CHAPTER 5. ENGINEERING ANALYSIS

TABLE OF CONTENTS

5.1 INTRODUCTION

................................ ................................ ................................ ........... 5

- 1

5.2 METHODOLOGY OVERVIEW

................................ ................................ .................... 5

- 1

5. 3 EQUIPMENT CLASSES AN ALYZED

................................ ................................ .......... 5

- 3

5.4 REPRESENTATIVE CAPAC ITIES

................................ ................................ ............... 5

- 4

5.5 TEARDOWN ANALYSIS

................................ ................................ .............................. 5

- 4

Selection of Units

................................ ................................ ................................ . 5

- 5 5.5.1

Generation of Bills of Materials

................................ ................................ .......... 5

- 6 5.5.2

5.6 COST MODEL

................................ ................................ ................................ ................ 5

- 7 Cost Structure of the Spreadsheet Models

................................ ........................... 5

- 7 5.6.1

Cost Model and Definition

................................ ................................ ................... 5

- 8 5.6.2 Cost Model Assumptions Overview

................................ ................................ .... 5

- 8 5.6.3 Manufacturing Production Cost

................................ ................................ ......... 5

- 11 5.6.4 Translating MPCs from 2011$ to 2013$

................................ ........................... 5

- 13 5.6.5

5.7 DESIGN OPTIONS

................................ ................................ ................................ ....... 5

- 14

Screened

- In Technologies

................................ ................................ .................. 5

- 14 5.7.1

5.8 EFFICIENCY LEVELS

................................ ................................ ................................ . 5

- 17 Overview of Efficiency Levels of SPVACs and SPVHPs and Common 5.8.1 Technologies Used at Each Efficiency Level

................................ .................... 5

- 18

Baseline Unit

................................ ................................ ................................ ...... 5

- 20 5.8.2 Intermediate Energy Efficiency Levels

................................ ............................. 5

- 21 5.8.3

Max

- Tech Efficiency Levels

................................ ................................ .............. 5

- 22 5.8.4 Correlating EER and COP for SPVHPs

................................ ............................. 5

- 22 5.8.5

5.9 COST

- EFFICIENCY CURVES

................................ ................................ .................... 5

- 24

5.10 MANUFACTURER MARKUP

................................ ................................ .................... 5

- 2 7 Manufacturer Selling Price

................................ ................................ ................ 5

- 28 5.10.1 Manufacturer Markup

................................ ................................ ........................ 5

- 28 5.10.2 Shipping Costs

................................ ................................ ................................ ... 5

- 28 5.10.3

5.11 ENGINEERING ANALYSIS SUMMARY OF RESULTS

................................ .......... 5

- 30 Summary of Results for Representative Models

................................ ............... 5

- 30 5.11.1

5

- iLIST OF TABLES

Table 5.3.1 Equipment Classes for SPVUs

................................ ................................ ................. 5

- 3

Table 5.4. 1 Representative Cooling Capacities for Analysis

................................ ...................... 5

- 4
Table 5.5.1 SPVU Teardowns performed for Engineering Analysis

................................ .......... 5

- 6
Table 5.6.1 Major Manufacturing Processes for SPVUs

................................ ........................... 5

- 10
Table 5.6.2 SPVU Factory Parameter Assumptions

................................ ................................ .. 5

- 11

Table 5.6.3 Five

- Year Average Metal Prices (2007

- 2011)

................................ ....................... 5

- 11
Table 5.7.1 Retained Design Options for SPVUs

................................ ................................ ...... 5

- 14
Table 5.8.1 Efficiency Levels for Analysis for SPV ACs and SPVHPs

................................ .... 5

- 18
Table 5.8.2 Design Options found at each Efficiency Level for Analysis of SPVU

................. 5

- 19
Table 5.10.1 Shipping Dimensions for SPVACs and SPVHPs <65,000 Btu/h

......................... 5

- 29 Table 5.10.2 Shipping Dimensions for SPVACs and SPVHPs ≥65,000 Btu/h and <135,000 Btu/h

................................ ................................ ................................ ........................... 5

- 29
Table 5.10.3 SPVU Shipping Cost Estimates

................................ ................................ ............ 5

- 30

Table 5.11.1 MPC and MSP for SPVACs <65,000 Btu/h

................................ ......................... 5

- 30

Table 5.11.2 MPC and MSP for SPVACs ≥ 65,000 Btu/h and <135,000 Btu/h

........................ 5

- 31
Table 5.11.3 MPC and MSP for SPVHPs <65,000 Btu/h

................................ ......................... 5

- 31

Table 5.11.4 MPC and MSP for SPVHPs ≥ 65,000 Btu/h and <135,000 Btu/h

........................ 5

- 31

LIST OF FIGURES

Figure 5.2.1 Flow Diagram of Engineering Analysis Methodology

................................ ........... 5

- 2
Figure 5.6.1 A General Breakdown of Costs Associated with Manufacturing an SPVU

......... 5

- 12
Figure 5.6.2 Breakdown of MPC into Material, Labor, Overhead, and Depreciation Costs for

10.0 EER, 3

- ton SPVAC

................................ ................................ .................... 5

- 13
Figure 5.8.1 Distribution of COP ratings for each EER rating

................................ .................. 5

- 23
Figure 5.9.1 Extrapolati on of Manufacturer Production Cost (MPC) from SPVAC <65,000 Btu/h
Equipment Class to Other Equipment Classes

................................ .................. 5

- 24
Figure 5.9.2 MPC versus EER for SPVACs

................................ ................................ .............. 5

- 26
Figure 5.9.3 MPC versus EER for SPVHPs

................................ ................................ .............. 5

- 26

5

- iiCHAPTER 5. ENGINEERING ANALYSIS

5.1 INTRODUCTION

The engineering analysis establishes the relationship between the manufacturer selling price ( MSP ) and the energy efficiency of single package vertical air conditioners (SPVACs) and single package vertical heat pumps (SPVHPs) , or collectively single packag e vertical units (SPVUs) . The relationship between the MSP and energy efficiency, or the cost

- efficiency relationship, serves as the ba sis for cost

- benefit calculations in terms of individual customers, manufacturers, and the Nation.

DOE typically structu res its engineering analysis around one of three methodologies. These are: (1) the design

- option approach, which calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency

- level approach, which calculates

the relative costs of achieving increases in energy efficiency levels, without regard to the particular design options used to achieve such increases; and/or (3) the reverse engineering or

cost

- assessment approach, which involves a “bottom

- up” manufacturing c ost assessment based

on a detailed bill of materials derived from teardowns of the equipment being analyzed. Deciding which methodology to use for the engineering analysis depends on the product, the design options under study, and any historical data that DOE can draw on.

DOE conducted this engineering analysis for SPVUs using a combination of the efficiency

- level and cost

- assessment approaches for analysis of the energy efficiency ratio ( EER ) and coefficient of performance (COP) efficiency levels. More specifically, DOE identified the

EER levels for analysis of SPVACs and SPVHPs and corresponding COP levels for SPVHPs,

and then used the cost

- assessment approach to determine the manufacturing costs at those levels

.

5.2 METHODOLOGY OV ERVIEW

This section describes the analytical methodology used in the engineering analysis. Figure 5.2

. 1 shows a flow diagram of this methodology and the correspondin g sections in this chapter. The results of the engineering analysis are cost

- efficiency curves for each equipment

class.

5

- 1Figure 5.2

. 1 Flow Diagram of Engineering Analysis Methodology

DOE started by identifying SPVUs available on the market and the energy efficiency

level associated with each model

. DOE then selected a representative cooling capacity for each equipment class analyzed. Next, DOE identified the technologies and features typically incorporated into equipment at the baseline level and various energy efficiency levels above the

baseline fo r each of the representative cooling capacities . DOE gathered information from

teardown s to create bills of materials (BOMs) for each equipment torn down using reverse engineering methods (see section 5.6 ) , and to confirm the technolog y options that manufacturers

use to increase the EER of SPVUs. DOE converted the information recorded in the BOMs to

dollar values to calculate the manufacturin g production cost ( MPC ) for equipment spanning the full range of efficiencies from the baseline to the maximum technolog icall y feasible (“max

tech”) level . DOE also identified the technology or combination of technologies mainly responsible for improving t he e nergy efficiency of SPVUs across this range

.

During the development of the cost

- efficiency curves , DOE interviewed manufacturers to gain insight into the SPVU industry and requested comments on the engineering approach DOE

used for the analysis. D OE used the information gathered from these interviews to refine efficiency levels and technolog y options implemented at each efficiency level, as well as any assumptions made in the cost model. Next, DOE converted the MPCs into MSPs using a

manufacturer m arkup (section 5.10 ) , which is calculated using publicly available industry financial data, along with manufacturer feedback. BOM
(S ection 5.5.2 )

Efficiency Levels

and Associated
Technologies
(S ection 5.8 )

Screening
Analysis
(C hapter 4) Cost Model
(S ection 5.1 ) Cost

- Efficiency

Curves
(S ection 5.9 )

Engineering

Manufacturer

Interviews Manufacturer
Markup Analysis

(S ection 5.10 )

Selling Price
Efficiency
Relationship
(S ection 5.11 )

Market and Technology

Assessment
(C hapter 3 )

5

- 25.3 EQUIPMENT CLASSES ANALYZED

DOE divi des covered equipment into classes by: (a) the type of energy used; (b) the capacity; or (c) any performance

- related features that affect cust omer utility or efficiency. (42 U.S.C. 6295(q)) Different energy efficiency standards may apply to different equi pment classes.

Table 5.3

. 1 show s the equipment classes for SPVUs that were considered for this rulemaking along with whether the equipment class was analyzed directly, indirectly, or not at

all

.

Table 5.3

. 1 Equipment Class es for SPVUs Equipment Type Cooling Capacity (Btu/h) Analyzed in this Rulemaking? Teardown

Performed for this Equipment Class ? (#)

SPVAC <65,000 Btu/h Directly* Yes (11)

SPVAC ≥65,000 Btu/h and <135,000 Btu/h Indirectly** Yes (2)

SPVAC ≥135,000 Btu/h and <240,000 Btu/h No No

SPVHP <65,000 Btu/h Indirectly** Yes (1)

SPVHP ≥65,000 Btu/h and <135,000 Btu/h Indirectly** No

SPVHP ≥135,000 Btu/h and <240,000 Btu/h No No

* Directly means that DOE performed enough teardowns to cover the full range of efficiency levels for analysis and develop a full set of cost

- efficiency curves. ** Indirectly means that DOE did not perform teardown s on enough models to cover the full range of efficiency

le vels and made assumptions based on the analysis of other equipment classes to develop a full set of cost

- efficiency

curves

.

As discussed in the market and technology assessment (see chapter 3), DOE did not find

models of SPVACs or SPVHPs with a cooling capacity greater than 135,000 Btu/h on the market, and also did not find any SPVHP models with a cooling capacity greater than 65,000

Btu/h and less than 135,000 Btu/h. As shown in Table 5.3

. 1 , DOE only directly analyzed the <65,000 Btu/h SPVAC equipment class. For the <65,000 Btu/h SPVHP equipment class, DOE performed one teardown and compared its cost to a similar model from the <65,000 Btu/h SPVAC equipment class.

For the mid

- sized SPVAC and SPVHP equipment class es (greater than 65,000 Btu/h and

less than 135,000 Btu/h ) that were indirectly analyzed , DOE calculated mark

- up values representing the increased cost of producing t he larger equipment classes, as described in section

5.9 of this chapter. DOE applied these mark

- ups to the cost

- efficiency curves for the smaller equipment class ( i.e., <65,000 Btu/h) to obtain a cost

- efficiency relationship for the larger equipment classes

, . Even though DOE did not find any SPVHP models on the market

between 65,000 Btu/h and 135,000 Btu/h, DOE did find SPVAC models of this size. DOE

believes that there are no technological barriers that would prevent manufacturers from

5

- 3converting these models into SPVHP models using commercially

- available components ( e.g. , reversing valve)

.

DOE did not analyze SPVUs with cooling capacities >135,000 Btu/h due to the lack of

models on the market.

5.4 REPRESENTATIVE CAPAC ITIES

Within each equipment class, SPVUs span a wide range of capacit ies

. For each equipment class, DOE conducted analyses (directly or indirectly) at a representative equipment capacity. Using a representative capacity allow ed DOE to analyze specific equipment in detail that can provide information representative of the entire equipment class , and allowed direct comparison of baseline and high

- efficiency models

. DOE analyzed the database it comp iled during the market and technology assessment to determine an appropriate representative capacity for each equipment class, as shown in Table 5.4.1 below.

Table 5.4

. 1 Representative Cooling Capacities for Analysis Equipment Type Cooling Capacity (Btu/h) Representative Cooling
Capacity

SPVAC <65,000 Btu/h 36,000 Btu/h

S PVAC ≥65,000 Btu/h and <135,000 Btu/h 7 2 ,000 Btu/h

S PVHP <65,000 Btu/h 36,000 Btu/h

S PVHP ≥65,000 Btu/h and <135,000 Btu/h 7 2 ,000 Btu/h

For each equipment classes listed in the table except for SPVHPs with a cooling capacity ≥65,000 Btu/h and < 135,000 Btu/h, DOE selected the size (rounded to the nearest cooling ton) of the most common model size offering for that equipment class. Section 3.8.2 of Chapter 3 of this NOPR TSD depicts the capacity distribution of each of these equipment classes in g reater detail. For those classes, t h e representative capacit ies selected corresponded to the capacity with the highest number of shipments for each of those equipment class es

. For SPVHPs with a cooling capacity ≥65,000 Btu/h and <135,000 Btu/h , no models existed on the market so DOE chose a representative capacity that corresponded to SPVACs with cooling capacities ≥65,000 Btu/h and <135,000 Btu/h

.

DOE used these representative equipment sizes as the basis for selecting units for the engineeri ng analysis.

5.5 TEARDOWN ANALYSIS

During the engineering analysis , DOE disassembled multiple units into their components

and estimated the material

, labor , and overhead cost attributed to each component. Using this information, DOE assemble d bill

- of

- materials ( BOMs ) spreadsheets to calculate the manufacturing costs of the different components in SPVUs. DOE also use d published manufacturer catalogs and supplementary component data to estimate the major physical

5

- 4differences between a product th at was physically disassembled and a similar product that was not. The teardown analysis for the NOPR included a total of 14 teardowns of SPVUs

.

Selection of Units 5.5.1

When selecting units for teardowns, DOE considered three main questions:

• What efficienc y levels should be captured in the teardown analysis?

• Are there model lines on the market that capture all potential efficiency levels?

• Which of the available units are most representative?

In responding to these questions, DOE adopted the following cr iteria for selecting units for the teardown analysis:

• The selected equipment should span the full range of efficiency levels for each equipment

class under consideration.

• If possible, the selected models within each equipment class should come from the s ame manufacturer and be within the same product series.

• The selected models should come primarily from manufacturers with large market share

in that equipment class, although the highest efficiency models were chosen irrespective

of manufacturer.

• The selected models should have non

- efficiency related features that are the same or

similar to features of other models in the same equipment class and for a range of efficiency levels.

DOE reviewed the SPVU industry and identified models available to c ustomers. DOE then applied the aforementioned criteria and selected baseline, intermediate, and max

- tech units

that met the equipment descriptions, energy efficiency levels, and included the common technolog y options identified during the market review and discussions with manufacturers

.

Using the data gathered from the teardowns, DOE characterized each component according to its weight, dimensions, material, quantity, and the manufacturing processes used to

fabricate and assemble it. Additionally, DOE gat hered product data such as dimensions, weight, and design features from publicly available manufacturer catalogs in order to model units which were not physically torn down . DOE obtained information and data not typically found in catalogs and brochures fr om the teardowns of similar equipment or by estimations based on industry knowledge. DOE collected additional component information during the manufacturer

interviews.

DOE selected 14 SPVUs to represent the market

, and conducted teardowns of these units

i n the engineering analysis. These teardown units are listed in Table 5.5

. 1

.

5

- 5Table 5.5

. 1 SPVU Teardowns performed for E ngineering Analysis

Manufacturer Equipment

Class Capacities (Btu/h) EER/COP

Manufacturer 1 HP <65,000

Btu/h 34600 (AC)/ 34000 (HP) 9 (AC)/ 3 (HP)

Manufacturer 1 AC <65,000

Btu/h 35400 9

Manufacturer 1 AC <65,000

Btu/h 35600 10

Manufacturer 1 AC <65,000

Btu/h 35400 11.3

Manufacturer 1 AC <65,000

Btu/h 35400 9

Manufacturer 1 AC >65,000

Btu/h 68000 9.5

Manufacturer 2 AC <65,000

Btu/h 35000 9.25

Manufacturer 2 AC <65,000

Btu/h 29000 11.75

Manufacturer 2 AC <65,000

Btu/h 35600 11.25

Manufacturer 2 AC < 65,000

Btu/h 35000 11

Manufacturer 2 AC <65,000

Btu/h 40000 10.5

Manufacturer 2 AC <65,000

Btu/h 49000 11.5

Manufacturer 2 AC <65,000

Btu/h 49000 11.75

Manufacturer 2 AC >65,000

Btu/h 70000 10

* DOE did not identify the model number or manufacturer of the units examined during the teardown analysis because this could expose sensitive information about individual

manufacturers’ equipment

.

Generation of Bills of Materials 5.5.2

The end result of each teardown is a structured BOM, which describes each equipment part and its relationship to the other parts in the estimated order in which the manufacturer would

have assembled them. The BOMs describe each fabrication and assembly operation in detail,

inclu ding the type of equipment needed ( e.g. , presses, drills), process cycle times, and labor associated with each manufacturing step. The result is a thorough and explicit model of the production process, including space, conveyor, and equipment requirements by planned production level. DOE developed structured BOMs for each of the teardowns.

5

- 6The BOMs incorporate all materials, components, and fasteners classified as either raw materials or purchased parts and assemblies. The designations as raw materials or purchased parts were based on DOE’s previous industry experience, recent information in trade publications, and discussions with high and low volume original equipment manufacturers (OEMs). DOE also visited manufacturing plants to reinforce its understandi ng of the industry’s current manufacturing practices for SPVUs

.

The price of purchased parts is estimated based on volume

- variable price quotations and detailed discussions with manufacturers and component suppliers. For fabricated parts, the prices

of “r aw” materials are estimated on the basis of 5

- year averages ( from 200 7

- 2011) to reduce impacts of recent price fluctuations on the estimated MPC . The cost of transforming the intermediate materials into finished parts is estimated based on current industry pricing.

DOE shared major estimates with manufacturers during manufacturer interviews to gain feedback on its analysis, assumptions, methodology, and results. Specifically, DOE received feedback from manufacturers on how, as a result of increased energy conservation standards, changes in heat exchanger design, motor type, and cabinet size would impact their purchased part and capital conversion costs. Capital conversion cost changes would result from modifications of fabrication equipment including brazi ng, dies, presses, tube expanders/benders, and assorted tooling. DOE used this feedback from manufacturer interviews to modify its

estimates.

5.6 COST MODEL

Cost Structure of the Spreadsheet Models 5.6.1

DOE uses a detailed, component

- focused technique for calculating the manufacturing cost of a product (direct materials, direct labor, and the overhead costs associated with production). The first step in the manufacturing cost assessment was creating a complete and structured BOM by dis assembling the units selected for teardown. The units were dismantled, and each part was characterized according to weight, manufacturing processes, dimensions, material, and quantity. The BOM incorporates all materials, components, and fasteners, as well as estimates of raw material and purchased part costs. Assumptions on the sourcing of parts and

in

- house fabrication were based on industry experience, information in trade publications, and

discussions with manufacturers.

After generating the BOMs from t he teardown analysis, the final step was to convert this information into dollar values. DOE collected information on labor rates, tooling costs, raw material prices, and other factors. DOE assumed values for these parameters using internal expertise and c onfidential information available to DOE contractors. Although most of the assumptions are manufacturer specific and cannot be revealed, S ection 5.6.4 provides a br ief discussion of the values used for each assumption.

DOE estimated costs of labor, materials, and overhead for each part, whether purchased or produced in

- house . DOE then aggregated single part costs into major assemblies and

summarized these costs in a worksheet. During engineering interviews with manufacturers, DOE

5

- 7shared key estimates from the cost model and requested feedback. DOE considered all relevant information manufacturers gave and incorporated it into the analysis, if appropriate.

Cost Model and Definition 5.6.2

Once DOE disassembled selected units, gathered information from manufacturer catalogs on additional products, and identified technologies, DOE created a manufacturing cost model to translate physical information contained in the BOMs into MPCs. The cost model is based on production activities and divides factory costs into the following categories:

• Materials : Purchased parts ( e.g. , fan motors, TXVs, plastics ), raw materials (e.g., cold rolled steel, copper tube), and indirect materials use d for processing and fabrication.

• Labor : Fabrication, assembly, indirect, and supervisor labor. Fabrication and assembly labor cost are burdened with benefits and supervisory costs.

• Overhead : Equipment, tooling, and building depreciation, as well as util ities, equipment and tooling maintenance, insurance, and property taxes.

5.6.2.1 Cost Definitions

Because there are many different accounting systems and methods to monitor costs, DOE

defined the above terms as follows:

• Direct material : Purchased parts (outsourced) plus manufactured parts (made in

- house from raw materials).

• Indirect material : Material used during manufacturing ( e.g. , welding rods, adhesives).

• Fabrication labor : Labor associated with in

- house piece manufacturing.

• Asse mbly labor : Labor associated with final assembly.

• Indirect labor : Labor costs that scaled with fabrication and assembly labor. This included the cost of technicians, manufacturing engineering support, stocking, etc. that were assigned on a span basis.

• Eq uipment and plant depreciation : Money allocated to pay for initial equipment installation and replacement as the production equipment wears out.

• Tooling depreciation : Cost for initial tooling (including nonrecurring engineering and debugging of the tools) and tooling replacement as it wears out.

• Building depreciation : Money allocated to pay for the building space and the conveyors that feed and/or make up the assembly line.

• Utilities : Electricity, gas, telephones, etc.

• Maintenance : Money spent on mainta ining tooling and equipment.

• Insurance : Appropriated as a function of unit cost.

• Property Tax : Appropriated as a function as unit cost.

Cost Model Assumptions Overview 5.6.3

As discussed in the previous section, assumptions about manufacturer practices and cost structure played an important role in estimating the final equipment cost. Assumptions varied for specific manufacturers, depending on market position, manufacturing practices, and size.

5

- 8In converting physical information about the equipment into cos t information, DOE reconstructed manufacturing processes for each component using internal expertise and knowledge of the methods used by the industry. DOE used assumptions about manufacturing process parameters ( e.g. , equipment use, labor rates, tooling d epreciation, and cost of purchased raw materials) to determine the value of each component. DOE then summed the values of the components into assembly costs and, finally, the total product cost. The product cost included the material, labor, and overhead c osts associated with the manufacturing facility. The material costs included both direct and indirect materials. The labor costs included fabrication, assembly, indirect, direct, and supervisor labor rates, including the associated overhead.

DOE refined i ts labor cost estimate s using information obtained during interviews with

SPVU manufacturers . Overhead costs include equipment depreciation, tooling depreciation, building depreciation, utilities, equipment, tooling maintenance, insurance, property, and ta xes.

DOE presented a draft of the cost of major components to manufacturers during the

interviews and used feedback from the interview s to update the se cost s to address manufacturer comments about component and material pricing and production volumes. DOE modified the se

cost s after the interview s

. Then, after the initial interviews, DOE presented a draft of the full

cost

- efficiency results and revised estimate s of the cost of major components to manufacturers for their feedback. Based on manufacturer responses, DOE modified its analysis to improve the accuracy of the model. Positive feedback from manufacturers presented with refined data confirmed the accuracy of the changes.

The next sections discuss assumptions about outsourcing, factory parameters, production volumes, and material prices. T he assumptions are presented as industry averages to prevent

disclosure of confidential information.

5.6.3.1 Fabrication Estimates

DOE characterized parts based on whether manufacturers purchased them from outside suppliers or fabricated them in

- house . For purchased parts, DOE estimated the purchase price. For fabricated parts, DOE estimated the price of raw materials ( e.g. , tube, sheet metal) and the cost of transforming them into finished parts. Whenever possible, DOE obtained price quotes directly from the manufacturers’ suppliers or from manufacturers themselves during interviews

.

DOE based the manufacturing operations assumptions on internal expertise, interviews with manufacturers, and visits to manufacturing facilities. Table 5.6

. 1 presents the major manufacturer processes identified and developed for the spreadsheet model

. Fabrication process cycle times were estimated and entered into the BOM

.

5

- 9Table 5.6

. 1 Major Manufacturing Processes for SPVUs

Fabrication Finishing Assembly /Joining Quality Control Fixturing Powder Coating Adhesive Bonding Inspection and Testing
Stamping/Pressing De

- Burring Spot Welding

Turret Punch Polishing P ackaging Tube Forming Refrigerant Charging Clinching Laser Cutting Tube Brazing Cutting and Shearing Enameling

5.6.3.2 Production Volume Assumptions

Manufacturer production volumes vary depending on several factors, including overall market size, individual company market share, the product or equipment produced, and whether the manufacturer produces other similar products or equipment that utilize the same materials and components . DOE based production volume assumptions for SPVUs on industry knowledge and information gathered during manufacturer intervi ews. DOE used an estimate that a factory produces 10,000 SPVUs a year.

5.6.3.3 Factory Parameters Assumptions

DOE used information gathered from publicly available literature, manufacturer interviews, and analysis of common industry practices to formulate aggreg ate factory parameters. DOE first made assumptions about a set of factory parameters before the manufacturer interviews, then revised the assumptions based comments and information gathered during the interviews. Table 5.6

. 2 lists DOE’s assumptions for manufacturers of

SPVUs.

5

- 10Table 5.6

. 2 SPVU Factory Parameter Assumptions Annual Production Volume (units/year) 10,000

Work Days Per Year (days) 250 Assembly Shifts Per Day (shifts) 1

Fabrication Shifts Per Day (shifts) 2 Assembly Labor Wages ($/hr) $14.39 Fabrication Labor Wages ($/hr) $14.44 Length of Shift (hrs) 8.5 Average Equipment Installation Cost (% of purchase price) 7% Fringe Benefits Ratio 56%

Indirect to Direct Labor Ratio 28% Average Scrap Recovery Value 28%

Worker Downtime 10%

Burdened Assembly Labor Wage ($ /h ) $22.48

Burdened Fabrication Labor Wage ($ /h ) $22.56 Supervisor Span (workers/supervisor) 25 Supervisor Wage Premium (over fabrication and assembly wage) 30%

5.6.3.4 Material Prices Assumptions

DOE determined the cost of raw materials using publicly available information such as

the American Metals Market 1

, interviews with manufacturers, and discussions with material suppliers. T he fabrication of single package vertical units requires various raw metals, includ ing primarily copper and steel. There have been drastic fluctuations in metal prices in recent years ; to minimize the impact of these fluctuations on the MPC estimates , DOE used a 5

- year average of metal prices from the Bureau of Labor Statistics Producer Pr ice Indices (PPIs) 2 spanning 2007 to

2011. Table 5.6

. 3 shows the 5

- year average metal prices DOE used for the analysis.

Table 5.6

. 3 Five

- Year Average Metal Prices ( 2007

- 2011)

Metals Cost ($20 11 )
$/lb

Plain Cold Rolled Steel (CRS) $0.44

Aluminized CRS $0.58

Galvanized CRS $0.54

Pre

- Painted CRS $0.69

Fin Aluminum $1.38 Plain Copper Tube, ≤0.75” OD $4.11 Rifled Copper Tube, ≤0.75”OD $4.28

Manufacturing Production Cost 5.6.4

Once the cost estimate for each teardown unit was finalized, DOE prepared a detailed summary for relevant components, subassemblies, and processes. The BOM thus details all aspects of unit costs. DOE totaled the cost of materials, labor, overhead , and depreciation used to manufacture a p roduct in order to calculate the MPC.

5

- 11Figure 5.6

. 1 A G eneral B reakdown of C osts A ssociated with M anufacturing a n SPVU

The full cost of the equipment is broken down into two main costs: the full production cost or MPC, and the nonproduction cost (both of which are depicted in Figure 5.6

. 1 ) . The nonproduction cost is equal to the manufacturer markup minus profits.

5

- 12Whe n calculating the MPC, DOE factored in the cost of depreciation of capital used to manufacture the equipment, in addition to the costs of material, labor, and overhead. Figure 5.6

. 2 depicts the breakdown of MPC into material, labor, overhead, and depreciation costs for a representative 10.0 EER, 3 ton SPV AC which was torn down as part of the engineering analysis.

Figure 5.6

. 2 B reakdown of MPC into Material, Labor, Overhead, and Depreciation Costs

for 10.0 EER, 3

- ton SPVAC

Following the development of the MPCs, DOE reviewed its major cost estimates with SPVU manufacturers, who provided feedback a nd validation.

The costs of t echnologies used in the units subject to teardown are estimated individually. Thus, various implementations of technologies can be accommodated, ranging from assemblies that are entirely purchased to units that are entirely m ade from raw materials. Therefore, hybrid assemblies, consisting of purchased parts and parts made on site, are also accommodated.

Translating MPCs from 2011$ to 201 3 $ 5.6.5

DOE began its analysis of manufacturer production cost in 2011. DOE initially performed teardown analysis, estimated manufacturing costs, and reviewed costs with
manufacturers in terms of 2011$. DOE converted th e se prices to 201 3 $, as is customary for a

n otice published in 201 4. To do so, DOE researched the Bureau of Labor Statistics Producer Price Index (PPI) 3 for the two market industries affected by this rule: “Unitary air

- conditioners, except for air source heat pumps” (PCU333415

- 333415E) and “Heat pum ps” (PCU 333415

- 333415H). DOE used the June 2013 and June 2011 PPI data for each of the two market industries to calculate the average change in cost between the two years. DOE calculated a 5% increase in PPI for “Unitary air

- conditioners, except for air s ource heat pumps” and a 5.4% increase in PPI for “Heat pumps.” Thus, DOE multiplied the MPCs (originally determined in 2011$) for SPVACs by 1.05 and for SPVHPs by 1.054 to obtain the corresponding MPCs in
2013$. 76.2% 11.5% 5.5% 6.8%



## Breakdown of MPC

Material

Labor

Overhead

Depreciation

5

- 135.7 DESIGN OPTIONS

Design options are technologies and design changes manufacturers use to improve equipment performance. These options provide different ways to increase equipment efficiency

from the minimum efficiency (“baseline”) to the highest possible efficiency that i s technologically feasible (“max

- tech”).

For the engineering analysis, DOE calculated the cost of manufacturing an SPVU at each efficiency level between the baseline and max

- tech

, using the cost of the specific design options

needed to reach that efficie ncy level ( which is known as a design option approach) . Using the teardown analysis and discussions with manufacturers, DOE calculated two parts to each design option:

• DOE calculated the increase in EER attributable to each collection of design option s ty

pically implemented to improve the efficiency of an SPVU over the baseline efficiency

level

.

• DOE determined the incremental costs associiated these collections of design options by analyzing specific component cost differences (calculated in the BOMs) between

individual SPVU of different efficiencies which were torn down.

DOE fed the costs and incremental efficiency improvements of each design option into

the cost model to calculate the MPCs of SPVU at each efficiency level between the baseline and

max

- tech, representative of SPVU manufacturers as a whole . Once the MPC at each efficiency

level was determined, DOE calculate d the cost

- efficiency curves (see S ection 5.9 ).

Screened

- In Technologies 5.7.1

When calculating the incremental MPCs of SPVU at each efficiency level above the

baseline , DOE only considered the incremental costs of design options that were not scr eened out in the screening analysis (see Chapter 4). Table 5.7. 1 lists the technologies that DOE did not

screen out.

Table 5.7. 1 Retaine d Design Options for SPVUs

Increased Heat Transfer Surface Area

Increased frontal coil area Increased depth of coil (add tube rows) Dual condensing heat exchangers Component Improvements Improved fan motor efficiency Improved compressor efficiency Improved fan blade efficiency

The design options and the technology levels for each design option are described below.

5

- 145.7.1.1 Increased frontal coil area One of the most common ways of improving the heat exchanger effectiveness is increasing the heat transfer surface area by using a coil w ith a larger frontal area. A greater condenser or evaporator coil face area increases the heat transfer perf ormance of the coil

. A larger condenser coil allows the required heat to be rejected from the refrigerant to the outside air stream at a lower condensing temperature. A larger evaporator coil allows the specified co oling capacity to be delivered to the conditioned space at a higher refrigerant temperature in the
evaporator . Th ese changes can reduce the pressure difference between the low pressure and high pressure sides of the compressor, thus reducing the required compressor po wer.

As a consequence of using larger heat exchangers , existing cabinet dimensions are often

too small to accommodate a larger heat exchanger. In the teardown analysis, DOE found that

units with increased frontal coil area necessitated an increase in cabinet size in order to accommodate the larger coil.

5.7.1.2 Increased depth of coil

In addition to increas ing the frontal coil area, a nother way of increasing the heat exchanger surface area is to add vertical tube rows to the coil, which increases its depth. Successively adding tube rows to each of the heat exchangers eventually require s an increase in

the si ze of the cabinet , which incurs significant costs beyond just the costs of the larger heat exchanger. As such, cost constraints limit the number of tube rows manufacturers can add to the heat exchangers. In the teardown analysis, DOE found that manufacture rs increase efficiency by adding a single tube row to either one or both of the heat exchangers, but no additional tube rows are added beyond that.

M anufacturer feedback indicates that if add itional successive vertical tube rows were added to the heat exchanger s beyond the initial additions, the expected efficiency gains would

decrease by about one ha lf for each additional tube row

. In addition to the constraints posed by

space restrictions and limit ed efficiency gains , increasing heat exchanger depth m ay also cause an increase in static pressure that the fan motor must overcome (by increasing its electrical draw) to provide adequate air flow . At a certain increase in depth, this additional power to the fan c ould
negate some, or all of the energy savings associated with the additional heat exchanger surface

area.

5.7.1.3 Dual conden ser heat exchangers

In air conditioning equipment, the effectiveness of a heat exchanger at discharging heat into the outdoor air stream is directly related to the amount of surface area of the heat exchanger

coils.

In order to continue improving the efficiency of the conde nser section of the unit

, manufacturers may elect to utilize two heat exchangers operating in series, rather than just one. Doing so allows the manufacturer to achieve the desired increase in total condenser coil surface

5

- 15area

. In the teardown analysis, DO E found that this design option was only used in models with

the 12.3 EER (max

- tech) efficiency level.

5.7.1.4 Improved fan motor efficiency and fan efficiency

Lower efficiency SPVUs primarily use permanent split capacitor (PSC) fan/blower

motors. These motors range in efficiency from 50 to 70 percent. While larger motors are generally more efficient, there is a range of efficiency for any given power level.

Electric motors operate based on the interaction between a field magnet and a magnetic

rot or. However, single

- phase motors only produce a rotating magnetic field when the rotor is rotating, and simply powering the electromagnet is therefore not sufficient to start such a motor. One of the most significant differences between different types of single

- phase motors is the way in which they handle start

- up. In a PSC motor, a small start

- up winding is present which is energized out of phase with the main winding. The start

- up winding is electrically connected in parallel with the main winding and in series with a capacitor. At start

- up, the interactions between the magnetic field generated by the start

- up winding and that generated by the main winding induce rotation. As the capacitor charges, the current flowing through the start

- up winding decrease s, and the start

- up winding becomes an auxiliary winding after the motor reaches running speed. Consequently, the current to the start

- up winding is cut off once the capacitor is fully charged and the motor reaches steady

- state speed. 3

Permanent magnet motors have higher efficiencies than PSC motors and are known as brushless DC (BLDC) motors , electronically commutated motors ( ECMs ) , brushless permanent magnet (BPM) motors, and electronically

- commutated permanent magnet (ECPM) motors.

BLDC motors convert single

- phase AC input power into DC power and achieve the commutation required for operation of DC motors by electronic switching rather than through

use of a conventional mechanical commutator. In BLDC motors, t he commutation is coordinated through use o f sensor technology that determines when the motor is at the proper angle for switching the power. BLDC motors (less than 1 horsepower) offer efficiency gains of at least 10% more than similarly

- sized PSC motors and offer even greater efficiency gains at p art

- load performance than PSC motors

. 4 However, BLDC motors can weigh more than PSC motors of the same shaft power, potentially necessitating some system redesign to accommodate the increased weight.

When surveying the SPVU market, DOE found that PSC mot ors are the dominant motor design in lower efficiency units and that BLDC motors are commonly found in higher efficiency equipment. DOE’s compiled database of SPVAC and SPVHP units indicates that a general

transition from using a PSC blower fan motor to using a BLDC blower fan motor occurs at 10 EER. DOE was able to verify this in the teardown analysis, where all units torn down that were

above 10 EER had a BLDC blower fan motor.

Air system efficiency can be improved by utilizi ng more advanced fan and blower design and by reducing restrictions to air flow within the cabinet. The air delivery system of an SPVU typically consists of two motors driving three fans

- two indoor blowers (which move air across the evaporator coil) and an outdoor fan (which moves air across the condenser coil). The evaporator blowers are typically centrifugal blowers, while the condenser fan is typically a

5

- 16propeller

- type fan. Improvements to the fan blade designs could increase the overall efficiency by decreasing the power demands for the fan motor. However, DOE is unaware of any data quantifying the impacts of more efficient fan blades.

Most SPVUs use forward curved blowers; some manufacturers have been experimenting

with backward

- curved blowers for t heir quieter performance and higher efficiencies (up to 85 percent when using airfoil blades). 5 In the teardown analysis, DOE found backwards

- curved fan blades in SPVUs at the 12.3 EER (max

- tech) efficiency level. DOE did not consider the impact

of the fan blade separate from the fan motor efficiency impact, but did consider the price of

backwards

- curved fans versus forward

- curved.

5.7.1.5 Improved compressor efficiency

The compressors used in SPVUs are almost exclusively scroll compressors, which use

two interle aving scrolls to pump refrigerant throughout the sealed system. These compressors effectively have identical designs, but vary in efficiency as a function of manufacturing tolerances. The scroll compressors found in SPVUs range in efficiency from about 2.8 0 to 3.25 COP. Combined with the indoor and outdoor blower fans and the central controls, the compressor consumes the majority of the electrical input to an SPVU. As such, utilizing a higher efficiency compressor yields a significant improvement to the EER /COP of an SPVU.

5.8 EFFICIENCY LEVELS

DOE analyzed multiple efficiency levels (EER for SPVACs

, and EER and COP for

SPVHPs ) for each equipment class at the representative equipment capacit ies presented in

section 5.4 and estimated the MPCs at each efficiency level analyzed . The following subsections provide a description of the full efficiency range from the baseline to max

- tech efficiency level

for each equ i pment class. D OE identified the max

- tech efficiency level by reviewing product literature for commercially available equipment and information obtained during interviews with

manufacturers

.

5

- 17Overview of Efficiency Levels of SPVACs and SPVHPs and Common 5.8.1 Technolog ies Used at Each Efficiency Level

In summary, DOE selected the efficiency levels for analysis as shown in Table 5.8

. 1

.

Table 5.8

. 1 Efficiency Levels for Analysis for SPVACs and SPVHPs Efficiency

Level SPVAC <65,000 Btu/h SPVHP <65,000 Btu/h SPVAC ≥65,000

Btu/h and <135,000 Btu/h SPVHP ≥65,000

Btu/h and <135,000 Btu/h

EPCA

Baseline 9.0 EER 9.0 EER

3.0 COP 8.9 EER 8.9 EER

3.0 COP

ASHRAE

Baseline * 10.0 EER 10.0 EER

3.0 COP 10.0 EER 10 EER

3.0 COP

EL 1 10.5 EER 10.5 EER

3.2 COP

EL 2 11.0 EER 11.0 EER

3.3 COP

EL 3 11.75 EER 11.75 EER

3.9 COP

EL 4 12.3 EER 12.3 EER

3.9 COP

* The ASHRAE Baseline is the max

- tech efficiency level for SPVU on the market in the ≥ 65,000

Btu/h an d <135,000 Btu/h capacity range

. The most efficient SPVU on the market in the ≥ 65,000 Btu/h and <135,000 Btu/h capacity range has a 10.0 EER and a 3.0 COP.

To determine common technology options manufacturers use to obtain these efficiency gains, DOE did the following:

• conducted teardowns for a group of models at varying efficiency levels

,

• reviewed manufacturers’ equipment literature,

• conducted confidential interviews with manufacturers on the technologies used to increase energy

- efficiency in SPVUs

DOE also found that in order to maintain retrofit ability and standardize manufacturing across product lines, manufacturers usually structure equipment designs around specific cabinet

sizes. O nce a particular design requires components that become too lar ge for a given cabinet,

manufacturers must move to a larger cabinet size, which increases manufacturing cost.

In Table 5.8

. 2

, DOE depicts the common technology options found to be used by manufacturers to make each efficiency level increase relative to the EPCA baseline (9.0 EER)

, based on information obtained from teardowns

. Table 5.8

. 2 also depicts the efficiency improvement (in EER) specific to each technology option analyzed for each efficiency level. These specific efficien cy improvements were determined based on analysis of the published

ef

ficiency of each unit torn down and known energy consumption of various operating

5

- 18components. Further descriptions of the incremental technological changes between efficiency

levels are d iscussed in greater detail below.

Table 5.8

. 2 Design Options found at each Efficiency Level for Analysis of SPV U

Efficien c y Levels Design Options

BLDC

Indoor

Fan

motor Increased

HX Face

Area Additional

HX tube

row Higher Efficiency Compressor BLDC

Outdoor Fan

motor High

Efficiency

Outdoor Fan

Blade Dual

Condenser

Heat Exchangers

EPCA

Baseline

9.0 EER

ASHRAE

Baseline X X

10.0 EER .3 EER .7 EER

EL 1 X

10.5 EER .5 EER

EL 2 X

11.0 EER .5 EER

EL 3 X X

11.75 EER .42 EER .33 EER

EL 4 X X X

12.3 EER .3 EER see note
below* .25 EER

*Due to a lack of definitive research or data available on the efficiency gains provided by higher efficiency fan blades, DOE is not able to attribute a spe cific efficiency improvement to the use of this technology option

.

5.8.1.1 9 .0 EER to 10.0 EER

Manufacturers commonly increase efficiency of SPVU s to 10.0 EER by increasing the heat exchangers’ face areas . As a result, SPVUs at a 10.0 EER level tend to have a bigger cabinet size than those at a 9.0 EER level to accommodate the increase in heat exchanger face area. Also at 10 EER, manufacturers comm only replace the indoor a PSC fan motor with a more efficient brushless DC motor (BLDC). DOE calculated that switching to a BLDC motor would give the equipment a 0.3 EER increase. b

Based on a side

- by

- side comparison of two SPVU s from the same manufactur er at both

10.0 EER and 9.0 EER (baseline) efficiencies, DOE determined the difference in heat exchanger

a ‘Indoor’ in this context refers to the components that are responsible for circulating and conditioning the indoor air. Likewise, outdoor refers to the components that move and reject or absorb heat from the outside air.

b To calculate this number, DOE f ollowed its method for calculating fan energy use from Chapter 5 of the May 5, 2011 NOPR TSD (76 FR 25622). Using manufacturer technical literature, DOE calculated the average electric power per volume of air moved for PSC motors (0.414 W/cfm) then multipl ied it by the ratio of the assumed BLDC motor efficiency (71%) to the assumed PSC motor efficiency (54%) to calculate the average power per volume for all BLDC motors (0.315 W/cfm). Assuming a static pressure of 0.3 ESP and air volume flow of 1100 CFM (typ ical

of 3

- ton SPVACs), DOE calculated a fan power decrease of 109 Watts or 0.3 EER increase for an SPVAC at 3

- ton cooling capacity.

5

- 19face area between both units. DOE determined that this increase in heat exchanger face area improved efficiency of the baseline unit by .7 EER.

5.8.1.2 10.0 E ER to 10 .5 EER

DOE found that to increase EER from 10.0 to 10.5, manufacturers will typically increase the depth of one of the heat exchanger coils (either the evaporator or condenser) by adding

another tube row

. This change does not usually require an i ncrease in cabinet size.

5.8.1.3 10.5 EER to 11.0 EER

In order to increase the EER from 10.5 EER to 11.0 EER

, m anufacturers generally will add another tube row to the other heat exchanger coil. This change also does not usually require

an increase in cabinet size.

5.8.1.4 11.0 EER to 11.75 EER

Manufacturers increase the efficiency of SPVUs from 11.0 EER to 11.75 EER by

increas ing the face areas of both the evaporator and condenser heat exchangers. DOE determined the necessary increase in heat exchanger face area as a proportion of the heat exchanger face area increase used to achieve the 10.0 EER efficiency level. This increase in heat exchanger face area requires an increase in cabinet size in orde r to accommodate the larger heat exchanger

. Manufacturers also will add a more efficien t compressor at this efficiency level. DOE research based on the units torn down suggests that the efficiency of the compressors in SPVU varies between approximately 10. 1 and 10.45 EER, with higher efficiency compressors typically used

in SPVU more efficient than 11.0 EER.

5.8.1.5 11.75 EER to 12.3 EER

In order to reach the 1 2.3 EER (max

- tech) efficiency level, manufactures may swap out

the outdoor a PSC fan motor for a more e fficient BLDC fan motor, which makes both fan motors

BPM motors. Manufacturers will also incorporate a high efficiency fan blade for the outdoor

fan. In addition, m anufacturers increase the condensing heat exchanger face area by using two condensing heat exchangers. These design changes require another increase in cabinet size (depth).

Baseline Unit 5.8.2

DOE selected baseline units as reference points for each equipment class, against which changes resulting from potential amended energy conservation standar ds could be measured. The

baseline unit in each equipment class displays the basic characteristics of equipment in that class and provides basic customer utility

. The engineering analysis took place prior to the adoption of

the amended ASHRAE 90.1

- 2013 standard on October 9 th , 2013 , which would prompt DOE to,

5

- 20through this rulemaking, Federal energy conservation standards for SPVUs to at least match the amended ASHRAE 90.1 levels. As such, in this analysis a baseline unit was a unit that just me t
and d id not exceed the Federal energy conservation standards prior to October 9 th , 2013 as defined under EPCA (42 U.S.C. 6313(a)(10)(A))

.

Following the adoption of the ASHRAE 90.1

- 2013 standard, DOE felt it was necessary

to cont inue to analyze the cost

- efficiency relationship between the EPCA baseline and the

amended ASHRAE 90.1

- 2013 levels. DOE believes that in order to most accurately model the manufacturing costs of units at the ASHRAE 90.1

- 2013 efficiency level on the complia nce date for that standard, the incremental engineering costs to achieve this level over the EPCA baseline

level must be taken into account. The units used in the cost model at the EPCA baseline level represent the most basic characteristics of SPVU and pr ovide basic customer utility. DOE believes that following the compliance date of ASHRAE 90.1

- 2013, manufacturers will continue to manufacture units with the most basic equipment characteristics and utility offerings, at the

amended ASHRAE baseline level. A s such, DOE determined that the most accurate methodology to model the manufacturing costs at the ASHRAE 90.1

- 2013 level would be to start with the manufacturing costs of EPCA baseline units, and add the incremental cost to

achieve the ASHRAE 90.1

- 2013 eff iciency level.

DOE uses the baseline unit for comparison in several phases of the analyses, including the engineering analysis, lifecycle cost (LCC) analysis, payback period (PBP) analysis and national impacts analysis (NIA). To determine energy savings t hat will result from an amended energy conservation standard, DOE compares energy use at each of the higher energy efficiency levels to the energy use of the baseline unit. Similarly, to determine the changes in price to the

customer that will result from an amended energy conservation standard, DOE compares the price of a baseline unit to the price of a unit at each higher efficiency level.

The identification of baseline units requires establishing the baseline efficiency level. For all equipment classes

, DOE define d the baseline efficiency level as the efficiency level equal to the current Federal energy conservation standards. The baseline efficiency levels for each equipment class can be viewed in Table 5.8

. 1

.

Intermediate Energy Efficiency Levels 5.8.3

As explained in Chapter 2, DOE compiled a database of SPVUs currently on the market to determine what types of equipment are currently available to customers. At each representative capacity , DOE surveyed various manufacturers’ equipment offerings to identify the different energy efficiency levels that were available . By identifying the most common energy efficienc y levels in the range of available equipment , DOE can establish a technology path that shows how manufacturers increase the EER of an SPVU through various technology options

.

Using this analysis, DOE established intermediate EER levels for each equipment class.

DOE reviewed AHRI’s Directory of Certified Product Performance

, 6 manufacturer catalogs, and other publicly available literature to determine which EER rating s are the most prevalent for each representative equipment class. For SPVACs and SPVHPs with cooling capacity <65,000 B tu/h,

DOE analyzed four efficiency levels between the baseline and max

- tech for analysis. For

5

- 21SPVACs and SPVHPs with a cooling capacity ≥65,000 Btu/h and <135,000 Btu/h, DOE did not analyze any efficiency level s between the baseline and max

- tech for analy sis.

Max

- T ech Efficiency Levels 5.8.4

As part of the engineering analysis, DOE determined the maximum technologically feasible improvement in energy efficiency for SPVUs as required by section 325(o) of EPCA. (42 U.S.C. 6295(o)) DOE surveyed the AHRI Directory

, manufacturers’ websites , and technical

literature to determine the highest efficiency a n SPVU can attain . DOE also discussed what an appropriate max

- tech level would be with manufacturers during interviews

. For each of the representative equipment capaci ties

, DOE is not aware of any commercially

- available products

or working prototypes at higher EERs than the max

- tech level that are currently available. Table

5.8

. 1 list s the max

- tech levels DOE determined for this NOPR for SPVUs

.

Correlating EER and COP for SPVHPs 5.8.5

For SPVHPs, DOE select ed a n appropriate COP level to correspond to each EER level selected for analysis. COP and EER are not perfectly correlated. While certain technology improvements such as more efficient motors and more efficient compressors can improve both the EER and COP of SPVHP, there are others, such as heat e xchanger improvements, which may not improve both metrics or may improve them disproportionately . Heat exchangers in heat pumps need to be more carefully balanced because each one will serve as both the evaporating and condensing coils for the system , dep ending on whether the system is operating in cooling or heating mode

. From interviews with manufacturers , DOE learned that manufacturers primarily focus on designing to achieve a certain EER goal with COP as a secondary concern. Thus, when selecting effici ency levels for analysis of SPVHPs , DOE focused on selecting and analyzing

EER levels and chose appropriate COP levels at each EER level based on equipment currently

on the market . In order to select the COP level corresponding to each EER level, DOE analy zed

the correlation of COP and EER of models in its database of SPVHPs and selected the median

COP for each EER , as shown in Figure 5.8

. 1

. Using the mean value for COP at each EER could be skewed by a small number of outliers. Therefore, DOE believes that using the median COP

value accurately reflects how the COP correlates with EER at increasing efficiency levels , and is

reasonable for deter mining the appropriate COP at each EER level analyzed

.

5

- 22Figure 5.8

. 1 Distribution of COP ratings for each EER rating 3

3 3

3

3.853.073.13.23.253.93.133.153.253.33.953.23.23.33.43.312693.493.63.7

0 10 20 30 40 50 60 70

9 10 10.5 11 11.75Number of Units

Energy Efficiency Ratio (EER) Bins 

## Distribution of COP ratings within each EER Bin

5

- 235.9 COST

- EFFICIENCY CURVES

After calculating the MPC for each of the 14 teardowns, DOE constructed cost

- efficiency

curves based on a market

- share

- weighted average of the manufacturing costs of individual SPVU

manufacturers. For SPVACs with a cooling capacity <65,000 Btu/h, DOE base d its cost

efficiency curves off the costs obtained from 5 of the teardowns . However, for the remaining three equipment classes for analysis (SPVACs ≥65,000 Btu/h and <135,000 Btu/h, SPVHPs <65,000 Btu/h, and SPVHPs ≥65,000 Btu/h and <135,000 Btu/h), DOE did not have enough data poi nts to directly construct a full cost

- efficiency curve. Thus, DOE extrapolated the results from the data of SPVACs with a cooling capacity <65,000 Btu/h to model these remaining equipment

classes

. This process of extrapolation is depicted in Figure 5.9

. 1 , and described in detail below.

Figure 5.9

. 1 Extrapolation of Manufacturer Production Cost (MPC) from SPVAC <65,000

Btu/h Equipment Class t o Other Equipment Classes MPCs of SPVAC <65,000 Btu/h

, based on teardowns

MPCs of SPVHP

<65,000 Btu/h MPCs of SPVAC
≥65,000 Btu/h and

<135,000 Btu/h

Multiply by 1.32 ;

based on 6

- ton

SPVAC teardowns Multiply by 1. 14;

based on 3

- ton

SPVHP teardown

Multiply by 1.32 ;

based on 6

- ton

SPVAC teardowns

MPCs of SPVHP
≥65,000 Btu/h and

<135,000 Btu/h

5

- 24For SPVHPs with a cooling capacity < 65,000 Btu/h, DOE performed a teardown of a

baseline SPVHP from the same model line as a baseline SPVAC that was torn down. This allowed DOE to have a nearly direct comparison of the two units. DOE calculated the percentage cost increase of the SPVHP in comparison to the SPVAC. DOE estimated that this
percentage cost increase ( 14% ) would apply at all efficiency levels; and thus, multiplied the price s in the SPVAC <65,000 Btu/h cost

- efficiency curve by 1.14 to generate the cost

- efficiency

curve for SPVHPs <65,000 Btu/h. This cost increase would result from the costs of a reversing valve, associated controls, and larger heat exchangers.

For both SPVACs and SPVHPs with cooling capacities ≥65,000 Btu/h and <135,000 Btu/h, DOE used the corresponding cost

- effic iency curve of the ir respective <65,000 Btu/h equipment class as a starting point for developing the cost

- efficiency relationship . DOE performed two teardowns on 6

- ton SPVACs at different efficiency levels and compared their

MPC s with the MPCs of the 3

- ton equipment at the same respective efficiency levels that was

also torn down. By comparing these two pairs of MPCs, DOE was able to obtain an average percentage price increase of SPVACs ≥65,000 Btu/h and <135,000 Btu/h over SPVACs <65,000

Btu/h. This percentage price increase results from the cost of a higher capacity compressor, larger cabinet size, bigger fan motors, larger heat exchangers, and longer refrigeration coils. DOE used this average price increase (32%) and multiplied the pric e in the cost

- efficiency curve

for SPVACs with cooling capacities <65,000 Btu/h by 1.32 to obtain the cost

- efficiency curve

for SPVACs with cooling capacities ≥65,000 Btu/h and <135,000 Btu/h. Likewise, to determine

the cost

- efficiency relationship for SPV HPs with cooling capacities ≥65,000 Btu/h and <135,000 Btu/h, DOE multiplied the MPC at each efficiency level by 1.32 for SPVHPs with cooling capacities <65,000 Btu/h.

The result of the engineering analysis is four cost

- efficiency curves representing the four equipment classes examined for this NOPR. These cost

- efficiency curves are depicted in Figure

5.9

. 2 and Figure 5.9

. 3 below.

5

- 25Figure 5.9

. 2 MPC versus EER for SP V AC s

Figure 5.9

. 3 MPC versus EER for SPVHP s $- $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00

8.5 9 9.5 10 10.5 11 11.5 12 12.5MPC (2013$)

EER <65,000 Btu/h SPVAC MPCs

≥65,000 and <135,000 Btu/h SPVAC MPCs

$- $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 $3,000.00

8.5 9 9.5 10 10.5 11 11.5 12 12.5MPC (2013$)

EER <65,000 Btu/h SPVHP MPC

≥65,000 and <135,000 Btu/h SPVHP MPCs

5

- 26All graphs show an increase in cost with increasing efficiency. The slopes between points can be explained based on the technology options used to reach certain efficiency levels.

From 9. 0 to 10 EER, there is a n increase in cost due to the increase in heat exchanger size (which increases cabinet size) plus the cost for chang ing out a PSC fan motor for the indoor fan with a

B LDC fan motor. F rom 10 to 11 EER, the cost and efficiency increase as a result of an increase in heat exchanger depth; however, th e cabinet size does not increase in this range . From 11 to 11.75 EER, the cost difference is driven by larger heat exchangers ( which increase cabinet size) and replac ement of the compressor with a more efficien t compressor. From 11.75 to 12.3 EER,

the co st difference is driven by the use of two condensing coils and replacing the outdoor fan

motor with a B LDC motor.

5.10 MANUFACTURER MARKUP

To meet new or amended energy conservation standards, manufacturers often introduce design changes to their product lines, which often result in increased MPCs. Depending on the competitive environment for these particular equipment , some or all of the inc reased production costs can be “passed through” to retailers and eventually to customers in the form of higher purchase prices. As production costs increase, manufacturers also typically incur additional overhead at the factory and corporate levels. The ma nufacturer selling price ( MSP ) must cover both of these contributions to overhead if a company is to maintain profitab ility . As discussed previously, overhead costs in the DOE model are a function of investments, material costs, labor costs, or total costs , depending on the overhead category. Together, materials, labor, and factory overhead make up the full production cost. DOE applies another multiplier to the full production cost to account for corporate nonproduction costs and profit. This multiplier, th e nonproduction cost markup, is the focus of this section.

In this section, DOE presents its methodology for converting the MPCs to MSPs, which is done using the nonproduction cost markup (“manufacturer markup”). The manufacturer markup is an integral par t of the overall markup, which also includes the markups in the distribution chain (e.g., wholesalers, distributors, retailers, contractors). The distribution chain markups (discussed in chapter 6 of this TSD) convert MSP to customer price. The customer

pr ices and installation costs are key inputs to the LCC and PBP analys e s, and the NIA. Using manufacturer and distribution chain markups and installation costs, DOE can calculat e the first

costs that customers would face under each efficiency level. DOE eval uates the tradeoff between the increase in first cost and the resulting changes in operating costs at each efficiency level in the LCC and PBP analyses (chapter 8), and NIA (chapter 10).

The manufacturer markup also has an important bearing on profitabili ty. A high markup under a standards scenario suggests manufacturers can pass through the increased variable costs and some of the capital and product conversion costs (one

- time expenditures). A low markup implies that manufacturers will not be able to reco ver as much of the necessary investment in plant and equipment.

5

- 27Manufacturer Selling Price 5.10.1

T he MSP is the price at which the manufacturer can recover all production and nonproduction costs and earn a profit. DOE analyzed the shipping cost (typically considered a nonproduction cost and included in the manufacturer markup) separately from the manufacturer markup for the NOPR analyses. DOE calculated the MSP by multiplying the MPC by the manufacturer markup, and then adding the shipping cost.

M anufactur er Markup 5.10.2

A pplying a manufacturer markup to the MPC of the equipment is the first step to calculating the MSP. In general, the manufacturer markup should ensure that the MSP of the equipment is high enough to recover the full cost of the equipment (i.e., full production and nonproduction costs), and generate a satisfactory profit.

D OE normally develops the manufacturer markup through an examination of annual reports and Securities and Exchange Commission (SEC) 10-K reports which provides a comprehensive overview of the business and financial conditions of publically-owned companies. However, in the case of SPVU manufacturers, DOE did not feel this process would be representative of the majorit y of the industry since most SPVU manufacturers are privatelyheld companies for which financial information is not publically available . Therefore, DOE based the manufacturer markup for the SPVU industry on the markup used for the package

terminal air co nditioner (PTAC) and package terminal heat pump (PTHP) final rule published on October 7, 2008 (73 FR 58772)

, c and sought manufacturer feedback on this number during the interview process. DOE used the PTAC manufacturer markup as a starting point because it is a comparable industry to the SPVU industry. After consultation with industry DOE estimated the average manufacturer markup for this industry to be 1.28.

Shi pping Costs 5.10.3

M anufacturers of HVAC equipment typically pay for shipping to the first step in the distribution chain. Freight is not a manufacturing cost; but because it is a substantial cost incurred by the manufacturer and varies with equipment efficiency (due to changes in equipment size) , DOE is accounting for shipping costs of SPVUs separately from other non-production costs that comprise the manufacturer markup. To calculate the MSP for SPVUs, DOE multiplied the MPC at each efficiency level by the manufacturer markup and added shipping costs for equipment at the given efficiency level.

D OE calculated shipping costs at each efficiency level based on market

- weighted average outer dimensions of equipment at the given efficiency level and assuming the use of a typical 53- foot straight fr ame trailer with a storage volume of 4,240 cubic feet. Shipping costs for SPVUs were determined on an area basis. These products are typically too tall to be double- stacked in a vertical fashion, and they cannot be shipped in any other orientation other t han vertical. As a result, the floor area taken up by the SPVU is often the limiting factor (as opposed to weight)

c For more information on the PTAC/PTHP rulemaking, see: http://www.regulations.gov/#!docketDetail;D=EERE

- 2012

- BT

- STD

- 0029

5-28dictating how many SPVUs can be shipped in a truckload. To calculate shipping costs, DOE calculated the cost per area of a trailer, based o n an estimated cost of $4,000 per shipping load

and the standard dimensions of a 53

- foot trailer (which would approximate the cost of shipping the equipment coast

- to

- coast ). DOE then calculated the market

- weighted average sizes of equipment in each equipm ent class at each efficiency level. DOE then estimated the shipping costs by multiplying the equipment area by the respective cost per area on the trailer. DOE also received manufacturer feedback on these shipping estimates during manufacturer interviews which confirmed the validity of the approach and estimate

. Then, DOE updated the shipping

costs to 2013 $ by applying a general GDP deflator from the U.S. Department of Commerce: Bureau of Economic Analysis

. 7 DOE divided the GDP c hain

- type price index from 2013 ( 10 6.57 ) by that of 2011 ( 103. 199 ) and calculated the general GDP deflator between those two

years to be 1.0 33 . Then, DOE multiplied the shipping costs (in 2011$) by this value to calculate the shipping cost s in 2013 $. DOE b elieves that using the general GDP deflator most accurately tracks the changes in shipping cost due to inflation because the shipping industry is a labor and fuel intensive industry.

DOE found that SPVHPs were the same size as SPVACs at each efficiency le vel , so shipping costs would be expected to be the same regardless of whether the unit is an SPVAC or

SPVHP

. Table 5.10

. 1 and Table 5.10

. 2 show the market

- weighted average shipping dimensions

of SPVUs that DOE calcu lated for each efficiency level, and Table 5.10

. 3 shows the shipping cost estimates DOE used for calculating the MSP.

Table 5.10

. 1 Shipping Dimensions for SPVACs and SPVHPs <65,000 Btu/h
Efficiency Level Height (in) Width (in) Depth (in) Floor Area (ft 2 )

9.0 EER 69.7 41.1 16.5 4.7

10.0 EER 85.7 44.2 22.6 7.0

10.5 EER 85.7 44.2 22.6 7.0

11.0 EER 85.7 44.2 22.6 7.0

11.75 EER 99.0 47.4 27.7 9.1

12.3 EER 94 47.6 31.4 10.3

Table 5.10

. 2 Shipping Dimensions for SPVACs and SPVHPs ≥65,000 Btu/h and <135,000

Btu/h
Efficiency Level Height (in) Width (in) Depth (in) Floor Area (ft 2 )

9.0 EER 94.73 44.1 23.6 7.2

10.0 EER 94.7 44.1 23.6 7.2

5

- 29Table 5.10

. 3 SPVU Shipping Cost Estimate s

SPVU Equipment Class Energy Efficiency

Level Shipping Costs ($20 1 3 )

SPVAC <65,000

Btu/h EPCA Baseline $ 4 6.04

ASHRAE Baseline $ 67. 74

EL1 $ 67. 74

EL2 $ 67. 74

EL3 $ 88. 78

EL4 $ 10 3.30

≥ 65,000

Btu/h EPCA Baseline $ 70.45

ASHRAE Baseline $ 70.45

SPVHP <65,000

Btu/h EPCA Baseline $ 4 6.04

ASHRAE Baseline $ 67. 74

EL1 $ 67. 74

EL2 $ 67. 74

EL3 $ 88. 78

EL4 $ 10 3.30

≥ 65,000

Btu/h EPCA Baseline $ 70.45

ASHRAE Baseline $ 70.45

5.11 ENGINEERING ANALYSIS SUMMARY OF RESULTS

The results from the engineering analysis are used in the LC C analysis to determine customer prices for SPVUs

. By applying the calculated manufacturer markup and shipping costs

to the MPCs , DOE calculated the MSPs of the SPVUs at the baseline and more efficient levels.

Summary of Results for Representative Models 5.11.1

Each of the MPCs and MSPs developed in the engineering analys is for the representative capacity of each equipment class are shown in Table 5.11

. 1 through Table 5.11

. 4 . DOE was able to receive manufacturer feedback on these MPCs and MSPs during the manufacturer interviews (see chapter 12 of this TSD , MI A). As descri bed in section 5. 10.1 , the MSP for SPVUs is calculated by multiplying the MPC by the manufacturer markup and then adding the shipping

cost.

Table 5.11

. 1 MPC and MSP for SPVAC s <65,000 Btu/h
Efficiency Level MPC 20 1 3 $ MSP 20 1 3 $

EPCA Baseline ( EER =9 .0 ) $ 1,149.47 $ 1,517

. 36

ASHRAE Baseline ( EER =10 .0 ) $ 1,424.10 $ 1,89 0. 59

EL1 ( EER =10.5 ) $ 1,492.81 $ 1,978

. 54

EL2 ( EER =11 .0 ) $ 1,561.53 $ 2,066

. 50

EL3 ( EER =11.75 ) $ 1,766.36 $ 2,3 49. 71

EL4

– Max

- Tech ( EER =12.3 ) $ 2,15 0. 71 $ 2, 876.87

5

- 30Table 5.11

. 2 MPC and MSP for SPVACs ≥ 65,000 Btu/h and <135,000 Btu/h
Efficiency Level MPC 20 1 3 $ MSP 20 1 3 $

EPCA Baseline ( EER =8.9) $ 1,503.07 $ 1,99 4.38

ASHRAE Baseline

– Max

- Tech ( EER =10) $ 1,884.72 $ 2,482. 89

Table 5.11

. 3 MPC and MSP for SPVHPs <65,000 Btu/h
Efficiency Level MPC 20 1 3 $ MSP 20 1 3 $

EPCA Baseline ( EER =9 .0, COP=3 ) $ 1,320.55 $ 1,736. 35

ASHRAE Baseline ( EER =10 .0, COP=3 ) $ 1,636.06 $ 2,161. 90

EL1 ( EER =10.5

, COP=3.2 ) $ 1,715.00 $ 2,262. 95

EL2 ( EER =11 .0, COP=3.3 ) $ 1,793.94 $ 2,363. 99

EL3 ( EER =11.75

, COP=3.9 ) $ 2,029.26 $ 2,68 6.23

EL4

– Max

- Tech ( EER =12.3

, COP=3.9 ) $ 2, 470.82 $ 3, 286.61

Table 5.11

. 4 MPC and MSP for SPVHPs ≥ 65,000 Btu/h and <135,000 Btu/h
Efficiency Level MPC 20 1 3 $ MSP 20 1 3 $

EPCA Baseline ( EER = 8. 9

, COP=3 ) $ 1,726.78 $ 2,280. 73

ASHRAE Baseline

– Max

- Tech ( EER=10.0, COP=3) $ 2,165.24 $ 2,841. 95

5

- 31REFERENCES

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2

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5

- 32