After a regulatory action has been completed, Executive Order 12866 requires agencies 

to identify the substantive changes between the draft submitted to Office of Information 

and Regulatory Affairs (OIRA) for review and the action subsequently announced, and to 

identify those changes made at the suggestion or recommendation of OIRA.
Draft Deliberative Document under EO 12866 Interagency Review. Do Not Cite, Quote 

or Release. Subject to Further Policy Review.

[6450-01-P]

DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket Number EERE–2012–BT–STD–0041]

RIN: 1904-AC85

Energy Conservation Program for Certain Industrial Equipment: Energy 

Conservation Standards for Single Package Vertical Air Conditioners and Single 

Package Vertical Heat Pumps

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy.

ACTION: Notice of proposed rulemaking (NOPR) and announcement of public meeting.

SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as amended,

prescribes energy conservation standards for various consumer products and certain 

commercial and industrial equipment, including single package vertical air conditioners 

and single package vertical heat pumps. EPCA also requires that each time the American 

Society of Heating, Refrigerating, and Air-conditioning Engineers (ASHRAE) Standard 

90.1 is amended with respect to the standard levels or design requirements applicable to 

that equipment, the U.S. Department of Energy (DOE) must adopt amended uniform 

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Draft Deliberative Document under EO 12866 Interagency Review. Do Not Cite, Quote 

or Release. Subject to Further Policy Review.

national standards for this equipment equivalent to those in ASHRAE Standard 90.1, 

unless DOE determines that there is clear and convincing evidence showing that morestringent, amended standards would be technologically feasible and economically 

justified, and would save a significant additional amount of energy. In this notice, DOE 

has tentatively concluded that there is sufficient record evidence to support morestringent standards for two classes of this equipment. However, for four equipment 

classes, DOE is proposing to adopt the revised ASHRAE levels, due to the absence of 

any models on the market in two classes, and absence of any models above the revised 

ASHRAE level in the remaining two classes. Accordingly, DOE is proposing amended 

energy conservation standards for all classes of single package vertical air conditioners 

and single package vertical heat pumps. The noticeDOE also announces a public meeting 

to receive comment on these proposed standards and associated analyses and results.

DATES: Meeting: DOE will hold a public meeting on [Day of week, Month, Day, 

Year], from 9:00 a.m. to 4:00 p.m., in Washington, DC. The meeting will also be 

broadcast as a webinar. See section VII, “Public Participation,” for webinar registration 

information, participant instructions, and information about the capabilities available to 

webinar participants. 

Comments: DOE will accept comments, data, and information regarding this 

notice of proposed rulemaking (NOPR) before and after the public meeting, but no later 

than [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE 

FEDERAL REGISTER]. See section VII, “Public Participation,” for details.

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or Release. Subject to Further Policy Review.

ADDRESSES: The public meeting will be held at the U.S. Department of Energy, 

Forrestal Building, Room [NUMBER], 1000 Independence Avenue, SW., Washington, 

DC 20585. To attend, please notify Ms. Brenda Edwards at (202) 586–2945. Please note 

that foreign nationals visiting DOE Headquarters are subject to advance security 

screening procedures. Any foreign national wishing to participate in the meeting should 

advise DOE as soon as possible by contacting Ms. Edwards at the phone number above to 

initiate the necessary procedures. Please also note that any person wishing to bring a 

laptop computer into the Forrestal Building will be required to obtain a property pass. 

Visitors should avoid bringing laptops, or allow an extra 45 minutes. Persons may also

attend the public meeting via webinar. For more information, refer to section VII, 

“Public Participation,” near the end of this noticethe preamble. 

Due to the REAL ID Act implemented by the Department of Homeland Security 

(DHS), there have been recent changes regarding identification (ID) requirements for 

individuals wishing to enter Federal buildings from specific States and U.S. territories. 

As a result, driver's licenses from the following States or territory will not be accepted for 

building entry, and instead, one of the alternate forms of ID listed below will be required.

DHS has determined that regular driver's licenses (and ID cards) from the 

following jurisdictions are not acceptable for entry into DOE facilities: Alaska, American

Samoa, Arizona, Louisiana, Maine, Massachusetts, Minnesota, New York, Oklahoma, 

and Washington.

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Draft Deliberative Document under EO 12866 Interagency Review. Do Not Cite, Quote 

or Release. Subject to Further Policy Review.

Acceptable alternate forms of Photo-ID include: U.S. Passport or Passport Card; 

an Enhanced Driver's License or Enhanced ID-Card issued by the States of Minnesota, 

New York or Washington (Enhanced licenses issued by these States are clearly marked 

Enhanced or Enhanced Driver's License); a military ID or other Federal governmentissued Photo-ID card.

Instructions: Any comments submitted must identify the NOPR for Energy 

Conservation Standards for Single Package Vertical Air Conditioners and Single Package 

Vertical Heat Pumps, and provide docket number EERE-2012–BT–STD–0041 and/or 

regulatory information number (RIN) number 1904-AC85. Comments may be submitted 

using any of the following methods: 

1. Federal eRulemaking Portal: www.regulations.gov. Follow the instructions for 

submitting comments. 

2. E-mail: SPVU2012STD0041@ee.doe.gov. Include the docket number and/or 

RIN in the subject line of the message. Submit electronic comments in 

WordPerfect, Microsoft Word, PDF, or ASCII file format, and avoid the use of 

special characters or any form of encryption.

3. Postal Mail: Ms. Brenda Edwards, U.S. Department of Energy, Building 

Technologies Office, Mailstop EE-5B, 1000 Independence Avenue, SW., 

Washington, DC, 20585-0121. If possible, please submit all items on a compact 

disc (CD), in which case it is not necessary to include printed copies.

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Tab stops: Not at -1" + -0.5" + 0" + 0.5" +

1" + 1.5" + 2" + 2.5" + 3" + 3.5" + 4" +

4.5" + 5" + 5.5" + 6" + 6.5" + 7" + 7.5" +

8" + 8.5" + 9" + 9.5" + 10" + 10.5" + 11"

+ 11.5" + 12" + 12.5" + 13"

4

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Draft Deliberative Document under EO 12866 Interagency Review. Do Not Cite, Quote 

or Release. Subject to Further Policy Review.

4. Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of Energy, 

Building Technologies Program, 950 L’Enfant Plaza, SW., Suite 600, 

Washington, DC, 20024. Telephone: (202) 586-2945. If possible, please submit 

all items on a CD, in which case it is not necessary to include printed copies.

Written comments regarding the burden-hour estimates or other aspects of the 

collection-of-information requirements contained in this proposed rule may be submitted 

to the Office of Energy Efficiency and Renewable Energy through the methods listed 

above and by e-mail to Chad_S._Whiteman@omb.eop.gov.

No telefacsimilies (faxes) will be accepted. For detailed instructions on 

submitting comments and additional information on the rulemaking process, see section 

VII of this document (Public Participation).

Docket: The docket, which includes Federal Register notices, public meeting 

attendee lists and transcripts, comments, and other supporting documents/materials, is 

available for review at www.regulations.gov. All documents in the docket are listed in 

the www.regulations.gov index. However, some documents listed in the index, such as 

those containing information that is exempt from public disclosure, may not be publicly 

available.

A link to the docket web page can be found at: 

www.regulations.gov/#!docketDetail;dct=FR%252BPR%252BN%252BO%252BSR%25

5

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or Release. Subject to Further Policy Review.

2BPS;rpp=25;po=0;D=EERE-2012-BT-STD-0041. This web page contains a link to the 

docket for this noticeNOPR on the www.regulations.gov site. The www.regulations.gov

web page contains simple instructions on how to access all documents, including public 

comments, in the docket. See section VII, “Public Participation,” for further information 

on how to submit comments through www.regulations.gov. 

For further information on how to submit a comment, review other public 

comments and the docket, or participate in the public meeting, contact Ms. Brenda 

Edwards at (202) 586-2945 or by email: Brenda.Edwards@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT: Mr. Ron Majette, U.S. Department of 

Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies 

Office, EE-5B, 1000 Independence Avenue, SW,., Washington, DC, 20585-0121. 

Telephone: (202) 586-7935. Email: Ronald.Majette@ee.doe.gov.

Mr. Eric Stas, U.S. Department of Energy, Office of the General Counsel, GC7133, 1000 Independence Avenue, SW,., Washington, DC, 20585-0121. Telephone: 

(202) 586-9507. Email: Eric.Stas@hq.doe.gov.

For information on how to submit or review public comments, contact Ms. 

Brenda Edwards at (202) 586-2945 or by email: Brenda.Edwards@ee.doe.gov.

SUPPLEMENTARY INFORMATION:

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or Release. Subject to Further Policy Review.

Table of Contents

I. Summary of the Proposed Rule

A. Benefits and Costs to Consumers

B. Impact on Manufacturers

C. National Benefits

II. Introduction

A. Authority

B. Background

1. Current Standards

2. History of Standards Rulemaking for Single Package Vertical Air Conditioners

and Single Package Vertical Heat Pumps

III. General Discussion

A. Compliance Dates

B. Equipment Classes and Scope of Coverage

1. Consideration of a Space Constrained SPVU Equipment Class

C. Technological Feasibility

1. General

2. Maximum Technologically Feasible Levels

D. Energy Savings

1. Determination of Savings

2. Significance of Savings

E. Economic Justification

1. Specific Criteria

a. Economic Impact on Manufacturers and Consumers

b. Savings in Operating Costs Compared to Increase in Price (Life-Cycle 

Costs)

c. Energy Savings

d. Lessening of Utility or Performance of Products

e. Impact of Any Lessening of Competition

f. Need for National Energy Conservation

g. Other Factors

2. Rebuttable Presumption

IV. Methodology and Discussion of Related Comments

A. Market and Technology Assessment

1. Definitions of a SPVAC and a SPVHP

2. Equipment Classes

3. Review of the Current Market for SPVUs

a. Trade Association Information

b. Manufacturer Information

c. Market Data

4. Technology Assessment

B. Screening Analysis

C. Engineering Analysis

1. Efficiency Levels for Analysis

2. Teardown Analysis

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3. Cost Model

4. Manufacturing Production Costs

5. Cost-Efficiency Relationship

6. Manufacturer Markup

7. Shipping Costs

8. Manufacturer Interviews

D. Markups Analysis

E. Energy Use Analysis

F. Life-Cycle Cost and Payback Period Analysis

1. Approach

2. Life-Cycle Cost Inputs

a. Equipment Prices

b. Installation Costs

c. Annual Energy Use

d. Electricity and Natural Gas Prices

e. Maintenance Costs

f. Repair Costs

g. Equipment Lifetime

h. Discount Rate

3. Payback Period

G. National Impact Analysis

1. Approach

a. National Energy Savings

b. Net Present Value

2. Shipments Analysis

3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies

H. Consumer Subgroup Analysis

I. Manufacturer Impact Analysis

1. Overview

2. GRIM Analysis

a. GRIM Key Inputs

b. GRIM Scenarios

3. Manufacturer Interviews

a. Size Constraints

b. Alternative Products

c. Compliance Tolerances

d. Constrained Innovation and Customization

J. Emissions Analysis

K. Monetizing Carbon Dioxide and Other Emissions Impacts

1. Social Cost of Carbon

2. Valuation of Other Emissions Reductions

L. Utility Impact Analysis

M. Employment Impact Analysis

V. Analytical Results and Conclusions

A. Trial Standard Levels

B. Economic Justification and Energy Savings

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1. Economic Impacts on Commercial Consumers

a. Life-Cycle Cost and Payback Period

b. Life-Cycle Cost Subgroup Analysis

c. Rebuttable Presumption Payback

2. Economic Impact on Manufacturers

a. Industry Cash-Flow Analysis Results

b. Impacts on Direct Employment

c. Impacts on Manufacturing Capacity

d. Impacts on Subgroups of Manufacturers

e. Cumulative Regulatory Burden

3. National Impact Analysis

a. Significance of Energy Savings

b. Net Present Value of Consumer Costs and Benefits

c. Indirect Impacts on Employment

4. Impact on Utility or Performance of Equipment

5. Impact of Any Lessening of Competition

6. Need of the Nation to Conserve Energy

7. Other Factors

C. Proposed Standards

1. Benefits and Burdens of Trial Standard Levels Considered for SPVUs

2. Summary of Benefits and Costs (Annualized) of the Proposed Standards

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

B. Review Under the Regulatory Flexibility Act

C. Review Under the Paperwork Reduction Act of 1995

D. Review Under the National Environmental Policy Act of 1969

E. Review Under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

H. Review Under the Treasury and General Government Appropriations Act, 1999

I. Review Under Executive Order 12630

J. Review Under the Treasury and General Government Appropriations Act, 2001

K. Review Under Executive Order 13211

L. Review Under the Information Quality Bulletin for Peer Review

VII. Public Participation

A. Attendance at the Public Meeting

B. Procedure for Submitting Requests to Speak and Prepared General Statements for 

Distribution

C. Conduct of the Public Meeting

D. Submission of Comments

E. Issues on Which DOE Seeks Comment

VIII. Approval of the Office of the Secretary

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I. Summary of the Proposed Rule

Title III, Part C1 of the Energy Policy and Conservation Act of 1975 (“EPCA” or 

“the Act”), Pub. L. 94-163 (42 U.S.C. 6311-6317, as codified), added by Public Law 95-

619, Title IV, §441(a), established the Energy Conservation Program for Certain 

Industrial Equipment, which includes the single package vertical air conditioners 

(SPVACs) and single package vertical heat pumps (SPVHPs) that are the subject of this 

rulemaking (collectively referred to as single package vertical units or SPVUs). Pursuant 

to EPCA, not later than 3 years after the date of enactment of the Energy Independence 

and Security Act of 2007 (EISA 2007), DOE must review the American Society of 

Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) Standard 90.1 

(ASHRAE Standard 90.1), “Energy Standard for Buildings Except Low-Rise Residential 

Buildings,” with respect to single package vertical air conditioners and single package 

vertical heat pumps in accordance with the procedures established in 42 U.S.C. 

6313(a)(6). (42 U.S.C. 6313(a)(10)(B))

At the time DOE commenced this rulemaking, the Department had not considered 

adoption of the then-current ASHRAE Standard 90.1-2010 levels as part of its analytical 

baseline (as is typically the case under 42 U.S.C. 6313(a)(6)), because the current energy 

conservation standards for SPVUs arewere already set at those levels by EPCA. 

However, on October 9, 2013, ASHRAE adopted ASHRAE Standard 90.1-2013, and this 

revision did contain amended standard levels for SPVUs, thereby triggering DOE’s 

statutory obligation to promulgate an amended uniform national standard at those levels, 

1

 For editorial reasons, upon codification in the U.S. Code, Part C was redesignated Part A-1.

Comment [A1]: Change recommended by OIRA.

Comment [A2]: Change recommended by OIRA.

Comment [A3]: Change recommended by OIRA.

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unless DOE determines that there is clear and convincing evidence supporting the 

adoption of more-stringent energy conservation standards than the ASHRAE levels. The 

test for adoption of more-stringent standards is whether such standards would result in 

significant additional conservation of energy and would be technologically feasible and 

economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(I) and (II)) Once complete, this 

rulemaking will satisfy DOE’s statutory obligations under both 42 U.S.C. 6313(a)(6) and 

(10)(B).

In accordance with these and other statutory provisions discussed in this

noticepreamble, DOE has tentatively concluded that there is sufficient evidence to 

support more-stringent standards for two classes of SPVUs. For the remaining four

equipment classes, DOE has tentatively decided to adopt the levels in ASHRAE Standard 

90.1-2013. Accordingly, DOE is proposing amended energy conservation standards for 

all classes of single package vertical air conditioners and single package vertical heat 

pumps. As shown in Table I.1, the proposed standards are expressed in terms of: (1)

energy efficiency ratio (EER), which is the ratio of the produced cooling effect of an air 

conditioner or heat pump to its total work input; and (2) coefficient of performance 

(COP), which is the ratio of produced heating effect to total work input (applicable only 

to heat pump units). 

If adopted, the proposed standards listed in Table I.1 that are more stringent than 

those contained in ASHRAE Standard 90.1-2013 would apply to such equipment

manufactured in, or imported into, the United States, excluding equipment that is 

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manufactured for export, on and after a date four years after publication of an energy 

conservation standards final rule. If adopted, the proposed standards listed in Table I.1 

that are set at the levels contained in ASHRAE Standard 90.1-2013 would apply to such 

equipment manufactured in, or imported into, the United States, excluding equipment that 

is manufactured for export, on and after a date two or three years after the effective date 

of the requirements in ASHRAE Standard 90.1-2013, depending on equipment size (i.e., 

October 9, 2015 or 2016).

Table I.1 Proposed Energy Conservation Standards for SPVUs

Equipment Class Cooling Capacity

Btu/h Efficiency Level Standard Level

Anticipated 

Compliance Date

Single Package 

Vertical Air 

Conditioner

<65,000 Btu/h EER =11,.0

More 

Stringent than 

ASHRAE

2019

[4 years after 

publication of 

final rule]

Single Package 

Vertical Air 

Conditioner

≥65,000 Btu/h and 

<135,000 Btu/h EER = 10.0 ASHRAE October 9, 2015

Single Package 

Vertical Air 

Conditioner

≥135,000 Btu/h and 

<240,000 Btu/h EER = 10.0 ASHRAE October 9, 2016

Single Package 

Vertical Heat Pump <65,000 Btu/h EER = 11.0COP = 3.3

More 

Stringent than 

ASHRAE

2019

[4 years after 

publication of 

final rule]

Single Package 

Vertical Heat Pump

≥65,000 Btu/h and 

<135,000 Btu/h

EER = 10.0

COP = 3.0 ASHRAE October 9, 2015

Single Package 

Vertical Heat Pump

≥135,000 Btu/h and 

<240,000 Btu/h

EER = 10.0

COP = 3,0 ASHRAE October 9, 2016

A. Benefits and Costs to Consumers

Table I.2Table I.2 presents DOE’s evaluation of the economic impacts of the 

proposed energy conservation standards on consumers of SPVACs and SPVHPs, as 

measured by the average life-cycle cost (LCC) savings and the median payback period

(PBP). Economic impacts are presented as compared to the ASHRAE 90.1-2013 level as 

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baseline, because DOE must at a minimum adopt that standard. In order to adopt levels 

above the levels specified in ASHRAE Standard 90.1, DOE must determine that such 

more-stringent standards would result in significant additional conservation of energy 

(relative to the efficiency levels specified in ASHRAE Standard 90.1) and that it would 

be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) 

In compliance with this statutory requirement, DOE based its determination to adopt 

more stringent standards on an analysis comparing these proposed standards with 

ASHRAE 90.1-2013 (Table I.2). Thus, economic impacts of this determination are 

calculated as compared to the ASHRAE 90.1-2013 level because DOE is required by 

statute to, at a minimum, adopt that standard.

2

 

The Office of Management and Budget’s Circular A-43 provides guidance on 

establishing the baseline for regulatory impact analyses as follows:

In some cases, substantial portions of a rule may simply restate statutory 

requirements that would be self-implementing, even in the absence of the 

regulatory action. In these cases, you should use a pre-statute baseline. If you are 

able to separate out those areas where the agency has discretion, you may also use 

a post-statute baseline to evaluate the discretionary elements of the action.

Accordingly, DOE presents consumer, manufacturer, and economic costs and 

benefits for the proposed SPVU standards as compared to the current Federal (EPCA) 

2 See 42 U.S.C. 6313(a)(6)(A)(ii)(I): In general.—Except as provided in subclause (II), not later than 18 

months after the date of publication of the amendment to the ASHRAE/IES Standard 90.1 for a product 

described in clause (i), the Secretary shall establish an amended uniform national standard for the product 

at the minimum level specified in the amended ASHRAE/IES Standard 90.1.

3 U.S. Office of Management and Budget “Circular A-4: Regulatory Analysis” (Sept. 17, 2003) contains 

guidelines regarding development of a baseline, including that “This baseline should be the best assessment 

of the way the world would look absent the proposed action.” (Available at: 

http://www.whitehouse.gov/omb/circulars_a004_a-4/ )

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minimum that are currently in effect (pre-statute baseline). In addition, as required by 

Statute in this case when proposing a standard more stringent than ASHRAE 90.1, and 

recommended by Circular A-4, DOE also provides these same analyses relative to the 

post-statute (ASHRAE 90.1-2013) baseline. As noted above, it is these latter analyses 

that DOE has used as the basis for its determination to adopt more stringent standards. 

The same analytic methodologies are used in both baselines. Key analyses (using both 

baselines) are summarized in this Executive Summary in Tables I-2: Impacts of Proposed 

Energy Conservation Standards on Consumers of SPVUs; I-3: Summary of National 

Economic Benefits and Costs of Proposed SPVU Energy Conservation Standards; and I-4 

and I-5: Annualized Benefits and Costs of Proposed Energy Conservation Standards for 

SPVUs. Additional analyses are presented in section V.C of this preamble, and in the 

NOPR TSD. Note that not all analyses were conducted using both baselines; rather DOE 

used the baseline(s) most appropriate to the purpose of the analysis (showing economic 

impacts relative to the pre-statute status quo and/or determining whether to adopt 

standards more stringent than ASHRAE 2013). In all cases, the baseline(s) used are 

indicated in the analyses. 

In overview, the average LCC savings are positive for the equipment classes for 

which standards higher than the levels in ASHRAE 90.1-2013 are being proposed. DOE 

did not evaluate economic impacts to the consumers of SPVACs ≥65,000 Btu/h and 

<135,000 Btu/h, because for the ASHRAE baseline, as the ASHRAE level is equal to 

max-tech,. However the economic impacts for this equipment class using the EPCA 

baseline can be found in Table I.2 and in appendix 8B of the NOPR TSD. DOE also 

Comment [A7]: Change recommended by OIRA.

Comment [A8]: Change recommended by OIRA.

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presents results for the parallel class of SPVHPs ≥65,000 Btu/h and <135,000 Btu/h using 

the EPCA baseline.4 DOE did not evaluate economic impacts for SPVHPs ≥65,000 Btu/h 

and <135,000 Btu/h or for the large equipment classes because there are no models on the 

market, and, therefore, no consumers.5

Table I.2 Impacts of Proposed Energy Conservation Standards on Consumers of 

SPVUs for ASHRAE and EPCA Baseline

Equipment 

Class

Cooling 

Capacity

Btu/h

Average LCC Savings

2013$

 

Median Payback Period

yearsYears

ASHRAE 

Baseline

EPCA 

Baseline

ASHRAE 

Baseline

EPCA 

Baseline

Single Package 

Vertical Air 

Conditioner

<65,000 

Btu/h $179 $261 8.4 10.4 

Single Package 

Vertical Air 

Conditioner

≥65,000 

Btu/h and 

<135,000 

Btu/h

Adopt 

ASHRAE $737 Adopt ASHRAE 7.0 

Single Package 

Vertical Air 

Conditioner

≥135,000 

Btu/h and 

<240,000 

Btu/h

Adopt 

ASHRAE N/A Adopt ASHRAE N/A

Single Package 

Vertical Heat 

Pump

<65,000 

Btu/h $424 $382 4.8 9.3 

Single Package 

Vertical Heat 

Pump

≥65,000 

Btu/h and 

<135,000 

Btu/h

Adopt 

ASHRAE $241 Adopt ASHRAE 10.9 

Single Package 

Vertical Heat 

Pump

≥135,000 

Btu/h and 

<240,000 

Btu/h

Adopt 

ASHRAE N/A Adopt ASHRAE N/A

Note: Expected life of SPVUs is on average 15 years.

4 However, there are no models available on the market for this class, and therefore these results are not 

carried into the national impact analysis or other downstream analyses.

5 Equipment classes for these cooling capacities exist in ASHRAE Standard 90.1 and were established in 

DOE regulation through EISA 2007. Despite the lack of models and consumers, for these equipment 

classes DOE is proposing to adopt as federal standards the efficiency levels in ASHRAE 90.1-2013 as 

required under 42 USC 6313(a)(6)(A)(ii)(I).

Comment [A9]: Change recommended by OIRA.

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OIRA.

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B. Impact on Manufacturers

The industry net present value (INPV) is the sum of the discounted cash flows to 

the industry from the base year through the end of the analysis period (2014 to 2048). 

Using a real discount rate of 10.4 percent6, DOE estimates that the INPV for 

manufacturers of SPVUs is $36.5 million in 2013$.$ using ASHRAE 2013 as a baseline. 

The INPV of SPVUs from the EPCA baseline can be found in chapter 12 of the NOPR 

TSD. Under the proposed standards, DOE expects that manufacturers may lose up to 9.0

percent of their INPV, , which is approximately $3.3 million.

C. National Benefits7

DOE’s analyses indicate that the proposed energy conservation standards for 

SPVUs would save a significant amount of energy. The cumulative energy savings for 

SPVUs purchased in the 30-year period that begins in the year of compliance with 

amended standards (2019-2048) amount to 0.23 quadrillion Btus (quads). The annual)

using ASHRAE as a baseline. This is a savings in 2030 are equivalent to 1of 6 percent of 

total U.S. commercialrelative to the energy use in 2012.of this equipment.

8 Energy 

savings using EPCA as a baseline can be found in chapter 10 of the NOPR TSD.

6 DOE estimated draft financial metrics, including the industry discount rate, based on data in Securities 

and Exchange Commission (SEC) filings and on industry-reviewed values published in prior HVAC final 

rules. DOE presented the draft financial metrics to manufacturer in MIA interviews. DOE adjusted those 

values based on feedback from manufacturers. The complete set of financial metrics and more detail about 

the methodology can be found in section 12.4.3 of TSD chapter 12. 7 All monetary values in this section are expressed in 2013 dollars and are discounted to 2014. National 

benefits apply only to DOE’s proposed standard levels that are higher than the ASHRAE levels, and 

impacts are presented as compared to the ASHRAE 90.1-2013 level as baseline. For equipment classes 

where DOE is proposing the ASHRAE levels, national benefits do not accrue.

8 The base case assumptions are described in section IV.G.

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The cumulative net present value (NPV) of total customer costs and savings of the 

proposed SPVU standards ranges from $0.11 billion (at a 7-percent discount rate) to 

$0.44 billion (at a 3-percent discount rate).) using ASHRAE as a baseline. NPV results 

using EPCA as a baseline can be found in chapter 10 of the NOPR TSD. This NPV 

expresses the estimated total value of future operating-cost savings minus the estimated 

increased product costs for SPVUs purchased in 2019-2048. 

In addition, the proposed standards would have significant environmental 

benefits. The energy savings described above using the ASHRAE baseline would result 

in cumulative emission reductions (over the same period as for energy savings) of 20

million metric tons (Mt)9 of carbon dioxide (CO2), 59 thousand tons of methane, 53

thousand tons of sulfur dioxide (SO2), 18 thousand tons of nitrogen oxides (NOX), and 

0.06 tons of mercury (Hg).10 The cumulative reduction in CO2 emissions through 2030 

amounts to 2.2 Mt. Emissions results using the EPCA baseline can be found in chapter 13 

of the NOPR TSD, and cumulative reduction in CO2 emissions through 2030 amounts to 

4.7 Mt relative to the EPCA baseline.

9 A metric ton is equivalent to 1.1 short tons. Results for NOX and Hg are presented in short tons. 10 DOE calculatescalculated emissions reductions relative to the Annual Energy Outlook 2013 (AEO 2013)

Reference case, which generally represents current legislation and environmental regulations for which 

implementing regulations were available as of December 31, 2012. Emissions factors based on the Annual 

Energy Outlook 2014 (AEO 2014), which became available too late for incorporation into this analysis, 

indicate that a significant decrease in the cumulative emission reductions of carbon dioxide and most other 

pollutants can be expected if the projections of power plant utilization assumed in AEO 2014 are realized. 

For example, the estimated amount of cumulative emission reductions of CO2 is expected to decrease by 

33% from DOE’s current estimate based on the projections in AEO 2014 relative to AEO 2013. The 

monetized benefits from GHG reductions would likely decrease by a comparable amount. DOE plans to 

use emissions factors based on the most recent AEO available for the next phase of this rulemaking, which 

may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

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The value of the CO2 reductions is calculated using a range of values per metric 

ton of CO2 (otherwise known as the Social Cost of Carbon, or SCC) developed by a 

recent Federal interagency process. 11 The derivation of the SCC values is discussed in 

section IV.K. DOE estimates that the present monetary value of the CO2 emissions 

reduction described above is between $0.12 and $1.9 billion. using the ASHRAE 

baseline. DOE also estimates the present monetary value of the NOX emissions reduction 

using the ASHRAE baseline is $7.3 million at a 7-percent discount rate and $21 million 

at a 3-percent discount rate.

12 Results using the EPCA baseline can be found in chapter 

14 of the NOPR TSD.

Table I.3 summarizes the national economic costs and benefits expected to result 

from today’sthe proposed standards for SPVUs using both the ASHRAE and EPCA 

baselines.

11 Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 

12866, Interagency Working Group on Social Cost of Carbon, United States Government (May 2013; 

revised November 2013) (Available at: 

http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbonfor-regulator-impact-analysis.pdf). 12 DOE is currently investigating valuation of avoided Hg and SO2 emissions.

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Table I.3 Summary of National Economic Benefits and Costs of Proposed SPVU

Energy Conservation Standards using ASHRAE and EPCA Baselines*

Category

Present Value

Billion 2013$ Discount 

Rate

ASHRAE %

Baseline EPCA Baseline

Benefits

Consumer Operating Cost Savings 0.49 1.0 7

1.2 2.6 3

CO2 Reduction Monetized Value 

($12.0/t case)** 0.12 0.26 5

CO2 Reduction Monetized Value 

($40.5/t case)** 0.60 1.2 3

CO2 Reduction Monetized Value 

($62.4/t case)** 1.0 2.0 2.5

CO2 Reduction Monetized Value 

($119/t case)** 1.9 3.8 3

NOX Reduction Monetized Value 

(at $2,684/ton)**

0.0073 0.015 7

0.021 0.042 3

Total Benefits†

1.1 2.3 7

1.9 3.8 3

Costs

Consumer Incremental Installed 

Costs

0.38 0.77 7

0.79 1.5 3

Net Benefits

Including CO2 and NOX Reduction 

Monetized Value 

0.72 1.5 7

1.1 2.3 3

* This table presents the costs and benefits associated with SPVU shipped in 2019-2048. These results 

include benefits to customers which accrue after 2044 from the equipment purchased in 2019-2048. The 

results account for the incremental variable and fixed costs incurred by manufacturers due to the amended 

standard, some of which may be incurred in preparation for this final rule. 

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios 

of the updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 

3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC 

distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporates an 

escalation factor.13

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to SCC value of 

$40.5/t in 2015.

13 The CO2 and NOx results are based on emissions factors in AEO 2013, the most recent version available 

at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, estimated at 33%, and an increase in NOx, estimated at 13%. In 

the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO

available, which may or may not be AEO 2014, depending on the timing of the issuance of the next 

rulemaking document.

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The benefits and costs of today’sthese proposed standards, for equipment sold in

2019-2048, can also be expressed in terms of annualized values. The annualized 

monetary values are the sum of: (1) the annualized national economic value of the 

benefits from customer operation of equipment that meet the proposed standards 

(consisting primarily of operating cost savings from using less energy, minus increases in 

equipment purchase and installation costs, which is another way of representing customer

NPV); and (2) the annualized monetary value of the benefits of emission reductions, 

including CO2 emission reductions.14

Although combining the values of operating savings and CO2 emission reductions 

provides a useful perspective, two issues should be considered. First, the national 

operating savings are domestic U.S. customer monetary savings that occur as a result of 

market transactions, whereas the value of CO2 reductions is based on a global value.

Second, the assessments of operating cost savings and CO2 savings are performed with 

different methods that use different time frames for analysis. The national operating cost 

savings is measured for the lifetime of equipment shipped in 2019-2048. The Because

14 DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized 

values. First, DOE calculated a present value in 2014, the year used for discounting the NPV of total 

consumer costs and savings, for the time-series of costs and benefits using discount rates of three and seven 

percent for all costs and benefits except for the value of CO2 reductions. For the latter, DOE used a range 

of discount rates, as shown in Table I.3.Table I.3. From the present value, DOE then calculated the fixed 

annual payment over a 30-year period (2019 through 2048) that yields the same present value. The fixed 

annual payment is the annualized value. Although DOE calculated annualized values, this does not imply 

that the time-series of cost and benefits from which the annualized values were determined is a steady 

stream of payments.

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carbon dioxide emissions have a very long residence time in the atmosphere,

15 the SCC 

values, on the other hand, reflect the present value of some future climate-related impacts 

resulting from the emission of one ton of carbon dioxide in each year. These impactsthat

continue well beyond 2100.

Estimates of annualized benefits and costs of the proposed standards (over a 30-

year period) are shown in Table I.4. The results under the primary estimate using the 

ASHRAE baseline are as follows. Using a 7-percent discount rate for benefits and costs 

other than CO2 reduction, for which DOE used a 3-percent discount rate along with the 

average SCC series that has a value of $40.5/t in 2015, the cost of the proposed standards

proposed in today’s rule is $29 million per year in increased equipment costs, while the 

benefits are $38 million per year in reduced equipment operating costs, $29 million from 

CO2 reductions, and $0.57 million from reduced NOX emissions. In this case, the 

annualized net benefit amounts to $38 million per year. Using a 3-percent discount rate 

for all benefits and costs and the average SCC series that has a value of $40.5/t in 2015, 

the cost of the standards proposed in today’s rule is $37 million per year in increased 

equipment costs, while the benefits are $58 million per year in reduced operating costs, 

$29 million from CO2 reductions, and $0.97 million in reduced NOX emissions. In this 

case, the net benefit amounts to $51 million per year.16 Results using the EPCA baseline 

are shown in Table I.5.

15 The atmospheric lifetime of CO2 is estimated of the order of 30–95 years. Jacobson, MZ (2005). 

"Correction to "Control of fossil-fuel particulate black carbon and organic matter, possibly the most 

effective method of slowing global warming."" J. Geophys. Res. 110. pp. D14105. 16 All CO2 and NOx results shown in this paragraph are based on emissions factors in AEO 2013, the most 

recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a 

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Table I.4 Annualized Benefits and Costs of Proposed Energy Conservation 

Standards for SPVUs (ASHRAE Baseline)

Discount Rate

Primary 

Estimate*

Low Net 

Benefits 

Estimate*

High Net 

Benefits

Estimate*

million 2013$/year

Benefits

Operating Cost Savings

7% 38 36 39

3% 58 55 61

CO2 Reduction Monetized Value 

($12.0/t case)** 5% 7.7 7.6 7.7

CO2 Reduction Monetized Value 

($40.5/t case)** 3% 29 28 29

CO2 Reduction Monetized Value 

($62.4/t case)** 2.5% 43 42 43

CO2 Reduction Monetized Value 

($119/t case)** 3% 89 88 89

NOX Reduction Monetized Value 

(at $2,684/ton)**

7% 0.57 0.56 0.57

3% 0.97 0.97 0.98

Total Benefits†

7% plus CO2

range

46 to 127 44 to 125 48 to 129

7% 67 65 69

3% plus CO2

range

67 to 148 63 to 144 70 to 151

3% 88 84 91

Costs

Incremental Equipment Costs

7% 29 40 28

3% 37 53 36

Net Benefits/Costs

Total†

7% plus CO2

range

17 to 98 4 to 85 19 to 101

7% 38 25 40

3% plus CO2

range

30 to 111 11 to 91 34 to 115

3% 51 31 55

* This table presents the annualized costs and benefits associated with SPVUs shipped in 2019−2048. These 

results include benefits to customers which accrue after 2048 from the products purchased in 2019-2048. 

significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase in NOx, 

estimated at 13%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the 

most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance 

of the next rulemaking document.

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Costs incurred by manufacturers, some of which may be incurred in preparation for the rule, are not directly 

included, but are indirectly included as part of incremental equipment costs. The Primary, Low Benefits, and 

High Benefits Estimates utilize projections of energy prices and building growth (leading to higher 

shipments) from the AEO 2013 Reference case, Low Estimate, and High Estimate, respectively. In addition, 

incremental equipment costs reflect constant real prices for the Primary Estimate, an increase in projected 

equipment price trends for the Low Benefits Estimate, and a decline rate in projected equipment price trends 

for the High Benefits Estimate. The methods used to derive projected price trends are explained in section 

IV.F.2.a.

** The CO2 values represent global monetized SCC values, in 2013$, in 2015 under several scenarios. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, 

respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% 

discount rate. The SCC time series incorporates an escalation factor. The value for NOX (in 2013$) is an

average value.

17

† Total benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC 

with a 3% discount rate ($40.5/t case). In the rows labeled “7% plus CO2 range” and “3% plus CO2 range,” 

the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added 

to the full range of CO2 values.

17 The CO2 and NOx results are based on emissions factors in AEO 2013, the most recent version available 

at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, estimated at 33%, and an increase in NOx, estimated at 13%. In 

the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO

available, which may or may not be AEO 2014, depending on the timing of the issuance of the next 

rulemaking document.

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Table I.5 Annualized Benefits and Costs of Proposed Energy Conservation 

Standards for SPVUs (EPCA Baseline)

Discount Rate

Primary 

Estimate*

Low Net 

Benefits 

Estimate*

High Net 

Benefits

Estimate*

million 2013$/year

Benefits

Operating Cost Savings

7% 80 76 83

3% 121 114 126

CO2 Reduction Monetized Value 

($12.0/t case)** 5% 16 16 16

CO2 Reduction Monetized Value 

($40.5/t case)** 3% 58 58 59

CO2 Reduction Monetized Value 

($62.4/t case)** 2.5% 87 87 88

CO2 Reduction Monetized Value 

($119/t case)** 3% 181 181 182

NOX Reduction Monetized Value 

(at $2,684/ton)**

7% 1.2 1.2 1.2

3% 2.0 2.0 2.0

Total Benefits†

7% plus CO2

range

97 to 262 93 to 257 100 to 266

7% 139 135 143

3% plus CO2

range

139 to 305 132 to 297 144 to 311

3% 182 174 187

Costs

Incremental Equipment Costs

7% 60 79 58

3% 70 97 68

Net Benefits/Costs

Total†

7% plus CO2

range

37 to 203 14 to 179 42 to 208

7% 80 56 85

3% plus CO2

range

68 to 234 35 to 199 76 to 243

3% 111 77 119

* This table presents the annualized costs and benefits associated with SPVUs shipped in 2019−2048. These 

results include benefits to customers which accrue after 2048 from the products purchased in 2019-2048. 

Costs incurred by manufacturers, some of which may be incurred in preparation for the rule, are not directly 

included, but are indirectly included as part of incremental equipment costs. The Primary, Low Benefits, and 

High Benefits Estimates utilize projections of energy prices and building growth (leading to higher 

shipments) from the AEO 2013 Reference case, Low Estimate, and High Estimate, respectively. In addition, 

incremental equipment costs reflect constant real prices for the Primary Estimate, an increase in projected 

equipment price trends for the Low Benefits Estimate, and a decline rate in projected equipment price trends 

for the High Benefits Estimate. The methods used to derive projected price trends are explained in section 

IV.F.2.a.

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** The CO2 values represent global monetized SCC values, in 2013$, in 2015 under several scenarios. The 

first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, 

respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% 

discount rate. The SCC time series incorporates an escalation factor. The value for NOX (in 2013$) is an

average value.

18

† Total benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC 

with a 3% discount rate ($40.5/t case). In the rows labeled “7% plus CO2 range” and “3% plus CO2 range,” 

the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added 

to the full range of CO2 values.

DOE has tentatively concluded that, based upon clear and convincing evidence,

the proposed standards for the equipment classes with levels more stringent than those 

presented in ASHRAE Standard 90.1-2013 represent the maximum improvement in 

energy efficiency that is technologically feasible and economically justified, and would 

result in the significant conservation of energy. 19 DOE further notes that products 

achieving these standard levels are already commercially available for all equipment

classes covered by today’sthis proposal.20 Based on the analyses described above, DOE 

has tentatively concluded that the benefits of the proposed standards to the Nation 

(energy savings, positive NPV of customer benefits, customer LCC savings, and emission 

reductions) would outweigh the burdens (loss of INPV for manufacturers). DOE also 

considered higher energy efficiency levels as trial standard levels, and is still considering 

them in this rulemaking. However, DOE has tentatively concluded that the potential 

burdens of the higher energy efficiency levels would outweigh the projected benefits. 

18 The CO2 and NOx results are based on emissions factors in AEO 2013, the most recent version available 

at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in 

cumulative emissions reductions for CO2, estimated at 33%, and an increase in NOx, estimated at 13%. In 

the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO

available, which may or may not be AEO 2014, depending on the timing of the issuance of the next 

rulemaking document.

19 DOE based this decision to set more stringent levels by using 2013 ASHRAE as the base case. 20 As shown in section 3.8, chapter 3 of the Technical Support Document, for equipment less than 65,000 

Btu/h, there are 42 SPVAC models and 69 SPVHP models available at 11 EER or higher.

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For the four equipment classes for which no models are available on the market at 

all, or for which there are no models with efficiency above those levels presented in 

ASHRAE 90.1-2013, DOE is proposing to adopt the levels in ASHRAE Standard 90.1-

2013, per the statutory directive.

Based on consideration of the public comments DOE receives in response to this 

noticeNOPR and related information collected and analyzed during the course of this 

rulemaking effort, DOE may adopt energy efficiency levels presented in this noticeNOPR

that are either higher or lower than the proposed standards, or some combination of 

level(s) that incorporate the proposed standards in part.

As noted previously, in this rulemaking, DOE is required to, at a minimum, adopt 

the As noted previously, in compliance with EPCA, DOE based its determination to 

adopt more stringent standards on an analysis comparing these proposed standards with 

ASHRAE 2013 as the base case. DOE presents Table I.5 as requested in OMB Circular 

A-4. 

ASHRAE Standard 90.1 levels as the Federal standard. (42 U.S.C. 

6313(a)(6)(A)(ii)(I)) In order to adopt levels above the levels specified in ASHRAE

Standard 90.1, DOE must determine that such more-stringent standard would result in 

significant additional conservation of energy and that it would be technologically feasible 

and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) In recognition of this 

statutory requirement, in this summary and throughout the NOPR, DOE examined and 

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presents consumer, manufacturer, and economic benefits for the proposed SPVU

standards as compared to the default automatic adoption of the ASHRAE Standard 90.1 

levels, in which case no models would be on the market at the current Federal minimum. 

However, for informational purposes only, in section V.C, DOE also presents summary 

results for the proposed standards in comparison to a base case set at the current Federal 

minimum standards, although this information was not used in the selection of the 

proposed standard level.

II. Introduction

The following section briefly discusses the statutory authority underlying 

today’sthis proposal, as well as some of the relevant historical background related to the 

establishment of standards for single package vertical air conditioners and single package 

vertical heat pumps.

A. Authority

Title III, Part C21 of the Energy Policy and Conservation Act of 1975 (“EPCA” or 

“the Act”), Pub. L. 94-163 (42 U.S.C. 6311-6317, as codified), added by Pub. L. 95-619, 

Title IV, §441(a), established the Energy Conservation Program for Certain Industrial 

Equipment, which includes the single package vertical air conditioners and single 

package vertical heat pumps that are the subjects of this rulemaking.22 In general, this 

program addresses the energy efficiency of certain types of commercial and industrial 

21 For editorial reasons, upon codification in the U.S. Code, Part C was redesignated Part A-1. 22 All references to EPCA in this document refer to the statute as amended through the American Energy 

Manufacturing Technical Corrections Act, Pub. L. 112-210 (enacted December 18, 2012).

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equipment. Relevant provisions of the Act specifically include definitions (42 U.S.C. 

6311), energy conservation standards (42 U.S.C. 6313), test procedures (42 U.S.C. 6314), 

labelling provisions (42 U.S.C. 6315), and the authority to require information and 

reports from manufacturers (42 U.S.C. 6316).

EPCA contains mandatory energy conservation standards for commercial heating, 

air-conditioning, and water-heating equipment. (42 U.S.C. 6313(a)) Specifically, the 

statute sets standards for small, large, and very large commercial package airconditioning and heating equipment, packaged terminal air conditioners (PTACs) and 

packaged terminal heat pumps (PTHPs), warm-air furnaces, packaged boilers, storage 

water heaters, instantaneous water heaters, and unfired hot water storage tanks. Id. In 

doing so, EPCA established Federal energy conservation standards that generally 

correspond to the levels in ASHRAE Standard 90.1, as in effect on October 24, 1992 

(i.e., ASHRAE Standard 90.1-1989), for each type of covered equipment listed in 42 

U.S.C. 6313(a). The Energy Independence and Security Act of 2007 (EISA 2007), Pub. 

L. 110-240, amended EPCA by adding definitions and setting minimum energy 

conservation standards for single package vertical air conditioners (SPVACs) and single

package vertical heat pumps (SPVHPs). (42 U.S.C. 6313(a)(10)(A)) The efficiency 

standards for SPVACs and SPVHPs established by EISA 2007 correspond to the levels 

contained in ASHRAE Standard 90.1-2004, which originated as addendum “d” to 

ASHRAE Standard 90.1-2001. 

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EPCA requires that DOE must conduct a rulemaking to consider amended energy 

conservation standards for a variety of enumerated types of commercial heating, 

ventilating, and air-conditioning equipment (of which SPVACs and SPVHPs are a 

subset) each time ASHRAE Standard 90.1 is updated with respect to such equipment.

(42 U.S.C. 6313(a)(6)(A)) Such review is to be conducted in accordance with the 

procedures established for ASHRAE equipment under 42 U.S.C. 6313(a)(6). According 

to 42 U.S.C. 6313(a)(6)(A), for each type of equipment, EPCA directs that if ASHRAE 

Standard 90.1 is amended, DOE must publish in the Federal Register an analysis of the 

energy savings potential of amended energy efficiency standards within 180 days of the 

amendment of ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(A)(i)) EPCA further 

directs that DOE must adopt amended standards at the new efficiency level in ASHRAE 

Standard 90.1, unless clear and convincing evidence supports a determination that 

adoption of a more-stringent level would produce significant additional energy savings 

and be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)) 

In addition, DOE notes that pursuant to the EISA 2007 amendments to EPCA, under 42 

U.S.C. 6313(a)(6)(C), the agency must periodically review its already-established energy 

conservation standards for ASHRAE equipment. In December 2012, this provision was 

further amended by the American Energy Manufacturing Technical Corrections Act 

(AEMTCA) to clarify that DOE’s periodic review of ASHRAE equipment must occur 

“[e]very six years.” (42 U.S.C. 6313(a)(6)(C)(i))

AEMTCA also modified EPCA to specify that any amendment to the design 

requirements with respect to the ASHRAE equipment, would trigger DOE review of the 

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potential energy savings under U.S.C. 6313(a)(6)(A)(i). Additionally, AEMTCA 

amended EPCA to require that if DOE proposes an amended standard for ASHRAE 

equipment at levels more stringent than those in ASHRAE Standard 90.1, DOE, in 

deciding whether a standard is economically justified, must determine, after receiving 

comments on the proposed standard, whether the benefits of the standard exceed its 

burdens by considering, to the maximum extent practicable, the following seven factors:

(1) The economic impact of the standard on manufacturers and consumers of the 

products subject to the standard;

(2) The savings in operating costs throughout the estimated average life of the 

product in the type (or class) compared to any increase in the price, initial charges, or 

maintenance expenses of the products likely to result from the standard;

(3) The total projected amount of energy savings likely to result directly from the 

standard;

(4) Any lessening of the utility or the performance of the products likely to result 

from the standard;

(5) The impact of any lessening of competition, as determined in writing by the 

Attorney General, that is likely to result from the standard;

(6) The need for national energy conservation; and

(7) Other factors the Secretary considers relevant.

(42 U.S.C. 6313(a)(6)(B)(ii))

EISA 2007 amended EPCA to provide an independent basis for a one-time review 

regarding SPVUs that is not tied to the conditions for initiating review specified by 42 

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U.S.C. 6313(a)(6)(A) or 42 U.S.C. 6313(a)(6)(C) described previously. Specifically, 

pursuant to 42 U.S.C. 6313(a)(10)(B), DOE must commence review of the most recently 

published version of ASHRAE Standard 90.1 with respect to SPVU standards in 

accordance with the procedures established under 42 U.S.C. 6313(a)(6) no later than 3 

years after the enactment of EISA 2007. DOE notes that this provision was not tied to 

the trigger of ASHRAE publication of an updated version of Standard 90.1 or to a 6-year 

period from the issuance of the last final rule, which occurred on March 7, 2009 (74 FR 

12058). DOE was simply obligated to commence its review by a specified date.

Because ASHRAE did not update its efficiency levels for SPVACs and SPVHPs 

in ASHRAE Standard 90.1-2010, DOE began this rulemaking by analyzing amended 

standards consistent with the procedures defined under 42 U.S.C. 6313(a)(6)(C). 

Specifically, pursuant to 42 U.S.C. 6313(a)(6)(C)(i)(II), DOE, must use the procedures 

established under subparagraph (B) when issuing a NOPR. The statutory provision at 42 

U.S.C. 6313(a)(6)(B)(ii), recently amended by AEMTCA, states that in deciding whether 

a standard is economically justified, DOE must determine, after receiving comments on 

the proposed standard, whether the benefits of the standard exceed its burdens by 

considering, to the maximum extent practicable, the following seven factors, as stated 

previously.

However, before DOE could finalize this NOPR, ASHRAE acted on October 9, 

2013 to adopt ASHRAE Standard 90.1-2013, and this revision did contain amended 

standard levels for SPVUs, thereby triggering DOE’s statutory obligation under 42 

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U.S.C. 6313(a)(6)(A) to promulgate an amended uniform national standard at those levels 

unless DOE determines that there is clear and convincing evidence supporting the 

adoption of more-stringent energy conservation standards than the ASHRAE levels. 

Consequently, DOE prepared an analysis of the energy savings potential of amended 

standards at the ASHRAE Standard 90.1 levels (as required by 42 U.S.C. 

6313(a)(6)(A)(i)) and updated this NOPR and accompanying analyses to reflect 

appropriate statutory provision, timelines, and compliance dates.

DOE has tentatively concluded that following this rulemaking process will 

provide “clear and convincing evidence” that for two equipment classes for which the 

proposed standards are more stringent than those set forth in ASHRAE Standard 90.1-

2013 would result in significant additional conservation of energy and would be 

technologically feasible and economically justified, as mandated by 42 U.S.C. 

6313(a)(6). For the other four equipment classes, DOE has tentatively concluded to 

adopt the levels set forth in ASHRAE Standard 90.1-2013.

EPCA, as codified, also contains what is known as an “anti-backsliding” 

provision, which prevents the Secretary from prescribing any amended standard that 

either increases the maximum allowable energy use or decreases the minimum required 

energy efficiency of a covered product. (42 U.S.C. 6313(a)(6)(B)(iii)(I)) Also, the 

Secretary may not prescribe an amended or new standard if interested persons have 

established by a preponderance of the evidence that the standard is likely to result in the 

unavailability in the United States of any covered product type (or class) of performance 

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characteristics (including reliability), features, sizes, capacities, and volumes that are 

substantially the same as those generally available in the United States. (42 U.S.C. 

6313(a)(6)(B)(iii)(II))

Further, EPCA, as codified, establishes a rebuttable presumption that a standard is 

economically justified if the Secretary finds that the additional cost to the customer of 

purchasing a product complying with an energy conservation standard level will be less 

than three times the value of the energy (and, as applicable, water) savings during the 

first year that the consumer will receive as a result of the standard, as calculated under the 

applicable test procedure.

Additionally, when a type or class of covered equipment such as ASHRAE 

equipment, has two or more subcategories, DOE often specifies more than one standard 

level. DOE generally will adopt a different standard level than that which applies 

generally to such type or class of products for any group of covered products that have 

the same function or intended use if DOE determines that products within such group: 

(A) consume a different kind of energy from that consumed by other covered products 

within such type (or class); or (B) have a capacity or other performance-related feature 

which other products within such type (or class) do not have and which justifies a higher 

or lower standard. In determining whether a performance-related feature justifies a 

different standard for a group of products, DOE generally considers such factors as the 

utility to the customer of the feature and other factors DOE deems appropriate. In a rule 

prescribing such a standard, DOE includes an explanation of the basis on which such 

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higher or lower level was established. DOE followed a similar process in the context of 

today’sthis rulemaking.

B. Background

Single package vertical units primarily serve modular classroom buildings in 

educational facilities; telecommonunications and electronics enclosures; and offices and 

other miscellaneous commercial buildings. In almost all of these commercial building 

applications, the buildings served are expected to be of modular construction, because 

SPVUs, as packaged air conditioners installed on external building walls, do not impact 

site preparation costs for modular buildings, which may be relocated multiple times over 

the building’s life. The vertically-oriented configuration of SPVUs allows the building 

mounting to be unobtrusive and minimizes impacts on modular building transportation 

requirements. These advantages do not apply to a significant extent in site-constructed 

buildings. 

B.

1. Current Standards

As noted above, EISA 2007 amended EPCA to establish separate equipment 

classes and minimum energy conservation standards for SPVACs and SPVHPs. (42 

U.S.C. 6313(a)(10)(A)) DOE published a final rule technical amendment in the Federal 

Register on March 23, 2009, which codified into DOE’s regulations the new SPVAC and 

SPVHP pump equipment classes and energy conservation standards for this equipment as 

prescribed by EISA 2007. 74 FR 12058. These standards apply to all SPVUs

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Comment [A42]: Change recommended by 

OIRA.

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manufactured on or after January 1, 2010. The current standards are set forth in Table 

II.1.

Table II.1 Current Federal Energy Conservation Standards for Single Package 

Vertical Air Conditioners and Heat Pumps

Equipment Type Cooling Capacity

Btu/h Efficiency Level

Single Package Vertical Air 

Conditioner <65,000 Btu/h EER = 9.0

Single Package Vertical Air 

Conditioner

≥65,000 Btu/h and

<135,000 Btu/h EER = 8.9

Single Package Vertical Air 

Conditioner

≥135,000 Btu/h and 

<240,000 Btu/h* EER = 8.6

Single Package Vertical Heat 

Pump <65,000 Btu/h EER = 9.0COP = 3.0

Single Package Vertical Heat 

Pump

≥65,000 Btu/h and 

<135,000 Btu/h

EER = 8.9

COP = 3.0

Single Package Vertical Heat 

Pump

≥135,000 Btu/h and 

<240,000 Btu/h*

EER = 8.6

COP = 2.9

*There are no models on the market at these cooling capacities.

2. History of Standards Rulemaking for Single Package Vertical Air Conditioners and 

Single Package Vertical Heat Pumps

Single package vertical units were established as a separate equipment class in 

ASHRAE Standard 90.1 by addendum “d” to ASHRAE Standard 90.1-2001. DOE 

subsequently evaluated the possibility of creating separate equipment classes for SPVUs 

but determined that the Energy Policy Act of 2005 (EPACT 2005) had revised the 

language in 42 U.S.C. 6313(a)(6)(A)(i)23 to limit DOE’s authority to adopt ASHRAE 

amendments for small, large, and very large commercial package air-conditioning and 

heating equipment until after January 1, 2010, and thus, DOE could not adopt equipment 

classes and standards for SPVUs at that time. As explained in a March 2007 energy 

conservation standards final rule for various ASHRAE products, DOE determined that 

SPVUs fall under the definition of “commercial package air conditioning and heating 

23 The relevant language in 42 U.S.C. 6313(a)(6)(A)(i) was subsequently revised by EISA 2007 to remove 

the reference to January 1, 2010.

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equipment” (42 U.S.C. 6311(8)(A)), and that any SPVU with cooling capacities less than 

760,000 Btu/h would fit within the commercial package air conditioning and heating 

equipment categories listed in EPCA and be subjected to their respective energy 

efficiency standards. 72 FR 10038, 10046-4710047 (March 7, 2007). 

Subsequently, EISA 2007 amended EPCA to: (1) create separate equipment 

classes for SPVACs and SPVHPs; (2) set minimum energy conservation standards for 

these equipment classes; (3) eliminate the restriction on amendments for small, large, and 

very large commercial package air-conditioning and heating equipment until after 

January 1, 2010; and (4) instruct DOE to review the most recently published ASHRAE 

Standard 90.1 with respect to SPVUs no later than 3 years after the enactment of EISA 

2007. As noted previously, DOE published a final rule technical amendment in the 

Federal Register which codified into DOE regulations the standards for SPVUs that were 

established by EISA 2007. 74 FR 12058 (March 23, 2009).

On October 29, 2010, ASHRAE officially released ASHRAE Standard 90.1-2010 

to the public. As an initial step in reviewing SPVUs under EPCA, DOE published a 

Notice of Data Availability (NODA) on May 5, 2011, which contained potential energy 

savings estimates for certain industrial and commercial equipment, including SPVUs. 76 

FR 25622. Although ASHRAE Standard 90.1-2010 did not update the efficiency levels 

for SPVUs, DOE was obligated to review the potential energy savings for these 

equipment classes under 42 U.S.C. 6313(a)(10)(B), as noted above. On January 17, 

2012, DOE published a notice of proposed rulemaking (January 2012 NOPR) in which it 

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proposed to incorporate by reference the Air-Conditioning, Heating, and Refrigeration 

Institute (AHRI) Standard 390-2003, “Performance Rating of Single Package Vertical 

Air-Conditioners and Heat Pumps,” into the DOE test procedure for SPVUs and 

proposed an optional equipment break-in period of no more than 16 hours. 77 FR 2356. 

DOE also decided to conduct additional analysis for SPVUs to consider more-stringent 

standards. Id. at 2359. On May 16, 2012, DOE published a final rule which incorporated 

by reference AHRI Standard 390-2003 into the DOE test procedure for SPVUs and 

increased the maximum duration of the optional break-in period to 20 hours. 77 FR 

28928. That final rule (as with the NOPR) did not contain amended standards for 

SPVUs, as DOE decided to consider more-stringent standards for such equipment on a 

separate timeline. 

However, as noted before, during the course of the present rulemaking, ASHRAE 

acted on October 9, 2013, to adopt ASHRAE Standard 90.1-2013, and this revision did 

contain amended standard levels for SPVUs, thereby triggering DOE’s statutory 

obligation to promulgate an amended uniform national standard at those levels, unless 

DOE determines that there is clear and convincing evidence supporting the adoption of 

more-stringent energy conservation standards than the ASHRAE levels. Once triggered 

by ASHRAE action, DOE became subject to certain new statutory requirements and 

deadlines. For example, the statute required DOE to publish in the Federal Register for 

comment an analysis of the energy savings potential of amended energy conservation 

standards at the ASHRAE Standard 90.1-2013 levels, not later than 180 days after 

amendment of the ASHRAE standard. DOE published this energy savings analysis as a 

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Notice of Data Availability (NODA) in the Federal Register on April 11, 2014. 79 FR 

20114.

Once triggered by ASHRAE action, the applicable legal deadline for completion 

of this standards rulemaking also shifted. When DOE first commenced this rulemaking 

pursuant to 42 U.S.C. 6313(a)(10)(B), that provision directed DOE to follow the 

procedures established under 42 U.S.C. 6313(a)(6). Because DOE had not been triggered 

by ASHRAE action at the time (as would necessitate use of the procedures under 42 

U.S.C. 6313(a)(6)(A)), DOE proceeded as a 6-year-lookback amendment of the standard 

under 42 U.S.C. 6313(a)(6)(C), which called for a NOPR followed by a final rule not 

more than two years later. DOE was close to issuing a NOPR at the time it was triggered 

by ASHRAE action on Standard 90.1-2013. Once triggered, DOE was then required to 

either adopt the levels in ASHRAE Standard 90.1-2013 not later than 18 months after the 

publication of the amended ASHRAE standard (i.e., by April 9, 2015), or to adopt morestringent standards not later than 30 months after publication of the amended ASHRAE 

standard (i.e., by April 9, 2016). However, given the advanced stage of the NOPR and 

DOE’s rulemaking process (including analysis of the levels ultimately adopted by 

ASHRAE in Standard 90.1-2013), the Department plans to move as expeditiously as 

possible and in advance of the statutory deadlines associated with the ASHRAE trigger. 

With that said, today’sthis NOPR is the next step for DOE’s analysis of amended energy 

conservation standards for SPVUs.

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In developing this NOPR, DOE reviewed the 11 comments it received in response 

to the April 2014 NODA. Commenters included: First Co.; Lennox International Inc.; 

National Comfort Products (NCP); Earthjustice; Goodman Global, Inc.; California 

Investor-Owned Utilities (CA IOUs); GE Appliances; Appliance Standards Awareness 

Project (ASAP), the American Council for an Energy-Efficient Economy (ACEEE), the 

National Resources Defense Council (NRDC), and the Northwest Energy Efficiency 

Alliance (jointly referred to as the Advocates); Daikin Applied; Edison Electric Institute 

(EEI); and Air-Conditioning, Heating & Refrigeration Institute (AHRI). All comments 

relevant to SPVU (as opposed to the other products discussed in the April 2014 NODA) 

are discussed in this NOPR.

In general, AHRI, Lennox International, Goodman Global, Daikin Applied, and 

EEI recommended that DOE should adopt the ASHRAE 90.1-2013 values as minimum 

standards for all considered equipment, including SPVUs. (AHRI, No. 24 at p. 1, Lennox 

International Inc., No. 15 at p. 2; Goodman Global, Inc., No. 18 at p. 4; Daikin Applied, 

No. 22 at p. 1; EEI, No. 23 at p. 2) In contrast, the CA IOUs, as well as the Advocates 

stated that the DOE should adopt more-stringent levels for certain equipment 

classestypes, including SPVU, because of the potential energy savings. (CA IOUs, No. 

19 at pp. 2-3; The Advocates, No. 21 at p. 1)

After careful consideration of the public comments and the available information, 

DOE has tentatively decided to propose energy conservation standards more stringent 

than those set forth in ASHRAE Standard 90.1-2013 for two SPVU equipment classes 

Comment [A43]: Change recommended by 

OIRA.

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and to propose adoption of the levels set forth in ASHRAE Standard 90.1-2013 for the 

remaining four SPVU equipment classes. Comments specific to individual issues or 

analyses are discussed in the relevant sections that follow.

III. General Discussion

A. Compliance Dates

As noted above, this rulemaking was initiated pursuant to an EISA 2007 

amendment to EPCA that requires DOE to conduct a one-time review of the standard 

levels for SPVUs under the procedures established in paragraph (6) of 42 U.S.C. 6313(a). 

(42 U.S.C. 6313(a)(10)(B)) Paragraph (6) contains a number of possible compliance 

dates for any resulting amended standards, which vary depending on the type of 

equipment, the triggering mechanism for DOE review (i.e., whether DOE is triggered by 

a revision to ASHRAE Standard 90.1 or by the “6-year look back” requirement), and the 

action taken (i.e., whether DOE is adopting ASHRAE Standard 90.1 levels or morestringent levels). The discussion below explains the potential compliance dates as they 

pertain to the present rulemaking.

Under the first relevant provision, EPCA requires that when ASHRAE Standard 

90.1 is amended with respect to certain commercial equipment, DOE must amend its 

minimum standards to either adopt levels equivalent to the ASHRAE Standard 90.1 

levels, or to adopt more-stringent levels. (42 U.S.C. 6313(a)(6)(A)(ii)) If DOE adopts 

the ASHRAE Standard 90.1 levels as Federal standard levels, compliance with the 

amended Federal standards is required either two or three years from the effective date of 

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the ASHRAE Standard 90.1 level, depending on the equipment type. (42 U.S.C. 

6313(a)(6)(D)) For small commercial package air-conditioning and heating equipment, 

PTACs, PTHPs, warm-air furnaces, packaged boilers, storage water heaters, 

instantaneous water heaters, and unfired hot water storage tanks, compliance is required 

two years after the effective date of the applicable minimum energy efficiency 

requirement in the amended ASHRAE Standard 90.1. For large and very large 

commercial package air-conditioning and heating equipment, compliance is required 

three years after the effective date of the applicable minimum energy efficiency 

requirement in the amended ASHRAE Standard 90.1. If DOE adopts more-stringent 

standard levels than the levels contained in the amended ASHRAE Standard 90.1 for any 

type of equipment, compliance is required four years after the date such final rule is 

published in the Federal Register. Id.

Under the second relevant provision, EPCA requires that at least once every 6 

years, DOE must review standards for covered equipment and publish either a notice of 

determination that standards do not need to be amended or a NOPR proposing new 

standards. (42 U.S.C 6313(a)(6)(C)) For any NOPR published pursuant to 42 U.S.C. 

6313(a)(6)(C), the final rule would apply on the date that is the later of either 3 years 

after publication of the final rule establishing a new standard, or 6 years after the 

effective date of the current standard for a covered product. (42 U.S.C. 

6313(a)(6)(C)(iv))

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In the context of the current rulemaking, when DOE first commenced the 

rulemaking process, ASHRAE had not released a full revision of ASHRAE Standard 90.1 

that revises the minimum energy efficiency requirements for SPVUs. Thus, DOE 

initially determined the procedural requirements of 42 U.S.C. 6313(a)(6)(C) to be 

applicable, and accordingly, DOE anticipated a compliance date of 2017, or 3 years after 

the expected publication of the final rule in 2014.24

However, as DOE expected might happen, ASHRAE released a revision of 

ASHRAE Standard 90.1 on October 9, 2013, consistent with its recent practice of 

releasing a full revision of ASHRAE Standard 90.1 every 3 years. Because this revision 

increased the energy efficiency requirements for SPVUs in ASHRAE Standard 90.1,

DOE was triggered to act on the ASHRAE Standard 90.1 levels for SPVUs pursuant to 

42 U.S.C. 6313(a)(6)(A), and consequently, this rulemaking will simultaneously satisfy

the requirements of 42 U.S.C. 6313(a)(6)(A), 42 U.S.C. 6313(a)(6)(C), and 42 U.S.C. 

6313(a)(10)(B). However, in this case, DOE believes that the statutory lead time for 

compliance under such circumstances must ultimately be dictated by the requirements of 

42 U.S.C. 6313(a)(6)(A), given that there is now an “ASHRAE trigger” upon which DOE 

is acting. Thus, DOE will use the compliance dates specified under 42 U.S.C. 

6313(a)(6)(D) for analyzing amended standards in the final rule. More specifically, if 

DOE adopts the ASHRAE Standard 90.1-2013 levels for certain SPVU equipment 

classes, as proposed, the applicable compliance date would be two or three years after the 

24 2017 is the later date compared to the alternative of 6 years after the effective date of the current 

standard, which would be 2016 (as the current SPVU standards became effective in 2010).

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effective date of the applicable ASHRAE standard, depending on equipment size (i.e., by 

October 9, 2015 or October 9, 2016).25 If DOE adopts more-stringent standards for 

certain other SPVU equipment classes, as proposed, the applicable compliance date 

would be four years after publication of the final rule in the Federal Register.

B. Equipment Classes and Scope of Coverage

When evaluating and establishing energy conservation standards, DOE divides 

covered products into equipment classes by the type of energy used or by capacity or 

other performance-related features that justifies a different standard. In making a 

determination whether a performance-related feature justifies a different standard, DOE 

must consider such factors as the utility to the consumer of the feature and other factors 

DOE determines are appropriate.

Existing energy conservation standards group SPVUs into the following six

equipment classes based on the cooling capacity and whether the equipment is an air 

conditioner or a heat pump:

25 Under 42 U.S.C. 6313(a)(6)(D)(i), the applicable compliance date when DOE adopts the ASHRAE 

standard levels for small commercial package air conditioning and heating equipment (including SPVACs 

and SPVHPs under 135,000 Btu/h) is two years after the effective date of the minimum energy efficiency 

requirements in the amended ASHRAE Standard 90.1. Under 42 U.S.C. 6313(a)(6)(D)(ii), the applicable 

compliance date when DOE adopts the ASHRAE standard levels for large and very large commercial 

package air conditioning and heating equipment (including SPVACs and SPVHPs ≥ 135,000 Btu/h and <

240,000 Btu/h) is three years after the effective date of the minimum energy efficiency requirement in the 

amended ASHRAE Standard 90.1. 

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Table III.1 Equipment Classes for Single Package Vertical Units

Equipment Type Cooling Capacity

Btu/h

Single Package Vertical Air 

Conditioners

<65,000

≥65,000 and <135,000

≥135,000 and <240,000

Single Package Vertical Heat 

Pumps

<65,000

≥65,000 and <135,000

≥135,000 and <240,000

10 Code of Federal Regulations (CFR) 431.97(d).

1. Consideration of a Space Constrained SPVU Equipment Class

In the April 2014 NODA, DOE noted that ASHRAE Standard 90.1-2013 created 

a new equipment class for SPVACs and SPVHPs used in space-constrained applications, 

with a definition for “nonweatherized space constrained single-package vertical unit” and 

efficiency standards for the associated equipment class. In the NODA, DOE tentatively 

concluded that there was no need to establish a separate space-constrained class for 

SPVUs, given that certain models currently listed by manufacturers as SPVUs, most of 

which would meet the ASHRAE space-constrained definition, are being misclassified 

and should be classified as central air conditioners (in most cases, space-constrained 

central air conditioners). 79 FR 20114, 20123 (April 11, 2014).

In response to the April 2014 NODA, AHRI and NCP requested that DOE adopt 

the new ASHRAE 90.1-2013 space-constrained SPVU product class. (AHRI, No. 24 at 

pp. 1-2; NCP, No. 16 at p. 3) First Co. disagreed with DOE’s conclusion that spaceconstrained SPVUs should be regulated as consumer products rather than commercial 

equipment and stated that increasing energy conservation standards for SPVU should be 

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done by changing EER/COP, as ASHRAE has done, not by reclassifying them as 

consumer products. (First Co. No. 14 at p. 1) 

DOE does not agree with these commenters and has provided responses to 

specific concerns below.

Lennox and NCP stated that multi-family structures above 3 stories are 

considered commercial buildings by both EPCA and ASHRAE Standard 90.1. (Lennox 

International, No. 15 at p. 4; NCP, No. 16 at pp. 7-8) AHRI added that hotels, 

apartments, and dormitories are all commercial applications in building types falling 

within the scope of ASHRAE Standard 90.1. (AHRI, No. 24 at p. 4) NCP argued that 

SPVUs are distributed to a significant extent for commercial applications, including 

commercial lodging such as student housing and dormitories, nursing homes, assisted 

care facilities, hotels, and high-rise apartment buildings. (NCP, No. 16 at p. 10) GE, 

Lennox, and AHRI analogized that many SPVU are distributed in the same market 

segments as PTAC/PTHP, which is a type of commercial equipment. (GE Appliances, 

No. 20 at p. 2; Lennox International, No. 15 at p. 4; AHRI, No. 24 at p. 4) 

GE, Lennox, and AHRI stated that SPVU are sold to commercial entities and that 

consumers are never involved in those sale transactions. (GE Appliances, No. 20 at p. 2; 

Lennox International, No. 15 at p. 5; AHRI, No. 24 at p. 5) Lennox added that SPVUs 

(including space-constrained models) involve a much higher degree of design integration 

than residential split system central air conditioners. (Lennox International, No. 15 at p. 

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5) NCP argued that while SPVUs may be used temporarily by individual occupants, over 

their life, they are owned and maintained by the commercial entities that own the 

buildings. (NCP, No. 16 at p. 7) NCP also added that characterizing SPVUs used in 

lodging as consumer products is going overbroad, because it overlooks the energy use 

constraints of various multi-family building configurations. (NCP, No. 16 at p. 3) 

DOE notes that the definitions for “consumer product” and “industrial equipment”

in EPCA are not dependent on the definition of residential or commercial buildings found 

elsewhere in EPCA or in ASHRAE Standard 90.1. As discussed in the April 2014 

ASHRAE NODA, EPCA defines “industrial equipment” as any article of equipment of 

certain specified types that consumes, or is designed to consume, energy, which is 

distributed to any significant extent for industrial and commercial use, and which is not a 

covered product as defined in 42 U.S.C. 6291(2),26 without regard to whether such article 

is in fact distributed in commerce for industrial or commercial use. (42 U.S.C. 

6311(2)(A)) EPCA defines “consumer product” as any article: (1) of a type that 

consumes or is designed to consume energy, and, to any significant extent, is distributed 

in commerce for personal use or consumption by individuals, (2) without regard to 

whether such article of such type is in fact distributed in commerce for personal use or 

consumption by an individual. (42 U.S.C. 6291(1)) Consistent with the NODA and 

these relevant statutory provisions, DOE maintains that products serving individual 

rooms in multi-family and lodging applications is for personal use or consumption by 

26 The term “covered product” means a consumer product of a type specified in section 6292 of this title. 

(42 U.S.C. 6291(2)) Central air conditioners and central air conditioning heat pumps are listed as a covered 

product in section 6292. (42 U.S.C. 6292(a)(3))

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individuals, regardless of who designed the system, was involved in the sale transaction, 

or maintains the equipment. In addition, DOE found similarities between units designed 

for multi-family applications and those intended for commercial lodging applications, 

indicating that those products should be treated the same under DOE’s regulatory 

scheme.

Furthermore, the definitions of “industrial equipment” and “consumer product”

are mutually exclusive. A product can only be considered commercial/industrial 

equipment under EPCA if it does not fit the definition of consumer product. PTACs, 

referenced by stakeholders as commercial equipment with applications similar to spaceconstrained SPVUs, are not relevant to this argument because the definition for “central 

air conditioner” explicitly excludes PTACs (see 42 U.S.C. 6291(21)). Therefore, DOE 

differentiates these situations, because while many of the products that would meet the 

ASHRAE definition for a space-constrained SPVU would also meet the EPCA definition 

for central air conditioner, PTACs cannot meet the latter definition because they are 

explicitly excluded.

Lennox and AHRI stated that in the November 4, 2013 proposed rule, “Energy 

Conservation Program for Consumer Products and Certain Commercial and Industrial 

Equipment: Test Procedures for Residential and Commercial Water Heaters,” (78 FR 

66202), DOE recognized that there are commercial water heaters that “could have 

residential applications,” yet DOE specifically chose not to treat that equipment as a 

consumer covered product because it would be distributed to a (more) significant extent 

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as a commercial product. (Lennox International, No. 15 at p. 5; AHRI, No. 24 at p. 5) 

NCP agreed that DOE should regulate SPVU in the same manner as DOE recently 

proposed for light commercial water heaters. (NCP, No. 16 at p. 10) Lennox 

International, AHRI, and NCP all maintain that SPVUs are used to a significant extent in 

commercial applications and more rarely in residential applications. (Lennox 

International, No. 15 at p. 5; AHRI, No. 24 at p. 5; NCP, No. 16 at p. 10)

To clarify this issue, DOE provides the following excerpt from the November 

2013 NOPR, along with additional information. The specific reference from the 

November 2013 NOPR is as follows: “Although light commercial water heaters could 

have residential applications, DOE notes that the new ‘light commercial water heater’ 

definition represents a type of water heater that, to a significant extent, is distributed in 

commerce for industrial or commercial use. These water heaters were and continue to be 

covered industrial equipment, and, if these proposals are finalized, will continue to be 

subject to the regulations in part 431 and the certification requirements for commercial 

and industrial equipment in part 429.” 78 FR 66202, 66207 (Nov. 4, 2013). One must 

keep in mind that EPCA’s definition addressing various types of “water heater[s]” 

contains specific limitations on the input capacities for such models to be considered 

consumer products. (42 U.S.C. 6291(27); codified at 10 CFR 430.2) DOE further notes 

that the proposed definition for “light commercial water heater” makes the equipment a 

subtype of commercial water heater. 78 FR 66202, 66207 (Nov. 4, 2013). Commercial 

storage and instantaneous water heaters are specifically listed in EPCA as a type of 

industrial equipment at 42 U.S.C. 6313(1)(K) and defined at 42 U.S.C. 6311(12), and 

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there are a number of related definitions in DOE’s regulations (see 10 CFR 431.102). 

Therefore, under the statutory scheme, equipment can only be classified as a “light 

commercial water heater” if it does not meet the definition of a “water heater” under 10 

CFR 430.2. In the same way, space-constrained SPVUs can only be classified as 

industrial equipment if they do not meet the definition of “central air conditioner” or any 

other covered consumer product. 

Lennox, NCP, and AHRI also referred to the history of SPVUs, stating that all 

SPVUs were previously classified as central air conditioners; the product class was not 

introduced in ASHRAE Standard 90.1 until the 2004 version and not established in 

EPCA until EISA 2007, which explicitly separated out SPVUs as type of covered 

equipment. (NCP, No. 16 at p. 9; Lennox International, No. 15 at p. 3; AHRI, No. 24 at 

pp. 3-4) NCP and Lennox added that EISA 2007 specified that SPVACs include 

equipment that is mounted “through an outside wall,” expressly contemplating spaceconstrained units. (NCP, No. 16 at p. 9; Lennox International, No. 15 at pp. 2-3) NCP 

commented that in an October 2000 NOPR (65 FR 59590, 59610 (Oct. 5, 2000)), DOE 

proposed creating standards for SPVUs as a niche product, noting that SPVUs “are not 

distributed for personal use or consumption by individuals, and therefore believes that at 

present they are commercial products....” NCP added that the NOPR (Id.) acknowledged 

that “the difficult air flow configuration... combined with the attempt to minimize the 

size constrains the ability of these units to attain higher SEERs.” (NCP, No. 16 at p. 9) 

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DOE disagrees that all SPVUs were classified as residential central air 

conditioners prior to EISA 2007. Traditional (non-space constrained) SPVU units and 

three-phase units would have been classified either as commercial air conditioners or not 

covered. Furthermore, in the April 2014 NODA, DOE was referring to products 

classified as through-the-wall (TTW) until January 23, 2010 (when TTW was removed as 

a product class and TTW products had to meet the regulatory requirements for other 

central air conditioner product classes). 79 FR 20114, 20121-23 (April 11, 2014). In 

regards to the intent of EISA 2007 and the October 2000 NOPR, DOE notes that before 

ASHRAE released Addendum “i” to Standard 90.1-2010 in March 2011, there was no 

such thing as a space-constrained SPVU equipment class. Prior to that time, any 

references to SPVUs were in regards to traditional units that were not limited in size. 

Consistent with DOE’s position in the October 2000 NOPR, EISA 2007 added SPVUs as 

a type of commercial equipment, but Congress declined to distinguish a separate 

equipment class for space-constrained SPVUs. DOE notes that the October 2000 NOPR 

also considered niche products called “through-the-wall condensers,” which were 

proposed for a separate residential product class.27 65 FR 59590, 59610 (Oct. 5, 2000). 

It is in this product class that DOE expressly contemplated residential space-constrained 

units, including those models previously classified as TTW that manufacturers are now 

attempting to classify as SPVUs. DOE does not believe the design, market, and 

application for these space-constrained units has changed substantially over the past 10 

years. In fact, DOE believes the space-constrained products are properly classified, as 

27 A TTW product class was created in a May 2002 final rule (67 FR 36368 (May 23, 2002)) and was 

replaced by the residential space-constrained product class in a June 2011 Direct Final Rule (76 FR 37408, 

(June 27, 2011)).

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they were once certified, as central air conditioners, a practice which changed only when

the TTW product class was combined with the space-constrained product class and 

compliance with amended standards for these product classes was required. Based upon 

the above reasoning, DOE does not see a basis or a need for the space-constrained SPVU 

equipment class, as these basic models are already covered products as space-constrained 

central air conditioners. Any product that meets the definition of a “consumer product” 

(42 U.S.C. 6291(1)) is classified as a consumer product and must meet any applicable

energy conservation standard, regardless of whether it is used in a commercial 

application or marketed as commercial equipment.

Lennox and AHRI asserted that the existing base of SPVU products in 

commercial buildings with fixed physical-dimension requirements limits the ability of 

manufacturers to increase efficiency; this was the reason for ASHRAE’s development of 

the space-constrained SPVU equipment class. (Lennox International No. 15 at p. 5; 

AHRI No. 24 at p. 5) NCP stated that lodging and commercial SPVACs are configured 

for ease of access and maintenance, which impacts efficiency. (NCP, No. 16 at pp. 7-8) 

NCP added that the presence of multiple units venting to the outside also would affect an 

individual unit’s ultimate performance. (NCP, No. 16 at p. 7) Lennox commented that 

space-constrained SPVU cannot meet the efficiency levels of residential units. (Lennox 

International, No. 15 at pp. 5-6)

DOE notes that while equipment meeting the ASHRAE Standard 90.1 definition 

of a space-constrained SPVU may in fact be constrained in efficiency, the presence of the 

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space-constrained central air conditioner (CAC) equipment class already provides respite 

for these products. The SEER requirement for space-constrained CAC is 12 SEER, one 

point below the current standards for CAC and two points below the standard for some 

CACs (split system CACs in the South and all single package CACs) beginning January 

1, 2015. (10 CFR 430.32(c)(1)-(3)) Furthermore, DOE notes that there are currently

space-constrained units on the market that meet the 12 SEER requirement,.

NCP argued that if DOE excludes equipment used in high-rise multi-family or 

other commercial lodging applications from the SPVAC class, DOE must establish a new 

equipment class because such equipment does not qualify as CAC or otherwise fall 

within any other existing category. (NCP, No. 16 at p. 10) Specifically, NCP stated that 

their Comfort Pack products cannot be classified as CAC because they always include 

gas or electric resistance heat. (NCP, No. 16 at pp. 5-6) 

In response to NCP, EPCA defines “central air conditioner” as a product, other 

than a packaged terminal air conditioner, which: (1) is powered by single phase electric 

current; (2) is air-cooled; (3) is rated below 65,000 Btu per hour; (4) is not contained 

within the same cabinet as a furnace with a rated capacity above 225,000 Btu per hour; 

and (5) is a heat pump or a cooling only unit. (42 U.S.C. 6291(21); 10 CFR 430.2) DOE 

notes that criteria number 5 refers to coverage of both a type of air conditioner unit that 

can only perform cooling (i.e., a “cooling only unit”) as well as a type of air conditioner 

unit that can perform both cooling and heating (i.e., a “heat pump”). Criteria number 5 

does not refer to other components such as a furnace or electric heater. The only heating 

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component that excludes equipment from coverage under this definition is a furnace with 

a rated capacity above 225,000 Btu/hour, as set forth in criteria number 4. DOE notes 

that for units meeting the definition of “central air conditioner” and also containing a 

furnace in the package (with a rated capacity under 225,000 Btu/hour), the air conditioner 

is subject to one set of energy conservation standards, while the furnace may be subject to 

separate standards. 

First Co. stated that its commercially-designed SPVHPs cannot be tested under 

the HSPF test procedure because they cannot be operated at temperatures required for 

testing Frost Accumulation or Low Temperature. (First Co., No. 14 at p. 2)

In response to First Co., DOE notes that whether a product can be tested in 

accordance with the test procedure is not typically determinative of whether it meets the 

product's definition. Instead, the characteristics of the product (as outlined above for 

central air conditioning) determine whether it meets the definition. If a product that 

meets the definition cannot be tested in accordance with the test procedure, a 

manufacturer may apply to DOE for a waiver of the test procedure..

AHRI and GE Appliances stated that all models of SPVUs listed in the AHRI 

Directory meet the requirement of having components arranged vertically and current 

models of space-constrained SPVU meet the EPCA definition of “SPVU.” (AHRI, No. 

24 at pp. 3-4; GE Appliances, No. 20 at pp. 1-2) NCP reasoned that by "arranged 

vertically," DOE intends to address products that operate in a vertical manner, with a 

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bottom "return air" opening and a top "supply air" opening. This configuration is 

commonly referred to within the industry as an "Upflow" unit. In addition, for NCP 

Comfort Pack units, the gas furnace or electrical heating component is positioned 

vertically above the cooling component and along the vertically moving air flow. 

Accordingly, NCP's products are vertically arranged as contemplated by the EPCA. 

(NCP, No. 16 at pp. 4-5) 

In response, the EPCA definition for “SPVU” requires that the major components 

be arranged vertically. (42 USC 6311(22)(A)(i); 10 CFR 431.92) In the April 2014 

NODA, when stating that some models do not have their components arranged vertically, 

DOE was referring to units in which all components were on the same horizontal plane 

within the cabinet. 79 FR 20114, 20122 (April 11, 2014). DOE acknowledges that most 

of the products in the AHRI database do have their components arranged vertically. 

However, even if the units in the AHRI database have their components arranged 

vertically and otherwise meet the definition of “SPVU,” they may also meet the 

definition of an applicable consumer product, which takes precedence, as discussed 

previously.

For all of the reasons discussed in this section, DOE is maintaining the position 

on space-constrained units that it outlined in the April 2014 NODA. Specifically, DOE 

has not identified a need to establish a separate space-constrained class for SPVUs, given 

that certain units currently listed by manufacturers as SPVUs, most of which would meet 

the ASHRAE space-constrained definition, are being misclassified and are appropriately 

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classified as central air conditioners (in most cases, space-constrained central air 

conditioners). 

Lennox and AHRI stated that DOE should expand the applications considered in 

the analysis; AHRI specified that in addition to office, education, and telecom, DOE 

should consider lodging, multi-family, and assisted-living applications. (Lennox 

International No. 15 at p. 7; AHRI No. 24 at p. 6) DOE notes that the applications used 

in the analysis apply to traditional (non-space constrained) SPVUs. DOE believes that 

the additional applications suggested by Lennox and AHRI are primarily related to spaceconstrained applications. Given that DOE is not considering the space-constrained units 

to be SPVUs, DOE has not included the additional applications in its analysis.

Issue 1: DOE seeks comment on its tentative conclusion that the creation of a 

space-constrained equipment class for SPVUs is not warranted.

C. Technological Feasibility

1. General

In each energy conservation standards rulemaking, DOE conducts a screening 

analysis based on information gathered on all current technology options and prototype 

designs that could improve the efficiency of the products or equipment that are the 

subject of the rulemaking. As the first step in such an analysis, DOE develops a list of 

technology options for consideration in consultation with manufacturers, design 

engineers, and other interested parties. DOE then determines which of those means for 

improving efficiency are technologically feasible. DOE considers technologies 

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incorporated in commercially-available products or in working prototypes to be 

technologically feasible. 10 CFR part 430, subpart C, appendix A, section 4(a)(4)(i).

After DOE has determined that particular technology options are technologically 

feasible, it further evaluates each technology option in light of the following additional 

screening criteria: (1) practicability to manufacture, install, and service; (2) adverse 

impacts on product utility or availability; and (3) adverse impacts on health or safety. 10 

CFR part 430, subpart C, appendix A, section 4(a)(4)(ii)-(iv). Section IV.B of this

noticepreamble discusses the results of the screening analysis for SPVUs, particularly the 

designs DOE considered, those it screened out, and those that are the basis for the trial 

standard levels (TSLs) in this rulemaking. For further details on the screening analysis 

for this rulemaking, see chapter 4 of the NOPR Technical Support Document (TSD).

After screening out or otherwise removing from consideration most of the 

technologies, the following technologies were identified for consideration in the 

engineering analysis: (1) increased frontal coil area; (2) increased depth of coil; (3) 

improved fan motor efficiency; (4) improved fan blade efficiency; and (5) improved 

compressor efficiency, and (6) dual condensing heat exchangers. To adopt standards for 

SPVUs that are more stringent than the efficiency levels in ASHRAE Standard 90.1 as 

amended, DOE must determine, supported by clear and convincing evidence, that such 

standards are technologically feasible. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) Since these six

design options are commercially available, have been used in SPVU equipment, and are 

the most common ways by which manufacturers improve the energy efficiency of their 

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SPVUs, DOE has tentatively determined that clear and convincing evidence supports the 

conclusion that all of the efficiency levels evaluated in this noticeNOPR are 

technologically feasible.

Additionally, DOE notes that the four screening criteria do not directly address

the propriety status of design options. DOE only considers efficiency levels achieved 

through the use of proprietary designs in the engineering analysis if they are not part of a 

unique path to achieve that efficiency level (i.e., if there are other non-proprietary 

technologies capable of achieving the same efficiency). DOE believes the proposed 

standards for the equipment covered in this rulemaking would not mandate the use of any 

proprietary technologies, and that all manufacturers would be able to achieve the 

proposed levels through the use of non-proprietary designs. DOE seeks comment on this 

tentative conclusion and requests additional information regarding proprietary designs 

and patented technologies.

2. Maximum Technologically Feasible Levels

When DOE proposes to adopt an amended standard for a type or class of covered 

product, it must determine the maximum improvement in energy efficiency or maximum 

reduction in energy use that is technologically feasible for such product. Accordingly, in 

the engineering analysis, DOE determined the maximum technologically feasible (“maxtech”) improvements in energy efficiency for SPVUs, using the design parameters for the 

most efficient products available on the market or in working prototypes. (See chapter 5

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of the NOPR TSD.) The max-tech levels that DOE determined for this rulemaking are 

described in section IV.C.1 of this proposed rule.

D. Energy Savings

1. Determination of Savings

For each TSL, DOE projected energy savings from the products that are the 

subject of this rulemaking purchased in the 30-year period that begins in the year of 

compliance with amended standards (2015-2044 for the ASHRAE level, and 2019-2048 

for higher efficiency levels). The savings are measured over the entire lifetime of 

products purchased in the 30-year analysis period.28 DOE quantified the energy savings 

attributable to each TSL as the difference in energy consumption between each standards 

case and theboth base casecases. The base case represents a projection of energy 

consumption in the absence of amended mandatory energy conservation standards, and it 

considers market forces and policies that affect demand for more-efficient products. 

DOE used its national impact analysis (NIA) spreadsheet model to estimate 

energy savings from amended standards for the products that are the subject of this 

rulemaking. The NIA spreadsheet model (described in section IV.G of this

noticepreamble) calculates energy savings in site energy, which is the energy directly 

consumed by products at the locations where they are used. For electricity, DOE reports 

28 In the past, DOE presented energy savings results for only the 30-year period that begins in the year of 

compliance. In the calculation of economic impacts, however, DOE considered operating cost savings 

measured over the entire lifetime of products purchased in the 30-year period. DOE has chosen to modify 

its presentation of national energy savings to be consistent with the approach used for its national economic 

analysis.

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national energy savings in terms of the savings in the energy that is used to generate and 

transmit the site electricity. To calculate this quantity, DOE derived annual conversion 

factors from the model used to prepare the Energy Information Administration’s (EIA) 

Annual Energy Outlook 2013 (AEO 2013).

29

DOE has begun to also estimate full-fuel-cycle energy savings, as discussed in 

DOE’s statement of policy and notice of policy amendment. 76 FR 51281 (August 18, 

2011), as amended at 77 FR 49701 (August 17, 2012). The full-fuel-cycle (FFC) metric 

includes the energy consumed in extracting, processing, and transporting primary fuels, 

and, thus, presents a more complete picture of the impacts of energy efficiency standards. 

DOE’s approach is based on the calculation of an FFC multiplier for each of the energy 

types used by covered equipment. See section IV.G.1.a for further discussion.

2. Significance of Savings

Among the criteria that govern DOE’s adoption of more-stringent standards for 

SPVUs than the amended levels in ASHRAE Standard 90.1, clear and convincing 

evidence must support a determination that the standards would result in ‘‘significant’’ 

additional energy savings. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) Although the term 

“significant” is not defined in the Act, the U.S. Court of Appeals, in Natural Resources 

Defense Council v. Herrington, 768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated that 

29 Conversion factors based on the Annual Energy Outlook 2014 (AEO 2014), which became available too 

late for incorporation into this analysis, show very little change compared to the AEO 2013-based factors. 

DOE plans to use convresion factors based on the most recent AEO available for the next phase of this 

rulemaking, which may or may not be AEO 2014, depending on the timing of the issuance of the next 

rulemaking document.

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Congress intended “significant” energy savings in this context to be savings that were not 

“genuinely trivial.” DOE’s estimates of the energy savings for each of the TSLs 

considered for today’sthe proposed rule for SPVUs <65,000 Btu/h (presented in section 

V.B.3.a) provide evidence that the additional energy savings each would achieve by 

exceeding the corresponding efficiency levels in ASHRAE Standard 90.1–2013 are 

nontrivial. Therefore, DOE considers these savings to be ‘‘significant’’ as required by 42 

U.S.C.6313(a)(6)(A)(ii)(II).

E. Economic Justification

1. Specific Criteria

As discussed beforehand, EPCA provides seven factors to be evaluated in 

determining whether a potential energy conservation standard is economically justified. 

(42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII)) The following sections discuss how DOE has 

addressed each of those seven factors in this rulemaking.

a. Economic Impact on Manufacturers and Consumers

In determining the impacts of a potential amended standard on manufacturers, 

DOE conducts a manufacturer impact analysis (MIA), as discussed in section IV.I. DOE 

first uses an annual cash-flow approach to determine the quantitative impacts. This step 

incorporates both a short-term impacts—based on the cost and capital requirements 

during the period between when a regulation is issued and when entities must comply 

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with the regulation—and a long-term impacts over a 30-year period.30 The industry-wide 

impacts analyzed include: (1) industry net present value (INPV), which values the 

industry on the basis of expected future cash flows; (2) cash flows by year; (3) changes in 

revenue and income; and (4) other measures of impact, as appropriate. Second, DOE 

analyzes and reports the impacts on sub-groups manufacturers, such as impacts on small 

manufacturers. Third, DOE considers the impact of standards on domestic manufacturer 

employment and manufacturing capacity, as well as the potential for standards to result in 

plant closures and loss of capital investment, as discussed in section IV.M. Finally, DOE 

takes into account cumulative impacts of various DOE regulations and other regulatory 

requirements on manufacturers.

For individual consumers, measures of economic impact include the changes in 

life-cycle cost (LCC) and payback period (PBP) associated with new or amended 

standards. These measures are discussed further in the following section. For consumers 

in the aggregate, DOE also calculates the national net present value of the economic 

impacts applicable to a particular rulemaking. DOE also evaluates the LCC impacts of 

potential standards on identifiable subgroups of consumers that may be affected 

disproportionately by a national standard.

b. Savings in Operating Costs Compared to Increase in Price (Life-Cycle Costs)

EPCA requires DOE to consider the savings in operating costs throughout the 

estimated average life of the covered product compared to any increase in the price of the 

30 DOE also presents a sensitivity analysis that considers impacts for products shipped in a 9-year period.

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covered product that are likely to result from the imposition of the standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(II)) DOE conducts this comparison in its LCC and PBP analysis. 

The LCC is the sum of the purchase price of a piece of equipment (including its 

installation) and the operating expense (including energy, maintenance, and repair 

expenditures) discounted over the lifetime of the equipment. To account for uncertainty 

and variability in specific inputs, such as equipment lifetime and discount rate, DOE uses 

a distribution of values, with probabilities attached to each value. For its analysis, DOE 

assumes that consumers will purchase the covered equipment in the first year of 

compliance with amended standards. 

The LCC savings and the PBP for the considered efficiency levels are calculated 

relative to a base case that reflects projected market trends in the absence of amended 

standards. DOE identifies the percentage of consumers estimated to receive LCC savings 

or experience an LCC increase, in addition to the average LCC savings associated with a 

particular standard level. DOE’s LCC analysis is discussed in further detail in section 

IV.F.

c. Energy Savings

Although significant conservation of energy is a separate statutory requirement 

for adopting an energy conservation standard, EPCA requires DOE, in determining the 

economic justification of a standard, to consider the total projected energy savings that 

are expected to result directly from the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(III)) As 

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discussed in section IV.G, DOE uses the NIA spreadsheet to project national energy 

savings.

d. Lessening of Utility or Performance of Products

In establishing classes of products, and in evaluating design options and the 

impact of potential standard levels, DOE evaluates potential standards that would not 

lessen the utility or performance of the considered products. (42 U.S.C. 

6313(a)(6)(B)(ii)(IV)) Based on data available to DOE, the proposed standards proposed

in today’s notice would not reduce the utility or performance of the products under 

consideration in this rulemaking.

e. Impact of Any Lessening of Competition

EPCA directs DOE to consider any lessening of competition that is likely to result 

from energy conservation standards. It also directs the Attorney General of the United 

States (Attorney General) to determine the impact, if any, of any lessening of competition 

likely to result from a proposed standard and to transmit such determination to the 

Secretary within 60 days of the publication of a proposed rule, together with an analysis 

of the nature and extent of the impact. (42 U.S.C. 6313(a)(6)(B)(ii)(V)) DOE will 

transmit a copy of today’sthis proposed rule to the Attorney General with a request that 

the Department of Justice (DOJ) provide its determination on this issue. DOE will 

publish and address the Attorney General’s determination in the final rule.

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f. Need for National Energy Conservation

In evaluating the need for national energy conservation, DOE expects that the 

energy savings from the proposed standards are likely to provide improvements to the 

security and reliability of the nation’s energy system. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) 

Reductions in the demand for electricity also may result in reduced costs for maintaining 

the reliability of the nation’s electricity system. DOE conducts a utility impact analysis 

to estimate how standards may affect the nation’s needed power generation capacity, as 

discussed in section IV.L. 

The proposed standards also are likely to result in environmental benefits in the 

form of reduced emissions of air pollutants and greenhouse gases associated with energy 

production. DOE reports the emissions impacts from today’sthe proposed standards, and 

from each TSL it considered, in section IV.J of this noticethis preamble. DOE also 

reports estimates of the economic value of emissions reductions resulting from the 

considered TSLs, as discussed in section IV.K.

g. Other Factors

EPCA allows the Secretary of Energy, in determining whether a standard is 

economically justified, to consider any other factors that the Secretary deems to be 

relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) 

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2. Rebuttable Presumption

EPCA creates a rebuttable presumption that an energy conservation standard is 

economically justified if the additional cost to the consumer of a product that meets the 

standard is less than three times the value of the first year’s energy savings resulting from 

the standard, as calculated under the applicable DOE test procedure. DOE’s LCC and 

PBP analyses generate values used to calculate the effects that proposed energy 

conservation standards would have on the payback period for customers. These analyses 

include, but are not limited to, the 3-year payback period contemplated under the 

rebuttable-presumption test. 

In addition, DOE routinely conducts an economic analysis that considers the full 

range of impacts to customers, manufacturers, the Nation, and the environment, as 

required under 42 U.S.C. 6313(a)(6)(B)(ii). The results of this analysis serve as the basis 

for DOE’s evaluation of the economic justification for a potential standard level (thereby 

supporting or rebutting the results of any preliminary determination of economic 

justification). The rebuttable presumption payback calculation is discussed in section 

V.B.1.c of this proposed rule.

IV. Methodology and Discussion of Related Comments

This section addresses the analyses DOE has performed for this rulemaking with 

regards to SPVACs and SPVHPs. A separate subsection addresses each component of 

the analysis.

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A. Market and Technology Assessment

To start the rulemaking analysis for SPVACs and SPVHPs, DOE researched 

information that provided an overall picture of the market for this equipment, including 

the purpose of the equipment, the industry structure, manufacturers, market

characteristics, and technologies used in the equipment. This activity included both 

quantitative and qualitative assessments based primarily on publically-available 

information. The topics addressed in this market and technology assessment for the

rulemaking include definitions, equipment classes, manufacturers, quantities, and types 

of equipment sold and offered for sale. The key findings of DOE’s market assessment 

are summarized below. For additional detail, see chapter 3 of the NOPR TSD.

1. Definitions of a SPVAC and a SPVHP

EPCA defines “single package vertical air conditioner” as: Air-cooled 

commercial package air conditioning and heating equipment that –

(1) Is factory-assembled as a single package that –

(i) Has“single package vertical heat pump” in 42 U.S.C. 6311(23) and 

(24). In particular, these units can be single or three-phase; must have

major components that are arranged vertically;

(ii) Is must be an encased combination of cooling and optional heating 

components; and

(iii) Is must be intended for exterior mountingmountain on, adjacent 

interior to, or through an outside wall;

(2) Is powered by a single- or 3-phase current;

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(3) May contain 1 or more separate indoor grilles, outdoor louvers, various 

ventilation options, indoor free air discharges, ductwork, wall plenum, or sleeves; 

and

(4) Has heating components that may include electrical resistance, steam, hot 

water, or gas, but may not include reverse cycle refrigeration as a heating means.

(42 U.S.C. 6311(23))

Similarly, EPCA defines “single package vertical heat pump” as: a single package 

vertical air conditioner that—

(1) Uses reverse cycle refrigeration as its primary heat source; and

(2) May include secondary supplemental heating by means of electrical 

resistance, steam, hot water, or gas.

(42 U.S.C. 6311(24))

. DOE codified these definitions into its regulations at 10 CFR 431.92. Certain of 

these equipment types are sometimes referred to as “wall-mount” units and are 

commonly installed on the exterior wall of classrooms, modular office buildings, and 

telecom shelters. Certain others of these units are also sometimes found installed in the 

interior wall of classrooms, such as in a utility closet. These units are beneficial because 

they provide each room with individual temperature control, and because in the event of a 

failure of the system, only one room would be affected as opposed to the whole space.

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2. Equipment Classes

In evaluating and establishing energy conservation standards, DOE divides 

covered equipment into equipment classes based on the type of energy used or by 

capacity or other performance-related feature that justifies having a higher or lower 

standard from that which applies to other equipment classes.

EPCA currently divides both SPVACs and SPVHPs into 3 size categories and sets 

a Federal minimum energy efficiency standard for each equipment class. During its 

research for the market and technology assessment, DOE did not find any performancerelated features that would justify creating a new equipment class for SPVUs. 

Accordingly, for this rulemaking, DOE is proposing to maintain the same equipment 

classes, as shown in Table IV.1.

Table IV.1 Current Federal Equipment Classes for SPVUs

Equipment Class Size Category (Btu/h)

SPVAC

<65,000

≥65,000 and <135,000

≥135,000 and <240,000

SPVHP

<65,000

≥65,000 and <135,000

≥135,000 and <240,000

3. Refrigerants

Since January 1st, 2010, all newly manufactured SPVUs in the United States have 

no longer been allowed to use the previously-prevalent R-22 refrigerant per the Montreal 

Protocol. As result, the vast majority of SPVUs began using R410A refrigerant instead. 

DOE is aware of one alternative refrigerant, R407C, which can be used as a replacement 

for R410A in SPVUs. DOE is aware of some SPVUs which utilize R407C; however, 

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these units are not offered for sale in the United States and therefore are not included 

among the products potentially regulated by this rule.

3.4. Review of the Current Market for SPVUs

In order to gather information needed for the market assessment for SPVUs, DOE 

consulted a variety of sources, including manufacturer literature, manufacturer websites, 

and the AHRI Directory of Certified Product Performance. This information served as 

resource material throughout the rulemaking. The sections below provide an overview of 

the SPVU market. For more detail on the SPVU market, see chapter 3 of the NOPR 

TSD.

a. Trade Association Information

The Air-Conditioning, Heating, and Refrigeration Institute (AHRI) is the trade 

association representing SPVU manufacturers. AHRI develops and publishes technical 

standards for residential and commercial air-conditioning, heating, and refrigeration 

equipment using rating criteria and procedures for measuring and certifying equipment 

performance. The current Federal test procedure for SPVUs incorporates by reference an 

AHRI standard – AHRI 390-2003, “Performance Rating of Single Package Vertical AirConditioners and Heat Pumps.” AHRI also maintains the Directory of Certified Product 

Performance, which is a database of equipment ratings for all manufacturers who elect to 

participate in the program. AHRI has two subsections for SPVUs: (1) Single Package 

Vertical Systems – AC; and (2) Single Package Vertical Systems – HP. DOE used the 

data in this certification directory in its market assessment. 

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b. Manufacturer Information

For SPVUs, DOE identified seven manufacturers: (1) Bard Manufacturing 

Company; (2) Change’Air; (3) Johnson Controls, Inc.; (4) Marvair; (5) Modine 

Manufacturing Company; (6) National Coil Company; and (7) Temspec, Inc. DOE also 

identified certain other companies that list their products in the AHRI Directory, but DOE 

believes that these models are residential products and not commercial equipment. 

Therefore, DOE did not include those manufacturers in this list.

Issue 2: DOE seeks comment on whether there are additional companies not 

named which manufacture this type of equipment. 

DOE also takes into consideration the impact of amended energy conservation 

standards on small businesses. At this time, DOE has identified one small business (Bard 

Manufacturing Company) in the SPVU market that fall under the Small Business 

Administration (SBA)’s threshold as having 750 employees or fewer. DOE studies the 

potential impacts on these small businesses in detail during the manufacturer impact 

analysis (MIA). A summary of these impacts is contained in section IV.I and VI.B of 

this NOPR and described in further detail in chapter 12 of the NOPR TSD.

c. Market Data

From the AHRI Directory and manufacturers’ websites, DOE compiled a 

database of 319 SPVACs and 270 SPVHPs. Of the 589 total SPVUs, DOE was able to 

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gather efficiency data on 497 units (about 86 percent of DOE’s database). DOE was not 

able to find any units on the market for SPVAC or SPVHP equipment with a cooling 

capacity greater than or equal to 135,000 Btu/h and less than 240,000 Btu/h and for 

SPVHP with a cooling capacity greater than or equal to 65,000 Btu/h and less than 

135,000 Btu/h. For more information on the SPVU equipment currently available on the 

market, including a full breakdown of these units into their equipment classes and graphs 

showing performance data, see chapter 3 of the NOPR TSD.

4.5. Technology Assessment

In the technology assessment, DOE identifies technology options that appear to be 

feasible mechanisms for improving equipment efficiency. This assessment provides the 

technical background and structure on which DOE bases its screening and engineering 

analyses. 

DOE began its technology assessment by examining SPVUs that are currently on 

the market at both the baselinebaselines and higher efficiency levels. This allowed DOE 

to identify technologies that are commonly incorporated into equipment to achieve higher 

efficiencies, as well as the impact of certain components and improvements on SPVU 

efficiency. DOE also researched technology options that are utilized in other airconditioning and refrigeration equipment to determine their potential applicability to 

SPVUs. Lastly, DOE explored the market and technical information to identify 

technologies that have not yet come to market but that are under development and to 

determine whether those technologies have the potential to improve SPVU efficiency. 

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Although DOE does consider technologies that are proprietary, it does not consider 

efficiency levels that can only be reached through the use of proprietary technologies, 

which could allow a single manufacturer to monopolize the market (any such 

technologies are eliminated during the engineering analysis). Through these methods, 

DOE identified numerous technologies that could improve the energy efficiency of 

SPVUs.

Generally, these technologies involve improvements to either the heat exchangers 

or to the other system components that will improve the overall energy efficiency of the 

system. First, DOE identified technologies that improve the heat exchanger 

effectiveness, which included: (1) increased frontal coil area; (2) increased depth of coil 

(additional tube rows); (3) increased fin density; (4) improved fin design; (5) improved 

tube design; (6) hydrophilic film coating on fins; (7) changing to microchannel heat 

exchangers; and (8) dual condensing heat exchangers. Second, DOE identified 

technologies that improve the efficiency of other components that make up the rest of the 

system, including: (1) improved indoor and outdoor fan motor efficiency; (2) improved 

fan blade efficiency; (3) improved compressor efficiency (including multi-speed

compressors); (4) thermostatic or electronic expansion valves; and (5) thermostatic cyclic 

controls. All of these technology options are presented in Table IV.2.

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Table IV.2 Potential Technology Options for Improved Energy Efficiency of SPVUs

Technology Options

Heat Exchanger 

Improvements

Increased frontal coil area

Increased depth of coil

Increased fin density

Improved fin design

Improved tube design

Hydrophilic film coating on fins

Microchannel heat exchangers

Dual condensing heat exchangers

Indoor Blower and 

Outdoor Fan 

Improvements

Improved fan motor efficiency

Improved fan blades

Compressor 

Improvements

Improved compressor efficiency

Multi-speed Compressors

Other 

Improvements

Thermostatic expansion valves

Electronic expansion valves

Thermostatic cyclic controls

Chapter 3 of the NOPR TSD provides additional detail and descriptions of the 

basic construction and operation of SPVUs, followed by a detailed discussion of each of 

the technology options discussed in the preceding paragraph. After identifying 

technology options that will improve the efficiency of SPVUs, DOE passed each of those 

technology options to the screening analysis for further evaluation.

B. Screening Analysis

DOE uses the following four screening criteria to determine which technology 

options are suitable for further consideration in an energy conservation standards 

rulemaking: 

1. Technological feasibility. DOE will consider technologies incorporated in 

commercial products or in working prototypes to be technologically feasible.

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2. Practicability to manufacture, install, and service. If mass production and 

reliable installation and servicing of a technology in commercial products could be 

achieved on the scale necessary to serve the relevant market at the time the standard 

comes into effect, then DOE will consider that technology practicable to manufacture, 

install, and service.

3. Adverse impacts on product utility or product availability. If DOE determines 

a technology would have a significant adverse impact on the utility of the product to 

significant subgroups of consumers, or would result in the unavailability of any covered 

product type with performance characteristics (including reliability), features, sizes, 

capacities, and volumes that are substantially the same as products generally available in 

the United States at the time, it will not consider this technology further.

4. Adverse impacts on health or safety. If DOE determines that a technology will 

have significant adverse impacts on health or safety, it will not consider this technology 

further.

(10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b))

These four screening criteria do not include the propriety status of design options. 

As noted previously, DOE will only consider efficiency levels achieved through the use 

of proprietary designs in the engineering analysis if they are not part of a unique path to 

achieve that efficiency level. DOE does not believe that any of the technologies 

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identified in the technology assessment are proprietary, and thus, did not eliminate any 

technologies for that reason. Through a review of each technology, DOE found that the 

technologies identified met all four screening criteria to be examined further in the 

analysis. 

Typically, technologies that pass the screening analysis are subsequently passed 

through to the engineering analysis for consideration in DOE’s downstream cost-benefit 

analysis. However, DOE did not analyze some of the technologies identified in the 

technology assessment because either: (1) data are not available to evaluate the energy 

efficiency characteristics of the technology; (2) available data suggest that the efficiency 

benefits of the technology are negligible; or (3) the test procedure and EER or COP

metric would not measure the energy impact of these technologies. Accordingly, DOE 

eliminated the following technologies from further consideration based upon these three 

additional considerations:

(1) Increased fin density 

(2) Improved fin design;

(3) Improved tube design;

(4) Hydrophilic film coating on fins;

(5) Thermostatic or electronic expansion valves;

(6) Thermostatic cyclic controls;

(7) Microchannel heat exchangers; and

(8) Multi-speed compressors.

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Of these technologies, numbers 1 through 4 are used in baseline products, so no 

additional energy savings would be expected. Any potential energy savings of 

technologies 5, 6, or 8 cannot be measured with the established energy use metrics (EER 

and COP) because those technologies are associated with part-load performance, which is 

not captured in the EER or COP metrics used for rating SPVUs. Information indicating 

efficiency improvement potential in SPVUs is not available for technology number 7.

 Issue 3: DOE requests comment on its elimination of these technologies from 

consideration based upon the criteria discussed above.

After screening out or otherwise removing from consideration most of the 

technologies, the following technologies were identified for consideration in the 

engineering analysis: (1) increased frontal coil area; (2) increased depth of coil; (3) 

improved fan motor efficiency; (4) improved fan blade efficiency; (5) improved 

compressor efficiency, and (6) dual condensing heat exchangers.

Chapter 4 of the NOPR TSD contains additional details on the screening analysis. 

C. Engineering Analysis

The engineering analysis establishes the relationship between an increase in 

energy efficiency of the equipment and the increase in manufacturer selling price (MSP) 

associated with that efficiency level. This relationship serves as the basis for cost-benefit 

calculations for individual consumers, manufacturers, and the Nation. DOE typically 

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structures its engineering analysis using one of three approaches: (1) design-option; (2) 

efficiency-level; or (3) reverse engineering (or cost-assessment). A design-option 

approach identifies individual technology options (from the market and technology 

assessment) that can be used alone or in combination with other technology options to 

increase the energy efficiency of a unit of equipment. Under this approach, cost 

estimates of the baseline equipment and more-efficient equipment that incorporates 

design options are based on manufacturer or component supplier data or engineering 

computer simulation models. Individual design options, or combinations of design 

options, are added to the baseline model in descending order of cost-effectiveness. An 

efficiency-level approach establishes the relationship between manufacturer cost and 

increased efficiency at predetermined efficiency levels above the baseline. Under this 

approach, DOE typically assesses increases in manufacturer cost for incremental 

increases in efficiency, without identifying the technology or design options that would 

be used to achieve such increases. A reverse-engineering, or cost-assessment, approach 

involves disassembling representative units of SPVACs and SPVHPs, and estimating the 

manufacturing costs based on a “bottom-up” manufacturing cost assessment; such 

assessments use detailed data to estimate the costs for parts and materials, labor, 

shipping/packaging, and investment for models that operate at particular efficiency 

levels.

DOE conducted this engineering analysis for SPVUs using a combination of the 

efficiency level and cost-assessment approaches for analysis of the EER and COP

efficiency levels. More specifically, DOE identified the efficiency levels for the analysis

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based on market data and then used the cost-assessment approach to determine the 

manufacturing costs at those levels.

1. Efficiency Levels for Analysis

The engineering analysis first identifies representative baseline equipment, which 

is the starting point for analyzing potential technologies that provide energy efficiency 

improvements. “Baseline equipment” refers to a model or models having features and 

technologies typically found in the least-efficient equipment currently available on the 

market. Based on market data, DOE identified 36,000 Btu/h (3-ton) as the representative 

cooling capacity for SPVACs and SPVHPs with a cooling capacity less than 65,000 

Btu/h, and DOE identified 72,000 (6-ton) as the representative cooling capacity for 

SPVACs and SPVHPs with a cooling capacity greater than or equal to 65,000 Btu/h and 

less than 135,000 Btu/h. In the case of SPVUs with a cooling capacity less than 65,000 

Btu/h, 3-ton represents the cooling capacity with the most models in the database for 

SPVACs and SPVHPs. For SPVACs with a cooling capacity greater than or equal to 

65,000 Btu/h and less than 135,000 Btu/h, 6-ton represents the most common size for that 

equipment class. DOE did not find any models of SPVHPs greater than or equal to 

65,000 Btu/h and less than 135,000 Btu/h on the market. DOE did not find any SPVUs 

on the market with cooling capacities greater than or equal to 135,000 Btu/h and less than 

240,000 Btu/h.

Next, using the information DOE gathered during the market and technology 

assessment, DOE selected higher efficiency levels for analysis for these representative 

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cooling capacities based on the most common equipment efficiencies on the market and 

identified typical technologies and features incorporated into equipment at these higher 

efficiency levels. DOE also selected the highest efficiency level on the market for each 

equipment class (i.e., the max-tech level). To determine the appropriate coefficient of 

performance (COP) levels for SPVHPs, DOE performed an analysis of how COP relates 

to energy efficiency ratio (EER). DOE reviewed the models in the database it compiled,

and for each equipment class, DOE calculated the median COP for each EER efficiency 

level for analysis. Table IV.3 and Table IV.4 below list the efficiency levels for analysis 

for SPVUs. Because DOE found no equipment on the market for SPVUs with cooling 

capacities ≥135,000 Btu/h and <240,000 Btu/h, DOE did not analyze any efficiency 

levels for those equipment classes. DOE seeks comment on the EER and COP pairings 

for SPVHPs and its method of deriving the pairings. This is identified as Issue 2 in 

section VII.E, “Issues on Which DOE Seeks Comment.”

Table IV.3 Efficiency Levels for Analysis for SPVUs <65,000 Btu/h

Efficiency Level SPVAC,

36,000 Btu/h

SPVHP, 

36,000 Btu/h

EPCA Baseline31 9.0 EER 9.0 EER

3.0 COP

ASHRAE Baseline32 10.0 EER 10.0 EER

3.0 COP

EL1 10.5 EER 10.5 EER

3.2 COP

EL2 11.0 EER 11.0 EER

3.3 COP

EL3 11.75 EER 11.75 EER

3.9 COP

EL4 (max-tech) 12.3 EER 12.3 EER

31 Refers to the currently-applicable federal minimum efficiency level. See 

http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/35

32 Refers to the current minimum efficiency permitted by the latest version of the ASHRAE standard, 

ASHRAE 90.1-2013. 

Comment [A52]: Change recommended by 

OIRA (footnote).

Comment [A53]: Change recommended by 

OIRA (footnote).

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3.9 COP

Table IV.4 Efficiency Levels for Analysis for SPVUs ≥65,000 Btu/h and <135,000 

Btu/h

Efficiency Level SPVAC, 72,000 

Btu/h

SPVHP,

72,000 Btu/h

EPCA Baseline 8.9 EER 8.9 EER

3.0 COP

ASHRAE Baseline

(max-tech)

10.0 EER 10.0 EER

3.0 COP

Issue 3: DOE seeks comment on the EER and COP pairings for SPVHPs and its 

method of deriving the pairings. 

2. Teardown Analysis

After selecting a representative capacity and efficiency level for each equipment 

class, DOE selected equipment near both the representative cooling capacity and the 

selected efficiency levels for its teardown analysis. DOE gathered information from 

these teardowns to create a detailed bill of materials (BOMs) that included all 

components and processes used to manufacture the equipment. To assemble the BOMs 

and to calculate the manufacturing product costs (MPCs) of SPVUs, DOE disassembled 

multiple units into their base components and estimated the materials, processes, and 

labor required for the manufacture of each individual component, a process known as a 

“physical teardown.” Using the data gathered from the physical teardowns, DOE 

characterized each component according to its weight, dimensions, material, quantity, 

and the manufacturing processes used to fabricate and assemble it.

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DOE also used a supplementary method called a “virtual teardown,” which 

examines published manufacturer catalogs and supplementary component data to 

estimate the major differences between a unit of equipment that was physically 

disassembled and a similar unit of equipment that was not. For virtual teardowns, DOE 

gathered product data such as dimensions, weight, and design features from publiclyavailable information, (e.g., manufacturer catalogs and manufacturer websites). DOE 

also obtained information and data not typically found in catalogs, such as fan motor 

details or assembly details, from physical teardowns of similar equipment or through 

estimates based on industry knowledge. The teardown analysis included 14 physical and 

virtual teardowns of SPVUs.

The teardown analysis allowed DOE to identify the technologies that 

manufacturers typically incorporate into their equipment, along with the efficiency levels 

associated with each technology or combination of technologies. The end result of each 

teardown is a structured BOM, which DOE developed for each of the physical and virtual 

teardowns. The BOMs incorporate all materials, components, and fasteners (classified as 

either raw materials or purchased parts and assemblies) and characterize the materials and 

components by weight, manufacturing processes used, dimensions, material, and 

quantity. The BOMs from the teardown analysis were then used as inputs to the cost 

model to calculate the MPCs for each type of equipment that was torn down. The MPCs 

resulting from the teardowns were then used to develop an industry average MPC for 

each equipment class analyzed. See chapter 5 of the NOPR TSD for more details.

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During the development of this engineering analysis, DOE held interviews with 

manufacturers to gain insight into the SPVU industry and to request feedback on the 

engineering analysis and assumptions that DOE used. DOE used the information it 

gathered from those interviews, along with the information obtained through the 

teardown analysis, to refine the assumptions and data in the cost model. For additional 

detail on the teardown process, see chapter 5 of the NOPR TSD.

During the teardown process, DOE gained insight into the typical design options 

manufacturers use to reach specific efficiency levels. DOE can also determine the 

efficiency levels at which manufacturers tend to make major technological design 

changes. For this engineering analysis, DOE assumed that manufacturers will switch 

from a permanent-split capacitor (PSC) indoor motor to a brushless permanent magnet 

(BPM) motor to achieve the 10 EER level, which was consistent with DOE observations 

during the physical teardowns. As a result, the engineering results at 10 EER (and higher 

levels) include the cost of a BPM blower motor. This assumption is further supported by 

data gathered during the market assessment. In the market assessment, DOE found that 

at 10 EER, there is a slightly higher number of models with BPM motors than with PSC 

motors. However, DOE found that most of the models (18 out of 21 models) using a 

PSC motor at 10 EER are gas-heat units, which DOE estimates make up a small 

percentage (<4%) of total SPVU shipments. A breakdown of the number of models on 

the market with BPM and PSC motors, as well as market share estimates of SPVUs with 

gas-heat, can be found in Chapter 3 of the NOPR TSD (Market and Technology 

Assessment).

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After considering the information gathered during the market assessment and 

observed during the teardown process, DOE concluded that BPM motors tend to be the 

dominant blower design option for SPVU manufacturers when reaching the 10 EER 

level. This assumption is accounted for in the engineering results at the 10 EER level and 

higher levels, as well as in the energy use characterization and, consequently, in the 

downstream analyses. DOE seeks comment as to whether switching to a BPM motor at 

10 EER represents the most probable option of achieving that efficiency level. This is 

identified as Issue 3 in section VII.E, “Issues on Which DOE Seeks Comment.” For 

more information on the design options DOE considered at each efficiency level, see

chapter 3 of the NOPR TSD.

Issue 4: DOE seeks comment as to whether switching to a BPM motor at 10 EER 

represents the most probable option of achieving that efficiency level.

3. Cost Model

DOE developed a manufacturing cost model to estimate the manufacturing 

production cost of SPVUs. The cost model is a spreadsheet model that converts the 

materials and components in the BOMs into dollar values based on the price of materials, 

average labor rates associated with fabrication and assembling, and the cost of overhead 

and depreciation, as determined based on manufacturer interviews and DOE expertise. 

To convert the information in the BOMs into dollar values, DOE collected information 

on labor rates, tooling costs, raw material prices, and other factors. For purchased parts, 

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the cost model estimates the purchase price based on volume-variable price quotations 

and detailed discussions with manufacturers and component suppliers. For fabricated 

parts, the prices of raw metal materials (e.g., tube, sheet metal) are estimates on the basis 

of five-year averages (from 2006 to 2011). The cost of transforming the intermediate 

materials into finished parts is estimated based on current industry pricing. Additional 

details on the cost model are contained in chapter 5 of the NOPR TSD.

4. Manufacturing Production Costs

Once the cost estimates for all the components in each teardown unit were 

finalized, DOE totaled the cost of materials, labor, and direct overhead used to 

manufacture each type of equipment in order to calculate the manufacturing production 

cost. The total cost of the equipment was broken down into two main costs: (1) the full 

manufacturing production cost, referred to as MPC; and (2) the non-production cost, 

which includes selling, general, and administration (SG&A) costs; the cost of research 

and development; and interest from borrowing for operations or capital expenditures. 

DOE estimated the MPC at each efficiency level considered for each equipment class, 

from the baseline through the max-tech level. The incremental increases in MPC over 

the EPCA baseline efficiency level for each subsequently higher efficiency level are 

shown in Table IV.5. After incorporating all of the assumptions into the cost model, 

DOE calculated the percentages attributable to each element of total production costs 

(i.e., materials, labor, depreciation, and overhead). These percentages are used to 

validate the assumptions by comparing them to manufacturers’ actual financial data 

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published in annual reports, along with feedback obtained from manufacturers during 

interviews. DOE uses these production cost percentages in the MIA.

The MPCs were initially developed in 2011$. To update the MPCs to 2013$, 

DOE multiplied the costs by the ratio of the mid-year producer price index (PPI) in 2011 

to the mid-year PPI in 2013. For SPVACs, DOE used the PPI for “unitary airconditioners, except for air source heat pumps” (PCU333415333415E),

33 and similarly, 

the SPVHP costs were updated using the PPI for “heat pumps” (PCU333415333415H), 

which can be found on the Bureau of Labor Statistics website.

34

Table IV.5 Incremental MPC Increases

Equipment 

Type

EPCA 

Baseline

ASHRAE 

Baseline EL1 EL2 EL3 EL4

SPVAC 

<65,000 Btu/h - $274.63 $343.35 $412.06 $616.89 $1,001.24

SPVAC 

≥65,000 Btu/h 

and <135,000 

Btu/h

- $381.65 - - - -

SPVHP 

<65,000 Btu/h - $315.51 $394.45 $473.39 $708.71 $1,150.27

SPVHP

≥65,000 Btu/h 

and <135,000 

Btu/h

- $438.45 - - - -

33 From http://www.bls.gov/news.release/ppi.htm, “current price indexes grouped by industry according to 

the North American Industry Classification System (NAICS) have series identifiers that begin with the 

prefix “PCU.” After the prefix, there are twelve digits (the six-digit industry code is listed twice) followed 

by up to seven alphanumeric characters identifying product detail.” The air-conditioning, refrigeration, and 

forced air heating equipment industry is identified by NAICS with the code 333415.

34 See http://www.bls.gov/ppi/. 

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5. Cost-Efficiency Relationship

The result of the engineering analysis is a cost-efficiency relationship. DOE 

created a separate cost-efficiency relationship at the representative cooling capacity for 

each of the four equipment classes analyzed. DOE reported the MPCs in aggregated 

form to maintain confidentiality of sensitive component data. DOE obtained input from 

manufacturers during the manufacturer interview process on the MPC estimates and 

assumptions to confirm their accuracy. For SPVACs with a cooling capacity <65,000 

Btu/h, DOE performed physical teardowns and supplemented that with virtual teardowns 

to develop cost-efficiency relationships for each manufacturer and then created a marketshare-weighted relationship based on approximate market share data obtained during the 

manufacturer interviews. For SPVACs with a cooling capacity ≥65,000 Btu/h and 

<135,000 Btu/h, DOE performed virtual teardowns of a 6-ton SPVAC and determined 

the average percentage increase in cost from a 3-ton SPVAC to a 6-ton SPVAC. Then, 

DOE scaled the 3-ton cost-efficiency curve by that average percentage increase in cost. 

Likewise for SPVHPs with a cooling capacity <65,000 Btu/h, DOE performed a physical 

teardown and compared the average percentage increase in cost of a 3-ton SPVHP 

compared to a 3-ton SPVAC. DOE applied this average percentage increase in cost to 

the cost-efficiency curve for both SPVACs with a cooling capacity <65,000 Btu/h and 

SPVACs with a cooling capacity ≥65,000 Btu/h and <135,000 Btu/h to get the respective 

cost-efficiency curves for the SPVHP equipment class. 

In order to develop the cost-efficiency relationships for SPVUs, DOE examined 

the cost differential to move from one efficiency level to the next for each manufacturer. 

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DOE used the results of the teardowns on a market-share weighted average basis to 

determine the industry average cost increase to move from one efficiency level to the 

next. Additional detail on how DOE developed the cost-efficiency relationships and 

related results are available in chapter 5 of the NOPR TSD. Chapter 5 of the NOPR TSD 

also presents these cost-efficiency curves in the form of energy efficiency versus MPC. 

DOE seeks comment on its derivation of the cost-efficiency curves for SPVHPs and 

SPVACs with a cooling capacity ≥65,000 Btu/h and <135,000 Btu/h. This is identified 

as Issue 4 in section VII.E, “Issues on Which DOE Seeks Comment.”

Issue 5: DOE seeks comment on its derivation of the cost-efficiency curves for 

SPVHPs and SPVACs with a cooling capacity ≥65,000 Btu/h and <135,000 Btu/h. 

6. Manufacturer Markup

To account for manufacturers’ non-production costs and profit margin, DOE 

applies a non-production cost multiplier (the manufacturer markup) to the full MPC. The 

resulting manufacturer selling price (MSP) is the price at which the manufacturer can 

recover all production and non-production costs and earn a profit. To meet new or 

amended energy conservation standards, manufacturers often introduce design changes to 

their equipment lines that result in increased MPCs. Depending on the competitive 

pressures, some or all of the increased production costs may be passed from 

manufacturers to retailers and eventually to customers in the form of higher purchase 

prices. As production costs increase, manufacturers typically incur additional overhead. 

The MSP should be high enough to recover the full cost of the equipment (i.e., full 

Comment [A56]: Change recommended by 

OIRA.

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production and non-production costs) and yield a profit. The manufacturer markup has 

an important bearing on profitability. A high markup under a standards scenario suggests 

manufacturers can readily pass along the increased variable costs and some of the capital 

and product conversion costs (the one-time expenditure) to customers. A low markup 

suggests that manufacturers will not be able to recover as much of the necessary 

investment in plant and equipment.

DOE normally develops the manufacturer markup through an examination of 

corporate annual reports and Securities and Exchange Commission (SEC) 10-K reports; 

however, in the case of SPVU manufacturers, DOE did not feel this process would be

representative of the majority of the industry, because most SPVU manufacturers are 

privately-held companies. Therefore, DOE based the manufacturer markup for the SPVU 

industry on the markup used for the package terminal air conditioner and package 

terminal heat pump final rule published on in the Federal Register on October 7, 2008 (73 

FR 58772), and sought manufacturer feedback on this markup number during the 

interview process. DOE used the PTAC manufacturer markup because it is a comparable 

industry to the SPVU industry in terms of the size of the market (i.e., the number of 

annual shipments) and the types of the equipment on the market (i.e., both are 

commercial air conditioners of similar capacities). Based on manufacturer feedback 

during the interviews, DOE determined that the manufacturer markup used in the PTAC 

and PTHP final rule (1.29) was slightly high for use with SPVU manufacturers. Thus, 

DOE lowered the estimated average manufacturer markup for the SPVU industry to 1.28

based on the feedback received. See chapter 6 of the NOPR TSD for additional details.

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7. Shipping Costs

Manufacturers of heating, ventilation, and air-conditioning (HVAC) equipment 

typically pay for shipping to the first step in the distribution chain. Freight is not a 

manufacturing cost, but because it is a substantial cost incurred by the manufacturer, 

DOE is accounting for shipping costs of SPVUs separately from other non-production 

costs that comprise the manufacturer markup. To calculate the MSP for SPVUs, DOE 

multiplied the MPC at each efficiency level (determined from the cost model) by the 

manufacturer markup and added shipping costs for equipment at the given efficiency 

level. More specifically, DOE calculated shipping costs at each efficiency level based on 

the average outer dimensions of equipment at the given efficiency and assuming the use 

of a typical 53-foot straight-frame trailer with a storage volume of 4,240 cubic feet.

In this rulemaking, shipping costs for SPVUs were determined on an area basis. 

These products are typically too tall to be double-stacked in a vertical fashion, and they 

cannot be shipped in any other orientation other than vertical. During interviews, 

manufacturers agreed with this approach and stated that the compressor and heat 

exchangers are more likely to be damaged in transit if they are oriented in any direction 

other than vertical. To calculate these shipping costs, DOE calculated the cost per area of 

a trailer, based on an estimated cost of $4,000 per shipping load and the standard 

dimensions of a 53-foot trailer (which would approximate the cost of shipping the 

equipment across the country). Next, DOE examined the average sizes of equipment in 

each equipment class at each efficiency level. DOE then estimated the shipping costs by 

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multiplying the equipment area by the respective cost per area on the trailer. DOE 

updated the shipping costs to 2013$ by using a general gross domestic product (GDP)

deflator.

35 Chapter 5 of the NOPR TSD contains additional details about DOE’s shipping 

cost assumptions and DOE’s shipping cost estimates.

8. Manufacturer Interviews

As noted in the preceding section, throughout the rulemaking process, DOE has 

sought and continues to seek feedback and insight from interested parties that would 

improve the information used in its analysis. DOE interviewed manufacturers as part of 

the NOPR manufacturer impact analysis. During the interviews, DOE sought feedback 

on all aspects of its analyses for SPVUs. For the engineering analysis, DOE discussed 

the analytical assumptions and estimates, cost model, and cost-efficiency curves with 

SPVU manufacturers. DOE considered all the information manufacturers provided when 

refining the cost model and assumptions. However, DOE incorporated data and 

information specific to individual manufacturers into the analysis as averages in order to 

avoid disclosing sensitive information about individual manufacturers’ equipment or 

manufacturing processes. More detail about the manufacturer interviews are contained in 

chapter 12 of the NOPR TSD.

35

U.S. Department of Commerce, Bureau of Economic Analysis (BEA), Implicit Price Deflators for Gross 

Domestic Product (Available in Section 1, Table 1.1.9 at 

http://www.bea.gov/national/nipaweb/DownSS2.asp) (Last accessed February 7, 2014).

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D. Markups Analysis

DOE understands that the price of SPVU equipment depends on the distribution 

channel the customer uses to purchase the equipment. Typical distribution channels for 

most commercial HVAC equipment include shipments that may pass through 

manufacturers’ national accounts, or through entities including wholesalers, mechanical 

contractors, and/or general contractors. However, DOE understands that there are 

multiple branched distribution channels for SPVU equipment for both new construction 

and replacement equipment. For SPVU equipment, the new equipment distribution 

channel is one in which SPVU equipment is sold directly or indirectly to manufacturers 

of wood and non-wood modular buildings, and the rest of the supply chain is essentially 

the chain of manufacturing, wholesaling, and contractor support for wood and non-wood 

modular buildings. The distribution channel for replacement equipment goes directly, or

through air conditioning wholesalers/distributors, to mechanical contractors who install 

replacements on behalf of customers, or to wholesalers/distributors of modular buildings, 

who own leased fleets of modular buildings and who are assumed to perform their own 

SPVU replacements in their leased fleets. 

DOE developed supply chain markups in the form of multipliers that represent 

increases above equipment purchase costs for air-conditioning equipment 

wholesalers/distributors, modular building manufacturers and wholesalers/distributors, 

and mechanical contractors and general contractors working on behalf of customers.

DOE applied these markups (or multipliers) to each distribution channel entity’s costs 

that were developed from the engineering analysis. DOE then added sales taxes and 

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installation costs (where appropriate) to arrive at the final installed equipment prices for 

baseline and higher-efficiency equipment. (See chapter 6 of the NOPR TSD for 

additional details on markups.) As noted above, DOE identified two separate distribution 

channels for SPVU equipment to describe how the equipment passes from the equipment 

manufacturer to the customer, as presented in Table IV.6 below.

Table IV.6 Distribution Channels for SPVU Equipment

Channel 1

New SPVU Equipment 

Channel 2

Replacement SPVU Equipment

Air-Conditioning Wholesale Distributor 

or Manufacturer’s Representative

Air-Conditioning Wholesale 

Distributor or Manufacturer’s 

Representative

Modular Building Manufacturer Mechanical Contractor or Modular 

Building Distributor Modular Building Distributor or 

General Contractor

Customer Customer

DOE estimated a baseline markup and an incremental markup. DOE defined a 

‘‘baseline markup’’ as a multiplier that converts the manufacturer selling price of 

equipment with baseline efficiency into the customer purchase price for the equipment at 

the same baseline efficiency level. An ‘‘incremental markup’’ is defined as the multiplier 

to convert the incremental increase in manufacturer selling price of higher-efficiency 

equipment into the customer purchase price for the same (higher-efficiency) equipment.

DOE developed the markups based on available financial data. More specifically, 

DOE based the air-conditioning wholesaler/distributor markups on data from the Heating, 

Air Conditioning, and Refrigeration Distributors International (HARDI) 2013 Profit 

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Report.36 DOE also used financial data from the 2007 U.S. Census Bureau37 for the 

wood38 and non-wood39 modular building manufacturing industries; concrete product 

manufacturing sector40; the wood41 and non-wood42 modular building wholesale 

industries; brick, stone, and related construction material merchant wholesalers;

43; the 

plumbing, heating, and air-conditioning contractor industry44; and the non-residential 

general contractor industries45 to estimate markups for all of these sectors.

36 Heating, Air-conditioning & Refrigeration Distributors International (HARDI), 2013 Profit Report (2012

Data) (Available at: http://www.hardinet.org/Profit-Report). 37 The U.S. Census Bureau conducts an Economic Census every five years. The 2012 Economic Census is 

may become available early in 2015; if so, the final rule analysis will be updated with data from the 2012 

Economic Census. 38 U.S. Census Bureau. 2007. Prefabricated Wood Building Manufacturing. Sector 32: 321992.Table 

EC073111 Manufacturing: Industry Series: Detailed Statistics by Industry for the United States: 2007.

(Available at http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?ref=top&refresh=t#none 

)

39 U.S. Census Bureau. 2007. Prefabricated Metal Building and Component Manufacturing. Sector 33: 

332311. EC073111 Manufacturing: Industry Series: Detailed Statistics by Industry for the United States: 

2007 (Available at 

http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?ref=top&refresh=t#none) 40 U.S. Census Bureau. 2007. Other Concrete Product Manufacturing Sector 32: 327390. EC073111 

Manufacturing: Industry Series: Detailed Statistics by Industry for the United States: 2007 (Available at: 

http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?ref=top&refresh=t#none). 41 U.S. Census Bureau. 2007. 423310 Lumber, plywood, millwork, and wood panel merchant wholesalers. 

EC0742SXSB06. Wholesale Trade: Subject Series - Misc Subjects: Gross Margin and its Components for 

Merchant Wholesalers for the United States: 2007 (Available at: 

http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?ref=top&refresh=t#none ) 42 U.S. Census Bureau. 2007. 423390. Other construction material merchant wholesalers. EC0742SXSB06. 

Wholesale Trade: Subject Series - Misc Subjects: Gross Margin and its Components for Merchant 

Wholesalers for the United States: 2007 (Available at: 

http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?ref=top&refresh=t#none ) 43 U.S. Census Bureau. 2007. Brick, stone, and related construction material merchant wholesalers: 2007. 

Sector 42: . 423320 Other Construction Material Merchant Wholesalers.Brick, stone, and related 

construction material merchant wholesalers: Merchant wholesalers, except manufacturers' sales branches 

and offices. Detailed Statistics by Industry for the United States: 2007 (Available at: 

http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?ref=top&refresh=t#none). 44 U.S. Census Bureau. 2007. Sector 23: 238220. Plumbing, heating, and air-conditioning contractors. 

EC0723I1: Construction: Industry Series: Preliminary Detailed Statistics for Establishments: 2007

(Available at:

http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?ref=top&refresh=t#none). 45 U.S. Census Bureau. 2007. Sector 23: 236220. Commercial and institutional building construction.

EC0723I1: Construction: Industry Series: Preliminary Detailed Statistics for Establishments: 2007

(Available at:

http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?ref=top&refresh=t#none)

Comment [A57]: Change recommended by 

OIRA (footnote).

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The overall markup is the product of all the markups (baseline or incremental) for 

the different steps within a distribution channel plus sales tax. DOE calculated sales 

taxes based on 2013 State-by-State sales tax data reported by the Sales Tax 

Clearinghouse.46 Because both distribution channel costs and sales tax vary by State, 

DOE allowed markups due to distribution channel costs and sales taxes within each 

distribution channel to vary by State. No information was available to develop State-byState distributions of SPVU equipment by building type or business type, so the 

distributions of sales by business type are assumed to be the same in all States. The 

national distribution of the markups varies among business types. Chapter 6 of the 

NOPR TSD provides additional detail on markups.

Issue 6: Because the identified market channels are complex and their 

characterization required a number of assumptions, DOE seeks input on its analysis of 

market channels for the above equipment classes. DOE identified this as Issue 5 under 

“Issues on Which DOE Seeks Comment” in section VII.E of this NOPR.

E. Energy Use Analysis

Based on information received from manufacturer interviews, DOE believes that 

approximately 35 percent of SPVAC shipments go to educational facilities, the majority 

of which are for space conditioning of modular classroom buildings. Another 

46 The Sales Tax Clearing House (2013) (Last accessed Feb. 7, 2014) (Available at:

www.thestc.com/STrates.stm).

Comment [A58]: Change recommended by 

OIRA.

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approximately 35 percent of the shipments go to providing cooling for 

telecommunications and electronics enclosures. The remainder of shipments (30 percent)

is used in a wide variety of commercial buildings, including offices, temporary buildings,

and some miscellaneous facilities. In almost all of these commercial building 

applications, the buildings served are expected to be of modular construction, because 

SPVUs, as packaged air conditioners installed on external building walls, do not impact 

site preparation costs for modular buildings, which may be relocated multiple times over 

the building’s life. The vertically-oriented configuration of SPVUs allows the building 

mounting to be unobtrusive and minimizes impacts on modular building transportation 

requirements. These advantages do not apply to a significant extent in site-constructed 

buildings. DOE also believes that shipments of SPVHP equipment would primarily be to 

educational facilities or office-type end uses, but would be infrequently used for 

telecommunication or electronic enclosures for which the heating requirements are often 

minimal.

DOE analyzed energy use in three different classes of commercial buildings that

utilize SPVU equipment: (1) modular classrooms; (2) modular offices; and (3) 

telecommunications shelters. To estimate the energy use of SPVU equipment in these 

building types, DOE developed building simulation models for use with DOE’s 

EnergyPlus software.47 A prototypical building model was developed for each building 

type, described by the building footprint, general building size, and design. The building 

47 EnergyPlus Energy Simulation Software and documentation are available at: 

http://apps1.eere.energy.gov/buildings/energyplus/.

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types were represented by a 1,568 ft2 wood-frame modular classroom, a 1,568 ft2 woodframe modular office, and a 240 ft2 concrete-wall telecommunication shelter. In each 

case, the building construction (footprint, window-wall ratio, general design) was

developed to be representative of typical designs within the general class of building. 

Operating schedules, internal load profiles, internal electric receptacle (plug) loads, and 

occupancy for the modular classroom were those from classroom-space-type data found 

in the DOE Primary School commercial prototype building model.48 Operating 

schedules, internal load profiles, internal plug loads, and occupancy for modular office 

buildings were those from office space in the DOE Small Office commercial prototype

building model. Id. For the telecommunications shelters, DOE did not identify a source 

for typical representative internal electronic loads as a function of building size, nor did it 

find information on representative internal gain profiles. However, based on feedback 

from shelter manufacturers, DOE used a 36,000 Btu/h (10.55 kW) peak internal load to 

reflect internal design load in the shelter. DOE determined that on average over the year, 

this load ran at a scheduled 65 percent of peak value, reflecting estimates for computer 

server environments.49 Each of these three building models was used to establish the 

energy usage of SPVAC and SPVHP equipment in the same building class.

48 The commercial prototype building models are available on DOE’s website as Energy Plus input files at:

http://www.energycodes.gov/development/commercial/90.1_models. Documentation of the initial model 

development is provided in: 

Deru, M., et al., U.S. Department of Energy Commercial Reference Building Models of the National 

Building Stock, NREL/TP-5500-46861 (2011). 49 EnergyConsult Pty Ltd., Equipment Energy Efficiency Committee Regulatory Impact Statement 

Consultation Draft: Minimum Energy Performance Standards and Alternative Strategies for Close Control 

Air Conditioners, Report No 2008/11 (2008) (Available at: www.energyrating.gov.au). 

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Envelope performance (e.g., wall, window, and roof insulation, and window 

performance) and lighting power inputs were based on requirements in ASHRAE 

Standard 90.1-2004.50 DOE believes that the requirements in ASHRAE Standard 90.1-

2004 are sufficiently representative of a mixture of both older and more recent 

construction51 and that resulting SPVU equipment loads will be representative of typical 

SPVU equipment loads in the building stock. Ventilation levels were based on ASHRAE 

Standard 62.1-2004.

52 

DOE simulated each building prototype in each of 237 U.S. climate locations, 

taking into account variation in building envelope performance for each climate as 

required by ASHRAE 90.1-2004. For simulations used to represent the less than 65,000 

Btu/h SPVU equipment, no outside air economizers were assumed for the modular office 

and modular classroom buildings.53 However, for simulations used to represent greater 

than or equal to 65,000 Btu/h but less than 135,000 Btu/h equipment, economizer usage 

was presumed to be climate-dependent in these building types, based on ASHRAE 

Standard 90.1-2004 requirements for unitary equipment in that capacity range. For the 

telecommunications shelters, economizers were assumed for 45 percent of buildings,

50 American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE), Energy 

Standard for Buildings Except Low-Rise Residential Buildings, ANSI/ASHRAE/IESNA Standard 90.1-

2004 (2005). 51 ASHRAE 90.1-2004 is still one of the prevailing building codes for the design of new commercial 

buildings. In addition, a large percentage of existing buildings were built in accordance with earlier 

versions of ASHRAE Standard 90.1.

52 American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE), Ventilation for 

Acceptable Indoor Air Quality, ANSI/ASHRAE/IESNA Standard 62.1-2004 (2004). 53 An “outside air economizer” is a combination of ventilation and exhaust air dampers and controls that 

increase the amount of outside air brought in to a building when the outside air conditions (i.e., temperature 

and humidity) are low, such that increasing the amount of ventilation air reduces the equipment cooling 

loads.

Comment [A59]: Change recommended by 

OIRA (footnote).

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based on manufacturer interviews. In response to the April 2014 NODA and DOE’s 

request for information on the use of economizers in telecommunications shelters, 

Lennox International stated their belief that economizers would be used in a majority of 

equipment serving this market. The commenter pointed out that ASHRAE Standard 90.1 

now requires the use of economizers in HVAC equipment greater than 54,000 Btu/h in all 

but two climate zones. Lennox stated that this change in ASHRAE Standard 90.1 has 

driven this economizer requirement to over 90 percent of units shipped for the 

telecommunications shelter application (Lennox International Inc., No. 15 at p.7).

In response, DOE’s understanding is that the 54,000 Btu/h limit introduced in 

ASHRAE Standard 90.1-2010 is for comfort cooling applications and that ASHRAE 

Standard 90.1 has separate economizer requirements for computer rooms (generally 

defined as a space where the primary function is to house equipment for processing of 

electronic data and which has a design electronics power density exceeding 20 W/sf -- as 

would be typical of a telecommunication shelter).54 These computer room economizer 

requirements begin to require economizers only for fan cooling units greater than or 

equal to 65,000 Btu/h and at that threshold only for certain climate zones. The comfort 

cooling requirements in ASHRAE Standard 90.1, to the extent they are adopted by local 

jurisdictions, would appear not to apply to telecommunications shelters. And, if such 

requirements were to apply, they would do so only for a fraction of the products in the 

less than 65,000 Btu/h SPVU market. Additionally, manufacturers generally agreed 

54 DOE notes that these requirements introduced in ASHRAE Standard 90.1.2010 continued unchanged in 

ASHRAE Standard 90.1-2013.

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during manufacturer interviews that approximately 45 percent of SPVUs that are shipped 

for telecommunications shelters contain economizers. For these reasons, in this NOPR,

DOE still assumed that 45 percent of these buildings used economizers, and requests 

further information regarding the percentage of SPVUs in telecommunication shelters 

that use economizers. Users of the SPVU LCC spreadsheet can change the percentage of 

equipment using economizers to see the impact of different weights. In addition, for the 

telecommunication shelter, redundant identical air conditioners with alternating usage 

were assumed when establishing average annual energy consumption per unit.

Simulations were done for the buildings using SPVAC equipment and electric 

resistance heating, and then a separate set of simulations was done for buildings with 

SPVHP equipment. For each equipment type and building type combination, DOE 

simulated each efficiency level identified in the engineering analysis for each equipment 

class. Fan power at these efficiency levels was based on manufacturer’s literature and 

reported fan power consumption data as developed in the engineering analysis. BPM

supply air blower motors were assumed at an EER of 10.0 and higher for all classes of 

equipment based on results from the engineering analysis. The supply air blower motors 

are assumed to run at constant speed and constant power while operating. 

DOE used typical meteorological weather data (TMY3) for each location in the 

simulations.55 DOE sized equipment for each building simulation using a design day 

55 Wilcox S. and W. Marion, User’s Manual for TMY3 Data Sets, National Renewable Energy Laboratory, 

Report No. NREL/TP-581-43156 (2008).

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sizing method incorporating the design data found in the EnergyPlus design-day weather 

data files for each climate.56 DOE also incorporated an additional cooling sizing factor

of 1.1 for the equipment used in the modular office and modular classroom simulations, 

reflective of the typical sizing adjustment needed to account for discrete available 

equipment capacities in SPVAC and SPVHP equipment. 

EER and heating COP were converted to corresponding simulation inputs for 

each efficiency level simulated. These inputs, along with the calculated fan power at 

each efficiency level, were used in the building simulations. Further details of the 

building model and the simulation inputs for the SPVAC and SPVHP equipment can be 

found in chapter 7 of the NOPR TSD. 

From the annual simulation results for SPVAC equipment, DOE extracted the 

condenser energy use for cooling, the supply air blower energy use for both heating and 

cooling hours, the electric resistance heating energy, and the equipment capacity for each 

building type, climate, and efficiency level. From these, DOE developed corresponding 

normalized annual cooling energy per cooling ton and annual blower energy per ton for 

the efficiency levels simulated. DOE also developed the electrical heating energy per ton 

for the building. These per-ton cooling and blower energy values were added together 

and then multiplied by the average cooling capacity estimated for the equipment class 

simulated to arrive at an initial energy consumption estimate for SPVAC. In a deviation 

56 EnergyPlus TMY3-based weather data files and design day data files available at: 

http://apps1.eere.energy.gov/buildings/energyplus/weatherdata_about.cfm.

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from the SPVU NODA analysis, DOE also noted that where fan power was reduced for 

higher efficiency levels, there was a corresponding increase in the amount of heating 

required in each climate to make up for the loss of heat energy imparted into the supply 

air stream through the use of the more efficient supply air blower during the heating 

season. This impact was climate dependent, with little heating impact in warm climates, 

and greater heating impact in cold climates where heating energy requirements dominate 

during the year. DOE calculated this heating “take back” effect for higher efficiency 

levels as a deviation from the baseline heating energy use for each equipment capacity. 

The final SPVAC energy consumption estimates were then based on the calculated 

cooling and supply blower energy uses plus this heating take back, which allowed the 

resulting energy savings estimates to correctly account for the heating energy increase 

during the year. In addition, it was estimated that 5 percent of the market for the SPVAC 

less than 65,000 Btu/h class utilize gas furnace heating. The heating take back for these 

systems was estimated based on the heating load of the systems with electric resistance 

heat and assuming an average 81-percent furnace annual fuel utilization efficiency 

(AFUE).

The analytical method for SPVHP was carried out in a similar fashion; however, 

for heat pumps, DOE included the heating energy (compressor heating and electric 

resistance backup) directly from the simulation results and, thus, did not separately 

calculate a heating take back effect. From these data, DOE developed per-ton energy 

consumption values for cooling, supply blower, and heating electric loads. These per-ton 

energy figures were summed and multiplied by the nominal capacity for the equipment 

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class simulated to arrive at the annual per-ton energy consumption for SPVHP for each 

combination of building type, climate, and efficiency level. 

For each combination of equipment class, building type, climate, and efficiency 

level, DOE developed unit energy consumption (UEC) values for each State using 

weighting factors to establish the contribution of each climate in each State. Once Statelevel UEC estimates were established, they were provided as input to the life-cycle cost 

analysis. National average UEC estimates for each equipment class and efficiency level 

were also established based on population-based weighting across States and shipment 

weights to the different building types. With regard to the latter, while DOE established 

shipment weights for SPVAC equipment related to the three building types (educational, 

office, and telecommunications), DOE determined that SPVHP equipment was not used 

to a significant extent in telecommunication facilities and, thus, only allocated shipments 

of SPVHP equipment to two building types, educational and office. 

For details of this energy use analysis, see chapter 7 of the NOPR TSD.

Table IV.7 shows the annual UEC estimates for SPVAC and SPVHP 

corresponding to the efficiency levels analyzed.

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Table IV.7 National UEC Estimates for SPVAC and SPVHP Equipment

Efficiency Level

Equipment Class

SPVAC, <65 

kBtu/h

SPVHP, <65 

kBtu/h

SPVAC, ≥65 and 

<135 kBtu/h

SPVHP, ≥65 and 

<135 kBtu/h

kWh/yr Gas 

kBtu/yr* kWh/yr kWh/yr kWh/yr

EPCA Baseline 6,880 - 20,921 13,743 41,721

ASHRAE Baseline** 6,175 54 20,383 12,251 40,589

EL1 5,923 54 19,921 NA NA

EL2 5,694 54 19,629 NA NA

EL3 5,387 54 18,775 NA NA

EL4** 5,185 54 18,633 NA NA * Calculated average gas heating “take back” based on 5 percent of market with gas heat. ** ASHRAE Baseline represents max-tech levels established for SPVAC and SPVHP greater than or equal 

to 65,000 Btu/h, but less than 135,000 Btu/h. EL4 represents max-tech levels established for SPVAC and 

SPVHP less than 65,000 Btu/h. 

Issue 7: DOE seeks input on its analysis of UEC for the equipment classes in 

Table IV.7 and its use in establishing the energy savings potential for higher standards. 

Of particular interest to DOE is input on shipments of SPVHP equipment to 

telecommunication shelters and the frequency of use of economizers in equipment 

serving these shelters. 

Issue 8: DOE also recognizes that there may be regional differences between the 

shipments of heat pumps and air conditioners to warmer or cooler climates, and requests 

stakeholder input on how or if such differences can be taken into account in the energy 

use characterization. DOE identified these topics as Issues 6 and 7 under “Issues on 

Which DOE Seeks Comment” in section VII.E of this NOPR.

F. Life-Cycle Cost and Payback Period Analysis

DOE conducted the life-cycle cost (LCC) and payback period (PBP) analysis to 

estimate the economic impacts of potential standards on individual consumers of SPVU 

Comment [A60]: Change recommended by 

OIRA.

Comment [A61]: Change recommended by 

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equipment. DOE first analyzed these impacts for SPVU equipment by calculating the 

change in consumers’ LCCs likely to result from higher efficiency levels compared with 

the EPCA and ASHRAE baseline efficiency levels for the SPVU classes discussed in the 

engineering analysis. The LCC calculation considers total installed cost (equipment cost, 

sales taxes, distribution chain markups, and installation cost), operating expenses (energy, 

repair, and maintenance costs), equipment lifetime, and discount rate. DOE calculated 

the LCC for all customers as if each would purchase an SPVU unit in the year the 

standard takes effect. DOE presumes that the purchase year for all SPVU equipment for 

purposes of the LCC calculation is 2015, the compliance date for the energy conservation 

standard equivalent to the levels in ASHRAE 90.1-2013 (for the EPCA baseline), or

2019, the compliance date for the energy conservation standard more stringent than the 

corresponding levels in ASHRAE 90.1-2013. (for the ASHRAE baseline). To compute 

LCCs, DOE discounted future operating costs to the time of purchase and summed them 

over the lifetime of the equipment. 

Next, DOE analyzed the effect of changes in installed costs and operating 

expenses by calculating the PBP of potential standards relative to baseline efficiency 

levels. The PBP estimates the amount of time it would take the customer to recover the 

incremental increase in the purchase price of more-efficient equipment through lower 

operating costs. In other words, the PBP is the change in purchase price divided by the 

change in annual operating cost that results from the energy conservation standard. DOE 

expresses this period in years. Similar to the LCC, the PBP is based on the total installed 

cost and operating expenses. However, unlike the LCC, DOE only considers the first 

Comment [A62]: Change recommended by 

OIRA.

Comment [A63]: Change recommended by 

OIRA.

Comment [A64]: Change recommended by 

OIRA.

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year’s operating expenses in the PBP calculation. Because the PBP does not account for 

changes in operating expense over time or the time value of money, it is also referred to 

as a simple PBP. 

DOE conducted the LCC and PBP analyses using a commercially-available 

spreadsheet tool and a purpose-built spreadsheet model, available on DOE’s website. 57

This spreadsheet model developed by DOE accounts for variability in energy use and 

prices, installation costs, repair and maintenance costs, and energy costs. It uses 

weighting factors to account for distributions of shipments to different building types and 

states to generate national LCC savings by efficiency level. The results of DOE’s LCC 

and PBP analysis are summarized in section V.B and described in detail in chapter 8 of 

the NOPR TSD.

1. Approach

Recognizing that each business that uses SPVU equipment is unique, DOE 

analyzed variability and uncertainty by performing the LCC and PBP calculations 

assuming a correspondence between five types of businesses (education, 

telecommunications, construction and mining firms occupying temporary offices, a 

variety of service and retail firms occupying conventional office space, and health care 

firms) for customers located in three types of commercial buildings (telecommunications, 

education, and office). DOE developed financial data appropriate for the customers in 

each business and building type. Each type of building has typical customers who have 

57 See http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/35. 

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different costs of financing because of the nature of the business. DOE derived the 

financing costs based on data from the Damodaran Online website.58

The LCC analysis used the estimated annual energy use for each SPVU 

equipment unit described in section IV.E. Because energy use of SPVU equipment is 

sensitive to climate, energy use varies by State. Aside from energy use, other important 

factors influencing the LCC and PBP analyses are energy prices, installation costs, 

equipment distribution markups, and sales tax. All of these factors are assumed to vary 

by State. At the national level, the LCC spreadsheets explicitly model both the 

uncertainty and the variability in the model’s inputs, using probability distributions based 

on the shipments of SPVU equipment to different States.

As mentioned earlier, DOE generated LCC and PBP results by business type

within building type and State and developed weighting factors to generate national 

average LCC savings and PBPs for each efficiency level. As there is a unique LCC and 

PBP for each calculated value at the building type and State level, the outcomes of the 

analysis can also be expressed as probability distributions with a range of LCC and PBP 

results. A distinct advantage of this type of approach is that DOE can identify the 

percentage of customers achieving LCC savings or attaining certain PBP values due to an 

increased efficiency level, in addition to the average LCC savings or average PBP for that 

efficiency level. 

58 Damodaran Online (Last accessed Feb. 14, 2014) (Available at: 

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/home.htm).

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2. Life-Cycle Cost Inputs 

For each efficiency level DOE analyzed, the LCC analysis required input data for 

the total installed cost of the equipment, its operating cost, and the discount rate. Table 

IV.8 summarizes the inputs and key assumptions DOE used to calculate the consumer 

economic impacts of all energy efficiency levels analyzed in this rulemaking. A more 

detailed discussion of the inputs follows. 

Table IV.8 Summary of Inputs and Key Assumptions Used in the LCC and PBP 

Analyses

Inputs Description

Affecting Installed Costs

Equipment Price

Equipment price was derived by multiplying manufacturer 

sales price or MSP (calculated in the engineering analysis) 

by distribution channel markups, as needed, plus sales tax 

from the markups analysis. 

Installation Cost

Installation cost includes installation labor, installer 

overhead, and any miscellaneous materials and parts, 

derived from RS Means CostWorks 2014 59and converted 

to 2013$.

Affecting Operating Costs

Annual Energy Use

Annual unit energy consumption for each class of 

equipment at each efficiency level estimated by state and 

building type using simulation models and a populationbased mapping of climate locations to states.

Electricity Prices, Natural Gas Prices

DOE developed average electricity prices based on Energy 

Information Administration (EIA) Form 826 data for 

2013.

60 Future electricity prices are projected based on 

Annual Energy Outlook 2013 (AEO 2013)

61. DOE 

59 RS Means CostWorks 2014, R.S. Means Company, Inc. (2013) (Last accessed on February 27, 2014) 

(Available at: www.meanscostworks.com/).). 60 U.S. Energy Information Administration. Electric Sales, Revenue, and Average Price 2013, Select table 

Sales and Revenue Data by State, Monthly Back to 1990 (Form EIA-826), (Last accessed on February 19 , 

2014) (Available at: 

http://www.eia.gov/cneaf/electricity/page/sales_revenue.xls). 61 U.S. Energy Information Administration. Annual Energy Outlook 2013 (2013) DOE/EIA-0383(2013).

(Last Accessed March 12, 2014) (Available at: http://www.eia.gov/forecasts/archive/aeo13/).

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developed natural gas prices based on EIA state-level 

commercial prices in EIA data navigator.62 Future natural 

gas prices are projected based on AEO 2013.

Maintenance Cost

DOE estimated annual maintenance costs based on RS 

Means CostWorks 2014 for small, single-zone rooftop 

commercial air conditioning equipment. Annual 

maintenance cost did not vary as a function of efficiency.

Repair Cost

DOE estimated the annualized repair cost for baselineefficiency SPVU equipment based on cost data from RS 

Means CostWorks 2014 for small, single-zone rooftop 

commercial air conditioning equipment. DOE assumed 

that the materials and components portion of the repair 

costs would vary in direct proportion with the MSP at 

higher efficiency levels because it generally costs more to 

replace components that are more efficient.

Affecting Present Value of Annual Operating Cost Savings

Equipment Lifetime

DOE estimated that SPVU equipment lifetimes range 

between 10 and 25 years, with an average lifespan of 15 

years, based on estimates cited in available packaged air 

conditioner literature.

63,64,65

Discount Rate

Mean real discount rates for all buildings range from 2.4

percent for education buildings to almost 11.5 percent for 

some office building owners. 

Analysis Start Year

Start year for LCC is 2019, which is the earliest 

compliance date that DOE can set for new standards if it 

adopts any efficiency level for energy conservation 

standards higher than that shown in ASHRAE Standard 

90.1-2013.

Analyzed Efficiency Levels

Analyzed Efficiency Levels

DOE analyzed the ASHRAE baseline efficiency levels and 

up to four higher efficiency levels for SPVUs <65,000 

Btu/h and only the ASHRAE baseline for SPVUs >65,000 

Btu/h . See the engineering analysis for additional details 

on selections of efficiency levels and cost.

62 U.S. Energy Information Administration. Average Price of Natural Gas Sold to Commercial Consumers -

by State. (Last accessed on February 17, 2014) (Available at: 

http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PCS_DMcf_a.htm).http://www.eia.gov/dnav/ng/ng_pri

_sum_a_EPG0_PCS_DMcf_a.htm). 63 American Society of Heating, Refrigerating, and Air-Conditioning Engineers, ASHRAE Handbook: 

2011 Heating, Ventilating, and Air-Conditioning Applications (2011). 64 Abramson, Interactive Web-based Owning and Operating Cost Database, Final Report ASHRAE 

Research Project RP-1237 (2005). 65 Energy Efficient Strategies Pty Ltd., Equipment Energy Efficiency Committee Regulatory Impact 

Statement Consultation Draft. Revision to the Energy Labelling Algorithms and Revised MEPS levels and 

Other Requirements for Air Conditioners, Report No 2008/09 (September 2008) (Last accessed March 22, 

2012) (Available at: http://www.energyrating.gov.au/wpcontent/uploads/Energy_Rating_Documents/Library/Cooling/Air_Conditioners/200809-ris-ac.pdf).

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DOE analyzed the EPCA and ASHRAE baseline efficiency levels (reflecting the 

efficiency levels in ASHRAE Standard 90.1-2013) and up to four higher efficiency levels 

for SPVUs <65,000 Btu/h. Chapter 5 of the NOPR TSD provides additional details on 

selections of efficiency levels and cost.

a. Equipment Prices

The price of SPVU equipment reflects the application of distribution channel 

markups (mechanical contractor markups) and sales tax to the manufacturer sales price 

(MSP), which is the cost established in the engineering analysis. As described in section 

IV.D, DOE determined distribution channel costs and markups for air-conditioning 

equipment. For each equipment class, the engineering analysis provided contractor costs 

for the ASHRAE baseline equipment and up to four higher equipment efficiencies. 

The markup is the percentage increase in price as the SPVU equipment passes 

through distribution channels. As explained in section IV.D, SPVU equipment is 

assumed to be delivered by the manufacturer through a variety of distribution channels. 

If the SPVU equipment is for a new installation, it is assumed to be sold as a component 

of a new modular building. There are several distribution pathways that involve different 

combinations of the costs and markups of air-conditioning equipment 

wholesaler/distributors, manufacturers of modular buildings, and wholesalers/distributors 

of modular buildings. In some cases, a general contractor is also involved for site 

preparation and management. Some replacement equipment is assumed to be sold 

directly to mechanical contractors and to wholesalers/distributors of modular buildings, 

Comment [A65]: Change recommended by 

OIRA.

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but some is sold through air-conditioning equipment wholesalers/distributors to these 

same entities. The overall markups used in LCC analyses are weighted averages of all of 

the relevant distribution channel markups.

To project an MSP price trend for the NOPR, DOE derived an inflation-adjusted 

index of the PPI for miscellaneous refrigeration and air-conditioning equipment over the 

period 1990-2010. These data show a general price index decline from 1990 to 2004, 

followed by a sharp increase, primarily due to rising prices of copper and steel 

components that go into this equipment, in turn driven by rapidly rising global demand. 

Since 2009, there has been no clear trend in the price index. Given the continued slow 

global economic activity in 2009 through 2013, DOE believes that the extent to which the

future trend can be predicted based on the last two decades is very uncertain and that the 

observed data do not provide a firm basis for projecting future costs trends for SPVU 

equipment. Therefore, DOE used a constant price assumption as the default price factor 

index to project future SPVU prices in 2019. Thus, prices projected for the LCC and 

PBP analysis are equal to the 2013 values for each efficiency level in each equipment 

class. Appendix 8-D of the NOPR TSD describes the historical data and the derivation of 

the price projection. 

Issue 9: DOE requests comments on the most appropriate trend to use for real 

(inflation-adjusted) SPVU prices. This is identified as Issue 8 in section VII.E, “Issues 

on Which DOE Seeks Comment.”

Comment [A66]: Change recommended by 

OIRA.

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b. Installation Costs

DOE derived national average installation costs for SPVU equipment from data 

provided in RS Means CostWorks 2014 (hereafter referred to as RS Means) specifically 

for packaged air-conditioning equipment. RS Means provides estimates for installation 

costs for SPVU units by equipment capacity, as well as cost indices that reflect the 

variation in installation costs for 295 cities in the United States. The RS Means data 

identify several cities in all 50 States and the District of Columbia. DOE incorporated 

location-based cost indices into the analysis to capture variation in installation costs, 

depending on the location of the consumer. 

For more-stringent efficiency levels, DOE recognized that installation costs 

potentially could be higher with larger units and higher-efficiency SPVU equipment,

mainly due to increased size. DOE utilized RS Means installation cost data from RS 

Means to derive installation cost curves by size of unit for base-efficiency models. DOE 

did not have data to calibrate the extent to which installation costs might change as 

efficiency increased. For the NOPR LCC analysis, DOE assumed that installation cost 

would not increase as a function of increased efficiency. This is identified as Issue 9

under “Issues on Which DOE Seeks Comment” in section VII.E of this NOPR.

Issue 10: DOE seeks comments on its assumption that installation costs would not 

increase for higher-efficiency SPVUs. Comment [A67]: Change recommended by 

OIRA.

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c. Annual Energy Use

DOE estimated the annual electricity and natural gas consumed by each class of 

SPVU equipment, by efficiency level, based on the energy use analysis described in 

section IV.E and in chapter 7 of the NOPR TSD.

d. Electricity and Natural Gas Prices

Electricity prices and natural gas prices are used to convert changes in the electric 

and natural gas consumption from higher-efficiency equipment into energy cost savings. 

Because of the variation in annual electricity and natural gas consumption savings and 

equipment costs across the country, it is important to consider regional differences in 

electricity and natural gas prices. DOE used average effective commercial electricity

prices66 and commercial natural gas prices67 at the State level from Energy Information 

Administration (EIA) data for 2013. This approach captured a wide range of commercial 

electricity and natural gas prices across the United States. Furthermore, different kinds of 

businesses typically use electricity in different amounts at different times of the day, 

week, and year, and therefore, face different effective prices. To make this adjustment, 

DOE used EIA’s 2003 CBECS data set68 to identify the average prices that the five 

business types paid for electricity and natural gas and compared them separately with the 

66 Energy Information Administration, Form EIA-826 Database Monthly Electric Utility Sales and Revenue 

Data (EIA-826 Sales and Revenue Spreadsheets) (Available at: 

http://www.eia.gov/electricity/data/eia826/> On the right side of the screen under Aggregated, select 1990-

current. (Last accessed March 26, 2014). 67Energy Information Administration, Natural Gas Prices (Available at: 

http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PCS_DMcf_a.htm) (Last accessed February 13, 2014). 68 Energy Information Administration, Commercial Building Energy Consumption Survey 2003, CBECS 

Public Use Microdata Files (Available at: < 

http://www.eia.gov/emeu/cbecs/cbecs2003/public_use_consumption/commercial/data/2003/cbecs_pudata2

003.htmlindex.cfm?view=microdata>) (Last accessed February 12, 2014).

.

Field Code Changed

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corresponding average prices that all commercial customers paid. DOE used the ratios of 

prices paid by the five types of businesses to the national average commercial prices seen 

in the 2003 CBECS as multipliers to adjust the average commercial 2013 State price data.

DOE weighted the electricity and natural gas consumption and prices each 

business type paid in each State by the estimated percentages of SPVU equipment in each 

business type and by the population in each State to obtain weighted-average national 

electricity and natural gas costs for 2013. The State/building-type weights reflect the 

probabilities that a given unit of SPVU equipment shipped will operate with a given fuel 

price. The original State-by-State average commercial prices range from approximately 

$0.074 per kWh to approximately $0.341 per kWh for electricity and from approximately 

$6.81 per MBtu to $43.36 per MBtu for natural gas. See chapter 8 of the NOPR TSD for 

further details.

The electricity and natural gas price trends provide the relative change in 

electricity and natural gas costs for future years. DOE used the AEO 2013 reference case 

to provide the default electricity and natural gas price scenarios. DOE extrapolated the 

trend in values at the Census Division level from 2025 to 2040 of the projection for all 

five building types to establish prices beyond 2040 (see section IV.F.2.g). DOE provides 

a sensitivity analysis of the LCC savings and PBP results to different fuel price scenarios 

using both the AEO 2013 high-price and low-price projections in appendix 8-C of the 

NOPR TSD.

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e. Maintenance Costs

Maintenance costs are the costs to the consumer of ensuring continued equipment 

operation. Maintenance costs include services such as cleaning heat-exchanger coils and 

changing air filters. DOE estimated annual routine maintenance costs for SPVU air 

conditioners as $311 per year (2013$) for capacities up to 135,000 Btu/h. For heat 

pumps less than 65,000 Btu/h capacity, maintenance costs reported in the RS Means 

CostWorks 2013 database were $345 per year; costs were $414 per year for larger

capacities. Because data were not available to indicate how maintenance costs vary with 

equipment efficiency, DOE used preventive maintenance costs that remain constant as 

equipment efficiency increases. 

f. Repair Costs

The repair cost is the cost to the customer of replacing or repairing components 

that have failed in the SPVU equipment. DOE estimated the one-time repair cost in RS 

Means as equivalent to those for small packaged rooftop units: $2,594 (2013$) for both 

air conditioners and heat pumps less than 65,000 Btu/h capacity, and $3,245 for larger 

units. Based on frequency and type of major repairs in the RS Means database, DOE 

assumed that the repair would be a one-time event at about year 10 of the equipment life

that involved replacing the supply fan motor, compressor, some bearings, and refrigerant. 

DOE then annualized the present value of the cost over the average equipment life of 15 

years to obtain an annualized equivalent repair cost. DOE determined that the materials 

portion of annualized repair costs would increase in direct proportion with increases in 

equipment prices, because the replacement parts would be similar to the more expensive 

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original equipment that they replaced. Because the price of SPVU equipment increases 

with efficiency, the cost for component repair is also expected to increase as the 

efficiency of equipment increases. See chapter 8 of the NOPR TSD for details on the 

development of repair cost estimates.

g. Equipment Lifetime

DOE defines “equipment lifetime” as the age when a unit of SPVU equipment is 

retired from service. DOE reviewed available literature to establish typical equipment 

lifetimes, which showed a wide range of lifetimes from 10 to 25 years. The data did not 

distinguish between classes of SPVU equipment. Consequently, DOE used a distribution 

of lifetimes between 10 and 25 years, with an average of 15 years based on a review of a 

range of packaged cooling equipment lifetime estimates found in published studies and 

online documents. DOE applied this distribution to all classes of SPVU equipment 

analyzed. Chapter 8 of the NOPR TSD contains a detailed discussion of equipment 

lifetimes.

h. Discount Rate

The discount rate is the rate at which future expenditures are discounted to 

establish their present value. DOE determined the discount rate by estimating the cost of

capital for purchasers of SPVU equipment. Most purchasers use both debt and equity 

capital to fund investments. Therefore, for most purchasers, the discount rate is the 

weighted-average cost of debt and equity financing, or the weighted-average cost of 

capital (WACC), less the expected inflation. 

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To estimate the WACC of SPVU equipment purchasers, DOE used a sample of 

more than 340 companies grouped to be representative of operators of each of five 

commercial business types (health care, education, telecommunications, temporary 

office, and general office,) drawn from a database of 7,766 U.S. companies presented on 

the Damodaran Online website.69 This database includes most of the publicly-traded 

companies in the United States. The WACC approach for determining discount rates 

accounts for the current tax status of individual firms on an overall corporate basis. DOE 

did not evaluate the marginal effects of increased costs, and, thus, depreciation due to 

more expensive equipment, on the overall tax status.

DOE used the final sample of companies to represent purchasers of SPVU 

equipment. For each company in the sample, DOE derived the cost of debt, percentage 

of debt financing, and systematic company risk from information on the Damodaran 

Online website. Damodaran estimated the cost of debt financing from the nominal longterm Federal government bond rate and the standard deviation of the stock price. DOE 

then determined the weighted average values for the cost of debt, range of values, and 

standard deviation of WACC for each category of the sample companies. Deducting 

expected inflation from the cost of capital provided estimates of the real discount rate by 

ownership category. 

69 Damodaran financial data used for determining cost of capital is available at: 

http://pages.stern.nyu.edu/~adamodar/ for commercial businesses (Last accessed February 12, 2014).

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For most educational buildings and a portion of the office buildings occupied by 

public schools, universities, and State and local government agencies, DOE estimated the 

cost of capital based on a 40-year geometric mean of an index of long-term tax-exempt 

municipal bonds (>20 years).70 Federal office space was assumed to use the Federal 

bond rate, derived as the 40-year geometric average of long-term (>10 years) U.S. 

government securities.71

Based on this database, DOE calculated the weighted-average, after-tax discount 

rate for SPVU equipment purchases, adjusted for inflation, in each of the five business 

types, which were allocated to the three building types used in the analysis based on 

estimated market shares of modular buildings used by each business type. The allocation 

percentages came from a combination of manufacturer interviews and industry data 

published by the Modular Buildings Institute.72,73,74,75 

Chapter 8 of the NOPR TSD contains the detailed calculations related to discount 

rates. 

70 Federal Reserve Bank of St. Louis, State and Local Bonds - Bond Buyer Go 20-Bond Municipal Bond 

Index (Last accessed February 12, 2014 (Available at: 

http://research.stlouisfed.org/fred2/series/MSLB20/downloaddata?cid=32995). 71 Rate calculated with 1973–2013 data. Data source: U.S. Federal Reserve (Last accessed February 12, 

2014) (Available at: 

www.federalreserve.gov/releases/h15/data.htm).http://www.federalreserve.gov/releases/h15/data.htm). 72 Modular Building Institute, State of the Industry 2006 (Available at: 

http://www.modular.org/HtmlPage.aspx?name=analysis) (March 6, 2014). 73 Modular Building Institute, Commercial Modular Construction Report 2008 (Available at: 

http://www.modular.org/HtmlPage.aspx?name=analysis) (March 6, 2014). 74 Modular Building Institute, Commercial Modular Construction Report 2009 (Available at: 

http://www.modular.org/HtmlPage.aspx?name=analysis) (March 6, 2014). 75 Modular Building Institute, Relocatable Buildings 2011 Annual Report (Available at: 

http://www.modular.org/HtmlPage.aspx?name=analysis) (March 6, 2014).

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3. Payback Period

DOE also determined the economic impact of potential amended energy 

conservation standards on consumers by calculating the PBP of more-stringent efficiency 

levels relative to the base-case efficiency levellevels. The PBP measures the amount of 

time it takes the commercial customer to recover the assumed higher purchase expense of 

more-efficient equipment through lower operating costs. Similar to the LCC, the PBP is 

based on the total installed cost and the operating expenses for each building type and 

State, weighted on the probability of shipment to each market. Because the simple PBP 

does not take into account changes in operating expense over time or the time value of 

money, DOE considered only the first year’s operating expenses to calculate the PBP, 

unlike the LCC, which is calculated over the lifetime of the equipment. Chapter 8 of the 

NOPR TSD provides additional details about the PBP.

G. National Impact Analysis

The national impact analysis (NIA) evaluates the effects of a considered energy 

conservation standard from a national perspective rather than from the customer 

perspective represented by the LCC. This analysis assesses the net present value (NPV) 

(future amounts discounted to the present) and the national energy savings (NES) of total 

commercial consumer costs and savings that are expected to result from amended 

standards at specific efficiency levels. 

Comment [A68]: Change recommended by 

OIRA.

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The NES refers to cumulative energy savings for the lifetime of units shipped 

from 2019 through 2048. DOE calculated energy savings in each year relative to a base 

case, defined as DOE adoption of the efficiency levels specified by ASHRAE Standard 

90.1-2013. DOE also calculated energy savings from adopting efficiency levels specified 

by ASHRAE Standard 90.1-2013 compared to the EPCA base case (i.e., the current 

Federal standards) for units shipped from 2015 through 2044. The NPV refers to 

cumulative monetary savings. DOE calculated net monetary savings in each year relative 

to the base case (ASHRAE Standard 90.1-2013) as the difference between total operating 

cost savings and increases in total installed cost. DOE accounted for operating cost 

savings until 2068, when the equipment installed in the 30th year after the compliance 

date of the amended standards should be retired. Cumulative savings are the sum of the 

annual NPV over the specified period.

1. Approach

The NES and NPV are a function of the total number of units in use and their 

efficiencies. Both the NES and NPV depend on annual shipments and equipment 

lifetime. Both calculations start by using the shipments estimate and the quantity of units 

in service derived from the shipments model.

To make the analysis more transparent to all interested parties, DOE used a 

spreadsheet tool, available on DOE’s website,

76 to calculate the energy savings and the 

76 DOE’s webpage on SPVUs can be found at: 

http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/35. 

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national economic costs and savings from potential amended standards. Interested parties 

can review DOE’s analyses by changing various input quantities within the spreadsheet. 

Unlike the LCC analysis, the NES spreadsheet does not use distributions for 

inputs or outputs, but relies on national average equipment costs and energy costs 

developed from the LCC spreadsheet. DOE used the NES spreadsheet to perform 

calculations of energy savings and NPV using the annual energy consumption and total 

installed cost data from the LCC analysis. For efficiency levels higher than ASHRAE, 

DOE projected the energy savings, energy cost savings, equipment costs, and NPV of 

benefits for equipment sold in each SPVU class from 2019 through 2048. For the 

ASHRAE level, DOE project energy savings for equipment sold from 2015 through 

2044. DOE does not calculate economic benefits for the ASHRAE level because it is 

statutorily required to use the ASHRAE level as the baseline. The projection provided 

annual and cumulative values for all four output parameters described above.

a. National Energy Savings

DOE calculated the NES associated with the difference between the per-unit 

energy use under a standards-case scenario and the per-unit energy use in the base case. 

The average energy per unit used by the SPVUs in service gradually decreases in the 

standards case relative to the base case because more-efficient SPVUs are expected to 

gradually replace less-efficient ones.

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Unit energy consumption values for each equipment class are taken from the LCC 

spreadsheet for each efficiency level and weighted based on market efficiency 

distributions. To estimate the total energy savings for each efficiency level, DOE first 

calculated the delta unit energy consumption (i.e., the difference between the energy 

directly consumed by a unit of equipment in operation in the base case and the standards 

case) for each class of SPVUs for each year of the analysis period. The analysis period 

begins with the earliest expected compliance date of amended energy conservation 

standards (i.e., 2015), assuming DOE adoption of the baseline ASHRAE Standard 90.1-

2013 efficiency levels. For the analysis of DOE’s potential adoption of more-stringent 

efficiency levels, the analysis period does not begin until the compliance date of 2019, 

four years after DOE would likely issue a final rule requiring such standards. Second, 

DOE determined the annual site energy savings by multiplying the stock of each 

equipment class by vintage (i.e., year of shipment) by the delta unit energy consumption 

for each vintage (from step one). As mentioned in section IV.E, this includes an increase 

in gas usage for some SPVAC units sold with gas furnaces (where fan power was 

reduced to achieve higher efficiency levels). Third, DOE converted the annual site 

electricity savings into the annual amount of energy saved at the source of electricity 

generation (the source or primary energy), using a time series of conversion factors 

derived from the latest version of EIA’s National Energy Modeling System (NEMS). 

Finally, DOE summed the annual primary energy savings for the lifetime of units shipped 

over a 30-year period to calculate the total NES. DOE performed these calculations for 

each efficiency level considered for SPVUs in this rulemaking.

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DOE has historically presented NES in terms of primary energy savings. In 

response to the recommendations of a committee on “Point-of-Use and Full-Fuel-Cycle 

Measurement Approaches to Energy Efficiency Standards” appointed by the National 

Academy of Science, DOE announced its intention to use full-fuel-cycle (FFC) measures 

of energy use and greenhouse gas and other emissions in the national impact analyses and 

emissions analyses included in future energy conservation standards rulemakings. 76 FR 

51281 (August 18, 2011). While DOE stated in that notice that it intended to use the 

Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) 

model to conduct the analysis, it also said it would review alternative methods, including 

the use of NEMS. After evaluating both models and the approaches discussed in the 

August 18, 2011 notice, DOE published a statement of amended policy in the Federal 

Register in which DOE explained its determination that NEMS is a more appropriate tool 

for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 

(August 17, 2012). DOE received one comment, which was supportive of the use of 

NEMS for DOE’s FFC analysis.

77

The approach used for today’sthe NOPR, and the FFC multipliers that were 

applied, are described in appendix 10A of the NOPR TSD. NES results are presented in 

both primary and FFC savings in section V.B.3.a.

DOE considered whether a rebound effect is applicable in its NES analysis for 

SPVUs. A rebound effect occurs when an increase in equipment efficiency leads to 

77 Docket ID: EERE-2010-BT-NOA-0028, comment by Kirk Lundblade.

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increased demand for its service. For example, when a consumer realizes that a moreefficient air conditioner will lower the electricity bill, that person may opt for increased 

comfort in the home by lowering the temperature, thereby returning a portion of the 

energy cost savings. The NEMS model assumes an efficiency rebound to account for an 

increased demand for service due to the increase in cooling (or heating) efficiency.78 For 

the SPVU market, there are two ways that a rebound effect could occur: (1) increased use 

of the air-conditioning equipment within the commercial buildings in which such units 

are installed; and (2) additional instances of air-conditioning of spaces that were not 

being cooled before. Because SPVUs are a commercial appliance, the person owning the 

equipment (i.e., the building owner) is usually not the person operating the equipment 

(i.e., the renter). Because the operator usually does not own the equipment, that person

will not have the operating cost information necessary to influence their operation of the 

equipment. Therefore, DOE believes that the first instance is unlikely to occur. 

Similarly, the second instance is unlikely because a small change in efficiency is 

insignificant among the factors that determine how much floor space will be airconditioned. DOE seeks comment on whether a rebound effect should be included in the 

determination of annual energy savings. If a rebound effect should be included, DOE 

seeks data to assist in calculation of the rebound effect. This matter is identified as Issue 

10 under “Issues on Which DOE Seeks Comment” in section VII.E of this NOPR.

78 An overview of the NEMS model and documentation is found at: 

www.eia.doe.gov/oiaf/aeo/overview/index.html.

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Issue 11: DOE seeks comment on whether a rebound effect should be included in 

the determination of annual energy savings. If a rebound effect should be included, 

DOE seeks data to assist in calculation of the rebound effect.

b. Net Present Value

To estimate the NPV, DOE calculated the net impact as the difference between 

total operating cost savings and increases in total installed costs. DOE calculated the 

NPV of each considered standard level over the life of the equipment using the following 

three steps. 

First, DOE determined the difference between the equipment costs under the 

standard-level case and the base case in order to obtain the net equipment cost increase 

resulting from the higher standard level. As noted in section IV.F.2.a, DOE used a 

constant price assumption as the default price forecast; the cost to manufacture a given 

unit of higher efficiency neither increases nor decreases over time. In addition, DOE 

considered two alternative price trends in order to investigate the sensitivity of the results 

to different assumptions regarding equipment price trends. One of these used an 

exponential fit on the deflated Producer Price Index (PPI) for all other miscellaneous 

refrigeration and air-conditioning equipment, and the other is based on the “deflator—

other durables excluding medical” that was forecasted for AEO 2013. The derivation of 

these price trends is described in appendix 10B of the NOPR TSD.

Comment [A69]: Change recommended by 

OIRA.

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Second, DOE determined the difference between the base-case operating costs 

and the standard-level operating costs in order to obtain the net operating cost savings 

from each higher efficiency level. Third, DOE determined the difference between the net 

operating cost savings and the net equipment cost increase in order to obtain the net 

savings (or expense) for each year. DOE then discounted the annual net savings (or 

expenses) to 2014 for SPVUs bought on or after 2019 and summed the discounted values 

to provide the NPV for an efficiency level. 

In accordance with the OMB’s guidelines on regulatory analysis,79 DOE 

calculated NPV using both a 7-percent and a 3-percent real discount rate. The 7-percent 

rate is an estimate of the average before-tax rate of return on private capital in the U.S. 

economy. DOE used this discount rate to approximate the opportunity cost of capital in 

the private sector, because recent OMB analysis has found the average rate of return on 

capital to be near this rate. DOE used the 3-percent rate to capture the potential effects of 

standards on private consumption (e.g., through higher prices for products and reduced 

purchases of energy). This rate represents the rate at which society discounts future 

consumption flows to their present value. This rate can be approximated by the real rate 

of return on long-term government debt (i.e., yield on United States Treasury notes minus 

annual rate of change in the Consumer Price Index), which has averaged about 3 percent 

on a pre-tax basis for the past 30 years.

79 OMB Circular A-4, section E (Sept. 17, 2003) (Available at: 

www.whitehouse.gov/omb/circulars_a004_a-4.) 

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2. Shipments Analysis

In its shipments analysis, DOE developed shipment projections for SPVUs and, in 

turn, calculated equipment stock over the course of the analysis period. DOE used the 

shipments projection and the equipment stock to determine the NES. In order to account 

for the analysis periods of both the ASHRAE level and higher efficiency levels, the 

shipments portion of the spreadsheet model projects SPVU shipments from 2015 through

2048,. 

To develop the shipments model, DOE started with 2005 shipment estimates from 

the Air-Conditioning and Refrigeration Institute (ARI, now AHRI) for units less than 

65,000 Btu/h as published in a previous rulemaking,

80 as more recent data are not 

available. DOE added additional shipments for SPVACs greater than or equal to 65,000 

Btu/h and less than 135,000 Btu/h, which make up 3 percent of the market, based on 

manufacturer interviews. As there are no models on the market for SPVHP greater than 

or equal to 65,000 Btu/h and less than 135,000 Btu/h, or for any SPVUs greater than or 

equal to 135,000 Btu/h, DOE did not develop shipment estimates (or generate NES and 

NPV) for these equipment classes. See chapter 9 of the NOPR TSD for more details on 

80 U.S. Department of Energy—Office of Energy Efficiency and Renewable Energy, Technical Support 

Document: Energy Efficiency Program for Commercial and Industrial Equipment: Efficiency Standards for 

Commercial Heating, Air-Conditioning, and Water Heating Equipment Including Packaged Terminal AirConditioners and Packaged Terminal Heat Pumps, Small Commercial Packaged Boiler, Three-Phase AirConditioners and Heat Pumps <65,000 Btu/h, and Single-Package Vertical Air Conditioners and SinglePackage Vertical Heat Pumps <65,000 Btu/h (March 2006) (Available at:

http://www1.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/ashrae_products/ashrae_prod

ucts_draft_tsd_030206.pdf). This TSD was prepared for the rulemaking that resulted in the Final Rule:

Energy Efficiency Program for Certain Commercial and Industrial Equipment: Efficiency Standards for 

Commercial Heating, Air-Conditioning, and Water-Heating Equipment. 72 FR 10038 (March 7, 2007).

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the initial shipment estimates by equipment class that were used as the basis for the 

shipments projections discussed below. 

To project shipments of SPVUs for new construction (starting in 2006), DOE 

relied primarily on sector-based estimates of saturation and projections of floor space. 

Based on manufacturer interview information, DOE allocated 35 percent of shipments to 

the education sector, 35 percent to telecom, and 30 percent to offices. DOE used the 

2005 new construction shipments and 2005 new construction floor space for education 

(from AEO 2013) to estimate a saturation rate.81 DOE applied this saturation rate to 

AEO 2013 projections of new construction floor space to project shipments to new 

construction in the education sector through 2048. In this projection, shipments to 

education decline through 2026 before rising to levels still lower than those in 2005.

DOE originally used this methodology for offices also, as published in the April 2014 

NODA. However, in response to the April 2014 NODA, AHRI and Lennox International 

suggested that the SPVU projected shipment trend was “optimistic” and did not reflect 

the economic downturn. (AHRI, No. 24 at p. 6; Lennox International Inc., No. 15 at p. 7)

After reviewing modular building industry literature,82 DOE agrees with AHRI and 

Lennox, but for the small office sector only; DOE has determined that the increasing 

81 Manufacturers reported that in 2012, 50 percent of shipments were for new construction. DOE originally 

adjusted that split for 2005 until the result from the shipments model was 50/50 in 2012. This resulting 

2005 split was 84 percent new construction and 16 percent replacement. However, this led to a steep 

shipments increase in the model from 2005 to 2006. Instead, DOE used the 50/50 split directly in 2005, 

which resulted in a much steadier shipments trend. Therefore, 2005 new construction shipments are 

derived using 50 percent of the total 2005 historical shipments. 82 Modular Building Institute, Relocatable Buildings 2012 Annual Report; Relocatable Buildings 2011 

Annual Report (Available at: http://www.modular.org/documents/2012-RB-Annual-Report.pdf and 

http://www.triumphmodular.com/resources/documents/2011relocatable.pdf).

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trend in the AEO for small offices does not adequately represent the modular building 

industry. As a result, DOE has tentatively decided to hold SPVU shipments to new office 

construction constant at 2005 levels. (For more details, see chapter 9 of the NOPR TSD.) 

For shipments to telecom, DOE developed an index based on County Business Pattern 

data for establishments83 and projected this trend forward. This projection increases 

significantly over the analysis period, which may have led in part to AHRI and Lennox’s 

suggestion that the overall shipment projection was optimistic. However, in response to 

the April 2014 NODA, the CA IOUs pointed out that the rapid expansion of wireless 

communications resulted in expanded use of SPVUs. (CA IOUs, No. 19 at p. 5) DOE 

agrees with the CA IOUs’ assessment for telecom and has chosen to maintain the 

increasing projection for that sector.

To allocate the total projected shipments for office, education, and telecom into 

the equipment classes applicable to each sector, DOE used the fraction of shipments from 

2005 for each equipment class in each sector. This fractions within each sector remained 

constant over time. The complete discussion of shipment allocation and projected 

shipments for the different equipment classes can be found in chapter 9 of the NOPR 

TSD.

In order to model shipments for replacement SPVUs, DOE developed historical 

shipments for SPVUs back to 1981 based on an index of square footage production data 

83 U.S. Census Bureau, County Business Patterns for NAICS 237130 Power and Communication Line and 

Related Structures Construction (Available at: http://www.census.gov/econ/cbp/index.html) (Last accessed 

April 15, 2014).

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from the Modular Buildings Institute.84 Shipments prior to 1994 were extrapolated based 

on a trend from 1994 to 2005. In the stock model, the lifetime of SPVUs follows the 

distribution discussed in section IV.F.2.g, with a minimum of 10 years and a maximum of 

25 years. All retired units are assumed to be replaced with new shipments. The complete 

discussion of the method for extrapolating historical shipments can be found in chapter 9

of the NOPR TSD.

As equipment purchase price and repair costs increase with efficiency, higher first 

costs and repair costs can result in a drop in shipments. In manufacturer interviews, 

manufacturers expressed concern that an increase in first cost could lead customers to 

switch to split-system or rooftop units. However, manufacturers did not provide any 

information on the price point at which this switch might occur, and DOE had 

insufficient data for estimating the elasticity of shipments for SPVUs as a function of first 

costs, repair costs, or operating costs. In addition, DOE notes that SPVUs serve a 

specific niche market and that a switch from SPVUs to another type of equipment would 

require significant changes in the market, such as installation on site rather than at the 

modular building manufacturer, the use of a mechanical contractor (including their 

markups), and potential changes to needed ductwork and other infrastructure. Therefore, 

DOE assumed that the shipments projection would not change under the considered 

standard levels. 

84 Available at: http://www.modular.org/HtmlPage.aspx?name=analysis (Last accessed May 18, 2012).

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Issue 12: DOE seeks comment on whether amended standards would be likely to 

affect shipments. This is identified as Issue 11 under “Issues on Which DOE Seeks 

Comment” in section VII.E of this NOPR.

3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies

DOE uses a base-case distribution of efficiency levels to project what the SPVU 

market would look like in the absence of amended standards. DOE developed a basecase distribution of efficiency levels for SPVU equipment using manufacturer-provided 

estimates. DOE applied the percentages of models within each efficiency range to the 

total unit shipments for a given equipment class to estimate the distribution of shipments 

for the base case. Then, from those market shares and projections of shipments by 

equipment class, DOE extrapolated future equipment efficiency trends both for a basecase scenario and for standards-case scenarios.

To estimate a base-case efficiency trend, DOE used the trend from 2012 to 2035 

found in the Commercial Unitary Air Conditioner Advance Notice of Proposed 

Rulemaking (ANOPR), which estimated an increase of approximately 1 EER every 35 

years.

85 DOE used this same trend in the standards-case scenarios, when seeking to 

ascertain the impact of amended standards. 

85 See DOE’s technical support document underlying DOE’s July 29, 2004 ANOPR. 69 FR 45460 

(Available at: http://www.regulations.gov/#!documentDetail;D=EERE-2006-STD-0103-0078). SPVUs 

have only had EER standards since 2002, which was not long enough to establish an efficiency trend.

Comment [A70]: Change recommended by 

OIRA.

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For each efficiency level analyzed, DOE used a “roll-up” scenario to establish the 

market shares by efficiency level for the year that compliance would be required with 

amended standards (i.e., 2015 if DOE adopts the efficiency levels in ASHRAE Standard 

90.1-2013, or 2019 if DOE adopts more-stringent efficiency levels than those in 

ASHRAE Standard 90.1-2013). DOE collected information suggesting that, as the name 

implies, the efficiencies of equipment in the base case that did not meet the standard level 

under consideration would roll up to meet the amended standard level. This information 

also suggests that equipment efficiencies in the base case that were above the standard 

level under consideration would not be affected. The base-case efficiency distributions 

for each equipment class are presented in chapter 10 of the NOPR TSD. 

H. Consumer Subgroup Analysis

In analyzing the potential impact of new or amended standards on commercial 

consumers, DOE evaluates the impact on identifiable groups (i.e., subgroups) of 

consumers, such as different types of businesses that may be disproportionately affected 

by a national standard level. For this rulemaking, DOE identified mining and 

construction companies occupying temporary office space as a disproportionately 

affected subgroup. Because it has generally higher costs of capital and, therefore, higher 

discount rates than other firms using SPVUs, this consumer subgroup is less likely than 

average to value the benefits of increased energy savings. However, this group also faces 

relatively high electricity prices compared with some other consumer subgroups. These 

two conditions tend to offset each other, so a quantitative analysis was required to 

determine whether this subgroup would experience higher or lower than average LCC

Comment [A71]: Change recommended by 

OIRA.

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savings. Another type of consumer that might be disproportionately affected is public 

education facilities. Because of their tax-exempt status, public education agencies 

generally have lower capital costs than other SPVU users and, thus, might 

disproportionately benefit from increased SPVU energy efficiency; however, they also 

typically face lower electricity costs than other commercial customers, so a quantitative 

analysis was required to determine whether they would have lower or higher than average 

LCC savings. 

For the NOPR, DOE also analyzed the potential effects of amended SPVU 

standards on businesses with high capital costs, which are generally (but not always) 

small businesses. DOE analyzed the potential impacts of amended standards by 

conducting the analysis with different discount rates, because small businesses do not 

have the same access to capital as larger businesses, but they may pay similar prices for 

electricity. DOE obtained size premium data from Ibbotson Associates’ Stocks, Bonds, 

Bills, and Inflation 2013 Yearbook.

86 For the period of 1926–2012, the geometric mean 

of annual returns for the smallest companies in all industries (13 percent) was 103.1

percent of the average for the total value-weighted index of companies listed on the New 

York Stock Exchange (NYSE), American Stock Exchange (AMEX), and National 

Association of Security Dealers Stock Exchange (NASDAQ) (9.6 percent), implying that 

on average, historical performance of small companies has been (113.0/109.6)=1.031 or 

3.1 percent points higher than the market average, in effect a “small company size 

86 Morningstar, Inc., Ibbotson SBBI 2013 Classic Yearbook. Market Results for Stocks, Bonds, Bills, and 

Inflation 1926-2012 (2013).

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premium”, an extra cost premium that they have to pay to do business. DOE assumed 

that for businesses purchasing SPVUs and purchasing or renting modular buildings 

containing SPVUs, the average discount rate for small companies is 3.1 percent higher 

than the industry average. 

DOE determined the impact of consumer subgroup costs and savings using the 

LCC spreadsheet model. DOE conducted the LCC and PBP analyses separately for 

consumers represented by the mining and construction firms using temporary office 

buildings and for public education agencies using portable classrooms, and then 

compared the results with those for average commercial customers. DOE also conducted 

an analysis in which only firms with a discount rate 3.1 percent higher than the 

corresponding industry average were selected. While not all of these firms were small 

businesses (some had volatile stock prices or other special circumstances), they were the 

ones that had the highest costs of capital and were the least likely to benefit from 

increased SPVU standards. 

Due to the higher costs of conducting business, benefits of SPVU standards for 

small and other high-capital-cost businesses are estimated to be slightly lower than for 

the general population of SPVU owners. 

The results of DOE’s LCC subgroup analysis are summarized in section V.B.1.b

and described in detail in chapter 11 of the NOPR TSD.

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I. Manufacturer Impact Analysis

1. Overview

DOE performed a manufacturer impact analysis (MIA) to estimate the financial 

impact of amended energy conservation standards on manufacturers of SPVUs and to 

calculate the potential impact of such standards on employment and manufacturing 

capacity. 

The MIA has both quantitative and qualitative aspects. The quantitative portion 

of the MIA primarily relies on the Government Regulatory Impact Model (GRIM), an 

industry cash-flow model customized for this rulemaking. The key GRIM inputs are data 

on the industry cost structure, equipment costs, shipments, and assumptions about 

markups and conversion expenditures. The key output is the industry net present value 

(INPV). Different sets of assumptions (markup scenarios) will produce different results.

The qualitative portion of the MIA addresses factors such as equipment characteristics, as 

well as industry and market trends. Chapter 12 of the NOPR TSD describes the complete 

MIA.

DOE calculated manufacturer impacts relative to a base case, defined as DOE 

adoption of the efficiency levels specified by ASHRAE Standard 90.1-2013. 

Consequently, when comparing the INPV impacts of the GRIM model, the baseline 

technology is at an efficiency of 10 EER / 3.0 COP. 

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DOE conducted the MIA for this rulemaking in three phases. In Phase 1 of the 

MIA, DOE prepared a profile of the SPVU industry which includes a top-down cost 

analysis of manufacturers that DOE used to derive preliminary financial inputs for the 

GRIM (e.g., sales, general, and administration (SG&A) expenses; research and 

development (R&D) expenses; and tax rates). DOE used public sources of information, 

including the 2008 Energy Conservation Program for Commercial and Industrial 

Equipment: Packaged Terminal Air Conditioner and Packaged Terminal Heat Pump

Energy Conservation Standards Final Rule (73 FR 58772 (Oct. 7, 2008)), the 2011 

Energy Conservation Standards Direct Final Rule for Residential Furnaces, Central Air 

Conditioners and Heat Pumps (76 FR 37408 (June 27, 2011)); Securities and Exchange 

Commission (SEC) 10–K filings87; corporate annual reports; the U.S. Census Bureau’s 

Annual Survey of Manufacturers88; and Hoovers reports.

89

In phase 2 of the MIA, DOE prepared an industry cash-flow analysis to quantify 

the potential impacts of an amended energy conservation standard. In general, new or 

more-stringent energy conservation standards can affect manufacturer cash flow in three 

distinct ways: (1) create a need for increased investment; (2) raise production costs per 

unit; and (3) alter revenue due to higher per-unit prices and possible changes in sales 

volumes. 

87 Filings & Forms, Securities and Exchange Commission (2013) (Available at: 

http://www.sec.gov/edgar.shtml) (Last accessed April 3, 2013). 88 U.S. Census Bureau, Annual Survey of Manufacturers: General Statistics: Statistics for Industry Groups 

and Industries (2010) (Available at: <http://www.census.gov/manufacturing/asm/index.html>) (Last 

accessed April 3, 2013). 

89 Hoovers | Company Information | Industry Information | Lists, D&B (2013) (Available at: 

http://www.hoovers.com/) (Last accessed April 3, 2013).

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In phase 3 of the MIA, DOE conducted structured, detailed interviews with a 

representative cross-section of manufacturers. During these interviews, DOE discussed 

engineering, manufacturing, procurement, and financial topics to validate assumptions 

used in the GRIM and to identify key issues or concerns. See section IV.I.3 for a 

description of the key issues manufacturers raised during the interviews.

Additionally, in phase 3, DOE evaluates subgroups of manufacturers that may be 

disproportionately impacted by standards or that may not be accurately represented by the 

average cost assumptions used to develop the industry cash-flow analysis. For example, 

small manufacturers, niche players, or manufacturers exhibiting a cost structure that 

largely differs from the industry average could be more negatively affected. Thus, during 

Phase 3, DOE analyzed small manufacturers as a subgroup. 

The Small Business Administration (SBA) defines a small business for North 

American Industry Classification System (NAICS) code 333415, “Air-Conditioning and 

Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment 

Manufacturing,” as having 750 employees or fewer. During its research, DOE identified 

one domestic company which manufactures equipment covered by this rulemaking and 

qualifies as a small business under the SBA definition. The small business subgroup is 

discussed in section VI.B of today’s noticethe preamble, and in chapter 12 of the NOPR 

TSD. 

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2. GRIM Analysis

As discussed previously, DOE uses the GRIM to quantify the changes in cash 

flow that result in a higher or lower industry value due to amended energy conservation 

standards. The GRIM analysis uses a discounted cash-flow methodology that 

incorporates manufacturer costs, markups, shipments, and industry financial information 

as inputs. The GRIM models changes in costs, distribution of shipments, investments, 

and manufacturer margins that could result from amended energy conservation standards. 

The GRIM spreadsheet uses the inputs to arrive at a series of annual cash flows, 

beginning in 2014 (the base year of the analysis) and continuing to 2048. DOE

calculated INPVs by summing the stream of annual discounted cash flows during this 

period. DOE applied a discount rate of 10.4 percent, which was derived from industry 

financials and then modified according to feedback received during manufacturer 

interviews. 

The GRIM calculates cash flows using standard accounting principles and 

compares changes in INPV between the base case and each TSL (the standards case).

Essentially, the difference in INPV between the base case and a standards case represents 

the financial impact of the amended energy conservation standard on manufacturers.

Additional details about the GRIM, the discount rate, and other financial parameters can 

be found in chapter 12 of the NOPR TSD.

a. GRIM Key Inputs

i. Manufacturer Production Costs

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Manufacturing a higher-efficiency product is typically more expensive than 

manufacturing a baseline product due to the use of more expensive components and 

larger quantities of raw materials. The changes in the manufacturer production cost 

(MPC) of the analyzed products can affect revenues, gross margins, and cash flow of the 

industry, making these product cost data key GRIM inputs for DOE’s analysis.

In the MIA, DOE used the MPCs for each considered efficiency level calculated 

in the engineering analysis, as described in section IV.C and further detailed in chapter 5 

of the NOPR TSD. In addition, DOE used information from its teardown analysis, 

described in section IV.C, to disaggregate the MPCs into material, labor, and overhead 

costs. To calculate the MPCs for products higher than the baseline, DOE added the 

incremental material, labor, and overhead costs from the engineering cost-efficiency 

curves to the baseline MPCs. These cost breakdowns and product mark-ups were revised 

based on manufacturer comments received during MIA interviews.

ii. Shipments Forecast

The GRIM estimates manufacturer revenues based on total unit shipment 

forecasts and the distribution of shipments by equipment class. For the base-case

analysis, the GRIM uses the NIA base-case shipments forecasts from 2014 (the base year 

for the MIA analysis) to 2048 (the last year of the analysis period). In the shipments 

analysis, DOE estimates the distribution of efficiencies in the base case for all equipment

classes. See section IV.G.2 for additional details.

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For the standards-case shipment forecast, the GRIM uses the NIA standards-case 

shipment forecasts. The NIA assumes that product efficiencies in the base case that do

not meet the energy conservation standard in the standards case “roll up” to meet the 

amended standard in the standard year. See section IV.G.2, above, for additional details.

iii. Product and Capital Conversion Costs

Amended energy conservation standards would cause manufacturers to incur onetime conversion costs to make necessary changes to their production facilities and bring

product designs into compliance. DOE evaluated the level of conversion-related 

expenditures that would be needed to comply with each considered efficiency level in 

each equipment class. For the purpose of the MIA, DOE classified these conversion 

costs into two major groups: (1) product conversion costs; and (2) capital conversion 

costs. Product conversion costs are one-time investments in research, development, 

testing, and marketing, focused on making product designs comply with the amended 

energy conservation standard. Capital conversion costs are one-time investments in 

property, plant, and equipment to adapt or change existing production facilities so that 

amended equipment designs can be fabricated and assembled.

To determine the level of capital conversion expenditures manufacturers would 

incur to comply with amended energy conservation standards, DOE gathered data on the 

level of capital investment required at each efficiency level during manufacturer 

interviews. DOE validated manufacturer comments through estimates of capital 

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expenditure requirements derived from the product teardown analysis and engineering 

model described in section IV.C.

DOE assessed the product conversion costs at each considered efficiency level by 

integrating data from quantitative and qualitative sources. DOE considered marketshare-weighted feedback from multiple manufacturers to determine conversion costs, 

such as R&D expenditures, at each efficiency level. Manufacturer numbers were 

aggregated to better reflect the industry as a whole and to protect confidential 

information. 

In general, DOE assumes that all conversion-related investments occur between 

the year of publication of the final rule and the year by which manufacturers must comply 

with the standard. The investment figures used in the GRIM can be found in section 

V.B.2 of today’s notice.the preamble. For additional information on the estimated 

product conversion and capital conversion costs, see chapter 12 of the NOPR TSD.

b. GRIM Scenarios

i. Markup Scenarios

As discussed previously, manufacturer selling prices (MSPs) include direct 

manufacturing production costs (i.e., labor, materials, and overhead estimated in DOE’s 

MPCs) and all non-production costs (i.e., SG&A, R&D, and interest), along with profit.

To calculate the MSPs in the GRIM, DOE applied non-production cost markups to the 

MPCs estimated in the engineering analysis for each equipment class and efficiency 

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level. Modifying these markups in the standards case yields different sets of impacts on 

manufacturers. For the MIA, DOE modeled two standards-case markup scenarios to 

represent the uncertainty regarding the potential impacts on prices and profitability for 

manufacturers following the implementation of amended energy conservation standards: 

(1) a preservation of gross margin percentage; and (2) a preservation of operating profit.

These scenarios lead to different markup values which, when applied to the input MPCs, 

result in varying revenue and cash flow impacts. 

Under the preservation-of-gross-margin-percentage scenario, DOE applied a 

single uniform “gross margin percentage” markup across all efficiency levels. As 

production costs increase with efficiency, this scenario implies that the absolute dollar 

markup will increase as well. DOE assumed the non-production cost markup—which 

includes SG&A expenses, research and development expenses, interest, and profit—to be 

1.28 for SPVU equipment. This markup is consistent with the one DOE assumed in the 

base case for the GRIM. Manufacturers tend to believe it is optimistic to assume that

they would be able to maintain the same gross margin percentage markup as their 

production costs increase. Therefore, DOE assumes that this scenario represents a high 

bound to industry profitability under an amended energy conservation standard.

In the preservation-of-operating-profit scenario, as the cost of production goes up

under a standards case, manufacturers are generally required to reduce their markups to a 

level that maintains base-case operating profit. DOE implemented this scenario in the 

GRIM by lowering the manufacturer markups at each TSL to yield approximately the 

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same earnings before interest and taxes in the standards case as in the base case in the 

year after the compliance date of the amended standards. The implicit assumption behind 

this markup scenario is that the industry can only maintain its operating profit in absolute 

dollars after the standard.

3. Manufacturer Interviews

As part of the MIA, DOE discussed potential impacts of standards with three 

manufacturers of SPVUs. The interviewed manufacturers account for over 90 percent of 

the domestic SPVU market. In interviews, DOE asked manufacturers to describe their

major concerns about this rulemaking. The following section highlights manufacturers’ 

most significant concerns. 

a. Size Constraints

Manufacturers noted that higher efficiency standards could force them to increase 

the size of their SPVU equipment to levels that are not acceptable to their customers.

The manufacturers stated that some critical design options, such as increasing the amount 

of heat exchanger surface area, would necessitate an increase in cabinet size and 

footprint. For example, in the modular classroom and modular office markets, any 

additional floor space taken up by a larger SPVU could not be used by students and 

tenants. In the telecom market, manufacturers noted that telecom operators have 

standard-sized telecom shelters and current SPVU designs already make use of all 

available wall space. Any increase in size would force their customers to redesign the 

layout of the shelters and the complex telecommunications electronics housed therein. 

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These size constraints would affect manufacturers if the amended standards are increased 

beyond the levels set in ASHRAE Standard 90.1-2013.

According to manufacturers, a change in cabinet size would be particularly 

problematic in the replacement market. Amended designs may no longer physically fit 

into existing installation locations. Some examples include units that are too wide to fit 

through standard-width doorways, that are too tall for the standard ceiling heights, and 

that protrude too far into classrooms or offices. Aside from the physical space 

constraints, manufacturers are concerned that air vents and wall plenums would no longer 

align. The use of sleeves or adaptors to reroute air flow would be unsightly, take up 

valuable space, and affect air flow in a manner that reduces product efficiency.

b. Alternative Products 

Multiple manufacturers stated that a large increase in efficiency could lead to 

price increases that would cause their customers to consider alternative products, such as 

unitary systems or commercial roof top units. The manufacturers argued that these 

systems are often less convenient for end-users due to the need for extensive duct work, 

the use of long refrigerant lines, and/or the reduced ability to control the flow of fresh air. 

These manufacturers were concerned that an increase in the energy conservation standard 

would raise the SPVU prices to the point where end-users would accept the drawbacks of 

alternative products. DOE did not receive any quantitative comments on the price point 

at which unitary systems and commercial systems typically become cost-competitive 

alternatives.

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c. Compliance Tolerances

Two manufacturers stated concerns about the tolerances required by compliance 

testing. They argued that SPVU manufacturers have no control over the variability in the 

performance of purchased components (such as compressors) or the variability of 

instrumentation within different test laboratories. As a result, the manufacturers stated 

that it is unrealistic for DOE to expect their products could test within the narrow 

confidence limits set forth at 10 CFR 429.43.

d. Constrained Innovation and Customization

Multiple manufacturers noted that complying with more-stringent energy 

conservation standards would draw time, resources, and focus away from innovation, 

customization, and customer responsiveness. Manufacturers believe that the design, 

engineering, and testing resources used to comply with amended standards would be 

better invested in developing features requested by their customers. Furthermore, 

multiple manufacturers stated that higher standards push manufacturers toward similar 

designs. Manufacturers argued that DOE’s energy conservation standards constrain their 

ability to customize products in ways that maximize efficiency based on the end user’s 

specific use-case.

J. Emissions Analysis

In the emissions analysis, DOE estimates the reduction in power sector emissions 

of carbon dioxide (CO2), nitrogen oxides (NOX), sulfur dioxide (SO2), and mercury (Hg) 

from amended energy conservation standards for the considered SPVU equipment. In 

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addition, DOE estimates emissions impacts in production activities (extracting, 

processing, and transporting fuels) that provide the energy inputs to power plants. These 

are referred to as “upstream” emissions. Together, these emissions account for the fullfuel-cycle (FFC). In accordance with DOE’s FFC Statement of Policy (76 FR 51281 

(August 18, 2011)), this FFC analysis includes impacts on emissions of methane (CH4) 

and nitrous oxide (N2O), both of which are recognized as greenhouse gases. 

DOE primarily conducted the emissions analysis using emissions factors for CO2

and most of the other gases derived from data in AEO 2013.

90 Combustion emissions of 

CH4 and N2O were estimated using emissions intensity factors published by the 

Environmental Protection Agency (EPA) through its GHG Emissions Factors Hub.

91

DOE developed separate emissions factors for power sector emissions and upstream 

emissions. DOE also calculated site and upstream emissions from the additional use of 

natural gas associated with some of the SPVU efficiency levels. The method that DOE 

used to derive emissions factors is described in chapter 13 of the NOPR TSD.

90 Emissions factors based on the Annual Energy Outlook 2014 (AEO 2014), which became available too 

late for incorporation into this analysis, indicate that a significant decrease in the cumulative emission 

reductions of carbon dioxide and most other pollutants can be expected if the projections of power plant 

utilization assumed in AEO 2014 are realized. For example, the estimated amount of cumulative emission 

reductions of CO2 is expected to decrease by 33% from DOE’s current estimate based on the projections in 

AEO 2014 relative to AEO 2013. The monetized benefits from GHG reductions would likely decrease by a 

comparable amount. DOE plans to use emissions factors based on the most recent AEO available for the 

next phase of this rulemaking, which may or may not be AEO 2014, depending on the timing of the 

issuance of the next rulemaking document.

91 See: http://www.epa.gov/climateleadership/guidance/ghg-emissions.html. See: 

http://www.epa.gov/climateleadership/inventory/ghg-emissions.html. 

Comment [A72]: Change recommended by 

OIRA.

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For CH4 and N2O, DOE calculated emissions reduction in tons and also in terms 

of units of carbon dioxide equivalent (CO2eq). Gases are converted to CO2eq by 

multiplying the physical units by the gas's global warming potential (GWP) over a 100-

year time horizon. Based on the Fifth Assessment Report of the Intergovernmental Panel 

on Climate Change,92 DOE used GWP values of 28 for CH4 and 265 for N2O.

EIA prepares the Annual Energy Outlook using NEMS. Each annual version of 

NEMS incorporates the projected impacts of existing air quality regulations on emissions. 

AEO 2013 generally represents current legislation and environmental regulations, 

including recent government actions, for which implementing regulations were available 

as of December 31, 2012.

SO2 emissions from affected electric generating units (EGUs) are subject to 

nationwide and regional emissions cap-and-trade programs. Title IV of the Clean Air Act 

sets an annual emissions cap on SO2 for affected EGUs in the 48 contiguous States and 

the District of Columbia (D.C.). SO2 emissions from 28 eastern States and D.C. were 

also limited under the Clean Air Interstate Rule (CAIR; 70 FR 25162 (May 12, 2005)), 

which created an allowance-based trading program that operates along with the Title IV 

program. CAIR was remanded to the U.S. Environmental Protection Agency (EPA) by 

the U.S. Court of Appeals for the District of Columbia Circuit, but it remained in effect. 

See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008; North Carolina v. EPA, 531 

92 92 IPCC, 2013: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to 

the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Stocker, T.F., D. Qin, G.-

K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. 

Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. Chapter 8.

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F.3d 896 (D.C. Cir. 2008). In 2011 EPA issued a replacement for CAIR, the Cross-State 

Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the 

D.C. Circuit issued a decision to vacate CSAPR.93 The court ordered EPA to continue 

administering CAIR. The emissions factors used for today’sthis NOPR, which are based 

on AEO 2013, assume that CAIR remains a binding regulation through 2040.

94

The attainment of emissions caps is typically flexible among EGUs and is 

enforced through the use of emissions allowances and tradable permits. Under existing 

EPA regulations, any excess SO2 emissions allowances resulting from the lower 

electricity demand caused by the adoption of an efficiency standard could be used to 

permit offsetting increases in SO2 emissions by any regulated EGU. In past rulemakings, 

DOE recognized that there was uncertainty about the effects of efficiency standards on 

SO2 emissions covered by the existing cap-and-trade system, but it concluded that 

negligible reductions in power sector SO2 emissions would occur as a result of standards. 

Beginning around 2016, however, SO2 emissions will fall as a result of the 

Mercury and Air Toxics Standards (MATS) for power plants. 77 FR 9304 (Feb. 16, 

2012). In the final MATS rule, EPA established a standard for hydrogen chloride as a 

93 See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38 (D.C. Cir. 2012).

94 On April 29, 2014, the U.S. Supreme Court reversed the judgment of the D.C. Circuit and remanded the 

case for further proceedings consistent with the Supreme Court's opinion. The Supreme Court held in part 

that EPA's methodology for quantifying emissions that must be eliminated in certain States due to their 

impacts in other downwind States was based on a permissible, workable, and equitable interpretation of the 

Clean Air Act provision that provides statutory authority for CSAPR. See EPA v. EME Homer City 

Generation, No 12-1182, slip op. at 32 (U.S. April 29, 2014). Because DOE is using emissions factors 

based on AEO 2013 for today'sthis NOPR, the analysis assumes that CAIR, not CSAPR, is the regulation 

in force. The difference between CAIR and CSAPR is not relevant for the purpose of DOE's analysis of 

SO2 emissions.

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surrogate for acid gas hazardous air pollutants (HAP), and also established a standard for 

SO2 (a non-HAP acid gas) as an alternative equivalent surrogate standard for acid gas 

HAP. The same controls are used to reduce HAP and non-HAP acid gas; thus, SO2

emissions will be reduced as a result of the control technologies installed on coal-fired 

power plants to comply with the MATS requirements for acid gas. AEO 2013 assumes 

that, in order to continue operating, coal plants must have either flue gas desulfurization 

or dry sorbent injection systems installed by 2016. Both technologies, which are used to 

reduce acid gas emissions, also reduce SO2 emissions. Under the MATS, emissions will 

be far below the cap that would be established by CAIR, so it is unlikely that excess SO2

emissions allowances resulting from the lower electricity demand would be needed or 

used to permit offsetting increases in SO2 emissions by any regulated EGU. Therefore, 

DOE believes that energy efficiency standards will reduce SO2 emissions in 2016 and 

beyond.

CAIR established a cap on NOx emissions in 28 eastern States and the District of 

Columbia.95 Energy conservation standards are expected to have little effect on NOx

emissions in those States covered by CAIR because excess NOx emissions allowances 

resulting from the lower electricity demand could be used to permit offsetting increases 

in NOx emissions. However, standards would be expected to reduce NOx emissions in 

95 CSAPR also applies to NOx and it would supersede the regulation of NOx under CAIR. As stated 

previously, the current analysis assumes that CAIR, not CSAPR, is the regulation in force. The difference 

between CAIR and CSAPR with regard to DOE's analysis of NOX emissions is slight.

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the States not affected by the caps, so DOE estimated NOx emissions reductions from the 

standards considered in today’sthe NOPR for these States.

The MATS limit mercury emissions from power plants, but they do not include 

emissions caps, and as such, DOE’s energy conservation standards would likely reduce 

Hg emissions. DOE estimated mercury emissions reduction using emissions factors

based on AEO 2013, which incorporates MATS. 

K. Monetizing Carbon Dioxide and Other Emissions Impacts

As part of the development of this NOPR, DOE considered the estimated 

monetary benefits from the reduced emissions of CO2 and NOX that are expected to result 

from each of the considered efficiency levels. In order to make this calculation similar to 

the calculation of the NPV of customer benefit, DOE considered the reduced emissions 

expected to result over the lifetime of products shipped in the forecast period for each 

efficiency level. This section summarizes the basis for the monetary values used for CO2

and NOX emissions and presents the values considered in this rulemaking.

For today’sthis NOPR, DOE is relying on a set of values for the social cost of 

carbon (SCC) that was developed by an interagency process. A summary of the basis for 

those values is provided in the following subsection, and a more detailed description of 

the methodologies used is provided as an appendix to chapter 14 of the NOPR TSD.

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1. Social Cost of Carbon 

The SCC is an estimate of the monetized damages associated with an incremental 

increase in carbon emissions in a given year. It is intended to include (but is not limited 

to) changes in net agricultural productivity, human health, property damages from 

increased flood risk, and the value of ecosystem services. Estimates of the SCC are 

provided in dollars per metric ton of carbon dioxide. A domestic SCC value is meant to 

reflect the value of damages in the United States resulting from a unit change in carbon 

dioxide emissions, while a global SCC value is meant to reflect the value of damages 

worldwide.

Under section 1(b)(6) of Executive Order 12866, “Regulatory Planning and 

Review,” 58 FR 51735 (Oct. 4, 1993), agencies must, to the extent permitted by law, 

assess both the costs and the benefits of the intended regulation and, recognizing that 

some costs and benefits are difficult to quantify, propose or adopt a regulation only upon 

a reasoned determination that the benefits of the intended regulation justify its costs. The

purpose of the SCC estimates presented here is to allow agencies to incorporate the 

monetized social benefits of reducing CO2 emissions into cost-benefit analyses of 

regulatory actions. The estimates are presented with an acknowledgement of the many 

uncertainties involved and with a clear understanding that they should be updated over 

time to reflect increasing knowledge of the science and economics of climate impacts.

As part of the interagency process that developed the SCC estimates, technical 

experts from numerous agencies met on a regular basis to consider public comments, 

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explore the technical literature in relevant fields, and discuss key model inputs and 

assumptions. The main objective of this process was to develop a range of SCC values 

using a defensible set of input assumptions grounded in the existing scientific and 

economic literatures. In this way, key uncertainties and model differences transparently 

and consistently inform the range of SCC estimates used in the rulemaking process.

a. Monetizing Carbon Dioxide Emissions

When attempting to assess the incremental economic impacts of carbon dioxide 

emissions, the analyst faces a number of challenges. A recent report from the National 

Research Council points out that any assessment will suffer from uncertainty, 

speculation, and lack of information about: (1) future emissions of greenhouse gases; (2) 

the effects of past and future emissions on the climate system; (3) the impact of changes 

in climate on the physical and biological environment; and (4) the translation of these 

environmental impacts into economic damages. As a result, any effort to quantify and 

monetize the harms associated with climate change will raise questions of science, 

economics, and ethics and should be viewed as provisional.

Despite the limits of both quantification and monetization, SCC estimates can be 

useful in estimating the social benefits of reducing carbon dioxide emissions. The agency 

can estimate the benefits from reduced emissions in any future year by multiplying the 

change in emissions in that year by the SCC value appropriate for that year. The net 

present value of the benefits can then be calculated by multiplying the future benefits by 

an appropriate discount factor and summing across all affected years. 

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It is important to emphasize that the interagency process is committed to 

updating these estimates as the science and economic understanding of climate change 

and its impacts on society improves over time. In the meantime, the interagency group 

will continue to explore the issues raised by this analysis and consider public comments 

as part of the ongoing interagency process.

b. Development of Social Cost of Carbon Values

In 2009, an interagency process was initiated to offer a preliminary assessment of 

how best to quantify the benefits from reducing carbon dioxide emissions. To ensure 

consistency in how benefits are evaluated across agencies, the Administration sought to 

develop a transparent and defensible method, specifically designed for the rulemaking 

process, to quantify avoided climate change damages from reduced CO2 emissions. The 

interagency group did not undertake any original analysis. Instead, it combined SCC 

estimates from the existing literature to use as interim values until a more comprehensive 

analysis could be conducted. The outcome of the preliminary assessment by the 

interagency group was a set of five interim values: global SCC estimates for 2007 (in 

2006$) of $55, $33, $19, $10, and $5 per metric ton of CO2. These interim values 

represented the first sustained interagency effort within the U.S. government to develop 

an SCC for use in regulatory analysis. The results of this preliminary effort were 

presented in several proposed and final rules.

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c. Current Approach and Key Assumptions 

After the release of the interim values, the interagency group reconvened on a 

regular basis to generate improved SCC estimates. Specifically, the group considered 

public comments and further explored the technical literature in relevant fields. The 

interagency group relied on three integrated assessment models commonly used to 

estimate the SCC: the FUND, DICE, and PAGE models. These models are frequently 

cited in the peer-reviewed literature and were used in the last assessment of the 

Intergovernmental Panel on Climate Change. Each model was given equal weight in the 

SCC values that were developed. 

Each model takes a slightly different approach to model how changes in 

emissions result in changes in economic damages. A key objective of the interagency 

process was to enable a consistent exploration of the three models while respecting the 

different approaches to quantifying damages taken by the key modelers in the field. An 

extensive review of the literature was conducted to select three sets of input parameters 

for these models: climate sensitivity, socio-economic and emissions trajectories, and 

discount rates. A probability distribution for climate sensitivity was specified as an input 

into all three models. In addition, the interagency group used a range of scenarios for the 

socio-economic parameters and a range of values for the discount rate. All other model 

features were left unchanged, relying on the model developers’ best estimates and 

judgments.

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The interagency group selected four sets of SCC values for use in regulatory 

analyses. Three sets of values are based on the average SCC from three integrated 

assessment models, at discount rates of 2.5 percent, 3 percent, and 5 percent. The fourth 

set, which represents the 95th-percentile SCC estimate across all three models at a 3-

percent discount rate, is included to represent higher-than-expected impacts from climate 

change further out in the tails of the SCC distribution. The values grow in real terms over 

time. Additionally, the interagency group determined that a range of values from 7 

percent to 23 percent should be used to adjust the global SCC to calculate domestic 

effects, although preference is given to consideration of the global benefits of reducing 

CO2 emissions. Table IV.9 presents the values in the 2010 interagency group report,96

which is reproduced in appendix 14-A of the NOPR TSD.

96 Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866. Interagency 

Working Group on Social Cost of Carbon, United States Government (February 2010) (Available at: 

http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-forRIA.pdf).

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Table IV.9 Annual SCC Values from 2010 Interagency Report, 2010–2050 (in 2007 

dollars per metric ton CO2)

Year

Discount Rate %

5 3 2.5 3

Average Average Average 95th Percentile

2010 4.7 21.4 35.1 64.9

2015 5.7 23.8 38.4 72.8

2020 6.8 26.3 41.7 80.7

2025 8.2 29.6 45.9 90.4

2030 9.7 32.8 50.0 100.0

2035 11.2 36.0 54.2 109.7

2040 12.7 39.2 58.4 119.3

2045 14.2 42.1 61.7 127.8

2050 15.7 44.9 65.0 136.2

The SCC values used for today’s noticethe NOPR were generated using the most 

recent versions of the three integrated assessment models that have been published in the 

peer-reviewed literature.97 (See appendix 14-B of the NOPR TSD for further 

information.) Table IV.10 shows the updated sets of SCC estimates in five year 

increments from 2010 to 2050. Appendix 14-B of the NOPR TSD provides the full set of 

SCC estimates. The central value that emerges is the average SCC across models at the 3 

percent discount rate. However, for purposes of capturing the uncertainties involved in 

regulatory impact analysis, the interagency group emphasizes the importance of including 

all four sets of SCC values.

97 Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 

12866. Interagency Working Group on Social Cost of Carbon, United States Government (May 2013; 

revised November 2013) (Available at:

http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbonfor-regulator-impact-analysis.pdf).

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Table IV.10 Annual SCC Values from 2013 Interagency Update, 2010–2050 (in 2007 

dollars per metric ton CO2)

Year

Discount Rate %

5 3 2.5 3

Average Average Average 95th Percentile

2010 11 32 51 89

2015 11 37 57 109

2020 12 43 64 128

2025 14 47 69 143

2030 16 52 75 159

2035 19 56 80 175

2040 21 61 86 191

2045 24 66 92 206

2050 26 71 97 220

It is important to recognize that a number of key uncertainties remain, and that 

current SCC estimates should be treated as provisional and revisable since they will 

evolve with improved scientific and economic understanding. The interagency group 

also recognizes that the existing models are imperfect and incomplete. The National 

Research Council report mentioned above points out that there is tension between the 

goal of producing quantified estimates of the economic damages from an incremental ton 

of carbon and the limits of existing efforts to model these effects. There are a number of 

analytical challenges that are being addressed by the research community, including 

research programs housed in many of the Federal agencies participating in the 

interagency process to estimate the SCC. The interagency group intends to periodically 

review and reconsider those estimates to reflect increasing knowledge of the science and 

economics of climate impacts, as well as improvements in modeling.

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In summary, in considering the potential global benefits resulting from reduced 

CO2 emissions, DOE used the values from the 2013 interagency report, adjusted to 2013$ 

using the Gross Domestic Product price deflator. For each of the four cases specified, the 

values used for emissions in 2015 were $12.0, $40.5, $62.4, and $119 per metric ton 

avoided (values expressed in 2013$). DOE derived values after 2050 using the relevant 

growth rates for the 2040-2050 period in the interagency update. 

DOE multiplied the CO2 emissions reduction estimated for each year by the SCC 

value for that year in each of the four cases. To calculate a present value of the stream of 

monetary values, DOE discounted the values in each of the four cases using the specific 

discount rate that had been used to obtain the SCC values in each case.

2. Valuation of Other Emissions Reductions

As noted above, DOE has taken into account how amended energy conservation 

standards would reduce NOX emissions in those 22 States not affected by emissions caps.

DOE estimated the monetized value of NOX emissions reductions resulting from each of 

the TSLs considered for today’sthe NOPR based on estimates found in the relevant 

scientific literature. Estimates of monetary value for reducing NOx from stationary 

sources range from $476 to $4,893 per ton (2013$).98 DOE calculated monetary benefits 

98 U.S. Office of Management and Budget, Office of Information and Regulatory Affairs, 2006 Report to 

Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and 

Tribal Entities, Washington, DC. Available at: 

www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_cb_final_report.pdfAvailab

le at: www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_cb_final_report.pdf.

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using a medium value for NOX emissions of $2,684 per short ton (in 2013$), and real 

discount rates of 3 percent and 7 percent.

DOE is evaluating appropriate monetization of avoided SO2 and Hg emissions in 

energy conservation standards rulemakings. It has not included such monetization in the 

current analysis.

L. Utility Impact Analysis

In the utility impact analysis, DOE analyzes the changes in electric installed 

capacity and generation that result for each trial standard level. The utility impact 

analysis uses a variant of NEMS,99 which is a public domain, multi-sectored, partial 

equilibrium model of the U.S. energy sector. DOE uses a variant of this model, referred 

to as NEMS-BT,100 to account for selected utility impacts of new or amended energy 

conservation standards. DOE’s analysis consists of a comparison between model results 

for the most recent AEO Reference Case and for cases in which energy use is 

decremented to reflect the impact of potential standards. The energy savings inputs 

associated with each TSL come from the NIA. Chapter 15 of the NOPR TSD describes 

the utility impact analysis.

99 For more information on NEMS, refer to the U.S. Department of Energy, Energy Information 

Administration documentation. A useful summary is National Energy Modeling System: An Overview 

2003, DOE/EIA-0581(2003), March, 2003. 100 DOE/EIA approves use of the name “NEMS” to describe only an official version of the model without 

any modification to code or data. Because this analysis entails some minor code modifications and the 

model is run under various policy scenarios that are variations on DOE/EIA assumptions, DOE refers to it 

by the name “NEMS-BT” (“BT” is DOE’s Building Technologies Program, under whose aegis this work 

has been performed). 

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M. Employment Impact Analysis

Employment impacts include direct and indirect impacts. Direct employment 

impacts are any changes in the number of employees of manufacturers of the products 

subject to standards; the MIA addresses those impacts. Indirect employment impacts are 

changes in national employment that occur due to the shift in expenditures and capital 

investment caused by the purchase and operation of more-efficient appliances. Indirect 

employment impacts from standards consist of the jobs created or eliminated in the 

national economy due to: (1) reduced spending by end users on energy; (2) reduced 

spending on new energy supply by the utility industry; (3) increased customer spending 

on the purchase of new products; and (4) the effects of those three factors throughout the 

economy. 

One method for assessing the possible effects on the demand for labor of such 

shifts in economic activity is to compare sector employment statistics developed by the 

Labor Department’s Bureau of Labor Statistics (BLS). BLS regularly publishes its 

estimates of the number of jobs per million dollars of economic activity in different 

sectors of the economy, as well as the jobs created elsewhere in the economy by this 

same economic activity. Data from BLS indicate that expenditures in the utility sector 

generally create fewer jobs (both directly and indirectly) than expenditures in other 

sectors of the economy.101 There are many reasons for these differences, including wage 

differences and the fact that the utility sector is more capital-intensive and less labor101 See Bureau of Economic Analysis, “Regional Multipliers: A User Handbook for the Regional InputOutput Modeling System (RIMS II),” U.S. Department of Commerce (1992).

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intensive than other sectors. Energy conservation standards have the effect of reducing 

customer utility bills. Because reduced customer expenditures for energy likely lead to 

increased expenditures in other sectors of the economy, the general effect of efficiency 

standards is to shift economic activity from a less labor-intensive sector (i.e., the utility 

sector) to more labor-intensive sectors (e.g., the retail and service sectors). Thus, based 

on the BLS data alone, DOE believes net national employment may increase because of 

shifts in economic activity resulting from amended energy conservation standards for 

SPVUs.

For the amended standard levels considered in today’sthe NOPR, DOE estimated 

indirect national employment impacts using an input/output model of the U.S. economy 

called Impact of Sector Energy Technologies version 3.1.1 (ImSET).102 ImSET is a 

special-purpose version of the “U.S. Benchmark National Input-Output” (I–O) model, 

which was designed to estimate the national employment and income effects of energysaving technologies. The ImSET software includes a computer-based I–O model having 

structural coefficients that characterize economic flows among the 187 sectors. ImSET’s 

national economic I–O structure is based on a 2002 U.S. benchmark table, specially 

aggregated to the 187 sectors most relevant to industrial, commercial, and residential 

building energy use. DOE notes that ImSET is not a general equilibrium forecasting 

model, and understands the uncertainties involved in projecting employment impacts, 

especially changes in the later years of the analysis. Because ImSET does not 

102 M. J. Scott, O. V. Livingston, P. J. Balducci, J. M. Roop, and R. W. Schultz, ImSET 3.1: Impact of 

Sector Energy Technologies, PNNL-18412, Pacific Northwest National Laboratory (2009) (Available at: 

www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf).

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incorporate price changes, the employment effects predicted by ImSET may overestimate actual job impacts over the long run. For the NOPR, DOE used ImSET only to 

estimate short-term (through 2023) employment impacts.

For more details on the employment impact analysis, see chapter 16 of the NOPR 

TSD.

V. Analytical Results and Conclusions

The following section addresses the results from DOE’s analyses with respect to 

potential energy conservation standards for SPVUs in this rulemaking. It addresses the 

TSLs examined by DOE, the projected impacts of each of these levels if adopted as 

energy conservation standards for SPVUs, and the proposed standard levels that DOE 

sets forth in today’sthe NOPR. Additional details regarding DOE’s analyses are 

contained in the TSD supporting this noticeNOPR.

A. Trial Standard Levels

DOE developed Trial Standard Levels (TSLs) that combine efficiency levels for 

each equipment class of SPVACs and SPVHPs. Table V.1Table V.1 presents the 

efficiency EERs for each equipment class in the EPCA and ASHRAE baseline and each 

TSL. TSL 1 consists of efficiency level 1 for equipment classes less than 65,000 Btu/h. 

TSL 2 consists of efficiency level 2 for equipment classes less than 65,000 Btu/h. TSL 3

consists of efficiency level 3 for equipment classes less than 65,000 Btu/h. TSL 4

consists of efficiency level 4 (max-tech) for equipment classes less than 65,000 Btu/h. 

For SPVACs between 65,000 and 135,000 Btu/h, there are no models on the market 

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above the ASHRAE level, and for SPVHPs between 65,000 and 135,000 Btu/h and 

SPVUs greater than or equal to 135,000 Btu/h and less than 240,000 Btu/h, there are no 

models on the market at all, and, therefore, DOE had no basis with which to develop 

higher efficiency levels or conduct analyses. As a result, for each TSL, the EER (and 

COP) for these equipment classes is shown as the ASHRAE standard level of 10.0 EER 

(and 3.0 COP for heat pumps).

Table V.1 EPCA Baseline, ASHRAE Baseline, and Trial Standard Levels for 

SPVUs

Equipment Class

EPCA 

Baseline

ASHRAE 

Baseline

Trial Standard Levels 

EER(/COP)

1 2 3 4

SPVAC <65,000 Btu/h 9.0 10.0 10.5 11.0 11.75 12.3

SPVHP <65,000 Btu/h 9.0/

3.0

10.0/

3.0

10.5/ 

3.2 

11.0/ 

3.3 

11.75/ 

3.9 

12.3/ 

3.9 

SPVAC ≥65,000 Btu/h and 

<135,000 Btu/h 8.9 10.0 10.0 10.0 10.0 10.0

SPVHP ≥65,000 Btu/h and 

<135,000 Btu/h

8.9/

3.0

10.0/ 

3.0

10.0/ 

3.0

10.0/ 

3.0

10.0/ 

3.0

10.0/ 

3.0

SPVAC ≥135,000 Btu/h and 

<240,000 Btu/h 8.6 10.0 10.0 10.0 10.0 10.0

SPVHP ≥135,000 Btu/h and 

<240,000 Btu/h

8.6/

2.9

10.0/ 

3.0

10.0/ 

3.0

10.0/ 

3.0

10.0/ 

3.0

10.0/ 

3.0

For clarity, DOE has also summarized the different design options that would be 

introduced across equipment classes at each TSL in Table V.2 below.

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Inserted Cells

Inserted Cells

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Table V.2 Design Options at Each Trial Standard Level for SPVUs

Equipment Class

ASHRAE 

Baseline

Trial Standard Levels

1 2 3 4

Design Options for Each TSL (options are cumulative- TSL 4 includes all preceding options)

SPVAC <65,000 Btu/h

BPM Indoor 

motor, 

Increased HX 

face area

Addition of 

HX tube row

Addition of 

HX tube row

Improved 

Compressor 

Efficiency, 

Increased 

HX face area

BPM

Outdoor 

motor, HighEfficiency 

outdoor fan 

blade, Dual 

condensing 

heat 

exchangers

SPVHP <65,000 Btu/h

BPM Indoor 

motor, 

Increased HX 

face area

Addition of 

HX tube row

Addition of 

HX tube row

Improved 

Compressor 

Efficiency, 

Increased 

HX face area

BPM

Outdoor 

motor, HighEfficiency 

outdoor fan 

blade, Dual 

condensing 

heat 

exchangers

*SPVAC ≥65,000 

Btu/h and <135,000 

Btu/h

BPM Indoor 

motor, 

Increased HX 

face area

No change No change No change No change

*SPVHP ≥65,000 

Btu/h and <135,000 

Btu/h

BPM Indoor 

motor, 

Increased HX 

face area

No change No change No change No change

SPVAC ≥135,000 

Btu/h and <240,000 

Btu/h

No change No change No change No change No change

SPVHP ≥135,000 

Btu/h and <240,000 

Btu/h

No change No change No change No change No change

* TSL1 through TSL4 are marked as “no change” because for these equipment classes, each TSL consists 

of the ASHRAE efficiency level. 

B. Economic Justification and Energy Savings

1. Economic Impacts on Commercial Consumers

a. Life-Cycle Cost and Payback Period

Customers affected by new standards usually incur higher purchase prices and 

lower operating costs. DOE evaluates these impacts on individual customers by 

calculating changes in LCC and the PBP associated with the TSLs. The results of the 

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LCC analysis for each TSL were obtained by comparing the installed and operating costs 

of the equipment in the base-case scenario (EPCA and ASHRAE baselinebaselines) 

against the standards-case scenarios at each TSL. Inputs used for calculating the LCC 

include total installed costs (i.e., equipment price plus installation costs), operating 

expenses (i.e., annual energy savings, energy prices, energy price trends, repair costs, and 

maintenance costs), equipment lifetime, and discount rates.

The LCC analysis is carried out using Monte Carlo simulations. Consequently, 

the results of the LCC analysis are distributions covering a range of values, as opposed to 

a single deterministic value. DOE presents the mean or median values, as appropriate, 

calculated from the distributions of results. The LCC analysis also provides information 

on the percentage of consumers for whom an increase in the minimum efficiency 

standard would have a positive impact (net benefit), a negative impact (net cost), or no 

impact.

DOE also performed a PBP analysis as part of the LCC analysis. The PBP is the 

number of years it would take for the consumer to recover the increased costs of higherefficiency equipment as a result of energy savings based on the operating cost savings. 

The PBP is an economic benefit-cost measure that uses benefits and costs without 

discounting. Chapter 8 of the NOPR TSD provides detailed information on the LCC and 

PBP analyses.

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As described in section IV.G, DOE used a “roll-up” scenario in this rulemaking.

Under the roll-up scenario, DOE assumes that the market shares of the efficiency levels 

(in the ASHRAE base-case) that do not meet the standard level under consideration 

would be “rolled up” into (meaning “added to”) the market share of the efficiency level at 

the standard level under consideration, and the market shares of efficiency levels that are 

above the standard level under consideration would remain unaffected. Customers in the 

ASHRAE base-case scenario who buy the equipment at or above the TSL under 

consideration, would be unaffected if the standard were to be set at that TSL. Customers 

in the ASHRAE base-case scenario who buy equipment below the TSL under 

consideration would be affected if the standard were to be set at that TSL. Among these 

affected customers, some may benefit from lower LCCs of the equipment and some may 

incur net cost due to higher LCCs, depending on the inputs to the LCC analysis such as 

electricity prices, discount rates, installation costs, and markups. 

DOE’s LCC and PBP analyses provided key outputs for each efficiency level 

above the baseline (i.e., efficiency levels more stringent than those in ASHRAE 90.1-

2013), as reported in 

Table V.3 and Table V.4Error! Reference source not found..

103.

.

104.

 DOE’s results 

indicate that for SPVAC units, affected customer savings are positive at TSLs 1 and 2, 

103 Because there are no units above the ASHRAE baseline in the classes greater than or equal to 65,000 

Btu/h and less than 135,000 Btu/h, and no units greater than or equal to 135,000 Btu/h and less than 

240,000 Btu/h, there are no LCC savings for these classes.

104 Because there are no units above the ASHRAE baseline in the classes greater than or equal to 65,000 

Btu/h and less than 135,000 Btu/h, and no units greater than or equal to 135,000 Btu/h and less than 

240,000 Btu/h, there are no LCC savings for these classes.

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and for SPVHP units, customer savings are positive at TSLs 1, 2, and 3. LCC and PBP 

results using the EPCA baseline are available in appendix 8B of the NOPR TSD.

Table V.3 Summary LCC and PBP Results for Single-Package Vertical Air 

Conditioners, <65,000 Btu/h Capacity

TSL

Efficiency 

Level

Life-Cycle Cost 

2013$ Life-Cycle Cost Savings

Payback 

Period 

years

Installed 

Cost

Discounted 

Operating Cost LCC

Average 

Savings

2013$*

% of Customers that 

Experience Median

Net

Cost

No 

Impact

Net 

Benefit

ASHRAE

Baseline 4,795 12,335 17,130 - - - - -

1 1 4,939 12,074 17,013 116 25 26 49 7.9 

2 2 5,083 11,839 16,922 179 37 1 62 8.4 

3 3 5,546 11,578 17,123 (24) 62 0 38 14.4 

4 4 6,407 11,516 17,924 (825) 87 0 13 27.3 

*Parentheses indicate negative values.

Table V.4 Summary LCC and PBP Results for Single-Package Vertical Heat 

Pumps, <65,000 Btu/h Capacity

TSL

Efficiency 

Level

Life-Cycle Cost 

2013$ Life-Cycle Cost Savings

Payback 

Period 

years

Installed 

Cost

Discounted 

Operating Cost LCC

Average 

Savings 

2013$*

% of Customers that 

Experience Median

Net

Cost

No 

Impact

Net 

Benefit

ASHRAE 

Baseline 5,363 30,464 35,827 

1 1 5,529 29,939 35,468 358 0 26 74 4.1 

2 2 5,695 29,618 35,313 424 1 1 98 4.8 

3 3 6,224 28,690 34,914 819 7 0 92 6.2 

4 4 7,210 28,698 35,909 (177) 68 0 32 13.6 

*Parentheses indicate negative values.

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b. Life-Cycle Cost Subgroup Analysis

Using the LCC spreadsheet model, DOE estimated the impacts of the TSLs on the 

following consumer subgroups: (1) mining and construction firms using modular 

temporary office buildings; (2) public education providers using portable classrooms; and 

(3) small businesses and other businesses with high risk premiums (often due to volatility 

in their share price and reliance on equity rather than debt financing) and high discount 

rates (described as “high rate” subgroup in this section). DOE analyzed this final

subgroup because this group has typically had less access to capital than other businesses, 

which results in higher financing costs and a higher discount rate than the industry 

average. Businesses with high discount rates need an earlier return on investment than 

other businesses and, other things equal, would place a lower value on future energy 

savings relative to immediate returns than would other businesses. Consequently, the 

present value of future savings is lower for these businesses. DOE estimated the average 

LCC savings and median PBP using the ASHRAE baseline for the high rate subgroup 

compared with average SPVU consumers, as shown in Table V.5 and Table V.6 below. 

The results of the life-cycle cost subgroup analysis indicate that for SPVAC units, 

the three subgroups all fare slightly worse than the average consumer, with those 

subgroups being expected to have lower LCC savings and longer payback periods than 

average. In the cases of education and mining and construction customers, this occurs 

mainly because although they pay the same installed cost premium for more-efficient 

SPVAC units, they use and save less energy than do average customers and so benefit 

less from the energy savings. In the case of mining and construction customers, LCC 

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savings are also further reduced by the effects of their higher discount rate, which further 

reduces the value of their already-smaller energy savings. The picture is somewhat more 

mixed for SPVHPs, with the high-rate subgroup and construction/mining firms generally 

faring worse, and education generally faring somewhat better than the average consumer. 

Education SPVHP customers save more energy than the average customer, whereas the 

opposite is true for education customers for air conditioners. Thus, even though they pay 

a lower price on average, education customers’ energy cost savings are higher than 

average, and they have a lower discount rate on those savings, making them worth more. 

In combination, these two factors make their LCC savings higher than those of the 

average SPVHP customer. The construction and mining SPVHP customers save less

energy than the average customer, and their higher discount rate makes these savings 

worth less to them. Finally, since high discount rate customers save the same amount of 

energy as the average customer, they only experience the effects of their higher discount 

rate, which moderately reduces their LCC savings and has no effect on PBP. Chapter 11 

of the NOPR TSD provides more detailed discussion on the LCC subgroup analysis and 

results.

Table V.5 Comparison of Impacts for Consumer Subgroups with All Consumers, 

SPVAC <65,000 Btu/h

TSL Energy 

Efficiency 

Level

LCC Savings

2013$*

Median Payback Period

years

Construction and 

Mining

Education High 

Rate All

Construction and 

Mining

Education High 

Rate All

1 1 (27) 98 101 116 13.8 9.6 7.9 7.9 

2 2 (60) 148 153 179 14.7 10.1 8.3 8.4 

3 3 (429) (92) (66) (24) 26.7 17.5 14.3 14.4 

4 4 (1,323) (944) (867) (825) 55.0 33.5 28.1 27.3 

*Parentheses indicate negative values.

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Table V.6 Comparison of Impacts for Consumer Subgroups with All Consumers, 

SPVHP <65,000 Btu/h

TSL Energy 

Efficiency 

Level

LCC Savings

2013$*

Median Payback Period

years

Construction and 

Mining

Education High 

Rate All

Construction and 

Mining

Education High 

Rate All

1 1 259 440 342 358 4.2 3.8 4.1 4.1 

2 2 274 549 403 424 5.4 4.6 4.8 4.8 

3 3 527 1,056 769 819 6.3 6.1 6.2 6.2 

4 4 (488) 83 (222) (177) 14.5 12.7 13.6 13.6 

*Parentheses indicate negative values.

c. Rebuttable Presumption Payback

As discussed in section III.E.2, EPCA provides a rebuttable presumption that, in 

essence, an energy conservation standard is economically justified if the increased 

purchase cost for a product that meets the standard is less than three times the value of 

the first-year energy savings resulting from the standard. However, DOE routinely 

conducts a full economic analysis that considers the full range of impacts, including those 

to the consumer, manufacturer, Nation, and environment, as required under 42 U.S.C. 

6295(o)(2)(B)(i) and 6316(e)(1). The results of this analysis serve as the basis for DOE 

to definitively evaluate the economic justification for a potential standard level, thereby 

supporting or rebutting the results of any preliminary determination of economic 

justification. For comparison with the more detailed analytical results, DOE calculated a 

rebuttable presumption payback period for each TSL. Table V.7 shows the rebuttable 

presumption payback periods for the representative equipment classes. using the 

ASHRAE baseline. No equipment class has a rebuttable presumption payback period of 

less than 3 years. 

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Table V.7 Rebuttable Presumption Payback Periods for SPVU Equipment Classes

Equipment Class Rebuttable Presumption Payback 

years

TSL 1 TSL 2 TSL 3 TSL 4

SPVAC <65,000 Btu/h 5.2 5.4 8.6 14.8

SPVHP <65,000 Btu/h 3.2 4.0 4.8 9.5 

2. Economic Impact on Manufacturers

As noted in section IV.I, DOE performed a manufacturer impact analysis to 

estimate the impact of amended energy conservation standards on manufacturers of 

SPVUs. DOE calculated manufacturer impacts relative to a base case, defined as DOE 

adoption of the efficiency levels specified by ASHRAE Standard 90.1-2013. 

Consequently, when comparing the INPV impacts under the GRIM model, the baseline 

technology is at an efficiency of 10 EER / 3.0 COP. The following subsection describes 

the expected impacts on manufacturers at each considered TSL. Chapter 12 of the NOPR 

TSD explains the analysis in further detail, and also contains results using the EPCA 

baseline.

a. Industry Cash-Flow Analysis Results

Table V.8 depicts the estimated financial impacts on manufacturers and the 

conversion costs that DOE expects manufacturers would incur at each TSL. The 

financial impacts on manufacturers are represented by changes in industry net present 

value. 

The impact of potential amended energy conservation standards were analyzed 

under two markup scenarios: (1) the preservation of gross margin percentage; and (2) the 

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preservation of operating profit. As discussed in section IV.I.2.b, DOE considered the 

preservation of gross margin percentage scenario by applying a uniform “gross margin 

percentage” markup across all efficiency levels. As production cost increases with 

efficiency, this scenario implies that the absolute dollar markup will increase. DOE 

assumed the nonproduction cost markup—which includes SG&A expenses, research and 

development expenses, interest, and profit to be a factor of 1.28. These markups are 

consistent with the ones DOE assumed in the engineering analysis and in the base case of 

the GRIM. Manufacturers have indicated that it is optimistic to assume that as their 

production costs increase in response to an amended energy conservation standard, they 

would be able to maintain the same gross margin percentage markup. Therefore, DOE 

assumes that this scenario represents a high bound to industry profitability under an 

amended energy conservation standard.

The preservation of operating profit scenario reflects manufacturer concerns about 

their inability to maintain their margins as manufacturing production costs increase to 

reach more-stringent efficiency levels. In this scenario, while manufacturers make the 

necessary investments required to convert their facilities to produce new standardscompliant equipment, operating profit does not change in absolute dollars and decreases 

as a percentage of revenue. 

Each of the modeled scenarios results in a unique set of cash flows and 

corresponding industry values at each TSL. In the following discussion, the INPV results 

refer to the difference in industry value between the base case and each standards case 

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that result from the sum of discounted cash flows from the base year 2014 through 2048, 

the end of the analysis period. To provide perspective on the short-run cash flow impact, 

DOE includes in the discussion of the results a comparison of free cash flow between the 

base case and the standards case at each TSL in the year before amended standards would 

take effect. This figure provides an understanding of the magnitude of the required 

conversion costs relative to the cash flow generated by the industry in the base case.

Table V.8 Manufacturer Impact Analysis Results for SPVUs

Units

Base Trial Standard Level*

Case 1 2 3 4

INPV $M 36.5 32.4 to 34.2 33.2 to 38.0 27.5 to 49.2 3.0 to 47.4

Change in 

INPV

$M − (4.1) to (2.3) (3.3) to 1.5 (9.0) to 12.7 (33.4) to 10.9

% − (11.3) to (6.3) (9.0) to 4.1 (24.7) to 34.9 (91.7) to 29.9

Free Cash 

Flow (FCF) 

in 2018

$M 2.9 0.6 0.4 (2.1) (9.5)

Change in 

FCF in 2018

$M − (2.3) (2.5) (5.0) (12.4)

% − (78.2) (85.0) (174.0) (428.2)

Conversion 

Costs $M − 6.5 7.2 16.1 33.9

*Parentheses indicate negative values.

At TSL 1, the standard for all equipment classes with capacity less than 65,000 

Btu/h is set at 10.5 EER / 3.2 COP. The standard for all equipment classes with capacity 

greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h and greater than or 

equal to 135,000 Btu/h and less than 240,000 Btu/h is set at the baseline (i.e., 10.0 

EER/3.0 COP). DOE estimates the change in INPV to range from -$4.1 to -$2.3 million, 

or a change of -11.3 percent to -6.3 percent. At this level, free cash flow is estimated to 

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decrease to $0.6 million, or a decrease of 78.2 percent compared to the base-case value of 

$2.9 million in the year 2018, the year before the standards year. DOE does expect a

standard at this level to require changes to manufacturing equipment, thereby resulting in 

capital conversion costs. The engineering analysis suggests that manufacturers would 

reach this amended standard by increasing heat exchanger size. Roughly sixty-five

percent of the SPVU models listed in the AHRI Directory would need to be updated to 

meet this amended standard level. Estimated industry conversion costs total $6.5 million.

At TSL 2, the standard for all equipment classes with capacity less than 65,000 

Btu/h is set at 11.0 EER / 3.3 COP. The standards for all equipment classes with capacity 

greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h and greater than or 

equal to 135,000 Btu/h and less than 240,000 Btu/h remain at baseline as in TSL 1. DOE 

estimates impacts on INPV to range from $1.5 million to -$3.3 million, or a change in 

INPV of 4.1 percent to -9.0 percent. At this level, free cash flow is estimated to decrease 

to $0.4, or a change of -85.0 percent compared to the base-case value of $2.9 million in 

the year 2018. Based on the engineering analysis, DOE expects manufacturers to reach 

this level of efficiency by further increasing the size of the heat exchanger. Product 

updates and associated testing expenses would further increase conversion costs for the 

industry to $7.2 million.

At TSL 3, the standard increases to 11.75 EER / 3.9 COP for equipment with 

capacity less than 65,000 Btu/h. The standards for SPVAC and SPVHP equipment with 

capacity greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h and greater 

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than or equal to 135,000 Btu/h and less than 240,000 Btu/h remain at baseline as in TSLs 

1 and 2. DOE estimates impacts on INPV to range from $12.7 million to -$9.0 million, 

or a change in INPV of 34.9 percent to -24.7 percent. At this level, free cash flow is 

estimated to decrease to less than zero, to -$2.1 million, or a change of -174.0 percent 

compared to the base-case value of $2.9 million in the year 2018. The engineering 

analysis suggests that manufacturers would reach this amended standard by once again 

increasing heat exchanger size and by switching to more-efficient two-stage compressors. 

Manufacturers that produce heat exchangers in-house may need to add coil fabrication 

equipment to accommodate the size of the heat exchanger necessary to meet the standard. 

Additionally, the new heat exchanger size may require manufacturers to invest additional 

capital into their sheet metal bending lines. Ninety-four percent of the SPVU models 

listed in the AHRI Directory would require redesign at this amended standard level. 

DOE estimates total conversion costs to be $16.1 million for the industry.

At TSL 4, the standard increases to 12.3 EER / COP of 3.9 for SPVAC and 

SPVHP equipment with capacity less than 65,000 Btu/h. The standards for SPVAC and 

SPVHP equipment with capacity greater than or equal to 65,000 Btu/h and less than 

135,000 Btu/h and greater than or equal to 135,000 Btu/h and less than 240,000 Btu/h 

remain at baseline as in TSLs 1, 2, and 3. DOE estimates impacts on INPV to range from 

$10.9 million to -$33.4 million, or a change in INPV of 29.9 percent to -91.7 percent. At 

this level, free cash flow is estimated to decrease to -$9.5 million, or a decrease of 428.2 

percent compared to the base-case value of $2.9 million in the year 2018. TSL 4 

represents the max-tech standard level. DOE expects manufacturers to meet the amended 

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standard by dramatically increasing the size of the evaporating heat exchanger and 

incorporating two condensing heat exchangers. Ninety-eight percent of all SPVU models 

listed in the AHRI Directory would require redesign at this amended standard level. 

Additionally, DOE expects designs to use BPMs for both the indoor and outdoor motors. 

Total conversion costs are expected to reach $33.9 million for the industry.

b. Impacts on Direct Employment

To quantitatively assess the potential impacts of amended energy conservation 

standards on direct employment, DOE used the GRIM to estimate the domestic labor 

expenditures and number of direct employees in the base case and at each TSL from 2014

through 2048. DOE used statistical data from the U.S. Census Bureau’s 2011 Annual 

Survey of Manufacturers,

105 the results of the engineering analysis, and interviews with 

manufacturers to determine the inputs necessary to calculate industry-wide labor 

expenditures and domestic direct employment levels. Labor expenditures related to 

manufacturing of the product are a function of the labor intensity of the product, the sales 

volume, and an assumption that wages remain fixed in real terms over time. The total 

labor expenditures in each year are calculated by multiplying the MPCs by the labor 

percentage of MPCs. DOE estimates that 95 percent of SPVU units are produced 

domestically. 

105 U.S. Census Bureau, Annual Survey of Manufacturers: General Statistics: Statistics for Industry Groups 

and Industries (2011) (Available at http://www.census.gov/manufacturing/asm/index.html).

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The total labor expenditures in the GRIM were then converted to domestic 

production employment levels by dividing production labor expenditures by the annual 

payment per production worker (production worker hours times the labor rate found in 

the U.S. Census Bureau’s 2011 Annual Survey of Manufacturers). The production 

worker estimates in this section only cover workers up to the line-supervisor level who 

are directly involved in fabricating and assembling a product within an original 

equipment manufacturer (OEM) facility. Workers performing services that are closely 

associated with production operations, such as materials handling tasks using forklifts, 

are also included as production labor. DOE’s estimates only account for production 

workers who manufacture the specific products covered by this rulemaking. To estimate 

an upper bound to employment change, DOE assumes all domestic manufacturers would 

choose to continue producing products in the U.S. and would not move production to 

foreign countries. To estimate a lower bound to employment, DOE estimated the 

maximum portion of the industry that would choose leave the industry rather than make 

the necessary product conversions. A complete description of the assumptions used to 

generate these upper and lower bounds can be found in chapter 12 of the NOPR TSD.

Using the GRIM, DOE estimates that in the absence of amended energy 

conservation standards, there would be 454 domestic production workers for SPVU 

equipment. As noted previously, DOE estimates that 95 percent of SPVU units sold in 

the United States are manufactured domestically. Table V.9 below shows the range of 

the impacts of potential amended energy conservation standards on U.S. production 

workers of SPVUs. 

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Table V.9 Potential Changes in the Total Number of SPVU Production Workers in 

2019

Trial Standard Level*

Base Case 1 2 3 4

Total Number of Domestic 

Production Workers in 

2019

412 389 to 421 389 to 432 339 to 461 285 to 559

Potential Changes in 

Domestic Production 

Workers in 2019

-- (23) to 9 (23) to 20 (73) to 49 (127) to 147

*Parentheses indicate negative values.

c. Impacts on Manufacturing Capacity 

According to SPVU manufacturers interviewed, demand for SPVUs, which 

roughly correlates to trends in telecommunications spending and construction of new 

schools, peaked in the 2001-2006 time frame. As a result, excess capacity exists in the 

industry today. 

Except at the max-tech level, any necessary redesign of SPVU models would not 

fundamentally change the assembly of the equipment. Any bottlenecks are more likely to 

come from the redesign, testing, and certification process rather than from production 

capacity. To that end, some interviewed manufacturers expressed concern that the 

redesign of all products to include BPM motors would require a significant portion of 

their engineering resources, taking resources away from customer responsiveness and 

R&D efforts. Furthermore, some manufacturers noted that an amended standard 

requiring BPMs would monopolize their testing resources and facilities – to their point 

when some manufacturers anticipated the need to build new psychometric test labs just to 

have enough in-house testing capacity to meet the amended standard. Once all products 

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have been redesigned to meet an amended energy conservation standard, manufacturers 

did not anticipate any production constraints.

d. Impacts on Subgroups of Manufacturers

Small manufacturers, niche equipment manufacturers, and manufacturers 

exhibiting a cost structure substantially different from the industry average could be 

affected disproportionately. As discussed in section IV.I using average cost assumptions 

developed for an industry cash-flow estimate is inadequate to assess differential impacts 

among manufacturer subgroups. 

For SPVU equipment, DOE identified and evaluated the impact of amended 

energy conservation standards on one subgroup, specifically small manufacturers. The 

SBA defines a “small business” as having 750 employees or less for NAICS 333415, 

“Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial 

Refrigeration Equipment Manufacturing.” Based on this definition, DOE identified 

onetwo domestic manufacturermanufacturers in the industry that qualifies as a small 

business. For a discussion of the impacts on the small manufacturer subgroup, see the 

regulatory flexibility analysis in section VI.B of this NOPR and chapter 12 of the NOPR 

TSD.

e. Cumulative Regulatory Burden

While any one regulation may not impose a significant burden on manufacturers, 

the combined effects of several impending regulations may have serious consequences 

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for some manufacturers, groups of manufacturers, or an entire industry. Assessing the 

impact of a single regulation may overlook this cumulative regulatory burden. Multiple 

regulations affecting the same manufacturer can strain profits and can lead companies to 

abandon product lines or markets with lower expected future returns than competing 

products. For these reasons, DOE conducts an analysis of cumulative regulatory burden 

as part of its rulemakings pertaining to appliance efficiency.

For the cumulative regulatory burden analysis, DOE looks at other regulations 

that could affect SPVU manufacturers that will take effect approximately three years 

before or after the compliance date of amended energy conservation standards for these 

products. For equipment with proposed standards that are more stringent than those 

contained in ASHRAE Standard 90.1-2013, the compliance date is four years after 

publication of an energy conservation standards final rule (i.e., compliance date assumed 

to be 2019 for the purposes of MIA). For equipment with proposed standards that are set 

at the levels contained in ASHRAE Standard 90.1-2013, the compliance date is two or 

three years after the effective date of the requirements in ASHRAE Standard 90.1-2013, 

depending on equipment size (i.e., 2015 or 2016). For this cumulative regulatory burden 

analysis, DOE considered regulations that could affect SPVU manufacturers that take 

effect from 2012 to 2022, to account for the range of compliance years.

In interviews, manufacturers cited Federal regulations on equipment other than 

SPVUs that contribute to their cumulative regulatory burden. In particular, 

manufacturers noted that some of them also produce residential central air conditioners 

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and heat pumps, residential furnaces, room air conditioners, and water-heating 

equipment. These products have amended energy conservation standards that go into 

effect within three years of the compliance date for any amended SPVU standards. The 

compliance years and expected industry conversion costs are listed below:

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Table V.10 Compliance Dates and Expected Conversion Expenses of Federal 

Energy Conservation Standards Affecting SPVU Manufacturers

Federal Energy Conservation 

Standards

Approximate Compliance 

Date

Estimated Total Industry 

Conversion Expense

2008 Packaged Terminal Air 

Conditioners and Heat Pumps

73 FR 58772 (Oct. 7, 2008)

2012 $33.7M (2007$)

2011 Room Air Conditioners

76 FR 22454 (April 21, 2011);

76 FR 52854 (August 24, 2011)

2014 $171M (2009$)

2007 Residential Furnaces & 

Boilers

72 FR 65136 (Nov. 19, 2007)

2015 $88M (2006$)*

2011 Residential Furnaces

76 FR 37408 (June 27, 2011);

76 FR 67037 (Oct. 31, 2011)

2015 $2.5M (2009$)**

2011 Residential Central Air 

Conditioners and Heat Pumps

76 FR 37408 (June 27, 2011);

76 FR 67037 (Oct. 31, 2011)

2015 $ 26.0M (2009$)**

2010 Gas Fired and Electric 

Storage Water Heaters

75 FR 20112 (April 16, 2010)

2015 $95.4M (2009$)

Walk-in Coolers and Freezers

79 FR 32050 (June 3, 2014) 2017 $33.6M (2012$)

Dishwashers*** 2018 TBD

Commercial Packaged Air 

Conditioners and Heat Pumps*** 2018 TBD

Commercial Warm-Air 

Furnaces*** 2018 TBD

Commercial Packaged Air 

Conditioners and Heat Pumps***

79 FR 58948 (September 18, 2014)

2019 $226.4M (2013$)

Furnace Fans

79 FR 38130 (July 3, 2014) 2019 $40.6M (2013$)

Packaged Terminal Air 

Conditioners and Heat Pumps***

79 FR 55538 (September 16, 2014)

2019 $14.3M (2013$)

Miscellaneous Residential 

Refrigeration*** 2019 TBD

Commercial Water Heaters*** 2019 TBD

Packaged Terminal Air 

Conditioners and Heat Pumps*** 2019 TBD

Commercial Packaged Boilers*** 2020 TBD

Residential Water Heaters*** 2021 TBD

Clothes Dryers*** 2022 TBD

Central Air Conditioners*** 2022 TBD

Room Air Conditioners*** 2022 TBD

* Conversion expenses for manufacturers of oil-fired furnaces and gas-fired and oil-fired boilers associated 

with the November 2007 final rule for residential furnaces and boilers are excluded from this figure. The 

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2011 direct final rule for residential furnaces sets a higher standard and earlier compliance date for oil-fired

furnaces than the 2007 final rule. As a result, manufacturers will be required design to the 2011 direct final 

rule standard. The conversion costs associated with the 2011 direct final rule are listed separately in this 

table. EISA 2007 legislated higher standards and earlier compliance dates for residential boilers than were 

in the November 2007 final rule. As a result, gas-fired and oil-fired boiler manufacturers were required to 

design to the EISA 2007 standard beginning in 2012. The conversion costs listed for residential gas-fired

and oil-fired boilers in the November 2007 residential furnaces and boilers final rule analysis are not 

included in this figure.

**Estimated industry conversion expense and approximate compliance date reflect a court-ordered April 

24, 2014 remand of the residential non-weatherized and mobile home gas furnaces standards set in the 2011 

Energy Conservation Standards for Residential Furnaces and Residential Central Air Conditioners and Heat 

Pumps. The costs associated with this rule reflect implementation of the amended standards for the 

remaining furnace product classes (i.e., oil-fired furnaces).

***The final rule for this energy conservation standard has not been published. The compliance date and 

analysis of conversion costs have not been finalized at this time. (If a value is provided for total industry 

conversion expense, this value represents an estimate from the NOPR.)

Additionally, manufacturers cited increasing ENERGY STAR standards for room 

air conditioners and packaged terminal air conditioners as a source of regulatory burden. 

In response, the Department does not consider ENERGY STAR in its presentation of 

cumulative regulatory burden, because ENERGY STAR is a voluntary program and is 

not Federally mandated.

3. National Impact Analysis

a. Significance of Energy Savings

For each TSL, DOE projected energy savings for SPVUs purchased in the 30-year 

period that begins in the year of compliance with amended standards (2015-2044 for the 

ASHRAE level and 2019-2048 for higher efficiency levels). The savings are measured 

over the entire lifetime of equipment purchased in the 30-year period. DOE quantified 

the energy savings attributable to each TSL as the difference in energy consumption 

between each standards case and the ASHRAE base case. DOE also compared the 

energy consumption of SPVUs under the ASHRAE Standard 90.1-2013 efficiency levels 

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to energy consumption of SPVUs under the EPCA base case (i.e., the current Federal 

standard).

Table V.11 presents the estimated primary energy savings for the ASHRAE level 

and for each considered TSL, and Table V.12 presents the estimated FFC energy savings.

The approach is further described in section IV.G.1. As mentioned previously, NES (and 

NPV) were not calculated for equipment classes with no shipments.

Table V.11 Cumulative National Primary Energy Savings for SPVU Trial Standard 

Levels for Units Sold in 2015-2044 (ASHRAE) or 2019-2048 (Higher)

ASHRAE

Baseline

Trial Standard Level

1 2 3 4

quads*

SPVAC <65,000 

Btu/h 0.14 0.06 0.13 0.21 0.23

SPVHP <65,000 

Btu/h 0.07 0.04 0.10 0.15 0.16

SPVAC ≥65,000 

Btu/h to 

<135,000 Btu/h 0.01 - - - -

Total -- All 

Classes 0.22 0.09 0.22 0.36 0.39

* All energy savings from TSLs above the ASHRAE Standard 90.1-2013 level are calculated with those 

ASHRAE levels as a baseline.

Note: Components may not sum to total due to rounding.

Table V.12 Cumulative National Full-Fuel-Cycle Energy Savings for SPVU Trial 

Standard Levels for Units Sold in 2015-2044 (ASHRAE) or 2019-2048 (Higher)

ASHRAE

Baseline

Trial Standard Level

1 2 3 4

quads*

SPVAC <65,000 

Btu/h 0.15 0.06 0.13 0.22 0.24

SPVHP <65,000 

Btu/h 0.07 0.04 0.10 0.15 0.16

SPVAC ≥65,000 

Btu/h to 

<135,000 Btu/h 0.01 - - - -

Total -- All 

Classes 0.22 0.09 0.23 0.37 0.39

* All energy savings from TSLs above the ASHRAE Standard 90.1-2013 level are calculated with those 

ASHRAE levels as a baseline.

Note: Components may not sum to total due to rounding.

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Circular A-4 requires agencies to present analytical results, including separate 

schedules of the monetized benefits and costs that show the type and timing of benefits 

and costs.106 Circular A-4 also directs agencies to consider the variability of key 

elements underlying the estimates of benefits and costs. For this rulemaking, DOE 

undertook a sensitivity analysis using nine rather than 30 years of product 

shipments. The choice of a nine -year period is a proxy for the timeline in EPCA for the 

review of certain energy conservation standards and potential revision of and compliance 

with such revised standards.

107 The review timeframe established in EPCA is generally 

not synchronized with the product lifetime, product manufacturing cycles, or other 

factors specific to SPVUs. Thus, such results are presented for informational purposes 

only and are not indicative of any change in DOE’s analytical methodology. The NES 

results based on a nine-year analytical period are presented in Table V.13. The impacts 

are counted over the lifetime of products purchased in 2015–2023 for the ASHRAE level 

and for 2019-2027 for higher levels.

106 U.S. Office of Management and Budget, “Circular A-4: Regulatory Analysis” (Sept. 17, 2003) 

(Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/ ). 107 EPCA requires DOE to review its standards at least once every 6 years, and requires, for certain 

products, a 3-year period after any new standard is promulgated before compliance is required, except that 

in no case may any new standards be required within 6 years of the compliance date of the previous 

standards. (42 U.S.C. 6313(a)(6)(C)) While adding a 6-year review to the 3-year compliance period adds 

up to 9 years, DOE notes that it may undertake reviews at any time within the 6-year period and that the 3-

year compliance date may yield to the 6-year backstop. A 9-year analysis period may not be appropriate 

given the variability that occurs in the timing of standards reviews and the fact that for some consumer 

products, the compliance period is 5 years rather than 3 years.

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Table V.13 Cumulative National Primary Energy Savings for SPVU Trial Standard 

Levels for Units Sold in 2015-2023 (ASHRAE) or 2019-2027 (Higher)

ASHRAE

Baseline

Trial Standard Level

1 2 3 4

quads

SPVAC <65,000 

Btu/h 0.04 0.01 0.03 0.06 0.07

SPVHP <65,000 

Btu/h 0.01 0.01 0.02 0.04 0.05

SPVAC ≥65,000 

Btu/h to 

<135,000 Btu/h 0.00 - - - -

Total -- All 

Classes 0.06 0.02 0.05 0.10 0.11

* All energy savings from TSLs above the ASHRAE Standard 90.1-2013 level are calculated with those 

ASHRAE levels as a baseline.

Note: Components may not sum to total due to rounding.

b. Net Present Value of Consumer Costs and Benefits

DOE estimated the cumulative NPV of the total costs and savings for consumers 

that would result from the TSLs considered for SPVUs. In accordance with OMB’s 

guidelines on regulatory analysis,

108 DOE calculated NPV using both a 7-percent and a 

3-percent real discount rate. Table V.14 shows the consumer NPV results for each TSL 

considered for SPVUs. using the ASHRAE baseline. In each case, the impacts cover the 

lifetime of equipment purchased in 2019-2048. DOE conducted all economic analyses 

relative to the ASHRAE baseline; because the ASHRAE level is max-tech for classes 

greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h, DOE did not include 

results for these classes in the NPV tables. Results for all equipment classes using the 

EPCA baseline can be found in chapter 10 of the NOPR TSD.

108 OMB Circular A-4, section E (Sept. 17, 2003) (Available at: 

http://www.whitehouse.gov/omb/circulars_a004_a-4). 

Comment [A83]: Change recommended by 

OIRA.

Comment [A84]: Change recommended by 

OIRA.

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Table V.14 Cumulative Net Present Value of Customer Benefit for SPVU Trial 

Standard Levels for Units Sold in 2019-2048

Equipment 

Class

Discount 

Rate (%)

Trial Standard Level

1 2 3 4

billion 2013$*

SPVAC 

<65,000 Btu/h

3 0.13 0.13 (0.64) (1.05)

7 0.04 0.01 (0.38) (0.66)

SPVHP 

<65,000 Btu/h

3 0.13 0.32 0.14 (0.06)

7 0.04 0.10 0.01 (0.12)

Total -- All 

Classes

3 0.26 0.44 (0.50) (1.10)

7 0.09 0.11 (0.37) (0.78)

* Numbers in parentheses indicate negative NPV.

Note: Components may not sum to total due to rounding.

The NPV results based on the aforementioned nine-year analytical period are 

presented in Table V.15. The impacts are counted over the lifetime of products 

purchased in 2019–2027. As mentioned previously, this information is presented for 

informational purposes only and is not indicative of any change in DOE’s analytical 

methodology or decision criteria. 

Table V.15 Cumulative Net Present Value of Customer Benefit for SPVU Trial 

Standard Levels for Units Sold in 2019-2027

Equipment 

Class

Discount 

Rate (%)

Trial Standard Level

1 2 3 4

billion 2013$*

SPVAC <65,000 

Btu/h

3 0.06 0.09 (0.04) (0.34)

7 0.02 0.03 (0.08) (0.30)

SPVHP <65,000 

Btu/h

3 0.05 0.09 0.14 (0.01)

7 0.02 0.04 0.05 (0.05)

Total -- All 

Classes

3 0.10 0.19 0.09 (0.35)

7 0.05 0.08 (0.03) (0.36)

* Numbers in parentheses indicate negative NPV.

Note: Components may not sum to total due to rounding.

The results presented in this section reflect an assumption of no change in SPVU

prices over the forecast period. In addition, DOE conducted sensitivity analysis using 

alternative price trends: one in which prices decline over time, and one in which prices 

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increase. These price trends, and the associated NPV results, are described in appendix 

10B of the NOPR TSD.

c. Indirect Impacts on Employment 

DOE expects energy conservation standards for SPVUs to reduce energy costs for 

equipment owners, with the resulting net savings being redirected to other forms of 

economic activity. Those shifts in spending and economic activity could affect the 

demand for labor. As described in section IV.M, DOE used an input/output model of the 

U.S. economy to estimate indirect employment impacts of the TSLs that DOE considered 

in this rulemaking. DOE understands that there are uncertainties involved in projecting 

employment impacts, especially changes in the later years of the analysis. Therefore, 

DOE generated results for near-term time frames (2019–2023), where these uncertainties 

are reduced. 

The results suggest that these proposed standards would be likely to have 

negligible impact on the net demand for labor in the economy. The net change in jobs is 

so small that it would be imperceptible in national labor statistics and might be offset by 

other, unanticipated effects on employment. Chapter 16 of the NOPR TSD presents more 

detailed results about anticipated indirect employment impacts.

4. Impact on Utility or Performance of Equipment

DOE has tentatively concluded that the amended standards it is proposing in this 

NOPR would not lessen the utility or performance of SPVUs. 

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5. Impact of Any Lessening of Competition 

DOE has also considered any lessening of competition that is likely to result from 

new and amended standards. The Attorney General determines the impact, if any, of any 

lessening of competition likely to result from a proposed standard, and transmits such 

determination in writing to the Secretary, together with an analysis of the nature and 

extent of such impact. (42 U.S.C. 6313(a)(6)(B)(ii)(V))

To assist the Attorney General in making such a determination, DOE has 

provided DOJ with copies of this notice and the TSD for review. DOE will consider 

DOJ’s comments on the proposed rule in preparing the final rule, and DOE will publish 

and respond to DOJ’s comments in that document.

6. Need of the Nation to Conserve Energy 

An improvement in the energy efficiency of the products subject to this rule is 

likely to improve the security of the nation’s energy system by reducing overall demand 

for energy. Reduced electricity demand may also improve the reliability of the electricity 

system. Reductions in national electric generating capacity estimated for each considered 

TSL are reported in chapter 15 of the NOPR TSD.

Energy savings from amended standards for the SPVU equipment classes covered 

in today’sthe NOPR could also produce environmental benefits in the form of reduced 

emissions of air pollutants and greenhouse gases associated with electricity production.

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Table V.16 provides DOE’s estimate of cumulative emissions reductions projected to 

result from the TSLs considered in this rulemaking. using the ASHRAE baseline, while 

results using the EPCA baseline can be found in chapter 13 of the NOPR TSD. The table 

includes both power sector emissions and upstream emissions. The upstream emissions 

were calculated using the multipliers discussed in section IV.G. DOE reports annual 

CO2, NOX, and Hg emissions reductions for each TSL in chapter 13 of the NOPR TSD.

As discussed in section IV.J, DOE did not include NOX emissions reduction from power 

plants in States subject to CAIR, because an energy conservation standard would not 

affect the overall level of NOX emissions in those States due to the emissions caps 

mandated by CSAPR.

Table V.16 Cumulative Emissions Reduction for Potential Standards for SPVUs

TSL

1 2 3 4

Power Sector and Site Emissions*

 CO2 (million metric tons) 8.0 20 32 34

 SO2 (thousand tons) 22 53 86 90

 NOX (thousand tons) 3.6 8.9 14 14

 Hg (tons) 0.03 0.06 0.10 0.11

 N2O (thousand tons) 0.11 0.27 0.44 0.46

 CH4 (thousand tons) 0.60 1.4 2.4 2.5

Upstream Emissions

 CO2 (million metric tons) 0.28 0.68 1.1 1.2

 SO2 (thousand tons) 0.06 0.15 0.24 0.26

 NOX (thousand tons) 3.9 9.4 16 17

 Hg (tons) 0.0002 0.0004 0.0006 0.0006

 N2O (thousand tons) 0.003 0.007 0.011 0.012

 CH4 (thousand tons) 24 57 94 101

Total Emissions

 CO2 (million metric tons) 8.3 20 33 35

 SO2 (thousand tons) 22 53 86 91

 NOX (thousand tons) 7.4 18 30 31

 Hg (tons) 0.03 0.06 0.11 0.11

 N2O (thousand tons) 0.11 0.28 0.45 0.47

 CH4 (thousand tons) 24 59 97 103

* Includes emissions from additional gas use of more-efficient SPVUs.

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Note: These results are based on emissions factors in AEO 2013, the most recent version 

available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a 

significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an 

increase in NOx, estimated at 13%. In the next phase of this rulemaking, DOE plans to use 

emissions factors based on the most recent AEO available, which may or may not be AEO 

2014, depending on the timing of the issuance of the next rulemaking document.

As part of the analysis for this NOPR, DOE estimated monetary benefits likely to 

result from the reduced emissions of CO2 and NOX estimated for each of the TSLs

considered for SPVUs. As discussed in section IV.K, for CO2, DOE used values for the 

SCC developed by an interagency process. The interagency group selected four sets of 

SCC values for use in regulatory analyses. Three sets are based on the average SCC from 

three integrated assessment models, at discount rates of 2.5 percent, 3 percent, and 5 

percent. The fourth set, which represents the 95th-percentile SCC estimate across all 

three models at a 3-percent discount rate, is included to represent higher-than-expected 

impacts from temperature change further out in the tails of the SCC distribution. The 

four SCC values for CO2 emissions reductions in 2015, expressed in 2013$, are 

$12.0/ton, $40.5/ton, $62.4/ton, and $119/ton. The values for later years are higher due 

to increasing emissions-related costs as the magnitude of projected climate change 

increases. 

Table V.17 presents the global value of CO2 emissions reductions at each TSL.

using the ASHRAE baseline, while results using the EPCA baseline are available in 

chapter 14 of the NOPR TSD. DOE calculated domestic values as a range from 7 percent 

to 23 percent of the global values, and these results are presented in chapter 14 of the

NOPR TSD for both the ASHRAE and EPCA baselines.

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Comment [A87]: Change recommended by 

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Table V.17 Global Present Value of CO2 Emissions Reduction for Potential 

Standards for SPVUs

TSL

SCC Scenario*

5% discount 

rate, 

average

3% discount 

rate, 

average

2.5% 

discount 

rate, 

average

3% discount rate, 

95th percentile

million 2013$

Power Sector and Site Emissions**

1 50 241 386 747

2 120 584 937 1812

3 202 969 1552 3006

4 216 1035 1656 3209

Upstream Emissions

1 1.8 8.5 14 26

2 4.3 21 33 64

3 7.2 34 55 107

4 7.8 37 59 114

Total Emissions

1 52 249 400 773

2 124 605 970 1875

3 209 1003 1607 3112

4 224 1072 1715 3324

* For each of the four cases, the corresponding SCC value for emissions in 2015 is 

$12.0, $40.5, $62.4 and $119 per metric ton (2013$).109

** Includes site emissions associated with additional use of natural gas by moreefficient SPVUs.

DOE is well aware that scientific and economic knowledge about the contribution 

of CO2 and other greenhouse gas (GHG) emissions to changes in the future global 

climate and the potential resulting damages to the world economy continues to evolve 

rapidly. Thus, any value placed in this rulemaking on reducing CO2 emissions is subject 

to change. DOE, together with other Federal agencies, will continue to review various 

methodologies for estimating the monetary value of reductions in CO2 and other GHG 

109 These results are based on emissions factors in AEO 2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative 

emissions reductions for CO2, estimated at 33%. The monetized benefits from GHG reductions would 

likely change by a comparable amount. In the next phase of this rulemaking, DOE plans to use emissions 

factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the 

timing of the issuance of the next rulemaking document.

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emissions. This ongoing review will consider the comments on this subject that are part 

of the public record for this and other rulemakings, as well as other methodological 

assumptions and issues. However, consistent with DOE’s legal obligations, and taking 

into account the uncertainty involved with this particular issue, DOE has included in this 

NOPR the most recent values and analyses resulting from the interagency review process.

DOE also estimated a range for the cumulative monetary value of the economic 

benefits associated with NOX emissions reductions anticipated to result from amended 

standards for the SPVU equipment that is the subject of this NOPR. The dollar-per-ton 

values that DOE used are discussed in section IV.K. Table V.18 presents the present 

value of cumulative NOX emissions reductions for each TSL using the ASHRAE baseline

calculated using the average dollar-per-ton values and 7-percent and 3-percent discount 

rates. Results using the EPCA baseline are available in chapter 14 of the NOPR TSD.

Comment [A90]: Change recommended by 

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Comment [A91]: Change recommended by 

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Table V.18 Present Value of NOX Emissions Reduction for Potential Standards for 

SPVUs110

TSL 3% Discount Rate 7% Discount Rate

million 2013$

Power Sector and Site Emissions*

1 3.6 1.0

2 9.1 2.6

3 15 4.2

4 15 4.3

Upstream Emissions

1 4.8 2.0

2 11 4.7

3 19 8.2

4 21 9.0

Total Emissions

1 8.4 3.0

2 21 7.3

3 34 12

4 36 13

* Includes site emissions associated with additional use of natural 

gas by more-efficient SPVUs.

The NPV of the monetized benefits associated with emissions reductions can be 

viewed as a complement to the NPV of the consumer savings calculated for each TSL 

considered in this rulemaking. Table V.19 presents the NPV values that result from 

adding the estimates of the potential economic benefits resulting from reduced CO2 and 

NOX emissions in each of four valuation scenarios to the NPV of consumer savings 

calculated for each TSL considered in this rulemaking using the ASHRAE baseline, at 

both a 7-percent and a 3-percent discount rate. The CO2 values used in the columns of 

each table correspond to the four scenarios for the valuation of CO2 emission reductions 

discussed above.

110 These results are based on emissions factors in AEO 2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 2014 would result in an increase in NOx emissions 

reductions, estimated at 13%. The monetized benefits from NOx reductions would likely change by a 

comparable amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the 

most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance 

of the next rulemaking document.

Comment [A92]: Change recommended by 

OIRA (footnote).

Comment [A93]: Change recommended by 

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Table V.19 SPVU TSLs: Net Present Value of Consumer Savings Combined with 

Net Present Value of Monetized Benefits from CO2 and NOX Emissions Reductions 

TSL

Consumer NPV at 3% Discount Rate added with:

SCC Value of 

$12.0/metric ton 

CO2

* and Medium 

Value for NOX

**

SCC Value of 

$40.5/metric ton 

CO2

* and Medium 

Value for NOX

**

SCC Value of 

$62.4/metric ton 

CO2

* and Medium 

Value for NOX

**

SCC Value of 

$119/metric ton 

CO2

* and Medium 

Value for NOX

**

billion 2013$

1 0.32 0.52 0.67 1.0

2 0.59 1.1 1.4 2.3

3 (0.26) 0.54 1.1 2.6

4 (0.84) 0.005 0.65 2.3

TSL

Consumer NPV at 7% Discount Rate added with:

SCC Value of 

$12.0/metric ton 

CO2

* and Medium 

Value for NOX

**

SCC Value of 

$40.5/metric ton 

CO2

* and Medium 

Value for NOX

**

SCC Value of 

$62.4/metric ton 

CO2

* and Medium 

Value for NOX

**

SCC Value of 

$119/metric ton 

CO2

* and Medium 

Value for NOX

**

billion 2013$

1 0.14 0.34 0.49 0.86

2 0.24 0.72 1.1 2.0

3 (0.15) 0.65 1.3 2.8

4 (0.54) 0.31 0.95 2.6

Note: Parentheses indicate negative values. * These label values represent the global SCC in 2015, in 2013$. The present values have been calculated 

with scenario-consistent discount rates.111

** Medium Value corresponds to $2,684 per ton of NOX emissions.

Although adding the value of consumer savings to the values of emission 

reductions provides a valuable perspective, two issues should be considered. First, the 

national operating cost savings are domestic U.S. customer monetary savings that occur 

as a result of market transactions, while the value of CO2 reductions is based on a global 

value. Second, the assessments of operating cost savings and the SCC are performed 

111 These results are based on emissions factors in AEO 2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative 

emissions reductions for CO2, estimated at 33%, and in increase in cumulative emissions reductions for 

NOx, estimated at 13%. The monetized benefits from GHG reductions would likely change by a 

comparable amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the 

most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance 

of the next rulemaking document.

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with different methods that use quite different time frames for analysis. The national 

operating cost savings is measured for the lifetime of products shipped in 2019–2048. 

The SCC values, on the other hand, reflect the present value of future climate-related 

impacts resulting from the emission of one metric ton of CO2 in each year. These 

impacts continue well beyond 2100.

7. Other Factors 

The Secretary of Energy, in determining whether a standard is economically 

justified, may consider any other factors that the Secretary deems to be relevant. (42 

U.S.C. 6295(o)(2)(B)(i)(VI)) No other factors were considered in this analysis.

C. Proposed Standards

EPCA contains criteria for prescribing new or amended energy conservation 

standards. For commercial HVAC equipment such as SPVUs, DOE must adopt as 

national standards the levels in amendments to ASHRAE Standard 90.1 unless DOE 

determines, supported by clear and convincing evidence, that standards more stringent 

than those levels ‘‘would result in significant additional conservation of energy and [be] 

technologically feasible and economically justified.’’ (42 U.S.C. 6313(a)(6)(A)(ii)(II))

In determining whether a standard is economically justified, the Secretary must determine 

whether the benefits of the standard exceed its burdens by, to the greatest extent 

practicable, considering the seven statutory factors discussed previously. (42 U.S.C. 

6313(a)(6)(B)(ii)) 

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In this rulemaking, DOE has evaluated whether standards more stringent than the 

efficiency levels in ASHRAE Standard 90.1–2013 for SPVUs are justified under the 

above criteria. As stated in sections III.C.1 and III.D.2, DOE has tentatively determined, 

based on clear and convincing evidence, that all of the more-stringent standard levels 

considered in this rulemaking are technologically feasible and would save significant 

additional amounts of energy. For today’sthis NOPR, DOE considered the impacts of 

amended standards for SPVUs at each TSL, beginning with the maximum 

technologically feasible level, to determine whether that level was economically justified. 

Where the max-tech level was not justified, DOE then considered the next-most-efficient 

level and undertook the same evaluation until it reached the highest efficiency level that 

is both technologically feasible and economically justified and saves a significant amount 

of energy.

To aid the reader in understanding the benefits and/or burdens of each TSL, tables 

in this section summarize the quantitative analytical results for each TSL, based on the 

assumptions and methodology discussed herein. The efficiency levels contained in each 

TSL are described in section V.A. In addition to the quantitative results presented in the 

tables, DOE also considers other burdens and benefits that affect economic justification. 

These include the impacts on identifiable subgroups of consumers who may be 

disproportionately affected by a national standard, and impacts on employment. Section 

V.B.1.b presents the estimated impacts of each TSL for these subgroups. DOE discusses 

the impacts on direct employment in SPVU manufacturing in section V.B.2.b, and 

discusses the indirect employment impacts in section V.B.3.c.

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1. Benefits and Burdens of Trial Standard Levels Considered for SPVUs 

Table V.20, Table V.21Table V.21, and Table V.22 summarize the quantitative 

impacts estimated for each TSL for SPVUs. using the ASHRAE baseline. The national 

impacts are measured over the lifetime of SPVUs purchased in the 30-year period that 

begins in the year of compliance with amended standards (2019-2048). The energy 

savings, emissions reductions, and value of emissions reductions refer to full-fuel-cycle 

results. Results for the proposed standard level using the EPCA baseline can be found in 

Tables V.24 through V.28.

Comment [A95]: Change recommended by 

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Comment [A96]: Change recommended by 

OIRA.

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Table V.20 Summary of Analytical Results for SPVUs: National Impacts112

Category TSL 1 TSL 2 TSL 3 TSL 4

National Energy 

Savings

quads 0.09 0.23 0.37 0.39

NPV of Customer Benefits (2013$ billion)

3% discount rate 0.26 0.44 (0.50) (1.10)

7% discount rate 0.09 0.11 (0.37) (0.78)

Cumulative Emissions Reduction (Total FFC Emissions)

CO2 (million metric 

tons) 8.3 20 33 35

SO2 (thousand tons) 22 53 86 91

NOX (thousand tons) 7.4 18 30 31

Hg (tons) 0.03 0.06 0.11 0.11

N2O (thousand tons) 0.11 0.28 0.45 0.47

CH4 (thousand tons) 24 59 97 103

Value of Emissions Reduction (Total FFC Emissions)

CO2 (2013$ million)* 52 to 773 124 to 1875 209 to 3112 224 to 3324

NOX – 3% discount rate 

(2013$ million) 8.4 21 34 36

NOX – 7% discount rate 

(2013$ million) 3.0 7.3 12 13

* Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced 

CO2 emissions.

Note: Parentheses indicate negative values.

112 These results are based on emissions factors in AEO 2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 2014 would result in a significant change in cumulative 

emissions reductions for CO2 and most other pollutants. For example, the estimated change for CO2

emissions reductions is a decrease of 33%, while the estimated change for NOx emissions reductions is an 

increase of 13%. The monetized benefits from GHG reductions would likely change by a comparable 

amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent 

AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next 

rulemaking document.

Comment [A97]: Change recommended by 

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Table V.21 NPV of Consumer Benefits by Equipment Class

Equipment 

Class

Discount 

Rate (%)

Trial Standard Level

1 2 3 4

billion 2013$*

SPVAC 

<65,000 Btu/h

3 0.13 0.13 (0.64) (1.05)

7 0.04 0.01 (0.38) (0.66)

SPVHP 

<65,000 Btu/h

3 0.13 0.32 0.14 (0.06)

7 0.04 0.10 0.01 (0.12)

Total -- All 

Classes

3 0.26 0.44 (0.50) (1.10)

7 0.09 0.11 (0.37) (0.78)

Note: Parentheses indicate negative values.

Table V.22 Summary of Analytical Results for SPVUs: Manufacturer and 

Consumer Impacts (ASHRAE baseline)

TSL 1 TSL2 TSL 3 TSL 4

Manufacturer Impacts

Industry NPV 

relative to a base 

case value of 36.5 

(2013$ millions)

32.4 to 34.2 33.2 to 38.0 27.5 to 49.2 3.0 to 47.4

Industry NPV (% 

change) (11.3) to (6.3) (9.0) to 4.1 (24.7) to 34.9 (91.7) to 29.9

Consumer Mean LCC Savings (2013$)

SPVAC <65,000 

Btu/h 116 179 (24) (825)

SPVHP <65,000 

Btu/h 358 424 819 (177)

Consumer Median PBP (years)

SPVAC <65,000 

Btu/h 7.9 8.4 14.4 27.3 

SPVHP <65,000 

Btu/h 4.1 4.8 6.2 13.6 

Distribution of Consumer LCC Impacts

SPVAC <65,000 Btu/h

Net Cost (%) 25 37 62 87 

Net Benefit (%) 49 62 38 13 

No Impact (%) 26 1 0 0 

SPVHP <65,000 Btu/h

Net Cost (%) 0 1 7 68 

Net Benefit (%) 74 98 92 32 

No Impact (%) 26 1 0 0 

Note: Parentheses indicate negative values.

First, DOE considered TSL 4, which would save an estimated total of 0.39 quads 

of energy, an amount DOE considers significant. TSL 4 has an estimated NPV of 

customer benefit of negative $0.78 billion using a 7-percent discount rate, and negative 

$1.10 billion using a 3-percent discount rate. 

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The cumulative emissions reductions at TSL 4 are 35 million metric tons of CO2, 

31 thousand tons of NOX, and 0.11 tons of Hg. The estimated monetary value of the CO2 

emissions reductions at TSL 54 ranges from $224 million to $3,324 million.113

At TSL 4, the average LCC savings ranges from a negative $825 to a negative

$177 depending on equipment class. The fraction of consumers with positive LCC 

benefits range from 13 percent for SPVACs less than 65,000 Btu/h to 32 percent for 

SPVHPs less than 65,000 Btu/h. 

At TSL 4, the projected change in INPV ranges from a decrease of $33.4 million

to an increase of $10.9 million. At TSL 4, DOE recognizes the risk of negative impacts if 

manufacturers’ expectations concerning reduced profit margins are realized. If the lower 

bound of the range of impacts is reached, as DOE expects, TSL 4 could result in a net 

loss of up to 91.7 percent in INPV for manufacturers.

 

Accordingly, the Secretary tentatively concludes that at TSL 4 for SPVUs, the 

benefits of energy savings, emission reductions, and the estimated monetary value of the 

CO2 emissions reductions would be outweighed by negative NPV of consumer benefit

113 These results are based on emissions factors in AEO 2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 2014 would result in a significant change in cumulative 

emissions reductions for CO2 and most other pollutants. For example, the estimated change for CO2

emissions reductions is a decrease of 33%, while the estimated change for NOx emissions reductions is an 

increase of 13%. The monetized benefits from GHG reductions would likely change by a comparable 

amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent 

AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next 

rulemaking document.

Comment [A99]: Change recommended by 

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overall, negative LCC savings for both equipment classes (SPVAC and SPVHP less than 

65,000 Btu/h) , and the significant burden on the industry. Consequently, DOE has 

concluded that TSL 4 is not economically justified. 

Next, DOE considered TSL 3, which would save an estimated total of 0.37 quads 

of energy, an amount DOE considers significant. TSL 3 has an estimated NPV of 

consumer benefit of negative $0.37 billion using a 7-percent discount rate, and negative

$0.50 billion using a 3-percent discount rate. 

The cumulative emissions reductions at TSL 3 are 33 million metric tons of CO2, 

30 thousand tons of NOX, and 0.11 tons of Hg. The estimated monetary value of the CO2 

emissions reductions at TSL 3 ranges from $209 million to $3,112 million.114

At TSL 3, the average LCC savings are range from a negative $24 to a positive 

$819 depending on equipment class. The fraction of consumers with positive LCC 

benefits ranged from 38 percent for SPVACs less than 65,000 Btu/h to 92 percent for 

SPVHPs less than 65,000 Btu/h. 

114 These results are based on emissions factors in AEO 2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 2014 would result in a significant change in cumulative 

emissions reductions for CO2 and most other pollutants. For example, the estimated change for CO2

emissions reductions is a decrease of 33%, while the estimated change for NOx emissions reductions is an 

increase of 13%. The monetized benefits from GHG reductions would likely change by a comparable 

amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent 

AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next 

rulemaking document.

Comment [A100]: Change recommended by 

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At TSL 3, the projected change in INPV ranges from a decrease of $9.0 million to 

an increase of $12.7 million. If the lower bound of the range of impacts is reached, TSL 

3 could result in a net loss of up to 24.7 percent in INPV for manufacturers.

Accordingly, the Secretary tentatively concludes that at TSL 3 for SPVUs, the 

benefits of energy savings, emission reductions, and the estimated monetary value of the 

CO2 emissions reductions would be outweighed by the negative NPV of consumer 

benefits, negative LCC savings for SPVAC less than 65,000 Btu/h, and the negative 

INPV on manufacturers. Consequently, DOE has tentatively concluded that TSL 3 is not 

economically justified.

Next, DOE considered TSL 2, which would save an estimated total of 0.23 quads 

of energy, an amount DOE considers significant. TSL 2 has an estimated NPV of 

consumer benefit of $0.11 billion using a 7-percent discount rate, and $0.44 billion using 

a 3-percent discount rate. 

The cumulative emissions reductions at TSL 2 are 20 million metric tons of CO2, 

18 thousand tons of NOX, and 0.06 tons of Hg. The estimated monetary value of the CO2 

emissions reductions at TSL 3 ranges from $124 million to $1,875 million.115

115 These results are based on emissions factors in AEO 2013, the most recent version available at the time 

of this analysis. Use of emissions factors in AEO 2014 would result in a significant change in cumulative 

emissions reductions for CO2 and most other pollutants. For example, the estimated change for CO2

emissions reductions is a decrease of 33%, while the estimated change for NOx emissions reductions is an 

increase of 13%. The monetized benefits from GHG reductions would likely change by a comparable 

amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent 

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At TSL 2, the average LCC savings range from $179 to $424 depending on 

equipment class. The fraction of consumers with positive LCC benefits range from 62

percent for SPVACs less than 65,000 Btu/h to 98 percent for SPVHPs less than 65,000 

Btu/h. 

At TSL 2, the projected change in INPV ranges from a decrease of $3.3 million to 

an increase of $1.5 million. At TSL 2, DOE recognizes the risk of negative impacts if 

manufacturers’ expectations concerning reduced profit margins are realized. If the lower 

bound of the range of impacts is reached, as DOE expects, TSL 2 could result in a net 

loss of up to 9.0 percent in INPV for manufacturers.

After considering the analysis and weighing the benefits and the burdens, DOE 

has tentatively concluded that at TSL 2 for SPVUs, the benefits of energy savings, 

positive NPV of consumer benefit, positive average consumer LCC savings, emission 

reductions, and the estimated monetary value of the emissions reductions would outweigh 

the potential reduction in INPV for manufacturers. The Secretary of Energy has 

tentatively concluded that TSL 2 would save a significant amount of energy, is 

technologically feasible and economically justified, and is supported by clear and 

convincing evidence. For the above reasons, DOE today proposes to adopt the energy 

conservation standards for SPVUs at TSL 2. Table V.23 presents the proposed energy 

AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next 

rulemaking document.

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conservation standards for SPVUs. As mentioned previously, for SPVHPs greater than 

or equal to 65,000 Btu/h and less than 135,000 Btu/h and for SPVUs greater than or equal 

to 135,000 Btu/h and less than 240,000 Btu/h, there are no models on the market, and, 

therefore, DOE had no basis with which to develop higher efficiency levels or conduct 

analyses. For SPVACs greater than or equal to 65,000 Btu/h and less than 135,000 

Btu/h, there are no models on the market higher than the ASHRAE 90.1-2013 level, and, 

therefore, DOE has no clear and convincing evidence with which to adopt higher levels. 

As a result, DOE is proposing amended standards for SPVUs equivalent to those in 

ASHRAE Standard 90.1-2013 for these four equipment classes, as required by law.

Table V.23 Proposed Energy Conservation Standards for SPVUs

Equipment Class Cooling Capacity

Btu/h Efficiency Level

Single Package Vertical Air 

Conditioner <65,000 Btu/h EER =11.0

Single Package Vertical Air 

Conditioner

≥65,000 Btu/h and <135,000 

Btu/h EER = 10.0

Single Package Vertical Air 

Conditioner

≥135,000 Btu/h and 

<240,000 Btu/h EER = 10.0

Single Package Vertical Heat 

Pump <65,000 Btu/h EER = 11.0COP = 3.3

Single Package Vertical Heat 

Pump

≥65,000 Btu/h and <135,000 

Btu/h

EER = 10.0

COP = 3.0

Single Package Vertical Heat 

Pump

≥135,000 Btu/h and 

<240,000 Btu/h

EER = 10.0

COP = 3.0

Although DOE proposed this level based on examining energy savings and 

economic justification as compared to adoption of the ASHRAE level as required by 

statute (42 U.S.C. 6313(a)(6)(A)(ii)), in 

Table V.24 through Table V.28 DOE presents, for informational purposes 

only,present the benefits and burdens on the consumer, the manufacturer, and the Nation 

in comparison to a base case including the current Federal standards (i.e., the EPCA 

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Comment [A102]: Change recommended by 

OIRA.

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baseline).the EPCA baseline), although only the incremental quantitative impacts from 

the ASHRAE baseline to the various TSL standard levels under consideration was used 

to propose these standards. The results compared to the ASHRAE baseline are also 

included for comparison.

Table V.24 Consumer Impact Results for SPVU Proposed Trial Standard Level

(Baseline Comparison)

Equipment 

Class

Baseline

Life-Cycle Cost, All Customers

2013$ Life-Cycle Cost Savings

Median

Payback 

Period 

years

Installed 

Cost

Discounted 

Operating 

Cost

LCC

Affected 

Customers’ 

Average 

Savings 

2013$

% of Consumers that 

Experience

Net 

Cost

No 

Impact

Net 

Benefit

SPVAC 

<65 

kBtu/h

ASHRAE 5,083 11,839 16,922 179 37 1 62 8.4

EPCA 5,083 11,839 16,922 261 42 1 57 10.4

SPVHP 

<65 

kBtu/h

ASHRAE 5,695 29,618 35,313 424 1 1 98 4.8

EPCA 5,695 29,618 35,313 382 21 1 78 9.3

SPVAC 

65-135 

kBtu/h

ASHRAE - - - - - - - -

EPCA 6,659 19,805 26,464 737 16 29 55 7.0

SPVHP 

65-135 

kBtu/h

ASHRAE - - - - - - - -

EPCA 7,409 56,078 63,487 241 34 29 37 10.9

Table V.25 Manufacturer Impact Analysis Results for SPVU Proposed Trial 

Standard Level (Baseline Comparison)

ASHRAE Baseline EPCA Baseline

Base Case INPV

(2013$ millions) 36.5 33.9

Standards Case INPV

(2013$ millions) 33.2 to 38.0 24.0 to 40.2

Change in INPV

(% Change) (9.0) to 4.1 (29.2) to 18.6

Comment [A103]: Change recommended by 

OIRA.

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Table V.26 Cumulative National Primary and Full-Fuel-Cycle Energy Savings and 

Net Present Value of Customer Benefit for SPVU Proposed Trial Standard Level for 

Units Sold in 2019-2048 (Baseline Comparison)

National Primary 

Energy Savings 

(quads)

National FFC 

Energy Savings 

(quads)

NPV at 3% 

(billion 2013$)

NPV at 7% 

(billion 2013$)

ASHRAE 

Baseline

EPCA 

Baseline

ASHRAE 

Baseline

EPCA 

Baseline

ASHRAE 

Baseline

EPCA 

Baseline

ASHRAE 

Baseline

EPCA 

Baseline

SPVAC 

<65,000 

Btu/h

0.13 0.28 0.13 0.28 0.13 0.51 0.01 0.10

SPVHP 

<65,000 

Btu/h

0.10 0.17 0.10 0.17 0.32 0.53 0.10 0.15

SPVAC 

≥65,000 

Btu/h to 

<135,000 

Btu/h

- 0.01 - 0.01 - 0.02 - 0.01

Total --

All 

Classes

0.22 0.45 0.23 0.46 0.44 1.07 0.11 0.26

Note: Components may not sum to total due to rounding.

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Table V.27 Cumulative Emissions Reduction, Global Present Value of CO2

Emissions Reduction, and Present Value of NOx Emissions Reduction for Proposed 

Standards for SPVUs (Baseline Comparison)

Power Sector and 

Site Emissions* Upstream Emissions Total Emissions

ASHRAE 

Baseline

EPCA 

Baseline

ASHRAE 

Baseline

EPCA 

Baseline

ASHRAE 

Baseline

EPCA 

Baseline

Cumulative Emissions Reductions

CO2 (million metric tons) 20 40 0.68 1.4 20 41

SO2 (thousand tons) 53 107 0.15 0.30 53 108

NOX (thousand tons) 8.9 18 9.4 19 18 37

Hg (tons) 0.06 0.13 0.0004 0.0007 0.06 0.13

N2O (thousand tons) 0.27 0.55 0.007 0.014 0.28 0.56

CH4 (thousand tons) 1.4 3.0 57 116 59 119

Global Present Value of CO2 Emissions Reduction, SCC Scenario** (million 2013$)

5% discount rate, average 120 247 4.3 8.8 124 256

3% discount rate, average 584 1194 21 42 605 1236

2.5% discount rate, average 937 1914 33 67 970 1982

3% discount rate, 95th

percentile 1812 3704 64 131 1875 3834

Present Value of NOx Emissions Reduction (million 2013$)

3% discount rate 9.1 18 11 24 21 42

7% discount rate 2.6 5.3 4.7 9.7 7.3 15

* Includes site emissions associated with additional use of natural gas by more-efficient SPVUs.

** For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4 

and $119 per metric ton (2013$).

Table V.28 SPVU Proposed TSL: Net Present Value of Consumer Savings 

Combined with Net Present Value of Monetized Benefits from CO2 and NOX

Emissions Reductions (Baseline Comparison)

SCC Value of 

$12.0/metric ton 

CO2

* and Medium 

Value for NOX

**

SCC Value of 

$40.5/metric ton 

CO2

* and Medium 

Value for NOX

**

SCC Value of 

$62.4/metric ton 

CO2

* and Medium 

Value for NOX

**

SCC Value of 

$119/metric ton 

CO2

* and Medium 

Value for NOX

**

ASHRAE 

Baseline

EPCA 

Baseline

ASHRAE 

Baseline

EPCA 

Baseline

ASHRAE 

Baseline

EPCA 

Baseline

ASHRAE 

Baseline

EPCA 

Baseline

billion 2013$

Consumer NPV 

at 3% Discount 

Rate added with 

each SCC and 

NOx value

0.59 1.4 1.1 2.3 1.4 3.1 2.3 4.9

Consumer NPV 

at 7% Discount 

Rate added with 

each SCC and 

NOx value

0.24 0.53 0.72 1.5 1.1 2.3 2.0 4.1

Note: Parentheses indicate negative values.

* These label values represent the global SCC in 2015, in 2013$. The present values have been calculated with 

scenario-consistent discount rates. ** Medium Value corresponds to $2,684 per ton of NOX emissions.

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2. Summary of Benefits and Costs (Annualized) of the Proposed Standards

The benefits and costs of today’sthe proposed standards can also be expressed in 

terms of annualized values. The annualized monetary values are the sum of: (1) the 

annualized national economic value, expressed in 2013$, of the benefits from operating 

products that meet the proposed standards (consisting primarily of operating cost savings 

from using less energy, minus increases in equipment purchase costs, which is another 

way of representing consumer NPV), and (2) the monetary value of the benefits of 

emission reductions, including CO2 emission reductions.116 The value of the CO2

reductions, otherwise known as the Social Cost of Carbon (SCC), is calculated using a 

range of values per metric ton of CO2 developed by a recent interagency process. 

Although combining the values of operating savings and CO2 reductions provides 

a useful perspective, two issues should be considered. First, the national operating 

savings are domestic U.S. consumer monetary savings that occur as a result of market 

transactions, while the value of CO2 reductions is based on a global value. Second, the 

assessments of operating cost savings and SCC are performed with different methods that 

use different time frames for analysis. The national operating cost savings is measured 

116 DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized 

values. First, DOE calculated a present value in 2014, the year used for discounting the NPV of total 

consumer costs and savings, for the time-series of costs and benefits using discount rates of 3 and 7 percent

for all costs and benefits except for the value of CO2 reductions. For the latter, DOE used a range of 

discount rates. From the present value, DOE then calculated the fixed annual payment over a 30-year

period, starting in 2013 that yields the same present value. The fixed annual payment is the annualized 

value. Although DOE calculated annualized values, this does not imply that the time-series of cost and 

benefits from which the annualized values were determined would be a steady stream of payments.

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for the lifetime of products shipped in 2019–2048. The SCC values, on the other hand, 

reflect the present value of future climate-related impacts resulting from the emission of 

one metric ton of CO2 in each year. These impacts continue well beyond 2100.

Table V.29 shows the annualized values for the proposed standards for SPVUs

compared to the ASHRAE baselinebaselines. The results under the primary estimate are 

as follows. (All monetary values below are expressed in 2013$.) Using a 7-percent 

discount rate for benefits and costs other than CO2 reduction, for which DOE used a 3-

percent discount rate along with the SCC series corresponding to a value of $40.5/ton in 

2015, the cost of the SPVU standards proposed in today’s rulethe NOPR is $29 million 

per year in increased equipment costs, while the benefits are $38 million per year in 

reduced equipment operating costs, $29 million in CO2 reductions, and $0.57 million in 

reduced NOX emissions. In this case, the net benefit amounts to $38 million per year. 

Using a 3-percent discount rate for all benefits and costs and the SCC series 

corresponding to a value of $40.5/ton in 2015, the cost of the SPVU standards proposed 

in today’s rulethe NOPR is $37 million per year in increased equipment costs, while the 

benefits are $58 million per year in reduced operating costs, $29 million in CO2

reductions, and $0.97 million in reduced NOX emissions. In this case, the net benefit 

amounts to $51 million per year.117

117 All CO2 and NOx results shown in this paragraph are based on emissions factors in AEO 2013, the most 

recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a 

significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase in 

cumulative NOx reductions, estimated at 13%. In the next phase of this rulemaking, DOE plans to use 

emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending 

on the timing of the issuance of the next rulemaking document.

Comment [A104]: Change recommended by 

OIRA.

Comment [A105]: Change recommended by 

OIRA.

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Table V.29 Annualized Benefits and Costs of Proposed Standards (TSL 2) for 

SPVUs 

Discount Rate

Primary 

Estimate*

Low Net 

Benefits 

Estimate*

High Net 

Benefits 

Estimate*

million 2013$/year

Benefits

Operating Cost Savings

7% 38 36 39

3% 58 55 61

CO2 Reduction Monetized Value 

($12.0/t case)** 5% 7.7 7.6 7.7

CO2 Reduction Monetized Value 

($40.5/t case)** 3% 29 28 29

CO2 Reduction Monetized Value 

($62.4/t case)** 2.5% 43 42 43

CO2 Reduction Monetized Value 

$119/t case)** 3% 89 88 89

NOX Reduction at $2,684/ton**

7% 0.57 0.56 0.57

3% 0.97 0.97 0.98

Total Benefits†

7% plus CO2

range

46 to 127 44 to 125 48 to 129

7% 67 65 69

3% plus CO2

range

67 to 148 63 to 144 70 to 151

3% 88 84 91

Costs

Incremental Equipment Costs

7% 29 40 28

3% 37 53 36

Net Benefits/Costs

Total†

7% plus CO2

range

17 to 98 4 to 85 19 to 101

7% 38 25 40

3% plus CO2

range

30 to 111 11 to 91 34 to 115

3% 51 31 55

* This table presents the annualized costs and benefits associated with SPVUs shipped in 2019−2048. These 

results include benefits to consumers which accrue after 2048 from the products purchased in 2019-2048. 

Costs incurred by manufacturers, some of which may be incurred in preparation for the rule, are not directly 

included, but are indirectly included as part of incremental equipment costs. The Primary, Low Benefits, and 

High Benefits Estimates utilize projections of energy prices and building growth from the AEO 2013 

Reference case, Low Estimate, and High Estimate, respectively. In addition, incremental equipment costs 

reflect constant real prices for the Primary Estimate, an increase for projected equipment price trends for the 

Low Benefits Estimate, and a decline for projected equipment price trends for the High Benefits Estimate. 

The methods used to derive projected price trends are explained in section IV.F.2.a.

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** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios. 

The values of $12.0, $40.5, and $62.4 per metric ton are the averages of SCC distributions calculated using 

5%, 3%, and 2.5% discount rates, respectively. The value of $119/t represents the 95th percentile of the SCC 

distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an 

escalation factor. The value for NOX (in 2013$) is the average of the low and high values used in DOE’s 

analysis.118

† Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to SCC 

value of $40.5/t. In the rows labeled “7% plus CO2 range” and “3% plus CO2 range,” the operating cost and 

NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of 

CO2 values.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

Section 1(b)(1) of Executive Order 12866, “Regulatory Planning and Review,” 58 

FR 51735 (Oct. 4, 1993), requires each agency to identify the problem that it intends to 

address, including, where applicable, the failures of private markets or public institutions 

that warrant new agency action, as well as to assess the significance of that problem. The 

problems that today’sthe proposed standards address are as follows: 

(1) There are external benefits resulting from improved energy efficiency of SPVUs 

that are not captured by the users of such equipment. These benefits include 

externalities related to environmental protection and energy security that are not 

reflected in energy prices, such as reduced emissions of greenhouse gases. DOE 

attempts to quantify some of the external benefits through use of Social Cost of 

Carbon values.

118 All CO2 and NOx results shown in this paragraph are based on emissions factors in AEO 2013, the most 

recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a 

significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase in 

cumulative NOx reductions, estimated at 13%. In the next phase of this rulemaking, DOE plans to use 

emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending 

on the timing of the issuance of the next rulemaking document.

Comment [A106]: Change recommended by 

OIRA (footnote).

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In addition, DOE has the Office of Information and Regulatory Affairs (OIRA) in 

the Office of Management and Budget (OMB) has determined that today’sthis regulatory 

action is an “economically a “significant regulatory action” under section 3(f)(1) of 

Executive Order 12866. Accordingly, section 6(a)(3) of the Executive Order requires 

that DOE prepare DOE has also prepared a regulatory impact analysis (RIA) on 

today’sfor the proposed rule and that the Office of Information and Regulatory Affairs 

(OIRA) in the Office of Management and Budget (OMB) review this rule. DOE 

presented to OIRA for review the draft rule and other documents prepared for this 

rulemaking, including the RIA, and has included these documents in the rulemaking 

record. The assessments prepared pursuant to Executive Order 12866 can be found in the 

technical support document for this rulemaking. .

DOE has also reviewed this regulation pursuant to Executive Order 13563, issued 

on January 18, 2011 (76 FR 3281 (Jan. 21, 2011)). Executive Order 13563 is 

supplemental to and explicitly reaffirms the principles, structures, and definitions 

governing regulatory review established in Executive Order 12866. To the extent 

permitted by law, agencies are required by Executive Order 13563 to: (1) propose or 

adopt a regulation only upon a reasoned determination that its benefits justify its costs 

(recognizing that some benefits and costs are difficult to quantify); (2) tailor regulations 

to impose the least burden on society, consistent with obtaining regulatory objectives, 

taking into account, among other things, and to the extent practicable, the costs of 

cumulative regulations; (3) select, in choosing among alternative regulatory approaches, 

Comment [A107]: Change recommended by 

OIRA.

Comment [A108]: Change recommended by 

OIRA.

Comment [A109]: Change recommended by 

OIRA.

Comment [A110]: Change recommended by 

OIRA.

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those approaches that maximize net benefits (including potential economic, 

environmental, public health and safety, and other advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify performance objectives, rather than specifying 

the behavior or manner of compliance that regulated entities must adopt; and (5) identify 

and assess available alternatives to direct regulation, including providing economic 

incentives to encourage the desired behavior, such as user fees or marketable permits, or 

providing information upon which choices can be made by the public. 

DOE emphasizes as well that Executive Order 13563 requires agencies to use the 

best available techniques to quantify anticipated present and future benefits and costs as 

accurately as possible. In its guidance, the Office of Information and Regulatory Affairs 

has emphasized that such techniques may include identifying changing future compliance 

costs that might result from technological innovation or anticipated behavioral changes.

For the reasons stated in the preamble, DOE believes that today’sthe NOPR is consistent 

with these principles, including the requirement that, to the extent permitted by law, 

benefits justify costs and that net benefits are maximized. 

B. Review Under the Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires preparation of an 

initial regulatory flexibility analysis (IRFA) for any rule that by law must be proposed for 

public comment, unless the agency certifies that the rule, if promulgated, will not have a 

significant economic impact on a substantial number of small entities. As required by 

Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking,” 

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67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 

2003, to ensure that the potential impacts of its rules on small entities are properly 

considered during the rulemaking process. 68 FR 7990. DOE has made its procedures 

and policies available on the Office of the General Counsel’s website 

(www.gc.doe.gov/gc/office-general-counselwww.energy.gov/gc/office-general-counsel).

DOE has determined that it cannot certify that the proposed rule, if promulgated, 

would not have a significant effect on a substantial number of small manufacturers. 

Therefore, DOE has prepared an initial regulatory flexibility analysis (IRFA), as 

presented in sections VI.B.1 through VI.B.4, for this rulemaking. 

1. Description and Estimated Number of Small Entities Regulated

For manufacturers of SPVUs, the Small Business Administration (SBA) has set a 

size threshold, which defines those entities classified as “small businesses” for the 

purposes of the statute. DOE used the SBA’s small business size standards to determine 

whether any small entities would be subject to the requirements of the rule. 65 FR 

30836, 30848 (May 15, 2000), as amended at 65 FR 53533, 53544 (Sept. 5, 2000) and 

codified at 13 CFR part 121. The size standards are listed by North American Industry 

Classification System (NAICS) code and industry description and are available at 

http://www.sba.gov/content/table-small-business-size-standards. SPVU manufacturing is 

classified under NAICS 333415, “Air-Conditioning and Warm Air Heating Equipment 

and Commercial and Industrial Refrigeration Equipment Manufacturing.” The SBA sets

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a threshold of 750 employees or less for an entity to be considered as a small business for 

this category.

DOE reviewed the proposed energy conservation standards for SPVUs 

considered in today’sthe notice of proposed rulemaking under the provisions of the 

Regulatory Flexibility Act and the procedures and policies published on February 19, 

2003. 68 FR 7990. To better assess the potential impacts of this rulemaking on small 

entities, DOE conducted a more focused inquiry of the companies that could be small 

business manufacturers of equipment covered by this rulemaking. DOE used available 

public information to identify potential small manufacturers. DOE’s research involved 

industry trade association membership directories (including AHRI), the DOE

certification database, individual company websites, and marketing research tools (e.g., 

Hoovers reports) to create a list of companies that manufacture or sell SPVU systems 

covered by this rulemaking. DOE also asked stakeholders and industry representatives if 

they were aware of any other small manufacturers during manufacturer interviews and at 

previous DOE public meetings. DOE reviewed the publicly-available data and contacted 

companies on its list, as necessary, to determine whether they met the SBA’s definition of 

a small business manufacturer of SPVU equipment. DOE screened out companies that 

did not offer equipment covered by this rulemaking, did not meet the definition of a 

‘‘small business,’’ or are foreign-owned and operated. 

DOE identified seven companies that produce equipment covered under the single 

package vertical unit energy conservation standard rulemaking. Two of the seven 

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companies are foreign-owned and operated. Of the remaining five businesses, two 

companies met the SBA definition of a “small business.” One small business 

manufacturer has the largest market share in the SPVU industry and 48 percent of the 

active listings in the AHRI Directory.119 The other has a more modest market share and 

5 percent of active listings in the AHRI Directory.

2. Description and Estimate of Compliance Requirements 

At the time of analysis, the domestic small manufacturer with the large market 

share had 229 active listings. Fifty-four of those listings, or 24 percent, would meet the 

proposed standards. The other 76 percent of the listings would not meet the proposed 

standard. The small manufacturer would need to either redesign those products or drop 

those products and move their customers to more-efficient offerings. However, DOE 

notes that the small manufacturer had more product listings than any other manufacturer 

that could meet the proposed standard. 

The domestic small manufacturer with the smaller market share had 27 active 

listings. None of those listings would meet the proposed standards. At the proposed 

standard level, this manufacturer would need to redesign its entire product offering or 

leave the SPVU market. 

119 Based on model listings in the AHRI directory accessed on June 6, 2012 (Available at: 

http://www.ahridirectory.org/ahridirectory/pages/ac/defaultSearch.aspx). 

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If small manufacturers chose to redesign their products that do not meet the 

proposed standard, they would need to make capital conversion and product conversion 

investments. DOE estimated an average total conversion cost of $1.49 million per 

manufacturer. DOE expects this investment, which is roughly 12% of an average 

manufacturer’s annual revenue, to be made over the four-year period between the 

publication of the final rule and the effective date of the standard.. Since small 

businesses may have a greater difficulty obtaining credit or may obtain less favorable 

terms than larger businesses, the small manufacturers may face higher overall costs if 

they choose to finance the conversion costs resulting from the change in standard. 

DOE notes that the small manufacturer with the larger market share produces 

more SPVU units than its larger competitors. The company could potentially spread the 

conversion costs over a larger number of units than its competitors. However, the small 

manufacturer did express concern in MIA interviews that such an effort would tie up their 

available engineering resources and prevent them from focusing on technology 

advancements and customer-driven feature requests. Larger manufacturers, which do not 

have the same shipment volumes as the small manufacturer, may have fewer engineers 

dedicated to SPVU equipment but potentially could marshal engineering and testing 

resources across their organization. The concern about adequate availability of

engineering resources would also likely apply to the small manufacturer with the smaller 

market share.

Comment [A111]: Change recommended by 

OIRA.

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Smaller manufacturers generally pay higher prices for purchased parts, such as 

BPMs, relative to larger competitors. Even the small manufacturer with the larger market 

share, and the highest number of SPVU shipments of any manufacturer in the industry, 

could pay higher prices for component than the larger competition. If their competitors 

have centralized sourcing, those companies could combine component purchases for 

SPVU product lines with purchases for other non-SPVU product lines and obtain higher 

volume discounts than those available to small manufacturers.

Due to the potential conversion costs, the potential engineering and testing effort, 

and the potential increases in component prices that result from a standard, DOE 

conducted this regulatory flexibility analysis. Based on DOE’s analysis, including 

interviews with manufacturers, the Department believes one of the identified small 

businesses would be able to meet the proposed standard. That small manufacturer has the

strong market share, technical expertise, and the production capability to meet the 

amended standard. The company successfully competes in both the current baselineefficiency and premium-efficiency market segments. The other small business has 

significantly less market share and does not compete in the premium-efficiency market 

today. Given the lack of existing product that meets the standard, potential conversion 

costs, and disadvantages in financing costs as well as in pricing for sourced components, 

the second small business may face headwinds in meeting the proposed standard. 

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3. Duplication, Overlap, and Conflict with Other Rules and Regulations

DOE is not aware of any rules or regulations that duplicate, overlap, or conflict 

with the rule being considered today.

4. Significant Alternatives to the Rule 

The discussion in section VI.B.2 analyzes impacts on small businesses that would 

result from DOE’s proposed rule. In addition to the other TSLs being considered, the 

proposed rulemaking TSD includes a regulatory impact analysis (RIA). For SPVUs, the 

RIA discusses the following policy alternatives: (1) no change in standard; (2) consumer 

rebates; (3) consumer tax credits; (4) manufacturer tax credits; (5) voluntary energy 

efficiency targets; (6) early replacement; and (7) bulk government purchases. While 

these alternatives may mitigate to some varying extent the economic impacts on small 

entities compared to the standards, DOE determined that the energy savings of these 

regulatory alternatives are from 0.01 to 0.5 percent smaller than those that would be 

expected to result from adoption of the proposed standard levels. Thus, DOE rejected 

these alternatives and is proposing the standards set forth in this rulemaking. (See 

chapter 17 of the NOPR TSD for further detail on the policy alternatives DOE 

considered.)

C. Review Under the Paperwork Reduction Act of 1995

Manufacturers of single package vertical air conditioners and single package 

vertical heat pumps must certify to DOE that their products comply with any applicable 

energy conservation standards. In certifying compliance, manufacturers must test their 

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equipment according to the applicable DOE test procedures for SPVACs and SPVHPs, 

including any amendments adopted for those test procedures on the date that compliance 

is required. DOE has established regulations for the certification and recordkeeping 

requirements for all covered customer products and commercial equipment, including 

SPVACs and SPVHPs. 76 FR 12422 (March 7, 2011). The collection-of-information 

requirement for the certification and recordkeeping is subject to review and approval by 

OMB under the Paperwork Reduction Act (PRA). This requirement has been approved 

by OMB under OMB Control Number 1910-1400. Public reporting burden for the 

certification is estimated to average 20 hours per response, including the time for 

reviewing instructions, searching existing data sources, gathering and maintaining the 

data needed, and completing and reviewing the collection of information. 

Notwithstanding any other provision of the law, no person is required to respond 

to, nor shall any person be subject to a penalty for failure to comply with, a collection of 

information subject to the requirements of the PRA, unless that collection of information 

displays a currently valid OMB Control Number.

D. Review Under the National Environmental Policy Act of 1969

Pursuant to the National Environmental Policy Act (NEPA) of 1969, DOE has 

determined that the proposed rule fits within the category of actions included in 

Categorical Exclusion (CX) B5.1 and otherwise meets the requirements for application of 

a CX. See 10 CFR Part 1021, App. B, B5.1(b); 1021.410(b) and Appendix B, B(1)-(5). 

The proposed rule fits within the category of actions because it is a rulemaking that 

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establishes energy conservation standards for customer products or industrial equipment, 

and for which none of the exceptions identified in CX B5.1(b) apply. Therefore, DOE 

has made a CX determination for this rulemaking, and DOE does not need to prepare an 

Environmental Assessment or Environmental Impact Statement for this proposed rule. 

DOE’s CX determination for this proposed rule is available at http://cxnepa.energy.gov/. 

E. Review Under Executive Order 13132

Executive Order 13132, “Federalism,” imposes certain requirements on Federal 

agencies formulating and implementing policies or regulations that preempt State law or 

that have Federalism implications. 64 FR 43255 (August 10, 1999). The Executive 

Order requires agencies to examine the constitutional and statutory authority supporting 

any action that would limit the policymaking discretion of the States and to carefully 

assess the necessity for such actions. The Executive Order also requires agencies to have 

an accountable process to ensure meaningful and timely input by State and local officials 

in the development of regulatory policies that have Federalism implications. On March 

14, 2000, DOE published a statement of policy describing the intergovernmental 

consultation process that it will follow in the development of such regulations. 65 FR 

13735. DOE has examined this proposed rule and has tentatively determined that it 

would not have a substantial direct effect on the States, on the relationship between the 

national government and the States, or on the distribution of power and responsibilities 

among the various levels of government. EPCA governs and prescribes Federal 

preemption of State regulations as to energy conservation for the products that are the 

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subject of today’sthis proposed rule. States can petition DOE for exemption from such 

preemption to the extent, and based on criteria, set forth in EPCA (42 U.S.C. 6297). 

Therefore, Executive Order 13132 requires no further action.

F. Review Under Executive Order 12988

With respect to the review of existing regulations and the promulgation of new 

regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” imposes on 

Federal agencies the general duty to adhere to the following requirements: (1) eliminate 

drafting errors and ambiguity; (2) write regulations to minimize litigation; (3) provide a 

clear legal standard for affected conduct rather than a general standard; and (4) promote 

simplification and burden reduction. 61 FR 4729 (Feb. 7, 1996). Regarding the review 

required by section 3(a), section 3(b) of Executive Order 12988 specifically requires that 

Executive agencies make every reasonable effort to ensure that the regulation: (1) clearly 

specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal 

law or regulation; (3) provides a clear legal standard for affected conduct while 

promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; 

(5) adequately defines key terms; and (6) addresses other important issues affecting 

clarity and general draftsmanship under any guidelines issued by the Attorney General. 

Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations 

in light of applicable standards in section 3(a) and section 3(b) to determine whether they 

are met or it is unreasonable to meet one or more of them. DOE has completed the 

required review and determined that, to the extent permitted by law, this proposed rule 

meets the relevant standards of Executive Order 12988.

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G. Review Under the Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) requires each 

Federal agency to assess the effects of Federal regulatory actions on State, local, and 

Tribal governments and the private sector. Pub. L. 104-4, sec. 201 (codified at 2 U.S.C. 

1531). For a proposed regulatory action likely to result in a rule that may cause the 

expenditure by State, local, and Tribal governments, in the aggregate, or by the private 

sector, of $100 million or more in any one year (adjusted annually for inflation), section 

202 of UMRA requires a Federal agency to publish a written statement that estimates the 

resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a),

(b)) The UMRA also requires a Federal agency to develop an effective process to permit 

timely input by elected officers of State, local, and Tribal governments on a proposed 

“significant intergovernmental mandate,” and requires an agency plan for giving notice 

and opportunity for timely input to potentially affected small governments before 

establishing any requirements that might significantly or uniquely affect them. On March 

18, 1997, DOE published a statement of policy on its process for intergovernmental 

consultation under UMRA. 62 FR 12820. DOE’s policy statement is also available at 

www.energy.gov/gc/office-general-counselwww.energy.gov/gc/office-general-counsel.

Although today’sthe proposed rule, which proposes amended energy conservation 

standards for SPVUs, does not contain a Federal intergovernmental mandate, it may 

require annual expenditures of $100 million or more by the private sector. Specifically, 

the proposed rule would likely result in a final rule that could require expenditures of 

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$100 million or more, including: (1) investment in research and development and in 

capital expenditures by SPVUs manufacturers in the years between the final rule and the 

compliance date for the amended standards, and (2) incremental additional expenditures 

by consumers to purchase higher-efficiency SPVUs, starting at the compliance date for 

the applicable standard.

Section 202 of UMRA authorizes a Federal agency to respond to the content 

requirements of UMRA in any other statement or analysis that accompanies the proposed 

rule. 2 U.S.C. 1532(c). The content requirements of section 202(b) of UMRA relevant to 

a private sector mandate substantially overlap the economic analysis requirements that 

apply under section 325(o) of EPCA and Executive Order 12866. The 

SUPPLEMENTARY INFORMATION section of the NOPR and the “Regulatory 

Impact Analysis” section of the TSD for this proposed rule respond to those 

requirements. 

Under section 205 of UMRA, the Department is obligated to identify and consider 

a reasonable number of regulatory alternatives before promulgating a rule for which a 

written statement under section 202 is required. 2 U.S.C. 1535(a). DOE is required to 

select from those alternatives the most cost-effective and least burdensome alternative 

that achieves the objectives of the proposed rule unless DOE publishes an explanation for 

doing otherwise, or the selection of such an alternative is inconsistent with law. As 

required by 42 U.S.C. 6313(a), today’sthe proposed rule would establish amended energy 

conservation standards for SPVUs that are designed to achieve the maximum 

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improvement in energy efficiency that DOE has determined to be both technologically 

feasible and economically justified. A full discussion of the alternatives considered by 

DOE is presented in the “Regulatory Impact Analysis” section of the TSD for today’sthe

proposed rule.

H. Review Under the Treasury and General Government Appropriations Act, 1999

Section 654 of the Treasury and General Government Appropriations Act, 1999 

(Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment 

for any rule that may affect family well-being. This rule would not have any impact on 

the autonomy or integrity of the family as an institution. Accordingly, DOE has 

concluded that it is not necessary to prepare a Family Policymaking Assessment.

I. Review Under Executive Order 12630

Pursuant to Executive Order 12630, “Governmental Actions and Interference with 

Constitutionally Protected Property Rights,” 53 FR 8859 (March 15, 1988), DOE has 

determined that this proposed rule would not result in any takings that might require 

compensation under the Fifth Amendment to the U.S. Constitution.

J. Review Under the Treasury and General Government Appropriations Act, 2001

Section 515 of the Treasury and General Government Appropriations Act, 2001 

(44 U.S.C. 3516 note) provides for Federal agencies to review most disseminations of 

information to the public under information quality guidelines established by each agency 

pursuant to general guidelines issued by OMB. OMB’s guidelines were published at 67 

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FR 8452 (Feb. 22, 2002), and DOE’s guidelines were published at 67 FR 62446 (Oct. 7, 

2002). DOE has reviewed today’sthis NOPR under the OMB and DOE guidelines and 

has concluded that it is consistent with applicable policies in those guidelines.

K. Review Under Executive Order 13211

Executive Order 13211, “Actions Concerning Regulations That Significantly 

Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires 

Federal agencies to prepare and submit to OIRA at OMB, a Statement of Energy Effects 

for any proposed significant energy action. A “significant energy action” is defined as 

any action by an agency that promulgates or is expected to lead to promulgation of a final 

rule, and that: (1) is a significant regulatory action under Executive Order 12866, or any 

successor order; and (2) is likely to have a significant adverse effect on the supply, 

distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a 

significant energy action. For any proposed significant energy action, the agency must 

give a detailed statement of any adverse effects on energy supply, distribution, or use 

should the proposal be implemented, and of reasonable alternatives to the action and their 

expected benefits on energy supply, distribution, and use. 

DOE has tentatively concluded that today’sthis regulatory action, which sets forth 

proposed energy conservation standards for SPVUs, is not a significant energy action 

because the proposed standards are not likely to have a significant adverse effect on the 

supply, distribution, or use of energy, nor has it been designated as such by the 

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Administrator at OIRA. Accordingly, DOE has not prepared a Statement of Energy 

Effects on this proposed rule.

L. Review Under the Information Quality Bulletin for Peer Review 

On December 16, 2004, OMB, in consultation with the Office of Science and 

Technology Policy (OSTP), issued its Final Information Quality Bulletin for Peer Review 

(the Bulletin). 70 FR 2664 (Jan. 14, 2005). The Bulletin establishes that certain 

scientific information shall be peer reviewed by qualified specialists before it is 

disseminated by the Federal Government, including influential scientific information 

related to agency regulatory actions. The purpose of the bulletin is to enhance the quality 

and credibility of the Government’s scientific information. Under the Bulletin, the 

energy conservation standards rulemaking analyses are “influential scientific 

information,” which the Bulletin defines as “scientific information the agency reasonably 

can determine will have or does have a clear and substantial impact on important public 

policies or private sector decisions.” Id. at 2667.

In response to OMB’s Bulletin, DOE conducted formal in-progress peer reviews 

of the energy conservation standards development process and analyses and has prepared 

a Peer Review Report pertaining to the energy conservation standards rulemaking 

analyses. Generation of this report involved a rigorous, formal, and documented 

evaluation using objective criteria and qualified and independent reviewers to make a 

judgment as to the technical/scientific/business merit, the actual or anticipated results, 

and the productivity and management effectiveness of programs and/or projects. The 

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“Energy Conservation Standards Rulemaking Peer Review Report” dated February 2007 

has been disseminated and is available at the following Web site: 

www1.eere.energy.gov/buildings/appliance_standards/peer_review.htmlenergy.gov/eere/

buildings/peer-review.

VII. Public Participation

A. Attendance at the Public Meeting

The time, date, and location of the public meeting are listed in the DATES and 

ADDRESSES sections at the beginning of this proposed rule. If you plan to attend the 

public meeting, please notify Ms. Brenda Edwards at (202) 586-2945 or 

Brenda.Edwards@ee.doe.gov. Please note that foreign nationals visiting DOE 

Headquarters are subject to advance security screening procedures. Any foreign national 

wishing to participate in the meeting should advise DOE as soon as possible by 

contacting Ms. Edwards at the phone number above to initiate the necessary procedures. 

Please also note that any person wishing to bring a laptop computer into the Forrestal 

Building will be required to obtain a property pass. Visitors should avoid bringing 

laptops, or allow an extra 45 minutes

VIII. Public Participation

A. Attendance at the Public Meeting

The time, date, and location of the public meeting are listed in the DATES and 

ADDRESSES sections at the beginning of this notice. If you plan to attend the public 

meeting, please notify Ms. Brenda Edwards at (202) 586-2945 or 

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Brenda.Edwards@ee.doe.gov. As explained in the ADDRESSES section, foreign 

nationals visiting DOE Headquarters are subject to advance security screening 

procedures. Any foreign national wishing to participate in the meeting should advise 

DOE of this fact as soon as possible by contacting Ms. Brenda Edwards to initiate the 

necessary procedures.

In addition, you can attend the public meeting via webinar. Webinar registration 

information, participant instructions, and information about the capabilities available to 

webinar participants will be published on DOE’s website at:

http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/35.

Participants are responsible for ensuring their systems are compatible with the webinar 

software.

B. Procedure for Submitting Requests to Speak and Prepared General Statements for

Distribution

Any person who has an interest in the topics addressed in this notice, or who is 

representative of a group or class of persons that has an interest in these issues, may 

request an opportunity to make an oral presentation at the public meeting. Such persons 

may hand-deliver requests to speak to the address shown in the ADDRESSES section at 

the beginning of this noticeproposed rule between 9:00 a.m. and 4:00 p.m., Monday 

through Friday, except Federal holidays. Requests may also be sent by mail or email to: 

Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, 

Mailstop EE-2J, 1000 Independence Avenue, SW, Washington, DC 20585-0121, or 

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Brenda.Edwards@ee.doe.gov. Persons who wish to speak should include with their 

request a computer diskette or CD-ROM in WordPerfect, Microsoft Word, PDF, or text 

(ASCII) file format that briefly describes the nature of their interest in this rulemaking 

and the topics they wish to discuss. Such persons should also provide a daytime 

telephone number where they can be reached. 

DOE requests persons scheduled to make an oral presentation to submit an 

advance copy of their statements at least one week before the public meeting. DOE may 

permit persons who cannot supply an advance copy of their statement to participate, if 

those persons have made advance alternative arrangements with the Building 

Technologies Program. As necessary, requests to give an oral presentation should ask for 

such alternative arrangements.

C. Conduct of the Public Meeting

DOE will designate a DOE official to preside at the public meeting and may also 

use a professional facilitator to aid discussion. The meeting will not be a judicial or 

evidentiary-type public hearing, but DOE will conduct it in accordance with section 336

of EPCA (42 U.S.C. 6306). A court reporter will be present to record the proceedings 

and prepare a transcript. DOE reserves the right to schedule the order of presentations 

and to establish the procedures governing the conduct of the public meeting. There shall 

not be discussion of proprietary information, costs or prices, market share, or other 

commercial matters regulated by U.S. anti-trust laws. After the public meeting, 

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interested parties may submit further comments on the proceedings, as well as on any 

aspect of the rulemaking, until the end of the comment period.

The public meeting will be conducted in an informal, conference style. DOE will 

present summaries of comments received before the public meeting, allow time for 

prepared general statements by participants, and encourage all interested parties to share 

their views on issues affecting this rulemaking. Each participant will be allowed to make 

a general statement (within time limits determined by DOE), before the discussion of 

specific topics. DOE will allow, as time permits, other participants to comment briefly 

on any general statements. 

At the end of all prepared statements on a topic, DOE will permit participants to 

clarify their statements briefly and comment on statements made by others. Participants 

should be prepared to answer questions by DOE and by other participants concerning 

these issues. DOE representatives may also ask questions of participants concerning 

other matters relevant to this rulemaking. The official conducting the public meeting will 

accept additional comments or questions from those attending, as time permits. The 

presiding official will announce any further procedural rules or modification of the above 

procedures that may be needed for the proper conduct of the public meeting.

A transcript of the public meeting will be included in the docket, which can be 

viewed as described in the Docket section at the beginning of this noticeproposed rule

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and will be accessible on the DOE website. In addition, any person may buy a copy of 

the transcript from the transcribing reporter.

D. Submission of Comments

DOE will accept comments, data, and information regarding this proposed rule 

before or after the public meeting, but no later than the date provided in the DATES

section at the beginning of this proposed rule. Interested parties may submit comments, 

data, and other information using any of the methods described in the ADDRESSES

section at the beginning of this notice.proposed rule . 

Submitting comments via www.regulations.gov. The www.regulations.gov web 

page will require you to provide your name and contact information. Your contact 

information will be viewable to DOE Building Technologies staff only. Your contact 

information will not be publicly viewable except for your first and last names, 

organization name (if any), and submitter representative name (if any). If your comment 

is not processed properly because of technical difficulties, DOE will use this information 

to contact you. If DOE cannot read your comment due to technical difficulties and 

cannot contact you for clarification, DOE may not be able to consider your comment.

However, your contact information will be publicly viewable if you include it in 

the comment itself or in any documents attached to your comment. Any information that 

you do not want to be publicly viewable should not be included in your comment, nor in 

any document attached to your comment. Otherwise, persons viewing comments will see 

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only first and last names, organization names, correspondence containing comments, and 

any documents submitted with the comments. 

Do not submit to www.regulations.gov information for which disclosure is 

restricted by statute, such as trade secrets and commercial or financial information 

(hereinafter referred to as Confidential Business Information (CBI)). Comments 

submitted through www.regulations.gov cannot be claimed as CBI. Comments received 

through the website will waive any CBI claims for the information submitted. For 

information on submitting CBI, see the Confidential Business Information section below.

DOE processes submissions made through www.regulations.gov before posting. 

Normally, comments will be posted within a few days of being submitted. However, if 

large volumes of comments are being processed simultaneously, your comment may not 

be viewable for up to several weeks. Please keep the comment tracking number that 

www.regulations.gov provides after you have successfully uploaded your comment. 

Submitting comments via email, hand delivery/courier, or mail. Comments and 

documents submitted via email, hand delivery, or mail also will be posted to 

www.regulations.gov. If you do not want your personal contact information to be 

publicly viewable, do not include it in your comment or any accompanying documents.

Instead, provide your contact information in a cover letter. Include your first and last 

names, email address, telephone number, and optional mailing address. The cover letter 

will not be publicly viewable as long as it does not include any comments.

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Include contact information each time you submit comments, data, documents, 

and other information to DOE. If you submit via mail or hand delivery/courier, please 

provide all items on a CD, if feasible, in which case it is not necessary to submit printed 

copies. No telefacsimiles (faxes) will be accepted.

 

Comments, data, and other information submitted to DOE electronically should 

be provided in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) 

file format. Provide documents that are not secured, that are written in English, and that 

are free of any defects or viruses. Documents should not contain special characters or 

any form of encryption and, if possible, they should carry the electronic signature of the 

author. 

Campaign form letters. Please submit campaign form letters by the originating 

organization in batches of between 50 to 500 form letters per PDF or as one form letter 

with a list of supporters’ names compiled into one or more PDFs. This reduces comment 

processing and posting time. 

Confidential Business Information. Pursuant to 10 CFR 1004.11, any person 

submitting information that he or she believes to be confidential and exempt by law from 

public disclosure should submit via email, postal mail, or hand delivery/courier two wellmarked copies: one copy of the document marked “confidential” including all the 

information believed to be confidential, and one copy of the document marked “non235

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confidential” with the information believed to be confidential deleted. Submit these 

documents via email or on a CD, if feasible. DOE will make its own determination about 

the confidential status of the information and treat it according to its determination.

Factors of interest to DOE when evaluating requests to treat submitted 

information as confidential include: (1) A description of the items; (2) whether and why 

such items are customarily treated as confidential within the industry; (3) whether the 

information is generally known by or available from other sources; (4) whether the 

information has previously been made available to others without obligation concerning 

its confidentiality; (5) an explanation of the competitive injury to the submitting person 

which would result from public disclosure; (6) when such information might lose its 

confidential character due to the passage of time; and (7) why disclosure of the 

information would be contrary to the public interest.

It is DOE’s policy that all comments may be included in the public docket, 

without change and as received, including any personal information provided in the 

comments (except information deemed to be exempt from public disclosure). 

E. Issues on Which DOE Seeks Comment

Although DOE welcomes comments on any aspect of this proposal, DOE is 

particularly interested in receiving comments and views of interested parties concerning 

the following issues: 

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1. DOE seeks comment on its tentative conclusion that the creation of a

space-constrained equipment class for SPVUs is not warranted. (See section III.B.1 of 

this preamble for additional information.)

2. DOE seeks comment on the EER and COP pairings for SPVHPs and its 

method of deriving the pairings. (See section IV.C.1 of this preamble for additional 

information.)

3. DOE requests comment on its elimination of technologies from 

consideration based upon the criteria using in the screening analysis. (See section IV.B of 

the preamble for additional information.)

3.4. DOE seeks comment as to whether switching to a BPM motor at 

10 EER represents the most probable option of achieving that efficiency level for 

manufacturers. (See section IV.C.2 of this preamble for additional information.)

4.5. DOE seeks comment on its derivation of the cost efficiency curves 

for SPVHPs and SPVACs with a cooling capacity ≥65,000 Btu/h and <135,000 Btu/h. 

(See section IV.C.5 of this preamble for additional information.)

5.6. DOE seeks input on its analysis of market channels for the SPVU

equipment classes. (See section IV.D of this preamble for additional information.)

6.7. DOE seeks input on its analysis of unit energy consumption (UEC)

for the above equipment classes and its use in establishing the energy savings potential 

for more-stringent standards. Of a particular interest to DOE is input on shipments of 

SPVHP equipment to telecommunication shelters and the frequency of use of 

economizers in equipment serving these shelters. (See section IV.E of this preamble for 

additional information.)

Comment [A112]: Change recommended by 

OIRA.

Comment [A113]: Change recommended by 

OIRA.

Comment [A114]: Change recommended by 

OIRA.

Comment [A115]: Change recommended by 

OIRA.

Comment [A116]: Change recommended by 

OIRA.

Comment [A117]: Change recommended by 

OIRA.

Comment [A118]: Change recommended by 

OIRA.

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7.8. DOE also recognizes that there may be regional differences 

between the shipments of heat pumps and air conditioners to warmer or cooler climates, 

and requests stakeholder input on how or if such differences can be taken into account in 

the energy use characterization. (See section IV.E of this preamble for additional 

information.)

8.9. DOE requests comments on the most appropriate trend to use for 

real (inflation-adjusted) SPVU prices. (See section IV.F.2.a of thispreamble for additional 

information.)

9.10. DOE seeks comments on its assumption that installation costs 

would not increase for higher-efficiency SPVUs. (See section IV.F.2.b of this preamble 

for additional information.)

10.11. DOE seeks comment on whether a rebound effect should be 

included in the determination of annual energy savings. If a rebound effect should be 

included, DOE seeks data to assist in calculation of the rebound effect. (See section 

IV.G.1.a of this preamble for additional information.)

11.12. DOE seeks comment on whether amended standards would affect 

shipments, and if so, DOE also requests data with which to estimate the elasticity of 

shipments for SPVUs as a function of first costs, repair costs, or operating costs. (See 

section IV.G.2 of this preamble for additional information.)

IX. Approval of the Office of the Secretary

Comment [A119]: Change recommended by 

OIRA.

Comment [A120]: Change recommended by 

OIRA.

Comment [A121]: Change recommended by 

OIRA.

Comment [A122]: Change recommended by 

OIRA.

Comment [A123]: Change recommended by 

OIRA.

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Draft Deliberative Document under EO 12866 Interagency Review. Do Not Cite, Quote 

or Release. Subject to Further Policy Review.

The Secretary of Energy has approved publication of today’sthis notice of 

proposed rulemaking.

List of Subjects in 10 CFR Part 431

Administrative practice and procedure, Confidential business information, Energy 

conservation, Incorporation by reference, and Reporting and recordkeeping requirements. 

Issued in Washington, DC, on 

________________________________

David T. Danielson

Assistant Secretary of Energy

Energy Efficiency and Renewable Energy

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Draft Deliberative Document under EO 12866 Interagency Review. Do Not Cite, Quote 

or Release. Subject to Further Policy Review.

For the reasons set forth in the preamble, DOE proposes to amend part 431 of

Chapter II, Subchapter D, of Title 10 of the Code of Federal Regulations as set forth 

below:

PART 431 – ENERGY EFFICIENCY PROGRAM FOR CERTAIN 

COMMERCIAL AND INDUSTRIAL EQUIPMENT

1. The authority citation for part 431 continues to read as follows:

Authority: 42 U.S.C. 6291-6317.

2. Section 431.97 is amended by: 

a. Revising paragraph (d); and 

b. Redesignating TablesTable 7 and 8 as Tables 9 and 10 respectively, in 

paragraphsparagraph (e) andas Table 9, and Table 8 in paragraph (f);) as Table 10;

The revisions read as follows:

§ 431.97 Energy efficiency standards and their compliance dates.

* * * * *

(d) (1) Each single package vertical air conditioner and single package vertical heat pump 

manufactured on or after January 1, 2010, but before October 9, 2015 (for models 

≥65,000 Btu/h and <135,000 Btu/h) or October 9, 2016 (for models ≥135,000 Btu/h and 

240

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Draft Deliberative Document under EO 12866 Interagency Review. Do Not Cite, Quote 

or Release. Subject to Further Policy Review.

<240,000 Btu/h), must meet the applicable minimum energy conservation standard 

level(s) set forth in Table 6 of this section.

Table 6 to § 431.97 Minimum Efficiency Standards for Single Package Vertical Air 

Conditioners and Single Package Vertical Heat Pumps

Equipment Type Cooling 

Capacity

SubcategoryEfficiency 

Level

Compliance 

Date: Products 

Manufactured 

on and after...

Single package 

vertical air 

conditioners and 

single package 

vertical heat pumps, 

single-phase and 

three-phase

<65,000 Btu/h

AC EER = 9.0 January 1, 2010

HP EER = 9.0 

COP = 3.0

January 1, 2010

Single package 

vertical air 

conditioners and 

single package 

vertical heat pumps

≥65,000 Btu/h 

and <135,000 

Btu/h

AC EER = 8.9 January 1, 2010

HP EER = 8.9

COP = 3.0

January 1, 2010

Single package 

vertical air 

conditioners and 

single package 

vertical heat pumps

≥135,000 

Btu/h and 

<240,000 

Btu/h

AC EER = 8.6 January 1, 2010

HP EER = 8.6

COP = 2.9

January 1, 2010

(2) Each single package vertical air conditioner and single package vertical heat pump 

manufactured on and after October 9, 2015 (for models ≥65,000 Btu/h and <135,000 

Btu/h) or October 9, 2016 (for models ≥135,000 Btu/h and <240,000 Btu/h), but before 

[date 4 years after publication of a final rule] must meet the applicable minimum energy 

conservation standard level(s) set forth in Table 7 of this section.

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Draft Deliberative Document under EO 12866 Interagency Review. Do Not Cite, Quote 

or Release. Subject to Further Policy Review.

Table 7 to § 431.97 Minimum Efficiency Standards for Single Package Vertical Air 

Conditioners and Single Package Vertical Heat Pumps

Equipment Type Cooling 

Capacity

SubcategoryEfficiency 

Level

Compliance 

Date: Products 

Manufactured 

on and after...

Single package 

vertical air 

conditioners and 

single package 

vertical heat pumps, 

single-phase and 

three-phase

<65,000 Btu/h

AC EER = 9.0 January 1, 2010

HP EER = 9.0 

COP = 3.0

January 1, 2010

Single package 

vertical air 

conditioners and 

single package 

vertical heat pumps

≥65,000 Btu/h 

and <135,000 

Btu/h

AC EER = 10.0 October 9, 2015

HP EER = 10.0

COP = 3.0

October 9, 2015

Single package 

vertical air 

conditioners and 

single package 

vertical heat pumps

≥135,000 

Btu/h and 

<240,000 

Btu/h

AC EER = 10.0 October 9, 2016

HP EER = 10.0

COP = 3.0

October 9, 2016

(3) Each single package vertical air conditioner and single package vertical heat pump 

manufactured on and after [date 4 years after publication of a final rule] must meet the 

applicable minimum energy conservation standard level(s) set forth in Table 8 of this 

section.

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Draft Deliberative Document under EO 12866 Interagency Review. Do Not Cite, Quote 

or Release. Subject to Further Policy Review.

Table 8 to § 431.97 Updated Minimum Efficiency Standards for Single Package 

Vertical Air Conditioners and Single Package Vertical Heat Pumps

Equipment Type Cooling 

Capacity

SubcategoryEfficiency 

Level

Compliance 

Date: Products 

Manufactured on 

and after...

Single package 

vertical air 

conditioners and 

single package 

vertical heat pumps, 

single-phase and 

three-phase

<65,000 Btu/h

AC EER = 11.0 [Date 4 years 

after publication 

of final rule]

HP EER = 11.0

COP = 3.3

[Date 4 years 

after publication 

of final rule]

Single package 

vertical air 

conditioners and 

single package 

vertical heat pumps

≥65,000 Btu/h 

and <135,000 

Btu/h

AC EER = 10.0 October 9, 2015

HP EER = 10.0

COP = 3.0

October 9, 2015

Single package 

vertical air 

conditioners and 

single package 

vertical heat pumps

≥135,000 

Btu/h and 

<240,000 

Btu/h

AC EER = 10.0 October 9, 2016

HP EER = 10.0

COP = 3.0

October 9, 2016

* * * * *

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