Department of Energy

Energy Efficiency & Renewable Energy

CommWarmAirFurn2013STD0021@ee.doe.gov

NOPR Public Meeting on Energy Conservation Standards for 

Commercial Warm Air Furnaces
2

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 Remarks
3

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 Adjourn
5

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 Comments
10

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 furnaces
14

Regulatory History

• Current equipment classes:

– Established by EPACT 1992;

– Divide CWAF into two classes: gas-fired and oil-fired.

• Current 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 gasfired 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 analysis
17

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

Rule
18

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 Comments
19

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

• Product listings available on manufacturers’ websites. 

• DOE proposed to maintain existing equipment classes and analyzed gasfired 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 “nearcondensing” 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 92

Number of Models

Thermal Efficiency (%)

Source: AHRI Directory of Certified Product Performance (August, 

2013), and manufacturer product literature
23

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 “nearcondensing” range)

• Oil-fired CWAF efficiency distribution

0

2

4

6

8

10

12

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

Number of Models

Thermal Efficiency (%)

Source: AHRI Directory of Certified Product Performance (August, 

2013), and manufacturer product literature
24

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 commerciallyavailable 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 (oilfired CWAF only)

Two-stage and modulating combustion Off-cycle dampers

Low NOx premix burners Electronic ignition

Concentric venting Pulse combustion

Burner de-rating
26

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 Ignition
29

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 analysis:

– 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 Comments
32

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 engineering analysis:

– Equipment teardowns & manufacturing cost modeling

– Manufacturer interviews

– Equipment testing

– Manufacturer product literature

– Certification data
33

• 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 Analysis
34

Engineering Analysis

• DOE used an efficiency level approach with reverse engineering to 

develop manufacturing production costs (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 administrative (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 CostEfficiency Curves
37

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

• Gas-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 furnacerelated components of an RTU. 

– Cost 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 furnacerelated 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 Analysis
39

• 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 Analysis
40

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 94

MPC (2013$)

Thermal Efficiency (%)

• Gas-fired CWAF MPCs
41

Engineering Analysis

1679.63

1703.88

2339.42

1000

1200

1400

1600

1800

2000

2200

2400

2600

80 82 84 86 88 90 92 94

MPC (2013$)

Thermal Efficiency (%)

• Oil-fired CWAF MPCs
42

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 calculated 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 3070.99
44

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 Comments
46

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 data
47

Markups Analysis

Baseline Markups

• Relate 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)

− Fixed 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 1.87
49

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 

Sample

Gas

Yes

Oil

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

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

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

• AdjFactor:

• Adjusted CBECS 2003/RECS 2009 energy use data for average 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 =

QQYYYY × TTEE ee × jjFFFFFFFFFFFF

CCCCCC _CC
53

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 161.3 117.7
54

Energy Use Characterization

Electricity Use

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

• yElecComp = ratio of electrical components on-time to burner on-time,

• BOHSH = burner operating hours during space heating, hours,

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

• DiffElecUseFan = 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 EETTTTTTTTTT

= EE EE EE EEEEEEEEEE EE EEEE × EE EE EE × BB SSHH +EE EE EE + DD ff

+ (8760 − BB SSHH) × 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 2
56

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 Comments
58

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

Cost
59

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 BB
60

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

Develop 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 Summary
61

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 

Fees
63

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 use
64

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 Analysis
65

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.

– 2018-2040 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 2040

2011$/MMBtu

Year

Commercial Electricity

Price

Commercial Natural

Gas Price

Commercial LPG Price

Commercial Fuel Oil

Price
66

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 $27.71
67

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 Oil-fired Furnaces 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 similarly 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 Analysis
69

Base-Case Efficiency Distribution

Purpose: Reflects 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 moreefficient 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 Furnace
72

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 7.5
73

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 Comments
75

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. 

Accounts 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 Analysis
76

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 Analysis
77

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

0.40

Shipments (million)

Oil-fired Commercial Warm Air Furnace

Gas-fired Commercial Warm Air Furnace

Historical Projected
78

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 

Projection
81

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 

Cost
82

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) Inputs
83

• 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 Gas-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 TSL
85

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: No 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 Purchases
89

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 Analysis
90

• 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 Analysis
91

Industry Cash-Flow Model

• Upstream Inputs

– Market and Technology Assessment

– Engineering Analysis

– Shipments Analysis

• MIA Inputs

– Markup Scenarios

– Conversion Cost Scenarios

Manufacturer Impact Analysis
92

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 industry
93

• 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-group
94

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 Comments
96

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 (CO2),

• 66.8 thousand tons of nitrogen oxides (NOX),

• 2.2 thousand tons of sulfur dioxide (SO2), and 

• 0.003 tons of mercury (Hg). 

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

201820232028203320382043204820532058206320682073207820832088209320982103

kt

CO2 Emissions Reduction

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
97

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 CO2

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

CO2 75 to 1119 76 to 1127 175 to 2598 175 to 2606 1160 to 17123

NOX 3% discount rate 35.2 35.4 81.7 82.0 550.9

NOX 7% discount rate 14.7 14.8 34.1 34.2 234.3

TSL4 is Proposed TSL
99

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 Comments
103

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