### A TIONAL ENE RGY S AVING

AN D N ET PRE S ENT VALUE

James E. McMahon (JE cMahon@LBL.gov) Ernest Orlando Lawrence Berkeley National Laboratory U.S. D OE Workshop on Standards for Residential Furnaces and Boilers

July 17, 2001National Energy Saving and Net Present Value Analysis: 

### O ve rv i ew

• Energy consumption for residential space heating by fuel will be calculated annually for a base case and standards cases • The difference between base case consumption and consumption in each standards case represents energy Saving • Results will be reported in physical units (quadrillion Btus primary energy) and economic units (dollars) for each year and cumulatively • The period of analysis is from start date of standard to about 30 years later (ca. 2040)
18National Ener gy Savin g and Ne t Pre s ent Valu e An alys i s:



### Methods for Forecasting Shipments

• Extrapolate from time series - No explicit accounting for number of households, percent owning equipment, changes in installed cost or operating expense
• Forecast using accounting model - new households and percent by equipment type - replacement as function of equipment lifetime • Consider impacts of existing non-regulatory efforts on base case efficiencies in future years.

19National Energy Saving and Net Present Value Analysis:



### DOE Reque sts 

### Input f

r 

### om 

### Stakeh o 

### lde rs on Shipmen ts



### • What other approaches should the Department consider to establish the forecasts for base case and standards cases?
• What are the best information sources for past shipment data by efficiency level ?
• What existing non-regulatory initiatives should be considered in the base case?

20National Energy Saving and Net Present Value Analysis:



### Cons u 

### mer 

### E cono 

### mic F act

### or s 

### Affect F 

### ue l Choic 

### e • Operating expenses: typically hundreds of dollars per household per year, depending upon fuel type, energy prices, and usage. - X42 billion spent for household space heating (1997) • $27 billion for gas or LPG • $8 billion for electricity * $6-billion for oil 7urchase expenses: typically thousands of dollars per installation - $11 billion for HVAC replacement (1994-95) - Plus equipment costs in new construction
21National Energy Saving and Net Present Value Analysis:



### Re si 

### dent ia 

### l M 

### a i 

### n H e 

### ati n 

### g Fuel , 

### 19 

### 7 8-9 7

1978 ®1987 q 1997 Gas re m ained the most frequently used main heating fuel, 55 % in 1978 and 52% in 1997. Electricity has increased from 16 percent in 1978 to 30 percent in 1997. Fuel oil or kerosene for space heat decreased from 22 percent to 10 percent. Electricity Natural Gas Fuel Oil or LPG K?rosenp Main Heating Fuel Wood

The difference betven the 1978 and 1997 estimates is statistically significant at the 95-percent confidence level. Source: Energy Information Administration, Residential Energy Consumption Survey, 1978, 1987, and 1997. From http://www.eia .doe.gov/emeu/recs/ '12National Energy Saving and Net Present Value Analysis:



### Impact of standards on fuel c will be considered

• Historically, fuel availability, changes in relative energy costs, utility programs, other factors have caused fuel switching.
• In the period 1986-1996, American Gas Association reports between 148,000 and 311,000 housing units annually converted from another fuel to natural gas househeating. - This represents 3-8% of annual gas furnace shipments.

23National Energy Saving and Net Present Value Analysis:



### Method : Net Prese nt Valu e (NPV )

• For each year analyzed, ca l culate the difference in installed costs and operating costs between the base case and each standards case
• Discount future values to the present - Include operating costs over lifetime of equipment purchased • Sum over years to get NPV - If present value of savings exceeds costs, NPV is positive. - If present value of costs exceeds costs, NPV is negative.

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