CHAPTER 7. NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

**7. 1**  **INT RODUCTION** 

**.............................................................................................................. 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 PRE**  **SENT 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** 

**7­i**LIST OF FIGURES

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

**Fired Commercial**  **Boilers)**

**................................................................................ 7­13** 

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

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

**7­ii**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**  **90.1­2007 1**  **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 Excel**  **spreadsheet, 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.** 

**7­1 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.** 

NES

t =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 NES

t 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 STOCK

V **x** UEC

V **x** src_conv

t 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,** 

STOCK

V **,** NES

**= Annual**  **national energy**  **savings (quads),** 

STOCK

V **= 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**

UEC

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

**(kBtu/yr),**

src_conv

t **= 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**

**7­2 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**  **UEC**

**v 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**  **(** STOCK

V **)**

**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.**

**7­3 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** 

**7­4 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:**

PV S



### = ∑

t 

### OCS

t **x** 

### DF

t Eq. 7.5

PV C 

### = ∑

t 

### TIC

t **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** 

**7­5 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

**Tot al**  **Annual Installed**  **Cost (**  TIC t ) **($)**

**Tot al**  **Annual Operating**  **Cost Savings**  **(** OCS t **) ($)** 

**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**  **shipment**

**weighted 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** 

**7­6 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 Basel ine) (ASHRAE) Level 1 Level 2 Level 3 Level 4

**Smal l,**  **Gas­Fired, Hot**  **Water 16,249**  **16,249 20,756**  **23,506 27,981**  **34,480**

**Smal l,**  **Gas­Fired, Steam,**  **All Except**  **23,430 23,430**  **27,729 29,944**  **33,414 35,943** 

**nat ural**  **Draft**

**Smal l,**  **Gas­Fired, Steam,**  **Natural Draft**  **24,155 24,155**  **28,036 29,372**  **31,453 na** 

**Smal l,**  **Oil­Fired, Hot**  **Water 22,191**  **22,191 26,874**  **29,935 34,801**  **na**

**Smal l,**  **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**

**Nat ural**  **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.**

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

Energy Consumption Level

Bel ow 0

(Market Level 0

Equipment Classs Basel ine) (ASHRAE) Level 1 Level 2 Level 3 Level 4

**Smal l,**  **Gas­Fired, Hot**  **Water 8.9%**  **14.3% 29.3%**  **22.3% 7.7%**  **17.5%**

**Smal l,**  **Gas­Fired, Steam,**  **All Except**  **10.0% 26.0%**  **45.0% 9.0%**  **3.0% 7.0%** 

**nat ural**  **Draft**

**Smal l,**  **Gas­Fired, Steam,**  **Natural Draft**  **26.5% 41.8%**  **9.4% 19.4%**  **2.9% na** 

**Smal l,**  **Oil­Fired, Hot**  **Water 29.3%**  **31.5% 12.0%**  **20.7% 6.5%**  **na**

**Smal l,**  **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%**

**Nat ural**  **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**  **base**

**case 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.** 

**7­8**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

**Smal l,**  **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

**Smal l,**  **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** 

**7­9 979** **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,** 

t p **= 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,** 

**7­10 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.** 

**7­11**Table 7.4.1 NES and NPV Inputs

Input Data Description

**Effect ive**  **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.**

**St andards­Case**  **Efficiencies Distribution**  **of shipments**  **by efficiency**  **level for**  **each standards**  **case. Standards** 

**case 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).**

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

**Life­Cycle Cost**  **and Payback**  **Period Analysis).** 

**Repai r**  **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).** 

**Mai ntenance**  **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.** 

**Escal ation**  **of Electricity**  **Prices 2008**  **EIA** Annual Energy Outlook **4 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.** 

**Di scount**  **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.**

**7­12**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**  **gas**

**fired 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.** Billion2008$ 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)

**7­13 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 seven** 

**percent discount**  **rates.**

**7­14**Cumulative Source Energy Savings and NPV

0.00 0.05 0.10 0.15 0.20 0.25

L e v e l 1 L e v e l 2 L e v e l 3 L e v e l 4 Efficiency LevelCumulativeEnergySavings(Quads)

­0.6 ­0.5 ­0.4 ­0.3 ­0.2 ­0.1 0NPV(Billion2008$)

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.**

**7­15**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

**Smal l,**  **Gas­Fired, Hot**  **Water $0.077**  **$0.274 $0.146**  **($0.510)**

**Smal l,**  **Gas­Fired, Steam,**  **All Except**  **natural Draft**  **($0.076) ($0.014)**  **($0.034) ($0.050)** 

**Smal l,**  **Gas­Fired, Steam,**  **Natural Draft**  **($0.100) $0.041**  **$0.125 na** 

**Smal l,**  **Oil­Fired, Hot**  **Water $0.053**  **$0.137 $0.121**  **na**

**Smal l,**  **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.**

**7­16**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://w**  **ww.whitehouse.gov/omb/circulars/a004/a**

**4.pdf (A**  **ccessed 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** 

**FLEO H**  **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** 

**7­17**