1 | Building Technologies Officeeere.energy.govThe Parker Ranch installation in HawaiiBUILDING TECHNOLOGIES OFFICEEnergy Conservation StandardsNotice of Proposed Rulemaking forFurnacesMarch 27, 2015Building Technologies OfficeEnergy Efficiency & Renewable EnergyDepartment of Energy2 | Building Technologies Officeeere.energy.govWelcome• Introductions (around the room)• Role of the Facilitator• Ground Rules– Speak one at a time.– Say your name for the record – there will be a completetranscript of this meeting.– Be concise – share the ‘air-time’.– Keep the focus here – cell phones on silent; limit sidebarconversations.– Webinar participants turn phone on mute; “raise your hand” to berecognized to speak.• Housekeeping Items• Agenda Review• Opening Remarks3 | Building Technologies Officeeere.energy.govIntroduction• Today’s presentation highlights key issues and areas thatDOE seeks feedback/discussion on with regard to theproposed rulemaking for certain furnaces.• Interested parties are encouraged to bring up relevant issuesfor discussion.4 | Building Technologies Officeeere.energy.govPurpose of the Public Meeting• Present the procedural and analytical approaches to evaluatepotential energy conservation standards (ECS) for furnaces.• Invite comment on the ECS notice of proposed rulemaking(NOPR) and technical support document (TSD), includingDOE’s proposed standard levels.• Invite participants to provide summary comments orstatements and raise additional issues for discussion.5 | Building Technologies Officeeere.energy.govIssues for DiscussionThe deadline for submitting comments is 6/10/2015.Issue Box:DOE welcomes comments, data, and informationconcerning its proposed standards for furnaces. Issues onwhich DOE seeks comment are highlighted in issue boxesthroughout this presentation. Whether invited by an issue boxor not, comments are welcome on any part of DOE’s analysis.6 | Building Technologies Officeeere.energy.govOpening RemarksMeeting participants are invited to provide openingremarks or statements at this time.7 | Building Technologies Officeeere.energy.govPublic Meeting Agenda1Overview2Scope; Engineering Analysis3Life Cycle Cost Analysis; Subgroup Analysis4Shipments Model; NIA; RIA5MIA6Environmental; Employment; Side Research7Closing Remarks8 | Building Technologies Officeeere.energy.govRegulatory Authority• Energy Policy and Conservation Act of 1975 (EPCA), Pub. L. 94-163– Established the Energy Conservation Program for Consumer ProductsOther Than Automobiles, which covers furnaces.• National Appliance Energy Conservation Act of 1987 (NAECA), Pub.L. 100-12– Amended EPCA to prescribe standards for furnaces– Directed DOE to conduct two further rulemakings to determine whether toamend these standards.• Energy Independence and Security Act of 2007 (EISA 2007), Pub. L.110-140– Amended EPCA to direct DOE to review standards for covered productsat least once every 6 years– Required new or amended standards promulgated after July 1, 2010 toaddress standby mode and off mode energy use.9 | Building Technologies Officeeere.energy.gov• Initial standards established by NAECA, except for “small” furnaces– DOE published a final rule on November 17, 1989 to set initial standardsfor “small” furnaces. 54 FR 47916.• DOE published a final rule on November 19, 2007. 72 FR 65136.– Amended standards for most classes of furnaces manufactured on orafter November 19, 2015.– Did not update standards for mobile home oil-fired furnaces andweatherized oil-fired furnaces.• DOE published a direct final ruleon June 27, 2011. 76 FR 37408.– Amended the AFUE standards for non-weatherized gas furnaces, mobilehome gas furnaces, and non-weatherized oil furnaces.– Amended the compliance date (but left the existing standards in place)for weatherized gas furnaces.– Established electrical standby/off mode standards for non-weatherizedgas furnaces, non-weatherized oil furnaces, and electric furnaces.Regulatory History10 | Building Technologies Officeeere.energy.gov• Following the June 2011 DFR, the American Public Gas Assn(APGA) filed a petition for review to invalidate the rule, in part.– Only as it pertained to the non-weatherized gas and mobile homegas product classes.• On April 24, 2014, the Court approved a DOE and APGAsettlement.– DOE agreed to remand of the non-weatherized gas and mobilehome gas furnace portions of theJune 2011 DFR to conduct furtherrulemaking.– Court’s order vacated the June 2011 DFR standards relating to nonweatherized gas furnaces and mobile home gas furnaces.Regulatory History (cont.)11 | Building Technologies Officeeere.energy.govCurrent Energy ConservationStandards• Current AFUE standards for non-weatherized gas furnacesand mobile home gas furnaces were established by NAECAand effective in 1992 and 1990, respectively.• The November 2007 final rule revised the AFUE standards,with compliance required starting on November 19, 2015.• Both the current AFUE standards and those for whichcompliance is required on November 19, 2015 are shown inthe table below:Equipment Class Current Standard(AFUE)November 19, 2015Standard (AFUE)NWGF 78% 80%MHGF 75% 80%12 | Building Technologies Officeeere.energy.govCriteria for Selecting Standard LevelsEPCAdirectsDOEtothemaximumextentpracticabletoconsidersevenfactorswhensettingenergyconservationstandards.EPCA Factor DOE Analysis1. Economic impact on consumersand manufacturersLife-cycle Cost AnalysisManufacturer Impact Analysis2. Lifetime operating cost savings Life-cycle Cost Analysis3. Total projected energy savings National Impact Analysis4. Impact on utility or performance Screening AnalysisEngineering Analysis5. Impact of any lessening ofcompetitionManufacturer Impact Analysis6. Need for national energyconservationNational Impact Analysis7. Other factors the Secretaryconsiders relevantEmissions Impact AnalysisUtility Impact AnalysisEmployment Impact Analysis13 | Building Technologies Officeeere.energy.govPublic Meeting Agenda1Overview2Scope; Engineering Analysis3Life Cycle Cost Analysis; Subgroup Analysis4Shipments Model; NIA; RIA5MIA6Environmental; Employment; Side Research7Closing Remarks14 | Building Technologies Officeeere.energy.govScope• EPCA defines a furnace as a product which:– utilizes only single-phase electric current, or single-phase electriccurrent or DC current in conjunction with natural gas, propane, or homeheating oil;– is designed to be the principal heating source for the living space of aresidence;– is not contained within the same cabinet with a central air conditionerwhose rated cooling capacity is above 65,000 Btu per hour;– is an electric central furnace, forced-air central furnace, or gravitycentral furnace; and– has a heat input rate of less than 225,000 Btu per hour for forced-aircentral furnaces, gravity central furnaces, and electric central furnaces.(42 U.S.C. 6291(23))– Based on the remand agreement, this rule only considers 2 classes:• (1) non-weatherized gasfurnaces (NWGF); and• (2) mobile home gas furnaces (MHGF).15 | Building Technologies Officeeere.energy.govEngineering AnalysisPurpose•Determinetherelationshipbetweenmanufacturersellingpriceandincreasedefficiencyinbothactivemodeandstandby/offmodeoperationoffurnaces.Method•Efficiencylevelapproachandreverseengineeringteardowns/costmodeling.•Informationsourcesincluded:– Product teardowns & manufacturing cost modeling– Manufacturer interviews– Product testing– Product literature– DOE product certification data16 | Building Technologies Officeeere.energy.govEngineering Analysis (AFUE)Physicaland CatalogTeardowns/BOMsSelection ofEfficiencyLevelsSelection ofUnits forTeardownMPCs forUnits TornDown(Physical andCatalog)Manuf. CostEstimateEstimatedMarket SharebyManufacturerShippingCostManufacturerMarkupIndustryAverageMPCsIndustryAverageMSPsDesignOptionPathwayModelInformation(from MTA)17 | Building Technologies Officeeere.energy.gov• For each equipment class, DOE selected AFUE efficiency levelsfor analysis at:– The baseline efficiency level– Efficiency levels with a high number of models available– Efficiency levels that represent substantial technologicalchanges– The max-tech efficiency levelEquipment ClassAFUE Efficiency Levels (%)Baseline EL1EL2EL3 (MHGFmax-tech)EL4 (NWGFmax-tech)NWGF80 9092 95 98MHGF 80 9295 97 -AFUE Efficiency Levels Analyzed18 | Building Technologies Officeeere.energy.govSelection of Units• DOE selected units for teardown spanning the efficiency levelsanalyzed for NWGF and MHGF.• Representative input capacity for analysis was 80,000 Btu/h.– Models chosen primarily at representative input, but also at higherand lower input ratings.• DOE chose products from multiple manufacturers at eachefficiency level.– Fabrication techniques, basic equipment design, and other factorsdiffer across manufacturers. Due to these variations, the MPCs fordifferent manufacturers to produce similar equipment designs willoften vary.Number of Units Torn Down by Rated AFUEAFUE 80 90 91 92 93 94 95 96 98No. units torn down 8 5 1 5 3 1 6 1 219 | Building Technologies Officeeere.energy.gov• The 2014 furnace fans final rule (79 FR 38129) set standards forthe electrical energy consumption of the furnace blower.– Compliance required by 2019 (i.e., prior to the likely 2021 compliancedate for this rule).• DOE assumed furnace fan standards will require the followingtechnologies to be implemented in baseline furnaces:• DOE accounted for these technologies in the baseline cost and athigher efficiency levels, as applicable.Product Class Indoor Blower Fan MotorTypeCombustionSystem TypeNWGF Constant-torque BPM Two-stageMHGF Improved PSC Single-stageCharacteristics of Baseline NWGFand MHGF20 | Building Technologies Officeeere.energy.gov• Baseline Efficiency Level (80% AFUE)– MPCs from baseline teardowns and manufacturer market share datawere used to calculate a market-share-weighted MPC at the baseline.• Condensing Efficiency Levels (90-95% AFUE)– MPCs were compared to the baseline MPC for each manufacturerindividually and baseline cost subtracted to determine manufacturerspecific incremental costs above baseline.– Incremental costs above baseline were subsequently aggregatedtogether to form a market-representative cost-efficiency curve.• Max-tech Efficiency Level (98% AFUE)– Incremental cost to achieve max-tech was calculated as a marketshare-weighted average of the difference in MPC between the 95% and98% efficiency levels for 2 manufacturers.Cost-Efficiency Curves21 | Building Technologies Officeeere.energy.gov• For MHGF DOE tore down several models at various ELs to analyzethe differences between MHGF and NWGF.• MHGF and NWGF from the same manufacturer were compared.– Manufacturer-specific design differences were used to developdifferential costs between MHGF and NWGF.• Generally the incremental cost differences and cost-efficiency trendwere similar. Observed design changes were also similar.• These differential costs were added to the aggregate MPCscalculated for NWGF at each efficiency level to develop industryrepresentative MPCs for MHGF.Cost-Efficiency Curves22 | Building Technologies Officeeere.energy.govDeriving MSPs• Manufacturer selling price (MSP)–The MSP is the price at which the manufacturer can recover allproduction and nonproduction costs and earn a profit.–MSP = MPC x manufacturer markup + shipping cost• Manufacturer markup–Initial estimate based on Securities and Exchange Commission (SEC)10-K reports from publicly-traded manufacturers (examining net sales,costs of sales, and gross profit).–Industry average markup calculated based on market-share weighting.–Industry average markup calibrated based on feedback receivedduring manufacturer interviews.–DOE estimated the industry average manufacturer markup to be1.34for NWGF and1.27for MHGF.23 | Building Technologies Officeeere.energy.govNWGF MSPs$400$450$500$550$600$650$700$750$800$850$90075 80 85 90 95 100

Manufacturer Selling Price (2013$)Representative Unit AFUE (%)AFUE MSP (2013$) Incr. MSP80$492.95-90$604.58$111.6392$614.77$121.8295$687.25$194.3098$850.41$357.4624 | Building Technologies Officeeere.energy.govEngineering Analysis: Request forCommentDOE seeks comments on any issues related to themethodology, assumptions, and results for the engineeringanalysis for AFUE efficiency levels.25 | Building Technologies Officeeere.energy.gov• DOE analyzed a single standard for standby mode and off mode.– Furnace blower is typically used withthe cooling system during the non-heatingseason.• DOE used a “design option” approach.– Baseline design was established basedon product test data and manufacturerfeedback.– Standby energy consumption was tested before teardowns– Baseline efficiency levels were defined as the most energy-consumptivecombination of electrical components in tested furnaces– Design options were applied to the baseline in order of cost-effectiveness.Engineering Analysis (Standby Modeand Off Mode)Component NWGF and MHGF PowerConsumption (W)Transformer 4BPM Blower Motor (includes controls) 3Controls/Other 4Total Baseline 11Baseline Standby Mode and Off Mode Energy Consumption26 | Building Technologies Officeeere.energy.gov• DOE identified two design options for reducing standby mode andoff mode energy consumption that passed the screening analysis:– Low-loss transformer (LLTX)– Switching mode power supplyEngineering Analysis (Standby Modeand Off Mode)EfficiencyLevelDescription Standby/Off ModePowerConsumption (W)MPC Increase(2013$)Baseline Linear power supply; Standard40VA transformer11 0EfficiencyLevel 1Linear power supply + LLTX 9.5 $1.00EfficiencyLevel 2Switching mode power supply 9.2 $9.02EfficiencyLevel 3Switching mode power supply +LLTX8.5 $9.6727 | Building Technologies Officeeere.energy.govEngineering Analysis: Request forCommentDOE seeks comment on the efficiency levels analyzed forstandby mode and off mode, and on the assumption thatstandby mode and off mode energy consumption (as definedby DOE) would be equal. DOE also seeks comment and dataon what fraction, if any, consumers shut the furnace off duringthe non-heating season.DOE seeks comment generally on any issue related to themethodology, assumptions, or results for the standby modeand off mode engineering analysis.28 | Building Technologies Officeeere.energy.govPublic Meeting Agenda1Overview2Scope; Engineering Analysis3Life Cycle Cost Analysis; Subgroup Analysis4Shipments Model; NIA; RIA5MIA6Environmental; Employment; Side Research7Closing Remarks29 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:FlowchartEngineeringAnalysisMarkupstoDetermineProductPriceEnergyUseCharacterizationBaselineManufacturerCostStd‐LevelManufacturerCostManufacturerMarkupDistributer&ContractorMarkupsSalesTaxEnergyConsumptionEnergyPricesConsumerPriceInstallationCostTotalInstalledCostIncremental*AnnualEnergyCostRepairCostMaintenanceCostAnnualOperatingCostSavings*LifetimeDiscountRateEnergyPriceTrendDiscountedLifetimeOperatingCostSavings*PaybackPeriodLife‐CycleCostProductSwitching**BaseCaseEfficiency* Differential between Standards Case and Base Case.** Product Switching methodology takes into account total installed costand annual operating cost of proposedstandard products in comparisonto alternatives products.30 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Purpose and MethodologyPurpose• Provide an economic evaluation from the consumer’s perspective.•Life-Cycle Cost (LCC)is the total consumer cost over the life of theproduct.•Payback Period (PBP)is the time required to recover the increasedpurchase price of more energy-efficient products through reducedoperating costs.Method• Use consumer samples developed in the energy use analysis.• Analysis models the uncertainty and variability of inputs using Monte Carloapproach and probability distributions using Excel® with Crystal Ball.®ൌ ܲܤܲݐݏ݋ܥ	݈݈ܽ݁݀ݐݏ݊ܫ	݈ܽݐ݋ܶ∆ݐݏ݋ܥ	݅݊݃ݐܽݎ݁݌ܱ	ݎܻ݁ܽ	ݐݏݎ݅ܨ∆ݐݏ݋ܥ	݅݊݃ݐܽݎ݁݌ܱ	݅݉݁ݐ݂݅݁ܮ ൅ ݐݏ݋ܥ	݈݈ܽ݁݀ݐݏ݊ܫ	݈ܽݐ݋ܶ ൌ ܥܥܮܥܥܮ ൌ ݏ݅݊݃ݒܵܽ	ܥܥܮௌ௧ௗܥܥܮ െ௘௦஻௔31 | Building Technologies Officeeere.energy.govInput Purpose/Definition MethodConsumerProduct PriceManufacturing cost multiplied bymarkups, sales tax, and pricetrend factor.Manufacturing cost from engineering analysis.Markups and sales taxes:from markups analysis.Future price trend: historical PPI and shipment data.InstallationCostsLabor and materials necessaryto install appliance.Higher costs for condensing furnace installations, which haveadditional venting requirements and condensate withdrawal.Energy UseDetermine field energy use. Based on RECS/CBECS energy use data and adjustmentfactors.Energy PricesDevelop average marginalmonthly prices projected intothe future.Multiplied most current averageannual energy prices by monthlyprice factors and marginal pricefactors by geographical area.Then multiplied by the projected annual energy price trends.Maintenance/Repair CostsCost of replacing or repairingfailed components in furnaceand routine cost to maintain.Based on maintenance frequency,failure year, warranty period,labor hours and cost, and material cost.DiscountRatesDetermine the present value oflifetime operating expenses.Derived from various types ofdebt and equity using the FederalReserve Board’s Surveyof Consumer Finances.Lifetime Age when the product is retired. Based on national survey data and manufacturer shipment data.Base CaseEfficiencyDistributionProject market share ofproducts at each efficiency levelin the absence of standards.Based on historical market share data, models information, andstakeholder input.ProductSwitchingProject product switching due tostandards.Based on consumer choice model that takes into account bothtotal installed costs and operating costs.LCC and Payback Period Analysis:Input Summary32 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Consumer Product Priceܽ

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ܿ• Manufacturing production costs (MPCs) developed in engineering analysis foreach efficiency level.• Markups derived from company direct costs, expenses, and profits.−Determine consumer price based on MSP for baseline and higher efficiency products.−Characterize NWGF and MHGF distribution channels.• Price trend based on historical PPI data and shipment data.• Default price trend: decreasing (by 16.5% over the 30 year analysis period)• Sensitivity analysis considered alternativeprice trends (high decreasing and constant).33 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Markups AnalysisManufacturerWholesalerMechanicalContractorConsumerReplacementsNew ConstructionManufacturerMobile HomeManufacturerMobile HomeDealerConsumerMHGFs:ManufacturerWholesalerMechanicalContractorGeneralContractorConsumerNWGFs:Note: The national account channel for NWGFs purchased for commercial installations includes manufacturer, wholesaler, and consumer.Input Variable Data SourceManufacturer U.S. Security and Exchange Commission (SEC) 10-K reports (see engineering ).Wholesaler Firm income statements from the HARDI 2012 Profit Report.MechanicalContractorACCA 2005 Financial Analysisreport; US Census Bureau, 2007Plumbing and HVACContractorssector.General Contractor USCensus Bureau, 2007Commercial Building Constructionsector.Mobile HomeManufacturerUS Census Bureau, 2007Manufactured Home (Mobile Home) ManufacturingandAllOther Specialty Trade Contractorssectors.Mobile Home DealerUS Census Bureau, 2007All Other Specialty Trade Contractorssector; informationfrom mobile home dealer websites and other sources.Sales Tax 2013 Sales Tax Clearinghouse Data.34 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Markups AnalysisBaseline Markups• Relate the MSP of baseline equipment to the consumer purchase price.• DOE applied baseline markups to the MSP of the baseline level.Incremental Markups• Relate the increase in MSP of more-efficient products to the increase inconsumer purchase price• Cover only expenses that vary with MSP (e.g., operating expenses andprofit)−Fixed costs such as overhead and labordo not scale with increased efficiency• DOE applied the incremental markups to the incremental difference inMSP at each level above the baseline.35 | Building Technologies Officeeere.energy.govAverage Markups for Market Participants (NWGFs)Average Markups by Product ClassMarket ParticipantReplacement New ConstructionBaseline Incr. Baseline Incr.Manufacturer1.34 1.34Wholesaler1.36 1.10 1.36 1.10Mechanical Contractor1.53 1.23 1.43 1.14General Contractor- 1.46 1.33Sales Tax1.07 -Overall Markup3.00 1.95 3.80 2.24National Account*1.96 1.59 1.83 1.48Product Class Baseline Markup Incremental MarkupNon-Weatherized Gas Furnaces 3.20 2.20Mobile Home Gas Furnaces 2.57 1.87* Includes manufacturer, wholesaler, and sales tax (for replacements).LCC and Payback Period Analysis:Markups Analysis36 | Building Technologies Officeeere.energy.govLCC and Payback Period AnalysisRequestforCommentDOEinvitescommentsandrecommendationsfrominterestedpartiesonanyaspectrelatingtotheMarkupsAnalysis.37 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Installation CostPurpose:Represent the labor and material costs necessary to install the product.Sources:• 2013 RS MeansResidential Cost Data• DOE’s 2007 Furnaceand Boiler Final RuleInstallation Model• Manufacturer literatureInstallationLocation ofFurnaceOrphanedWater Heater(Replacement)New PVC VentingChimney Relining(Replacement)Metal VentModification(Replacement)IndividualBuildingInstallationCostNon-Condensing FurnaceCondensing FurnaceNew Metal Vent(New Owner/NewConstruction)Combustion AirDirect VentConcealing VentPipe(Replacement)BasicInstallationCostsVentingInstallationCostsCondensateWithdrawalInstall. Costs• Putting in place & setting upfurnace• Gas piping• Ductwork• Electrical hookup(thermostat)• Attic installation adder• Permit & removal/disposalfees• Condensate Pipe• Drip pan• Condensatepump• Freeze protection• Electric outlet38 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Installation Location DeterminationHasBasement?RECS 2009HouseSample1) ConditionedBasementYesBasementFinished?2) Un-ConditionedBasementNoYesHas Atticand HHbuilt after1980?AtticFinished?HasCrawlSpace?6) ConditionedAttic7) UnConditioned AtticNoYesNoHasGarage?3) CrawlSpaceYes5) IndoorNoNoYesNoYes4) GarageNote: All NWGFs installed in commercial buildingsand MHGFs were assumed tobe in “indoor” locations.39 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:NWGF Installation Location ResultsGarageNational: 10.0%North: 3.5%South: 17.3%Crawl SpaceNational: 9.4%North: 7.9%South: 11.1%HeatedBasementNational: 29.3%North: 48.7%South: 7.4%UnheatedBasementNational: 11.1%North: 16.6%South: 4.9%IndoorNational: 27.7%North: 20.0%South: 36.3%HeatedNational: 0.8%North: 0.1%South: 1.6%UnheatedNational:11.8%North: 3.2%South: 21.4%Attic40 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Basic Installation Costs• Applicable to all installations and includes:−trip charge (replacement only),−removal of existing furnace (replacement only),−putting in place and setting up the furnace (varies by input capacity),−unit start-up, check, and clean up,−gas piping,−electrical hookup for the thermostat,−permit, removal or disposal fees,−when applicable, additional labor hours for an attic installation, and−ductwork costs same for all installations.Basic Installation Costs for Non-Weatherized Gas Furnaces (2013$)RegionAverage Cost 2013$ReplacementNew Construction/NewOwnerNational$631 $626North$710 $708Rest of Country$545 $52841 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:NWGF Venting Installation CostCategory I VentingCategory IVVentingCost factors: Installation location; installationtype (replacement or newconstruction); ventmaterial type (metal or plastic); chimney type;direct vent (two-pipe or concentric).42 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:NWGF Vent Pipe Length DeterminationHorizontalDistance**RECS2009/CBECS2003 DataVent Size* X 1.5= 6 feetDistance fromFurnaceto RoofFloor HeightNumber ofFloors AboveFurnaceVerticalLength= Floor Height X # of Floors Above Furnace+ Floor Height – 4 ft+ 3 ft distance above roof+ Cathedral ceiling height for atticinstallationsCathedralCeilingHigh CeilingApplied to atticinstallationsonlyNAHB FloorHeight DataNumber ofFloorsHorizontalLengthHorizontalDistanceVerticalDistance†Avg Wall toHorizontalVent LengthRatioInstall.LocationSquareFootageAssumed square box (averagebetween diagonal and side lengths)Average WallLengthVent Size X 1.5= 3 feet + FloorHeight (ifbasement orcrawl space)1) Basement of Crawl Space= # of Floors2) Garage and 1⁄2 Indoor= # of Floors – 13) Attic and 1⁄2 Indoor = 0* Vent size of NWGF assumed to be4”. Only takes value of the ventsize.** Only applied if NWGF is commonly vented with water heater.†Only applied if NWGF is installed in basement or crawl space.43 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Replacement: Non-Condensing to Non-Condensing• Masonry chimney requires relining if:– Household has a chimney, and– Furnace was installed before 1995 or buildingbuilt before 1995 (based on the National FuelGas Code (NFGC)).• Venting resizing and vent connectors required if:– Household has an existing natural draft NWGF <75% AFUE,• Sources: RECS 2009 - furnace age vintage, with historical shipments existing AFUE from AHRI data– Last furnace replacement before 2020, and– Chimney does not need to be relined.ExistingNWGFReplacementNWGFInstallation Requirement Fraction ImpactedAvg.Cost<75% AFUE 80% AFUEReplace Vent Connectors (North) 0.3% $234Replace Vent Connectors (Rest ofCountry)0.5% $164<75% AFUE 80% AFUEResizing Vent System (North) 0.1% $910Resizing Vent System (Rest of Country) 0.1% $592<75% AFUE 80% AFUEChimney Relining (North) 0.5% $964Chimney Relining (Rest of Country)0.1% $930Venting Type Northeast Midwest South WestMasonry73% 53% 10% 27%Metal Vent27% 47% 90% 73%Fraction of Existing Masonry Chimney and Metal Vent Installations44 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Replacement: Non-Condensing to CondensingInstallation Cost Considerations• Replacing metal vent with PVC flue vent:– Furnace location– House ceiling height and number of floors– Furnace distance from wall or roof, vertical or horizontal vent– Wall type, which determines the cost of penetrating the wall– Vent terminations account for vertical and horizontal installations• Combustion air vent for direct-vent installations:– Vent length, which is the same as flue pipe length.– Vent installation fraction, which depends on the installation location.• Concealing vent pipes in indoor installations:– Assumedhalfof the indoor horizontally vented condensingNWGFinstallations wouldrequire vent pipe concealing (9% of all replacement non-condensing to condensinginstallations).• Orphaned water heaters:– Some installations need to reline the chimney and resize venting when a condensingNWGF replaces an existing non-condensing NWGF that is commonly vented with a gaswater heater.45 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Replacement: Direct Vent (PVC)• Fraction of direct vent installations for condensing NWGFs dependenton furnace location– Based on consultant report (2011 DFR TSD Appendix 8-B; EERE-2011-BT-STD-0011-0012)– Direct vent length: same as flue pipe lengthID Installation LocationFraction ofDirect VentInstallationsFraction of InstallationsNorthRest ofCountryNational1 Basement (Conditioned) 67% 48.69% 7.40% 29.28%2 Basement (Unconditioned) 33% 16.64% 4.85% 11.10%3 Crawl Space 33% 7.91% 11.06% 9.39%4 Garage 100% 3.45% 17.27% 9.95%5 Indoor (Closet, Alcove, Utility Room) 67% 20.04% 36.42% 27.74%6 Attic (Conditioned) 67% 0.06% 1.62% 0.79%7 Attic (Unconditioned) 33% 3.21% 21.38% 11.75%Total Fraction of Installations that are Direct Vent 58.7% 60.0% 59.3%46 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Replacement: Concealing PVC Flue Vent• Concealing Vent Pipes: putting in place structures to mask vents that passthrough living spaceInstallation Cost CriteriaFraction ofInstallationsImpactedAverageCostConcealing VentPipes50% of indoor horizontalcondensing NWGFinstallations9% $360Description CrewLaborHoursUnitBare Costs (2013$)QuantityTotalincl.O&PMaterials Labor TotalTrip Charge1CARP*0.5 Ea. $0.00 $15.73 $15.73 1 $26.42Wallboard repair 8"-12" 1 CARP 0.5C.L.F.$3.04 $15.73 $18.77 14 $420.01Total$446.42* 1 CARP means a crew of 1 carpenter.Concealing Ductwork Cost Example Using National Labor Costs47 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Replacement Venting SummaryExistingFurnaceReplacementFurnaceInstallation RequirementFrequency ofapplyingrequirementsFractionImpactedAvg.CostChimney installedbefore 199080% AFUE Relining all unlined chimneys100% 0.9% $960Natural Draft 80 % AFUEInstalling New VentConnectors (Converting fromsingle-wall to Type B doublewall)75% 1.1% $190Natural Draft 80% AFUE Resizing Vent System20% 0.2% $731Non-Condensing to Condensing NWGF InstallationsExisting NonCondensingFurnaceReplacement Installation RequirementFrequency ofapplyingrequirementsFractionImpactedAvg.CostNatural Draft CondensingFurnaceConvert Water Heater from singlewall to Type B vent Connector100% 0.1% $111Natural Draft CondensingFurnaceResizing Orphaned Water HeaterChimney or upgrading Metal Vent75% 0.6% $672Natural Draft orFan AssistedCondensingFurnaceReline all unlined chimneys forOrphaned Water Heater100% 0.6% $747Fan Assisted CondensingFurnaceResizing Orphaned Water HeaterChimney or upgrading Metal Vent40% 18%$672Non-Condensing to Non-Condensing NWGF Installations48 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:New Construction/New Owner Installations•Installation costsof new venting systems are taken into account for bothnon-condensing and condensing furnaces, and for NWGFs commonly ventedwith a water heater.– For non-condensing furnaces, a new metal flue vent is the only adder.– For condensing furnaces, the adders includenew flue vent (PVC), combustion airvent for direct vent installations (PVC), accounting for a commonly vented waterheater (NWGF only), and condensate removal.•Commonly ventednon-condensing NWGF and water heater installationventing costs are all assigned to the NWGF.•Condensing NWGFventing cost for installations that originally planned toinstall a non-condensing NWGF with a commonly vented gas water heater:added the venting system installation cost of the now-orphaned water heater.49 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Condensate Withdrawal MethodologyDrip PanInstallationLocation ofFurnaceCondensatePipeAttic or Indoorabove 1stfloorCondensateRemovalCostsHeat TapeCondensatePumpHas NoCentral ACUnconditionedAtticElectricalOutletAll installationsAll installationsCondensateNeutralizerAppliedthe time50% ofAppliedthe time50% of= 1.5 ft pipeinstallationsapplicable to allAppliedthe time12.5% of50 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Condensate Removal SummaryInstallation Fractions and Average Costsfor Condensate Removal: ReplacementsInstallation Cost Description AssumptionFractionImpactedAvgCostCondensate Pipe Deposit condensate down drain. All installations 100% $18Drip Pan Some building codes require a drip panif furnace is installed above the 1stfloor.Attics or higher floorinstallations25% $45Condensate Pump If a drain is not near the furnace, thenthe condensate must be pumped to aremote drain.25% of installationswithout AC 6% $259Heat Tape Protect condensate pipe from freezingtemperatures.50% of installations inunconditioned attic5% $97Electrical Outlet (add’l) Required for some installations tooperate condensate pump or heat tape.50% of installationsrequiring pump/heat tape5% $136Condensate Neutralizer Neutralizes condensate before disposal. 12.5% of all installations 12.5% $103Installation Cost Description AssumptionFractionImpactedAvgCostCondensate PipeDeposit condensate down drain.All installations 100% $17Drip PanSome building codes require a drip panif furnace is installed above the 1stfloor.Attics or higher floorinstallations30% $61Condensate NeutralizerNeutralizes condensate before disposal.12.5% of all installations 12.5% $100Installation Fractions and Average Costs forCondensate Removal: New Construction/Owner51 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Installation Cost by Market Segments52 | Building Technologies Officeeere.energy.govInstallation Fractions and Average Costs for Condensate Removal (Replacements)LCC and Payback Period Analysis:MHGF Installation CostsCondensing MHGF: Condensate RemovalInstallation Cost Description AssumptionFractionImpactedAvgCostCondensate PipeDeposit condensate down drain.All installations100% $18Heat TapeProtect condensate pipe from freezingtemperatures.All replacementinstallations50% $106Electrical Outlet (add’l)Required for some installations tooperate condensate pump or heat tape.50% of installationsrequiring heat tape25%$136CondensateNeutralizerNeutralizes condensate before disposal. 12.5% of all installations12.5%$102MHGF: Venting• U.S. HUD code requires sealed combustion (direct vent) for all MHGFinstallations.53 | Building Technologies Officeeere.energy.govEnergy Use Characterization:Purpose and MethodPurpose• Determine annual energy consumption of NWGFs and MHGFs at theconsidered efficiency levels to find annual energy costs and savings.• Annual energy costs are inputs to Life-Cycle Cost and Payback PeriodAnalysis.Method݁ݏܷ	ݕݐ݅ܿ݅ݎݐ݈݁ܿܧ ൅ ݁ݏܷ	݈݁ݑܨ ൌ ݁ݏܷ	ݕ݃ݎ݊݁ܧ	݈ܽݐ݋ܶ•Fuel Use:Total fuel consumption as a result of space heating load.•Electricity Use: Electrical consumption of allelectrical components, includingstandby mode and off mode consumption.54 | Building Technologies Officeeere.energy.govRECS2009SampleNWGFMHGFNoYes Non-MH MHHeatedsquarefootage≤10,000?CBECS2003SampleFuel typeNoYesOtherUsesfurnacefor spaceheating?Gas*Out ofSampleOut ofSampleOut ofSampleProduct Class Count# of Bldgs,millionRECS 2009NWGF 5700 53.7MHGF 195 2.5CBECS 2003NWGF 685 1.162MHGF 0 0* Includes natural gas and LPGEnergy Use Characterization:Building Sample Determination55 | Building Technologies Officeeere.energy.govEnergy Use Characterization:Building Sample Adjustments•Households sharing a furnace: RECS 2009-reported weight is decreased by thenumber of units sharingthe furnace as follows:•Buildings with multiple furnaces: RECS 2009-reported weight is increased by thenumber of furnaces in a building−Residential buildings over 5,000 square feet assumed to have two NWGFs .• Projected growth of the number of furnaces by 2021 based on shipments analysis.•Historical Shipments: matched NWGF sample weights to AHRI furnace shipments.•Disaggregating NWGFs from WGFs RECS 2009: used AHRI shipments data toaccount for weatherized gas furnaces in RECS 2009 sample.−About 10 percent of total furnaceshipments are weatherized furnaces−DOE multiplied the RECS 2009 weight for households with both a gas furnace and central airconditioning (CAC) by 0.97 for the North region, 0.79 for the hot-dry Rest of Country region, and0.82 for hot-humid Rest of Country region.Single-family home:share furnace with 1 other unitMulti-family home(2-4 units):share furnace with 3 other unitsMulti-family home (5+ units):share furnace with # of units reported in building56 | Building Technologies Officeeere.energy.govEnergy Use Characterization:FlowchartRECS2009/CBECS2003DataInputCapacityofExistingFurnaceHistoricalShipmentandModelDataFurnaceEnergyUseConstantFanOperatingHoursBurnerOperatingHoursFuelUseElectricityUseBuildingHeatingLoadRECS2009/CBECS2003DataHeating/CoolingLoadAdjustmentsConstantFanOperationFieldDataOperatingHoursUsefulEnergyOutputAFUEofExistingFurnaceUsefulHeatfromBlowerAdjustmentFactorsRECS2009/CBECS2003AgeHistoricalShipmentDataAverageFanPowerPowerofElectricalComponentsElectricityUseofAuxiliaryEquipmentASHRAEStandard103‐2007Non‐HeatingFanElectricityUseDifferentialCoolingOperatingHoursStandbyElectricityUse57 | Building Technologies Officeeere.energy.govEnergy Use CharacterizationFuel Use Determination• Input capacity of existing furnace basedon household characteristics, historicalshipment data, and AHRI model directory data.Burner Operating Hours•Useful Outputis the output of the furnace and alsoincludes useful heat from electricallosses.BuildingHeatingLoadin2021•QYR:annualfuelconsumptionforheatingbasedonRECS2009orCBECS2003.•AFUEex:AFUEoftheexistingfurnace(basedonageoffurnaceandhistoricalshipmentsdata).•BlowerHeat:usefulheatfromtheblower;basedonaveragefanpower.•AdjFactor:−Adjustedenergyusedataforaverageclimateconditions usingmostrecent10‐yearNOAAclimatedata.−Adjustedforchangesinbuildingshellefficiencyandclimatechangein2021.•FurnaceCount:numberoffurnacesusedtofulfillthebuildingheatingload.•NumberofUnitsServed:numberofhousingunitsservedbyeachfurnace.ݕݐܽܿ݅݌ܽܥ	ݐݑ݌݊ܫ	݊ܽܿ݁ݎݑܨ ൈ	 ݏݎݑ݋ܪ	݅݊݃ݐܽݎ݁݌ܱ	ݎ݊݁ݎݑܤ	 ൌ ݁ݏܷ	݈݁ݑܨൌ ݏݎݑ݋ܪ	݅݊݃ݐܽݎ݁݌ܱ	ݎ݊݁ݎݑܤܽ݀݋ܮ	ݐ݁ܽܪ	݈݅݀݅݊݃ݑܤݐݑ݌ݐݑܱ	݈ݑ݂݁ݏܷܮܪܤ௥௡௔௖௘ ி௨ൌܳோ௒ܧܷܨܣ ൈ௫௘݆݀ܣ ൈ ݐ݁ܽܪݎ݁ݓ݋݈ܤ ൅௥௢௧௔௖ிݐ݊ݑ݋ܥ݊ܽܿ݁ݎݑܨ݁݀ݒݎܵ݁ݏݐ݂ܷ݊݅݋ݎܾ݉݁ݑܰ ൈ58 | Building Technologies Officeeere.energy.govEnergy Use Characterization:Distribution of Fuel Use in Building SampleEquipmentClassAverage Heating Energy Usefrom RECS 2009/CBECS2003, MMBtu/yr (Median)Average Estimated HeatingEnergy Use in 2021 atBaseline, MMBtu/yr (Median)NWGF 50.5 (43.7) 42.7 (37.4)MHGF 39.7 (36.2) 33.3 (31.3)59 | Building Technologies Officeeere.energy.govEnergy Use CharacterizationElectricity UseActiveMode•ElecPowerElecComp= power of multiple electricalcomponents required during furnaceoperation (kW),•OHElecComp= operating hours of the electrical components,•ElecUseAux= electricity use of the auxiliaryequipment, such as condensate pumpsand heat tape (kWh), and•DiffElecUseFan= differential of electricity use ofthe furnace fan during cooling andcontinuous fan circulation, (kWh)(based on 2014 furnace fan final rule).StandbyMode•StbyE= power consumption during standby(kW) (from engineering analysis),• 8760 = hours in a year,•BOH= burner operating hours,•COH= cooling operating hours (basedon RECS 2009/CBECS 2003-reportedcooling energy use for households and buildings with a central air conditioner), and•CFOH= continuous fan operating hours (based on field studies).ܧ݈ܷ݁ܿݏ݁ ൌ ܧ݈ܷ݁ܿݏ݁௖஺௧௜௩௘ெ௢ௗ௘൅ ܧ݈ܷ݁ܿݏ݁ௌ௧௕௬݁ݏ݈ܷ݁ܿܧ௘ ௗ௢ெ௘௩௜௧஺௖ݎ݁ݓ݋݈݁ܿܲܧ ൌ௟௘௖஼௢௠௣ ாܪܱ ൈ௣௠௢஼௖௘௟ா݁ݏ݈ܷ݁ܿܧ ൅௨௫஺݁ݏ݈ܷ݁ܿܧ݂݂݅ܦ ൅௡௔௙݁ݏ݈ܷ݁ܿܧ௬௕ௌ௧ሻܪܱܨܥ െ ܪܱܥ െ ܪܱܤ െ 8760ሺ ൈ	 ܧݕܾݐܵ ൌ60 | Building Technologies Officeeere.energy.govEnergy Use Characterization:ResultsNon-Weatherized Gas Furnace, AFUE StandardsEL AFUEAnnual Fuel Use (MMBtu/yr)Annual ElectricityConsumption (kWh/yr)Total Savings Total SavingsNational0 80% 42.8 - 349.0 -1 90% 38.1 4.7 340.5 8.52 92% 37.3 5.5 335.1 13.93 95% 36.2 6.6 322.1 26.94 98% 34.8 7.9 349.7 (0.7)North0 80% 54.3 - 397.3 -1 90% 48.3 5.9 388.0 9.32 92% 47.3 7.0 381.5 15.73 95% 45.9 8.4 366.0 15.54 98% 44.2 10.1 398.4 (32.3)Rest of Country0 80% 29.8 - 294.6 -1 90% 26.6 3.3 287.0 7.62 92% 26.0 3.8 282.7 11.93 95% 25.2 4.6 272.5 22.14 98% 24.4 5.5 294.9 (0.3)61 | Building Technologies Officeeere.energy.govEnergy Use CharacterizationRequestforCommentDOEseeksinputonthefractionofconsumersthatturnthefurnaceoffduringthenon‐heatingseason.DOEinvitescommentandrecommendationsfrominterestedpartiesonanyaspectrelatingtotheEnergyUseCharacterization.62 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Energy PricesPurpose: Develop average marginal monthly prices by geographical area.Method: Multiply most current average annual energy prices by monthly pricefactors and marginal price factors.• 2012 average annual energy prices by geographical area based on:‒Electricity: EIA’s 2012 Form 826 data‒Natural Gas: EIA’s 2012 Natural Gas Navigator monthly‒LPG: EIA’s 2012 State Energy Consumption, Price, and ExpendituresEstimates (SEDS)• Monthly energy price factors by geographical area based on:‒Electricity: EIA’s 1993-2012 Form 826 monthly data‒Natural Gas: EIA’s 1993-2012 Natural Gas Navigator monthly data‒LPG: EIA’s 2009 Short Term EnergyOutlook 1995-2009 historical data• Marginal energy price factors for electricity and natural gas by 30 geographicalareas and 10 Census regions based on EIA monthly data from 2003-2012.63 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Energy Price Trends•Method: applied to 2012 average monthly marginal energy prices bygeographical area to projected future annual energy prices–2020-2040: trends based on EIA’sAEO 2014by census division–After 2040: trends based on Federal EnergyManagement Program (FEMP)guidelinesNational Residential Energy Price Forecasts64 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Energy Prices ResultsSummary of Non-Weatherized Gas Furnaces Average and Marginal Prices in 2021Energy Price UnitEnergy Prices (2013$)Fraction of AffectedShipmentsAverage MarginalNationalNatural Gas2013$/MMbtu 11.2 10.0 90%LPG2013$/MMbtu 26.0 26.0 10%Electricity2013$/kWh 0.123 0.115 100%NorthNatural Gas2013$/MMbtu 10.8 9.7 87%LPG2013$/MMbtu 26.0 26.0 13%Electricity2013$/kWh 0.126 0.114 100%Rest of CountryNatural Gas2013$/MMbtu 11.65 10.24 94%LPG2013$/MMbtu 26.0 26.0 6%Electricity2013$/kWh 0.119 0.117 100%65 | Building Technologies Officeeere.energy.govLCC and Payback Period Analyses:Repair and Maintenance•Repair Cost:Cost of replacing or repairing components in the furnace that have failed.•Sources: 2013 RS Means Facilities Repair and Maintenance Data,manufacturerliterature, Decision Analysts 2008 American Home Comfort Study.•Maintenance Cost:labor and materials required to maintain furnace.•Sources: Decision Analysts 2008 American Home Comfort Study,2013 RS MeansFacilities Repair and Maintenance Data.• Accounts for additional maintenance costs associated with condensate withdrawalsystem and condensate neutralizer.Product ClassEfficiencyLevelRepair Cost(2013$)Maintenance Cost(2013$)Annualized Incremental Annualized IncrementalNonWeatherizedGas Furnace80% $19.80 - $38.20 -90% $22.52 $2.72 $40.06 $1.8692% $22.52 $2.72 $40.06 $1.8695% $22.52 $2.72 $40.06 $1.8698% $22.52 $2.72 $40.06 $1.86Mobile HomeGas Furnace80% $8.84 - $37.79 -92% $9.90 $1.05 $39.62 $1.8495% $9.90 $1.05 $39.62 $1.8497% $9.90 $1.05 $39.62 $1.8466 | Building Technologies Officeeere.energy.govLCC and Payback Period Analyses:Lifetime•Definition: Age when the furnace is retired from service.•Method: Used national survey data and manufacturer shipment datato calculate the distribution of lifetimesProduct Class MeanWeibull ParametersAlpha (scale) Beta (shape)Location(delay)All Furnaces21.5 22.9 3.37 167 | Building Technologies Officeeere.energy.govLCC and Payback Period Analyses:Residential Discount Rates•Purpose: Used to determine the present value of lifetime operating expenses.•Method: Derived from various types of debt and equity using the FederalReserve Board’sSurvey of Consumer Finances.• Primary data sources: Federal Reserve Board’sSurvey of Consumer Financesfor the years 1995, 1998, 2001, 2004, 2007, and 2010.Income Group Discount Rate (%)1 4.852 5.123 4.754 4.045 3.806 3.57Overall Average 4.49Average real effective discount68 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Base Case Efficiency DistributionPurpose: Reflects projected marketshares of products at different efficiency levels in thebase case (in the absence of standards).• Not all consumers purchase products at current minimum standard.• LCC analysis recognizes that consumers already purchasing products at efficiencies greater than orequal to a prospective standard level are not impacted by the standard.Method: Projected NWGF and MHGF efficiencymarket share in 2021 for each productclass based on historical shipment data and theshare of models in each product class fromthe latest AHRI certification directory.Sources:•Number of shipments disaggregated by non-condensing and condensing gas furnaces from AHRI(1978-1992, 1992-2009)•AHRI Directory of Certified Product Performance•ENERGY STAR® unit shipments for NWGFs from 2009-2012Efficiency,AFUE2021 Market share in percent, NWGFsNational North, Repl North, New South, Repl South, New80% 53.4% 33.0% 34.7% 77.6% 70.4%90% 5.2% 5.5% 8.8% 3.4% 5.5%92% 17.9% 15.8% 32.4% 13.9% 20.2%95% 23.0% 44.9% 23.6% 4.9% 3.8%98% 0.5% 0.8% 0.6% 0.1% 0.2%69 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Base Case Efficiency Distribution Chart0%10%20%30%40%50%60%70%80%90%100%

Condensing market shareHistorical, NationalProjected, NationalHistorical, NorthProjected, NorthHistorical, Rest of CountryProjected, Rest of Country70 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Product Switching Methodology• In the face of high installation costs for a condensing NWGF, someconsumers may choose to switch toelectric space heating optionsunder a standards case.•Switching options–Space heating: non-condensing NWGFcondensing NWGF, EF, or HP–Space cooling: CACCAC or AH + HP–Water heating: GSWHGSWH or ESWH•Inputs: total installed cost, first year operating cost, lifetime, energyprices of alternative space conditioning and water heating options.• Switching decision based on PBP of condensing NWGF relative toalternative product– 2006, 2008, 2010, and 2013 American Home Comfort Survey (AHCS)– average space conditioning energy cost determined from RECS 2001,RECS 2005, and RECS 200971 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Product Switching OptionsNon-condensingNWGFCondensingNWGFElectricFurnaceHeat PumpCentral AirConditionerCentral AirConditionerAirHandler/HeatPumpWater HeatingGas WaterHeatingElectric WaterHeating72 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Product Switching Options73 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Product Switching OptionsExisting Product Combination New Space Heating New Water Heating Cooling(1) Non-Cond. NWGFCondensing NWGF N/A N/AEF N/A N/A(2) Non-Cond. NWGF + CACCondensing NWGF N/A CACEF N/A CACAH/EF N/A HP(3) Non-Cond. NWGF + HPCondensing NWGF N/A HPAH/EF N/A HP(4) Non-Cond. NWGF + GSWHCondensing NWGF GSWH N/ACondensing NWGF ESWH N/AEF GSWH N/AEF ESWH N/A(5) Non-Cond. NWGF + GSWH+ CACCondensing NWGF GSWH CACCondensing NWGF ESWH CACEF GSWH CACEF ESWH CACAH/EF GSWH HPAH/EF ESWH HP(6) Non-cond. NWGF + GSWH +HPCondensing NWGF GSWH HPCondensing NWGF ESWH HPAH/EF GSWH HPAH/EF ESWH HP74 | Building Technologies Officeeere.energy.govExisting Product CombinationReplacement New ConstructionNational NorthRest ofCountryNational NorthRest ofCountryNon-Cond. NWGF2.6% 4.0% 1.7% 2.7% 4.2% 1.7%Non-Cond. NWGF + CAC10.2% 7.0% 12.3% 10.8% 12.4% 9.8%Non-Cond. NWGF + HP1.0% 0.2% 1.5% 0.9% 0.2% 1.4%Non-Cond. NWGF + GSWH17.2% 27.3% 10.8% 7.4% 9.5% 6.0%Non-Cond. NWGF + GSWH + CAC65.9% 59.5% 70.0% 72.7% 68.9% 75.2%Non-cond. NWGF + GSWH + HP3.1% 2.1% 3.7% 5.5% 4.9% 5.8%LCC and Payback Period Analysis:Product Switching Options StatisticsFraction of Installations of Product Combinations in 202175 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Product Switching Decision CriteriaYearAverage Cost Consumers areWilling to Pay for 25% HigherEfficiencyNominal $ 2013$2006 $720 $ 831.992008 $832 $ 900.742010 $817 $ 872.832013 $564 $ 564.00Average $ 792.39YearAverage SpaceConditioning Energy CostNominal $ 2013$2001 $667 $877.382005 $792 $944.932009 $825 $896.05Average $906.12Maximum Product Price Consumers would Pay to PurchaseHigher-Efficiency Products Based on AHCS (2006-2013)Average Space Conditioning Energy Cost (Heating and Cooling)from RECS 2001, 2005, and 2009ܲݎ݅ܿ݁ெ௢௥௘ିா௙௙௜௖௜௘௡௧	௉௥௢ௗ௨௖௧ݐݏ݋ܥ	ݕ݃ݎ݊݁ܧ	݊݅݊݃݋݅ݐ݊݀݅݋ܥ	ܽܿ݁݌ܵ	݂݋	25%ൌ$792ݎ݁ܽݕ$906/ ൈ 25%ݏݎ݁ܽݕ	3.5 ൌ76 | Building Technologies Officeeere.energy.govInput Data SourceProduct EFs CACs and HPs WHsProduct PriceDetermined incrementalcost compared to NWGFsbased on RS Means 2013data2011 CAC and HP directfinal rule2010 heating products finalruleFuture Price TrendSame as NWGFsHistorical PPI andshipment data(decreasing)Assumed to be constantInstallation,Maintenance, andRepair CostsRS Means 2013 Residential Cost Data, manufacturer literatureEnergy Efficiency• DOE furnace andboiler test procedure(98% AFUE)• New: minimum efficiencyunder standards that tookeffect in 2015• Existing: historicalshipments• New: minimumefficiencies to take effectin 2015• Existing: Historicalstandards enacted in1990 and 2004LifetimeSame as NWGFs Based on 2011 direct finalruleBased on 2010 final ruleLCC and Payback Period Analysis:Product Switching Data Inputs77 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Product Switching ResultsPercent of Product Switching for Replacement Units in Residential SectorConsumer OptionNational Standard at:*90% AFUE 92% AFUE 95% AFUE 98% AFUENorthRest ofCountryNorthRest ofCountryNorthRest ofCountryNorthRest ofCountryPurchase NWGF atStandard Level88.40% 79.99% 88.89% 80.02%87.02% 75.08% 84.67% 65.35%Switch from Non-Cond.NWGF to EF**3.08% 5.76% 2.76% 5.68% 3.08% 5.79% 3.41% 7.20%Switch from Non-Cond.NWGF to HP**8.52% 14.26% 8.35% 14.30% 9.89% 19.12% 11.92% 27.44%Total100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Switch from GSWH toESWH2.68% 2.56% 2.27% 2.71% 2.76% 3.04% 3.33% 3.94%* Components may not add to100 percent due to rounding.**Includes households that also switch froma gas water heater to an electric water78 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:ResultsExample: Non-Weatherized Gas FurnaceEfficiencyLevelAFUEAverage Costs2013$SimplePaybackyearsAverageLifetimeInstalledCostFirst Year’sOperatingCostLifetimeOperatingCostLCCNational0 80%$2,218 $642 $10,314 $12,533 -- 21.51 90%$2,654 $589 $9,388 $12,042 8.2 21.52 92%$2,669 $579 $9,228 $11,897 7.2 21.53 95%$2,788 $565 $8,985 $11,773 7.4 21.54 98%$2,948 $554 $8,771 $11,718 8.3 21.5North0 80%$2,410 $807 $12,923 $15,333 -- 21.51 90%$2,985 $737 $11,761 $14,746 8.3 21.52 92%$3,000 $724 $11,555 $14,556 7.2 21.53 95%$3,133 $706 $11,251 $14,385 7.2 21.54 98%$3,311 $690 $10,979 $14,290 7.7 21.5Rest of Country0 80%$2,003 $456 $7,374 $9,376 -- 21.51 90%$2,280 $422 $6,714 $8,994 8.1 21.52 92%$2,295 $415 $6,606 $8,901 7.1 21.53 95%$2,398 $406 $6,430 $8,828 7.9 21.54 98%$2,539 $401 $6,281 $8,820 9.6 21.579 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:ResultsExample: Non-Weatherized Gas FurnaceEfficiency Level AFUELife-Cycle Cost Savings% of Consumers thatExperience Net CostAverage Savings* 2013$National0 80%0% --1 90%22% $2362 92%20% $3053 95%24% $3884 98%40% $441North0 80%0% --1 90%11% $2082 92%10% $2773 95%14% $3744 98%37% $467Rest of Country0 80%0% --1 90%33% $2672 92%31% $3363 95%35% $4044 98%43% $41280 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Results Comparison (Effect of Product Switching)Comparison of Results With and Without Product Switching for NWGFsELAverage LCC Savings Simple Payback Period% of Consumers thatExperience Net Cost2013$ YearsWithoutSwitchingWithSwitchingWithoutSwitchingWithSwitchingWithoutSwitchingWithSwitchingNational1$164 $236 12.2 10.6 23% 22%2$238 $305 9.0 7.7 20% 20%3$311 $388 9.6 8.9 24% 24%4$332 $441 12.9 12.0 41% 40%North1$169 $208 9.6 8.8 12% 11%2$244 $277 5.9 5.3 10% 10%3$343 $374 8.0 7.8 14% 14%4$435 $467 12.0 11.8 37% 37%Rest of Country1$158 $267 13.8 11.8 35% 33%2$232 $336 11.0 9.5 32% 31%3$276 $404 11.3 10.1 36% 35%4$215 $412 14.3 12.4 47% 43%81 | Building Technologies Officeeere.energy.govAGA Analysis vs. DOE NOPRAnalysisAGA Case Study• Based on a simplified model to calculate impacts of potentialcondensing (90% AFUE standard)• Incorporates fuel switching results from 2013-2014 builder andcontractor product switching survey conducted by GTI• Uses shipment data for a single year (2012)• Uses market data for 2013 (energy use, energy prices, source energyfactors, emissions) for a single city or state to represent each region• Results are presented for 10 regions and aggregated to national levelAGA study conclusions• Increased energy costs ($44.91 million/yr)• Increased source energy use (0.0005 Quads/yr)• Increased CO2 emissions (350,000 tons/yr)82 | Building Technologies Officeeere.energy.govAGA Analysis vs. DOE NOPRAnalysisKey differences• AGA impacts are not based on household specific economic criteria to assessthe individual households that are switching and their energy use and energyprices:Conclusions• AGA’s assumptions of higher heating load and higher electricity prices (andlower natural gas prices) for the households that switch leads to higherimpacts of switching on national energy costs, source energy use, andemissions compared to DOE’s analysis.Inputs AGA Analysis DOE NOPR AnalysisSpaceHeating Load(Energy Use)assumes that households thatswitch have same space heatingload as those that do not switchuses household specific analysis whichshows that switching households havelower space heating loadEnergyPricesassumes that households thatswitch have same energy pricesas those that do not switchuses household specific analysis whichshows that switching households tendto have lower electricity prices andhigher natural gas prices than thosethat don’t switch83 | Building Technologies Officeeere.energy.govLCC and Payback Period Analysis:Consumer Subgroup AnalysisPurpose:Evaluate impacts on groups or customers who may bedisproportionately affected by a proposed national energy conservation standard.– Subgroups: Low-income householdsand senior-only households.Example: Non-Weatherized Gas Furnace, ComparisonEL AFUEAverage Life-Cycle Cost Savings Simple Payback Period2013$yearsSenior-Only Low-IncomeAllConsumersSenior-Only Low-IncomeAllConsumersNational1 90%$255 $176 $236 7.8 9.6 8.22 92%$326 $247 $305 6.8 8.3 7.23 95%$427 $330 $388 6.9 8.3 7.44 98%$542 $485 $441 7.5 8.5 8.3North1 90%$223 $148 $208 7.9 9.1 8.32 92%$293 $228 $277 6.9 7.8 7.23 95%$405 $346 $374 6.7 7.6 7.24 98%$573 $624 $467 7.1 7.5 7.7Rest of Country1 90%$293 $209 $267 7.5 10.8 8.12 92%$367 $269 $336 6.7 9.6 7.13 95%$454 $312 $404 7.3 10.0 7.94 98%$504 $321 $412 8.6 11.7 9.684 | Building Technologies Officeeere.energy.govLCC and Payback Period AnalysisRequestforCommentDOEinvitescommentsandrecommendationsfrominterestedpartiesonanyaspectrelatingto Life‐CycleCostandPaybackPeriodAnalysis.85 | Building Technologies Officeeere.energy.govPublic Meeting Agenda1Overview2Scope; Engineering Analysis3Life Cycle Cost Analysis; Subgroup Analysis4Shipments Model; NIA; RIA5MIA6Environmental; Employment; Side Research7Closing Remarks86 | Building Technologies Officeeere.energy.govShipments Analysis:Purpose and MethodologyPurpose• Forecast the NWGFs and MHGFs that would be expected to be shippedbetween 2021 and 2050 with and without energy conservation standards.Method•Shipment Projections:Estimate the number of NWGFs and MHGFsshipped annually in the absence of new standards (base case) and for thestandard cases between 2021 and 2050 regionally and by market segment:‒Replacements: Historical shipments used to generate product stock. Survivalfunction based on product lifetime applied tostock. Demolished units removedfrom stock.‒New Construction: New housing construction projections multiplied by newconstruction market saturations. Determined using new building constructionprojections and historical market shares.‒New Owners: Existing buildings that acquire a NWGF for the first time.•Efficiency Projections: Projects the percent of shipments in each productclass at each efficiency level in the base case and for the standard cases.87 | Building Technologies Officeeere.energy.govShipments Analysis:Methodology FlowchartNewInstallationsHistoricalNewConstructionSaturationsProjectedNewHousingStartsReplacementShipmentsHistoricalAnnualShipmentsRetirementFunctionTotalShipmentsNewOwnersHistoricalNewOwnerShipmentsSwitching*Demolitions***Switchingtoelectricspaceconditioningand/orwaterheatingproductsbasedonproductswitchingmethodology.**Basedonyear‐to‐yearchangestoprojectedhousingstock.88 | Building Technologies Officeeere.energy.govShipments Analysis:Data SourcesInput SourcesHistoricalAnnualShipments• Appliance Magazine gas furnace shipments, 1961-2012• AHRI historical shipments, 1972-2005• AHRI historical shipments, combined NWGF and MHGF, 2005-2009.• Census MHGF new constructiondata, MHGF lifetime, AmericanHousing Survey (AHS) saturation data used to disaggregate NWGFand MHGF historical shipments.RetirementFunctionBased on lifetime distribution (see TSD chapter 8).Historical NewConstructionMarketSaturations• Saturations from Characteristics of New Housing data, U.S. CensusBureau.• U.S. Census historical housing starts data.• RECS 2009 saturation data.Projected NewConstructionStartsEIA’sAEO 2014projections.ProductSwitchingBased on consumer choice modelin LCC Analysis (see TSD chapter8).89 | Building Technologies Officeeere.energy.govShipments Analysis:Historical and Projected ShipmentsHistoricalandProjectedBaseCaseShipmentsforNWGFsandMHGFs0.01.02.03.04.05.0

Shipments (million)Mobile Home Gas FurnacesNon-Weatherized Gas FurnacesHistorical Projected90 | Building Technologies Officeeere.energy.govProjected NWGF Base Case Shipments0.01.02.03.04.05.06.0

Shipments (million)North - New OwnersNorth - New ConstructionsNorth - Replacement UnitsRest of Country - New OwnersRest of Country - New ConstructionsRest of Country - Replacement UnitsShipments Analysis:Projected Shipments by Region and Market91 | Building Technologies Officeeere.energy.govShipments Analysis:Product Switching FractionsSpace HeatingOptionNWGF AFUEStandardFraction of Shipments that Do Not Switch (%)North Rest of CountryReplacement New Const. Replacement New Const.NWGF 80%80% 100.0 100.0 100.0 100.0NWGF 90%90% 88.4 82.9 80.0 78.9NWGF 92%92% 88.9 83.1 80.0 78.8NWGF 95%95% 87.0 79.1 75.1 74.6NWGF 98%98% 84.7 73.3 65.4 67.3Fraction of Shipments that Switch to Electric Heating (%)80% NWGF toElectric Furnace80% 0.0 0.0 0.0 0.090% 3.1 5.1 5.8 5.292% 2.8 4.9 5.7 5.095% 3.1 5.6 5.8 7.098% 3.4 7.3 7.2 6.880% NWGF toHeat Pump80% 0.0 0.0 0.0 0.090% 8.5 12.0 14.3 16.092% 8.4 12.0 14.3 16.295% 9.9 15.4 19.1 18.398% 11.9 19.4 27.4 25.9Fuel Switching Impacts Due to NWGF Standards92 | Building Technologies Officeeere.energy.govShipments AnalysisDOE seeks input on the fraction of NWGFs and MHGFs that areused in commercial applications.RequestforCommentDOE seeks input on the methodology and data sources used forprojecting the future shipments of NWGFs and MHGFs in theabsence of amended energy conservation standards.DOE seeks input on the potential impacts on product shipmentsrelated to fuel and product switching.93 | Building Technologies Officeeere.energy.govNational Impact AnalysesPurpose• Estimate the national impacts ofenergy conservation standards forNWGFs and MHGFs shipped between 2021 and 2050.−National Energy Savings (NES):Primary energy savings.−Net Present Value (NPV):Difference between the present value of annualenergy expenditures and the present value of annual equipmentexpenditures.Method• For each product class in each standards case:1. Calculate per-unit cost increase and per-unit energy savings.2. Calculate number of units (stock) in use from 2021 to 2050.3. Combine the above to determine NES and NPV.94 | Building Technologies Officeeere.energy.govNational Impact Analyses*Overlifetimeofproductsshippedfrom2021‐2050.NationalEnergySavingsStandards‐CaseCumulativeEnergyUse*Base‐CaseAnnualEnergyConsumptionShipmentsAnalysisBase‐CaseCumulativeEnergyUse*NationalEnergySavingsSitetoSourceEnergyConversionStandards‐CaseAnnualEnergyConsumptionStandards‐CaseProjectionBase‐CaseProjection95 | Building Technologies Officeeere.energy.govNational Impact AnalysesNetPresentValueStandards‐CaseProjectionBase‐CaseProjectionCumulativeTotalConsumerCostIncrease*EnergyCostNetPresentValueDiscountRateCumulativeOperatingCostSavings*ShipmentsAnalysisMaintenanceandRepairCostTotalInstalledCostEnergyCostMaintenanceandRepairCostTotalInstalledCost*Overlifetimeofproductsshippedfrom2021‐2050.96 | Building Technologies Officeeere.energy.govInput DescriptionAnnual Unit EnergyConsumptionFunction of product efficiency for each product class from LCC analysis results.ShipmentsProjected shipments for each product class under the base case and all standardscases.Product StockDetermined yearly stock using annual shipments and lifetimes for each product class.Rebound Effect15%Base-Case EfficienciesDeveloped a distribution of efficienciesin the base case for 2021 (see TSD chapter8). In each standards case, “roll-up” scenario is used to establish the efficiencydistribution. Future trends are based onhistorical data and stakeholder input.Site-to-Power PlantConversion FactorConverts site energy into primary(power plant) energy consumption (AEO 2014)Full-Fuel-CycleAccount for energy used for resource extraction and distribution losses. (AEO 2014)Total Installed Cost perUnitFunction of product efficiency for each product class based on LCC analysis.Calculated by vintage.Total Operating Costper UnitIncludes costs for energy, maintenance, andrepair derived as a function of equipmentefficiency for each product class based on LCC analysis.Calculated by vintage.Discount RateUsed to determine present value of futuremonetary values. 7% and 3% real fromOMB’s Regulatory Analysis Guideline A-4.NationalImpactAnalyses:InputsNationalImpactAnalyses(NIA)Inputs97 | Building Technologies Officeeere.energy.govEfficiencyLevelMarket Share for Non-Weatherized Gas Furnaces2021Base Case2021 Standards Case1* 2* 3 4 5Baseline55% NA/76% NA/76%15% 25%/4% NA/4%217% 34%/15% NA/15% 77%323% 40%/5% 99%/5% 23% 100%40% 1%/0% 1%/0% 0% 0% 100%•Productsbelowstandardwill“roll‐up”tocomplywithstandards.Productsatorabovethestandardwillnotbeaffected.Base‐CaseEfficienciesNationalImpactAnalyses*RegionalTSL(North/RestofCountry)0%20%40%60%80%100%

NWGF Market Share98% AFUE95% AFUE92% AFUE90% AFUE80% AFUEProjectionofBase‐CaseEfficiencyDistributionforNWGFs98 | Building Technologies Officeeere.energy.govNational Impact AnalysesTSL Selection Criteria for each product class:•TSL 5: Max-tech efficiency levels•TSL 4:Yields maximum NPV at 7% discount rate and for which the percentage of LCCwinners is higher than the percentage of LCC losers•TSL 3:92-percent AFUE efficiency levels•TSL 2:95-percent efficiency level for the North and baseline non-condensing efficiencylevel for the Rest of Country•TSL 1:Baseline condensing efficiency level for the North and baseline non-condensingefficiency level for the Rest of CountryProduct ClassAFUE (%)TSL 1 TSL 2 TSL 3 TSL 4 TSL 5Non-Weatherized Gas Furnaces90%/80% 95%/80% 92% 95% 98%Mobile Home Gas Furnaces92%/80% 95%/80% 92% 95% 97%TrialStandardLevels(TSLs)– AFUEStandardsTSL3isProposedTSL99 | Building Technologies Officeeere.energy.govNational Impact AnalysesTSL Selection Criteria for each product class:•TSL 3:Switching mode power supply with low-loss transformer•TSL 2:Switching mode power supply•TSL 1:Low-loss transformerProduct ClassPower (Watts)TSL 1 TSL 2 TSL 3Non-Weatherized Gas Furnaces9.5 9.2 8.5Mobile Home Gas Furnaces9.5 9.2 8.5TrialStandardLevels(TSLs)– StandbyModeandOffModeStandardsTSL3isProposedTSL100 | Building Technologies Officeeere.energy.govProduct ClassTSL 1 TSL 2 TSL 3 TSL 4 TSL 5PrimaryEnergySavingsNon-Weatherized Gas Furnaces1.004 1.756 2.124 3.263 4.364Mobile Home Gas Furnaces0.062 0.066 0.127 0.131 0.142Total*1.066 1.821 2.251 3.394 4.507Full-FuelCycle EnergySavingsNon-Weatherized Gas Furnaces1.222 2.054 2.638 3.963 5.322Mobile Home Gas Furnaces0.069 0.073 0.141 0.146 0.159Total*1.291 2.126 2.780 4.110 5.481National Impact AnalysesNationalEnergySavings– AFUEStandards(quads)TSL3isProposedTSL* Components may not sum tototal due to rounding.101 | Building Technologies Officeeere.energy.govProduct ClassDiscountRateTSL 1 TSL 2 TSL 3 TSL 4 TSL 5Non-Weatherized Gas Furnaces3%8.1 13.5 15.1 20.4 24.1Mobile Home Gas Furnaces0.6 0.7 1.0 1.1 1.2Total *8.6 14.1 16.1 21.5 25.3Non-Weatherized Gas Furnaces7%1.9 3.3 2.8 3.7 3.3Mobile Home Gas Furnaces0.2 0.2 0.3 0.3 0.3Total *2.1 3.6 3.1 4.0 3.7National Impact AnalysesNetPresentValueofConsumerBenefit‐AFUEStandards(billion2013$)TSL3isProposedTSL* Components may not sumto total due to rounding.102 | Building Technologies Officeeere.energy.govProduct Class TSL 1TSL 2TSL 3Primary EnergySavingsNon-Weatherized Gas Furnaces0.147 0.176 0.264Mobile Home Gas Furnaces0.0002 0.0002 0.0003Total *0.147 0.176 0.264Full-Fuel CycleEnergy SavingsNon-Weatherized Gas Furnaces0.154 0.184 0.276Mobile Home Gas Furnaces0.0002 0.0002 0.0003Total *0.154 0.185 0.277National Impact AnalysesNationalEnergySavings– StandbyModeandOffModeStandards(quads)TSL3isProposedTSL* Components may not sumto total due to rounding.103 | Building Technologies Officeeere.energy.govNational Impact AnalysesNetPresentValueofConsumerBenefit‐StandbyModeandOffModeStandards(billion2013$)Product ClassDiscountRateTSL 1TSL 2TSL 3Non-Weatherized Gas Furnaces3%2.1 2.0 3.3Mobile Home Gas Furnaces0.002 0.002 0.003Total *2.1 2.0 3.3Non-Weatherized Gas Furnaces7%0.7 0.6 1.0Mobile Home Gas Furnaces0.001 0.001 0.001Total *0.7 0.6 1.0TSL3isProposedTSL* Components may not sum tototal due to rounding.104 | Building Technologies Officeeere.energy.govPurpose• Investigate national impacts of non-regulatory alternatives to mandatoryamended energy conservation standards.Method• Used modified NIA spreadsheet to evaluate non-regulatory alternatives toproposed standards:Results• DOE identified 155 programs from 65 organizations offering rebates rangingfrom $50 to $800 for the purchase of condensing furnaces.• No alternative was found to be as beneficial as the proposed energyconservation standards. (See chapter 17 of the TSD for methodology andresults.)Regulatory Impact Analysis• No New Regulatory Action • Manufacturer Tax Credits• Consumer Rebates • Voluntary Energy EfficiencyTargets• Consumer Tax Credits • Bulk Government Purchases105 | Building Technologies Officeeere.energy.govNational Impact AnalysesRequestforCommentDOE seeks input on the reasonableness of the value that DOEused to characterize the rebound effect with higher-efficiencyNWGFs and MHGFs.106 | Building Technologies Officeeere.energy.govPublic Meeting Agenda1Overview2Scope; Engineering Analysis3Life Cycle Cost Analysis; Subgroup Analysis4Shipments Model; NIA; RIA5MIA6Environmental; Employment; Side Research7Closing Remarks107 | Building Technologies Officeeere.energy.govMIA: OverviewPurpose• To assess the impacts of standards on manufacturers• To identify and estimate impactson manufacturer subgroups thatmay be more severely affected than the industry as a whole• To examine the direct employment, manufacturing capacity, andcumulative regulatory impacts on the industryMethodology• Analyze industry cash flow and industry net present value (INPV)through use of the Government Regulatory Impact Model (GRIM)• Interview manufacturers to refine inputs to the GRIM, developsubgroup analyses, and address qualitative issues108 | Building Technologies Officeeere.energy.govMIA: Methodology• Phase 1– DOE creates an industry profileto characterize the market andidentify important issues that require further investigation.• Phase 2– DOE prepares a draft industry cash flow model and aninterview questionnaire to guide subsequent discussions withmanufacturers.• Phase 3– DOE interviews manufacturers and assesses the impacts ofstandards both quantitatively (using the GRIM) and qualitatively(impacts on employment, competition, manufacturing capacity,and regulatory burden).109 | Building Technologies Officeeere.energy.govMIA: Key Issues Raised byManufacturers• Replacement Market Installation Costs• Product Switching• Regional Enforcement• Reduced Product Differentiation110 | Building Technologies Officeeere.energy.govMIA: Methodology• Upstream Inputs– Market and Technology Assessment (MTA) Industry Profile– Engineering MPCs– Shipments• MIA Inputs– Markup Scenarios– Conversion Costs111 | Building Technologies Officeeere.energy.govMIA: Markup Scenarios• DOE modeled three markup scenarios to capture a range ofpotential financial impacts on the industry:– Preservation of Gross Margin Percentage Markup Scenario• Manufacturers pass through additional costs to their consumersand maintain a gross margin percentage in the standards case.– Preservation of Operating Profit Markup Scenario• Manufacturers maintain the same total operating profit in absolutedollars in the standards case as in the base case, despite a higherlevel of investment.– Three Tier Markup Scenario• Manufacturers reduce profit margins on high efficiency products asthese products become the baseline, higher volume product.112 | Building Technologies Officeeere.energy.govMIA: INPV Results for Active ModeUnits Base CaseTrial Standard Level12345INPV (2013$ M)1,055.13990.91to1,049.23825.40to1,063.76972.99to1,064.35742.42to1,103.17548.11to1,084.42Change in INPV (%)-(6.09)to(0.56)(21.77)to0.82(7.79)to0.87(29.64)to4.55(48.05)to2.78Product Conversion Costs (2013$ M) - 15.77 23.00 16.47 23.00 64.36Capital Conversion Costs (2013$ M) - 16.95 33.24 38.53 65.81 199.94Total Conversion Costs (2013$ M) - 32.72 56.24 55.00 88.81 264.30113 | Building Technologies Officeeere.energy.govCumulative Regulatory Burden• Furnace Fan and Furnace rules– Rules impact design and manufacturing of same product– Rules occur in a similar timeframe– Design changes and conversion costs are largely additiveDOE seeks comment on the impacts of the cumulative burden presented bythese rules and information on the potential for cost-reducing synergies interms of improving the energy efficiency of furnaces and furnace fans at thesame time.Effective Year MPC Increase(NWGF / MHF)Conversion CostRes. Furnaces TSL 4 2021 $145 / $154 $84MRes. Furnaces TSL 3 2021 $91 / $98 $55MFurnace Fans 2019 $68 / $6 $41M114 | Building Technologies Officeeere.energy.govMIA: Small Business Impacts• DOE identified three domestic small business manufacturersof furnaces.– Small businesses were defined as having 750 employees orfewer based on SBA small business size standards (NAICScode 333415).• One domestic small business manufacturer of nonweatherized gas-fired furnaces.• Two domestic small business manufacturers of mobile homegas-fired furnaces.DOE requests comment on the number of small manufacturers of furnaces; onthe potential impacts of amended energy conservation standard on those smallmanufacturers; and on the severity of those impacts.115 | Building Technologies Officeeere.energy.govMIA: INPV Results for Standby ModeUnits Base CaseTrial Standard Level123INPV (2013$ M)1,055.131,053.41to1,054.611,046.10to1,055.581,042.97to1,055.99Change in INPV (%)-(0.16)to(0.05)(0.86)to0.04(1.15)to0.08Product Conversion Costs (2013$ M)-1.35 1.35 1.35Capital Conversion Costs (2013$ M)----Total Conversion Costs (2013$ M)-1.35 1.35 1.35116 | Building Technologies Officeeere.energy.govPublic Meeting Agenda1Overview2Scope; Engineering Analysis3Life Cycle Cost Analysis; Subgroup Analysis4Shipments Model; NIA; RIA5MIA6Environmental; Employment; Side Research7Closing Remarks117 | Building Technologies Officeeere.energy.govEmissions AnalysisPurpose•Estimateemissionreductionsresultingfromamendedstandards.•IncludesFFCemissions,includingpowerplantandupstreamemissions.•Includesfugitivemethaneemissions.Method•UsedoutputfromAEO2014referenceandstandardcasestoestimatemarginalemissionfactors.ResultsEmissionAFUEStandards(TSL 3)Standby Mode and OffMode Standards (TSL 3)CO2(million metric tons)137.3 15.6NOX(tons)815.9 24.3SO2(tons)-202.6* 13.0Hg (tons)-0.629* 0.040* Negative values indicatean increase in emissions.118 | Building Technologies Officeeere.energy.govMonetization of Emission ReductionsPurpose•Estimatethemonetarybenefitofreducedemissionsresultingfromtheproposedenergyconservationstandard.Method•UsedthemostcurrentSocialCostofCarbon(SCC)valuesdevelopedthroughinteragencyreviews.–SCCisintendedtobeamonetarymeasureoftheincrementaldamageresultingfromgreenhousegas(GHG)emissions,includingbutnotlimitedtoagriculturalproductivityloss,humanhealtheffects,propertydamagefromrisingsealevel,andchangesintheecosystem.•Interagencyestimates1ofthepotentialglobalbenefitsresultingfromreducedCO2emissionsin2015are$12.0,$40.5,$62.4,and$119permetricton(2013$).•DOEalsomonetizedNOxemissionsreductionsresultingfromamendedstandards.2– Estimatesofmonetaryvaluerangefrom$476to$4,893pershortton.– DOEcalculatedmonetarybenefitsusingamediumvalueof$2,684pershortton.•DOEisstillevaluatingappropriatevaluestousetomonetizeavoidedSO2andHgemissions.1: Interagency Working Group, 2010 and 20132: OMB report to Congress, 2006119 | Building Technologies Officeeere.energy.govMonetization of Emission ReductionsResults: FFC Emission Reductions Benefits (AFUE Standards)million 2013$TSL 1 TSL 2 TSL 3 TSL 4 TSL 5CO2358.1 to5,640615.4 to9,637732.3 to11,7351,115 to17,7521,484 to23,621NOX3% discount rate384 529.5 878.6 1,199 1,634NOX7% discount rate142.5 195 318.4 434.4 593.7TSL3isProposedTSL120 | Building Technologies Officeeere.energy.govEmissions Impact AnalysisDOE seeks input on the approach for estimating monetarybenefits associated with emission reductions.RequestforCommentDOE seeks input on the approach for conducting the emissionsanalysis for NWGFs and MHGFs.121 | Building Technologies Officeeere.energy.govUtility Impact AnalysisPurpose•Assessimpactsonelectricinstalledcapacityandgenerationresultingfromtheadoptionofpotentialenergyconservationstandards.Method•ModeledenergysavingsimpactsfromTSLsusingAEO2014togenerateforecaststhatdeviatefromtheAEOreferencecase.Results•Changesintotalelectricitygeneration.•Changestothemixofelectricitygenerationbyfueltype.•Changestototalinstalledcapacity.Seechapter15oftheTSD.122 | Building Technologies Officeeere.energy.govEmployment Impact AnalysisPurpose•Assesstheoverallimpactonindirect*nationalemploymentfromtheproposedenergyconservationstandardthatresultsfromshiftingconsumerexpendituresamonggoodsandservicesandchangingproductandenergycosts.Method•DOEusedtheImpactofSectorEnergyTechnologies(ImSET)modelfortheevaluationofindirectemploymentimpacts.Results•DOEanticipatesthatnetlabormarketimpactswillbesmallovertimeduetothesmallmagnitudeoftheshort‐termeffects.(Seechapter16oftheTSD.)*DirectnationalemploymentimpactsarediscussedintheManufacturerImpactAnalysis(MIA).123 | Building Technologies Officeeere.energy.govAlternative Venting Technologies• DOE is funding research in the area of venting.−Momen, A. M., J. Munk, K. Biswas, and P.Hughes, Condensing Furnace Venting Part 1:The Issue, Prospective Solutions, and Facility for Experimental Evaluation, October2014. Oak Ridge National Laboratory. Oak Ridge, Tennessee.<http://web.ornl.gov/sci/buildings/docs/Condensing-Furnace-Venting-Part1-Report.pdf>−Momen, A. M., J. Munk, and P. Hughes, Condensing Furnace Venting Part 2: Evaluationof Same-Chimney Vent Systems for Condensing Furnaces and Natural Draft WaterHeaters, February 2015. Oak Ridge National Laboratory. Oak Ridge, Tennessee.http://web.ornl.gov/sci/buildings/docs/Condensing-Furnace-Venting-Part2-Report.pdf• Retrofit solution for Type B metal chimneys approved by UL in January 2015.• LCC analysis is not based on this new technology, but DOE is hopeful that thisresearch shows promise for the future. If these technologies were to becomemarket proven, they would help mitigate potential impacts of this rule.SideResearchDOEseekscommentontheresearchandreportsonalternativeventingtechnologies.124 | Building Technologies Officeeere.energy.govSame-Chimney Vent Systems for Condensing Furnaces and NaturalDraft Water Heaters Using M&G DuraVent Retrofit SolutionsSideResearchIn an unlined Masonry ChimneyIn a Type B Metal Chimney(already UL listed and for sale)Images from Momenet al.2015.New vent capNew flexible stainlesssteel liner (vent forcondensing furnace)Pre-existing Type B ventVent for water heater(annular space)New flexible stainlesssteel liner (vent forcondensing furnace)New flexible aluminumliner (vent for waterheater)New vent capPre-existing unlinedmasonry chimney125 | Building Technologies Officeeere.energy.govSideResearchDOEseekscommentontheresearchandreportsonalternativeventingtechnologies.RequestforComment126 | Building Technologies Officeeere.energy.govPublic Meeting Agenda1Overview2Scope; Engineering Analysis3Life Cycle Cost Analysis; Subgroup Analysis4Shipments Model; NIA; RIA5MIA6Environmental; Employment; Side Research7Closing Remarks127 | Building Technologies Officeeere.energy.govClosing RemarksMeeting participants are invited to provide closingremarks at this time.128 | Building Technologies Officeeere.energy.govHow to Submit Comments• In all correspondence, please refer to the furnace rulemakingby:–Energy Conservation Standards for Furnaces–Docket Number: EERE–2014–BT–STD–0031–Regulatory Identification Number (RIN): 1904-AD20• Email:ResFurnaces2014STD0031@ee.doe.govPostalMail:Ms.BrendaEdwardsU.S.DepartmentofEnergyBuildingTechnologiesOfficeMailstopEE‐5B1000IndependenceAvenue,S.W.Washington,DC20585‐0121Courier:Ms. Brenda EdwardsU.S. Department of EnergyBuilding Technologies OfficeL’Enfant Plaza, S.W., Suite 600Washington, DC 20024Telephone: (202) 586-2945•Comment period closes June 10, 2015 at 11:59 PM EDT