U.S. Department of Energy



### Energy Efficiency and Renewable Energy ife-Cycle Cost and Payback Period Analysis



# LCC and PBP Analysis Inputs

From Engineering Analysis (Price is a function of Efficiency)

From Markups for Eguiement Price Determination

From Energy Use Determination (Use is a function of Efficiency) Baseline

Manufacturer Cost Std-Level Manufacturer Cost

Energy Use Annual Energy Expense

Repair Cost

Maintenance Cost Annual )perating Expense
Lifetime

Energy and Water Price Trends 81

# Energy Prices

• Energy prices are used to convert energy use to energy costs. • DOE will develop electricity prices from DOE-Energy Information Administration (EIA) Form 861 data. • DOE will develop natural gas prices from DOE-EIA Natural Gas Monthlydata. • DOE will use the DOE-EIA Annual Energy Outlook (AEO) for projections of future average energy prices (reference, high, and low scenarios). • DOE may evaluate other quantitative price projections provided by stakeholders as sensitivities.
Item 8-3 DOE seeks stakeholder input on the planned approach for estimating current and forecasted energy prices.
82

# Maintenance, Repair and Installation Costs

• DOE does not currently have information indicating that routine repair and maintenance costs are different for more and less efficient clothes dryers and room air conditioners. • Installation costs may change if more efficient products are significantly larger or heavier.
Item 8-4 DOE seeks stakeholder input on whether it is correct to assume that changes in maintenance, repair, and installation costs will be negligible for more-efficient clothes dryers and room air conditioners.

83

# Product Lifetimes

• DOE proposes to use an analysis where product lifetimes for the base case and standards case are the same. • Past DOE analyses have used the following product lifetimes: - Clothes Dryers: 13 years. - Room Air Conditioners: 12.5 years.

Item 8-5 DOE seeks input on appropriate product lifetimes for the residential clothes dryer and room air conditioner products covered in this rulemaking.

84

# Discount Rate

• Discount rates are used to convert streams of annual operating expenses to present value in the LCC analysis. • DOE will use similar approach as for other residential product standards rulemakings. - Derived from estimates of the "finance cost" to purchase residential products. - Finance cost based on: • Financial cost of any debt incurred to purchase products (e.g., credit cards, home equity loans) • Opportunity cost of any equity to purchase products (e.g., stocks, bonds, savings accounts) 

## - Federal Reserve Board's Survey of Consumer Finances is a source of much of the equity and debt data.
Item 8-6 DOE seeks stakeholder input on the planned approach for estimating discount rates for residential consumers. 85

# Steps in the Standards Rulemaking: ANOPR

Market & Technology Screening Analysis Framework Document

Engineering Analysis

Preliminary Manufacturer Impact Analysis ANOPR

Markups for Equipment Price Determination

Energy Use Determination Final Rule Effective

Date

Life-Cycle Cost and Payback Period Analysis

Shipments Analysis National Impact Analysis

86STks`3ti 

# Shipments Analysis WIN AN 11, W -



## • Purpose: - Quantify changes in product shipments due to potential new energy efficiency standards.



## • Method: - The shipments model will rely on a range of data sources. - The model will only consider shipments of covered products.

87

### cents Analysis



# Base-Case Shipments Forecast Approach

• 

## Depicts the situation where new standards are not adopted. • Shipments forecast accounts for: (1) product sales to new construction and (2) replacements for failed units. • Historical forecasts ('backcasts') calibrated to historical shipments. - Calibration performed by accounting for product sales to existing households that do not already own the appliance. 

# • Data requirements: New construction product sales • New housing construction forecasts: EIA's Annual Energy Outlook. • Historical rates of product ownership (saturation rates): EIA's RECS & AHAM's Fact Book. 

### Replacements • Product lifetimes and retirement functions of LCC and PBP analysis. Historical shipments 

## 88

# Request for Comment

Item 9 -1 DOE seeks data on representative saturation rates for residential clothes dryers and room air conditioners.

89

# Clothes Dryer Historical Shipments Data

• DOE requests historical shipments data in order to calibrate its base-case shipments forecasts.

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006
90

# Room Air Conditioner Historical Shipments Data

• DOE requests historical product class market share data in order to calibrate its base-case shipments forecasts. - DOE already has historical shipments from the AHAM Fact Book and Appliance magazine for all room air conditioners.

2000 2001 2002 2003 2004 2005 2006 r 

# 77

** Total market share percentages for each year should equal 100%.

91

## ergy Ef it 

# Request for Comment

Item 9 -2 For residential clothes dryers, DOE seeks historical shipments data broken down by product class. For room air conditioners, DOE seeks historical market share data showing the percentage of product shipments in each product class.

92

# Standards Impacts on Shipments

• DOE develops Standards-Case Forecasts from the same data it used to develop the Base-Case Forecast. Standards-Case Forecasts also use purchase price increases and operating cost savings to estimate shipments impacts. It is difficult to obtain data showing sensitivity of shipments to purchase price and operating costs. - DOE may forecast Standards-Case shipments forecasts with scenarios (i.e., specific percentage drops in annual shipments for particular efficiency levels). 

## • DOE will consider impacts from market-pull programs.

93

# Request for Comment

Item 9-3 As part of its preliminary manufacturer impact analysis, DOE will seek input from manufacturers on the potential impact of new energy conservation standards on product shipments. Other stakeholders are also welcome to provide input. DOE also requests input on any market-pull programs that currently exist to promote the adoption of more-efficient residential clothes dryer and room air conditioner products.

94

# Steps in the Standards Rulemaking: ANOPR

Market & Technology Screening Analysis Framework Document

Engineering Analysis

Preliminary Manufacturer Impact Analysis ANOPR

Markups for Equipment Price Determination

Energy Use Determination Final Rule Effective

Date

Life-Cycle Cost and Payback Period Analysis

Shipments Analysis 

### Standards

National Impact Analysis

95

# National Impact Analysis

• Purpose: - Determine the projected national energy savings and consumer national net present value. 

## • Method: - Develop annual series of national energy and economic impacts. - Utilize the shipments model to estimate the total stock of appliances in service each year. - Utilize the LCC to estimate cost and energy use per unit in any given year. - Aggregate the costs and energy use for all years in the analysis period. - Report national energy savings (NES) in Quads of primary energy consumption (One Quad = 1 quadrillion BTUs = 293 terawatt hours). - Report estimates for economic impact as change in consumer National Net Present Value (NPV) (in constant year dollars). - Account for the time-value of money though defined discount rates. 96

# National Energy Savings Flow Diagram

Base-Case Projection

--------- 2043

r ---------------------- 2016 2015 Base Case 2014 Annual Energy Consumption

Base-Case Cumulative Energy Use 0 

### Shipments Analysis

Site to Source Energy Conversion 

# 1 National Energy Savings 1 StandardsCase Projection

r- ------ _-,----- 2043

r -----------------------" 2016 2015 Standards Case 14 Annual Energy Consumption

Standards-Case Cumulative Energy Use

97

# National Consumer Net Present Value Flow Diagram

Base-Case Projection
Energy Cost (2014 - 20XX) Maint &

Repair Cost (2014- 20)O() Equipment

Cost (2014- 2043)

Cumulative Operating Cost Savings 0 

### Shipments Analysis

Discount Rate 

# 1 Net Present Value Energy

Cost (2014 - 20XX)

4 StandardsCase Projection

Maint & Repair Cost (2014 - 20XX) Equipment

Cost (2014- 2043)

Cumulative Total Equipment 

### Cost Increase

98

# Shipment

-Weighted Efficiency and Market Share Efficiency Data • Shipment-weighted efficiency data: - Key components of the national impact analysis are dependent on shipment-weighted efficiencies. • Per-unit annual energy consumption-needed to determine NES. 

### • Retail price and per-unit annual operating costs-needed to determine NPV. - Historical trends in product efficiency help project future product efficiencies for the base-case. 

## • Market share efficiency data - Historical market share efficiency data help estimate how standards will impact base-case efficiencies. - Market share data (or base-case efficiency distributions) are requested in the LCC and PBP analysis (slide 79) and will also be used in the national impact analysis. • DOE has assumed a "roll up" scenario to forecast standards impacts in past standards rulemakings.
99

# Clothes Dryer Historical Efficiency Data

• DOE requests historical shipment-weighted average efficiency data by product class in order to calculate NES and NPV. DOE assumes that shipment-weighted efficiency data for vent-less dryers are not available-DOE will still analyze vent-less dryers in national impact analysis but will need to estimate efficiencies

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006 100

# Room Air Conditioner Historical Efficiency Data

DOE requests historical shipment-weighted average efficiency data by product class in order to calculate NES and NPV.

101

# Request for Comment

Item 10 -1 For both residential clothes dryers and room air conditioners, DOE seeks historical shipment-weighted efficiency data by product class. DOE also seeks historical market share data showing the percentage of product shipments by efficiency level for as many product classes as possible.
Item 10 -2 DOE seeks input on its plan to develop NES spreadsheet models for estimating national impacts of amended energy conservation standards for residential clothes dryers and room air conditioners.

102

# Public Meeting Agenda

NOPR Analyses

103IN .& I OVINW-OrPROOMMM s"



## Energy Effici

## ency 

### and 

## Renewable Energy Bringing you a prosperous future where energy is dean, abundant, reliable, and affordable

Revise ANOPR Analyses 

### Energy Conservation Standards 

# Steps in the Standards Rulemaking: NOPR

Life-Cycle Cost Subgroup Analysis Manufacturer Utility Employment

Impact Impact Impact Analysis Analysis Analysis Environmenta 'Assessment Regulatory

Impact Analysis

104

# Steps in the Standards Rulemaking: NOPR

Revise ANOPR Analyses Framework

Document

Life-Cycle Cost Subgroup Analysis ANOPR Final Rule

Manufacturer Utility Employment Impact Impact Impact Analysis Analysis Analysis Environmenta Assessment Regulatory

Impact Analysis

Engineering Analysis 

## L Life-Cycle

Cost & Payback Period Analyses National

Impact Analysis 105VI n W



### Energy Efficiency and Renewable Energy Bringingyou a prosperous future where energy is clean, abundant, reliable, and afforda 

### ife-Cycle Cost Subgroup Analysis



# Life-Cycle Cost Subgroup Analysis • Purpose: - Analyze the economic impacts of standards on consumers, including subgroups who may be disproportionately impacted compared with the general user population.


## • Method: - Extend the LCC analysis to examine the impacts for defined subgroups.

106

# Request for Comment

Item 11 -1 DOE requests input as to what, if any, consumer subgroups are appropriate in considering standards for residential clothes dryers and room air conditioners.

107

# Steps in the Standards Rulemaking: NOPR

Life-Cycle Cost Subgroup Analysis e

Manufactur Impact Analysis

WOUNEWOO Utility Employment

Impact Impact Analysis Analysis Environmenta 'Assessment Regulatory

Impact Analysis

Engineering Analysis 

## L Life-Cycle

Cost & Payback Period Analyses National

Impact Analysis 108

# Manufacturer Impact Analysis

• Purpose: - Assess the impacts of standards on manufacturers. - Identify and estimate impacts on manufacturer subgroups that may be more severely impacted than the industry as a whole. - Examine the impact of cumulative regulatory burden on the industry.


## • Method: - Analyze industry cash flow and net present value through use of the Government Regulatory Impact Model (GRIM). - Interview manufacturers to refine inputs to the GRIM, develop subgroup analyses, and address qualitative issues.

109

# Methodology

• In the NOPR phase, the MIA will consist of phases 2 and 3

NOPR

110 ANOPR 

### Phase 1 Phase 2 Phase 3

* Government Regulatory Impact Model (GRIM)

# Methodology: Phase 2

• Consists of the strawman GRIM and interview guide preparation

Starting point for discussion of impacts Inputs include: Manufacturer prices Shipment forecasts >> Manufacturing cost estimates Financial information 

## m md^ ^^ 7 7, T- 7 

### Interview topics include:

>>

Impact of the standard's effective date Engineering analysis Shipments model Cost structure and financial parameters Conversion costs Cumulative burden Direct employment impacts Import / Export issues Consolidation / competitive impacts Replacement parts or refurbishments

111U.S.



### Energy Et nd Renewable Energy

p a }ea a energy is dean abundant, reliable, and affordable 

### Manufacturer pact Analysis 

# Methodology: Phase 3 Consists of the manufacturer interviews, subgroup analyses, and assessment of industry impacts
anufacturer Interview; Confidential discussion of potential impacts resulting from standards, including: >> Obsolescence of existing manufacturing assets Tooling Investment Assess competitive impacts on smaller, significant manufacturers Assess cumulative regulatory burden on manufacturers from amended DOE standards and other

subgroups Assess impacts on manufacturer regulatory actions Assess impacts on industry employment levels

112

### We Energy



# Cumulative Regulatory Burden
• Regulations that could affect the industries impacted by this rulemaking include: - DOE standards for residential clothes dryers and room air conditioners enacted since 1990 - DOE standards for residential clothes washers that took effect in 2007 - Anti-circumvention rulemaking - CFC and HCFC phaseout by 2010 - Reduction of Hazardous Substances (RoHS) EU directive

113I.S. 

### Dow



## Ene hci Manufacturer Impact Analysis



# Request for Comment

Item 12-1 DOE welcomes comment on what potential manufacturer subgroups for residential clothes dryers and room air conditioners it should consider in a manufacturer subgroup analysis.
Item 12 -2 DOE welcomes comment on whether there are other regulations or pending regulations that it should consider in its examination of cumulative regulatory burden.

114

# Steps in the Standards Rulemaking: NOPR

Life-Cycle Cost Subgroup Analysis Manufacturer

Impact Analysis

Z Engineering Analysis 

## L Life-Cycle

Cost & Payback Period Analyses National

Impact Analysis Utility \ Employment Impact Impact Analysis Analysis Environmenta Assessment Regulatory

Impact Analysis

115

## Energy E iciency and Renewable Energy Bringing you a prosperous Mute where energy is clean, abundant, reliable, and affordable



# Utility Impact Analysis • Purpose: Utility Impact Analysis



## - Assess the overall impacts on domestic energy supplies that would result from the imposition of standards. 

## • Method: DOE proposes to use NEMS

- BT, a variant of the NEMS ( National Energy Modeling System ) developed and used by DOE/EIA for their Annual Energy Outlook (AEO) report , as the basis of the Utility Impact Analysis. Outputs of the utility impact analysis include forecasts of electricity and gas sales , price, and avoided capacity resulting from a comparison of base and standards cases. DOE will model the energy savings impacts from amended energy conservation standards using NEMS-BT to generate forecasts that deviate from the AEO reference case.

116

# Request for Comment

Item 13-1 DOE seeks input from stakeholders on its plans to use NEMS-BT to conduct the utility impact analysis.
Item 13-2 Should DOE consider using methods or tools other than NEMS in the utility impact analysis? If so, please discuss identified alternatives.

117

### Enemy Conserva



# Steps in the Standards Rulemaking: NOPR

Framework ANOPR ` r`'''' Document Rule Date Final Effective

Revise Life-Cycle Manufacturer Utility Employment 1 Regulatory ANOPR Cost Impact Impact U. Impact Environmenta A t Impact Analyses Subgroup Analysis Analysis Analysis 4 ssessmen Analysis

Analysis `ow



# 2 Engineering Analysis Life-Cycle

Cost & Payback Period Analyses National

Impact Analysis 118

# Employment Impact Analysis

• Purpose: - Assess the overall impact on national employment from the imposition of efficiency standards at differing levels. - Include both direct and indirect employment impacts. • Direct employment impacts are estimated in the manufacturer impact analysis. • Indirect employment impacts result from shifting consumer expenditures among goods and services ( "substitution effect") and changing equipment and energy costs ("income effect"). 

## • Method: - DOE intends to use the ImSET (Impact of Sector Energy Technologies) model for the evaluation of indirect employment impacts. (Note: ImSET is an update of IMBUILD.)

119

## Energy Efficiency and Renewable Energy Bringing you a pros ous future where energy is clean, abundant, reliable, and affordable



# Request for Comment

Item 14-1 DOE welcomes feedback on its planned approach for assessing national employment impacts, both direct and indirect.

120

# Steps in the Standards Rulemaking: NOPR

Revise ANOPR Analyses Framework Final Effective ^r^, • " Documen ANOPR

t Rule Date

Life-Cycle Cost Subgroup Analysis Manufacturer Utility Employment

Impact Impact Impact Analysis Analysis Analysis Environmenta Assessment Regulatory

Impact Analysis


# \1 I Engineering Analysis Life-Cycle

Cost & Payback Period Analyses National

Impact Analysis 

## L 121=rays x.' 'Fk'k4^ tiaN^ Ad a %sSHa4.x 2:en'z1' iAm, L..35^" ,.vZa^b t d 

### Environmental Assessment



# Environmental Assessment • Purpose: - Estimate national environmental impacts from new energy efficiency standards for residential clothes dryers and room air conditioners. • Method: - DOE intends to use the environmental impacts predicted from the NEMS-BT modeling analysis used for the Utility Impacts Analysis. Impacts calculated within NEMS include: • Quantities of U.S. emissions of carbon (C02), nitrogen oxides (NOX), sulfur dioxide (S02), and mercury from power plants. • Due to existing legislation that caps SO2 and effectively caps NOX and mercury, physical emission reductions will be zero or nearly zero from any single appliance standard. - DOE will carry out a separate analysis to estimate in-building emissions from gas-fired clothes dryers. 122

# Request for Comment ronmental Assessment



## Item 15-1 Are there any other environmental factors DOE should consider in this rulemaking?
Item 15-2 Are there other approaches to the environmental assessment that DOE should consider?

123

### Energy Conservation Standards

Revise ANOPR Analyses 

# Steps in the Standards Rulemaking: NOPR

Life-Cycle Cost Subgroup Analysis

Life-Cycle Cost & Payback Period Analyses Manufacturer Utility Employment

Impact Impact Impact Analysis Analysis Analysis

National Impact Analysis Environmenta Assessment Regulatory

Impact Analysis

124

# Regulatory Impact Analysis

• Purpose: - Explore the potential for non-regulatory alternatives to new energy efficiency standards.


## • Method: - Base the assessment on the actual impacts of any such initiatives to date, but consider information presented regarding the impacts that any existing initiative might have in the future.

125N. d'.• ;. '^. 4 :. }8 i4'= ^ LNi'^ts+i Z I^ ^ 6 3 .^ .^



# Public Meeting Agenda

Closing Remarks

126

## Closing Remarks



# How to Submit Written Comments
In all correspondence , please refer to the Residential Clothes Dryer and Room Air Conditioner rulemaking by: - Framework Document for Residential Clothes Dryers and Room Air Conditioners, - Docket Number EERE-2007-BT-STD-010, and - Regulatory Identification Number (RIN) 1904-AA89
Email: home-appliance2.rulemaking@ee.doe.gov Postal Mail: Ms . Brenda Edwards-Jones

U.S. Department of Energy Building Technologies Program, Mailstop EE-2J 1000 Independence Avenue, SW Washington, DC 20585-0121 Courier : Same as above, except "Room 1 J-018" in place of "Mail Stop EE-2J"

Telephone: (202) 586-2945 Comment period closes November 6, 2007 127