked in order of Substitute sensitivity

decreasing

Conventional Emerging attractiveness for

Teebnology Technology most typical applications)

Ductless split 12.0 12.0 1. Window Lower Moderate

2. High-velocity Same

3. Conventional split Higher

High-velocity, 12.5 12.5 1. Window Lower Low

small duct

2. Ductless split Same

3. Conventional split Higher

Vertical packaged, 12.0 12.5 1. Conventional Higher Moderate

wall mounted packaged

Through-the-wall 11.0 13.0 1. Repair Lower High

condenser

Through-the-wall 12.0 15.0 1. Hydronic systems Higher High

packaged ___ _____ 2. Conventional split Higher

4.6.3 Possible Loopholes Created by Product Class Definitions

Anytime two product classes exist with different efficiency standards, there is the potential

for companies to attempt to exploit the lower standards. Taking steps to define the products as

carefully as possible and to ensure that the new standards do not significantly alter the cost

differential between the product classes can minimize the temptation to market lower efficiency

products in applications traditionally served by equipment that have higher efficiency requirements.

For example, there is nothing that would physically prevent a contractor from installing a through

the wall condensing unit on a pad. That is not common practice today since both conventional split

condensers and through-the-wall condensers must meet the same efficiency requirements and

conventional split condensers are less costly. However, if through-the-wall condensers were granted

a lower efficiency standard than their conventional pad-mounted counterparts, the price difference

between the two systems could favor the through-the-wall equipment, causing their use in padmounted applications to increase. More widespread use of less efficient equipment would increase

national energy consumption.

4-48

C

EE-RM-STD-98-440 COMMENT 208

EE-RM/STO-98_440 *'2 D~ 

Table 4.23 Assessment of Factors that Influence the Decision to Establish Separate 

Classes for Niche Products 

... 

Nicbe Product Estimated Higbest Viable Substitutes Efficiency of Cross- price 

Efficiency Level (SEER) (ranked in order of Substitute sensitivity 

decreasing 

Conventional Emerging attractiveness for 

Tecbnology Tecbnology most typical 

applications) 

Ductless split 12.0 12.0 I. Window Lower Moderate 

2. High-velocity Same 

3. Conventional split Higher 

High-velocity. 12.5 12.5 1. Window Lower Low 

small duct 

2. Ductless split Same 

3. Conventional split Higher 

Vertical packaged, 12.0 12.5 I. Conventional Higher Moderate 

wall mounted packaged 

Through-the-wall 11.0 13.0 I. Repair Lower High 

condenser 

Through-the-wall 12.0 15.0 I. Hydronic systems Higher High 

packaged 2. Conventional split Higher 

4 ... 

4.6.3 Possible Loopholes Created by Product Class Definitions 

Anytime two product classes exist with different efficiency standards, there is the potential 

for companies to attempt to exploit the lower standards. Taking steps to defme the products as 

carefully as possible and to ensure that the new standards do not significantly alter the cost 

differential between the product classes can minimize the temptation to market lower efficiency 

products in applications traditionally served by equipment that have higher efficiency requirements. 

For example, there is nothing that would physically prevent a contractor from installing a through 

the wall condensing unit on a pad. That is not common practice today since both conventional split 

condensers and through-the-wall condensers must meet the same efficiency requirements and 

conventional split condensers are less costly. However, ifthrough-the-wall condensers were granted 

a lower efficiency standard than their conventional pad-mounted counterparts, the price difference 

between the two systems could favor the through-the-wall equipment, causing their use in padmounted applications to increase. More widespread use of less efficient equipment would increase 

national energy consumption. 

4-48 
EE-RM/STD-98-440 -2. C

The price differential between ductless minisplits and high velocity equipment is high (about

twice) that of conventional equipment at the same efficiency and capacity. Therefore, the concern

about creating attractive loopholes is low for these products. Similarly, if properly defined and

regulated, there is little chance that wall-mounted vertical packaged systems would find their way

into conventional residential applications due to the prevalence of lower priced competing

technologies.

However, the price premium for through-the-wall condensing and packaged equipment is

relatively low--about 30 percent and 70 percent, respectively. For three-ton equipment, that equates

to a $200 and $430 difference in manufacturer price, respectively, for the two systems compared to

their conventional counterparts. To maintain those price differences, standards for through-the-wall

systems would have to stay within one SEER point of the standards set for pad or roof mounted

systems in order to reduce the likelihood that the market will exploit the difference and increase the

demand for through-the-wall equipment in pad or roof mounted applications.

4.7 ALTERNATIVE REFRIGERANTS

Effective January 1,2010, the Environmental Protection Agency will prohibit the sale of new

equipment utilizing HCFC refrigerants, including HCFC-22 (R-22), the dominant refrigerant in

unitary air conditioning systems. Researchers continue to develop and test alternative refrigerants,

but a consensus is settling on two chlorine-free HFC alternatives: HFC-407C (407C) and HFC-41 OA

(410A). Each has comparative advantages and disadvantages, particularly regarding energy

~( ,,efficiency.

407C is a blend of HFC-32, -125, and -134a. Its physical properties and operating

characteristics make it a suitable drop-in replacement for R-22. However, 407C lowers the efficiency

of unmodified R-22 systems by 5-10 percent under the SEER test conditions. Likewise, a new 407C

system is likely to be more costly than an R-22 system at the same efficiency level. If 407C becomes

the refrigerant of choice for new equipment, this will increase the cost of attaining a given efficiency

compared to HCFC-22. Lennox has announced that they will introduce a line of light commercial

products based on 407C early in 2000.

410A is an mixture of HFC-32 and -125. It operates at substantially higher pressure (50-70

percent) than does R-22 and requires a soluble polyol ester lubricant, so it is not suitable as a drop-in

R-22 replacement. However, its higher operating pressure and slightly better thermodynamic

properties may allow new 410A systems to achieve the same efficiencies as R-22 systems at a

slightly lower cost. The higher operating pressure in 410A equipment requires either smaller tube

diameters or thicker tube walls. Since 41 OA has a higher cooling capacity than R-22, manufacturers

can preserve system capacity by reducing tube diameter (and tube cost). Furthermore, 410A can

provide a slight efficiency boost at the SEER testing points. However, at the EER test point which

more closely represents peak cooling conditions, 410A is about 3 percent less efficient than R-22.'0

This would exacerbate utilities' peak loading concerns. Furthermore, manufacturers will bear a

4-49

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STO-98-440 "*.~ O~ 

The price differential between ductless minisplits and high velocity equipment is high (about 

twice) that of conventional equipment at the same efficiency and capacity. Therefore, the concern 

about creating attractive loopholes is low for these products. Similarly, if properly defmed and 

regulated, there is little chance that wall-mounted vertical packaged systems would find their way 

into conventional residential applications due to the prevalence of lower priced competing 

technologies. 

However, the price premium for through-the-wall condensing and packaged equipment is 

relatively low--about 30 percent and 70 percent, respectively. For three-ton equipment, that equates 

to a $200 and $430 difference in manufacturer price, respectively, for the two systems compared to 

their conventional counterparts. To maintain those price differences, standards for through-the-wall 

systems would have to stay within one SEER point of the standards set for pad or roof mounted 

systems in order to reduce the likelihood that the market will exploit the difference and increase the 

demand for through-the-wall equipment in pad or roof mounted applications. 

4.7 ALTERNATNE REFRIGERANTS 

Effective January 1,20 I 0, the Environmental Protection Agency will prohibit the sale of new 

equipment utilizing HCFC refrigerants, including HCFC-22 (R-22), the dominant refrigerant in 

unitary air conditioning systems. Researchers continue to develop and test alternative refrigerants, 

but a consensus is settling on two chlorine-free HFC alternatives: HFC-407C (407C) and HFC-41 OA 

(410A). Each has comparative advantages and disadvantages, particularly regarding energy 

efficiency. 

407C is a blend of HFC-32, -125, and -I34a. Its physical properties and operating 

characteristics make it a suitable drop-in replacement for R-22. However, 407C lowers the efficiency 

ofunmodifiedR-22 systems by 5-10 percent under the SEER test conditions. Likewise, a new 407C 

system is likely to be more costly than an R-22 system at the same efficiency level. If 407C becomes 

the refrigerant of choice for new equipment, this will increase the cost of attaining a given efficiency 

compared to HCFC-22. Lennox has announced that they will introduce a line of light commercial 

products based on 407C early in 2000. 

410A is an mixture ofHFC-32 and -125. It operates at substantially higher pressure (50-70 

percent) than does R-22 and requires a soluble polyol ester lubricant, so it is not suitable as a drop-in 

R-22 replacement. However, its higher operating pressure and slightly better thermodynamic 

properties may allow new 410A systems to achieve the same efficiencies as R-22 systems at a 

slightly lower cost. The higher operating pressure in 41 OA equipment requires either smaller tube 

diameters or thicker tube walls. Since 41 OA has a higher cooling capacity than R-22, manufacturers 

can preserve system capacity by reducing tube diameter (and tube cost). Furthermore, 410A can 

provide a slight efficiency boost at the SEER testing points. However, at the EER test point which 

more closely represents peak cooling conditions, 410A is about 3 percent less efficient than R-22.IO 

This would exacerbate utilities' peak loading concerns. Furthermore, manufacturers will bear a 

4-49 
EE-RM/STD-98-440 20°

significant capital conversion cost to allow plants to handle the smaller tube diameters and strict antiC ~' ~ contamination standards. Carrier introduced a line of products based on 41 0A in 1998 and most other

major manufacturers have since followed suit.

Momentum is building behind 410A as the refrigerant of choice in new equipment, but it is

too early to predict with absolute certainty which refrigerant will ultimately dominate by 2006.

Hydrocarbons and carbon dioxide both could still dominate by 2010. However, for the 2006

rulemaking date, neither 410A nor 407C will substantially change the cost-efficiency relationship,

and neither will substantially affect consumer life cycle costs. Therefore, conclusions suggested by

analysis of HCFC-22-based equipment should still be valid for equipment utilizing either 410A or

407C. The issue plays a greater role in assessing the cumulative burden of new standards on

manufacturers (Chapter 8).

4.8 OTHER ANALYSES IN THE ENGINEERING ANALYSIS

Beyond the preceding analysis, there are several other engineering issues that can play an

important role in the Department's selection of trial standard levels.

4.8.1 Definition of the Relationship between SEER and HSPF in Heat Pumps

Currently, cooling efficiency standards (SEER) do not differ based on whether a system

provides heating, but heat pumps do face an additional regulation on heating efficiency (HSPF). The

Department investigated whether the relationship between HSPF and SEER is rigid enough to allow

a SEER standard to serve as a defacto HSPF standard.

Since SEER and HSPF are calculated values and incorporate factors other than system

physics, no rigid relationship between the two would be expected. As Figure 4.5 illustrates, a survey

of available equipment supports that hypothesis. Each band in the Figure represents 20 percent of

the products available at the stated efficiency level. Although HSPF generally increases with SEER,

the correlation is low (0.63). However, the relationship between HSPF and SEER is surprisingly

close below 13 SEER, with 60 percent of models falling within a range of 0.3 to 0.5 HSPF.

To set efficiency standards for heat pumps, the Department must determine both an HSPF

level and a SEER level. This complicates the analysis since each SEER level corresponds to a broad

range of HSPF ratings. To provide a rationale for selecting SEER-HSPF pairs, the Department

examined histograms based on Figure 4.5 that showed the number of models possessing each HSPF

at each SEER level. Table 4.24 lists the results. Median (50"' percentile) HSPFs are generally well

above the minimum allowable HSPF, revealing that market does not apply strong downward

pressure on HSPF.

4-50

(

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 '* 'LO'!::, 

significant capital conversion cost to allow plants to handle the smaller tube diameters and strict anticontamination standards. Carrier introduced a line of products based on 41 OA in 1998 and most other 

major manufacturers have since followed suit. 

Momentum is building behind 41 OA as the refrigerant of choice in new equipment, but it is 

too early to predict with absolute certainty which refrigerant will ultimately dominate by 2006. 

Hydrocarbons and carbon dioxide both could still dominate by 2010. However, for the 2006 

rulemaking date, neither 41 OA nor 407C will substantially change the cost-efficiency relationship, 

and neither will substantially affect consumer life cycle costs. Therefore, conclusions suggested by 

analysis of HCFC-22-based equipment should still be valid for equipment utilizing either 41 OA or 

407C. The issue plays a greater role in assessing the cumulative burden of new standards on 

manufacturers (Chapter 8). 

4.8 OTHER ANALYSES IN THE ENGINEERING ANALYSIS 

Beyond the preceding analysis, there are several other engineering issues that can play an 

important role in the Department's selection of trial standard levels. 

4.8.1 Definition of the Relationship between SEER and HSPF in Heat Pumps 

Currently, cooling efficiency standards (SEER) do not differ based on whether a system 

provides heating, but heat pumps do face an additional regulation on heating efficiency (HSPF). The 

Department investigated whether the relationship between HSPF and SEER is rigid enough to allow 

a SEER standard to serve as a de facto HSPF standard. 

Since SEER and HSPF are calculated values and incorporate factors other than system 

physics, no rigid relationship between the two would be expected. As Figure 4.5 illustrates, a survey 

of available equipment supports that hypothesis. Each band in the Figure represents 20 percent of 

the products available at the stated efficiency level. Although HSPF generally increases with SEER, 

the correlation is low (0.63). However, the relationship between HSPF and SEER is surprisingly 

close below 13 SEER, with 60 percent of models falling within a range of 0.3 to 0.5 HSPF. 

To set efficiency standards for heat pumps, the Department must determine both an HSPF 

level and a SEER level. This complicates the analysis since each SEER level corresponds to a broad 

range of HSPF ratings. To provide a rationale for selecting SEER-HSPF pairs, the Department 

examined histograms based on Figure 4.5 that showed the number of models possessing each HSPF 

at each SEER level. Table 4.24 lists the results. Median (50th percentile) HSPFs are generally well 

above the minimum allowable HSPF, revealing that market does not apply strong downward 

pressure on HSPF. 

4-50 
EE-RM/STD-98-440 4^0OX

10

9

6.5 6.5 NAECA Minimum =6.8 HSPF

6 I----

10 11 12 13 SEER 14 15 16 17

Source: ARI Unitary Directory, Feb -July 1998

Figure 4.5 Relationship between HSPF and SEER in available 3-ton Split Heat

Pumps

'I::

After examining the histograms, the Department plotted the relationship between HSPF and

SEER for all 3-ton split heat pumps listed in the Spring 1998 ARI Unitary Directory (Figure 4.5).

At 10 SEER, the difference between the minimum HSPF (6.8) and the median (7.1) is 0.3 HSPF.

We then defined the equation of a line that ran generally parallel with the median HSPF at each

SEER level while passing through the 10 SEER, 6.8 HSPF point:

SEER 10- 14: HSPF= 6.8+ 0.3* (SEER- 10)

SEER >14: HSPF= 8.0+ 0.2* (SEER- 14)

The proposed minimum HSPF requirements are derived by inserting the minimum SEER

requirements into the formula. For example, under a 12 SEER standard, all products would have to

attain a minimum HSPF of 7.4.

Even though the Department does not have information on the distribution of heat pump sales

by HSPF at each SEER level, it is apparent that the market currently favors products that exceed the

minimum allowable HSPF level. This is due both to the natural relationship between HSPF and

SEER and the preference in the market for high HSPF heat pumps in cooler climates. The

4-51

(:

EE-RM-STD-98-440 COMMENT 208

EE-RM/STO-98-440 1f2.D ~ 

10 

9.5 

9 

8.5 

~ 

ArI'.l 8 

= 

7.5 

7 

~~ ____ nn~ ____________________________ • 

NAECA Minimum = 6.B HSPF 

6.S 

6 

10 11 12 

Source: ARI Unitary Directory, Feb· July 199B 

13 SEER 14 15 16 17 

Figure 4.5 Relationship between HSPF and SEER in available 3-ton Split Heat 

Pumps 

After examining the histograms, the Department plotted the relationship between HSPF and 

SEER for all 3-ton split heat pumps listed in the Spring 1998 ARl Unitary Directory (Figure 4.5). 

At 10 SEER, the difference between the minimum HSPF (6.8) and the median (7.1) is 0.3 HSPF. 

We then defmed the equation of a line that ran generally parallel with the median HSPF at each 

SEER level while passing through the 10 SEER, 6.8 HSPF point: 

SEER 10- 14: HSPF= 6.8+ 0.3* (SEER- 10) 

SEER >14: HSPF= 8.0+ 0.2* (SEER-14) 

The proposed minimum HSPF requirements are derived by inserting the minimum SEER 

requirements into the formula. For example, under a 12 SEER standard, all products would have to 

attain a minimum HSPF of 7.4. 

Even though the Department does not have information on the distribution of heat pump sales 

by HSPF at each SEER level, it is apparent that the market currently favors products that exceed the 

minimum allowable HSPF level. This is due both to the natural relationship between HSPF and 

SEER and the preference in the market for high HSPF heat pumps in cooler climates. The 

4-51 
EE-RM/STD-98-440 a~_ °

Department believes that establishing an HSPF standard equal to the current median at a given SEER

level would impose an undue design constraint on manufacturers, adding to the cost and burden of

designing, producing, testing, and qualifying the product without resulting in a significant increase

in the average HSPF of equipment sold.

Table 4.24 summarizes the selection of HSPF standard levels. It also shows the HSPF levels

that ARI considered to be the "most likely" HSPF rating at each SEER standard level. In all cases,

the ARI "most likely" HSPF value exceeds the selected minimum HSPF levels, typically by 0.2 to

0.3 HSPF.

Table 4.24 Comparison of Proposed HSPF Standard Levels with Median HSPFs of

Equipment Listed in the ARI Unitary Directory

Efficiency/Standard Level 10 11 12 13 14 15 16 17

(SEER)

Recommended minimum 6.8 7.1 7.4 7.7 8.0 8.2 8.4 8.6

HSPF

Median HSPF in available 7.1 7.4 7.9 7.9 7.9 8.9 8.2 8.4

products

Offset from Median (HSPF) -0.3 -0.3 -0.5 -0.2 +0.1 -0.7 +0.2 +0.2

Increase in Minimum HSPF - 0% 67% -33% -133% 133% -167% -167%

from Base HSPF

Fraction of Available 0% <10% 10% 10% <60% <30% <100% <100%

Equipment below the

recommended HSPF Level

ARI "Most Likely" HSPF - 7.28 7.69 7.99 8.25 8.28 -

Table 4.25 provides a more detailed breakdown of the models available at each efficiency

level in 1998 as well as the total number of models at each efficiency level.

4-52

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *' L O~ 

Department believes that establishing an HSPF standard equal to the current median at a given SEER 

level would impose an undue design constraint on manufacturers, adding to the cost and burden of 

designing, producing, testing, and qualifying the product without resulting in a significant increase 

in the average HSPF of equipment sold. 

Table 4.24 summarizes the selection ofHSPF standard levels. It also shows the HSPF levels 

that ARl considered to be the "most likely" HSPF rating at each SEER standard level. In all cases, 

the ARl "most likely" HSPF value exceeds the selected minimum HSPF levels, typically by 0.2 to 

0.3 HSPF. 

Table 4.24 Comparison of Proposed HSPF Standard Levels with Median HSPFs of 

Equipment Listed in the ARI Unitary Directory .... 1M 

Efficiency/Standard Level 10 11 12 13 14 15 16 17 

(SEER) 

Recommended minimum 6.8 7.1 7.4 7.7 8.0 8.2 8.4 8.6 

HSPF 

Median HSPF in available 7.1 7.4 7.9 7.9 7.9 8.9 8.2 8.4 

products 

Offset from Median (HSPF) -0.3 -0.3 -0.5 -0.2 +0.1 -0.7 +0.2 +0.2 

Increase in Minimum HSPF 0% 67% -33% -133% 133% -167% -167% 

from Base HSPF 

Fraction of Available 0% <10% 10% 10% <60% <30% <100% <100% 

Equipment below the 

recommended HSPF Level 

ARI "Most Likely" HSPF 7.28 7.69 7.99 8.25 8.28 

.... 

Table 4.25 provides a more detailed breakdown of the models available at each efficiency 

level in 1998 as well as the total number of models at each efficiency level. 

4-52 
EE-RM/STD-98-440 ' 2 - 0'

Table 4.25 Prevalence of HSPF Ratings by SEER Level for 3-ton Split Heat

Pumps with Impacts of Suggested HSPF Standards

Efficiency Level (SEER)

11 12 13 14 15 16 17

Decile

Selected HSPF

7.1 7.4 7.7 8.0 8.2 8.4 8.6

0% 6.7 6.8 7.1 6.9 7.9 8.0 8.3

10% 7.2 7.4 7.7 7.4 8.0 8.1 8.4

20% 7.3 7.5 7.9 7.5 8.1 8.1 8.4

30% 7.4 7.6 7.9 7.6 8.4 8.1 8.4

40% 7.4 7.7 7.9 7.9 8.9 8.2 8.4

50% 7.4 7.9 7.9 7.9 8.9 8.2 8.4

60% 7.4 7.9 7.9 . 8.4 8.9 8.3 8.4

70% 7.5 7.9 8.1 8.4 8.9 8.3 8.4

80% 7.6 7.9 8.4 8.7 8.9 8.3 8.5

90% 7.9 8.1 8.5 8.9 8.9 8.3 8.5

100% 8.2 8.7 9.0 9.5 9.0 8.5 8.6

No. 1015 1127 437 257 13 36 7

Models

Source: ARI Unitary Directory, February-July 1998

4.8.2 Repair versus Replace

A few parties have expressed concern that standards which are too aggressive will encourage

consumers to repair old, inefficient equipment rather than replace it, and that this could actually

increase national energy consumption with respect to the base case. Since most equipment sales are

replacement sales, this is an important concern.

We used a simple equipment attrition model to project equipment shipments through 2030

assuming that new standards would result in the tendency to repair rather than replace equipment,

thereby extending its life. Table 4.26 shows the added lifespan that would have to be at each

potential standard level to result in an increase in national energy consumption over the base case

(no new standard).

4-53

/

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 W'2..D~ 

Table 4.25 Prevalence of HSPF Ratings by SEER Level for 3-ton Split Heat 

Pumps with Impacts of Suggested HSPF Standards 

EffideDCY Level (SEER) 

11 12 13 14 15 16 17 

Decile 

Selected HSPF 

7.1 7.4 7.7 8.0 8.2 8.4 8.6 

0% 6.7 6.8 7.1 6.9 7.9 8.0 8.3 

10% 7.2 7.4 7.7 7.4 8.0 8.1 8.4 

20% 7.3 7.5 7.9 7.5 8.1 8.1 8.4 

30% 7.4 7.6 7.9 7.6 8.4 8.1 8.4 

40% 7.4 7.7 7.9 7.9 8.9 8.2 8.4 

50% 7.4 7.9 7.9 7.9 8.9 8.2 8.4 

60% 7.4 7.9 7.9 8.4 8.9 8.3 8.4 

70% 7.5 7.9 8.1 8.4 8.9 8.3 8.4 

80% 7.6 7.9 8.4 8.7 8.9 8.3 8.5 

90% 7.9 8.1 8.5 8.9 8.9 8.3 8.5 

100% 8.2 8.7 9.0 9.5 9.0 8.5 8.6 

No. 1015 1127 437 257 13 36 7 

Models 

Source: ARl Umtary DIrectory, February-July 1998 

Wk .... 1 

4.8.2 Repair versus Replace 

A few parties have expressed concern that standards which are too aggressive will encourage 

consumers to repair old, inefficient equipment rather than replace it, and that this could actually 

increase national energy consumption with respect to the base case. Since most equipment sales are 

replacement sales, this is an important concern. 

We used a simple equipment attrition model to project equipment shipments through 2030 

assuming that new standards would result in the tendency to repair rather than replace equipment, 

thereby extending its life. Table 4.26 shows the added lifespan that would have to be at each 

potential standard level to result in an increase in national energy consumption over the base case 

(no new standard). 

4-53 
EE-RM/STD-98-440 '20%

Table 4.26 Equipment Life Extension Resulting in

Increased National Energy Consumption

Standard Level Necessary Years Added

(SEER) to Life

10.7 1

10.8 3

10.9 5

11.0 7

11.1 10

11.2 14

11.3 18

As expected, the results do not support the suggestion that higher standards would necessarily

increase national energy consumption by delaying equipment replacement. For example, an 11 SEER

standard would have to extend equipment life by more than seven years in order to increase energy

consumption nationwide. Standards higher than 11.4 SEER will not increase energy consumption

unless products survive for more than an additional 20 years. Neither scenario is likely. More likely

is that a slight increase in the standard would increase national energy consumption. For instance,

the change in retail price under a standard of 10.8 SEER is estimated to be about $80. According to

Table 4.26, a standard level of 10.8 would increase national energy consumption if it extended

equipment life beyond an additional three years.

New standards will reduce national energy consumption even if they prolong equipment life

because sales into the new construction market accumulate over time. In the attrition model base

case, equipment sold into homes built after 1998 consumes 15 percent of the total consumed by all

residential air conditioners through 2030. That cumulative effect causes the repair-replace decision

to have less of an effect on national energy consumption as standard levels rise. The Shipments

analysis in Chapter 6 explores this repair-replace issue in greater detail.

4.9 ESTABLISHING A MINIMUM EER(95°F) REQUIREMENT

Many utilities and environmental advocates support the establishment of minimum efficiency

standards based on EER at an outdoor temperature of 95°F, (EER(95°F)) in lieu of, or in addition

4-54

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 "* 2 D6 

Table 4.26 Equipment Life Extension Resulting in 

Increased National Energy Consumption 

Standard Level 

(SEER) 

10.7 

10.8 

10.9 

11.0 

11.1 

11.2 

11.3 

!!§IN 

Necessary Years Added 

to Life 

iBM' 

3 

5 

7 

10 

14 

18 

As expected, the results do not support the suggestion that higher standards would necessarily 

increase national energy consumption by delaying equipment replacement. For example, an 11 SEER 

standard would have to extend equipment life by more than seven years in order to increase energy 

consumption nationwide. Standards higher than 11.4 SEER will not increase energy consumption 

unless products survive for more than an additional 20 years. Neither scenario is likely. More likely 

is that a slight increase in the standard would increase national energy consumption. For instance, 

the change in retail price under a standard of 10.8 SEER is estimated to be about $80. According to 

Table 4.26, a standard level of 10.8 would increase national energy consumption if it extended 

equipment life beyond an additional three years. 

New standards will reduce national energy consumption even if they prolong equipment life 

because sales into the new construction market accumulate over time. In the attrition model base 

case, equipment sold into homes built after 19~8 consumes 15 percent of the total consumed by all 

residential air conditioners through 2030. That cumulative effect causes the repair-replace decision 

to have less of an effect on national energy consumption as standard levels rise. The Shipments 

analysis in Chapter 6 explores this repair-replace issue in greater detail. 

4.9 ESTABLISHING A MINIMUM EER(95°F) REQUIREMENT 

Many utilities and environmental advocates support the establishment of minimum efficiency 

standards based on EER at an outdoor temperature of 95°F, (EER(95°F» in lieu of, or in addition 

4-54 
EE-RM/STD-98-440 '2 A

(1j : to, SEER, which is based largely on an outdoor temperature of 82°F. They are concerned that an

increase in SEER does not necessarily correspond to an increase in EER, and that a 95°F rating

condition better represents the performance of an air conditioner on hot days when electricity

demand is at its highest. They believe that residential air conditioners contribute significantly to this

peak demand, particularly in warmer regions of the country.

Since electricity generation, transmission, and distribution capacity is determined by the

electrical load served during these peak demand times, products that demonstrate improved

efficiency under peak conditions can reduce the need for added electrical system capacity. The

utilities and environmental advocates also believe that reducing peak demand is an important

component of any integrated plan to improve the reliability of the nation's electrical system.

Recently there have been several well-publicized blackouts and brownouts following, orin the midst

of, hot periods. Advocates of an EER-based standard believe that a SEER-only standard does not

guarantee the desired improvement in peak-period performance.

4.9.1 Current Relationship between SEER and EER

It is certainly true that SEER is not an ideal indicator of system efficiency in very hot

weather, and SEER may not be the best indicator of the seasonal efficiency for equipment operating

in the warmest regions of the country. However, the relationship between efficiency at 82°F and at

95°F is fairly close for single-speed, single-capacity equipment, which represents the vast majority

of unitary equipment in the marketplace. For other equipment, including variable or multi-speed

equipment or equipment with modulating capacity, the 82°F test point is given a great deal of weight

in determining the SEER rating. In these cases, the relationship between SEER and EER(95°F) is

less certain, and manufacturers have some flexibility and incentive to improve SEER without

improving EER(95°F).

The SEER test, representing equipment performance over the entire cooling season,

encourages manufacturers to design equipment that consumes less energy throughout the cooling

season for the average user. The EER(95°F) test, which is a measure of steady-state performance

under only one set of climatic conditions, cannot provide insight into cyclical performance or cooling

efficiency at cooler temperatures which represent the bulk of the cooling season nationwide.

Figure 4.6 shows the relationship between SEER and EER in available 3-ton split air

conditioners based on three factors: 1) whether the compressors are single speed/capacity or

modulating, 2) whether outdoor fans are single or variable speed, and 3) whether indoor fans are

single or variable speed. Each oval represents a particular combination of the three factors. No

models with a combination of factors falls outside its oval.

4-55

(:

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 W'L D~ 

to, SEER., which is based largely on an outdoor temperature of 82°F. They are concerned that an 

increase in SEER does not necessarily correspond to an increase in EER., and that a 95°F rating 

condition better represents the performance of an air conditioner on hot days when electricity 

demand is at its highest. They believe that residential air conditioners contribute significantly to this 

peak demand, particularly in warmer regions of the country. 

Since electricity generation, transmission, and distribution capacity is determined by the 

electrical load served during these peak demand times, products that demonstrate improved 

efficiency under peak conditions can reduce the need for added electrical system capacity. The 

utilities and environmental advocates also believe that reducing peak demand is an important 

component of any integrated plan to improve the reliability of the nation's electrical system. 

Recently there have been several well-publicized blackouts and brownouts following, orin the midst 

of, hot periods. Advocates of an EER-based standard believe that a SEER-only standard does not 

guarantee the desired improvement in peak-period performance. 

4.9.1 Current Relationship between SEER and EER 

It is certainly true that SEER is not an ideal indicator of system efficiency in very hot 

weather, and SEER may not be the best indicator of the seasonal efficiency for equipment operating 

in the warmest regions of the country. However, the relationship between efficiency at 82°F and at 

95°F is fairly close for single-speed, single-capacity equipment, which represents the vast majority 

of unitary equipment in the marketplace. For other equipment, including variable or multi-speed 

equipment or equipment with modulating capacity, the 82°F test point is given a great deal of weight 

in determining the SEER rating. In these cases, the relationship between SEER and EER(95°F) is 

less certain, and manufacturers have some flexibility and incentive to improve SEER without 

improving EER(95°F). 

The SEER test, representing equipment performance over the entire cooling season, 

encourages manufacturers to design equipment that consumes less energy throughout the cooling 

season for the average user. The EER(95°F) test, which is a measure of steady-state performance 

under only one set of climatic conditions, cannot provide insight into cyclical performance or cooling 

efficiency at cooler temperatures which represent the bulk of the cooling season nationwide. 

Figure 4.6 shows the relationship between SEER and EER in available 3-ton split air 

conditioners based on three factors: 1) whether the compressors are single speed/capacity or 

modulating, 2) whether outdoor fans are single or variable speed, and 3) whether indoor fans are 

single or variable speed. Each oval represents a particular combination of the three factors. No 

models with a combination of factors falls outside its oval. 

4-55 
EE-RM/STD-98-440 2 08

14-

13 fan OMoutdooruoen - - Speeds Speeds

12 -

10 11 12 13 14 15 16 17 18 19

SEER

Source: ARI Unitary Directory, February-July 1998

Figure 4.6 Effects of Compressor and Fan Modulation on the EER-SEER

Relationship in Existing 3-ton Split Air Conditioning Systems

-. U

The graph shows a clear division between models based on whether they possess modulating

compressors. The models with the highest SEER ratings have modulating compressors (this includes

systems with multiple compressors, variable speed compressors, and variable capacity compressors.)

This suggests that, all else equal, a system with a modulating compressor will achieve a SEER boost

of 2-4 points or will suffer an EER loss of up to 2 points.

Manufacturers have some leeway in designing SEER-EER the relationship. Systems with

modula compressors tin g are typically optimized for low capacit yoperation SEER. to boost This can

reduce the performance of system th at capacity. high Sensible heat ratios (dehumidification) and

sound levels can also suffer. Since the efficiency standards and the market are tied to SEER ratings,

manufacturers have the incentive to boost SEER at the expe nse of EER. Notice, however, that totally

modulating systems can attain the same EER ratings as their single speed counterparts. That

indicates that manufacturers can design and produce high efficiency, totally modulating systems that

boost both EER and SEER.

g The DOE SEER test procedure for modulating systems gives weight to the operating efficiency at low-capacity

and an outdoor dry bulb of 82°F.

4-56

EE-RM-STD-98-440 COMMENT 208

EE-RM/STO-9B-440 t '2-D'6 

14 

13 

12 

« 11 

ttl 

Indoor fan 

speeds 

Models 

below 12 

SEER not 

10 shown 

9 

8 

10 11 12 13 14 

SEER 

Source: ARI Unitary Directory, February.July 1998 

15 16 17 18 

Figure 4.6 Effects of Compressor and Fan Modulation on the EER-SEER 

Relationship in Existing 3-ton Split Air Conditioning Systems 

19 

The graph shows a clear division between models based on whether they possess modulating 

compressors. The models with the highest SEER ratings have modulating compressors (this includes 

systems with multiple compressors, variable speed compressors, and variable capaci ty compressors.) 

This suggests that, all else equal, a system with a modulating compressor will achieve a SEER boost 

of 2-4 points or will suffer an EER loss of up to 2 points. 

Manufacturers have some leeway in designing the SEER-EER relationship. Systems with 

modulating compressors are typically optimized for low capacity operation to boost SEERg. This can 

reduce the performance of the system at high capacity. Sensible heat ratios (dehumidification) and 

sound levels can also suffer. Since the efficiency standards and the market are tied to SEER ratings, 

manufacturers have the incentive to boost SEER at the expense ofEER. Notice, however, that totally 

modulating systems can attain the same EER ratings as their single speed counterparts. That 

indicates that manufacturers can design and produce high efficiency, totally modulating systems that 

boost both EER and SEER. 

g Title DOE SEER test procedure for modulating systems gives weight to the operating efficiency at low-capacity 

and an outdoor dry bulb of 82°F. 

4-56 
EE-RM/STD-98-440 t2.0

(C':X~ e The graph also suggests a few conclusions about the indoor and outdoor fans. First. the SEER

and EER impacts of modulating indoor fans is greater than the impacts of outdoor fans. Second,

modulating compressors cannot achieve their greatest SEER and EER benefits unless both the indoor

and outdoor fans are also modulating. Third, systems with efficient single speed compressors do not

receive much of a boost in either SEER or EER by virtue of the presence of variable speed fans.

Clearly, a higher SEER standard will not guarantee a proportional increase in EER. As time

progresses, thermodynamic limitations make it more expensive to squeeze additional efficiency from

a system. At the same time, advances in control and power technologies reduce the cost of

incorporating the modulating capabilities that allow manufacturers to boost SEER without raising

EER.

4.9.2 The Effect of Refrigerant Choice on EER and SEER

Refrigerant also plays a role in this issue. 41 OA is less efficient than both HCFC-22 and 407C

at high condenser temperatures, but more efficient at low condenser temperatures. The difference

between 410A and 407C is on the order of 5 percent at the EER rating points. 410A can result in

improved SEER ratings and reduced EER ratings. Equipment manufacturers will be encouraged to

adopt 410A for its SEER effect, but utilities may prefer 407C for its EER effect.

4.9.3 Options for Possible EER Standards

The Department has at least four options for ensuring that EER(95°F) performance is

maintained under new SEER standards. First, the Department could rely on the physical relationship

between EER(95°F) and SEER to ensure that an increase in SEER would result in a corresponding

increase in EER. The Department is not aware of any modulating, multi-speed, or variable speed

air conditioners (hereafter referred to collectively as modulating equipment) being offered below

13 SEER, and very few of the available 13 SEER products are modulating equipment.

The second option would be to establish an EER(95°F) floor that must be met by modulating

equipment only or, alternately, all equipment.

The third option would be to establish a minimum EER requirement at each SEER level,

even for products exceeding the minimum SEER level. Again, this could be established for

modulating equipment only or for all equipment.

The fourth option would be to alter the SEER test procedure to rely more on 95°F

performance and less on performance at cooler temperatures. This would provide incentive for

manufacturers to optimize their designs to favor the warmer part of the cooling season and warmer

regions of the country.

4-57

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 ~~2D~ 

The graph also suggests a few conclusions about the indoor and outdoor fans. First. the SEER 

and EER impacts of modulating indoor fans is greater than the impacts of outdoor fans. Second, 

modulating compressors cannot achieve their greatest SEER and EER benefits unless both the indoor 

and outdoor fans are also modulating. Third, systems with efficient single speed compressors do not 

receive much of a boost in either SEER or EER by virtue of the presence of variable speed fans. 

Clearly, a higher SEER standard will not guarantee a proportional increase in EER. As time 

progresses, thermodynamic limitations make it more expensive to squeeze additional efficiency from 

a system. At the same time, advances in control and power technologies reduce the cost of 

incorporating the modulating capabilities that allow manufacturers to boost SEER without raising 

EER. 

4.9.2 The Effect of Refrigerant Choice on EER and SEER 

Refrigerant also plays a role in this issue. 41 OA is less efficient than both HCFC-22 and 407C 

at high condenser temperatures, but more efficient at low condenser temperatures. The difference 

between 410A and 407C is on the order of 5 percent at the EER rating points. 410A can result in 

improved SEER ratings and reduced EER ratings. Equipment manufacturers will be encouraged to 

adopt 41 OA for its SEER effect, but utilities may prefer 407C for its EER effect. 

4.9.3 Options for Possible EER Standards 

TIle Department has at least four options for ensuring that EER(95°F) performance is 

maintained under new SEER standards. First, the Department could rely on the physical relationship 

between EER(95°F) and SEER to ensure that an increase in SEER would result in a corresponding 

increase in EER. The Department is not aware of any modulating, multi-speed, or variable speed 

air conditioners (hereafter referred to collectively as modulating equipment) being offered below 

13 SEER, and very few of the available 13 SEER products are modulating equipment. 

The second option would be to establish an EER(95°F) floor that must be met by modulating 

equipment only or, alternately, all equipment. 

The third option would be to establish a minimum EER requirement at each SEER level, 

even for products exceeding the minimum SEER level. Again, this could be established for 

modulating equipment only or for all equipment. 

The fourth option would be to alter the SEER test procedure to rely more on 95°F 

performance and less on performance at cooler temperatures. This would provide incentive for 

manufacturers to optimize their designs to favor the warmer part of the cooling season and warmer 

regions of the country. 

4-57 
EE-RM/STD-98-440 . 7°

The first option, relying on the current relationship between EER and SEER, would provide (9i ~ no assurance that manufacturers would not develop and promote equipment in the long term that

would seriously reduce EER ratings. The fourth option, altering the SEER test procedure to favor

higher temperatures, would require a new rulemaking to establish new procedures as well as a full

revision to the analysis supporting this rule to incorporate the new SEER values.

Both the second and third options, mandating minimum EER ratings, would guarantee that

products under new standards would achieve the same EER ratings as they do today without altering

the test procedures. The third option is more aggressive since it would require that products of

higher SEER ratings must also meet increasingly stringent EER ratings.

Within the second and third options, the Department could establish EER requirements of

varying degrees of stringency. For example, it could select EER levels equivalent to the ratings of

the minimum EER rating of available equipment today at the proposed standard level, the median

EER rating, anywhere in between, or even higher.

A serious concern regarding the third option and EER standards higher than the minimum

EER ratings available today is that both would discourage the development and sale of modulating

capacity and variable speed equipment. Modulating equipment realizes a benefit in the SEER test,

allowing manufacturers to reduce the cost of the core components compared to non-modulating

equipment. This cost reduction partially offsets the cost of the modulation, making modulating

equipment more affordable for consumers. Being required to meet the same EER standards as nonmodulating equipment would negate this cost benefit.

( v4~~ : Consumers value the added benefits of modulation, and manufacturers realize this value in

the form of higher revenues. For consumers and the nation, modulation mitigates the inefficiencies

caused by oversizing the system during installation. Oversizing is a widespread problem that causes

frequent equipment cycling, increasing energy consumption. Furthermore, oversizing arguably

contributes more to peak power demand than does any reduction in EER associated with modulating

equipment.

4.9.4 EER-SEER Relationship in Current Equipment

To help to determine what the appropriate EER(95°F) requirement might be for each of the

four classes, Table 4.27 shows the EER rating for models at each decile within a SEER level. The

data source is the ARI Unitary Directory. We considered only NAECA-covered products below

66,000 BTU/hr intended for domestic sale. Each SEER level includes all products from the nominal

SEER level through those rated 0.2 SEER higher than the nominal level (e.g. 10 SEER through

10.2 SEER). We considered only coil-only models where possible. The data includes all models

available, not only the High Sales Volume models subject to DOE certification. The Table also

provides the number of models included in the dataset in each category.

4-58

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 i "lD'l 

The first option, relying on the current relationship between EER and SEER, would provide 

no assurance that manufacturers would not develop and promote equipment in the long term that 

would seriously reduce EER ratings. The fourth option, altering the SEER test procedure to favor 

higher temperatures, would require a new rulemaking to establish new procedures as well as a full 

revision to the analysis supporting this rule to incorporate the new SEER values. 

Both the second and third options, mandating minimum EER ratings, would guarantee that 

products under new standards would achieve the same EER ratings as they do today without altering 

the test procedures. The third option is more aggressive since it would require that products of 

higher SEER ratings must also meet increasingly stringent EER ratings. 

Within the second and third options, the Department could establish EER requirements of 

varying degrees of stringency. For example, it could select EER levels equivalent to the ratings of 

the minimum EER rating of available equipment today at the proposed standard level, the median 

EER rating, anywhere in between, or even higher. 

A serious concern regarding the third option and EER standards higher than the minimum 

EER ratings available today is that both would discourage the development and sale of modulating 

capacity and variable speed equipment. Modulating equipment realizes a benefit in the SEER test, 

allowing manufacturers to reduce the cost of the core components compared to non-modulating 

equipment. This cost reduction partially. offsets the cost of the modulation, making modulating 

equipment more affordable for consumers. Being required to meet the same EER standards as nonmodulating equipment would negate this cost benefit. 

Consumers value the added benefits of modulation, and manufacturers realize this value in 

the form of higher revenues. For consumers and the nation, modulation mitigates the inefficiencies 

caused by oversizing the system during installation. Oversizing is a widespread problem that causes 

frequent equipment cycling, increasing energy consumption. Furthermore, oversizing arguably 

contributes more to peak power demand than does any reduction in EER associated with modulating 

equipment. 

4.9.4 EER-SEER Relationship in Current Equipment 

To help to determine what the appropriate EER(95°F) requirement might be for each of the 

four classes, Table 4.27 shows the EER rating for models at each decile within a SEER level. The 

data source is the ARl Unitary Directory. We considered only NAECA-covered products below 

66,000 BTUIhr intended for domestic sale. Each SEER level includes all products from the nominal 

SEER level through those rated 0.2 SEER higher than the nominal level (e.g. 10 SEER through 

10.2 SEER). We considered only coil-only models where possible. The data includes all models 

available, not only the High Sales Volume models subject to DOE certification. The Table also 

provides the number of models included in the dataset in each category. 

4-58 
EE-RM/STD-98-440 ' 2

-k

(|-i~ :Table 4.27 Distribution of Energy Efficiency Ratios (EERs) in Residential Unitary Products

Nominal Efficiency (SEER)

11 12 1 13 10 11 12 13

Decile Split Air Conditioners (RCU-A-C) Packaged Air Conditioners (SP-A)

0% 8.5 9.4 9.1 9.7 8.3 9.2 10.0 10.1

10% 9.0 9.8 10.5 11.2 8.7 9.5 10.3 10.1

20% 9.1 9.8 10.6 11.4 8.8 9.6 10.4 10.5

30% 9.2 9.9 10.7 11.5 8.9 9.8 10.4 10.9

40% 9.3 10.0 10.7 11.5 9.0 10.0 10.5 11.0

50% 9.3 10.0 10.8 11.6 9.1 10.1 10.5 11.0

60% 9.4 10.2 10.9 11.7 9.2 10.2 10.5 11.0

70% 9.5 10.2 11.0 11.8 9.3 10.3 10.6 11.0

80% 9.5 10.4 11.0 11.8 9.4 10.5 10.7 11.1

90% 9.6 10.6 11.2 12.0 9.6 11.0 10.8 11.4

100% 10.8 11.4 12.8 13.0 10.7 11.2 11.0 11.5

Number 5133 2809 4156 901 446 146 157 50

Decile Split Heat Pumps (HRCU-A-C) Packaged Heat Pumps (HSP-A)

0% 7.4 9.3 8.6 9.6 8.2 9.0 9.8 11.0

10% 9.0 9.6 10.3 11.1 8.7 9.2 10.0 11.0

20% 9.1 9.7 10.4 11.3 9.0 9.3 10.1 11.0

30% 9.1 9.9 10.5 11.5 9.0 9.5 10.2 11.0

40% 9.2 10.0 10.6 11.6 9.0 9.5 10.3 11.0

50% 9.3 10.0 10.7 11.9 9.1 9.7 10.4 11.0

60% 9.4 10.2 10.8 12.3 9.2 9.9 10.5 11.6

70% 9.5 10.3 10.9 12.3 9.4 10.0 10.6 12.0

80% 9.5 10.5 11.0 12.4 9.5 10.0 10.8 12.0

90% 9.6 10.7 11.4 12.5 9.6 10.0 11.0 12.0

100% 10.8 12.0 12.7 13.7 10.5 10.2 11.5 12.0

Number 2538 1408 2147 452 443 96 306 7

4-59

("

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 *,.2J) ~ 

Table 4.27 Distribution of EnergyEfficiencv Ratios (EERs) in Residential Unitan' Products 

Nominal Efficiency (SEER) 

10 I II I 12 I 13 10 I II I 12 I 13 

Decile Split Air Conditioners (RCU-A-C) Packaged Air Conditioners (SP-A) 

0% 8.5 9.4 9.1 9.7 8.3 9.2 10.0 10.1 

10% 9.0 9.8 10.5 11.2 8.7 9.5 10.3 10.1 

20% 9.1 9.8 10.6 11.4 8.8 9.6 10.4 10.5 

30% 9.2 9.9 10.7 1l.5 8.9 9.8 10.4 10.9 

40% 9.3 10.0 10.7 1l.5 9.0 10.0 10.5 11.0 

50% 9.3 10.0 10.8 11.6 9.1 10.1 10.5 11.0 

60% 9.4 10.2 10.9 11.7 9.2 10.2 10.5 11.0 

70% 9.5 10.2 11.0 11.8 9.3 10.3 10.6 11.0 

80% 9.5 10.4 11.0 11.8 9.4 10.5 10.7 11.1 

90% 9.6 10.6 11.2 12.0 9.6 11.0 10.8 11.4 

100% 10.8 11.4 12.8 13.0 10.7 11.2 11.0 11.5 

Number 5133 2809 4156 901 446 146 . 157 50 

Decile Split Heat Pumps (HRCU-A-C) Packaged Heat Pumps (HSP-A) 

0% 7.4 9.3 8.6 9.6 8.2 9.0 9.8 11.0 

10% 9.0 9.6 10.3 11.1 8.7 9.2 10.0 11.0 

20% 9.1 9.7 10.4 11.3 9.0 9.3 10.1 11.0 

30% 9.1 9.9 10.5 11.5 9.0 9.5 10.2 11.0 

40% 9.2 10.0 10.6 11.6 9.0 9.5 10.3 11.0 

50% 9.3 10.0 10.7 11.9 9.1 9.7 10.4 11.0 

60% 9.4 10.2 10.8 12.3 9.2 9.9 10.5 11.6 

70% 9.5 10.3 10.9 12.3 9.4 10.0 10.6 12.0 

80% 9.5 10.5 11.0 12.4 9.5 10.0 10.8 12.0 

90% 9.6 10.7 11.4 12.5 9.6 10.0 11.0 12.0 

100% 10.8 12.0 12.7 13.7 10.5 10.2 11.5 12.0 

Number 2538 1408 2147 452 443 96 306 7 

4-59 
EE-RM/STD-98-440 k'2 o

(j} REFERENCES

1. ARI Report U-SEER-5-Q, January - December, 1994. Industry sources confirm that the

prevalence of 10 SEER equipment remains valid in 1999.

2. Dun & Bradstreet, Duns FinancialProfile, Industry Profile, 1999. SIC# 1521 "Construction-

-General-General Contractors--Single-Family Houses". Markup = 1/(1998 cost of sales)

3. Risk Management Associates,Annual Statement Studies: S1C#1521. 1999. Markup = 1/(1 - Gross Profit from 4/1/98 - 3/31/99 for all firms)

4. Financial Analysis for the HVACR Contracting Industry, Air Conditioning Contractors of

America (1995)

5. Federal Trade Administration, January 1998

6. Sales Tax Institute, 1999

7. ARI U-SEER-5-Q,1994

8. Energy Design, June 1999

9. Thermal Components "List of commonly asked questions about coils manufactured using (/-*C ~brazed aluminum technology", February 2000.

10. Optimization Strategiesfor UnitaryAir Conditioners Using R-41OA, Jing Zheng, H. Hughes,

M. Spatz, G. Zyhowoski, Allied Signal

4-60

(I

EE-RM-STD-98-440 COMMENT 208

EE-RM/STD-98-440 "* '2o~ 

REFERENCES 

1. ARI Report U-SEER-5-Q, January - December, 1994. Industry sources confirm that the 

prevalence of 10 SEER equipment remains valid in 1999. 

2. Dun & Bradstreet, Duns Financial Profile, Industry Profile, 1999. SIC# 1521 "Construction-

-General-General Contractors--Single-Family Houses". Markup = 1/(1998 cost of sales) 

3. Risk Management Associates, Annual Statement Studies: SIC#1521. 1999. Markup = 1/( 1 -

Gross Profit from 4/1/98 - 3/31/99 for all firms) 

4. Financial Analysisfor the HVACR Contracting Industry, Air Conditioning Contractors of 

America (1995) 

5. Federal Trade Administration, January 1998 

6. Sales Tax Institute, 1999 

7. ARI U-SEER-5-Q ,1994 

8. Energy Design, June 1999 

9. Thermal Components "List of commonly asked questions about coils manufactured using 

brazed aluminum technology", February 2000. 

10. Optimization Strategies for Unitary Air Conditioners Using R -41 OA, Jing Zheng, H. Hughes, 

M. Spatz, G. Zyhowoski, Allied Signal 

4-60