Energy Conservation Standards forCommercial Refrigeration EquipmentANOPR Public MeetingLife-Cycle Cost AnalysisBuilding Technologies ProgramOffice of Energy Efficiency and Renewable EnergyU.S. Department of EnergyAugust 23, 2007ANOPR Analyses Flow DiagramFrameworkDocumentANOPRNOPRFinalRuleNationalImpactAnalysisEnergy UseizationTechnologyAnalysisAnalysisPricePaybackPeriod AnalysisShipmentsAnalysisCharacterMarket andAssessmentScreeningEngineeringMarkups toDetermineEquipmentLife-CycleCost and2PurposeEnergy Use Characterization•To develop electrical energy consumption savings estimates for selectedequipment efficiency levels.•To validate the energy savings estimates from the engineering analysis usingrefrigerant system and whole building modeling for a diverse set of climates.Markups to Determine Equipment Price•To characterize the channels for howequipment is distributed from themanufacturer to the customer.•To determine prices paid by customersbased on manufacturer selling pricesfor baseline and higherefficiency equipment.Life-Cycle Cost and Payback Period Analyses•To develop the customer life-cycle cost savings and payback period for higherefficiency equipment.3ANOPR Issues for Public CommentDisplay Case Lighting Operating Hours (Issue #6)Operation and Maintenance Practices (Issue #7)Equipment Lifetime (Issue #8)Life-Cycle Cost Baseline Level (Issue #9)4Energy Use CharacterizationEnergy Use CharacterizationDOE used the engineering estimates of energy consumption based on theARI 1200 Test Procedure “Performance Rating of Commercial RefrigeratedDisplay Merchandisers and Storage Cabinets, 2006”ARI 1200 TestProcedure accounts for•Direct energy consumption(evaporator fan motors,lighting, anti-sweatheaters, defrost and drain heaters,and condensate pan heaters in allequipment and compressor energy consumption) in self-contained equipment.•Indirect energy consumption(compressor energy consumption) in remotecondensing equipment.ARI 1200 does not account for•Variation in building temperatureor humidity from rating conditions•The impact of outdoor air temperature on remote compressor/condensers•Subsequent building HVAC impactsof improved CRE efficiency.DOE validated the engineering estimates using whole-building annualenergy simulation incorporating interactive refrigeration system modeling(DOE 2.2R) for seven classes ofremote condensing equipment.5Energy Use CharacterizationSelectClasses andTranslateCharacteristicsDefine RemoteCondensingDevelopModel andSelect ClimatesEquipmentLevels forAnalysisDisplay Caseto DOE2.2RSystemSupermarketWhole Building Simulation Approach3⁄4Single 45,000 ft2supermarket. 16 hour/day operating schedule.HVAC: Unitary AC/ gas heat. Lighting: 1.5 W/sf.Misc: 0.4 W/sf.Five U.S. Climates (Baltimore, Chicago, Houston, Los Angelesand Memphis)3⁄4Seven equipment classes analyzed: VOP.RC.M, SVO.RC.M,VCT.RC.M, HZO.RC.M, SOC.RC.M,VOP.RC.L, VCT.RC.L]. Fouranalytically derived efficiency levels per class.3⁄4Equipment characteristics derived from engineering analysis.3⁄4Refrigeration rack compressors were based on same model andperformance used for ARI 1200.Air-cooled condenser withfloating- head pressure presumed. Separate compressor racksby equipment class were used6070Energy Use CharacterizationSample Results (VOP.RC.M)Case refrigeration load, overall energy consumption (direct andindirect), overall refrigeration energy savings from baseline, andoverall building energy savings from baseline.VOP.RC.M-BaltimoreVOP.RC.M

i i i i i i i iEff lli

Annual Sim. Eng neer ng Annual Sim. Eng neer ng Annual Sim. Eng neer ng Annual Sim. Eng neer ngf Level AD1 Ef Leve AD3 Eff Level AD5 Eff Level AD6CompE ecCaseD rElec25

Energy Savings (kWh/Day)

Energy Consumption (kWh/Day)6050Annual Sim._BaltimoreAnnual Sim._ChicagoAnnual Sim._HoustonAnnual Sim._Los AngelesAnnual Sim._MemphisEngineering2040301520101050Eff Level AD1 Eff Level AD3 Eff Level AD5 Eff Level AD67Energy Use CharacterizationComparison of Refrigeration System Savings to WholeBuilding SavingsEnergy Savings for Baltimore()05001000150020002500

(lRef. System versus Whole Building

Energy Savings MBtu)Ref. SystemWho e BuildingLevel BLevel CLevel D8Energy Use CharacterizationKey ObservationsSimulated case refrigeration loads are less than the case refrigeration loadscalculated in the engineering analysis--believed due to simulated buildinghumidity being less on average during the year than that used in the ratingcondition.While simulated refrigeration loads are lower but compressor energy use isapproximately the same as calculatedby ARI 1200 for most equipment classes.•Note: Simulation program accounts for additionalrefrigerant superheat occurring in thesupermarket refrigeration piping to providethe presumed suction gas temperature (65°F) to thecompressors.Reductions in case heat load reduce total refrigerant mass flow needed in thecase, which generally results in lesstotal “additional superheat” load on thecompressor and lead to greater energy savings benefits to a design change thennot taking this additional superheat load into account.9Energy Use CharacterizationKey Observations (cont.)Averaged over the five climates, the simulated refrigeration system energysavings was between 4% and 9% higher atthe highest efficiency level analyzedthan was determined by the engineering analysisWarm and humidclimates (Houston and Memphis) have slightly greater energysavings than relatively cooler and drierclimates (Baltimore, Chicago and LosAngeles).The difference in energy savings, between the refrigeration system only and thewhole building, is less than 10% at all levels and is a function of the designoption analyzed. When the highest efficiency levels were considered, thedifference was on the order of 1%.The interaction between the display case modifications and the building HVACsystem is small. Whole-building energy savings are mostly attributable to theenergy savings of the CRE system.10Energy Use CharacterizationCase Lighting Operating Hours(Issue #6)The engineering analysis assumeda 24-hour operation of the display-caselighting.DOE conducted a lighting sensitivity studyof the relative energy savings as afunction of display-case lighting operating hours per day120%100%80%60%40%20%0%HZO.RC.LSVO.RC.MVCT.RC.LVOP.RC.M

(iii

Relative Energy Savings from Baseline Level 1)24 hour l ghting20 hour l ghting16 hour l ghtingDOE invites comments on the assumption of 24-hours for display-caselighting operation.11Energy Use CharacterizationOperation and Maintenance Practices(Issue #7)DOE invites comments on operation and maintenance practices.•Additional O&M practices for CRE or buildings using CRE that maydiffer from standardized conditions, such as those represented in atest procedure•The frequency that such factors come in to play in energy use in thefield•Whether and how DOE might account for these factors in assessingthe overall impacts of the candidate standards levels for CRE12Markups to Determine Equipment PriceMarkups to Determine Equipment PricePurpose, Inputs, and OutputPurpose•To determine customer prices under a standards scenario based onmanufacturer costs•Characterize equipment distribution channels and market segments•Describe equipment distributing companydirect costs, expenses, and profitsInputs•Firm balance sheets–Wholesalers:HARDI’s 2005 Profit Planning Report–Mechanical Contractors:U.S. Census Bureau Financial Data for Plumbing, Heating, andAir-Conditioning Contractors, 2002Output•Baseline and incremental markups13Distribution ChannelsMarkups to Determine Equipment PriceEstimated Fraction of Equipment Shipments by Distribution ChannelsManufacturerNational AccountCustomerMechanical Contractor(New Construction or Replacement)CustomerCustomerWholesaler or Wholesale Distribution86%7%7%•DOE assumed the same market sharesby distribution channel for replacementand new construction14Markups to Determine Equipment PriceBaseline and Incremental MarkupsMarkupsrelate customer price to cost of goods sold (COGS)Baseline markupsrelate price to cost prior to a change in efficiency•Baseline markups indicate a customer price that covers allof a wholesaler’s orcontractor’s expenses plus profit•Direct labor costs (salaries, payroll, rental and occupancy) are includedIncremental markupsrelate the incremental change in customer priceto the incremental change in COGS beyond baseline•Some distribution costs remain constant with COGS increases•Incremental markups cover only expenses that vary with COGS – in this case,expenses that increase due to anincrease in equipment efficiency–For example, direct labor costs (salaries, payroll, rental and occupancy) do not vary withefficiency-induced changes in COGS•DOE assumes other operating costs and profit will scale proportionally withCOGS15Markups to Determine Equipment PriceDistribution Expenses and Markups (cont.)Wholesaler markup estimated from HARDI Financial DataNational Account Markups•DOE derived an average nationalaccount markup, assuming that the resulting equipmentprice increase was one halfof that realized from a distribution through the wholesalerchannel (before application of sales tax).Mechanical contractor markup indiceswere developed based on State levelcensus data and applied to averagemechanical contractor markups.Sales tax is applied based oneach specific State’s tax data.National average estimates for sales taxand mechanical contractor markuprequire estimates of relative shipments of commercial refrigerationequipment by State.Since relative shipments at a State level are unknown, DOE used censusdata for refrigerated and frozen foodsales by State as a proxy for equipmentshipment.16Markups to Determine Equipment PriceDistribution Expenses and Markups (cont.)Resulting Average Baseline MarkupsMechanicalNationalOverallWholesalerContractor(IncludesWholesaler)Account(MfgDirect)WeightedAverageMarkupDistributor(s)1.4362.1821.2181.301MarkupSales TaxMultiplier1.0681.0681.0681.068Overall1.5332.3301.3001.389MarkupResulting Average Incremental MarkupsMechanicalContractorNationalWholesaler(IncludesWholesaler)Account(Mfg Direct)OverallDistributor(s)1.1071.3621.0541.079MarkupSales TaxMultiplier1.0681.0681.0681.068Overall1.1821.4541.1251.152Markup17Life-Cycle Cost and Payback Period AnalysisLife-Cycle Cost AnalysisLife-Cycle Cost (LCC) equals customer price plus the sum of annualoperating costs discounted to a particular base yearEconomic evaluation from the customer perspectiveAnalysis implemented in an Excel®spreadsheetResults are expressed as LCC difference (baseline minus standard level)Simple payback (in years) is also calculated and reported in this analysisCombineChangesin CostsLCC ResultsFirst CostOperating ExpensesPresentValue(Consumer Price + Installation Cost)Convert to18Life-Cycle Cost and Payback Period AnalysesFromEngineeringAnalysis(Price is aFunction ofEfficiency)From Markupsfor EquipmentPriceDeterminationAnalysisFrom EnergyUseCharacterizationAnalysis(Energy Use as aFunction ofEfficiency)LCC Calculation FlowchartCostExpenseCostAnnualExpenseExpenseEnergyMarkupMarkupPriceCostBaselineManufacturerPriceStd-LevelManufacturerPriceTotal InstalledElectricityPricesAnnual EnergyRepair CostMaintenanceOperatingLifetimeDiscount RateElectricityPrice TrendLifetimeOperatingPaybackPeriodConsumptionDistributorSales TaxMechanicalContractorConsumerInstallation19Life-Cycle Cost and Payback Period AnalysesSelection of Efficiency Levels for AnalysisUp to 11 efficiency levels were examined for equipment in theengineering analysis; only up to 8 efficiency levels selected for theLCC analysis to reduce analysis complexity.Where 8 or fewer efficiency levels existed in the engineeringanalysis, all were included in the LCC analysis.Where more than 8 efficiency levels were examined in theengineering analysis, 8 levels were selected, spanning the breadthof efficiency levels from the engineering analysis (removing levelsthat were at approximately the same cost-efficiency point or thatappeared less cost-effective than adjacent levels).20Life-Cycle Cost and Payback Period AnalysesElectricity PricesAnalysis was based on State-by-State average electricity prices paidby four business classes using CRE equipment.Electricity prices by business class were developed using the ratioof average price in 2003 CBECS by business class to commercialaverage price.These ratios are then applied to the State-by-State average electricityprices projected for 2012 and out years by EIA.Business TypeGroceryStore/FoodMarketConvenienceStoreConvenienceStore with GasStationMulti-lineRetailersand OtherFood SalesAllCommercialBuildingsRatio of ElectricityPrice to Average Pricefor all CommercialBuildings0.9281.1090.9931.0571.0021Life-Cycle Cost and Payback Period AnalysesElectricity Prices (cont.)Example distribution ofelectricity prices (2006$) forsupermarkets/large grocerystores.Electricity price projections0%0 1 2 3 4 5 6 7 8 9ElElectricity Prices Faced by CREs Sold to Supermarkets10%20%30%40%50%60%70%80%90%100%10 11 12 13 14Cents per kWh

Cumulative Percent of Electricity Pricesectricity PriceElectricity Price Index Projections1.10based on EIA/AEO referenceHigh GrowthAEO 20061.05case for commercial sector.Low Growth1.00AEO High Growth and Low0.950.90Growth cases can be run as a0.85sensitivity.0.802000 2010 2020 2030 2040Year

Index (2006=1.00)22Life-Cycle Cost and Payback Period AnalysesOther InputsInstallation Costs•Based on RS Means data:$295 for remote condensingequipment classes, $227for self-contained equipment classes.•Installation costs assumed not to vary with equipmentprice or efficiency levelDiscount Rates•Derived from estimates of the cost ofcapital of companies that purchasecommercial refrigeration equipment by business class.•Cost of capital is calculated from the weighted-average cost of capital (WACC) tothe firm to obtain equity and debt financing.•Weighted-average value equals 4.76% (real)for large grocery retailers, 5.66%for multi-line retailers, and 7.26% for small grocery and convenience stores (withand without gasoline stations).23Life-Cycle Cost and Payback Period AnalysesOther Inputs (con’t)Equipment Lifetime•Used average age of 10 years based upon literature survey and industry input foraverage age at replacement.•Used-equipment market notconsidered in analysis.Repair Costs•Annualized repair costs based on fraction(0.5) of customer equipment pricedivided by equipment lifetime.•Repair costs were not assumed to increase with costs of design options.Maintenance Costs•Based on RS Means data(2006) for commercial refrigeration equipment.•DOE used a flat $156/yr for preventative maintenance activities for all equipmentclasses and efficiency levels.•Lighting maintenance costs calculatedseparately based on 2-year replacementcycle for fluorescent bulbs,ballast replacement once over the 10-year equipmentlife, and LED fixture replacement once over the 10-year equipment life.24Life-Cycle Cost and Payback Period AnalysesEquipment Lifetime(Issue #8)DOE invites comments on the lifetime of CRE and whether, in fact,this is a significant issue and whether DOE should perform asensitivity analysis of this variable in the LCC and NES analysis.•How long these units are typically maintained in service, on average,either for all equipment covered under this rulemaking or byequipment class and store type•The existence and significance of a used equipment market for CREand the importance of considering such a market in its analysis25Life-Cycle Cost and Payback Period AnalysesLife-Cycle Cost Baseline Level(Issue #9)DOE did not receive data from industry concerning the average energyefficiency of CRE currently being shipped or historical shipments, nor werethese data provided in further discussion with manufacturers.An analysis ofthe literature suggests little data on the energycharacteristics of display cases in the general market is available.DOE used the Level 1 (minimum energyefficiency level) established in theengineering analysis as the baseline for the LCC analysis.DOE invites comments on the selection ofLevel 1 as the baseline in the LCCanalysis.•Whether a distribution of efficiencies should be used in the LCC analysisbaseline (instead of a single efficiencylevel), and if so, what data could beused to populate this distribution•If more detailed data to develop a distribution of efficiencies in the baselinecannot be provided, DOE seeks inputon how a sensitivity analysis toalternative baselines could best beused to inform the LCC and NES analyses26U.S. Average Basis)Life-Cycle Cost and Payback Period AnalysesExample of LCC Results for VOP.RC.M(Installed Cost-LCC TradeoffEquipment= Vertical Open (VOP), Operating Mode=Remote Condenser (RC), Temperature=Medium (M),Fuel Price=AEO 2006 - Reference Case, Start Year= 2012

Life Cycle Cost$22,500$22,000$21,500$21,000$20,500$20,000$19,500$19,000$18,500$18,000$17,500Installed Cost-LCC Tradeoff$5,778$6,170$6,332$6,512$6,937$7,193$7,484$7,894Level 1Level 2Level 3Level 4Level 5Level 6Level 7Level 8Installed Cost27U.S. Average Basis)Life-Cycle Cost and Payback Period AnalysesExample of LCC Results for VCT.RC.M(Installed Cost-LCC TradeoffEquipment= Vertical Closed Transparent (VCT), Operating Mode=Remote Condenser (RC),Temperature=Medium (M), Fuel Price=AEO 2006 - Reference Case, Start Year= 2012

Life Cycle Cost$22,000$21,500$21,000$20,500$20,000$19,500$19,000$18,500$18,000Installed Cost-LCC Tradeoff$9,396$9,444$9,478$9,560$9,638$10,850$11,831#N/ALevel 1Level 2Level 3Level 4Level 5Level 6Level 7Level 8Installed Cost28Life-Cycle Cost and Payback Period AnalysesExample of LCC Savings Results -VOP.RC.MCumulative LCC Savings at Level 4Equipment= Vertical Open (VOP), Operating Mode=Remote Condenser (RC), Temperature=Medium (M),Fuel Price=AEO 2006 - Reference Case, Start Year= 2012100%90%80%70%60%50%40%30%20%10%0%CumulatLevel 4ive LCC Savings at

Cumulative Probability0 500 1000 1500 2000 2500 3000 3500LCC Savings (2006$)29Life-Cycle Cost and Payback Period AnalysesExample of Payback Period Results – VOP.RC.MInstalled Cost-Payback TradeoffEquipment= Vertical Open (VOP), Operating Mode=Remote Condenser (RC),Temperature=Medium (M), Fuel Price=AEO 2006 - Reference Case, Start Year= 20123.503.002.50

Payback Period (Years)2.001.501.000.500.00Installed Cost-Payback Period Tradeoff$5,778$6,170$6,332$6,512$6,937$7,193$7,484$7,894Level 1Level 2Level 3Level 4Level 5Level 6Level 7Level 8Installed Cost30Life-Cycle Cost and Payback Period Analyses

Payback Period (Years)Example of Payback Period Results – VCT.RC.MInstalled Cost-Payback TradeoffEquipment= Vertical Closed Transparent (VCT), Operating Mode=Remote Condenser (RC),Temperature=Medium (M), Fuel Price=AEO 2006 - Reference Case, Start Year= 20124.504.003.50#N/Ai1.502.002.503.00$9,396 $9,444 $9,478 $9,560 $9,638 $10,850 $11,831Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8Installed Cost-Payback Per od Tradeoff1.000.500.00Installed Cost31Life-Cycle Cost and Payback Period AnalysesExample of Payback Period Results(VOP.RC.M)Cumulative Payback Period at Level 4Equipment= Vertical Open (VOP), Operating Mode=Remote Condenser (RC), Temperature=Medium (M), FuelPrice=AEO 2006 - Reference Case, Start Year= 20120%10%20%30%40%50%60%70%80%90%100%

Cumulative ProbabilityCumulative Payback atLevel 40 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5Years32Life-Cycle Cost and Payback Period AnalysesNational Average LCC Savings by Equipment ClassEquipmentClassNational Average LCC Savings (2006$)Level 1Level 2Level 3Level 4Level 5Level 6Level 7Level 8VOP.RC.M048587112391910220324592707VOP.RC.L012092604351234703443NANAVOP.SC.M075988310061265132814871482VCT.RC.M0104613091596175023621925NAVCT.RC.L01179165021052949333336844272VCT.SC.I01371258130203285531356135398VCS.SC.I039896113831451155916191609SVO.RC.M0227500758100012231458NASVO.SC.M055258864482484112001186SOC.RC.M083517791718190118681540NAHZO.RC.M0208435490NANANANAHZO.RC.L023459193512671459NANAHZO.SC.M066286354381445466543HZO.SC.L06855510711136115514481457HCT.SC.I0250315731809835NANA33Life-Cycle Cost and Payback Period AnalysesNational Average Payback Period by Equipment ClassEquipmentTypeNational Average Payback Period (Years)Level 1Level 2Level 3Level 4Level 5Level 6Level 7Level 8VOP.RC.MNA3.22.82.62.72.82.93.1VOP.RC.LNA0.50.81.11.22.0NANAVOP.SC.MNA0.70.70.81.11.42.03.1VCT.RC.MNA0.30.40.70.92.73.9NAVCT.RC.LNA1.41.61.82.12.22.32.7VCT.SC.INA0.30.40.50.61.31.52.1VCS.SC.INA0.30.60.60.70.70.81.2SVO.RC.MNA3.22.82.72.82.93.0NASVO.SC.MNA0.80.80.91.11.31.82.4SOC.RC.MNA0.61.01.21.43.13.9NAHZO.RC.MNA0.81.21.5NANANANAHZO.RC.LNA1.21.61.71.81.9NANAHZO.SC.MNA0.71.01.11.11.21.41.8HZO.SC.LNA0.60.60.80.80.91.31.3HCT.SC.INA0.70.71.31.41.4NANA34Life-Cycle Cost and Payback Period AnalysesLife-Cycle Cost Baseline Level Sensitivity AnalysisLCC sensitivity analyses were performed for AEO High Growthand Low Growth fuel escalation rate scenarios.•The choice of fuel escalation ratescenario impacted the life-cycle costfor all equipment classes.•The minimum life-cycle cost efficiency level (maximum life-cycle costsavings level) differed from theAEO reference case for only twoequipment classes, VOP.SC.M and SOC.RC.M and only when the HighGrowth scenario was examined.Sensitivity of the LCC Savings and Payback Period to assumedbaseline level was also examined.•The minimum life-cycle-cost level isunaffected by choice of baselineefficiency level, but the magnitude of the savings is affected.•PBP is affected, with PBP generallyincreasing when higher baselineefficiency levels are assumed.35Other IssuesLife-Cycle Cost and Payback Period AnalysesDOE invites comments and recommendations from stakeholders onany other aspects related to the Life-Cycle Cost Analysis.36