CHAPTER 7. NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

7.1 INTRODUCTION .............................................................................................................. 7­1

7.2 NATIONAL ENERGY SAVINGS .................................................................................... 7­2

7.2.1 National Energy Savings Definition .................................................................... 7­2

7.2.2 National Energy Savings Inputs........................................................................... 7­3

7.3 NET PRESENT VALUE.................................................................................................... 7­5

7.3.1 Net Present Value Definition............................................................................... 7­5

7.3.2 Net Present Value Inputs ..................................................................................... 7­6

7.4 NATIONAL ENERGY SAVINGS AND NET PRESENT VALUE RESULTS............. 7­11

7.4.1 National Energy Savings and Net Present Value Input Summary..................... 7­11

7.4.2 National Energy Savings Results....................................................................... 7­11

7.4.3 Annual Costs and Savings ................................................................................. 7­13

7.4.4 Net Present Value Results.................................................................................. 7­14

REFERENCES .......................................................................................................................... 7­17

LIST OF TABLES

Table 7.2.1 National Energy Saving Inputs............................................................................ 7­3

Table 7.3.1 Net Present Value Inputs ..................................................................................... 7­6

Table 7.3.2 Total Installed Cost per Unit by Efficiency Level from Life­Cycle Cost

(2008$)................................................................................................................. 7­7

Table 7.3.3 Market Shares by Efficiency Level, Base Case Used for NIA Analysis............. 7­8

Table 7.3.4 Shipment­Weighted Average Total Installed Cost by Standard Level

(2008$)................................................................................................................. 7­9

Table 7.3.5 Shipment­Weighted Average Energy Consumption by Standard Level

(2008$)................................................................................................................. 7­9

Table 7.4.1 NES and NPV Inputs......................................................................................... 7­12

Table 7.4.2 Cumulative National Energy Savings for Commercial Boiler Equipment

(2012 to 2042) (Quads) by Equipment Class..................................................... 7­12

Table 7.4.3 Cumulative NPV Results Based on a 7­Percent Discount Rate

(Billion 2008$) by Equipment Class.................................................................. 7­16

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LIST OF FIGURES

Figure 7.4.1 National Annual Costs and Savings for Efficiency Level 1 (Small GasFired Commercial Boilers) ................................................................................ 7­13

Figure 7.4.2 Cumulative NPV Results for Small, Gas­fired, Hot Water Based on a

Seven­Percent Discount Rate (Billion 2008$)................................................... 7­15

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7.1 INTRODUCTION

This chapter describes the method for estimating the magnitude and net present value

(NPV) of future national energy savings (NES) to customers from possible trial efficiency levels

(TSLs) for commercial boiler equipment. Results of the national impact analysis (NIA)

described here include national energy consumption and savings, monetary value of energy

savings to the nation as a result of standards, increased total installed costs to the Nation as a

result of standards, and the NPV of energy savings (the difference between the present monetary

values of energy savings and the increased total installed costs).

The U.S. Department of Energy (DOE) determined both the NPV and the NES for each

candidate efficiency standard level it considered for each of the 10 equipment classes of

commercial boiler equipment it examined. DOE considered as possible standard levels up to

four efficiency levels above the baseline efficiency level defined by the American Society of

Heating, Refrigerating and Air­Conditioning (ASHRAE) Standard 90.1­20071 plus one baseline

efficiency level equivalent to the ASHRAE Standard 90.1­2007 level for each of the 10

equipment classes. DOE also included a market baseline level in the analysis spreadsheet.

Because of the timing difference between DOE adopting standards at ASHRAE Standard 90.1­

2007 levels as opposed to the adoption of standards of a higher efficiency level DOE must

address the potential energy savings that could occur in the time between the effective dates.

Therefore, DOE must include a market baseline efficiency level in its analysis of NES for DOE

setting standards more efficient than those set forth in ASHRAE Standard 90.1­2007. DOE

calculates the benefits for going higher than ASHRAE by analyzing the energy savings for

adoption of standards at the ASHRAE Standard 90.1­2007 level and for adoption of more

stringent standards compared with the market baseline. However, because DOE by statute may

not adopt standards at efficiency levels less stringent than those specified in ASHRAE Standard

90.1­2007, it reports all energy and economic impacts in this analysis as potential impacts

compared with adoption of the ASHRAE Standard 90.1­2007 baseline levels. To do this, DOE

subtracts the energy impacts and economic impacts for adoption of the ASHRAE levels

(compared to the market baseline) from the energy and economic impacts from the adoption of

higher standards (compared to the market baseline). In this chapter DOE reports the results as

energy and economic impacts of going to higher standard levels relative to adoption of standards

at the ASHRAE Standard 90.1­2007 baseline level. Appendix 7­A shows the energy savings and

NPV impacts calculated relative to the market baseline.

DOE performed all calculations using a Microsoft Excelspreadsheet, which is accessible

on the Internet at

http://www1.eere.energy.gov/buildings/appliance_standards/commercial/ashrae_products_docs_

meeting.html.

The important facets of national energy consumption for each class of commercial boiler

equipment include shipments, stock or inventory, national average electricity consumption, and

the site­to­source conversion factor to convert the annual site energy savings into the annual

amount of energy saved at the source of gas generation (the source energy). This chapter

discusses how these are used in the calculation of national energy and economic impacts.

Chapter 6, Shipments Analysis, provides a detailed description of the shipments analysis that

DOE used to forecast future purchases of commercial boiler equipment.

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DOE was not able to obtain information that quantified how voluntary energy efficiency

programs affect equipment efficiencies on a national basis, but voluntary programs may increase

the share of energy­efficient equipment prior to the implementation date of any new standards.

Consequently, DOE did not explicitly incorporate the impact of market­based initiatives into the

shipment forecasts detailed in Chapter 6 of this TSD.

7.2 NATIONAL ENERGY SAVINGS

7.2.1 National Energy Savings Definition

DOE calculates annual NES as the difference between two scenarios: a base case

(without new standards) and a standards case (with new standards). DOE develops NES

estimates for each boiler class independently. Positive values of NES correspond to net energy

savings; i.e., national annual energy consumption (AEC) with standards is less than AEC in the

base case.

NESt =AEC base ­ AEC standard Eq. 7.1

Cumulative energy savings are the sum over a defined time period from the

implementation of a standard forward (from 2012 to 2042) of the annual national energy savings.

NES cum = ∑t NESt Eq. 7.2

DOE calculated the AEC by multiplying the number or stock of commercial boiler

equipment (by vintage) by the unit energy consumption (also by vintage) as shown by the

following equation:

AEC =∑v STOCKV x UECV x src_convt Eq. 7.3

For the above expressions, DOE defined the following quantities:

AEC = Annual national energy consumption each year in quadrillion British thermal

units (quads), summed over vintages of commercial boiler equipment stock,

STOCKV,

NES = Annual national energy savings (quads),

STOCKV = Stock of commercial boiler equipment of vintage V surviving in the year for

which DOE calculated annual energy consumption.

Vintages range from 7 years to approximately 50 years, a consequence of an

assumed 30­year average lifetime of the equipment

UECV = Annual unit energy consumption in thousand British thermal units per year

(kBtu/yr),

src_convt = Time­dependent conversion factor to convert from site energy to source

energy (quads) (Btu/Btu),

V = Year in which the commercial boiler equipment was purchased as a new unit,

t = Year in the forecast (e.g., 2012 to 2042).

The stock of commercial boiler equipment is dependent on annual shipments, the lifetime

of the equipment, the shipments by efficiency level for previous years, and the efficiency levels

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assumed for the existing stock in 2012. However, the energy consumption in the stock for all

boilers with vintages before 2012, the onset of the rule, is the same in both the base­case scenario

and the standards­case scenario, and as such the difference in the energy consumption for these

boilers is zero and the assumed efficiency has no impact on the annual energy savings calculated.

However, the UECv in each scenario is impacted by the distribution of efficiencies in the

shipments over the period from 2012 to 2042.

7.2.2 National Energy Savings Inputs

Table 7.2.1 lists the inputs for the determination of NES. Each of the inputs is then

discussed below.

Table 7.2.1 National Energy Saving Inputs

Input

Annual Unit Energy Consumption (UEC) (quads)

Shipments

Equipment Stock (STOCKV)

Site­to­Source Conversion Factor (src_conv) (quads) (Btu/Btu)

7.2.2.1 Shipments

DOE forecasted shipments for the base case and all standards cases (see chapter 6,

Shipments Analysis). DOE thinks that the shipment projections under the standards cases could

be lower than those in the base­case projection because the higher installed costs would cause

some customers to forego new equipment purchases. However, DOE has no information that

would allow a calculation of this effect. For the Notice of Proposed Rulemaking (NOPR), the

projections of total shipments are the same in both the base case and standards cases.

7.2.2.2 Equipment Stock

The commercial boiler stock in a given year is the total of commercial boiler equipment

shipped from earlier years that survive in the given year. The NES spreadsheet model keeps

track of the total commercial boiler units shipped each year. For the purposes of the NES and

NPV analyses, DOE assumed that existing boiler units are retired by following a Weibull

distribution with an average lifetime of 30 years. The Weibull distribution shows that

approximately 1 percent of the existing units are retired by year 10 of life, retirements occur

most rapidly at approximately year 31 of life, and then tail off gradually to less than 10 percent

per year by year 41 of life. Retired units in the population are replaced until 2042. For units

shipped in 2042, any units still remaining at the end of 2085 are replaced in that year. The

survival function for the commercial packaged boiler equipment is shown in chapter 6.

7.2.2.3 National Annual Energy Consumption

The national AEC is the product of the annual UEC and the stocks of commercial boiler

units of each vintage. This approach accounts for differences in UEC from year to year.

Equation 11.3 above was used for determining the national AEC of boiler equipment.

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DOE initially calculated the AEC at the site (i.e., electricity in kilowatt hours [kWh]

consumed by the commercial boiler equipment units). DOE then calculated primary energy

consumption from site energy consumption by applying a conversion factor to account for losses

associated with the generation, transmission, and distribution of electricity.

7.2.2.4 Effective Date and Analysis Period

Generally, covered equipment to which a new or amended energy conservation standard

applies must comply with the standard if such equipment is manufactured or imported on or after

a specified date. DOE is evaluating potential energy savings estimates for commercial packaged

boilers at the efficiency levels specified by ASHRAE Standard 90.1­2007 and at more stringent

efficiency levels than those in ASHRAE Standard 90.1­2007. If DOE were to propose a rule

prescribing energy conservation standards at the efficiency levels contained in ASHRAE

Standard 90.1­2007, the Energy Policy and Conservation Act of 1975 (EPCA) states that any

such standards “shall become effective on or after a date which is two years after the effective

date of the applicable minimum energy efficiency requirement in the amended ASHRAE/IES

standard” (i.e., ASHRAE Standard 90.1­2007). (42 U.S.C. 6313(a)(6)(D)) DOE has applied this

2­year implementation period to determine the effective date of any energy conservation

standard equal to the efficiency levels specified by ASHRAE Standard 90.1­2007 prescribed by

this rulemaking. Thus, if DOE decides to adopt the levels in ASHRAE Standard 90.1­2007 the

rule would apply to products manufactured on or after 2012 (and include any modifications to

the standards in 2022 respectively for equipment where efficiency levels were set in two tiers).

These DOE effective dates are 2 years from the effective date(s) specified in ASHRAE Standard

90.1­2007 because the effective date in ASHRAE Standard 90.1­2007 is January 1, 2010, for

commercial packaged boilers or January 1, 2020, for certain equipment classes of commercial

packaged boilers for which ASHRAE designated a second tier of efficiency requirements.

If DOE were to propose a rule prescribing energy conservation standards higher than the

efficiency levels contained in ASHRAE Standard 90.1­2007, EPCA states that any such

standards “shall become effective for products manufactured on or after a date which is four

years after the date such rule is published in the Federal Register” (42 U.S.C. 6313(a)(6)(D)).

DOE has applied this 4­year implementation period to determine the effective date of any energy

conservation standard higher than the efficiency levels specified by ASHRAE Standard 90.1­

2007 that might be prescribed in a future rulemaking. Thus, for products for which DOE might

adopt a level more stringent than the ASHRAE efficiency levels, the rule would apply to

products manufactured by or after July 2014, which is four years from the date of publication of

the final rule because DOE would, if it determines to set standards higher than ASHRAE 90.1­

2007, expect to issue a final rule for this proceeding establishing higher standard levels in July

2010. Thus, in determining energy savings for setting standards at efficiencies higher than

ASHRAE, the implementation of such higher standards would be effective July 2014. For the

purposes of its analysis DOE established an analysis period starting at 2012 to capture the impact

of energy savings starting with shipments of equipment at higher efficiency levels under a

scenario of DOE adoption of efficiency levels from ASHRAE Standard 90.1­2007. A 30­year

analysis period is used for the NES, extending from 2012 to 2042 and capturing the effect of

shipments over that time frame. The time period for energy savings for standards going higher

than ASHRAE Standard 90.1­2007 is therefore from 2014 to 2042, starting with the earliest

effective date in 2014. This approach accounts for any lost energy savings from a delay incurred

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by DOE’s not adopting ASHRAE efficiency levels, but instead adopting standards at efficiency

levels higher than those specified in ASHRAE Standard 90.1­2007.

7.2.2.5 Site­to­Source Conversion Factor

The site­to­source conversion factor is the multiplicative factor used for converting site

energy consumption into primary or source energy consumption. As was done for the Notice of

Data Availability (NODA), DOE calculated average site­to­source conversion factor spanning

the analysis period (i.e., 2012 to 2042) using the Energy Information Administration’s (EIA’s)

Annual Energy Outlook for 2008 (AEO2008) [DOE/EIA 2008]). DOE derived the annual

conversion factors by dividing the total energy used to produce gas in each forecast year in the

United States, as indicated in AEO2008, by the total gas delivered for each forecasted year. DOE

then determined the 30­year average to be 1.097. DOE assigned the same annual conversion

factor for calculation of the NES for oil­fired equipment.

7.3 NET PRESENT VALUE

7.3.1 Net Present Value Definition

The NPV is the value in the present of a time series of costs and savings. The NPV is

given by the following equation:

NPV = PVS – PVC Eq. 7.4

where PVS = present value of operating cost savings (including electricity, repair, and

maintenance costs) ($),

PVC = present value of increased total installed costs (including equipment and

installation) ($).

The PVS and PVC are determined according to the following expressions:

PVS = ∑t OCS t x DF t Eq. 7.5

PVC =∑t TICt x DF t Eq. 7.6

where: OCS = total annual operating cost savings ($),

TIC = total annual installed cost increases ($),

DF = discount factor,

t = year (PVS is summed over 2012 to 2085, and PVC is summed over 2012 to

2042).

DOE determined the contribution to PVC for each year, from the effective date of the

standard (2012) to the year 2042, discounted for the NOPR analysis, to the year 2008. The

contribution to PVS was determined for each year, from the effective date of the standard (2012)

to the year when the last units purchased in 2042 have retired (assumed to be 2085). DOE first

calculated costs and savings as the difference between a standards case and a base case

represented as the market baseline (i.e., without new standards). DOE determined the annual

operating cost savings from adoption of the ASHRAE standard over the market base case as well

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as the annual costs increases. It then calculated the standards­case savings from adoption of

standards higher than ASHRAE by first calculating the annual operating cost savings of the

standards case over the market base case and of the annual operating costs over the market base

case. DOE calculated a discount factor from the discount rate and the number of years between

the “present” (i.e., year to which the sum is being discounted) and the year in which the costs and

savings occur. DOE calculated the NPV as the sum over time of the discounted net savings

(which is equivalent to the approach shown in Equations 11.5 through 11.7). It then subtracted

the impact from adoption of the ASHRAE Standard 90.1­2007 efficiency levels to arrive at NPV

results for the adoption of each higher standard level over the ASHRAE Standard 90.1­2007

baseline.

7.3.2 Net Present Value Inputs

Table 7.3.1 lists the inputs to the NPV calculation. Each of the inputs is then discussed

below.

Table 7.3.1 Net Present Value Inputs

Input

Total Annual Installed Cost (TICt) ($)

Total Annual Operating Cost Savings (OCSt) ($)

Discount Factor

Present Value of Costs (PVC) ($)

Present Value of Savings (PVS) ($)

7.3.2.1 Total Annual Installed Cost

The increase in the total annual installed cost is equal to the annual change in the per­unit

total installed cost (difference between base case and standards case) multiplied by the shipments

forecasted in the standards case. The total installed cost includes both the equipment cost and

the installation price. DOE based average equipment costs on average manufacturer prices (see

chapter 5, Life­Cycle Cost and Payback Period Analysis) multiplied by average overall markup

values (also shown in chapter 5). DOE based average installation prices on nationally

representative values for each equipment class and efficiency level (see chapter 5), and

developed base­case and standards­case energy­efficiency shipment scenarios as discussed in

chapter 6. For both the base­case and standards­case energy­efficiency scenarios, DOE

calculated annual shipment­weighted­average efficiencies. Associated with each annual

shipment­weighted­average efficiency, DOE assigned a total installed cost, based on shipmentweighted total installed cost for all efficiency levels shipped under that standards­case scenario.

DOE determined the relationship between efficiency level and total installed cost for each

commercial packaged boiler class as shown in Table 7.3.2. DOE considers the ASHRAE level

as the base minimum standard that it could set under Federal law. In the NIA, DOE establishes

the NPV for going above the baseline, but does not need to determine the NPV of adoption of

that minimum baseline. DOE only looked at subsequent higher standard levels to determine

whether each higher level, when examined independently, has a positive NPV compared with the

baseline. For that reason, the installed costs established for the market baseline are to some

extent arbitrary and for these DOE set the installed costs for the market baseline identical to

those for the adoption of the ASHRAE level. DOE is primarily interested in the differences in

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installed costs between the ASHRAE level and subsequent levels that impact the analysis and the

decision­making process.

Table 7.3.2 Total Installed Cost per Unit by Efficiency Level from Life­Cycle Cost

(2008$)

Below 0

(Market Level 0

Equipment Class Baseline) (ASHRAE) Level 1 Level 2 Level 3 Level 4

Small, Gas­Fired, Hot Water 16,249 16,249 20,756 23,506 27,981 34,480

Small, Gas­Fired, Steam, All Except 23,430 23,430 27,729 29,944 33,414 35,943

natural Draft

Small, Gas­Fired, Steam, Natural Draft 24,155 24,155 28,036 29,372 31,453 na

Small, Oil­Fired, Hot Water 22,191 22,191 26,874 29,935 34,801 na

Small, Oil­Fired, Steam 20,799 20,799 25,013 27,053 31,500 na

Large, Gas­Fired, Hot Water 37,027 37,027 42,449 47,091 54,492 84,465

Large, Gas­Fired, Steam, All Except 60,818 60,818 66,069 68,192 70,431 72,792

Natural Draft

Large, Gas­Fired, Steam, Natural Draft 63,157 63,157 67,696 70,334 74,343 63,157

Large, Gas­Fired, Hot Water 50,778 50,778 59,438 66,336 73,547 na

Large, Oil­Fired, Steam 58,964 58,964 64,110 68,034 74,081 58,964

* na means that this efficiency level was not analyzed and no installed cost was therefore calculated for this efficiency level.

7.3.2.2 Annual Installed Cost–Weighted by Efficiency Distribution

The NIA analysis takes into account that the commercial packaged boiler market reflects

shipments with a distribution of efficiencies as was shown in chapter 3. To assess the impacts on

the market from the introduction of higher standards, DOE calculates impacts based on

efficiency­distribution weighted annual expenditures for new equipment and the national

operating costs for products at various efficiency levels in the commercial boiler stock. As an

example, for the annual installation costs, DOE develops shipment­weighted annual installation

costs based on the distribution of efficiencies in the standards scenario being examined. Because

DOE only developed costs for explicit efficiency levels, the distribution of efficiencies used in

the calculation is based on the data outlined in chapter 2 to describe the current market, but is

“compressed” to fit into the range of efficiency levels selected for analysis. To do this, each

DOE­analyzed efficiency level was examined. The fraction of the current market distribution

that meets a given analyzed efficiency level but does not exceed the next higher analyzed

efficiency level is allocated to the lower efficiency level. This compressed market baseline

distribution, used for the NIA and NES analyses, is shown in Table 7.3.3.

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Table 7.3.3 Market Shares by Efficiency Level, Base Case Used for NIA Analysis

Energy Consumption Level

Below 0

(Market Level 0

Equipment Classs Baseline) (ASHRAE) Level 1 Level 2 Level 3 Level 4

Small, Gas­Fired, Hot Water 8.9% 14.3% 29.3% 22.3% 7.7% 17.5%

Small, Gas­Fired, Steam, All Except 10.0% 26.0% 45.0% 9.0% 3.0% 7.0%

natural Draft

Small, Gas­Fired, Steam, Natural Draft 26.5% 41.8% 9.4% 19.4% 2.9% na

Small, Oil­Fired, Hot Water 29.3% 31.5% 12.0% 20.7% 6.5% na

Small, Oil­Fired, Steam 17.5% 24.0% 34.4% 18.2% 5.8% na

Large, Gas­Fired, Hot Water 17.0% 32.1% 28.3% 5.7% 11.3% 5.7%

Large, Gas­Fired, Steam, All Except 17.7% 20.8% 35.4% 3.1% 3.1% 19.8%

Natural Draft

Large, Gas­Fired, Steam, Natural Draft 3.3% 8.9% 45.5% 18.7% 16.3% 7.3%

Large, Gas­Fired, Hot Water 0.0% 48.0% 28.0% 0.0% 24.0% na

Large, Oil­Fired, Steam 0.0% 34.2% 25.2% 24.8% 5.0% 10.9%

* na means that this efficiency level was not analyzed and no installed cost was therefore calculated for this standard level.

DOE considers setting standards for each analyzed efficiency level. For each standard

level analyzed, DOE has assumed that all equipment shipped in the base case with efficiencies

below the standard level become shipments at that standard level in the standard­level shipment

distributions. Shipments in the base­case distribution that are above the efficiency defined by the

standard level are assumed to be unaffected. DOE terms this a “roll­up” scenario, because basecase efficiency shipments below the proposed standard level “roll up” to meet the standard.

Using the base­case market distribution and the calculated distributions at each possible standard

level, DOE developed an average shipment­weighted installation cost for all shipments for each

proposed standard level. The shipment­weighted installation costs for each possible standard

level, including the ASHRAE Standard 90.1­2007 base­case level are listed in Table 7.3.4. The

shipment­weighted average total installed cost for the market baseline is calculated to be

identical to that of level 0 (ASHRAE). The shipment­weighted average energy consumption is

shown in Table 7.3.5 for each standard level, including the ASHRAE Standard 90.1­2007 level.

The average energy consumption for the current market is also shown. Some fraction of current

shipments is below the ASHRAE Standard 90.1­2007 levels as described in chapter 2. For this

fraction of the market, DOE developed shipment­weighted average efficiencies based on the

shipment data shown in chapter 2 for all shipments below the ASHRAE level. These were in

turn used to develop the average annual energy consumption estimates for this fraction of the

market using the full load equipment operating hours approach from chapter 4.

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Table 7.3.4 Shipment­Weighted Average Total Installed Cost by Standard Level (2008$)

Shipment­Weighted Average Total Installed Cost by

Standard Level (2008$)*

Level 0

Equipment Class (ASHRAE) Level 1 Level 2 Level 3 Level 4

Small, Gas­Fired, Hot Water 23,426 24,472 25,915 29,263 34,625

Small, Gas­Fired, Steam, All Except natural Draft 27,372 28,920 30,714 33,837 36,189

Small, Gas­Fired, Steam, Natural Draft 26,001 28,651 29,689 31,710 na

Small, Oil­Fired, Hot Water 25,021 27,871 30,101 34,649 na

Small, Oil­Fired, Steam 24,224 25,975 27,525 31,713 na

Large, Gas­Fired, Hot Water 44,127 46,788 50,379 56,523 84,801

Large, Gas­Fired, Steam, All Except Natural Draft 66,276 68,300 69,871 71,597 73,490

Large, Gas­Fired, Steam, Natural Draft 70,333 70,886 72,409 75,473 80,490

Large, Gas­Fired, Hot Water 53,396 53,396 53,396 59,978 na

Large, Oil­Fired, Steam 66,725 68,483 70,814 75,903 85,390

* na means that this efficiency level was not analyzed and no installed cost was therefore calculated for this standard level.

Table 7.3.5 Shipment­Weighted Average Energy Consumption by Standard Level

(2008$)

Shipment­Weighted Annual Average Energy Consumption by

Standard Level (2008$)*

Below 0

(Market Level 0

Equipment Classs Baseline) (ASHRAE) Level 1 Level 2 Level 3 Level 4

Small, Gas­Fired, Hot Water 1,038 1,035 1,029 1,016 998

Small, Gas­Fired, Steam, All Except 1,078 1,077 1,072 1,061 1,050 1,038

natural Draft

Small, Gas­Fired, Steam, Natural Draft 1,117 1,111 1,101 1,090 1,077 na

Small, Oil­Fired, Hot Water 1,030 1,022 1,007 990 968 na

Small, Oil­Fired, Steam 1,054 1,052 1,046 1,037 1,014 na

Large, Gas­Fired, Hot Water 3,967 3,958 3,934 3,897 3,858 3,671

Large, Gas­Fired, Steam, All Except 4,025 4,025 4,005 3,968 3,931 3,893

Natural Draft

Large, Gas­Fired, Steam, Natural Draft 4,111 4,111 4,104 4,074 4,035 3,989

Large, Gas­Fired, Hot Water 3,870 3,917 3,917 3,917 3,846 na

Large, Oil­Fired, Steam 3,920 3,920 3,904 3,875 3,836 3,757

* na means that this efficiency level was not analyzed and no shipment weighted energy consumption was calculated for this

standard level.

7.3.2.3 Total Annual Operating Cost Savings

The annual operating cost savings to the nation are equal to the change in the average

annual operating costs (difference between base case and standards case) per unit in the stock for

each year multiplied by the total number of units in the stock forecasted in the standards case.

Calculations are done separately for each equipment class.

The annual operating cost includes electricity, repair, and maintenance costs.

Annual Energy Cost Savings. As described in chapter 5, DOE calculated annual energy

costs based on average State­level commercial electricity prices. To calculate annual energy cost

savings for a particular equipment class in a given year, DOE first calculated the annual energy

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costs in each forecast year at each efficiency level by multiplying the U.S. average energy

consumption at each efficiency level (from chapter 4) by the stock at each efficiency level and in

each equipment class, as appropriate, in each year. This is then multiplied by the national

average commercial fuel prices. To determine energy savings, the national energy costs at each

efficiency level (Levels 1–4) were then subtracted from the national energy costs at the baseline

level (Level 1). Commercial fuel prices for natural gas and fuel oil are derived from the

reference case AEO 2008 forecasts through 2030. DOE extrapolated the trend in values from

2020 to 2030 of the forecast to establish fuel prices from 2030 to 2085, through the end of the

NPV analysis period. This method of extrapolation is in line with methods the EIA uses to

forecast fuel prices for the Federal Energy Management Program.

Annual Repair Costs. DOE based average annual repair costs on a base repair cost,

which increased with the value of the commercial boiler equipment in 2008$ (see chapter 5).

Using the efficiency distribution of the stock at each standard level analyzed, DOE developed a

weighted average repair cost for the stock based on the distribution at each standard level.

Repair costs for the market baseline were assumed to be equal to that of the ASHRAE Standard

90.1­2007 efficiency levels.

Annual Maintenance Costs. DOE determined average annual maintenance costs for

commercial boilers from the life­cycle cost analysis (see chapter 5). DOE used a value of $1,445

per year for boilers with output capacities of nominally 800 kBtu/h and $2,835 per year for

boilers with output capacities of 3,000 kBtu/h. These values were applied to all boilers in the

stock at each year.

7.3.2.4 Discount Factor

DOE multiplied monetary values in future years by the discount factor to determine the

present value. The discount factor (DF) is described by the following equation:

1 DF = Eq. 7.7

(1+ r)

t−tp

where r = discount rate (percent),

t = year of the monetary value,

tp = year in which the present value is being determined.

DOE estimated national impacts with both a 3 percent and a 7 percent real discount rate.

These discount rates are used in accordance with the Office of Management and Budget’s

(OMB) guidance to Federal agencies on the development of regulatory analysis (OMB Circular

A­4, September 17, 2003), and section E, “Identifying and Measuring Benefits and Costs,”

therein.2 DOE defined the present year as 2008 for the NOPR analysis.

7.3.2.5 Present Value of Costs

The present value of increased installed costs is the annual installed cost increase in each

year (i.e., the difference between the standards case and the base case), discounted to the present,

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and summed for the time period that DOE is considering for the installation of commercial boiler

equipment (i.e., from the earliest effective date of standards, 2012, to the year 2042).

The increase in total installed cost refers to the equipment cost and installation cost

associated with the higher­efficiency commercial packaged boilers purchased in the standards

case compared to the base case. DOE calculated annual installed costs as the difference in total

installed cost for new equipment purchased each year, multiplied by the shipments in the

standards case.

7.3.2.6 Present Value of Savings

The present value of operating cost savings is the annual operating cost savings (i.e., the

difference between the base case and standards case) discounted to the year 2008, and summed

over the period from the effective date of the standard, 2012, to the time when the last unit

installed in 2042 is retired from service (assumed to be 2085). Operating cost savings represent

decreases in operating costs (including electricity, repair, and maintenance) associated with the

higher efficiency of commercial packaged boilers purchased in the standards case compared to

the base case. Total annual operating cost savings is the savings multiplied by the number

boilers of each vintage surviving in a particular year. Equipment consumes energy over its entire

lifetime, and for units purchased in 2042, the PVS includes energy consumed until the last unit is

retired from service at the end of 2085.

7.4 NATIONAL ENERGY SAVINGS AND NET PRESENT VALUE RESULTS

The NES spreadsheet model provides estimates of the NES and NPV for various

efficiency levels. The inputs to the NES spreadsheet are discussed earlier in

sections 7.2.2 (National Energy Savings Inputs) and 7.3.2 (Net Present Value Inputs)..

7.4.1 National Energy Savings and Net Present Value Input Summary

Table 7.4.1summarizes the inputs to the NES spreadsheet model. For each input, a brief

description of the data source is given.

7.4.2 National Energy Savings Results

The following section provides NES results for each efficiency level considered for the

10 classes of commercial boiler equipment analyzed. The results are cumulative to 2042 and are

shown as primary energy savings in quads. Inputs to the NES spreadsheet model are based on

weighted­average values, yielding results that are discrete point values, rather than a distribution

of values as in the life­cycle cost (LCC) analysis.

Table 7.4.2 shows the NES results for the efficiency levels analyzed for each equipment

class of commercial boiler equipment relative to the ASHRAE Baseline. See Appendix 7­A for

energy savings impacts relative to the market baseline.

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Table 7.4.1 NES and NPV Inputs

Input Data Description

Effective Date of Standard 2012 assumed for adoption of ASHRAE Standard 90.1­2007 efficiency levels.

2014 for DOE adoption of higher efficiency levels

Shipments Annual shipments from shipments model (see chapter 6, Shipments Analysis).

Base­Case Efficiencies Distribution of base­case shipments by efficiency level.

Standards­Case Efficiencies Distribution of shipments by efficiency level for each standards case. Standardscase annual market shares by efficiency level remain constant over time for the

base case and each standards case.

Annual Energy Consumption Annual weighted­average values are a function of efficiency level. (Established

from the Energy Use Characterization, chapter 4).

Total Installed Cost Annual weighted­average values are a function of efficiency level (see chapter 5,

Life­Cycle Cost and Payback Period Analysis).

Repair Cost Annualized repair cost for baseline efficiency commercial boilers based on cost

data from MARS 8 Facility Cost Forecast System Database for commercial

boilers. DOE assumed that repair costs would vary in direct proportion with the

MSP at higher efficiency levels (see chapter 5).

Maintenance Cost Annual maintenance costs were $1,445 for small commercial boilers and $2,835

for large commercial boilers based on data on annual maintenance costs for

3 commercial boilers based on MARS 8 Facility Cost Forecast System Database

for commercial boilers (see chapter 5). Annual maintenance cost did not vary as

a function of efficiency.

Escalation of Electricity Prices 2008 EIA Annual Energy Outlook4 forecasts (to 2030) with extrapolation for

beyond 2030.

Site­to­Source Conversion Site­to­source conversion determined from EIA’s AEO2008 for natural gas and

equal to 1.097 Btu/Btu.

Discount Rate 3 and 7 percent real.

Present Year Future costs are discounted to year 2008.

Table 7.4.2 Cumulative National Energy Savings for Commercial Boiler Equipment

(2012 to 2042) (Quads) by Equipment Class

* National Energy Savings (quads)

Equipment Class Level 1 Level 2 Level 3 Level 4

Small, Gas­Fired, Hot Water 0.022 0.072 0.140 0.212

Small, Gas­Fired, Steam, All Except natural Draft (0.000) 0.014 0.030 0.045

Small, Gas­Fired, Steam, Natural Draft (0.006) 0.016 0.042 na

Small, Oil­Fired, Hot Water 0.015 0.034 0.057 na

Small, Oil­Fired, Steam 0.009 0.027 0.068 na

Large, Gas­Fired, Hot Water 0.014 0.037 0.061 0.176

Large, Gas­Fired, Steam, All Except Natural Draft 0.022 0.063 0.105 0.148

Large, Gas­Fired, Steam, Natural Draft (0.022) 0.002 0.032 0.067

Large, Gas­Fired, Hot Water 0.014 0.024 0.034 na

Large, Oil­Fired, Steam 0.039 0.106 0.198 0.410

* 0.000 indicates savings are less than 0.0005 quads. na means that this efficiency level was not analyzed and no installed cost

was therefore calculated for this efficiency level.

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7.4.3 Annual Costs and Savings

As a prelude to providing the NPVs for each efficiency level in each equipment class, this

section presents the annual equipment cost (or total installed cost) increases and annual operating

cost savings at the national level.

Figure 7.4.1 shows the changes over time of the non­discounted annual equipment price

increases and the non­discounted operating cost savings for efficiency level 1 for the small gasfired commercial boiler equipment class, which corresponds to efficiency Level 5. The total net

annual impact is the discounted value of the difference between annual equipment purchases and

annual operating costs at a 7­percent discount rate. The figure also shows the net annual impact,

which is the difference between the savings and costs for each year. Appendix 7­A of this TSD

shows comparable figures for other efficiency levels and other equipment classes. The annual

equipment price change is the increase in equipment price for equipment purchased each year

over the 30­year period from 2012 to 2042. The annual operating savings is the savings in

operating costs for equipment purchased, and which have not been retired, for each year over the

time period from 2012 to 2085. The NPV (the discounted total net annual impact) is the

difference between the cumulative annual discounted savings and the cumulative annual

discounted costs.

Billion 2008$

0.025

0.02

0.015

0.01

0.005

­0.005

­0.01

­0.015

­0.02

Net Savings

0

2012 2020 2028 2036 2044 2052 2060 2068 2076 2084

Year

Undiscounted Total Annual Operating Savings

Undiscounted Annual Equipment Purchase Savings

Discounted Total Net Annual Impact

Figure 7.4.1 National Annual Costs and Savings for Efficiency Level 1 (Small Gas­Fired

Commercial Boilers)

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Figure 7.4.1 initially shows smaller annual operating cost savings compared to the

increased equipment price costs (shown in Figure 7.4.1 as operating savings). In this example,

annual costs to the nation are larger than annual energy cost savings through approximately 2032

at which point the accumulated annual savings for all installed boilers begins to outweigh the

annual equipment cost expenditures. After 2042, no additional boiler sales are included in the

analysis; however the annual energy savings continues to accrue until the last of the boilers

installed in 2042 are removed from the stock after 2085.

7.4.4 Net Present Value Results

DOE developed NPV results for the efficiency levels considered for the 10 commercial

boiler equipment classes. Results are cumulative and are shown as the discounted value of these

savings in dollar terms. The inputs to the NES spreadsheet model are based on weighted­average

values yielding results that are discrete point values, rather than a distribution of values as in the

LCC analysis. The present value of increased total installed costs is the total installed cost

increase (i.e., the difference between the standards case and base case), discounted to 2008, and

summed over the time period in which DOE evaluates the impact of standards (i.e., from the

effective date of the standards, 2012, to the year 2085).

Savings are decreases in operating costs (including fuel costs, repair, and maintenance)

associated with the higher energy efficiency of commercial boilers purchased in the standards

case compared to the base case. Total operating cost savings are the average savings per unit

multiplied by the number of units of each vintage (i.e., the year of manufacture) surviving in a

particular year. Commercial boiler equipment consumes energy and must be maintained over its

entire lifetime. For units purchased in 2042, the operating cost includes energy consumed and

maintenance and repair costs incurred until the last unit is retired from service in 2085.

Figure 7.4.2 shows the NPV and NES results for the four efficiency levels analyzed for

the small gas­fired hot­water boiler equipment class, with NPVs calculated using a seven­percent

discount rate. Both NES and NPV are calculated as benefits of the analyzed standard levels

compared with adoption of the ASHRAE 90.1­2007 standard level. Similar figures are provided

in Appendix 7­A for all 10 commercial boiler equipment classes using both three­ and sevenpercent discount rates.

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Cumulative Source Energy Savings and NPV

0.00

0.05

0.10

0.15

0.20

0.25

Level 1

Level 2

Level 3

Level 4

Efficiency Level

Cumulative Energy Savings (Quads)

­0.6

­0.5

­0.4

­0.3

­0.2

­0.1

0

NPV (Billion 2008$)

Energy Savings NPV

u

Figure 7.4.2 Cumulative NPV Results for Small, Gas­fired, Hot Water Based on a SevenPercent Discount Rate (Billion 2008$)

Table 7.4.3 shows the NPV results for the efficiency levels considered for commercial

boiler equipment based on a 7­percent discount rate. DOE based all results on electricity price

forecasts from the AEO2008 Reference Case. Table 7.4.4 provides the NPV results based on the

3­percent discount rate and electricity price forecasts from the AEO 2008 Reference Case.

Appendix 7­A shows NPV impacts relative to the market baseline; however these impacts only

reflect the results of the difference in operating costs due to the energy impacts. As discussed

previously, DOE estimated the costs for boilers at the market baseline based on the installed

costs for boilers at the ASHRAE Standard 90.1­2007 baseline.

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Table 7.4.3 Cumulative NPV Results Based on a 7­Percent Discount Rate

(Billion 2008$) by Equipment Class

Cumulative NPV (Billion 2008$)

Equipment Class Level 1 Level 2 Level 3 Level 4

Small, Gas­Fired, Hot Water ($0.014) ($0.010) ($0.166) ($0.543)

Small, Gas­Fired, Steam, All Except natural Draft ($0.038) ($0.041) ($0.081) ($0.114)

Small, Gas­Fired, Steam, Natural Draft ($0.037) ($0.016) ($0.028) na

Small, Oil­Fired, Hot Water ($0.008) ($0.000) ($0.041) na

Small, Oil­Fired, Steam ($0.031) ($0.040) ($0.085) na

Large, Gas­Fired, Hot Water $0.011 $0.028 $0.003 ($0.093)

Large, Gas­Fired, Steam, All Except Natural Draft $0.027 $0.127 $0.226 $0.322

Large, Gas­Fired, Steam, Natural Draft ($0.054) ($0.021) ($0.013) ($0.045)

Large, Gas­Fired, Hot Water $0.042 $0.071 $0.063 na

Large, Oil­Fired, Steam $0.062 $0.184 $0.248 $0.504

* 0.000 indicates savings are less than $0.0005 billion. na means that this efficiency level was not analyzed and no installed cost

was therefore calculated for this efficiency level.

Table 7.4.4 Cumulative NPV Results Based on a 3­Percent Discount Rate

(Billion 2008$) by Equipment Class

Cumulative NPV (Billion 2008$)

Equipment Class Level 1 Level 2 Level 1 Level 4

Small, Gas­Fired, Hot Water $0.077 $0.274 $0.146 ($0.510)

Small, Gas­Fired, Steam, All Except natural Draft ($0.076) ($0.014) ($0.034) ($0.050)

Small, Gas­Fired, Steam, Natural Draft ($0.100) $0.041 $0.125 na

Small, Oil­Fired, Hot Water $0.053 $0.137 $0.121 na

Small, Oil­Fired, Steam ($0.023) $0.014 $0.049 na

Large, Gas­Fired, Hot Water $0.093 $0.222 $0.259 $0.483

Large, Gas­Fired, Steam, All Except Natural Draft $0.166 $0.576 $0.984 $1.391

Large, Gas­Fired, Steam, Natural Draft ($0.257) ($0.081) $0.077 $0.174

Large, Gas­Fired, Hot Water $0.146 $0.243 $0.262 na

Large, Oil­Fired, Steam $0.302 $0.830 $1.328 $2.702

* 0.000 indicates savings are less than $0.0005 billion. na means that this efficiency level was not analyzed and no installed cost

was therefore calculated for this efficiency level.

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REFERENCES

1. American Society of Heating, Refrigerating, and Air­Conditioning Engineers (ASHRAE).

2008. Energy Standard for Buildings Except Low­Rise Residential Buildings.

ANSI/ASHRAE 90.1­2007, ASHRAE, Atlanta, Georgia.

2. Office of Management and Budget. 2003. Guidance to Federal Agencies on the Development

of Regulatory Analysis. Available at: http://www.whitehouse.gov/omb/circulars/a004/a4.pdf (Accessed September 2008).

3 Whitestone Research. 2008. MARS 8 Facility Cost Forecast System Database CD­ROM.

Whitestone Research, Washington, D.C.

4. U.S. Department of Energy/Energy Information Administration (DOE/EIA). 2008. Annual

Energy Outlook 2008. DOE/EIA­0383(2008), DOE/EIA,Washington, D.C.

ABBREVIATIONS AND ACRONYMS

AEC annual energy consumption

ASHRAE American Society of Heating, Refrigerating and Air­Conditioning

DOE U.S. Department of Energy

DF discount factor

EPCA Energy Policy and Conservation Act of 1975

FLEOH Full Load Equivalent Operating Hours

LCC life­cycle cost

NES national energy savings

NIA national impact analysis

NODA Notice of Data Availability

NOPR Notice of Proposed Rulemaking

NPV net present value

OMB Office of Management and Budget

PVS present value of operating cost savings

TSD technical support document

TSL trial efficiency level

UEC unit energy consumption

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