CHAPTER 12. LIFE­CYCLE COST SUB­GROUP ANALYSIS

TABLE OF CONTENTS

12.1 INTRODUCTION ............................................................................................................ 12­1

12.2 SUB­GROUP ANALYSIS ............................................................................................... 12­1

12.2.1 PTAC and PTHP Customer Sub­Group ............................................................ 12­1

12.2.2 Life­Cycle Cost and Payback Period Results for Small Business Sub­group ... 12­2

LIST OF TABLES

Table 12.2.1 Mean LCC Savings by Equipment Class and Trial Standard Level, Small

Business Sub­Group (Independent Hotels) and All Business Types (2006$)...... 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$)........................................ 12­4

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

Business Sub­Group (Independent Hotels) and All Business Types (2006$)...... 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............................................................................ 12­5

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CHAPTER 12. LIFE­CYCLE COST SUB­GROUP ANALYSIS

12.1 INTRODUCTION

The life­cycle 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 used 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 ANALYSIS

12.2.1 PTAC and PTHP Customer Sub­Group

DOE identified 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 examining 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

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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 subgroup 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 purposes 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 Cost and Payback Period Results for Small Business Sub­group

Table 12.2.1 summarizes the LCC savings results for the small business subgroup 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.

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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

Size PTAC

12,000

Btu/h CC*

NonStandard

Size PTAC

Standard

Size PTHP

9,000 Btu/h

CC*

Standard

Size PTHP

12,000

Btu/h CC*

NonStandard

Size PTHP

TSL 1 Independent Hotels ($1) ($2) $22 $10 $11 $53

All Business Types $0 ($1) $27 $13 $15 $61

TSL 2 Independent Hotels ($1) ($2) $22 $19 $20 $56

All Buildings $0 ($1) $27 $24 $26 $66

TSL 3 Independent Hotels ($2) ($5) $25 $19 $20 $56

All Business Types ($0) ($3) $31 $24 $26 $66

TSL 4 Independent Hotels ($1) ($2) $22 $26 $16 $69

All Business Types $0 ($1) $27 $32 $23 $81

TSL 5 Independent Hotels ($4) ($9) $26 $26 $16 $69

All Business Types ($2) ($7) $33 $32 $23 $81

TSL 6 Independent Hotels ($7) ($15) $16 $23 $11 $60

All Business Types ($4) ($11) $26 $30 $18 $74

TSL 7 Independent Hotels ($17) ($42) $1 $30 ($4) $37

All Business Types ($13) ($36) $12 $40 $9 $54

* CC stands for cooling capacity

** Values in 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.

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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

Size PTAC

12,000 Btu/h

CC*

NonStandard

Size PTAC

Standard

Size PTHP

9,000 Btu/h

CC*

Standard Size

PTHP 12,000

Btu/h CC*

NonStandard

Size PTHP

TSL 1 Independent Hotels 7% 6%  16% 14%  14% 19% 

All Business Types 8% 7% 16% 15% 15% 19%

TSL 2 Independent Hotels 7% 10%  16% 30%  29% 36% 

All Business Types 8% 7% 16% 30%  31% 36%

TSL 3 Independent Hotels 12%  6% 29%  30%  29% 36% 

All Business Types 14% 13% 30% 30%  31% 52% 

TSL 4 Independent Hotels 7% 12% 16% 44% 37% 52%

All Business Types 8% 7% 16% 45%  40% 53%

TSL 5 Independent Hotels 16% 7% 38% 44% 37% 52%

All Business Types 19% 15% 40% 45%  40% 53%

TSL 6 Independent Hotels 19% 12% 37% 52% 41% 57%

All Business Types 23% 18%  40%  55% 45% 59% 

TSL 7 Independent Hotels 16% 10% 34% 63% 36% 53%

All Business Types 22% 13% 39%  66% 43% 59%

* CC stands 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

Size PTAC

12,000 Btu/h

CC*

NonStandard

Size PTAC

Standard

Size PTHP

9,000 Btu/h

CC*

Standard

Size PTHP

12,000 Btu/h

CC*

Non­Standard

Size PTHP

TSL 1 Independent Hotels 11.5 12.9 4.2 4.5 4.9 2.0

All Business Types 11.6 13.0 4.2 4.5 4.9 2.0

TSL 2 Independent Hotels 11.5 12.9 4.2 4.0 4.4 2.6

All Business Types 11.6 13.0 4.2 4.0 4.4 2.6

TSL 3 Independent Hotels 12.4 13.8 4.9 4.0 4.4 2.6

All Business Types 12.5 13.9 4.9 4.0 4.4 2.6

TSL 4 Independent Hotels 11.5 12.9 4.2 3.9 5.2 2.8

All Business Types 11.6 13.0 4.2 3.9 5.3 2.8

TSL 5 Independent Hotels 13.2 14.7 5.7 3.9 5.2 2.8

All Business Types 13.2 14.8 5.7 3.9 5.3 2.8

TSL 6 Independent Hotels 13.9 15.7 7.8 4.5 6.1 4.2

All Business Types 14.0 15.9 7.8 4.5 6.1 4.2

TSL 7 Independent Hotels 15.9 19.7 9.5 4.8 7.5 5.8

All Business Types 16.0 19.8 9.6 4.8 7.5 5.8

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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

Size PTAC

12,000 Btu/h

CC*

NonStandard

Size PTAC

Standard

Size PTHP

9,000 Btu/h

CC*

Standard Size

PTHP 12,000

Btu/h CC*

NonStandard

Size PTHP

TSL 1 Independent Hotels 5% 3% 43% 21% 13% 91%

All Business Types 5% 3% 41% 21% 13% 91%

TSL 2 Independent Hotels 5% 3% 43% 29% 21% 73%

All Business Types 5% 3% 41% 29% 19% 73%

TSL 3 Independent Hotels 5% 1% 25% 29% 21% 73%

All Business Types 5% 1% 25% 29% 19% 73%

TSL 4 Independent Hotels 5% 3% 43% 29% 7% 65%

All Business Types 5% 3% 41% 29% 7% 65%

TSL 5 Independent Hotels 3%  1% 17% 29% 7% 65%

All Business Types 3%  1% 19% 29% 7% 65%

TSL 6 Independent Hotels 1% 1% 13% 17% 1% 25%

All Business Types 1% 1% 13% 17% 1% 25%

TSL 7 Independent Hotels 1% 1% 7% 11% 1% 7%

All Business Types 1% 1%  5% 9% 1% 7%

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REFERENCES

1. Title 13, Code of Federal Regulations, Chapter I­Small Business Administration, Part

121­Small Business Administration, Subpart A­Size Eligibility Provisions and

Standards, May 4, 2005.

2. Ducker Worldwide. 2001. 2000 U.S. Market for Residential and Specialty Air

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

Report, March 2001.

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