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 

# 1,-/**~6** 

## .. 

# National Shipments, Energy Savings, and Net Present Value Analysis: Central Air 

# Conditioner and Heat Pumps
fC _ .. :-_.

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# ~.~ 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, 1999EE-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-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 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 

# 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 

# 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

-- 3---„ -- Central A/C and Heat Pump Shipments and NES/NPV EE-RM/STD-98-440 I**~** G**~** 

# Shipments Model Flow Diagram (Extended Lifetime , New Housing , and Houses w/o CAC or HP)

### ~**I~ ~l'** **------------~------~~~-------------------------- ::~~**  I Start of vear l 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

_ _ _ _ _ _ - _ _ _ _ _ _ -_ _ _ _ _ _i~ 27~ 7 Z Z 7 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/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 (14 0 /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- 0.6 0.6 - 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 

# 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 (------



# - c: o 

# OUTPUT: CAC Shipments (No new standards)**~~~~~~-~~--------** -**~** - -------------**~=--- ---'--~'-'-"-------** **~- -~~-~---~** **~---- ~**  ----**---~ --~~-**  -**~--- -~---** **~~=--** 7.0 ..,--------------------------------, 6.0 +---------------------------;: E 5.0 +---------------------:: E 

# - Non-Owner Conversions**~** 4.0 +----------------: CD Normal Replacements E .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 ,-**~ -~**  9EE-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 :10 T 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
1-x X x XXA v ~0. ~.X 1956010 1970 1980 1990 2000 2010 2020 2030 1950 1960 1970 1980 1990 2000 2010 2020 2030 Year

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

### xx**o+- ~----~----~----~------~----~----~----~**  1950 1960 1970 1980 1990 Year 2000 2010 2020 2030

---------- Central AlC and Heat Pump Shipments and NES/NPV
_ ... - 11EE-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 

# OUTPUT: CAC Shipments (Reverse Engineering cost data)

til C o


## - -**~======== ------------------------------------1**  6 5 x Historical

- Basecase -0- 11 SEER 12 SEER**~--------------------------------~ ~**  13 SEER I-------------------------------:j ofl'.**.....A -_______l** 

--- 14 SEER 'E 4 -fr- 15 SEER



# - til 

# - c 

## E**3+-------------------------~~------------------~** c.**2+------------- ----~** **-------------------------** XX Xx x ..;< X 1+- ________**_J ~**  __ x ____________________________**~** v 0 X x:'**~x o+-** **~----~----~----~----~----~----~----~** 1950 1960 1970 1980 1990 Year 2000 2010 2020 2030**-~---.,.-** Central AlC and Heat Pump Shipments and NES/NPV 12EE-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



### • 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**~-~~-~.~,** 13EE-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- .. . .. ." 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· ----- - .. ' 14EE-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- ]$ 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**~** ----**~--** .. --- 15EE-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-98-4 4 0 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**~- ~**  16EE-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 · 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 ," 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-- -**~ ~**  187 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
- S'b== 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/STO - 98-4 40 

# 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 19EE-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 1'-1 G G 

# OUTPUT: Net Present Value (Split Systems) 

# !**:TI---- ~**  

# ....**~~ ------------------** **~** c .2**-~+------------- ~----** **-- ~--------** **~** 

# - .- 

## e**-$8+------------------- ----** **----~ ----** **~** II) ::::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 2 0