CHAPTER 5. ENGINEERING ANALYSIS

TABLE OF CONTENTS

5.1 INTRODUCTION ........................................................................................................... 5-1

5.2 METHODOLOGY OVERVIEW.................................................................................... 5-1

5.3 EQUIPMENT CLASSES ANALYZED.......................................................................... 5-3

5.4 REPRESENTATIVE CAPACITIES............................................................................... 5-4

5.5 TEARDOWN ANALYSIS.............................................................................................. 5-4

5.5.1 Selection of Units................................................................................................. 5-5

5.5.2 Generation of Bills of Materials .......................................................................... 5-6

5.6 COST MODEL................................................................................................................ 5-7

5.6.1 Cost Structure of the Spreadsheet Models........................................................... 5-7

5.6.2 Cost Model and Definition................................................................................... 5-8

5.6.3 Cost Model Assumptions Overview .................................................................... 5-8

5.6.4 Manufacturing Production Cost......................................................................... 5-11

5.6.5 Translating MPCs from 2011$ to 2013$ ........................................................... 5-13

5.7 DESIGN OPTIONS....................................................................................................... 5-14

5.7.1 Screened-In Technologies.................................................................................. 5-14

5.8 EFFICIENCY LEVELS................................................................................................. 5-17

5.8.1 Overview of Efficiency Levels of SPVACs and SPVHPs and Common 

Technologies Used at Each Efficiency Level .................................................... 5-18

5.8.2 Baseline Unit...................................................................................................... 5-20

5.8.3 Intermediate Energy Efficiency Levels ............................................................. 5-21

5.8.4 Max-Tech Efficiency Levels.............................................................................. 5-22

5.8.5 Correlating EER and COP for SPVHPs............................................................. 5-22

5.9 COST-EFFICIENCY CURVES.................................................................................... 5-24

5.10 MANUFACTURER MARKUP .................................................................................... 5-27

5.10.1 Manufacturer Selling Price ................................................................................ 5-28

5.10.2 Manufacturer Markup ........................................................................................ 5-28

5.10.3 Shipping Costs................................................................................................... 5-28

5.11 ENGINEERING ANALYSIS SUMMARY OF RESULTS.......................................... 5-30

5.11.1 Summary of Results for Representative Models ............................................... 5-30

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LIST 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 SPVACs 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 Extrapolation 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

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CHAPTER 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 package vertical units 

(SPVUs). The relationship between the MSP and energy efficiency, or the cost-efficiency 

relationship, serves as the basis for cost-benefit calculations in terms of individual customers, 

manufacturers, and the Nation.

DOE typically structures 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 cost 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 OVERVIEW

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

Figure 5.2.1 shows a flow diagram of this methodology and the corresponding sections in this 

chapter. The results of the engineering analysis are cost-efficiency curves for each equipment

class.

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Figure 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 for each of the representative cooling capacities. DOE gathered information from 

teardowns to create bills of materials (BOMs) for each equipment torn down using reverse 

engineering methods (see section 5.6), and to confirm the technology options that manufacturers 

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

dollar values to calculate the manufacturing production cost (MPC) for equipment spanning the 

full range of efficiencies from the baseline to the maximum technologically feasible (“maxtech”) level. DOE also identified the technology or combination of technologies mainly 

responsible for improving the energy 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. DOE used the information gathered from these interviews to refine 

efficiency levels and technology 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 markup (section 5.10), which is calculated using publicly available industry 

financial data, along with manufacturer feedback.

BOM

(Section 5.5.2)

Efficiency Levels 

and Associated 

Technologies

(Section 5.8)

Screening 

Analysis

(Chapter 4)

Cost Model

(Section 5.1)

Cost-Efficiency 

Curves

(Section 5.9)

Engineering 

Manufacturer 

Interviews

Manufacturer 

Markup Analysis

(Section 5.10)

Selling Price 

Efficiency 

Relationship

(Section 5.11)

Market and Technology 

Assessment

(Chapter 3)

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5.3 EQUIPMENT CLASSES ANALYZED

DOE divides covered equipment into classes by: (a) the type of energy used; (b) the 

capacity; or (c) any performance-related features that affect customer utility or efficiency. (42 

U.S.C. 6295(q)) Different energy efficiency standards may apply to different equipment classes.

Table 5.3.1 shows 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 Classes 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 teardowns on enough models to cover the full range of efficiency 

levels 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 classes (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 the 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 

between65,000 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

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converting 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 CAPACITIES

Within each equipment class, SPVUs span a wide range of capacities. For each 

equipment class, DOE conducted analyses (directly or indirectly) at a representative equipment 

capacity. Using a representative capacity allowed 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 compiled 

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

SPVAC ≥65,000 Btu/h and <135,000 Btu/h 72,000 Btu/h

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

SPVHP ≥65,000 Btu/h and <135,000 Btu/h 72,000 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 greater detail.

For those classes, the representative capacities selected corresponded to the capacity with the 

highest number of shipments for each of those equipment classes. 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 

engineering 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 assembled bill-of-materials (BOMs) spreadsheets to calculate the 

manufacturing costs of the different components in SPVUs. DOE also used published 

manufacturer catalogs and supplementary component data to estimate the major physical 

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differences between a product that was physically disassembled and a similar product that was 

not. The teardown analysis for the NOPR included a total of 14 teardowns of SPVUs. 

5.5.1 Selection of Units

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

• What efficiency 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 criteria 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 same 

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 customers. 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 

technology 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 gathered 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 from 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 

in the engineering analysis. These teardown units are listed in Table 5.5.1.

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Table 5.5.1 SPVU Teardowns performed for Engineering 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. 

5.5.2 Generation of Bills of Materials

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, 

including 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.

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The 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 understanding 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 “raw” materials are estimated on the basis of 5-year averages (from 2007-2011) 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 brazing, dies, presses, tube expanders/benders, 

and assorted tooling. DOE used this feedback from manufacturer interviews to modify its 

estimates.

5.6 COST MODEL

5.6.1 Cost Structure of the Spreadsheet Models

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 disassembling 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 the 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 confidential information available to DOE contractors. Although most of the 

assumptions are manufacturer specific and cannot be revealed, Section 5.6.4 provides a brief 

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 

5-7
shared key estimates from the cost model and requested feedback. DOE considered all relevant 

information manufacturers gave and incorporated it into the analysis, if appropriate.

5.6.2 Cost Model and Definition

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 used 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 utilities, 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. 

• Assembly 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. 

• Equipment 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 maintaining tooling and equipment. 

• Insurance: Appropriated as a function of unit cost. 

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

5.6.3 Cost Model Assumptions Overview

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.

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In converting physical information about the equipment into cost 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 depreciation, 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 costs 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 its labor cost estimates using information obtained during interviews with 

SPVU manufacturers. Overhead costs include equipment depreciation, tooling depreciation, 

building depreciation, utilities, equipment, tooling maintenance, insurance, property, and taxes.

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

interviews and used feedback from the interviews to update these costs to address manufacturer 

comments about component and material pricing and production volumes. DOE modified these

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

cost-efficiency results and revised estimates 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. The 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. 

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Table 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 Packaging

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 interviews. 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 aggregate 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.

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Table 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 Market1, interviews with manufacturers, and discussions with material 

suppliers. The fabrication of single package vertical units requires various raw metals, including 

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 Price 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 ($2011)

$/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

5.6.4 Manufacturing Production Cost

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 product in order to calculate the MPC.

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Figure 5.6.1 A General Breakdown of Costs Associated with Manufacturing an 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.

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When 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 SPVAC which was torn down as part of the engineering analysis.

Figure 5.6.2 Breakdown 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 and validation. 

The costs of technologies 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 made from raw materials. Therefore, hybrid 

assemblies, consisting of purchased parts and parts made on site, are also accommodated.

5.6.5 Translating MPCs from 2011$ to 2013$

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$. DOE converted these prices to 2013$, as is customary for a 

notice published in 2014. 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 pumps” (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 source 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

5-13
5.7 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 is 

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 efficiency 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 options

typically 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 calculated the cost-efficiency curves (see Section 5.9).

5.7.1 Screened-In Technologies

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 screened 

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 Retained 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.

5-14
5.7.1.1 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 with a larger frontal area. A greater 

condenser or evaporator coil face area increases the heat transfer performance 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 cooling 

capacity to be delivered to the conditioned space at a higher refrigerant temperature in the 

evaporator. These changes can reduce the pressure difference between the low pressure and high 

pressure sides of the compressor, thus reducing the required compressor power.

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 increasing the frontal coil area, another 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 requires an increase in 

the size 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 manufacturers 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. 

Manufacturer feedback indicates that if additional successive vertical tube rows were 

added to the heat exchangers beyond the initial additions, the expected efficiency gains would 

decrease by about one half for each additional tube row. In addition to the constraints posed by 

space restrictions and limited efficiency gains, increasing heat exchanger depth may 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 could

negate some, or all of the energy savings associated with the additional heat exchanger surface 

area. 

5.7.1.3 Dual condenser 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 condenser 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 

5-15
area. In the teardown analysis, DOE 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 

rotor. 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 decreases, 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, the commutation is coordinated 

through use of 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 part-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 motors 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 utilizing 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 

5-16
propeller-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 their 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 interleaving 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 2.80 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 capacities 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 equipment class. DOE identified the max-tech efficiency level by reviewing product 

literature for commercially available equipment and information obtained during interviews with 

manufacturers.

5-17
5.8.1 Overview of Efficiency Levels of SPVACs and SPVHPs and Common 

Technologies 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

EL1 10.5 EER 10.5 EER

3.2 COP

EL2 11.0 EER 11.0 EER

3.3 COP

EL3 11.75 EER 11.75 EER

3.9 COP

EL4 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 and <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. Once a particular design requires components that become too large 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 efficiency improvements were determined based on analysis of the published

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

5-18
components. Further descriptions of the incremental technological changes between efficiency 

levels are discussed in greater detail below.

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

Efficiency

Levels

Design Options

BLDC 

Indoor 

Fan 

motor

Increased 

HX Face 

Area

Additional 

HX tube 

row

Higher 

Efficiency 

Compressor

BLDC 

Outdoor Fan 

motor

HighEfficiency 

Outdoor Fan 

Blade

Dual 

Condenser 

Heat 

Exchangers

EPCA 

Baseline

9.0 EER

ASHRAE 

Baseline

X X

10.0 EER .3 EER .7 EER

EL1 X

10.5 EER .5 EER

EL2 X

11.0 EER .5 EER

EL3 X X

11.75 EER .42 EER .33 EER

EL4 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 specific 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 SPVUs 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 commonly replace the indoora 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 SPVUs from the same manufacturer 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 followed 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 multiplied 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 (typical 

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. 

5-19

 
face 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 EER 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 increase 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, manufacturers 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 

increasing 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 order to accommodate the larger heat exchanger.

Manufacturers also will add a more efficient 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 12.3 EER (max-tech) efficiency level, manufactures may swap out 

the outdoora PSC fan motor for a more efficient 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, manufacturers increase the condensing heat exchanger face area by using two 

condensing heat exchangers. These design changes require another increase in cabinet size 

(depth).

5.8.2 Baseline Unit

DOE selected baseline units as reference points for each equipment class, against which 

changes resulting from potential amended energy conservation standards 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 9th, 2013, which would prompt DOE to, 

5-20
through 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 met

and did not exceed the Federal energy conservation standards prior to October 9th, 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 continue 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 compliance 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 provide 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. As 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 efficiency 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 that 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 defined 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.

5.8.3 Intermediate Energy Efficiency Levels

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 efficiency 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 ratings are the most prevalent for each 

representative equipment class. For SPVACs and SPVHPs with cooling capacity <65,000 Btu/h, 

DOE analyzed four efficiency levels between the baseline and max-tech for analysis. For 

5-21
SPVACs and SPVHPs with a cooling capacity ≥65,000 Btu/h and <135,000 Btu/h, DOE did not 

analyze any efficiency levels between the baseline and max-tech for analysis.

5.8.4 Max-Tech Efficiency Levels

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 an SPVU can attain. DOE also discussed what an

appropriate max-tech level would be with manufacturers during interviews. For each of the 

representative equipment capacities, 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 lists the max-tech levels DOE determined for this NOPR for SPVUs.

5.8.5 Correlating EER and COP for SPVHPs

For SPVHPs, DOE selected an 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 exchanger 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, depending 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 efficiency 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 analyzed 

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 determining the appropriate COP at each EER level analyzed. 

5-22
Figure 5.8.1 Distribution of COP ratings for each EER rating

3

3

3

3

3.85

3.07

3.1

3.2

3.25

3.13

3.15

3.9

3.25

3.3

3.2

3.95

3.2

3.3

3.31

2

3.4

6

9

3.49

3.63.7

0

10

20

30

40

50

60

70

9 10 10.5 11 11.75

Number of Units

Energy Efficiency Ratio (EER) Bins

Distribution of COP ratings within each EER Bin

5-23
5.9 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 based its costefficiency 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 

points 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 to 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

5-24
For 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 

prices 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-efficiency curve of their 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 

MPCs 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 price 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 SPVHPs 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.

5-25
Figure 5.9.2 MPC versus EER for SPVACs

Figure 5.9.3 MPC versus EER for SPVHPs 

 $-

 $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 12.5

MPC (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 12.5

MPC (2013$)

EER

<65,000 Btu/h SPVHP MPC

≥65,000 and <135,000 Btu/h SPVHP MPCs

5-26
All 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 an increase in cost due to the increase in heat exchanger size (which 

increases cabinet size) plus the cost for changing out a PSC fan motor for the indoor fan with a 

BLDC fan motor. From 10 to 11 EER, the cost and efficiency increase as a result of an increase 

in heat exchanger depth; however, the 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 replacement of the compressor with a more efficient compressor. From 11.75 to 12.3 EER, 

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

motor with a BLDC 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 increased 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 manufacturer selling price (MSP) must cover 

both of these contributions to overhead if a company is to maintain profitability. 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, the 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 part 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

prices and installation costs are key inputs to the LCC and PBP analyses, and the NIA. Using 

manufacturer and distribution chain markups and installation costs, DOE can calculate the first 

costs that customers would face under each efficiency level. DOE evaluates 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 profitability. 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 recover as much of the necessary investment in 

plant and equipment.

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5.10.1 Manufacturer Selling Price

The 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. 

5.10.2 Manufacturer Markup 

Applying 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. 

DOE 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 majority 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 conditioner (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. 

5.10.3 Shipping Costs

Manufacturers 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. 

DOE 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 frame 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 than 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

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dictating how many SPVUs can be shipped in a truckload. To calculate shipping costs, DOE 

calculated the cost per area of a trailer, based on 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 equipment 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 chain-type price index from 2013 

(106.57) by that of 2011 (103.199) and calculated the general GDP deflator between those two 

years to be 1.033. Then, DOE multiplied the shipping costs (in 2011$) by this value to calculate 

the shipping costs in 2013$. DOE believes 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 level, 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 calculated 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 

(ft2)

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 

(ft2)

9.0 EER 94.73 44.1 23.6 7.2

10.0 EER 94.7 44.1 23.6 7.2

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Table 5.10.3 SPVU Shipping Cost Estimates

SPVU Equipment Class Energy Efficiency 

Level

Shipping Costs

($2013)

SPVAC

<65,000 

Btu/h

EPCA Baseline $46.04

ASHRAE Baseline $67.74

EL1 $67.74

EL2 $67.74

EL3 $88.78

EL4 $103.30

≥65,000 

Btu/h

EPCA Baseline $70.45

ASHRAE Baseline $70.45

SPVHP

<65,000 

Btu/h

EPCA Baseline $46.04

ASHRAE Baseline $67.74

EL1 $67.74

EL2 $67.74

EL3 $88.78

EL4 $103.30

≥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 LCC 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.

5.11.1 Summary of Results for Representative Models

Each of the MPCs and MSPs developed in the engineering analysis 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, MIA). As described 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 SPVACs <65,000 Btu/h

Efficiency Level MPC 2013$ MSP 2013$ 

EPCA Baseline (EER=9.0) $1,149.47 $1,517.36

ASHRAE Baseline (EER=10.0) $1,424.10 $1,890.59

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 $2,349.71

EL4 – Max-Tech (EER=12.3) $2,150.71 $2,876.87

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

Efficiency Level MPC 2013$ MSP 2013$ 

EPCA Baseline (EER=8.9) $1,503.07 $1,994.38

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 2013$ MSP 2013$ 

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 $2,686.23

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 2013$ MSP 2013$ 

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

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