CHAPTER 17. 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 ASSUMPTIONS ................................................ 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 ALTERNATIVES................................... 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 

Packaged Terminal Heat Pumps................................................................... 17-13

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

to Manufacturer Tax Credits for Packaged Terminal Air Conditioners 

and Packaged Terminal Heat Pumps............................................................ 17-15

Table 17.3.5 Estimated Market Barriers 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 Targets for Packaged Terminal Air 

Conditioners and Packaged Terminal Heat Pumps....................................... 17-18

17-i
Table 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-ii
CHAPTER 17. REGULATORY IMPACT ANALYSIS

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 constitutes an “economically 

significant regulatory action” under Executive Order (E.O.) 12866, Regulatory Planning and 

Review. 58 FR 51735 (October 4, 1993). For such actions, E.O. 12866 requires Federal agencies 

to provide “an assessment, including the underlying analysis, of costs and benefits of potentially 

effective and reasonably feasible alternatives 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 

potential 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 Chapter 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 levels (TSL) for 

packaged terminal air conditioners (PTACs) and packaged terminal heat pumps (PTHPs), which

are the subject of this rulemaking. The non-regulatory policy alternatives are listed in Table 

17.1.1, which also includes the “no new regulatory action” alternative. DOE evaluated each 

alternative in terms of its ability to achieve significant energy 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 presents the results of the policy 

alternatives.

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17.2 NON-REGULATORY POLICIES

This section describes the method DOE used to analyze 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 discusses the NIA-RIA integrated model approach.

DOE quantified the effect of each alternative on the purchase of equipment that meet the 

efficiency levels 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 levels 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 standards 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 affect 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 and 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 each non-regulatory alternative in the same way it did for the 

proposed standards. 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 rebates 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 decrease 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 saved 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.

17-2

 
during 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-year 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 those 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 implementation, 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 have 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.

Each 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 having the 

same efficiency level as required by the proposed standards (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 shows the efficiency level stipulated in the proposed standards for PTACs 

and PTHPs.

17-3
Table 17.2.1 Efficiency Levels for Trial Standard Levels for Packaged Terminal 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 standards 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 nonregulatory policy for the PTAC and PTHP equipment classes.

17.3 NON-REGULATORY POLICY ASSUMPTIONS

The following subsections describe DOE’s analysis of the impacts of the five nonregulatory policy alternatives to proposed standards 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 estimates of the market penetration of high-efficiency equipment 

both with and without each of the non-regulatory policy alternatives.

17-4
17.3.1 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 Chapter 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 the scenario in which the Federal government would provide financial 

incentives in the form of rebates 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. The study, performed by XENERGY, 

Inc.,b summarized experiences with various utility rebate programs.1 XENERGY’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 response 

could not be established.5DOE decided that the most appropriate available method for this 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 information 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 policy measure. XENERGY calibrated the curves based on participation data from 

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

17-5

 
utility 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 highefficiency equipment. DOE adjusted the XENERGY former penetration curves based on expert 

advice founded on more recent utility program experience.5, 8

DOE modeled the effects of a consumer rebate policy 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 customized 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 

barrier level faced by each equipment class. Section 17.3.2.2 shows the interpolated curves used 

in the analysis.

17.3.2.2 Analysis 

For the six equipment classes it analyzed, DOE estimated the 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 utilities or 

agencies in various States. (Appendix 17-A, identifies the rebate programs.) To represent the 

rebate level, DOE used the simple average of the rebate amounts in these programs. DOE 

assumed that 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 the 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 larger B/C ratio. Table 17.3.1 shows the effect of 

consumer 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 engineering analysis, 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. 

17-6

 
Table 17.3.1 Benefit/Cost Ratios Without and With 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 Barriers

No No-Low HighxHighHigh-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 Barriers

No-Low No-Low LowModerateModerateHighModerateHigh

> 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 Barriers

No HighxHighHighxHighHigh-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 Barriers

LowModerateLowModeratexHigh 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 Barriers

LowModerateNo-Low LowModerateModerateHighxHigh

> 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 Barriers Curve LowModerate

No-Low xHigh xHigh xHigh

17-7
DOE used these B/C ratios along with the penetration curves 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 penetration curves 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 90 100

Market 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 90 100

Market 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 90 100

Market 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 90 100

Market 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 90 100

Market 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 90 100

Market Penetration

B/C Ratio

Mkt Penetration Curve Without Rebate With Rebate

17-8
For each equipment class, DOE next estimated the percent increases represented by the 

change in penetration rate shown on the corresponding penetration curve. It then added this

percent increase to the market share of units that meet the target level in the base case to obtain 

the market share of units that meet the target 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 in 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.

17-9

 
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

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 increases in market shares as inputs to represent 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 consumer 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 effect of rebates and tax credits into a direct price effect, 

17-10
which derives from the savings in purchase price, and an announcement effect, which is 

independent of the amount of the incentive.

10, 11 The announcement 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 would encompass both direct price effects and 

announcement effects, and that half the increase in market penetration associated with either 

policy would be due to the direct price effect and half to the announcement effect.

In estimating the effects of a tax 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 credit 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 received 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 (EPACT 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 program 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 also reviewed its previous analysis of 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 credits 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 washers having equivalent

efficiency. This finding supports its original assumption that participation in a tax credit program 

17-11
would be about 60 percent of participation in a rebate program. Additional discussion of State 

tax credits for Oregon and other states 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 assumptions for consumer response to financial 

incentives from the penetration curves selected for PTACs and PTHPs.

Table 17.3.3 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 a consumer tax credit. 

17-12
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 

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 penetration 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 policy 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 

17-13
manufacturers 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 not 

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 

efficient 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 manufacturers 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 sources 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 effects 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 assumption, 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.

17-14

 
Table 17.3.4 Market Penetrations in the First Year of the Analysis 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 attributable 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 penetration 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 set 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 

17-15
conjunction with industry partners. The ENERGY STAR program specifies the minimum energy 

efficiencies that various products must have to receive the ENERGY STAR label. ENERGY 

STAR encourages consumers to purchase efficient products via marketing that promotes 

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 

dissemination 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 STAR-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 levels over 10 years. 

Table 17.3.6 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 the 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 PTACs 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

17-16
Table 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.

17-17
Table 17.3.7 Market Penetrations in the First Year of the Analysis Period Attributable 

to Voluntary Energy Efficiency Targets 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 share increases due to this policy. Section 17.4 presents the resulting market penetration 

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 

Bulk 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 multiple 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 

17-18
favorable prices. Such a program also can induce “market pull,” whereby 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 purchases 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 purchasing 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 previous 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 purchases in 2000 already 

incorporated energy efficiency requirements based on FEMP guidelines. One scenario in the 

DOE report showed energy efficient purchasing ramping 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 purchase program instituted within a 10-year period would result in at least 80 

percent of government-purchased PTACs 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 Energy Consumption Survey (CBECS 2003 )

27, 

most of the cooled floor space of this subset of buildings (61 percent for PTACs, and 82 percent 

for PTHPs) would consist of public buildings used for education, lodging, offices and nonrefrigerated 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 

individual 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 (2017 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 

17-19
program 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 Year of the Analysis Period Attributable 

to Bulk Government Purchasing of 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.

17-20
17.4 IMPACTS OF NON-REGULATORY ALTERNATIVES

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. Relative to the base case, the 

policy cases increase the market shares that meet the target level. Recall the proposed standards 

(not shown in the figures) would result in a 100-percent market penetration of equipment that 

meets 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

17-21
Figure 17.4.3 Market Penetration of Packaged Terminal Air Conditioners 

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

Figure 17.4.4 Market Penetration of Packaged Terminal Heat Pumps <7,000 

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

17-22
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)

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 shows the national energy savings and net present value for five nonregulatory policies analyzed in detail for PTACs and PTHPs. The target level for each policy 

equals the efficiency levels proposed for standards in TSL 2. The case in which no regulatory 

action is taken with regard to PTACs and PTHPs constitutes the base case (or "No New 

Regulatory Action" scenario), in which NES and NPV are zero by definition. For comparison, 

the table includes the impacts of the proposed standards. 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%

2019

2020202120222023202420252026202720282029

2030203120322033203420352036203720382039204020412042204320442045204620472048

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

17-23
British thermal units (quads), and economic savings in million 2013 dollars. The NPVs 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. The policy 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

million 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)

17-24
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