ATIONAL ENERGY SAVING

AND NET PRESENT VALUE

James E. McMahon

(JE cMahon@LBL.gov)

Ernest Orlando Lawrence Berkeley National Laboratory

U.S. DOE Workshop on Standards

for Residential Furnaces and Boilers

July 17, 2001

EE-RM/STD-01-350 COMMENT 02LL
National Energy Saving and Net Present Value Analysis:

Overview

• Energy consumption for residential space heating

by fuel will be calculated annually for a base case

and standards cases

• The difference between base case consumption

and consumption in each standards case represents

energy Saving

• Results will be reported in physical units

(quadrillion Btus primary energy) and economic

units (dollars) for each year and cumulatively

• The period of analysis is from start date of

standard to about 30 years later (ca. 2040)

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EE-RM/STD-01-350 COMMENT 02LL
National Energy Saving and Net Present Value Analysis:

Methods for Forecasting Shipments

• Extrapolate from time series

- No explicit accounting for number of households,

percent owning equipment, changes in installed cost or

operating expense

• Forecast using accounting model

- new households and percent by equipment type

- replacement as function of equipment lifetime

• Consider impacts of existing non-regulatory

efforts on base case efficiencies in future years.

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EE-RM/STD-01-350 COMMENT 02LL
National Energy Saving and Net Present Value Analysis:

DOE Requests Input from

Stakeholders on Shipments

• What other approaches should the

Department consider to establish the

forecasts for base case and standards cases?

• What are the best information sources for

past shipment data by efficiency level?

• What existing non-regulatory initiatives

should be considered in the base case?

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EE-RM/STD-01-350 COMMENT 02LL
National Energy Saving and Net Present Value Analysis:

Consumer Economic Factors

Affect Fuel Choice

• Operating expenses: typically hundreds of

dollars per household per year, depending upon

fuel type, energy prices, and usage.

- X42 billion spent for household space heating (1997)

• $27 billion for gas or LPG

• $8 billion for electricity

* $6-billion for oil

7urchase expenses: typically thousands of dollars

per installation

- $11 billion for HVAC replacement (1994-95)

- Plus equipment costs in new construction

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EE-RM/STD-01-350 COMMENT 02LL
National Energy Saving and Net Present Value Analysis:

Residential Main Heating Fuel, 197 8-97

1978 ®1987 q 1997

Gas remained the most

frequently used main heating

fuel, 55% in 1978 and 52% in

1997.

Electricity has increased from

16 percent in 1978 to 30

percent in 1997.

Fuel oil or kerosene for space

heat decreased from 22

percent to 10 percent.

Electricity Natural Gas Fuel Oil or LPG

K?rosenp

Main Heating Fuel

Wood

The difference betven the 1978 and 1997 estimates is statistically significant at the

95-percent confidence level.

Source: Energy Information Administration, Residential Energy Consumption Survey, 1978,

1987, and 1997.

From http://www.eia.doe.gov/emeu/recs/

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EE-RM/STD-01-350 COMMENT 02LL
National Energy Saving and Net Present Value Analysis:

Impact of standards on fuel c

will be considered

• Historically, fuel availability, changes in relative

energy costs, utility programs, other factors have

caused fuel switching.

• In the period 1986-1996, American Gas

Association reports between 148,000 and 311,000

housing units annually converted from another

fuel to natural gas househeating.

- This represents 3-8% of annual gas furnace shipments.

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EE-RM/STD-01-350 COMMENT 02LL
National Energy Saving and Net Present Value Analysis:

Method: Net Present Value (NPV)

• For each year analyzed, calculate the difference in

installed costs and operating costs between the base

case and each standards case

• Discount future values to the present

- Include operating costs over lifetime of equipment purchased

• Sum over years to get NPV

- If present value of savings exceeds costs, NPV is positive.

- If present value of costs exceeds costs, NPV is negative.

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EE-RM/STD-01-350 COMMENT 02LL