CHAPTER 12. LIFE­CYCLE COST SUB­GROUP ANALYSIS

TABLE OF CONTENTS

**12.1 INTRODUCTION** 

**.................................. ..........................................................................**  **12­1**

**12.2 SUB­GROUP**  **AN ALYSIS** 

**............................................................................................... 12­1** 

**12.2.1 PTAC**  **a nd**  **PTHP Customer**  **Sub­Group**

**............................................................ 12­1** 

**12.2.2 Life­Cycle**  **C ost**  **and Payback**  **Period Results**  **for Small**  **Business Sub­group** 

**... 12­2** 

LIST O F TABLES

**Table 1**  **2.2.1 Mean**  **LCC Savings**  **by Equipment**  **Class and**  **Trial Standard**  **Level, Small** 

**Business S**  **ub­Group (Independent**  **Hotels) and**  **All Business**  **Types (2006$)** 

**...... 12­3** 

**Table 12.2.2**  **Percentage of**  **Customers Showing**  **Positive Life­Cycle**  **Cost Savings**  **by**

**Equipment C**  **lass and**  **Trial Standard**  **Level, Small**  **Business Sub­Group** 

**(Independent H**  **otels) and**  **All Business**  **Types (2006$)** 

**........................................ 12­4** 

**Table 12.2.3**  **Mean Payback**  **Period by**  **Equipment Class**  **and Trial**  **Standard Level,**  **Small**

**Business S**  **ub­Group (Independent**  **Hotels) and**  **All Business**  **Types (2006$)** 

**...... 12­4** 

**Table 12.2.4**  **Percentage of**  **Customers Showing**  **PBP Less**  **Than 3**  **Years, by**  **Equipment**

**Class a**  **nd Trial**  **Standard Level,**  **Small Business**  **Sub­Group (Independent** 

**Hotels) a**  **nd All**  **Business Types** 

**............................................................................ 12­5** 

**12­i**CHAPTER 12. LIFE­CYCLE COST SUB­GROUP ANALYSIS

12.1 INTRODUCTION

**The l**  **ife­cycle cost**  **(LCC) sub­group**  **analysis evaluates**  **impacts on**  **any**

**identifiable groups**  **of customers**  **of packaged**  **terminal air**  **conditioners (PTACs)**  **and**

**packaged terminal**  **heat pumps**  **(PTHPs) who**  **may be**  **disproportionately affected**  **by**

**amended energy**  **conservation standards.**  **The U.S.**  **Department of**  **Energy (DOE)** 

**accomplished this,**  **in part,**  **by analyzing**  **the LCC**  **and payback**  **period (PBP)**  **for those** 

**PTAC and**  **PTHP customers**  **that fall**  **into any**  **specific sub­groups.** 

**DOE u**  **sed the**  **LCC spreadsheet**  **model to**  **estimate the**  **impact on**  **PTAC and**  **PTHP**

**sub­groups. DOE**  **developed this**  **LCC spreadsheet**  **model to**  **conduct the**  **LCC and**  **PBP**

**analyses for**  **both PTAC**  **and PTHP**  **customers, as**  **described in**  **Chapter 8,**  **life­cycle cost** 

**and payback**  **period analyses.**  **The standard**  **LCC and**  **PBP analyses**  **(see Chapter**  **8) for** 

**PTACs and**  **PTHPs includes**  **various types**  **of businesses**  **occupying commercial**  **buildings**

**that use**  **PTAC and**  **PTHP equipment.**  **The LCC**  **spreadsheet model**  **allows for**  **the**

**identification of**  **certain sub­groups**  **of businesses,**  **which can**  **then be**  **analyzed by** 

**sampling only**  **that sub­group.**  **Chapter 8,**  **life­cycle cost**  **and payback**  **period analyses,** 

**explains in**  **detail the**  **inputs to**  **the LCC**  **spreadsheet model**  **used in**  **determining the**  **LCC**

**and PBP.**  **The LCC**  **spreadsheet model**  **is accessible**  **over the**  **internet**

**(http://www.eere.energy.gov/buildings/appliance_standards/commercial/packaged_ac_hp**

**.html).**

12.2 SUB­GROUP A NALYSIS

12.2.1 PTAC and P THP Customer Sub­Group

**DOE i**  **dentified small**  **businesses as**  **a sub­group**  **that possibly**  **could be** 

**disproportionately affected**  **by the**  **amended energy**  **conservation standard**  **for PTACs**  **and**

**PTHPs. DOE**  **was concerned**  **that increases**  **in the**  **purchase price**  **of PTAC**  **and PTHP** 

**equipment could**  **have negative**  **impacts on**  **small businesses**  **(i.e., those**  **with low**  **annual**

**revenues). To**  **identify small**  **businesses, DOE**  **used size**  **standards from**  **the Small** 

**Business Administration**  **(SBA) to**  **define which**  **business entities**  **are considered**  **to be** 

**small. The**  **SBA established**  **size standards**  **for types**  **of economic**  **activity, or**  **industry,**

**under the**  **North American**  **Industry Classification**  **System (NAICS).**  **1**

**The SBA**  **defines a**  **small business**  **from a**  **customer perspective**  **by either**  **its**

**annual receipts**  **(i.e., revenues)**  **or its**  **number of**  **employees. Assembly,**  **education, food** 

**services, office,**  **and retail**  **businesses are**  **generally defined**  **to be**  **small if**  **annual receipts** 

**are $6**  **million or**  **less. Businesses**  **located in**  **warehouses are**  **considered to**  **be small**  **if they** 

**employ 100**  **or fewer**  **people.**

**In e**  **xamining the**  **four categories**  **of businesses**  **in the**  **Chapter 8**  **analysis, DOE** 

**considered which**  **categories would**  **be likeliest**  **to be**  **adversely affected.**  **Considering that** 

**about 70**  **percent of**  **all applications**  **of PTAC**  **and PTHP**  **units are**  **in chain**  **hotels (mostly** 

**12­1 owned**  **by large**  **corporations) and**  **another 15**  **percent are**  **used in**  **assisted living**  **facilities**

**(also are**  **predominantly owned**  **by large**  **corporations), a**  **maximum of**  **about 15**  **percent of** 

**the market**  **potentially could**  **be small**  **businesses. 2**  **About five**  **percent of**  **PTACs and** 

**PTHPs are**  **used in**  **offices and**  **health care**  **facilities and**  **some portion**  **of these**  **are small** 

**businesses. However,**  **many of**  **these offices**  **are likely**  **to be**  **branch offices**  **of much** 

**larger organizations.**  **It is**  **likelier that**  **the 10**  **percent of**  **the market**  **represented by** 

**independent hotels**  **consists of**  **small businesses**  **that could**  **be adversely**  **affected by**  **the**

**proposed efficiency**  **regulation. DOE**  **does not**  **have sufficient**  **information to**  **correlate**

**annual revenues**  **with the**  **costs of**  **more efficient**  **PTACs and**  **PTHPs to**  **identify the**  **sub**

**group of**  **small businesses**  **in the**  **building sample.**  **However, DOE**  **believes that**  **the**

**results from**  **the LCC**  **sub­group analysis**  **provide an**  **adequate indication**  **of whether**  **the**

**small business**  **sub­group would**  **be disproportionately**  **advantaged or**  **disadvantaged by**  **a**

**proposed standard.** 

**For pu**  **rposes of**  **this sub­group**  **analysis, independent**  **hotels are**  **assumed to**  **pay**

**approximately the**  **same electricity**  **prices as**  **their large­chain**  **counterparts, since**  **both**

**types of**  **entities occupy**  **structures having**  **similar sizes**  **and similar**  **construction materials** 

**and use**  **similar amounts**  **of electricity.**  **However, the**  **smaller independent**  **entities may** 

**face somewhat**  **higher costs**  **of capital**  **(i.e., a**  **difference estimated**  **in Chapter**  **8 as**  **250**

**basis points**  **or 2.5**  **percent). With**  **the exception**  **of the**  **cost of**  **capital, all**  **other inputs**  **to**

**the LCC**  **and PBP**  **spreadsheet model**  **for the**  **small business**  **sub­group were**  **the same**  **as**

**for all**  **the business**  **types considered**  **in the**  **rulemaking (e.g.,**  **total installed**  **costs, repair** 

**costs, maintenance**  **costs, and**  **equipment lifetime**  **etc). The**  **lower the**  **cost of**  **electricity**

**and the**  **higher the**  **cost of**  **capital, the**  **more likely**  **it is**  **that an**  **entity would**  **be**

**disadvantaged by**  **the requirement**  **to purchase**  **more efficient**  **PTACs or**  **PTHPs.**

12.2.2 Life­Cycle C ost and Payback Period Results for Small Business Sub­group

**Table 1**  **2.2.1 summarizes**  **the LCC**  **savings results**  **for the**  **small business**  **sub**

**group for**  **each of**  **the PTAC**  **and PTHP**  **equipment classes,**  **and compares**  **them to**  **the**

**results for**  **the total**  **sample of**  **business types**  **used in**  **the overall**  **LCC analysis.** 

**12­2**Table 12.2.1 Mean LCC Savings by Equipment Class and Trial Standard Level,

Small Business Sub­Group (Independent Hotels) and All Business

Types (2006$)

Standard

Size PTAC

9,000 Btu/h

CC* Standard

S ize PTAC

12,000

Btu/h CC* NonS tandard

Size PTAC Standard

S ize PTHP

9,000 Btu/h

CC* Standard

S ize PTHP

12,000

Btu/h CC* NonS tandard

Size PTHP

**TSL 1**  **Independent H**  **otels ($1)**  **($2) $22**  **$10 $11**  **$53**

**All B**  **usiness Types**  **$0 ($1)**  **$27 $13**  **$15 $61** 

**TSL 2**  **Independent H**  **otels ($1)**  **($2) $22**  **$19 $20**  **$56**

**All B**  **uildings $0**  **($1) $27**  **$24 $26**  **$66**

**TSL 3**  **Independent H**  **otels ($2)**  **($5) $25**  **$19 $20**  **$56**

**All B**  **usiness Types**  **($0) ($3)**  **$31 $24**  **$26 $66** 

**TSL 4**  **Independent H**  **otels ($1)**  **($2) $22**  **$26 $16**  **$69**

**All B**  **usiness Types**  **$0 ($1)**  **$27 $32**  **$23 $81** 

**TSL 5**  **Independent H**  **otels ($4)**  **($9) $26**  **$26 $16**  **$69**

**All B**  **usiness Types**  **($2) ($7)**  **$33 $32**  **$23 $81** 

**TSL 6**  **Independent H**  **otels ($7)**  **($15) $16**  **$23 $11**  **$60**

**All B**  **usiness Types**  **($4) ($11)**  **$26 $30**  **$18 $74** 

**TSL 7**  **Independent H**  **otels ($17)**  **($42) $1**  **$30 ($4)**  **$37**

**All B**  **usiness Types**  **($13) ($36)**  **$12 $40**  **$9 $54** 

***** **CC s**  **tands for**  **cooling capacity** 

****** **Values i**  **n parentheses**  **stand for**  **the negative**  **LCC savings** 

**Table 12.2.2**  **compares the**  **percentages of**  **customers showing**  **LCC savings**  **for the** 

**two groups**  **of businesses,**  **namely, the**  **small business**  **sub­group (or**  **independent hotels)** 

**and the**  **total sample**  **of all**  **business types**  **considered for**  **this PTAC**  **and PTHP** 

**rulemaking. Similarly,**  **Table 12.2.3**  **summarizes the**  **mean PBP**  **results for**  **the two**  **groups**

**and Table**  **12.2.4 compares**  **the percentages**  **of the**  **two groups**  **experiencing payback** 

**periods of**  **less than**  **3 years.**  **Results are**  **provided by**  **trial standard**  **level (TSL)**  **for each** 

**of PTAC**  **and PTHP**  **equipment classes.**  **As is**  **evident from**  **the LCC**  **and PBP**  **results,**

**although the**  **LCC savings**  **for small**  **business are**  **slightly smaller**  **than for**  **the full**  **sample**

**of businesses**  **due to**  **their higher**  **financing costs,**  **the overall**  **effect of**  **a potentially**  **higher**

**PTAC and**  **PTHP efficiency**  **level on**  **the small**  **business sub­group**  **is virtually**  **identical to** 

**the effect**  **on the**  **full sample**  **of business**  **types that**  **use PTAC**  **and PTHP**  **equipment.**

**Thus, small**  **businesses are**  **affected no**  **differently by**  **increased PTAC**  **and PTHP** 

**equipment efficiency**  **levels than**  **the full**  **sample of**  **PTAC and**  **PTHP customers** 

**considered in**  **the rulemaking.** 

**12­3**Table 12.2.2 Percentage of Customers Showing Positive Life­Cycle Cost Savings by

Equipment Class and Trial Standard Level, Small Business SubGroup (Independent Hotels) and All Business Types (2006$)

Standard

Size PTAC

9,000 Btu/h

CC* Standard

S ize PTAC

12,000 Btu/h

CC* NonS tandard

Size PTAC Standard

S ize PTHP

9,000 Btu/h

CC* Standard S ize

PTHP 12,000

Btu/h CC* NonS tandard

Size PTHP

**TSL 1**  **Independent H**  **otels 7%**  **6% 16%**  **14% 14%**  **19%**

**All B**  **usiness Types**  **8% 7%**  **16% 15%**  **15% 19%** 

**TSL 2**  **Independent H**  **otels 7%**  **10% 16%**  **30% 29%**  **36%**

**All B**  **usiness Types**  **8% 7%**  **16% 30%**  **31% 36%** 

**TSL 3**  **Independent H**  **otels 12%**  **6% 29%**  **30% 29%**  **36%**

**All B**  **usiness Types**  **14% 13%**  **30% 30%**  **31% 52%** 

**TSL 4**  **Independent H**  **otels 7%**  **12% 16%**  **44% 37%**  **52%**

**All B**  **usiness Types**  **8% 7%**  **16% 45%**  **40% 53%** 

**TSL 5**  **Independent H**  **otels 16%**  **7% 38%**  **44% 37%**  **52%**

**All B**  **usiness Types**  **19% 15%**  **40% 45%**  **40% 53%** 

**TSL 6**  **Independent H**  **otels 19%**  **12% 37%**  **52% 41%**  **57%**

**All B**  **usiness Types**  **23% 18%**  **40% 55%**  **45% 59%** 

**TSL 7**  **Independent H**  **otels 16%**  **10% 34%**  **63% 36%**  **53%**

**All B**  **usiness Types**  **22% 13%**  **39% 66%**  **43% 59%** 

***** **CC s**  **tands for**  **cooling capacity.** 

Table 12.2.3 Mean Payback Period by Equipment Class and Trial Standard Level,

Small Business Sub­Group (Independent Hotels) and All Business

Types (2006$)

Standard

Size PTAC

9,000 Btu/h

CC* Standard

S ize PTAC

12,000 Btu/h

CC* NonS tandard

Size PTAC Standard

S ize PTHP

9,000 Btu/h

CC* Standard

S ize PTHP

12,000 Btu/h

CC* Non­Standard

S ize PTHP

**TSL 1**  **Independent H**  **otels 11.5**  **12.9 4.2**  **4.5 4.9**  **2.0**

**All B**  **usiness Types**  **11.6 13.0**  **4.2 4.5**  **4.9 2.0** 

**TSL 2**  **Independent H**  **otels 11.5**  **12.9 4.2**  **4.0 4.4**  **2.6**

**All B**  **usiness Types**  **11.6 13.0**  **4.2 4.0**  **4.4 2.6** 

**TSL 3**  **Independent H**  **otels 12.4**  **13.8 4.9**  **4.0 4.4**  **2.6**

**All B**  **usiness Types**  **12.5 13.9**  **4.9 4.0**  **4.4 2.6** 

**TSL 4**  **Independent H**  **otels 11.5**  **12.9 4.2**  **3.9 5.2**  **2.8**

**All B**  **usiness Types**  **11.6 13.0**  **4.2 3.9**  **5.3 2.8** 

**TSL 5**  **Independent H**  **otels 13.2**  **14.7 5.7**  **3.9 5.2**  **2.8**

**All B**  **usiness Types**  **13.2 14.8**  **5.7 3.9**  **5.3 2.8** 

**TSL 6**  **Independent H**  **otels 13.9**  **15.7 7.8**  **4.5 6.1**  **4.2**

**All B**  **usiness Types**  **14.0 15.9**  **7.8 4.5**  **6.1 4.2** 

**TSL 7**  **Independent H**  **otels 15.9**  **19.7 9.5**  **4.8 7.5**  **5.8**

**All B**  **usiness Types**  **16.0 19.8**  **9.6 4.8**  **7.5 5.8** 

**12­4**Table 12.2.4 Percentage of Customers Showing PBP Less Than 3 Years, by

Equipment Class and Trial Standard Level, Small Business SubGroup (Independent Hotels) and All Business Types

Standard

Size PTAC

9,000 Btu/h

CC* Standard

S ize PTAC

12,000 Btu/h

CC* NonS tandard

Size PTAC Standard

S ize PTHP

9,000 Btu/h

CC* Standard S ize

PTHP 12,000

Btu/h CC* NonS tandard

Size PTHP

**TSL 1**  **Independent H**  **otels 5%**  **3% 43%**  **21% 13%**  **91%**

**All B**  **usiness Types**  **5% 3%**  **41% 21%**  **13% 91%** 

**TSL 2**  **Independent H**  **otels 5%**  **3% 43%**  **29% 21%**  **73%**

**All B**  **usiness Types**  **5% 3%**  **41% 29%**  **19% 73%** 

**TSL 3**  **Independent H**  **otels 5%**  **1% 25%**  **29% 21%**  **73%**

**All B**  **usiness Types**  **5% 1%**  **25% 29%**  **19% 73%** 

**TSL 4**  **Independent H**  **otels 5%**  **3% 43%**  **29% 7%**  **65%**

**All B**  **usiness Types**  **5% 3%**  **41% 29%**  **7% 65%** 

**TSL 5**  **Independent H**  **otels 3%**  **1% 17%**  **29% 7%**  **65%**

**All B**  **usiness Types**  **3% 1%**  **19% 29%**  **7% 65%** 

**TSL 6**  **Independent H**  **otels 1%**  **1% 13%**  **17% 1%**  **25%**

**All B**  **usiness Types**  **1% 1%**  **13% 17%**  **1% 25%** 

**TSL 7**  **Independent H**  **otels 1%**  **1% 7%**  **11% 1%**  **7%**

**All B**  **usiness Types**  **1% 1%**  **5% 9%**  **1% 7%** 

**12­5**REFERENCES

**1. Title**  **1 3,**  **Code of**  **Federal Regulations,**  **Chapter I­Small**  **Business Administration,**  **Part**

**121­Small Business**  **Administration, Subpart**  **A­Size Eligibility**  **Provisions and** 

**Standards, May**  **4, 2005.** 

**2. Ducker**  **W orldwide.**  **2001. 2000**  **U.S. Market**  **for Residential**  **and Specialty**  **Air**

**Conditioning: PTAC**  **(Packaged Terminal**  **Air Conditioning).**  **HVAC0002. Final** 

**Report, March**  **2001.**

**12­6**