CHAPTER 11. NATIONAL IMPACT ANALYSIS 

TABLE OF CONTENTS 

11.1 INTRODUCTION ............................................................................................................. 11-1

11.1.1 General Approach .............................................................................................. 11-2

11.1.2 NES and NPV Input Summary .......................................................................... 11-3

11.2 NATIONAL ENERGY SAVINGS ................................................................................... 11-4

11.2.1 NES Definition................................................................................................... 11-4

11.2.2 NES Inputs ......................................................................................................... 11-5

11.2.2.1 Annual Unit Energy Consumption.................................................... 11-5

11.2.2.2 Shipments .......................................................................................... 11-9

11.2.2.3 Equipment Stock ............................................................................... 11-9

11.2.2.4 National Annual Energy Consumption ............................................. 11-9

11.2.2.5 Site-to-Source Conversion Factor ................................................... 11-10

11.3 NET PRESENT VALUE ................................................................................................ 11-11

11.3.1 Net Present Value Definition ........................................................................... 11-11

11.3.2 Net Present Value Inputs ................................................................................. 11-11

11.3.2.1 Total Annual Installed Cost ............................................................ 11-12

11.3.2.2 Total Annual Operating Cost Savings ............................................ 11-13

11.3.2.3 Discount Factor ............................................................................... 11-14

11.3.2.4 Present Value of Costs .................................................................... 11-15

11.3.2.5 Present Value of Savings ................................................................ 11-15

11.4 NES AND NPV RESULTS ............................................................................................. 11-15

11.4.1 National Energy Savings Results ..................................................................... 11-15

11.4.2 Annual Costs and Savings ............................................................................... 11-18

11.4.3 Net Present Value Results ................................................................................ 11-19

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 EERE-2007-BT-STD-0012 COMMENT 32
11-ii

LIST OF TABLES 

Table 11.1.1 Summary of NES and NPV Model Inputs ......................................................... 11-3

Table 11.2.1 Risk Premiums by Risk Class (j) in the NEMS Commercial Model ................. 11-6

Table 11.2.2 Shipment-Weighted Market Shares by Efficiency Level for PTACs, Base 

Case .................................................................................................................... 11-7

Table 11.2.3 Shipment-Weighted Market Shares by Efficiency Level for PTHPs, Base 

Case .................................................................................................................... 11-7

Table 11.2.4 Annual Unit Energy Consumption by Efficiency Level .................................... 11-8

Table 11.2.5 Shipment-Weighted Average Annual Unit Energy Consumption by Trial 

Standard Level ................................................................................................... 11-9

Table 11.2.6 Marginal Site-to-Source Conversion Factors (Btu/kWh) ................................ 11-10

Table 11.3.1 Average Total Installed Cost per Unit by Efficiency Level (2007$) ............... 11-12

Table 11.3.2 Shipment-Weighted Average Total Installed Cost per Unit by Trial 

Standard Level (2007$).................................................................................... 11-13

Table 11.3.3 Average Annual Repair Cost per Unit (2007$) ............................................... 11-14

Table 11.3.4 Average Annual Maintenance Cost per Unit (2007$) ..................................... 11-14

Table 11.4.1 Cumulative National Energy Savings for PTACs and PTHPs ........................ 11-16

Table 11.4.2 Cumulative National Energy Savings for PTACs and PTHPs Based on 

Seven-Percent Discount Rate ........................................................................... 11-17

Table 11.4.3 Cumulative National Energy Savings for PTACs and PTHPs Based on 

Three-Percent Discount Rate ........................................................................... 11-17

Table 11.4.4 Cumulative NPV Results Based on a Seven-Percent Discount Rate 

(Billion 2007$) ................................................................................................. 11-19

Table 11.4.5 Cumulative NPV Results based on a Three-Percent Discount Rate 

(Billion 2007$) ................................................................................................. 11-20

LIST OF FIGURES 

Figure 11.4.1 National Annual Costs and Savings for Standard Size PTAC, 9,000 Btu/h 

Cooling Capacity, TSL6 .................................................................................. 11-18

 EERE-2007-BT-STD-0012 COMMENT 32
CHAPTER 11. NATIONAL IMPACT ANALYSIS 

11.1 INTRODUCTION

The national impacts analysis evaluates the impact of a proposed standard from a national 

perspective rather than from the customer perspective represented by the life-cycle cost (LCC) 

(see Chapter 8 of this TSD). This chapter describes the U.S. Department of Energy (DOE)’s 

methodology for estimating future national energy savings (NES) from amended energy 

conservation standards for packaged terminal air conditioners (PTACs) and packaged terminal 

heat pumps (PTHPs) as well as the national economic impact using the net present value (NPV) 

metric. DOE determined both the NPV and NES for each trial standard level (TSL) that it 

considered for all the equipment classes of PTAC and PTHP equipment. DOE considered up to 

seven TSLs for each equipment class. The detailed discussion on the TSLs can be found in 

Chapter 9 of this TSD. 

For each TSL, DOE calculated the NPV, as well as the NES, as the difference between a 

base case forecast (without amended standards) and the standards case (with amended 

standards). The NES refers to cumulative energy savings from 2012 through 2042. The NPV 

refers to cumulative monetary savings. DOE calculated net monetary savings in each year 

relative to the base case as the difference between total operating cost savings and increases in 

total installed cost. Cumulative savings are the sum of the annual NPV over the specified period. 

DOE accounted for operating cost savings until 2062; that is, until all the equipment installed 

through 2042 is retired. 

Results of the national impact analysis (NIA) described here include: 1) national energy 

consumption and savings, 2) monetary value of energy savings to the nation as a result of 

standards, 3) increased total installed costs to the Nation as a result of standards, and 4) the net 

present value of energy savings (i.e., the difference between the present monetary values of 

energy savings and increased total installed costs). 

To make the analysis more accessible and transparent to all stakeholders, DOE used an 

MS Excel spreadsheet model to calculate the energy savings and the national economic costs and 

savings from amended standards. The spreadsheet model is accessible on the Internet at 

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

Details and instructions for using the spreadsheet are discussed in appendix F. A more detailed 

set of results is available in appendix G. 

Unlike the LCC analysis, the NES spreadsheet does not use distributions for inputs or 

outputs. DOE examined sensitivities by applying different scenarios. DOE used the NES 

spreadsheet to perform calculations of energy savings and NPV, using the annual energy 

consumption and total installed cost data from the LCC analysis. DOE forecasted the energy 

savings, energy cost savings, equipment costs, and NPV of benefits for each of equipment 

classes from 2012 through 2042. The forecasts provided annual and cumulative values for all 

four output parameters as described above. 

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 EERE-2007-BT-STD-0012 COMMENT 32
11.1.1 General Approach 

Over time, in the standards case, equipment that is more efficient gradually replaces less 

efficient equipment. This affects the calculation of both the NES and NPV, both of which are a 

function of the total number of units in use and their efficiencies, and thus are dependent on 

annual shipments and equipment lifetime, including changes in shipments and retirement rates in 

response to changes in equipment costs due to standards. Both calculations start by using the 

estimate of shipments, and the quantity of units in service, that are derived from the shipments 

model. 

With regard to estimating the NES, because more efficient PTACs and PTHPs gradually 

replace less efficient ones, the energy per unit of capacity used by the PTACs and PTHPs in 

service gradually decreases in the standards case relative to the base case. DOE calculated the 

NES by subtracting energy use under a standards scenario from energy use in a base-case 

scenario. 

Unit energy savings for each equipment class are the same weighted-average values as 

calculated in the LCC and PBP spreadsheet. To estimate the total energy savings for each TSL, 

DOE first calculated the national site energy consumption (i.e., the energy directly consumed by 

the units of equipment in operation) for PTACs or PTHPs for each year, beginning with the 

expected effective date of the standards (2012), for the base case forecast and the standards case 

forecast. Second, DOE determined the annual site energy savings, consisting of the difference in 

site energy consumption between the base case and the standards case. Third, DOE converted 

the annual site energy savings into the annual amount of energy saved at the source of electricity 

generation (the source energy), using a site-to-source conversion factor. Finally, DOE summed 

the annual source energy savings from 2012 to 2042 to calculate the total NES for that period. 

DOE performed these calculations for each TSL considered in this rulemaking. 

To estimate NPV, DOE calculated the net impact as the difference between total 

operating cost savings (including electricity, repair, and maintenance cost savings) and increases 

in total installed costs (which consists of MSP, sales taxes, distribution chain markups, and 

installation cost). DOE calculated the NPV of each TSL over the life of the equipment, using the 

following three steps. First, DOE determined the difference between the equipment costs under 

the TSL case and the base case in order to obtain the net equipment cost increase resulting from 

the TSL. Second, DOE determined the difference between the base case operating costs and the 

TSL operating costs, in order to obtain the net operating cost savings from the TSL. Third, DOE 

determined the difference between the net operating cost savings and the net equipment cost 

increase in order to obtain the net savings (or expense) for each year. DOE then discounted the 

annual net savings (or expenses) to the year 2008 for PTACs and PTHPs bought on or after 2012 

and summed the discounted values to provide the NPV of a TSL. An NPV greater than zero 

shows net savings (i.e., the TSL would reduce customer expenditures relative to the base case in 

present value terms). An NPV that is less than zero indicates that the TSL would result in a net 

increase in customer expenditures in present value terms. 

Although voluntary energy efficiency programs may increase the share of energyefficient equipment prior to the implementation date of any new or amended energy conservation 

standards, DOE was not able to obtain information that quantified how such programs affect 

11-2

 EERE-2007-BT-STD-0012 COMMENT 32
equipment efficiencies on a national basis. Consequently, DOE did not explicitly incorporate the 

impact of market-based voluntary energy efficiency programs into the shipment forecasts 

detailed in Chapter 10 of this TSD. 

11.1.2 NES and NPV Input Summary 

The important inputs of national energy consumption for each PTAC and PTHP 

equipment class include: 1) shipments of each equipment class, 2) existing stock of each 

equipment class 3) national average energy consumption for each equipment class, and 4) site-tosource conversion factor to translate electricity consumption at the site of use into the amount of 

energy that must be generated at the power plant (source) and then transmitted to the site where 

it is consumed. Chapter 10 provides a detailed description of the shipments model that DOE 

used to forecast future purchases of PTAC and PTHP equipment. Table 11.1.1 summarizes the 

inputs to the NES spreadsheet model. For each input a brief description of the data source is 

given. 

Table 11.1.1 Summary of NES and NPV Model Inputs 

Inputs Description

Shipments Annual shipments from shipments model (see Chapter 10 of the 

TSD). 

Effective Date of Standard September 2012 

Base Case Efficiencies Distribution of base-case shipments by efficiency level. 

Standard Case Efficiencies Distribution of shipments by efficiency level for each standards 

case. Standards case annual shipment-weighted market shares 

remain constant for base case and each standard level for all 

efficiencies above the TSL. All other shipments are at the TSL 

efficiency 

Annual Energy Use per Unit Annual national weighted-average values are a function of 

efficiency level (Chapter 7 of the TSD). 

Total Installed Cost per Unit Annual weighted-average values are a function of efficiency 

level (Chapter 8 of the TSD). 

Repair Cost per Unit Annual weighted-average values increase with manufacturer’s 

cost level (Chapter 8 of the TSD). 

Maintenance Cost per Unit Annual weighted-average value equals $117 (Chapter 8 of the 

TSD) 

Escalation of Electricity Prices 2008 EIA AEO forecasts (to 2030) and extrapolation for beyond 

2030 (Chapter 8 of the TSD). 

Electricity Site-to-Source Conversion 

Factor 

Conversion factor varies yearly and is generated by EIA’s 

NEMS* model. Includes the impact of electric generation, 

transmission, and distribution losses. 

Discount Rate 3 and 7 percent real. 

Present Year Future costs are discounted to year 2008. 

* Chapter 14 on the utility impact analysis provides more detail on NEMS. 

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 EERE-2007-BT-STD-0012 COMMENT 32
11.2 NATIONAL ENERGY SAVINGS 

11.2.1 NES Definition 

DOE calculates annual national energy savings for a given year (t) as the difference 

between two scenarios: a base case (without new or amended standards) and a standards case 

(with new or amended standards). Positive values of NES correspond to net annual energy 

savings, i.e., annual national energy consumption (AEC) with standards is less than AEC in the 

base case. 

 NESt =AEC base - AECstandard Eq. 11.1 

Cumulative energy savings are the sum over a defined time period from the 

implementation of a standard forward (from 2012 to 2042) of the annual national energy savings. 

 NES cum = t NES t Eq. 11.2

DOE calculated the AEC by multiplying the number or stock of units of PTAC and 

PTHP equipment (by vintage) by the unit energy consumption (also by vintage) as shown by the 

following equation: 

 AEC = v (STOCKV x UECV x src_convt) Eq. 11.3

For the above expressions, DOE defined the following quantities: 

AEC = Annual national energy consumption each year in quads, summed over vintages of 

PTAC and PTHP equipment stock, STOCKV, 

NES = Annual national energy savings (in quads), 

STOCKV = Stock of PTAC and PTHP equipment (millions of units) of vintage 

V surviving in the year for which DOE calculated annual energy consumption, 

Vintages range from 1 year to approximately 20 years, a function of an assumed 10-year 

average lifetime for PTAC and PTHP equipment, 

UECV = Annual unit energy consumption in kilowatt hours (kWh) of vintage V, 

src_convt = Time-dependent conversion factor to convert from site energy (kWh) to 

source energy (quads) (Btu/kWh), 

V = Year in which the PTAC or PTHP equipment was purchased as a new unit, 

t = Year in the forecast (e.g., 2012 to 2042). 

The stock of PTAC and PTHP equipment is dependent on annual shipments and the 

lifetime of the equipment. DOE believes that the shipment projections under the standards cases 

could be lower than those in the base case projection, because the higher installed costs would 

cause some customers to forego new equipment purchases. However, DOE does not have 

sufficient information that would allow a calculation of this effect. For the notice of final rule, 

DOE estimated the total shipments assuming that the projections are the same in both the base 

case and standards cases. 

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 EERE-2007-BT-STD-0012 COMMENT 32
11.2.2 NES Inputs 

The inputs for the determination of NES are listed below: 

Annual unit energy consumption (kWh/year) (section 11.2.2.1) 

Shipments (section 11.2.2.2) 

Equipment stock (section 11.2.2.3) 

National annual energy consumption (section 11.2.2.4) 

Site-to-source conversion factor (section 11.2.2.5) 

11.2.2.1 Annual Unit Energy Consumption 

The annual unit energy consumption (UEC) is the site energy consumed by a PTAC or 

PTHP unit per year. The UEC is directly tied to the efficiency of the unit. Thus, knowing the 

efficiency of a PTAC or PTHP unit determines the corresponding annual energy consumption. 

DOE estimated the annual unit energy consumption for each of PTAC and PTHP equipment 

classes, as discussed in the energy use characterization analysis in Chapter 7. As described 

below, DOE determined annual forecasted shipment-weighted average equipment efficiencies 

that, in turn, enabled a determination of shipment-weighted annual energy consumption values. 

 First, DOE converted the 2006 PTAC and PTHP equipment shipments by equipment 

class into market shares by equipment class, then adapted an economic model that employed a 

cost-based method used in the Energy Information Administration (EIA)’s National Energy 

Modeling System (NEMS) to estimate market shares for each equipment class by TSL.1

 Then, 

from those market shares and projections of shipments by equipment class, DOE extrapolated 

future trends of PTAC and PTHP equipment efficiency both for a base case scenario (i.e., 

without new standards) and various standards case scenarios (i.e., with new standards). The 

difference in equipment efficiency between the base case and standards cases was the basis for 

determining the reduction in per-unit annual energy consumption that could result from new 

standards. 

The market share for each equipment class by TSL is defined as EFF_Level_Share(i,y), 

for each equipment class y at TSL i. Because the average lifetime of each equipment class is 

presumed to be the same, and because DOE had no information regarding future changes in 

market shares between equipment classes, DOE assumed the market share for a particular 

equipment class to be constant over time. DOE calculated the EFF_Level_Share(i,y) for each 

TSL i using the following formula, based on the relative annualized cost of each TSL. 

























	

	





















	

	
















k

i

v

n yi

j

j

yi

v

n yi

j

j

yi m

j

j

OC

r

r

IC

OC

r

r

IC

LevelEFF byiShare

1

),( ).(

),( ).(

1

)1(1

)1(1 ),(__ Eq. 11.4

11-5

 EERE-2007-BT-STD-0012 COMMENT 32
where 

EFF_Level_Share(i,y) = the market share of equipment class y at TSL i, 

IC(i, y) = installed costs of equipment class y at TSL i, i=1 to k. 

OC(i,y) = annual operating cost (maintenance, repair, and energy cost) of equipment 

class y at TSL i,

rj = private, risk-adjusted discount rate for risk class j. Derived by adding a “time 

preference premium” to the risk-free real rate of return in the marketplace (4.39% longterm Treasury bond rate, minus the estimated long-term inflation rate of 2.2% = 2.19%) 

bj = market share of equipment users with risk class j, j =1 to m, 

v = risk penalty factor (also known as a measure of market heterogeneity) 

n = equipment lifetime 

The components for IC and OC came from the same inputs as the life-cycle cost analysis 

(see Chapter 8, life-cycle cost and payback period analysis). The annualization factor 

(rj/(1-(1+rj)

-n) converts installed cost into its annualized equivalent, so that market shares are 

based on the relative annualized costs of each TSL, with (generally) higher annualized costs of 

higher TSLs leading to lower relative market shares. This is consistent with the approaches used 

in the EIA’s NEMS1

 and in Canada’s CIMS model2 a. The calibration constants are the private 

risk-based discount rates by risk class rj, taken from the NEMS commercial model as shown in 

Table 11.2.1, the default value of v = 10, taken from the CIMS model, and the equipment lifetime 

of 10 years. 

Table 11.2.1 Risk Premiums by Risk Class (j) in the NEMS Commercial Model 

Percentage of Users in Class Time Preference Premium Implied Real Discount Rate 

1% 0.0% 2.14% 

2% 13.6% 15.45% 

10% 19.9% 21.61% 

15% 30.9% 32.38% 

20% 55.4% 56.35% 

25% 152.9% 151.75% 

27% 1000.0% 980.62% 

100% 

Source: EIA’s NEMS Commercial Model 

Table 11.2.2 and Table 11.2.3 provide estimated base case shipment-weighted market 

shares for each of the equipment classes of PTACs and PTHPs, respectively, proposed in this 

rulemaking. 

 

a

 The CIMS Model was originally known as the Canadian Integrated Modeling System, but as the model is now 

being applied to other countries, the acronym is now used as its proper name. 

11-6

 EERE-2007-BT-STD-0012 COMMENT 32
Table 11.2.2 Shipment-Weighted Market Shares by Efficiency Level for PTACs, Base 

Case

Equipment Class 

Cooling 

Capacity 

Shipment-Weighted Market Shares by Efficiency 

Level*

Baseline 

(ASHRAE 

90.1-1999) Level 1 Level 2 Level 3 Level 4 

Standard Size PTAC 10,000 Btu/h 22.6% 21.0% 19.9% 18.8% 17.7% 

> 10,000 Btu/h 22.8% 21.1% 19.9% 18.7% 17.5% 

Equipment Class

Cooling 

Capacity

Baseline 

(ASHRAE 

90.1-1999) Level 1 Level 2 Level 3

Non-Standard Size 

PTAC All Capacity 27.4% 25.4% 24.3% 22.9% 

* Shares may not add to 100% exactly due to rounding. 

Table 11.2.3 Shipment-Weighted Market Shares by Efficiency Level for PTHPs, Base 

Case

Equipment Class 

Cooling 

Capacity 

Shipment-Weighted Market Shares by Efficiency 

Level*

Baseline 

(ASHRAE 

90.1-1999) Level 1 Level 2 Level 3 Level 4 

Standard Size PTHP 10,000 Btu/h 22.5% 20.5% 19.8% 19.1% 18.1% 

> 10,000 Btu/h 22.8% 20.7% 19.9% 18.8% 17.8% 

Equipment Class

Cooling 

Capacity

Baseline 

(ASHRAE 

90.1-1999) Level 1 Level 2 Level 3

Non-Standard Size 

PTHP All Capacity 27.4% 25.4% 24.3% 22.9% 

* Shares may not add to 100% exactly due to rounding. 

To project changes in weighted average TSLs as amended standards above baseline 

efficiency level (i.e., ASHRAE/IESNA Standard 90.1-1999)b are introduced, DOE assumed that 

market shares above the minimum permitted efficiency level would be reassigned to the new 

minimum level (i.e., the amended standard). This is called a “roll-up” scenario. For example, if 

TSL 5 (Efficiency Level 3 in this case) was imposed as the new standard in 2012 on standard 

size PTAC with a cooling capacity of 9,000 British thermal units per hours (Btu/h) equipment, 

then the market shares for baseline efficiency level, Level 1 and Level 2 would be assigned to 

TSL 3, which would result in a total market share of 82.3 percent, i.e., by adding 22.6 percent, 

 

b

 ASHRAE/IESNA Standard 90.1-1999 stands for the American Society of Heating, Refrigerating, and AirConditioning Engineers, Inc. (ASHRAE) and the Illuminating Engineering Society of North America (IESNA) 

Standard 90.1-1999, “Energy Standard for Buildings Except Low-Rise Residential Buildings” (ASHRAE/IESNA 

Standard 90.1-1999). 

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 EERE-2007-BT-STD-0012 COMMENT 32
21.0 percent, 19.9 percent, and 18.8 percent from the first four columns of the first row in Table 

11.2.2, beginning in 2012. The market shares for Level 4 (TSL 6) would not be affected because 

the market already has a choice of that equipment with TSL 5 also available. DOE, thus, 

assumed that the new standard would not affect the relative attractiveness of equipment with 

efficiencies higher than the standard. 

As stated earlier, annual energy consumption values are tied directly to the efficiency of 

the equipment. Table 11.2.4 provides annual energy consumption values for specific TSLs for 

all six representative cooling capacities of PTACs and PTHPs. 

Table 11.2.4 Annual Unit Energy Consumption by Efficiency Level 

Equipment

Class 

Representative 

Cooling 

Capacity 

Annual unit energy consumption (kWh/year/unit) 

Baseline 

(ASHRAE 

90.1-1999) 

Level 1 Level 2 Level 3 Level 4 

Standard 

Size PTAC 

9,000 Btu/h 1,045 1,026 1,013 1,001 990 

12,000 Btu/h 1,317 1,294 1,279 1,264 1,251 

Standard 

Size PTHP 

9,000 Btu/h 2,063 2,013 1,984 1,957 1,945 

12,000 Btu/h 2,467 2,406 2,370 2,356 2,343 

Equipment

Class

Representative 

Cooling 

Capacity

Baseline 

(ASHRAE 

90.1-1999)

Level 1 Level 2 Level 3

NonStandard 

Size PTAC 11,000 Btu/h 

1,658 1,584 1,559 1,536 

NonStandard 

Size PTHP 

11,000 Btu/h 2,661 2,533 2,508 2,465 

For the annual shipment-weighted efficiency levels specified in the base case and 

standards case efficiency scenarios, DOE calculated the shipment-weighted UEC values in Table 

11.2.5. For each equipment class, the value shown for a given TSL is the efficiency weighted 

average annual unit energy consumption, after taking into account the non-availability of 

equipment at the TSL shown below.

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 EERE-2007-BT-STD-0012 COMMENT 32
Table 11.2.5 Shipment-Weighted Average Annual Unit Energy Consumption by Trial 

Standard Level 

Equipment

Class 

Representative 

Cooling 

Capacity 

Shipment-weighted average annual unit energy consumption 

(kWh/year/unit) 

TSL 1 TSL 2 TSL 3 TSL A TSL 4 TSL 5 

TSL 6 

(Max 

Tech)

Standard 

Size PTAC 

9,000 Btu/h 1,012 1,012 1,007 1,007 1,012 999 990 

12,000 Btu/h 1,278 1,278 1,271 1,278 1,278 1,262 1,251 

Standard 

Size PTHP 

9,000 Btu/h 1,984 1,972 1,972 1,955 1,955 1,955 1,945 

12,000 Btu/h 2,378 2,363 2,363 2,363 2,354 2,354 2,343 

Equipment

Class

Representative 

Cooling 

Capacity

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

NonStandard 

Size PTAC 

11,000 Btu/h 1,567 1,567 1,554 1,567 1,536 

NonStandard 

Size PTHP 

11,000 Btu/h 2,511 2,498 2,498 2,465 2,465 

11.2.2.2 Shipments

DOE forecasted shipments for the base case and all standards cases (see Chapter 10, 

shipment analysis). 

11.2.2.3 Equipment Stock

In a given year, PTAC and PTHP equipment stock is the total units of PTAC and PTHP 

equipment shipped from earlier years which survive in that year. The NES spreadsheet model 

keeps track of the total number of PTAC and PTHP units shipped each year. DOE assumed 

that the existing PTAC and PTHP units are retired by following a Weibull distribution with an 

average lifetime of 10 years. The Weibull distribution shows that approximately 8 percent of the 

existing PTAC and PTHP units are retired from 2012 to 2019 (i.e. by year 7), then tail off 

gradually to less than one percent per year by year 20. Retired units are replaced until 2042. For 

units shipped in 2042, any units still remaining at the end of 2062 are replaced. 

11.2.2.4 National Annual Energy Consumption

The national AEC is the product of the annual UEC and the stocks of PTAC and PTHP 

units of each vintage. This approach accounts for differences in unit energy consumption from 

year to year. Equation 11.3 above was used for determining the national annual energy 

consumption of PTAC and PTHP equipment. 

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 EERE-2007-BT-STD-0012 COMMENT 32
In determining AEC, DOE initially calculated the annual energy consumption at the site 

(i.e., electricity in kWh consumed by the PTAC and PTHP unit). DOE then calculated primary 

energy consumption converted from site energy consumption by applying a marginal site-tosource conversion factor to account for losses associated with the generation, transmission, and 

distribution of electricity. 

11.2.2.5 Site-to-Source Conversion Factor 

The site-to-source conversion factor is the multiplier used for converting site energy 

consumption, expressed in kWh, into primary or source energy consumption, expressed in quads. 

The site-to-source conversion factor accounts for losses in electricity generation, transmission, 

and distribution. DOE used annual site-to-source marginal conversion factors based on a 

detailed analysis contained in appendix H. These factors take into account the fact that energy 

savings that would occur as a result of adopting more efficient equipment standard for PTACs 

and PTHPs would be most likely to reduce demand for energy from power plants used for 

peaking power and load following, and which have heat rates lower than the U.S. average values. 

As shown in Table 11.2.6, the conversion factors vary over time, due to projected changes in 

electricity generation sources (i.e., the power plant types projected to provide electricity to the 

country). Detailed discussion on calculations of marginal site-to-source conversion factors can 

be found in appendix H. 

Table 11.2.6 Marginal Site-to-Source Conversion Factors (Btu/kWh) 

Year PTACs Year PTHPs 

2012 9,191 2012 8,111

2013 9,191 2013 8,111

2014 9,073 2014 8,368

2015 9,756 2015 9,080

2016 10,012 2016 9,186

2017 10,491 2017 9,359

2018 10,293 2018 9,587

2019 10,103 2019 9,909

2020 10,961 2020 10,478

2021 11,647 2021 10,573

2022 12,602 2022 10,756

2023 12,007 2023 10,312

2024 11,940 2024 10,394

2025 11,797 2025 10,674

2026 12,477 2026 11,306

2027 13,212 2027 11,602

2028 13,654 2028 11,739

2029 13,978 2029 11,885

2030-2042 13,978 2030-2042 11,885

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11.3 NET PRESENT VALUE 

11.3.1 Net Present Value Definition 

The NPV is the value in the present of a time series of costs and savings. The NPV is 

given by the equation: 

 NPV = PVS – PVC Eq. 11.5

where 

PVS = present value of operating cost savings (including energy, repair, and maintenance 

costs), 

PVC = present value of increased total installed costs (including equipment and 

installation). 

The PVS and PVC are determined according to the following expressions: 

 PVS = t OCS t x DF t Eq. 11.6

 PVC =t TIC t x DF t Eq. 11.7

where: 

OCS = total annual operating cost savings, 

TIC = total annual installed cost increases, 

DF = discount factor, 

t = year (PVS is summed over 2012–2062, and PVC is summed over 2012–2062). 

DOE determined the contribution to PVC for each year, from the effective date of the 

amended standard (year 2012) to the year 2062, discounted for the final rule analysis, to the year 

2008. All dollar values are reported in constant 2007 dollars. The contribution to PVS was 

calculated for each year, from the effective date of the same amended standard (year 2012) to the 

year when units purchased in 2042 retire (assumed to be 2062). DOE calculated costs and 

savings as the difference between a standards case (i.e., with an amended standard) and a base 

case (i.e., without new standards). DOE calculated a discount factor from the discount rate and 

the number of years between the “present” (i.e., year to which the sum is being discounted) and 

the year in which the costs and savings occur. The net present value is the sum over time of the 

discounted net savings, which is equivalent to the approach shown in Eq. 11.5 to Eq. 11.7. 

11.3.2 Net Present Value Inputs 

The inputs to the NPV calculation are listed below: 

Total Annual Installed Cost (section 11.3.2.1) 

Total Annual Operating Cost Savings (section 11.3.2.2) 

Discount Factor (section 11.3.2.3) 

Present Value of Costs (section 11.3.2.4) 

Present Value of Savings (section 11.3.2.5) 

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 EERE-2007-BT-STD-0012 COMMENT 32
11.3.2.1 Total Annual Installed Cost 

The increase in the total annual installed cost is equal to the annual change in the per-unit 

total installed cost (difference between base case and standards case) multiplied by the shipments 

forecasted in the standard case. The total installed cost includes both the equipment cost and the 

installation price. DOE based average equipment costs on average manufacturer selling prices 

multiplied by average overall markup values (see Chapter 8, life-cycle cost and payback period 

analyses). DOE based average installation prices on nationally representative values for each 

equipment class (see Chapter 8). Table 11.3.1 shows the resulting average total installed costs 

per unit for each of the equipment classes of PTAC and PTHP equipment by efficiency levels. 

Table 11.3.1 Average Total Installed Cost per Unit by Efficiency Level (2007$) 

Equipment

Class 

Representative 

Cooling 

Capacity 

Average Total Installed Cost per Unit (2007$) 

Baseline 

(ASHRAE 

90.1-1999) 

Level 1 Level 2 Level 3 Level 4 

Standard Size 

PTAC 

9,000 Btu/h $1,165 $1,178 $1,188 $1,197 $1,208 

12,000 Btu/h $1,404 $1,420 $1,432 $1,444 $1,458 

Standard Size 

PTHP 

9,000 Btu/h $1,275 $1,296 $1,306 $1,315 $1,325 

12,000 Btu/h $1,511 $1,537 $1,549 $1,561 $1,575 

Equipment

Class

Representative 

Cooling 

Capacity

Baseline 

(ASHRAE 

90.1-1999)

Level 1 Level 2 Level 3

Non-Standard 

Size PTAC 11,000 Btu/h $1,515 $1,538 $1,550 $1,564 

Non-Standard 

Size PTHP 11,000 Btu/h $1,632 $1,657 $1,669 $1,683 

DOE developed base case and standards case energy efficiency scenarios as discussed in 

section 11.2.2.1. For both the base case and standards case energy efficiency scenarios, DOE 

calculated annual shipment-weighted average efficiencies. Associated with each annual 

shipment-weighted average efficiency value, DOE assigned a total installed cost, based on 

shipment-weighted total installed cost for all TSLs. DOE based the relationship between 

efficiency and total installed cost for each PTAC and PTHP equipment class on the data in Table 

11.3.2. As shown in Table 11.3.2, DOE estimated the shipments-weighted installed cost. DOE 

determined forecasted average shipments-weighted total installed costs based on the annual 

shipments by TSL.

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 EERE-2007-BT-STD-0012 COMMENT 32
Table 11.3.2 Shipment-Weighted Average Total Installed Cost per Unit by Trial Standard 

Level (2007$) 

Equipment

Class 

Representative 

Cooling 

Capacity 

Shipment-Weighted Average Total Installed Cost per Unit (2007$) 

TSL 1 TSL 2 TSL 3 TSL A TSL 4 TSL 5 

TSL 6 

(Max 

Tech)

Standard 

Size PTAC 

9,000 Btu/h $1,189 $1,189 $1,193 $1,193 $1,189 $1,199 $1,208 

12,000 Btu/h $1,434 $1,434 $1,439 $1,434 $1,434 $1,447 $1,458 

Standard 

Size PTHP 

9,000 Btu/h $1,307 $1,311 $1,311 $1,317 $1,317 $1,317 $1,325 

12,000 Btu/h $1,551 $1,556 $1,556 $1,556 $1,564 $1,564 $1,575 

Equipment

Class

Representative 

Cooling 

Capacity

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

NonStandard 

Size PTAC 11,000 Btu/h 

$1,547 $1,547 $1,553 $1,547 $1,564 

NonStandard 

Size PTHP 

11,000 Btu/h $1,666 $1,672 $1,672 $1,683 $1,683 

11.3.2.2 Total Annual Operating Cost Savings 

The annual operating cost savings to the Nation are equal to the change in the annual 

operating costs (difference between base case and standards case) per unit multiplied by the 

shipments forecasted in the standards case. The annual operating cost includes electricity, repair, 

and maintenance costs. 

Annual Electricity Cost Savings. As described in Chapter 8, DOE calculated annual 

electricity costs based on average State-level commercial electricity prices. To calculate annual 

energy cost savings for a particular equipment class in a given year, DOE first calculated the 

annual energy costs in each forecast year at each TSL from Table 11.2.5 multiplied by 1) the 

units of surviving equipment stock in the equipment class in each year, and then 2) by the salesweighted national average electricity prices for the four business types in Chapter 8. To 

determine energy cost savings, the national energy costs at each TSL were then subtracted from 

the national energy costs at the baseline level. 

Annual Repair Costs. DOE based average annual repair costs on the value of the PTAC 

and PTHP equipment (see Chapter 8). Table 11.3.3 shows the average per-unit repair costs for 

each of the equipment classes of PTACs and PTHPs. The NES spreadsheet provides the 

capability to allow repair costs to differ by the price of the PTAC and PTHP equipment, and 

therefore by TSL. For the purposes of this final rule analysis, DOE assumed the repair costs to 

increase in each equipment class as the manufacturer selling price increases, as shown in Table 

11.3.3. 

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 EERE-2007-BT-STD-0012 COMMENT 32
Table 11.3.3 Average Annual Repair Cost per Unit (2007$) 

Equipment

Class 

Representative 

Cooling 

Capacity 

Average Annual Repair Cost per Unit (2007$) 

Baseline 

(ASHRAE 

90.1-1999) 

TSL 1 TSL 2 TSL 3 TSL A TSL4 TSL 5 

TSL 6 

(Max 

Tech)

Standard 

Size PTAC 

9,000 Btu/h $15.17 $15.47 $15.47 $15.68 $15.68 $15.47 $15.91 $16.14 

12,000 Btu/h $15.17 $15.48 $15.48 $15.71 $15.48 $15.48 $15.96 $16.22 

Standard 

Size PTHP 

9,000 Btu/h $15.17 $15.60 $15.79 $15.79 $16.00 $16.00 $16.00 $16.21 

12,000 Btu/h $15.17 $15.63 $15.84 $15.84 $15.84 $16.07 $16.07 $16.30 

Equipment

Class

Representative 

Cooling 

Capacity

Baseline 

(ASHRAE 

90.1-1999)

TSL 1 TSL 2 TSL 3 TSL4 TSL 5

NonStandard 

Size PTAC 

11,000 Btu/h $15.17 $15.57 $15.78 $15.78 $16.03 $16.03 

NonStandard 

Size PTHP 

11,000 Btu/h $15.17 $15.57 $15.76 $15.76 $15.98 $15.98 

Annual Maintenance Costs. DOE was unable to locate any data on annual preventive 

maintenance cost (see Chapter 8), but annual maintenance is believed to be a relatively simple 

and inexpensive process for PTAC and PTHP equipment. An annual value of $117 per unit was 

assigned to all equipment. Table 11.3.4 shows the resulting annual maintenance costs per unit, 

which does not vary with TSL. 

Table 11.3.4 Average Annual Maintenance Cost per Unit (2007$) 

Equipment Classes Cost per Unit ($2007) 

Standard Size PTAC $117 

Standard Size PTHP $117 

Non-Standard Size PTAC $117 

Non-Standard Size PTHP $117 

11.3.2.3 Discount Factor 

DOE determined present value of monetary values in future years using the discount 

factor. The discount factor DF is described by the equation: 

tpt r   )1(

DF  1 Eq. 11.8

where: 

r = discount rate, 

t = year the monetary value is accrued, 

tP = year in which the present value is being determined. 

DOE estimated national impacts with both a three percent and a seven percent real 

(adjusted for inflation) discount rate as the average real rate of return on private investment in the 

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 EERE-2007-BT-STD-0012 COMMENT 32
U.S. economy. These discount rates are used in accordance with the Office of Management and 

Budget (OMB)’s guidance to Federal agencies on the development of regulatory analysis (OMB 

Circular A-4, September 17, 2003), and section E., “Identifying and Measuring Benefits and 

Costs,” therein. DOE defined the present year as 2008 for the final rule analysis. 

11.3.2.4 Present Value of Costs

The present value of increased installed costs is the annual installed cost increase in each 

year (i.e., the difference between the standards case and base case), discounted to the present, 

and summed for the time period over which DOE is considering the installation of PTAC and 

PTHP equipment (i.e., from the effective date of standards, 2012, to the year 2042, the last year 

in which installations occur). 

The increase in total installed cost refers to both equipment cost and installation cost 

associated with the higher energy efficiency of PTAC and PTHP units purchased in the standards 

case compared to the base case. DOE calculated the difference in installed cost as the difference 

in between total installed costs with and without the standard case scenarios. Total installed cost 

in each case was calculated as the unit installed costs of equipment at each TSL, times the 

number of units of each TSL shipped in each year with and without the standard. 

11.3.2.5 Present Value of Savings

The present value of operating cost savings is the annual operating cost savings (i.e., the 

difference between the base case and standards case) discounted to the year 2008, the year of the 

publication of the final rule for this rulemaking, and summed over the period from the effective 

date, 2012, to the time when the last unit installed in 2042 is retired from service (assumed to be 

2062). Savings are decreases in operating costs (including electricity, repair, and maintenance 

costs) associated with the higher energy efficiency of PTAC and PTHP units purchased in the 

standards case compared to the base case. Total annual operating cost savings is the savings per 

unit multiplied by the number of units of each vintage surviving in a particular year. Equipment 

consumes energy over its entire lifetime, and for units purchased in 2042, the PVS includes the 

cost of energy consumed until the unit is retired from service. 

11.4 NES AND NPV RESULTS 

The NES spreadsheet model provides estimates of the NES and NPV due to various trial 

standard levels. The inputs to the NES spreadsheet have been discussed earlier in sections 11.2.2 

(NES Inputs) and 11.3.2 (NPV Inputs). 

11.4.1 National Energy Savings Results 

The following section provides NES results for each energy consumption level 

considered for the four equipment classes of packaged terminal air conditioner and heat pumps. 

Results are cumulative to 2042 and are shown as primary energy savings in quads. Inputs to the 

NES spreadsheet model are based on weighted-average values, yielding results which are 

discrete point values, rather than a distribution of values as in the life-cycle cost (LCC) analysis. 

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 EERE-2007-BT-STD-0012 COMMENT 32
Table 11.4.1 shows the NES results for the trial standard levels analyzed for each 

equipment class of PTACs and PTHPs. DOE based all the results on electricity price forecasts 

from the 2008 EIA Annual Energy Outlook (AEO2008) Reference Case. In addition, Table 

11.4.2 and Table 11.4.3 also show the magnitude of the energy savings if the savings are 

discounted at rates of 7 percent and 3 percent, respectively. 

DOE reports both undiscounted and discounted values of energy savings. There is 

evidence that each TSL that is more stringent than the corresponding level in ASHRAE/IESNA 

Standard 90.1-1999. For the standard size PTAC and PTHP equipment, it results in additional 

energy savings, ranging from 0.015 quads to 0.068 quads for TSLs 1 through 6. In addition, the 

additional energy savings for the non-standard equipment range from 0.004 quads to 0.009 quads 

for TSLs 1 through TSLs 5, as shown in Table 11.4.1. 

Table 11.4.1 Cumulative National Energy Savings for PTACs and PTHPs 

Equipment Class 

Cumulative Energy Savings (2012-2042) (quads) 

TSL 1 TSL 2 TSL 3 TSL A TSL 4 TSL 5 TSL 6 

Standard Size 

PTAC 0.005 0.005 0.012 0.008 0.005 0.021 0.033 

Standard Size 

PTHP 0.009 0.019 0.019 0.024 0.028 0.028 0.035 

Total 0.015 0.024 0.031 0.032 0.033 0.049 0.068 

Equipment Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Non-Standard 

Size PTAC 0.002 0.002 0.003 0.002 0.004 

Non-Standard 

Size PTHP 0.002 0.003 0.003 0.004 0.004 

Total 0.004 0.004 0.005 0.006 0.009 

* Detailed changes may not sum to total due to rounding. 

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 EERE-2007-BT-STD-0012 COMMENT 32
Table 11.4.2 Cumulative National Energy Savings for PTACs and PTHPs Based on 

Seven-Percent Discount Rate 

Equipment Class 

Cumulative Energy Savings (2012-2042) (quads) 

TSL 1 TSL 2 TSL 3 TSL A TSL 4 TSL 5 TSL 6 

Standard Size 

PTAC 0.001 0.001 0.003 0.002 0.001 0.005 0.007 

Standard Size 

PTHP 0.002 0.004 0.004 0.005 0.006 0.006 0.008 

Total 0.003 0.006 0.007 0.007 0.008 0.011 0.015 

Equipment Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Non-Standard 

Size PTAC 0.000 0.000 0.001 0.000 0.001 

Non-Standard 

Size PTHP 0.000 0.001 0.001 0.001 0.001 

Total 0.001 0.001 0.001 0.001 0.002 

* Detailed changes may not sum to total due to rounding. 

Table 11.4.3 Cumulative National Energy Savings for PTACs and PTHPs Based on 

Three-Percent Discount Rate 

Equipment Class 

Cumulative Energy Savings (2012-2042) (quads) 

TSL 1 TSL 2 TSL 3 TSL A TSL 4 TSL 5 TSL 6 

Standard Size 

PTAC 0.003 0.003 0.006 0.004 0.003 0.011 0.017 

Standard Size 

PTHP 0.005 0.010 0.010 0.012 0.014 0.014 0.018 

Total 0.007 0.012 0.016 0.016 0.017 0.025 0.035 

Equipment Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Non-Standard 

Size PTAC 0.001 0.001 0.001 0.001 0.002 

Non-Standard 

Size PTHP 0.001 0.001 0.001 0.002 0.002 

Total 0.002 0.002 0.003 0.003 0.004 

* Detailed changes may not sum to total due to rounding. 

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 EERE-2007-BT-STD-0012 COMMENT 32
11.4.2 Annual Costs and Savings 

As a prelude to providing the NPVs for each trial standard level in each equipment class, 

this section presents the annual equipment cost (or total installed cost) increases and annual 

operating cost savings at the national level. 

Figure 11.4.1 shows the changes over time of the non-discounted annual equipment price 

increases and the non-discounted operating cost savings at TSL 6 for standard size PTAC with a 

cooling capacity of 9,000 Btu/h. The total net annual impact is the discounted value of the 

difference between annual equipment purchases and annual operating costs at a seven percent 

discount rate. Appendix G shows comparable figures for other TSLs and other equipment 

classes. The annual equipment price change is the increase in equipment price for equipment 

purchased each year over the period 2012–2042. The annual operating cost savings is the 

savings in operating costs for equipment purchased, and which have not been retired, for each 

year over the time period 2012-2062. DOE determined the annual costs and savings presented in 

each figure based on the AEO2008 Reference Case. The NPV is the difference between the 

cumulative annual discounted savings and the cumulative annual discounted costs. 

Net Savings

(0.0065)

0.0000

0.0065

2012 2016 2020 2024 2028 2032 2036 2040 2044 2048 2052 2056 2060

Year

Billion 2007$

Undiscounted Total Annual Operating Savings

Undiscounted Annual Equipment Purchase Savings

Discounted Total Net Annual Impact

Figure 11.4.1 National Annual Costs and Savings for Standard Size PTAC, 9,000 Btu/h 

Cooling Capacity, TSL6 

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 EERE-2007-BT-STD-0012 COMMENT 32
11-19

Figure 11.4.1 initially shows smaller annual operating cost savings compared to the 

increased equipment price costs (shown on the figure as operating savings). For all trial standard 

levels, operating cost savings increase with time through 2042, as more and more equipment 

meeting the efficiency standard comprises the packaged terminal air conditioner and heat pump 

stock. The savings then decrease as the equipment retires and is not replaced. 

11.4.3 Net Present Value Results 

The following section provides NPV results for the trial standard levels considered for 

the equipment classes of PTACs and PTHPs. Results are cumulative and are shown as the 

discounted value of these savings in dollar terms. The present value of increased total installed 

costs is the total installed cost increase (i.e., the difference between the trial standard case and 

base case), discounted to 2008, and summed over the time period in which DOE evaluates the 

impact of standards (i.e., from the effective date of standards, 2012, to the year 2062). 

Table 11.4.4 shows the NPV results for the TSLs considered for PTAC and PTHPs based 

upon a seven percent discount rate. DOE based all results on electricity price forecasts from the 

AEO2007 Reference Case. Detailed results showing the breakdown of the NPV into national 

equipment costs and national operating costs are provided in appendix G. 

Table 11.4.4 Cumulative NPV Results Based on a Seven-Percent Discount Rate 

(Billion 2007$) 

Equipment Class 

Cumulative NPV – 7% Discount Rate (billion 2007$)* 

TSL 1 TSL 2 TSL 3 TSL A TSL 4 TSL 5 TSL 6 

Standard Size 

PTAC ($0.003) ($0.003) ($0.009) ($0.005) ($0.003) ($0.020) ($0.038) 

Standard Size 

PTHP $0.004 $0.012 $0.012 $0.015 $0.010 $0.010 ($0.003) 

Total $0.001 $0.008 $0.002 $0.010 $0.006 ($0.011) ($0.041) 

Equipment Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Non-Standard 

Size PTAC $0.002 $0.002 $0.003 $0.002 $0.004 

Non-Standard 

Size PTHP $0.003 $0.004 $0.004 $0.006 $0.006 

Total $0.005 $0.006 $0.007 $0.008 $0.010 

* Values in parentheses indicate negative NPV. Detailed changes may not sum to total due to rounding.

 EERE-2007-BT-STD-0012 COMMENT 32
Table 11.4.5 provides the NPV results based on the three percent discount rate and 

electricity price forecasts from the AEO2007 Reference Case. As with the NPV results based 

upon a seven percent discount rate, detailed results showing the breakdown of the NPV into 

national equipment costs and national operating costs based upon a three percent discount rate 

are provided in appendix G. 

Table 11.4.5 Cumulative NPV Results based on a Three-Percent Discount Rate 

(Billion 2007$) 

Equipment Class 

Cumulative NPV – 3% Discount Rate (billion 2007$)* 

TSL 1 TSL 2 TSL 3 TSL A TSL 4 TSL 5 TSL 6 

Standard Size 

PTAC ($0.001) ($0.001) ($0.006) ($0.003) ($0.001) ($0.020) ($0.043) 

Standard Size 

PTHP $0.018 $0.044 $0.044 $0.057 $0.050 $0.050 $0.034 

Total $0.017 $0.043 $0.038 $0.054 $0.049 $0.031 ($0.010) 

Equipment Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Non-Standard 

Size PTAC $0.006 $0.006 $0.008 $0.006 $0.011 

Non-Standard 

Size PTHP $0.008 $0.010 $0.010 $0.017 $0.017 

Total $0.014 $0.016 $0.019 $0.023 $0.029 

* Values in parentheses indicate negative NPV. Detailed changes may not sum to total due to rounding.

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REFERENCES

1. 1. U.S. Department of Energy/Energy Information Administration (DOE/EIA), Annual 

Energy Outlook 2008, June 2008. Washington, D.C. DOE/EIA-0383(2008). 

2. Energy Information Administration (EIA). National Energy Modeling System Commercial 

Model (2004 Version). 

3. ERG/MKJ. Energy Research Group & M.K. Jaccard & Associates. 2000. Integration of 

GHG Emissions Reduction Options using CIMS. 

<<http://www.emrg.sfu.ca/reports/Rollup.pdf>> (05 June 2001). 

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