Energy Conservation Standards forCommercial Unitary Air Conditioners and Heat PumpsANOPR Public MeetingNOPR Analyses and Next StepsBuilding Technologies ProgramOffice of Energy Efficiency and Renewable EnergyU.S. Department of EnergySeptember 30, 20042NOPR Analyses Flow DiagramManufacturerImpactAnalysisUtilityImpactAnalysisTrialStandardLevelsReviseANOPRAnalysesEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis3ANOPR RevisionsRevise ANOPR AnalysesANOPR AnalysisActionEngineering Analysis•Consider ANOPR comments•Revise using latest dataLife-Cycle Cost and PaybackPeriod Analyses•Consider ANOPR comments•Revise using latest data•Conduct LCC Sub-Group AnalysisNational Impacts Analysis•Consider ANOPR comments•Revise using latest data4IssuesCustomer Sub-Groups(ANOPR Issue #14)The Department seeks comments on building characteristics that canbe used as an indicator of annual revenues in order to identifysmaller businesses.Smaller businesses have been identified as a possible sub-group to beanalyzed for the NOPR in the LCC Sub-Group Analysis.The Department does not have annual revenues for businesses in thebuildings analyzed in the LCC analysis.5NOPR Analyses Flow DiagramManufacturerImpactAnalysisUtilityImpactAnalysisTrialStandardLevelsReviseANOPRAnalysesEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis6Trial Standard LevelsSelection of Trial Standard LevelsPurpose•To develop a list of standard levels from which impacts are weighed and aproposed standard level is selected– Each trial standard level consists of aset of potential minimum efficiency levelscovering all product classes, and may vary between product classes– NOPR analyses assess impacts for trial standard levels (not product classes)Method•Trial standard levels are assembled fromthe product classes identified in theANOPR– Candidate standard levels covera range of efficiencies including:Most energy efficientlevel (max tech)Efficiency level with the lowest life-cycle costEfficiency level with a paybackperiod of three years or lessEfficiency levels withnoteworthy technologiesEfficiency levels that fill in largegaps between candidate standard levels– Each trial standard level consists ofthe candidate standard level from eachproduct class that meetsone of the above criteria7Trial Standard LevelsTrial Standard Level CriteriaA critical part of the NOPR analysis on which the Department is seekingearly guidance and input.•Trial standard levels are created from combinations of candidatestandard levels at a product class level.•Based around a consistent theme, such as lowest life-cycle cost orpayback in 3-years or less.The Department seeks comments on the criteria for selecting TrialStandard Levels.8NOPR Analyses Flow DiagramManufacturerImpactAnalysisUtilityImpactAnalysisTrialStandardLevelsReviseANOPRAnalysesEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis9Manufacturer Impact AnalysisManufacturer Impact AnalysisPurpose•To assess the impacts of standards oncommercial air-conditioner and heat pumpmanufacturers•To identify and estimate impacts on manufacturer sub-groups that may be moreseverely impacted thanthe industry as a whole•To examine the impact of cumulativeregulatory burdens on the industryMethod•Analyze industry cash flow and net present value through use of the GovernmentRegulatory Impact Model (GRIM)•Interview manufacturers to refine inputsto the GRIM, developsub-group analyses,and address qualitative issuesOutput•Industry Net Present Value impacts•Sub-group Net Present Value impacts•Other impacts10Manufacturer Impact AnalysisManufacturer Impact Analysis ProcessThe MIA consists of three phasesIndustryprofileDevelopstraw-manGRIM*DevelopinterviewguideInterviews& industrywide /subgroupanalysesAssess directemployment,competition,cumulativeburdenFinalizeMIA resultsfor NOPRPhase 2Phase 3Phase 1* Government Regulatory Impact Model (GRIM)11Manufacturer Impact AnalysisThe MIA is both concurrent and coordinated with activities throughoutthe rulemaking process.Phase IIndustry ProfilePhase IIIManufacturer InterviewsRevise Industry Cash FlowManufacturer Subgroup AnalysisQualitative AssessmentPhase II“Strawman” GRIMManufacturer Impact AnalysisOther Rulemaking AnalysesScreening AnalysisScreening AnalysisEngineering AnalysisEngineering AnalysisLCC AnalysisLCC AnalysisNational EnergySavings AnalysisNational EnergySavings AnalysisConsumer SubgroupConsumer SubgroupUtility ImpactsUtility ImpactsEnvironmental ImpactsEnvironmental ImpactsIndirect EmploymentImpactsIndirect EmploymentImpacts12Manufacturer Impact AnalysisPhase I: Industry ProfileCollect financial and market information•Industry reports•Company annual reports and websites•Trade journals•U.S. Census Bureau•SEC 10-K form filings•ANOPR information: manufacturer production costs, markups andmanufacturer selling prices, shipments13Manufacturer Impact AnalysisPhase II: Develop Straw-man GRIMThe Government Regulatory Impact Model (GRIM) is an industrycash flow analysis to estimate the change in industry value dueto the introduction of new efficiency standards.Manufacturer PricesShipmentsManufacturing CostsFinancial InformationCash Flow Impacts,Changes in Industry NPVGRIM14Manufacturer Impact AnalysisPhase II: Develop Interview GuideA critical aspect of the MIA involves interviews with manufacturers. Aninterview guide is sent to manufacturers in preparation for Phase III.Interview topics will include . . .•Engineering analysis•Shipments model•Cost structure and financial parameters•Conversion costs (capital expenditures, tooling, R&D, testing)•Impact of other regulations / cumulative burden•Direct employment impacts•Import / Export issues•Consolidation / competitive impacts•Replacement parts or refurbishments•Impact of the standard’s effective date•Other topics important to manufacturers15Manufacturer Impact AnalysisPhase III: Manufacturer InterviewsExpected timeframeTime and personnel commitment for manufacturers (industry-wideGRIM, GRIM assumptions, subgroup analysis discussion)Confidentiality agreements16Manufacturer Impact AnalysisPhase III: Manufacturer Subgroup AnalysisThe subgroup analysis is a more focused version of the industrywide analysis.•Work with subgroup representatives totailor a GRIM incorporating uniquefinancial characteristics•Consider and focus on issues of importance to the subgroup, includingemployment, capacity utilization and cumulative burden•Review draft findings withsubgroup members during developmentThe Department invites comment and discussion on manufacturersubgroups to be analyzed.17NOPR Analyses Flow DiagramManufacturerImpactAnalysisUtilityImpactAnalysisTrialStandardLevelsReviseANOPRAnalysesEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis18Utility Impact AnalysisUtility Impact AnalysisPurpose•To investigate the effects on utilities from reduced energy sales and peak loaddemand due to potential standardsMethod•Uses national energy savings results•Uses the Energy Information Administration’s National Energy Modeling System(NEMS) tailored for DOE’s BuildingTechnologies Program (NEMS-BT)Output•Change in electricity sales and price by region•Change in the mix of electricity generation•Change in new capacity construction19NOPR Analyses Flow DiagramManufacturerImpactAnalysisUtilityImpactAnalysisTrialStandardLevelsReviseANOPRAnalysesEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis20Employment Impact AnalysisEmployment Impact AnalysisPurpose•To report net jobs created or eliminated nationally as a consequence of newenergy efficiency standardsMethod•Uses the IMBUILD tool, a buildings-sector version ofthe IMPLAN national inputoutput model•Changes in equipment and energy expenditures taken from the National EnergySavings Analysis•Direct employment impacts taken from the Manufacturer Impact AnalysisOutput•Change in employment by sectoras a consequence of new standards21NOPR Analyses Flow DiagramManufacturerImpactAnalysisUtilityImpactAnalysisTrialStandardLevelsReviseANOPRAnalysesEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis22Environmental AssessmentEnvironmental AssessmentPurpose•To report environmental impacts as aconsequence of newenergy efficiencystandards, including changes in power plant emissionsMethod•Energy savings results taken fromthe National Energy Savings Analysis•Energy Information Administration’s National Energy Modeling System (NEMS)provides power-plant emissionsOutput•Estimate of national emission reductions of NOxand CO223NOPR Analyses Flow DiagramManufacturerImpactAnalysisUtilityImpactAnalysisTrialStandardLevelsReviseANOPRAnalysesEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis24Regulatory Impact AnalysisRegulatory Impact AnalysisPurpose•To investigate the national impacts dueto non-regulatory alternatives comparedwith mandatory energy efficiency standards•The non-regulatory alternativesthat may be considered:– No new regulatory action;early replacement; prescriptive standards; customer taxcredits; manufacturer tax credits; customer rebates; voluntary efficiency targets; bulkgovernment procurementMethod•Modify NES spreadsheet model to consider scenarios. Changes may include:energy prices and escalation factors; implicit marketdiscount rates; customerpurchase price, operating cost, and income elasticities; and equipment stockdataOutput•National Energy Savings and Net Present Value of the non-regulatoryalternatives•Impact of non-regulatory alternativeson purchase price and use of energyefficient equipment25ClosingThe Energy Policy and Conservation Act (EPCA) directs DOE toconsider seven factors when setting energy conservation standardsFactorAnalysis1. Economic impact on consumers andmanufacturersLife-cycle cost analysisManufacturer impacts analysis2. Lifetime operating cost savingsLife-cycle cost analysis3. Total projected energy savingsNational impact analysis4. Impact on utility or performanceScreening analysisEngineering analysis5. Impact of any lessening ofcompetitionManufacturer impacts analysis6. Need for national energyconservationNational impact analysis7. Other factors the Secretaryconsiders relevantEnvironmental assessmentUtility impact analysisEmployment impact analysis26How to Submit Comments...Public Meeting– oral comments will be captured in the transcript andbecome part of the public record.Written comments– ANOPR comment period open until Nov. 12, 2004Reference docket #: EE-RM/STD-01-375 and/or RIN #: 1904-AB09Email: commercialairconditioner.anopr@ee.doe.govMail: Ms. Brenda Edwards-JonesU.S. Department of EnergyBuilding Technologies Program, Mail stop EE-2JANOPR for Commercial Unitary AirConditioners and Heat Pumps,EE-RM/STD-01-3751000 Independence Avenue, SWWashington DC, 20585-0121Courier: Ms. Brenda Edwards-JonesU.S. Department of EnergyBuilding TechnologiesProgram, 1J-0181000 Independence Avenue, SWWashington DC, 20585-0121