CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS

1.1 PURPOSE OF THE DOCUMENT ................................................................................. 1-1

1.2 SUMMARY OF THE NATIONAL BENEFITS ............................................................. 1-1

1.3 OVERVIEW OF STANDARDS FOR SMALL, LARGE, AND VERY LARGE 

AIR-COOLED CUAC AND CUHP ................................................................................ 1-5

1.4 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS ................... 1-6

1.5 STRUCTURE OF THE DOCUMENT ............................................................................ 1-8

LIST OF TABLES

Table 1.2.1 Summary of National Economic Benefits and Costs of Proposed 

Energy Conservation Standards for Small, Large, and Very Large 

Commercial Package Air Conditioning and Heating Equipment* ................ 1-2

Table 1.2.2 Annualized Benefits and Costs of Proposed Energy Conservation 

Standards for Small, Large, and Very Large Commercial Package Air 

Conditioning and Heating Equipment ........................................................... 1-4

Table 1.4.1 Analyses Under the Process Rule* ................................................................ 1-7

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CHAPTER 1. INTRODUCTION

1.1 PURPOSE OF THE DOCUMENT

This notice of proposed rulemaking (TSD) is a stand-alone report that provides the 

technical analyses and results supporting the information presented in the notice of proposed 

rulemaking (NOPR) for small, large, and very large air-cooled CUAC and CUHP. This TSD 

reports on the activities and analyses conducted in support of the NOPR. 

1.2 SUMMARY OF THE NATIONAL BENEFITS

DOE’s analyses indicate that the proposed standards would save a significant amount of 

energy. The lifetime savings for small, large, and very large air-cooled CUAC and CUHP 

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

(2019–2048) amount to 8.5 quads. This is equivalent to nearly 50 percent of total U.S. 

commercial sector energy use in 2012. 

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

proposed standards for small, large, and very large air-cooled CUAC and CUHP ranges from 

$11.9 billion to $37.7 billion for 7-percent and 3-percent discount rates, respectively. This NPV 

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

increased product costs for products purchased in 2019–2048. 

In addition, the proposed standards would have significant environmental benefits.a The 

energy savings would result in cumulative emission reductions of 780 million metric tons (Mt)b

of carbon dioxide (CO2), 2,210 thousand tons of methane (CH4), 11.1 thousand tons of nitrous 

oxide (N2O), 2,110 thousand tons of sulfur dioxide (SO2), 734 thousand tons of nitrogen oxides 

(NOX) and 2.57 tons of mercury (Hg).c 

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

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

process. The derivation of the SCC values is discussed in chapter 14. Using discount rates 

appropriate for each set of SCC values, DOE estimates the present monetary value of the CO2 

emissions reduction to be between $4.2 billion and $65.9 billion. Additionally, DOE estimates 

the present monetary value of the NOx emissions reduction to be $227 million and $728 million 

at 7-percent and 3-percent discount rates, respectively. 

Table 1.2.1 summarizes the national economic costs and benefits expected to result from 

the proposed standards for small, large, and very large air-cooled CUAC and CUHP. 

a DOE calculated emissions reductions relative to the Annual Energy Outlook (AEO) 2013 Reference case, which 

generally represents current legislation and environmental regulations for which implementing regulations were 

available as of December 31, 2012.

b A metric ton is equivalent to 1.1 short tons. Results for NOX and Hg are presented in short tons. c DOE also estimated CO2 and, for CH4 and N2O, CO2 equivalent (CO2eq) emissions that occur through 2030. The 

estimated emissions reductions through 2030 are 46 million metric tons CO2, 3.5 million tons CO2eq for CH4, and 

186 thousand tons CO2eq for N2O.

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Table 1.2.1 Summary of National Economic Benefits and Costs of Proposed Energy 

Conservation Standards for Small, Large, and Very Large Commercial 

Package Air Conditioning and Heating Equipment* 

Category Present Value

Billion 2013$ Discount Rate

Benefits

Operating Cost Savings 20.6 7% 

59.7 3%

CO2 Reduction Monetized Value ($12.0/t case)** 6.1 5%

CO2 Reduction Monetized Value ($40.5/t case)** 30.9 3% 

CO2 Reduction Monetized Value ($62.4/t case)** 49.9 2.5% 

CO2 Reduction Monetized Value ($119/t case)** 95.9 3%

NOX Reduction Monetized Value (at $2,684/ton)** 0.3 7% 

1.1 3%

Total Benefits†

51.9 7%

91.6 3% 

Costs

Incremental Installed Costs 4.1 7%

8.8 3%

Total Net Benefits

Including EmissionsReduction Monetized Value† 47.8 7%

82.8 3%

* This table presents the costs and benefits associated with small, large, and very large air-cooled CUAC and CUHP 

shipped in 2019−2048. These results include benefits to customers which accrue after 2048 from the products 

purchased in 2019−2048. The results account for the incremental variable and fixed costs incurred by manufacturers 

due to the standard, some of which may be incurred in preparation for the rule. 

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

updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% 

discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 

3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX is the 

average of the low and high values used in DOE’s analysis.

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

percent discount rate.

The benefits and costs of today’s proposed standards, for products sold in 2019-2048, can 

also be expressed in terms of annualized values. The annualized monetary values are the sum of 

(1) the annualized national economic value of the benefits from consumer operation of products 

that meet the proposed standards; consisting primarily of operating cost savings from using less 

energy, minus increases in equipment purchase and installation costs, which is another way of 

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representing customer NPV, and (2) the annualized monetary value of the benefits of CO2 and 

NOX emission reductions.d 

Although combining the values of operating savings and CO2 emission reductions 

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

savings are domestic U.S. consumer monetary savings that occur as a result of market 

transactions while the value of CO2 reductions is based on a global value. Second, the 

assessments of operating cost savings and CO2 savings are performed with different methods that 

use different time frames for analysis. The national operating cost savings is measured for the 

lifetime of small, large, and very large air-cooled CUAC and CUHP shipped in 2019–2048. The 

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

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

well beyond 2100. 

Estimates of annualized benefits and costs of the proposed standards are shown in Table 

1-2. The results under the primary estimate are as follows. Using a 7-percent discount rate for 

benefits and costs other than CO2 reduction, for which DOE used a 3-percent discount rate along 

with the average SCC series that uses a 3-percent discount rate, the cost of the standards 

proposed in today’s rule is $190 million per year in increased equipment costs, while the benefits 

are $1,089 million per year in reduced equipment operating costs, $1,055 million in CO2

reductions, and $17 million in reduced NOX emissions. In this case, the net benefit amounts to 

$1,971 million per year. Using a 3-percent discount rate for all benefits and costs and the average 

SCC series, the cost of the standards proposed in today’s rule is $284 million per year in 

increased equipment costs, while the benefits are $2,153 million per year in reduced operating 

costs, $1,055 million in CO2 reductions, and $36 million in reduced NOX emissions. In this case, 

the net benefit amounts to $2,960 million per year.

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

First, DOE calculated a present value in 2013, the year used for discounting the NPV of total customer costs and 

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

benefits except for the value of CO2 reductions. For the latter, DOE used a range of discount rates. From the present 

value, DOE then calculated the fixed annual payment over a 30-year period (2019 through 2048) that yields the 

same present value. The fixed annual payment is the annualized value. Although DOE calculated annualized values, 

this does not imply that the time-series of cost and benefits from which the annualized values were determined is a 

steady stream of payments.

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Table 1.2.2 Annualized Benefits and Costs of Proposed Energy Conservation Standards 

for Small, Large, and Very Large Commercial Package Air Conditioning 

and Heating Equipment

Discount Rate

Primary Estimate

Low Net 

Benefits 

Estimate

High Net 

Benefits 

Estimate

million 2013$/year

Benefits

Operating Cost Savings 

7% 2,177 1,984 2,407

3% 3,426 3,127 3,781

CO2 Reduction Monetized 

Value ($12.0/t case)** 5% 484 467 505 

CO2 Reduction Monetized 

Value ($40.5/t case)** 3% 1,774 1,714 1,846 

CO2 Reduction Monetized 

Value ($62.4/t case)** 2.5% 2,632 2,543 2,737 

CO2 Reduction Monetized 

Value ($119/t case)** 3% 5,504 5,317 5,727 

NOX Reduction Monetized 

Value (at $2,684/ton)**

7% 36.18 34.75 37.90

3% 60.89 58.85 63.40

Total Benefits†

7% plus CO2

range 2,698 to 7,718 2,486 to 7,336 2,950 to 8,172 

7% 3,988 3,733 4,291

3% 5,262 4,900 5,691

3% plus CO2

range 3,972 to 8,991 3,653 to 8,503 4,349 to 9,572 

Costs

Incremental Product Costs

7% 430 350 485

3% 507 433 550

Net Benefits

Total†

7% plus CO2

range 2,268 to 7,288 2,135 to 6,986 2,465 to 7,687

7% 3,558 3,383 3,806

3% 4,755 4,468 5,140

3% plus CO2

range 3,465 to 8,484 3,220 to 8,071 3,799 to 9,021 

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* This table presents the annualized costs and benefits associated with small, large, and very large air-cooled CUAC 

and CUHP shipped in 2019−2048. These results include benefits to customers which accrue after 2048 from the 

products purchased in 2019−2048. The results account for the incremental variable and fixed costs incurred by 

manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low 

Benefits, and High Benefits Estimates utilize projections of energy prices from the AEO2013 Reference case, Low 

Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product costs 

reflect no change for projected product price trends in the Primary Estimate, an increasing trend for projected 

product prices in the Low Benefits Estimate, and a decreasing trend for projected product prices in the High Benefits 

Estimate. The methods used to derive projected price trends are explained in section IV.F.

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

updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% 

discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 

3% discount rate. The SCC time series incorporate an escalation factor. The value for NOX is the average of the low 

and high values used in DOE’s analysis.

† Total Benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to average 

SCC with 3-percent discount rate. In the rows labeled “7% plus CO2 range” and “3% plus CO2 range,” the operating 

cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of 

CO2 values.

1.3 OVERVIEW OF STANDARDS FOR SMALL, LARGE, AND VERY LARGE 

AIR-COOLED CUAC AND CUHP

Title III, Part Ce

 of the Energy Policy and Conservation Act of 1975 (EPCA or the Act), 

Pub. L. 94-163 (42 U.S.C. 6311-6317, as codified), was added by the National Energy 

Conservation Policy Act (Pub. L. 95-619 (Nov. 9, 1978). That law established the Energy 

Conservation Program for Certain Industrial Equipment, which includes provisions covering the 

commercial heating and air-conditioning equipment that is the subject of this notice.f

 In general, 

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

equipment. Relevant provisions of the Act include definitions (42 U.S.C. 6311), energy 

conservation standards (42 U.S.C. 6313), test procedures (42 U.S.C. 6314), labelling provisions 

(42 U.S.C. 6315), and the authority to require information and reports from manufacturers (42 

U.S.C. 6316). 

Section 342(a) of EPCA concerns energy conservation standards for small, large, and 

very large, air-cooled CUAC and CUHP. (42 U.S.C. 6313(a)) This category of equipment has a 

rated capacity between 64,000 Btu/h and 760,000 Btu/h. It is designed to heat and cool 

commercial buildings and is typically located on the building’s rooftop. Section 5(b) of the 

American Energy Manufacturing Technical Corrections Act of 2012 (Pub. L. No. 112-210 (Dec. 

18, 2012) (AEMTCA) amended Section 342(a)(6) of EPCA. Among other things, AEMTCA 

modified the manner in which DOE must amend the energy efficiency standards for certain types 

of commercial and industrial equipment. DOE is typically obligated either to adopt those 

standards developed by the American Society of Heating, Refrigerating, and Air-Conditioning 

Engineers (ASHRAE) – or to adopt levels more stringent than the ASHRAE levels if there is 

clear and convincing evidence in support of doing so (42 U.S.C. 6313(a)(6)(A)). AEMTCA 

added to this process a requirement that DOE initiate a rulemaking to consider amending the 

e

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

f

 All references to EPCA in this document refer to the statute as amended through the American Energy 

Manufacturing Technical Corrections Act of 2012, Pub. L. 112-210 (Dec. 18, 2012).

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standards for any covered equipment as to which more than 6 years has elapsed since the 

issuance of the most recent final rule establishing or amending a standard for the equipment as of 

the date of AEMTCA’s enactment, December 18, 2012. (42 U.S.C. 6313(a)(6)(C)(vi)) Under this 

new framework, DOE must issue either a notice of determination that the current standards do 

not need to be amended or a notice of proposed rulemaking (NOPR) containing proposed 

standards by December 31, 2013. See 42 U.S.C. 6313(a)(6)(C)(i) and (vi).g 

DOE most recently issued amended standards for small, large, and very large, air-cooled

CUAC and CUHP on October 18, 2005, which codified both the amended standards for small 

and large equipment and the new standards for very large equipment set by the Energy Policy 

Act of 2005 (EPAct 2005), Pub. L. No. 109-58, 70 FR 60407 (Aug. 8, 2005). 

1.4 PROCESS FOR SETTING ENERGY CONSERVATION STANDARDS

Under EPCA, when DOE is studying new or amended standards, it must consider, to the 

greatest extent practicable, the following seven factors: 

1) the economic impact of the standard on the manufacturers and consumers of the affected 

products; 

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

compared to any increases in the initial cost or maintenance expense; 

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

of the standard; 

4) any lessening of the utility or the performance of the products likely to result from the 

imposition of the standard; 

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

General, that is likely to result from the imposition of the standard; 

6) the need for national energy conservation; and 

7) other factors the Secretary considers relevant. (42 U.S.C. 6313(a)(6)(B)) 

Other statutory requirements are set forth in 42 U.S.C. 6313(a)(6)(A)–(C). 

DOE considers interested party participation to be a very important part of the process for 

setting energy conservation standards. Through formal public notifications (i.e., Federal Register

notices), DOE actively encourages the participation and interaction of all interested parties 

during the comment period in each stage of the rulemaking. Beginning with the framework 

document and during subsequent comment periods, interactions among interested parties provide 

a balanced discussion of the information that is required for the standards rulemaking. 

g Subparagraph (A) and subparagraph (B) refer to 42 U.S.C. 6313(a)(6).

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Before DOE determines whether or not to adopt a proposed energy conservation 

standard, it must first solicit comments on the proposed standard. Any new or amended standard 

must be designed to achieve significant additional conservation of energy and be technologically 

feasible and economically justified. To determine whether economic justification exists, DOE

must review comments on the proposal and determine that the benefits of the proposed standard 

exceed its burdens to the greatest extent practicable, weighing the seven factors listed above. 

The energy conservation standards rulemaking process involves two formal public 

notices, which DOE publishes in the Federal Register. The first notice is the NOPR, which 

presents the analyses of the impacts of potential amended energy conservation standards on 

consumers, manufacturers, and the Nation; DOE’s weighting of these impacts of amended 

energy conservation standards; and the proposed energy conservation standards for the 

equipment. The second notice is the final rule, which presents a discussion of the comments 

received in response to the NOPR; the revised analyses; DOE’s weighting of these impacts; the 

amended energy conservation standards DOE is adopting for each product; and the effective 

dates of the amended energy conservation standards. 

Table 1.4.1 Analyses Under the Process Rule* 

Preliminary Analyses NOPR Final Rule

Market and technology assessment Customer subgroup analysis Revised NOPR analyses

Screening analysis Manufacturer impact analysis

Engineering analysis Utility impact analysis

Energy use determination Emissions analysis

Markups for equipment price 

determination

Employment impact analysis

Life-cycle cost and payback period 

analysis

Regulatory impact analysis

Shipments analysis

National impact analysis

* In the current rulemaking, DOE conducted the analyses listed under Preliminary Analyses as part of the NOPR 

analysis.

On February 1, 2013, DOE published a request for information and notice of document 

availability for small, large, and very large, air cooled CUAC and CUHP. 78 FR 7296. This 

notice is available at: http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD0007-0002. The notice sought to solicit information from the public to help DOE determine 

whether national standards more stringent than those that are currently in place would result in a 

significant amount of additional energy savings and whether those national standards would be 

technologically feasible and economically justified. Separately, DOE also sought information on 

the merits of adopting integrated energy efficiency ratio (IEER) as the energy efficiency 

descriptor for small, large, and very large air-cooled CUAC and CUHP. 

As part of the information gathering and sharing process, DOE organized and held 

interviews with manufacturers of the equipment considered in this rulemaking as part of the 

engineering analysis. DOE had four objectives for these interviews: (1) solicit manufacturer 

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feedback on the draft inputs to the engineering analysis; (2) solicit feedback on topics related to 

the manufacturer impact analysis; (3) provide an opportunity to express manufacturers’ concerns 

to DOE; and (4) foster cooperation between manufacturers and DOE. DOE incorporated the 

information gathered during the engineering interviews with manufacturers into its engineering 

analysis (chapter 5 of the NOPR TSD) and the manufacturer impact analysis (chapter 12 of the 

NOPR TSD). 

1.5 STRUCTURE OF THE DOCUMENT

This preliminary TSD outlines the analytical approaches used in this rulemaking. The

TSD consists of fourteen chapters, an environmental assessment, a regulatory impact analysis, 

and appendices. 

Chapter 1 Introduction: provides an overview of the appliance standards program 

and how it applies to this rulemaking and outlines the structure of the 

document. 

Chapter 2 Analytical Framework: describes the rulemaking process.

Chapter 3 Market and Technology Assessment: characterizes the market for the 

considered products and the technologies available for increasing 

product efficiency.

Chapter 4 Screening Analysis: identifies all the design options that improve 

efficiency of the considered products and determines which technology 

options are viable for consideration in the engineering analysis. 

Chapter 5 Engineering Analysis: discusses the methods used for developing the 

relationship between increased manufacturer price and increased 

efficiency.

Chapter 6 Markups Analysis: discusses the methods used for establishing markups 

for converting manufacturer prices to customer product costs.

Chapter 7 Energy Use Analysis: discusses the process used for generating energyuse estimates for the considered products as a function of standard 

levels.

Chapter 8 Life-Cycle Cost and Payback Period Analysis: discusses the methods 

used to analyze effects of standards on individual customers and users of 

the products and compares the LCC and PBP of products with and 

without higher efficiency standards. 

Chapter 9 Shipments Analysis: estimates shipments of the products over the 30-year 

analysis period that is used in performing the national impact analysis 

(NIA), including how shipments may vary under alternative standard 

levels. 

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Chapter 10 National Impact Analysis: assesses the national energy savings, and the 

national net present value of total consumer costs and savings, expected 

to result from specific, potential energy conservation standards. 

Chapter 11 Consumer Subgroup Analysis: discusses the effects of potential standards 

on different subgroups of consumers. 

Chapter 12 Manufacturer Impact Analysis: discusses the effects of standards on the 

finances and profitability of product manufacturers.

Chapter 13 Emissions Analysis: discusses the effects of standards on three 

pollutants—sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury—

as well as CO2 emissions.

Chapter 14 Monetization of Emissions Reductions: discusses the basis for estimated 

monetary values used for the reduced emissions of CO2 and NOx that are 

expected to result from each of the TSLs considered. 

Chapter 15 Utility Impact Analysis: discusses selected effects of potential standards 

on electric utilities.

Chapter 16 Employment Impact Analysis: discusses the effects of standards on 

national employment.

Chapter 17 Regulatory Impact Analysis: discusses the impact of non-regulatory 

alternatives to efficiency standards.

Appendix 5A Engineering Questionnaires 

Appendix 6A Detailed Data for Equipment Price Markups

Appendix 7A Modifications to Simulations for Energy Use Calculations 

Appendix 8A Distributions used for Discount Rates 

Appendix 10A Full-Fuel-Cycle Multipliers

Appendix 10B National Net Present Value of Consumer Benefits using Alternative 

Equipment Price Forecasts and Economic Growth Scenarios 

Appendix 14A Social Cost of Carbon for Regulatory Impact Analysis Under Executive 

Order 12866 

Appendix 14B Technical Update of Social Cost of Carbon for Regulatory Impact 

Analysis Under Executive Order 12866 

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Appendix 17A Regulatory Impact Analysis: Supporting Materials

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