Department of Energy Energy Efficiency & Renewable Energy CommWarmAirFurn2013STD0021@ee.doe.gov 

# NOPR Public Meeting on Energy Conservation Standards for Commercial Warm Air Furnaces2 

# Welcome

• Introductions (around the room )

• Role of the Facilitator

• Ground Rules

– Speak one at a time.

– Say your name for the record

– there will be a complete transcript of this meeting.

– Be concise

– share the ‘air

- time’.

– Keep the focus here

– cell phones on silent; limit sidebar conversations.

– Webinar participants turn phone on mute; “raise your hand” to be recognized to speak.



# • Housekeeping Items

• Agenda Review

• Opening Remarks3 

# Agenda

9:00

– 9:15 am Welcome ; Introductions; and Agenda Review Doug Brookman

9:15

– 9:45 am Purpose of Public Meeting; Opening Statements; and Regulatory Authority and Rulemaking Overview John Cymbalsky

9:45

– 10:15 am Market and Technology Assessment; and Screening Analysis Adam Darlington

10:15

– 10:30 am Break

10:30

– 11:15 am Engineering Analysis Adam Darlington

11:15

– 12:00 pm Markups; Energy Use Characterization; and Lifecycle Cost (LCC) and Payback Period Analysis Victor Franco

12:00

– 1:00 pm Lunch (on your own )4 

# Agenda (cont.)

1:00

– 1:30 pm LCC and Payback Period Analysis (cont.) Victor Franco

1:30

– 2:15 pm National Impact Analysis, Shipments, and Regulatory Impact Analysis Victor Franco

2:15

– 2:30 pm Break

2:30

– 3 :00 pm Manufacturer Impact Analysis Christopher Lau

3 :00

– 3:30 pm Environmental Impacts and Indirect Employment Impacts Victor Franco

3:30

– 4:00 pm Closing Remarks from Interested Parties John Cymbalsky

4:00 pm Adjourn5 

# Participating Via the Webcast

• The Department is broadcasting this meeting live over the Internet.

• DOE is providing the webcast to accommodate stakeholders who are unable to attend the public meeting in person.

• The web broadcast allows stakeholders to listen in, view the slides, and participate directly.

• All stakeholders are encouraged to submit written comments after the public meeting.6 

# Purpose of the Public Meeting

• Present the procedural and analytical approaches to evaluate potential energy conservation standards for commercial warm air furnaces (CWAF).

• Invite comment on the energy conservation standards notice of proposed rulemaking (NOPR) and technical support document (TSD), including DOE’s proposed standard levels.

– 80 FR 6182 (Feb. 4, 2015).



# • Invite participants to provide summary comments or statements and raise additional issues for discussion.7 

# Issues for Discussion

The deadline for submitting comments is April 6, 2015

. Issue Box: DOE welcomes comments, data, and information concerning its proposed standards for CWAF. Issues that correspond to those raised in DOE’s published material will be numbered in accordance with that material. Whether invited by an issue box or not, comments are welcome on any part of DOE’s analysis.8 

# Opening Remarks

Meeting participants are invited to provide opening remarks or statements at this time.9 

# Public Meeting Agenda

1 Overview

2 Market and Technology Assessment; Screening Analysis

3 Engineering Analysis

4 Energy Use; Markups Analysis

5 Life

- Cycle Cost and Payback Period Analysis

6 Shipments; NIA; RIA; MIA

7 Environmental Impacts; Indirect Employment

8 Closing Remarks and How to Submit Comments10 

# Regulatory Authority

• Energy Policy and Conservation Act (EPCA) of 1975 (P.L. 94

- 163)

– Established the Energy Conservation Program for Certain Commercial and Industrial Equipment

• Energy Policy Act of 1992 (EPACT 1992), ( P.L. 102−486) amended EPCA to add CWAF as a type of covered equipment. (42 U.S.C. 6311(1)(J) and (11)(A)) The statute also set initial energy conservation standards for CWAF equipment. (42 U.S.C. 6313(a)(4))

• EPCA directs DOE to consider amending existing Federal energy conservation standards for CWAF whenever ASHRAE amends the efficiency levels in Standard 90.1. (42 U.S.C. 6313(a)(6))11 

# Regulatory Authority

• Energy Independence and Security Act of 2007 (EISA 2007) (P.L. 110

- 140) and the American Energy Manufacturing Technical Corrections Act (AEMTCA) (P.L. 112

- 210) amended EPCA to require that every 6 years, the Secretary publish either:

– A notice of the determination that standards for the product do not need to be amended; or

– A notice of proposed rulemaking including new proposed standards. (42 U.S.C. 6313(6)(C)( i ))

• AEMTCA also required that DOE consider amended energy conservation standards (ECS) for equipment for which more than 6 years had elapsed since the most recent ECS final rule. (42 U.S.C. 6313(a)(6)(C)(vi))12 

# Regulatory Authority

• EPCA defines a “warm air furnace” as:

– “A self

- contained oil

- or gas
- fired furnace designed to supply heated air through ducts to spaces that require it and includes combination warm air furnace/electric air conditioning units but does not include unit heaters and duct furnaces .” (42 U.S.C. 6313 (11)(A))

• DOE further defines a “commercial warm air furnace” as:

– “A warm air furnace that is industrial equipment, and that has a capacity (rated maximum input) of 225,000 Btu per hour or more.” (10 CFR 431.72)13 

# Rulemaking Scope

• Per the EPCA and DOE definitions, this rulemakings covers:

– Self

- contained gas

- fired and oil

- fired warm

- air furnaces that supply heated air through ducts with input ratings above 225,000 Btu/h

– Includes commercial warm air furnaces that are designed for make

- up air heating

– Includes combination warm air furnace/electric air conditioning units but does not include unit heaters or duct furnaces14 

# Regulatory History

• Current equipment classes:

– Established by EPACT 1992;

– D ivide CWAF into two classes: gas

- fired and oil

- fired.

• C urrent minimum Federal energy conservation standards:

– Established by EPACT 1992;

– Effective date of January 1, 1994;

– These standards are as follows:
Equipment Class Thermal Efficiency
Gas

- Fired CWAF 80% Oil

- Fired CWAF 81%15 

# Test Procedure and Efficiency Metric

• CWAF test procedure: 10 CFR 431.76, “Uniform test method for the measurement of energy efficiency of commercial warm air furnaces.”

– Incorporates ANSI standard Z21.47

- 2006, “Gas

- Fired Central Furnaces,” for gas

fired CWAF;

– Incorporates UL standard 727

- 2006, “Standard for Safety Oil

- Fired Central Furnaces,” for oil

- fired CWAF;

– Incorporates ASHRAE Standard 103

- 1993, “ Method of Testing for Annual Fuel Utilization Efficiency of Residential Central Furnaces and Boilers” for condensing CWAF

.



## • Energy efficiency metric for CWAF is thermal efficiency (TE)

– “Thermal efficiency” equals 100 percent minus percent flue loss determined using the test procedure prescribed under 10 CFR 431.76

. ( 10 CFR 431.72)16 

# Criteria for Selecting Standard Levels
The Energy Policy and Conservation Act (EPCA) directs DOE to the maximum extent practicable to consider seven factors when setting energy conservation standards



## .
EPCA Factor DOE Analysis
1. Economic impact on consumers and manufacturers Life

- cycle cost analysis Manufacturer impact analysis
2. Lifetime operating cost savings Life

- cycle cost analysis

3. Total projected energy savings National impact analysis

4. Impact on utility or performance Screening analysis Engineering analysis
5. Impact of any lessening of competition Manufacturer impact analysis

6. Need for national energy conservation National impact analysis

7. Other factors the Secretary considers relevant Environmental assessment Utility impact analysis Employment impact analysis17 

# Energy Conservation Standards Rulemaking

Market & Technology Screening Analysis Engineering Analysis

Markups for Equipment Price Determination Shipments Analysis Energy Use & End Use Load Characterization Life

- Cycle Cost and Payback Period Analysis

Manufacturer Impact Analysis National Impact Analysis Regulatory Impact Analysis

Employment Impact Analysis

Utility Impact Analysis

Environmental Impact Analysis Request for Information NOPR Final Rule18 

# Public Meeting Agenda

1 Overview

2 Market and Technology Assessment; Screening Analysis

3 Engineering Analysis

4 Energy Use; Markups Analysis

5 Life

- Cycle Cost and Payback Period Analysis

6 Shipments; NIA; RIA; MIA

7 Environmental Impacts; Indirect Employment

8 Closing Remarks and How to Submit Comments19 

# Market and Technology Assessment

Purpose



# • Market assessment develops a qualitative and quantitative characterization of the CWAF industry.

• Technology assessment develops a list of technologies that could be used to improve the energy efficiency of CWAF.

Method



# • Based on publicly

- available data and on information gathered directly from manufacturers and interested parties.20 

# Market Assessment: CWAF Overview

• Gas

- fired CWAF make up the majority of the CWAF market.

– Primarily installed outdoors and supply heated air to commercial buildings via ducts.

– Most are manufactured in a single package with a commercial unitary air conditioner (CUAC), installed on a rooftop, and are “weatherized.”



# • Oil

- fired CWAF are a small portion of the market.

– Are not packaged with a CUAC.

– Intended for indoor installation and are “non

- weatherized.”



# • The market is comprised of 4 major manufacturers and 9 other manufacturers with relatively smaller market shares.21 

# Market Assessment

• DOE developed a database of CWAF basic models on the market using:

• Air

- Conditioning, Heating, and Refrigeration Institute (AHRI) Directory of Certified Product Performance; and

• P roduct listings available on manufacturers’ websites.



## • DOE proposed to maintain existing equipment classes and analyzed gas

fired and oil

- fired CWAF separately.

• The distribution of models by equipment class is below. Models are also grouped based on whether they are non

- weatherized or weatherized, although they were not considered separately in the analysis:

Equipment Class Model Distribution by Equipment Class Weatherization Number of Basic Models Offered Distribution by Weatherization

Gas

- fired 94.8% Non

- Weatherized 21 7.7% Weatherized 236 87.1%

Oil

- fired 5.2% Non

- Weatherized 14 5.2% Weatherized 

### 0 0%22 

# Market Assessment

– Range from 80% to 92% thermal efficiency

– Most models at 80% thermal efficiency

– No models above 82% and below 90% ( i.e. , in the “near

condensing” range) 

## • Gas

- fired CWAF efficiency distribution

0 20 40 60 80 100 120 140 160 180

80 81 82 83 84 85 86 87 88 89 90 91 92Number of Models

Thermal Efficiency (%) Source: AHRI Directory of Certified Product Performance (August, 2013), and manufacturer product literature23 

# Market Assessment

– Range from 81% to 92% thermal efficiency

– Most models at 82% thermal efficiency

– No models above 82% and below 92% ( i.e. , in the “near

condensing” range) 

## • Oil

- fired CWAF efficiency distribution

0 2 4 6 8 10 12

81 82 83 84 85 86 87 88 89 90 91 92Number of Models

Thermal Efficiency (%) Source: AHRI Directory of Certified Product Performance (August, 2013), and manufacturer product literature24 

# Technology Assessment

Purpose

• To develop a preliminary list of technologies that could improve the efficiency of CWAF.

Method

• DOE identified technologies from various sources including:

– Literature review;

– Manufacturer brochures and specification sheets for commercially

available equipment; and

– Comments and input from stakeholders.



## • All technologies are described in detail in Chapter 3 of the NOPR TSD.25 

# Technology Assessment

Potential Technologies for Improving CWAF Energy Efficiency Condensing secondary heat exchanger Insulation improvements Increased heat exchanger surface area Delayed

- action oil pump solenoid valve (oil

- fired CWAF only) Heat exchanger improvement features Low pressure, air

- atomized burner (oil

fired CWAF only)
Two

- stage and modulating combustion Off

- cycle dampers
Low NOx premix burners Electronic ignition Concentric venting Pulse combustion Burner de

- rating26 

# Market and Technology Assessment

Request for Comment

Item 2

- 1: DOE seeks comment on the proposed equipment classes for this rulemaking, and in particular whether there is a need for separate equipment classes for non
- weatherized and weatherized CWAF.

DOE invites comment and recommendations from interested parties on any aspect relating to the market and technology assessment. Item 2

- 2: DOE seeks comment on the technologies identified in this rulemaking.27 

# Screening Analysis
Purpose

• To determine which design options will pass screening criteria to be considered in downstream analyses.


## Method

• Design options are evaluated and “screened out” if they:

– Are not technologically feasible;

– Are not practicable to manufacture, install, and service;

– Have adverse impacts on equipment utility or availability to customers; and

– Have adverse impacts on health or safety.



### • DOE only considers efficiency levels achieved using proprietary designs in the engineering analysis if there are other non

- proprietary technologies capable of achieving the same efficiency.

• DOE also removed from consideration technologies that do not affect calculated energy consumption as measured by the test procedure.28 

# Screening Analysis

• Screened

- Out Technologies:

– Pulse combustion

– Low NOx premix burners

– Burner de

- rating

– Low pressure, air

- atomized burner (oil

- fired CWAF only)



## • Technologies that passed screening but not considered because they have no or de minimis affect on calculated efficiency per the DOE test method:

– Two

- stage and modulating combustion

– Insulation improvements

– Off

- cycle dampers

– Delayed

- action oil pump solenoid valve (oil

- fired CWAF only)

– Electronic Ignition29 

# Screening Analysis

• Technologies that passed screening but not considered due to insufficient information about efficiency benefits:

– Concentric venting (Only applicable in non

- weatherized installations)



# • Technologies that passed all screening criteria and were examined in the engineering a nalysis:

– Addition of condensing, secondary heat exchanger

– Increased heat exchanger surface area

– Incorporation of heat exchanger surface features such as dimples, and internal features such as baffles and turbulators

.30 

# Screening Analysis

Request for Comment

Item 2

- 3: DOE seeks comment on the potential for lessening of product utility for CWAF meeting the proposed standards and whether the proposed standards would likely result in the unavailability in the United States of any covered product type (or class) of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available currently.

DOE invites comment and recommendations from interested parties on any aspect relating to the screening analysis.31 

# Public Meeting Agenda

1 Overview

2 Market and Technology Assessment; Screening Analysis

3 Engineering Analysis

4 Energy Use; Markups Analysis

5 Life

- Cycle Cost and Payback Period Analysis

6 Shipments; NIA; RIA; MIA

7 Environmental Impacts; Indirect Employment

8 Closing Remarks and How to Submit Comments32 

# Engineering Analysis

Purpose

• Determine the relationship between equipment cost and increased efficiency.
Method

• Efficiency level approach and reverse engineering teardowns/cost modeling

• DOE incorporated information from the following sources in developing the e ngineering analysis:

– Equipment teardowns & manufacturing cost modeling

– Manufacturer interviews

– Equipment testing

– Manufacturer product literature

– C ertification data33 

# • DOE selected efficiency levels for each equipment class, which included:

- The baseline efficiency level;

- Intermediate efficiency levels based on model distribution or significant technologies; and

- The max

- tech efficiency level.



# • The efficiency levels selected for analysis are:

Equipment Class Efficiency Levels (Thermal Efficiency ) Baseline (%) EL1 (%) EL2 (%) Max

- tech (%)
Gas

- fired CWAF 80 81 

### 82 92 Oil

- fired CWAF 81 82



### - 92 

# Engineering Analysis34 

# Engineering Analysis

• DOE used an efficiency level approach with reverse engineering to develop manufacturing p roduction c osts (MPCs) at each level.

Raw Materials

Finished Materials Purchased Parts Physical Teardown Selection of Units

Fabrication Processes Bill of Materials

Assembly Processes
Manufacturing Cost 

## • Models were first selected for teardown.

• Physical teardowns were conducted.

• Bills of material (BOMs) are generated during each teardown analysis and entered into the manufacturing cost model.

• The cost model generates an MPC for each unit torn down.

• Manufacturer interviews were conducted to further refine the analytical inputs and assumptions in the cost model.35 

# Engineering Analysis Structure/Classification of Manufacturing Costs

Full Manufacturer Selling Price (MSP)

Non

- Production Cost **

Selling General & Admin. R & D Interest Full Manufacturing Production Cost (MPC)*

Direct Labor Direct Material Overhead

Indirect labor

Indirect material

Maintenance
Depreciation

Taxes

Insurance related to assets Market research
Advertising
POS promotion
Sales person compensation & travel
Logistics

- Warehousing

- Delivery

- Record keeping Costs of service & staff units

General corporate costs

– comp., etc. Costs associated with efforts to find
new or improved products or production processes Costs of borrowing funds

* Tax Reform Act of 1986 essentially requires companies to measure cost of goods sold as the full production cost of the goods sold. ** In a company’s income statement, many of these costs are reported as a lump sum, under selling, general, and administrativ e ( SG&A).36 

# Engineering Analysis

• MPCs from teardowns are used to develop the cost

- efficiency relationship. The cost

- efficiency relationship is developed in 4 steps:

• Develop an MPC representative of a standard baseline unit.

• Identify the design options used to achieve each efficiency level based on observations during teardowns and in product literature, and discussions with manufacturers.

• Use cost modeling and teardown results to calculate the MPC for each efficiency level above baseline.

• Generate cost

- efficiency curve, which depicts the MPC at each efficiency level. Establish Baseline

Calculate Costs Develop Efficiency Pathway

Generate Cost

Efficiency Curves37 

# Engineering Analysis

Gas

- fired CWAF Efficiency Levels Design Options Increased Primary Heat Exchanger Surface area Addition of Condensing Secondary Heat Exchanger Baseline: 80% TE

- - EL1: 81% TE X

- EL2: 82% TE X

- Max

- tech: 92% TE X

Oil

- fired CWAF Efficiency Levels Design Options Increased Primary Heat Exchanger Surface area Addition of Condensing Secondary Heat Exchanger Baseline: 81% TE

- - EL1: 82% TE X

- Max

- tech: 92% TE X 

## • Design options assumed to be implemented at each efficiency level are:38 

## • G as
- fired CWAF are typically packaged in a single cabinet with a CUAC (referred to as rooftop units (RTUs)).

• Gas

- fired CWAF cost estimates reflect only the cost of the furnace

related components of an RTU.

– C ost does not include the costs of the CUAC components, indoor blower motor/fan, cabinet, or any structural components of the RTU.

– Costs at higher efficiency levels only reflect changes in the furnace

related components and any other changes that are a direct result ( e.g. , cabinet size increases).



## • Oil

- fired CWAF are not packaged with a CUAC, and are manufactured as stand

- alone units.

– MPCs for oil

- fired CWAF reflect the entire cost of the unit, including the indoor blower motor/fan, cabinet, and all structural components. 

# Engineering Analysis39 

## • DOE tested and tore down two gas

- fired units.

– One unit was rated at 80% TE and tested at 82.2% TE.

– One unit was rated at 82% TE and tested at 81.7% TE.



## • DOE assumed a smaller HX is used to achieve 80% and 81% TE.

– This assumption is based on product literature and manufacturer feedback.

– DOE estimated 10% increase in HX surface area results in 1% increase in TE.

– DOE modeled the size difference of the HX based on these assumptions to determine MPCs. 

# Engineering Analysis40 

# Engineering Analysis

266.25

270.84 275.89 879.11

0 100 200 300 400 500 600 700 800 900 1000

78 80 82 84 86 88 90 92 94MPC (2013$)

Thermal Efficiency (%) 

# • Gas

- fired CWAF MPCs41 

# Engineering Analysis

1679.63

1703.88 2339.42

1000 1200 1400 1600 1800 2000 2200 2400 2600

80 82 84 86 88 90 92 94MPC (2013$)

Thermal Efficiency (%) 

# • Oil

- fired CWAF MPCs42 

# Engineering Analysis

• Manufacturer markups

– Initial estimate based on Securities and Exchange Commission (SEC) 10

- K reports from publicly

- traded manufacturers (examining net sales, costs of sales, and gross profit).

– Industry average markup c alculated based on market

- share weighting.

– Industry average markup calibrated based on feedback received during manufacturer interviews.



## • DOE estimated the average manufacturer markups for the CWAF industry to be:

– 1.31 for gas

- fired CWAF equipment

– 1.28 for oil

- fired CWAF equipment.43 

# Engineering Analysis

• Manufacturer selling price (MSP)

– The MSP is the price at which the manufacturer can recover all production and nonproduction costs and earn a profit

.

– MSP = MPC x manufacturer markup + shipping cost



## • Shipping costs considered a non

- production cost and are available in Chapter 5 of the NOPR TSD.

• MSPs were as follows:

Gas

- fired CWAF TE (%) MPC ($) MSP ($)
80 266.25 348.79
81 270.84 354.80
82 275.89 361.42
92 879.11 1191.27 Oil

- fired CWAF TE (%) MPC ($) MSP ($)
81 1679.63 2213.71
82 1703.88 2250.57
92 2339.42 3070.9944 

# Engineering Analysis

Request for Comment

Item 3

- 1: DOE seeks comment on the efficiency levels analyzed for gas

- fired and oil

- fired commercial warm air furnaces, including the max

- tech efficiency levels and the 82 percent thermal efficiency level for gas

- fired commercial furnaces.

DOE invites comment and recommendations from interested parties on any aspect relating to the engineering analysis. Item 3

- 2: DOE seeks comment on the incremental manufacturing costs above the baseline cost at the efficiency levels considered in the engineering analysis.45 

# Public Meeting Agenda

1 Overview

2 Market and Technology Assessment; Screening Analysis

3 Engineering Analysis

4 Energy Use; Markups Analysis

5 Life

- Cycle Cost and Payback Period Analysis

6 Shipments; NIA; RIA; MIA

7 Environmental Impacts; Indirect Employment

8 Closing Remarks and How to Submit Comments46 

# Markups Analysis

Purpose

• Determine commercial customer prices based on manufacturer’s selling price for baseline and higher efficiency equipment.

• Characterize CWAF distribution channels.



## Method

• Analyze company direct costs, expenses, and profits Wholesaler Small Mechanical Contractor Commercial Consumer

(40%) Manufacturer
Large Mechanical Contractor Commercial Consumer

(26%)

Replacements Manufacturer Commercial Consumer

(14%) Wholesaler

National Account Wholesaler Small Mechanical Contractor General Contractor Commercial Consumer

(10%) Manufacturer Large Mechanical Contractor General Contractor Commercial Consumer

( 6 .5%)

Manufacturer Commercial Consumer

(3.5%) Wholesaler

National Account New Construction

Input Data Source Manufacturer Markup U.S. Security and Exchange Commission (SEC) 10

- K reports (see engineering analysis) Wholesaler Markup Firm income statements from the HARDI 2012 Profit Report
Mechanical Contractor Markup ACCA 2005 Financial Analysis report; US Census Bureau, 2007 Economic Census: Plumbing and HVAC Contractors sector General Contractor Markup US Census Bureau, 2007 Economic Census: Commercial Building Construction sector Sales Tax 2013 Sales Tax Clearinghouse data47 

# Markups Analysis

Baseline Markups

• R elate the MSP of baseline equipment to the commercial customer purchase price. 

## Incremental Markups

• Relate the increase in MSP of more

- efficient equipment to the increase in commercial customer purchase price

• Cover only expenses that vary with MSP ( e.g

. , operating expenses and profit )

− F ixed costs such as overhead and labor do not scale with increased efficiency



## • DOE applied baseline markups to the MSP of the baseline level, and the incremental markups to the incremental difference in MSP at each level above the baseline.48 

## Average Markups for Market Participants 

# Markups Analysis

Market Participant Replacement New Construction Baseline Markup Incremental Markup Baseline Markup Incremental Markup Manufacturer (gas

- fired/oil

- fired CWAF) 1.31/1.28 1.31/1.28
Wholesaler 1.36 1.10 1.36 1.10 Mechanical Contractor (large/small) 1.69/1.48 1.36/1.19 1.61/1.39 1.29/1.12
General Contractor

-- -- 1.31 1.19
Sales Tax 1.07 1.07

-- -- Overall Markup 3.22/2.82 2.10/1.83 3.76/3.24 2.21/1.92
National Account* 1.91 1.54 1.78 1.44

* Includes manufacturer, wholesaler, and sales tax (for replacements) 

## Average Markups by Product Class Equipment Class Baseline Markup Incremental Markup
Gas

- fired CWAFs 2.98 1.95
Oil

- fired CWAFs 2.85 1.8749 

# Markups Analysis

Request for Comment

DOE invites comments and recommendations from interested parties on any aspect relating to the Markups Analysis.50 

# Energy Use Characterization

Purpose

• Determine annual energy consumption of CWAFs at the considered efficiency levels to find annual energy costs and savings.

• Annual energy costs are inputs to Life

- Cycle Cost and Payback Period Analysis

. 

## Method TTTTTTTTTT EEEEEEEEEEEE UUUU = SSSS SS HH HH FFFF UUUU + EE EE EE EE UUUU

• Space Heating Fuel Use : Burner operating hours (BOH) multiplied by input capacity of newly installed furnace.

– Burner operating hours determined using thermal efficiency (TE) value at each efficiency level and heating load based on CBECS 2003/RECS 2009 heating energy use data, existing CWAF TE, and adjustment factors.

– Input capacity assumed to be 250 kBtu / hr (representative inputs capacity from engineering analysis).

• Electricity Use : Determined using operating hours and power ratings of the electrical components. Includes the impact on non

- heating season energy use of condensing CWAF if the circulating fan is used for air conditioning.51 

# Energy Use Characterization Building Sample

* Building has packaged heating units or furnaces that heat air directly. The furnace heats at least a portion of the building. ** 11,250 sq ft for RECS 2009 sample. Product Class Count # of Bldgs , million CBECS 2003 Gas

- fired CWAF 1447 1.02 Oil

- fired CWAF 111 0.09 RECS 2009 Gas

- fired CWAF 45 0.52 Oil

- fired CWAF 11 0.08 CBECS 2003 Sample

Gas

- fired CWAF

Oil

- fired

CWAF Out of SampleGas YesOil Heated square footage ≥

3,750**

Other No

Out of Sample RECS 2009

Sample

Out of Sample No

Fuel Type Uses a Furnace for Space Heating?*52 

# Energy Use Characterization Space Heating Fuel Use

Burner Operating Hours

• Useful Output includes useful heat from electrical components losses and the output capacity of the furnace (input capacity multiplied by the thermal efficiency) 

### Building Heating Load in 2018

• Q YR : annual fuel consumption for heating based on CBECS 2003 and RECS 2009.

• TE ex : thermal efficiency of the existing CWAF (dependent on age of CWAF).

• Adj Factor :

• Adjusted CBECS 2003/RECS 2009 energy use data for a verage climate conditions using most recent 10

- year NOAA climate data.

• Adjusted for changes in building shell efficiency and climate change in 2018.

• CWAF_Count : number of CWAFs used to meet the building heating load

. 

### FFFF UUUU = BB OO HH × CCCCCC II CC

BB OO HH = BB BB HH LL UUUU UU OO

BB FFFFFFFFFFFFFF 

### = QQ YYYY 

### × TT EE ee 

### × jj FFFFFFFFFFFF 

### CCCCCC

_ CC53 

# Energy Use Characterization Distribution of Fuel Use in Building Sample

Equipment Class Average Heating Energy Use from CBECS 2003/RECS 2009 ( MMBtu / yr ) Estimated Average Heating Energy Use in 2018 at Baseline (EL 0) ( MMBtu / yr ) Gas

- fired CWAFs 210.4 163.4
Oil

- fired CWAFs 161.3 117.754 

# Energy Use Characterization
Electricity Use

• ElecPower ElecComp = power of multiple electrical components required during CWAF operation, kW,

• y ElecComp = ratio of electrical components on

- time to burner on

- time,

• BOH SH = burner operating hours during space heating, hours,

• ElecUse Aux = electricity use of the auxiliary equipment, such as condensate pumps and heat tape, kWh,

• DiffElecUse Fan = differential of electricity use of the furnace fan during cooling, kWh,

• 8760 = hours in one year, and

• StbyE = power consumption during standby, kW. 

### EE EE EE TTTTTTTTTT



### = EE EE EE EEEEEE EEEE EE EEEE 

### × EE EE EE 

### × BB SS HH 

### + EE EE EE + DD ff 

### + ( 8760

− BB SS HH 

### ) × SS SS

Component Power (watts) Circulating Fan 1492*
Inducer Fan 100 Ignition Device 25 Standby 10

* Based on 2 horsepower circulating fan motor from engineering analysis.55 

# Energy Use Characterization
Summary of Results

EL Design Option Annual Fuel Use Annual Electricity Consumption of Auxiliary Components Total Savings Total Savings MMBtu/yr MMBtu / yr kWh/ yr kWh/ yr Gas

- fired Commercial Warm Air Furnace 0 80% TE

- Baseline 163.4

- 1070

- 1 81% TE

– Increased HX Area 161.5 1.9 1058 12 2 82% TE

– Increased HX Area 159.6 3.8 1047 23 3 92% TE

– Condensing ( Max

- Tech ) 142.7 20.7 1030 40 Oil

- fired Commercial Warm Air Furnace 0 81% TE

– Baseline 117.7

- 851.8

- 1 82% TE

– Increased HX Area 116.6 1.1 844.6 7 2 92% TE

– Condensing ( Max

- Tech ) 106.5 11.2 849.4 256 

# Energy Use Characterization

Request for Comment

Item 4

- 1: DOE seeks comment on the approach of using CBECS and RECS data for determining the energy consumption of CWAF in residential and commercial buildings.

DOE invites comment and recommendations from interested parties on any aspect relating to the Energy Use Characterization. Item 4

- 2: DOE seeks comment on the analytical methodology to estimate the annual energy use for CWAF.57 

# Public Meeting Agenda

1 Overview

2 Market and Technology Assessment; Screening Analysis

3 Engineering Analysis

4 Energy Use; Markups Analysis

5 Life

- Cycle Cost and Payback Period Analysis

6 Shipments; NIA; RIA; MIA

7 Environmental Impacts; Indirect Employment

8 Closing Remarks and How to Submit Comments58 

# Life

- Cycle Cost and Payback Period Analysis LCC & Payback Period Analyses Flowchart

Engineering Analysis

Markups to Determine Product Price

Energy Use Characterization Baseline Manufacturer Cost

Std

- Level Manufacturer Cost

Manufacturer Markup

Distributer & Contractor

Markups

Sales Tax

Energy Consumption

Marginal Energy Prices Equipment Price

Installation Cost Total Installed Cost

Annual Energy Cost

Repair Cost

Maintenance Cost Annual Operating Expense

Lifetime

Discount

Rate

Energy Price Trend Lifetime Operating Expense Payback Period Life

- Cycle Cost59 

# Life

- Cycle Cost and Payback Period Analysis

Purpose

• Provide an economic evaluation from the commercial consumer’s perspective.

• Life

- Cycle Cost (LCC) is the total consumer cost over the life of the equipment.

• Payback Period (PBP) is the time required to recover the increased purchase price of more energy

- efficient equipment through reduced operating costs. 

## Method

• Use consumer samples developed in the energy use analysis

.

• Analysis models the uncertainty and variability of inputs using Monte Carlo approach and probability distributions using Excel ® with Crystal Ball

. ® = ∆ TTTTTTTTTT II CC ∆ FF YY OO CC 

### LL = TTTTTTTTTT II CC + LL OO CC

LL SS SS = LL SS SS 

### − LL BB BB60 Input Purpose/Definition Methodology

Equipment Price and Trends Manufacturing cost multiplied by markups and sales tax. Manufacturing cost: from Engineering Analysis. Markups and sales taxes: from Markups Analysis. Future price trend: historical PPI and shipment data. Installation Costs Labor and materials necessary to install appliance. Higher costs for condensing furnace installations, which have additional condensate withdrawal and venting requirements.

Maintenance Routine cost to the consumer for furnace maintenance. Based on maintenance frequency and labor hours and cost.

Repair Cost of replacing or repairing failed components in the furnace. Repair cost is based on failure year, warranty period, labor hours and cost, and material cost. Marginal Energy Prices D evelop average marginal monthly prices. Multiplied most current average annual energy prices by monthly price factors and marginal price factors by geographical area

. Energy Price Trends Project future energy prices. Multiply marginal energy prices by the projected annual energy price trends for the corresponding Census Division.

Discount Rates Determine the present value of lifetime operating expenses. Calculated as the weighted average cost of capital (WACC), using the Capital Asset Pricing Model (CAPM) for different economic sectors.

Lifetime Age when the product is retired from service. Based on survey data for gas

- fired CWAF; oil

- fired CWAF based on survey and shipments data for residential oil

- fired furnace.

Base

- Case Efficiencies Project market share of products at each efficiency level in the absence of standards. Projected efficiency market share for each product class based on historical market share data and models information. 

# Life

- Cycle Cost and Payback Period Analysis LCC Methodology Summary61 

# Life

- Cycle Cost and Payback Period Analysis
Commercial Consumer Equipment Price

CC CC EEEE EEEEEE = MM CC × MM MM

• Manufacturing production costs derived from engineering analysis.

• Markups and sales taxes determined from the markups analysis.

• Commercial consumer equipment prices determined for each efficiency level.

• Price trend based historical PPI data.

• Default price trend: decreasing

• Sensitivity analysis considered alternative price trends (high decreasing and low decreasing).62 

### Purpose: represent the labor and material costs necessary to install the equipment.

Installation Location: Gas

- fired : 95% outdoors, 5% indoors; Oil

- fired : 100% indoors

Sources: 2013 RS Means (Mechanical Cost Data) , manufacturer literature, and information from experts. 

# Life

- Cycle Cost and Payback Period Analysis

Installation Costs

Basic Installation Costs

Condensate Withdrawal Installation Costs

Venting Installation Costs (Indoor ) 

## Individual Building Installation Cost - Pipe

- Pump

- Condensate Neutralizer

- Heat Tape

- Electric Outlet - Putting in Place & Setting

Up Furnace

- Gas or Oil Piping

- Ductwork Hookup

- Electrical Hookup

(Thermostat)

- Permit & Removal/Disposal

Fees63 

### Installation Fractions and Average Costs for Condensate Removal 

# Life

- Cycle Cost and Payback Period Analysis

Condensing CWAF: Condensate Removal

Installation Cost Description Criteria Frequency of applying

criteria Condensate Pipe Drain excess condensate All installations 100% Condensate Pump* Pump condensate to a remote drain Replacement installations without CUAC 50%

Freeze Protection * Protect condensate from freezing temperatures Outdoor installations 100%

Electrical Outlet ( additional) Some installations requiring pump or freeze protection need additional outlet Installations requiring a pump or heat tape 50%

Condensate Neutralizer Neutralizes acidic condensate before draining Fraction of all installations 12.5%

* Accounted for additional energy use64 

# Energy Prices

• Purpose : Develop average marginal monthly prices by geographical area.

• Method : Multiply most current average annual energy prices by monthly price factors and marginal price factors.

• 2012 average annual energy prices by geographical area based on:

‒ Electricity Prices : EIA’s 2012 Form 826 data

‒ Natural Gas : EIA’s 2012 Natural Gas Navigator monthly

‒ LPG : EIA’s 2012 State Energy Consumption, Price, and Expenditures Estimates (SEDS)

• Monthly energy price factors by geographical area based on:

‒ Electricity Prices : EIA’s 1993

- 2012 Form 826 monthly data

‒ Natural Gas : EIA’s 1993

- 2012 Natural Gas Navigator monthly data

‒ LPG : EIA’s 2009 Short Term Energy Outlook 1995

- 2009 historical data

• Marginal energy price factors for electricity and natural gas by 30 geographical areas based on EIA monthly data from 2003

- 2012. 

# Life

- Cycle Cost and Payback Period Analysis65 

# Energy Price Trends

National Commercial Price Factors 

### • Method : 2012 average monthly marginal energy prices by geographical area multiplied to projected annual energy price trends for the corresponding Census Division.

– 20 18

- 2040 trends based on EIA’s AEO 2013 by Census Division.

– After 2040 trends based on Federal Energy Management Program (FEMP) guidelines. 

# Life

- Cycle Cost and Payback Period Analysis

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00

2010 2015 2020 2025 2030 2035 20402011$/MMBtu

Year Commercial Electricity Price

Commercial Natural Gas Price

Commercial LPG Price

Commercial Fuel Oil Price66 

# Repair and Maintenance

• Repair Cost: Cost of replacing or repairing components in the CWAF that have failed.

• Sources : 2013 RS Means Facilities Repair and Maintenance Data , manufacturer literature, equipment costs from engineering analysis, and Consumer Reports data.



### • Maintenance Cost: labor and materials required to maintain equipment.

• Sources : 2013 RS Means Facilities Repair and Maintenance Data , CBECS 2003 and RECS 2009 data about CWAF maintenance, EIA data about low

- sulfur fuel oil regulations.

• Accounted for additional maintenance costs associated with condensate withdrawal system and condensate neutralizer for condensing designs and for the impacts of low

- sulfur fuel oil. 

# Life

- Cycle Cost and Payback Period Analysis

Equipment Class Efficiency Level Repair Cost (2013$) Maintenance Cost (2013$)
Annualized Incremental Annualized Incremental

Gas

- Fired Commercial

Warm Air

Furnace 80% TE

- Baseline $0.56 $0.00 $157.20 $0.00
81% TE

- Increased HX Area $0.57 $0.01 $157.20 $0.00
82% TE

- Increased HX Area $0.57 $0.01 $157.20 $0.00
92% TE

- Condensing (Max Tech) $1.31 $0.75 $169.33 $12.13

Oil

- Fired Warm Air Furnace 81% TE

- Baseline $1.92 $0.00 $288.97 $0.00
82% TE

- Increased HX Area $1.94 $0.02 $288.97 $0.00
92% TE

- Condensing (Max Tech) $2.58 $0.67 $316.68 $27.7167 

# Lifetime

• Definition : Age when the furnace is retired from service.

• Method : Used national survey data and manufacturer shipment data to determine the distribution of lifetimes.

• Sources : 2014 CUAC NOPR (gas

- fired CWAFs); 2011 Residential O il

- fired F urnaces DFR (oil

- fired CWAFs)

. *

Equipment Class Mean Lifetime Median Lifetime Gas

- fired CWAF 18.4 18.7 Oil

- fired CWAF 26.5 26.3 

# Life

- Cycle Cost and Payback Period Analysis

CGWAF COWAF

*Note: Gas

- fired CWAFs are packaged with CUAC as a single unit. The CUAC is the primary component of these units and if it fails the entire roof top unit is replaced, including the CWAF component. Oil

- fired CWAFs are typically stand

- alone units and operate simi larly to residential oil

- fired furnaces.68 

# Discount Rates

• Purpose : Used to determine the present value of lifetime operating expenses.

• Methodology : Calculated as the weighted average cost of capital (WACC), using the Capital Asset Pricing Model (CAPM) for different economic sectors.

• Primary data sources : Damodaran Online database of company debt and equity financing

Sector Mean Discount Rate (%) Standard Deviation (%) Retail 4.30 2.09 Property owners 5.16 1.30 Medical services 4.19 1.86 Industrial 4.95 1.18 Lodging 5.88 2.28 Food Service 4.84 2.60 Offices 5.40 1.85 State / Local Government / Education 2.46 2.15 Federal Government 3.30 1.36 Other 4.35 1.64 

# Life

- Cycle Cost and Payback Period Analysis69 

## Base

- Case Efficiency Distribution Purpose: R eflects the projected market share of equipment at different efficiency levels in the base case (in the absence of standards).

• Not all commercial consumers purchase equipment at current minimum standard.

• Commercial consumers already purchasing equipment at efficiencies greater than or equal to a prospective standard level are not impacted by the standard. 

### Method : Projected CWAF efficiency market share in 2018 for each equipment class based on the share of models in each product class from the latest AHRI certification directory. 

# Life

- Cycle Cost and Payback Period Analysis

EL Design Option Base Case Market Share in 2018 (%) Gas

- fired Commercial Warm Air Furnace Outdoor Indoor 0 80% TE

– Baseline 70 4 1 81% TE

– Increased HX Area 20 93 2 82% TE

– Increased HX Area 9 4 3 92% TE

– Condensing (Max Tech) 1 0 Oil

- fired Commercial Warm Air Furnace 0 81% TE

– Baseline 31 1 82% TE

– Increased HX Area 69 2 92% TE

– Condensing (Max Tech) 0
Note: Components may not sum to 100% due to rounding.70 

# Life

- Cycle Cost and Payback Period Analysis

Item 5

- 1: DOE seeks comment on the approach and data sources used for assessing changes in installation costs for more

- efficient CWAF. 

## Request for Comment

Item 5

- 2: DOE seeks comment on the methodology and data sources used for assessing changes in maintenance and repair costs for more

efficient CWAF.

Item 5

- 3: DOE seeks comment on the approach used to determine the lifetimes for CWAF.

Item 5

- 4: DOE seeks comment on the appropriate base

- case distribution of energy efficiencies for CWAF in 2018 (anticipated compliance year of the standard) in the absence of amended energy conservation standards.71 

# Life

- Cycle Cost and Payback Period Analysis LCC and PBP Analysis Results
Gas

- fired Commercial Warm Air Furnace

EL TE Life

- Cycle Cost (2013$) Life

- Cycle Cost Savings Median Payback

Period (years) Average Installed Cost Average Lifetime Operating Cost Average LCC Average Savings (2013$) % Buildings with

Net Cost No Impact Net Benefit

0 80% $2,262 $26,623 $28,885 N/A 0% 100% 0% N/A
1 81% $2,271 $26,343 $28,613 $186 1.4% 33.1% 65.6% 0.6 2 82% $2,280 $26,069 $28,349 $426 1.9% 9.7% 88.4% 0.7 3 92% $3,848 $23,898 $27,746 $1,025 48.4% 1.1% 50.6% 12.2

EL TE Life

- Cycle Cost (2013$) Life

- Cycle Cost Savings Median Payback

Period (years) Average Installed Cost Average Lifetime Operating Cost Average LCC Average Savings (2013$) % Buildings with

Net Cost No Impact Net Benefit

0 81% $6,504 $67,313 $73,817 N/A 0% 100% 0% N/A
1 82% $6,556 $66,754 $73,310 $164 7.6% 68.9% 23.4% 2.8 2 92% $8,008 $62,187 $70,195 $3,278 46.7% 0.0% 53.3% 7.5 Oil

- fired Commercial Warm Air Furnace72 

# Life

- Cycle Cost and Payback Period Analysis
LCC Consumer Subgroup Analysis Purpose: Evaluate impacts on groups or customers who may be disproportionately affected by a proposed energy conservation standard.

– Subgroup: small businesses. Comparison

Product

Class Efficiency Level Average LCC Savings Median Payback Period 2013$ Years Small Businesses All Small Businesses All

Gas

- fired CWAF 1 $158 $186 0.6 0.6
2 $365 $426 0.7 0.7
3 $708 $1,025 12.6 12.2
Oil

- fired

CWAF 1 $132 $164 2.3 2.8
2 $2,454 $3,278 8.8 7.573 

# Life

- Cycle Cost and Payback Period Analysis

Request for Comment

Item 5

- 6: DOE seeks comment on consumer subgroups that should be considered in this rulemaking.

DOE invites comments and recommendations from interested parties on any aspect relating to Life

- Cycle Cost and Payback Period Analysis.74 

# Public Meeting Agenda

1 Overview

2 Market and Technology Assessment; Screening Analysis

3 Engineering Analysis

4 Energy Use; Markups Analysis

5 Life

- Cycle Cost and Payback Period Analysis

6 Shipments; NIA; RIA; MIA

7 Environmental Impacts; Indirect Employment

8 Closing Remarks and How to Submit Comments75 

## Purpose: Forecast the CWAFs that would be expected to be shipped between 2018 and 2047 with and without energy conservation standards. 

## Methodology

• Shipment Projections : Estimate the number of CWAF shipped annually in the absence of new standards (base case) and standards cases between 2018 and 2047 by market segment.

− New construction: Determined by using the projected commercial floor space and projected CWAF market shares in new construction market.

− Replacements: Determined by using historical shipments and survival function. A ccounts for the units demolished.

• Efficiency Projections : Project the percent of shipments in each equipment class at each efficiency level in the base case and for the standard cases.

• Accounted for impact of standards on shipments using price elasticities

.

− Commercial consumer purchase decisions influenced by purchase price and operating cost.

− Some consumers may choose to repair rather than replace CWAF. 

# Shipments Analysis76 New Construction

Shipments CWAF Saturations Projected New Construction Commercial Floor Space

Replacement Shipments Historical Annual Shipments

Retirement Function Total Shipments

Demolitions* * Based on year

- to

- year changes to commercial floor space.

Input Sources Projected New Construction Commercial Floor Space EIA’s Annual Energy Outlook (AEO) 2013

CWAF Saturations CBECS 2003 and RECS 2009 Historical Annual Shipments • AHRI gas

- fired CWAF historical shipments in 1994

• CUAC historical shipments based on AHRI data from 1980

- 2001 and Census data from 1980

- 2012

• Ratio of total CUAC shipments to CWAF shipments

• Ratio of oil

- fired to gas

- fired CWAF (based on AHRI residential furnace shipments)
Retirement Function Based on lifetime distribution (see TSD Chapter 8) 

# Shipments Analysis77 

# Shipments Analysis
Historical and Projected Base Case Shipments for CWAF

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40Shipments (million) Oil-fired Commercial Warm Air Furnace Gas-fired Commercial Warm Air Furnace 

### Historical Projected78 

# Shipments Analysis

Item 6

- 1: DOE seeks comment on the methodology and data sources used for projecting the future shipments of CWAF in the absence of amended energy conservation standards. Specifically, DOE is interested in the historical data from the past 10 years for CWAF. 

## Request for Comment

Item 6

- 2: DOE seeks comment on the potential impacts of amended standards on product shipments, including impacts related to equipment switching.79 

# National Impact Analysis

Purpose: Estimate national impacts of energy conservation standards over the lifetime of CWAFs shipped between 2018 and 2047.

• National Energy Savings (NES): Difference in annual energy use between the base case and each standards case, summed over the lifetime of CWAFs shipped from 2018

- 2047.

• Net Present Value (NPV) : Difference between the present value of installed cost and the present value of operating costs over the analysis period (2018

- 2047).

• Account for time

- value of money through defined discount rates

. 

## Method

• For each equipment class in each standards case : 1. Calculate per

- unit costs and per

- unit energy use for each year.
2. Calculate number of units (stock) in use each year from 2018 to 2047.
3. Combine the above to determine NES and NPV.80 

# National Impact Analysis

* Over lifetime of equipment shipped from 2018

- 2047. 

## National Energy Savings

Standards

- Case Cumulative Energy Use* Base

- Case Annual Energy Consumption Shipments Analysis

Base

- Case Cumulative Energy Use*

National Energy Savings Site to Source Energy Conversion Standards

- Case Annual Energy Consumption Standards

- Case Projection Base

- Case Projection81 

# National Impact Analysis

* Over lifetime of equipment shipped from 2018

- 2047. 

## Net Present Value

Standards

- Case Projection Base

- Case Projection

Cumulative Total Consumer Cost Increase* Energy Cost

Net Present Value Discount Rate Cumulative Operating Cost Savings* Shipments Analysis

Maintenance and Repair Cost Total Installed Cost Energy Cost Maintenance and Repair Cost Total Installed Cost82 Input Description Annual Unit Energy Consumption Function of equipment efficiency for each equipment class from LCC analysis results.

Shipments Projected shipments for each equipment class under the base case and all standards cases. Equipment Stock Determined yearly stock using annual shipments and lifetimes for each equipment class.
Rebound Effect Not applied.

Base

- Case Efficiencies Developed a distribution of efficiencies in the base case for 2018 (see TSD chapter 8). In each standards case, “roll

- up” scenario is used to establish the efficiency distribution. Future trends are based on historical data and stakeholder input.
Site

- to

- Power Plant Conversion Factor Converts site energy into primary (power plant) energy consumption. From AEO 2013

.

Full

- Fuel

- Cycle Account for energy used for resource extraction and distribution losses. From AEO 2013

. Total Installed Cost per Unit Function of equipment efficiency for each equipment class based on LCC analysis. Calculated by vintage.
Total Operating Cost per Unit Includes costs for energy, maintenance , and repair derived as a function of equipment efficiency for each equipment class based on LCC analysis. Calculated by vintage.

Discount Rate Used to determine present value of future monetary values. 7% and 3% real from OMB’s Regulatory Analysis Guideline A

- 4

. 

# National Impact Analysis
National Impact Analysis (NIA) Inputs83 

### • Equipment below standard will “roll

- up” to comply with standards. Equipment at or above the standard will not be affected. 

# Base Case Efficiencies 

# National Impact Analysis

Projection of Base

- Case Efficiency Distribution of New Units for G as - fired CWAF Efficiency Level Market Share (percent) Base Case Efficiency Level (EL) 1 2 3 CGWAF

0 80% Baseline 67 1 81% 24 90 2 82% 9 9 99 3 91% 1 1 1 100 COWAF

0 81% Baseline 31 1 82% 69 100 2 92% 0 0 100 Commercial Applications

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Base Case Efficiency Distribution

EL 3

EL 2

EL 1

EL 0

Note: Components may not sum to 100% due to rounding.84 Equipment Class Trial Standard Levels 1 2 3 4 5 Thermal Efficiency (TE) Gas

- Fired Commercial Warm Air Furnace 81% 81% 82% 82% 92%
Oil

- Fired Commercial Warm Air Furnace 81% 82% 81% 82% 92% 

# National Impact Analysis

TSL Selection Criteria for each product class:

• TSL 5 : Max

- tech efficiency levels

• TSL 2

- 4 : Combinations of intermediary efficiency levels

• TSL 1 : Most common efficiency level above the baseline for gas

- fired CWAF and at the baseline for oil

- fired CWAF. 

# Trial Standard Levels (TSLs)

TSL4 is Proposed TSL85 Equipment Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Primary Energy Savings Gas

- fired CWAF 0.203 0.203 0.471 0.471 3.040
Oil

- fired CWAF 0.000 0.001 0.000 0.001 0.031
Total* 0.203 0.204 0.471 0.472 3.071

Full

- Fuel

- Cycle Energy Savings Gas

- fired CWAF 0.222 0.222 0.516 0.516 3.338
Oil

- fired CWAF 0.000 0.001 0.000 0.001 0.036
Total* 0.222 0.223 0.516 0.517 3.374 

# National Impact Analysis

National Energy Savings ( quads)

TSL4 is Proposed TSL

* Components may not sum to total due to rounding.86 Product Class Discount Rate TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
Gas

- fired CWAF
3% 1.139 1.139 2.643 2.643 10.008
Oil

- fired CWAF 0.000 0.016 0.000 0.016 0.376
Total * 1.139 1.155 2.643 2.659 10.384
Gas

- fired CWAF
7% 0.436 0.436 1.011 1.011 2.780
Oil

- fired CWAF 0.000 0.006 0.000 0.006 0.122
Total * 0.436 0.442 1.011 1.017 2.902 

# National Impact Analysis

Net Present Value of Consumer Benefit (billion 2013$)

TSL4 is Proposed TSL

* Components may not sum to total due to rounding.87 

# National Impact Analysis

Item 6

- 3: DOE seeks comment on the potential for a rebound effect associated with higher

- efficiency CWAFs in commercial and residential installations. 

## Request for Comment

DOE invites comment and recommendations from interested parties on any aspect relating to the National Impact Analysis.88 

## Purpose

• Investigate national impacts of non

- regulatory alternatives to mandatory amended energy conservation standards. 

## Method

• Used modified NIA spreadsheet to evaluate non

- regulatory alternatives to proposed standards:



## Output: NES and NPV for non

- regulatory alternatives. 

## Results: N o alternative was found to be as beneficial as the proposed energy conservation standards. (See chapter 17 of the TSD for methodology and results.)



# Regulatory Impact Analysis

• No New Regulatory Action • Manufacturer Tax Credits

• Consumer Rebates • Voluntary Energy Efficiency Targets

• Consumer Tax Credits • Bulk Government Purchases89 

# Purpose:

• Assess the impacts of amended energy conservation standards on manufacturers.

• Identify and estimate impacts on manufacturer subgroups that may be more severely affected than the industry as a whole.

• Examine the direct employment, manufacturing capacity, and cumulative regulatory impacts on the industry.



# Methodology:

• Analyze industry cash flow and industry net present value (INPV) through use of the Government Regulatory Impact Model (GRIM); and

• Interview manufacturers to refine inputs to the GRIM, develop subgroup analyses, and address qualitative issues 

# Manufacturer Impact Analysis90 

# • Phase 1

– DOE creates an industry profile to characterize the market and identify important issues that require further investigation.



# • Phase 2

– DOE prepares an industry cash

- flow model and an interview questionnaire to guide subsequent discussions with manufacturers.



# • Phase 3

– DOE interviews manufacturers and assesses the impacts of standards both quantitatively (using the GRIM) and qualitatively (impacts on employment, competition, manufacturing capacity, and regulatory burden).

– DOE also evaluates subgroups of manufacturers that may be disproportionately impacted by standards or that may not be accurately represented by the average cost assumptions used to develop the industry cash

- flow analysis. 

# Manufacturer Impact Analysis91 

# Industry Cash

- Flow Model

• Upstream Inputs

– Market and Technology Assessment

– Engineering Analysis

– Shipments Analysis



# • MIA Inputs

– Markup Scenarios

– Conversion Cost Scenarios 

# Manufacturer Impact Analysis92 

# Manufacturer Impact Analysis

Base Case TSL1 TSL 2 TSL 3 TSL 4 TSL 5

INPV ($M) 74.7 64.2 to 67.9 60.1 to 67.5 36.7 to 64.0 31.4 to 63.5

- 23.7 to 89.4

Change in INPV (%) - - 14.0 to

- 9.0

- 19.5 to

- 9.6

- 50.8 to

- 14.3

- 58.0 to

- 14.9

- 131.7 to 19.8

Conversion Costs ( $M) - 11.7 to 15.7 12.4 to 22.2 19.2 to 53.2 19.9 to 59.7 89.4 to 152.5 

# INPV Results

Summary of TSL 4

• Expected INPV change in the range of

- 58% to

- 15%

• Expected conversion costs total $20 to $60 million for the industry93 

# • One small manufacturer producing gas

- fired CWAF;

– Accounts for 17 of the 254 gas

- fired CWAF listings in the AHRI Directory.

– Product mix was not substantially different from some large competitors.



# • One small manufacturer producing oil

- fired CWAF;

– Accounts for 11 of the 16 oil

- fired CWAF listings in the AHRI Directory.

– Produces some of the most efficient products on the market at 82

- percent TE. 

# Small Business Sub

- group94 

# Manufacturer Impact Analysis

Item 6

- 5: DOE seeks comment on the potential impacts of the amended standards on the industry, on the need for conversion investments, on the key drivers of those conversion investments, and on changes in manufacturer pricing and markups due to amended standards.

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD 

## Request for Comment

Item 6

- 4: DOE seeks comment on the number of small manufacturers; on the potential impacts of amended energy conservation standards on those small manufacturers; and on the severity of those impacts.

DOE invites comment and recommendations from interested parties on any aspect relating to the Manufacturer Impact Analysis.95 

# Public Meeting Agenda

1 Overview

2 Market and Technology Assessment; Screening Analysis

3 Engineering Analysis

4 Energy Use; Markups Analysis

5 Life

- Cycle Cost and Payback Period Analysis

6 Shipments; NIA; RIA; MIA

7 Environmental Impacts; Indirect Employment

8 Closing Remarks and How to Submit Comments96 

# Emissions Impact Analysis

Purpose

• Estimate emission reductions resulting from amended standards.

• Includes FFC emissions, including power plant and upstream emissions.

• Includes fugitive methane emissions. 

## Method

• Used output from AEO 2013 reference and standard cases to estimate marginal emission factors. 

## Results Energy savings from the proposed standards would be expected to reduce cumulative emissions by:

• 27.9 million metric tons (Mt) of carbon dioxide (CO 2 

### ),

• 66.8 thousand tons of nitrogen oxides (NO X 

### ),

• 2.2 thousand tons of sulfur dioxide (SO 2 

### ), and

• 0.003 tons of mercury (Hg).

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000201820232028203320382043204820532058206320682073207820832088209320982103kt CO 2 Emissions Reduction

TSL 1 TSL 2 TSL 3 TSL 4 TSL 597 

# Monetization of Emission Reductions

Purpose

• Estimate the potential monetary benefit of reduced power plant emissions resulting from the considered energy conservation standard levels. 

## Method

• DOE used the most current Social Cost of Carbon (SCC) values developed through interagency reviews.

– SCC is intended to be a monetary measure of the incremental damage resulting from greenhouse gas (GHG) emissions, including but not limited to agricultural productivity loss, human health effects, property damage from rising sea level, and changes in the ecosystem.



### • Interagency estimates of the potential global benefits resulting from reduced CO 2 

### emissions in 2015 are $ 12.0, $ 40.5, $ 62.4, and $ 119 per metric ton (2013$).

• For emission reductions that occur in later years, SCC values grow in real terms over time.

• DOE also monetized NOx emissions reductions resulting from amended standards

.

• Estimates of monetary value range from $476 to $4,893 per short ton.

• DOE calculated monetary benefits using a medium value of $2,684 per short ton.98 

# Monetization of Emission Reductions

Results: FFC Emission Reductions Benefits (million 2013$)

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
CO 2 75 to 1119 76 to 1127 175 to 2598 175 to 2606 1160 to 17123
NO X 3 % discount rate 35.2 35.4 81.7 82.0 550.9
NO X 7 % discount rate 14.7 14.8 34.1 34.2 234.3 TSL4 is Proposed TSL99 

# Emissions Impact Analysis

Item 7

- 1: DOE seeks comment on the approach for conducting the emissions analysis for CWAF

. 

## Request for Comment

Item 7

- 2: DOE seeks comment on the approach for estimating monetary benefits associated with emissions reductions, including the SCC values used.100 

# Utility Impact Analysis

Purpose

• Assess impacts on electric installed capacity and generation resulting from the adoption of potential energy conservation standards

. 

## Method

• Modeled energy savings impacts from TSLs using NEMS

- BT to generate forecasts that deviate from the AEO reference case. 

## Output

• Changes in total electricity generation.

• Changes in primary fuel ( e.g. , coal, natural gas) consumption

• Changes to the mix of electricity generation by fuel type.

• Changes to total installed capacity. 

## Results: See chapter 15 of the TSD.101 

# Indirect Employment Impact Analysis

Purpose:

• Assess the overall impact on indirect* national employment from the proposed energy conservation standard that results from shifting consumer expenditures among goods and services and changing product and energy costs

. 

## Methodology:

• Used the Impact of Sector Energy Technologies (ImSET) model to evaluate indirect employment impacts.

• Changes in national equipment and energy expenditures from the NIA are entered as inputs into ImSET

. 

## Results:

• Net labor market impacts will be small over time due to the small magnitude of the short

- term effects . (See chapter 16 of the TSD.)

* Direct national employment impacts are discussed in the Manufacturer Impact Analysis (MIA).102 

# Public Meeting Agenda

1 Overview

2 Market and Technology Assessment; Screening Analysis

3 Engineering Analysis

4 Energy Use; Markups Analysis

5 Life

- Cycle Cost and Payback Period Analysis

6 Shipments; NIA; RIA; MIA

7 Environmental Impacts; Indirect Employment

8 Closing Remarks and How to Submit Comments103 

# Closing Remarks

Meeting participants are invited to provide closing remarks at this time.104 

# How to Submit Comments

• In all correspondence, please refer to the CWAF rulemaking by:

– Energy Conservation Standards for Commercial Warm Air Furnaces

– Docket Number: EERE

– 2013

– BT

– STD

– 0021

– Regulatory Identification Number (RIN ): 1904

- AD11



## • Email: CommWarmAirFurn2013STD0021@ee.doe.gov



# Postal Mail: Ms. Brenda Edwards U.S. Department of Energy Building Technologies Office Mailstop EE

- 5B 1000 Independence Avenue, S.W. Washington, DC 20585

- 0121 

# Courier: Ms. Brenda Edwards U.S. Department of Energy Building Technologies Office L’Enfant Plaza, S.W., Suite 600 Washington, DC 20024 Telephone: (202) 586

- 2945



## • Comment period closes April 6, 2015 at 11:59 PM EDT