EE-RMISTD-98-440 /L/ -V 6

LE--Rkt/STD- 5 ' -Yao

National Shipments, Energy Savings,

and Net Present Value Analysis:

Central Air Conditioner

and Heat Pumps

__--_-- __ __-_._--_B__- _---- rrrrrrr | Il 

Jim McMahon

JEMcMahon@lbl.gov m

Ernest Orlando Lawrence Berkeley National Laboratory M.

U.S. Department of Energy t

Workshop on Standards for Central Air Conditioners

and Heat Pumps

December 9, 1999

GI

EE-RM-STD-98-440 COMMENT 14GG

· .. EE-RM/STD-98-440 1,-/ ~6 .. 

National Shipments, Energy Savings, 

and Net Present Value Analysis: 

Central Air Conditioner 

and Heat Pumps 

fC _ .. :-_. ~ci';"~~----""""'~-~=--~""~i~""";' -. '-"':-=-==;~"";i'~" ,..--- .--::~=-.- __ ..... --~-.-... __ ~.~ 

Jim McMahon 

JEMcMahon@lbl.gov 

Ernest Orlando Lawrence Berkeley National Laboratory 

u.s. Department of Energy 

Workshop on Standards for Central Air Conditioners 

and Heat Pumps 

December 9, 1999 
EE-RM/STD-98-440 / /

Shipments Model:

Ownership Categories _

* Four ownership categories

- New housing

- Existing housing with a regular CAC or HP

- Housing without a CAC or HP

- Housing with an extended life CAC or HP

* Assumes that used CAC and HP are not available

* Population of CAC and HP in each category are

referred to as the STOCK of units in that category

- Central A/C and Heat Pump Shipments and NES/NPV --

I ', •• EE-RM-STD-98-440 COMMENT 14GG

EE.RM/STD-9a.44Q 1£/ c: ~ 

Shipments Model: 

Ownership Categories /~~------- -------------~------- ------- --- --------- -- ------~-- ------ -------------------------- --- ------------- -------- ---~ 

• Four ownership categories 

- New housing 

- Existing housing with a regular CAC or HP 

- Housing without a CAC or HP 

- Housing with an extended life CAC or HP 

• Assumes that used CAC and HP are not available 

• Population of CAC and HP in each category are 

referred to as the STOCK of units in that category 

- - --- - - 7' Central Ale and Heat Pump Shipments and NES/NPV' - - 2 ~ 
EE-RM/STD-98-440 /y

Shipments Model:

Market Segments IrF

Market segments reflect the REASONS for

purchasing a new CAC or HP

Five market segments

- Net new housing market

- Early (discretionary) replacement market

- Regular replacement market

- Extra repair market

- Homes without a CAC or HP

Central A/C and Heat Pump Shipments and NES/NPV -

. , ~. EE-RM-STD-98-440 COMMENT 14GG

. ~ .. , . .. . 

, . 

EE-RM/STD-98-440 II..{ C b 

Shipments Model: 

Market Segments '---~ .. -.-~ . ~--.~ .... ---.-~-~ .. --. -

• Market segments reflect the REASONS for 

purchasing a new CAC or HP 

,.' 

• Five market segments 

- Net new housing market 

- Early (discretionary) replacement market 

- Regular replacement market 

- Extra repair market 

- Homes without a CAC or HP 

, Central AlC and Heat Pump Shipments and NES/NPV ~ - -""3 ~ 
EE-RM/STD-98-440

Shipments Model:

Events and Decisions

Events are things that happen to a stock that can

change the status of a portion of that stock

- Do not depend on economic conditions, but are dependent on

the properties of the stock (e.g., need for repair)

Decisions are consumer reactions to events and

market conditions (e.g., replace or repair)

- Treated as probabilities that typically depend on the type of

stock, the age of the CAC or HP, the incremental cost of the

decision, and market conditions

- Modeled with a standard econometric logit equation

- Calibrated coefficients to price, operating cost, and income

elasticities estimated in previous studies

- Futule versionl will examine calibration and may base

elasticities on additional historical price data .. .. . - Central A/C and Heat Pump Shipments and NES/NPV - 4

· , .. EE-RM-STD-98-440 COMMENT 14GG

" EE-RM/STD-98-440 

Shipments Model: 

~==.~ _______ ~I;!_en_ts al'1=~_~I?:~_~siC?~s=~7C') ~ 

• Events are things that happen to a stock that can 

change the status of a portion of that stock 

- Do not depend on economic conditions, but are dependent on 

the properties of the stock (e.g., need for repair) 

• Decisions are consumer reactions to events and 

market conditions (e.g., replace or repair) 

- Treated as probabilities that typically depend on the type of 

stock, the age of the CAC or HP, the incremental cost of the 

decision, and market conditions 

- Modeled with a standard econometric logit equation 

- Calibrated coefficients to price, operating cost, and income 

elasticities estimated in previous studies 

- Futuie veision will eXCtrlline calibration and may base 

elasticities on additional historical price data ~---,~~~~- - ~- Central AlC and Heat Pump Shipments and NES/NPV-=-4·~ 
EE-RM/STD-98-440 / ! G

Shipments Model Flow Diagram

No Replacement No

Y Yes (Regular CC aB uy CAC or HP

pair or> Repleeplace Replace?

Repair < _ r Regular

Extra Repair

Central AC and Heat Pump Shipments and NES/NPV

C Central A/C and Heat Pump Shipments and NES/NPV U

EE-RM-STD-98-440 COMMENT 14GG

EE-RM/STD-98-440 

Shipments Model Flow Diagram 

(Regular CAC and HP owners) ~ 

I Start of Year I 

-No---~ 

'----Repair·-~ 

I End of Year I 

:r----No---

Yes 

·<----Buy CAC or H .... ---

>----ReguI ar---

'-----Extra Repair'---

Houses with 

Extended 

Lifetime 

CAC or HP 

---Central Ale and Heat Pump Shipments and NES/NPV ---5-
EE-RM/STD-98-440 q (6

Shipments Model Flow Diagram

(Extended Lifetime, New Housing, and Houses wlo CAC or HP) r a

No

No.o

No

re as

Start of Year End s ^ olff Ylr

-- -- Central A/C and Heat Pump Shipments and NES/NPV 3---„ 

EE-RM-STD-98-440 COMMENT 14GG

EE-RM/STD-98-440 I ~ G ~ 

Shipments Model Flow Diagram 

(Extended Lifetime, New Housing, and Houses w/o CAC or HP) ~ I~ ------------~------~~~-------------------------- ::~~ ~l' 

IStart of vearl I Enit of Year 

~-------------No----------------__ ~ ... 

------------Ves-------------

~----------No------------lIi1~ 

~---------No----------~ 

~------------Ves-------------

Central AlC and Heat Pump Shipments and NES/NPV -~~-~~ 
EE-RM/STD-98-440

INPUTS: Shipments Model _ a _ _ _ _ _ _ - _ _ -_ _ _ _ _ _ _ _ _ 27~ 7 Z Z 7 _i~ lm~I-

* Purchases from New Housing

- New housing saturations from RECS

* Existing Housing with a regular CAC or HP

- 1990 ASHRAE paper (Bucher et al) provides basis for

probability an existing CAC or HP needing repair, when a unit

will be retired early, and whether it will be replaced or repaired

* Households without a CAC or HP

- 1993 ACHR News (14% of shipments in 1992 were "add-ons")

* Housing with an extended life CAC or HP

- Assumed that extended life units have lifetime 6 years longer

than regular life units

......- Central A/C and Heat Pump Shipments and NES/NPV --

EE-RM-STD-98-440 COMMENT 14GG

EE-RM/STO-98-440 

INP~T~~ __ Shipments Model _____ . __ L

'· -- ___________________ ..... -_.-. -._----_ .~~------.------- --------.----- _._- - -

• Purchases from New Housing 

- New housing saturations from RECS 

• Existing Housing with a regular CAC or HP 

- 1990 ASH RAE paper (Bucher et al) provides basis for 

probability an existing CAC or HP needing repair, when a unit 

will be retired early, and whether it will be replaced or repaired 

• Households without a CAC or HP 

- 1993 ACHR News (140/0 of shipments in 1992 were "add-ens") 

• Housing with an extended life CAC or HP 

- Assumed that extended life units have lifetime 6 years longer 

than regular life units 

~---.~ 

. Central AlC and Heat Pump Shipments and NES/NPV -
EE-RM/STD-98-440 I/ 6

Consumer Action Depends on

Age of CAC or HP _A

Relative Probability of Decisions/Events

Early Replacement

1.0 - Replace

0.8-

0.60.6 - Repair

°_ 0.4- Keep

a.

0.2

0.0

0 3 6 9 12 15 18 21 24

Age of Unit

-Central A/C and Heat Pump Shipments and NES/NPV

EE-RM-STD-98-440 COMMENT 14GG

EE-RM/STD-98-440 

Consumer Action Depends on 

Age_o! CAC o_r _tlf» ______________ _ ~,---

~--~--~~----

0.8 

~ 

:: 0.6 

.a 

ca 

.a e 0.4 

a.. 

0.2 

Relative Probability of Decisions/Events 

Early Replacement 

Keep 

o 3 6 9 12 15 18 21 24 

Age of Unit 

~ 'Central AlC and Heat Pump Shipments and NES/NPV ,~---~--- -8- --
EE-RM/STD-98-440 / / G6

OUTPUT: CAC Shipments

(No new standards) _

7.0 -

6.0

0

5.0

Non-Owner Conversions

4.0

E_ Normal Replacements

'7 3.0

= 2.0 - Early Replacements

1.0

0.0

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Year

... - - Central A/C and Heat Pump Shipments and NES/NPV

EE-RM-STD-98-440 COMMENT 14GG

(------

-c: 

o 

OUTPUT: CAC Shipments 

(No new standards) ~~~~~~-~~-------- - ~ - ------------- ~=---

---'--~'-'-"------- ~- -~~-~---~ ~---- ~ ---- ---~ --~~- - ~--- -~--- ~~=--

7.0 ..,--------------------------------, 

6.0 +---------------------------;: 

E 5.0 +---------------------:: 

E 

- Non-Owner Conversions 

~ 4.0 +----------------: 

CD 

E Normal Replacements 

.e- .c 3.0 -f---------, 

U) 

"iii 

g 2.0 +-------: Early Replacements c: 

c:( 

1.0 

0.0 

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 

Year 

-~-~--- - ---- Central Ale and Heat Pump Shipments and NES/NPV ,- ~ -~ 

9 
EE-RM/STD-98-440

Consumers' Reactions

to New Standards

Higher equipment prices mean:

- fewer early replacements

- more repairs/fewer replacements

Lower operating expenses mitigate the reactions

to higher equipment prices

Higher household incomes mitigate the reactions

to higher equipment prices

_- Central A/C and Heat Pump Shipments and NES/NPV -1 :10T

EE-RM-STD-98-440 COMMENT 14GG

I 

• Higher equipment prices mean: 

- fewer early replacements 

- more repairs/fewer replacements 

EE-R M/STD-98-440 

• Lower operating expenses mitigate the reactions 

to higher equipment prices 

• Higher household incomes mitigate the reactions 

to higher equipment prices 

~--~-~ -~~~-- -- 'Central AlC and Heat Pump Shipments and NES/NPV ~~- io~ 
EE-RM/STD-98-440 / C/

OUTPUT: CAC Shipments

(ARI cost data) rrr

7

x Historcal

Basecase

-- 11 SEER

-- 12 SEER :

5 13SEER

o 14 SEER ~

= 4 - -15 SEER

E 3

n2 xx

XXA 1-x X v x

~0. ~.X

1956010 1950 1960 1970 1980 1970 1980 1990 1990 2000 2000 2010 2010 2020 2020 2030 2030

Year

.. _Central A/C and Heat Pump Shipments and NES/NPV 7 -

EE-RM-STD-98-440 COMMENT 14GG

EE-RM/STD-98-440 I 1-1 ~ C; 

OUTPUT: CAC Shipments 

(ARI cost data) 

~======~----------------------------------~ 

6 

5 -tn 

c:: 

o 

'E 4 

-tn 

-

c:: 

x Historical 

- 8asecase 

~ 11 SEER 

-.- 12 SEER 

13 SEER 

---*- 14 SEER 

-&- 15 SEER 

~------------------------------------~ 

~ 3+---------------------------~~----~L-------------~ 

Co 

.c 

tn 

2+--------------A------~~--------------------------~ " x V ;K. , ''x 

x ;< x' 

1 +-__________ ~--~------------------------------_ 

,x 

xXA 

xx o+- ~----~----~----~------~----~----~----~ 

1950 1960 1970 1980 1990 

Year 

2000 2010 2020 2030 

----------Central AlC and Heat Pump Shipments and NES/NPV _ ... - 11 
EE-RM/STD-98-440

OUTPUT: CAC Shipments

(Reverse Engineering cost data) Aa

7

x Historical

Basecase

6-- 11 SEER

-- 12 SEER

5 13 SEER

|o A I 14 SEER

-4

3

U,

X x

2-X X X

Central A/C and Heat - Pump Shipments and NES/NPV 12

EE-RM-STD-98-440 COMMENT 14GG

EE-RM/STD-98-440 

OUTPUT: CAC Shipments 

(Reverse Engineering cost data) 

til 

C 

o 

--

~======== ------------------------------------1 

6 

5 

x Historical 

- Basecase 

-0- 11 SEER 

12 SEER 

~--------------------------------~~ 

13 SEER I-------------------------------:jofl'. .....A -_______l 

--- 14 SEER 

'E 4 

-fr- 15 SEER 

-til 

-

c E 3+-------------------------~~------------------~ 

c. 

2+------------- ----~ -------------------------

XX Xx 

x ..;< X 

1+-________ _J~ __ x ____________________________ ~ 

v 

0 Xx:' 

~x o+- ~----~----~----~----~----~----~----~ 

1950 1960 1970 1980 1990 

Year 

2000 2010 2020 2030 

-~---.,.- Central AlC and Heat Pump Shipments and NES/NPV 12 
EE-RM/STD-98-440

Standards will have LESS effect, if... rA

* Future consumers value energy savings more

* Manufacturers act to mitigate sales decrease

* Consumers shift to lower-priced models

* Early replacement programs by government or

utilities are effective

* High efficiency equipment captures more market

share in the baseline (no new standards) case

* Other factors besides price, operating cost, and

income cause an increase in sales

-- Central A/C and Heat Pump Shipments and NES/NPV -1

EE-RM-STD-98-440 COMMENT 14GG

EE-RM/STD-98-440 

• Future consumers value energy savings more 

• Manufacturers act to mitigate sales decrease 

• Consumers shift to lower-priced models 

• Early replacement programs by government or 

utilities are effective 

• High efficiency equipment captures more market 

share in the baseline (no new standards) case 

• Other factors besides price, operating cost, and 

income cause an increase in sales 

- -~ Central AlC and Heat Pump Shipments and NES/NPV ~-~~-~.~, 13 
EE-RM/STD-98-440

Standards will have MORE effect if... r-A

* Future consumers value energy savings less

* High efficiency equipment captures less market

share in the baseline case.

_-- Central A/C and Heat Pump Shipments and NES/NPV -- 14-

.. . .. EE-RM-STD-98-440 COMMENT 14GG

." 11-j6G 

EE-RM/STD-98-440 

St~_r'ldards will hCive_Nl0FtE effe~t J!-~:_. , ~ I~ ,~~.~ .... -------.--.. -. -"-"-'---. ----...... - ...... --- --------.-. "'-_."-.,,,'. '0 :fllJ3'9~ 

• Future consumers value energy savings less 

• High efficiency equipment captures less market 

share in the baseline case. 

-~-- Central AlC and Heat Pump Shipments and NES/NPV· ----- -.. ' 14 
EE-RM/STD-98-440

METHOD: National Energy Savings rr

( . . __ _ _____ _ ____ . __ _ _ _ _ _ _ _ . _ _ __

* Annual energy consumption accounts for the

vintage/efficiency of the equipment

* Sum over vintages (year bought) gives national

energy consumption for the entire stock

* The difference between two scenarios ([no new

standards] - [new standards]) gives energy

savings.

-- - - - Central A/C and Heat Pump Shipments and NES/NPV- ]$

EE-RM-STD-98-440 COMMENT 14GG

IEE-RM/STD-98-440 l'i G, . 

M EII-I9~_~1'I~ti ()_r1aL~nergy _~Clvi!1g_~ ~~I~ (.- -- - ---------------~- -- -- --- ------- --~------- ------ ------ -- ---------- ----------~ IJm!!\uQ'1IM J 

• Annual energy consumption accounts for the 

vintage/efficiency of the equipment 

• Sum over vintages (year bought) gives national 

energy consumption for the entire stock 

• The difference between two scenarios ([no new 

standards] - [new standards]) gives energy . savings. 

----- -----~----~ Central AlC and Heat Pump Shipments and NES/NPV ~ ---- ~--.. ---

15 
EE-RM/STD-98-440 I

METHOD: Net Present Value (NPV)

* Annual equipment costs and annual energy costs

are calculated for each of two scenarios (no new

standards; new standards)

* The difference between the scenarios each year

gives increased equipment cost and annual

energy savings.

* The present value of future costs and savings is

discounted.

* The sum over time of present values is the net

present value. Net savings are positive; net

costs are negative. .. .-- . Central A/C and Heat Pump Shipments and NES/NPV- -

EE-RM-STD-98-440 COMMENT 14GG

EE_RM/STD-98-440 Il( G G. 

}\t~E!_~~~u:_~e~t_P~~~~~t Val~~ t~_~V') ~ 

• Annual equipment costs and annual energy costs 

are calculated for each of two scenarios (no new 

standards; new standards) 

• The difference between the scenarios each year 

gives increased equipment cost and annual . energy savings. 

• The present value of future costs and savings is 

discounted. 

• The sum over time of present values is the net 

present value. Net savinQs are positive: net - - . .. 

costs are negative. 

- ----- ---. --- -- - Central AlC and Heat Pump Shipments and NES/NPV ~- ~ 

16 
EE-RM/STD-98-440 / " G

Inputs to NES / NPV calculation rA

* Shipments

- From Shipments Analysis

* Total Installed Consumer Cost

- Weighted-average values for baseline and each standard

level from LCC Analysis

* Repair and Maintenance Costs

- Weighted average values from LCC Analysis

* Historical Efficiencies

- 1976 to 1997: From ARI

* Future Efficiency Trend

- 1998 to Standard Effective Date (2006): Equal to '97 level

- Effective Date to 2030: Equal to standard level SEER/HSPF

Central A/C and Heat Pump Shipments and NES/NPV -

17

EE-RM-STD-98-440 COMMENT 14GG

· 1l{6G EE_RM/STO-98-440 

, Inl?"~ts to N~~ I NP~.:~~~~_I~t~o~.:_:_ :;:~I~ .. IIf11U9rDl1!li1"'--

• Shipments 

- From Shipments Analysis 

• Total Instal-led Consumer Cost 

- Weighted-average values for baseline and each standard 

level from Lee Analysis 

• Repair and Maintenance Costs 

- Weighted average values from Lee Analysis 

• Historical Efficiencies 

- 1976 to 1997: From ARI 

• Future Efficiency Trend 

- 1998 to Standard Effective Date (2006): Equal to '97 level 

- Effective Date to 2030: Equal to standard level SEER/HSPF 

-Central AlC and Heat Pump Shipments and NES/NPV ,-~ ~--17 ~ 
EE-RM/STD-98-440 I

Inputs to NES NPV calculation (cont.)-,

* Unit Annual Energy Consumption

- Weighted-average values from LCC Analysis scaled

from RECS93 data

* Electricity Prices

- Weighted-average of marginal prices from LCC

Analysis based on RECS93 data

* Future Electricity Prices (1999-2030)

- Trend From 1999 Annual Energy Outlook

- Sensitivities will be analyzed (e.g., high and low growth

AEO cases and GRI projections)

* Electricity Site-to-Source Conversions

- From EIA's National Energy Modeling System (NEMS)

* Discount Rate of 7% real for NPV

... _____. -. Central A/C and Heat Pump Shipments and NES/NPV - -- ]8

EE-RM-STD-98-440 COMMENT 14GG

," 

I 

I •• ~ 

EE-RM/STO"-98-440 Il( G G 

·1~PlJ~S t~.N~~~~/~!_~_Cal~U~f3~i=~_nJc~rl_t}:9A 

• Unit Annual Energy Consumption 

- Weighted-average values from LCC Analysis scaled 

from RECS93 data 

• Electricity Prices 

- Weighted-average of marginal prices from LCC 

Analysis based on RECS93 data 

• Future Electricity Prices (1999-2030) 

- Trend From 1999 Annual Energy Outlook 

- Sensitivities will be analyzed (e.g., high and low growth 

AEO cases and GRI projections) 

• Electricity Site-to-Source Conversions 

- From EIA's National Energy Modeling System (NEMS) 

• Discount Rate of 7% real for NPV 

- -~ Central AlC and Heat Pump Shipments and NES/NPV r-- - ~ ~ 18 
7

m- 6 -o--- ARI - Split A/C 6 -- -- Rev Eng - Split A/C i o

O 5 -- ARI-SplitHP

en, 4_-- RevEng-SplitHP

CO 4

u,)

10 11 12 13 14 15 16

SEER

;;;-'==-;9 - S'b== S Central A/C and Heat Pump Shipments and NES/NPV ,19,

>% 00,~~~~~~~~~~~~~~~~~~^

2~

__ _ ~~~~~central A/C and Heat Pump Shipments and NES/NPV - 9

EE-RM-STD-98-440 COMMENT 14GG

EE RM/STO-98-440 

OUTPUT: National Energy Savings 

(Split Systems) 3 

------------------------------------~ 

_ 6 ARI-SplitNC 

en 

~ • Rev Eng - Split NC 

a 5 - 0- ARI- Split HP 1------- ._=_-------1 

-

~ 4 -... Rev Eng - Split HP 

c .-

> 

~3 

~ 

~2+--------- -- --------------------~ CD 

c 

w +-------~ ------------------------~ 

O+-- --~---~- -~ -~--~ 

10 11 12 13 

SEER 

14 15 16 . 

---------Central AlC and Heat Pump Shipments and NES/NPV 19 
EE-RM/STD-98-440 q C

OUTPUT: Net Present Value

(Split Systems) m a

__ $4

$0 _

.2 -$4 \\

-$8

-$12 - a-ARI-Split A/C

-$16 -*-Rev Eng - Split A/C -$16

2!, = ARI- Split HP

a. -$20 - - Rev Eng - Split HP

Z -$24

10 11 12 13 14 15 16

SEER

Central A/C and Heat Pump Shipments and NES/NPV -n

EE-RM-STD-98-440 COMMENT 14GG

EE-RM/STD-98-440 1'-1 G G 

OUTPUT: Net Present Value 

(Split Systems) 

! :TI---- ~ .... ~~ ------------------~ c .2 -~+------------- ~---- -- ~--------~ 

.--

e 

II) -$8+------------------- ---- ----~ ----~ 

::::s 

-

~ -$12 --0-ARI- Split MC ... 

c 

= -$16 

e 

Il. -$20 ... 

II) 

• Rev Eng - Split MC I----------~~----------~ 

= 0= ARI - Split HP "-

........ -.... Rev Eng - Split HP I-----------------.:: ------~ 

z -$24+-----~------~----~----~------~----~ 

10 11 12 13 

SEER 

14 15 16 

-~-------- Central AlC and Heat Pump Shipments and NES/NPV 20