CHAPTER 10: NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

10.1 INTRODUCTION

......................................................................................................... 10- 1 10.2 FORECASTED ENERGY EFFICIENCIES

................................................................. 10-2 10.2.1 Room Air Conditioners

.................................................................................................. 10-2 10.2.2 Clothes Dryers

......................................................................................................... ...... 10-4 10.3 NATIONAL ENERGY SAVINGS

............................................................................... 10-6 10.3.1 Definition of Nationa l Energy Savings

.......................................................................... 10-6 10.3.2 Inputs to National Energy Savings

................................................................................ 10-7 10.3.2.1 Annual Energy Consumption per Unit

........................................................ 10-7 10.3.2.2 Shipments and Equipment Stock

............................................................... 10-10 10.3.2.3 National Annual Energy Consumption

...................................................... 10-11 10.3.2.4 Site-to-Source Energy Conversion Factors

................................................ 10-11 10.4 NET PRESENT VALUE

............................................................................................. 10-13 10.4.1 Definition of Net Present Value

................................................................................... 10-1 3 10.4.2 Inputs to Calculation of Net Present Value

.................................................................. 10-14 10.4.2.1 Total Installed Cost per Unit

...................................................................... 10-15 10.4.2.2 Annual Operating Cost Savings per Unit

................................................... 10-17 10.4.2.3 Total Increases in Annual Installed Cost

................................................... 10-17 10.4.2.4 Total Savings in A nnual Operating Cost

................................................... 10-17 10.4.2.5 Discount Factors

........................................................................................ 10-18 10.4.2.6 Present Value of Costs

............................................................................... 10-18 10.4.2.7 Present Value of Savings

........................................................................... 10-18 10.5 NES AND NPV RESULTS

......................................................................................... 10-19 10.5.2 National Energy Savings Results

................................................................................. 10-19 10.5.2.1 Room Air Conditioners

.............................................................................. 10-20 10.5.2.2 Clothes Dryers

........................................................................................... 10-21 10.5.3 Annual Costs and Savings

........................................................................................... 10- 22 10.5.4 Consumer Net Present Value Results

.......................................................................... 10-23 10.5.4.1 Room Air Conditioners

.............................................................................. 10-24 10.5.4.2 Clothes Dryers

........................................................................................... 10-24 10.6 IMPACT OF STANDARDS ON NATURAL GAS PRICES AND ASSOCIATED NATIONAL BENEFITS

................................................................... 10-25 10.6.1 Impact on Natural Gas Prices

...................................................................................... 10-2 5 10.6.2 Impact of Changes in Natu ral Gas Price on Gas Users

............................................... 10-27

LIST OF TABLES

Table 10.2.1 Room Air Conditioners, Without Reverse Cycle and With Louvers, Less than 6,000 Btu/h: Energy Efficiency Distributions in 2014

.............................. 10-3 Table 10.2.2 Room Air Conditioners, Withou t Reverse Cycle and With Louvers, 8,000– 13,999 Btu/h: Energy Efficiency Distributions in 2014

.................................... 10-3

10-iTable 10.2.3 Room Air Conditioners, Without Reverse Cycle and With Louvers, 20,000 Btu/h or more: Energy Efficiency Distributions in 2014

................................... 10-3 Table 10.2.4 Room Air Conditioners, With out Reverse Cycle and Without Louvers, 8,000–13,999 Btu/h: Energy Efficiency Distributions in 2014

......................... 10-4 Table 10.2.5 Vented Dryer, Electric, Standard: Energy Efficiency Distributions in 2014

..... 10-4 Table 10.2.6 Vented Dryer, Electric, Compact 120V: Energy Efficiency Distributions in 2014

.................................................................................................................... 10-5 Table 10.2.7 Vented Dryer, Electric, Compact 240V: Energy Efficiency Distributions in 2014

.................................................................................................................... 10-5 Table 10.2.8 Vented Dryer, Gas: Energy Efficiency Distributions in 2014

........................... 10-5 Table 10.2.9 Vent-less Dryer, Electric, Compact 240V: Energy Efficiency Distributions in 2014

............................................................................................................... 10-6 Table 10.2.10 Vent-less Dryer, Electric, Co mbination Washer/Dryer: Energy Efficiency Distributions in 2014

.......................................................................................... 10-6 Table 10.3.1 Room Air Conditioners: Ship ments-Weighted Average per-Unit Annual Energy Consumption in 2014, Residential Sector

............................................. 10-8 Table 10.3.2 Room Air Conditioners: Ship ments-Weighted Average per-Unit Annual Energy Consumption in 2014, Commercial Sector

........................................... 10-9 Table 10.3.3 Clothes Dryers: Shipments-Weighted Average per-Unit Annual Energy Consumption

.................................................................................................... 10-10 Table 10.4.1 Room Air Conditioners: Ship ments-Weighted Average per-Unit Total Installed Cost in 2014

...................................................................................... 10-15 Table 10.4.2 Clothes Dryers: Shipments-We ighted Average per-Unit Total Installed Costs

................................................................................................................. 10-16 Table 10.5.1 Inputs to National Energy Savings and Net Present Value

.............................. 10-19 Table 10.5.2 Room Air Conditioners: Cumulativ e National Energy Savings in Quads

....... 10-20 Table 10.5.3 Room Air Conditioners: Cumula tive National Energy Savings in Quads, Discounted at 3 Percent

................................................................................... 10-20 Table 10.5.4 Room Air Conditioners: Cumula tive National Energy Savings in Quads, Discounted at 7 Percent

................................................................................... 10-21 Table 10.5.5 Clothes Dryers: Cumulative National Energy Savings in Quads

.................... 10-21 Table 10.5.6 Clothes Dryers: Cumulative National Energy Savings in Quads, Discounted at 3 Percent

................................................................................... 10-21 Table 10.5.7 Clothes Dryers: Cumulative National Energy Savings in Quads, Discounted at 7 Percent

................................................................................... 10-22 Table 10.5.8 Room Air Conditioners: Cumu lative Consumer Net Present Value, Discounted at 3 Percent

................................................................................... 10-24 Table 10.5.9 Room Air Conditioners: Cumu lative Consumer Net Present Value, Discounted at 7 Percent

................................................................................... 10-24 Table 10.5.10 Clothes Dryers: Cumulative Cons umer Net Present Value, Discounted at 3 Percent

.............................................................................................................. 10-25 Table 10.5.11 Clothes Dryers: Cumulative Cons umer Net Present Value, Discounted at 7 Percent

.............................................................................................................. 10-25

10-iiTable 10.6.1 Cumulative NPV of the Ec onomy-Wide Savings in Natural Gas Expenditures Due to the Projected Decline in Natural Gas Prices Resulting from Amended Standards for Room Air C onditioners and Clothes Dryers

.... 10-28

LIST OF FIGURES

Figure 10.3.1 Site-to-Source Conversion Factors for Electricity – Room Air Conditioners

..................................................................................................... 10-12 Figure 10.3.2 Site-to-Source C onversion Factors for Electricity – Clothes Dryers

............... 10-13 Figure 10.5.2 Non-Discounted Changes in Annua l Installed Cost and Operating Cost for Room Air Conditioner Product Cl ass Group 3 at CSL 1

................................. 10-23 Figure 10.6.1 Change in U.S. Natural Gas Consumption Associated with Scenarios for Room Air Conditioner and Clot hes Dryer Standards

...................................... 10-26 Figure 10.6.2 Effects of Standards Scenarios on Average Wellhead Natural Gas Prices

...... 10-27

10-iiiCHAPTER 10. NATIONAL IMPACT ANALYSIS

10.1 INTRODUCTION

This chapter describes the U.S. Department of Energy’s (DOE’s) estimation of certain national impacts that may result from potential energy conservation standards for room air conditioners and clothes dryers. Results described here include : (1) national energy savings (NES) from considered efficiency levels, (2) the monetary value of the energy savings and changes in other operating costs, (3) increased total installed costs of the considered appliances that are attributable to the considered efficiency levels, and (4) the net present value (NPV) of the difference between the value of operating cost savings and the total installed costs.

DOE determined the NES and NPV for all the standard levels considered for the two products under consideration (room air conditioners and clothes dryers). All calculations for each of the considered products were performed using a Microsoft Excel spreadsheet model, which is accessible on the Internet ( www.eere.energy.gov/buildings/appliance_standards / ). Each product’s spreadsheet model, referred to as a national impact analysis (NIA ) model, incorporates the calculations for determining the NES and NPV as well as inputs from the associated shipments model. Details and instructions for us ing the NIA models are provided in appendix 9­ A, User Instructions for Shipme nts and National Energy Savings Spreadsheet Model. Chapter 9, Shipments Analysis, describes the shipments models that DOE used to forecast future purchases of the considered products.

For room air conditioners, DOE has analyzed four representative product classes in detail. For the NIA, DOE assigned each of the sixteen product classes included in this rulemaking to one of four produc t class groups, each of which is based on the analyses for the four representative product classes. To estimate the national impacts of am ended standards for all the product classes considered in this rulemaking, DOE allocated the product cost and annual energy consumption of each representative produc t class to all product classes within its group. The following list indicates which product classes are associated with each product class group:

• Group 1 consists of product class 1: Less than 6,000 Btu/h, Without Reverse Cycle and With Louvers

• Group 2 consists of product classe s 2, 3, 4, 11, 16 and is based on Product class 3: 8,000–13,999 Btu/h, Without Reverse Cycle and With Louvers

• Group 3 consists of product cl asses 5 and 12 and is ba sed on product class 12: >20,000 Btu/h, Without Reverse Cycle and With Louvers

• Group 4 consists of product classe s 6, 7, 8, 9, 10, 13,14,15 and is based on product class 8: 8,000–13,999 Btu/h, Without Reverse Cycle and Without Louvers

10-110.2 FORECASTED ENERGY EFFICIENCIES

A key component of DOE’s estimates of NE S and NPV for each of the two products is the energy efficiencies forecas ted for the base case (without amended energy conservation standards) and each of the st andards cases (with amended ener gy conservation standards). The forecasted energy efficiency represents the annu al shipments-weighted energy efficiency of the product under consideration during the forecast peri od (that is, from the assumed effective date of an amended standard to 30 years after that date).

For calculating the NES, per-unit average a nnual energy consumption is a direct function of product energy efficiency. For the NPV, the per- unit total installed cost is a direct function of energy efficiency; the per-unit annual operating cost, because it is a function of per-unit annual energy consumption, is indirectly dependent on product energy efficiency. The above NES and NPV inputs, as well as all other inputs to the calculation of NES and NPV, are discussed further in sections 10.3 and 10.4.

To forecast the base-case energy efficiency for each product class, DOE used as a starting point the shipments-weighted ener gy efficiency for 2014. To represent the distribution of product energy efficiencies in 2014, DOE used the same market shares as in the base case for the lifecycle cost (LCC) analysis (see chapter 8). Based on recent trends, DOE assumed no improvement of energy efficiency in the base case.

For its forecast of standards-case energy effi ciencies, DOE used a “roll-up” scenario to establish the shipments-weighted average energy e fficiency for the year that energy conservation standards are assumed to become effective (2014). In this appro ach, product energy efficiencies in the base case that do not meet the standard level under consideration would “roll up” to meet the new standard level. Product energy efficienci es in the base case that exceeded the standard level under consideration would not be affected.

The following sections detail the energy efficiency forecasts that DOE developed for the two products.

10.2.1 Room Air Conditioners

Tables 10.2.1 through 10.2.4 show the distri butions for base- and standards-case product energy efficiency in 2014 that DOE used in its NIA for room air conditioners, as well as the shipments-weighted energy efficiency ratio (SWEER) for each considered candidate standard level (CSL). DOE assumed that energy efficien cies for all room air conditioner product classes remains constant throughout the forecast period in the absence of standard.

10-2Table 10.2.1 Room Air Conditioners, Without Reverse Cycle and With Louvers, Less than 6,000 Btu/h: Energy Efficiency Distributions in 2014

Energy Efficiency Level Market Shares

IEER Base Case Candidate Standard Level
1 2 3 4 5
Baseline 9.5 96%
1 10.1 0% 96%
2 10.6 4% 4% 100%
3 11.1 0% 0% 0% 100%
4 11.6 0% 0% 0% 0% 100%
5 12.0 0% 0% 0% 0% 0% 100%
SWEER 9.57 10.12 10.60 11.10 11.60 12.00

Table 10.2.2 Room Air Conditioners, Without Reverse Cycle and With Louvers, 8,000–13,999 Btu/h: Energy Efficien cy Distributions in 2014

Energy Efficiency Level Market Shares

IEER Base Case Candidate Standard Level
1 2 3 4
Baseline 9.7 51%
1 10.3 2% 53%
2 10.8 44% 44% 97%
3 11.3 2% 2% 2% 99%
4 11.5 1% 1% 1% 1% 100%
SWEER 10.24 10.55 10.82 11.30 11.50

Table 10.2.3 Room Air Conditioners, Without Reverse Cycle and With Louvers, 20,000 Btu/h or more: Energy Effi ciency Distributions in 2014

Energy Efficiency Level Market Shares

IEER Base Case Candidate Standard Level
1 2 3 4
Baseline 8.5 37%
1 9.0 6% 43%
2 9.4 56% 56% 99%
3 9.8 1% 1% 1% 100%
4 10.0 0% 0% 0% 0% 100%
SWEER 9.03 9.23 9.40 9.80 10.00

10-3Table 10.2.4 Room Air Conditioners, Without Reverse Cycle and Without Louvers, 8,000–13,999 Btu/h: Energy Efficien cy Distributions in 2014

Energy Efficiency Level Market Shares

IEER Base Case Candidate Standard Level
1 2 3
Baseline 8.4 39%
1 8.9 0% 39%
2 9.3 61% 61% 100%
3 9.8 0% 0% 0% 100%
SWEER 8.95 9.14 9.30 9.80

10.2.2 Clothes Dryers

Tables 10.2.5 through 10.2.10 show the dist ributions for base- and standards-case product energy efficiency in 2014 that DOE used in its NIA for clothes dryers. Also included in the tables are the shipments-weighted energy effici encies associated with the base case and each considered standard level. DOE assumed that energy efficiencies for all product classes of clothes dryers remain constant at 2014 levels.

Table 10.2.5 Vented Dryer, Electric, Standard: En ergy Efficiency Distributions in 2014 Energy Efficiency Level IEF (lb/kWh) Market Share

Base Case Candidate Standard Level 1 2 3 4 5 6 Baseline 2.96 29% 1 3.04 50% 79% 2 3.10 21% 21% 100% 3 3.33 0% 0% 0% 100% 4 3.35 0% 0% 0% 0% 100% 5 3.40 0% 0% 0% 0% 0% 100% 6 4.52 0% 0% 0% 0% 0% 0% 100% SWEF 3.03 3.06 3.10 3.33 3.35 3.40 4.52

10-4Table 10.2.6 Vented Dryer, Electric, Compact 120V: Energy Efficiency Distributions in 2014 Energy Efficiency Level IEF (lb/kWh) Market Share

Base Case Candidate Standard Level 1 2 3 4 5 6 Baseline 3.00 100% 1 3.08 0% 100% 2 3.15 0% 0% 100% 3 3.37 0% 0% 0% 100% 4 3.41 0% 0% 0% 0% 100% 5 3.53 0% 0% 0% 0% 0% 100% 6 4.69 0% 0% 0% 0% 0% 0% 100% SWEF 3.00 3.08 3.15 3.37 3.41 3.53 4.69

Table 10.2.7 Vented Dryer, Electric, Compact 240V: Energy Efficiency Distributions in 2014 Energy Efficiency Level IEF (lb/kWh) Market Share

Base Case Candidate Standard Level 1 2 3 4 5 6 Baseline 2.79 39% 1 2.86 39% 78% 2 2.96 0% 0% 78% 3 3.06 22% 22% 22% 100% 4 3.10 0% 0% 0% 0% 100% 5 3.19 0% 0% 0% 0% 0% 100% 6 4.34 0% 0% 0% 0% 0% 0% 100% SWEF 2.88 2.91 2.99 3.06 3.10 3.19 4.34

Table 10.2.8 Vented Dryer, Gas: Energy Effi ciency Distributions in 2014 Energy Efficiency Level IEF (lb/kWh) Market Share

Base Case Candidate Standard Level 1 2 3 4 5 Baseline 2.63 27% 1 2.71 43% 70% 2 2.81 29% 29% 99% 3 2.97 1% 1% 1% 100% 4 2.98 0% 0% 0% 0% 100% 5 3.02 0% 0% 0% 0% 0% 100% SWEF 2.72 2.74 2.80 2.97 2.98 3.02

10-5Table 10.2.9 Vent-less Dryer, Electric, Compact 240V: Energy Efficiency Distributions in 2014 Energy Efficiency Level IEF (lb/kWh) Market Share

Base Case Candidate Standard Level 1 2 3 4 5 Baseline 2.29 100% 1 2.31 0% 100% 2 2.37 0% 0% 100% 3 2.39 0% 0% 0% 100% 4 2.59 0% 0% 0% 0% 100% 5 3.54 0% 0% 0% 0% 0% 100% SWEF 2.29 2.31 2.37 2.39 2.59 3.54

Table 10.2.10 Vent-less Dryer, Electric, Combination Washer/Dryer: Energy Efficiency Distributions in 2014 Energy Efficiency Level IEF (lb/kWh) Market Share

Base Case Candidate Standard Level 1 2 3 4 5 Baseline 1.90 100% 1 2.15 0% 100% 2 2.34 0% 0% 100% 3 2.36 0% 0% 0% 100% 4 2.42 0% 0% 0% 0% 100% 5 3.31 0% 0% 0% 0% 0% 100% SWEF 1.90 2.15 2.34 2.36 2.42 3.31

10.3 NATIONAL ENERGY SAVINGS

The following sections discuss the definiti on of NES and the inputs to the calculation of NES.

10.3.1 Definition of National Energy Savings

DOE calculates NES for each year as the difference between energy consumption of the product stock using the average unit energy consumption (UEC) of the stock in the base case (without new standards) or in a case given new standards. 

## ( ) class = AffStock 

## ( ) y class × UEC ( y ) base

, class − UEC ( y ) std

, class 

# ) NES y 

# (

Where:

AffStock(y) class = the stock of products sold after th e year of the standard that is still in operation in year y (affected stock), UEC(y) base class = the unit energy consumption in the base case in year y , and

10-6UEC(y) std. class = the unit energy consumption in the standard case in year y.
The affected stock in year y is given by:

y 

## ( )
= 

## ( ) × Surv 

## ( y

− i 

## ) AffStock y 

# L S i class class class i = stdyr
The quantity of stock in year y is dependent on the number of shipments S(y) class in past years, multiplied by the survival function Surv(v) , which is the fraction of shipments that survive until age v (vintage). Only those shipments made after the year standards are enacted ( stdyr ) are considered in calculating NES, because shipments before that date are unaffected by the standard, and thus will produce no energy savings. The variables UEC base,class and UEC std,class are the average unit energy consumption of products so ld in either the base or standards case. DOE doesn’t assume any increase in usage, and since energy efficiency remains constant in the base
case, UEC base,class remains constant throug hout the forecast period.

Cumulative energy savings are the sum of annual NES during the forecast period, which is 2014–2044.

2044 NES = 

# L NES 

## ( ) y cum y = stdyr
The stock of products is depe ndent on annual shipments and the lifetime of the products.

10.3.2 Inputs to National Energy Savings

The inputs for determining NES are:

• annual energy consumption per unit ( UEC)

• shipments

• product stock ( STOCK V

)

• national annual energy consumption (AEC)

• site- to-source conversion factor ( src_conv)

10.3.2.1 Annual Energy Consumption per Unit

DOE developed per-unit annua l energy consumption as a function of product energy efficiency for each of the considered products (chapter 7, Energy Use Characterization, and chapter 8, Life-Cycle Cost and Payback Peri od Analyses). Because per-unit annual energy consumption is directly dependent on energy efficiency, DOE used the shipments-weighted energy efficiencies for the base and standards cases (presented in section 10.2), along with the annual energy use data presented in chapter 8, to estimate the shipments-weighted average annual per-unit energy consumption under the base and standards cases.

10-7Room Air Conditioners. Using the relationship between EER and annual energy consumption described in chapter 8, DOE calcul ated the per-unit annual energy consumption based on the shipments-weighted average energy efficiencies that correspond to the base case and each considered standard case for each room air conditioner product class. Tables 10.3.1 and 10.3.2 show the values used for shipments to th e residential and commercial sector, respectively.

Table 10.3.1 Room Air Conditioners: Shipments-Weighted Average per-Unit Annual Energy Consumption in 2014, Residential Sector

Product Class Base Case Candidate Standard Level

1 2 3 4 5 Less than 6,000 Btu/h, with Louvers IEER 9.5 10.1 10.6 11.1 11.6 12.0 Annual Energy Use (kWh) 688 654 628 605 583 567 8,000

– 13,999 Btu/h, with Louvers IEER 9.7 10.3 10.8 11.3 11.5 Annual Energy Use (kWh) 688 654 628 605 583 20,000 Btu/h or more, with Louvers IEER 8.5 9.0 9.4 9.8 10.0 Annual Energy Use (kWh) 1118 1062 1024 989 972 8,000

– 13,999 Btu/h, without Louvers IEER 8.4 8.9 9.3 9.8 Annual Energy Use (kWh) 712 679 654 626

10-8Table 10.3.2 Room Air Conditioners: Shipments-Weighted Average per-Unit Annual Energy Consumption in 2014, Commercial Sector
Product

Class Base Case Candidate Standard Level

1 2 3 4 5 Less than 6,000 Btu/h, with Louvers IEER 9.7 10.2 10.7 11.2 11.6 12.0 Annual Energy Use (kWh) 640 609 585 563 543 528 8,000

– 13,999 Btu/h, with Louvers IEER 9.8 10.3 10.8 11.3 11.8
Annual Energy Use (kWh) 1,181 1,121 1,077 1,037 1,022 20,000 Btu/h or more, with Louvers IEER 8.5 9.0 9.4 9.8 10.2

Annual Energy Use (kWh) 3,343 3,176 3,062 2,957 2,908 8,000

– 13,999 Btu/h, without Louvers IEER 9.8 10.3 10.8 11.3

Annual Energy Use (kWh) 1,359 1,296 1,249 1,196

As noted in section 10.2, DOE assumed that forecasted energy efficiencies in the base and standards cases remain constant at 2014 levels. Because per-unit annual energy consumption is a function of energy efficiency, DOE held the values shown in Tables 10.3.1 and 10.3.2 constant throughout the forecast period.

When calculating energy consumption at each considered efficiency level for room air conditioner, DOE applied a rebound effect of 15 percent. When the rebound effect is incorporated, calculated energy savings are lo wer than if no rebound effect were considered

Clothes Dryers. Using the relationship between the EF of clothes dryers and the annual energy consumption described in chapter 8, DOE calculated the per-unit annual energy consumption of clothes dryers. The calculation was based on the shipments-weighted energy efficiencies that correspond to the base case and each standards case for each clothes dryer product class (Table 10.3.3).

10-9Table 10.3.3 Clothes Dryers: Shipments-Weighted Average per-Unit Annual Energy Consumption

Product Class Base Case Candidate Standard Level 1 2 3 4 5 6

Vented Electric Standard IEF (lbs/kWh) 2.96 3.04 3.10 3.33 3.35 3.40 4.52 Annual Energy Use (kWh/yr) 519 504 495 461 457 445 335

Vented Electric Compact 120V IEF (lbs/kWh) 3.00 3.08 3.15 3.37 3.42 3.53 4.69 Annual Energy Use (kWh/yr) 270 263 258 241 237 225 169

Vented Electric Compact 240V IEF (lbs/kWh) 2.79 2.86 2.96 3.06 3.10 3.19 4.34 Annual Energy Use (kWh/yr) 290 283 274 265 260 248 183

Vented Gas IEF (lbs/kWh) 2.63 2.71 2.80 2.97 2.98 3.02 Annual Gas Use (MMBtu/yr) 1.65 1.60 1.53 1.45 1.45 1.45 Annual Elec. Use (kWh/yr) 71 71 71 68 64 52 Vent-less Electric Compact 240V IEF (lbs/kWh) 2.29 2.31 2.37 2.39 2.59 3.54 Annual Energy Use (kWh/yr) 351 347 335 332 307 224 Vent-less Electric Combination Washer/Dryer IEF (lbs/kWh) 1.90 2.15 2.34 2.36 2.42 3.31
Annual Energy Use (kWh/yr) 423 375 344 340 328 239

As noted in section 10.2, DOE assumed that forecasted energy efficiencies in the base and standards cases remain constant at 2014 levels. Because per-unit annual energy consumption is a function of energy efficiency, DOE held the values shown in Table 10.3.3 constant throughout the forecast period.

10.3.2.2 Shipments and Equipment Stock

The methodology for conducting and generating shipments forecasts for each considered product is described in de tail in chapter 9. The product stock in a given year is the number of products shipped from earlier years that survive in the given year. The NIA models keep track of the number of units shipped each year. DOE a ssumes that the products have an increasing probability of retiring as they age. The survival function represents the probability of survival as a function of years since purchase. The sections in chapter 9 that concern with specific products present further details on the survival functions that DOE used in its analyses.

10-1010.3.2.3 National Annual Energy Consumption

The national annual energy consumption (AEC ), which is calculated for the base case only, is the product of the annual energy consum ption per unit and the number of units of each vintage. 

## ( )
= UEC 

## ( ) AEC y × Stock y class base

, class class

Where:

UEC base class = the unit energy consumption in the base case, and Stock(y) class = the stock of equipment in year y.

10.3.2.4 Site-to-Source Energy Conversion Factors

In determining annual NES, DOE initially considered the annual energy consumption at a residence (for electricity, the en ergy in kWh consumed by the household). DOE then calculated primary (source) energy savings from site energy consumption by applying a conversion factor to account for losses associated with the generatio n, transmission, and dist ribution of electricity and natural gas. The site-to-source conversion factor is a multiplicative factor used for converting site energy consumption into primar y or source energy consumption, expressed in quadrillion Btu (quads).

DOE used annual site-to-source conversion factors based on the version of the national energy modeling system (NEMS) that co rresponds to the DOE Energy Information Administration’s (EIA’s) Annual Energy Outlook 2009 ( AEO2009 ). 1 The factors are marginal values, which represent the response of the system to an incremental decrease in consumption. For electricity, the conversion factors change over time in response to projected changes in generation sources ( i.e ., the types of power plant projected to provide electricity). Figure 10.3.1 shows the site-to-source conversion factors fo r electricity between 2005 and 2030 for room air conditioners, which were generated by NEMS base d on the load shape for room air conditioners. NEMS outputs stop in 2030; DOE assumed that conversion factors remain constant at 2030 values throughout the rest of the forecast.

10-110 2000 4000 6000 8000 10000 12000 14000

2005 2010 2015 2020 2025 2030**Btu/kWh**

Residential
Commercial

Figure 10.3.1 Site-to-Source Conversion Factors for Electricity – Room Air Conditioners

Figure 10.3.2 shows the site-to-source conversion factors for electricity between 2005 and 2030 for clothes dryers. NEMS does not have a load shape for clothes dryers, so DOE used the refrigerator load shape as a proxy.

10-12Figure 10.3.2 Site-to-Source Conversion Factors for Electricity – Clothes Dryers

10.4 NET PRESENT VALUE

The following sections provide the defin ition of NPV and inputs to the calculation of NPV.

10.4.1 Definition of Net Present Value

The NPV is the value in the present of a combination of costs and savings. The NPV is described by the equation:

NPV = 

# L ( S ( y )

− C ( y ) 

## ) × DF ( y )

y

Where:

S(y) = value of operating cost savings (inc luding energy, repair, and maintenance costs) in year y , C(y) = value of increased total installed costs (including products a nd installation), and DF(y)= discount factor in each year.

10-13DOE calculated the total annual savings in operating costs by multiplying the number or stock of a given product (by vintage) by its pe r-unit savings on operating costs (also by vintage). DOE calculated the total annual increases in inst alled costs by multiplying the number or stock of the given product (by vintage) by its per-unit total increase in installed costs (also by vintage). The calculation of the annual savings in operating costs and total annual in creases in installed cost is represented by the following equations.

OCS ( y ) = 

# I UOCS ( y ) × AffStock ( y )

TIC ( y ) = 

# I UTIC ( y ) xS ( y )

Where:

OCS = total annual savings in operating co sts each year summed over vintages of the product stock considered, AffStock(y)

, TIC = total annual increase in installed cost each year summed over vintages of the product stock considered, AffStock(y)

, S(y) = stock of product (millions of units) of vintage V that survive in the year for which DOE calculated annual energy consumption, UOCS(y) = annual savings in operating cost per unit in year y , UTIC(y) = annual increase in total in stalled cost per unit in year y , and
y = year in forecast.

DOE calculated a discount factor from the di scount rate and the number of years between the present ( i.e ., the year to which the sum is being discounted) and the year in which the costs and savings occur. The NPV is the sum over time of the discounted net savings.

10.4.2 Inputs to Calculation of Net Present Value

The inputs to calculations of NPV are:

• total installed cost per unit,

• annual savings in operating cost per unit,

• total annual increases in installed cost,

• total annual operating costs,

• discount factor,

• present value of costs, and

• present value of savings.

The increase in total annual installed cost is equal to the annual change in the per-unit total installed cost (difference between base case and standards cases) multiplied by the shipments forecasted for the standards case. As when calculating the NES, DOE did not use base case shipments to calculate total annual installed costs for all of the products.

10-14The total annual savings in operating costs are equal to the change in annual operating costs (difference between base case and standards case) per unit multiplied by the shipments forecasted in the standards case. The annual operating cost includes energy, repair, and maintenance costs, as described in chapter 8, Life-Cycle Cost and Payback Period Analyses.

10.4.2.1 Total Installed Cost per Unit

The per-unit total installed cost of each cons idered product is described in chapter 8 as a function of product energy efficiency. Because the per-unit total annual insta lled cost is directly dependent on energy efficiency, DOE used the shipments-weighted energy efficiencies of the base and standards cases described in section 10.2, in combination with the total installed costs developed in chapter 8, to estimate the ship ments-weighted averag e annual per-unit total installed cost under the base and standards cases.

Room Air Conditioners. DOE based average room air conditioner consumer product costs on average manufacturer costs plus averag e overall markup values. Using the relationship between room air conditioner EER and total installed cost presented in chapter 8, DOE derived the per-unit total installed cost based on the shipments-weighted energy efficiencies that correspond to the base case and each standards case for the representativ e room air conditioner product classes (Table 10.4.1).

Table 10.4.1 Room Air Conditioners: Shipments-Weighted Average per-Unit Total Installed Cost in 2014

Product Class Base Case Candidate Standard Level

1 2 3 4 5 Less than 6,000 Btu/h, with Louvers IEER 9.52 10.10 10.60 11.10 11.60 12.00 Total Installed Cost (2008$) $329 $337 $347 $362 $379 $389 8,000

– 13,999 Btu/h, with Louvers IEER 9.69 10.30 10.80 11.30 11.50 Total Installed Cost (2008$) $489 $503 $517 $543 $602 20,000 Btu/h or more, with Louvers IEER 8.47 9.00 9.40 9.80 10.00 Total Installed Cost (2008$) $860 $884 $913 $951 $996 8,000

– 13,999 Btu/h, without Louvers IEER 8.41 8.90 9.30 9.80 Total Installed Cost (2008$) $557 $562 $569 $590

As noted in section 10.2, DOE assumed that forecasted energy efficiencies in the base and standards cases remain frozen at the levels existing in the effective year of the standard.

10-15Because per-unit total installed costs are a function of energy efficiency, DOE maintained the values shown in Table 10.4.1 cons tant throughout the forecast period.

Clothes Dryers . Total installed cost for clothes dr yers includes costs for both the product and the installation. DOE based average consumer product costs on average manufacturer costs multiplied by average overall markup values. Usin g the relationship between the Energy Factor(EF) for clothes dryers and total installed cost presented in chapter 8, DOE calculated the perunit total installed cost for clothes dryers, based on the shipments-weighted energy efficiencies that correspond to the base case and each standards case (Table 10.4.2).

Table 10.4.2 Clothes Dryers: Shipments-Weighted Average per-Unit Total Installed Costs
Product

Class Base Case Candidate Standard Level 1 2 3 4 5 6

Vented Electric Standard EF (lb/kWh) 2.96 3.04 3.10 3.33 3.35 3.40 4.52

Total Installed Cost ( 2008$ ) 552 571 651 703 705 704 953

Vented Electric Compact 120V EF (lb/kWh) 3.00 3.08 3.15 3.37 3.41 3.53 4.69

Total Installed Cost ( 2008$ ) 553 570 651 702 704 703 934

Vented Electric Compact 240V EF (lb/kWh) 2.79 2.86 2.96 3.06 3.10 3.19 4.34

Total Installed Cost ( 2008$ ) 553 570 651 702 704 703 934

Vented Gas EF (lb/kWh) 2.63 2.71 2.80 2.97 2.98 3.02

Total Installed Cost ( 2008$ ) 661 684 762 903 905 904

Vent-less Electric Compact 240V EF (lb/kWh) 2.29 2.31 2.37 2.39 2.59 3.54

Total Installed Cost ( 2008$ ) 1,240 1,242 1,241 1,260 1,347 1,575

Vent-less Electric Combination Washer/Dryer EF (lb/kWh) 1.90 2.15 2.34 2.36 2.42 3.31

Total Installed Cost ( 2008$ ) 1,582 1,583 1,665 1,667 1,666 1,939

As noted in section 10.2, DOE assumed that forecasted energy efficiencies in the base and standards cases remain cons tant at 2014 levels. Because per- unit total installed cost is a

10-16function of energy efficiency, DOE held the va lues shown in Table 10.4.2 constant throughout the forecast period.

10.4.2.2 Annual Operating Cost Savings per Unit

Per-unit annual operating cost re presents the annual cost fo r energy. DOE determined the savings in per-unit annual energy cost for each product by multiplying the savings in per-unit annual energy consumption by th e appropriate energy price.

Estimates of per-unit annual energy consum ption for the base case and each standards case were presented in section 10.3.2.1. DOE forecasted energy prices based on EIA’s AEO2009

. The energy prices and price trends are described in chapter 8.

10.4.2.3 Total Increases in Annual Installed Cost

The increase in total annual installed cost for any given standards case is the product of the total installed cost increase per unit due to the standard and the number of units of each vintage. This approach accounts for differences in total installed cost from year to year. DOE used the following equation (also presented in sect ion 10.4.1) to determine the increase in total annual installed cost for a given standards case.

TIC ( y ) = 

# I UTIC ( y ) × S ( y )

10.4.2.4 Total Savings in Annual Operating Cost

The total savings in annual operating cost fo r any given standards case is the product of the annual operating cost savings per unit due to the standard and the number of units of each vintage. This approach accounts for differences in savings in annual operating cost from year to year. DOE used the following equation (also presen ted in section 10.4.1) to determine the total savings in annual operating cost for a given standards case.

OCS ( y ) = 

# I UOCS ( y ) × AffStock ( y )

As discussed in chapter 8, the take-back in energy consumption associated with the rebound effect provides increased value to consumers ( e.g ., a more comfortable indoor environment). The net impact is the sum of the ch ange in the cost of owning the product (that is, national consumer expenditures for total installed and operating costs) and the increased value of the enhanced service from the product. DOE beli eves that, if the increased national value (to consumers) produced by the rebound effect coul d be monetized, it would be similar to the monetary value of the foregone energy savings. For this analysis, DOE estimated that this increased value to consumers is equivalent to the monetary value of the energy savings that would have occurred without the rebound effect . The national economic impacts on consumers with or without the rebound effect, as measured by the NPV analysis, therefore are the same.

10-1710.4.2.5 Discount Factors

DOE multiplies monetary values in future years by a discount factor to determine present values. The discount factor ( DF ) is described by the equation:

1 DF = ( y y p ) (1 + r ) _

Where:

r = discount rate,
y = year of the monetary value, and
y P = year in which the present value is being determined.

DOE used both a 3-percent and a 7-percent real discount rate wh en estimating national impacts. These discount rates were applied in accordance with the Office of Management and Budget (OMB)’s guidance to Federal agencies on developing regulatory analyses (OMB Circular A-4, September 17, 2003, and section E., “Iden tifying and Measuring Benefits and Costs,” therein).

DOE defines the present year as 2011, which is when it expects the final rule for this rulemaking to be published.

10.4.2.6 Present Value of Costs

The present value of increased installed costs is the annual increase in installed cost for each year ( i.e ., the difference between the standards cas e and base case), discounted to the present and summed over the period for which DO E is considering the installed products (from the effective date of energy conserva tion standards through 30 years later).

The increase in total installed cost refers to both product and installation costs associated with the higher energy efficiency of products pur chased in the standards case compared to the base case. DOE calculated annual incr eases in installed cost as the di fference in total cost of new products installed each year, multiplied by the shipments in the standards case.

10.4.2.7 Present Value of Savings

The present value of savings in operating co st is the annual savings in operating cost ( i.e.
, the difference between the base case and standard s case), discounted to the present and summed over the period that begins with the effective date of standards and ends when the last installed unit is retired from service.

Savings represent decreases in operating cost (including costs for energy, repair, and maintenance) associated with the higher energy efficiency of products purchased in a standards case compared to the base case. Total annual sa vings in operating cost are the savings per unit multiplied by the number of units of each vintage that survive in a particular year. Because
10-18equipment consumes energy throughout its lifetime, the energy consumption for units installed in the past year includes energy consumed until the unit is retired from service.

10.5 NES AND NPV RESULTS

The NIA model provides estimates of the NE S and NPV that would result from standards at various efficiency levels. The inputs to the NI A model were discussed in sections 10.3.2 (NES Inputs) and 10.4.2 (NPV Inputs). DOE generate d the NES and NPV results using a Microsoft Excel spreadsheet, which is accessible on the Internet ( www.eere.energy.gov/buildings/appliance_standards / ). Details and instructions for using the spreadsheet are provided in appendix 9-A, User Instructions for Shipments and National Energy Savings Spreadsheet Model, in the sec tion titled, “NES and NPV Input Summary.”

Table 10.5.1 summarizes inputs to the NIA model.

Table 10.5.1 Inputs to National Energy Savings and Net Present Value Input Data Description Shipments Annual shipments from shipments model (see chapter 9).
Effective Date of Standard 2014. Energy Efficiency in Base Case Shipments-weighted unit energy consumption (UEC) determined for each year. Energy Efficiency in Standards Cases “Roll-up” scenario assumed for determining shipmentsweighted UEC for each standards case (see section 10.2.). Annual Energy Consumption per Unit Annual weighted-average values are a function of shipmentsweighted UEC. Total Installed Cost per Unit Annual weighted-average values are a function of efficiency level. Energy Cost per Unit Annual weighted-average values are a function of the annual UEC and energy prices (see chapter 8 for energy prices). Repair Cost and Maintenance Cost per Unit Annual values are a function of efficiency level (see chapter 8).

Escalation of Energy Prices Based on EIA AEO2009 forecasts (to 2030) and on extrapolation after 2030 (see chapter 8). Energy Site-to-Source Conversion Factor Conversion, which differs yearly, is generated by DOE/EIA’s NEMS program (a time-series conversion factor that includes electric generation, transmission, and distribution losses).
Discount Rate 3 percent and 7 percent real.
Present Year 2011.

10.5.2 National Energy Savings Results

The following sections provide results of calculating NES for the two products in the standards cases. NES results, which are cumula tive to 2044, are shown as primary energy savings. Because DOE based the inputs to the NIA model on weighted-average values, results

10-19are discrete point values, rather than a distri bution of values as produced by the LCC and PBP analyses. DOE reports both undiscounted and disc ounted values of energy savings. Discounted energy savings represent a policy perspective where energy savings farther in the future are less significant than energy savings closer to the present

10.5.2.1 Room Air Conditioners

Tables 10.5.2 through 10.5.4 show the NES results for the CSLs analyzed for each room air conditioner product class group. See secti on 10.1 for description of the product classes contained in each group.

Table 10.5.2 Room Air Conditioners: Cumulative National Energy Savings in Quads

Product Class Candidate Standard Level 1 2 3 4 5 Group 1 - based on Less than 6,000 Btu/h, with Louvers 0.15 0.26 0.37 0.46 0.52

Group 2 - based on 8,000–13,999 Btu/h, with Louvers 0.16 0.29 0.49 0.64

Group 3 - based on 20,000 Btu/h or more, with Louvers 0.01 0.02 0.04 0.05

Group 4 - based on 8,000–13,999 Btu/h, with Louvers 0.02 0.03 0.07

Table 10.5.3 Room Air Conditioners: Cumulative Na tional Energy Savings in Quads, Discounted at 3 Percent

Product Class Candidate Standard Level 1 2 3 4 5 Group 1 - based on Less than 6,000 Btu/h, with Louvers 0.09 0.15 0.21 0.27 0.30

Group 2 - based on 8,000–13,999 Btu/h, with Louvers 0.09 0.17 0.29 0.37

Group 3 - based on 20,000 Btu/h or more, with Louvers 0.01 0.01 0.02 0.03

Group 4 - based on 8,000–13,999 Btu/h, with Louvers 0.01 0.02 0.04

10-20Table 10.5.4 Room Air Conditioners: Cumulative Na tional Energy Savings in Quads, Discounted at 7 Percent

Product Class Candidate Standard Level 1 2 3 4 5 Group 1 - based on Less than 6,000 Btu/h, with Louvers 0.05 0.08 0.11 0.14 0.16

Group 2 - based on 8,000–13,999 Btu/h, with Louvers 0.05 0.09 0.15 0.20

Group 3 - based on 20,000 Btu/h or more, with Louvers 0.00 0.01 0.01 0.01

Group 4 - based on 8,000–13,999 Btu/h, with Louvers 0.01 0.01 0.02

10.5.2.2 Clothes Dryers

Tables 10.5.5 through 10.5.7 show the results of calculating NES for the CSLs analyzed for clothes dryers.

Table 10.5.5 Clothes Dryers: Cumulative Nati onal Energy Savings in Quads

Product Class Candidate Standard Level 1 2 3 4 5 6 Vented Electric Standard 0.08 0.20 0.77 0.84 1.04 2.45 Vented Electric Compact 120V 0.00 0.00 0.00 0.00 0.00 0.00 Vented Electric Compact 240V 0.00 0.00 0.00 0.00 0.01 0.01 Vented Gas 0.01 0.05 0.12 0.14 0.19 Vent-less Electric Compact 240V 0.00 0.00 0.00 0.01 0.01 Vent-less Electric Combination Washer/Dryer 0.01 0.01 0.01 0.01 0.02

Table 10.5.6 Clothes Dryers: Cumulative National Energy Savings in Quads, Discounted at 3 Percent

Product Class Candidate Standard Level 1 2 3 4 5 6 Vented Electric Standard 0.04 0.11 0.42 0.46 0.57 1.34 Vented Electric Compact 120V 0.00 0.00 0.00 0.00 0.00 0.00 Vented Electric Compact 240V 0.00 0.00 0.00 0.00 0.00 0.01 Vented Gas 0.01 0.02 0.06 0.07 0.10 Vent-less Electric Compact 240V 0.00 0.00 0.00 0.01 0.01 Vent-less Electric Combination Washer/Dryer 0.00 0.00 0.00 0.01 0.01

10-21Table 10.5.7 Clothes Dryers: Cumulative National Energy Savings in Quads, Discounted at 7 Percent

Product Class Candidate Standard Level 1 2 3 4 5 6 Vented Electric Standard 0.02 0.06 0.21 0.23 0.28 0.67 Vented Electric Compact 120V 0.00 0.00 0.00 0.00 0.00 0.00 Vented Electric Compact 240V 0.00 0.00 0.00 0.00 0.00 0.00 Vented Gas 0.00 0.01 0.03 0.04 0.05 Vent-less Electric Compact 240V 0.00 0.00 0.00 0.00 0.00 Vent-less Electric Combination Washer/Dryer 0.00 0.00 0.00 0.00 0.01

10.5.3 Annual Costs and Savings

Figure 10.5.1 illustrates the basic inputs to cal culations of the NPV fo r the example of the non-discounted annual increases in installed cost and annual saving s in operating cost for room air conditioner product class 3 under CSL 1. The fi gure also shows net savings, which is the difference between the savings and costs for each year. The annual product cost is the sum of the increase in the total installed cost for products purchased each year during the forecast period. The annual savings in operating cost is the sa vings for products operating in each year. The NPV is the difference between the cumulative annua l discounted savings a nd the cumulative annual discounted costs. Figures similar to the one pres ented below could be crea ted from analysis data for each of the considered products’ standard cases.

10-22-$0.04 -$0.02 $0.00 $0.02 $0.04 $0.06 $0.08 $0.10 $0.12 $0.14 $0.16

2014 2024 2034 2044Billions of 2008 Dollars

Commercial Operating Cost Savings Commercial Equipment Cost
Residential Operating Cost Saving

Residential E q ui p ment Cost

Figure 10.5.2 Non-Discounted Changes in Annual Installed Cost and Operating Cost for Room Air Conditioner Product Class Group 1 at CSL 1

10.5.4 Consumer Net Present Value Results

The following sections provide results from calculations of consumer NPV that would result from each of the CSLs considered for th e product classes of r oom air conditioners and clothes dryers. Results, which are cumulative, are shown as the discounted value of the net savings in dollar terms. Because DOE based the inputs to the NIA model on weighted-average values, results are discrete point values, rather than a distribution of values as produced by the LCC and PBP analyses.

The present value of total increased installed costs is the total annual increase in installed cost ( i.e ., the difference between the standards case and base case), discounted to the present and summed over the period for which DOE evaluates th e impact of energy conservation standards. Savings are decreases in operating costs associated with the higher energy efficiency of products purchased in the standards cases compared to th e base case. Total savings in operating cost are the savings per unit multiplied by the number of un its of each vintage (year of manufacture) that survive in a particular year. For units purchased through the final year (2043), the operating cost includes energy consumed until the last unit is retired from service.

10-2310.5.4.1 Room Air Conditioners

Tables 10.5.8 through 10.5.9 show the re sults of calculating the NPV for the CSLs analyzed for each room air conditioner product cl ass group. See section 10.1 for description of the product classes contained in each group. A negative NPV indicates that the costs of a standard at a given efficiency level exceed the savings.

Table 10.5.8 Room Air Conditioners: Cumulative Consumer Net Present Value, Discounted at 3 Percent

Product Class Candidate Standard Level 1 2 3 4 5 Billion 2008$ Group 1 - based on Less than 6,000 Btu/h, with Louvers 1.54 2.52 3.09 3.47 3.83

Group 2 - based on 8,000­ 13,999 Btu/h, with Louvers 1.43 2.37 2.60 -0.68

Group 3 - based on 20,000 Btu/h or more, with Louvers 0.10 0.16 0.21 0.09

Group 4 - based on 8,000­ 13,999 Btu/h, with Louvers 0.22 -0.78 -0.54

Table 10.5.9 Room Air Conditioners: Cumulative Consumer Net Present Value, Discounted at 7 Percent

Product Class Candidate Standard Level 1 2 3 4 5 Billion 2008$ Group 1 - based on Less than 6,000 Btu/h, with Louvers 0.68 1.08 1.27 1.35 1.46

Group 2 - based on 8,000­ 13,999 Btu/h, with Louvers 0.59 0.95 0.78 -1.37

Group 3 - based on 20,000 Btu/h or more, with Louvers 0.04 0.06 0.06 -0.01

Group 4 - based on 8,000­ 13,999 Btu/h, with Louvers 0.10 -0.38 -0.30

10.5.4.2 Clothes Dryers

Tables 10.5.10 and 10.5.11 show the consumer NPV results for the CSLs analyzed for each clothes dryer product class. A negative NPV indicates that the costs of a standard at a given efficiency level exceed the savings.

10-24Table 10.5.10 Clothes Dryers: Cumulative Consumer Net Present Value, Discounted at 3 Percent

Product Class Candidate Standard Level 1 2 3 4 5 6 Billion 2008$ Vented Electric Standard 0.21 -6.83 -6.40 -5.76 -3.09 -10.66 Vented Electric Compact 120V 0.00 -0.02 -0.03 -0.03 -0.02 -0.05 Vented Electric Compact 240V 0.00 -0.07 -0.11 -0.10 -0.07 -0.20 Vented Gas -0.12 -1.85 -5.80 -5.62 -4.91 Vent-less Electric Compact 240V 0.00 0.02 0.01 0.08 -0.10 Vent-less Electric Combination Washer/Dryer 0.06 0.04 0.04 0.06 -0.05

Table 10.5.11 Clothes Dryers: Cumulative Consumer Net Present Value, Discounted at 7 Percent

Product Class Candidate Standard Level 1 2 3 4 5 6 Billion 2008$ Vented Electric Standard -0.03 -4.26 -5.06 -4.83 -3.69 -10.60 Vented Electric Compact 120V 0.00 -0.01 -0.02 -0.02 -0.02 -0.03 Vented Electric Compact 240V 0.00 -0.04 -0.07 -0.06 -0.05 -0.14 Vented Gas -0.09 -1.13 -3.50 -3.43 -3.13 Vent-less Electric Compact 240V 0.00 0.01 0.00 0.02 -0.08 Vent-less Electric Combination Washer/Dryer 0.03 0.00 0.01 0.01 -0.06

10.6 IMPACT OF STANDARDS ON NATURAL GAS PRICES AND ASSOCIATED NATIONAL BENEFITS

The NIA described in the preceding sections examines the potential impacts of alternative standard levels on consum ers of the products being considered . To evaluate potentially important indirect effects of energy conservation standards on energy users in general, DOE analyzed the potential impact on natural gas prices resulting from amended standards on clothes dryers and room air conditioners, and the associated benefits for all natural gas consumers in all sectors of the economy.

For this analysis, DOE considered two scenarios for standards: one with efficiency levels at CSL 1 for each product class, and the other with max-tech efficiency levels. Tables 9.6.1 and 9.6.2 in chapter 9 show the energy efficiency levels corresponding to CSL 1 and max-tech (which is the highest CSL for each product class). The scenarios bracket the range of impacts that could result from amended standards on clothes dryers and room air conditioners.

10.6.1 Impact on Natural Gas Prices

Figure 10.6.1 shows the annual change in U. S. natural gas consumption, relative to the base case with no new standards, for each consid ered scenario. Because the standards decrease

10-25electricity demand, and a significant percentage of electricity is generated using natural gas, the standards reduce natural gas consumption in the utility sector as well as the residential sector.

**Change in Gas Consumption**

-0.060 -0.050 -0.040 -0.030 -0.020 -0.010 0.000 0.010 0.020

2015 2018 2021 2024 2027 2030**quads**

EL1

Max Tech

Figure 10.6.1 Change in U.S. Natural Gas Consumption Associated with Scenarios for Room Air Conditioner and Clothes Dryer Standards

As described in chapter 13, Utility Impact Analysis, using NEMS-BT to analyze impacts of relatively small annual changes in energy consumption typically involves using higherdecrement runs to isolate the impacts of the standards from numerical noise. After generating results using higher decrements to gas consumption, DOE utilized a regressed interpolation toward the origin to derive the price effects associated with the energy savings resulting from each considered scenario.

Figure 10.6.2 shows the annual change in av erage U.S. wellhead price for natural gas, relative to the base case, for each considered standards scenario. The price reduction averages 0.1 cents per MMBtu (in 2008$) under CSL 1 a nd 1.2 cents per MMBtu (in 2008$) under the max-tech scenario.

10-26**Change in Wellhead Prices**

-0.030 -0.025 -0.020 -0.015 -0.010 -0.005 0.000 0.005 0.010 0.015

2015 2018 2021 2024 2027 2030**2007$/MMBtu**

EL1

Max Tech

Figure 10.6.2 Effects of Standards Scenarios on Average Wellhead Natural Gas Prices

10.6.2 Impact of Changes in Natu ral Gas Price on Gas Users

Although NEMS indicates that amended sta ndards for clothes dryers and room air conditioners would reduce natural gas prices by only a small amount, the associated economywide savings in natural gas expenditures during the forecast period are substantial. DOE calculated the nominal savings in total natural gas expenditures in each year by multiplying the annual change in the average-user price for na tural gas by the total annual U.S. natural gas consumption forecast by NEMS. a The amended standards would continue to reduce demand for natural gas after 2030 (which is the last year in the NEMS forecast). The estimate for 2031–2045 (the period used to estimate the NPV of the nati onal consumer benefits from amended standards) applies the average gas price reduction in 2015–203 0 to estimated total annual gas consumption in 2031–2045. b DOE then discounted the stream of re duced expenditures to calculate a NPV.

Table 10.6.3 shows the calculated NPV of the economy-wide savings in natural gas expenditures for each considered scenario at 3-pe rcent and 7-percent discount rates. The need to extrapolate price effects and gas consumption be yond 2030 suggests that one should interpret the results as a rough indication of the bene fits to natural ga s users post-2030.

a The average user includes electric utilities. Presumably the d ecrease in expenditures of natural gas that they experience would largely be passed on to electricity consumers.

b The estimation of gas consumption after 2030 uses the average annual growth rate in 2026–2030 from the AEO2009 reference projection. 10-27Table 10.6.1 Cumulative NPV of the Economy- Wide Savings in Natural Gas Expenditures Due to the Projected Decline in Natural Gas Prices Resulting from Amended Standards for Room Air Conditioners and Clothes Dryers CSL 1 (billion $2008) Max-Tech (billion $2008) 2013–2030 3 percent 0.297 2.51 7 percent 0.157 1.35 2013–2045 3 percent 0.482 6.58 7 percent 0.224 3.24

In the short run, DOE’s preliminary analysis indicates that consumer savings from lower natural gas prices would be offset by declines in gas producer revenue. In the long run, the analyses indicate that the reduction in natural gas prices mainly results from changes in gas extraction costs. Since there is only a limited supply of low-cost, c onventional natural gas sources, natural gas extraction costs rise over time as these low-cost sources are depleted. Reduced gas demand puts downward pressure on extraction costs and prices by delaying the depletion of the low-cost reserves and the shift toward higher-cost sources.

DOE recognizes that there is uncertainty a bout the magnitude, distribution, and timing of the costs and benefits within the economy. While some benefit to gas users seems likely, DOE is uncertain of the effects of the drop in natural gas price on producers and distributors of natural gas. While their revenues and costs are expected to drop, it is uncertain whether they will drop in proportion over time. Gas producers will likely expe rience some revenue loss due to both the price changes and the reduction in gas sales that they will experience. However, DOE’s previous preliminary analysis suggests that a large part of the long-term decreases in wellhead prices forecasted by NEMS represents both a benefit to consumers of natural gas and a net benefit to society.

10-28REFERENCES

1. Energy Information Administration, Updated Annual Energy Outlook 2009 Reference Case Service Report , 2009. Washington, DC. Report No. DOE/EIA-0383(2009).

< http://www.eia.doe.gov/oiaf/aeo / >

2. Ryan Wiser, Mark Bolinger, and Matt St. Clair, Easing the Natural Gas Crisis: Reducing Natural Gas Prices through Increased Deploy ment of Renewable Energy and Energy Efficiency, January, 2005. Lawrence Berkeley National Laboratory. Report No. 56756.

3. Natural Gas, Fuel Diversity and North American Energy markets, September 2003. Energy Modeling Forum, Stanford University. Report No. EMF Report 20.

4. Balancing Natural Gas Policy - Fueling th e Demands of a Growing Economy, Vol. I Summary of Findings and Recommendations, September 25, 2003. National Petroleum Council.

5. National Commission on Energy Policy, Increasing U.S. Natural Gas Supplies: A Discussion Paper and Recommendations from the National Commission on Energy Policy, October, 2003. < www.energycommission.org >

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