### 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

January2001

U.S. Department ofEnergy Assistant Secretary, Energy Efficiency & Renewable Energy Office ofBuilding Research and Standards Washington, DC 20585 

### EE-RM/STD-98-440



# TECHNICAL SUPPORT DOCUMENT: ENERGY EFFICIENCY STANDARDS FOR CONSUMERPRODUCTS: RESIDENTIAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS Including: Regulatory Impact Analysis

January 2001

U.S. Department ofEnergy Assistant Secretary, Energy Efficiency & 

### Renewable Energy Office ofBuilding Research and Standards Washington, DC 20585

### EE-RM/STD-98-440

- 2.

This Document was prepared for the Department ofEnergy by staffmembers of Arthur D. Little, Inc. and Ernest Orlando Lawrence Berkeley National Laboratory Energy Analysis Department EE-RM/STD-98-440

# *"**2~**

This Document was prepared for the Department ofEnergy by staffmembers of Arthur D. Little, Inc. and Ernest Orlando Lawrence BerkeleyNational 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 ofa 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 ofProposed Rulemaking, published in the Federal Register onNovember 24, 1999. (64 FR 66306). A revised TSD was posted to the Department's web site in October, 2000 in support ofthe Notice ofProposed Rulemaking (NOPR) published in the Federal Register on October 5, 2000. (65 FR 59590). Because theTSD for the Final Rule is similar to thatforthe NOPR, the Department decided that the TSD for the Final Rule will consist ofthe October, 2000, version ofthe TSD plus the following new or revised sections: Preface Revised Table ofContents Appendix I: Errata Appendix Appendix J: Supplemental Appendix Appendix K: List ofAcronyms and Abbreviations



## ( 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 ofa 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 inNovember, 1999, in support ofa Supplemental Advanced Notice ofProposed Rulemaking, published 

### in the Federal Register onNovember 24, 1999. (64 FR 66306). A revised TSD was posted to the Department's web site in October, 2000 in support ofthe Notice ofProposed Rulemaking (NOPR) published 

### in the Federal Register on October 5, 2000. (65 FR 59590). BecausetheTSD for theFinal Rule is similarto thatfortheNOPR,theDepartmentdecided that the TSD for the Final Rule will consist ofthe October, 2000, version ofthe TSD plus the following new orrevised sections: • Preface • Revised Table ofContents • Appendix I: Errata Appendix • Appendix 

### J: Supplemental Appendix • Appendix K: List ofAcronyms and Abbreviations

### EE-RM/STD-98-440 't 2'^ TABLE OF CONTENTS CHAPTER 1: INTRODUCTION ............................................... 1-1 

### 1.1 Purpose ofDocument ............................................. 1-1 1.2 Overview ofAppliance Standards ................................... 1-1 1.3 Overview ofCentral Air Conditioner and Heat Pump Standards .......... 1-2 1.4 Structure ofthe 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 Costsbetween 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 i 

### EE-RMISTD-98-440 

# t 2 cJ

## ~ TABLE OF CONTENTS CHAPTER 1: INTRODUCTION ............................................... 1-1 1.1 Purpose ofDocument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1-1 1.2 Overview ofAppliance Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1-1 1.3 Overview ofCentral Air Conditioner and Heat Pump Standards ........... 1-2 1.4 Structure ofthe 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 ofBaseline 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 ofSample Equipment . .............. 4-6 4.2.4 Modeling the Production Facility ............................. 4-7 4.2.5 Compensating for the Commoditization Effect ofEfficiency 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 ofARI Results .................................. 4-17 4.3 Markups ...................................................... 4-17 4.3.1 Description ofDistribution Chain ............................ 4-17 4.3.2 Determination ofthe Manufacturer Markup . ................ 4-18 4.3.3 Determination ofDistributor Markup ......................... 4-20 4.3.4 Determination ofBuilder Markup ................... ......... 4-21 4.3.5 Determination ofDealer Markup ............................. 4-21 4.3.6 Determination ofSales 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 .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 UtilityAnalysis ........................ :....................... 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 ofBaseline 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 ofSample Equipment ................ 4-6 4.2.4 Modeling the Production Facility ............................. 4-7 4.2.5 Compensating for the Commoditization Effect ofEfficiency 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 ofARI Results .................................. 4-17 4.3 Markups ...................................................... 4-17 4.3.1 Description ofDistribution Chain ............................ 4-17 4.3.2 Determination ofthe Manufacturer Markup .................... 4-18 4.3.3 Determination ofDistributor Markup ......................... 4-20 4.3.4 Determination ofBuilder Markup ............................ 4-21 4.3.5 Determination ofDealer Markup ............................. 4-21 4.3.6 Determination ofSales 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 ofEmerging Technologies . .............. 4-33 4.5.3 Potential ofEmerging 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 ofNiche 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 forNiche 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 forTesting .................... 4-46 4.6.2.4.5 Redefinition ............................... 4-46 4.6.2.5 Justification forNew 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 ofthe 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

### ~

# '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 ofEmerging Technologies ............... 4-33 4.5.3 Potential ofEmerging 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 orCombining 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 ofNiche 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 ofthe 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 ofRefrigerant 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 ofLCC, PBP, and Rebuttable PBP Inputs ........... 5-2 5.1.3 Use ofResidential Energy Consumption Survey (RECS) inLCC 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 Markup ................................. 5-13 5.2.2.5 Dealer M arkup .................................... 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 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 ofStandard . ................ 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

## 1t.o<O~ 4.9.1 Current Relationship between SEER and EER .................. 4-55 4.9.2 The Effect ofRefrigerant 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 ofLCC, PBP, and Rebuttable PBP Inputs ............... 5-2 5.1.3 Use ofResidential 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 ofStandard .......................... 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 Breakdownbased 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 ofPayback 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 ofMarket Segments and Ownership Categories ......... 6-1 6.1.2 Shipment Model Features ................................... 6-4 6.1.3 Review ofOther 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 ofPurchase Model .......................... 6-22 6.3.1.1 Logit Equation ..................................... 6-22 6.3.2 Determination ofMarket Shares ............................. 6-24

v 

### 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 ofPayback 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 ofMarket Segments and Ownership Categories ......... 6-1 6.1.2 Shipment Model Features ................................... 6-4 6.1.3 Review ofOtherPublished 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 anExtended-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 ofPurchase Model .......................... 6-22 6.3.1.1 Logit Equation ....... '" ........................... 6-22 6.3.2 Determination ofMarket Shares ............................. 6-24

v

### EE-RM/STD-98-440 

### - 0 O 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 ofSplit 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 forEarly 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 ofFuel 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 ofEfficiency-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 ofAir 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

## ~

# 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 ofSplit 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 ofFuel 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 Sensitivityto 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 ofEfficiency-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 ofAir Conditioners and Heat Pumps byVintage (STOCK v ) ......................................... 7-6 7.2.2.5 Annual Energy perUnit (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 ofCosts (PVC) ......................... 7-14 7.3.2.3 Present Value ofSavings (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 ofGRIM Inputs .................................... 8-8 8.3.2 Overview ofthe 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 vii EE-RM/STD-98-440 

# 'tf"2 0

# 1' 7.3.2.2 Present Value ofCosts (PVC) ......................... 

### 7-14 7.3.2.3 Present Value ofSavings (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 Sensitivityto 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 Sensitivityto 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 ofGRIM Inputs .................................... 8-8 8.3.2 Overview ofthe 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 ofImpacts 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 atthe 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 Methodology ................................................... 9-1 9.3 Results ........................................................ 9-1 viii 

### 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 ofImpacts 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 ofthe 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 VARIABILITY ............ A-1 A.1 Introduction ................................................... A-i A.2 Uncertainty .................................................... A-i A.3 Variability .................................................... A-i A.4 Approaches to Uncertainty and Variability ........................... A-2 A.5 Probability Analysis and the Use ofCrystal 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 Materials .................................. ...... C-8 C.5.4 Coil Fabrication Costs ...................................... C-9 C.6 Structure ofthe Cost Models .................................... C-9 ix 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 ofthe 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 FORUNCERTAINTY AND VARlABILITY ............ A-I A:l Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. A-I A.2 Uncertainty .................................................... A-I A.3 Variability .................................................... A-I AA Approaches to Uncertainty andVariability ........................... A-2 A.5 Probability Analysis and the Use ofCrystal 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 ofthe Cost Models ...................................... C-9 ix

### EE-RM/STD-98-440 , 

### 2 0 C.6.1 M ain Cost Model ............................. ............ 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 ofSupplemental ANOPR and NOPR Markup Calculations .... D-2 D.3 Average, Disaggregated, and Incremental Markups . ....... ......... D-4 D.4 Analysis ofFinancial Statements ................................... D-6 D.4.1 Distributors ............................................. D-6 D.4.2 Dealers/Contractors .............................. ......... D-7 D.5 Econometric Analysis ofU.S. Census Bureau Data . ....... ....... D-7 D.5.1 Distributor Markups ....................................... D-8 D.5.2 Dealer Markups ........................................ D-10 D.6 Sensitivity ofTest ofMarginal Markup Measurements ................ D-11 D.7 Summary ofResults ........................................... 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 of30-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 

# 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 DISTRIBUTORIWHOLESALERAND DEALER/CONTRACTOR MARKUPS ON INCREMENTAL CENTRAL AIR CONDIT10NER AND HEAT PUMP COSTS ................... D-l D.l lntroduction ................................................... D-l D.2 Comparison ofSupplemental ANOPR and NOPR Markup Calculations . . .. D-2 D.3 Average, Disaggregated, and lncremental Markups .................... D-4 DA Analysis ofFinancial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. D-6 DA.l Distributors ............................................. D-6 D.4.2 Dealers/Contractors ....................................... D-7 D.5 Econometric Analysis ofU.S. Census Bureau Data .................... D-7 D.S.l Distributor Markups ....................................... D-8 D.S.2 Dealer Markups ......................................... D-I0 D.6 Sensitivity ofTest ofMarginal Markup Measurements ................ D-l1 D.7 Summary ofResults ............................................ 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 of30-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. Methodology ................................................ 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 

# 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 ofDesign Information ..................................... 4-5 Table 4.3 Breakdown ofEquipment Subjected to Cost Estimation Analysis .......... 4-6 Table 4.4 Production Facility Specifications ................................... 4-7 Table 4.5 Examples ofProduct 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 ofRevised 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 ofIrreversibility in a Conventional Refrigerator ................ 4-25 Table 4.16 Key Assumptions usedto Derive Emerging Technology System Cost Estimates ................................................. 4-34 Table 4.17 Potential Impact ofEmerging Technologies on the Production Cost of3-ton Split Air Conditioners with Fancoils by 2007 ......................... 4-35 Table 4.18 Estimated Likelihood ofCommercial Dominance in Baseline Equipment by 2006 Under Various Standard Levels ............................. 4-36 Table 4.19 Estimated Likelihood ofCommercial 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 ofResidential Unitary Condensers by Capacity (1996) ......... 4-41 Table 4.22 Characteristics ofNiche Products .................................. 4-42 Table 4.23 Assessment ofFactors that Influence the Decision to Establish Separate Classes forNiche Products ....................................... 4-48 Table 4.24 Comparison ofProposed HSPF Standard Levels with Median HSPF's of Equipment Listed in the ARI Unitary Directory ....................... 4-52 Table 4.25 Prevalence ofHSPF Ratings by SEER Level for 3-ton Split Heat Pumps with Impacts ofSuggested HSPF Standards .......................... 4-53 xii 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 Table4.14 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 ofDesign Information ..................................... 4-5 Breakdown ofEquipment Subjectedto Cost Estimation Analysis .......... 4-6 Production Facility Specifications ................................... 4-7 Examples ofProduct 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 ofRevised 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 ofIrreversibility in a Conventional Refrigerator ................ 4-25 Key Assumptions used to Derive Emerging Technology System Cost Estimates ................................................. 4-34 Potential Impact ofEmerging Technologies on the Production Cost of3-ton Split Air Conditioners with Fancoils by 2007 ......................... 4-35 Estimated Likelihood ofCommercial Dominance in Baseline Equipment by 2006 Under Various Standard Levels ............................. 4-36 Estimated Likelihood·ofCommercial Dominance in Premium Equipment by2006 Under Various Standard Levels ............................. 4-36 Available Packaged Systems Models Rated at and below 10 SEER ........ 4-39 Shipments ofResidential Unitary Condensers by Capacity (1996) ......... 4-41 Characteristics ofNiche Products .................................. 4-42 Assessment ofFactors that Influence the Decision to Establish Separate Classes for Niche Products ....................................... 4-48 Comparison ofProposed 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 ofSuggested 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 ofEnergy 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 ofDistributor/Wholesaler Markups ... 5-14 Table 5.5 Cumulative Probability Distribution ofDealer/Contractor Markups ....... 5-15 Table 5.6 Baseline Installation Costs ........................................ 5-18 Table 5.7 Costs and Markups for Determination ofWeighted-Average Total Installed Costs ......................................................... 5-19 Table 5.8 Weighted-Average Total Installed Costs for Central Air Conditioners and Heat Pumps ................................................ 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 ofUnitary 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 ofBuilding 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 ofUnitary 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 ofBuilding Stock utilizing Residential-Size Space-Heating Equipment .................................................... 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 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 ofEnergy 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 ofDistributorlWholesaler Markups ... 5-14 Cumulative Probability Distribution ofDealer/Contractor Markups ....... 5-15 Baseline Installation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-18 Costs and Markups for Determination ofWeighted-Average Total Installed Costs ......................................................... 5-19 Weighted-Average Total Installed Costs for Central 

### Air Conditioners and Heat Pumps ................................................ 5-20 Inputs forOperating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-25 Census Division and Four Large State 30-yearAverage CDD ............ 5-28 Shipments Weighted SEERs ofUnitary 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 ofBuilding 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 ofUnitary 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 ofBuilding 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 ofCommercial 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 ofLCC Results for Split Air Conditioners ................... 5-86 Table 5.36 Summary ofLCC Results for Split Heat Pumps ....................... 5-86 Table 5.37 Summary ofLCC Results for Single Package Air Conditioners ........... 5-87 Table 5.38 Summary ofLCC 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 Lifetime................................... .......... 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 ofPayback Period Results for Split Air Conditioners .......... 5-105 Table 5.54 Summary ofPayback Period Results for Split Heat Pumps ............. 5-106 Table 5.55 Summary ofPayback Results for Single Package Air Conditioners ....... 5-107 Table 5.56 Summary ofPayback Period Results for Single Package Heat Pumps ..... 5-108 xiv 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 ofCommercial 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 ofLCC Results for Split Heat Pumps ....................... 5-86 SummaryofLCC Results for Single Package Air Conditioners ........... 5-87 SummaryofLCC 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 SystemAlC

- 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 PackageAlC

- 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 ofPayback Period Results for Split Air Conditioners .......... 5-105 Summary ofPayback Period Results for Split Heat Pumps ............. 5-106 SummaryofPayback Results for Single Package Air Conditioners ....... 5-107 SummaryofPayback 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 ofRebuttable PBPs and Inputs for Split System Air Conditioners .................... .......................... 5-112 Table 5.59 Summary ofRebuttable PBPs and Inputs for Split System Heat Pumps .................................................. 5-113 Table 5.60 Summary ofRebuttable PBPs and Inputs for Single Package Air Conditioners ............................................... 5-113 Table 5.61 Summary ofRebuttable 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 Equipment 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 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

## ~ EfficiencyLevel Market Shares for 1994 ........................... 5·110 Summary ofRebuttable PBPs and Inputs for Split System Air Conditioners ............................................... 5·112 Summary ofRebuttable PBPs and Inputs for Split System Heat Pumps .................................................. 5-113 Summary ofRebuttable PBPs and Inputs for Single Package Air Conditioners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-113 Summary ofRebuttable 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 AirConditioners and Heat Pumps . . . . . . . 7-17 NBS Model Inputs and Assumptions ................................ 7-20 Cumulative NBS Results based onAE02000 Reference Case (2006-2030) . 7-22 Cumulative NES Results based onAE02000 Low Growth Case (2006-2030) ............................................... 7-23 Cumulative NES Results based on AE02000 High Growth Case (2006-2030) ............................................... 7-24 Cumulative NPV Results based onAE02000 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 ofUnitary 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 ofDebt Calculation ......................................... 8-13 Table 8.5 Cost ofEquity 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 ofIndustry-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 MIA ............................................ 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 ofSplit Air Conditioners Under a 10 SEER Standard using Industry Mean Relative Costs and a "Flat"Markup ................................................. 8-36 Table 8.21 Consumer Payback (years) forEfficiency Upgrades ofSplit Air Conditioners Under a New Standard Levels using Industry Mean Relative Costs ................................................ 8-37 

### Table 8.22 Consumer Payback (years) for Efficiency Upgrades ofSplit Air Conditioners Under a New Standard Levels using Reverse Engineering Costs ......................................................... 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 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( 0

### 2 0

# t Market Shares (%) in the Residential Unitary Industry (1987

- 1999) ....... 8-5 Historical Comparison ofUnitary 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 ofDebt Calculation ......................................... 8-13 Cost ofEquity Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-14 Product Costs Used in the GRIM Analysis ..................... : ..... 8-16 Manufacturer Markups Used in the GRIM ........................... 8-17 Summary ofIndustry-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 byProduct 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 YearLife, Roll-up Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-27 Changes in Industry Net Present Value

- Industry Relative Cost, 18 Year Life, Shift EfficiencyMix ................................. 8-27 Changes in Industry Net Present Value

- Industry Relative Cost, 14 YearLife, NAECA EfficiencyMix .............................. 8-28 Changes in IndustryNet 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 ofSplit Air Conditioners Under a 10 SEER Standard using Industry Mean Relative Costs and a "Flat" Markup ................................................. 8-36 Consumer Payback (years) for Efficiency Upgrades ofSplit Air Conditioners Under a New Standard Levels using Industry Mean Relative Costs ................................................. 8-37 Consumer Payback (years) for Efficiency Upgrades ofSplit 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 inNet 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 inNet 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 ofMajor Regulations on Central Air Conditioner Manufacturers . 8-59 Table 8.39 Market Shares ofMajor 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 ofLow-Income Households at 100% ofPoverty L ine ... ...................................................... 10-1 

### Table 10.2 Comparison ofInput Values for All Households and Low-Income Households .................................. ................. 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 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 UnderNew 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 ofMajorRegulations on Central Air Conditioner Manufacturers . 8-59 Market Shares ofMajorAir Conditioner Manufacturers in Regulated Products ....................................................... 8-60 Estimated Investments Required to Meet Impending Federal Regulations ($ million) .................................................... 8-61 1997 RECS Definitions ofLow-Income Households at 100% ofPoverty Line ......................................................... 10-1 Comparison ofInput Values for All Households and Low-Income Households. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10-2 SplitAlC: 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 PackageAlC: 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 1Forecast ........................................ 11-6 Table 11.3 Standard Level 2 Forecast ........................................ 11-7 Table 11.4 Standard Level 3Forecast ........................................ 11-8 Table 11.5 Standard Level 4 Forecast ........................................ 11-9 Table 11.6 Standard Level 5Forecast ....................................... 11-10 Table 11.7 Standard Level 3Roll-up Forecast ................................. 11-11 Table 11.8 Standard Level 3Shift Forecast ................................... 11-12 Table 11.9 Standard Level 3Low Economic Forecast .......................... 11-13 Table 11.10 Standard Level 3High Economic Forecast .......................... 11-14 Table 12.1 Net National Change inJobs ...................................... 12-2 Table B.1 Split Air Conditioners (cased coil)

- 3Ton ............................ B-2 Table B.2 Split Air Conditioners (fancoil)

- 3 Ton .............................. B-3 Table B.3 Split Heat Pumps

- 3Ton .......................................... B-4 Table B.4 Packaged Air Conditioners

- 3Ton ................................. 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 ofNOPR 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 of30-year Average CDD and HDD ......................................... E-20 Table E.3 Census Division 3(East North Central): Calculation of30-year Average CDD and HDD ................................................. E-21

xviii 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 SplitAirConditioners (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 ofNOPRMarkups 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 HVACR Contractors ....................... D-16 U.S. Census Data for Air-Conditioning WholesalerslDistributors ........ D-17 U.S. Census Data for HVAC Contractors ........................... D-18 Census Division 1 (New England): Calculation of30-yearAverage CDD andHDD ................................................. E-19 Census Division 2 (Mid Atlantic minus New York): Calculation of30-year Average CDD and HDD ......................................... E-20 Census Division 3 (East North Central): Calculation of30-yearAverage 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 (SouthAtlantic minus Florida): Calculation of30-year Average CDD and HDD ......................................... E-23 Table E.6 Census Division 6(East South Central): Calculation of30-year Average CDD and HDD ................................................. E-24 Table E.7 Census Division 7(West South Central minus Texas): Calculation of30-year Average CDD and HDD ......................................... E-25 Table E.8 Census Division 8(Mountain): Calculation of30-year Average CDD and HDD ................................................. E-26 Table E.9 Census Division 9 (Pacific minus California): Calculation of30-year Average CDD and HDD ................................................. E-27 Table E.10 New York State: Calculation of30-year Average CDD and HDD ......... E-28 Table E. 11 Forida State: Calculation of30-year Average CDD and HDD ............ E-29 Table E.12 Texas State: Calculation of30-year Average CDD and HDD ............. E-30 Table E.13 California State: Calculation of30-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 SplitA/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 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-yearAverage 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-yearAverage 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-yearAverage CDD and HDD ................................................. E-26 Census Division 9 (Pacific minus California): Calculation of30-yearAverage CDD and HDD ................................................. E-27 New York State:: Calculation of30-year Average CDD and HDD ......... E-28 Forida State: Calculation of30-yearAverage CDD and HDD ............ E-29 Texas State: Calculation of30-yearAverage CDD and HDD ............. E-30 California State: Calculation of30-yearAverage CDD and HDD ......... E-31 Split AlC, 11 SEER: Energy Savings ................................ F-2 Split AlC, 11 SEER: Costs and NetPresent Value ...................... F-2 Split AlC, 12 SEER: Energy Savings ................................ F-3 Split AlC, 12 SEER: Costs andNet 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 andNet 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 ofMultipliers 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 ofLCC Results for Split Air Conditioners based on Reverse Engineering Manufacturing Costs ................................... J-5 Table 5.36S Summary ofLCC Results for Split Heat Pumps based on Reverse Engineering Manufacturing Costs ................................... J-5 Table 5.37S Summary ofLCC Results for Single Package Air Conditioners based on Reverse Engineering Manufacturing Costs ............................ J-6 Table 5.38S Summary ofLCC Results for Single Package Heat Pumps based on Reverse Engineering Manufacturing Costs ................................... J-6 Table 5.53S Summary ofPayback Period Results for Split Air Conditioners based on Reverse Engineering Manufacturing Costs ................................... J-7 Table 5.54S Summary ofPayback Period Results for Split Heat Pumps based on Reverse Engineering Manufacturing Costs ................................... J-8 Table 5.55S Summary ofPayback Results for Single Package Air Conditioners based on Reverse Engineering Manufacturing Costs ............................ J-9 Table 5.56S Summary ofPayback Period Results for Single Package Heat Pumps based on Reverse Engineering Manufacturing Costs ........................... J-10 Table 5.58S Summary ofRebuttable PBPs and Inputs for Split System Air Conditioners based on Reverse Engineering Manufacturing Costs ...... J-l1 Table 5.59S Summary ofRebuttable PBPs and Inputs for Split System Heat Pumps based on Reverse Engineering Manufacturing Costs ......... J-l 1 Table 5.60S Summary ofRebuttable PBPs and Inputs for Single Package Air Conditioners based on Reverse Engineering Manufacturing Costs ...... J-11 Table 5.61S Summary ofRebuttable 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 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 ofMultipliers 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 onReverse Engineering Manufacturing Costs. . . . . . . . . . . . . .. 1-1 Central Air Conditioner and Heat Pump Average Repair Costs based on Reverse Engineering Manufacturing Costs ............................ 1-2 Summary ofLCC Results for Split 

### Air Conditioners based on Reverse Engineering Manufacturing Costs ................................... 1-5 SummaryofLCC 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 SummaryofLCC Results for Single Package Heat Pumps based on Reverse Engineering Manufacturing Costs ................................... 1-6 Summary ofPayback Period Results for Split 

### Air Conditioners based on Reverse Engineering Manufacturing Costs ................................... 1-7 SummaryofPayback Period Results for Split Heat Pumps based on Reverse Engineering Manufacturing Costs ................................... 1-8 SummaryofPayback Results for Single Package Air Conditioners based on Reverse Engineering Manufacturing Costs ............................ 1-9 Summary ofPayback Period Results for Single Package Heat Pumps based on Reverse Engineering Manufacturing Costs ........................... 1-10 Summary ofRebuttable PBPs and Inputs for Split System AirConditioners based on Reverse Engineering Manufacturing Costs ...... 1-11 SummaryofRebuttable PBPs and Inputs for Split System Heat Pumps based on Reverse Engineering Manufacturing Costs ......... 1-11 SummaryofRebuttable PBPs and Inputs for Single Package 

### AirConditioners based on Reverse Engineering Manufacturing Costs ...... 1-11 SummaryofRebuttable 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 - 2 

# n 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 

# 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 onReverse 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 IndustryNet Present Value

- Reverse Engineering Cost, NAECA EfficiencyMix .......................................... 1-26 Changes in IndustryNet Present Value

- Reverse Engineering Cost, Roll-up Efficiency Mix .......................................... 1-26 Changes in IndustryNet Present Value

- Reverse Engineering Cost, Shift EfficiencyMix ............................................. 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 1Forecast 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 5Forecast 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 11.7A 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 inJobs .................................... ... 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 Manufacturing 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 

# 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 11.7A 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 ............................................. J-44 Table 11.9A Standard Level 4 Low Economic Forecast based on ARlMean 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. 1.1S 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 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.7.1 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

# * 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 onReverse 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 onReverse 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 onReverse 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-7S 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 Manufacturing 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

# ~ "2 0

# ~ Table F.14.2S Pack. HP, 12 SEER: Costs andNet 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 RegulatoryAlternative 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 ofthe manufacturer impact analysis methodology .......... 2-15 Figure 4.1 Phases ofthe Engineering Analysis ....................... ........... 4-2 Figure 4.2 Relationship ofProduction Cost Estimates in New Reverse Engineering Approach ................... ............... ............... . 4-11 Figure 4.3 Historical Compressor EER Improvements ........................... 4-28 Figure 4.4 Distribution ofSplit 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 ofCompressor and FanModulation on the EER-SEER Relationship in Existing 3-ton SplitAir Conditioning Systems ........... 4-56 Figure 5.1 Flow Diagram ofLCC, PBP, and Rebuttable PBP Inputs ................ 5-5 Figure 5.2 Distribution ofManufacturer Markups .............................. 5-12 Figure 5.3 Sales Tax Distribution for the Replacement/Retrofit Market ............. 5-17 Figure 5.4 Probability Distribution ofSplit A/C Installation Cost .................. 5-18 Figure 5.5 Flow Diagram for the Determination ofthe Standard-Level Annual Space-Cooling Energy Cost for Households .......................... 5-22 Figure 5.6 Flow Diagram for the Determination ofthe Standard-Level Annual Space-Heating Energy Cost forHouseholds .......................... 5-22 Figure 5.7 Flow Diagram for the Determination ofthe Standard-Level Annual Space-Cooling Energy Cost for Commercial Buildings ................. 5-23 Figure 5.8 Flow Diagram for the Determination ofthe Standard-Level Annual Space-Heating Energy Cost for Commercial Buildings ................. 5-23 Figure 5.9 Percent ofHouseholds with Central Air Conditioners by Weather-Adjusted Annual Space-Cooling Energy Consumption ......................... 5-29 Figure 5.10 Percent ofHouseholds with Heat Pumps by Weather-Adjusted Annual Space-Cooling Energy Consumption ......................... 5-30 Figure 5.11 Distribution ofAge Indices for RECS Households with a Central A/C ..... 5-31 Figure 5.12 Distribution ofAge Indices for RECS Households with a Heat Pump ...... 5-31 Figure 5.13 Percent ofCommercial Buildings by Baseline Annual Space-Cooling Energy Consumption .................................................. 5-36 Figure 5.14 Percent ofHouseholds with Heat Pumps by Weather-Adjusted Annual SpaceHeating Energy Consumption .................... ................. 5-44 Figure 5.15 Distribution ofAge Indices forRECS Households with a Heat Pump ...... 5-45 Figure 5.16 Percent ofCommercial Buildings by Baseline Annual Space-Heating Energy Consumption .................................................. 5-50 Figure 5.17 Percent ofHouseholds with Central Air Conditioners by Average Electricity Prices ............................................... 5-55

XXV 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 ofthe manufacturer impact analysis methodology . . . . . . . . . . 2-15 Phases ofthe Engineering Analysis .................................. 4-2 Relationship ofProduction Cost Estimates in New Reverse Engineering Approach ................................................... ,. 4-11 Historical CompressorEER Improvements ........................... 4-28 Distribution ofSplit Air Conditioner Models by Capacity and Efficiency ... 4-40 Relationship Between HSPF and SEER in Available 3-ton Split Heat Pumps ............................................... 4-51 Effects ofCompressor and FanModulation on the EER-SEER Relationship in Existing 3-ton Split Air Conditioning Systems ........... 4-56 Flow Diagram ofLCC, PBP, and Rebuttable PBP Inputs ................ 5-5 Distribution ofManufacturer Markups .............................. 5-12 Sales Tax Distribution for the ReplacementlRetrofit Market ............. 5-17 Probability Distribution ofSplitAlC Installation Cost .................. 5-18 Flow Diagram for the Determination ofthe Standard-Level Annual Space-Cooling Energy Cost for Households .......................... 5-22 Flow Diagram for the Determination ofthe Standard-Level Annual Space-Heating Energy Cost for Households .......................... 5-22 Flow Diagram for the Determination ofthe Standard-Level Annual Space-Cooling Energy Cost for Commercial Buildings ................. 5-23 Flow Diagram for the Determination ofthe Standard-Level Annual Space-Heating Energy Cost for Commercial Buildings ................. 5-23 Percent ofHouseholds with Central Air Conditioners by**Weather~Adjusted** Annual Space-Cooling Energy Consumption ......................... 5-29 Percent ofHouseholds with Heat Pumps by Weather-Adjusted Annual Space-Cooling Energy Consumption ......................... 5-30 Distribution ofAge Indices for RECS Households with a CentralAlC ..... 5-31 Distribution ofAge Indices for RECS Households with a Heat Pump ...... 5-31 Percent ofCommercial Buildings by Baseline Annual Space-Cooling Energy Consumption .................................................. 5-36 Percent ofHouseholds with Heat Pumps by Weather-Adjusted Annual SpaceHeating Energy Consumption ..................................... 5-44 Distribution ofAge Indices for RECS Households with a Heat Pump ...... 5-45 Percent ofCommercial Buildings by Baseline Annual Space-Heating Energy Consumption .................................................. 5-50 Percent ofHouseholds with Central Air Conditioners by Average Electricity Prices ............................................... 5-55

xxv

### EE-RM/STD-98-440 + 

## 2 0 Figure 5.18 Percent ofHouseholds with Heat Pumps by Average Electricity Prices ..... 5-55 Figure 5.19 Percent ofCommercial Buildings with Space-Conditioning Equipment by Average Electricity Prices ........................................ 5-58 Figure 5.20 Percent ofHouseholds with Central Air Conditioners by Marginal Electricity Prices ............................................... 5-63 Figure 5.21 Percent ofHouseholds with Heat Pumps by Marginal Electricity Prices .... 5-64 

### Figure 5.22 Percent ofCommercial Buildings with Space-Cooling Equipment by Marginal Electricity Prices ........................................ 5-65 Figure 5.23 Electricity Price Trends .......................................... 5-66 Figure 5.24 Distribution ofAnnual Maintenance Costs ........................... 5-68 Figure 5.25 Retirement Function for Central Air Conditioners and Heat Pumps ........ 5-70 Figure 5.26 Distribution ofNew Home Mortgage Nominal Interest Rates ............ 5-73 Figure 5.27 Distribution ofSecond Mortgage Nominal Interest Rates ................ 5-73 Figure 5.28 Distribution ofCredit 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 ofBuildings by Life-Cycle Cost, Baseline ............ 5-81 Figure 5.42 Split HP: Percent ofBuildings by Life-Cycle Cost, Baseline ............. 5-82 Figure 5.43 Package A/C: Percent ofBuildings by Life-Cycle Cost, Baseline .......... 5-82 Figure 5.44 Package HP: Percent ofBuildings by Life-Cycle Cost, Baseline .......... 5-83 Figure 5.45 Frequency Chart ofLCC Differences for 11 SEER Efficiency Level ....... 5-84 Figure 5.46 Cumulative Chart ofLCC 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 ofSplit 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 ofSplit 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 ofSingle 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 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 ofHouseholds with Heat Pumps by Average ElectricityPrices ..... 5-55 Percent ofCommercial Buildings with Space-Conditioning Equipment by Average ElectricityPrices ........................................ 5-58 Percent ofHouseholds with Central Air Conditioners byMarginal Electricity Prices ............................................... 5-63 Percent ofHouseholds with Heat Pumps by Marginal Electricity Prices .... 5-64 Percent ofCommercial Buildings with Space-Cooling Equipment by Marginal Electricity Prices ........................................ 5-65 Electricity Price Trends .......................................... 5-66 Distribution ofAnnual Maintenance Costs ........................... 5-68 Retirement Function for Central Air Conditioners and Heat Pumps . . . . . . .. 5-70 Distribution ofNew Home Mortgage Nominal Interest Rates ............ 5-73 Distribution ofSecond Mortgage Nominal Interest Rates . . . . . . . . . . . . . . . . 5-73 Distribution ofCredit Card Nominal Interest Rates .................... 5-74 SplitAlC: 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 PackAlC: Mean Installed Consumer Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-79 PackAlC: Mean Annual Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5-79 PackAlC: 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 ofBuildings by Life-Cycle Cost, Baseline ............ 5-81 Split HP: Percent ofBuildings by Life-Cycle Cost, Baseline ............. 5-82 Package AlC: Percent ofBuildings by Life-Cycle Cost, Baseline . . . . . . . . . . 5,.82 Package HP: Percent ofBuildings by Life-Cycle Cost, Baseline .......... 5-83 Frequency Chart ofLCC Differences for 11 SEER Efficiency Level . . . . . .. 5-84 Cumulative Chart ofLCC Differences for 11 SEER Efficiency Level ...... 5-85 Average LCCs for Split System Central Air Conditioners ............... 5-89 Percent ofSplit 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 ofSplit 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 ofSingle 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 ofSingle 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 Costs .................................... ..................... 5-94 Figure 5.56 Percent ofSplitA/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 ofSplit 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 ofSingle Package A/C Consumers with Net Costs, No Significant Impacts, and Net Savings

- LCC Scenario with Rev Eng Manufacturer Costs ......................................................... 5-96 Figure 5.61 Average LCCs for Single Package HP - LCC Scenario with Rev Eng Manufacturer Costs ............................................. 5-97 Figure 5.62 Percent ofSingle Package HP Consumers with Net Costs, No Significant Impacts, and Net Savings

- LCC Scenario with Rev Eng Manufacturer Costs ............................................ ............ 5-97 Figure 5.63 Average LCCs for Split A/C

- LCC Scenario with 14 year average Lifetime 5-99 Figure 5.64 Percent ofSplit 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 ofSplit 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 Lifetime ............................................... 5-101 Figure 5.68 Percent ofSingle 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 Lifetime ............................................... 5-102 Figure 5.70 Percent ofSingle 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 ofPayback 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 forNew Housing Purchases ............................ 6-8 xxvii 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 ofSingle Package Heat Pump Consumers with Net Costs, No Significant Impacts, and Net Savings ............................... 5-92 Average LCCs for SplitAlC

- LCC Scenario with Rev Eng Manufacturer Costs ......................................................... 5-94 Percent ofSplitAlC 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 ofSplit HP Consumers with Net Costs, No Significant Impacts, and Net Savings

- LCC Scenario with Rev Eng Manufacturer Costs ....... 5-95 Average LCCs for Single PackageAlC

- LCC Scenario with Rev Eng Manufacturer Costs ............................................. 5-96 Percent ofSingle 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 ofSingle Package HP Consumers with Net Costs, No Significant Impacts, and Net Savings

- LCC Scenario with Rev Eng Manufacturer Costs ......................................................... 5-97 Average LCCs for SplitAlC

- LCC Scenario with 14 year average Lifetime 5-99 Percent ofSplitAlC 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 ofSplit 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 ofSingle 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 ofSingle Package HP Consumers with Net Costs, No Significant Impacts, and Net Savings -LCC Scenario with 14 year average Lifetime .. 5-102 Frequency Chart ofPayback Periods for 11 SEER Efficiency Level for Split Air Conditioners .......................................... 5-104 SplitAlC: 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 ofHeat Pumps relative to Total Central Air Conditioner and Heat Pump Sales ............................................ 6-10 Figure 6.4 Decision Tree for Replacement and Repair ofRegular 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 ofRegular Replacement, Repair, Early Replacement and No Action as a Function ofCAC-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 inNew Single Family Housing and Housing Stock: Comparison ofData 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 ofBase Case Shipments, NAECA Efficiency Scenario to AEO 2000 Forecasts ............................................ 6-34 Figure 6.16 Impacts ofIncreased 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 ofIncreased 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 ofIncreased 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 ofIncreased 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 forCentral 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 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'ZO<t Market Share ofHeat Pumps relative to Total Central AirConditioner and Heat Pump Sales ............................................ 6-10 Decision Tree for Replacement and Repair ofRegular 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 ofRegular Replacement, Repair, Early Replacement andNo 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 FamilyHousing and Housing Stock: Comparison ofData and Logit Function Fits ............. 6-25 Combined Central Air Conditioner and Heat Pump Shipments Forecast based onNAECA 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 basedon Shift Efficiency Scenario and AE02000 Reference Case ........ 6-33 Sensitivity ofBase Case Shipments, NAECA Efficiency Scenario to AEO 2000 Forecasts ............................................ 6-34 Impacts 0f Increased Efficiency for the Year 2006 and Average Impacts Over the Period 2006 to 2030 for SplitAlC Sales and Shipments ......... 6-37 Impacts ofIncreased Efficiency for the Year 2006 and Average Impacts Over the Period 2006 to 2030 for Split Heat Pump Sales and Shipments .... 6-38 Impacts ofIncreased Efficiency for the Year 2006 and Average Impacts Overthe Period 2006 to 2030 for Package AlC Sales and Shipments ...... 6-38 Impacts ofIncreased Efficiency for the Year 2006 and Average Impacts Overthe 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 TSL4, 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% ofTotal 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% ofTotal 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% ofTotal National Base Case Costs based on AEO2000 High Growth Case (2006

- 2030) .................. 7-33 Figure 7.16 Split A/C: Comparison ofManufacturer Cost Multipliers ............... 7-35 Figure 7.17 Split HP: Comparison ofManufacturer Cost Multipliers ................ 7-35 Figure 7.18 Pack. A/C: Comparison ofManufacturer Cost Multipliers ............... 7-35 Figure 7.19 Pack. HP: Comparison ofManufacturer Cost Multipliers ............... 7-35 Figure 7.20 Cumulative Total National Operating and Equipment Costsbased 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 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 TSL4, 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% ofTotal National Base Case Costs based onAE02000 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% ofTotal 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% ofTotal National Base Case Costs based on AE02000 High Growth Case (2006

- 2030) .................. 7-33 SplitAlC: Comparison ofManufacturer Cost Multipliers ............... 7-35 Split HP: Comparison ofManufacturer Cost Multipliers ................ 7-35 Pack. AlC: Comparison ofManufacturer Cost Multipliers ............... 7-35 Pack. HP: Comparison ofManufacturerCost 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 onReverse Engineering Manufacturer Cost Scenario (2006

- 2030) ...................................... 7-38 Cumulative Total National Operating and Equipment Costs based on 14-yearAverage Lifetime Scenario (2006

- 2030) ................... 7-39 Cumulative National NPVs based on 14-yearAverage 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 ofa 12 SEER Efficiency-Level for Split A/C ............. 7-46 Figure 8.1 Value ofAll 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 ofProducts at Each Efficiency Level to Industry Profits (EBIT) under Trial Standards

- NAECA Efficiency Scenario ............ 8-33 Figure 8.7 Contribution ofProducts at Each Efficiency Level to IndustryProfits (EBIT) under Trial Standards

- Roll-up Efficiency Scenario ............. 8-34 Figure 8.8 Contribution ofProducts 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 ofMedian and Mean Payback Periods between Low-Income Households and the Overall Sample ...................... 10-5 Figure 10.2 Split HP: Comparison ofMedian and Mean Payback Periods between Low-Income Households and the Overall Sample ...................... 10-5 Figure 10.3 Package A/C: Comparison ofMedian and Mean Payback Periods between Low-Income Households and the Overall Sample ...................... 10-5 Figure 10.4 Package HP: Comparison ofMedian 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 ofConsumer Savings .......................... 12-4 Figure 12.3 Employment Impacts ofChanges in Equipment Cost ................... 12-5 Figure 12.4 Employment Impacts ofUtility Savings ............................. 12-6

xxx 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 SystemAlC based on a 12 SEER Efficiency-Level ......... 7-45 NPV for Split SystemAlC based on a 12 SEER Efficiency-Level ......... 7-45 Annual Values ofa 12 SEER Efficiency-Level for SplitAlC ............. 7-46 Value ofAll 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 IndustryNet Cash Flow

- Roll-up Efficiency Scenario .................. 8-32 Contribution ofProducts at Each Efficiency Level to Industry Profits (EBIT) under Trial Standards

- NAECA Efficiency Scenario ............ 8-33 Contribution ofProducts at Each Efficiency Level to Industry Profits (EBIT) under Trial Standards

- Roll-up Efficiency Scenario ............. 8-34 Contribution ofProducts 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 SplitAlC: Comparison ofMedian and Mean Payback Periods between Low-Income Households and the Overall Sample ...................... 10-5 Figure 10.2 Split HP: Comparison ofMedian and Mean Payback Periods between Low-Income Households and the Overall Sample ...................... 10-5 Figure 10.3 Package AlC: Comparison ofMedian and Mean Payback Periods between Low-Income Households and the Overall Sample ...................... 10-5 Figure 10.4 Package HP: Comparison ofMedian 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 ofConsumer Savings .......................... 12-4 Employment Impacts ofChanges in Equipment Cost ................... 12-5 Employment Impacts ofUtility 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 ofSplit 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 ofSplit Air Conditioner Samples - Fans .................. B-9 Figure B.7 Characteristics of Split Air Conditioner Samples - Capacity and Charge .... B-10 

### Figure B.8 Characteristics ofSplit Air Conditioner Samples

- Weight ............... B-10 Figure B.9 Characteristics ofSplit Air Conditioner Samples

- Cabinet Volume ....... B-11 Figure B. 10 Characteristics ofSplit Air Conditioner Samples - Fin Density .......... B-11 Figure B. 11 Characteristics ofSplit Air Conditioner Samples - Tube Rows and Face Area ..................................................... B-12 Figure B.12 Characteristics ofSplit Heat Pump Samples - Compressor Type .......... B-12 Figure B.13 Characteristics ofSplit Heat Pump Samples - TXV .................... B-13 Figure B.14 Characteristics ofSplit Heat Pump Samples - Refrigerant Management .... B-13 

### Figure B.15 Characteristics ofSplit Heat Pump Samples - Tube Rifling ............. B-14 Figure B.16 Characteristics ofSplit Heat Pump Samples - Fan Control ............... B-14 Figure B.17 Characteristics ofSplit Heat Pump Samples - Fans ..................... B-15 Figure B.18 Characteristics ofSplit Heat Pump Samples - Capacity and Charge ........ B-15 Figure B.19 Characteristics ofSplit Heat Pump Samples

- Weight .................. B-16 Figure B.20 Characteristics ofSplit Heat Pump Samples - Cabinet Volume .......... B-16 Figure B.21 Characteristics ofSplit 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 ofPackage Air Conditioner Samples - Compressor Type .... B-18 Figure B.24 Characteristics ofPackage Air Conditioner Samples - TXV .............. B-18 Figure B.25 Characteristics ofPackage Air Conditioner Samples - Refrigerant Management ......................................... B-19 Figure B.26 Characteristics ofPackage Air Conditioner Samples - Tube Rifling ....... B-19 Figure B.27 Characteristics ofPackage Air Conditioner Samples - Fan Control ........ B-20 Figure B.28 Characteristics ofPackage Air Conditioner Samples - Fans .............. B-20 Figure B.29 Characteristics ofPackage Air Conditioner Samples - Capacity and Charge . B-21 Figure B.30 Characteristics ofPackage Air Conditioner Samples - Weight ........... B-21 Figure B.31 Characteristics ofPackage Air Conditioner Samples - Volume ........... B-22 Figure B.32 Characteristics ofPackage Air Conditioner Samples - Fin Density ........ B-22 Figure B.33 Characteristics ofPackage Air Conditioner Samples - Coils ............. B-23 Figure B.34 Characteristics ofPackage Heat Pump Samples

- Compressor Type ....... B-23 Figure B.35 Characteristics ofPackage Heat Pump Samples - TXV ................. B-24 Figure B.36 Characteristics ofPackage Heat Pump Samples - Refrigerant Management .. B-24 Figure B.37 Characteristics ofPackage Heat Pump Samples

- Tube Rifling ........... B-25 Figure B.38 Characteristics ofPackage Heat Pump Samples - Fan Control ............ B-25 xxxi 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 ProbabilityDistribution ................................... A-3 Triangular Probability Distribution ......... . . . . . . . . . . . . . . . . . . . . . . .. A-3 Unifonn Probability Distribution ................................... A-3 Characteristics ofSplit Air Conditioner Samples

- Compressor Type ....... B-7 Characteristics ofSplit Air Conditioner Samples

- TXV ................. B-7 Characteristics ofSplit Air Conditioner Samples

- Refrigerant Management .. B-8 Characteristics ofSplit Air Conditioner Samples

- Tube Rifling ........... B-8 Characteristics ofSplit Air Conditioner Samples

- Indoor Fan Control ...... B-9 Characteristics ofSplit Air Conditioner Samples

- Fans .................. B-9 Characteristics ofSplit Air Conditioner Samples

- Capacity and Charge .... B-I0 Characteristics ofSplit Air Conditioner Samples

- Weight ............... B-10 Characteristics ofSplit Air Conditioner Samples

- Cabinet Volume ....... B-11 Characteristics ofSplit Air Conditioner Samples

- Fin Density ........... B-ll Characteristics ofSplit Air Conditioner Samples

- Tube Rows and Face Area ..................................................... B-12 Characteristics ofSplit Heat Pump Samples

- Compressor Type .......... B-12 Characteristics ofSplit Heat Pump Samples

- TXV .................... B-13 Characteristics ofSplit Heat Pump Samples

- Refrigerant Management .... B-13 Characteristics ofSplit Heat Pump Samples

- Tube Rifling .............. B-14 Characteristics ofSplit Heat Pump Samples

- Fan Control ...............B-14 Characteristics ofSplit Heat Pump Samples

- Fans ..................... B-15 Characteristics ofSplit Heat Pump Samples

- Capacity and Charge ........ B-15 Characteristics ofSplit Heat Pump Samples

- Weight .................. B-16 Characteristics ofSplit Heat Pump Samples

- Cabinet Volume ........... B-16 Characteristics ofSplit Heat Pump Samples

- Fin Density ............... B-17 Characteristics ofSplit Heat Pump Samples

- Tube Rows and Face Area ... B-17 Characteristics ofPackage Air Conditioner Samples

- Compressor Type .... B-18 Characteristics ofPackage Air Conditioner Samples

- TXV .............. B-18 Characteristics ofPackage Air Conditioner Samples

- Refrigerant Management ......................................... B-19 Characteristics ofPackage Air Conditioner Samples

- Tube Rifling ....... B-19 Characteristics ofPackage Air Conditioner Samples

- Fan Control ........ B-20 Characteristics ofPackage Air Conditioner Samples

- Fans .............. B-20 Characteristics ofPackage AirConditioner Samples

- Capacity and Charge. B-21 Characteristics ofPackage Air Conditioner Samples

- Weight ............ B-21 Characteristics ofPackage Air Conditioner Samples

- Volume ........... B-22 Characteristics ofPackage Air Conditioner Samples

- Fin Density ........ B-22 Characteristics ofPackage Air Conditioner Samples

- Coils ............. B-23 Characteristics ofPackage Heat Pump Samples

- Compressor Type ....... B-23 Characteristics ofPackage Heat Pump Samples

- TXV ................. B-24 Characteristics ofPackage Heat Pump Samples

- Refrigerant Management .. B-24 Characteristics ofPackage Heat Pump Samples

- Tube Rifling ........... B-25 Characteristics ofPackage Heat Pump Samples

- Fan Control ............ B-25 XXXI

### EE-RM/STD-98-440 2 

### 0 

### g Figure B.39 Characteristics ofPackage Heat Pump Samples

- Fans .................. B-26 Figure B.40 Characteristics ofPackage Heat Pump Samples

- Capacity and Charge ..... B-26 Figure B.41 Characteristics ofPackage Heat Pump Samples

- Weight ................ B-27 Figure B.42 Characteristics ofPackage Heat Pump Samples

- Volume ............... B-27 Figure B.43 Characteristics ofPackage Heat Pump Samples

- Fin Density ............ B-28 Figure B.44 Characteristics ofPackage Heat Pump Samples

- Coils ................. B-28 Figure C.1 Sample structured bill ofmaterials .................................. C-5 Figure C.2 Sample Fabrication and Assembly Summary Table ..................... C-8 Figure C.3 Overall Model Structure .......................................... C-9 Figure C.4 Sample ofGlobal 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 ofWholesaler/Distributor Markups ...................... D-13 Figure D.3 Comparison ofDealer/Contractor Markups .......................... D-14 Figure E.1 Split A/C, 11 SEER: Frequency Chart ofLCC Difference ................ E-2 Figure E.2 Split A/C, 11 SEER: Cumulative Chart ofLCC Difference ............... E-2 Figure E.3 Split A/C, 12 SEER: Frequency Chart ofLCC Difference ................ E-3 Figure E.4 Split A/C, 12 SEER: Cumulative Chart ofLCC Difference ............... E-3 Figure E.5 Split A/C, 13 SEER: Frequency Chart ofLCC Difference ................ E-4 Figure E.6 Split A/C, 13 SEER: Cumulative Chart ofLCC Difference ............. E-4 Figure E.7 Split A/C, 18 SEER: Frequency Chart ofLCC Difference ............ .. E-5 Figure E.8 Split A/C, 18 SEER: Cumulative Chart ofLCC Difference ............... E-5 Figure E.9 Split Heat Pump, 11 SEER: Frequency Chart ofLCC Difference ........... E-6 Figure E.10 Split Heat Pump, 11 SEER: Cumulative Chart ofLCC Difference .......... E-6 Figure E. 11 Split Heat Pump, 12 SEER: Frequency Chart ofLCC Difference ........... E-7 Figure E.12 Split Heat Pump, 12 SEER: Cumulative Chart ofLCC 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 ofLCC Difference .......... E-8 Figure E.15 Split Heat Pump, 18 SEER: Frequency Chart ofLCC Difference ........... E-9 Figure E. 16 Split Heat Pump, 18 SEER: Cumulative Chart ofLCC Difference .......... E-9 Figure E. 17 Single Package A/C, 11 SEER: Frequency Chart ofLCC Difference ....... E-10 Figure E.18 Single Package A/C, 11 SEER: Cumulative Chart ofLCC Difference ...... E-10 Figure E.19 Single Package A/C, 12 SEER: Frequency Chart ofLCC Difference ....... E-l I xxxii 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 ofPackage Heat Pump Samples

- Fans .................. B-26 Characteristics ofPackage Heat Pump Samples

- Capacity and Charge ..... B-26 Characteristics ofPackage Heat Pump Samples

- Weight ................ B-27 Characteristics ofPackage Heat Pump Samples

- Volume ............... B-27 Characteristics ofPackage Heat Pump Samples

- Fin Density ............ B-28 Characteristics ofPackage Heat Pump Samples

- Coils ................. B-28 Sample structured bill ofmaterials .................................. C-S Sample Fabrication and Assembly SummaryTable ..................... C-8 Overall Model Structure .......................................... C-9 Sample ofGlobal Controls Sheet ................................... ColO Sample table showing major sub-assembly andplant 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 ofWholesalerlDistributor Markups. . . . . . . . . . . . . . . . . . . . .. D-13 Comparison ofDealer/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 ofLCC Difference ................ E-4 Split AlC, 13 SEER: Cumulative Chart ofLCC Difference ............... E-4 Split AlC, 18 SEER: Frequency Chart ofLCC Difference ................ E-S Split AlC, 18 SEER: Cumulative Chart ofLCC Difference ............... E-S Split Heat Pump, 11 SEER: Frequency Chart ofLCC 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 ofLCC Difference ........... E-8 Split Heat Pump, 13 SEER: Cumulative Chart ofLCC Difference .......... E-8 Split Heat Pump, 18 SEER: Frequency Chart ofLee Difference ........... E-9 Split Heat Pump, 18 SEER: Cumulative Chart ofLCC Difference .......... E-9 Single Package Ale, 11 SEER: Frequency Chart ofLCC Difference ....... E-I0 Single Package AlC, 11 SEER: Cumulative Chart ofLCe 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 ofLCC Difference ...... E- 1 Figure E.21 Single Package A/C, 13 SEER: Frequency Chart ofLCC Difference ....... E-12 Figure E.22 Single Package A/C, 13 SEER: Cumulative Chart ofLCC Difference ...... E-12 Figure E.23 Single Package A/C, 18 SEER: Frequency Chart ofLCC Difference ....... E-13 Figure E.24 Single Package A/C, 18 SEER: Cumulative Chart ofLCC Difference ...... E-13 Figure E.25 Single Package Heat Pump, 11 SEER: Frequency Chart ofLCC Difference . E-14 Figure E.26 Single Package Heat Pump, 11 SEER: Cumulative Chart ofLCC Difference E-14 Figure E.27 Single Package Heat Pump, 12 SEER: Frequency Chart ofLCC Difference . E-15 Figure E.28 Single Package Heat Pump, 12 SEER: Cumulative Chart ofLCC Difference E-15 Figure E.29 Single Package Heat Pump, 13 SEER: Frequency Chart ofLCC Difference . E-16 Figure E.30 Single Package Heat Pump, 13 SEER: Cumulative Chart ofLCC Difference E-16 Figure E.31 Single.Package Heat Pump, 18 SEER: Frequency Chart ofLCC 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 ofthe Interpolation ofa Trial Standard Level: Difference in Coal Capacity ................................................ H-4 Figure H.lb Close-Up ofthe Interpolation ofTrial Standard Level X2 from X1 ........ H-5 Figure H.2 Example ofTrial Standard Level XI: Marginal NO, Emissions ........... H-6 Figure 5.29S Split A/C: Mean Installed Consumer Costs based on Rev Eng Manufacturing Costs .......................................................... J-3 Figure 5.30S Split A/C: Mean Annual Operating Costs based on Rev Eng Manufacturing Costs .......................................................... 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 Costs .......................................................... J-3 xxxiii 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'2a**~** 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 ofLCC Difference . E-16 Single Package Heat Pump, 13 SEER: Cumulative Chart ofLCC Difference E-16 Single.Package Heat Pump, 18 SEER: Frequency Chart ofLCC Difference . E-17 Single Package Heat Pump, 18 SEER: Cumulative Chart ofLCC 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 ofthe Interpolation ofa Trial Standard Level: Difference in Coal Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. H-4 Close-Up ofthe Interpolation ofTrial Standard Level X2 from XI ........ H-5 Example ofTrial Standard Level Xl: Marginal NOx Emissions ........... H-6 Figure 5.29S SplitAlC: 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 i2L 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 A/C: Mean Installed Consumer Costs based on Rev Eng Manufacturing Costs .................................. ............. .......... J-4 Figure 5.36S Pack A/C: Mean Annual Operating Costs based on Rev Eng Manufacturing Costs .............................................. ........... . J-4 Figure 5.37S Pack A/C: 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 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 7.1OS 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% ofTotal 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% ofTotal 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

# ~ 

# 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 EngManufacturing Costs .......................................................... J-3 Figure 5.35S PackAlC: Mean Installed Consumer Costs based on Rev Eng Manufacturing Costs .......................................................... J-4 Figure 5.36S PackAlC: Mean Annual Operating Costs based on Rev Eng Manufacturing Costs .......................................................... J-4 Figure 5.37S PackAlC: MeanLife-Cycle Costs based onRev EngManufacturing Costs ..... ; .................................................... J-4 Figure 5.38S Pack HP: Mean Installed ConsumerCosts based onRev 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 onRev Eng Manufacturing Costs .......................................................... J-4. Figure 5.72S SplitAlC: 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 onbased 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% ofTotal 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% ofTotal 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% ofTotal 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 ofConsumer Savings ......................... J-48 Figure 12.3S Employment Impacts ofChanges in Equipment Cost ................... J-48 Figure 12.4S Employment Impacts ofUtility Savings ............................. J-49 Figure E.1S Split A/C, 11 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-50 Figure E.2S Split A/C, 11 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-50 Figure E.3S Split A/C, 12 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-51 Figure E.4S Split A/C, 12 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-51 Figure E.5S Split A/C, 13 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-52 Figure E.6S Split A/C, 13 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ................. .......... J-52 Figure E.7S Split A/C, 18 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-53 Figure E.8S Split A/C, 18 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-53 Figure E.9S Split Heat Pump, 11 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-54 Figure E.10S Split Heat Pump, 11 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-54 Figure E. 11S Split Heat Pump, 12 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-55

xxxv Figure 7.14S Figure 7.15S Figure 7.26S Figure 7.27S Figure 7.26A Figure 7.27A Figure 12.1S 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.l1S 

### EE·RM/STD·98·440 

# =*"2**D~** Cumulative Total Equipment and OperatingCosts based on Reverse Engineering Manufacturing Costs and AE02000 High Growth Case (2006

- 2030) .................................................. J·20 Cumulative NPVs relative to ±2% ofTotal National Base Case Costs based onReverse 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 onReverse 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 ofConsumer" Savings .......................... J-48 Employment Impacts ofChanges in Equipment Cost ................... J-48 Employment Impacts ofUtility 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 SplitAlC, 13 SEER: Frequency Chart ofLCC 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 ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-54 Split Heat Pump, 11 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-54 SplitHeat 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 ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-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.15S Split Heat Pump, 18 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .......................... J-57 Figure E. 16S Split Heat Pump, 18 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-57 Figure E.17S Single Package A/C, 11 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-58 Figure E.18S Single Package A/C, 11 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-58 Figure E.19S Single Package A/C, 12 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-59 Figure E.20S Single Package A/C, 12 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-59 Figure E.21S Single Package A/C, 13 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-60 Figure E.22S Single Package A/C, 13 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-60 Figure E.23S Single Package A/C, 18 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-61 Figure E.24S Single Package A/C, 18 SEER: Cumulative Chart ofLCC 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 ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-62 Figure E.27S Single Package Heat Pump, 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 ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-64 Figure E.30S Single Package Heat Pump, 13 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-64 Figure E.31S Single Package Heat Pump, 18 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-65 Figure E.32S Single Package Heat Pump, 18 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-65 Figure F.1S Split A/C, 11 SEER: Annual Savings and Costs based on Reverse Engineering Manufacturing Costs .................................. J-66 xxxvi EE-RM/STD-98-440 

# *,2 0 

# 'i Figure E.I2S Split Heat Pump, 12 SEER: Cumulative Chart ofLCC 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 ofLCC Difference based on Reverse Engineering Manufacturing Costs ........................... J-57 Figure E.17S Single Package AlC, 11 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs ................... ' J-58 Figure E.18S Single Package AlC, 11 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... 1-58 Figure E.I9S Single Package AlC, 12 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-59 Figure E.20S Single Package AlC, 12 SEER: Cumulative Chart ofLCC 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 ofLCC 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 ofLCC 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 ofLCC Difference based on Reverse Engineering Manufacturing Costs. . . . . . . . . . . . . . . . . . .. J-64 Figure E.30S Single Package Heat Pump, 13 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs. . . . . . . . . . . . . . . . . . .. J-64 Figure E.31S Single Package Heat Pump, 18 SEER: Frequency Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-65 Figure E.32S Single Package Heat Pump, 18 SEER: Cumulative Chart ofLCC Difference based on Reverse Engineering Manufacturing Costs .................... J-65 Figure F.lS 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 

# -: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 providesthe technical analvscs and results in support ofthe 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-cyclecost (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 PolicyAct 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 providesenergy 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 aproposed 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 benefitsofthe proposed standard exceed its burdens by weighing, to the greatest extent practicable, the following seven factors: (I The economic impact ofthe 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 airconditioners: (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 

# 2 D

## ~ CHAPTER 1: 11'TRODUCTIOl' 1.1 PURPOSE OF DOCUMENT This Technical Support Document (TSD) is a "stand-alonc"rcport that providcsthc tcchnical analvses and rcsults in support ofthc infonnation presented in the Notiee ofProposcd Rulcmaking (NOPR) forccntral air conditionersand heat pumps (65 FR 59590. October5.2000). 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 ofEnergy'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 I9, 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 EnergyPolicyAct 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 consumerproducts. 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) ofcovered product. EPCA. section 325. 42 U.s.c. 6295. Before the Department detennineswhetherto adopt aproposed energyconservation standard it must first solicit commcntson thc proposed standard. EPeA. 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 ofthe proposed standard exceed its burdens by weighing. to the greatest extent practicable, the following seven factors:( I ) The economic impact ofthe standard on the manufacturers and on the consumers of the products subject to such standard:

"The I::! productsarc: ( I )refrigerators,refrigerator-freezers. and free/ers; (::!) room airconditioners: (J )centraI 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 ofthe standard; (3) The total projected amount of energy savings likely to result directly from the imposition ofthe standard; (4) Any lessening of the utility or the performance of the covered products likely to result from the imposition ofthe standard; (5) The impact ofany lessening ofcompetition. as determined in writing bythe Attorney General. that is likely to result from the imposition ofthe 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 PSTANDARDS 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 

# '*2.**O~** (2) The sa\ings in operating costs throughout the estimated average life ofthe 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 ofthe standard: (3) The total projected amount of energy savings likely to result directly from the imposition ofthe standard: (4) Any lessening ofthe utility or the pcrfonnance ofthe covered products likely to result from the imposition ofthe standard: . (5) The impact ofany lessening ofcompetition. as detennined in writing bythe Attorney General. that is likely to result from the imposition ofthe 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 ruIe no later than January I. 200I. In 1992. the Department initiated engineering and Lee studies for central air conditioners and heat pumps based on usc of computersimulation 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 (ARI), Lawrence Berkeley National Laboratory (LBNL). and Oak Ridge National Laboratory (ORNL). also provided production cost data for establishing the cost-effectiveness ofthe various design options selected for study. On September 8. 1993. the Department published an Advance Notice of Proposed Rulemaking (ANOPR) (58 FR 172. September 8.1(93) which discussed the number ofproduct classes and design options, the computer simulation models. and the methodologies which the Department intended to usc in its analysis ofincreased 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 aresult ofconccrnsexpressed by the industry. Theconcerns included: the cost/pcrfonnance relations derived from the computer simulations were not consistent with the experience ofthe 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 ofthe fiscal year 1996 appropriations. there was considerable debate about the efficacy ofthe standards program. The Department ofthe 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 aFinal 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 bythe 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 ofthe 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 

# * 2. 0

# ~ ofLCCs. payback periods. and preliminary NES which were shared with representatives frolll the air-conditioning industry. In 1995. the Department abandoned the approach ofusing computer simulation models as aresult ofconcernsexpressed bythe industry. The concerns included: the costrperfonnancerelations derived from the computer simulations were not consistent with the experience ofthe industry: the assumptions and procedures were flawed: and the industry expressed doubts overthe Department's experience with selection ofappropriate 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 ofthe fiscal year 1996 appropriations. there was considerable debate about the efficacy ofthe standards program. The Department ofthe Interior and Related Agencies Appropriations Act for Fiscal Year 1996 included the aforementioned moratorium on proposing or issuing energy conservation appliance standards forthe remainder ofFiscal 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 ofNew 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 ofuncertainty 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 Io(f)( I»). In addition. an Advisory Committee on Appliance EnergyEfficiency Standards.consisting ofa representative group ofthese interested parties. was established to make recommendations to the Secretary regarding the implementation ofthe 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. Iftimely 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 aworkshop 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., aMonte Carlo sampling methodology, and the life-cycle cost (LCC) and national energy savings (NES) spreadsheets) that the Department was using in performing analyses ofthe 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

# * 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 tLCe 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.. aMontc Carlosamplingmethodology. and the life-cycle cost (LCC) and national ener!,,), savings (NES) sprcadshccts) that the Departmcnt was using in perfonning analyses ofthc impacts ofenerk,)' conservation standards: 

### 0) the results ofpreliminary 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 ofnational average cncrgy prices). defining a range ofcncrgy price futures for each fuel used inthe economic analyses and dcfining arange ofprimary cncrgyconversion 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 offuture energy prices for the analysis that was conducted for the NOPR. 1.4 STRUCTURE OF THE DOCUMENT This TSD consists oftwelve 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 ofthe 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 ofthe appliances. Itcompares 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) ofnew regulations. 

### 1-5 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 ofconsumer marginal energy rates (CMER) in the 

## Lee Analysis (replacing the use ofnational average energy prices). defining a range ofenerb'), price futures foreach fuel used in the economic analyses and defining a range ofprimaryenergyconversion 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 offuture energy prices for the analysis that was conducted for the NOPR. 1.4 STRUCTURE OF THE DOCUMENT This TSDconsistsoftwelve 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 ofthe appliance standards program and how it applies to the central air conditioner and heat pump rulemaking. and outlines the structure ofthe 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 ofstandards on individual purchasers and users ofthe appliances. It compares the life-cycle cost of appliances and other measures ofconsumer 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 ~ 

# i 0 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 ofstandards on low-income subgroup of households. Chapter I 1 Utility Impacts Analysis: determinesthe decrease inelectricity 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 

# ( 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 ofstandards on the competition between manufacturers. Chapter 10 Consumer Sub-GroupAnalysis: describes the effect ofstandards on low-income subgroup ofhouseholds. Chapter II Utility Impacts Analysis: detenninesthe decrease in electricity needed and the primary energy source for electricity generation. Chapter 12 Net National Employment Impact Analysis: detcnnines the impact ofstandards on national emploY1nent. Appendix A Approach for Uncenainty and Variability Appendix B Detailed Reverse Engineering Cost Estimates and Equipment Data Appendix C Technical Description ofthe 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 ofUtility and Environmental Results from NEMS-BRS Output Environmental Assessment: determinesthe reduction in emissionsdue to higherefficiencystandards. Regulatory Impact Analysis: analysis impact ofnon-regulatory altematives to standards.

1-6

### EE-RM/STD-98-440 : 2 

## O CHAPTER 2: ANALYTICAL FRAMEWORK Inprescribing 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 descriptionofthe general analytical framework used by the Department in developing standards and assessing the impacts forall products. This chapter also provides a description ofthoseaspects oftheframework specific to central airconditioners and heat pumps. The analytic framework essentially is a description ofthe methodology, the analytical tools, and the relationship between the various analyses conducted as part ofa rulemaking. A diagram ofthe 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 1in Fig. 2.1) * A Screening Analysis to review each technology option and determine ifit 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 ofachieving 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 ofthe covered product compared to any increase in the installed cost fortheproduct likelytoresult directly from the imposition ofthe standard. (Subtask 5inFig. 2.1) * A National Impacts Analysis to assess the aggregate impacts at the national level of consumerpayback, net present value(NPV) oftotal consumerlife-cycle cost, national energy savings, and national employment. (Subtask 8in Fig. 2.1) * A ConsumerAnalysis to evaluate variations inhousehold characteristics (e.g., energy prices, appliance use behavior, installation costs) that might cause a standard to impact particular consumer sub-populations, inparticular low-income households, differently thanthe 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) * AUtilityAnalysis to estimate the effects ofproposed standards onelectric utilities. (Subtask 12 in Fig. 2.1) * AnEnvironmental Analysis toprovide estimates ofchanges inemissions ofpollutants (sulfur and nitrogen oxides and carbon dioxide). (Subtask 13 in Fig. 2.1) * A Regulatory Impact Analysis topresent 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 

# W 2**O~** CHAPTER 

### 2: ANALYTICAL FRAMEWORK 

### In prescribing new oramended energyefficiencyappliance standards, the Departmentmust achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. Thischapterprovidesadescriptionofthe general analytical frameworkused bythe Department in developing standards and assessing the impacts for all products. This chapter alsoprovides a description ofthose aspects ofthe framework specific to central airconditioners and heatpumps. The analytic framework essentially is a description ofthe methodology, the analytical tools, and the relationship between the various analyses conducted as part of a rulemaking. A diagram ofthe 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 existingtechnologyoptions includingprototypedesigns. (Subtask 1inFig. 2.1) • A Screening Analysis to review eachtechnology option and determine ifit is practicable to manufacture, install and service, would adversely impact product utility or product availability, orwould 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 ofachieving 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 ofthe coveredproduct compared to any increase in the installed cost fortheproductlikelytoresultdirectlyfrom the impositionofthe standard. (Subtask 

### 5inFig. 2.1) • A National Impacts Analysis to assess the aggregate impacts at the national level of consumerpayback,netpresentvalue (NPV)of total consumerlife-cyclecost,nationalenergy savings, and national employment. (Subtask 

### 8 in Fig. 2.1) • A ConsumerAnalysisto evaluatevariations inhouseholdcharacteristics (e.g., energyprices, appliance use behavior, installation costs) that might cause a standard to impact particular consumersub-populations, inparticularlow-incomehouseholds, differentlythanthe 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 UtilityAnalysis to estimatethe effectsofproposed standardsonelectricutilities. (Subtask 12 in Fig. 2.1) • AnEnvironmentalAnalysistoprovideestimatesofchangesinemissionsofpollutants(sulfur and nitrogen oxides and carbon dioxide). (Subtask 13 in Fig. 2.1) • A RegulatoryImpactAnalysis to presentmajoralternativestoproposed standardsthatcould achieve substantiallythe same regulatory goal at a lower cost. (Subtask 14 in Fig. 2.1) 2-1

## ggRM/STD-98-440 -2 

# 7 f.l// * i-"----'--,'--- "---------



# . AApproaches Kev-InDuts I Analysis Key-Outputs InOutSy Rneve I ientIy Fiann l Preducai * ir y BoiuCue I-.7 - Preliminary Market I Shipnnt ForIt oQuanrtsr- Aa/l Httoicl Io & Technology I - OuCiutave Anyl-tn- M.eAr Fm Segnemnaon : Characterization Exasng Technology OphonS Identification & PrototypeDassIN I1... Screening Analysis 

## d D«slin-Optlon Appoah I | i i I Cotacy-Lvna*ppocn J j Cost rac . i , Ejc.y . Eff.ncy/Pd..oan.c -, E------pn- Engineering ; ; g i

_ 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

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iom

nt : -*"'P ife-cycle

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### ~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 ;-**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... ____**~-_--''''''** 

# :t 1 

# t

i. 1,**!F~ue!!'..!T!!""'!!....**__**....;_-.i~,----;:::::==:;-----,** 

### :**~=~~**

## ooc.::::;" DemographlC-l**t--~**.... --r-........=====""---**~!** I : ! : ".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) '-----_-t J DOJ Competrbve

# J r Impact Assessment

NOPR FINAL RULE eol! (el. Pnce (PI. Quanbty (a). F.,..ne.el (F) HEMS Sub-group CasMk>ws

EmISSIOns Fuel Us.

i 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 interestedparties to provide input to guide the Department. On July 15, 1996, the Department published a Final Rule: Procedures for Consideration ofNew 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 identifiedbythe interested parties. Theprocess improvement effort also included a review ofthe: 1)economic models; 2) analytical tools; 3) methodologies; 4)non-regulatory approaches; and 5)prioritization offuture rules. The Department will also take into account uncertainty and variability by doing scenario or probability analysis. A detailed discussion ofvariability and uncertainty is provided in Appendix A. The Department developed the analytical framework forthe central air conditioner and heat pump rulemaking in response to stakeholder concerns regarding the application ofthe 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 ofthe rulemaking framework. 2.2 PRELIMINARY MARKET AND TECHNOLOGY ASSESSMENT Apreliminary market and technology assessment characterizing therelevant productmarkets 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 ofthe assessment were conducted. Those elements are discussed in this TSD. 2.2.1 MarketAssessment When initiating a standards rulemaking, the Department develops information onthepresent and past industry structure and market characteristics ofthe product(s) concerned. This activity consists ofboth 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 offirms; 3) the financial situation ofmanufacturers; 4) existing non-regulatory efficiency improvement initiatives; and 5) trends in product characteristics and retail markets. The information collected serves asresource material to be used throughout the rulemaking. Manufacturer market share and characteristics ofthe 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 hundreddistributors, 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

## ~ 

# 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 otherinterestedpartiestoprovideinputto guide the Department. OnJuly 15,1996,the Department published a Final Rule: Procedures for Consideration ofNew or Revised Energy Conservation Standards for ConsumerProducts (hereinafterreferred to as the Process Rule). 61 FR 36974. The Process Rule outlinedtheprocedural improvementsidentifiedbythe interestedparties. Theprocess improvement effort also included a review ofthe: 1) economic models; 2) analytical tools; 3) methodologies; 4) non-regulatoryapproaches; and 5)prioritizationoffuture rules. The Department will also take into account uncertainty and variability by doing scenario orprobability analysis. A detailed discussion ofvariability and uncertainty is provided in Appendix A. The Departmentdeveloped the analytical framework for the central air conditionerand heat pumprulemakinginresponseto stakeholderconcernsregardingthe applicationoftheProcessRule. 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 ofthe rulemaking framework. 

### 2.2 PRELIMINARY MARKET AND TECHNOLOGY ASSESSMENT Apreliminarymarketandtechnologyassessmentcharacterizingtherelevantproductmarkets 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 ofthe assessment were conducted. Those elements are discussed in this TSD. 

### 2.2.1 MarketAssessment Wheninitiatinga standardsrulemaking,the Departmentdevelops informationonthepresent and past industry structure and market characteristics ofthe product(s) concerned. This activity consists ofboth quantitative and qualitative efforts to assess the industry and products based on publicly available information. Issues to be addressed include: 1) manufacturermarket share and characteristics; 2) trends in the number offrrrns; 3) the fmancial situation ofmanufacturers; 4) existingnon-regulatoryefficiencyimprovement initiatives; and 5) trends inproduct characteristics andretail markets. Theinformationcollectedserves as resourcematerial to be usedthroughout the rulemaking. Manufacturermarket share and characteristics ofthe central air conditioner and heat pump marketare outlinedinChapter4.3,DistributionMarkups. As discussed inthat section,roughlytwo dozenequipmentmanufacturers, severalhundreddistributors, andmorethan 30,000dealersoperate 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. Formore 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 areused as inputs to the screening analysis. In consultation with interested parties, the Department develops a list of design options forconsideration. 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 orcapacity 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 tobe commercially available, their potential impact on reducing the cost of3- ton split system air conditioners were analyzed. 2.2.3 Preliminary Base Case Shipments Forecast The Department developed abase case forecast ofproduct shipments in the absence ofnew standards forthe Supplemental ANOPR. This forecast was revised andupdated forthis 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 ofsuch 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 ofthe steps manufacturers, distribution channels,utilities orothers will taketo realize such voluntary efficiency improvements. The base case shipments forecast is used as input to the national impacts analysis, in which a forecast ofannual 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

# *2D~ manufacturers control 97 percent of the market. Most remaining manufacturers produce such products as indoorcoilsorniche productlines. Formore details ontrends in theretail market,refer to Section 4.3. 

### 2.2.2 Technology Assessment Informationrelative to existingtechnologyoptions and prototype designs are used as inputs to the screening analysis. In consultation with interestedparties, the Department develops a list of design options for consideration. All technologically feasible design options are candidates in this initial assessment. As described in Chapter4.3, commonlyutilized technologies that improve the efficiencyof central airconditioners and heatpumps include: 1) increased coil face areas and depth, 2) multiple speed fan motors orblowermotors, 3)variable (ormultiple) speed orcapacitycompressors ordual compressors, 4) thermostatic orelectronic expansion valves, 5) improved air flow and fan designs, and 6) increased efficiency compressors (scroll, advanced reciprocating). As describedinChapter4.5, 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 emergingtechnologies were not consideredto be commercially available, theirpotential impact on reducing the cost of3- ton split system air conditioners were analyzed. 

### 2.2.3 Preliminary Base Case Shipments Forecast The Departmentdeveloped a base case forecast ofproduct shipments in the absence ofnew standards for the Supplemental ANOPR. This forecast was revised andupdated forthis 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 ofsuch initiatives to date, and also considers information presentedregarding the possible impacts that any existing initiatives might have in the future. Such information could include a demonstrationof the stepsmanufacturers,distributionchannels,utilitiesorotherswilltaketorealize such voluntary efficiency improvements. The base case shipments forecast is used as input to the national impacts analysis, in which a forecast ofannual 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 tomanufacture, 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 ofdesign 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 aredivided into classes usingthe following criteria: a) thetype ofenergy used; b)capacity; and c) performance-related features that affect consumer utilityor 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 TSDthe following four product classes are analyzed: 1)split system airconditioners, 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 abaseline unit. For each product class, the assumed baseline unit isaproduct that meets the existing standard. For central air conditioners andheat pumps, suchbaseline equipment aretypically "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 ofbaseline central air conditioners andheat pump equipment is provided in Chapter 4.1, Descriptionof Baseline Unit. 

### 23.3 Technology Screening An initial list of efficiency enhancement options is developed from the technologies identified inthe technology assessment. Then theDepartment, inconsultation withinterested 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 

# o

# 'l 2.3 SCREENINGANALYSIS The screening analysis reviews various technologies with regard to whether they: a) are technologicallyfeasible; b) areimpracticableto manufacture, install and service; c) have anadverse impact onproductutility orproduct availability; and d) have adverse impacts onhealth 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 ofdesign options for central air conditioners and heat pumps while Chapter4 provides a discussion on product classes and baseline equipment. 

### 2.3.1 Product Classes Producttypesaredividedintoclassesusingthe following criteria: a) thetype ofenergyused; b) capacity; and c) performance-related features that affect consumerutilityorefficiency. Different energy efficiency standards will apply to different product classes. In general, classes are defmed usinginformationobtainedindiscussionswithappliancemanufacturers,trade associations, andother interested parties. Inthis TSDthe following four product classes are analyzed: I) split system airconditioners, 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 defmesa baselineunit. Foreachproduct class, the assumedbaselineunit is aproductthatmeetsthe existingstandard. Forcentralairconditionersandheatpumps, suchbaseline equipmentaretypically "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 specificproducttypes. A description ofbaseline central airconditioners andheatpump 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 identifiedinthetechnologyassessment. ThentheDepartment,inconsultationwithinterestedparties, reviews the list to determine if they are practicable to manufacture, install and service, would adverselyaffectproductutilityorproduct availability, orwouldhave adverse impacts onhealthand 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 Aspresented inChapter4,the engineering analysis determines themaximum technologically feasible energy efficiencylevel and develops cost-efficiency relationships to show the manufacturer costs ofachieving increased efficiency. The engineering analysis conducted forthe Supplemental ANOPR was revised and updated forthis TSD. 2.4.1 Efficiency Improvement Potential In general, the engineering analysis estimates the efficiency improvement potential ofthe individual orcombinations ofdesign options not eliminated in theprevious 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 ofdesign options tothe baseline unit. Acost-efficiency relationship isdeveloped to show the manufacturer costofachieving 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 Actrequires that the Department design any new or amended standard "to achieve the maximum improvement in energy efficiency thatthe 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) ofcovered products...." EPCA Section 325 (p)(2), 42 U.S.C. 6295(p)(2). Therefore an essential role ofthe engineering analysis consists ofidentifying the maximum technologically feasible level. The maximumtechnologically feasible levelis one that can bereached bythe additionofefficiency 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 ofadding design options to a baseline model; 2) the efficiency-level approach, reporting relative costs ofachieving energy efficiency improvements; 3) and thereverse engineering or cost-assessment approach which requires a "bottoms-up" manufacturing cost assessment based 2-6 EE-RM/STD-98-440 

# -f20,&

considered in the central air conditioner and heat pump Engineering Analysis. Also included is a list ofemerging technologies which could impact future central air conditioner and heat pump manufacturing costs. 2.4 .ENGINEERING ANALYSIS Aspresentedin Chapter4, theengineeringanalysisdeterminesthemaximumtechnologically feasible energyefficiencylevel anddevelops cost-efficiencyrelationshipsto showthe manufacturer costs ofachieving increased efficiency. The engineering analysis conducted for the Supplemental ANOPRwas revised and updated for this TSD. 2.4.1 Efficiency Improvement Potential 

### In general, the engineering analysis estimates the efficiency improvement potential ofthe individual orcombinations ofdesign optionsnoteliminatedin 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. Theengineeringanalysisinvolves addingindividualorcombinationsofdesign optionstothe baselineunit. A cost-efficiencyrelationshipis developedto showthemanufacturercostofachieving increasedefficiency. Theefficiencylevels correspondingto various designoptioncombinationsare determined from manufacturer data submittals and from DOE engineering calculations. As described inChapter I,the Actrequires that the Departmentdesign anynew oramended standard "to achieve the maximum improvement in energy efficiencythat the Secretarydetermines 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) ofcoveredproducts...." EPCA Section 325 (p)(2), 42 U.S.C. 6295(P)(2). Therefore an essential role ofthe engineering analysis consistsofidentifying themaximumtechnologicallyfeasible level. Themaximumtechnologicallyfeasible levelisonethat canbereachedbythe additionof efficiencyimprovementsand!ordesignoptions,bothcommercially feasible and in prototypes, to the baseline units. The Department believes that the design options comprisingthe maximumtechnologically feasible level musthave beenphysicallydemonstrated in at least a prototype form to be considered technologically feasible. 

### In general, three methodologies canbe used to generate the manufacturing costs needed for the engineering analysis. These methods include: 1) the design-option approach, reporting the incremental costs ofadding design options to 

### a baseline model; 2) the efficiency-level approach, reportingrelative costsofachievingenergyefficiencyimprovements; 3) andthereverseengineering 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 ofmaterials. The Department considers public comments in determining the best approach fora rulemaking. Ifthe 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 ofexisting products on the market; and/or 3)information obtained for the technology assessment. Stakeholders will be consulted on the efficiency level selection. The use ofa 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 ofengineering models to simulate the energy consumption of different design configurations under various user profiles and applications. However, the Department recognizes thatthemanufacturer cost information derived inthedesign-option approach does not reflect the variability in design strategies and cost structures that can exist between manufacturers. Therefore, the Department mayderive 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 isnotpublically available because ofproprietary reasons, the product is a prototype, and/or the data is not provided by the manufacturers. In the rulemaking for central air conditioners andheat 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 theirunique design strategies for achieving increased efficiency levels. But the simplicity ofthe 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

# * 'Aoq

ona detailedbill ofmaterials. The Departmentconsiders public comments in determining the best approach for a rulemaking. Ifthe 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 ofexisting products on the market; and/or 3) information obtained for the technology assessment. Stakeholders will be consulted on the efficiency level selection. The use ofa 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 ofengineering models to simulate the energy consumption of different design configurations under various user profiles and applications. However, the Departmentrecognizesthatthemanufacturercostinformationderivedinthedesign-optionapproach does not reflect the variability in design strategies and cost structures that can exist between manufacturers. Therefore,theDepartmentmayderive additionalmanufacturingcostestimatesfrom other approaches developed in consultation with interested parties. The reverse engineering or cost-assessment approach can be used to supplement the efficiency-levelordesign optionapproachesunderspecialcircumstanceswhendataisnotpublically available because ofproprietaryreasons, the product is a prototype, and/or the data is not provided bythe 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 manufacturercost data for incremental increases in efficiency. Cost-efficiencycurves canbe 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 detailedcostdatawithoutrevealingtheiruniquedesign strategies for achieving increasedefficiency levels. But the simplicity ofthe 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 ofthe 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 aresult, some other type of analysis is likely needed in order to verify the accuracy ofthe costs supplied through the efficiency level approach. 2.4.1.2 Reverse Engineering Approach Asdiscussed above,the efficiency level approach requires verification ofthe data submitted. Theuseofacomponent-based technology-costing (reverseengineering) approach identifies potential technological paths manufacturers typically use to achieve increased product energy efficiency. Underthistype ofanalysis, actual equipment on themarket are physically analyzed, i.e., dismantled, component-by-component to determine what technologies and designs manufacturers employ to increase efficiency. Independent costing methods andmanufacturer andcomponent supplier data are thenused to estimate the costs ofthe components. This approach has the distinct advantage ofusing "real"market equipment to establishthe technologies that areused bymanufacturers andto establish the manufacturing cost to produce more efficient units. The primary disadvantage ofreverse engineering is the time and effort required to analyze "real" equipment. Several models from a diverse range ofmanufacturers may have to be assessed inorder to ensure that an accurate representation oftechnological paths for increasing efficiency are identified. In addition, since only equipment in themarket is analyzed, prototypical designs maynot 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 ofdesign options which increase efficiency. Design option efficiency increases can either be based on manufacturer or component supplier estimates or through the use ofengineering computer simulation models. The incremental manufacturing costs ofadding design options to a baseline model are then established. Individual or combinations ofdesign 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 ofthe change in total consumer cost to the change in operating cost. The primary advantage ofthe design option approach is its ability to analyze individual technologies. The approach is transparent in that the impact ofany single technology on cost and efficiency is explicit. An additional advantage is its ability to incorporate designs that have been demonstrated toperform in prototypes but have yet tobe utilized in equipment currently available onthe market. Thus, maximum technologically feasible designs are more easily established then in the efficiency level approach. Although individual technologies can beassessed, the design option approach can tendto be complex. Individual technologies maybe combined in waysnot typicallyutilized bymanufacturers, especially ifprototypical technologies are being analyzed, thus, making it difficult to assess a 2-8 EE-RM/STD-98-440 

# i'2. 0

## 'g designs are then difficult to ascertain. As a result, some other type ofanalysis is likely needed in orderto verify the accuracy ofthe costs supplied through the efficiency level approach. 

### 2.4.1.2 Reverse Engineering Approach Asdiscussedabove,theefficiencylevel approachrequires verification ofthe data submitted. Theuseofa component-basedtechnology-costing(reverseengineering) approachidentifiespotential technological paths manufacturers typically use to achieve increased product energy efficiency. Underthis type ofanalysis, actualequipmentonthe marketarephysicallyanalyzed, i.e., dismantled, component-by-component to determine what technologies and designs manufacturers employ to increaseefficiency. Independentcostingmethodsandmanufacturerandcomponent supplierdataare thenusedto estimate the costs ofthe components. This approachhas the distinct advantage ofusing "real"marketequipmenttoestablishthetechnologiesthatareusedbymanufacturersandto establish the manufacturing cost to produce more efficient units. The primary disadvantage ofreverse engineering is the time and effort required to analyze "real" equipment. Several models from a diverse range ofmanufacturers may have to be assessed inorderto ensurethat an accurate representation oftechnologicalpaths for increasing efficiencyare identified. In addition, since onlyequipmentinthe market is analyzed,prototypical designsmaynot be captured bythe analysis, thus making it difficult to establish maximum technologically feasible designs. 

### 2.4.1.3 Design Option Approach The design option approach identifies individual orcombinations ofdesign options which increase efficiency. Design option efficiency increases can either be based on manufacturer or component supplierestimates orthrough the use ofengineering computer simulation models. The incremental manufacturingcosts ofadding design options to a baseline model are then established. Individual orcombinations ofdesign 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 ofthe change in total consumer cost to the change in operating cost. The primary advantage ofthe design option approach is its ability to analyze individual technologies. The approach is transparent in that the impact ofany 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 beutilized in equipment currently available onthe market. Thus, maximumtechnologicallyfeasible designs are more easilyestablishedthen in the efficiency level approach. Although individualtechnologies canbeassessed,the design optionapproachcantendto be complex. Individualtechnologiesmaybecombinedin ways nottypicallyutilizedbymanufacturers, 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 ofinaccuracy, agreat deal oftime and effort must be expended to validate the model's results at a variety ofoperating conditions. Simulation models demand detailed input that mayrequiremanufacturers 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 andcoststructures thatcan existbetweenmanufacturers. Therefore, forthemanufacturing impact analysis, the Department may needto 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 ofthe product. Some of these changes can also affect the efficiency ofthe 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 ofHCFC refrigerants. 

# k\v~ ;Chapter 4.7, AlternativeRefrigerants,provides more detailed information on this topic. 2.4.2 Manufacturer Costs Manufacturing costs are used as the means ofdetermining retail prices, and are needed for the manufacturer impact analysis. Manufacturing costs for central air conditioners andheat pumps are described in detail in Chapter 4.2, ManufacturingCosts. 2.4.2.1 Characterizing Uncertainty Consistentwiththe process rule,DOE places arange around theaverage manufacturing costs ofachieving various efficiency levels. The ranges ofcosts 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 iscommitted to assessing the differential impacts ofstandards on different manufacturers. The results are used as inputs for the sub-group analysis ofmanufacturing impacts, which entails calculating cashflows separately for each class ofmanufacturer. 2-9 EE-RM/STD-98-440 

# if20ct 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 ofinaccuracy, a great deal oftime and effort must be expended to validate the model's results at a variety ofoperating conditions. Simulation models demanddetailedinputthatmayrequiremanufacturers andcomponent supplierstoreveal 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 manufacturingimpact analysis. The Departmentrecognizes that the manufacturercost information derived in a component-based analysis does not reflect the variability in baseline units, design strategiesandcoststructuresthatcanexistbetweenmanufacturers. Therefore, forthemanufacturing impact analysis, the Departmentmay needto 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 Inconducting an engineeringanalysis, there sometimes occurregulatory changes outside of the NAECA efficiency standards process that can impact the manufacture ofthe product. Some of these changes can also affect the efficiency ofthe 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 ofHCFC refrigerants. Chapter4.7,AlternativeRefrigerants, provides more detailed information on this topic. 2.4.2 Manufacturer Costs Manufacturing costs are used as the means ofdetermining retail prices, and are needed for the manufacturerimpact analysis. Manufacturing costs for central air conditioners and heatpumps are described in detail in Chapter4.2, Manufacturing Costs. 2.4.2.1 Characterizing Uncertainty Consistentwiththeprocessrule, DOEplacesarange aroundthe averagemanufacturingcosts ofachieving various efficiency levels. The ranges ofcosts 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 committedto assessing the differential impacts ofstandards on different manufacturers. The results are used as inputs for the sub-group analysis ofmanufacturing impacts, which entails calculating cashflows separately for each class ofmanufacturer. 2-9

### EE-RM/STD-98-440 '20° 2.4.2.3 ProprietaryDesign 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 ofthe covered product compared to any increase in the installed cost for the product likely to result directly from the imposition ofa standard. The life-cycle cost and payback period analysis conducted forthe Supplemental ANOPR was revised and updated for this TSD. In determining economicjustification, the Act directs the Department to consider a number of different factors, including the economic impact ofpotential standards on consumers. The Act also establishes a rebuttable presumption that a standard is economically justified ifthe additional product costs attributedto the standard are lessthan three times thevalue ofthe first yearenergy cost savings that the consumer will receive as a result ofthe 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 priceplus installation cost), operating expenses (energy, repair, and maintenance costs), lifetime ofthe appliance, and adiscount 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 (orprobability distributions) can be entered for each input variable needed to perform the calculations. Based on the results ofthe LCC analysis, DOE selects candidate standard levels for a more detailed analysis. The range ofcandidate standard levels typically includes: (1)the most energyefficient combination ofdesign options or most energy-efficient level equipment available in the market; (2) the combination ofdesign options orefficiency levels with the lowest LCC; and (3) the 2-10 EE-RM/STD-98-440 

# f'2og 2.4.2.3 Proprietary Design In general, the Departmentconsiders in its analysis all design options that are commercially available orpresent 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 repaircosts) throughout the estimated average life ofthe coveredproduct comparedto any increase in the installed cost for the product likely to result directly from the imposition of a standard. The life-cycle cost and paybackperiod analysis conducted for the Supplemental ANOPR was revised and updated for this TSD. In determining economicjustification, the Act directs the Department to consider a number of different factors, including the economic impact ofpotential standards on consumers. The Act also establishes a rebuttable presumption that a standard is economicallyjustified ifthe additional productcosts attributedtothe standardare less thanthree timesthe value ofthe first yearenergycost savings that the consumer will receive as a result ofthe standard. EPCA, §325(0)(2)(B)(iii), 42 U.S.C. §6295 (0)(2)(B)(iii). Toconsiderthese requirements the Departmentcalculates changes in LCC to the consumers that are likelyto result from the proposed standard as well as two different simple paybackperiods: 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 ofstandards 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 calculatingthe change in LCC as comparedto the base case. Inputs to the LCC calculation include theinstalledconsumercost(purchasepriceplusinstallationcost), operatingexpenses (energy,repair, and maintenance costs), lifetime ofthe appliance, and a discount rate. 

### 2.S.1 LCC Spreadsbeet Model The LCC analysis is conducted using a spreadsheet model developed in Microsoft Excel combinedwithCrystal Ball (a commerciallyavailable software program). The Model uses aMonte Carlo simulation described in Appendix A to perform the analysis, considering uncertainty and variability. The LCC spreadsheet is organized so that ranges (orprobability distributions) can be entered for each input variable needed to perform the calculations. Based on the results ofthe LCC analysis, DOE selects candidate standard levels for a more detailed analysis. The range ofcandidate standard levels typically includes: (1) the most energyefficient combination ofdesign options or most energy-efficient level equipment available in the market; (2) the combination ofdesign options orefficiency levels with the lowest LCC; and (3) the 2-10

### EE-RM/STD-98-440 '. O combination ofdesign options or efficiency levels with a payback period ofnot more than three years. Additionally, candidate standard levels that incorporate noteworthy technologies or fill in large gaps between efficiency levels ofother candidate standards levels may be selected. Payback iscalculatedbased onthe same inputsused fortheLCC analysis (withthe difference thatthe values are based only on the first year the standard takes affect). The output is aprobability 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 ofthe 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 ofthat being sold in the year 2006. The paybacks are then weighted and averaged according to the percentage ofeach equipment efficiency sold before a new standard is enacted. Input values such as the annual operational hours peryear will correspond to those outlined in the DOE test procedure. The payback is calculated for the expected effective year ofthe 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 byvarious approaches, retail prices would be described within arange ofuncertainty. Chapter 4.3, Distribution Markups, and Appendix D provide a detailed description ofthe approach used for determining industry-average prices and mark-ups forcentral 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 animpact onboth 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 Asdiscussed inChapter 7,the national impacts analysisassesses the netpresent value (NPV) oftotal consumer LCC, energy savings and indirectemployment impacts. Apreliminary assessment ofthe 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 ofFederal 

# 4~~~~~~~~~~( ~2-11 EE-RM/STD-98-440

# * 2.

# O~ combination ofdesign options or efficiency levels with a payback period ofnot more than three years. Additionally, candidate standard levels that incorporate noteworthy technologies or fill in large gaps between efficiency levels ofother candidate standards levels maybe selected. Paybackiscalculatedbasedonthe sameinputsusedfortheLCC analysis (withthe difference that the values are based only onthe first yearthe standard takes affect). The output is a probability distribution ofpayback 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 ofthe 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 ofthat being sold in the year 2006. Thepaybacksare then weighted and averaged accordingto the percentage ofeach equipment efficiency sold before a new standard is enacted. Input values such as the annual operational hours peryear will correspond to those outlined in the DOE testprocedure. Thepaybackis calculated for the expected effective year ofthe 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 othermarket 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 ofuncertainty. Chapter 4.3, Distribution Markups, and Appendix D provide a detailed description ofthe approachusedfor determiningindustry-averagepricesandmark-ups forcentralairconditionersand 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 manufacturerstoconsumers,as this hasanimpactonbothconsumersandmanufacturers. Consumer and manufacturer economics are linked and inverselyrelated. Forthis reason, retail prices used for the LCC analysis need to be reconciled with manufacturer prices. 

### 2.6 PRELIMINARYNATIONAL IMPACTS ANALYSIS AsdiscussedinChapter7, thenationalimpactsanalysisassessesthenetpresentvalue(NPV) of total consumerLCC, energy savingsandindirectemploymentimpacts. Apreliminaryassessment ofthe 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 ofFederal 2-11

### EE-RM/STD-98-440

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### Z°O 

# (1i \ menergy-efficiency 

### standards requires acomparison ofprojected 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 ofefficiencies being sold atthe timethe standard becomes effective. As discussed in Chapter 6, sales projections together with efficiency levels ofthe 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 ofthe standards. National annual energy savings are calculated as the difference between two projections: abase case and a standards case. Analysis includes estimated energy savings by fuel type used for generating electricity. Energy consumption and savings are estimatedbased on site energy (kWh ofelectricity), thenthe electricity consumption and savings are converted to source energy. Measures ofimpact reported include the net present value (NPV) oftotal consumer LCC, national energy savings, and indirect employment impacts. Each ofthe above are determined for selected trial standard levels. These calculations are done by the use ofa 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 usingMicrosoft Excelto calculate the national energy savings and the national economic costs and savings from new standards. Input quantities canbe 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 onthe DOE website. 2.6.2 Shipments One ofthe more important components of any estimate offuture impacts is shipments. Forecasts ofshipments forthe base case and the standard case need tobe obtained as an input to the NES. The Department chose an accounting modelmethod toprepare shipment scenarios forthe base case and several standard cases. Basically, the model keeps track ofthe stocks and purchases ofeach type ofcentral air conditioner and heat pump. Events and consumer decisions influence how the stock and supply ofcentral air conditioner andheat pump systems flow from one category to another. Decisions that are economically influenced are modeled with econometric equations. 2-12 EE_RM/STO-98-440

## ~ 

# 2

# o't energy-efficiency standardsrequires acomparisonof projectedU.S. residential energyconsumption with and without standards. The base case, which is the projected US residential energy consumption without standards, includes the mix ofefficienciesbeing sold at the time the standard becomes effective. As discussed in Chapter 6, sales projections together with efficiencylevels ofthe central air conditioners and heat pumps are important inputs to determine the energy consumption for the Nation as a whole underbothbase case and standards case scenarios. The differences betweenthe 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 ofthe 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 estimatedbasedon site energy(kWhofelectricity), then the electricityconsumptionand savings are converted to source energy. Measures ofimpact reported include the net present value (NPV) oftotal consumer LCC, national energy savings, and indirect employment impacts. Each ofthe above are determined for selectedtrial standardlevels. These calculations are done bythe use ofa spreadsheettool calledthe National Energy Savings (NES) SpreadsheetModel, 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 spreadsheetmodelwasdevelopedusingMicrosoftExceltocalculatethenational energysavings and thenational economic costsandsavings from new standards. Inputquantitiescanbechangedwithin 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 ofthe more important components of any estimate of future impacts is shipments. Forecasts ofshipments for the base case and the standard case need to be obtained as an input to the NES. TheDepartmentchoseanaccountingmodelmethodtoprepareshipmentscenariosforthebase caseandseveral standardcases. Basically,themodel keeps trackofthe stocks andpurchases ofeach type ofcentral air conditioner and heat pump. Events and consumer decisions influence how the stockandsupplyofcentralairconditionerandheatpump systems flow from onecategoryto another. Decisions that are economically influenced are modeled with econometric equations. 2-12

### EE-RM/STD-98-440 ' , 0 

# (I2,~~ IThe model is organized intothree classes ofelements: 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 forpurchases 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 ofhow 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 ofstandards on employment for airconditioner 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 ifstandards lead to a change in the number ofemployees 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 inthe manufacturing sector being regulated. Net national employment impacts mayresult from bothexpenditures 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 ofincreased spending to purchase central air conditioners and heat pumps and reduced spending to payutility 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 maybe spent on other items. Using an input/output model ofthe U.S. economy, this analysis seeks to estimate the effects on different sectors, and the net impact onjobs. National impacts have been estimated for major sectors ofthe U.S. economy forthis TSD. Public andcommercially available data sources and software havebeen 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 impactsto consumers with low-income levels, who may be disproportionately affected by any national energy efficiency standard level.

2-13 EE-RM/STD-98-440 

# f**2.o~** Themodel is organized into three classes ofelements: stocks, events, and decisions. Stocks ofcentral 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 orreplacement. 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. Decisiontrees are used to describe consumerchoices for purchases and repairs. A logitprobability model simulates consumerpurchase decisions that based on equipment price, operating costs, and incomelevel. Chapter6provides a detaileddescriptionofhow 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. TheDepartmentwill estimatethe impacts ofstandardsonemploymentfor airconditioner 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 ifstandards lead to a change in the number ofemployees 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 economyotherthaninthe manufacturing sectorbeingregulated. Netnational employmentimpacts mayresult frombothexpenditures shiftingamonggoods (substitutioneffect), andincome 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 payutility 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 energysavings. The savings inenergyexpenditures maybe spent on otheritems. Usingan input/output model ofthe U.S. economy, this analysis seeks to estimate the effects on different sectors, and the net impact onjobs. National impacts have been estimated for major sectors ofthe U.S. economyforthisTSD. Publicandcommerciallyavailabledata sources and softwarehavebeen utilized to estimate employment impacts. All methods and documentation are provided in Chapter 12. 

### 2.7 CONSUMERANALYSIS Chapter 10describestheconsumersub-groupanalysiswhichevaluatesimpactstoconsumers with low-income levels, who maybe 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 ofa standard. DOE obtains estimates ofthe variability in each input quantity and considers this variability in its calculation ofconsumer impacts. Variations in energy use for a particular appliance can depend on factors such as: climate, type ofhousehold, number ofpeople 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 ofconsumers. The impact on low-income consumer sub-groups has been determined using the LCC spreadsheet model. 2.7.1 Purchase Price Increases The Department hasbeen sensitive to purchase price increases to avoid negative impacts to low-income households. Additionally, the Department has assessed the likely impacts ofpurchase 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 ofdeveloping standards. This includes notification ofconsumer representatives duringthe 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 heatpumps on the basis ofstakeholder comments. Thedocument outlines procedural steps and outlines issues for consideration. Three important elements of the approach consist of the preparation ofan industry cash flow, the development ofaprocess to consider sub-group cash flow, and the design ofa 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 onthe methodologytobeused inperforming the manufacturer impact analyses. Themanufacturer impact analyses was conducted in three phases (see Figure 2.2). Phase 1consisted oftwo activities, namely, preparation of an V~4.~~~~~~ ~~~~2-14 EE-RM/STD-98-440

# * '2**O~** In evaluating consumers with low-income levels, the Department has evaluated variations in regional energyprices, variations in energyuse and variations in installation costs that affect the netpresent value ofa standard. DOE obtains estimates ofthe variability in each input quantity and considers this variability in its calculation ofconsumer impacts. Variations in energy use for a particular appliance can depend on factors such as: climate, type ofhousehold, number ofpeople 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 ofconsumers. The impact on low-income consumer sub-groups has been determined using the LCC spreadsheet model. 

### 2.7.1 Purchase Price Increases The Departmenthas been sensitive to purchase price increases to avoid negative impacts to low-income households. Additionally, the Department has assessed the likely impacts ofpurchase price increases on product sales. 

### 2.7.2 Consumer Participation TheDepartment seeksto inform andinvolveconsumers and consumerrepresentatives inthe process ofdeveloping standards. This includes notification ofconsumerrepresentatives duringthe 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 airconditioners andheatpumps onthe basis ofstakeholdercomments. The document outlinesprocedural steps and outlines issues for consideration. Three important elements of the approach consist of the preparation ofanindustrycashflow, the developmentofaprocess to consider sub-group cashflow, and the design ofa 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 approachdocument,the Departmentdescribesand obtainscommentsonthemethodologytobeused inperformingthe manufacturerimpactanalyses. The manufacturerimpactanalyses was conducted in three phases (see Figure 2.2). Phase 1 consisted oftwo activities, namely, preparation of an 2-14

### EE-RM/STD-98-440 2. X 

# (; industry characterization and identification ofissues. The second phase was focused on the larger industry. Inthisphase, the Government Regulatory Impact Model (GRIM) has beenusedtoperform 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 ofmanufacturers. Phase 3 also entails calculating additional impacts on competition, employment, and manufacturing capacity. 2.8.1 Industry Characterization Phase 1ofthe MIA consists ofcollecting 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 ofequipment production costs and distribution markups. Sources ofinformation include reports published by industry groups, trade journals, and the U.S. Bureau ofCensus, and copies ofSEC 10-K filings. Manufacturer ImpactAnalyses

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 ,fWW~ fSSS 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

# * 1.

# O~ industry characterization and identification ofissues. The second phase was focused on the larger industry. Inthisphase,the GovernmentRegulatoryhnpactModel (GRIM)hasbeenusedto 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 ofmanufacturers. Phase 3 also entails calculating additional impacts on competition, employment, and manufacturing capacity. 

### 2.8.1 Industry Characterization Phase 1 ofthe MIA consists ofcollecting 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 ofequipment production costs and distribution markups. Sources ofinformation include reports published by industry groups, trade journals, and the U.S. Bureau ofCensus, and copies ofSEC 10-K filings.

ANOPR Manufacturer Impact Analyses PHASE 1: Industry Profile

Industry Characterization Issue Identification PHASE 2: IndustryCash Flow 

# IManufacturing Costs 

# t 

# IPrice Forecasts . 

# I . IShipment Forecasts 

# I Estimate Industry Cash Flow PHASE 3: SubgroupAnalysis Estimate Manufacturer Costs Estimate Prices and Shipments Cash Flow Analysis



### Figure 2.2 Flow diagram ofthe manufacturer impact analysis methodology

2-15

### EE-RM/STD-98-440 ;, © 

### " 

# (^ \ .2.8.2 IndustryCash Flow Increased efficiency standards affect manufacturers in three distinct ways, by (1)requiring additional investment; (2)byraisingproductioncosts, and (3)by affectingrevenue 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 onpublicly available data and manufacturer information confidentially submitted to the Department's contractor, Arthur D. Little, Inc . The GRIM analysis uses a number offactors-annual expected revenues; manufacturer costs suchas costofsales, 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 ofstandards and continuing explicitly for several years after implementation. Themeasure ofindustrynetpresent values arecalculated bydiscounting theannual cash flows from the period before implementation of standards to some future point in time. Appendix G provides a description ofGRIM's operating principles. 2.8.3 Manufacturer Sub-Group Analysis Assessment ofimpacts on sub-groups ofmanufacturers isPhase 3ofthe 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. Inhighly concentrated industries thismaybepossible. In industries having numerous participants, theDepartment willuse theresults ofthe industry characterization to group manufacturers exhibiting similar characteristics. The financial analysis ofthe "prototypical" firm performed in the Phase 2industry analysis can serve as a benchmark against which manufacturer sub-groups can be analyzed. Themanufacturing cost data collected forthe engineering analysis has been used tothe extent practical in the sub-group impact analysis. Tobe useful, however, this data hasbeen disaggregated to reflect the variability in costs between relevant sub-groups offirms. The Department has conducted detailedinterviews with asmanymanufacturers asispossible to gain insight intothe potential impacts ofstandards. During these interviews, the Department has gathered theinformation necessaryto evaluate cashflows andto assess competitive, employment and capacity impacts. Firm-specific cumulative burden has been considered.

2-16 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)byraisingproductioncosts, and (3)byaffectingrevenuebecauseof higher prices and, possibly, lower quantities sold. To quantifythese changes the Department performs an industrycash flow analysis using the Government Regulatory Impact Model (GRIM). Usuallythis 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 developedbased onpublicly available data and manufacturer information confidentially submitted to the Department's contractor, Arthur D. Little, Inc . TheGRIManalysis usesanumberoffactors-annualexpected**revenues~** manufacturercosts suchascostofsales, sellingand general administrationcosts, taxes, andcapital expendituresrelated to depreciation, new standards, and maintenance-to arrive at a series of annual cash flows beginningfrom before implementation ofstandards and continuingexplicitlyfor several years after implementation. Themeasureofindustrynetpresentvaluesarecalculatedbydiscountingtheannual cash flows from the period before implementation of standards to some future point in time. Appendix G provides a description ofGRIM's operating principles. 

### 2.8.3 Manufacturer Sub-Group Analysis Assessmentofimpactsonsub-groupsof manufacturersis Phase3oftheMIA. Usingindustry "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 Departmentwouldconsiderthe impactoneveryfirm individually. Inhighlyconcentratedindustries thismaybepossible. Inindustrieshavingnumerousparticipants,theDepartmentwillusetheresults of the industry characterization to group manufacturers exhibiting similar characteristics. The fmancial analysis ofthe "prototypical" firm performedin the Phase 2 industry analysis can serve as a benchmark against which manufacturer sub-groups can be analyzed. Themanufacturingcostdatacollectedfortheengineeringanalysishasbeenusedtotheextent 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 offirms. TheDepartmenthasconducteddetailedinterviewswithas manymanufacturersas ispossible to gain insight into the potential impacts ofstandards. Duringthese interviews, the Departmenthas gatheredtheinformationnecessarytoevaluatecashflows andto assess competitive,employmentand capacity impacts. Finn-specific cumulative burden has been considered.

2-16

### EE-RM/STD-98-440 'kD' 

# (9; L2.8.4 Interview Process The revisedrulemaking process provides for greaterpublic inputand forimproved 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 ofinterested parties. Interviews were conducted in mostphases ofthe analyses as determined in Phase 1ofthe 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 ofthe 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 ofdetailed and focused questionnaires, as needed, to perform all phases ofthe manufacturer impact analyses. The Phase 3(sub-group analysis) questionnaire solicits information on the possible impacts ofpotential efficiency levels on manufacturing costs, product prices, and sales. Evaluation ofthe possible impacts on direct employment, capital assets, andindustry 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 confirmthe accuracy and protectthe confidentiality ofall 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 ofthe major issues and outcomes. 2.9 COMPETITIVE IMPACT ASSESSMENT Legislation directs the Department to consider any lessening ofcompetition that is likely to result from standards. It further directs the Attorney General to gauge the impacts, ifany, of any lessening ofcompetition. 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 

# «'2., D

## ~ 2.8.4 Interview Process Therevisedrulemakingprocessprovides for greaterpublicinputandforimprovedanalytical 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 ofinterested parties. Interviews were conducted in most phases ofthe analyses as determined in Phase 1 ofthe MIA The interviewprocess 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 ofthe 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 ofdetailed and focused questionnaires, as needed, to perform all phases ofthe manufacturer impact analyses. The Phase 3 (sub-group analysis) questionnaire solicits information onthe possible impacts ofpotential efficiency levels on manufacturing costs, product prices, and sales. Evaluation ofthe possible impacts on direct employment, capital assets, and industrycompetitiveness 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 providedto give participantsthe opportunityto confrrm the accuracyandprotectthe confidentiality ofall collected information. All the information transmitted was considered, when appropriate, in DOE'sdecision-makingprocess. However, confidential information will not be made available in the public record. DOE has collated the completed interview questionnaires and prepared a summary ofthe major issues and outcomes. 

### 2.9 COMPETITIVE IMPACT ASSESSMENT Legislation directs the Departmentto considerany lessening ofcompetitionthat is likely to result from standards. It further directs the Attorney General to gauge the impacts, ifany, ofany lessening ofcompetition. DOE has made an effort to gather and report frrm-specific fmancial information and impacts. The competitive analysis, as discussed in Chapter9, 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 3ofthe MIA. The Department ofJustice (DOJ) has helped in drafting questions to be used in the manufacturer interviews. These questions pertain to the assessment ofthe likelihood ofincreases inmarket concentration levels and othermarket conditions that could leadto anti-competitive pricing -behavior. The manufacturer interviews have focused on gathering information that helps in assessing asymmetrical cost increases to some manufacturers, increased proportion offixed costs potentiallyincreasing businessrisks, andpotentialbarriers to market entry (proprietarytechnologies, etc.). 2.10 UTILITY ANALYSIS The utility analysis estimates the effects ofproposed 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 ofthe U.S. energy sector that has been developed over several years by the EIA, primarily for the purpose ofpreparing the Annual Energy Outlook (AEO). NEMS produces a widely recognized baseline forecast forthe U.S. through 2020 and is available in the public domain. The version ofNEMS 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 ofstandards, NEMS-BRS is firstrun exactly as itwould be to produce an AEO forecast, then a second run is conducted with residential energy usage reduced by the amount ofenergy (gas, oil, and electricity) saved due to appliance standards forthe 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 ofelectricity, which primary fuel is used for generation). 2.11 ENVIRONMENTAL ANALYSIS The Department is preparing an Environmental Assessment ofthe impacts ofthe proposed rule andDOE anticipates completing a Finding ofNo 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. Auseful summary isNationalEnergy ModelingSystem:An Overview 1998,DOE/EIA0581(98), February, 1998. DOE/EIA approves use ofthe name NEMS to describe only an official version ofthe 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

# ~ '20

# ~ 3 ofthe MIA. The Department ofJustice (DOJ) has helped in drafting questions to be used in the manufacturerinterviews. These questions pertain to the assessment ofthe likelihood ofincreases inmarketconcentrationlevelsandothermarketconditionsthatcouldleadto anti-competitivepricing 'behavior. The manufacturer interviews have focused on gathering information that helps in assessing asymmetrical cost increases to some manufacturers, increased proportion offixed costs potentiallyincreasingbusinessrisks, andpotentialbarrierstomarketentry(proprietarytechnologies, etc.). 

### 2.10 UTILITY ANALYSIS The utility analysis estimates the effects ofproposed 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 ofthe U.S. energy sector that has been developed overseveral years bythe EIA, primarilyfor thepurpose ofpreparingthe 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 ofNEMS 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 ofstandards, NEMS-BRS is first run exactlyas it would be to produce an AEO forecast, then a second run is conducted with residential energy usage reduced by the amount ofenergy (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 energyprices, generation and installed capacity (and in the case ofelectricity, which primary fuel is used for generation). 

### 2.11 ENVIRONMENTAL ANALYSIS The Department is preparing an Environmental Assessment ofthe impacts ofthe proposed rule andDOEanticipatescompletingaFindingofNo SignificantImpact (FONSI)beforepublishing 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. Auseful summaryisNationalEnergyModelingSystem:An Overview/998,DOEIEIA0581 (98), February, 1998. DOEIEIAapproves use ofthe name NEMS to describe only an official version ofthe model without any modification to code ordata. 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 ofnitrogen (NOx) and sulfur (SO2

### ), as well as carbon dioxide (CO2). The first two are majorcauses ofacid precipitation, which canaffect humans byreducingthe productivity offarms, forests andfisheries, 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 precipitationpatterns, changes inthegaseous equilibrium between the atmosphere and thebiosphere, andthe melting ofsome ofthe ice now covering polar lands and oceans, causing arise 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 AEO99 version with minor modifications. NEMS-BRS is run exactlythe same as theoriginal NEMS except that residential energy usage isreduced by the amount ofenergy (gas, oil, andelectricity) saved due toappliance standards fortheappliance being analyzed. Theinput ofenergy savings are obtained fromthe NES spreadsheet. For the environmental analysis, the output is the forecasted physical emissions. The net benefits ofa standard will be the difference / 

# Sebetween emissions estimated by theAE02000 version ofNEMS-BRS and those it estimates with a standard in place. 2.12 REGULATORY IMPACT ANALYSIS DOE hasprepared adraftregulatory analysispursuant 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 ata reasonable cost and will be compared to the effectiveness ofthe 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 

### -: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. Powerplant emissions include oxides ofnitrogen (NOx) and sulfur (S02)' as well as carbon dioxide (C02 ). The first two are majorcauses ofacidprecipitation, whichcanaffecthumans byreducingtheproductivityoffarms, forests andfisheries, decreasingrecreationalopportunitiesand 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. CO2emissions 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 precipitationpatterns, changesinthegaseousequilibriumbetweentheatmosphere andthebiosphere, and the melting ofsome ofthe ice now coveringpolarlands and oceans, causing a rise in sea level. The Department uses EIA's widely recognized NEMS for the appliance environmental analyses. The version ofNEMS tobe used for appliance standards analysis will be called NEMSBRS, and will be based on the AE099 version with minor modifications. NEMS-BRS is run exactlythe sameas the originalNEMS exceptthatresidential energyusageis reducedbythe amount ofenergy(gas, oil, andelectricity) saveddue to appliance standards fortheappliancebeinganalyzed. The inputofenergy savings are obtainedfrom the NES spreadsheet. Forthe environmental analysis, the outputis the forecasted physical emissions. The net benefits ofa standardwill 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 DOEhasprepared adraft regulatory analysis pursuant to E.O. 12866, "RegulatoryPlanning 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 areasonablecost and will be compared to the effectiveness ofthe rule. Underthe 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 

# "* 2, 0

## ~ Table 2.1 Non-Regulatory Alternatives to Standards Alternatives Examined -No new regulatory action -Consumerproduct labeling -Public Education -Prescriptive Standards -Consumertax credits -Manufacturer tax credits -Consumer Rebates -Low Income Subsidy -Voluntary energy efficiencytargets -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. Tobe considered as the basis for the rulemaking, design options must satisfy four screeningcriteria: * Must be technically feasible * Must be practical to mass manufacture, install, and service * Mustnot substantially reduce consumer utility * Must not raise significant safety concerns We assume that design options available inproducts currently offered to the mass market meet those screening criteria. The mostwidespread ofthese efficiency-relatedenhancementsare: * Increased coil face area and depth * Multiple speed fan motor or blower motor * Variable (or multiple) speed or capacity compressor ordual compressor * Thermostatic or electronic expansion valve * Improved air flow and fandesign * Increased efficiency compressor (scroll, advanced reciprocating) Several recent and ongoing developments may soon change the cost impact of some ofthese enhancements and make themmore attractive to manufacturers. Eachofthese emergingtechnologiesalso 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 ofthese emerging technologies separately from our ARI validation effort. Finally, the industry currently faces a federally mandated phase out ofrefrigerant HCFC-22 by 2010. Although researchers continue toinvestigate severalalternative refrigerants, onlytwo seem likely to achieve significant penetration: 41OA and 407C. For new products, 41OA is favored. Itshigher 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 

# * 2 0 ,{( CHAPTER3: 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 consumerutility • 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 ofthese efficiency-relatedenhancements are: • Increased coil face area and depth • Multiple speed fan motor or blowermotor • 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 ofsome ofthese enhancements and makethemmore attractive tomanufacturers. Eachof theseemergingtechnologies 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 ofthese emerging technologies separately from our ARI validation effort. Finally, the industry currently faces a federally mandated phase out ofrefrigerant HCFC-22 by 2010. Although researchers continue to investigate severalalternative refrigerants, onlytwo seem likely to achieve 

### significantpenetration: 41OA and 407C. For new products, 41OA is favored. Its 

### higheroperating 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 ofthese within our ARI validation effort since 

### ARt considered equipment limited toHCFC-22. 

### 3-1

### EE-RMSTD-98-440 ct 

# (i CHAPTER 

### 4: ENGINEERING ANALYSIS 

### The Engineering Analysis develops the relationship between the efficiency and cost ofa central air conditioner or heat pump. This relationship serves as the basis for the subsequent costbenefit calculations in terms ofindividual consumers, manufacturers, and the nation. Determining the cost-efficiency relationship involves analysis of the options available to manufacturers for increasing the efficiency ofthe 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 thatmanufacturers: 1)structure their product lines around efficiency levels, 2) sell significant volumes ofhigher efficiency equipment, and 3)offer, or have studied, most ofthe design options available for increasing product efficiency. These characteristics make it possible to largely determine the cost-efficiency relationship forcentral air conditioners andheat pumps byexamining actual products in the marketplace instead ofestimating the cost andperformance ofdesignoptions using theoretical models. The Department has chosen to take an efficiency level approach to this rulemaking. That is, analysis is performed in terms ofproduct efficiency levels ratherthan design options. This method recognizes that manufacturers may use different paths to meet an efficiency requirement and estimates the cost ofachieving the efficiency level without specifying precisely which path istaken. 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) repaircosts, 5)product life, and 6) energy costs. The Engineering Analysis characterizes all ofthese potential effects. The analysis ofequipmentproduction costsproceeded intwo distinctphases-the validation analysis phase andthe 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 ofthe 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 oftechnologies that are currently under development but which have not been widely deployed. For the validation analysis, the Department estimated the costs ofproducing equipment utilizing today's established technologies undernew 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 ahigher efficiency product, say a 12 SEER air conditioner, would decrease ifthe minimum efficiency were raised to that level. Manufacturers ofsuch products 4-1



### EE-RMJSTD-88-440 

# *1 D

# '6 CHAPTER 4: ENGINEERING ANALYSIS The Engineering Analysis develops the relationship between the efficiency and cost ofa central air conditioner or heat pump. This relationship serves as the basis for the subsequent costbenefit calculations in tenns ofindividual consumers, manufacturers, and the nation. Determining the cost-efficiency relationship involves analysis of the options available to manufacturers for increasing the efficiency ofthe baseline product (i.e, one thatjust meets the minimum efficiency standard.) Residential central air conditioners are somewhat unique among the products regulated by the Departmentinthatmanufacturers: 1) structuretheirproductlines aroundefficiencylevels, 2) sell significantvolumes ofhigherefficiencyequipment, and 3) offer, orhave studied, most ofthe design options available for increasingproduct efficiency. These characteristics make it possible to largely detenninethe cost-efficiencyrelationship for central airconditioners and heatpumpsbyexamining actual products in the marketplace instead ofestimating the cost andperfonnance ofdesign options using theoretical models. The Department has chosen to take an efficiencylevel approach to this rulemaking. That is, analysis is perfonned in tenns ofproduct efficiency levels ratherthan design options. This method recognizes that manufacturers may use different paths to meet an efficiency requirement and estimates the cost ofachievingthe efficiencylevel without specifyingpreciselywhich 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) repaircosts, 5) product life, and 6) energycosts. The EngineeringAnalysis characterizes all ofthese potential effects. The analysisof equipmentproductioncostsproceededintwodistinctphases-the validation analysisphase andthe emergingtechnologyanalysis phase-as shown in Figure4.1. The validation analysis phase (Section 4.2) inc:luded the tasks needed to detennine the reasonableness ofthe 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 oftechnologies that are currently under development but which have not been widely deployed. For the validation analysis, the Department estimated the costs ofproducing equipment utilizingtoday'sestablishedtechnologiesundernewefficiencystandards. Thus, eachefficiencylevel analyzed assumed that new minimum efficiency standard was set at that level. The Department believesthatcurrentproduction costs for ahigherefficiencyproduct, saya 12 SEERairconditioner, would decrease ifthe minimum efficiencywereraisedtothat level. Manufacturersofsuchproducts 4-1

### EE-RM/STD-98-440 " ' 

### 0 would have agreater incentive to cost-optimize theirproduction atthat level because ofmore intense competition and higherproduction 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 ofhigh-efficiency products may actually increase under new standards dueto capital, engineering, and marketing costsincurred in converting tothe new standard. Today'sproducts Today'sproducts Tomorrow's undernew productsunder 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 

### Figure4.1 Phases ofthe 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 

# AtA.

# O~ wouldhavea greaterincentivetocost-optimizetheirproductionatthat levelbecauseofmoreintense competitionand higherproductionvolumes.ARl'sguidelines to theirmemberswere to incorporate the same assumption regarding production at a new efficiency standard. However, some manufacturers might argue that costs ofhigh-efficiency products may actually increase under new standardsduetocapital,engineering,andmarketingcostsincurredinconvertingtothenew standard. Taday's products Today's products undernew 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 newstandards New technologies 

## i New efficiency i standards i 

### ! Validation analysis Emerging technology

analysis 

### Figure 4.1 Phases ofthe 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 neverbeen widely deployed and existing technologies that can benefit from further technological advance and economies ofscale. 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) singlepackaged 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 ofequipment sold is rated at the minimum allowable efficiency.' " Products ratedatthe minimum efficiency level aretermed baseline.They compete primarily onprice and share similarphysical characteristics. Although the efficiency level approach describes onlythe cost ofthe product atthe 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 ofthese areas or may contain additional efficiency-related features such as variable speed control and time delay relays. Appendix B provides a more complete description ofdesign choices displayed in our equipment samples.

aNumbered references refer to notes at end ofthe chapter 

### 4-3 

# c 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) singlepackagedcentral airconditioning systems (cooling-only), and4) singlepackaged 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 Table4.1. 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 ofequipment sold is rated at the minimum allowable efficiency.l a Productsratedattheminimumefficiencylevel aretermedbaseline. Theycompeteprimarilyonprice and share similarphysical characteristics. Although the efficiencylevel approach describes onlythe cost ofthe product atthe minimum efficiency level (and higher efficiencylevels) 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 blowermotors Equipment at higher efficiency levels may contain enhancements in one or more ofthese areas ormay contain additional efficiency-related features such as variable speed control and time delayrelays. Appendix B provides a more complete description ofdesign choices displayed in our equipment samples.

a Numbered references refer to notes at end ofthe 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 ofadopting those designs themselves, and to attempt to avoid infringing on their competitor's patents. In the context ofthis Engineering Analysis, the term "reverse engineering" solely describes the estimation ofproduction costs by examining actual equipment or designs. The ample examples ofresidential unitary equipment inthe marketprovide theopportunity touse 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. Theseproduction costs were normalized to the cost oftheirrespective 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 ofmaterials, components, and assembly operations Assumptions and data were based upon six sources ofinformation: * Interviews with manufacturers and suppliers * Disassembly and analysis ofequipment (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 ofdiscussion includedproductdesign, manufacturing methods, market dynamics, alternative refrigerants, product classifications, special issues relatedtoheat pumps,and concerns related tonew standards. Several visits also included tours ofmanufacturing facilities.

4-4 

## r' 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 ofadopting those designs themselves, and to attempt to avoid infringing on their competitor's patents. In the context ofthis Engineering Analysis, the term "reverse engineering" solelydescribes the estimation ofproduction costs by examining actual equipment ordesigns. The ampleexamplesof residentialunitaryequipmentinthemarketprovidetheopportunitytousereverse 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 equipmentundernew efficiency standards. Theseproduction costs were normalized to the cost oftheirrespective baseline costs, yieldingrelative costs analogous to ARI'srelative 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 offour tasks: 1. Selecting representative equipment 

### 2. Describing equipment attributes 3. Modeling production processes 4. Determining the cost ofmaterials, components, and assembly operations Assumptions and data were based upon six sources ofinformation: • Interviews with manufacturers and suppliers • Disassembly and analysis ofequipment (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 Septemberand November 1998, DOE and ADL employees visited the facilities of 16 manufacturers and component suppliers and participated in presentations, interviews, and tours. Topicsofdiscussionincludedproductdesign,manufacturingmethods,marketdynamics, alternative refrigerants,productclassifications, specialissuesrelatedtoheatpumps, andconcernsrelatedtonew standards. Several visits also included tours ofmanufacturing facilities.

### EE.RM/STD-98-440 ~ '2 Table 4.2 Sources ofDesign Information Uses ofInformation Equipment Description Process Component

selection ofproduct modeling pricing attributes Manufacturer/supplier / visits/interviews § Manufacturer data / e 

### submissions e Tear downs l 4

a ARI Attribute Data / V 0 

### Product Literature 4 / 4

Thevisits served manypurposes including gathering information concerning theEngineering Analysis, introducing company executives to the rulemaking process, andunderstanding the impact ofa new standard onmanufacturers. Ten ofthese meetings were conducted under an agreement of confidentiality, and the DOE employees did not retain written materials from any ofthe 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 theirproduct 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 theywould expect would be similar to the 12 SEER model under a 12 SEER standard. Manufacturers were also askedto describe the efficiency-related attributes oftheproducts they selected. Fourmajormanufacturers submitted design datafor splitcooling-only equipment, and three ofthose 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 ofthose and other 4-5 

# C EE_RM/STD-98-440

# "***'20~** Table 4.2 Sources ofDesigo Ioformation Uses ofInformation Equipment Description Process Component

selection ofproduct modeling pricing attributes Manufacturer/supplier 

### ./ ./ ./ visits/interviews c Manufacturer data 

### ./ 0 ; submissions 

## "**~** 0 

### ./ ./ 

# - Tear downs oS '0 

## " CD u ARI Attribute Data 

### ./ ./ 

## ... ::I 0 (/) Product Literature 

### ./ ./ ./

Thevisits servedmanypurposesincludinggatheringinformationconcerningtheEngineering Analysis, introducingcompanyexecutivesto the rulemakingprocess, andunderstandingthe impact ofanew standard on manufacturers. Ten ofthese meetings were conducted under an agreement of confidentiality, and the DOE employees did not retain written materials from any ofthe 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 theirproduct lines that would most nearly represent baseline equipment at each efficiency level through 17 SEER. For example, they named their current 12 SEERmodel that they would expect would be similarto the 12 SEERmodel under a 12 SEER standard. Manufacturers were also askedtodescribethe efficiency-relatedattributesofthe products theyselected. Fourmajormanufacturerssubmitteddesigndatafor splitcooling-onlyequipment,and three ofthose 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 ofthose and other

4-5

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

# (SB~ 'manufacturers.b We also usedthe ARI Product Attribute Database (provided toour contractor under a non-disclosure agreement) and technical literature to describe the efficiency-related attributes in those products. Finally, from the group ofmanufacturer submittals, three units were purchased for extensive disassembly and inspection. Table 4.3 shows the breakdown ofmodels 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 ofdisassembly 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 ofestimating production cost short ofobtaining 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 teardowns were meticulous andprovidedcomprehensive 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 ofthe 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 ofthe range ofthe costs bounded by manufacturer submissions. This ensured that the sample included only models with cost considered "representative" by manufacturers. 

### 4-6 (**~** 

## '2 0 'l EE_RM/STD-98-440 

### 1\ {J manufacturers.bWe also usedthe AR1 ProductAttribute Database (providedto ourcontractorunder a non-disclosure agreement) and technical literature to describe the efficiency-related attributes in those products. Finally, from the group ofmanufacturer submittals, three units were purchased for extensive disassembly and inspection. Table 4.3 shows the breakdown ofmodels examined. 

### Table 4.3 Breakdown ofEquipment 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 ofSample 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 ofdisassembly 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 ofestimating production cost short ofobtaining 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 SEERteardownsweremeticulousandprovidedcomprehensiveknowledgeabout those products. After disassembly, each part was identified, weighed, and described in detail. The 12 SEER teardown was less thorough since it was intended only to confirm the results ofthe 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 detenninedthattheircostsfell outside ofthe range ofthe costs boundedbymanufacturersubmissions. Thisensured that the sample included only models with cost considered "representative"bymanufacturers. 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 bythe order ofassembly. Each fabrication and assembly operation is described in detail, includingthe type ofequipment used and the cycle time. The result is a thorough and explicit model ofthe production process. Visits to equipment plants and detailed discussions with a major supplier ofplant 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 foreach plant. Notice that the plants are greenfield facilities. "Greenfield" means thatthe 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 

# *'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 eachpart andits relationship to the otherparts by the order ofassembly. Eachfabrication andassemblyoperationis describedin detail, includingthetype ofequipmentused and the cycle time. The result is a thorough and explicit model ofthe production process. Visits to equipmentplants and detailed discussions with a major supplier ofplant 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 peryear) Actual production volume 125,000 Fabrication shifts per day 2 (split AlC and HP) (units peryr) Designed production capacity 30,000 Hours per shift 8 (Pkg AlC and HP) (units peryr) 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 ofreliability and comfort. This emphasis on low price puts pressure on manufacturers to reduceproduction costs onbaseline products. Thepressure to reduce the production costs ofhigher efficiency products isnot as greatbecause those purchasers are less sensitive toprice. Since baseline products make up the majority oftheir production volume, manufacturers must considerthis difference in costreduction pressure between baseline and non-baseline products when seeking to optimize their production processes. Consequently, optimal production typically results inmore cost-efficient production ofbaseline 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 ofthose products occurs as the market drives out premium products with added features in favor oflower price models. The elimination of features and the pricing pressures that result from more intense competition lower the costofthe product. The cost estimates inthe reverse engineering analysis are based on these commoditized versions oftoday'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 thatmore than 95 percent ofthe cost ofthe baseline system was efficiencyrelated.

4-8 (: 

### 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 ofreliability and comfort. This emphasis on low price puts pressure on manufacturerstoreduceproductioncostsonbaselineproducts. Thepressuretoreducetheproduction costs ofhigherefficiencyproducts is not as greatbecausethosepurchasersare less sensitivetoprice. Since baseline products make up the majority oftheir production volume, manufacturers mustconsiderthisdifference in costreductionpressurebetweenbaselineandnon-baselineproducts when seeking to optimize their production processes. Consequently, optimal production typically results inmore cost-efficientproduction ofbaseline equipment and less cost-efficientproduction of non-baseline equipment. As the efficiency standard rises, models that once exceeded the minimum efficiency level becomethe newbaselinemodels. The Department assumes that commoditization ofthose 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 competitionlowerthe cost ofthe product. The cost estimates inthe reverse engineeringanalysis are based on these commoditized versions oftoday'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 concludedthatmore than 95 percent ofthe cost ofthe baseline system was efficiencyrelated.

4-8

### EE-RM/STD-98-440 

### T 

# k2 Table 4.5 Examples ofProduct 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, andpricing pressures will continue to prevent manufacturers fromincorporating non-efficiency attributes intobaseline equipmentunder new standards. Second, only those differences in incremental cost that relate to incremental efficiency affect the results ofthe consumer life cycle cost analysis. Some mayargue that one or more ofthe designated non-efficiency attributes are, in fact, tied to efficiency. For example, ifhigher efficiency products are inherently noisier, purchasers could require manufacturers to incorporate special noise suppression features even on their baseline equipment. Ifthat 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 intofinished parts was estimated. Wheneverpossible, ADL obtained price quotes directly from suppliers in volumes necessary to produce theequipment volumes shown in Table 4.4. Forhigher 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 

# * '20

## ~ Table 4.5 Examples ofProduct 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, andpricingpressures will continue topreventmanufacturers from incorporatingnon-efficiencyattributes intobaselineequipmentunder new standards. Second, only those differences in incremental cost that relate to incremental efficiency affect the results ofthe consumer life cycle cost analysis. Somemayargue that one ormore ofthedesignated non-efficiencyattributes are, in fact, tied to efficiency. For example, ifhigher efficiency products are inherently noisier, purchasers could require manufacturers to incorporate special noise suppression features even on their baseline equipment. Ifthat were the case, the reverse engineering analysis would underestimate the cost of higher efficiencybaseline 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 transformingthemintofinishedpartswasestimated. Wheneverpossible,ADLobtainedpricequotes directlyfrom suppliersinvolumesnecessaryto produce the equipmentvolumes showninTable4.4. . Forhigher efficiency equipment, this assumption generally resulted in highercomponentpurchase volumes and mayhave 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 oflabor 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 S13.33 per hr Utility cost 21.6% ofdepreciation Fringe 30% ofwage Maintenance cost 4% ofdepreciation Indirect labor 50% ofdirect labor Property tax 0.9% ofrevenues Equipment 1-20 years based on Property insurance 0.8% ofrevenues Depreciation equipment type Building depreciation 30 years Freight-in 3% ofmaterials 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 ofproducing coils. The otherestimates the cost offabricating the remaining components and assembling the equipment.The workbooks contain proprietary and confidential information and are not publically available. More complete details ofthis 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 ofsplit airconditioners, 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, weapplied "rules-of-thumb" suggested byMr.Joseph Pietsch in an independent review. For systems ofequivalent 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 splitheat 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 

# -* 2. D

## ~ After incorporating information on prices and manufacturing processes, estimates oflabor 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% ofwage 50%ofdirect labor 1-20 years based on equipment type 30years Utility cost Maintenance cost Propertytax Propeny insurance Freight-in Freight-out 'M 4.2.7 Generating Production Cost Results 21.6% ofdepreciation 4% ofdepreciation

0.9% ofrevenues 0.8% ofrevenues 3% ofmaterials cost $1.66 percubic 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 ofproducing coils. The otherestimates the costoffabricatingthe remainingcomponentsandassemblingthe equipment. The workbooks containproprietary and confidential information and are not publically available. More complete details ofthis 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 ofsplit 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,weapplied"rules-of-thumb" suggestedby

### Mr. JosephPietschin anindependentreview. For systems ofequivalent 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 splitairconditioning fancoil system and split heat pump will share the same indoorunit. 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 apackaged airconditioner and apackaged heat pump, should beconsistent across efficiency levels. These guidelines are valid only for aparticular manufacturer's product line and do not hold across product lines or across manufacturers. Since the reverse engineering equipment sample contained severalmanufacturers and product lines, applying these rules hasthe effect ofminimizing any variability and bias introduced by the sample set. The approach also allows us to estimate the production costs ofequipment at efficiencylevels where we did not have any samples originally. We assessed only through 15 SEER to cover the range ofrelative cost estimates provided by ARI. Figure 4.2 illustrates howthe split air conditioner (cased coil) isusedto derive the production cost estimates for the otherproducts. At each stage, common costs are translated to the nextproduct, 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 

## C Packaged Air! Conditioner Figure4.2 Relationship ofProduction CostEstimates inNew Reverse EngineeringApproach 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 ofdata.

4-11 EE-RM/STD-98-440 

# 1f2.0 

# '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 apackagedairconditionerand apackagedheatpump, shouldbe consistentacross efficiency levels. These guidelines are valid only for a particularmanufacturer'sproduct line and do not hold across product lines or across manufacturers. Since the reverse engineering equipment sample contained severalmanufacturers andproductlines,applyingtheserules has the effectofminimizing any variability and bias introduced by the sample set. The approach also allows us to estimate the productioncostsof equipmentatefficiencylevels wherewe didnothave any samplesoriginally. We assessed onlythrough 15 SEER to cover the range ofrelative cost estimates provided by ARl. Figure4.2 illustrateshowthe split airconditioner(casedcoil) is usedtoderivetheproduction costestimates forthe otherproducts. Ateach stage, commoncosts are translatedto the nextproduct, 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,..1

1 

### Conditioner i ,--I -------' I 

### Packaged 

## I Heat Pump 

## I (faneoiI) ---.::,....**I-~~.!** i

### Packaged Air!

,--I ------' 

## i Conditioner 

## I

Figure4.2 RelationshipofProduction CostEstimatesin New ReverseEngineeringApproach 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 ofdata.

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 Equipment 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 onthose products and which werebased on Mr.Peitsch's rules ofthumb using costs estimated for other product classes. 4-12 

# (: EE-RM/STD-98-440

## ~

# 20

## ~ Table4.7 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 newresults are higher, Table 4.8 Revised Reverse Engineering Production Cost Multipliers for 3-ton Unitary 

### E· t

,'lUlpmen 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 onthoseproducts and which werebased on Mr. Peitsch'srules ofthumbusing costs estimated for otherproduct classes.

4-12

### EE-RM/STD-98-440 ;', 

# qC', 4.2.8 Outbound Freight Outbound freightisnormally considered a sales expense and notaproduction cost. However, in the reverse engineering analysis, outbound freight charges scale asthe size ofequipment changes, sooutboundfreightchargesareincludedin the productioncost results.To avoid double-counting, outbound freight is later deducted from the recommended manufacturer markup (Section 4.3.2). 4.2.9 IndustryReview 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 ofpresent baseline equipment. This section describes that validation effort. 4.2.9.1 ARI Results The Department andARI agreed ona set ofbasic assumptions before ARI began collecting the data from its members. Each member who provided data to ARI estimated its own equipment costunder each new standard relative to its own current 10 SEER equipment. On March 13, 1999 ARI provided the aggregated results ofthis survey to the Department consisting ofthe 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 ofARI'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 ofwhether the relative costs reflected the distribution ofshipments, ARIreceived permission from itsmembers toprovide 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 ofthe 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 apriorversion ofthe tables in Appendix B. The Department pointed outthat significant and unexplained discrepancies still existed, and ARI agreed to review the results again. Certain manufacturers contactedthe Department's contractor (Arthur D.Little, Inc.) toreview theresults 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

## ~~**u~** 4.2.8 Outbound Freight Outboundfreight isnonnallyconsideredasalesexpenseandnotaproductioncost. However, inthereverse engineeringanalysis, outbound freight charges scale as the size ofequipmentchanges, sooutboundfreightcharges are includedin theproduction 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 ofpresent baseline equipment. This section describes that validation effort. 

### 4.2.9.1 ARI Results The Department andARI agreed on a set ofbasic 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 ofARI'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 ofwhetherthe relative costsreflectedthe distribution ofshipments,ARIreceivedpennissionfrom itsmemberstoprovide shipmentweightedmeanvalues. These data, which were provided to the Department on April 26, 1999, were based on 1998 manufacturer shipments and represent 90 percent ofthe total industry shipments. 

### 4.2.9.2 Second ARI Review On May 14, 1999 the Departmentpresentedthe reverse engineering estimates to ARI for all four classes, having earlier reported results for split air conditioners only. ARI's members also receivedapriorversionofthetables inAppendix B. The Departmentpointedoutthat significantand unexplained discrepancies still existed, and ARI agreed to review the results again. Certain manufacturerscontactedtheDepartment'scontractor(ArthurD. Little,Inc.)toreviewtheresultsand 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 ofreverse engineering relative costs forthe split air conditioner class is not straightforward since fancoil and cased coil unitswere evaluated separately. Eighty-four (84)percent ofthe split air conditioner samples through 13 SEER were cased coil units. At 14 SEER, 57percent ofthe 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 ofcased coil systems relative to the cost ofthe average cost ofa 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 ofboth the cased coil and fancoil costs relative to theirrespective 10 SEER counterparts. Because the level ofdetail 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 ofsplit air conditioners, and that the three aspects can explain most, ifnot all, ofthe discrepancy between the two sets ofrelative costs: * Outdoor unit cabinet materials and labor * Indoor coil materials * Refrigerant Afterreexamining those components and making adjustments, thereverse 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 ofthe 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 

# '*'2

# i),

4.2.10 Comparison Between Reverse Engineering and ARI Relative Costs Table 4.9 compares the relative production costs provided byARl with those developed in the reverse engineering analysis. These data show that as efficiency increases, ARl'smean 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 orexceedARl's "minimum" relative costs. The derivation ofreverse engineering relative costs for the split air conditioner class is not straightforwardsince fancoil andcasedcoilunitswereevaluatedseparately. Eighty-four(84)percent ofthe splitairconditioner samples through 13 SEERwere cased coil units. At 14 SEER, 57 percent ofthe 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 ofcased coil systems relative to the cost ofthe average cost ofa 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 airconditionerrelative costrepresents the average ofboth the cased coil and fancoil costs relative to their respective 10 SEER counterparts. Because the level ofdetail 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 ofsplit air conditioners, and that the three aspects can explain most, ifnot all, ofthe discrepancy between the two sets ofrelative costs: • Outdoor unit cabinet materials and labor • Indoor coil materials • Refrigerant Afterreexaminingthosecomponentsandmakingadjustments,thereverseengineeringresults still fall belowARI's suggested values. ARl did not suggest improvements for split airconditioners over 14 SEER orfor the other classes. The Department believes that other factors may explain part ofthe 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 ARImembers may assume higher prices morein line with historic averages. * R-22prices 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. * 

### Conversioncosts 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. * 

### Baselinecosts 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 ofbaseline equipment cost. Thus, differences in baseline equipment cost could explain much ofthe 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 ofmodels 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-9S-440 

# t 2 o

# 'i

features. Industry members might have defmed essential features differently. • Metalprices The reverse engineering analysis assumed flat 1998 prices, but someARImembers mayassumehigherpricesmoreinline with historic averages. • R-22prices 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 theirassumptionsofbaselineequipmentcost. Thus, differences in baseline equipment cost could explain much ofthe 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 ofmodels 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 orlower 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 RevEng 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 MostLikely 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 ofrelative cased coil and fancoil system costs with respect to their 10 SEER baselines.



### 4-16 

# C: EE-RM/STD-98-440

### ~ 

# 2.O"L 

### Table 4.9 Comparison ofRevised 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 SEERpackaged systems I II SEER

- 13 SEER based on cased coil only, with respect to the 10 SEER cased coil system cost. 15 SEERbased on fancoil only with respect to the 10 SEER faneoil system cost. 14 SEER represents the mean ofrelative 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 ofARI 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 ofARI'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 onprice and keep products within the same price variation ascurrent 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, and2)the incremental prices they mustpay topurchase 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 airconditioning market, dealers sell equipment as part ofan installation package and do notlistretail equipment prices separately frominstallation 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 analternative tothe 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 istransparent and avoidsthe 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) foritsLennox-brand products andis the only notable exception. Large retailers (Sears, Home Depot) replace the distributor in the chain for some manufacturers.

4-17 

# (: ifi.RM/STD-98-440 

# *' 'L0

# ~ 4.2.11 Validation ofARI Results In all cases, ARl's mean production cost multipliers exceed those from the reverse engineering analysis. However, the reverse engineering cost model cannotreplicate many ofARl'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-efficiencyproducts to compete on price and keep products within the same price variation as current baseline equipment. Without further explanation from ARlas to the assumptions behind theirmaximum 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 baselineequipment, and2) the incrementalpricestheymustpaytopurchasehigherefficiencylevels 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 ofan installation package and do notlistretail equipmentprices separatelyfrom installationcost. Furthermore,differences inlocal markets, weather conditions, demand, and many other factors can all affect the price contractors charge for air conditioning equipment. As an alternativetotheretailprice survey,the Departmentdeterminedtypical 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 publiclyavailablecorporateandindustrydata. This approachis transparentandavoidsthe 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 ofDistribution 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-stepdistribution (manufacturerto dealer) for its Lennox-brandproductsand is the onlynotable exception. Large retailers (Sears, Home Depot) replace the distributor inthe chainfor 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 awave ofconsolidation 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 oftheir products directly to distributors (also called wholesalers.) Distributors sell to dealers at the distributor (wholesale) price. Distributors absorb short-term imbalances in supplyand demand, allowing manufacturers to operate more efficientlyand satisfying consumer needs for fast deliveries. Distributors may specialize in HVAC equipment or maydeal inother products.They are alsoimportant sources for after-market parts thatboostmargins. Distributors compete on price and service, although geographic boundaries andrelationshipsprevent 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 ofits distribution channels. At each point in the distribution chain, companies mark up the price ofthe equipment to cover their business costs and profit margin. In financial statements, grossmarginis the effective 

### markup on a company's cost ofsales. 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 ofa product to contribute positively to company cash flow, its markup mustbe 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 ofthe manufacturers listed have since merged. The six sets ofreports served as the basis for the estimation ofthe manufacturer markup. Thecompanies represented account for about 85 percent ofthe unitarymarket. Manufacturers D, E, and F engage substantially in business other than the production of air conditioning equipment. Manufacturer Fengages substantially in business notrelated to building equipment. All companies sell products other than residential unitary air conditioners, including furnaces, commercial air conditioners, and aftermarketparts. Many ofthese otherproducts command higher margins than do baseline air conditioners. 4-18 

# ( 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 ofconsolidation 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 oftheir products directly to distributors (also called wholesalers.) Distributors sell to dealers at the distributor (wholesale) price. Distributors absorb short-tennimbalancesin supplyanddemand, allowingmanufacturerstooperatemoreefficientlyand satisfying consumer needs for fast deliveries. Distributors may specialize in HVAC equipment or maydealinotherproducts.Theyarealsoimportantsourcesfor after-marketpartsthatboostmargins. Distributorscompeteonpriceand service, althoughgeographicboundariesandrelationshipsprevent 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 manufacturerlevels. There are now several large, national, publiclytraded airconditioning dealers. Lennox has also acquired dealers to complement its vertical integration ofits distribution channels. At each point in the distribution chain, companies mark up the price ofthe equipment to cover their business costs and profit margin. In financial statements, gross margin is the effective markup on a company's cost ofsales. 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 ofa product to contribute positively to company cash flow, its markupmustbegreaterthanthe corporate gross margin lessthe company's operatingprofitmargin. 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 ofthe 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 Table4.10 as Mfr. A - Mfr. F). Two ofthe manufacturers listed have since merged. The six sets ofreports served as the basis for the estimation ofthe manufacturer markup. The companiesrepresented account for about 85 percentofthe unitarymarket. Manufacturers D, E, and F engage substantially in business other than the production of air conditioning equipment. ManufacturerF engages substantiallyin business not related to building equipment. All companies sell products other than residential unitary air conditioners, including furnaces, commercial air conditioners, andaftermarketparts. Manyofthese otherproductscommandhighermargins thando baseline air conditioners. 4-18

### EE-RMISTD-98-440 '2-D0 

### Ofthe six public companies, Manufacturers A and B are most dependent on residential unitary sales, and we expect their financial statement to be most indicative ofthe cost structure associated with the production and sale ofresidential unitary equipment. Manufacturer C, because it is also engaged solely in the airconditioning business, is also a good example. Manufacturer A's fiveyear average isadversely affected by extraordinary restructuring charges in 1995. Manufacturer B's gross margin is substantially higher than that ofits 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 ofthe six manufacturers. Each firm's profit margin (EBIT, Earnings Before Interest and Taxes) is replaced with a 2percent figure to simulate the margin on a baseline unit. Actual margins may be higher, particularly for firms who specialize in the production and sale ofbaseline 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) MfrA 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 arepresentative manufacturer markup of1.23 for use inestimating 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

# *''2 D

## ~ Ofthe six public companies, Manufacturers A and B are most dependent on residential unitary sales, and we expect their financial statement to be most indicative ofthe cost structure associated with the production and sale ofresidential unitary equipment. Manufacturer C, because it is also engaged solelyin the airconditioningbusiness, is also a good example. ManufacturerA's five yearaverageis adverselyaffectedbyextraordinaryrestructuringcharges in 1995. Manufacturer B's gross margin is substantiallyhigher than that ofits 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 ofthe 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 marginsmaybe higher, particularlyfor finns who specialize in the production and sale ofbaseline equipment. Outbound freight was also deducted since it is already included it in the reverse engineering cost estimates (see Section4.2.8). Except where noted, figures are listed for 1997 as well as the averages overthe 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), 10.0report (4QI999) 

# -

TheDepartment selectedarepresentativemanufacturermarkupof1.23 foruse 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 ofDistributorMarkup Table 4.11 liststhe median 1997 gross margin for 14 members ofthe Air Conditioning and Refrigeration Wholesalers (ARW) engaged in the sale of air conditioning and heating equipment. Table 4.11 DistributorMedian Gross Margins and Markups Gross 1997 27.0% margin 1993-97 26.9% Markup 1997 1.37 1993-97 1.37 Source: 1998 WholesalerPROFIT 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 ofan air conditioner increases, we would expect that the markup on the price difference to be less than the average markup since only a fraction ofthe distributor's costs scale with the unit cost ofmaterials. 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 ofU.S. Census data suggested a value of 1.09. A wide uncertainty band exists around both ofthese 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 ofequipment costs. The basic portion ofequipment 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 DistributorMarkups used in the Analysis for each StandardLevel 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 

# :it**~** 8 

# t 4.3.3 Determination ofDistributor Markup Table4.11 lists the median 1997 gross margin for 14 members ofthe AirConditioning and Refrigeration Wholesalers (ARW) engaged in the sale ofair 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 PROFITSurvey 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 ofanair conditionerincreases, we would expectthat the markup onthe price difference to be less than the average markup since only a fraction ofthe distributor's costs scale with the unit cost ofmaterials. 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 expectto scale with prices cbanges. The markup suggestedbythat analysis is 1.11. Anexamination ofU.S. Census data suggested a value of 1.09. A wide uncertaintyband exists around both ofthese 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 ofequipment costs. The basic portion ofequipment 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 

### o.. < Appendix D presents the detailed derivation ofthe 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 ofmarkups from 1.20to 1.32 to the 34 percent ofair conditioners andheat 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 ofDealer 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., andmarkups required to install the equipment. This flat rate pricing hides the actual dealer price ofthe equipment. Just as withthedistributor markup, we estimated the average equipment markup on baseline equipment, and the markup on changes in the unit cost ofthe equipment. Analysis offinancial !~( ~ 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 ofthe 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 ofdealer markups, we chose to use it in the analysis. Thus, we applied amean dealer markup of 1.27 to allproduct classes at all standard levels. 4.3.6 Determination ofSales Tax Inmany cases,local and stategovernments apply salestaxes toair conditionerpurchases. The sales tax applied tothe 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 data 7



### . The mean sales tax rate is 6.7 percent, corresponding to amarkup of 1.07. We adopted this distribution forthe sales tax paid, except forthe 34percent ofunits soldinto thenew construction market. Inthose cases,we assumed that purchasers 4-21 

## ( EE_RM/STO-98-440 

# 4t L D

### ~ Appendix D presents the detailed derivation ofthe distributor markups. 

### 4.3.4 Determination ofBuilder 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 ofmarkups from 1.20to 1.32 to the 34 percentofairconditioners andheatpumpsthat fmd theirway 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 ofDealer Markup Dealers, orcontractors, sell equipment to consumers at the dealerprice. However, since the dealer also install the system, the purchasertypicallypays an installed price that includes all labor, materials" andmarkupsrequiredto installtheequipment. This flat ratepricinghidesthe actual dealer price ofthe equipment. Justaswiththedistributormarkup, we estimatedthe averageequipmentmarkup onbaseline equipment, and the markup on changes in the unit cost ofthe equipment. Analysis offinancial 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 ofthe financial statements suggest that the average contractor markup on equipmentonlyis closerto 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 ofdealer markups, we chose to use it in the analysis. Thus, we applied a mean dealermarkup of 1.27 to all product classes at all standardlevels. 

### 4.3.6 Determination ofSales Tax Inmanycases,localandstategovernments apply salestaxestoairconditionerpurchases.The sales tax applied to the dealerprice yields the retail price paid by the consumer. Table4. 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, correspondingtoa markup of1.07. Weadopted this distribution forthe sales tax paid, exceptforthe 34percentofunits soldintothenewconstructionmarket. Inthosecases,We assumedthatpurchasers 4-21

### EE-RM/STD-98-440 . iD 

### pay no sales tax onthe equipment. This is equivalent to a weighted average salestax forallproducts 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%

Fractionof 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 ManufacturerMarkup 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

# * 1

...

# D~ payno salestax ontheequipment. This is equivalentto a weighted average salestax for all products of 1.04. Table 4.13 Distribution of 1994 Unitary Shipments at Various Sales Tax Rates .'4 , Combined Sales Tax Rate (nearestwhole percent) 

### 0% 5% 6% 7% 8% 10%

Fraction ofShipments 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 economicallyjustified" is known as "Max Tech." Aproduct canbe technologically feasible without being either commercially practical or economicallyjustified. 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 30EER, butthat equipment isnot commercially practical. Thehighest commercially practical efficiency level is estimated to be nearly 16 EER, or 20 SEER. Thus, the Department is proposing to eliminate from consideration anypotential standard levelthat exceeds a20 SEERrating as not commercially practical, and therefore, not economicallyjustified. Furthermore, since we are not aware ofanyprototype or production unit that exceeds, or has ever exceeded, 18 SEER, we are considering 18 SEERto bethe 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 ofall equipment through 18 SEER, but are confident that their costs exceed those of the highest efficiency products we evaluated. For example, the cost ofa 18 SEER split air conditioner is expected to cost at least as much to produce as a 15 SEER split air conditioner. The remainder ofthis 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 vaporcompressioncycleto cool interior air andreject the heatto 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 throughthe tubes intube-and-fin heatexchanger "coils" as airpasses overthe 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 inthe process. In the condenser, the hotgas 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 lowerpressure. In the evaporator, the cold gas accepts heat from the indoor air. Some ofthe heat comes from water vapor (humidity) as it condenses on the evaporator coil.

cInheat pumps, the role ofthe condenser and evaporator reverses in the heating mode, but the names remain the same. 

### 4-23 EE_RM/STD-98-440

# * -2.**O~** 4.4 MAX TECH The highest efficiencylevel that is ''technologically feasible and economicallyjustified" is knownas "MaxTech."Aproductcanbe technologicallyfeasible withoutbeingeithercommercially practical oreconomicallyjustified. Based on a limited assessment of thermodynamic limitations and potential system improvements,theDepartmentestimates that thehighest technologically feasible level for 3-ton air conditioners is 30EER. butthat equipmentisnotcommerciallypractical. Thehighest commercially practical efficiency level is estimated to be nearly 16 EER. or 20 SEER. Thus, the Department is proposingto eliminatefrom considerationanypotential standardlevelthatexceedsa20SEERrating as not commerciallypractical, and therefore, not economicallyjustified. Furthermore, since we are not aware ofany prototype orproduction unit that exceeds, orhas ever exceeded, 18 SEER, we are considering 18 SEERto bethe Max Techlevel. Somenicheproductsand all coil-onlyproductshave a Max Tech that is considerably lower. We did not estimatethe cost ofall equipment through 18 SEER. but are confidentthat their costs exceed those of the highest efficiency products we evaluated. For example, the cost of a 18 SEER split airconditioneris expected to cost at least as much to produce as a 15 SEER split air conditioner. The remainder ofthis 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 cycletocool interiorairandreject the heatto exteriorair. (Inheatingmode,heatpumps 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 refrigerantpasses throughthetubesintube-and-fmheatexchanger"coils"as airpasses overthe 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 pressureintheprocess. Inthe condenser,thehot gasrejects heattothe outsideairandcondensesinto a liquid. After leaving the condenser, the liquid refrigerant passes through an orifice or expansion valve and returns to the evaporator at a lowerpressure. In the evaporator, the cold gas accepts heat from the indoor air. Some ofthe heat comes from water vapor (humidity) as it condenses on the evaporator coil.

C In heat pumps, the role ofthe condenser and evaporatorreverses in the heating mode, but the names remain the same. 4-23EE-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 ofbeing 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 ofa vapor compressorcycle canbe expressed interms ofits 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 of52°F. The efficiency ofa 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 Barriersto CarnotCycle Equipment The use of an expansion valve or orifice in conventional air conditioners results in superheated vapor thatmust be returned toa liquid inthe condenser. A Carnot system wouldreplace the expansion device with aturbine or other mechanical expander that could generate power as the refrigerant expands. The power generated would thenbe used to power the compressor. The Carnot system also would use another compressor to raise the pressure ofthe refrigerant to its saturation pressure before itreaches the condenser. The added cost and maintenance associated with the extra compressor and power transmission equipment is prohibitive for residential applications. Furthermore, each piece ofreal equipment would contribute inefficiencies that would reduce the overall effectiveness ofthe system. 4.4.2.3 Irreversibilities As an ideal cycle, the Carnot cycle is comprised ofa set ofperfectly reversible processes. Real cycles, on the other hand, contain several imperfections that result in irreversible processes. These include:

dThe 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

# '* 2..0

# '6 4.4.2 Technically Feasible Efficiencies Technical feasibility implies that a system is not only theoretically possible, but is capable ofbeing 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 commerciallypractical. 

### 4.4.2.1 Carnot Efficiency Theideal efficiencyofavaporcompressorcycle canbeexpressed in terms ofits 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 conditioneris 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 of52°F. The efficiency ofa Carnot cycle operatingbetween 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 superheatedvaporthat mustbe returnedto a liquid in the condenser. A Carnot system wouldreplace the expansion device with a turbine or other mechanical expander that could generate poweras the refrigerantexpands. Thepower generated wouldthen be used to powerthe compressor. The Carnot system also would use another compressor to raise the pressure ofthe refrigerant to its saturation pressure before itreaches the condenser. The added cost and maintenance associated with the extra compressor and power transmission equipment is prohibitive for residential applications. Furthermore, each piece ofreal equipment would contribute inefficiencies that would reduce the overall effectiveness ofthe system. 

### 4.4.2.3 Irreversibilities As an ideal cycle, the Carnot cycle is comprised ofa set ofperfectly reversible processes. Real cycles, on the other hand, contain several imperfections that result in irreversible processes. These include:

d Thefonnula for detennining FirstLawefficiency in EER is 3.412 ·TAT JrT L )where TL and TJIare 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 ofheat to the environment atpoints 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 motorinefficiency and transfer ofheat fromthecompressor motorto 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 thetemperatures of20°F and 90°F (Table 4.15). Table 4.15 Sources of Irreversibilityin 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 Barriersto 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 smallerthe heat transfer surface, the higher the required temperature difference. The 4-25 

# ( 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 ofheat 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 • Compressormotorinefficiencyandtransferof heat from thecompressormotortothe refrigerant The 

### 1997 ASHRAE Handbook- Fundamentals (F-l.13) gives some relative values for sources ofirreversibilityin a 2-ton refrigeration system operatingbetween the temperatures of20°F and 90°F (Table 4.15). 

### Table 4.15 Sources ofIrreversibility in a Conventional Refrigerator Component Evaporator Suction Line Compressor Discharge Line Condenser Liquid Line 

### Fraction ofTotal 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. Forthis 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 smallerthe heattransfer surface, the highertherequired temperature difference. The 4-25

### EE-RM/STD-98-440

- 

### '2j impact ofthis constraint issignificant. Forexample, atemperature 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 ofa mechanical expander for the expansion device in conventional residential systems. However, such a substitution is technically feasible. * Insulation oflines and components can be highly effective, but would have only a slight impact on system efficiency. Cost isthe primary constraint, although a highly insulated system is technically feasible. * Clearances in the compressor can be reduced to lessen internal circulation between highand lowpressure zones. This istechnically feasible to apoint, 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 ofthe vapor-compression cycle efficiency. Fan motors are the most significant ofthese. Controls are another example. Parasitic requirements can account for up to 25 percent ofthe power consumed in a conventional residential air conditioner. 4.4.2.6 Practical Barriersto 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-9S-440

# "***'2.u~** impactofthis constraintis significant. Forexample,atemperaturedifferenceof 25°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 ofa mechanical expander for the expansion device in conventional residential systems. However, such a substitution is technically feasible. • Insulation oflines and components can be highly effective, but would have only a slight impact on system efficiency. Cost is the primaryconstraint, although a highly insulated system is technically feasible. • Clearances in the compressor can be reduced to lessen internal circulation between highandlowpressurezones. Thisistechnicallyfeasible to apoint,butincreasescost. 

### 4.4.2.5 Parasitics Electric power consumed by components other than the compressor are called parasitics. Equipmentparasitics consume system power and affect system EER and SEERratings, but are not accounted for in the calculation ofthe vapor-compression cycle efficiency. Fanmotors are the most significant ofthese. Controls are another example. Parasitic requirements can account for up to 25 percent ofthe 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 ofreducing 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 aresidential airconditioner 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 ofan expansion valve or orifice, condenser and evaporator size limitations, andprojected 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 by2007. According to theARI Unitary Directory(Feb

- Jul1998),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 ofequipment efficiency at aparticular 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 atypical U.S. home as a function ofthe cooling load. Although the SEER test procedure differs with the type ofsystem being rated, it favors equipment that performs most efficiently at an 82°F outdoor ambient temperature-much lower thanthe 95°F EERtestpoint. The SEER test also considers cyclic losses caused by equipment startup and shutdown. There isno directrelationship between EER and SEER across producttypes. However, there are strong correlations insystems with single capacity, single speed compressors andin 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 of20 SEER. However, given that we are not aware ofany 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 halfofall air conditioner condensers sold are paired with fancoils. The other half are paired with cased coils and therefore are not capable ofusing evaporator blower energy savings orfanmodulation to raise their SEERratings. Forthese 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

### ~~~

# 0'b Still, coil designs that are capable ofreducing 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 keptto a minimum while maintainingreasonable constraints on heat exchanger size, the technically feasible rating for a residential airconditioner 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 Giventhe conventional use ofan expansion valve or orifice, condenserand evaporator size limitations, andprojected improvements in compressorand heat exchangertechnology, the highest efficiency level expected to be commerciallypractical for a 3-ton system is on the order of 16 EER by2007. Accordingto theARl UnitaryDirectory (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 EERis a straightforwardmeasure ofequipmentefficiencyat aparticularsetoftest conditions, the federal efficiency standard is based on the Seasonal Energy Efficiency Rating, or SEERtest. The SEERtest attempts to quantify the energy consumed byan air conditioning system over an entire cooling season in a typical U.S. home as a function ofthe cooling load. Although the SEER test procedure differswith the type ofsystem being rated, it favors equipment that performs mostefficientlyat an 82°F outdoorambienttemperature-muchlowerthanthe 95°FEERtestpoint. The SEER test also considers cyclic losses caused by equipment startup and shutdown. Thereis nodirectrelationship betweenEERand SEERacross producttypes. However, there are strongcorrelationsin systems with single capacity, single speedcompressorsandin systemsthat 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 of20 SEER. However, given that we are not aware ofany 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 halfofall air conditioner condensers sold are paired with fancoils. The other half are paired with cased coils and therefore are not capable ofusing evaporatorblowerenergy savings orfan modulationto raise their SEERratings. Forthese casedcoil systems, the MaxTech selection would be substantially less than the 18 SEERidentified for fancoil systems. A closerestimate 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 byany member ofthe class. Still, ifmanufacturers are tobe able to sell cased coil equipment, the standard level must remain below 14.5 SEER. 4.4.4 Prospects for Near-Term Efficiency Gains Thecommercially practical efficiencies outlined above exceed the best efficiency oftoday's equipmentbyover 1EER (6 percent) and2 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.

\.~~~~ .-- / 

### OA40I960 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 60percent efficiency. Electrically commutated motors (ECMs) can boost thatto 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 

# *' 1.-

## O~ coil systems are not considered to be separate product classes, the Max Tech used must be the highest efficiencyattainable byanymemberofthe class. Still, ifmanufacturers 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 commerciallypractical efficienciesoutlinedaboveexceedthe best efficiencyoftoday's equipmentbyover 1EER( 6percent)and2 SEER(10percent). Thatimprovementrequiresadvances 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 efficiencyby2007.**~ ~**  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 ofCopeland 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 typically60percentefficiency. Electricallycommutatedmotors (ECMs) canboostthat to morethan 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° Frictionlossesrelated torefrigerant flow restrictions are difficult toreduce 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, nonear-term reductions inrefrigerant flowresistance 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, othernot-inkind cooling effects exist that are not subject to many factors that constrain the efficiency of conventional equipment. Fournot-in-kind technologies are absorption, evaporative,dessicantand thermoelectriccooling. None ofthese is compatible with the definition ofcentral air conditioners in NAECA', so are not considered further. 

# (: ~ 4.5 EMERGING TECHNOLOGIES The reverse engineering cost estimation methodology lends itselfto the analysis ofproducts that are currently available. However, assessing the effects ofemerging technologies thathave not found their way into the market requires additional analysis based on those results. Emerging technologies can be incorporated into a reverse engineering analysis iftheir effects on the cost and efficiency ofconventional 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. Knowingthe price ofthe new compressor, the cost ofthe 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 ofthe 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 ofwhich 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

## ~L 

# 0'1

Frictionlossesrelatedtorefrigerant flow restrictionsare difficulttoreducewithoutincreasing the flow diameters within the system. However, largertube sizes reduce heat transfer and impede oil return. Equipment must meet these types of size and operational constraints in order to be consideredcommerciallypractical.Therefore,nonear-termreductionsinrefrigerant flowresistance 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 slightlyhigherthan the 16 EER level we identified as the technological limit. 

### 4.4.5 Not-in-kind Cooling Technologies Although the vaporcompressioncycle dominates airconditioningtechnology, othernot-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 ofthese is compatible with the defmition ofcentral air conditioners in NAECN, so are not considered further. 

### 4.5 EMERGING TECHNOLOGIES Thereverse engineering cost estimationmethodology lends itselftothe analysis ofproducts that are currently available. However, assessing the effects ofemerging technologies that have not found their way into the market requires additional analysis based on those results. Emerging technologies canbe incorporated into a reverse engineering analysis iftheir effects onthe cost and efficiency ofconventional 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 compressorcouldboost systemefficiencyfrom 10 SEERto 11 SEER. Knowingtheprice ofthenew compressor, the cost ofthe 11 SEER system can be determined by adding the cost ofthe 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 ofthe 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 ofwhich is above 225,000 Btu perhour; and (E) is a heat pump ora cooling onlyunit. 4-29

### EE-RM/STD-98-440 ' 0Z° 

### This technique can assess the impacts ofmore 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 10SEER 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 ofthe potential impact ofemerging technologies on the conventional cost-efficiency relationship. When certainty is essential, the technique cannot substitute for testing or modeling. The emerging technology analysis can suggestthe likely effect on the reverse engineering cost-efficiency curve, but shouldnot 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 theirpotential impacts on the production costs ofthe conventional systems estimated using reverse engineering. 4.5.1.1 Variable Speed Motor Controls Because ofpractical limitations onequipment efficiency asmeasured byEER, 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 ofpermanent 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 ofhighermotor 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 inpower supply and digital control technologies will make VS systems more reliable and 4-30 A 

### EE-RM/STD-98-440 

# W**1o~** This technique can assess the impacts ofmore than one emerging technology at a time. Supposetestdata showthat substitutingan advancedheat exchangerinto a conventional systemcan havethe same effect, boosting efficiencyfrom 10 SEERto 11 SEER. Since the compressor andthe heat exchanger are independent, their cost impact on the system can be estimated as the product of both individual impacts onthe system. Components that are not perfectly independent would have a lesser combined effect. Although convenient and transparent, this technique is only an estimate ofthe potential impact ofemerging technologies on the conventional cost-efficiencyrelationship. When certainty is essential, the technique cannot substitute for testing or modeling. The emerging technology analysis cansuggestthe likelyeffectonthereverseengineeringcost-efficiencycurve,butshouldnot 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 theirpotential impacts on the production costs ofthe conventional systems estimated using reverse engineering. 4.5.1.1 Variable Speed Motor Controls Becauseof practicallimitationsonequipmentefficiencyasmeasuredbyEER,variable speed (VS) systems dominate the market over 14 SEER, and it is rare to fInd a system over l3 SEERthat does not incorporate a variable speed indoorblower. 

### 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 ofpermanent magnet DC motor, the electrically commutated motor, (ECM) is now the typical choice as an indoor fan motor in high SEERsystems. The SEERbenefIt is a combinationofhighermotorefficiency(80percentversus 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 inpowersupplyand digital control technologies will make VS systems morereliable and 4-30

### EE-RM/STD-98-440 : 

### 20 < 

### less costly. These trends will tend to drive the use ofvariable speed systems in lower SEER levels and will lower the cost ofsystems over 14 SEER. Manufacturers can choose to give up some ofthe 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. Ifnot properly filtered, the noise can affect sensitive electronics elsewhere in thepower grid and can generate radio interference. Stricter filtering requirements would add to the cost ofVS equipment and may make them less cost effective. WhileVS fanmotors are certainlyviable, the largest SEER impact comes from incorporating VS technology into compressors. Thecurrent SEERtest does not offerVS systemsmuch ofabenefit over two-capacity equipment, so existing VS compressor controls are generally not cost effective. However, developments inswitched reluctance motors (SRMs) andECMs for hermetic compressors could ultimatelyoffer a true VS compressor atonly a slightpremium overa single-speed compressor equipment. 4.5.1.2 Advanced Compressors Compressor manufacturers are pursuing advanced designs that can raise EER and SEER ratings. Most ofthese efforts are still confidential, but manufacturers have announced twoproducts that show particular potential. Both the Copeland Modulated ScrollM and the Bristol Twin-Single, orTSTM, reciprocating compressor will offer original equipment manufacturers (OEMs) the ability toproduce a simple two-capacity system that our analysis suggests will be cost effective inthe range ofexisting modulating systems. The TS T 

### M deactivates one ofitstwo pistons when running inreverse. ATSTM system requires additional compressor motor controls and a two-speed indoor blower motor inverter. York began offering TSM systems in an upgraded version ofits Stellar product line in the summer of 1999. The other advances in compressor technology come from Copeland who introduced its Modulated Scroll T 

### technology in early 2000. The Modulated ScrollTM also functions as a twocapacity compressor, and OEMs would use it forthe same reasons. Rather than reversing direction, the Modulating ScrollT bypasses refrigerant internally toachieve a lowercapacity 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.RMjSTD-98-440 

# % 2.**D~** less costly. These trends will tend to drive the use ofvariable speed systems in lower SEER levels andwill lowerthe cost ofsystems over 14 SEER. Manufacturers can chooseto giveup some ofthe 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. Ifnot properly filtered, thenoise canaffect sensitiveelectronics elsewhere in the powergrid and cangenerateradio interference. Stricter filtering requirements would add to the cost ofVS equipment and maymake them less cost effective. WhileVSfanmotorsare certainlyviable,thelargestSEERimpactcomesfromincorporating VS technologyintocompressors. Thecurrent SEERtestdoes notofferVS systemsmuchofabenefit over two-capacity equipment, so existing VS compressor controls are generally not cost effective. However,developmentsinswitchedreluctancemotors (SRMs) andECMsforhermeticcompressors couldultimatelyoffera true VScompressoratonlya slightpremiumovera single-speedcompressor equipment. 

### 4.5.1.2 Advanced Compressors Compressor manufacturers are pursuing advanced designs that can raise EER and SEER ratings. Mostofthese efforts are still confidential,butmanufacturers have announcedtwoproducts that showparticularpotential. Boththe Copeland Modulated ScrollTM andthe Bristol Twin-Single, orTSTM, reciprocating compressorwill offeroriginal equipment manufacturers (OEMs) the ability toproduce a simpletwo-capacitysystemthat ouranalysis suggests will becosteffective inthe range ofexisting modulating systems. TheTSTM deactivatesoneof itstwopistonswhenrunningin reverse. A TSTM systemrequires additional compressor motor controls and a two-speed indoor blower motor inverter. York began offering TSTM systems in anupgraded version ofits 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 twocapacitycompressor, and OEMs would use it for the same reasons. Ratherthan reversing direction, theModulatingScrollTMbypassesrefrigerantinternallyto achieve a lowercapacityata 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 overreciprocating compressors. 4-31

### EE-RM/STD-98-440 D 2>D 

# (€"' 

# ,,,~:t PModulating compressors perform best at low capacity. At high capacity, theyare 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 tubeplate fin (RTPF) heatexchanger, the microchannel has a rectangular cross-section containing several small channels through which refrigerant passes. Finspass between the tubes and arebrazed to thetubes. All components are aluminum. The resulting microchannel coil transfers more heat per unit offace area than does an RTPF coil ofcomparable 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 toproduce thana conventional RTPF coil, the microchannel heat exchanger offers particular opportunities to reduce the size and weight ofthe heat exchanger. Those advantages ledtothe rapid and almost total transition ofthe 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 torefrigerant slugging. Areduction inrefrigerant charge can alsobe attractive as theprice ofHCFC22 rises and more expensive alternative refrigerants take its place. Even after several years of dominance in the automobile market, the microchannel heat exchanger hasnot penetrated the building airconditioning marketswhere size and weight constraints are not as important. The cost advantages ofreducing the size and weight ofthe 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 ofthe technology in evaporators and in heat pump condensers. Some manufacturers may decide not to adopt the new technology ifthey cannot offer it in all oftheir products. Second, there are concerns whether residential heat exchangers are proven to perform well under wide variations in ambient temperatures given thattheyareconsiderably 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 ofthe difficulty ofsuccessfully brazing aluminum in the field. 4-32 EE-RM/STD-98-440 

# 1f

# z0'6 Modulating compressorsperfonnbest at lowcapacity. Athigh capacity, theyare likelyto be slightly less efficient than their single capacity counterparts. To fully utilize the potential offull 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 conventionalroundtubeplate fm (RTPF)heatexchanger, the microchannel

, has a rectangular cross-section containing several small channels through which refrigerant passes. Finspassbetweenthetubes andarebrazedto the tubes. All componentsare aluminum. The resulting microchannel coil transfers more heat per unit offace area than does an RTPF coil ofcomparable 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 ofthe same face area. Because the microchannel fm arrangement prevents natural condensate drainage, heat pump and evaporator coil applications are not forthcoming. Althoughthe microchannel heatexchangercosts more to producethan aconventional RTPF coil, the microchannel heat exchanger offers particular opportunities to reduce the size and weight oftheheatexchanger. Thoseadvantages led to therapidand almosttotal transitionofthe automobile air conditioner market to microchannel technology. Microchannel heat exchangers also offer significant reductions inrefrigerant charge,whichsuggeststhattheyreducecompressorfailures due torefrigerant slugging. Areduction in refrigerant charge can alsobe attractive as thepriceofHCFC22 rises and more expensive alternative refrigerants take its place. Even after several years ofdominance in the automobile market, the microchannel heat exchangerhasnotpenetratedthebuildingairconditioningmarketswhere sizeandweightconstraints are not as important. The cost advantages ofreducing the size and weight ofthe condenser orthe 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 constructionmakes condensateremoval muchmore challenging. That poses a serious barrierto the adoption ofthe technology in evaporators and in heat pump condensers. Some manufacturers may decide not to adopt the new technology ifthey cannot offerit in all oftheirproducts. Second, there are concerns whetherresidential heat exchangers are provento perfonn well underwide variations inambienttemperaturesgiventhattheyareconsiderablylargerthanautomobileheatexchangersand 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 notbe able to repair coil leaks effectively because ofthe difficulty ofsuccessfully 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, butwithout a clear cost advantage over conventional coils manufacturers havehad little incentive to make determined efforts to address them. Recentactivity indicates the attitude may be changing, however. Several major OEMs have performed limited testing ofmicrochannel heat exchangers in residential equipment. One small company, Peregrine Industries, offers aresidential condenser line based on microchannel technology for sale in coastal markets8



### . Thermal Components, a supplierofheatexchangers, including microchannel, expects several airconditioner OEMs to produce air conditioners utilizing microchannel condensers beginning later in 2000 and extending into2001.9 OEMs maybe 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 ofmicrochannel technology in residential air conditioner applications is difficult to predict with certainty. There is unresolved intellectual property litigation surrounding microchannel technology. It ispossible that a few companies oreven asinglecompany could be granted exclusive rights to sell and license microchannel heat exchangers in the United States. 4.5.2 Potential Cost Impacts ofEmerging Technologies Various OEMs and suppliers provided us with guidance ofhow 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 ofa system utilizing a single emerging technology at each efficiency level usingthe 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 ofthe potential ofemerging technologies to reduce system cost, we have not evaluated prototype designs to verify the accuracy ofour estimates, nor have we asked OEMs or suppliers to verify our assumptions.

4-33 

# (: EE-RM/STD-98-440 

# ***:2~'6** With the possible exception of condensate removal, none of these barriers seems insurmountable,butwithout a clearcost advantage overconventional coils manufacturershavehad littleincentivetomakedeterminedeffortsto addressthem. Recentactivityindicatestheattitudemay be changing, however. Several major OEMs have performed limited testing ofmicrochannel 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 supplierofheatexchangers, includingmicrochannel, expects several airconditioner OEMs to produce air conditioners utilizing microchannel condensers beginning later in 2000 and extending into 2001. 9 OEMs maybe fmding that microchannel heat exchangers offeradvantages 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 ofmicrochannel technology in residential airconditioner applications is difficult to predict with certainty. There is unresolved intellectual property litigation surrounding microchannel technology. Itispossiblethat a few companiesoreven a singlecompanycouldbe granted exclusiverightsto sell and license microchannel heat exchangers in the United States. 

### 4.5.2 Potential Cost Impacts ofEmerging Technologies Various OEMs and suppliers provided us with guidance ofhow 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 ofa system utilizing a single emerging technologyateach efficiencylevel usingthe cost data generatedbythereverseengineeringanalysis. Those guidelines are presented in Table 4.16. Since we intend to present only a roughly accurate projection ofthe potential ofemerging technologies to reduce system cost, we have not evaluated prototype designs to verify the accuracy ofour 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 Emerging 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 ofthe 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 ofthe modified 13 SEER system 

### Incases where theemerging technology would obviouslyraise the costofthe system, wedid 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 

# if'**2D~** Table 4.16 Kev Assumptions used to Derive EmenlngTechno 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 +I0%; outdoorunit 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 ofthe 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 ofthe 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



### Incaseswherethe emergingtechnologywouldobviously raisethe costofthe system,wedid 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 Costv3.1 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 anew technology only ifit promises to lower the costof the system relative toconventional technologies. Therefore, ifatechnology tends to increase the cost ofa system, the amount ofincrease is not reported. Table 4.17 Potential Impact ofEmerging Technologies on the Production Cost of3-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 ofthe system. At 14 SEER and 15 SEER, however, advanced modulating compressors and microchannel heatexchangers both have the potential toeliminate the need forcostly variable speed fan motor controls as well as reducing cabinet size and refrigerant charge. Table 4.18 provides an assessment ofthe 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 ismost favorable to it. Thismeans 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 ofresistence to thebroad adoption ofanew technology given the other viable alternatives.

4-35 ( 

### EE-RM/STD-98-440 

# "* 1....

# O<"~ captured in the CAC Costv3.1 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 onlyifitpromises to lowerthe cost of the systemrelativetoconventionaltechnologies. Therefore, ifatechnologytendstoincreasethecost ofa system, the amount ofincrease is not reported. 

### Table 4.17 Potential Impact ofEmerging Technologies on the Production Cost of3-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 emergingtechnologyidentified promises a clearbenefit in equipment rated lower than 14 SEER. The incremental costs of applying the technology exceed the savings achieved in the balance ofthe system. At 14 SEER and 15 SEER, however, advanced modulating compressors and microchannelheatexchangersbothhavethepotential to eliminatetheneed for costlyvariable speed fan motor controls as well as reducing cabinet size and refrigerant charge. Table 4.18 provides an assessment ofthe likelihood that the product will be the dominant design choice in baseline equipment at the time a new standard becomes effective (2006) under a standardlevel that is most favorable to it. Thismeans that a product will bepractical and functional at price point acceptable for mass market products and will be the most attractive technology employed.Thisassessmentreflectsthe level ofresistencetothebroadadoptionofanewtechnology given the otherviable alternatives.

4-35

### EE-RM/STD-98-440 ° © 

### Table 4.18 Estimated Likelihood of Commercial Dominance in Baseline Equipment by 2006 Under Various StandardLevels 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 ofcontrols and without requiring an indoor blower, has the highest potential ofbeing 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 stilllikelychoose a modulating technology option, although itisunclear 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 abaseline system since a system utilizing an advanced modulating compressor or microchannel heat exchanger wouldrequire neitherofthese 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 ofemerging technologies that would be used in practice. Such a system would be adqal-capacity microchannel heat exchanger system designed primarily for low-capacity operation, incorporating amodulating compressor and its associated controls. The low-capacity design reduces coil and cabinet sizes and costs, but does notreduce the size ofthe compressor since compressor capacity is established atthe high capacity. 4-36 I 

### EE-RM/STO-98-440

# *;(0

# ~ Table 4.18 Estimated Likelihood ofCommercial Dominance in Baseline Equipment by 2006 Under Various Standard Levels 10 SEER 11 SEER 12 SEER 13 SEER VS Compressormotors 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 ofcontrols and without requiring an indoor blower, has the highest potential ofbeing used in baseline equipment. However, along with other potential drawbacks, not being applicable to indoor coil and heatpump applications limits its potential use in cooling-only condensers. As Table 4.19 shows, for premium equipment with efficiency ratings higher than the baseline,manufacturerswill still likelychooseamodulatingtechnologyoption, althoughitisunclear whether they would decide to do so rather than offer microchannel heat exchangers.

Table 4.19 Estimated Likelihood ofCommercial 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 notbeneficial in abaseline system since a system utilizing anadvancedmodulatingcompressorormicrochannel heat exchangerwouldrequireneitherofthese 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 ofemerging technologies that wouldbe used in practice. Such a system would be a d4al-capacitymicrochannel 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 notreduce the size ofthe compressor since compressor capacityis established atthe 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 ofthe 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 ofthe niche products identified (Section 4.6.2.2). Cabinet size isa majorconstraint to improving niche product efficiency, and all ofthe 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 oftheir condensate removal limitations. 4.5.4 Issues Associated with ProprietaryTechnologies Where a company holds exclusive rightsto produce and sell an emerging technology, anew standard that favors thattechnology canpotentially reduce competition. At this point, however, the Department believes that enough viable competing technologies exist at each efficiency level to encourage vigorous competition at anypotential standard level. TheManufacturing 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 arejustified 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 orpackaged. This section examines whether those four classes arejustified from a technical standpoint. 4.6.1.1 Heat Pump versus Cooling-only In addition to the features offered bycooling-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

# ~ 2-

# O~ Since both technologies remove the need for variable speed controls or a second or dual compressor,thecombination ofthe twotechnologiesproduces amore costlysystemthan doesusing 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 ofEmerging Technologies to Benefit Niche Products Emerging technologies can have an even more significant impact on many ofthe niche products identified (Section 4.6.2.2). Cabinet size is a majorconstraint to improving niche product efficiency, and all ofthe 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 oftheir condensate removal limitations. 

### 4.5.4 Issues Associated with Proprietary Technologies Where a companyholds exclusiverights to produce and sell an emerging technology, a new standardthat favors that technology can potentiallyreduce competition. At this point, however, the Department believes that enough viable competing technologies exist at each efficiency level to encouragevigorouscompetition atanypotential standardlevel. The ManufacturingImpactAnalysis (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 arejustified 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 orpackaged. This section examines whether those four classes arejustified from a technical standpoint. 

### 4.6.1.1 Heat Pump versus Cooling-only In additionto the features offeredbycooling-only air conditioners,heatpumpsofferelectric 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 forpackaged systems also offer utilitythat 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 maynot require a lower efficiency standard. First, split systems incurrefrigerant 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 atypical packaged systems from attaining the same minimum efficiency as split systems.' Boosting the efficiency ofpackaged 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 ofraising packaged system efficiency by 0.3 SEER is expected to be roughly 3percent. This added cost isnot trivial, but we would not expect it to alter the distribution ofsales in the marketplace. In fact, as Table 4.20 shows, most manufacturers do not take advantage ofthe lower standard currently. They prefer instead to incur a bit more cost to align their marketing approach with that oftheir split systems.

fThere are niche packaged products that do face special size constraints which are considered separately. 

### 4-38 

# (: 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 therelationship 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 offerutility 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 compensatepackaged equipment for efficiency losses due to heat transfer between the evaporator and condenser compartments. There are two reasons why packaged equipment maynot 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 constraintprevents a typical packaged systems from attainingthe same minimum efficiencyas split systems.fBoosting the efficiency ofpackaged systems by0.3 SEER to match that ofsplit systems is trivial from a design standpoint. Based on the reverse engineering analysis, the costs ofraising 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 alterthe distribution ofsales in the marketplace. In fact, as Table 4.20 shows, most manufacturers do not take advantage ofthe lower standard currently. They prefer instead to incur a bit more cost to align their marketing approach with that oftheir 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 UnitaryDirectory,February-July 1998

Athigher efficiency levels, packaged systems possess anadvantage over split systems. Since they are usually roof-mounted, they typically face less stringent footprint and height constraints. Although weight constraints canbe important, packaged systems can attain higher EER ratings than split systems by using larger evaporator and condenser coils. No manufacturer has expressed a strong desireeither tocontinue orto 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 CreatingAdditional Classes Some manufacturers have expressed adesire 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 inmid-capacity systems. This situation couldjustify the creation ofnew product classes based on product capacity and allow the Department to impose a less aggressive standard on small and large capacity equipment. According tomanufacturers, low capacity equipmenthas difficulty meeting higher standards because 1)efficient compressors are more costlyto produce insmall 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 ofthe split air 4-39 

## ( 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

Athigherefficiencylevels,packaged systemspossessan advantageoversplit systems. Since they are usually roof-mounted, they typically face less stringent footprint and height constraints. Althoughweightconstraints canbeimportant, packaged systems can attainhigherEERratings than split systems by using larger evaporator and condenser coils. Nomanufacturerhas expresseda strongdesireeitherto continue orto eliminatethe 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 Somemanufacturers have expressed a desire for the Departmentto create classes otherthan 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 above48,000BTUIh) than in mid-capacity systems. This situation couldjustifythe creation ofnew product classes based on product capacity and allow the Department to impose a less aggressive standard on small and large capacity equipment. Accordingtomanufacturers, lowcapacityequipmenthasdifficultymeetinghigherstandards because 1) efficientcompressorsare more costlyto producein small capacities, and2) 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 ofthe 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



### . 

## 5Figure 4.4 Distribution ofSplit Air ConditionerModels by Capacity and Efficiency Weak demand is another reason system manufacturers do not offer low capacity systems in higher efficiencies. This isa combination oftwo market effects. First, asTable 4.21 illustrates, fewer consumers purchase low capacity equipment ingeneral. 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 ofefficient 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 ofmodulating systems.

4-40 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 ofSplit Air Conditioner Models by Capacity and Efficiency Weakdemand is another reason systemmanufacturers do not offer low capacity systems in higherefficiencies. This is acombinationoftwo marketeffects. First, as Table4.21 illustrates, fewer consumerspurchaselowcapacityequipmentin general. Second, since low capacity systemsuseless 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 ofefficient components in smaller sizes and encourage system manufacturers to incorporate them. Higher standards would also encourage manufacturers to boost SEER byreducing cyclic losses and expanding their offering ofmodulating 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 3to 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 ofthe Census MA-35M-96 High capacity systems doface cabinet sizeconstraints insingle 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 playarole in easing cabinet constraints (Section 4.6.2.4.3). Since the absence ofproducts atall efficiency levels results from a lack ofdemand for those products and not from any strict physical limitation, the Department finds nocompelling technical justification fordefining new product classes based on capacity. 4-41 EE-RM/STD-98-440 

# \t**1.D~·** Table4.21 Shipments ofResidential 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 ofthe Census MA-35M-96 Highcapacitysystemsdo face cabinetsizeconstraintsinsinglecapacitysystems. Modulating systems do not face the same constraints, so weak demand is probably responsible for the lack of highcapacity,high efficiencyproducts. Emergingtechnologiescanalsoplayarole in easingcabinet constraints (Section 4.6.2.4.3). Sincethe absence ofproducts at all efficiencylevels results from a lack ofdemand forthose products and not from any strict physical limitation, the Department finds no compellingtechnical 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 ofcertain niche products under higher efficiency standards. Table 4.22 provides some key information on these products. Table 4.22 Characteristics ofNiche 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 ofthe residential unitary market. As such,the efficiency standard established forthese 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 facejustify 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 1percent ofthe domestic market. They consist ofa 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 oftenbe installed for less cost andin less space than can the equivalent ducting. This makes themparticularly attractive fortheretrofit market. They also offer the possibility oftrue 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

# ~''LD~ 4.6.2.2 Classes for Niche Products Several manufacturers have asked the Department to establish new classes to protect the viabilityofcertain niche products underhigherefficiency standards. Table 4.22 provides some key information on these products. 

### Table 4.22 Characteristics ofNiche 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 ofthe residential unitarymarket. 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 facejustify 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 buthold only about 1percent ofthe domestic market. They consist ofa 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 applicationsbecausetubingandelectrical service can oftenbe installedfor less costandinless space than canthe equivalentducting. This makes themparticularlyattractive fortheretrofitmarket. They also offerthe possibilityoftrue individual temperature control. Since consumers may considerthe 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 aspossible. This cabinet size constraint combined with efficiencylosses due to heattransfer 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 formanyretrofit situations where consumers' space is a premium, and where installing aconventional split system iscostprohibitive. 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 tuberows and larger capacity, but offers the associated benefit ofenhanced humidity removal. The inefficient fancoil unitin high velocitysystems requires them topair withhigh 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 unitsoutsidethe conditioned space, penalizing efficiency in the field. However, the manufacturers ofhigh velocity systems claim that the ducts are tight and durable, and that superior dehumidification will cause occupants toraise their thermostat settings. Both would lower energy consumption compared to conventional systems ofequal 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 ofthe condenser andevaporator compartments takes air inand exhausts itthrough thesame face)combined with the attempt to minimize size constrains the ability ofthese units to attain higher SEERs. 4.6.2.2.4 Through-the-wall Condenser Through-the-wall condensers were popularin new multistory residential construction in the 1960s and 1970s. Majormanufacturers 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**u..~** 

## 2.**()~** 

### EE-RM/STD-98-440 1\' compactas possible. Thiscabinet sizeconstraintcombinedwithefficiencylossesdue'toheattransfer between refrigerant lines puts pressure on equipment efficiency. 4.6.2.2.2 High Velocity, Small Duct High velocity, small duct fancoil units target primarilythe retrofit market. According to the manufacturers, the small, easy to install ducts, non-intrusive discharges, and silent operationmake these units attractive for manyretrofit situations where consumers' space is a premium, and where installinga conventional split systemis costprohibitive. Architectural and aesthetic advantagesalso make this a viable product for high-end custom homes. Highvelocitysystemsare designed to dischargeconditionedairrapidlythrough roundducts 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. Thisincreasesthe costthrough addedtuberows and largercapacity,butoffers the associated benefit ofenhanced humidityremoval. Theinefficientfancoil unitinhigh velocitysystemsrequiresthemtopairwithhighefficiency 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. Contractorstypicallyinstall fancoil unitsoutsidethe conditionedspace,penalizingefficiency in the field. However, the manufacturers ofhigh 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 ofequal SEERratings. 4.6.2.2.3 Vertical Packaged, Wall Mounted Manufacturers design these products for installation in mobile ormodular structures, which are almost exclusively commercial applications. However, manufacturers may offer them with single-phase motors, placingthem underNAECA. The difficult air flow configuration (each ofthe condenserandevaporatorcompartmentstakes airin andexhaustsitthroughthe sameface) combined with the attempt to minimize size constrains the ability ofthese units to attain higher SEERs. 4.6.2.2.4 Through-the-wall Condenser Through-the-wall condensers werepopularinnew multistoryresidential constructioninthe 1960s and 1970s. Majormanufacturers have since abandonedthe 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 fitwithinthe same wall opening asthe original units, even though original units maybehalfas efficient as thenew ones. Residents orbuilding 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, anew standard that increases cabinet size orresults in a significant price increase could be counterproductive, preventing the turnover ofold, inefficient equipment. 4.6.2.2.4 Through-the-wall Packaged Through-the-wall packaged equipment is similar to packaged terminal air conditioners (PTACs),butaretypically installed in acloset and ductedto theinterior space. Likethrough-the-wall condensing units, they serveprimarily multi-family high rise applications. However, unlike today's through-the-wall condensing units,through-the-wall packaged units aretargetedto new construction without prior wall opening constraints. 4.6.2.3 Description ofNiche ProductConstraints 4.6.2.3.1 Small Cabinet Size Cabinet size constrains efficiency primarily by restricting coil face area and coil configuration. As face areadecreases, thevelocity ofthemoving air increases.This slightlyimproves the heat transfer between the air and the coil, but it also increases the pressure drop across the coil and increases the power consumption ofthe blower or fan. As face area shrinks, the increased fan powernegates anybenefits from improved heattransfer and lowersthe efficiency ofthe system.The face area limitation is particularly important in the condenser where the similarity between ambient airtemperature andrefrigerant temperature requires higher airvolumes to transferthe same amount of heat. In the evaporator, the temptation to increase coil face area to reduce blower power consumption andincrease cycle efficiency is somewhatcounteracted bytheneed toprovide 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 ofthe 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 airthrough only one face, or to take in and exhaust airthrough the same face can reduce efficiency by increasing fan powerconsumption. Some short-circuiting ofexhaust airintotheintake mayalso occur. Indoorunits 4-44 EE-RM/STD-98-440 

# *'2-**[)~** Newthrough-the-wall condensersmust fit withinthe samewall openingasthe originalunits, eventhough originalunits maybehalfas efficientas the new ones. Residents orbuildingowners 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, anewstandardthatincreases cabinetsizeorresultsina significantpriceincreasecould be counterproductive, preventing the turnover ofold, inefficient equipment. 

### 4.6.2.2.4 Through-the-wall Packaged Through-the-wall packaged equipment is similar to packaged terminal air conditioners (PTACs),butaretypicallyinstalledinaclosetandductedto the interiorspace.Likethrough-the-wall condensingunits, they serveprimarilymulti-familyhighrise applications. However, unlike today's through-the-wallcondensingunits,through-the-wallpackagedunitsaretargetedtonewconstruction without prior wall opening constraints. 

### 4.6.2.3 Description ofNiche Product Constraints 4.6.2.3.1 Small Cabinet Size Cabinet size constrains efficiency primarily by restnctmg coil face area and coil configuration. Asface areadecreases, thevelocityofthemovingairincreases. This slightlyimproves the heat transfer between the air and the coil, but it also increases the pressure drop across the coil and increases the power consumption ofthe blower or fan. As face area shrinks, the increased fan powernegates anybenefits from improvedheattransferand lowersthe efficiencyofthe system. The face area limitationis particularly important in the condenserwhere the similaritybetweenambient airtemperature andrefrigeranttemperature requires higher airvolumes to transferthe same amount of heat. In the evaporator, the temptation to increase coil face area to reduce blower power consumptionandincreasecycleefficiencyis somewhatcounteractedbytheneedtoprovideadequate dehumidification. A crampedcabinetmayalso make it difficult, orimpossible, to install optimal components ortechnical upgrades, like controls, that could improve system efficiency. 

### 4.6.2.3.2 Poor Airflow Configuration The orientation ofair intake and discharge and the internal path ofthe airflow can affect system efficiency. Most split system outdoor units take in air horizontally around their entire perimeteranddischarge it verticallyupward. Restrictingthe outdoorunit to take in airthrough only one face, orto take in and exhaust airthrough the same face can reduce efficiencyby increasing fan powerconsumption. Some short-circuitingofexhaustairintothe intakemayalsooccur. Indoorunits 4-44

### EE-RM/STD-98-440 ' '" typically take in air horizontally near the bottom ofthe 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 blowerpower 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 ofheat 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 themmaybe penalized through higherblowerpowerconsumption thanis assumed inthe 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 EvaporatorDischarge Temperature Producing alowerthannormal airtemperature from theevaporatorrequires either moretube rows or a slower face velocity. Under cabinet size constraints, these improvements may not be possible. Furthermore, the additional heat transferincreases therequired capacity ofthe condensing unit. 4.6.2.4 Remedies for Niche Product Constraints Mostniche manufacturers, although they serve specialized markets, still attempt tokeep costs at a minimum. Since many niche products serve manufactured and multifamily housing markets, specifiers and consumers maybe especially price-conscious. Furthermore, because ofthe 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 totheir competitors would allow themto introduce more expensive, butmore efficient, design options without losing market share or reducing profit margins. Several ofthese 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 orsize constraints, butthesemodifications wouldraise 4-45 EE-RM/STD-98-440

# ~(2;:)~ typically take in air horizontally near the bottom ofthe 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 blowerpowerconsumption and may also result in uneven airflow overthe coil, resulting in only partial coil use. Packaged units may suffer from the same airflow related problems, with the additional possibility ofheat 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 exceedthemmaybepenalizedthroughhigherblowerpowerconsumptionthanis assumedinthetest 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 Producingalowerthannormal airtemperature from the evaporatorrequires eithermoretube rows or a slower face velocity. Under cabinet size constraints, these improvements may not be possible. Furthermore, the additional heattransferincreases the required capacityofthe condensing unit. 

### 4.6.2.4 Remedies for Niche Product Constraints Mostnichemanufacturers, althoughtheyserve specializedmarkets, still attempttokeepcosts at a minimum. Since many niche products serve manufactured and multifamily housing markets, specifiers and consumers may be especiallyprice-conscious. Furthermore, because ofthe 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 applyevenlytotheircompetitorswould allowthemto introducemore expensive,butmoreefficient, design options without losing market share or reducing profit margins. Several ofthese 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 componentswithoutexceedingperformance orsizeconstraints,butthesemodificationswouldraise 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 ofmarket 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 itincreases cabinet sizes to attain higher efficiencies, but no clear thresholds exist above which itsproducts cease to be commercially viable. Without thresholds, the Manufacturer Impact Analysis is the appropriate analysis for determining whether a standard level threatens the viability ofthe product. 4.6.2.4.3 Use of Emerging Technologies Emerging technologies, especiallyadvanced 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 andpackaged units. It would not included high-velocity systems or ductless split systems since those systems are constrained by the size ofthe evaporator, which is notcurrently 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 ofhigh 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 orothervariable speed or adjustable components couldraise their SEERratings byallowing them to test under a set ofconditions more closely representative ofconventional equipment while still allowing proper installation in the field. 4.6.2.4.5 Redefinition Verticalpackaged, wallmounted equipment currently falls underthe definition ofresidential products (singlephase, less than 65,000 BTU/h), butis intended forcommercial application. TheAir 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

# *' '2**D~** production costs. Depending on the cross-price elasticity with competing products, any increase in price could result in a substantial loss ofmarket 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,butno clearthresholds existabove which its products cease to be commerciallyviable. Without thresholds, the Manufacturer Impact Analysis is the appropriate analysis for determining whether a standard level threatens the viability ofthe product. 

### 4.6.2.4.3 Use ofEmerging Technologies Emergingtechnologies,especiallyadvancedmodulatingcompressorsandmicrochannelheat 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 orductless split systems since those systems are constrained bythe size ofthe evaporator, whichis notcurrentlybeingconsideredas a viable application formicrochannel technologybecause 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 thatdifferfrom thetest conditions. Forexample, manufacturers ofhigh 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 blowersorothervariable speed oradjustable components couldraise their SEERratingsbyallowing them to test undera set ofconditions more closely representative ofconventional equipment while still allowing proper installation in the field. 

### 4.6.2.4.5 Redefinition Verticalpackaged,wallmountedequipmentcurrentlyfalls underthedefinitionofresidential products (singlephase,lessthan65,000BTUIh),butis intendedforcommercial application. TheAir 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 ofniche 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 forthe 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 eachofthe candidate products utilizing bothconventional and emerging technologies. Discussions with manufacturers ofthese products and engineering and marketingjudgment are the basis forthepreliminary conclusions. Inthiscase, "viable" meanstechnically feasible,commercially practical, and able to retain its own unique characteristics and utility. For example, consumers purchase high velocity systems fortheir small diameter, easy to install ducts and compact airhandler. As the airhandler 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 ifthe price difference between the two products changes even slightly. This will cause consumers to shift to the substitute product, andcould eventually eliminate the subjectproduct from themarket. A price differential can increase when anew efficiency standard results in a more severe price increasein 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 

# *"L 01; 4.6.2.5 Justification for New Classes Based on Niche Products One type ofniche 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 achievableforeachof the candidateproductsutilizingbothconventional andemergingtechnologies. Discussions with manufacturers ofthese products and engineering and marketingjudgment are the basisforthepreliminaryconclusions.

### Inthiscase, ''viable''meanstechnicallyfeasible, commercially practical, and able to retain its own unique characteristics and utility. For example, consumers purchasehighvelocitysystems fortheirsmalldiameter,easyto installducts andcompactaiihandler. As the airhandlergets largerand duct branches get more numerous, the product eventually loses its uniqueness comparedto conventional systems and becomes increasinglyunviable as aproductwith 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 ifthe price dIfference betweenthe twoproducts changes even slightly. This will cause consumersto shift to the substitute product, andcouldeventuallyeliminate the subjectproduct from the market. A pricedifferential can increasewhenanewefficiencystandardresults in amore severepriceincreaseinthe subjectproduct 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 thatInfluence 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 isnot 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 ofless efficient equipment would increase national energy consumption. 4-48 

# C EE-RM/STO-98_440

# *'2**D~** Table 4.23 Assessment ofFactors 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 productsin applications traditionally servedbyequipmentthat have higherefficiencyrequirements. For example, there is nothing that would physically prevent a contractor from installing a through the wall condensingunit on a pad. Thatis not commonpractice today since both conventional split condensers and through-the-wall condensers must meet the same efficiency requirements and conventional splitcondensersare less costly. However, ifthrough-the-wall condenserswere 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 ofless 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 ishigh (about twice) that ofconventional 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 70percent, respectively. For three-ton equipment, that equates to a $200 and $430 difference in manufacturer price, respectively, forthe two systems compared to their conventional counterparts. Tomaintain those price differences, standards forthrough-the-wall systems would have to stay within one SEER point ofthe standards set for pad or roofmounted 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 roofmounted applications. 4.7 ALTERNATIVE REFRIGERANTS Effective January 1,2010, theEnvironmental Protection Agency willprohibit the sale ofnew 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 aconsensus is settling ontwo chlorine-free HFC alternatives: HFC-407C (407C) andHFC-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 makeita suitable drop-inreplacement for R-22. However, 407C lowers the efficiency ofunmodified R-22 systems by5-10 percent under the SEER test conditions. Likewise, anew 407C system islikely tobe more costly than an R-22 system atthe same efficiency level. If407C becomes the refrigerant ofchoice for new equipment, this will increase the cost ofattaining a given efficiency compared to HCFC-22. Lennox has announced that they will introduce a line oflight commercial products based on 407C early in 2000. 410A is an mixture ofHFC-32 and -125. Itoperates at substantially higher pressure (50-70 percent) than does R-22 and requires a soluble polyol ester lubricant, so it is not suitable asadrop-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 tubewalls. Since41 OA has a higher cooling capacity thanR-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 3percent less efficient than R-22.'0 

### This would exacerbate utilities' peak loading concerns. Furthermore, manufacturers will bear a 4-49 

# ( EE-RM/STO-98-440

## "*.~**O~**

Thepricedifferentialbetweenductlessminisplitsandhighvelocityequipmentishigh (about twice) that ofconventional equipment at the same efficiency and capacity. Therefore, the concern about creating attractive loopholes is low for these products. Similarly, ifproperly 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 30percent and 70percent,respectively. Forthree-ton equipment, thatequates to a $200 and $430 difference in manufacturerprice, respectively, for the two systems compared to theirconventionalcounterparts. Tomaintainthosepricedifferences, standards for through-the-wall systems would have to stay within one SEER point ofthe standards set for pad or roofmounted systems in orderto reduce the likelihoodthat the market will exploitthe difference and increasethe demand for through-the-wall equipment in pad orroofmounted applications. 

### 4.7 ALTERNATNE REFRIGERANTS EffectiveJanuary 1,20I0,theEnvironmentalProtectionAgencywillprohibitthe saleof 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, buta consensusis settlingontwochlorine-freeHFCalternatives: HFC-407C(407C)andHFC-41OA (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 characteristicsmakeita suitabledrop-inreplacementforR-22. However,407Clowerstheefficiency ofunmodifiedR-22 systemsby5-10percentunderthe SEERtestconditions. Likewise, a new407C systemis likelytobemorecostlythananR-22 systematthe sameefficiencylevel. If407Cbecomes the refrigerantofchoice fornewequipment,this will increasethe costofattaininga given efficiency compared to HCFC-22. Lennox has announced that they will introduce a line oflight commercial products based on407C early in 2000. 410A is an mixture ofHFC-32 and -125. It operates at substantiallyhigherpressure (50-70 percent)than does R-22 andrequires a solublepolyol esterlubricant, soit is not suitable asa 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 orthickertube walls. Since41OA has a highercoolingcapacitythan R-22, manufacturers can preserve system capacity by reducing tube diameter (and tube cost). Furthermore, 410A can provide a slight efficiencyboost at the SEERtesting points. However, at the EERtest point which more closelyrepresentspeakcooling conditions,410Ais about 3 percentless efficientthanR-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 costtoallow plantsto handlethe smaller tube diameters and strictantiC ~' ~ contamination standards. Carrier introduced a lineofproducts based on410A in 1998 and most other major manufacturers have since followed suit. Momentum is building behind 410A asthe refrigerant ofchoice 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 nor407C will substantially change the cost-efficiency relationship, and neither will substantially affect consumer life cycle costs. Therefore, conclusions suggested by analysis ofHCFC-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 OTHERANALYSES 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 oftrial standard levels. 4.8.1 Definition ofthe 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 doface anadditional regulation onheating efficiency (HSPF). The Department investigated whether the relationship between HSPF and SEER isrigid enough to allow a SEER standard to serve as a defactoHSPF standard. Since SEER and HSPF are calculated values and incorporate factors other than system physics, no rigidrelationship between thetwo would be expected. As Figure 4.5 illustrates, a survey ofavailable equipment supports that hypothesis. Each band in the Figure represents 20 percent of the products available atthe 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 ofmodels falling within a range of0.3 to 0.5 HSPF. To set efficiency standards for heat pumps, the Department must determine both an HSPF level and a SEERlevel. This complicates the analysis since each SEER level corresponds to abroad 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 ofmodelspossessing 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

# '* 'LO'!::, significantcapitalconversioncostto allowplantsto handlethe smallertube diametersand strictanticontaminationstandards. Carrierintroducedaline of productsbasedon41OA in 1998 andmostother majormanufacturers have since followed suit. Momentum is buildingbehind41OA as the refrigerant ofchoice 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, neither41OA nor407C will substantially change the cost-efficiencyrelationship, andneitherwill substantially affect consumerlife cycle costs. Therefore, conclusions suggestedby analysis ofHCFC-22-based equipment should still be valid for equipment utilizing either41 OA or 407C. The issue plays a greater role in assessing the cumulative burden of new standards on manufacturers (Chapter 8). 

### 4.8 OTHERANALYSES 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 oftrial standard levels. 

### 4.8.1 Definition ofthe Relationship between SEER and HSPFin Heat Pumps Currently, cooling efficiency standards (SEER) do not differ based on whether a system providesheating, butheatpumpsdo face an additionalregulation onheatingefficiency(HSPF). The DepartmentinvestigatedwhethertherelationshipbetweenHSPFand SEERis rigidenoughto 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, norigidrelationshipbetweenthe two wouldbe expected. As Figure4.5 illustrates, a survey ofavailable equipment supports that hypothesis. Each band in the Figure represents 20 percent of theproducts available atthe stated efficiencylevel. Although HSPF generallyincreaseswith SEER, the correlation is low (0.63). However, the relationship between HSPF and SEER is surprisingly close below 13 SEER, with 60 percent ofmodels falling within a range of0.3 to 0.5 HSPF. To set efficiency standards for heat pumps, the Department must determine both an HSPF level and a SEERlevel. This complicatesthe analysis since each SEERlevel corresponds to a broad range ofHSPF ratings. To provide a rationale for selecting SEER-HSPF pairs, the Department examined histogramsbasedonFigure4.5 thatshowedthe numberofmodelspossessingeachHSPF 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 UnitaryDirectory,Feb

- July 1998 

### Figure 4.5 Relationship between HSPF and SEER in available 3-ton Split Heat Pumps 'I:: 

### Afterexamining the histograms, the Department plotted the relationship between HSPF and SEER for all 3-ton split heat pumps listed in the Spring 1998 ARI UnitaryDirectory(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 ofa 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 intothe formula. For example, under a 12 SEER standard, all products would have to attain aminimum HSPF of7.4. Eventhough theDepartment does nothave information onthedistribution ofheatpump sales by HSPF ateach 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/STO-98-440 

# 1f2.D**~**

10 9.5

9 8.5**~**A8 rI'.l 

# = 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 Afterexaminingthehistograms, the Departmentplottedtherelationship 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 ofa 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. Forexample, under a 12 SEER standard, all products would have to attain a minimum HSPF of7.4. Eventhoughthe Departmentdoes nothave informationonthe distributionof heatpumpsales byHSPF ateach SEERlevel, it is apparentthat the market currentlyfavors productsthatexceedthe 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~_ 

### ° Departmentbelieves that establishing an HSPFstandard equal to the current median at agiven SEER level would impose an undue design constraint on manufacturers, adding to the cost andburden of designing, producing, testing, and qualifying the product without resulting in a significant increase in the average HSPF ofequipment sold. Table 4.24 summarizes the selection ofHSPF 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 ofProposed HSPF StandardLevels 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 ofAvailable 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 ofthe models available at each efficiency level in 1998 as well as the total number ofmodels at each efficiency level.

4-52 EE-RM/STD-98-440 

# *'L**O~** DepartmentbelievesthatestablishinganHSPFstandardequaltothecurrentmedianat agiven SEER level would imposean 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 ofequipment sold. Table4.24 summarizesthe selection ofHSPFstandard levels. It also showsthe HSPFlevels thatARl considered to be the "most likely" HSPF rating at each SEER standard level. In all cases, theARl "most likely" HSPF value exceeds the selected minimum HSPF levels, typically by 0.2 to 0.3 HSPF. 

### Table 4.24 Comparison ofProposed 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 ofAvailable 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 ofthe models available at each efficiency level in 1998 as well as the total number ofmodels 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 SelectedHSPF 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 fewparties have expressed concern that standards which are tooaggressive 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

## W'2..D~ Table 4.25 Prevalence ofHSPF Ratings by SEER Level for 3-ton Split Heat Pumps with Impacts ofSuggested HSPF Standards EffideDCY Level (SEER) 11 12 13 14 15 16 17 Decile SelectedHSPF 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 fewpartieshaveexpressedconcernthat standardswhicharetoo aggressive will encourage consumers to repair old, inefficient equipment rather than replace it, and that this could actually increase national energyconsumptionwith respectto 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 StandardLevel 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

Asexpected, theresults donot supportthe suggestionthathigher standards would necessarily increase nationalenergy consumption by delaying equipment replacement. For example, an 11 SEER standard would have to extend equipment life bymore 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 iftheyprolong 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 ofthe 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 theestablishment ofminimum efficiency standards based on EER at an outdoor temperature of95°F, (EER(95°F)) in lieu of, or in addition 4-54 EE-RM/STD-98-440 

# "* 2 D

## 6

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

Asexpected,theresultsdonot supportthe suggestionthathigherstandardswouldnecessarily increasenationalenergyconsumptionbydelayingequipmentreplacement. Forexample,an 11 SEER standard wouldhave to extend equipment life by more than seven years in orderto 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. Accordingto 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 energyconsumptioneveniftheyprolong equipmentlife 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 ofthe total consumedby 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 Manyutilitiesandenvironmentaladvocates supporttheestablishmentofminimumefficiency standards based on EER at an outdoor temperature of95°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 of82°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 isatits highest. They believe that residential air conditioners contribute significantlyto this peak demand, particularly in warmer regions ofthe 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 havebeen several well-publicized blackouts andbrownouts following, orinthe midst of, hot periods. Advocates ofan EER-based standard believe that a SEER-only standard does not guarantee the desired improvement in peak-period performance. 4.9.1 CurrentRelationship between SEER and EER It is certainly true that SEER is not an ideal indicator ofsystem efficiency in very hot weather, and SEER maynot be the best indicator ofthe seasonal efficiency forequipment operating in the warmest regions ofthe 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 ofunitary equipment in the marketplace. For other equipment, including variable or multi-speed equipment or equipment withmodulating capacity, the 82°Ftest pointis given agreat dealofweight 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 onlyone set ofclimatic conditions, cannotprovide insight intocyclical performance or cooling efficiency at cooler temperatures which represent the bulk ofthe 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 ofthe three factors. No models with a combination offactors falls outside its oval.

4-55 

## (: EE-RM/STD-98-440 

# W'L**D~** to, SEER., which is based largely on an outdoor temperature of82°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 demandisatits highest. Theybelievethatresidential airconditioners contribute significantlytothis peak demand, particularly in warmer regions ofthe 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. Recentlytherehavebeen severalwell-publicizedblackoutsandbrownoutsfollowing, orinthemidst of, hot periods. Advocates ofan EER-based standard believe that a SEER-only standard does not guarantee the desired improvement in peak-period performance. 

### 4.9.1 CurrentRelationship between SEER and EER It is certainly true that SEER is not an ideal indicator of system efficiency in very hot weather, and SEERmaynotbethe bestindicatorofthe seasonal efficiencyfor equipmentoperating in the warmestregions ofthe country. However, the relationship between efficiencyat 82°F and at 95°F is fairly close for single-speed, single-capacityequipment, whichrepresents the vast majority ofunitary equipment in the marketplace. For other equipment, including variable or multi-speed equipmentorequipmentwithmodulatingcapacity,the 82°Ftestpointis givena greatdeal ofweight in determining the SEERrating. 

### In these cases, the relationship between SEERand 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 ofsteady-state performance underonlyonesetof climaticconditions,cannotprovideinsightintocyclicalperformanceorcooling efficiency at coolertemperatures which represent the bulk ofthe 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 ofthe three factors. No models with a combination offactors 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 theypossess modulating compressors. The modelswith thehighest SEERratings have modulating compressors (this includes systems with multiple compressors, variable speed compressors, andvariable capacity compressors.) This suggests that, all else equal, a system with a modulating compressor will achieve a SEER boost of2-4 points or will suffer an EER loss ofup to 2points. Manufacturers have some leeway in designing the SEER-EER relationship. Systems with modula tin g compressors are typically optimized for low capacit yoperationto boost SEER. Thiscan reduce the performance ofth system at high capacity. Sensible heat ratios (dehumidification) and sound levelscan also suffer. Since the efficiency standards andthe market are tied to SEERratings, manufacturers have the incentive to boost SEER atthe expe nse ofEER. Notice, however, thattotally modulating systems can attain the same EER ratings as their single speed counterparts.That indicates that manufacturers candesign andproduce high efficiency, totally modulating systems that boost both EER and SEER.

gTheDOE SEER test procedure formodulating systems gives weight to theoperating efficiency at low-capacity and an outdoor drybulb of82°F. 

### 4-56 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 

### Figure4.6 Effects ofCompressor and Fan Modulation on the EER-SEER Relationship in Existing 3-ton Split Air Conditioning Systems 19

The graph shows acleardivisionbetweenmodelsbasedon whethertheypossessmodulating compressors.ThemodelswiththehighestSEERratingshavemodulatingcompressors(thisincludes systemswithmultiplecompressors,variable speedcompressors,andvariablecapacitycompressors.) This suggests that, all elseequal, a system with a modulating compressorwill achieve a SEERboost of2-4 points orwill suffer an EER loss ofup to 2 points. Manufacturers have some leeway in designing the SEER-EER relationship. Systems with modulatingcompressorsaretypicallyoptimizedforlowcapacity operationtoboostSEERg. Thiscan reduce the performance ofthe system at high capacity. Sensible heat ratios (dehumidification) and soundlevels can also suffer. Since the efficiency standards and the market are tied to SEERratings, manufacturershavetheincentiveto boost SEERatthe expenseofEER.Notice,however,thattotally modulating systems can attain the same EER ratings as their single speed counterparts. That indicatesthatmanufacturerscandesignandproducehighefficiency,totallymodulating systemsthat boost both EER and SEER.

gTitleDOESEERtestprocedureformodulatingsystemsgivesweighttotheoperatingefficiencyatlow-capacity and an outdoor dry bulb of82°F. 

### 4-56

### EE-RM/STD-98-440 t2.0 

# (C':X~ e The graphalso suggests a fewconclusions about theindoor and outdoorfans. First.the SEER and EER impacts ofmodulating indoor fans is greater than the impacts ofoutdoor fans. Second, modulating compressors cannotachieve theirgreatest SEERand EERbenefits unlessboth theindoor andoutdoor fans arealso modulating. Third, systems with efficient single speed compressors donot receive much ofa boost in either SEER or EER by virtue ofthe presence ofvariable speed fans. Clearly, a higher SEER standard will not guarantee aproportional increase in EER. As time progresses, thermodynamic limitations make itmore 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 ofRefrigerant Choice on EER and SEER Refrigerant also playsarole inthis issue.41 OAis less efficient thanbothHCFC-22 and407C at high condenser temperatures, but more efficient at low condenser temperatures. The difference between 410A and 407C is on the order of5 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 relyonthe physical relationship between EER(95°F) and SEER to ensure that an increase in SEERwould result in a corresponding increase in EER. The Department is not aware ofany modulating, multi-speed, or variable speed air conditioners (hereafter referred to collectively as modulating equipment) being offered below 13 SEER, and very few ofthe available 13 SEER products are modulating equipment. The second option would beto establish an EER(95°F) floorthat mustbe met bymodulating 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 ofthe cooling season and warmer regions ofthe country. 4-57 EE-RM/STD-98-440

## ~~2D~ Thegraphalso suggestsa few conclusionsabouttheindoorandoutdoorfans. First.the SEER and EER impacts ofmodulating indoor fans is greater than the impacts ofoutdoor fans. Second, modulatingcompressorscannotachievetheirgreatestSEERandEERbenefitsunlessboththeindoor andoutdoorfans arealsomodulating. Third, systemswith efficient single speedcompressorsdonot receive much ofa boost in either SEER orEERbyvirtue ofthe presence ofvariable speed fans. Clearly, a higher SEERstandardwill not guarantee a proportional increase inEER. Astime progresses,thermodynamiclimitationsmakeitmoreexpensiveto squeezeadditional efficiencyfrom 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 ofRefrigerant Choice on EER and SEER Refrigerantalsoplaysa roleinthisissue.41OAis less efficientthanbothHCFC-22 and407C at high condenser temperatures, but more efficient at low condenser temperatures. The difference between 410A and 407C is on the order of5 percent at the EER rating points. 410A can result in improved SEERratings and reduced EERratings. Equipment manufacturers will be encouraged to adopt 41 OA for its SEER effect, but utilities mayprefer 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 maintainedundernewSEERstandards. First, the Departmentcouldrelyonthephysicalrelationship betweenEER(95°F) and SEERto ensure that an increase in SEERwouldresult in a corresponding increase in EER. The Department is not aware ofany modulating, multi-speed, or variable speed air conditioners (hereafter referred to collectively as modulating equipment) being offered below 13 SEER, andvery few ofthe available 13 SEERproducts are modulating equipment. The secondoption would be to establishan EER(95°F) floorthatmustbe metbymodulating 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 onlyor 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 optimizetheirdesigns to favor the warmerpart ofthe cooling season and warmer regions ofthe 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 undernew standards would achieve the same EERratings as theydo 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 ofstringency. For example, it could select EER levels equivalent to the ratings of the minimum EER rating ofavailable equipment today atthe 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 ofmodulating capacity and variable speed equipment. Modulating equipment realizes abenefit in the SEER test, allowing manufacturers to reduce the cost ofthe core components compared to non-modulating equipment. This cost reduction partially offsets the cost ofthe modulation, making modulating equipment more affordable for consumers. Being required to meet the same EER standards as nonmodulating equipment would negate this cost benefit. 

# ( v

# 4~~ : Consumers value the added benefits ofmodulation, and manufacturers realize this value in the form ofhigherrevenues. For consumers and the nation, modulation mitigates the inefficiencies caused by oversizing the systemduring installation. Oversizing is awidespread problem that causes frequent equipment cycling, increasing energy consumption. Furthermore, oversizing arguably contributes more topeakpowerdemand thandoes anyreduction in EER associated with modulating equipment. 4.9.4 EER-SEER Relationship in CurrentEquipment To help to determine what the appropriate EER(95°F) requirement might be foreach ofthe four classes, Table 4.27 shows the EER rating for models at each decile within a SEER level. The data source is the ARI UnitaryDirectory.We considered only NAECA-covered products below 66,000 BTU/hrintended for domestic sale. Each SEER level includes allproducts 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 ofmodels included in the dataset in each category. 4-58 EE-RM/STD-98-440 

# i "lD'l The first option, relying onthe currentrelationshipbetweenEER and SEER, would provide no assurance that manufacturers would not develop and promote equipment in the long term that would seriouslyreduce EERratings. The fourth option, altering the SEERtest procedure to favor highertemperatures, would require a new rulemaking to establish new procedures as well as a full revision to the analysis supportingthis rule to incorporate the new SEERvalues. Boththe second and third options, mandating minimum EERratings, would guarantee that productsundernew standards wouldachievethe sameEERratings as theydo todaywithoutaltering the test procedures. The third option is more aggressive since it would require that products of higher SEERratings must also meet increasingly stringent EER ratings. Within the second and third options, the Department could establish EER requirements of varying degrees ofstringency. For example, it could select EERlevels equivalent to the ratings of the minimum EERrating ofavailable equipment today at the proposed standard level, the median EERrating, anywhere in between, or even higher. A serious concern regarding the third option and EER standards higher than the minimum EERratings availabletodayis that both would discourage the development and sale ofmodulating capacity and variable speed equipment. Modulating equipment realizes a benefit in the SEERtest, allowing manufacturers to reduce the cost ofthe core components compared to non-modulating equipment. This cost reduction partially.offsets the cost ofthe modulation, making modulating equipmentmore affordable for consumers. Beingrequiredtomeetthe sameEER standards asnonmodulating equipment would negate this cost benefit. Consumers value the added benefits ofmodulation, and manufacturers realize this value in the form ofhigherrevenues. Forconsumers andthe nation, modulation mitigates the inefficiencies causedbyoversizingthe system duringinstallation. Oversizingis a widespreadproblemthat causes frequent equipment cycling, increasing energy consumption. Furthermore, oversizing arguably contributesmoretopeakpowerdemandthandoes anyreduction in EERassociatedwithmodulating equipment. 

### 4.9.4 EER-SEER Relationship in Current Equipment To help to determine whatthe appropriate EER(95°F) requirement might be for each ofthe 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 66,000BTUIhrintended for domestic sale. Each SEERlevel 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 ofmodels included in the dataset in each category.

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### EE-RM/STD-98-440 ' 2 

### -k 

# (|-i~ :Table 4.27 Distribution ofEnergy 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 

# *,.2J)**~** Table 4.27 Distribution ofEnergyEfficiencv 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

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### EE-RM/STD-98-440 

# k'2o 

# (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, DunsFinancialProfile, IndustryProfile, 1999. SIC# 1521 "Construction- -General-General Contractors--Single-Family Houses". Markup = 1/(1998 cost of sales) 3. RiskManagement Associates,Annual StatementStudies: S1C#1521. 1999. Markup = 1/(1

- Gross Profit from 4/1/98

- 3/31/99 for all firms) 4. Financial Analysis for theHVACR 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. EnergyDesign,June 1999 9. Thermal Components "List ofcommonly asked questions about coils manufactured using 

# (/-*C ~brazed aluminum technology", February 2000. 10. OptimizationStrategiesforUnitaryAirConditionersUsing R-41OA, Jing Zheng,H. Hughes, M. Spatz, G. Zyhowoski, Allied Signal

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# (I 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,DunsFinancialProfile, IndustryProfile, 1999. SIC# 1521 "Construction- -General-General Contractors--Single-Family Houses". Markup 

## = 1/(1998 cost ofsales) 3. RiskManagementAssociates,AnnualStatementStudies: SIC#1521. 1999. Markup

## = 1/( 1 - Gross Profit from 4/1/98

- 3/31/99 for all firms) 4. FinancialAnalysisfor the HVACR ContractingIndustry, 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. EnergyDesign, June 1999 9. Thermal Components "List ofcommonly asked questions about coils manufactured using brazed aluminum technology", February 2000. 10. OptimizationStrategies for UnitaryAirConditioners UsingR-41OA, JingZheng,H. Hughes, M. Spatz, G. Zyhowoski, Allied Signal

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