### 8

- i CHAPTER 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

TABLE OF CONTENTS

8.1 INTRODUCTION

................................ ................................ ................................ ........... 8

- 1

8.1.1 General Approach for Life

- Cycle Cost and Payback Period Analyses

........................... 8

- 1

8.1.2 Overview of Life

- Cycle Cost and Payback Period Analyses Inputs

............................... 8

- 2

8.1.3 Use of Residential Energy Consumption Survey (RECS) in LCC and PBP Analysis

................................ ................................ ................................ ............................ 8

- 7

8.1.4 Co mmercial Building Analysis

................................ ................................ ........................ 8

- 9

8.2 LIFE

- CYCLE COST ANALYSIS INPUTS

................................ ................................ .. 8

- 11

8.2.1 Definition

................................ ................................ ................................ ....................... 8

- 11

8.2.2 Total In stalled Cost Inputs

................................ ................................ ............................. 8

- 11

8.2.2.1 Forecasting Future Product Prices

................................ ............................... 8

- 12

8.2.2.2 Baseline Manufacturer Selling Price

................................ ........................... 8

- 13

8.2.2.3 Standard

- Compliant Manufacturer Selling Price Increases

......................... 8

- 16

8.2.2.4 Transportation Cost

................................ ................................ ...................... 8

- 18

8.2.2.5 Overall Markup

................................ ................................ ............................ 8

- 20

8.2.2.6 Installation Cost

................................ ................................ ........................... 8

- 21

8.2. 2.7 Weighted

- Average Total Installed Cost

................................ ....................... 8

- 27

8.2.3 Operating Cost Inputs

................................ ................................ ................................ .... 8

- 38

8.2.3.1 Electricity Price Analysis

................................ ................................ ............. 8

- 39

8.2.3.2 Electricity Price Trend

................................ ................................ ................. 8

- 45

8.2.3.3 Repair Cost

................................ ................................ ................................ ... 8

- 51

8.2.3.4 Maintenance Cost

................................ ................................ ......................... 8

- 56

8.2.3.5 Lifetime

................................ ................................ ................................ ........ 8

- 59

8.2.3.6 Discou nt Rate

................................ ................................ ............................... 8

- 68

8.2.3.7 Effective Date of Standard

................................ ................................ ........... 8

- 74

8.2.3.8 Base Case Distribution of Efficiency Levels

................................ ............... 8

- 74

8.3 PAYBACK PERIOD INPUT S

................................ ................................ ...................... 8

- 80

8.3. 1 Definition

................................ ................................ ................................ ....................... 8

- 80

8.3.2 Inputs

................................ ................................ ................................ .............................. 8

- 81

8.4 LCC AND PBP RESULTS

................................ ................................ ............................ 8

- 82

8.4.1 Split

- System Air Conditioners

................................ ................................ ....................... 8

- 82

8.4.1.1 Mean LCC Savings for Split

- System Air Conditioners by Region

............. 8

- 83

8.4.1.2 Payback Period Results for Split

- System Air Conditioners by Region

....... 8

- 86

8.4.1.3 Detailed Regional Results for Split

- System Air Conditioners

.................... 8

- 89

8.4.2 Split

- Sy stem Heat Pumps

................................ ................................ .............................. 8

- 96

8.4.2.1 Mean LCC Savings for Split

- System Heat Pumps by Region

..................... 8

- 96

8.4.2.2 Payback Period Results for Split

- System Heat Pumps by Region

.............. 8

- 98

8.4.2.3 Detailed Regional Results for Split

- System Heat Pumps

.......................... 8

- 100

8.4.3 Single

- Package Air C onditioners

................................ ................................ ................. 8

- 104

8.4.3.1 Mean LCC Savings for Single

- Package Air Conditioners for the

Nation 8

- 105

### 8

- ii 8.4.3.2 Payback Period Results for Single

- Package Air Conditioners for the

Nation 8

- 106

8.4.3.3 Detailed Results for Single

- Package Air Conditioners

.............................. 8

- 108

8.4.4 Single

- Package Heat Pumps

................................ ................................ ........................ 8

- 108

8.4.4.1 Mean LCC Savings for Single Package Heat Pumps for the Nation

......... 8

- 108

8.4.4.2 Payback Period Results for Single

- Package Heat Pumps

.......................... 8

- 110

8.4.4.3 Detailed Results for Single

- Package Heat Pumps

................................ ..... 8

- 112

8.4.5 Small

- Diameter High

- Velocity Pro ducts

................................ ................................ ..... 8

- 112

8.4.5.1 Mean LCC Savings for Small

- Diameter High

- Velocity Products by Region 8

- 112

8.4.5.2 Payback Period Results for Small

- Diameter High

- Velocity Products by Region

................................ ................................ ................................ ... 8

- 114

8.4.5.3 Detailed Regional Results for Small

- Diameter High

- Velocity Products

.. 8

- 115

8.4.6 Non

- Weatherized Gas Furnace

................................ ................................ .................... 8

- 117

8.4.7 Manufactured Home Gas Furnace

................................ ................................ ............... 8

- 122

8.4.8 Oil

- Fired Furnace

................................ ................................ ................................ ......... 8

- 127

8.5 OFF MODE AND STANDBY POWER CONSUMPTION

................................ ....... 8

- 130

8.5.1 Central Air Conditioner and Heat Pump

................................ ................................ ...... 8

- 130

8.5.1.1 Product Cost

................................ ................................ ............................... 8

- 132

8.5.1.2 Installation Costs

................................ ................................ ........................ 8

- 132

8.5.1.3 Energy Prices

................................ ................................ ............................. 8

- 133

8.5.1.4 Energy Price Trends

................................ ................................ ................... 8

- 133

8.5.1.5 Repair and Maintenance Costs

................................ ................................ ... 8

- 133

8.5.1.6 Off Mode Measure Lifetime

................................ ................................ ...... 8

- 133

8.5.1.7 Discount Rate

................................ ................................ ............................. 8

- 133

8.5.1.8 Compliance Date

................................ ................................ ........................ 8

- 134

8.5.1.9 Off Mode Base Case

................................ ................................ .................. 8

- 134

8. 5.1.10 Off Mode LCC Results for Central Air Conditioners and Heat Pumps

.... 8

- 134

8.5.2 Furnaces

................................ ................................ ................................ ....................... 8

- 137

LIST OF TABLES

Table 8.1.1 Summary of Inputs and Key Assumptions Used in the LCC and PBP Analyses

................................ ................................ ................................ ............... 8

- 5 Table 8.2.1 Representative CAC and HP Products Evaluated for the Life

- Cycle Cost and Payback Analyses

................................ ................................ .............................. 8

- 14 Table 8.2.2 Baseline Manufacturer Selling Price per Unit (CACs and HPs)

............................ 8

- 14 Table 8.2.3 Baseline Manufacturer Production Cost per Unit (Furnaces)

................................ . 8

- 16

Table 8.2.4 SEER Standard

- Compliant Manufacturer Selling Prices per Unit, Split

System CAC and HP Products Including Transportation

................................ .. 8

- 17

Table 8.2.5 SEER Standard

- Compliant Manufacturer Selling Prices per Unit, Single

Package and Niche CAC and HP Products, Including Transportation

.............. 8

- 17

Table 8.2.6 Standard

- Level Manufacturer Cost Increases (Non

- Weatherized Gas Furnace)

Standard

- Level Manufacturer Cost Increases (Non

- Wea therized Gas Furnace)

................................ ................................ ................................ ............. 8

- 18

### 8

- iii Table 8.2.7 Standard

- Level Manufacturer Cost Increases (Manufactured Home Gas Furnace)

................................ ................................ ................................ ............. 8

- 18

Table 8.2.8 Standard

- Level Manufacturer Cost Increases (Oil

- Fired Furnace)

........................ 8

- 18 Table 8.2.9 Transportation Costs of SEER Standard

- Compliant Products, Split

- System

CAC and HP Products

................................ ................................ ....................... 8

- 19 Table 8.2.10 Shipping Costs of SEER Standard

- Compliant Products, Split

- System Products, Single

- package, and Niche CAC and HP Products

........................... 8

- 20 Table 8.2.11 Shipping Costs for Furnaces

................................ ................................ ................. 8

- 20 Table 8.2.12 Overall National Average Baseline Markup Factors

................................ ............ 8

- 21 Table 8.2.13 Overall National Average Incremental Markup Factors

................................ ....... 8

- 21

Table 8.2.14 Installation Costs for Baseline CAC and HP Products (SEER 13)

....................... 8

- 22 Table 8.2.15 Installation Cost Indices (National Average Value = 100.0)

................................ 8

- 23

Table 8.2.16 Additional Installation Costs for Non

- Weatherized Gas Furnaces in Replacement Installations

................................ ................................ .................. 8

- 24

Table 8.2.17 Additional Installation Costs for Non

- Weatherized Gas Furnaces in New Construction Applications

................................ ................................ ................. 8

- 25 Table 8.2.18 Fraction of Shipments in New Construction and Replacement Applications

...... 8

- 25 Table 8.2.19 Installation Costs by Region and Construction Type

- Non

- Weatherized Gas

Furnaces

................................ ................................ ................................ ............. 8

- 26 Table 8.2.20 Installation Costs by Region and Construction Type

- Manufact ured Home

Gas Furnaces

................................ ................................ ................................ ...... 8

- 26 Table 8.2.21 Installation Costs by Region and Construction Type

- Oil

- Fired Furnaces

.......... 8

- 27 Table 8.2.22 Costs and Markups for Determination of Weighted

- Average Total Installed

Costs for a New 3

- Ton Split

- System A/C Blower

- Coil Unit (Effi ciency Level 5: SEER 15)

................................ ................................ ............................. 8

- 28 Table 8.2.23 Shipments

- Weighted Product Price, Installation Cost, and Total Installed

Costs for Split

- System CAC (Coil

- Only) *

................................ ........................ 8

- 29 Table 8.2.24 Shipments

- Weighted Product Price, Installation Cost, and Total Installed

Costs for Split

- System CAC (Blower

- Coil) *

................................ .................... 8

- 30 Table 8.2.25 Shipments

- Weighted Product Price, Installation Cost, and Total Installed

Costs for Split

- System HP *

................................ ................................ ............... 8

- 32 Table 8.2.26 Shipments

- Weighted Product Price, Installation Cost, and Total Installed

Costs for Single Package A/C *

................................ ................................ .......... 8

- 34 Table 8.2.27 Manufacturer Shipments

- Weighted Selling Price (Including Transportation), Product Price, Installation Cost, and Total Installed Costs for Single

Pa ckage HP *

................................ ................................ ................................ ...... 8

- 35 Table 8.2.28 Manufacturer Shipments

- Weighted Selling Price (Including Transportation), Product Price, Installation C ost, and Total Installed Costs for Small

Diameter High

- Velocity CAC *

................................ ................................ ......... 8

- 36

Table 8.2.29 Total Installed Cost for Non

- Weatherized Gas Furnaces by Region

.................... 8

- 37 Table 8.2.30 Total Installed Cost for Manufactured Home Gas Furnaces by Region

............... 8

- 37

Table 8.2.31 Total Installed Cost for Oil

- Fired Furnaces

................................ .......................... 8

- 38 Table 8.2.32 Regional Averages of the Annual Average Prices and January and July Marginal Prices

................................ ................................ ................................ .. 8

- 41

### 8

- iv Table 8.2.33 Effective Marginal Price by Region for the Commercial Building Sample (¢/kWh).

................................ ................................ ................................ ............. 8

- 42 Table 8.2.34 Average Electricity Prices in 2009

................................ ................................ ....... 8

- 43 Table 8.2.35 Average Residential Natural Gas P rices in 2009

................................ .................. 8

- 44 Table 8.2.36 Average Residential LPG Prices in 2008

................................ ............................. 8

- 44 Table 8.2.37 Average Residential Fuel Oil Prices in 2008

................................ ........................ 8

- 45 Table 8.2.38 Split

- System Central Air Conditioner and Heat Pump Basic Average Annualized Repair Costs by Efficiency Level

................................ ................... 8

- 53 Table 8.2.39 Single

- Package and Niche Central Air Conditioner and Heat Pump Basic Average Annualized Repair Costs by Efficiency Level

................................ .... 8

- 53 Table 8.2.40 Table Central Air Conditioner and Heat Pump Shipments

- Weighted Average Annualized Repair Costs by Efficiency Level and Region

................. 8

- 54 Table 8.2.41 Annualized Repair Cost for Furnaces

................................ ................................ ... 8

- 56 Table 8.2.42 Shipments

- Weighted Central Air Conditioner and Heat Pump Basic Average Annual Maintenance Costs

................................ ................................ .. 8

- 58

Table 8.2.43 Annualized Maintenance Cost for Furnaces

................................ ......................... 8

- 59 Table 8.2.44 Central Air Conditioners: Comparison of RECS and AHS with M odeled

Stock

................................ ................................ ................................ .................. 8

- 63 Table 8.2.45 Heat Pumps: Comparison of RECS and AHS Stock to Stock Calculated

from a Weibull Survival Function

................................ ................................ ..... 8

- 66 Table 8.2.46 Lifetime parameter for Furnaces

................................ ................................ ........... 8

- 68 Table 8.2.47 Types of Household Debt and Equity by Percentage Shares

................................ 8

- 69

Table 8.2. 48 Average Nominal Interest Rates for Household Debt

................................ .......... 8

- 69 Table 8.2.49 Average Real Effective Interest Rates for Household Debt

................................ . 8

- 70 Table 8.2.50 Average Nominal and Real Interest Rates for Household Equity

........................ 8

- 70 Table 8.2.51 Average Interest on Household Debt and Equity

................................ ................. 8

- 71 Table 8.2.52 Data Used to Calculate Real Effective Mortgage Rates

................................ ....... 8

- 72

Table 8.2.53 CAC and HP Efficien cy Distributions Estimated for 2007

................................ .. 8

- 76 Table 8.2.54 CAC and HP Average SEER Values for 2006 through 2016

............................... 8

- 77 Table 8.2.55 Central Air Conditioners and Heat Pumps: 2016 Market Distribution of Efficiency Levels by Product Class

................................ ................................ ... 8

- 78

Table 8.2.56 Non

- Weatherized Gas Furnace Fraction of Condensing Unit Sales for 2006 through 2016

................................ ................................ ................................ ...... 8

- 79 Table 8.2.57 Furnaces: 2016 Market Distribution of Efficiency Levels by Product Class

....... 8

- 80 Table 8.2.58 Basecase Distribution of Furnaces by Region (2016)

................................ .......... 8

- 80 Table 8.4.1 Mean LCC Savings for Spl it

- System Air Conditioners (Coil

- Only) by Region by Efficiency Level (SEER Value)

................................ ................................ .... 8

- 83 Table 8.4.2 Mean LCC Savings for Split

- System Air Conditioners (Blower

- Coil) by Region by Efficiency Level (SEER Value)

................................ ....................... 8

- 84 Table 8.4.3 Median Payback Period for Sp lit

- System Air Conditioners (Coil

- Only) by Region

................................ ................................ ................................ ................ 8

- 87 Table 8.4.4 Median Payback Period for Split

- System Air Conditioners (Blower

- Coil) by Region

................................ ................................ ................................ ................ 8

- 87 Table 8.4.5 Rebuttable Payback Period for Split

- System Air Conditioners

.............................. 8

- 88

### 8

- v Table 8.4.6 National LCC and PBP Results for Split

- System Air Conditioners (Coil

Only) by Efficiency Level (SEER Value): Nation

................................ ............ 8

- 90 Table 8.4.7 LCC and PBP Results for Split

- System Air Conditioners (Blower

- Coil) by Efficiency Level (SEER Value): Nation

................................ ............................ 8

- 90 Table 8.4.8 LCC and PBP Results for Split

- System Air Conditioners (Coil

- Only) by Efficiency Level (SEER Value): Hot

- Humid Region

................................ ........ 8

- 91 Table 8.4.9 LCC and PBP Results for Split

- System Air Conditioners (Blower

- Coil) by Efficiency Level (SEER Value): Hot

- Humid Region

................................ ........ 8

- 92 Table 8.4.10 LCC and PBP Results for Split

- System Air Conditioners (Coil

- Only) by Efficiency Level (SEER Value): Hot

- Dry Region

................................ ............. 8

- 93 Table 8.4.11 LCC and PBP Results for Split

- System Air Conditioners (Blower

- Coil) by Efficiency Level (SEER Value): Hot

- Dry Region

................................ ............. 8

- 94 Table 8.4.12 LCC and PBP Results for Split

- System Air Conditioners (Coil

- Only) by Efficiency Level (SEER Value): Rest of Country

................................ ............. 8

- 95 Table 8.4.13 LCC and PBP Results for Split

- System Air Conditioners (Blower

- Coil) by Efficiency Level (SEER Value): Rest of Cou ntry

................................ ............. 8

- 96 Table 8.4.14 Mean LCC Savings for Split

- System Heat Pumps by Region by Efficiency Level (SEER Value and HSPF Value)

................................ ............................... 8

- 97 Table 8.4.15 Median Payback Period for Split

- System Heat Pumps by Region

....................... 8

- 99 Table 8.4.16 Rebuttable Payback Period for Split

- System Heat Pumps

................................ ... 8

- 99 Table 8.4.17 LCC and PBP Results for Split

- System Heat Pumps by Efficiency Level (SEER Value): Nation

................................ ................................ ...................... 8

- 101 Table 8.4.18 LCC and PBP Results for Split

- System Heat Pumps by Efficiency Level (SEER Value): Hot

- Humid Region

................................ ................................ . 8

- 102

Table 8. 4.19 LCC and PBP Results for Split

- System Heat Pumps by Efficiency Level (SEER Value): Hot

- Dry Region

................................ ................................ ...... 8

- 103

Table 8.4.20 LCC and PBP Results for Split

- System Heat Pumps by Efficiency Level (SEER Value): Rest of Country

................................ ................................ ....... 8

- 104 Table 8.4.21 Mean LCC Savings for Sing le

- Package Air Conditioners for the Nation by Efficiency Level (SEER Value)

................................ ................................ ....... 8

- 105 Table 8.4.22 Median Payback Period for Single Package Air Conditioners

........................... 8

- 107 Table 8.4.23 Rebuttable Payback Period for Single Package Air Conditioners

...................... 8

- 107

Table 8. 4.24 LCC and PBP Results for Single

- Package Air Conditioners by Efficiency Level (SEER Value): Nation

................................ ................................ ........... 8

- 108

Table 8.4.25 Mean LCC Sa vings for Single

- Package Heat Pumps for the Nation by Efficiency Level (SEER Value)

................................ ................................ ....... 8

- 109 Table 8.4.26 Median Payback Period for Sin gle

- Package Heat Pumps

................................ .. 8

- 111 Table 8.4.27 Rebuttable Payback Period for Single

- Package Heat Pumps

............................. 8

- 111 Table 8.4.28 LCC and PBP Results for Single

- Package Heat Pumps by Efficiency Level (SEER Value): Nation

................................ ................................ ...................... 8

- 112 Table 8.4.29 Mean LCC Savings for SDHV by Region by Efficiency Level (SEER Value)

................................ ................................ ................................ ............... 8

- 113 Table 8.4.30 Median Paybac k Period for SDHVs by Region

................................ .................. 8

- 114 Table 8.4.31 Rebuttable Payback Period for SDHVs

................................ .............................. 8

- 114

### 8

- vi Table 8.4.32 LCC and PBP Results for SDHVs by Efficiency Level (SEER Value):

Nation

................................ ................................ ................................ ............... 8

- 115 Table 8.4.33 LCC and PBP Results for SDHVs by Efficiency Level (SEER Value): Hot

Humid Region

................................ ................................ ................................ .. 8

- 116 Table 8.4.34 LCC and PBP Results for SDHVs by Efficiency Level (SEER Value): Hot

Dry Region

................................ ................................ ................................ ....... 8

- 116

Table 8.4.35 LCC and PBP Results for SDHVs by Efficiency Level (SEER Value): Rest of Country

................................ ................................ ................................ ........ 8

- 117

Table 8.4.36 LCC and PBP Results for Non

- Weatherized Gas Furnaces

............................... 8

- 118 Table 8.4.37 Rebuttable Payback Period for Non

- Weatherized Gas Furnaces

....................... 8

- 122

Table 8.4.38 LCC and PBP Results for Manufactured Home Gas Furnaces

.......................... 8

- 123 Table 8.4.39 Rebuttable Payback Period for Manufactured Home Gas Furnaces

................... 8

- 127

Table 8.4.40 LCC and PBP Results for Oil

- Fired Furnaces

................................ .................... 8

- 128 Table 8.4.41 Rebuttable Payback Period for Oil

- fired Furnaces

................................ ............. 8

- 129 Table 8.5.1 Summary of Inputs and Methods for the LCC and PBP Analysis for Central Air Conditioners and Heat Pumps

................................ ................................ ... 8

- 132 Table 8.5.2 National LCC and Payback Period Results for Off Mode Power Analysis

– Air Conditioners

................................ ................................ ............................... 8

- 1 35 Table 8.5.3 National LCC and Payback Period Results for Off Mode Power Analysis

– Split

- System and Space Constrained Heat Pumps

................................ ........... 8

- 136 Table 8.5.4 National LCC and Payback Period Results for Off

- Mode Pow er Analysis

– Single

- Package Heat Pumps

................................ ................................ ............ 8

- 137 Table 8.5.5 Summary of Inputs and Methods for the LCC and PBP Analyses for Furnaces

.. 8

- 137 Table 8.5.6 National LCC and Payback Period Results for Off Mode Power Analysis

– Furnaces

................................ ................................ ................................ ........... 8

- 138

LIST OF FIGURES

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

........................... 8

- 5 Figure 8.2.1 Electricity Price Trends for Residential Cooling to 2045 (Index: 2009=1.00)

..... 8

- 46 Figure 8.2.2 Electricity Price Trends for Residential Heating to 2045 (Index: 2009=1.00)

..... 8

- 47 Figure 8.2.3 Electricity Price Trends for Commercial Cooling to 2045 (Index: 2009=1.00)

................................ ................................ ................................ ......... 8

- 48 Figure 8.2.4 Electricity Price Trends for Commercial Heating to 2045 (Index: 2009=1.00)

.... 8

- 49 Figure 8.2.5 Resid ential Electricity Price Trends

................................ ................................ ...... 8

- 50 Figure 8.2.6 Residential Natural Gas Price Trend

................................ ................................ ..... 8

- 50 Figure 8.2.7 Residential LPG Price Trend

................................ ................................ ................. 8

- 51 Figure 8.2.8 Residential Fuel Oil Price Trend

................................ ................................ ........... 8

- 51 Figure 8.2.9 Comparison of DOE Modeled Air Conditioner Age Distributio n with RECS Reported Stock

................................ ................................ ................................ ... 8

- 64 Figure 8.2.10 Comparison of DOE Modeled Total Air Conditioner Stock with Adjusted

AHS Stock

................................ ................................ ................................ ......... 8

- 64 Figure 8.2.11 Central AC Survival Function, Characterized by Weibull Parameters α = 20.29, β = 1.89, and θ = 1.0.

................................ ................................ .............. 8

- 65

### 8

- vii Figure 8.2.12 Comparison of DOE Modeled Total Heat Pump Stock with Adjusted AHS

Stock

................................ ................................ ................................ .................. 8

- 67 Figure 8.2.13 Heat Pump Survival Function, Characterized by Weibull Parameters α = 17.04, β = 1.64, and θ = 1.0

................................ ................................ ............... 8

- 67 Figure 8.4.1 Plots of the Distributions of LCC Savings for Split

- System Air Conditioners (Coil

- Only) by Region

................................ ................................ ....................... 8

- 85 Figure 8.4.2 Plots of the Distributions of LCC Savings for Split

- System Air Conditioners (Blower

- Coil) by Region

................................ ................................ ................... 8

- 86 Figure 8.4.3 Plots of the Distributions of PBP for Split

- System Air Conditioners (Coil

Only) by Region

................................ ................................ ................................ . 8

- 88 Figure 8.4.4 Plots of the Distributions of PBP for Split

- System Air Conditioners (Blower

Coil) by Region

................................ ................................ ................................ .. 8

- 89 Figure 8.4.5 Plots of the Distributions of LCC Savings for Split

- System Heat Pumps by Region

................................ ................................ ................................ ................ 8

- 98 Figure 8.4.6 Plots of the Distributions of PBP for Split

- System Heat Pumps by Region

....... 8

- 100 Figure 8.4.7 Plot of the Distribution of LCC Savings for Single

- Package Air Conditioners

.. 8

- 106 Figure 8.4.8 Plot of the Distribution of PBP for Single Pack age Air Conditioners

................ 8

- 107 Figure 8.4.9 Plots of the Distributions of LCC Savings for Single

- Package Heat Pumps

...... 8

- 110 Figure 8.4.10 Plots of the Distributions of PBP for Single

- Package Heat Pumps

................... 8

- 111 Figure 8.4.11 Plots of the Distributions of LCC Savings for SDHVs by Region

................... 8

- 113 Figure 8.4.12 Plots of the Distributions of PBP for SDHVs by Region

................................ .. 8

- 115 Figure 8.4.13 Plot of the Distributions of LCC Savings for Non

- Weatherized Gas

Furnaces

– National

................................ ................................ ......................... 8

- 119 Figure 8.4.14 Plot of the Distributions of LCC Savings for Non

- Weatherized Gas

Furnaces

– North Region

................................ ................................ ................. 8

- 119 Figure 8.4 .15 Plot of the Distributions of LCC Savings for Non

- Weatherized Gas

Furnaces

– South Region

................................ ................................ ................. 8

- 120 Figure 8.4.16 Plot of the Distri butions of PBB for Non

- Weatherized Gas Furnaces

– National

................................ ................................ ................................ ............ 8

- 121 Figure 8.4.17 Plot of the Distributions of PBB for Non

- Weatherized Gas Furnaces

– North Region

................................ ................................ ................................ .... 8

- 121 Figure 8.4.18 Plot of the Distributions of PBB for Non

- Weatherized Gas Furnaces

– South Region

................................ ................................ ................................ .... 8

- 122 Figure 8.4.19 Plot of the Distributions of LCC Savings for Mobile Home Gas Furnaces

– National

................................ ................................ ................................ ............ 8

- 124 Figure 8.4.20 Plot of the Distributions of LCC Savings for Mobile Home Gas Furnaces

– North Region

................................ ................................ ................................ .... 8

- 124 Figure 8.4.21 Plot of the Distributions of LCC Savings for Mobile Home Gas Furnaces

– South Region

................................ ................................ ................................ .... 8

- 125 Figure 8.4.22 Plot of the Distributions of PBB for Mobile Home Gas Furnaces

– National

.. 8

- 126 Figure 8.4.23 Plot of the Distributions of PBB for Mobile Home Gas Furnaces

– North Region

................................ ................................ ................................ .............. 8

- 126 Figure 8.4.24 Plot of the Distributions of PBB for Mobile Home Gas Furnaces

– South Region

................................ ................................ ................................ .............. 8

- 127

### 8

- viii Figure 8.4.25 Plot of the Distributions of LCC Savings for Mobile Home Gas Furnaces

– National

................................ ................................ ................................ ............ 8

- 128 Figure 8.4.26 Plot of the Distributions of PBB for Mobile Home Gas Furnaces

– National

.. 8

- 129

### 8

- 1 CHAPTER 8. LIFE

- CYCLE COST AND PAYBA CK PERIOD ANALYSIS

8.1 INTRODUCTION

The effect of amended standards on individual customers usually includes a reduction in operating cost and an increase in purchase cost. This chapter describes two metrics used in the analysis to determine the economic impact of standards on individual residential consumers and

commercial customers

.

**•** Life

- cycle cost (LCC) is the total customer cost over the life of an appliance or product, including purchase costs and operating costs (which in turn include maintenance, repair, and energy costs). Future operating costs are discounted to the time of purchase and

s ummed over the lifetime of the appliance or product.

**•** Payback period (PBP) measures the amount of time it takes customers to recover the assumed higher purchase price of more energy

- efficient products through reduced operating costs.

The U.S. Department of Energy (DOE) conducted the LCC and PBP analysis using a spreadsheet model developed in Microsoft Excel. When combined with Crystal Ball (a commercially available software program), the LCC and PBP model generates a Monte Carlo simulation to perform the an alysis by incorporating uncertainty and variability considerations in certain of the key parameters as discussed below.

Inputs to the LCC and PBP analyses of central air conditioning (CAC), heat pump ( HP)

, and furnace products are discussed in sections 8.2 and 8.3 respectively. Results for each metric are presented in section 8.4 . Key variables and calculations are presented for each metric. The calculations discussed here were performed with a series of Microsoft Excel spreadsheets which

are accessible over the Internet ( http://www1.eere.energy.gov/buildings/appliance_standards/residential/central_ac_hp.html ).

Details of, and instructions for, using the spreadsheets are discussed in appendices 8

- A

and 8

- E

.

8.1.1 General Approach f or Life

- Cycle Cost and Payback Period Analyses

In recognition that each building where air conditioners (A/C), heat pumps (HP), or furnaces are used is unique, variability and uncertainty is analyzed by performing the LCC and

PBP calculations detailed here for a representative sample of individual households and commercial buildings. Although the vast majority of the products are used in residential buildings, t he analysis takes into account product use in commercial buildings based on the assumption that 7 % of air conditioner and heat pump product applications are in commercial buildings. The results are expressed as the number of buildings experiencing economic impacts of different magnitudes. The LCC and PBP model was developed using Microsoft Excel

sprea dsheets combined with Crystal Ball. The LCC and PBP analyses explicitly model both the

### 8

- 2 uncertainty and the variability in the model’s inputs using Monte Carlo simulation and probability distributions.

The LCC analysis used the estimated energy use for each CAC, HP, and furnace unit as described in the energy use characterization analysis in chapter 7 of the TSD. Energy use of CACs, HPs, and furnaces is sensitive to climate, so it varies by location within the United States. An important feature of the LCC a nd PBP analysis is that it has been conducted at both the regional and national level. Aside from energy use, other important factors influencing the LCC and PBP analyses include energy prices, installation costs, product distribution markups, and

sales tax es

. At both the n ational and the regional level, the LCC spreadsheets explicitly modeled both the uncertainty and the variability in the model’s inputs, using probability distributions based on the shipment of product s t o different regions of the country.

As mentioned above, DOE generated LCC and PBP results as probability distributions using a simulation based on Monte Carlo analysis methods, in which certain key inputs to the analysis consist of probability distributio ns rather than single

- point values. Therefore, the outcomes of the Monte Carlo analysis can also be expressed as probability distributions. As a result, the Monte Carlo analysis produces 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.

The LCC and PBP resul ts are displayed as distributions of impacts compared to a market baseline. As described in chapter 7, the market baseline efficiency level is for 2016 and is

defined as a mix of CAC, HP, or furnace efficiency levels reflecting the current distribution of efficiency levels purchased by product class. Results are presented at the end of this chapter. A variety of graphic displays can be created to illustrate the implications of the analysis. Examples of graphic displays are (1) a cumulative probability distr ibution showing the percentage of CAC,
HP, or furnace product in U.S. residential and commercial buildings that would experience a net LCC savings, and (2) a cumulative frequency chart depicting variation in PBP for each central

air conditioner or furnace efficiency level considered.

For CACs and HPs , all analyses were performed under the assumption that the current R

22 refrigerant would have been displaced by an alternative refrigerant in 2010 due to provisions in the Clean Air Act. The analysis methodolo gy and results presented in this chapter assume that

all CAC and HP products manufactured after 2010 will use R

- 410A.

8.1.2 Overview of Life

- Cycle Cost and Payback Period Analyses Inputs

The LCC is the total customer cost over the life of the product, including purchase price (including retail markups, sales taxes, and installation costs), and operating cost (including repair costs, maintenance costs, and energy cost). Future operating costs are discounted to the time of purchase and summed over the lifetime of the product. The PBP is the increase in purchase cost of a higher efficiency product divided by the change in annual operating cost (as a result of lower energy consumption) of the product. It represents the number of years that it will take the

### 8

- 3 customer t o recover the increased purchase cost through decreased operating costs. In the calculation of PBP, future costs are not discounted.

Inputs to the LCC and PBP analyses are categorized as follows: (1) inputs for establishing the purchase cost, otherwise known as the total installed cost; and (2) inputs for calculating the operating cost ( i.e. , energy, maintenance, and repair costs).

The primary inputs for establishing the total installed cost are:

**•** Baseline manufacturer selling price : The baseline manufact urer selling price (MSP) is the price charged by the manufacturer to either a wholesaler or customer for product meeting existing minimum efficiency (or baseline) standards. The MSP includes a markup that converts the cost of production ( i.e. , the manufact urer cost) to a MSP.

**•** Standard

- level manufacturer selling price increase : The standard

- level MSP is the incremental change in MSP associated with producing product at each of the higher

standard levels.

**•** Markups and sales tax : Markups and sales tax are the wholesaler and contractor margins and state and local retail sales taxes associated with converting the MSP to a customer price. The markups and sales tax are described in detail in chapter 6, Markups for Product

Price Determination.

**•** Installation cost : Ins tallation cost is the cost to the customer of installing the product. The installation cost represents all costs required to install the product but does not include the

marked

- up customer product price. The installation cost includes labor, overhead, and any miscellaneous materials and parts. Thus, the total installed cost equals the customer product price plus the installation price.

The primary inputs for calculating the operating cost are:

**•** Product energy consumption : The product energy consumption is th e site energy use

associated with the use of the CAC, HP, or furnace units to provide space

- conditioning to the building. Chapter 7, Building Energy Use Characterization, provides complete details

on CAC, HP, and furnace energy use simulations and their re sults.

**•** Energy Prices : Electricity prices used in the analysis are the price per kilowatt

- hour in cents or dollars ($/kWh) paid by each customer for electricity. For CACs and HPs

,

### 8

- 4 electricity prices are determined using marginal residential and commercial p rices a



### • Electricity, natural gas, and fuel oil price trends : The Energy Information Administration’s (EIA’s) Annu al Energy Outlook 2010 ( AEO 2010 ) is used to forecast electricity prices into the future. 3 

### For the results presented in this chapter, DOE used the

AEO 2010 reference case to forecast future electricity prices. calculated from electrical tariff information on individual service areas, as determined from utility data on 90 utilities, in 2008$ (but expressed in the analysis in 2009 dollars). 1,

2 

### For furnaces, electricity, natural gas, liquid petroleum gas (LPG), and fuel oil prices are determined using average monthly energy prices, in 2009$.

**•** Maintenance costs : The labor and material costs associated with maintaining the operation of the product ( e.g. , cleaning h eat exchanger coils and drain pans, changing air filters).

**•** Repair costs : The labor and material costs associated with repairing or replacing components that have failed.

**•** Lifetime : The age at which the central air conditioner and furnace product is retired from

service.

**•** Discount rate : The rate at which future costs are discounted to establish their present

value. Figure 8.1

. 1 graphically depicts the relationships between the installed cost and operating cost inputs for the calculation of the LCC and PBP.

a

. DOE developed residential marginal electricity prices from tariffs collected in 2008 from a representative sample of electric utilities throughout the United States. DOE collected over 150 residential tariffs from a sample of about 90 electric utilities. DOE also developed commercial marginal electricity prices from tariffs for those commercial building applications that use resi dential CAC and CHP equipment. DOE used 260 commercial tariffs collected in 2004 and adjusted the values to a 2008 basis using data in Edison Electric
Institute, EEI Typical Bills and Average Rates Report,

< www.eei.org/products_and_services/descriptions_and_access/typ_bills_report.htm >, and in Regulatory
Research Associates, Inc., Average Regulated Retail Price of Electricity, 2007 & Comparative Historical Da ta

, 2008, Jersey City, NJ.

### 8

- 5 Figure 8.1

. 1 Flow Diagram of Inputs for the Determination of LCC and PBP

Table 8.1

. 1 provides descriptions of the various inputs to the calculation of the LCC and

PBP. As noted earlier, most of the inputs are characterized by probability distributions that capture variability in the input variables.

Table 8.1

. 1 Summary of Inputs and Key Assumptions Used in the LCC and PBP A nalyses
Inputs Description Affecting Installed Costs

Product Price Derived MSP for 2

- , 3

- , and 5

- ton capacity units CAC and HP and for different input capacities for furnaces (from the engineering analysis) and multiplied by wholesaler markups and contractor markups plus sales tax (from markups analysis). Used the probability distribution for the different markups to describe their variability.

Installation Cost Includes installation labor derived from RS Means CostWorks 20 10 and RS

Means Residential Cost Data 20 10

. Overhead and materials costs and profits are assumed to be included in the contractor’s markup. 

### Thus, the total installed cost equals the consumer product price (manufacturer cost multiplied by the various markups plus sales tax) plus the installation

cost.

Transportation Cost Shipping cost of units based on volume of the unit and costs per cubic foot,

based 

### on a typical 53

- foot straight

- frame trailer with a storage volume of 4,240 cubic feet

. Affecting Operating Cos ts

Annual Energy Use 

### For CAC and HP , the annual energy consumption is the annual site energy use associated with providing space cooling. For heat pumps, the annual energy consumption is the annual site energy use associated with Manufacturer Sales

Price Standard i= 1

... n

Manufacturer Sales

Price Standard i= 1

... n

Installation Costs Installation Costs

Repair Costs

Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity Consumption

Electricity Consumption

Manufacturer Base

Price

Total Installed Cost (Std i

– Base) Manufacturer Base

Price

Contractor Markups Wholesaler/

Distributor Markup

Electricity Prices Equipment Prices

Sales Tax

Manufacturer Selling Price (Base)

Installation Costs Manufacturer Selling

Price Standard i= 1

... n

Electricity Consumption Annual Energy Costs

Annual Maintenance

Repair Costs Annual Operating Cost (Std i

- Base) Payback

Period

Discount Rate

Lifetimes Lifetime Operating Cost (Std

i

– Base) Lifecycle

Cost

Annual Maintenance

Costs Manufacturer Sales

Price Standard i= 1

... n

Manufacturer Sales

Price Standard i= 1

... n

Installation Costs Installation Costs

Repair Costs

Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity Consumption

Electricity Consumption

Manufacturer Base

Price

Total Installed Cost (Std i

– Base) Manufacturer Base

Price

Contractor Markups Wholesaler/

Distributor Markup

Electricity Prices Equipment Prices

Sales Tax

Manufacturer Selling Price (Base)

Installation Costs Manufacturer Selling

Price Standard i= 1

... n

Electricity Consumption Annual Energy Costs

Annual Maintenance

Repair Costs Annual Operating Cost (Std i

- Base) Payback

Period

Discount Rate

Lifetimes Lifetime Operating Cost (Std

i

– Base) Lifecycle

Cost

Annual Maintenance

Costs

### 8

- 6 providing both space cooling and space heating. For heat pumps, the annual energy consumption is the annual site energy use associated with providing space heating. For households, the annual energy consumption

is based on data from the EIA 2005 Residential Energy Consumption Survey ( RECS ) . For those households surveyed in RECS with a central

air conditioner

, heat pump , or furnace , the estimated annual energy consumption corresponds to the household’s equipment characteristics

, specifically its capacity and efficiency. For prod ucts used in commercial buildings, the annual energy consumption is determined through computer simulations of a representative small commercial building

based on DOE’s commercial small

- office benchmark building, developed

for use as a baseline benchmark f or DOE’s Net Zero Commercial Building Initiative. 4



### Energy Efficiency 

### The seasonal energy efficiency ratio (SEER) is the efficiency descriptor for central air conditioners. For heat pumps, the cooling efficiency is represented with the SEER

, while the heating efficiency is represented with the heating seasonal performance factor (HSP F). The annual fuel utilization efficiency ( AFUE ) is the efficiency descriptor for furnaces

. Central air conditioner, heat pump , and furnace efficiencies in existing households are primarily based on data from the 2005 RECS . For product s used in commercial buildings, all buildings were assumed to have product efficiencies equal to existing minimum efficiency standards (SEER 13). For central air conditioners an d heat pumps

, t o estimate the annual energy consumption associated with a particular standard level, the ratio of the building’s stock efficiency to the standard

- level efficiency is multiplied by the building’s annual energy consumption. For furnaces,

test procedure equations are used to determine the annual energy consumption associated with a particular standard level

.

Energy Prices For residential CAC and HP customers, energy costs were calculated for RECS 2005 households from marginal and average electricity price s in each utility service area in each region, as determined from utility tariff data for 2008

. For

commercial CAC and HP customers, the analysis used commercial marginal and average electricity price in each utility service area in each r egion, as determined for 2004, escalated to 2008 prices using data from Edison Electric Institute and Regulatory Research Associates. For residential furnace customers,

costs were calculated for RECS 2005 households from monthly average electricity and nat ural gas, LPG, or fuel oil price s in each census division or four large states. Both residential and commercial prices were escalated by the

AEO 20 10 forecasts to estimate the future electricity prices. Escalation was performed separately for residential a nd commercial heating and cooling at the census division level and aggregated to the larger regions used in the study.

Maintenance Cost 

### The cost associated with maintaining the operation of the product ( e.g. , cleaning heat exchanger coils, checking refrigerant charge levels). Costs were chosen from an array of services from a variety of published

sources. Annual maintenance cost does not change as a function of MSP , with the exception of oil

- fired furnaces at the highest efficiency level.

### 8

- 7 Repair Cos t Estimated the annualized repair cost for baseline efficiency CAC, HP, or furnace product, based on costs of major repair (compressor or heat exchanger replacement), from a variety of published sources. It is assumed that 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

Product Lifetime Used the probability distribution of lifetimes, with mean lifetime for each of four product classes assumed to be 19 years for air conditioning units

, 16.3 years for heat pumps , 23.7 years for non

- weatherized gas furnaces, 18.8 years for manufactured home furnaces, and 26.6 years for oil

- fired furnaces

. B ased on literature reviews and consultation with industry experts.

Discount Rate Mean real discount rates ranging from 0 percent to 10.7 percent for various

classes of residential customers based on 

### Federal Reserve Board’s Survey of

Consumer Finances

. Commercial sector customers are expected to have a

mean real discount rate of 6.9% based on a sample of 1 ,815 companies on the

Damodaran Online website. Probability distributions are assumed for the discount rates of both groups of customers.

Date Standa rds

Become Effective June 30, 2016 ( 5 years after the publication of the final rule)

Analyzed Efficiency Levels

Analyzed Efficiency

Levels For CACs and HPs , b aseline efficiency levels will follow the estimated market distribution of efficiency levels in 2016 based on a minimum SEER of 13 for

new units and from 3 to 15 higher efficiency levels available in four principal product classes and one niche class . For furnaces, the minimum AFUE is 80 for

new non

- weatherized gas and manufactured home furnaces and 82 for new oil

fired furnaces and from 3 to 4 higher efficiency levels for each product class.



### All of the inputs depicted in Figure 8.1

. 1 and summarized in Table 8.1

. 1 ar e discussed in

sections 8.2 and 8.3.

8.1.3 Use of Residential Energy Consumption Survey (RECS) in LCC and PBP Analysis

The LCC and PBP calculations detailed here are for a representative sample of individual households and commercial buildings. For CAC and HP , 93% of product applications are assumed to be in residential buildings (households), 5 

### while all furnace equipment is assumed to be for residential buildings.

For products used in households, the 2005 RECS 6 

### serves as the basis for determining the representative sample. The 2005 RECS is based on a sample of 4,382 households that were surveyed for information on their housing units, energy consumption and expenditures, stock of

energy

- consuming appliances, and energy

- related behavior. Information was also collected on certain demographic and economic characteristics of household members.

The information collected represents all households nationwide

— approximately 111 million. RECS is conducted every 3 years with data collected directly from energy end users.

The 2005 RECS is the twelfth su rvey of residential housing units conducted by the DOE’s EIA.

### 8

- 8 Previous RECS were conducted annually from 1978 to 1982 and triennially since 1984. The RECS consists of three parts:

**•** Personal interviews with households for information about energy used, how i t is used,

energy

- using appliances, structural features, energy efficiency measures, and demographic characteristics of the household.

**•** Telephone interviews with rental agents for households that have any of their energy use

included in their rent. This inf ormation augments information collected from those households that may not be knowledgeable about the fuels used for space heating or water heating.

**•** Mail questionnaires sent to energy suppliers (after obtaining permission from households)

to collect the ac tual billing data on energy consumption and expenditures.

Of the 4,382 households surveyed in the 2005 RECS, 1,854 households representing

25.1% of the housing population have a central air conditioner, 339 households representing

7.7% of the h ousing popu lation have an electric heat pump, b



### Of the inputs necessary for the LCC and PBP analysis, there are four inputs (as depicted

in 1,726 households representing 41.0% of the housing population have a gas furnace (non

- weatherized or weatherized), 109 representing 2.3% of the housing population have a manufactured home gas furnace, and 150 representin g 2.5% of the housing population have an oil

- fired furnace. Using the households in RECS that utilize a central air conditioner, heat pump, or furnace, LCC and PBP analyses are performed on a household

- by

- household basis to determine whether an increase in the minimum efficiency standard is economically justified. Each RECS household is identified to be within one of the three geographic regions discussed previously in chapter 7 and has an associated household weight representing the number of similar house holds in the nation.

Figure 8.1

. 1 ) that are based on data from the 2005 RECS: (1) space

- conditioning annual energy consumption (RECS

- based), (2) product efficiency, (3) average electricity price, and (4) marginal electricity price. All four of these inputs are used in determining the operating cost. With the exception of product efficiency, each household in RECS with a central air conditioner, heat pump, or furnace has a unique value for the space

- conditioning annual energy c onsumption, the average electricity price, and the marginal electricity price. In other words, the annual energy consumption, average electricity price, and marginal electricity price associated with a particular

RECS household are not uncertain and are, t herefore, not expressed with probability

distributions. Although those three input variables are not uncertain, they are extremely variable. Due to the large number of households considered in the LCC and PBP analysis (more than

1

, 850 for central air condi tioners, more than 300 for heat pumps, and almost 2,000 for furnaces), the range of annual energy use, average electricity price, and marginal electricity price is quite

b The number of households actually used in the central air conditioner and heat pump LCC and PBP analyses were 1,854 and 339, respectively. A small number of central air

- conditioned households were dropped from the analysis for one or more of the following reasons: 1) the central air conditioner was not used, 2) a room air conditioner was present and used, or 3) marginal energy prices could not be determined for the household. With regard to households with heat pumps, they were dropped from the analysis fo r one or more of the following reasons: 1) the heat pump was not used or 2) marginal energy prices could not be determined for the household.

### 8

- 9 large. (The actual ranges are presented and discussed later in this chapter.) Thus, al though the above three input variables are not uncertain for any particular household, their variability across all households contributes significantly to the range of LCCs and PBPs calculated for any particular standard level.

8.1.4 Commercial Building Analysi s

Seven percent of residential

- type ( i.e. , single

- phase) central air conditioner and heat pump applications are assumed to be in commercial buildings. A small commercial office building was simulated at 237 di fferent locations around the country (correspo nding to the Typical Meteorological Year

- 2 (TMY2) weather stations) 7 

### to represent commercial applications

for CAC and HP units. The results from these simulations were used for the LCC and PBP analysis of commercial buildings, allowing for a building

- by

- building approach to be utilized for determining whether an increase in the standard is economically justified ( e.g. , similar to the approach described above for households from the 2005 RECS). DOE used population

weighting factors to represent the importance of each climate in each state and in each of the three regions. These weighting factors, in conjunction with the relative weighting betwe en commercial and residential shipments

, were used to incorporate the commercial building energy consumption into the overall energy consumption for CAC and HP equipment at each efficiency

level. Seventeen locations in Alaska, representing less than 0.2 pe rcent of the national population, were eventually removed from the LCC analysis due to lack of data for electrical pricing and uncertainty about commercial use in these climates.

As with the analysis of residential buildings, four inputs are necessary (as depicted in Figure 8.1

. 1 ) from the commercial building analysis in order to perform the LCC and PBP calculations: (1) space

- conditioning annual energy consumption, (2 ) product efficiency, (3) average electricity price, and (4) marginal electricity price. The space

- conditioning energy consumption associated with the commercial building in each of the full set of 237 locations

simulated were determined through computer m odeling performed at Pacific Northwest National Laboratory (PNNL) using the EnergyPlus simulation tool. The procedure for calculating space

conditioning energy consumption relied on the determination of hourly operating loads for each of the 237 buildings.

DOE performed an analysis in which DOE used the EnergyPlus building energy simulation software to simulate the energy consumption of CAC and HP equipment used to satisfy the cooling, supply fan, and

, in the case of HP equipment , the electrical heating energy required in a small office building. DOE used an existing small office building model developed for DOE’s energy benchmarking task for this analysis

. The deter mination of space

- cooling and

space

- heating loads assumed that a single type of product

— in this case a residential

- type space

conditioning product

— was used to condition the building. DOE simulated the same building as served either by CAC or HP equipment and, for each equipment type, simulated the equipment using four different efficiency level s. These levels were a 13 SEER, 14 SEER, 16 SEER, and a

max

- tech level for either CAC (SEER 22, based on blower

- coil ratings, or SEER 16.5, based on

coil

- only ratings) or HP (SEER 19.5). Equipment parameters used in the simulation were adjusted to reflect engineering designs corresponding to each efficiency level. The simulated building utilized five individual CAC or HP units. DOE extracted the annual energy

### 8

- 10 consumption for cooling and fan energy use and HP heating from each unit as well as the equipment c apacity from each unit from each simulation run and aggregated these to the whole building level. Using this whole building data, DOE normalized the CAC and HP energy consumption for each location and efficiency level to reflect that of an average 3

- ton ce ntral air conditioner or central heat pump unit for use in the LCC analysis. To estimate the energy consumption for intermediate efficiency levels between those simulated, DOE linearly interpolated the energy use estimates based on the results for the four simulated efficiencies. A complete description of the commercial energy use calculations is found in chapter 7.

T he baseline commercial CAC and HP use developed for the 237 TMY locations (many of which represent climates in portions of more than one state ) were associated with relative weighting factors for each TMY location much as the residential analysis uses the representative RECS weights. DOE used population

- based weighting factors developed for each TMY climate

based on data from the U.S. Geological Survey to represent the importance of each TMY2 climate in each state. The development and documentation of these weighting factors is discussed in chapter 7 . Because certain TMY locations represent climates that cover more than

one state DOE originally d eveloped weighting factors for a total of 543 TMY

- State

combinations. Removal of the s eventeen Alaskan locations discussed previously resulted in 526

TMY

- State combinations , with associated population weights, which then formed the basis of

the commercial energy use sample.

The average and marginal electricity prices were developed through a procedure of matching building hourly loads for each of the 526 represented buildings to actual modeled commercial tariffs (including any time

- of

- use rates) and then ca lculating customer bills. The methodology for matching commercial building peak demands to modeled tariffs is explained in appendix 8

- F. Energy bills are calculated for a market baseline case and standards cases. Average electricity prices are determined b y taking the bill for the market baseline case and dividing it by the amount of energy consumed. Marginal electricity prices are determined by taking the bill difference between the market baseline and standard cases (in dollars) and dividing it by the usa ge difference (in kilowatt

- hours ) to give a “marginal” rate of $/kWh for that

increment.

Since several tariffs were applied to each building, both the average and marginal rates calculated from each tariff were weighted by the number of customers covered by the tariff to come up with a weighted

- average marginal and average rate for each building in each region. The above procedure was used to develop space

- cooling and space

- heating average and marginal rates. Since detailed building loads and demands were not available for space

- heating, average rather than marginal electricity prices were used to determine the energy costs associated with the operation of heat pumps during the space

- heating season.

As with the residential buildings from the RECS sample, th e annual energy consumption, average electricity price, and marginal electricity price associated with each of the 526 commercial buildings observations are not uncertain and are, therefore, not expressed with probability distributions. Although the above three input variables are not uncertain, they are variable. Due to the number of buildings considered in the LCC and PBP analysis, the range of annual energy use, average electricity price, and marginal electricity price is large. (The actual

### 8

- 11 ranges are pr esented and discussed later in this chapter.) Thus, although the above three input variables are not uncertain for any particular building, their variability across all buildings contributes significantly to the range of LCCs and PBPs calculated for any pa rticular standard

level.

8.2 LIFE

- CYCLE COST ANALYSIS INPUTS

8.2.1 Definition

Life

- cycle cost is the total customer cost over the life of a product, including purchase cost and operating costs (which are composed of energy costs, maintenance costs, and repair costs) . Future operating costs are discounted to the time of purchase and summed over the lifetime of the product. Life

- cycle cost is defined by the following equation:



# ∑

**=** 

### + **+ =**  N

t t

t 

### r OC IC LCC

1 

### ) 1 /( Eq. 8.2

. 1

Where:

LCC = life

- cycle cost ($),

IC = total installed cost ($), ∑

= sum over the lifetime, from year 1 to year N, where N = lifetime of product (years),

OC = operating cost ($),

r = discount rate, and

t = year for which operating cost is being determined.

Altho ugh DOE gathered most of its data for the LCC analysis in 2010, DOE expresses all the costs in 2009$. By convention, DOE reports its costs in the years’ dollars preceding the year of the analysis. Total installed cost, operating cost, lifetime, and discoun t rate are discussed in the following sections. In the LCC analysis, the year of product purchase is assumed to be 2016

, the effective date of the amended energy conservation standards for central air conditioners and

furnaces.

8.2.2 Total Installed Cost Inputs

The total installed cost to the customer is defined by the following equation:

INST EQP IC **+ =**  

### Eq. 8.2

. 2

Where: EQP = product price ($) ( i.e. , customer price for the product only), and

INST = installation cost or the customer price to install product ($) ( i.e. , the cost for labor and materials).

### 8

- 12 The product price is based on the distribution channel through which the customer purchases the product. As discussed in chapter 6, Markups for Produc t Price Determination,

DOE defined one major distribution channel f or new units to describe how the product passes

from the manufacturer to the customer: the manufacturer sells the product to a wholesaler or distributor

, who sells to a mechanical contracto r hired by a general contractor. The general contractor purchases and installs the product on behalf of the customer and adds its markup to the mechanical contractor’s price. Replacement products follow the same distribution channel, except that there is n o general contractor. Instead, the mechanical contractor takes on the general

contractor’s function.

The remainder of this section provides information about the variables DOE used to

calculate the total installed cost for central air conditioner and furna ce products. Inputs to

determine total installed cost are shown below:

**•** Baseline manufacturer selling prices ($) (section 8.2.2.2 )

**•** Standard

- level manufacturer selling price increases ($) (section 8.2.2.3 )

**•** Transportation costs ($) (section 8.2.2.4 )

**•** Overall markups (section 8.2.2.5 )

**•** Installation costs ($) (section 8.2.2.6 )

**•** Weighted

- average total installed costs ($) (section 8.2.2.7 )

8.2.2.1 Forecasting Future Product Prices

Examination of historical price data for certain appliances and equipment that have been subject to energy conservation standards indicates that the assumption of constant real prices and costs may, in many cases, overestimate long

- term trends in appliance and equipment price s

. Economic literature and historical data suggest that the real costs of these products may in fact trend downward over time according to “learning” or “experience” curves. A draft paper, “Using the Experience Curve Approach for Applia nce Price Forecasting,” posted on the DOE web site at http://www.eere.energy.gov/buildings/appliance_standards, summar izes the data and literature currently available to DOE that is relevant to price forecasts for selected appliances and equipment.

In lig ht of these data and DOE’s aim to improve the accuracy and robustness of its analyses, DOE has decided to assess future costs by incorporating learning over time, consistent with the analysis in the available literature

. DOE is using this approach to forec ast future prices

of central air conditioners, heat pumps, and furnaces at the considered efficiency levels.

### 8

- 13 An extensive literature discusses the “learning” or “experience” curve phenomenon, typically based on observations in the manufacturing sector. c 

### I n the experience curve method, the real cost of production is related to the cumulative production or “experience” with a product. To explain the empirical relationship, the theory of technology learning is used to substantiate a decline in the cost of pr oducing a given product as firms accumulate experience with the technology. A common functional relationship used to model the evolution of production costs

is :

Y = aX - b



### W here :

a = an initial price (or cost),

b = a positive constant known as the learning rate parameter,

X = cumulative production, and

Y = the price as a function of cumulative production

.

Thus, as experience (production) accumulates, the cost of producing the next unit decreases. The percentage reduction in cost that occurs with each doubling of cumulative production is known as the learning rate ( LR ), and is given by:

LR = 1

– 2 - b



### In typical learning curve formulations, the learning rate parameter is derived using two historical data series: price (or cost) and cumulative production, which is a function of shipments during a long time span.

DOE’s derivation of learning rates for c entral air conditioners, heat pumps, and furnaces, and their application in the LCC and PBP analysis, are described in appendix 8

- J.

8.2.2.2 Baseline Manufacturer Selling Price

The baseline MSP is the price charged by manufacturers to either a wholesaler or very

l arge customer for product meeting existing minimum efficiency (or baseline) standards. The MSP includes a markup that converts the cost to manufacture ( i.e. , the manufacturing cost) to a MSP. DOE developed the baseline MSP through an efficiency level analy sis supplemented by certain design

- option considerations. Refer to chapter 5, Engineering Analysis, for details. DOE developed MSP for product classes identified in the market and technology assessment analysis, chapter 3 of the TSD.

c In addition to the draft paper mentioned above, see Weiss, M., Junginger, H.M., Pat el, M.K., and Blok, K. 2010. A Review of Experience C urve Analyses for Energy Demand T echnologies. Technological Forecasting & Social Change . 77:411

- 428

.

### 8

- 14 

## Air Conditioners and Heat Pumps

The LCC and PBP were calculated based on the same set of representative products as given in Table 8.2

. 1 . For this analysis, split

- system air conditioners and heat pumps were evaluated at 3 representative capacities: 2

- ton (24,000 Btu/hr), 3

- ton (36,000 Btu/hr), and 5

- ton (60,000 Btu/hr). Single

- package systems and small

- volume high

- velocity systems were

evaluated at 3

- ton capacities only.

Table 8.2

. 1 Representative CAC and HP Products Ev aluated for the Life

- Cycle Cost and Payback Analyses

Product Cl ass Representative

Product Capacities Description

S plit

- S ystem AC (Coil

- Only) SS

- AC (Coil

- Only) : 2

- , 3

- , and 5

- Ton Split

- system air conditioners, inside evaporator coil

- only (no blower unit purchased)

S plit

- System AC (Blower

- Coil) SS

- AC (Blower

- Coil) : 2

- , 3

- , and 5

- Ton Split

- system air conditioners, including blower unit (evaporator coil and air handler purchased)

S plit

- System HP SS

- HP : 2

- , 3

- ,and 5

- Ton Split

- system heat pumps

S ingle Package AC SP

- AC : 3

- T on Single

- package air conditioners

S ingle P ackage HP SP

- HP : 3

- T on Single

- package heat pumps

S mall

- Diameter High

- Velocity SDHV : 3

- T on Small

- diameter duct, high

- velocity (SDHV) systems



### DOE determined the market baseline with a minimum requirement of 13 SEER 8 

### as the

baseline cooling efficiency levels for CACs and HPs . The minimum efficiency levels specified are detailed in chapter 5, Engineering Analysis. In the case of split

- system air conditioners, DOE analyzed options with and without a complete air handler uni t, because it is not clear whether a furnace or other fan unit would be purchased at the same time as the inside evaporator coil and outside condensing unit. DOE developed the MSP for the baseline efficiency products as a part of the engineering analysis ( see chapter 5 of the TSD); these are shown in Table 8.2

. 2

. Transportation (shipping cost) is also discussed in section 8.2.2.4

.

Table 8.2

. 2 Baseline Manufacturer Selling Price per Unit (CACs and HPs)

Representative Product Representative Capacity

t ons SEER (Baseline Efficiency) Baseline Manufacturer Selling

Price* , Excluding

Transportation

200 9 $ Baseline Manufacturer Selling

Price , Including Transportation

200 9 $ Split

- System A / C (Coil

- Only) 2 13.0 662 678

3 13.0 741 762

5 13.0 1,033 1,061

S plit

- System A / C (Blower

- Coil) 2 13.0 851 871

3 13.0 951 976

5 13.0 1,269 1,305

S plit

- System

- HP 2 13.0 966 992

3 13.0 1,136 1,165

5 13.0 1,445 1,482

S ingle Package A / C 3 13.0 1,093 1,123

S ingle P ackage HP 3 13.0 1,347 1,378

S D HV 3 13.0 1,554 1,582

* Baseline MSP is based upon the CAC products using R

- 410A refrigerant. Shipping not included.

### 8

- 15 Because air conditioners and heat pumps are commonly sold in situations in which heating and cooling equipment are being considered together, there is some uncertainty in the

determina tion of what assumption should be made concerning any cost and efficiency benefit for

a fuel

- fired (gas

- , oil

- , or LPG

- fired) furnace. To account for this, the MSP for split

- system air conditioners is handled in one of two ways.

In a replacement scenario i n which only the outdoor unit and evaporator coil need to be replaced and the coil

- only purchase is at SEER values of 14.5 SEER or less, the air

- conditioning unit is assumed to be installed in a situation in which an appropriate furnace fan is available to
circulate air. For 15

- SEER replacements in which the furnace or air handler is not replaced, DOE assumed that half of the units replaced will require an add

- on fan kit to supply the multi

- speed fan capability required to reach 15 SEER. For 15.5

- SEER repla cements in which the furnace or air handler is not replaced, DOE assumed that an add

- on fan kit always will be required.

In a replacement scenario in which the furnace or air handler is being replaced, DOE assumed that a portion of the cost of furnace rep lacement is attributable to the air

- conditioning requirements of the system. Rather than conduct a complex analysis of the combined furnace and

air

- conditioning system, DOE assumed that the air

- conditioning component of the combined system was equivalent t o the cost of an air handler without heating capability. In this case, the cost includes an air handler with a blower and evaporative coil and is called a blower

- coil system. The blower

- coil configuration also covers all new installations. Systems using a blower

coil configuration can use improvements on the indoor air handler to achieve higher SEER ratings. Systems rated as “ coil

- only ” systems must use improvements on the indoor coil or outdoor condensing unit to achieve higher SEER rating s.

For simplicity, split

- system heat pumps always were assumed to be sold with an air handler, due to the need to closely match condensing, evaporative, and air handling capabilities to gain efficiency in a heat pump sy stem. Single

- package heat pumps, single

- pack age air

conditioners , and SDHVs are sold as complete packages, including condensing unit, evaporator unit, and blower.



## Furnaces

DOE developed the baseline manufacturer costs for furnaces as described in chapter 5, Engineering Analysis. The baseline manu facturer costs are shown in Table 8.2

. 3

. The cost of adding two

- stage controls is $32 for non

- weatherized gas furnaces

.

### 8

- 16 Table 8.2

. 3 Baseline Manufacturer Production Cost per Unit (Furnaces)

Product Class Input Capacity

kBtu/h AFUE Motor Type Manufacturer

Production Cost
2009$

Non

Weatherized

Gas Furnaces 60

80% PSC 259

80 266

100 282

120 305

60

ECM 325

80 334

100 365

120 388

Manufactured

Home Gas

Furnaces 80 80% PSC 297

ECM 365

Oil

- Fired

Furnaces 105 82% PSC 809

ECM 899 kBtu/h = kilo British thermal units per hour PSC = permanent split capacitor ECM = electronically commutated motor



### 8.2.2.3 Standard

- Compliant Manufacturer Selling Price Increases

The standard

- compliant MSP increase is the change in MSP associated with producing product at higher efficiency levels. DOE developed MSP increases associated with increases in product efficiency lev els through a combination of efficiency level and design

- option analyses in the engineering analysis (see c hapter 5 of the TSD). MSP increases as a function of product efficiency were developed for each of the representative product categories in the engin eering analysis as well.



## Air Conditioners and Heat Pumps

Table 8.2

. 4 and Table 8.2

. 5 summarize the estimated MSP for CAC and HP efficiency levels considered in the LCC and PBP analyses.

### 8

- 17 Table 8.2

. 4 SEER Standard

- Compliant Manufacturer Selling Prices per Unit, Split

- System

CAC and HP Products Including Transportation

Efficiency

Level

SEER MSP for Representative Standard

- Compliant Products
2009$
Split

- S ystem AC (Coil

Only ) Split

- System AC (Blower

- Coil) Split

- System HP

2T 3T 5T 2T 3T 5T 2T 3T 5T

13.5 713 796 1,108 906 1,017 1,356 1,028 1,219 1,540

14 752 839 1,166 942 1,059 1,409 1,065 1,272 1,600

14.5 792 889 1,234 976 1,100 1,467 1,106 1,327 1,664

15 838 949 1,315 1,010 1,141 1,525 1,146 1,381 1,728

15.5 886 1,018 1,404 1,047 1,185 1,587 1,185 1,432 1,797

16 937 1,097 1,503 1,083 1,230 1,651 1,241 1,507 1,901

16.5 994 1,184 NA 1,119 1,276 1,717 1,282 1,560 1,979

17 1,054 1,282 NA 1,156 1,323 1,786 1,322 1,614 2,057

18 1,184 NA NA 1,235 1,420 1,934 1,406 1,722 2,236

19 NA NA NA 1,313 1,522 NA 1,493 1,830 NA

20 NA NA NA 1,393 1,629 NA 1,580 1,956 NA

21 NA NA NA 1,477 1,744 NA 1,670 2,079 NA

22 NA NA NA 1,562 1,864 NA 1,763 NA NA

23 NA NA NA 1,649 NA NA NA NA NA

24.5 NA NA NA 1,783 NA NA NA NA NA



### Table 8.2

. 5 SEER Standard

- Compliant Manufacturer Selling Prices per Unit, Single

Package and Niche CAC and HP Products, Including Transportation

Efficiency

Level

SEER MSP for Representative Standard

- Compliant

Products

2009$

Single Package

AC Single Package

HP Small Diameter High Velocity

3T 3T 3T

13.5 1,195 1,428 1,6 67

14 1,250 1,517 1,7 55

14.5 1,344 1,630 1,8 48

15 1,437 1,744 NA

15.5 1,542 1,872 NA

16 1,649 2,044 NA

16.5 1,834 2,219 NA

17 NA NA NA

18 NA NA NA

19 NA NA NA

20 NA NA NA

21 NA NA NA

22 NA NA NA

23 NA NA NA

24.5 NA NA NA

### 8

- 18 

## Furnaces

DOE developed manufacturer cost increases associated with increases in product energy efficiency levels as described in chapter 5, Engineering Analysis

. Table 8.2

. 6 through Table

8.2

. 8 present the standard

- level manufacturer cost increases for the three product classes. Transportation costs are not included in these tables and do not increase with increased efficiency. The incremental cost of permanent split capacitor ( PSC ) blower motors and electronically commutated motors ( ECM s) are the same.

Table 8.2

. 6 Standard

- Level Manufacturer Cost Increases (Non

- Weatherized Gas Furnace)

Standard

- Level Manufacturer Cost Increases (Non

- Weatherized Gas Furnace)

Energy Efficiency

Level Manufacturer Cost Increase
2009$

60 kBtu/h 80 kBtu/h 100 kBtu/h 120 kBtu/h

1 108 112 120 130

2 138 145 159 168

3 194 216 245 263

4 323 329 348 381



### Table 8.2

. 7 Standard

- Level Manufacturer Cost Increases (Manufactured Home Gas Furnace)

Energy Efficiency

Level Manufacturer Cost Increase
2009$

80 kBtu/h

1 116

2 150

3 223



### Table 8.2

. 8 Standard

- Level Manufacturer Cost Increases (Oil

- Fired Furnace)

Energy Efficiency

Level Manufacturer Cost Increase
2009$

105 kBtu/h

1 8

2 16

3 26

4 279



### 8.2.2.4 Transportation Cost

The MSP of CAC, HP, and furnace products derived above is considered to be a price that includes the cost of shipping the product to the distributor. Based on the physical attributes

of the CAC, HP , and furnace products (product dimensions and shipping) and the requirements

for maximum weight and dimensions of a standard 53

- ft trailer, DOE determined that manufacturers were likely to run out of volume inside the shipping trailer before reaching the maximum weight for a truckload. The additional cost of transporting a CAC, HP , or furnace unit to the local distribution point depends mainly on its volume, which was calculated for each

### 8

- 19 product class at each efficiency level. S hipping cost was calculated as a function of its volume

for both CAC and HP

. DOE first calculated the cost per cubic f oot of space on a trailer, based on a cost of $2,500 per shipping load and the standard dimensions of a 53

- ft trailer. Chapter 5 of the technical support document ( TSD ) contains additional details about DOE’s shipping cost assumptions and DOE’s shipping co st estimates.



## Air Conditioners and Heat Pumps

Table 8.2

. 9 and Table 8.2

. 10 show the estimated transportation costs of standard

compliant equipment.

Table 8.2

. 9 Transportation Costs of SEER Standard

- Compliant Products, Split

- System

CAC and HP Products

Efficiency Level

SEER Transportation Costs for Representative Standard

- Compliant Products
2009$

Split

- system AC (Coil

- Only ) Split

- System AC (Blower

- Coil) Split

- System HP

2T 3T 5T 2T 3T 5T 2T 3T 5T

13.5 18.07 22.62 28.97 21.64 26.95 35.89 25.60 29.58 37.60

14 20.30 24.83 29.50 23.66 29.11 36.16 25.45 30.54 38.42

14.5 20.04 24.16 30.06 23.97 29.55 37.93 28.60 33.50 39.74

15 23.30 25.40 33.08 23.50 28.81 38.20 31.12 35.40 39.58

15.5 23.91 26.73 33.38 25.19 29.76 39.44 32.09 34.70 40.14

16 24.52 28.10 33.65 27.00 30.75 40.69 33.07 34.09 40.71

16.5 26.59 28.90 NA 27.38 32.02 40.69 33.97 35.40 41.44

17 28.67 30.74 NA 27.74 33.35 40.69 34.86 36.72 42.17

18 31.41 NA NA 33.48 35.23 41.82 36.48 39.52 42.90

19 NA NA NA 35.70 37.03 NA 40.27 41.64 NA

20 NA NA NA 38.51 38.91 NA 41.15 42.19 NA

21 NA NA NA 42.09 42.26 NA 41.59 42.91 NA

22 NA NA NA 45.01 44.71 NA 41.82 NA NA

23 NA NA NA 46.36 NA NA NA NA NA

24.5 NA NA NA 46.75 NA NA NA NA NA

### 8

- 20 Table 8.2

. 10 Shipping Costs of SEER Standard

- Compliant Products, Split

- System Products, Single

- package, and Niche CAC and HP Products

Efficiency

Level

SEER Transportation Costs for Representative Standard

Compliant Products
2009$
Single Package

AC Single Package

HP Small Diameter High Velocity

AC

3T 3T 3T

13.5 32.13 33.38 31.76

14 33.89 34.91 33.93

14.5 35.69 36.48 35.81

15 37.55 38.08 NA

15.5 39.47 39.72 NA

16 41.44 41.39 NA

16.5 43.88 42.75 NA

17 NA NA NA

18 NA NA NA

19 NA NA NA

20 NA NA NA

21 NA NA NA

22 NA NA NA

23 NA NA NA

24.5 NA NA NA



## Furnaces

Table 8.2

. 11 shows the estimated transportation costs of standard

- compliant equipment. Shipping costs do not vary by AFUE or motor type.

Table 8.2

. 11 Shippin g Costs for Furnaces

Product Class Input Capacity

kBtu/h Shipping Cost

Estimate

2009$

N on

W eatherized

G as F urnaces 60 10

80 10

100 12

120 14

M anufactured

H ome G as
F urnaces 80 19

O il

- Fired

F urnaces 105 20



### 8.2.2.5 Overall Markup

For a given distribution channel, the overall markup is the value determined by multiplying all the associated markups a nd the applicable sales tax together to arrive at a single overall distribution chain markup value. The overall markup is multiplied times the baseline or

### 8

- 21 standa rd

- compliant MSP (including transportation) to arrive at the price paid by the customer. Because there are baseline and incremental markups associated with the wholesaler and mechanical contractor, the overall markup is also divided into a baseline markup ( i.e. , a markup used to convert the baseline manufacturer price into a customer price) and an incremental markup ( i.e. , a markup used to convert a standard

- compliant MSP increase due to an efficiency increase into an incremental customer price). Markups ca n differ depending on whether the product is being purchased for a new construction installation or is being purchased to replace an existing product. DOE developed the overall baseline markups and incremental markups for both new construction and replacem ent applications as a part of the markups analysis (chapter 6 of the TSD).

Based on the percentages of the market attributed to each distribution channel in chapter 6, Table 8.2

. 12 and Table 8.2

. 13 display the weighted

- average overall markups and their

associated com ponents for the baseline and incremental markups, respectively. DOE used the appropriate baseline markup times the baseline and incremental MSP (including transportation) to obtain estimates of the retail price of the CAC and HP equipment. The calculations are demonstrated in section 8.2.2.6.

Table 8.2

. 12 Overall National Average Baseline Markup Factors

Factor New

Construction Application Replacement Application

Wholesale Markup 1.362 1.362

Mechanical Contractor Markup 1.280 1.380

General Contractor Markup 1.480 NA*

Sales Tax 1.073 1.073 Total Markup 2.767 2.016 * General contractors do not appear in the replacements

distribution channel



### Table 8.2

. 13 Overall National Average Incremental Markup Factors

Factor New

Construction Application Replacement Application

Wholesale Markup 1.091 1.091

Mechanical Contractor Markup 1.024 1.104

General Contractor Markup 1.347 NA*

Sales Tax 1.073 1.073

Total Markup 1.614 1.292 * General contractors do not appear in the replacements

distribution channel



### 8.2.2.6 Installation Cost

The installation cost is the price to the consumer of labor and materials (other than the

cost of the actual product) needed to install the central air conditioner or furnace product.

### 8

- 22 

## Central Air Conditioner and Heat Pump

DOE derived installation cost for CAC and HP product from data in the RS Means

Residential Cost Data 2009 9 

### and RS Means CostWorks 2010. 10



### RS Means Reside ntial Cost Data provides estimates on the person

- hours required to

install CAC and HP products, labor rates, and costs associated with the type of crew required to install the products. Generally speaking, installation involves movement into the building, installation or setting of product (including sleeve), connecting to power supply, filling/flushing/cleaning/touchup, startup and running adjustments, training the owner’s representative, and warranty and call

- back service. DOE calculated the installation cost by building up the labor costs for installing the components of the system types discussed in the engineering analysis, chapter 5, because materials costs, overheads, and profits were assumed to be captured in the contractor markups. Labor rates vary significantly from region to region of the country, and the RS Means data provide the necessary information to capture this regional variability. RS Means CostWorks provides cost indices that reflect the labor rates for 295 cities in

the United States. Cit ies in all 50 states and the District of Columbia are identified in the RS

Means data and most states are represented by more than one city. DOE used the city indices to develop population weighted averages for each state and the District of Columbia. DOE incorporated the state indices into the analysis to capture place

- to

- place variation in installation

cost.

Table 8.2

. 14 summarizes the nationally representative instal lation costs based on person

hours and labor rates associated with the installation of CAC and HP products as presented in RS

Means . DOE assumed that these installation costs remain fixed regardless of efficiency level (a

“flat” installation cost scenario). DOE’s LCC spreadsheet initially allowed for an alternative

scenario

— that the installation cost increases with higher efficiency levels

— and this alternative was implemented in the LCC spreadsheet by providing for an installation price that varies in proportion to increased manufacturer cost above the baseline efficiency level. However, DOE discussed installation costs with a small sample of installers and did not find a basis for installation costs increasing with efficiency or capacity of system components covered in this rulemaking. DOE therefore assumed that installation costs varied by region but not by efficiency

level

.

Table 8.2

. 14 Installation Costs for Baseline CAC and HP Products (SEER 13)

MS P for Representative Standard

- Compliant Products

200 9 $ Split

System AC (Coil

Only) Split

system

AC (Blower

Coil) Split

system

HP Single Package

AC Single Package

HP Small

Diameter

High Velocity

508 511 561 528 403 511



### Table 8.2

. 15 summarizes the cost indices for installations in each of the 50 states, plus the District of Columbia, that were used to vary the nationally representative installation costs in

Table 8.2

. 14 . To arrive at an average index for each state, DOE weighted the city indices in each

### 8

- 23 state by their population within each state. Because city

- level population e stimates were not available for 2009, DOE used estimated city population weights for the year 2008 from the U.S.

Census Bureau 11 

### to calculate a weighted

- average index for each state from the RS Means

CostWorks data for 2010. Weighted averages and estimates at the regional and national level were computed using 2 00 9 state population weights from the U.S. Census Bureau. 12



### Table 8.2

. 15 Installation Cost Indices (National Average Value = 100.0)

State Index State Index State Index

Alabama 59.2 Kentucky 82.6 North Dakota 59.4

Alaska 111.0 Louisiana 61.5 Ohio 98.8

Arizona 77.9 Maine 71.2 Oklahoma 59.3

Arkansas 57.4 Maryland 95.7 Oregon 105.3

California 129.7 Massachusetts 129.5 Pennsylvania 131.2

Colorado 82.6 Michigan 113.2 Rhode Island 121.7

Connecticut 123.1 Minnesota 127.3 South Carolina 41.8

Delaware 126.3 Mississippi 63.6 South Dakota 48.2

Dist. Of Columbia 101.6 Missouri 106.4 Tennessee 77.3

Florida 68.6 Montana 75.1 Texas 65.0 Georgia 75.0 Nebraska 82.2 Utah 74.5

Hawaii 116.8 Nevada 111.0 Vermont 71.5

Idaho 71.0 New Hampshire 93.9 Virginia 75.2

Illinois 142.5 New Jersey 139.6 Washington 107.7

Indiana 89.5 New Mexico 77.2 West Virginia 93.6

Iowa 75.2 New York 170.0 Wisconsin 104.2

Kansas 69.8 North Carolina 42.0 Wyoming 61.5



## Furnaces

The installation cost is the cost to the consumer of installing the furnace. The cost of installation covers all labor and material costs associated with the replacement of an existing furnace or the installation of a furnace in a new home, as well as deli very of the new furnace, removal of the existing furnace, and any applicable permit fees. Higher efficiency furnaces may require additional installation costs. DOE’s analysis of installation costs account s for regi onal

differences in labor costs and estima te d specific installation costs for each sample household based on building characteristics given in the 2005 RECS.

DOE estimate d installation costs at each considered efficiency level using a variety of sources, including RS Means Residential Cost Data 2010, RS Means CostWorks 2010

, RS Means Mechanical Cost Data 2010, manufacturer literature, and info rmation from expert consultants.

DOE gave separate consideration to the cost of installing a condensing gas furnace in replacement cases and in new homes. DOE conducted a detailed analysis of installation costs

when a non

- condensing gas furnace is replaced with a condensing gas furnace, with particular attention to venting issues in replacement applications. The installation cost depends on the

furnace insta llation location and DOE used information from 2005 RECS to assign the location of the furnace in each of the sample homes.

### 8

- 24 For non

- weatherized gas furnaces , DOE estimated basic installation costs that are applicable to both replacement and new home instal lations . These costs, which apply to both condensing and non

- condensing gas furnaces, include putting in place and setting up the furnace, gas piping, ductwork, electrical hookup for the thermostat

, permit

, removal or disposal fees, and

, where applicable, additional labor hours for an attic installation. Table 8.2

. 16 shows the average basic i nstallation cost for replacement installations and Table 8.2

. 17 shows the average basic

i nstallation cost for new construction installations

.

For replacement installations , DOE included a number of additional costs (“adders”) for a fraction of the sample households. These adders apply to both non

- condensing and condensing

non

- weatherized gas furnaces. For non

- condensing furnaces, these additional costs included updating flu e vent connectors, vent resizing, and chimney relining. F or condensing furnaces

, these additional costs included adding a new flue vent (PVC), combustion air vent for direct vent

installations (PVC), concealing vent pipes for indoor installations , addressi ng an orphaned water heater (by updating flue vent connectors, vent resizing, or chimney relining), and condensate removal. Freeze protection is accounted for in the cost of condensate removal.

Table 8.2

. 16 shows the fraction of the impacted replacement installations and the average cost for each of the adders. The derivation of the fraction of impacted installations as well as the derivation of the costs are described in appendix 8

- B

.

Table 8.2

. 16 Additional Installation Costs for Non

- Weatherized Gas Furnaces in Replacement Installations

Installation Cost Adder Criteria Installations Impacted

% Average

Cost
2009$ Total

Cost
2009$

Non

- Condensing Furnaces

Basic Installation All Installations 100 690 690

Flue Vent Connectors 75% of natural draft vent systems 4 199 8 Chimney Relining 100% of unlined chimneys 13 681 87 Vent Resizing 10% of natural draft vent systems 1 576 4

TOTAL $789
Condensing Furnaces

Basic Installations 100% of installations 100 690 690 New Flue Venting (PVC) All Installations 100 306 306 Combustion Air Venting (PVC) 62% of installations 62 301 186 Concealing Vent Pipes 50% of indoor horizontal vented 5 302 15 Orphaned Water Heater Chimney Relining & Resizing 18 501 89

Condensate Removal 100% of installations 100 71 71

TOTAL $1,357



### DOE also included installation adders for new construction installations . For non

condensing furnaces, a new flue vent (metal) is the only adder. For condensing gas furnaces, the adders include new flue vent (PVC), combustion air vent for direct vent installations (PVC), accounting for a commonly vented water heater, and conde nsate removal

. Table 8.2

. 17 shows the estimated fraction of new home installations impacted and the average cost for each of the adders. For details, see appendix 8

- B

.

### 8

- 25 Table 8.2

. 17 Additional Installation Costs for Non

- Weatherized Gas Furnaces in New

Construction Applications

Installation Cost Adder Criteria Installations Impacted

% Average

Cost
2009$ Total

Cost
2009$

Non

- Condensing Furnaces

Basic Installation All Installations 100 509 509

New Flue Vent All Installations 100 1,036 1036 Common Venting credit 1⁄2 common venting cost is credited 48

- 405

- 195

TOTAL $1,350
Condensing Furnaces

Basic Installations 100% of installations 100 509 509 New Flue Venting (PVC) All Installations 100 247 247 Combustion Air Venting (PVC) 60% of installations 60 239 144 Common Venting Adder 1⁄2 of common venting cost is added 48 405 195

Condensate Removal 100% of installations 100 13 13

TOTAL $1,108



### F or manufactured home gas furnaces DOE included similar basic installation costs as described above for non

- weatherized gas furnaces. DOE also included costs for venting and for

condensate removal including f reeze protection

. . In addition, DOE considered the cost of dealing with space constraints that could be encountered when a condensing furnace is installed.

For oil

- fired furnaces DOE included similar basic installation costs as for non

weatherized gas furnaces. DOE also include d costs for venting (including stainless steel vent for

installations at 83 %

**−** 85 % AFUE) and condensate removal. In addition, DOE assumed that condensing oil

- fired furnaces require two additional labor hours to tune up the combustion

system.

For further details on installation costs for non

- weatherized gas furnaces, manufactured home gas furnaces and oil

- fired furnaces, see appendix 8

- B

.

Total installation cost varies by new construction and replacement markets. The fractions

of installations at each market for the three product classes are developed as part of the shipments model described in Chapter 9. For the LCC analysis DOE uses the values derived for

2016. Table 8.2

. 18 shows the fractions of installations for each market as used in the LCC analysis

.

Table 8.2

. 18 Fraction of Shipments in New Construction and Replacement Applications

Heating Product Share of Replacement Applications

% Share of New Construction Applications

%

Non

- Weatherized Gas Furnace 75 25

Manufactured Home Gas Furnace 50 50

Oil

- Fired Furnace 90 10



### Table 8.2

. 19 through Table 8.2

. 21 show the results for the total installation cost for each furnace product class by region for both, the replacement and new construction market.

### 8

- 26 Table 8.2

. 19 Installation Costs by Region and Construction Type

- Non

- Weatherized Gas

Fu rnaces

Region Energy Efficiency Level, AFUE Replacement 2009$ New Construction
2009$ All
2009$

Average Incr. Average Incr. Average Incr.

National 80%, baseline 789 1,350 928

90% 1,357 567 1,108

- 242 1,295 367

92% 1,357 567 1,108

- 242 1,295 367

95% 1,357 567 1,108

- 242 1,295 367

98% 1,367 577 1,133

- 217 1,309 381

North 80%, baseline 884 1,458 1,022

90% 1,457 573 1,227

- 231 1,402 379

92% 1,457 573 1,227

- 231 1,402 379

95% 1,457 573 1,227

- 231 1,402 379

98% 1,467 583 1,254

- 204 1,416 394

South 80%, baseline 642 1,198 785

90% 1,202 559 940

- 258 1,134 349

92% 1,202 559 940

- 258 1,134 349

95% 1,202 559 940

- 258 1,134 349

98% 1,211 569 962

- 235 1,147 361



### Table 8.2

. 20 Installation Costs by Region and Construction Type

- Manufactured Home

Gas Furnaces

Region Energy Efficiency Level, AFUE Replacement 2009$ New Construction
2009$ All
2009$

Average Incr. Average Incr. Average Incr.

National 80%, baseline 597 678 637

90% 1,158 561 881 203 1,019 381

92% 1,354 758 959 281 1,156 518

96% 1,559 962 1,041 363 1,299 661

North 80%, baseline 658 737 698

90% 1,246 589 946 209 1,094 397

92% 1,441 783 1,025 289 1,231 533

96% 1,648 991 1,106 369 1,374 676

South 80%, baseline 540 621 581

90% 1,075 535 818 196 947 366

92% 1,273 733 895 274 1,085 504

96% 1,476 936 978 356 1,227 647

### 8

- 27 Table 8.2

. 21 Installation Costs by Region and Construction Type

- Oil

- Fired Furnaces

Region Energy Efficiency Level, AFUE Replacement 2009$ New Construction
2009$ All
2009$

Average Incr. Average Incr. Average Incr.

National 82%, baseline 774 1,889 880

83% 909 135 2,099 210 1,015 135

84% 1,166 392 2,056 167 1,240 360

85% 1,470 695 2,008 119 1,447 567

97 % 2,184 1,409 1,540 (349) 2,211 1,330



### 8.2.2.7 Weighted

- Average Total Installed Cost

As presented in above , the total installed cost is the sum of the product price and the

installation cost. DOE derived the consumer product price for any given efficiency level by taking the product of the baseline MSP and the baseline markup index (including the sales tax) and adding to it the product of the incremental MSP and the incremental markup index (including the sales tax). MSPs, markups, and the sales tax all can take on a variety of values, depending on loca tion, so the resulting total installed cost for a particular efficiency level will not be a single

- point value, but rather a distribution of values.



## Central Air Conditioners and Heat Pumps

The baseline MSP and the standard

- compliant MSP increases are the starting points for determining the total installed cost (values are taken directly from Table 8.2

. 2

, Table 8.2

. 4 , and

Table 8.2

. 5 )

. DOE used t he baseline and incremental markups and installation costs to convert
the MSP s into total installed costs . Both the percentage retail markups and the percentage

installation cost may change with the efficiency level. As an example, the weighted average costs

for a 3

- ton split

- system air conditioner product category are presented for the baseline level.

Table 8.2

. 22 summarizes the weighted

- average costs and markups necessary for determining the weighted

- average baseline and standard

- compliant total installed costs for a new split

- system air

conditioner coil

- only unit

.

### 8

- 28 Table 8.2

. 22 Costs and Markups for Determination of Weighted

- Average Total Installed

Costs for a New 3

- Ton Split

- S ystem A / C Blower

- Coil Unit (Efficiency Level 5: SEER 15 )

Variable SEER Weighted Average Value

National Average Hot

Humid Hot

- Dry Rest of Country

Baseline Manufacturer Selling Price, Including Transportation (SEER 13) $761.60 $ 761.60 $ 761.60 $ 761.60

Standard

- compliant Manufacturer selling price Increase ( Efficiency Level

5

— SEER 15 ) $187.61 $187.61 $187.61 $187.61

Average Overall Baseline Markup (Regional) 2.767 2.711 3.897 2.776

Average Overall Incremental Markup (Regional) 1.614 1. 581 2.098 1. 619

Installation Cost $508 $ 508 $ 508 $ 508

Insta llation Cost Factor

– Regional 1.000 0.677 1.194 1.185



### To illustrate the derivation of the weighted

- average total installed cost shown in Table

8.2

. 22 , DOE presents the calculations for the baseline efficiency (Eq. 8.2.3) and a higher efficiency split

- system blower

- coil 3

- ton air conditioner unit at SEER 15 (Level 5) (Eq. 8.2.4). For baseline products, the calculation of the hot

- humid regional average total installed cost is as

follows:

IC BASE SS

- AC

- 3T = EQP B ASE

- SS

- AC

- 3T +INST BAS E

- SS

- AC

- 3T x INSTNDEX 

### Eq. 8.2

. 3

= MSP BASE

- SS

- AC

- 3T X 

### MU BASE

- SS

- AC

- 3T 

### + INST BASE

- SS

- AC

- 3T 

### x INSTNDEX
= $ 761.60 x 2. 711 + $ 508 x 0. 677 = $ 2,064.70 + $ 343.92 = $ 2,408.62.

W here :

IC = total installed cost ($)

, EQP = product price ($)

, M SP = manufacturer selling price ($)

, MU = overall baseline markup

, INST = installation cost or the customer price to install product ($)

, and

I N

STINDEX = location dependent installation cost index , approxim ately 1.0 at a national

average

.

In this specific example, MSP is the national average baseline MSP for the split

- system
blower

- coil central air conditioner product class and MU is the overall baseline markup factor. The calculation of the higher efficie ncy (efficiency level 5

- SEER 15) total installed cost includes the use of a MSP adder. In addition, DOE derived an incremental markup.

### 8

- 29 Based on incremental product price changes, the derivation of the efficiency level 5 total

installed cost is based on det ermining the change in product price over the baseline product price. The manufacturer price increment for higher efficiency product is multiplied by the incremental markup.

DOE calculated the efficiency level 5 total installed cost ( IC SS

- AC

- 3T Level 5 

### ) as follows:

IC SS

- AC

- 3T Level5 

### = ( EQP BASE

- SS

- AC

- 3T 

### + ∆EQP SS

- AC

- 3T Level 5 

### )

+ INST SS

- AC

- 3T Level 5 

### x INSTINDEX Eq. 8.2

. 4

= ( MSP BASE

- SS

- AC

- 3T X 

### MU BASE

- SS

- AC

- 3T 

### ) + ( ∆MSP SS

- AC

- 3T Level 5

X 

### MU SS

- AC

- 3T Level 5 

### ) + INST SS

- AC

- 3T Level 5 

### x ISTINDEX

= $ 761.60 x 2. 711 + $ 187.61 x 1.581 + $ 508 x 0. 677 = $ 2,705.22

W here :

∆EQP = increase in product price ($),

∆MFG = increase in manufacturer price ($)

, and

MU = markup factor (base or incremental, as shown in Table 8.2

. 12 and Table

8.2

. 13

, respectively)

.

Table 8.2

. 23 presents the shipments

- weighted average product price, installation costs, and total installed costs for the representative product split

- system air conditioner (Coil

- Only) at the baseline level and at each efficiency lev el examined. Table 8.2

. 24 through Table 8.2

. 28 present these data for the othe r product classes.

Table 8.2

. 23 Shipments

- Weighted Product Price, Installation Cost, and Total Installed

Costs for Split

- System CA C (Coil

- Only) *

Efficiency Level

SEER Product Price (Including Markups)
2009$ Installation

Cost
2009$ Total Installed

Cost
2009$

National Average

13 1,584 442 2,026

13.5 1,632 442 2,074

14 1,688 442 2,130

14.5 1,751 442 2,193

15 2,243 512 2,755

15.5 2,742 582 3,324

16 2,834 582 3,416

16.5 2,915 582 3,497

17 3,004 582 3,586

18 3,073 582 3,655

Hot

- Humid Region

13 1,501 333 1,834

13.5 1,546 333 1,880

14 1,600 333 1,934

### 8

- 30 14.5 1,660 333 1,993

15 2,129 386 2,515

15.5 2,605 439 3,044

16 2,691 439 3,130

16.5 2,769 439 3,208

17 2,854 439 3,293

18 2,926 439 3,365

Hot

- Dry Region

13 1,976 607 2,582

13.5 2,036 607 2,642

14 2,106 607 2,713

14.5 2,184 607 2,791

15 2,807 703 3,510

15.5 3,439 799 4,238

16 3,552 799 4,351

16.5 3,656 799 4,455

17 3,771 799 4,570

18 3,874 799 4,673
Rest of Country

13 1,586 541 2,127

13.5 1,633 541 2,175

14 1,690 541 2,231

14.5 1,753 541 2,295

15 2,237 627 2,864

15.5 2,728 713 3,440

16 2,821 713 3,534

16.5 2,898 713 3,611

17 2,984 713 3,696

18 3,040 713 3,753 * Details may not add to total due to rounding.



### Table 8.2

. 24 Shipments

- Weighted Product Price, Installation Cost, and Total Installed

Costs for Split

- System CA C (Blower

- Coil) *

Efficiency Level

SEER Product Price (Including Markups)

2009$ Installation

Cost
2009$ Total Installed

Cost
2009$

National Average

13 2,570 445 3,015

13.5 2,633 445 3,078

14 2,698 445 3,142

14.5 2,761 445 3,206

15 2,825 445 3,269

15.5 2,893 445 3,337

16 2,962 445 3,407

### 8

- 31 16.5 3,032 445 3,477

17 3,104 445 3,549

18 3,256 445 3,701

19 3,379 445 3,824

20 3,508 445 3,953

21 3,645 445 4,089

22 3,787 445 4,231

23 3,838 445 4,283

24.5 3,918 445 4,362

Hot

- Humid Region

13 2,438 335 2,774

13.5 2,498 335 2,833

14 2,559 335 2,894

14.5 2,619 335 2,955

15 2,679 335 3,015

15.5 2,743 335 3,079

16 2,809 335 3,145

16.5 2,875 335 3,211

17 2,943 335 3,279

18 3,087 335 3,422

19 3,206 335 3,541

20 3,330 335 3,666

21 3,462 335 3,797

22 3,598 335 3,933

23 3,651 335 3,986

24.5 3,733 335 4,069

Hot

- Dry Region

13 3,214 610 3,825

13.5 3,293 610 3,903

14 3,374 610 3,984

14.5 3,453 610 4,063

15 3,532 610 4,142

15.5 3,616 610 4,226

16 3,703 610 4,313

16.5 3,789 610 4,399

17 3,878 610 4,488

18 4,067 610 4,677

19 4,227 610 4,837

20 4,394 610 5,004

21 4,571 610 5,182

22 4,755 610 5,365

23 4,831 610 5,442

### 8

- 32 24.5 4,949 610 5,559

Rest of Country

13 2,565 545 3,110

13.5 2,627 545 3,172

14 2,692 545 3,236

14.5 2,755 545 3,300

15 2,819 545 3,364

15.5 2,887 545 3,432

16 2,957 545 3,502

16.5 3,028 545 3,572

17 3,100 545 3,645

18 3,254 545 3,798

19 3,370 545 3,915

20 3,493 545 4,038

21 3,622 545 4,167

22 3,757 545 4,302

23 3,800 545 4,344

24.5 3,865 545 4,410

* Details may not add to total due to rounding.



### Table 8.2

. 25 Shipments

- Weighted Product Price, Installation Cost, and Total Installed

Costs for Split

- System HP *

Efficiency Level

SEER Product Price (Including Markups)

2009$ Installation

Cost
2009$ Total Installed

Cost
2009$

National Average

13 2,499 435 2,934

13.5 2,564 435 2,999

14 2,630 435 3,065

14.5 2,700 435 3,135

15 2,812 442 3,254

15.5 2,923 449 3,372

16 3,022 449 3,471

16.5 3,097 449 3,546

17 3,172 449 3,621

18 3,321 449 3,770

19 3,426 449 3,874

20 3,540 449 3,988

21 3,653 449 4,102

22 3,701 449 4,149

Hot

- Humid Region

13 2,439 364 2,804

### 8

- 33 13.5 2,503 364 2,867

14 2,567 364 2,932

14.5 2,635 364 3,000

15 2,744 370 3,114

15.5 2,851 375 3,226

16 2,948 375 3,323

16.5 3,021 375 3,396

17 3,095 375 3,470

18 3,242 375 3,617

19 3,343 375 3,718

20 3,454 375 3,829

21 3,565 375 3,940

22 3,608 375 3,983

Hot

- Dry Region

13 3,145 663 3,808

13.5 3,227 663 3,890

14 3,310 663 3,973

14.5 3,398 663 4,061

15 3,539 673 4,212

15.5 3,679 682 4,361

16 3,801 682 4,483

16.5 3,893 682 4,575

17 3,985 682 4,667

18 4,169 682 4,851

19 4,316 682 4,998

20 4,476 682 5,158

21 4,636 682 5,318

22 4,705 682 5,387

Rest of Country

13 2,474 592 3,065

13.5 2,537 592 3,129

14 2,601 592 3,193

14.5 2,670 592 3,262

15 2,780 600 3,380

15.5 2,890 609 3,499

16 2,988 609 3,597

16.5 3,061 609 3,670

17 3,136 609 3,744

18 3,280 609 3,889

19 3,381 609 3,990

20 3,490 609 4,099

21 3,599 609 4,208

### 8

- 34 22 3,654 609 4,262

* Details may not add to total due to rounding.



### Table 8.2

. 26 Shipments

- Weighted Product Price, Installation Cost, and Total Installed

Costs for Single Package A/C *

Efficiency Level

SEER Product Price (Including Markups)

2009$ Installation

Cost
2009$ Total Installed

Cost
2009$

National Average

13 2,587 453 3,040

13.5 2,690 453 3,143

14 2,770 453 3,223

14.5 2,904 453 3,358

15 3,038 453 3,492

15.5 3,190 453 3,643

16 3,345 453 3,798

16.5 3,611 453 4,064

Hot

- Humid Region

13 2,383 346 2,729

13.5 2,478 346 2,825

14 2,552 346 2,898

14.5 2,676 346 3,022

15 2,799 346 3,145

15.5 2,938 346 3,285

16 3,081 346 3,427

16.5 3,327 346 3,673

Hot

- Dry Region

13 3,173 630 3,803

13.5 3,300 630 3,930

14 3,398 630 4,028

14.5 3,563 630 4,192

15 3,727 630 4,357

15.5 3,913 630 4,542

16 4,103 630 4,733

16.5 4,430 630 5,059

Rest of Country

13 2,439 562 3,001

13.5 2,537 562 3,099

14 2,612 562 3,174

14.5 2,739 562 3,301

15 2,865 562 3,427

15.5 3,008 562 3,570

### 8

- 35 16 3,154 562 3,716

16.5 3,405 562 3,967

* Details may not add to total due to rounding.



### Table 8.2

. 27 Manufacturer Shipments

- Weighted Selling Price (Including Transportation)

, Product Price, Installation Cost, and Total Installed Costs for Single Package HP *

Efficiency Level

SEER Product Price (Including Markups)

2009$ Installation

Cost
2009$ Total Installed

Cost
2009$

National Average

13 3,300 323 3,623

13.5 3,373 323 3,696

14 3,505 323 3,828

14.5 3,673 323 3,996

15 3,840 323 4,163

15.5 4,029 323 4,353

16 4,284 323 4,607

16.5 4,543 323 4,866

Hot

- Humid Region

13 3,046 264 3,311

13.5 3,114 264 3,378

14 3,235 264 3,500

14.5 3,390 264 3,654

15 3,545 264 3,809

15.5 3,720 264 3,984

16 3,955 264 4,219

16.5 4,194 264 4,458

Hot

- Dry Region

13 4,056 481 4,537

13.5 4,146 481 4,627

14 4,308 481 4,788

14.5 4,514 481 4,995

15 4,720 481 5,200

15.5 4,953 481 5,433

16 5,265 481 5,746

16.5 5,584 481 6,064

Rest of Country

13 3,118 429 3,546

13.5 3,187 429 3,616

14 3,311 429 3,740

14.5 3,470 429 3,898

15 3,627 429 4,056

### 8

- 36 15.5 3,807 429 4,236

16 4,047 429 4,476

16.5 4,292 429 4,721

* Details may not add to total due to rounding.



### Table 8.2

. 28 Manufacturer Shipments

- Weighted Selling Price (Including Transportation)

, Product Price, Installation Cost, and Total Installed Costs for Small

- Diameter High

Ve locity CA C *

Efficiency Level

SEER Product Price (Including Markups)

2009$ Installation

Cost
2009$ Total Installed

Cost
2009$

National Average

13 4,470 445 4,915

13.5 4,610 445 5,055

14 4,755 445 5,200

14.5 4,908 445 5,353

Hot

- Humid Region

13 4,275 335 4,610

13.5 4,408 335 4,744

14 4,547 335 4,883

14.5 4,693 335 5,029

Hot

- Dry Region

13 5,692 610 6,302

13.5 5,870 610 6,480

14 6,055 610 6,665

14.5 6,249 610 6,859

Rest of Country

13 4,375 545 4,919

13.5 4,511 545 5,056

14 4,654 545 5,198

14.5 4,803 545 5,347

* Details may not add to total due to rounding.



## Furnaces

Table 8.2

. 29 through Table 8.2

. 31 present the shipmen ts

- weighted average product price, installation costs, and total installed costs for the each furnace product class at the baseline level and at each efficiency level examined.

### 8

- 37 Table 8.2

. 29 Total Installed Cost for Non

- Weatherized Gas Furnaces by Region

Region Energy Efficiency Level, AFUE Equipment Price
2009$ Installation Cost
2009$ Total Installed Cost
2009$

Average Incr. Average Incr. Average Incr.

National 80%, baseline 858 927 1,786

90% 1,064 205 1,293 366 2,475 689

92 % 1,126 268 1,293 366 2,544 758

95% 1,271 413 1,293 366 2,705 919

98% 1,523 665 1,307 379 2,996 1,210

North 80%, baseline 876 1,024 1,901

90% 1,083 207 1,391 366 2,474 573

92 % 1,145 269 1,391 366 2,536 635

95% 1,294 418 1,391 366 2,685 784

98% 1,538 661 1,405 381 2,943 1,042

South 80%, baseline 831 783 1,614

90% 1,035 204 1,147 364 2,182 568

92 % 1,097 265 1,147 364 2,244 630

95% 1,237 406 1,147 364 2,384 770

98% 1,502 671 1,159 376 2,661 1,047



### Table 8.2

. 30 Total Installed Cost for Manufactured Home Gas Furnaces by Region

Region Energy Efficiency Level, AFUE Equipment Price
2009$ Installation Cost
2009$ Total Installed Cost
2009$

Average Incr. Average Incr. Average Incr.

National 80%, baseline 794 638 1,432

90% 1,021 227 1,019 382 2,040 608

92% 1,091 297 1,157 519 2,248 816

96% 1,240 446 1,300 662 2,540 1,108

North 80%, baseline 793 695 1,488

90% 1,019 226 1,092 398 2,112 624

92% 1,089 296 1,229 534 2,318 830

96% 1,238 445 1,373 678 2,611 1,123

South 80%, baseline 795 583 1,379

90% 1,023 227 949 366 1,972 593

92% 1,093 298 1,088 505 2,181 802

96% 1,243 447 1,230 646 2,472 1,094

### 8

- 38 Table 8.2

. 31 Total Installed Cost for Oil

- Fired Furnaces

Region Energy Efficiency Level, AFUE Equipment Price
2009$ Installation Cost
2009$ Total Installed Cost
2009$

Average Incr. Average Incr. Average Incr.

National 82%, baseline 2,128 880 3,008

83% 2,141 13 1,016 136 3,157 148

84% 2,154 26 1,239 359 3,394 385

85% 2,169 41 1,452 572 3,622 613

9 7% 2,575 447 2,235 1,355 4,810 1,802



### 8.2.3 Operating Cost Inputs

The operating cost is determined for households using data from the 2005 RECS and industry sources on repair cost and maintenance cost. The operating cost for commercial buildings is based on computer modeling of a representative commercial building in 237 climates. For the LCC analysis of central air conditioners (either split or package systems), the LCC of an increased efficiency level is calculated for those residential and commercial buildings that are determined to have a central air conditioner. For heat pumps (either split or package systems), the LCC of an increased efficiency level is calculated for those buildings that are determined to have a central heat pump. For furnaces, the LCC of an increased efficiency level is calculated for those buildings that are determined to have a central furnace. The LCC analysis results in a distribution of LCC savings ( i.e. , the LCC differ ence between the baseline product and product with a higher efficiency level) for 10,000 individual realizations at each higher efficiency level nationally and in each region. The analysis computes the mean LCC difference at each efficiency level in each r egion, as well as the percentage of buildings analyzed that have positive LCC savings associated with the more efficient product.

DOE defined the operating cost by the following equation:

OC = EC+ RC+ MC Eq. 8.2

. 5

Where:

OC = operating cost ($)

, EC = energy cost associated with operating the product ($),

RC = repair cost associated with component failure ($), and

MC = annual maintenance cost for maintaining product operation ($).

The remainder of this section provides information about the variables that DOE used to calculate the operating cost for CAC

, HP , and furnace products. Product lifetime, discount rate, and effective date of the amended energy conservation standard are requ ired for determining the operating cost and for establishing the operating cost present value. The annual energy costs of the product are computed from energy consumption per unit for the baseline efficiency and

standard

- compliant cases (efficiency level 2

, 3 , etc.), combined with the electricity prices. Chapter 7, Building Energy Use Characterization Analysis, provides complete details on the

### 8

- 39 central air conditioner product energy consumption results for three regions and the nation as a whole. The key inp uts for the determination of operating costs are shown below:

**•** Baseline and standard

- compliant annual energy consumption (kWh) (chapter 7);

**•** Electricity price (cents/kWh) (section 8.2.3.1 );

**•** Electricity price trend (section 8.2.3.2 );

**•** Repair cost ($) (section 8.2.3.3 );

**•** Maintenance cost ($) (section 8.2.3.4 );

**•** Equipment lifetime (years) (section 8.2.3.5 );

**•** Discount rate (percentage) (section 8.2.3.6 ); and

**•** Effective date of amended energy conservation standard (section 8.2.3.7 ).

8.2.3.1 Electricity Price A nalysis

Electricity price information is required to calculate the dollar benefits to consumers who purchase and operate a more efficient appliance. The electricity cost savings comprise the benefit

side of the cost

- benefit analysis used to define the LCC impacts of a proposed standard. In previous rulemakings, DOE has used estimates of marginal electricity prices to calculate these cost savings. The marginal price for a given consumer is the cost of the next increment of electricity use on the consumer’s u tility bill, and is the correct estimate of the value of savings that a consumer would see in the real world. In some cases, it may be sufficient to use estimates of average electricity prices, which are less accurate but simpler to calculate. However, if there is reason to believe that marginal prices differ significantly from average prices, the approximation is not justified. For a peak

- coincident end

- use such as air conditioning, there is a general expectation that the actual cost of operating the appli ance is higher than the average price of electricity. These increased costs are often reflected in utility tariff structures, through block rates, different types of demand charges, or mandatory time

- of

- use rates. Accurate estimation of marginal prices req uires taking rate structures into account explicitly.

In general, several methods and data sources can be used to calculate electricity prices. After reviewing the strengths and weaknesses of different approaches and the available data, the Department cho se to base the analysis on the utility tariffs comprising the TAP (Tariff Analysis Project) database. 13 

### The TAP database and calculation tools were first developed at Lawrence Berkeley National Laboratory for use in the Com mercial Unitary Air Conditioning (CUAC) rulemaking. 14 

### This approach provides an up

- to

- date and ge ographically diverse data set that can accurately capture real prices. Other data sources have various weaknesses that could lead to significant errors in the estimated electricity cost savings, and do not provide sufficient

information to allow DOE to res pond adequately to stakeholder comments. A more detailed discussion of electricity price data and calculation methods is presented in appendix 8

- F , along with a description of the tariff

- based approach, the data used, and validation tests. Detailed

documen tation is also available in published reports. 10, 11, 15 

### Residential electricity cost savings are calculated based on the default tariffs collected in the TAP database. Currently, for all

### 8

- 40 utilities the default tariff is not time

- of

- use. A large number of utilities offer optional time

- of

- use (TOU) tariffs, but there are cur rently very few customers enrolled in these optional rate plans.

A ppendix 8

- G provides a quantitative comparison of prices for consumers on TOU or default

tariffs for utilities that offer both

.

For the analysis conducted for CACs and HPs , electricity price s are required for both residential and commercial consumers. The LCC is based on a consumer sample derived from RECS and EIA’s Commercial Building Energy Consumption Survey (CBECS), 16 

### and both an

ave rage annual price and a seasonal marginal price are required for each household or building in the sample. Following the methodology in the LCC, the consumer sample is also segregated according to product type ( i.e.

, CAC or HP ). The basic methodology is to estimate the customer’s monthly electricity use and to use the tariff data to calculate the corresponding electricity bill. Empirical marginal prices (EMPs) are calculated by taking the difference between the bill for the baseline electricity use and the bill for a candidate standard level and then dividing by the change in energy use. This approach requires estimation of monthly consumer electricity use for the baseline and the energy savings associated with each candidate standard

level. As both the rate structures and the required energy data differ significantly for residential

and commercial consumers, the details of the approach for these two sectors are discussed separately.



## Calculation of Residential Prices (Central Air Conditioners and Heat Pumps)

The calculation methodology provides, for each household in the building sample, an average annual price and a monthly marginal price. To compute these prices, the monthly baseline energy consumption must first be estimated. This is done using the monthly billing data

from the RECS 2001 dataset

, because the detailed monthly billing data from the RECS 2005 was considered to be proprietary and could not be used; details of the calculation are presented in

a

ppendix 8

- F . Given the monthly energy use, 12 monthly bills per household are calculated using the tariffs. To increase the effective size of the sample, within a region each household is paired

with each utility in its region. DOE refers to the pairing of a household with a utility as an

account

. Th e utilities are weighted by the fraction of customers they serve within a region. 17, 18



### Taking the weighted sum over accounts provides a single set of prices for each household.

The annual average baseline price is calculated as a simple average over the 12 monthly baseline bills. To calculate monthly marginal prices for each accou nt, the monthly energy use is decremented by 7%, and the bill recalculated. The marginal price in each month is defined as the bill savings divided by the energy savings under this test. This will be the valid price under all

candidate standard levels. Mon thly variability in the marginal price is due primarily to seasonal rates, as season definitions vary by utility. Within the LCC, the annual cost savings are equal to the monthly marginal price times the monthly energy savings, summed across months. A

desc ription of how the monthly energy savings are estimated for each efficiency level is given in

a

ppendix 8

- G

.

To provide an indication of the prices that result from this analysis, Table 8.2

. 32 shows the annual average price and marginal prices for January and July. The table presents regional averages calculated for the hot

- humid, hot

- dry, and rest

- of

- country regions defined for this

### 8

- 41 rulemaking. The table also shows th e total RECS weight associated with the household sample for each product type. Note that these regional averages are for information only; the LCC uses

household

- level prices.

Table 8.2

. 32 Regional A verages o f the A nnual A verage Prices and January and July

M arginal P rices

Product and Region RECS Nweight Residential Electricity Prices

cents/kWh

Annual Average Price January Marginal Price July Marginal Price

Central Air

Hot

- Humid 19,045,578 10.04 8.86 9.75

Hot

- Dry 6,164,451 16.11 19.79 19.97

Rest of Country 25,769,446 10.73 9.11 10.57

Nation 50,979,476 11.12 10.30 11.40

Heat Pump

Hot

- Humid 5,545,454 10.01 9.50 10.20

Ho t

- Dry 837,752 14.35 16.22 15.80

Rest of Country 3,608,821 9.68 8.52 9.93

Nation 9,992,026 10.26 9.71 10.57



## Calculation of Commercial Prices (Central Air Conditioners and Heat Pumps)

Electricity tariffs for commercial consumers can be very complex, incorporating block rates, seasonal rates, demand charges, time

- of

- use rates, etc. To calculate commercial electricity bills requires both the monthly consumption and demand; for utilities w ith mandatory TOU tariffs, consumption and demand data are required for each TOU period. For the central air conditioner and HP analysis, this data is provided from building simulations. The simulation approach is described in more detail in c hapter 7. Briefly, in this approach a representative set of small commercial building s is simulated at several SEER levels across the full set of weather

locations defined in the TMY2 dataset. d



### Given the monthly bills, the bill savings in dollars for each account at each SEER level are determined relative to the baseline bill. The EMP can be calculated by taking the ratio of t he bill savings to the energy savings. Note that, as far as the analysis is concerned, the EMP is a The simulation output for SEER 13 is taken as the

baseline. As with the residential data, a set of accounts are created by pairing each building in the simulation set with each utility in its region. For the commercial analysis the regions are defined as census divisions. Once a building is assigned to a utility, the tariff is assigned automatically based on the tariff rules and the annual peak demand or energy consumption, or both. For each account and each SEER level, monthly energy and demand values, by TOU period if necessary, are determined from the hourly simulation outpu t. With this data, monthly bills can be calculated using the tariffs.

d TMY means typical meteorological year; version 3 of this dataset is the most recent.

### 8

- 42 derived quantity that is used for information purposes only; the LCC uses the total annual bill savings for each customer directly.

The commercial tariff da ta were last updated in 2004. To convert to 2008$, two datasets were used: the report, Average Regulated Retail Price of Electricity for the years 2004 through

2007, 2 

### and the EEI Typical Bill reports for 2007 to 2008. 19 

### Based on these data, a weighted

average price escalation factor for each regi on was calculated using consumer counts as the weights. The consumer counts come from the most recent EIA Form 861 data, which is for

2006. 19, 20 

### EIA data from 2003 through 2006 were used to determine how much the rate of price

escalation differs on average between the publicly and the privately owned utility companies.

To give an indication of the prices obtained with this methodology, Table 8.2

. 33 shows

the r egional average values of the EMP at the SEER levels simulated. These regional averages were calculated based on population

- weighting of the building simulation sample. The table also shows the scaling factors used to convert from 2004 to 2008 nominal doll ars. Investigation of changes in the Consumer Price Index for electricity showed little or no net change from 2008 to 2009, so these prices were assumed to prevail in 2009 as well. Note that the EMP varies by SEER level, and this variation may be non

- monot onic. This behavior results from the complex block structures for both demand and energy charges that exist in commercial tariffs. 18



### Table 8.2

. 33 Effective Marginal Price by Region for the Commercial Building Sample (¢/kWh).

Census

Division Marginal Prices

cents/kWh Scaling

Factor*

Central Air Conditioners Heat Pumps

SEER 14 SEER 16 SEER 19 SEER 14 SEER 16 SEER 19

1 32.7 22.1 25.3 28.5 19.5 21.9 1.44

2 25.0 17.4 19.6 22.6 15.4 17.4 1.15

3 22.2 14.3 16.6 19.0 12.2 14.1 1.25

4 7.4 6.6 6.9 8.0 6.5 6.9 1.07

5 14.6 12.3 13.1 14.6 11.7 12.6 1.36

6 10.7 9.5 10.0 10.3 9.1 9.4 1.28

7 17.5 14.8 16.0 16.3 13.5 14.5 1.34

8 10.9 9.8 10.1 13.2 9.8 10.6 1.18

9 12.7 12.2 12.5 13.6 11.6 11.8 1.09

* The scaling factors used to convert from 2004 $ to 2008 $

.



## Calculation of Residential Prices (Furnaces)

Using data from EIA, DOE derived average annual monthly energy prices for 13 geographic areas in the United States

— the nine U.S. census divisions, with four large states (New York , Florida, Texas, and California) treated separately. For census divisions containing one of these large states, DOE calculated the regional average values leaving out data for the large state; for example, the Pacific region average does not include Calif ornia, and the West

### 8

- 43 South Central does not include Texas. Using these data , DOE assigned an appropriate price to

each household in the sample, depending on its location.

To be able to determine monthly prices for use in the furnace analysis, DOE developed monthly energy price factors for each fuel. For a detailed discussion of the development of monthly energy price factors, see appendix 8

- I , Monthly Energy Price Factor Calculations.

Residential Electricity Prices

. DOE derived 20 09 annual electricity prices from EIA

Form 861 data

. 21 

### The EIA Form 861 data are published annually and include annual electricity sales, revenues from electricity sales, and number of consumers for the residential, commercial, and industrial sectors at the utility level. DOE calculated annual regional electricity prices by weighting each utility’s average price by the number of electricity consumers in each utility’s service area. DOE then aggregated the prices by the nine U.S. c ensus d ivisions and four large

states

. Table 8.2

. 34 shows the monthly average results for each geographic area.

Table 8.2

. 34 Average Electricity Pri ces in 200 9

Geographic Area Residential
2009$/kWh

New England $0.174

Middle Atlantic (excludes NY) $0.135

East North Central $0.111

West North Central $0.092

South Atlantic (excludes FL) $0.108

East South Central $0.095

West South Central (excludes TX) $0.087

Mountain $0.101

Pacific (excludes CA) $0.099

New York $0.178

Florida $0.150

Texas $0.127

California $0.123

U.S. $0.121



### Residential Natural Gas Prices

. DOE obtained the data for the natural gas price

calculation from EIA’s Natural Gas Navigator. 22 

### This publication includes a compilation of monthly natural gas prices by s tate for residential, commercial, and industrial customers. DOE weighted the residential natural gas prices for each s tate by the number of natural gas consumers

in each s tate 23 

### and transformed the values from units of $/tcf to $/MMBtu. Finally, DOE aggregated and averaged the prices by the nine U.S. c ensus d ivisions and four large states. Table

8.2

. 35 displays the 2009 annual natural gas prices.

### 8

- 44 Table 8.2

. 35 Average Residential Natural Gas Prices in 2009

Geographic Area Residential Average Prices
2009$/MMBtu
New England $16.37

Middle Atlantic (excludes NY) $15.24

East North Central $11.65

West North Central $11.64

South Atlantic (excludes FL) $17.17

East South Central $14.38

West South Central (excludes TX) $13.74

Mountain $11.99

Pacific (excludes CA) $14.69

New York $15.27

Florida $9.07

Texas $12.43

California $21.01

U.S. $12.92

Source: EIA Natural Gas Navigator

.



### Residential Liquid Petroleum Gas ( LPG ) Prices

. DOE collected 200 8 average LPG prices from EIA’s 200 8 State Energy Consumption, Price, and Expenditures Estimates (SEDS). 24



### SEDS includes annual LPG prices for residential, commercial, industrial, and transportation consumers by s tate. DOE weighted the average residential LPG prices for each s tate by the amount of LPG consumed by each state. Finally, DOE aggregated and averaged the prices by 13 geographic areas ( Table 8.2

. 36 )

.

Table 8.2

. 36 Average Residential LPG Prices in 2008

Geographic Area Annual Average
2009$/MMBtu

CD 1

- New England $33.96

CD 2

- Middle Atlantic (excludes NY) $34.19

CD 3

- East North Central $26.95

CD 4

- West North Central $24.04

CD 5

- South Atlantic (excludes FL) $31.74

CD 6

- East South Central $30.86

CD 7

- West South Central (excludes TX) $27.78

CD 8

– Mountain $28.78

CD 9

- Pacific (excludes CA) $31.43

CD 10

- New York $33.26

CD 11

– California $33.78

CD 12

– Texas $30.79

CD 13

– Florida $38.72

CD 14

- United States $29.26

### 8

- 45 Residential Fuel Oil Prices

. DOE collected 200 8 average fuel oil prices from EIA’s 200 8 State Energy Consumption, Price, and Expenditures Estimates (SEDS). 24 

### SEDS includes annual

fuel oil prices for residential, commercial, industrial, and transportation consumers by s tate. DOE weighted the average residential fuel oil prices for each s tate by the amount of fuel oil consumed by each state. Finally, DOE aggregated and averaged the prices by 13 geographic areas ( Table

8.2

. 37 )

.

Table 8.2

. 37 Average Residential Fuel Oil Prices in 2008

Geographic Area Annual Average
2009$/MMBtu

CD 1

- New England $24.17

CD 2

- Middle Atlantic (excludes NY) $24.78

CD 3

- East North Central $23.56

CD 4

- West North Central $23.48

CD 5

- South Atlantic (excludes FL) $24.13

CD 6

- East South Central $23.89

CD 7

- West South Central (excludes TX) $24.09

CD 8

– Mountain $23.86

CD 9

- Pacific (excludes CA) $24.79

CD 10

- New York $24.61

CD 11

– California $25.62

CD 12

– Texas $24.60

CD 13

– Florida $24.24

CD 14

- United States $24.27



### 8.2.3.2 Electricity Price Trend

The electricity price trend provides the relative change in electricity prices for future years out to the year 2045 . Estimating future electricity prices is difficult, especially considering that there are efforts in many states throughout the country to restructure the electricity supply industry.



## Central Air Conditioners and Heat Pumps

DOE uses regional projections of residential and commercial average electricity prices for heating and cooling end

- uses calculated in the NEMS

- BT model at the census divi sion level to develop estimates of future electricity costs for the regions covered in this rulemaking. DOE

a

pplie d projected trend s in regional average electricity prices separately for heating and cooling

to each customer’s 2009 electricity prices. Of the following four scenarios, the main LCC analysis uses the AEO 2010 reference price scenario:

1. Constant energy prices at 200 9 values (Constant index at 200 9 = 1.0)

2. AEO 2010 , High Growth (“High Growth ” in Figure 8.2

. 1

**−** Figure 8.2

. 4 )

3. AEO 2010 , Reference Case (“ Reference ” in Figure 8.2

. 1

**−** Figure 8.2

. 4 )

### 8

- 46 4. AEO 2010 , Low Growth (“Low Growth ” in Figure 8.2

. 1

**−** Figure 8.2

. 4 )

Figure 8.2

. 1 shows the trends for the three AEO 2010 residential cooling price projections

in which prices are assumed to change. DOE extrapolated the values in later years ( i.e. , after

203 5 ) from their relative sources because AEO 2010 does not forecast beyond 203 5

. To arrive at values for these later years, DOE used the price trend from 2020 to 203 5 o f the forecast to establish prices in the years 203 5 to 2045

.

The default electricity price trend scenario used in the LCC analysis is the trend from the

AEO 2010 Reference Case, which is the middle line in Figure 8.2

. 1 through Figure 8.2

. 4

. Spreadsheets used in calculating the LCC have the capability to analyze the othe r electricity price trend scenarios, namely, the AEO 2010 High Growth and the AEO 2010 Low Growth price trends and constant energy prices. A similar set of trend scenarios for the residential heating, commercial cooling, and commercial heating sector are s hown in Figure 8.2

. 2 through Figure

8.2

. 4

.

Figure 8.2

. 1 Electricity Price Trends for Residential Cooling to 204 5 (Index: 2009=1.00) 0.80 0.90 1.00 1.10 1.20 1.30 1.402009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Hot

- Humid

0.80 0.90 1.00 1.10 1.20 1.30 1.402009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

National

0.80 0.90 1.00 1.10 1.20 1.30 1.402009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Hot

- Dry
0.80 0.90 1.00 1.10 1.20 1.30 1.402009201220152018202120242027203020332036203920422045 Reference

High Growth

Rest of Country

### 8

- 47 Figure 8.2

. 2 Electricity Price Trends for Residential Heating to 2045 (Index: 2009=1.00) 0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.252009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Hot

- Humid

0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.252009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

National

0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.252009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Hot

- Dry

0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.252009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Rest of Country

### 8

- 48 Figure 8.2

. 3 Electricity Price Trends for Commercial Cooling to 2045 (Index: 2009=1.00) 0.80 0.90 1.00 1.10 1.20 1.30 1.402009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Hot

- Humid

0.80 0.90 1.00 1.10 1.20 1.30 1.402009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

National

0.80 0.90 1.00 1.10 1.20 1.30 1.402009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Hot

- Dry

0.80 0.90 1.00 1.10 1.20 1.30 1.402009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Rest of Country

### 8

- 49 Figure 8.2

. 4 Electricity Price Trends for Commercial Heating to 2045 (Index: 2009=1.00)



## Furnaces

DOE used price forecasts by the EIA to estimate future trends in natural gas and electricity prices. To arrive at prices in future years, it multiplied the average prices described in the preceding section by the forecast of annual average price changes in EIA’s AEO 2 010. To estimate the trend after 2035, DOE followed past guidelines provided to the Federal Energy Management Program (FEMP) by EIA and used the average rate of change during 2020

– 2035 for electricity, natural gas, and LPG.

DOE calculated LCC and PBP using three separate projections from AEO 20 10 : Reference, Low Economic Growth, and High Economic Growth. The high

- and low

- growth cases show the projected effects of alternative growth assumptions on energy markets. Figure

8.2

. 5 through Figure 8.2

. 8 show the residential and commercial electricity, natural gas, LPG, fuel oil price trends, respectively, based on the three AEO 2010 projections. For the LCC results

, DOE used only the energy price forecasts from the AEO Reference Case. 0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.202009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Hot

- Humid

0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1.302009201120132015201720192021202320252027202920312033203520372039204120432045 Low Growth

Reference

High Growth

National

0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1.302009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Hot

- Dry

0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1.302009201220152018202120242027203020332036203920422045 Low Growth

Reference

High Growth

Rest of Country

### 8

- 50 Figure 8.2

. 5 Residential Electricity Price Trends

Figure 8.2

. 6 Residential Natural Gas Price Trend 10.0 10.5 11.0 11.5 12.0 12.5 13.0

2005 2010 2015 2020 2025 2030 20352008¢/kWh High Growth

Reference

Low Growth

9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0

2007 2010 2013 2016 2019 2022 2025 2028 2031 2034Natural Gas Price (2008$ / MMBtu)

Reference

High Growth

Low Growth

### 8

- 51 Figure 8.2

. 7 Residential LPG Price Trend

Figure 8.2

. 8 Resi dential Fuel Oil Price Trend

8.2.3.3 Repair Cost

The repair cost is the cost to the consumer for replacing or repairing components in the CAC, HP, or furnace e quipment that have failed. 20.0 22.0 24.0 26.0 28.0 30.0 32.0 34.0 36.0 38.0

2007 2010 2013 2016 2019 2022 2025 2028 2031 2034LPG Price (2008$ / MMBtu)

Reference

High Growth

Low Growth

16.0 18.0 20.0 22.0 24.0 26.0 28.0 30.0

2005 2010 2015 2020 2025 2030 20352008$/MMBtu High Growth

Reference

Low Growth

### 8

- 52 

## Central Air Conditioners and Heat Pumps

The assumed annualized repair cost for baseline efficiency central air

- conditioning and heat pump equipment ( i.e. , the cost the consumer pays annually for repairing the equipment) and equipment with efficiencies of 13 SEER and greater are based on the following expression:



### ) ( ) (

r r

BASE STD

Base STD 

### st m EQP EQP RC RC **• •**  **• =**  Eq. 8.2

. 6

Where:

RC STD 

### = repair cost at a standard efficiency level ( e.g. , level 2, 3),

RC BASE 

### = repair cost at the base efficiency level (level 1), EQP STD 

### = equipment price (consumer price for only the equipment) at a standard level, EQP BASE 

### = equipment price (consumer price for only the equipment) at the base efficiency level,

m r 

### = mechanical contractor markup index in region r , and

st

r 

### = state and loca l tax rate index (factor relative to national average).

Data on average repair costs are scarce in published sources. However, based on information in a few consumer advice websites and discussions with service representatives, it appears that the range of values for parts and labor for major repairs, such as replacing a compressor, is between $700 and $1,500. 25, 26, 27, 28, 29, 30, 31 

### Furthermore, it appears that

compressor re placements are rarely needed before about the eighth year and are often covered by warranty, if needed. In addition, if the equipment is older than 15 years, it is usually economically rational to replace the entire system rather than to incur the cost of a major repair for the limited average equipment life remaining. Because this is a range rather than a specific value associated with a particular technology, DOE applied the range to all classes and assumed that the range included average national values for wholesale markups, mechanical contractor markups, and sales taxes.

Through 14 SEER, system technology generally does not incorporate sophisticated electronic components, which are believed to incur higher repair costs. Increases in SEER are generally a chieved through more efficient single

- speed compressors or more efficient or larger heat exchanger coils. Systems with efficiencies beyond 14.5 SEER start to incorporate two

- speed

and variable

- speed fans, as well as larger coils and more complex electronic s, all of which are expected to be more susceptible to failure and cost more to repair.

Table 8.2

. 38 and Table 8.2

. 39 show the basic average annualized repair costs by standard level for split

- system and single

- package central air conditioners and heat pumps. The annualized value accounts for the probability of needing a major repair, its uncertain cost, and the time period before such repair might be required (between 8 and 15 years). Since equipment prices are a function of variables that are represented by distributions rather than single

- point values ( e.g

. , manufacturer, distributor, dealer, and builder markups, installation costs, and sales

### 8

- 53 tax), repair costs are actually represented by a distribution of values rather than just the average

values shown in Table 8.2

. 38 and Table 8.2

. 39

.

Table 8.2

. 38 Split

- System Central Air Conditione r and Heat Pump Basic Average

Annualized Repair Costs by Efficiency Level

Efficiency

Level

SEER Repair Costs for Representative Standard

- Compliant Products
2009$ Split

- S ystem AC (Coil

- Only) Split

- S ystem AC (Blower

- Coil) Split

- S ystem HP

2 T 3 T 5 T 2 T 3 T 5 T 2 T 3 T 5 T

13 56.54 63.48 88.43 56.67 63.48 84.88 56.67 63.48 84.88

13.5 58.41 65.32 90.96 58.03 65.07 86.85 57.91 65.23 86.85

14 60.47 67.64 94.05 59.40 66.70 88.92 59.16 66.96 88.91

14.5 62.59 70.27 97.70 60.73 68.30 91.13 60.54 68.74 91.07

15 65.09 73.48 102.03 62.04 69.88 93.39 61.91 70.49 93.28

15.5 67.64 77.18 106.77 63.45 71.57 95.78 63.24 72.14 95.61

16 70.37 81.38 112.06 64.88 73.30 98.27 65.15 74.55 99.17

16.5 73.39 86.05 NA 66.26 75.08 100.82 66.53 76.29 101.82

17 76.59 NA NA 67.67 76.90 103.49 67.91 78.03 104.47

18 83.54 NA NA 70.73 80.66 109.21 70.73 81.53 110.57

19 NA NA NA 73.74 84.60 NA 73.71 85.03 NA

20 NA NA NA 76.85 88.75 NA 76.67 89.11 NA

21 NA NA NA 80.08 93.18 NA 79.72 93.10 NA

22 NA NA NA 83.39 97.82 NA 82.86 NA NA

23 NA NA NA 86.75 NA NA NA NA NA

24.5 NA NA NA 91.93 NA NA NA NA NA



### Table 8.2

. 39 Single

- Package and Niche Central Air Conditioner and Heat Pump Basic Average Annualized Repair Costs by Efficiency Level

Efficiency

Level

SEER Repair Costs for Representative Standard

Compliant Products
2009$

Single

Package

AC Single

- Package

HP Small Diameter High Velocity

3T 3T 3T

13 63.48 63.48 63.48

13.5 65.89 64.84 65.50

14 67.75 67.27 67.61

14.5 70.89 70.38 69.81

15 74.01 73.48 NA

15.5 77.54 76.99 NA

16 81.15 81.70 NA

16.5 87.37 86.49 NA



### Because labor rates and sales taxes vary across the country and repair costs also vary for any given efficiency level for each product type, Table 8.2

. 40 shows the ave rage annualized repair costs by region of the country and product type.

### 8

- 54 Table 8.2

. 40 Table Central Air Conditioner and Heat Pump Shipments

- Weighted Average

Annualized Repair Costs by Efficiency Level and Regio n

Efficiency

Level

SEER Shipments

- Weighted Repair Costs
2009$ Split

S ystem

AC (Coil

Only) Split

S ystem

AC (Blower

- Coil) Split

S ystem

HP Single Package

AC Single Package

HP Small

Diameter

High Velocity

National Average

13 65 65 64 65 64 64

13.5 67 66 66 67 66 66

14 69 68 68 69 68 68

14.5 72 69 70 73 72 71

15 75 71 72 76 75 NA

15.5 79 73 74 80 79 NA

16 82 75 76 84 84 NA

16.5 86 76 78 90 89 NA

17 89 78 80 NA NA NA

18 92 82 84 NA NA NA

19 NA 85 87 NA NA NA

20 NA 88 89 NA NA NA

21 NA 92 92 NA NA NA

22 NA 95 93 NA NA NA

23 NA 97 NA NA NA NA

24.5 NA 99 NA NA NA NA

Hot

- Humid

13 63 63 64 63 63 63

13.5 65 64 65 65 64 65

14 67 66 67 67 67 67

14.5 70 68 69 70 70 69

15 73 69 71 74 73 NA

15.5 76 71 73 77 77 NA

16 80 73 75 81 81 NA

16.5 83 74 77 88 86 NA

17 87 76 79 NA NA NA

18 90 80 83 NA NA NA

19 NA 83 86 NA NA NA

20 NA 86 89 NA NA NA

21 NA 89 91 NA NA NA

22 NA 93 92 NA NA NA

23 NA 94 NA NA NA NA

24.5 NA 97 NA NA NA NA

Hot

- Dry

13 70 69 69 70 70 70

13.5 72 71 70 73 71 72

14 74 73 72 75 74 75

14.5 77 75 74 79 78 77

15 80 76 76 82 81 NA

15.5 84 78 78 86 85 NA

16 88 80 81 91 91 NA

16.5 92 82 83 98 96 NA

### 8

- 55 17 96 84 85 NA NA NA

18 99 88 89 NA NA NA

19 NA 91 92 NA NA NA

20 NA 95 96 NA NA NA

21 NA 99 99 NA NA NA

22 NA 103 101 NA NA NA

23 NA 104 NA NA NA NA

24.5 NA 107 NA NA NA NA Rest of Country

13 67 66 65 64 64 64

13.5 69 68 67 67 65 66

14 71 69 69 69 68 68

14.5 74 71 70 72 71 71

15 77 73 72 75 75 NA

15.5 80 74 74 79 78 NA

16 84 76 77 83 83 NA

16.5 88 78 79 90 88 NA

17 91 80 81 NA NA NA

18 94 84 85 NA NA NA

19 NA 87 87 NA NA NA

20 NA 90 90 NA NA NA

21 NA 93 93 NA NA NA

22 NA 97 94 NA NA NA

23 NA 98 NA NA NA NA

24.5 NA 100 NA NA NA NA



## Furnaces

DOE estimate d repair costs at each considered efficiency level using a variety of sources, including 2010 R S Means Facility Repair and Maintenance Data , manufacturer literature, and

information f rom expert consultants. DOE account s for regional differences in labor cos ts.

DOE estimated that about 3% of furnaces are repaired annually based on Consumer
Reports data on frequency of repair for gas furnaces installed between 2000 and 2006. 32 

### DOE assumed that an average repair has a parts cost equivalent to one

- half of the equipment cost and requires 1.5 hours of labor.

Table 8.2

. 41 shows the annualized repair cost estimates for each product class.

### 8

- 56 Table 8.2

. 41 Annualized Repair Cost for Furnaces

Product Class Energy Efficiency Level, AFUE Repair Cost 2009$/year

Average Incr.

Non

- Weatherized Gas Furnaces 0 (80%, baseline) 0.51
1 (90%) 0.63 0.12
2 (92%) 0.67 0.16
3 (95%) 0.76 0.24
4 (98%) 0.90 0.39

Manufactured Home Gas

Furnaces 0 (80%, baseline) 0.57
1 (90%) 0.69 0.12
2 (92%) 0.72 0.16
3 (96%) 0.80 0.23

Oil

- Fired Furnaces 0 (82%, baseline) 0.89
1 (83%) 0.90 0.01
2 (84%) 0.91 0.01
3 (85%) 0.91 0.02
4 (97%) 1.13 0.24



### 8.2.3.4 Maintenance Cost

The maintenance cost is the routine annual cost to the consumer of maintaining equipment operation

. The maintenance cost excludes the cost associated with the replacement or repair of components that have failed (di scussed in section 8.2.3.3 ). I t is the cost associated with general maintenance ( e.g ., checking and maintaining refrigerant charge levels, cleaning heat exchanger coils).



## Central Air Conditioner

Virtually no published data are available on annual maintenance cost per unit. DOE

estimated the annualized maintenance costs for central air conditioner products based on fragmentary data available on the Internet. The cost of the basic preventative maintenance for an

individual central air conditioner unit is specified as a range of values from $20 per year (2009$) for minimal maintenance (homeowner replaces the unit’s air filter two times per year) to an

advertised full maintenance service at $120 (2009$) per year. 33 

### The full maintenance service involved the following activities:

For the Indoor Component:

**•** Inspect refrigerant lines for signs of leakage ;

**•** C heck and maintain standard air filters ;

**•** Check operating temperatures ;

**•** Check blower or air handler operation and lubricate as necessary ;

**•** Check blower belt and tension ;

### 8

- 57 **•** Check condensate drain and maintain as necessary ; and

**•** Check operational controls and ther mostat

.

For the Outdoor Component:

**•** Inspect refrigerant lines for signs of leakage ;

**•** Inspect and clean condenser coil as necessary ;

**•** Check condenser fan operation and lubricate as necessary ;

**•** Check operation and condition of the compressor contactor ;

**•** Check sy stem voltage ; and

**•** Check operating temperatures

.

D ata were not available to indicate how maintenance costs vary with equipment efficiency, but stakeholder comments on the framework document indicated that they likely increase as equipment efficiency increa ses. However, DOE was not able to identify any components of preventative maintenance costs that increase as equipment efficiency increases. Due to differences in labor costs, maintenance costs were expected to vary regionally with labor

costs. Installatio n costs vary in the same geographic pattern, so average national costs were multiplied times the installation cost index.



## ) (

r Base STD 

## ic M M **• =**  Eq. 8.2

. 7

Where:

M STD 

### = repair cost at a standard efficiency level ( e.g. , level 2, 3),

M BASE 

### = repair cost at the base efficiency level (level 1), and

ic

r 

### = installation cost index in region r (factor relative to national average).

Because labor rates and sales taxes vary across the country, basic maintenance costs vary by region. However, there appears to be no reason for the costs of basic maintenance activities to vary by product class, by efficiency level, or by capacity within p roduct classes. Table 8.2

. 42 shows the shipment

- weighted average annual maintenance costs by region of the country and product class.

### 8

- 58 Table 8.2

. 42 Shipments

- Weighted Central Air Conditioner and Heat Pump Basic Average

Annual Maintenance Costs

Efficiency

Level Average Maintenance Costs for Representative Standard

Compliant Products
2009$ Split

System

AC (Coil

Only) Split

System

AC (Blower

- Coil) Split

system

HP Single Package

AC Single Package

HP Small

Diameter

High Velocity

National Average 61 61 55 60 56 61

Hot

- Humid 46 46 46 46 46 46

Hot

- Dry 85 85 85 84 84 85

Rest of Country 74 74 74 74 74 74



## Furnaces

DOE estimate d repair costs at each considered efficiency level using a variety of sources, including 2010 R S Means Facility Repair and Maintenance Data , manufacturer literature, and

information f rom expert consultants. DOE account s for regional differences in labor costs.

DOE estimated costs for annual maintenance using data from a consumer survey 34 

### on the frequency with which owners of different types of furnaces perform maintenance. For condensing oil furnaces, the high quantity of sulfur in the fuel results in frequent cleaning of the secondary heat exchanger, and DOE accounted for this cost.

Table 8.2

. 43 shows the annualized maintenance cost estimates for each product class.

### 8

- 59 Table 8.2

. 43 Annualized Maintenance Cost for Furnaces

Product Class Energy Efficiency Level, AFUE Maintenance Cost 2009$/year

Average Incr.

Non

- Weatherized Gas Furnaces 0 (80%, baseline) 40.78
1 (90% ) 40.78 40.28

2 (92 % ) 40.78 40.28
3 ( 95%) 40.78 40.28
4 (98%) 40.78 40.28

Manufactured Home Gas

Furnaces 0 (80%, baseline) 40.78
1 (90% ) 40.78 40.23

2 (92 % ) 40.78 40.23
3 (96 %) 40.78 40.23

Oil

- Fired Furnaces 0 (82 %, baseline) 60.97
1 (83 % ) 60.97 60.10

2 (84 % ) 60.97 60.10
3 (8 5%) 60.97 60.10
4 (97 %) 176.85 188.20



### 8.2.3.5 Lifetime

DOE define d lifetime as the age when a central air conditioner or furnace unit is retired

from service. DOE used national survey data, along with manufacturer shipment data, to calculate the distribution of air conditioner and heat pump lifetimes. This analysis concluded that the mean lifetime for central air conditioners is 19.01 years, for heat pumps is 16.24 years, for

non

- weatherized gas furnaces is 23.68, for manufactured home gas furnaces is 18.80, and for oil

fired furnaces is 26.59.

EIA’s RECS 35 

### surveys occupied primary housing units, noting the presence of a range of appliances and placing the age of each appliance into several

- year bins. The U.S. Census’s
American Housing Survey (AHS) 36 

### surveys all housing, including vacant and second homes. Using the AHS data allowed DOE to adjust the RECS data to reflect some appliance use outside of primary residences. AHS also has a larger sample size, with correspondingly smaller sampling

e rror. By combining these survey results with the known history of appliance shipments (collected from manufacturer trade associations) DOE estimated the fraction of appliances of a given age still in operation. This survival function, which DOE assumed has the form of a cumulative Weibull distribution, provides an estimate of the average and median appliance

lifetime.

The Weibull distribution is a probability distribution function commonly used to measure

failure rates. 37 

### Its form is similar to an exponential distribution, which would model a fixed failure rate, except that it allows for a failure rate which chan ges over time in a particular

fashion. The cumulative distribution takes the form:

### 8

- 60 

# e x



## x P **β**

**α**

**θ ** 

** **  ** **  ****

**−**

**−**



## = ) ( for x > θ and P(x) = 1 for x ≤ θ

, Eq. 8.2

. 8

Where:

P(x) = probability that the appliance is still in use at age x ,

x = appliance age,

α = the scale parameter, which is the decay length in an exponential distribution, β = the shape parameter, which determines the way in which the failure rate changes in time, an d

θ = the delay parameter, which allows for a delay before any failures occur.

When β = 1, the failure rate is constant over time, and this distribution takes the form of a cumulative exponential distribution. For the case of appliances, β is commonly gre ater than 1, which results from a rising failure rate as the appliance ages. A plot of a Weibull distribution (DOE’s calculated air conditioner survival function) with α = 20.29, β = 1.89, and θ = 1.0 is

shown as Figure 8.2

. 5

.

The RECS survey is DOE’s primary resource for air conditioner and heat pump ages. For several appliances, including air conditioners, the survey asks respondents to place the appliance’s age into one of these bins:

**•** less than 2 years;

**•** 2 to 4 years;

**•** 5 to 9 years;

**•** 10 to19 years and

**•** more than 20 years.

The RECS survey has been conducted every 3 or 4 years for the last several decades. For this analysis, DOE used the surveys conducted in 1990, 1993, 19 97, 2001, and 2005. The AHS survey is conducted every other year, and DOE used the surveys conducted from 1991 to 2007. DOE used the AHS count of housing units with air conditioners to scale the RECS data to better

match the total installed stock. DOE used the surveys’ household

- level micro

- data to count households with shared or multiple air conditioners or heat pumps. Households that did not know the age of their appliances were allocated among the remaining age bins according to the distribution of respo ndents who did report their appliance age.

DOE used RECS appliance age data, AHS total installed stock data, and the history of appliance shipments to generate an estimate of the survival function. For example, DOE summed the total shipments from 5 to 9 ye ars prior to the RECS survey, and compared this number with the number of units of those ages still in use, to calculate one approximation of the surviving appliance fraction within that age bin. The AHS total stock acts as an “all ages” bin. By combining the age bins from five RECS surveys and nine AHS surveys with shipments data,

### 8

- 61 DOE had enough data to build a fit to a Weibull distribution and find the parameters ( α , β

, θ ) that best approximate the surviving units, using a least

- squares method. Because th e first two (youngest) RECS bin data tend to have a large scatter relative to the shipments in those years, DOE combined the RECS and shipments data in the first two bins. Generally, appliances do not tend to fail in large numbers during this period, so co mbining bins does not appreciably lower the accuracy of the shape of the distribution. DOE weighted each bin’s contribution to the sum of squares by the inverse of the variance in the survey results, which controls for the changes in sample size between RE CS bins, between RECS and AHS, and within each survey over time. 37



### RECS and AHS have complicated err or models; DOE used only the error due to finite sample size to determine the variance used to weight each data point’s contribution. The error due to sampling is less than 1% for AHS survey data and is typically about 5% for RECS age bins. The equation fo r the sum of squares DOE minimized is therefore:



# ( **)** 

# ( **) ∑**  **∑ −**  **+ −** 

j AHS j j j

i RECS i i i 

## Surv AHS Surv RECS

2

, 2

2

, 2



## σ **σ** Eq. 8.2

. 9

Where:

i = the identifier for a bin from a single RECS,
j = the identifier for a single AHS survey,

RECS i 

### = the number of appliances reported by RECS in bin i

, AHS j 

### = the number of appliances reported by AHS in survey year j

, Surv i 

### = the number of surviving appliances in bin i predicted by the Weibull distribution applied to the number of appliances shipped ( a function of α , β , and θ ),

σ

i ,RECS 

### = the standard error (square root of the variance) of the RECS data point for

bin i, and

σ

j,AHS 

### = the standard error (square root of the variance) of the AHS data point for

year j.

DOE adjusted the RECS and AHS survey data in several ways to place it on an even footing with the historical shipment data. In particular, DOE adjusted for the fact that the RECS survey is scaled to July of its reference year, the AHS survey is conducted in the middle portion of the year, and shipment data is provided for each calendar year. Adjustments included:

**•** DOE modeled the additional retirement of older appliances and their replacement by new ones that took place in the latter half of the survey year (after a given respondent had

been su rveyed), using the survival function. This had the effect of moving households from the older RECS age bins to the youngest age bin.

**•** For appliances installed directly in new construction, such as central air conditioners, DOE added units to the youngest RECS age bin and to the AHS total stock to represent half of the new construction for the final year of the survey, which were known to have installed the appliance type in question, using data from the U.S. Census for new

construction starts

.

### 8

- 62 **•** DOE assumed that 9 3% of appliances were installed in residences, while 7% were installed in commercial or other applications not counted by AHS or RECS.

**•** Households that shared an air conditioner were counted as owning half of one air conditioner, and households who reported owning more than one air conditioner were counted as owning two. (For AHS surveys before 1997, the number of air conditioners

wa s not reported; DOE assumed a linear increase with time in the fraction of homes with

two air

- conditioning units.)



## Assumptions

DOE’s lifetime

- calculation technique depends on several assumptions:

**•** Appliance lifetime can be modeled by a survival function. I n particular, a Weibull distribution is an appropriate survival function.

**•** The appliance survival function does not change over time.

**•** The survival function is independent of other household factors (such as household size, region, etc.) as well as product c lass (within air conditioners or heat pumps).

**•** The age bin for the appliance as reported by the RECS respondent is correct.

**•** The historical shipment data is correct.

**•** The Weibull delay parameter, θ , is limited to between 1 and 5 years.

Three of these assumptions are of particular importance. The first is the assumption that a Weibull distribution is the correct distribution to use for appliance retirement rates. This distribution is the standard distribution for use in lifetime analysis, but it is not guaranteed to reflect actual consumer behavior. The second assumption is that consumer behavior and mechanical appliance lifetime have not changed over time. This assumption required DOE to treat all data from different RECS surveys on an equal footing. Us ing only recent surveys (to potentially better reflect recent consumer behavior and appliance lifetime) would result in attempted least

- squares fits using a small number of data points, leading to large statistical uncertainty.

DOE limited the delay parame ter to between 1 and 5 years to reflect the range of common appliance warranties. A delay of less than 1 year would imply that some appliances fail or are replaced within their initial year of use, when they are commonly covered by parts and

labor warranti es. A delay of greater than 5 years implies that no appliances are replaced for some length of time after the end of the longest standard warranty. Fits with θ > 5 also commonly show nonsensical behavior with sharp changes in consumer behavior or appliance survival immediately following the “delay” period.

### 8

- 63 

## Central Air Conditioners

Table 8.2

. 44 shows the RECS and AHS data for air conditioners and the corresponding

to tal shipments and best

- fit Weibull calculation of stock by age bin. Figure 8.2

. 9 plots the data from the RECS portion of the third and fourth columns of Table 8.2

. 44 against each other to show the quality of the fit. Figure 8.2

. 10 plots the AHS survey total stock against the Weibull

based calculated stock. DOE allowed the delay parameter, θ

, to vary only between 1 and 5 years, which corresponds to common warranty periods (see discussion below); for air conditioners and heat pumps the best fit within this range is 1 year. This Weibull distribution is characterized by the parameters α = 20.29, β = 1.89, and θ = 1.0, and shown in Figure 8.2

. 11 . This distribution has a mean air conditioner lifetime of 19.01 years and a median lifetime of 17.70 years.

Table 8.2

. 44 Central Air Conditioners: Comparison of RECS and AHS with M odeled

S tock

RECS 2005 Age B in Shipments RECS S tock Modeled S tock 0 to 4 yrs. 23,384,298 21,121,201 23,202,596 5 to 9 yrs. 20,606,096 15,568,739 18,628,161 10 to 19 yrs. 26,252,849 15,840,393 16,908,120 20 or more yrs. 29,643,170 6,611,168 5,434,630

RECS 2001 Age B in Shipments RECS S tock Modeled S tock 0 to 4 yrs. 20,833,446 16,179,828 20,669,235 5 to 9 yrs. 15,707,082 14,511,234 14,252,361 10 to 19 yrs. 20,982,218 14,367,204 13,670,285 20 or more yrs. 23,056,758 5,583,734 4,771,136

RECS 1997 Age B in Shipments RECS S tock Modeled S tock 0 to 4 yrs. 16,822,938 12,213,941 16,697,701 5 to 9 yrs. 12,555,897 12,441,915 11,311,053 10 to 19 yrs. 16,825,109 10,799,049 10,843,901 20 or more yrs. 17,112,973 4,046,096 4,137,030

RECS 1993 Age B in Shipments RECS S tock Modeled stock 0 to 4 yrs. 12,781,848 11,450,065 12,671,267 5 to 9 yrs. 10,579,559 9,198,439 9,572,156 10 to 19 yrs. 14,275,598 9,410,523 8,960,434 20 or more yrs. 11,535,301 3,727,973 3,257,844

RECS 1990 Age B in Shipments RECS S tock Modeled S tock 0 to 4 yrs. 11,836,478 10,544,271 11,745,800 5 to 9 yrs. 7,930,531 7,343,580 7,200,298 10 to 19 yrs. 15,067,767 10,136,090 9,435,899 20 or more yrs. 6,644,873 3,025,410 1,897,721

AMERICAN HOUSING SURVEY Survey Y ear Adjusted AHS S tock Modeled S tock

2007 66,850,067 67,116,846

2005 63,023,984 64,173,507

2003 56,640,747 58,293,705

2001 54,080,318 53,363,017

1999 48,189,582 48,428,026

### 8

- 64 1997 41,173,857 42,989,684

1995 38,446,053 38,517,301

1993 35,072,816 31,793,586

1991 32,893,755 31,733,007



### Figure 8.2

. 9 Comparison of DOE Modeled Air Conditioner Age Distribution with RECS Reported Stock

Figure 8.2

. 10 Comparison of DOE Modeled Total Air Conditioner Stock with Adjusted

AHS Stock 0 5000000 10000000 15000000 20000000 25000000

0 5000000 10000000 15000000 20000000 25000000

RECS reported number of households with AC by binCalculated number of households with AC by bin

Age bins

ideal

20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000

20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000

Adjusted American Housing Survey CAC StockCalculated CAC Stock AHS surveys

ideal

### 8

- 65 Figure 8. 2

. 11 Central AC Survival Function, Characterized by Weibull Parameters α = 20.29, β = 1.89, and θ = 1.0.



## Heat Pumps

DOE undertook a calculation for heat pumps that is very similar to the one it did for

central air conditioner s. The only difference between the heat pump and central air conditioner analyses was in the number of AHS survey years included. DOE found that when the heat pump stock analysis was done with AHS

- reported stock from all nine AHS surveys between 1991 and

2 007 with manufacturer

- reported shipments history, an assumed unchanging heat pump lifetime,

and an assumed 95% to 5% residential

- to

- commercial market split, the results were inconsistent. In the interest of timeliness and consistency, DOE chose to use only the most recent four surveys (2001, 2003, 2005, and 2007). Using only the most recent four AHS surveys, DOE was able to develop a consistent survival function. Figure 8.2

. 12 shows the AHS survey results plotted against the modeled stock and shows the contrast between earlier and more recent data.

The best

- fit Weibull parameters for heat pump lifetime are α = 17.04, β = 1.64, and

θ = 1.0. The resulting calculated mean heat pump lifetime is 16.24 years; the median lifetime is 14.63 years. Table 8.2

. 45 lists the (adjusted) heat pumps reported in each of the RECS age bins and AHS survey year, along with the modeled stock based on the best fit Weibull survival

function and the manufacturer

- provided shipments history. Figure 8.2

. 13 shows the survival

function used in the life

- cycle cost and national impact analyses. 17.70

19.01

0.0 0.2 0.4 0.6 0.8 1.0 1.2

0 10 20 30 40 50

Age (years)Fraction surviving Survival function

Median lifetime

Mean lifetime

### 8

- 66 Table 8.2

. 45 Heat P umps: Comparison of RECS and AHS S tock to S tock C alculated from

a Weibull S urvival F unction

RECS 2005 Age B in Shipments RECS S tock Modeled S tock

0 to 4 yrs. 7,656,050 5,903,720 7,531,948
5 to 9 yrs. 5,437,867 4,186,956 4,545,002
10 to 19 yrs. 7,609,488 4,167,868 3,947,892
20 or more yrs. 5,421,606 1,172,137 947,223

RECS 2001
Age B in Shipments RECS S tock Modeled S tock

0 to 4 yrs. 5,693,105 4,564,988 5,593,500
5 to 9 yrs. 4,318,866 3,641,519 3,626,504
10 to 19 yrs. 6,413,059 3,191,956 3,383,920
20 or more yrs. 3,320,977 1,273,838 622,144

RECS 1997
Age B in Shipments RECS S tock Modeled S tock

0 to 4 yrs. 4,615,287 4,550,375 4,536,486
5 to 9 yrs. 3,500,621 3,871,200 2,914,225
10 to 19 yrs. 5,271,716 3,828,288 2,852,397
20 or more yrs. 1,671,785 575,473 319,727

RECS 1993
Age B in Shipments RECS S tock Modeled S tock

0 to 4 yrs. 3,582,387 3,847,273 3,515,747
5 to 9 yrs. 3,514,244 3,043,034 2,938,354
10 to 19 yrs. 3,308,542 2,425,988 1,803,756
20 or more yrs. 822,935 523,705 139,039

RECS 1990
Age B in Shipments RECS S tock Modeled S tock

0 to 4 yrs. 3,637,163 2,929,208 3,565,942
5 to 9 yrs. 2,494,052 3,030,644 2,112,769
10 to 19 yrs. 2,327,546 1,846,344 1,356,527
20 or more yrs. 600,009 168,614 111,330

AMERICAN HOUSING SURVEY
Survey Y ear Adjusted AHS S tock Modeled S tock

2007 16,718,490 18,037,674

2005 16,130,513 16,123,461

2003 14,318,151 14,017,726

2001 13,653,239 12,564,764

1999 13,331,680 11,290,213

1997 13,658,054 10,091,692

1995 11,460,574 8,980,076

1993 10,412,946 7,977,051

1991 9,349,377 7,165,773

### 8

- 67 Figure 8.2

. 12 Comparison of DOE Modeled Total Heat Pump Stock with Adjusted AHS

Stock

Figure 8.2

. 13 Heat Pump Survival Function, Characterized by Weibull Parameters α = 17.04, β = 1.64, and θ = 1.0 0 5,000,000 10,000,000 15,000,000 20,000,000

0 5,000,000 10,000,000 15,000,000 20,000,000

AHS reported stock of heat pumpsModeled stock of heat pumps Recent AHS surveys

Older AHS surveys

ideal

14.63

16.24

0.0 0.2 0.4 0.6 0.8 1.0 1.2

0 5 10 15 20 25 30 35 40 45 50

Age (years)Fraction surviving Survival function

Median lifetime

Mean lifetime

### 8

- 68 

## Furnaces

Similar to central air conditioners and heat pumps, furnace lifetime is derived from RECS, AHS, and shipments data. The 2008 American Comfort Survey was also used to increase the accuracy of the estima te. Table 8.2

. 46 shows the minimum, median, and average lifetime, as well as the Weibull distribution parameters alpha and beta for furnaces.

Table 8.2

. 46 Lifetime parameter for Furnaces

Product Class Weibull Parameters

Minimum

years Median

years Average

years Alpha (scale) Beta (shape)

Non

- Weatherized Gas

Furnaces 1 22.6 23.6 26.7 2.218

Manufactured Home Gas

Furnaces 1 16.9 18.7 21.0 1.682

Oil

- Fired Furnaces 1 26.3 26.5 29.7 3.019



### 8.2.3.6 Discount Rate

The discount rate is the rate at which future expenditures are discounted to establish their present value. DOE derived the discount rates for the LCC analysis by estimating the cost of capital for individuals and companies that purchase central air condit ioner or furnace products

.

In the case of individual households, the financing of purchasing products installed in

new homes is different from the financing of appliances bought directly by consumers (i.e. , as a replacement for a failed unit or as a new pu rchase for an existing household that does not already own the appliance). Thus, DOE used different discount rates for these residential purchases.



## Residential Discount Rates for Products Purchased in Existing Households

Households use various methods to finance the purchase of major appliances. In principle, one could estimate the interest rates on the actual financing vehicles used to purchase appliances. However, the frequency with which each financing vehicle is used to purchase an appliance is unknow n.

DOE’s approach involved identifying all possible debt or asset classes that might be used to purchase the considered appliances, including household assets that might be affected indirectly. e

e An indirect effect would arise if a ho usehold sold assets in order to pay off a loan or credit card debt that might

have been used to finance the appliance purchase. 

### DOE excluded debt from primary mortgages and the equity of a ssets considered non

liquid (such as retirement accounts), because those financing methods are unlikely to be used by households in existing housing to purchase appliances. DOE estimated the average percentage
shares of the various types of debt and equity in the average U.S. household using data from the

### 8

- 69 Federal Reserve Board’s Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001,
2004, and 2007. 38 

### Table 8.2

. 47 shows the average percentages of each considered type of debt or equity. DOE derived the mean percentages of each source of financing for the 7 years s urveyed.

Table 8.2

. 47 Types of Household Debt and Equity by Percentage Shares

Type of Debt or Equity Distribution

%

1989 1992 1995 1998 2001 2004 2007 Mean

Home equity loan 4.3 4.5 2.7 2.8 2.8 4.4 4.6 3.7

Credit card 1.6 2.1 2.6 2.2 1.7 2.0 2.4 2.1

Other installment loan 2.8 1.7 1.4 1.7 1.1 1.3 1.1 1.6

Other residential loan 4.4 6.9 5.2 4.3 3.1 5.8 7.1 5.3

Other line of credit 1.1 0.6 0.4 0.2 0.3 0.5 0.3 0.5

Checking account 5.8 4.7 4.9 3.9 3.6 4.2 3.4 4.4

Savings or money market account 19.2 18.8 14.0 12.8 14.2 15.1 13.0 15.3

Certificate of deposit 14.5 11.7 9.4 7.0 5.4 5.9 6.5 8.6

Savings bond 2.2 1.7 2.2 1.1 1.2 0.9 0.7 1.4

Bonds 13.8 12.3 10.5 7.0 7.9 8.4 6.7 9.5

Stocks 22.4 24.0 25.9 36.9 37.5 28.0 28.6 29.0

Mutual funds 8.0 11.1 20.9 20.1 21.3 23.4 25.5 18.6

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 2007.



### DOE also estimated interest or return rates associated with each type of equity and debt. The source for interest rates for loans, credit cards, and lines of credit was the Federal Reserve

Board’s SCF for 1989, 1992, 1995, 1998, 200 1, 2004, and 2007. Table 8.2

. 48 shows the average nominal rates in each year and the inflation factors used to calculate real rates. DOE calculated effective interest rates for home equity loans in a similar manner as for mortgage rates, because

interest on both such loans is tax deductible. Table 8.2

. 49 shows the average effective real rates in each year and the mean rate across years. Because the interest rates for each type of household debt reflect economic conditions throughout numerous years, they are expected to be representative of rat es that may be in effect in 2016

.

Table 8.2

. 48 Average Nominal Interest Rates for Household Debt

Type of Debt Average Nominal Interest Rate

%

1989 1992 1995 1998 2001 2004 2007 Mean

Home equity loan 11.5 9.6 9.6 9.8 8.7 5.7 6.3 7.9

Credit card*

- - 14.2 14.5 14.2 11.7 7.9 9.0

Other installment loan 9.0 7.8 9.3 7.8 8.7 7.4 12.6 13.4

Other residential loan 8.8 7.6 7.7 7.7 7.5 6.0 10.4 8.6

Other line of credit 14.8 12.7 12.4 11.9 14.7 8.8 6.3 7.4

Inflation rate 4.82 3.01 2.83 1.56 2.85 2.66 2.85

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 2007.

* No data on interest rates available for credit cards in 1989 or 1992.

### 8

- 70 Table 8.2

. 49 Average Real Effective Interest Rates for Household Debt

Type of Debt Average Real Effective Interest Rate

%

1989 1992 1995 1998 2001 2004 2007 Mean

Home equity loan 3.8 4.3 4.4 5.8 3.8 1.9 2.1 3.0

Credit card*

- - 11.0 12.7 11.1 9.1 3.3 3.9

Other installment loan 4.9 5.8 7.0 6.6 6.1 5.4 9.7 10.7

Other residential loan 4.0 4.7 4.8 6.0 4.6 3.3 5.8 6.0

Other line of credit 9.6 9.4 9.3 10.2 7.3 6.0 3.4 4.4

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004,

and 2007.

* No data on interest rates available for credit cards in 1989 or 1992.



### No similar rate data are available from the SCF for classes of assets, so the Department

derived that information from national historical data. The interest rates associated with

certificates of deposit, 39 

### savings bonds, 40 

### and bonds (AAA corporate bonds) 41 

### were collected

from Federal Reserve Board time

- series data for 1977

– 2008. DOE assu med rates on checking accounts to be zero. Rates on savings and money market accounts came from Cost of Savings Index data covering 1984

– 2008. 42 

### The rates for stocks are the annual returns on the Standard and

Poor’s 500 for 1977

– 2008. 43 

### Rates for mutual funds are a weighted average of the stock rates (two

- thirds weight) and the bond rates (one

- third weight) in each year for 1977

– 2008. DOE adjusted the nominal rates to real rates using the annual inflation rate for each year. Average

nominal and real interest rates for the classes of household assets are listed in Table 8.2

. 50

. Because the interest and return rates for each type of asset reflect economic conditions throughout numerous years, they are expected to be representative of rat es that may be in effect

in 2016

.

Table 8.2

. 50 Average Nominal and Real Interest Rates for Household Equity

Type of Equity Average Nominal

Rate

% Average Real

Rate

%

Checking account

- 0.0

Savings and money market accounts 5.4 2.2

Certificate of deposit 6.6 2.3

Savings bond 7.7 3.3

Bonds 8.5 4.1

Stocks 11.6 7.1

Mutual funds 10.3 5.8



### Table 8.2

. 51 summarizes the mean real effective rates of each type of equity or debt.

DOE determined the average percentage of each type of debt and asset using SCF data for 1989, 1992, 1995, 1998, 2001, 2004, and 2007. Each year of SCF data provides the percents of debts and assets for U.S. households. DOE averaged those percentages for the 7 years of survey data to

### 8

- 71 arrive at the percentages shown in Table 8.2

. 51 . The average rate across all types of household debt and equity, weighted by the percentages of each type, is 4.8 percent

.

Table 8.2

. 51 Average Interest on Househ old Debt and Equity

Type of Debt or Equity Average Percentage of Household Debt plus Equity

% * Mean Effective Real Rate

% **

Home equity loan 3.7 3.9

Credit card 2.1 10.7

Other installment loan 1.6 6.0

Other residential loan 5.3 4.4

Other line of credit 0.5 8.8

Checking account 4.4 0.0

Savings and money market account 15.3 2.2

Certificate of deposit 8.6 2.3

Savings bond 1.4 3.3

Bonds 9.5 4.1

Stocks 29.0 7.1

Mutual funds 18.6 5.8

Total/weighted

- average discount rate 100.0 4.8

* Not including primary mortgage or retirement accounts.

** Adjusted for inflation and, for home equity loans, tax deduction of interest.



### DOE developed a normal probability distribution of interest rates for each asset type by using the mean value and standard deviation from the distribution. To account for variation among households, DOE sampled a rate for each household from the distributi ons for the appropriate asset class. Appendix 8

- C presents the probability distribution s for each class that DOE used in the LCC and PBP analys e s.



## Residential Discount Rates for Products Installed in New Housing

Appliances installed in new homes (“new

- housing appliances”) are purchased as part of the home, which is almost always financed with a mortgage loan. DOE estimated discount rates

for new

- housing appliances using the effective real (after

- inflation) mortgage rate for homebuyers. This rate c orresponds to the interest rate after deduction of mortgage interest for income tax purposes and after adjusting for inflation (using the Fisher formula). f



### The data sources DOE used for mortgage interest rates were the SCF in 1989, 1992, 1995, 1998, 2001, 200 4 , and 2007. Using the appropriate SCF data for each year, DOE adjusted For example, a 6% nominal mortgage rate has an effective nominal rate of 4.5% for a household at the 25% marginal tax rate. When adjusted for an inflation rate of 2%, the effective real rate becomes

2.45%.

f Fisher formula is given b y: Real Interest Rate = [(1 + Nominal Interest Rate) / (1 + Inflation Rate)]

– 1.

### 8

- 72 the mortgage interest rate for each relevant household in the SCF for mortgage tax deduction and inflation (see Table 8.2

. 52 ). In cases where the effective interest rate is equal to or below the inflation rate (resulting in a negative real interest rate), DOE set the real effective interest rate to

zero.

The average nominal mortgage rate carried by homeowners in these 6 years was 7.9%.

Since the mortgage rates carried by households in these years were established over a range of time, DOE believes they are representative of rates that may apply when amended standards take

effect. After adjusting for inflation and interest tax deduction, effective real interest rates on mortgages across the six surveys averaged 3.0%.

Table 8.2

. 52 Data Used to Calculate Real Effective Mortgage Rates

Year Mortgage Interest Rates in Selected Years

%

Average Nominal

Interest Rate Inflation Rate 44 Marginal Tax Rate Applicable to Mortgage

Interest 45 Average Real

Effective Interest Rate

1989 9.7 4.82 24.3 2.4

1992 9.1 3.01 23.4 3.8

1995 8.2 2.83 24.1 3.3

1998 7.9 1.56 23.9 4.4

2001 7.6 2.85 22.9 2.9

2004 6.2 2.66 20.6 2.2

2007 6.3 2.85 21.6 2.1

Average 7.9 3.0



### To account for variation among households, DOE sampled a rate for each household in the RECS samples from a distribution of mortgage rates. DOE developed the distribution based

on the SCF data

. Appendix 8

- C presents the probability distribution that DOE us ed in the LCC

and PBP analyses

.



## Commercial Discount Rate

The commercial discount rate for central air conditioners is estimated using cost of capital data for firms that might occupy or rent out office space in small office buildings. DOE

estimated the co st of equity using the capital asset pricing model (CAPM). The CAPM assumes that the cost of equity ( k

e 

### ) for a particular company is proportional to the systematic risk faced by that company, where high risk is associated with a high cost of equity and low risk is associated with a low cost of equity. The systematic risk facing a firm is determined by several variables: the risk coefficient of the firm ( β ), the expected return on risk

- free assets ( R

f 

### ), and the equity risk premium (ERP). The risk coefficient of the firm indicates the risk associated with that firm relative to the price variability in the stock market. The expected return on risk

- free assets is defined by the yield on long

- term government bonds. The ERP represents the difference between

the ex pected stock market return and the risk

- free rate.

### 8

- 73 Described below, DOE estimates the cost of equity for each sector with the CAPM model

as follows:

k

e 

### = R f 

### + ( β • ERP) Eq. 8.2

. 10

W here :

e 

## k

= the cost of equity,

f 

### R

= the expected return of the risk

- free asset (long term treasury bonds), and



### β = the beta of the sector

, and 

### ERP is the expected equity risk premium

.



### Calculations were performed using data available on β for individual U.S. commercial companies, estimated market ERP from a 40

- year rolling geometric average of the Standard and

Poor’s 500 stock index from Damodaran Online

, 46 

### and 40

- year rolling average of long term treasury bond rates for R f 

### from the Federal Reserve (6.88 percent in 2009), 47, 48 

### DOE calculate d

the cost of e quity k

e 

### for each firm. The difference for 2009 was 3.07 %

.

The cost of debt financing ( k d



### ) is the interest rate paid on money borrowed by a company. The cost of debt is estimated by adding a risk adjustment factor ( R

a 

### ) to the risk

- free rate.

a f d 

### R R k **+ =**  , Eq. 8.2

. 11

Where:

k

d 

### = the cost of debt financing for each firm,

R

f 

### = the expected return on risk

- free assets, and

a 

## R = is the risk adjustment factor to risk

- free rate for each firm.

The risk adjustment factor depends on the variability of stock returns represented by standard deviations in stock prices and was taken from Damodaran Online weighted average cost of capital worksheets for 2001

**−** 2008.

Finally, as inflation has already been accounted for in both the cost of debt and the cost of equity, the real weighted aver a ge cost of capital WACC

r 

### (real discount rate) is calculated as

follows:

WACC

r 

### = k

e 

### • w e 

### + k d 

### • w d 

### Eq. 8.2

. 12

Where:

e 

## k

= the cost of equity,

e 

## w = the percent of equity financing,

d 

## k

= the cost of debt, and

### 8

- 74 d 

## w = the percent of debt financing.

The discount rate is estimated for each firm for 2009, based on January 2010 data. The source of cost of capital data that are used in the calculations are individual company data from Damodaran Online’s Data Page. DOE used Damodaran Online data from the S IC categories with Standard Industrial Classification (SIC) 6000

- 9975, with the exception of Hotels and Gaming (SIC code 7000). Broadly speaking, this includes all of the commercial subsectors that could occupy small offices that might use a residential

- si zed central air conditioner. The sample includes 1,816 companies with usable data. It includes both large and small companies, because it is not clear that small offices necessarily would be occupied or owned by an entity that was

also a small business. Th e weighted average cost of capital for this sample of U.S. companies was 8.85%. Nominal rates for individual firms in the January 2010 sample varied from 3.54% to 13.40%, which were fitted to a normal distribution truncated at 0 to prevent negative rates. The standard deviation of the statistical sample was 1. 21 %. Adjusted for the long

- term expected

inflation rate of 1.8 % percent from the January 2010 FY 2011 U.S. Government Budget supporting documention, 48 

### the inflation

- and risk

- adjusted discount rate was 6.93%, which is used as the average real discount rate for central air conditioners purchase d for small offices.

8.2.3.7 Effective Date of Standard

The effective date is the future date when a new standard becomes operative. Pursuant to 42 U.S.C. 6295( m ), the effective date of any new energy efficiency standard for central air

conditioner and furnace equipment will be 5 years after the final rule is published. DOE calculated the LCC for all customers as if they each would purchase a new air conditioner or heat pump in the year the standard takes effect. Consistent with its published regulatory agenda, DOE assumed that the final rule would be issued in 2011 and that, therefore, the new standards would take effect in 2016 and used these dates in the NOPR analyses. It based the cost of the equipment on this year; however, all dollar values are expressed in constant 2009$

. Annual energy prices

are included for the life o f the central air conditioner, heat pump , or furnace

.

8.2.3.8 Base Case Distribution of Efficiency Levels

DOE did not have access to sales data describing the actual distribution of efficiencies in

c urrent sales, nor was such information provided by industry for this rulemaking. As a consequence, DOE developed estimates of the distribution of SEER levels for four classes of product: spli t

- system CAC , single

- package CAC , split

- system HP , and single

- pac kage HP . The development of these distributions was based on the following key data inputs:

**•** From AHRI data, the average SEER of equipment sold in each product class in 2006 as well as the relative shipments by product class for the market as a whole.

**•** An in dustry trade press article that indicated approximate sale s segmentation by SEER

for the CAC and HP industry in 2007. 49



### • AHRI Directory of Certified Product Performance, 50 

### which allowed review of specific efficiencies sold into the market for each product class.

### 8

- 75 Acc ording to the trade press article, the distribution in 2007 had approximately 9% of sales at 14 SEER, 3% of sales at 15 SEER, 2% at 16 SEER, and 2% for 17 SEER. The remainder of the product sales was assumed to fall below 14 SEER.

According to AHRI data, 51 

### product sales in 2007 were as follows: 63.0% percent spli t

system CAC , 5.9% single

- package central air conditioner, 27.6 % split

- system HP , and 3.5% single

- package HP Produc t sales in 2008 through September were as follows: 63.0% split

- system

CAC , 4.8% single

- package CAC , 28.8% split

- system HP , and 3.4% single

- package HP . AHRI reported average shipped SEER by product class for 2007: split

- system central air conditioner,

13.72 ; single

- package CAC , 12.83; split

- system HP, 13.86; single

- package HP 13.16. DOE did not know if the average 12.83 for single

- package CAC represented continued sales of pre

SEER 13 equipment or if it included through

- the

- wall or other classes with lower e fficiency. As these data were provided by AHRI for this rulemaking, it was assumed to be representative of single

- phase equipment only. AHRI reported average shipped SE ER for 2008 and 2009 as: split

system CAC , 13.77 and 13.90 ; single

- package CAC, 13.02 and 13.41 ; split

- system HP , 13.9 9

and 14.25 ; single

- package HP, 13.41 and 13.73

.

DOE first created 16 SEER bins corresponding roughly to the SEER efficiency levels developed in the engineering analysis

, with those levels serving as a representative efficie ncy for

each bin. These bins are shown in Table 8.2

. 53 . Then, through an iterative process that took into account available efficiency levels in each product class, D OE developed an efficiency distribution for each product class that was consistent with the above data sources in that it provided average efficiency by split

- system CAC, split

- system HP , and single

- package HP

p roduct class as reported by AHRI in 2007, as well as provided an overall distribution by SEER that corresponded with the industry trade press article cited above. Bins that included 14 and 15 SEER were assumed to be uniformly distributed efficiencies above and below the characteristic efficiency in t he bin. It was obviously not possible to develop a shipment

- weighted efficiency below 13 SEER as was seen for single

- package central air conditioner using this distribution. Instead DOE chose to match the 2008 shipment weighted average value for this produ ct class.

The estimated distribution for all classes for 2007 is shown in Table 8.2

. 53

.

### 8

- 76 Table 8.2

. 53 CAC and HP Effic iency Distributions Estimated for 2007

SEER Bins SEER Distribution by Equipment Class Industry

Wide SEER

Distribution (Four Classes)

% Bottom of Bin Top of Bin Characteristic Efficiency in Bin Split

CAC

% Single Package

C AC

% Split HP

% Single Package

HP

%

13 13.25 13 25.00 76.20 15.00 76.20 27.07

13.25 13.75 13.5 56.00 18.80 57.00 18.80 52.77

13.75 14.25 14 6.00 2.00 8.00 2.00 6.18

14.25 14.75 14.5 2.50 2.00 7.50 2.00 3.83

14.75 15.25 15 3.00 1.00 5.00 1.00 3.36

15.25 15.75 15.5 2.00 0.00 2.00 0.00 1.81

15.75 16.5 16 3.10 0.00 2.00 0.00 2.50

16.5 17.5 17 1.00 0.00 1.50 0.00 1.04

17.5 18.5 18 0.60 0.00 1.50 0.00 0.79

18.5 19.5 19 0.30 0.00 0.50 0.00 0.33

19.5 20.5 20 0.20 0.13

20.5 21.5 21 0.20 0.13

21.5 22.5 22 0.10 0.06

22.5 23.5 23

23.5 24.5 24

24.5 25.5 24.5

Wt. Average SEER 13.71 13.16 13.85 13.16 13.70 13.66 13.78



### DOE was not able to develop a distribution using the same methodology for the 2008 and

2009 data that would be consistent with the industry trade press article overall distribution. DOE made slight changes to the relative shipment weights by efficiency bin from the 2007 distribution, in order to match the higher average SEERs in 2008 and 2009 whi le maintaining the general flavor of the distribution by product class.

To establish an efficiency distribution in 2016, the anticipated compliance date of the rule, DOE first developed an estimate of the sales

- weighted efficiency for each product class i n 2016. To estimate the change in sales

– weighted efficiency up through 2016, , DOE first used data provided by AHRI which demonstrated the growth in the average SEER of CAC and HP equipment from 2006 to 2009. As evidenced in Table 8 .2

. 54 , the efficiency growth for each product class was significant, ranging from 0.75 to 1.02 SEER. DOE attributed this rapid efficiency growth to federal manufacturer tax credits for the production and sale of high efficiency household space

- conditioning equipment. Because the latest federal tax credits are not set to expire until the end of 2011, DOE estimated the average SEER of CAC and HP equipment would continue to grow at the rate o bserved between 2006 and 2009 through 2011.

Table 8.2

. 54 provides the estimated average SEER for 2010 and 2011 based on the 2006 to 2009 growth rates. After 2011, DOE assumed that the sales

- weighted efficiency for each class would return to the growth rate trend they would have been on without the 2006 to 2011 tax credits.

DOE established the 201 6 sales

- weighted efficiencies by using the efficiency growth rate by prod uct class between 1992

- 2003 and applying it to th e sales

- weighted efficiencies in 2006. DOE considered only the 1993 to 2002 time period to forecast sales

- weighted efficiency growth

### 8

- 77 rates in order to factor out: (1) any lingering effects on equipment effi ciencies from industry efforts to comply with the 1992 standards; (2) any anticipatory efforts by the industry to comply with the 2006 standards that DOE issued in 2001; and (3) the effects of the 2006 to 2011 tax credits to promote the purchase of high

- ef ficiency central air conditioners and heat pumps. DOE assumed that market pull programs in existence during 1992

- 2003 are more reflective of typical

market

- pull effectiveness, i.e., the 2006 to 2011 tax credits are seen as extraordinarily aggressive. Appli cation of the 1992

- 2003 growth rates results in a significant drop in sales weighted efficiency from 2011 to 2012 as shown in Table 8.2

. 54

. A detailed discussion of the historical

sales

- weighted efficiencies is presented in chapter 10, section 10.2, National and Regional Impact Analyses.

Table 8.2

. 54 CAC an d HP Average SEER Values for 2006 through 201 6

Year Split CAC Single Package

CAC Split HP Single Package

HP

2006 13.16 12.39 13.45 12.74

2007 13.72 12.83 13.86 13.16

2008 13.77 13.02 13.99 13.41

2009 13.90 13.41 14.25 13.73

2010* 14.16 13.77 14.53 14.08

2011* 14.42 14.14 14.81 14.43

2012** 13.60 12.92 13.85 13.23

2013** 13.68 13.01 13.92 13.31

2014** 13.76 13.11 13.98 13.40

2015** 13.83 13.20 14.05 13.48

2016** 13.91 13.29 14.12 13.56

*Estimated based on average growth rate from 2006 through 2009. ** Estimated using efficiency growth trend from 1992

- 2003 applied to 2006 average SEER values.



### Based on the average SEER of equipment for 2016, DOE redistributed the distribution of efficiencies that it determined for 2007 to match the average SEER in 2016 for each product class. The resulting efficiency distri butions are shown in Table 8.2

. 55

.

Note that in Table 8.2

. 55 the efficiency distribution for SDHV systems is also reported. DOE was not provided with any efficiency data for SDHV systems and therefore estimated that the entire market is currently at an efficiency of 13 SEER.

DOE did not have similar data on space heating efficien cies for HP equipment. For analysis of the market baseline HSPF efficiencies, DOE used the HSPF values that corresponded to each HP SEER level as identified in the engineering analysis. Because these engineering levels represented typical market averages b ased on the AHRI data, they were deemed sufficient for characterizing average market HSPF by SEER level and corresponding average HP heating energy use in the market baseline.

### 8

- 78 See chapter 10, section 10.2, National and Regional Impact Analyses for details of forecasted changes in efficiency distributions.

Table 8.2

. 55 Central Air Conditioners and Heat Pumps: 2016 Market Distribution of Efficiency Levels by Product Class

Bin Assumed Average

SEER in

Bin Split

- System AC % Split

- System

HP % Single Package AC

% Single Package

HP

% Small

Diameter

High Velocity

AC

% Coil

- Only Blower

Coil

1 13 .0 24.62 18.46 13.00 62.70 32.10 100.00

2 13.5 48.21 36.15 40.00 20.00 32.00 NA

3 14 .0 4.10 3.08 10.00 14.30 28.90 NA

4 14.5 7.44 5.58 13.00 2.00 5.00 NA

5 15 .0 5.90 4.42 11.50 1.00 2.00 NA

6 15.5 2.05 1.54 3.50 0.00 0.00 NA

7 16 .0 7.18 5.39 5.00 0.00 0.00 NA

8 16.5 0.51 0.39 2.00 NA NA NA

9 17.0 NA 10.00 1.50 NA NA NA

10 18.0 NA 7.00 0.50 NA NA NA

11 19.0 NA 3.00 NA NA NA NA

12 20.0 NA 2.00 NA NA NA NA

13 21.0 NA 2.00 NA NA NA NA

14 22.0 NA 1.00 NA NA NA NA

15 23.0 NA NA NA NA NA NA

16 24.5 NA NA NA NA NA NA



### For non

- weatherized furnaces, AHRI provided historical shipments data showing the fraction of sales of condensing (90% AFUE and above) products from 1994 though 2009. The fraction of sales was provided at a national level as well as regionally (i.e., for t he North and South). To estimate the market baseline fraction of condensing units in 2010, DOE used the growth in the share of condensing units from 2006 to 2009. As evidenced in Table 8.2

. 56 , the growth rate was significant. DOE attributed this rapid efficiency growth to federal manufacturer tax credits for the production and sale of high efficiency household space

- conditioning equipment. Because the latest federal tax credits are not set to expire until the end of 2011, DOE estimated that the market share of condensing equipment would continue to grow at the rate observed between 2006 and 2009 through 2011. Table 8.2

. 57 provides the estimated fraction of condensing equipment for 2010 and 2011 based on the 2006 to 2009 growth rates. After 2011,

DOE assumed that the market share of condensing equipment would return to the growth rate

trend they would have been on without the 2006 to 2011 tax credits. DOE established the 201 6 fraction of condensing equipment by using the growth rate between 1994

- 2005 and applying it to

th e condensing equipment fraction in 2011

. DOE considered only the 1994 to 2005 time per iod

to forecast thr condensing equipment market share growth rate in order to factor out the lingering effects of new furnace standards that required compliance in 1992 as well as the effects of the

2006 to 2011 tax credits to promote the purchase of high

- efficiency condensing furnaces

. DOE assumed that market pull programs in existence during 1994

- 2005 are more reflective of typical

### 8

- 79 market

- pull effectiveness, i.e., the 2006 to 2011 tax credits are seen as extraordinarily aggressive. Application of the 1994

- 2005 growth rate results in a significant drop in condensing equipment

market share from 2011 to 2012 as shown in Table 8.2

. 56

. A detailed discussion of the historica l

sales

- weighted efficiencies is presented in chapter 10, section 10.2, National and Regional Impact Analyses.

Table 8.2

. 56 Non

- Weatherized Gas Furnace Fraction of Condensing Unit Sales for 2006 through 201 6

Year National North South



### 2006 36.5% 54.2% 19.9%

2007 37.1% 53.0% 21.2%

2008 43.3% 59.2% 24.2%

2009 50.2% 67.6% 29.0%

2010 * 54.1% 71.7% 31.7%

2011* 58.0% 75.8% 34.3%

2012** 41.2% 62.6% 22.2%

2013** 42.1% 64.2% 22.8%

2014** 43.1% 65.9% 23.3%

2015** 44.1% 67.5% 23.8%

2016** 45.0% 69.1% 24.4%

*Estimated based on average growth rate from 2006 through 2009. ** Estimated using efficiency growth trend from 1994

- 2005 applied to 2006 condensing equipment market share.



### DOE disaggregated the non

- weatherized gas furnace condensing market share into specific efficiency levels based on model availability as specified in the AHRI Directory of

Certified Product Performance. DOE assumed that the market share of non

- condensing

e quipment was entirely at 80% AFUE. The resulting efficiency distribution for 2016 is shown in

Table 8.2

. 57

.

Note that in Table 8.2

. 57 efficiency distributions for mobile home gas and oil furnaces are also reported. DOE was not provided with any efficiency data for this furnace equipment. Therefore, DOE estimated the distribution of efficiencies based solely on model availability as specified in the AHRI Directory of Certified Product Performance.

See chapter 10, section 10.2, National and Regional Impact Analyses for details of forecasted changes in efficiency distributions.

### 8

- 80 Table 8.2

. 57 Furnaces: 2016 Market Distribution of Efficiency Levels by Product Class

Bin Non

- Weatherized Gas Mobile Home Gas Oil

Assumed Average

AFUE in

Bin National

% North

% South

% Assumed Average

AFUE in

Bi n National

% Assumed Average

AFUE in

Bin National

%

1 80 48.1 29.1 75.9 80% 90.5 82% 41.7

2 90 10.0 13.7 4.4 90% 2.0 83% 19.7

3 92 24.6 33.6 11.5 92% 4.0 84% 5.6

4 95 16.9 23.0 7.9 96% 3.5 85% 32.1

5 98 0.4 0.6 0.3

- - 97% 0.9



### For non

- weatherized gas furnaces, basecase efficiencies are assigned to each household randomly depending on the census division or large state as shown in Table 8.2

. 58

.

Table 8.2

. 58 Basecase Distribution of Furnaces by Region (2016)

Division or large state 80% AFUE 90% AFUE 92% AFUE 95% AFUE 98% AFUE

1 4.2 18.5 45.7 30.9 0.7

2 25.7 14.3 35.5 24.0 0.6

3 26.5 14.2 35.0 23.7 0.5

4 20.9 15.3 37.7 25.5 0.6

5 (South) 55.9 8.5 21.0 14.2 0.3 5 (North) 5.0 18.3 45.3 30.6 0.7

6 54.2 8.8 21.8 14.8 0.3

7 90.6 1.8 4.5 3.0 0.1

8 (North) 60.5 7.6 18.8 12.7 0.3 8 (South) 81.2 3.6 9.0 6.1 0.1

9 (North) 57.7 8.2 20.2 13.6 0.3 9 (South) 37.3 12.1 29.9 20.2 0.5

10 37.7 12.0 29.7 20.1 0.5

11 82.1 3.4 8.5 5.8 0.1

12 93.5 1.3 3.1 2.1 0.0

13 96.0 0.8 1.9 1.3 0.0



### 8.3 PAYBACK PERIOD INPUT S

8.3.1 Definition

The PBP is the amount of time it takes the customer to recover the assumed higher purchase cost of more energy

- efficient equipment as a result of lower operating costs.

### 8

- 81 Numerically, the PBP is the ratio of the increase in purchase cost ( i.e ., from a less efficien t design to a more efficient design) to the decrease in annual operating expenditures. This type of calculation is known as a “simple” payback period, because i t does not take into account changes

in the operating cost value of money

— that is, the calculati on is done at an effective discount rate of 0 percent.

The equation for PBP is:

PBP = ∆ IC/ ∆ O C Eq. 8.3

. 1

W here:

PB P = payback period in years,

∆ IC = difference in the total installed cost between the more efficient standard

- level equipment (efficiency levels 2, 3, etc.) and the baseline efficiency equipment,

and

∆OC = difference in first year annual operating costs.

Payback periods are expressed in years. Payback periods greater than the life of the equipm ent mean that the increased total installed cost of the more efficient equipment is not recovered fast enough in reduced operating costs.

DOE also calculates a rebuttable PBP, which is the time it takes the consumer to recover the assumed higher purchase c ost of more energy

- efficient equipment as a result of lower energy

costs. N umerically, the rebuttable PBP is the ratio of the increase in purchase cost ( i.e ., from a less efficient design to a more efficient design) to the decrease in annual energy expendi tures ; that is, the difference in first year annual energy cost as calculated from the DOE test procedure. The calculation excludes repair costs and maintenance costs. This type of calculation also is a “simple” payback period

.

8.3.2 Inputs

The data inputs to PBP are the total installed cost of the equipment to the customer for each efficiency level and the annual (first year) operating costs for each efficiency level. The inputs to the total installed cost are the equipment price and the installation cost. The inputs to the operating costs are the annual energy cost, the annual repair cost, and the annual maintenance

cost (or in the case of rebuttable PBP, only the annual energy cost) . The PBP uses the same inputs as the LCC analysis described in section 8.2 , except that electricity price trends and discount rates are not required. Since the PBP is a “simple” (undiscounted) payback, the required electricity cost is only for the year in which a new efficient standard is to take effect

— in this case, the y ear 2016. The electricity price used in the PBP calculation was the price projected for 2016, expressed in 200 9 $. Discount rates are not used in the PBP calculation.

### 8

- 82 8.4 LCC AND PBP RESULTS

This section presents the LCC and PBP results for residential CAC

, HPs , and furnaces that are used in residential and commercial (small office) applications. As discussed in section

8.1.1

, DOE’s approach for conducting the LCC and PBP analysis relied on developing samples of households that use each of the products. DOE also characterized the uncertainty of many of the inputs to the analysis with pro bability distributions. DOE used a Monte Carlo simulation technique to perform the LCC and PBP calculations on the households in the sample. For each set of sample households using the equipment in each product class, DOE calculated the average

LCC and LCC savings and the median and average PBP for each of the efficiency levels. These efficiency levels are also referred to as candidate standard levels (CSLs).

DOE calculated LCC savings and PBPs relative to the market baseline equipment that it assigned to t he households and commercial consumers. In some cases, DOE assigned market baseline equipment that is more efficient than some of the CSLs. For that reason, in those cases the average LCC impacts are not equal to the difference between the LCC of a specifi c CSL and

the LCC of the market baseline equipment.

LCC and PBP calculations were performed 10,000 times on the sample of households established for each residential product. Each LCC and PBP calculation was performed on a single household that was select ed from the sample of the residential observations or alternatively, from one of the commercial buildings using the CAC or HP equipment. The first sampling conducted was based on the probability of whether the given observation was a

residential or a comme rcial application. The probability of a residential observation was 93%, while that of a commercial observation was 7%. If the observation was residential, then the selection of a household was based on its sample weight ( i.e. , how representative a particu lar

household is of other households in the distribution

— either regionally or nationally) in the 2005

RECS Public Use Sample, as described in chapter 7 of the TSD. Each LCC and PBP calculation also sampled from the probability distributions that DOE develo ped to characterize many of the inputs to the analysis.

For the commercial applications, DOE sampled from commercial small office building simulations using weights representative of 526 combinations of Typical Meteorological Year (TMY) weather file and st ate. The weights assigned were population weights assigned to each combination as described in chapter 7.

Based on the Monte Carlo simulations that DOE performed, for each standard level, DOE

calculated the share of households and commercial consumers rec eiving a net LCC benefit, a net LCC cost, and no impact. DOE considered a household or commercial user to receive no impact at a given standard level if DOE assigned it base case equipment whose efficiency is the same as, or is more than, the CSL.

8.4.1 Split

- S ystem Air Conditioners

This section presents summary LCC results for the efficiency improvement levels specified in the engineering analysis ( c hapter 5) and also presented in section 8.2.2.3 , Standard

-

### 8

- 83 Level Manufacturer Price Increases. The results presented here are based on annual operating

costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance costs developed for each i ndividual observation . Section 8.2 presents the electricity price inputs

, as well as all other LCC inputs.

As stated earlier, DOE used the Monte Carlo method of an alysis relying on Crystal Ball ( i.e. , random sampling from distributions) to conduct the LCC analysis. The results presented here are based on 10,000 samples per Monte Carlo run. DOE’s first step in developing LCC

results was to establish the market baseline LCC for each of the product class es. The baseline efficiency level in each region is SEER 13, but LCC savings and PBP are calculated only for the consumers affected by the regulation at each efficiency level. Particularly at lower efficiency

stand ards, significant numbers of consumers would have bought products more efficient than those required by the standard and would not have been affected by the regulation.

8.4.1.1 Mean LCC Savings for Split

- System Air Conditioners by Region

Because the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single

- point value. Thus, DOE also represents the LCC results as a distribution of values. Before proceeding with the presentation of the distribution of LCC results, DOE presents average values for LCC savings to show how these savings vary with efficiency for each of the split

- system central air conditioner product class es and by region

. Table 8.4

. 1 presents results for coil

- only improvements

. Mean LCC savings are positive with national level standards and, in the hot

- humid and hot

- dry regions, with regional standards up through SEER 14.5. No SEER level beyond SEER 13 produces LCC savings for a coil

- only standard in the rest of the country. Table 8.4

. 2 shows that LCC savings are positive at national

level blower

- coil standards up to SEER 18 and, in the hot

- humid and hot

- dry regions, savings are positive up to SEER 21and SEER 20, respectively. No SEER level beyond SEER 13 produces LCC savings for a blower

- coil standard in the rest of the country.

Table 8.4

. 1 Mean LCC Savings for Split

- System Air Conditioners (Coil

- Only) by Region by Efficiency Level (SEER Value)

Efficiency

Level SEER LCC Savings by Region
2009$

Nation Hot

- Humid Hot

- Dry Rest of Country

2 13.5 55 86 104 (8)

3 14 51 93 107 (26)

4 14.5 67 137 152 (59)

5 15 (433) (303) (468) (603)

6 15.5 (915) (728) (1,067) (1,128)

7 16 (939) (726) (1,071) (1,191)

8 16.5 (925) (706) (1,040) (1,188)

9 17 (990) (751) (1,102) (1,278)

10 18** (1,046) (797) (1,182) (1,343)
*Values in parentheses denote negative savings. **Varies by capacity of equipment: 2

- ton units are 18 SEER, 3

- ton units are 17 SEER, 5

- ton units are 16 SEER.

### 8

- 84 Table 8.4

. 2 Mean LCC Savings for Split

- System Air Conditioners (Blower

- Coil) by Region by Efficiency Level (SEER Value)

Efficiency

Level SEER LCC Savings by Region
2009$

Nation Hot

- Humid Hot

- Dry Rest of Country

2 13.5 46 77 90 (18)

3 14 49 89 101 (30)

4 14.5 76 140 158 (52)

5 15 92 177 196 (74)

6 15.5 96 201 219 (105)

7 16 96 223 239 (142)

8 16.5 82 223 234 (181)

9 17 66 231 235 (234)

10 18 6 197 181 (331)

11 19 (52) 157 123 (407)

12 20 (125) 108 50 (507)

13 21 (214) 42 (45) (623)

14 22 (316) (39) (157) (747)

15 23 (355) (72) (214) (791)

16 24.5** (421) (130) (311) (903)
*Values in parentheses denote negative savings.

* * Varies by capacity of equipment: 2

- ton units are 24.5 SEER, 3

- ton units are 22 SEER, 5

- ton units are 18 SEER.



### It is worth reiterating that the results shown in Table 8.4

. 1 and Table 8.4

. 2 are mean values and do not show the distributions of savings. Thus, although observations can be made as to how the various inputs impact LCC and, in turn, how the resulting LCCs change with efficiency, conclusions should only be drawn from the distribution of LCC results that are presented in the box plots of Figure 8.4

. 1 and Figure 8.4

. 2

. These figures show not only the mean savings, but also the LCC savings in the median case (50 percent of cases have smaller savings),

the 75 th 

### and 25 th 

### percentile cases (at the upper and lower ends of the box) and the 95 th 

### and 5 th


### percentiles (at the ends of the finer lines). For example, although a blower

- coil standard at SEER 18 (efficiency level 10) shows positive mean LCC savings, the corresponding figure shows that

more than half of affected consumers experience LCC losses. Their losses are outweighed by the minority of cases where very high LCC savings occur. Section 8.4.1.3 provides information on the percentages of consumers in each region at each efficiency level that would experience LCC savings benefits, LCC cost increases, and no impact from the standard.

### 8

- 85 Figure 8.4

. 1 Plots of the Distributions of LCC Savings for Split

- System Air Conditioners (Coil

- Only) by Region - 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10Life-cycle Cost Savings($)

Efficiency Level Mean Median `

Hot

- Humid - 2500 - 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10Life-cycle Cost Savings($)

Efficiency Level Mean Median

National

- 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10Life-cycle Cost Savings($)

Efficiency Level Mean Median `

Hot

- Dry - 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10Life-cycle Cost Savings($)

Efficiency Level Mean Median

Rest

- of

- Country

### 8

- 86 Figure 8.4

. 2 Plots of the Distributions of LCC Savings for Split

- System Air Conditioners (Blower

- Coil) by Region

8.4.1.2 Payback Period Results for Split

- System Air Conditioners by Region

This section presents PBP results for the efficiency improvement levels specified in the engineering analysis ( c hapter 5) and also presented in s ection 8.2.2.3 , Standard

- Level Manufacturer Price Increases. The results presented here are based on annual operating costs

calculated from residential and commercial electricity tariffs

. S ection 8.3 describes the PBP inputs.

Similar to LCC, the analysis provides an estimate of the simple PBP at different ranges of energy prices, sales taxes, and installation costs that prevail across the country for each efficiency level and each region

. Table 8.4

. 3 and Table 8.4

. 4 show the effect on median PBP as the level of efficiency changes from the market baseline for central air conditioner products in residential and commercial buildings for each region’s energy prices, sales taxes, and installation

costs.

Similar to the LCC differences, DOE estimated PBP results as a distribution of values.

The median values of these distributions are shown in Table 8.4

. 3 and Table 8.4

. 4

. Rebuttable PBP for each efficiency level is shown in Table 8.4

. 5 . Regional values ar e not shown bec ause by regulation the rebuttable payback period is calculated using national average prices and energy savings calculated by the DOE test procedure. Regional distributions of PBP results are shown in Figure 8.4

. 3 and Figure 8.4

. 4

. - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Life-cycle Cost Savings($)

Efficiency Level Mean Median `

Hot

- Humid - 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Life-cycle Cost Savings($)

Efficiency Level Mean Median `

National

- 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Life-cycle Cost Savings($)

Efficiency Level Mean Median `

Hot

- Dry - 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Life-cycle Cost Savings($)

Efficiency Level Mean Median

Rest

- of

- Country

### 8

- 87 Table 8.4

. 3 Median Payback Period for Split

- System Air Conditioners (Coil

- Only) by Region

Efficiency

Level SEER Payback Period by Region

years
Nation Hot

- Humid Hot

- Dry Rest of Country

2 13.5 9.1 5.6 8.0 23.1

3 14 12.5 7.2 10.3 33.1

4 14.5 13.6 8.1 11.2 39.9

5 15 62.4 34.4 49.0 100.0+

6 15.5 97.9 52.5 75.3 100.0+

7 16 89.6 46.1 66.4 100.0+

8 16.5 94.1 45.0 67.3 100.0+

9 17 100.0+ 46.2 69.8 100.0+

10 18* 100.0 + 46.6 71.2 100.0+
*Varies by capacity of equipment: 2

- ton units are 18 SEER, 3

- ton units are 17 SEER, 5

- ton units are 16 SEER.



### Table 8.4

. 4 Median Payback Period for Split

- System Air Conditioners (Blower

- Coil) by Region

Efficiency

Level SEER Payback Period by Region

years
Nation Hot

- Humid Hot

- Dry Rest of Country

2 13.5 11.4 7.2 9.5 26.1

3 14 12.6 7.9 10.7 27.5

4 14.5 12.6 8.1 10.7 28.3

5 15 13.0 8.4 10.8 29.9

6 15.5 13.8 8.9 11.4 33.0

7 16 14.6 9.4 12.0 35.6

8 16.5 16.1 10.2 13.2 41.1

9 17 17.2 10.9 14.2 45.2

10 18 21.1 12.6 17.0 60.6

11 19 24.9 14.1 19.7 80.0

12 20 28.1 15.7 22.2 100.0+

13 21 32.1 17.5 25.0 100.0+

14 22 36.4 19.5 28.0 100.0+

15 23 38.2 20.0 29.0 100.0+

16 24.5* 41.0 20.8 30.6 100.0+
*Varies by capacity of equipment: 2

- ton units are 24.5 SEER, 3

- ton units are 22 SEER, 5

- ton units are 18 SEER.

### 8

- 88 Table 8.4

. 5 Rebuttable Payback Period for Split

- System Air Conditioners

Efficiency

Level SEER Reb uttable Payback Period

years Coil Only Blower

- Coil

2 13.5 4.3 6.2

3 14 5.4 6.7

4 14.5 6.2 6.9

5 15 24.8 7.1

6 15.5 36.2 7.5

7 16 32.2 7.8

8 16.5 29.8 8.2

9 17 28.5 * 8.6

10 18 NA 9.5

11 19 NA 10.4

12 20 NA 11.4

13 21 NA 12.4

14 22 NA 13.5 *

15 23 NA NA

16 24.5 NA NA
*Max tech varies by capacity of equipment: Coil

– only max tech units 2

- ton units are 18 SEER, 3

- ton units are 17 SEER, 5

- ton
units are 16 SEER. Blowe r

- coil max tech 2

- ton units are 24.5 SEER, 3

- ton units are 22 SEER, 5

- ton units are 18 SEER. Results

are shown for 3

- ton units.



### Figure 8.4

. 3 Plots of the Distributions of PBP for Split

- System Air Conditioners (Coil

- Only) by Region 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10Payback Period (years)

Efficiency Level Mean Median National 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10Payback Period (years)

Efficiency Level Mean Median Hot

- Humid

0 20 40 60 80 100 120

2 3 4 5 6 7 8Payback Period (years)

Efficiency Level Mean Median Hot

- Dry 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10Payback Period (years)

Efficiency Level Mean Median `

Rest

- of

- Country

### 8

- 89 Figure 8.4

. 4 Plots of the Distributions of PBP for Split

- System Air Conditioners (Blower

Coil) by Region

8.4.1.3 Detailed Regional Results for Split

- S ystem Air Conditioners

This section provides data on the detailed LCC results for split

- system central air

conditio ners, the components of LCC, LCC savings, and PBP. Table 8.4

. 6 through Table 8.4

. 13 present these details separately for coil

- only central air condit ioner units and blower

- coil central air conditioner units, and for each region by efficiency level. The detailed results indicate that more than half of all consumers are unaffected by standards up to about 14 SEER for coil

- only systems and about 14 SEER f or blower

- coil systems. For a coil

- only national standard, only at 13.5 SEER do as many affected “winner” consumers experience savings as experience losses (“losers”). For a blower

- coil standard, those experiencing a net cost are always at least as great a s those experiencing a net gain. In the hot

- humid region, a regional coil

- only standard would yield more winners than losers up through 14.5 SEER; a regional blower

- coil standard would yield more winners than losers through 17 SEER. In the hot

- dry region, the regional coil

- only standard would yield more winners than losers at 13.5 SEER and a regional blower

- coil standard would yield more winners than losers at 13.5 SEER. Losers outnumber winners for regional standards

at all SEER levels above the baseline i n the rest of the country. 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Payback Period (years)

Efficiency Level Mean Median National 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Payback Period (years)

Efficiency Level Mean Median Hot

- Humid

0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Payback Period (years)

Efficiency Level Mean Median Hot

- Dry 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Payback Period (years)

Efficiency Level Mean Median `

Rest

- of

- Country

### 8

- 90 Table 8.4

. 6 National LCC and PBP Results for Split

- System Air Conditioners (Coil

- Only) by Efficiency Level (SEER Value): Nation

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 2,026 4,872 6,898 n/a 0 100 0 n/a

13.5 2,074 4,770 6,844 55 11 75 14 9.1

14 2,130 4,680 6,811 51 39 27 34 12.5

14.5 2,193 4,599 6,792 67 43 23 34 13.6

15 2,755 4,531 7,286 (433) 77 16 7 62.4

15.5 3,324 4,472 7,796 (915) 87 10 4 97.9

16 3,416 4,424 7,840 (939) 87 8 5 89.6

16.5 3,497 4,397 7,894 (925) 93 1 6 94.1

17 3,586 4,377 7,963 (990) 93 0 7 100.0+

18** 3,655 4,365 8,020 (1,046) 93 0 7 100.0+
*Values in parentheses denote negative values.

* * Varies by capacity of equipment: 2

- ton units are 18 SEER, 3

- ton units are 17 SEER, 5

- ton units are 16 SEER

.



### Table 8.4

. 7 LCC and PBP Results for Split

- System Air Conditioners (Blower

- Coil) by Efficiency Level (SEER Value): Nation

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 3,015 4,869 7,884 n/a 0 100 0 n/a

13.5 3,078 4,762 7,840 46 9 82 9 11.4

14 3,142 4,664 7,807 49 30 45 25 12.6

14.5 3,206 4,572 7,778 76 31 42 26 12.6

15 3,269 4,487 7,756 92 35 37 28 13.0

15.5 3,337 4,409 7,746 96 39 32 29 13.8

16 3,407 4,338 7,744 96 41 31 29 14.6

16.5 3,477 4,275 7,752 82 46 25 28 16.1

17 3,549 4,218 7,767 66 48 25 27 17.2

18 3,701 4,119 7,820 6 59 15 26 21.1

19 3,824 4,053 7,877 (52) 67 8 25 24.9

20 3,953 3,998 7,951 (125) 71 5 24 28.1

21 4,089 3,954 8,043 (214) 75 3 22 32.1

22 4,231 3,918 8,149 (316) 79 1 20 36.4

23 4,283 3,906 8,189 (355) 79 1 20 38.2

24.5 ** 4,362 3,893 8,255 (421) 80 1 19 41.0
*Values in parentheses denote negative values. **Varies by capacity of equipment: 2

- ton units are 24.5 SEER, 3

- ton units are 22 SEER, 5

- ton units are 18 SEER.

### 8

- 91 

## Hot

- Humid Region

Table 8.4

. 8 LCC and PBP Results for Split

- System Air Conditioners (Coil

- Only) by Efficiency Level (SEER Value): Hot

- Humid Region

Efficiency

Le vel

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 1,834 5,649 7,484 n/a 0 100 0 n/a

13.5 1,880 5,514 7,393 86 7 75 18 5.6

14 1,934 5,393 7,326 93 26 27 46 7.2

14.5 1,993 5,283 7,276 137 30 23 47 8.1

15 2,515 5,188 7,702 (303) 73 16 12 34.4

15.5 3,044 5,104 8,147 (728) 84 10 6 52.5

16 3,130 5,031 8,161 (726) 84 8 8 46.1

16.5 3,208 4,986 8,193 (706) 89 1 10 45.0

17 3,293 4,949 8,242 (751) 90 0 10 46.2

18 ** 3,365 4,923 8,288 (797) 90 0 10 46.6

*Values in parentheses denote negative values.

* * Varies by capacity of equipment: 2

- ton units are 18 SEER, 3

- ton units are 17 SEER, 5

- ton units are 16 SEER.

### 8

- 92 Table 8.4

. 9 LCC and PBP Results for Split

- System Air Conditioners (Blower

- Coil) by Efficiency Level (SEER Value): Hot

- Humid Region

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 2,774 5,640 8,413 n/a 0 100 0 n/a

13.5 2,833 5,500 8,333 77 6 82 12 7.2

14 2,894 5,371 8,265 89 21 45 34 7.9

14.5 2,955 5,251 8,205 140 22 42 36 8.1

15 3,015 5,139 8,154 177 25 37 39 8.4

15.5 3,079 5,036 8,115 201 28 32 39 8.9

16 3,145 4,941 8,086 223 31 31 39 9.4

16.5 3,211 4,857 8,068 223 35 25 39 10.2

17 3,279 4,779 8,057 231 37 25 38 10.9

18 3,422 4,640 8,063 197 47 15 38 12.6

19 3,541 4,546 8,087 157 55 8 37 14.1

20 3,666 4,466 8,132 108 60 5 35 15.7

21 3,797 4,399 8,196 42 64 3 33 17.5

22 3,933 4,342 8,275 (39) 69 1 30 19.5

23 3,986 4,322 8,308 (72) 69 1 30 20.0

24.5 ** 4,069 4,298 8,367 (130) 70 1 29 20.8

*Values in parentheses denote negative values. **Varies by capacity of equipment: 2

- ton units are 24.5 SEER, 3

- ton units are 22 SEER, 5

- ton units are 18 SEER.

### 8

- 93 

## Hot

- Dry Region

Table 8.4

. 10 LCC and PBP Results for Split

- System Air Conditioners (Coil

- Only) by Efficiency Level (SEER Value): Hot

- Dry Region

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 2,582 6,134 8,716 n/a 0 100 0 n/a

13.5 2,642 5,977 8,619 104 10 75 14 8.0

14 2,713 5,837 8,550 107 37 27 36 10.3

14.5 2,791 5,709 8,500 152 40 23 37 11.2

15 3,510 5,598 9,108 (468) 75 16 9 49.0

15.5 4,238 5,500 9,738 (1,067) 85 10 5 75.3

16 4,351 5,415 9,765 (1,071) 85 8 7 66.4

16.5 4,455 5,357 9,812 (1,040) 91 1 9 67.3

17 4,570 5,310 9,880 (1,102) 91 0 9 69.8

18 ** 4,673 5,288 9,960 (1,182) 91 0 9 71.2

*Values in parentheses denote negative values.

* * Varies by capacity of equipment: 2

- ton units are 18 SEER, 3

- ton units are 17 SEER, 5

- ton units are 16 SEER.

### 8

- 94 Table 8.4

. 11 LCC and PBP Results for Split

- System Air Conditioners (Blower

- Coil) by Efficiency Level (SEER Value): Hot

- Dry Region

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 3,825 6,171 9,995 n/a 0 100 0 n/a

13.5 3,903 6,009 9,912 90 9 82 10 9.5

14 3,984 5,860 9,844 101 28 45 27 10.7

14.5 4,063 5,721 9,784 158 29 42 28 10.7

15 4,142 5,592 9,734 196 33 37 31 10.8

15.5 4,226 5,473 9,699 219 36 32 31 11.4

16 4,313 5,363 9,676 239 38 31 31 12.0

16.5 4,399 5,265 9,665 234 44 25 31 13.2

17 4,488 5,175 9,663 235 45 25 30 14.2

18 4,677 5,014 9,691 181 55 15 30 17.0

19 4,837 4,899 9,736 123 63 8 29 19.7

20 5,004 4,800 9,805 50 67 5 28 22.2

21 5,182 4,717 9,898 (45) 71 3 26 25.0

22 5,365 4,646 10,011 (157) 75 1 24 28.0

23 5,442 4,627 10,069 (214) 75 1 24 29.0

24.5 ** 5,559 4,606 10,166 (311) 76 1 23 30.6

*Values in parentheses denote negative values.

* * Varies by capacity of equipment: 2

- ton units are 24.5 SEER, 3

- ton units are 22 SEER, 5

- ton units are 18 SEER.

### 8

- 95 

## Rest of Country

Table 8.4

. 12 LCC and PBP Results for Split

- System Air Conditioners (Coil

- Only) by Efficiency Level (SEER Value): Rest of Country

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 2,127 3,476 5,603 n/a 0 100 0 n/a

13.5 2,175 3,434 5,609 (8) 17 75 8 23.1

14 2,231 3,401 5,633 (26) 56 27 16 33.1

14.5 2,295 3,372 5,667 (59) 62 23 15 39.9

15 2,864 3,353 6,216 (603) 83 16 1 100.0+

15.5 3,440 3,340 6,780 (1,128) 90 10 0 100.0+

16 3,534 3,335 6,869 (1,191) 92 8 0 100.0+

16.5 3,611 3,340 6,951 (1,188) 99 1 1 100.0+

17 3,696 3,352 7,048 (1,278) 99 0 1 100.0+

18 ** 3,753 3,360 7,113 (1,343) 99 0 1 100.0+

*Values in parentheses denote negative values.

* * Varies by capacity of equipment: 2

- ton units are 18 SEER, 3

- ton units are 17 SEER, 5

- ton units are 16 SEER.

### 8

- 96 Table 8.4

. 13 LCC and PBP Results for Split

- System Air Conditioners (Blower

- Coil) by Efficiency Level (SEER Value): Rest of Country

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 3,110 3,468 6,577 n/a 0 100 0 n/a

13.5 3,172 3,422 6,594 (18) 14 82 4 26.1

14 3,236 3,381 6,617 (30) 43 45 12 27.5

14.5 3,300 3,340 6,640 (52) 45 42 13 28.3

15 3,364 3,303 6,667 (74) 50 37 13 29.9

15.5 3,432 3,270 6,702 (105) 55 32 13 33.0

16 3,502 3,241 6,742 (142) 57 31 13 35.6

16.5 3,572 3,219 6,792 (181) 63 25 12 41.1

17 3,645 3,200 6,845 (234) 64 25 11 45.2

18 3,798 3,172 6,970 (331) 76 15 9 60.6

19 3,915 3,156 7,071 (407) 84 8 8 80.0

20 4,038 3,147 7,184 (507) 89 5 6 100.0+

21 4,167 3,143 7,310 (623) 92 3 5 100.0+

22 4,302 3,145 7,447 (747) 94 1 5 100.0+

23 4,344 3,146 7,490 (791) 95 1 4 100.0+

24.5 ** 4,410 3,193 7,603 (903) 96 1 3 100.0+

*Values in parentheses denote negative values.

* * Varies by capacity of equipment: 2

- ton units are 24.5 SEER, 3

- ton units are 22 SEER, 5

- ton units are 18 SEER.



### 8.4.2 Split

- System Heat Pumps

This section presents LCC results for the efficiency improvement levels specified in the engineering analysis for split

- system HPs ( c hapter 5) and also presented in section 8.2.2.3

, Standard

- Level Manufacturer Price Increases. The results presented here are based on annual operating costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance costs developed for each individual observation . Section 8.2 presents the electricity price inputs

, as well as all other LCC inputs.

As stated earlier, the Monte Carlo method of analysis relying on C rystal Ball ( i.e.

, random sampling from distributions) was used to conduct the LCC analysis. The following results presented here are based on 10,000 samples per Monte Carlo run.

8.4.2.1 Mean LCC Savings for Split

- System Heat Pumps by Region

Because the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single

- point value. Thus, DOE also represents the LCC

### 8

- 97 results as a distribution of values. In Table 8.4

. 14 DOE presents average values for LCC savings

of affected consumers to show how these savings vary with efficiency for the split

- system HP product classes and by region. In contrast to the situation with split

- s ystem CAC units, LCC savings for split

- system heat pump standards are positive at the national level and in both hot

humid and hot

- dry regions up to one level below the max

- tech level (21 SEER). No standard

level above 14 SEER showed LCC savings in the colder part of the country (r est of c ountry)

.

Table 8.4

. 14 Mean LCC Savings for Split

- System Heat Pumps by Region by Efficiency Level (SEER Value and HSPF Value)

Efficiency

Level SEER HSP F *** Mean LCC Savings by Region
2009$

Nation Hot

Humid Hot

- Dry Rest of Country

2 13.5 8.0 71 82 148 5

3 14 8.1 85 102 175 4

4 14.5 8.2 124 151 264 (4)

5 15 8.3 97 137 274 (89)

6 15.5 8.5 68 119 266 (156)

7 16 8.6 57 117 291 (208)

8 16.5 8.7 65 132 328 (233)

9 17 8.8 73 148 372 (263)

10 18 8.9 63 152 426 (347)

11 19 9.1 61 159 479 (404)

12 20 9.4 38 146 498 (478)

13 21 9.6 1 118 493 (562)

14 22** 9.8 (20) 103 477 (604)
*Values in parentheses denote negative values. **Varies by capacity of equipment: max tech 2

- ton units are 22 SEER, 3

- ton units are 21 SEER, 5

- ton units are 18 SEER. ***For a given SEER the corresponding HSPF values also vary slightly by unit capacity. Those shown are for a 2

- ton unit

.



### It is worth reiterating that the results shown in Table 8.4

. 14 are mean values and do not show the distributions of savings. Thus, although observations can be made as to how the various inputs impact LCC and, in turn, how the resulting LCCs change with efficiency, conclusions should only be drawn from the distribution of LCC results that are presented in Figure 8.4

. 5

. For example, only in the hot

- dry region do median LCC savings remain positive at a SEER value greater than 18 (50 percent of affected consumers would show a loss), even though mean savings are positive at far higher SEER values, and losers outnumber winners at all levels above the

baseli ne in the North (rest of c ountry region). Section 8.4.2.3 provides information on the percentages of consumers in each region at each efficiency le vel that would experience LCC savings benefits, LCC cost increases, and no impact from the standard.

### 8

- 98 Figure 8.4

. 5 Plots of the Distributions of LCC Savings for Split

- System Heat Pumps by Region

8.4.2.2 Payback Period Results for Split

- System Heat Pumps by Region

This section presents PBP results for the efficiency improvement levels specified in the engineering analysis ( c hapter 5) and also presented in s ection 8.2.2.3 , Standard

- Level Manufacturer Price Increases. The results presented here are based on annual operating costs

calculated from residential and commercial electricity tariffs

. S ection 8.3 describes the PBP inpu ts.

Similar to LCC, the analysis provides an estimate of the simple PBP at different ranges of energy prices, sales taxes, and installation costs that prevail across the country for each efficiency level and each region

. Table 8.4

. 15 sho ws the effect on PBP as the level of efficiency changes from the market baseline for split

- system HP products in residential and commercial buildings for each region’s energy prices, sal es taxes, and installation costs.

Similar to the LCC differences, DOE depicted PBP results as a distribution of values. The

medians of these distributions are shown in Table 8.4

. 15 , and the distributions of values for PBP

are shown in Figure 8.4

. 6 . Rebuttable PBP for each efficiency level is shown in Table 8.4

. 16

. No levels met the criterion of less than 3 years payback. In addition, DOE provides data on the

median PBP for each efficiency level in each region in section 8.4.2.3

. - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 12 13 14Life-cycle Cost Savings($)

Efficiency Level Mean Median `

Hot

- Humid - 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 12 13 14Life-cycle Cost Savings($)

Efficiency Level Mean Median `

National

- 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 12 13 14Life-cycle Cost Savings($)

Efficiency Level Mean Median `

Hot

- Dry - 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 12 13 14Life-cycle Cost Savings($)

Efficiency Level Mean Median

Rest

- of

- Country

### 8

- 99 Table 8.4

. 15 Median Payback Period for Split

- System Heat Pumps by Region

Efficiency

Level SEER HSPF** Payback Period by Region

years
Nation Hot

Humid Hot

- Dry Rest of Country

2 13.5 8.0 6.6 6.1 4.5 13.2

3 14 8.1 6.7 6.0 4.8 13.3

4 14.5 8.2 7.4 6.6 5.2 14.8

5 15 8.3 7.9 7.2 5.4 20.1

6 15.5 8.5 8.4 7.6 5.7 20.5

7 16 8.6 10.1 9.1 6.8 24.5

8 16.5 8.7 10.4 9.5 7.0 24.8

9 17 8.8 10.5 9.6 7.2 24.4

10 18 8.9 11.5 10.4 7.7 26.6

11 19 9.1 12.0 10.9 8.1 27.6

12 20 9.4 12.8 11.6 8.6 29.6

13 21 9.6 13.6 12.4 9.2 32.0

14 22* 9.8 13.9 12.6 9.4 32.7
*Varies by capacity of equipment: max tech 2

- ton units are 22 SEER, 3

- ton units are 21 SEER, 5

- ton units are 18 SEER. **For a given SEER the corresponding HSPF values also vary slightly by unit capacity. Those shown are for a 2

- ton unit.



### Table 8.4

. 16 Rebuttable Payback Period for Split

- System Heat Pumps

Efficiency

Level SEER HSPF ** Rebuttable Payback

Period

years
Nation

2 13.5 8.0 4.1

3 14 8.1 3.1

4 14.5 8.2 3.7

5 15 8.3 4.1

6 15.5 8.5 4.2

7 16 8.6 4.9

8 16.5 8.7 5.0

9 17 8.8 4.7

10 18 8.9 5.0

11 19 9.1 5.3

12 20 9.4 5.5

13 21 9.6 5.8

14 22* 9.8 NA***
*Varies by capacity of equipment: max tech 2

- ton units are 22 SEER, 3

- ton units are 21 SEER, 5

- ton units are 18 SEER.

**For a given SEER the corresponding HSPF values also vary slightly by unit capacity. Those shown are for a 2

- ton unit.

***V alues are calculated only for 3

- ton units, which achieve a max tech level at 21 SEER.

### 8

- 100 Figure 8.4

. 6 Plots of the Distributions of PBP for Split

- System Heat Pumps by Region

8.4.2.3 Detailed Regional Results for Split

- System Heat Pumps

This section provides data on the detailed LCC results for split

- system central heat pumps, the components of LCC, LC C savings, and PBP. These details are shown separately by region and efficiency level. Table 8.4

. 17 through Table 8.4

. 20 present these details for each region by efficiency level. The detailed results indicate that more than half of all consumers are unaffected by standards up to about 14 SEER. For a national standard, at up through 15.5 SEER more affected consumers experience savings (“winners”) than experience losses (“losers”). In the

hot

- humid region, a regional standard would yield more winners than losers up through 17

SEER. In the hot

- dry region, the regional standard would yi eld more winners than losers up through 20 SEER). Losers outnumber winners for regional standards at all SEER levels above the baseline in the rest of the country. 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14Payback Period (years)

Efficiency Level Mean Median National 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14Payback Period (years)

Efficiency Level Mean Median Hot

- Humid

0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14Payback Period (years)

Efficiency Level Mean Median Hot

- Dry 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14Payback Period (years)

Efficiency Level Mean Median `

Rest

- of

- Country

### 8

- 101 

## Nation

Table 8.4

. 17 LCC and PBP Results for Split

- System Heat Pumps by Efficiency Level (SEER Value): Nation

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 2,934 6,882 9,816 n/a 0 100 0 n/a

13.5 2,999 6,743 9,742 71 5 86 9 6.6

14 3,065 6,607 9,672 85 20 45 35 6.7

14.5 3,135 6,484 9,618 124 26 36 39 7.4

15 3,254 6,366 9,619 97 33 23 44 7.9

15.5 3,372 6,262 9,634 68 41 12 47 8.4

16 3,471 6,171 9,642 57 49 9 43 10.1

16.5 3,546 6,085 9,631 65 52 4 44 10.4

17 3,621 6,000 9,621 73 54 2 45 10.5

18 3,770 5,861 9,630 63 57 0 42 11.5

19 3,874 5,758 9,632 61 59 0 41 12.0

20 3,988 5,667 9,655 38 62 0 38 12.8

21 4,102 5,591 9,692 1 64 0 36 13.6

22 ** 4,149 5,564 9,713 (20) 65 0 35 13.9

*Values in parentheses denote negative values. **Varies by capacity of equipment: max tech 2

- ton units are 22 SEER, 3

- ton units are 21 SEER, 5

- ton units are 18 SEER. For a given SEER the corresponding HSPF values also vary slightly by unit capacity.

### 8

- 102 

## Hot

- Humid Region

Table 8.4

. 18 LCC and PBP Results for Split

- System Heat Pumps by Efficiency Level (SEER Value): Hot

- Humid Region

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 2,804 6,943 9,747 n/a 0 100 0 n/a

13.5 2,867 6,791 9,658 82 4 86 10 6.1

14 2,932 6,644 9,576 102 17 45 38 6.0

14.5 3,000 6,511 9,511 151 22 36 43 6.6

15 3,114 6,383 9,496 137 29 23 48 7.2

15.5 3,226 6,270 9,496 119 36 12 52 7.6

16 3,323 6,170 9,494 117 43 9 48 9.1

16.5 3,396 6,077 9,473 132 47 4 49 9.5

17 3,470 5,984 9,454 148 49 2 50 9.6

18 3,617 5,831 9,448 152 52 0 47 10.4

19 3,718 5,721 9,439 159 55 0 45 10.9

20 3,829 5,624 9,453 146 57 0 43 11.6

21 3,940 5,541 9,481 118 59 0 41 12.4

22 ** 3,983 5,513 9,496 103 60 0 40 12.6

*Values in parentheses denote negative values. **Varies by capacity of equipment: max tech 2

- ton units are 22 SEER, 3

- ton units are 21 SEER, 5

- ton units are 18 SEER. For a given SEER the corresponding HSPF values also vary slightly by unit capacity.

### 8

- 103 

## Hot

- Dry Region

Table 8.4

. 19 LCC and PBP Results for Split

- System Heat Pumps by Efficiency Level (SEER Value): Hot

- Dry Region

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 3,808 9,221 13,029 n/a 0 100 0 n/a

13.5 3,890 8,987 12,877 148 4 86 11 4.5

14 3,973 8,763 12,735 175 15 45 40 4.8

14.5 4,061 8,558 12,619 264 19 36 46 5.2

15 4,212 8,348 12,560 274 25 23 52 5.4

15.5 4,361 8,171 12,532 266 30 12 58 5.7

16 4,483 8,014 12,497 291 36 9 55 6.8

16.5 4,575 7,868 12,443 328 39 4 57 7.0

17 4,667 7,725 12,393 372 40 2 58 7.2

18 4,851 7,482 12,333 426 43 0 56 7.7

19 4,998 7,280 12,278 479 45 0 55 8.1

20 5,158 7,101 12,259 498 48 0 52 8.6

21 5,318 6,946 12,264 493 50 0 50 9.2

22 ** 5,387 6,894 12,280 477 51 0 49 9.4

*Values in parentheses denote negative values. **Varies by capacity of equipment: max tech 2

- ton units are 22 SEER, 3

- ton units are 21 SEER, 5

- ton units are 18 SEER. For a given SEER the corresponding HSPF values also vary slightly by unit capacity.

### 8

- 104 

## Rest of Country

Table 8.4

. 20 LCC and PBP Results for Split

- System Heat Pumps by Efficiency Level (SEER Value): Rest of Country

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost 2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 3,065 5,927 8,993 n/a 0 100 0 n/a

13.5 3,129 5,861 8,990 5 9 86 5 13.2

14 3,193 5,792 8,986 4 35 45 20 13.3

14.5 3,262 5,731 8,992 (4) 43 36 21 14.8

15 3,380 5,693 9,073 (89) 58 23 19 20.1

15.5 3,499 5,652 9,150 (156) 67 12 21 20.5

16 3,597 5,611 9,208 (208) 74 9 18 24.5

16.5 3,670 5,574 9,244 (233) 78 4 18 24.8

17 3,744 5,534 9,278 (263) 80 2 18 24.4

18 3,889 5,476 9,365 (347) 83 0 16 26.6

19 3,990 5,434 9,424 (404) 84 0 16 27.6

20 4,099 5,399 9,498 (478) 86 0 15 29.6

21 4,208 5,374 9,582 (562) 87 0 13 32.0

22 ** 4,262 5,362 9,624 (604) 87 0 13 32.7

*Values in parentheses denote negative values. **Varies by capacity of equipment: max tech 2

- ton units are 22 SEER, 3

- ton units are 21 SEER, 5

- ton units are 18 SEER. For a given SEER the corresponding HSPF values also vary slightly by unit capacity.



### 8.4.3 Single

- Package Air Conditioners

This section presents LCC results for the efficiency improvement levels specified in the engineering analysis for single

- package central air conditioners ( c hapter 5) and also presented in

section 8.2.2.3 , Standard

- Level Manufacturer Price Increases. The results presented here are based on annual operating costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance costs develo ped for each individual observation . Section 8.2 presents the electricity price inputs

, as well as all other LCC inputs.

As stated earlier, the Monte Carlo method of analysis relying on Crystal Ball (i.e., random sampling from distributions) was used to conduct the LCC analysis. The following results presented here are based on 10,000 samples per Monte Carlo run.

### 8

- 105 8.4.3.1 Mean LCC Savings for Single

- Package Air Conditioners for the Nation

Because the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single

- point value. Thus, DOE also represents the LCC

results as a distribution of values. In Table 8.4

. 21 DOE presents average values for LCC savings

to show how these savings vary with efficiency for each of the single

- package central air conditioner product classes for the nation . The LCC savings for single

- package central air conditioners are negative at the national level for a standard at any level beyond 14 SEER.

Table 8.4

. 21 Mean LCC Savings for Single

- Package Air Conditio ners for the Nation by Efficiency Level (SEER Value)

Efficiency

Level SEER Mean LCC Savings for the

Nation
2009$

2 13.5 9

3 14 37

4 14.5 (15)

5 15 (68)

6 15.5 (150)

7 16 (244)

8 16.5 (492)
*Values in parentheses denote negative values.



### The results shown in Table 8.4

. 21 are mean values and do not show the distributions of savings. Thus, although observations can be made as to how the various inputs impact LCC and, in turn, how the resulting LCCs change with efficiency, conclusions should only be drawn from

the distributi on of LCC results that are presented in Figure 8.4

. 7 . Section 8.4.3.3 pro vides information on the percentages of consumers in for the nation at each efficiency level that would experience LCC savings benefits, LCC cost increases, and no impact from the standard. Median savings are generally negative, indicating that more consum ers would experience losses than gains for standards above 13 SEER.

### 8

- 106 Figure 8.4

. 7 Plot of the Distribution of LCC Savings for Single

- Package Air Conditioners

8.4.3.2 Payback Period Results for Single

- Package Air Conditioners for the Nation

This section presents PBP results for the efficiency improvement levels specified in the engineering analysis ( c hapter 5) and also presented in s ection 8.2.2.3 , Standard

- Level Manufacturer Price Increases. The results presented here are based on annual operating costs

calculated from residential and commercial electricity tariffs

. S ection 8.3 descri bes the PBP inputs.

Similar to LCC, the analysis provides an estimate of the simple PBP at different ranges of energy prices, sales taxes, and installation costs that prevail across the country for each efficiency level and each building type. Table 8.4

. 22 s hows the effect on PBP as the level of efficiency changes from the market baseline for central air conditioner products in residential and commercial buildings for each region’s energy prices, sales taxes, and installation costs.

Similar to the LCC differences, DOE estimated PBP results as a distribution of values.

The me dian s of these distributions are shown in Table 8.4

. 22

, a nd the distributions of values for

PBP are shown in Figure 8.4

. 8

. Rebuttable PBP is shown in Table 8.4

. 23 . No level met the criterion of less than three years. In addition, DOE provides d ata on the median PBP for each efficiency level for the na tion in section 8.4.3.3

. - 1500 - 1000

- 500 0 500 1000 1500 2000

2 3 4 5 6 7 8Life-cycle Cost Savings($)

Efficiency Level Mean Median

National

### 8

- 107 Table 8.4

. 22 Median Payback Period for Single Package Air Conditioners

Efficiency

Level SE ER Payback Period for

the Nation

years

2 13.5 17.7

3 14 15.1

4 14.5 21.3

5 15 24.2

6 15.5 28.1

7 16 31.9

8 16. 5 46.3



### Table 8.4

. 23 Rebuttable Payback Period for Single Package Air Conditioners

Efficiency

Level SEER Rebuttable Payback Period

years
Nation

2 13.5 9.9

3 14 9.0

4 14.5 11.3

5 15 12.5

6 15.5 13.9

7 16 15.0

8 16. 5 18.0



### Figure 8.4

. 8 Plot of the Distribution of PBP for Single Package Air Conditioners 0 20 40 60 80 100 120

2 3 4 5 6 7 8Payback Period (years)

Efficiency Level Mean Median National

### 8

- 108 8.4.3.3 Detailed Results for Single

- Package Air Conditioners

This section provides data on the detailed LCC results for single

- package central air conditioner, the components of LCC, LCC savings, and PBP. Table 8.4

. 24 present s these details separately for single

- package central air conditioner units for the nation by efficiency level. The

detailed results indicate that although average savings are positive at SEER 14, n o national standard above the 13 SEER baseline yields more a ffected consumers that experience savings (“winners”) than experience losses (“losers”).

Table 8.4

. 24 LCC and PBP Results for Single

- Package Air Conditioners by Efficiency Level (SEER Value): Nation

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 3,040 5,303 8,343 n/a 0 100 0 n/a

13.5 3,143 5,189 8,332 9 40 37 23 17.7

14 3,223 5,077 8,301 37 50 17 33 15.1

14.5 3,358 4,989 8,346 (15) 67 3 30 21.3

15 3,492 4,908 8,400 (68) 72 1 27 24.2

15.5 3,643 4,840 8,483 (150) 76 0 24 28.1

16 3,798 4,779 8,577 (244) 78 0 22 31.9

16. 5 4,064 4,760 8,825 (492) 84 0 16 46.3

*Values in parentheses denote negative values.



### 8.4.4 Single

- Package Heat Pumps

This section presents LCC results for the efficiency improvement levels specified in the engineering analysis for single

- package HPs ( c hapter 5) and also presented in section 8.2.2.3

, Standard

- Level Manufacturer Price Increases. The results presented here are based on annual operating costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance costs developed for each individual observation . Section 8.2 presents the electricity price inputs as well as all other LCC inputs.

As stated earlier, the Monte Carlo method of analysis r elying on Crystal Ball ( i.e.

, random sampling from distributions) was used to conduct the LCC analysis. The following results presented here are based on 10,000 samples per Monte Carlo run.

8.4.4.1 Mean LCC Savings for Single Package Heat Pumps for the Nation

Bec ause the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single

- point value. Thus, DOE also represents the LCC

### 8

- 109 results as a distribution of values. In Table 8.4

. 25 DOE presents average values for LCC savings to show how these savings vary with efficiency for the single

- package HP product classes for the

nation

. The LCC savings for single

- package HPs are positive at the national level for a standard up to 15 SEER.

Table 8.4

. 25 Mean LCC Savings for Single

- Package Heat Pumps for the Nation by Efficiency Level (SEER Value)

Efficiency

Level SEER HSPF Mean

LCC Savings

for the

Nation
2009$

2 13.5 7.9 124

3 14 8.1 104

4 14.5 8.3 58

5 15 8.4 15

6 15.5 8.6 (45)

7 16 8.8 (195)

8 16. 5 9.0 (363)
*Values in parentheses denote negative values.



### The results shown in Table 8.4

. 25 are mean values and do not show the distributions of savings. Thus, although observations can be made as to how the various inputs impact LCC and, in turn, how the resulting LCCs ch ange with efficiency, conclusions should only be drawn from the distribution of LCC results that are presented in Figure 8.4

. 9 . Section 8.4.4.3 provides information on the percentages of consumers for the nation at each efficiency level that would experience LCC savings benefits, LCC cost increas es, and no impact from the standard. Median savings are positive only up to 14 SEER for a national standard, indicating that more consumers would experience losses than gains for standards above 14 SEER.

### 8

- 110 Figure 8.4

. 9 Plots of the Distributions of LCC Savings for Single

- Package Heat Pumps

8.4.4.2 Payback Period Results for Single

- Package Heat Pumps

This section presents PBP results for the efficiency improvement levels specified in the engineeri ng analysis ( c hapter 5) and also presented in s ection 8.2.2.3 , Standard

- Level Manufacturer Price Increases. The results presented here are based on annual operatin g costs
calculated from residential and commercial electricity tariffs

. Section 8.3 describes the PBP inputs.

Similar to LCC, the analysis provides an estimate of the simple PBP at different ranges of energy prices, sales taxes, and installation costs that prevail across the country for each efficiency level for the nation

. Table 8.4

. 26 shows the effect on PBP as the level of efficiency changes from the market baseline for single

- package HP products in residential and commercial buildings for each region’s energy prices, sales taxes, and installation costs.

Similar to the LCC differences, DOE depicted PBP results as a distribution of values. T he

me di ans of these distrib utions are shown in Table 8.4

. 26 a nd the distributions of values for PBP

are shown in Figure 8.4

. 10 . Rebuttable PBP for each efficiency level is shown in Table 8.4

. 27

. Only SEER level 13.5 met the criterion of payback in less than three years

. In addition, DOE provides data on the median PBP for each efficiency level for the nation in section 8.4.4.3

. - 1500 - 1000

- 500 0 500 1000 1500 2000

2 3 4 5 6 7 8Life-cycle Cost Savings($)

Efficiency Level Mean Median

National

### 8

- 111 Table 8.4

. 26 Median Payback Period for Single

- Package Heat Pumps

Efficiency

Level SEER HSPF Payback

Period for

the Nation

years
2 13.5 7.9 4.7

3 14 8.1 8.4

4 14.5 8.3 11.6

5 15 8.4 13.6

6 15.5 8.6 15.0

7 16 8.8 18.0

8 16. 5 9.0 20.7



### Table 8.4

. 27 Rebuttable Payback Period for Single

- Package Heat Pumps

Efficiency

Level SEER HSPF Rebuttable Payback

Period

years
Nation

2 13.5 7.9 2.6

3 14 8.1 4.1

4 14.5 8.3 5.3

5 15 8.4 6.5

6 15.5 8.6 7.0

7 16 8.8 7.9

8 16. 5 9.0 8.7



### Figure 8.4

. 10 Plots of the Distributions of PBP for Single

- Package Heat Pumps 0 20 40 60 80 100 120

2 3 4 5 6 7 8Payback Period (years)

Efficiency Level Mean Median National

### 8

- 112 8.4.4.3 Detailed Results for Single

- Package Heat Pumps

This section provides data on the detailed LCC results for single

- package central heat pump, the components of LCC, LCC savings, and PBP. These details are shown separately by efficiency level for the nation in Table 8.4

. 28

. The detailed results indicate that more than half of all consumers are unaffected by standards up to about 13.5 SEER. The tables show that a national standard yields positive average LCC sav ings up through 15 SEER. No national standard above 14 SEER yields more affected consumers that experience savings (“winners”) than experience losses (“losers”). Losers outnumber winners for regional standards at all SEER

levels above the 14 SEER level for the nation as a whole.

Table 8.4

. 28 LCC and PBP Results for Single

- Package Heat Pumps by Efficiency Level (SEER Value): Nation

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 3,623 7,834 11,457 n/a 0 100 0 n/a

13.5 3,696 7,635 11,332 124 8 68 25 4.7

14 3,828 7,463 11,291 104 29 36 35 8.4

14.5 3,996 7,309 11,305 58 55 7 38 11.6

15 4,163 7,182 11,345 15 63 2 35 13.6

15.5 4,353 7,052 11,404 (45) 69 0 31 15.0

16 4,607 6,948 11,555 (195) 75 0 25 18.0

16. 5 4,866 6,856 11,722 (363) 79 0 21 20.7
*Values in parentheses denote negative values.



### 8.4.5 Small

- Diameter High

- Velocity Products

This section presents LCC results for the efficiency improvement levels specified in the engineering analysis for SDHV products ( c hapter 5) and also presented in section 8.2.2.3

, Standard

- Level Manufacturer Price Increases. The results presented here are based on annual operating costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance costs developed for each individual observation . Section 8.2 presents the electricity price inputs as well as all other LCC inputs.

As stated earlier, the Monte Carlo method of analysis relying on Crystal Ball ( i.e.

, random sampling from distributions) was used to conduct the LCC analysis. The following results presented here are based on 10,000 samples per Monte Carlo run.

8.4.5.1 Mean LCC Savings for Small

- Diameter High

- Velocity Products by Region

Because the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single

- point value. Th us, DOE also represents the LCC

results as a distribution of values. In Table 8.4

. 29 DOE presents average values for LCC savings

### 8

- 113 to show how these savings vary with e fficiency for the s mall

- diameter high velocity product classes and by region. The results indicate that with the possible marginal exception of the hot humid region at 13.5 SEER, no standard above the 13 SEER baseline produces positive average LCC savings.

Table 8.4

. 29 Mean LCC Savings for SDHV by Region by Efficiency Level (SEER Value)

Efficiency

Level SEER Mean LCC Savings by Region
2009$

Nation Hot

Humid Hot

- Dry Rest of Country

2 13.5 (38) 1 (22) (96)

3 14 (92) (14) (65) (202)

4 14.5 (138) (25) (106) (294) *Values in parentheses denote negative values.



### The results shown in Table 8.4

. 29 are mean values and do not show the distributions of savings. Thus, although observations can be made as to how the various inputs impact LCC and, in turn, how the resulting LCCs change with efficiency, conclusions should only be drawn from the distribution of LCC results that are presented in Figure 8.4

. 11 . Section 8.4.5.3 provides information on the perce ntages of consumers in each region at each efficiency level that would experience LCC savings benefits, LCC cost increases, and no impact from the standard. Median savings are consistently negative.

Figure 8.4

. 11 Plots of the Distributions of LCC Savings for SDHVs by Region - 1000 - 500

0 500 1000 1500 2000

2 3 4Life-cycle Cost Savings($)

Efficiency Level Mean Median `

Hot

- Humid - 1000 - 500

0 500 1000 1500 2000

2 3 4Life-cycle Cost Savings($)

Efficiency Level Mean Median `

National

- 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4Life-cycle Cost Savings($)

Efficiency Level Mean Median `

Hot

- Dry - 2000 - 1500 - 1000 - 500

0 500 1000 1500 2000

2 3 4Life-cycle Cost Savings($)

Efficiency Level Mean Median

Rest

- of

- Country

### 8

- 114 8.4.5.2 Payback Period Results for Small

- Diameter High

- Velocity Products by

Region

This section presents PBP results for the efficiency improvement levels specified in the engineering analysis ( c hapter 5) and also presented in s ection 8.2.2.3 , Standard

- Level Manufacturer Price Increases. The results presented here are based on annual operating costs

calculated from residential and commercial electricity tariffs

. Section 8.3 descri bes the PBP inputs.

Similar to LCC, the analysis provides an estimate of the simple PBP at different ranges of energy prices, sales taxes, and installation costs that prevail across the country for each efficiency level and each building type. Table 8.4

. 30 shows the effect on PBP as the level of efficiency changes from the market baseline for small

- diameter high velocity products in residential and commercial buildings for each region’s energy prices, sales taxes, and installation

costs.

Similar to the LCC differences, DOE depicted PBP results as a distribution of values. T he

me di ans of these distributions are shown in Table 8.4

. 30 a nd the distributions of values for PBP

are shown in Figure 8.4

. 12 . Median PBPs exceed the lifetime of the SDHV products. Rebuttable PBP for each efficiency level is shown in Table 8.4

. 31

. No level met the rebuttable payback

criterion. In addition, DOE provides data on the median PBP for each efficiency level in each region in section 8.4.5.3

.

Table 8.4

. 30 Median Payback Period for SDHVs by Region

Efficiency

Level SEER Payback Period by Region

years
Nation Hot

Humid Hot

- Dry Rest of Country

2 13.5 28.7 16.6 24.3 66.7

3 14 30.9 17.8 26.1 74.3

4 14.5 29.2 17.3 23.3 74.7



### Table 8.4

. 31 Rebuttable Payback Period for SDHVs

Efficiency

Level SEER Rebuttable Payback

Period

years
Nation

2 13.5 11.4

3 14 1 2.0

4 14.5 1 2.7

### 8

- 115 Figure 8.4

. 12 Plots of the Distributions of PBP for SDHVs by Region

8.4.5.3 Detailed Regional Results for Small

- Diameter High

- Velocity Products

This section provides data on the detailed results for small

- diameter high

- velocity LCC, the components of LCC, LCC savings, and PBP. These details are shown separately by region

and efficiency level. Table 8.4

. 32 through Table 8.4

. 35 present these details for each region by efficiency level. Because the market is assumed to be at 13 SEER, 100 percent of consumers are

a ssumed to be affected by any higher standard. However, consumers who experience LCC losses outnumber those who experience savings at all standard levels above 13 SEER, both nationally and regionally.

Table 8.4

. 32 LCC and PBP Results for SDHVs by Efficiency Level (SEER Value): Nation

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 4,915 4,853 9,768 n/a 0 100 0 n/a

13.5 5,055 4,751 9,806 (38) 77 0 23 28.7

14 5,200 4,660 9,860 (92) 79 0 21 30.9

14.5 5,353 4,553 9,906 (138) 78 0 22 29.2

*Values in parentheses denote negative values. 0 20 40 60 80 100 120

2 3 4Payback Period (years)

Efficiency Level Mean Median National 0 20 40 60 80 100 120

2 3 4Payback Period (years)

Efficiency Level Mean Median Hot

- Humid

0 20 40 60 80 100 120

2 3 4Payback Period (years)

Efficiency Level Mean Median Hot

- Dry 0 20 40 60 80 100 120

2 3 4Payback Period (years)

Efficiency Level Mean Median `

Rest

- of

- Country

### 8

- 116 

## Hot

- Humid Region

Table 8.4

. 33 LCC and PBP Results for SDHVs by Efficiency Level (SEER Value): Hot

Humid Region

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 4,610 5,643 10,253 n/a 0 100 0 n/a

13.5 4,744 5,508 10,252 1 66 0 34 16.6

14 4,883 5,385 10,268 (14) 68 0 32 17.8

14.5 5,029 5,250 10,279 (25) 67 0 33 17.3

*Values in parentheses denote negative values.



## Hot

- Dry Region

Table 8.4

. 34 LCC and PBP Results for SDHVs by Efficiency Level (SEER Value): Hot

- Dry Region

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period

years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 6,302 6,105 12,407 n/a 0 100 0 n/a

13.5 6,480 5,949 12,429 (22) 73 0 27 24.3

14 6,665 5,807 12,472 (65) 74 0 26 26.1

14.5 6,859 5,654 12,513 (106) 74 0 26 23.3

*Values in parentheses denote negative values.

### 8

- 117 

## Rest of Country

Table 8.4

. 35 LCC and PBP Results for SDHVs by Efficiency Level (SEER Value): Rest of Country

Efficiency

Level

SEER Life

- Cycle Cost Life

- Cycle Cost Savings Payback

Period years
Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings Experience Median

Net

Cost No Impact Net

Benefit

13 (Baseline) 4,919 3,447 8,367 n/a 0 100 0 n/a

13.5 5,056 3,406 8,462 (96) 94 0 6 66.7

14 5,198 3,370 8,568 (202) 95 0 5 74.3

14.5 5,347 3,313 8,660 (294) 92 0 8 74.7

*Values in parentheses denote negative values.



### 8.4.6 Non

- Weatherized Gas Furnace

Table 8.4

. 36 shows the LCC and PBP results for non

- weatherized gas furnaces by region. As mentioned earlier, for some households DOE assigned base case products that are more energy efficient than some of the standard levels. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline products. Similarly with regard to the PBPs shown below, DOE determined the median

and a verage values by excluding the percentage of households not impacted by a standard at a given efficiency level. The values for average lifetime operating cost in the tables are discounted sums of the annual operating costs over the product lifetime.

### 8

- 118 Table 8.4

. 36 LCC and PBP Results for Non

- Weatherized Gas Furnaces

Efficiency

Level AFUE Life

- Cycle Cost
2009$ Life

- Cycle Cost Savings
2009$ Median Payback

Period

years Installed

Cost Discounted Operating

Cost LCC Average Savings
2009$ % of Households with

Net

Cost No Impact Net

Benefit

Nation

0 80% 1,786 9,551 11,337 N/A 0 100 0 N/A

1 90% 2,357 8,621 10,978 87 25 52 22 15.8

2 92% 2,419 8,456 10,875 136 26 42 32 11.9

3 95% 2,564 8,220 10,785 205 36 17 47 11.7

4 98% 2,830 8,114 10,944 46 64 0 35 20.1

North

0 80% 1,901 11,553 13,454 N/A 0 100 0 N/A

1 90% 2,474 10,409 12,883 155 10 71 19 10.1

2 92% 2,536 10,206 12,742 215 11 56 33 7.7

3 95% 2,685 9,916 12,601 323 23 23 54 9.4

4 98% 2,943 9,784 12,727 198 59 1 41 17.1

South (Rest of Country)

0 80% 1,614 6,566 8,180 N/A 0 100 0 N/A

1 90% 2,182 5,955 8,137 (13) 48 24 28 24.1

2 92% 2,244 5,846 8,090 19 48 20 32 21.3

3 95% 2,384 5,692 8,076 28 56 8 36 20.5

4 98% 2,661 5,624 8,286 (181) 72 0 27 28.9

*Values in parentheses denote negative values.



### Figures 8. 4.13 through 8.3. 14 show the range of LCC savings for the efficiency levels

considered for non

- weatherized gas furnaces by region

. For each standard level, the top and the

bottom of the box indicate the 75 th 

### and 25 th 

### percentiles, respectively. The bar at the middle of the box indicates the median; 50 percent of the households have lifecycle cost savings above this value. The ‘whiskers’ at the bottom and the top of the box indicate the 5 th 

### and 95 th 

### percentiles.

The sma ll box shows the average LCC savings for each standard level.

### 8

- 119 Figure 8.4

. 13 Plot of the Distributions of LCC Savings for Non

- Weatherized Gas Furnaces

– National

Figure 8.4

. 14 Plot of the Distributions of LCC Savings for Non

- Weatherized Gas Furnaces

– North Region - 1500 - 1000

- 500 0 500 1000 1500 2000 2500

Level 1 Level 2 Level 3 Level 4Average LCC Savings (2009$)

Efficiency Level 

### NWGF (National) Average LCC Savings Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

- 1000

- 500 0 500 1000 1500 2000 2500

Level 1 Level 2 Level 3 Level 4Average LCC Savings (2009$)

Efficiency Level 

### NWGF (North) Average LCC Savings Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 120 Figure 8.4

. 15 Plot of the Distributions of LCC Savings for Non

- Weatherized Gas Furna ces

– South Region

Figures 8. 4

. 16 through 8. 4.18 show the range of PBPs for all efficiency levels considered

for non

- weatherized gas furnaces by region. For each efficiency level, the top and bottom of the box in the figure indicate the 75 th 

### and 25 th 

### percentiles, respectively. The bar at the middle of the box indicates the median: 50 percent of the households have a payback period above this value.

The horizontal lines above and below each box indicate the 95 th 

### and 5 th 

### percentiles, respectively.

The s mall box indicates the average PBP for each efficiency level

. - 1500 - 1000

- 500 0 500 1000 1500 2000

Level 1 Level 2 Level 3 Level 4Average LCC Savings (2009$)

Efficiency Level 

### NWGF (South)Average LCC Savings Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 121 Figure 8.4

. 16 Plot of the Distributions of PBB for Non

- Weatherized Gas Furnaces

– National

Figure 8.4

. 17 Plot of the Distributions of PBB for Non

- Weatherized Gas Furnaces

– North Region 0 20 40 60 80 100 120 140 160 180

1 2 3 4Average PBP (years)

Efficiency Level 

### NWGF (National)Average Payback Period Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

0 10 20 30 40 50 60 70 80 90 100

Level 1 Level 2 Level 3 Level 4Average PBP (years)

Efficiency Level 

### NWGF (North)Average Payback Period Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 122 Figure 8.4

. 18 Plot of the Distributions of PBB for Non

- Weatherized Gas Furnaces

– South Region

Rebuttable PBP fo r each efficiency level is shown in Table 8.4

. 37

.

Table 8.4

. 37 Rebuttable Payback Period for Non

- Weatherized Gas Furnaces

Efficiency

Level AFUE Total Costs Rebuttable Payback

Period

years Total

Installed

Costs Total Operating

Costs

0 80% 1,590 917

1 90% 2,135 818 5.5

2 92% 2,188 800 5.1

3 95% 2,301 776 5.1

4 98% 2,495 733 4.9



### 8.4.7 Manufactured Home Gas Furnace

Table 8.4

. 38 shows the LCC and PBP results for manufactured home gas furnaces by region. As mentioned earlier, for some households DOE assigned base case products that are more energy efficient than some of the standard levels. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline products. Similarly with regard to the PBPs shown below, DOE determined the median

and average values by excluding the percentage of households not impacted by a standard at a given efficiency level. The values for average lifetime operating cost in the tables are discounted sums of the annual operating costs over the product lifetime. 0 50 100 150 200 250 300

Level 1 Level 2 Level 3 Level 4Average PBP (years)

Efficiency Level 

### NWGF (South)Average Payback Period Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 123 Tab le 8.4

. 38 LCC and PBP Results for Manufactured Home Gas Furnaces

Efficiency

Level AFUE Life

- Cycle Cost
2009$ Life

- Cycle Cost Savings
2009$ Median Payback

Period

years Installed

Cost Discounted Operating

Cost LCC Average Savings
2009$ % of Households that Experience

Net

Cost No Impact Net

Benefit

Nation

0 80% 1,518 11,851 13,368 n/a 0 100 0 n/a

1 90% 2,151 10,802 12,952 372 44 10 46 10.7

2 92% 2,366 10,590 12,956 369 48 8 44 11.6

3 96 % 2,674 10,193 12,867 456 51 4 45 12.2

North

0 80% 1,577 13,730 15,308 n/a 0 100 0 n/a

1 90% 2,226 12,576 14,801 452 43 10 47 10.7

2 92% 2,440 12,329 14,769 482 47 8 46 11.3

3 96 % 2,748 11,866 14,615 633 49 4 48 11.7

South (Rest of Country)

0 80% 1,422 10,903 12,326 n/a 0 100 0 n/a

1 90% 2,023 9,870 11,893 298 45 9 46 10.7

2 92% 2,236 9,676 11,912 262 49 8 43 12.1

3 96 % 2,545 9,312 11,857 288 54 4 43 13.0

*Values in parentheses denote negative values.



### Figures 8. 4.19 through 8.3. 21 show the range of LCC savings for the efficiency levels

considered for mobile home gas furnaces by region

. For each standard level, the top and the

bottom of the box indicate the 75 th 

### and 25 th 

### percentiles, respectively. The bar at the middle of the box indicates the median; 50 percent of the households have lifecycle cost savings above this value. The ‘whiskers’ at the bottom and the top of the box indicate the 5 th 

### and 95 th 

### percentiles.

The sma ll box shows the average LCC savings for each standard level.

### 8

- 124 Figure 8.4

. 19 Plot of the Distributions of LCC Savings for Mobile Home Gas Furnaces

– National

Figure 8.4

. 20 Plot of the Distributions of LCC Savings for Mobile Home Gas Furnaces

– North Region - 2000 - 1000 0 1000 2000 3000 4000 5000

Level 1 Level 2 Level 3Average LCC Savings (2009$)

Efficiency Level 

### MHGF (National) Average LCC Savings Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

- 2000 - 1000 0 1000 2000 3000 4000 5000

Level 1 Level 2 Level 3Average LCC Savings (2009$)

Efficiency Level 

### MHGF (North) Average LCC Savings Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 125 Figure 8.4

. 21 Plot of the Distributions of LCC Savings for Mobile Home Gas Furnaces

– So uth Region

Figures 8. 4

. 22 through 8. 4.24 show the range of PBPs for all efficiency levels considered for mobile home gas furnaces by region. For each efficiency level, the top and bottom of the box in the figure indicate the 75 th 

### and 25 th 

### percentiles, respectively. The bar at the middle of the box indicates the median: 50 percent of the households have a payback period above this value. The

horizontal lines above and below each box indicate the 95 th 

### and 5 th 

### percentiles, respectively. The

s mall box indicates the average PBP for each efficiency level. - 1500 - 1000

- 500 0 500 1000 1500 2000 2500 3000 3500 4000

Level 1 Level 2 Level 3Average LCC Savings (2009$)

Efficiency Level 

### MHGF (South)Average LCC Savings Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 126 Figure 8.4

. 22 Plot of the Distributions of PBB for Mobile Home Gas Furnaces

– National

Figure 8.4

. 23 Plot of the Distributions of PBB for Mobile Home Gas Furnaces

– North Region 0 10 20 30 40 50 60 70

Level 1 Level 2 Level 3Average PBP (years)

Efficiency Level 

### MHGF (National)Average Payback Period Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

0 10 20 30 40 50 60

Level 1 Level 2 Level 3Average PBP (years)

Efficiency Level 

### MHGF (North)Average Payback Period Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 127 Figure 8.4

. 24 Plot of the Distributions of PBB for Mobile Home Gas Furnaces

– South Region

Rebuttable PBP for each efficiency level is shown in Table 8.4

. 39

.

Table 8.4

. 39 Rebuttable Payback Period for Manufactur ed Home Gas Furnaces

Efficiency

Level AFUE Total Costs Rebuttable Payback

Period

years Total

Installed

Costs Total Operating

Costs

0 80% 1,410 1,210

1 90% 2,017 1,079 4.7

2 92% 2,224 1,056 5.3

3 95% 2,516 1,013 5.6



### 8.4.8 Oil

- Fired Furnace

Table 8.4

. 40 shows the LCC and PBP results for oil

- fired furnaces. As mentioned earlier,

for some households DOE assigned base case products that are more energy effi cient than some of the standard levels. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline products. Similarly with regard to the PBPs shown below, DOE determine d the median and average values by excluding the percentage of households not impacted by a standard at a given efficiency level. The values for average lifetime operating cost in the tables are discounted sums of the annual operating costs over the produc t lifetime. 0 10 20 30 40 50 60 70 80

Level 1 Level 2 Level 3Average PBP (years)

Efficiency Level 

### MHGF (South)Average Payback Period Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 128 Table 8.4

. 40 LCC and PBP Results for Oil

- Fired Furnaces

Efficiency

Level AFUE Life

- Cycle Cost
2009$ Life

- Cycle Cost Savings
2009$ Median Payback

Period

years Installed

Cost Discounted Operating

Cost LCC Average Savings
2009$ % of Households with

Net

Cost No Impact Net

Benefit

0 80% 3,008 30,287 33,295 n/a 0 100 0 n/a

1 90% 3,157 29,946 33,103 15 10 58 32 1.0

2 92% 3,394 29,613 33,007 (13) 24 39 37 1.9

3 95% 3,622 29,287 32,909 (18) 35 33 32 19.8

4 98% 4,810 27,809 32,619 272 51 1 48 18.2

*Values in parentheses denote negative values.



### Figures 8. 4.25 show s the range of LCC savings for the efficiency levels considered for

oil

- fired furnaces by region

. For each standard level, the top and the bottom of the box indicate

the 75 th 

### and 25 th 

### percentiles, respectively. The bar at the middle of the box indicates the median; 50 percent of the households have lifecycle cost savings above this value. The ‘whiskers’ at the bottom and the top of the box indicate the 5 th 

### and 95 th 

### percentiles. The sma ll box shows the average LCC savings for each standard level.

Figure 8.4

. 25 Plot of the Distributions of LCC Savings for Mobile Home Gas Furnaces

– National - 4000 - 3000 - 2000 - 1000 0 1000 2000 3000 4000 5000

Level 1 Level 2 Level 3 Level 4Average LCC Savings (2009$)

Efficiency Level 

### OF (National) Average LCC Savings Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 129 Figures 8. 4

. 26 show s the range of PBPs for all efficiency levels considered for oil

- fired furnaces by region. For each efficiency level, the top and bottom of the box in the figure indicate

the 75 th 

### and 25 th 

### percentiles, respectively. The bar at the middle of the box indicates the median: 50 p ercent of the households have a payback period above this value. The horizontal lines above

and below each box indicate the 95 th 

### and 5 th 

### percentiles, respectively. The small box indicates the average PBP for each efficiency level.

Figure 8.4

. 26 Plot of the Distributions of PBB for Mobile Home Gas Furnaces

– National

Rebuttable PBP for each efficiency level is shown in Table 8.4

. 41

.

Table 8.4

. 41 Rebuttable Payback Period for Oil

- fired Furnaces

Efficiency

Level AFUE Total Costs Rebuttable Payback

Period

years Total

Installed

Costs Total Operating

Costs

0 80% 2,919 1,653

1 90% 3,067 1,634 7.6

2 92% 3,317 1,615 10.4

3 95% 3,572 1,596 11.5

4 98% 4,804 1,403 7.5 0 20 40 60 80 100 120 140 160

1 2 3 4Average PBP (years)

Efficiency Level 

### OF (National)Average Payback Period Average; Median; Box 25%

- 75%; Whisker 5%

- 95% median

average

### 8

- 130 8.5 OFF MODE AND STANDBY POW ER CONSUMPTION

8.5.1 Central Air Conditioner and Heat Pump

Residential air conditioners and heat pumps use a small amount of electricity during their “off mode” (neither cooling nor heating). The principal sources of this off mode power consumption are crankcase heaters (CCHs) in the outside unit (nominally 40 wat ts) and transformers providing low voltage power for controls in the inside unit. For this analysis, DOE calculated the impact on LCC of efficiency levels based on various combinations of improved control techniques for crankcase heaters and more efficient low voltage transformers. Between one and four efficiency levels, including the baseline, were identified in the engineering analysis, depending on product class and whether or not the equipment would utilize a crankcase heater. These levels were subseque ntly included in the off mode LCC analysis.

T he baseline unit was assumed to have no temperature control on the crankcase heater , so that the crankcase heater is “on” whenever the air conditioner or heat pump is in the off mode. For equipment with crankca se heaters, DOE identified three efficiency levels above the baseline for air conditioners and two efficiency levels above the baseline for heat pumps. These are

described as follows:

For air conditioners:

Level 1

– Temperature controls so that the CCH is only activated below 60°F

Level 2

– Level 1 plus the use of a self regulating CCH with an insulated compressor

cover

Level 3

– Level 2 plus the use of an improved (toroidal) low voltage transformer

For heat pumps:

Level 1

– Temperature controls which reduc e CCH usage during the shoulder season period

Level 2

– Level 2 plus the use of an improved (toroidal) low voltage transformer

Several additional considerations exist within the air conditioner and heat pump markets.

For coil

- only air conditioners, efficie ncy level 3 was not considered a viable design option since the indoor unit housing the low voltage transformer is physically not part of the test of coil

- only units. In addition, DOE recognized that because of the small change in power consumption

associa ted with improving the low voltage transformer, an off mode power standard written that would permit the additional off mode power consumption due to blowers using electronically commutated motors (ECM), approximately 3 watts, would necessarily be set high enough that manufacturers utilizing permanent split capacitor (PSC) motors would be able to comply with the same CCH design options but without improving the low voltage transformer. DOE assumed that only the fraction of the market with ECMs would be affe cted by efficiency level 3. DOE

### 8

- 131 estimated that 71% of the air conditioner and heat pump market would utilize PSC motors, based on data for furnaces, which indicated that 29% of furnace blowers utilized ECMs.

Finally, while the largest power

- using compone nt during off mode is a CCH, it is not found in all products. For air conditioner products and heat pump products without a crankcase heater, the only available efficiency level above the baseline is the improved low voltage transformer, indentified as eff iciency level 1 for these products and for the reasons identified above, applicable only to products with an ECM.

As discussed in chapter 5, with the exception of coil

- only split

- system central air conditioners, two different off mode power consumption le vels exist for each engineering efficiency level. These power consumption levels are dependent on whether the system utilizes a PSC or an ECM blower motor. However, the cost of each design option and the energy savings from each design option utilized in t he efficiency levels are unaffected by the blower motor choice. The off mode LCC analysis was done assuming ECMs; however, the LCC results are identical for systems with PSC motors, with the exception that the low voltage transformer is not

considered a vi able design option for equipment with PSC blower motors.

This off mode analysis was conducted using single point national average estimates for the LCC inputs and was conducted only at the national level. Energy use for each efficiency

level was based on t he seasonal operating hours at rated conditions from the proposed DOE test procedure as discussed in chapter 7. Table 8.5

. 1 shows key input assumptions for the LCC

ana lysis. Details on these inputs follow.

### 8

- 132 Table 8.5

. 1 Summary of Inputs and Methods for the LCC and PBP Analysis for C entral

Air Conditioners and H eat P umps LCC Analysis Inputs Equipment Class Air Conditioners (Split

- System, Single Package, Space Constrained, and SDHV) Heat pumps (Split

- System, Single Package , and Space Constrained )

Product Cost Derived by multiplying manufacturer baseline cost and incremental costs by national average baseline and incremental manufacturer markups and sales tax. New and replacement markets considered separately.

Installation Cost No installation costs assumed. E fficiency level costs are part of equipment design and do not impact installation. Annual Off Mode Energy Consumption Based on P1 and P2 power consumption established in engineering analysis multiplied by shoulder and heating season hours, respectively, from proposed DOE test procedure. Based on P1 power consumption established in engineering analysis multiplied by shoulder season hours from proposed DOE test procedure.

Energy Prices Electricity prices based on national average and marginal residential electricity prices for heating season for heat pumps from residential tariff analysis Energy Price Trends Forecast based on national

- average residential electricity price indices

devel oped from the AEO2010 Reference case. Repair and Maintenance Costs No repair and maintenance costs assumed for any efficiency levels

Measure Life 19 years based on average equipment life 16.3 years based on average equipment life

Discount Rate 5 percent real, based on weighted average of residential discount rate and commercial discount rate (calculated as weighted average cost of capital) Compliance Date of New Standard 2016



### 8.5.1.1 Product Cost

The price of off mode equipment to the consumer was estimated by applying distribution chain markups to the MSP. The MSP was estimated based on a single markup factor of 1.3 applied to the manufacturers’ production cost. To estimate distribution chain markups, national average baseline and incremental markup factors we re used. The average markup factors are shown in the summary of national average m arkups table in chapter 6 for wholesalers, mechanical contractors, and general contractors. Baseline markups are applied to the baseline manufacturer’s selling price. Increme ntal markups were applied to the incremental cost for each efficiency level above the baseline. Derivation of these distribution chain markups is discussed in detail in chapter 6 of the TSD.

8.5.1.2 Installation Costs

DOE assumed that there would be no additional installation c osts. Each efficiency level considered reflects component and labor costs that are entirely captured in the equipment price.

No additional installation costs for the off mode efficiency levels are required or anticipated beyond the base air conditioner or heat pump installation costs.

### 8

- 133 8.5.1.3 Energy Prices

Electricity prices for the off mode energy consumption were based on national average and marginal residential el ectricity prices for heating season for heat pumps as developed from

the residential tariff analysis . Electricity prices for heating were assumed to best reflect the electricity costs for off mode power consumption during the heating seasons (for air

condi tioners). In lieu of a separate and detailed analysis of shoulder season electricity costs, electricity costs for heating were used as these were presumed to be less volatile and more reflective of prices suitable for shoulder seaso ns than cooling costs. S ee section 8.2.3.1 for details on the calculation of average electricity prices

8.5.1.4 Energy Price Trends

Future electricity prices were based on national

- average reside ntial electricity price indices developed from the AEO 2010 r eference case forecasts . See section 8.2.3.2 for details.

8.5.1.5 Repair and Maintenance Costs

No repair and m aintenance costs were assumed for any off mode efficiency levels . CCHs and CCH controls are simple devices and should be relatively robust, and, because CCHs do not directly impact the utility of the air conditioner or heat pump, their problems are expecte d to be difficult to diagnose in the field. A failure of a CCH may result in premature compressor failure and early replacement, but these would be captured within the lifetime estimates of the air conditioner or heat pump. DOE had no data on the frequency of repair for CCHs or CCH controls and for this reason assigned no repair or maintenance costs to changes in design options associated with the defined off mode efficiency levels. In the case of efficiency levels incorporating the toroidal transformer, DO E believes that low voltage transformers are robust and failures infrequent. No incremental repair or maintenance costs were assigned to efficiency levels using toroidal transformers.

8.5.1.6 Off Mode Measure Life time

DOE based the measure lifetime used for the o ff mode analysis on the average equipment

life for CAC s or HPs as appropriate. These are 19 years for central air conditioners and 16.3

years for central heat pumps as established in section 8.2.3.5

.

8.5.1.7 Discount Rate

The discount rate used for the off mode LCC analysis was based on a weighted average of national average residential consumer discount rates and commercial weighted average cost of capital. Residential shipments were estimated at 93% of the market, with co mmercial shipments estimated at 7%. The average calculated discount rate was 5% using the analytical approach

established in section 8.2.3.6

.

### 8

- 134 8.5.1.8 Compliance Date

The initial starting year for the LCC analysis was 2016, the anticipated compliance date for new central air conditioner and heat pump standards.

8.5.1.9 Off Mode Base Case

In addition to the LCC inputs discussed previously, DOE developed a base case

distribution to a ttempt to project the off mode energy consumption and use of off mode technologies in 2016 in the absence of off mode standards. DOE was not able to identify a data source establishing the fraction of central air conditioner or heat pump products in the U. S. market that would be tested with CCHs or would be expected to have CCHs installed in the field. CCHs are used to protect compressors from refrigerant vapor migrating to the compressor crankcase, condensing and mixing with the crankcase oil, and potentia lly damaging the compressor during start up. Reciprocating compressors are considered more sensitive to liquid refrigerant in the crankcase and are believed to more commonly utilize CCHs, but scroll compressors also may utilize CCHs, depending on applicati on and total refrigerant charge. Little information on the overall use of CCHs was identified. A 2004 study for the Australian market

estimated that one in six air conditioners in that market utilized CCHs. 52 

### However, changes in compressor type utilization since 2004, in particular market growth in the use of scroll compressors, are expected to result in a lower fraction of the U.S. central air conditioner market having CCHs. DOE estimated that 10 percent of central air conditioners within each product

class would utilize CCHs. CCHs are much more commonly used in HPs , which are intended to be able to cycle on in cold weather. DOE assumed that two

- thirds of HPs would utilize CCHs in each product class in the base case.

DOE also estimated base

- case efficiency distributions for CAC and HP off mode p ower for units with and without CCHs. For split

- system central air conditioners with CCHs DOE estimated that 60% of the affected market would be at the baseline level, 30% would utilize thermostat controls and be at approximately efficiency level 1, and 10 % would use more advanced controls, including use of self

- regulating heaters, and would be approximately equivalent to efficiency level 2. Based on manufacturer feedback with regard to the toroidal transformer technology, 0% of the market was assigned to l evel 3 for air conditioners. Since the design options in efficiency levels 1 and 2 are applied to the condensing unit, DOE assumed the

same market fractions for blower

- coil or coil

- only units. However, since the low voltage transformer is part of the indoo r unit, and does not exist when testing coil

- only equipment, this design option is not applicable to coil

- only equipment. For split

- system and single

- package HPs with CCHs, DOE estimated that 50% of the affected market would be at the baseline level and

50 % at efficiency level 1 in 2016. For equipment without a crankcase heater, 100% of the market

was assumed to be at the baseline level.

8.5.1.10 Off Mode LCC Results for Central Air Conditioners and Heat Pumps

Estimated installed cost, average operating costs, and a verage LCC for each efficiency level are shown. It addition, the average LCC savings compared with the base case and the median PBP are shown. While the analysis is based on single point estimates for most of the

### 8

- 135 inputs, there is variation in the LCC resul ts due to the shipments to new and to replacement markets, as well as due to the fraction of the market at each efficiency level in the base case. The proportions of the market estimated to be impacted positively, negatively, or not impacted by

standards s et at each efficiency level based on this variation are also shown.

Table 8.5

. 2 National LCC and Payback Period Results for Off Mode Power Analysis

– Air

Conditioners

Split

- System Air Conditioner (Blower

- Coil) , Single

- Package Air Conditioner, and SDHV with CCH

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience %

Net

Cost No Impact Net

Benefit

(Baseline) 20 344 364 n/a 0 100 0 n/a

1 26 255 281 84 0 40 60 0. 8

2 80 217 297 39 30 10 60 5.6

3 97 211 309 24 40 0 60 8 .6

Split

- System Air Conditioner (Blower

- Coil), Single

- Package Air Conditioner, and SDHV without CCH

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ * Experience %

Net

Cost No Impact Net

Benefit

(Baseline) 1 6 79 9 5 n/a 0 100 0 n/a

1 3 4 73 1 07 (1 2 ) 100 0 0 35.6

Split

- System Air Conditioner (Coil

- Only) with CCH

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience %

Net

Cost No Impact Net

Benefit

(Baseline) 9 265 274 n/a 0 10 0 0 n/a

1 15 176 191 84 0 40 60 0.8

2 69 138 207 39 30 10 60 5.6

Split

- System Air Conditioner (Coil

- Only) without CCH **

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience %

Net

Cost No Impact Net

Benefit

(Baseline) 0 0 0 n/a 0 10 0 0 n/a

Space Constrained Air Conditioner with CCH

Off Mode Life

- Cycle Cost Life

- Cycle Cost Savings Median

### 8

- 136 Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience %

Net

Cost No Impact Net

Benefit

(Baseline) 20 34 8 36 8 100

1 26 258 28 4 85 0 40 60 0. 8

2 80 219 29 9 41 30 10 60 5.6

3 97 214 3 11 25 40 0 60 8 .6

Space Constrained Air Conditioner without CCH

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience %

Net

Cost No Impact Net

Benefit

(Baseline) 1 6 80 9 6 100

1 3 4 74 1 08 (1 1 ) 100 0 0 35.6

*Values in parentheses denote negative values. ** Provided for completeness in tables

. No efficiency level options identified



### Table 8.5

. 3 National LCC and Payback Period Results for Off Mode Power Analysis

– Split

- System and Space Constrained Heat Pumps

Split

- System and Space Constrained Heat Pump s with CCH

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience

Net

Cost No Impact Net

Benefit

(Baseline) 20 41 61 n/a 0 10 0 0 n/a

1 26 26 52 9 0 50 50 4.2

2 43 25 69 (12) 100 0 0 19.9

Split

- System and Space Constrained Heat Pump s without CCH

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience

Net

Cost No Impact Net

Benefit

(Baseline) 1 6 11 28 n/a 0 10 0 0 n/a

1 3 4 11 4 4 (1 7 ) 100 0 0 >100
*Values in parentheses denote negative values.

### 8

- 137 Table 8.5

. 4 National LCC and Payback Period Results for Off

- Mode Power Analysis

– Single

- Package Heat Pumps

Single Package Heat Pump with CCH

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience

Net

Cost No Impact Net

Benefit

(Baseline) 2 1 41 6 2 n/a 0 10 0 0 n/a

1 27 26 5 4 9 0 50 50 4. 2

2 45 26 7 1 (1 3 ) 100 0 0 19.9

Single Package Heat Pump without CCH

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience

Net

Cost No Impact Net

Benefit

(Baseline) 1 7 11 29 n/a 0 10 0 0 n/a

1 3 5 11 46 (1 7 ) 100 0 0 >100

*Values in parentheses denote negative values.



### 8.5.2 Furnaces

The furnace off mode analysis was conducted only at the national level and was conducted using many of the same distributions and variables as the furnace LCC analysis. Energy use for each efficiency level was based on the seasonal operating hours calculat ed in the furnace LCC analysis. Table 8.5

. 5 shows key input assumptions for the LCC analysis.

Table 8.5

. 5 Summary of Inp uts and Methods for the LCC and PBP Analys e s for Furnaces

LCC Analysis Inputs Equipment Class

Product Cost Derived by multiplying manufacturer baseline cost and incremental costs by regional baseline and incremental manufacturer markups and sales taxes. New and replacement markets considered separately.

Installation Cost No installation costs assumed. Efficie ncy level costs are part of equipment design and do not impact installation. Annual Off Mode Energy Consumption Power consumption established in engineering analysis multiplied by 8760 minus furnace burner operating hours calculated for each sampled household during the furnace simulation run. Energy Prices Electricity prices based on monthly regional average residential electricity prices. Energy Price Trends Forecast based on regional

- average residential electricity price indices developed from the AEO 2010 Reference case. Repair and Maintenance Costs No repair and maintenance costs assumed for any efficiency levels Component Life time Same as the furnace equ ipment lifetime.

Discount Rate Same as for the furnace LCC analysis. Compliance Date of New Standard 2016

### 8

- 138 Estimated installed cost, average operating costs, and average LCC for each efficiency

level are shown in Table 8.5

. 6 for each furnace product class.

Table 8.5

. 6 National LCC and Payback Period Results for Off Mode Power Analysis

– Furnaces

Off Mode Efficiency

Level Life

- Cycle Cost Life

- Cycle Cost Savings Median Payback

Period

years Average

Installed

Cost
2009$ Average Operating

Cost
2009$ Average

LCC
2009$ Average Savings
2009$ Experience

Net

Cost No Impact Net

Benefit

Non

- Weatherized Gas Furnaces
(Baseline) 0 133 133 n/a 0 100 0 n/a

1 3 128 132 2 9 72 18 10.7

2 8 125 133 (0) 17 72 11 16.1

Manufactured Home Gas Furnaces
(Baseline) 0 103 103 n/a 0 100 0 n/a

1 1 102 103 (0) 6 91 4 11.9

2 4 101 104 (1) 8 91 2 17.9

Oil

- fired Furnaces
(Baseline) 0 180 180 n/a 0 100 0 n/a

1 1 178 179 1 1 91 8 7.9

2 3 177 179 1 4 91 6 11.9

Electric Furnaces
(Baseline) 0 111 111 n/a 0 100 0 n/a

1 1 110 111 0 4 90 5 10.3

2 3 109 111 (1) 7 90 3 15.5

### 8

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