CHAPTER 1 7

. REGULATORY IMPACT ANALYSIS

TABLE OF CONTENTS

17.1 INTRODUCTION

................................ ................................ ................................ ... 17

- 1

17.2 NON

- REGULATORY POLICIES

................................ ................................ .......... 17

- 2

17.2.1 Methodology

................................ ................................ ................................ ............ 17

- 2

17.2.2 Assumptions Regarding Non

- Regulatory Policies

................................ .................. 17

- 3

17.2.3 Policy Interactions

................................ ................................ ................................ ... 17

- 4

17.3 NON

- REGULATORY POLICY AS SUMPTIONS

................................ ................ 17

- 4

17.3.1 No New Regulatory Action

................................ ................................ ..................... 17

- 5

17.3.2 Consumer Rebates

................................ ................................ ................................ ... 17

- 5

17.3.2.1 Methodology

................................ ................................ .......................... 17

- 5

17.3.2.2 Analysis

................................ ................................ ................................ .. 17

- 6

17.3.3 Consumer Tax Credits

................................ ................................ ........................... 17

- 10

17.3.4 Manufacturer Tax Credits

................................ ................................ ...................... 17

- 13

17.3.5 Voluntary Energy Efficiency Targets

................................ ................................ .... 17

- 15

17.3.6 Bulk Government Purchases

................................ ................................ .................. 17

- 18

17.4 IMPACTS OF NON

- REGULATORY ALTERNATI VES

................................ ... 17

- 21

LIST OF TABLES

Table 17.1.1 Non

- Regulatory Alternatives to National Standards

................................ ...... 17

- 1

Table 17.2.1 Efficiency Levels for Trial Standard Levels for Packaged Terminal Air Conditioner and Packaged Terminal Heat Pump Equipment Classes (EER)

................................ ................................ ................................ .............. 17

- 4

Table 17.3.1 Benefit/Cost Ratios Without and With Rebates for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

................................ .. 17

- 7

Table 17.3.2 Market Penetrations in the First Year of the Analysis Period Attributable to Consumer Rebates for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

................................ ................................ ... 17

- 10

Table 17.3.3 Market Penetrations in the First Year of the Analysis Period Attributable to Consumer Tax Credits for Packaged Terminal Air Conditioners and

Pack aged Terminal Heat Pumps

................................ ................................ ... 17

- 13

Table 17.3.4 Market Penetrations in the First Year of the Analysis Period Attributable

to Manufact urer Tax Credits for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

................................ ............................ 17

- 15

Table 17.3.5 Estimated Market Barr iers to Energy Efficient PTACs and PTHPs

............ 17

- 16

Table 17.3.6 Reduced Market Barriers to Energy Efficient PTACs and PTHPs

.............. 17

- 17

Table 17.3.7 Market Penetrations in the First Year of the Analysis Period Attributable to Voluntary Energy Efficiency Target s for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

................................ ....... 17

- 18

17

- iTable 17.3.8 Market Penetrations in the First Year of the Analysis Period Attributable to Bulk Government Purchasing of Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

................................ ............................ 17

- 20

Table 17.4.1 Impacts of Non

- Regulatory Alternatives for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps* (TSL 2)

....................... 17

- 24

LIST OF FIGURES

Figure 17.3.1 Market Penetration Curves (TSL 2)

................................ ................................ 17

- 8 Figure 17.4.1 Market Penetration of Packaged Terminal Air Conditioners <7,000 Btu/h Meeting the Target Level in Policy Cases (TSL 2)

............................ 17

- 21 Figure 17.4.2 Market Penetration of Packaged Terminal Air Conditioners 7,000

– 15,000 Btu/h Meeting the Target Level in Policy Cases (TSL 2)

................ 17

- 21 Figure 17.4.3 Market Penetration of Packaged Terminal Air Conditioners >15,000 Btu/h Meeting the Target Level in Policy Cases (TSL 2)

............................ 17

- 22 Figure 17.4.4 Market Penetration of Packaged Terminal Heat Pumps <7,000 Btu/h Meeting the Target Level in Policy Cases (TSL 2)

................................ ...... 17

- 22 Figure 17.4.5 Market Penetration of Packaged Terminal Heat Pumps 7,000

– 15,000 Btu/h Meeting the Target Level in Policy Cases (TSL 2)

............................ 17

- 23 Figure 17.4.6 Market Penetration of Packaged Terminal Heat Pumps >15,000 Btu/h Meeting the Target Level in Policy Cases (TSL 2)

................................ ...... 17

- 23

17

- iiCHAPTER 17. REGULATORY IMPACT AN ALYSIS

17.1 INTRODUCTION

The U.S. Department of Energy (DOE) has determined that the regulatory action described in the Federal Register notice associated with this TSD constitute s an “economically significant regulatory action” under Executive Order (E.O.) 12866

, R egulatory Planning and Review. 58 FR 51735 (October 4, 1993). For such actions, E.O. 12866 requires Federal agencies to provide “a n assessment, including the underlying analysis, of costs and benefits of potentially effective and reasonably feasible alter natives to the planned regulation, identified by the agencies or the public (including improving the current regulation and reasonably viable non

- regulatory actions), and an explanation why the planned regulatory action is preferable to the identified

pote ntial alternatives. ” 58 FR 51735, 51741.

To conduct this analysis , DOE used an integrated National Impact Analysis ( NIA )

- RIA

model built on the NIA model discussed in C hapter 10 for its analysis.

DOE identified five non

- regulatory policy alternatives that possibly could provide

incentives for the same energy efficiency levels as the ones in the trial standard level s (TSL) for packaged terminal air conditioners (PTACs) and packaged terminal heat pumps (PTHPs), which

a re the subject of this rulemaking. The non

- regulatory policy alternatives are listed in Table

17.1.1 , which also includes the “no new regulatory act ion” alternative . DOE evaluated each alternative in terms of its ability to achieve significant e nergy savings at a reasonable cost, and compared the effectiveness of each to the effectiveness of the proposed standard.

Table 17.1.1 Non

- Regulatory Alternatives to National Standards No New Regulatory Action

Consumer Rebates

Consumer Tax Credits

Manufacturer Tax Credits Voluntary Energy Efficiency Targets

Bulk Government Purchases

Sections 17.2 and 17.3 discuss the analysis of five selected policies listed above ( excluding the

alternative of no new regulatory action)

. Section 17.4 present s the results of the policy

alternatives

.

17

- 117.2 NON

- REGULATORY POLICIES

This section describes the method DOE used to ana lyze the energy savings and cost

effectiveness of the non

- regulatory policy alternatives for PTACs and PTHPs

. This section also

describes the assumptions underlying the analysis.

17.2.1 Methodology

DOE used its integrated NIA

- RIA spreadsheet model to calculate the national site energy savings (NES) and net present value (NPV) associated with each non

- regulatory policy

alternative . Chapter 10 of the technical support document (TSD) describes the NIA spreadsheet

model

. Appendix 17

- A discusse s the NIA

- RIA integrated model approach.

DOE quantified the effect of each alternative on the purchase of equipment that meet the efficiency level s corresponding to the levels set for each TSL . After establishing the quantitative assumptions underlying each alternative, DOE appropriately revised inputs to the NIA

- RIA spreadsheet model . The primary model inputs revised were market shares of equipment meeting

the target efficiency level s set for each TSL . The shipments of equipment for any given year

reflect a distribution of efficiency levels. DOE assumed , for each TSL, that new energy efficiency standard s would affect 100 percent of the shipments of equipment that did not meet

the TSL target level in the base case, a whereas the non

- regulatory policies would af fect a smaller percentage of those shipments. DOE made certain assumptions about the percentage of shipments affected by each alternative policy

. DOE used those percentages to calculate the shipment

- weighted average energy consumption and costs of PTACs an d PTHPs attributable to each policy alternative.

Increasing the efficiency of equipment often increases its average installed cost.

However , operating costs generally decrease because energy consumption declines. DOE

therefore calculated an NPV for eac h non

- regulatory alternative in the same way it did for the proposed standard s. In some policy scenarios, increases in total installed cost are mitigated by government rebates or tax credits. Because DOE assumed that consumers would re

- pay credits

and reba tes in some way (such as additional taxes) , DOE did not include rebates or tax credits as a consumer benefit when calculating national NPV. DOE’s analysis also excluded any

administrative costs for the non

- regulatory policies; including such costs would de crease the NPVs slightly.

The following are key measures for evaluating the impact of each alternative.

• National Site Energy Savings (NES) , given in quadrillion Btus (quads), describes the

cumulative national site energy sav ed over the lifetime of equipment purchased

a The base case for the NIA is a market

- weighted average energy efficiency calculated from units at several efficiency levels.

17

- 2during the 30

- year analysis period starting in the effective date of the policy ( 2019

- 2048)

.

• Net Present Value (NPV)

, represents the value of net monetary savings in 2014

, expressed in 2013$

, from equipment purchased during the 30

- yea r analysis period starting in the effective date of the policy ( 2019

- 2048)

. DOE calculated the NPV as

the difference between the present value of installed equipment cost and operating expenditures in the base case and the present value of th o se costs in each policy case. DOE calculated operating expenses (including energy costs ) for the life of equipment

.

17.2.2 Assumptions Regarding Non

- Regulatory Policies

The effects of non

- regulatory policies are by nature uncertain because they depend on program implementa tion

, marketing efforts

, and on consumers’ responses to a program. Because the projected effects depend on assumptions regarding the rate of consumer participation, they are subject to more uncertainty than are the impacts of mandatory standards, which DOE

assumes will be met with full compliance. To increase the robustness of the analysis, DOE conducted a literature review regarding each non

- regulatory policy and consulted with recognized experts to gather information on similar incentive programs that hav e been implemented in the United States. By studying experiences with the various types of programs, DOE sought to make credible assumptions regarding potential market impacts . Section 17.3 presents the sources DOE relied on in developing assumptions about each alternative policy and reports DOE’s conclusions as they affected the assumptions that underlie the modeling of each

alternative policy.

Ea ch non

- regulatory policy that DOE considered would improve the average efficiency

of new PTACs and PTHPs relative to their base case efficiency scenario . The analysis considered that each alternative policy would induce consumers to purchase units h aving t he same efficiency level as required by the proposed standard s (the target level ) set for each TSL

. As opposed to the standards case, however, the policy cases may not lead to 100 percent market penetration of units that meet the target level

.

Table 17.2.1 show s the efficiency level stipulated in the proposed standard s for PTACs

and PTHPs

.

17

- 3Table 17.2.1 Efficiency Levels for Trial Standard Levels for Packaged Termin al Air Conditioner and Packaged Terminal Heat Pump Equipment Classes (EER)

Equipment Class Trial Standard Levels

1 2 3 4 5

PTAC < 7,000 Btu/h 12.2 12.6 13.1 13.6 13.8
7,000

– 15,000 Btu/h 11.5 12.0 12.4 12.9 13.1 > 15,000 Btu/h 9.7 10.0 10.4 10.8 11.0

PTHP < 7,000 Btu/h 12.2 12.6 13.1 13.6 13.8
7,000

– 15,000 Btu/h 11.5 12.0 12.4 12.9 13.1 > 15,000 Btu/h 9.7 10.0 10.4 10.8 11.0

DOE assumed that the effects of non

- regulatory policies would last from the effective

date of standard s through the end of the analysis period ( 2019

- 2048)

.

17.2.3 Policy Interactions

DOE calculated the effects of each non

- regulatory policy separately from those of the other policies. In practice, some policies are most effective when implemented in combination,

such as voluntary efficiency targets implemented with consumer rebates or tax credits. However, DOE attempted to make conservative assumptions to avoid double

- counting policy impacts. The resulting policy impacts are not additive ; the combined effect of several or all policies cannot be inferred from summing their results.

Section 17.4 presents graphs that show the market penetration estimated under each non

regulatory policy for the PTAC and PTHP equipment class es

.

17.3 NON

- REGULATORY POLIC Y ASSUMPTIONS

The following subsections describe DOE’s analysis of the impacts of the five non

regulatory policy alternatives to proposed standard s for PTACs and PTHPs

. (Because the alternative of No New Regulatory Action has no energy or economic impacts, essentially representing the NIA base case, DOE did not perform any additional analysis for that alternative.) DOE developed estimate s of the market penetration of high

- efficiency equipment

both with and without each of the non

- regulatory policy alternatives

.

17

- 417.3.1 No New Regulatory Action

The case in which no new regulatory action is taken with regard to the energy efficiency

of PTACs and PTHPs constitutes the base case, as described in C hapter 10

, National Impact Analysis. The base case provides the basis of comparison for all other policies. By definition, no new regulatory action yields zero NES and an NPV of zero dollars.

17.3.2 Consumer Rebates

DOE considered th e scenario in which the Federal government would provide financial

incentives in the form of rebate s to consumers for purchasing energy

- efficient appliances

. This policy provides a consumer rebate for purchasing PTACs and PTHPs that operate at the same efficiency as stipulated in each TSL ( target level )

.

17.3.2.1 Methodology

DOE based its evaluation methodology for consumer rebates on a comprehensive study of California’s potential for achieving energy efficiency

. Th e study, performed by XENERGY,
Inc., b summarize d experiences with various utility rebate programs. 1 XENE RGY’s analytical

method utilized graphs, or penetration curves , that estimate the market penetration of a technology based on its benefit/cost (B/C) ratio. DOE consulted with experts and reviewed other methods of estimating the effect of consumer rebate programs on the market penetration of efficient technologies. The other methods, developed after the referenced XENERGY report was published, 2

, 3

, 4

, 5

, 6

, 7 used different approaches: other economic parameters (e.g., payback period), expert surveys, or model calibration based on specific utility program data rather than

multi

- utility data

. Some models in use by energy efficiency program evaluation experts were so

client

- specific that generic relationships between economic parameters and consumer res ponse
could not be established. 5 DOE decided that the most appropriate available method for th is RIA analysis was the XENERGY approach of penetration curves based on B/C ratio, which incorporates lifetime operating cost savings

.

XENERGY’s model estimates market impacts induced by financial incentives based on the premise that two types of inform ation diffusion drive the adoption of new technologies.

Internal sources of information encourage consumers to purchase new equipment primarily through word

- of

- mouth from early adopters. External sources affect consumer purchase decisions through marketing efforts and information from outside the consumer group. Appendix

17

- A contains additional details on internal and external information diffusion.

XENERGY’s model equation accounts for the influences of both internal and external sources of information by superimposing the two components. Combining the two mechanisms for information diffusion, XENERGY’s model generates a set of penetration (or implementation)

curves for a po licy measure. XENERGY calibrated the curves based on participation data from

b XENERGY is now owned by KEMA, Inc. ( www.kema.com )

17

- 5utility rebate programs. The curves illustrate the increased penetration (i.e., increased market share) of efficient equipment driven by consumer response to changes in B/C ratio induced by rebate programs. The penetration curves depict various diffusion patterns based on perceived

market barriers (from no

- barriers to extremely

- high

- barriers ) to consumer purchase of high

efficiency equipment

. DOE adjusted the XENERGY former penetra tion curves based on expert advice founded on more recent utility program experience. 5

, 8

DOE modeled the effects of a consumer rebate polic y for PTACs and PTHPs by determining , for each TSL, the increase in market penetration of equipment meeting the target

level relative to their market penetration in the base case. It used the interpolation method presented in Blum et al (2011) 9 to create cu stomized penetration curves based on relationships between actual base case market penetrations and actual B/C ratios. To inform its estimate of B/C ratios provided by a rebate program DOE performed a thorough nationwide search for existing rebate programs for PTACs and PTHPs . It gathered data on utility or agency rebates throughout the nation for this equipment , and used this data to calibrate the customized penetration curves it developed for each equipment class so they can best reflect the market

barrie r level faced by each equipment class

. Section 17.3.2.2 shows the interpolated curve s used in the analysis.

17.3.2.2 Analysis

For the six equipment class es it analyzed

, DOE estimated t he effect of increasing its B/C

ratio via a rebate that would pay all ( or part ) of the increased installed cost of a unit that met the target efficiency level compared to one meeting the baseline efficiency level. c To inform its

estimate of an appropriate rebate amount, DOE performed a thorough nationwide search for existing rebate programs for PTACs and PTHPs

. It gathered data from a sample of utility and

agency rebate programs that includes 37 rebates for PTACs and PTHPs initiated by 30 uti lities or agencies in various States. (Appendix 17

- A

, identifies the rebate programs .) To represent the rebate level, DOE used t he simple average of the rebate amounts in these programs. DOE

assumed th at rebates would remain in effect at the same levels throughout the forecast period ( 2019

- 2048)

.

For each of the six equipment classes

, DOE first calculated the B/C ratio without a rebate using the difference in total installed costs (C) and lifetime operating cost savings (B) between the unit meeting th e target level and the baseline unit. It then calculated the B/C ratio given a rebate for the unit meeting the target efficiency level

. Because the rebate reduced the incremental cost, the unit receiving the rebate had a l arger B/C ratio. Table 17.3.1 show s the effect of

con sumer rebates on the B/C ratio for each TSL in the first year of the corresponding analysis period (2019)

.

c The baseline technology for each product class is defined in the e ngineering a nalysis

, Chapter 5, as the technology that represents the basic characteristics of products in that class

. A baseline unit typically is one that just meets current Federal energy conservation standards and provides basic consumer utility

.

17

- 6Table 17.3.1 Benefit/Cost Ratios Without and W ith Rebates for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

Trial Standard Levels

PTAC 1 2 3 4 5
< 7,000 Btu/h

B/C Without Rebate 0.8 0.8 0.8 0.8 0.8 Rebate ( 2013$ ) 34.82 37.13 39.43 41.74 42.89

B/C With Rebate infinite 4.8 1.8 1.4 1.2

Market Barrier s No No

- Low High

xHigh High

- xHigh High

- xHigh

7,000

– 15,000 Btu/h

B/C Without Rebate 0.8 0.9 0.9 0.9 0.9 Rebate ( 2013$ ) 43.95 47.70 51.45 55.20 57.08

B/C With Rebate infinite infinite 4.0 2.2 1.9

Market Barrier s No

- Low No

- Low Low

Moderate Moderate

High Moderate

High
> 15,000 Btu/h

B/C Without Rebate 0.9 0.8 0.7 0.7 0.6 Rebate ( 2013$ ) 48.74 52.67 56.60 60.52 62.49

B/C With Rebate infinite infinite 2.1 1.2 1.1

Market Barrier s No High

xHigh High

xHigh High

- xHigh High

- xHigh

PTHP 1 2 3 4 5
< 7,000 Btu/h

B/C Without Rebate 1.3 1.2 1.1 1.0 1.0 Rebate ( 2013$ ) 32.91 33.14 33.37 33.60 33.71

B/C With Rebate infinite infinite 2.6 1.7 1.6

Market Barrier s Low

Moderate Low

Moderate xHigh xHigh xHigh

7,000

– 15,000 Btu/h

B/C Without Rebate 2.0 1.5 1.4 1.3 1.3
Rebate ( 2013$ ) 40.95 41.32 41.70 42.07 42.26

B/C With Rebate infinite infinite 6.4 2.9 2.4

Market Barrier s Low

Moderate No

- Low Low

Moderate Moderate

High xHigh

> 15,000 Btu/h

B/C Without Rebate 1.3 1.3 1.1 1.0 1.0
Rebate ( 2013$ ) 45.71 46.10 46.49 46.88 47.08

B/C With Rebate infinite infinite 3.2 1.7 1.5

Market Barrier s Curve Low

Moderate No

- Low xHigh xHigh xHigh

17

- 7DOE used the se B/C ratios along with the penetration curve s shown in Figure 17.3.1 to estimate the percentage of consumers who would purchase PTACs and PTHPs that meet the target level both with and without a rebate incentive. The p enetration curve s calculated by DOE to represent the market behavior for each equipment class at TSL 2 are indicated in Table 17.3.1

.

PTAC < 7,000 Btu/h PTHP < 7,000 Btu/h

PTAC 7,000

– 15,000 Btu/h PTHP 7,000

– 15,000 Btu/h

PTAC > 15,000 Btu/h PTHP > 15,000 Btu/h

Figure 17.3.1 Market Penetration Curves (TSL 2 ) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 10 20 30 40 50 60 70 80 90 100Market Penetration

B/C Ratio

Mkt Penetration Curve Without Rebate With Rebate 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 10 20 30 40 50 60 70 80 90 100Market Penetration

B/C Ratio

Mkt Penetration Curve Without Rebate With Rebate

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 10 20 30 40 50 60 70 80 90 100Market Penetration

B/C Ratio

Mkt Penetration Curve Without Rebate With Rebate 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 10 20 30 40 50 60 70 80 90 100Market Penetration

B/C Ratio

Mkt Penetration Curve Without Rebate With Rebate

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 10 20 30 40 50 60 70 80 90 100Market Penetration

B/C Ratio

Mkt Penetration Curve Without Rebate With Rebate 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 10 20 30 40 50 60 70 80 90 100Market Penetration

B/C Ratio

Mkt Penetration Curve Without Rebate With Rebate

17

- 8For each equipment class, DOE next estimated the percent increase s represented by the change in penetration rate shown on the corresponding penetration curve. It then added this percent increase to t he market share of units that meet the target level in the base case to obtain the market share of units that meet the targ et level in the rebate policy case. d

Table 17 .3.2 summarizes DOE’s assumptions for PTACs and PTHPs regarding the market penetration of products i n the start year of analysis that meet the target efficiency level at
each TSL given a consumer rebate

.

d Note that the percent increases are upper bounded by the total market share below the target level in the base case.

17

- 9Table 17.3.2 Market Penetrations in the First Y ear of the A nalysis Period Attributable

to Consumer R ebates for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

Trial Standard Levels

PTAC 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 63.5% 36.5% 0.0% 0.0% 0.0% Policy Case Market Share 63.5% 76.6% 0.2% 0.1% 0.1%

Increased Market Share 0.0% 40.0% 0.2% 0.1% 0.1%

7,000

– 15,000 Btu/h

Base

- Case Market Share 31.3% 29.8% 2.5% 0.9% 0.3%
Policy Case Market Share 66.5% 87.5% 27.1% 7.2% 2.3%

Increased Market Share 35.2% 57.7% 24.6% 6.3% 2.0%

> 15,000 Btu/h

Base

- Case Market Share 46.1% 0.1% 0.0% 0.0% 0.0%
Policy Case Market Share 99.9% 56.2% 0.4% 0.1% 0.1%

Increased Market Share 53.8% 56.1% 0.4% 0.1% 0.1%

PTHP 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 15.9% 17.5% 0.0% 0.0% 0.0% Policy Case Market Share 74.9% 76.5% 0.4% 0.2% 0.1%

Increased Market Share 59.0% 59.0% 0.4% 0.2% 0.1%
7,000

– 15,000 Btu/h

Base

- Case Market Share 8.0% 30.1% 9.5% 0.5% 0.0% Policy Case Market Share 59.9% 80.0% 43.5% 3.2% 0.3%

Increased Market Share 51.9% 49.9% 34.0% 2.7% 0.3%
> 15,000 Btu/h

Base

- Case Market Share 2.8% 30.6% 0.0% 0.0% 0.0% Policy Case Market Share 69.4% 82.2% 0.7% 0.2% 0.1%

Increased Market Share 66.7% 51.6% 0.7% 0.2% 0.1%

DOE used the resulting annual increase s in market shares as inputs t o rep resent the rebate policy case scenario in its NIA

- RIA model. Appendix 17

- A shows the annual market share increases due to this policy. Section 17.4 presents the resulting market penetration trends for the policy case of con sumer rebates for PTACs and PTHPs

.

17.3.3 Consumer Tax Credits

DOE estimated the effects of tax credits on consumer purchases based on its previous analysis of consumer participation in tax credits. DOE supported its approach using data from Oregon State’s tax credit program for energy

- efficient appliances. DOE also incorporated previous research that disaggregated the effe ct of rebates and tax credits into a direct price effect

,

17

- 10which deriv es from the savings in purchase price

, and an announcement effect , which is independent of the amount of the incentive

. 10

, 11 The announce ment effect derives from the credibility that a technology receives from being included in an incentive program, as well as changes in product marketing and modifications in markup and pricing. DOE assumed that the rebate and consumer tax credit policies w ould encompass both dire ct price effect s and

announcement effect s, and that half the increase in market penetration associated with either policy would be due to the direct price effect and ha lf to the announcement effect.

In estimat ing the effects of a t ax credit on purchases of consumer products that meet new efficiency standards, DOE assumed the amount of the tax credit would be the same as the corresponding rebate amount discussed above

.

DOE estimated that fewer consumers would participate in a tax c redit program than would take advantage of a rebate. Research has shown that the delay required for a consumer to receive a tax credit, plus the added time and cost in preparing the tax return, make a tax credit

incentive less effective than a rebate recei ved at the time of purchase. Based on previous analyses, DOE assumed that only 60 percent of the consumers who would take advantage of a rebate would take advantage of a tax credit. 12

In preparing its assumptions to estimate the effects of tax credits on consumer purchases

of PTACs and PTHPs , DOE also reviewed other tax credit programs that have been offered at both the Federal and State levels for energy

- efficient appliances.

The Energy Policy Act of 2005 (EPA CT 2005 ) included Federal tax credits for

consumers who purchase energy

- efficient products

. 13 Those tax credits were in effect in 2006

and 2007, expired in 2008, were reinstated for 2009

– 2010 by the American Recovery and

Reinvestment Act of 2009 ( ARRA ), extended by Congress for 2011 with some modifications

, and expired at the end of 2011

. 14

, 15 The American Taxpayer Relief Act of 2012 extended, with some modifications, residential tax credits for air conditioners, heat pumps, furnaces, and water heaters placed in service between January 1, 2012 and December 31, 2013. 16 DOE reviewed Internal Revenue Service data on the numbers of taxpayers who claimed the tax credits during tax years 2006 and 2007. DOE also reviewed data from an earlier Federal energy conservation tax credit progra m in place in the 1980s. However, DOE did not find data specific enough to

PTACs and PTHPs to warrant adjusting its analysis method for the Consumer Tax Credits policy case. Appendix 17

- A contains more information on Federal consumer tax credits.

DOE al so reviewed its previous analysis o f Oregon’s tax credits for clothes washers to provide support for its assumptions. 17 In that previous analysis, DOE compared the market

shares of ultra

- high efficiency (UHE) residential clothes washers in Oregon, which offered both

State tax cr edits and utility rebates, with those in Washington State, which offered only utility rebates during the same period. Based on this analysis, DOE estimated that in Oregon the impact

of tax credits was 62 percent of the impact of rebates for UHE clothes was hers having equivalent efficiency. This finding supports its original assumption that participation in a tax credit program

17

- 11would be about 60 percent of participation in a rebate program. Additional discussion of State tax credits for Oregon and other stat es is in Appendix 17

- A.

DOE applied the assumed 60 percent participation described above to the penetration rates estimated for the rebate policy to estimate penetration rates attributable to consumer tax credits. In doing so, DOE incorporated the assum ptions for consumer response to financial incentives from the penetration curves selected for PTACs and PTHPs.

Table 17.3.3 summarizes DOE’s assumptions for PTAC s and PTHPs regarding the market penetration of units in the start year of analysis that meet the efficiency level at each TSL given a consumer tax credit.

17

- 12Table 17.3.3 Market Penetrations in the First Y ear of the A nalysis Period Attributable

to Consumer Tax Credits for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

Trial Standard Levels

PTAC 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 63.5% 36.5% 0.0% 0.0% 0.0% Policy Case Market Share 63.5% 60.6% 0.1% 0.1% 0.1%

Increased Market Share 0.0% 24.0% 0.1% 0.1% 0.1%

7,000

– 15,000 Btu/h

Base

- Case Market Share 31.3% 29.8% 2.5% 0.9% 0.3%
Policy Case Market Share 52.4% 64.4% 17.3% 4.7% 1.5%

Increased Market Share 21.1% 34.6% 14.8% 3.8% 1.2%

> 15,000 Btu/h

Base

- Case Market Share 46.1% 0.1% 0.0% 0.0% 0.0%
Policy Case Market Share 78.4% 33.8% 0.2% 0.1% 0.1%

Increased Market Share 32.3% 33.7% 0.2% 0.1% 0.1%

PTHP 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 15.9% 17.5% 0.0% 0.0% 0.0% Policy Case Market Share 51.3% 52.9% 0.3% 0.1% 0.1%

Increased Market Share 35.4% 35.4% 0.3% 0.1% 0.1%
7,000

– 15,000 Btu/h

Base

- Case Market Share 8.0% 30.1% 9.5% 0.5% 0.0% Policy Case Market Share 39.1% 60.1% 29.9% 2.1% 0.2%

Increased Market Share 31.2% 30.0% 20.4% 1.6% 0.2%
> 15,000 Btu/h

Base

- Case Market Share 2.8% 30.6% 0.0% 0.0% 0.0% Policy Case Market Share 42.8% 61.5% 0.4% 0.1% 0.1%

Increased Market Share 40.0% 31.0% 0.4% 0.1% 0.1%

The increased market shares attributable to consumer tax credits shown in Table 17.3.3 were used as inputs in the NIA

- RIA model. Appendix 17

- A shows the annual market share increases due to this policy. Section 17.4 presents the resulting market penetratio n trends for the policy case of consumer tax credits for PTACs and PTHPs that meet the efficiency level for each

TSL

.

17.3.4 Manufacturer Tax Credits

To analyze the potential effects of a poli cy that offers tax credits to manufacturers that produce PTACs and PTHPs that meet the target efficiency level at each TSL, DOE assumed that a manufacturer tax credit would lower the consumer’s purchase cost by an amount equivalent to that provided by the consumer rebates or tax credits described above. DOE further assumed that

17

- 13manufacturers would pass on some of their reduced costs to consumers, causing a direct price effect. DOE assumed that no announcement effect would occur, because the program would no t
be visible to consumers. e Because the direct price effect is approximately equivalent to the

announcement effect, 10 DOE estimated that a manufacturer tax credit would induce half the number of consumers assumed to take advantage of a consumer tax credit to purchase more

e fficient equipment. Thus the assumed participation rate is equal to 30 percent of the number of consumers who would participate in a rebate program.

DOE attempted to investigate manufacturer response to the Energy Efficient Appliance

Credits for manufactu rers mandated by EPACT 2005. 18 Those manufacturer tax credits have been in effect for dishwashers, clothes washers and refrigerators produced beginning in 2009.

DOE was unable to locate data from the Internal Revenue Service or other s ources on manufacturer response to the Federal credits. Appendix 17

- A presents details on Federal

manufacturer tax credits.

DOE applied the assumption of 30 percent participation to the penetration rates predicted for the rebate policy to estimate the eff ects of a manufacturer tax credit policy. In doing so, the Department incorporated the assumptions for consumer response to financial incentives from the penetration curves calculated for PTACs and PTHPs

.

Table 17.3.4 summarize DOE’s assumptions for PTACs and PTHPs regarding the market penetration of units in the start year of analysis that meet the efficiency level at each TSL given a

manufacturer tax credit.

e Note that this is a conservative a ssumption, since it is possible that manufacturers or utility/agency efficiency programs might promote the models for which manufacturers increase production due to the tax credits, which in turn might induce some announcement effect. However, DOE found no data on such programs on which to base an estimate of the magnitude of this possible announcement effect on consumer behavior.

17

- 14Table 17.3.4 Mark et Penetrations in the First Y ear of the A nalysis Period Attributable

to Manufacturer Tax Credits for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

Trial Standard Levels

PTAC 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 63.5% 36.5% 0.0% 0.0% 0.0% Policy Case Market Share 63.5% 48.5% 0.1% 0.0% 0.0%

Increased Market Share 0.0% 12.0% 0.1% 0.0% 0.0%

7,000

– 15,000 Btu/h

Base

- Case Market Share 31.3% 29.8% 2.5% 0.9% 0.3%
Policy Case Market Share 41.8% 47.1% 9.9% 2.8% 0.9%

Increased Market Share 10.6% 17.3% 7.4% 1.9% 0.6%

> 15,000 Btu/h

Base

- Case Market Share 46.1% 0.1% 0.0% 0.0% 0.0%
Policy Case Market Share 62.2% 16.9% 0.1% 0.0% 0.0%

Increased Market Share 16.2% 16.8% 0.1% 0.0% 0.0%

PTHP 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 15.9% 17.5% 0.0% 0.0% 0.0% Policy Case Market Share 33.6% 35.2% 0.1% 0.0% 0.0%

Increased Market Share 17.7% 17.7% 0.1% 0.0% 0.0%
7,000

– 15,000 Btu/h

Base

- Case Market Share 8.0% 30.1% 9.5% 0.5% 0.0% Policy Case Market Share 23.6% 45.1% 19.7% 1.3% 0.1%

Increased Market Share 15.6% 15.0% 10.2% 0.8% 0.1%
> 15,000 Btu/h

Base

- Case Market Share 2.8% 30.6% 0.0% 0.0% 0.0% Policy Case Market Share 22.8% 46.0% 0.2% 0.0% 0.0%

Increased Market Share 20.0% 15.5% 0.2% 0.0% 0.0%

The increased market shares attributab le to a manufacturer tax credit shown in Table

17.3.4 were used as inputs in the NIA

- RIA model. Appendix 17

- A shows the annual market share increases due to this policy

. Section 17.4 presents the resulting market penetratio n trends

for the policy case of manufacturer tax credits for PTACs and PTHPs

.

17.3.5 Voluntary Energy Efficiency Targets

For each equipment class , DOE assumed that voluntary energy efficiency targets would be achieved as manufacturers gradually stopped producing units that operated below the efficiency level s et for each TSL . DOE assumed that the impetus for phasing out production of

low

- efficiency units would be a program with impacts similar to those of the ENERGY STAR labeling program conducted by the Environmental Protection Agency (EPA) and DOE in

17

- 15conjunction with industry partners . The ENERGY STAR program specifie s the minimum energy

efficienc ies that various products must have to receive the ENERGY STAR label . ENERGY STAR encourages consumers to purchase efficient products via marketing that promo tes consumer label recognition, various incentive programs that adopt the ENERGY STAR specifications, and manufacturers’ promotion of their qualifying appliances. ENERGY STAR projects market penetration of compliant appliances and estimates the percentage of sales of compliant appliances that are attributable to the ENERGY STAR program.

Researchers have analyzed the ENERGY STAR program’s effects on sales of several consumer products. Program efforts generally involve a combination of information

dissemi nation and utility or agency rebates. The analyses have been based on State

- specific data

on percentages of shipments of various appliances that meet ENERGY STAR specifications. The analyses generally have concluded that the market penetration of ENERGY ST AR

- qualifying appliances is higher in regions or States where ancillary promotional programs have been

active

. 19

, 20

, 21

DOE believes that informational incentive programs

– like ENERGY STAR, or any other labeling program sponsored by industry or other organizations

– are likely to reduce the market barriers to more efficient equipment over time. Table 17.3.5 shows the estimated market barriers to energy efficient PTACs and PTHPs in the base case for each TSL. DOE estimates that voluntary energy efficiency targets could reduce these barriers to lower level s over 10 years

. Table 1 7.3.6 shows the reduced market barriers to energy efficient PTACs and PTHPs for each

TSL. DOE followed the methodology presented by Blum et al ( 2011) 22 to evaluate the effects that such a reduction in market barriers have on the market penetration of each equipment class

of PTACs and PTHPs . The methodology relies on interpolated market penetration curves to

calculate

– given a B/C ratio

– how t he market penetration of more efficient units increases as

the market barrier level to those units decreases.

Table 17.3.5 Estimated Market Barriers to Energy Efficient P TACs and PTHPs

Trial Standard Levels

PTAC 1 2 3 4 5

< 7,000 Btu/h No No

- Low Hg

- xHg Hg

- xHg Hg

- xHg
7,000

– 15,000 Btu/h No

- Low No

- Low Lo

- Mod Mod

- Hg Mod

- Hg > 15,000 Btu/h No Hg

- xHg Hg

- xHg Hg

- xHg Hg

- xHg

PTHP 1 2 3 4 5 < 7,000 Btu/h Lo

- Mod Lo

- Mod xHigh xHigh xHigh
7,000

– 15,000 Btu/h Lo

- Mod No

- Low Lo

- Mod Mod

- Hg xHigh > 15,000 Btu/h Lo

- Mod No

- Low xHigh xHigh xHigh

No: No barriers

No

- Low: No

- to

- Low barriers

Lo

- Mod: Low

- to

- Moderate barriers

Mod

- Hg: Moderate

- to

- High barriers Hg

- xHg: High

- to

- Extremely

- High barriers xHigh: Extremely high barriers

17

- 16Table 17.3.6 Reduced Market Barriers to Energy Efficient PTACs and PTHPs

Trial Standard Levels

PTAC 1 2 3 4 5

< 7,000 Btu/h No No High High High
7,000

– 15,000 Btu/h No No Low Moderate Moderate > 15,000 Btu/h No High High High High

PTHP 1 2 3 4 5 < 7,000 Btu/h Low Low High High High
7,000

– 15,000 Btu/h Low No Low Moderate High > 15,000 Btu/h Low No High High High

Table 17.3.7 summarizes DOE’s assumptions for PTACs and PTHPs regarding the market penetration of units in the start year of analysis that meet the efficiency level at each TSL given voluntary energy efficiency targets.

17

- 17Table 17.3.7 Market Penetrations in the First Y ear of the A nalysis Period Attributable

to V oluntary Energy E fficiency T argets for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

Trial Standard Levels

PTAC 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 63.5% 36.5% 0.0% 0.0% 0.0% Policy Case Market Share 63.5% 37.7% 0.1% 0.0% 0.1%

Increased Market Share 0.0% 1.1% 0.1% 0.0% 0.1%

7,000

– 15,000 Btu/h

Base

- Case Market Share 31.3% 29.8% 2.5% 0.9% 0.3%
Policy Case Market Share 34.5% 34.1% 7.1% 3.8% 0.5%

Increased Market Share 3.2% 4.3% 4.6% 2.9% 0.2%

> 15,000 Btu/h

Base

- Case Market Share 46.1% 0.1% 0.0% 0.0% 0.0%
Policy Case Market Share 46.1% 0.2% 0.0% 0.0% 0.0%

Increased Market Share 0.0% 0.1% 0.0% 0.0% 0.0%

PTHP 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 15.9% 17.5% 0.0% 0.0% 0.0% Policy Case Market Share 19.3% 19.5% 0.1% 0.1% 0.1%

Increased Market Share 3.4% 2.1% 0.1% 0.1% 0.1%
7,000

– 15,000 Btu/h

Base

- Case Market Share 8.0% 30.1% 9.5% 0.5% 0.0% Policy Case Market Share 20.1% 40.4% 16.2% 1.1% 0.1%

Increased Market Share 12.1% 10.3% 6.7% 0.6% 0.1%
> 15,000 Btu/h

Base

- Case Market Share 2.8% 30.6% 0.0% 0.0% 0.0% Policy Case Market Share 10.8% 38.4% 0.1% 0.1% 0.1%

Increased Market Share 8.0% 7.9% 0.1% 0.1% 0.1%

The increased market shares attributable to voluntary energy efficiency targets shown in

Table 17.3.7 were used as inputs in the NIA

- RIA model. Appendix 17

- A shows the annual

market sh are increases due to this policy

. Section 17.4 presents the resulting market penetratio n trends for the policy case of voluntary energy efficiency targets for PTACs and PTHPs that meet the efficiency level for each TSL

.

17.3.6 Bulk Government Purchases

B ulk government purchases can lead to Federal, State, and local governments purchasing large quantities of equipment that meet the target efficiency level . Combining the market

demands of mu ltiple public sectors also can provide a market signal to manufacturers and vendors that some of their largest customers seek equipment that meet an efficiency target at

17

- 18favorable p rices. Such a program also can induce “market pull,” wh ereby manufacturers and vendors would achieve economies of scale for high efficiency equipment

.

Most of the previous bulk government purchase (procurement) initiatives at the Federal, State, and municipal levels have not tracked data on numbers of purc hases or degree of compliance with procurement specifications. In many cases, procurement programs are decentralized, being part of larger State or regional initiatives. DOE based its assumptions regarding the effects of this policy on studies the Federal Energy Management Program (FEMP) performed regarding the savings potential of its procurement specifications for appliances and other equipment. FEMP, however, does not track purchasing data, because of the complex range of purchasing systems, large number of vendors, and so on . States, counties, and municipalities have demonstrated increasing interest and activity in “green purchasing." Although many of the programs target office equipment, the growing infrastructure for developing and applying efficient p urchasing specifications indicates that bulk government purchase programs are

feasible

. 23

, 24

DOE assumed that government agencies would administer bulk purchasing programs for

PTACs and PTHPs

. There are currently no FEMP procurement guidelines in place for PTACs

and PTHPs

. 25 DOE reviewed its own pre vious research on the potential for market transformation through bulk government purchases. Its major study analyzed several scenarios based on the assumption that 20 percent of Federal equipment purchas es in 2000 already incorporated energy efficiency re quirements based on FEMP guidelines. One scenario in the DOE report showed energy efficient purchasing ram ping up during 10 years from 20 percent to 80 percent of all Federal purchases. 26 Based on this study, DOE estimated that a bulk government purchas e program instituted within a 10

- year period would result in at least 80 percent of government

- purchased P TACs and PTHPs meeting target efficiency levels.

DOE assumed that bulk government purchases would affect a subset of federal government owned buildings cooled by individual room air conditioners or heat pumps

. According to the 2003 Commercial Buildings E nergy Consumption Survey (CBECS 2003 ) 27

,

m ost of the cooled floor space of t his subset of buildings (61 percent for PTACs, and 82 percent for PTHPs) would consist of public buildings used for education, lodging, offices and non

refrigerated warehouses. They represent about 1.8 percent and 0.3 percent of the floor space of

all commercial buildings cooled

– respectively

– by individual room air conditioners and

in d ividual room heat pumps

. 27 DOE therefore estimated that these percentages of U.S. commercial buildings constitute the market to which this policy would apply.

DOE estimated that starting in the first policy year ( 201 7 for TSL 1, and 2019 for the remaining TSLs ) , each year of a bulk government purchase policy would result in an increasing percent of shipments of government

- purchased units beyond the base case that would meet target efficiency levels. DOE estimated that within 10 years bulk government purchasing programs would result in 80 percent of the PTACs and PTHPs market for federal government owned commercial buildings meeting target levels. DOE modeled the bulk government purchase

17

- 19program assuming that the market share for PTACs and PTHPs achieved in the tenth year would be at least maintained throughout the rest of the forecast period.

Table 17.3.8 summarizes DOE’s assumptions for PTACs and PTHPs regarding the market penetration of units in the start year of analysis that meet the efficiency level at each TSL given bulk government purchasing.

Table 17.3.8 Market Penetrations in the First Y ear of the A nalysis Per iod Attributable

to Bulk Government Purchasing o f Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

Trial Standard Levels

PTAC 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 63.5% 36.5% 0.0% 0.0% 0.0% Policy Case Market Share 63.5% 37.2% 0.4% 0.4% 0.4%

Increased Market Share 0.0% 0.7% 0.4% 0.4% 0.4%

7,000

– 15,000 Btu/h

Base

- Case Market Share 31.3% 29.8% 2.5% 0.9% 0.3%
Policy Case Market Share 31.9% 30.3% 2.9% 1.4% 0.7%

Increased Market Share 0.6% 0.5% 0.4% 0.4% 0.4%

> 15,000 Btu/h

Base

- Case Market Share 46.1% 0.1% 0.0% 0.0% 0.0%
Policy Case Market Share 46.9% 0.5% 0.4% 0.4% 0.4%

Increased Market Share 0.8% 0.4% 0.4% 0.4% 0.4%

PTHP 1 2 3 4 5
< 7,000 Btu/h

Base

- Case Market Share 15.9% 17.5% 0.0% 0.0% 0.0% Policy Case Market Share 15.9% 17.5% 0.1% 0.1% 0.1%

Increased Market Share 0.0% 0.1% 0.1% 0.1% 0.1%
7,000

– 15,000 Btu/h

Base

- Case Market Share 8.0% 30.1% 9.5% 0.5% 0.0% Policy Case Market Share 8.0% 30.2% 9.5% 0.6% 0.1%

Increased Market Share 0.0% 0.1% 0.1% 0.1% 0.1%
> 15,000 Btu/h

Base

- Case Market Share 2.8% 30.6% 0.0% 0.0% 0.0% Policy Case Market Share 2.8% 30.6% 0.1% 0.1% 0.1%

Increased Market Share 0.0% 0.1% 0.1% 0.1% 0.1%

The increased market shares attributable to bulk government purchasing shown in Table

17.3.8 were used as inputs in the NIA

- RIA model. Appendix 17

- A shows the annual market share increases due to this policy that DOE used as inputs to the NIA

- RIA model. Section 17.4

below presents the resulting market penetration trends for the policy case of bulk government purchase of PTACs and PTHPs

.

17

- 2017.4 IMPACT S OF NON

- REGULATORY ALTERNATI VE S

Figure 17.4.1 through Figure 17.4.6 show the effects of each non

- regulatory policy on market penetration for the six equipment classes DOE analyzed. R elative to the base case, the policy cas es increase the market sha res that meet the target level. Recall the proposed standards (not shown in the figures) would result in a 100

- percent market penetration of equipment th at

meet s the target efficiency level.

Figure 17.4.1 Market Penetration of Packaged Terminal Air Conditioners <7,000 Btu/h Meeting the Target Level in Policy Cases (TSL 2 )

Figure 17.4.2 Market Penetration of Packaged Terminal Air Conditioners 7,000

– 15,000 Btu/h Meeting the Target Level in Policy Cases (TSL 2 ) 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201920202021202220232024202520262027202820292030203120322033203420352036203720382039204020412042204320442045204620472048 Rebates

Cons Tax Credits

Manf Tax Credits

Vol Eff Targets

Govt Bulk Purch

Base case

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201920202021202220232024202520262027202820292030203120322033203420352036203720382039204020412042204320442045204620472048 Rebates

Cons Tax Credits

Manf Tax Credits

Vol Eff Targets

Govt Bulk Purch

Base case

17

- 21Figure 17.4.3 Market Penetration of Packaged Terminal Air Conditioners >15,000 Btu/h Meeting the Tar get Level in Policy Cases (TSL 2 )

Figure 17.4.4 Market Penetration of Packaged Terminal Heat Pumps <7,000 Btu/h Meeting the Tar get Level in Policy Cases (TSL 2 ) 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201920202021202220232024202520262027202820292030203120322033203420352036203720382039204020412042204320442045204620472048 Rebates

Cons Tax Credits

Manf Tax Credits

Vol Eff Targets

Govt Bulk Purch

Base case

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201920202021202220232024202520262027202820292030203120322033203420352036203720382039204020412042204320442045204620472048 Rebates

Cons Tax Credits

Manf Tax Credits

Vol Eff Targets

Govt Bulk Purch

Base case

17

- 22Figure 17.4.5 Market Penetration of Packaged Terminal Heat Pumps 7,000

– 15,000 Btu/h Meeting the Target Level in Policy Cases (TSL 2 )

Figure 17.4.6 Market Penetration of Packaged Terminal Heat Pumps >15,000

Btu/h Meeting the Target Level in Policy Cases (TSL 2 )

Table 17.4.1 show s the national energy savings and net present value for five non

regulatory policies analyzed in detail for PTACs and PTHPs . T he target level for each policy equals the efficiency level s proposed for standard s in TSL 2

. The case in which no regulatory action is taken with regard to PTACs and PTHPs constitute s the base case (or "No New Regulatory Action" scenario ) , in which NES and NPV are zero by definition. For comparison,

the table include s the impacts of the proposed standard s. Energy savings are given in quadrillion 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201920202021202220232024202520262027202820292030203120322033203420352036203720382039204020412042204320442045204620472048 Rebates

Cons Tax Credits

Manf Tax Credits

Vol Eff Targets

Govt Bulk Purch

Base case

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201920202021202220232024202520262027202820292030203120322033203420352036203720382039204020412042204320442045204620472048 Rebates

Cons Tax Credits

Manf Tax Credits

Vol Eff Targets

Govt Bulk Purch

Base case

17

- 2 3British thermal units (quads) , and economic savings in million 2013 dollars

. The NPV s shown in

Table 17.4.1 is based on two discount rates, 7 percent and 3 percent

.

The energy benefits from the alternative policies for PTACs and PTHPs range from 0. 4
percent to 21.9 percent of those from standards

. NPV results for all alternative policies are positive at both 7 and 3 percent discount rates. T he polic y with the highest projected cumulative

energy and economic savings are consumer rebates , followed by consumer tax credits and

manufacturer tax credits

. Voluntary energy efficiency targets and bulk government purchases result in very little benefits compared to energy efficiency standards.

Table 17.4.1 Impacts of Non

- Regulatory Alternatives for Packaged Terminal Air

Conditioners and Packaged Terminal Heat Pumps * (TSL 2 )

Policy Alternative Site Energy Savings

quads Net Present Value

m illion 2013$

7% Discount

Rate 3% Discount

Rate

Consumer Rebates 0.005 6.608 22.293

Consumer Tax Credits 0.003 3.965 13.376

Manufacturer Tax Credits 0.002 1.982 6.688
Voluntary Energy Efficiency Targets 0.000 0.770 2.157

Bulk Government Purchases 0.000 0.010 0.235
Proposed Standards 0.024 10.324 68.816

*For equipment shipped during the TSL 2 analysis period (2019

- 2048)

17

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