10

- i CHAPTER 10: NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

10.1 INTRODUCTION

................................ ................................ ................................ ......... 10

- 1

10.2 PROJECTED ENERGY EFF ICIENCIES

................................ ................................ ..... 10

- 2

10.3 NATIONAL ENERGY SAVI NGS

................................ ................................ ............... 10

- 4

10.3.1 Definition of National Energy Savings

................................ ................................ .......... 10

- 4

10.3.2 Inputs to Calculation of National Energy Savings

................................ ......................... 10

- 5

10.3.2.1 Annual Energy Consumption per Unit

................................ ........................ 10

- 5

10.3.2.2 Shipments and Product Stock

................................ ................................ ...... 10

- 7

10.3.2.3 National annual Energy Consumption

................................ ......................... 10

- 7

10.3.2.4 Site

- to

- Power

- Plant Energy Conversion Factors

................................ ......... 10

- 8

10.3.2.5 Full

- Fuel

- Cycle Multipliers

................................ ................................ ......... 10

- 9

10.3.2.6 Rebound Effect

................................ ................................ .......................... 10

- 10

10 .4 NET PRESENT VALUE

................................ ................................ ............................. 10

- 10

10.4.1 Definition of Net Present Value

................................ ................................ ................... 10

- 10

10.4.2 Inputs to Calculation of Net Present Value

................................ ................................ .. 10

- 11

10.4.2.1 Total Installed Cost per Unit

................................ ................................ ...... 10

- 12

10.4.2.2 Increase in Total Annual Installed Cost

................................ ..................... 10

- 14

10.4.2.1 Annual Savings in Operating Costs per Unit

................................ ............. 10

- 14

10.4.2.2 Total Savings in Annual Operating Costs

................................ .................. 10

- 15

10.4.2.3 Discount Factors

................................ ................................ ........................ 10

- 15

10.4.2.4 Present Value of Costs

................................ ................................ ............... 10

- 16

10.4.2.5 Present Value of Savings

................................ ................................ ........... 10

- 16

10.5 RESULTS

................................ ................................ ................................ .................... 10

- 16

10.5.2 Natio nal Energy Savings by Candidate Standard Level

................................ .............. 10

- 17

10.5.3 Annual Costs and Savings

................................ ................................ ........................... 10

- 18

10.5.4 Consumer Net Present Value by Candidate Standard Level

................................ ....... 10

- 19

LIST OF TABLES

Table 10.2.1 Portable ACs: Base

- Case and Standards

- Case Energy Efficiency

Distributions in 2019

................................ ................................ .......................... 10

- 3

Table 10.3.1 Shipments

- Weighted Average per

- Unit Annual Energy Consumption in

2014, Residential and Commercial Sectors

................................ ....................... 10

- 6

Table 10.3.2 Full

- Fuel

- Cycle Energy Multipliers (based on AEO 2014)

............................. 10

- 10

Table 10.4.1 Shipments

- Weighted Average Total Installed Cost in 2019

........................... 10

- 12

Table 10.5.1 Inputs to Calculating National Energy Savings and Net Present Value

.......... 10

- 17

Table 10.5.2 Cumulative Primary National Energy Savings

................................ ................ 10

- 18

Table 10.5.3 National Energy Savings for Full

- Fuel

- Cycle

................................ ................. 10

- 18

Table 10.5.4 Cumulative Consumer Net Present Value for Each CSL

................................ 10

- 2010

- ii LIST OF FIGURES

Figure 10.2.1 Projected SWEER
cm s for the Base Case and Each Candidate Standard

Case

................................ ................................ ................................ .................... 10

- 4 Figure 10.3.1 Projected Energy Consumption for the Base Case and Each Candidate

Standards Case, Residential Settings

................................ ................................ . 10

- 6 Figure 10.3.2 Projected Energy Consumption for the Base Case and Each Candidate

Standards Case, Commercial Settings

................................ ............................... 10

- 7 Figure 10.3.3 Site

- to

- Power Plant Conversion Factors for Electricity

................................ ..... 10

- 9 Figure 10.4.1 Total Installed Cost Projected for the Base Case and Each Candidate

Standard Case, Residential Settings

................................ ................................ . 10

- 13 Figure 10.4.2 Total Installed Cost Projected for the Base Case and Each Candidate

Standards Case, Commercial Settings

................................ ............................. 10

- 14 Figure 10.5.2 Non

- Discounted Changes in Annual Installed Cost and Operating Costs

under CSL 1

................................ ................................ ................................ ..... 10

- 1910-1 CHAPTER 10. NATIONAL IMPACT ANAL YSIS

10.1 INTRODUCTION

This chapter describes t he method s the U.S. Department of Energy ( DOE ) used to

conduct a national impacts analysis (NIA) of potential energy efficiency standard levels for portable air conditioners (ACs)

. DOE evaluated the following impacts: (1) national energy savings (NES) attributable to each standard , (2) monetary value of th e energy savings for

consumers of portable ACs

, (3) increased total installed costs of portable ACs because of

standard s , and (4) the net present value (NPV)

, which is the difference between the value of energy savings and of increased total installed costs for each standard considered

.

DOE determined the NES and NPV for all the candidate standard levels (CSLs)

considered for portable ACs

. DOE performed a ll calculations using a Microsoft Excel spreadsheet model, which is accessible on the Internet at ( www.eere.energy.gov/buildings/appliance_standards/ ). The spreadsheet combine s the calculations for determining the NES and NPV for each considered CSL with input from the appropriate s hipments model. Details and in structions for using the NIA model are provided in

a ppendix 10

- A.

Chapter 9 provides a detailed description of the shipments model that DOE used to project future purchases of portable ACs . Chapter 9 also includes descriptions of consumers’ sensitivities to total installed cost (purchase price plus installation costs) and operating costs, and how DOE captured those sensitivities within the model.

DOE analyzed the benefits and burdens of four C SLs for portable ACs . The C SLs were

de rived from the energy efficiency levels for portable ACs that DOE developed in chapter 5 analyzed in chapter 8

. Table Error! Reference source not found. presents the C SLs

, the ir corresponding efficiency levels

, and their cooling energy efficiency ratios (EER
cm s) at various

average capacities , which are given in British thermal units per hour ( Btu/hr )

. C SL 4 represents the maximum technologically fe asible (“max

- tech”) improvement in energy efficiency for portable ACs

. CSLs 2 and 3 represent intermediate efficiency levels between CSLs 1 and 4. C SL

1 represents the first efficiency level consider ed that exceeds baseline efficiency

.

Table 10.1

. 1 Candidate Standard Levels for Portable ACs

CSL Efficiency

Level Average Capacity

Btu/hr Average EER cm

Btu/Wh

-- B aseline 2,512 2.08

1 1 4,327 3.53

2 2 5,294 4.32

3 3 6,540 5.28

4 4 6,604 5.8210-2

10.2 PROJECTED ENERGY EFFICIENCIES

A key component of DOE’s estimates of NES and NPV for portable ACs is the energy

efficiencies projected for the base case (without new energy conservation standards ) and each

standard s case (with new energy conservation standards ). The projected energy effici enc y represent s the annual shipment s

- weighted energy efficiency of portable ACs during the analysis period ( that is, from the assumed effective date of a new standard to 30 years after that date ). Based on DOE’s implementation report for energy conservation standards activities submitted pursuant to Section 141 of the Energy Policy Act of 2005, a final rule for the portable air conditioners being considered for this standard s rulemaking is scheduled for completion in August 2016. 1 The effective date of any new energy efficiency standards for portable ACs would be 3 years after the final rule is published, or August 2019.

For calculating the NES, per

- unit average annual energy consumption is a direct function

o f product energy effici ency

. For the NPV, the per

- unit total installed cost is a direct function of energy effici ency ; the per

- unit annual operating cost, because it is a f unction of per

- unit annual

energy consumpti on, is indirectly dependent on product energy effici ency

. The above NES and NPV inputs, as well as all other inputs for the calculation of NES and NPV, are discussed further

in sections 10.3 and 10.4

.

To project the base

- case energy efficienc y for portab le ACs , DOE us ed as a starting point the shipment s

- weighted cooling energy efficiency ratio (SWEER
cm ) for 201 9 (the assumed date of compliance with a new standard)

. To represent the distribution of product energy efficiencies

in 201 9 , DOE used the same market shares as used in the base case for the life

- cycle cost analysis ( described in c hapter 8 ). To project efficiencies for the base case
, DOE made assumptions regar ding future improveme nts i n efficiency

, assuming an annual increase in efficiency of 0.25 percent between 2019 and 2048

.

I n order to project standards

- case energy efficiencies for portable ACs, DOE used a “roll

up” scenario to establish the shipments

- weighted average energy efficiency for 2019

. Using this approach, product energy efficiencie s in the base case that do not meet the standard level under consideration would “roll up” to meet the new standard level. Product energy efficiencies in the

base case that exceed the standard level under consideration would not be affected.

I n addition to a “roll

- up” scenario for standards cases , DOE developed a shift scenario in

which DOE applie d an annual growth rate in average energy efficiency to the SWEER
cm , as done

for the base case. To develop projected SWEER
cm s for standards case s , DOE developed growth

trends for each candidate standard level that maintained , throughout the analysis period (2019

– 2048)

, the same difference in per

- unit average total installed cost as between the base case and

each standards case found in 2019 . DOE’s approach to dev eloping standards

- case SWE ER cm s assumes that the adoption of more efficient products under a standards case can occur only at a

rate that ensures that the average difference in total installed cost between the standards case and

base case is held constant throughout the analysis period. Because the total installed cost versus efficiency relationship demonstrates an increasing cost for more efficient products, the10-3

SW EER cm growth rate for each standards case is lower than the SWE ER cm growth rate for the

base case.

Table 10.2.1 show s the market shares of base

- and standards

- case product s in 2019. The table also presents the energy efficiency r atio s that DOE used in its NIA for portable ACs and

the SWEER
cm for each considered candidate standard level.

Table 10.2.1 Portable ACs : Base

- Case and Standards

- Case Energy Efficiency

Distributions in 201 9

Efficiency

Level Average

Capacity Average

EER cm Market Share %

Base

Case Candidate Standard Level

Btu/h Btu/Wh 1 2 3 4

Baseline 2,512 2.08 90 0 0 0 0

1 4

, 327 3.53 5 95 0 0 0

2 5

, 294 4.32 5 5 100 0 0

3 6

, 540 5.28 0 0 0 100 0

4 6

, 604 5.82 0 0 0 0 100

SWEER cm Btu/Wh 2.26 3.57 4.32 5.28 5.82

0 illustrates the approach DOE used to estimate SWEER
cm s for portable ACs . The figure

show s the EER cm - based historical base

- case SWEER
cm s, the base

- case projected energy efficiency trend

, and the projected energy efficiency trend for each standard s case for portable

ACs

. As the figure illustrates , the growth rat es in efficiency for the standard s cases are slightly

lower than for the base case. Note th at for the standards cases, the efficiency trend does not increase past the max

- tech level.10-4

Figure 10.2.1 Projected SWEER cm s for the Base Case and Each

Candidate Standard Case

10.3 NATIONAL ENERGY SAVI NGS

DOE calculated the national energy savings associated with the difference between the

base case and each candidate standard level for portable ACs . DOE calculated cumulative energy savings throughout the analysis period, from 201 9 to 30 years after that da te (through 2048)

.

10.3.1 Definition of N ational Energy Savings

The following equation shows that DOE calculated annual national energy savings (NES) as the difference between two projections: a base case (without new standards) and a standards case. Positive values of NES represent energy savings (that is, they show t hat national

annual energy consumption ( AEC ) under a standard s case is less than in the base case).

Cumulative energy savings are the sum of annual NES throughout the analysis period,

from 201 9 to through 204 8

.

DOE calculated t he national annual site energy consumption by multiplying the number

or stock of the product (by vintage) by its unit energy consumption (UEC; also by vintage).

National annual energy consumption is calculated using the following equation.10-5

Where:

AEC = annual national energy consumption each year in quadrillion Btus (quads),

summed over vintages of the product stock, STOCK V ; NES = annual national energy sav ings (quads );

STOCK V = stock of product (millions of units) of vintage V that survive in the year for

which DOE calculated annual energy co nsumption ; UEC V = annual energy consumption of portable ACs in kilowatt

- hours (kWh );

V = year in which the product was purchased as a new unit ; and

y = year in the forecast.

The stock of a product depends on annual shipments and the lifetime of the product. As described in chapter 9, DOE projected product shipments under the base case and standards

cases. To avoid including saving s attributable to shipments displaced (units not purchased) because of standards, DOE used the projected candidate standards

- case shipments and, in turn,

the standards

- case stock, to calculate the AEC for the base case.

10.3.2 Inputs to Calculation of National Energy Savings

The inputs for determining NES are:

 a nnual e nergy c onsumption per u nit

,

 s hipments

,

 product s tock (considered along with shipments)

,

 national annual e nergy c onsumption , and

 site

- to

- primary conversion factor

.

10.3.2.1 Annual Energy Consumpt ion per Unit

DOE developed per

- unit annual energy consumption as a function of prod uct energy effici ency for portable ACs ( Chapter 7

, E nergy U se Characterization

, and C hapter 8, L ife

- C ycle

C ost and P ayback P eriod Analysis )

. Because per

- unit annual energy consumption depend s directly on energy effici ency, DOE used the shipments

- weighted energy efficiencies for the base

and standards case s (presented in section 10.2)

, along with the annual energy use data presented

in chapter 8, to estimate the shipment s

- wei ghted annual average per

- unit energy consumption (SWAEU) under the base and standards cases. Table 10.3.1 show s the values of AEUs and

average SWAEU s applied to shipments to both the residential and commercial sectors.10-6

Table 10.3.1 Shipments

- Weighted Average per

- Unit Annual Energy Consumption in

2014, Residential and Commercial Sector s

Efficiency

Level Annual Energy Use

kWh/yr Market Share %

Base

Case Candidate Standard Level

Residential Commercial 1 2 3 4

Baseline 724 1,713 90 0 0 0 0

1 525 1,411 5 95 0 0 0

2 473 1,330 5 5 100 0 0

3 434 1,274 0 0 0 100 0

4 400 1,173 0 0 0 0 100

SWAEU kWh/yr Residential 701 522 473 434 400

Commercial 1,679 1,407 1,330 1,274 1,173

As noted in section 10.2, DOE applied a growth rate to the SWEER
cm to project energy efficiencies under the base and standards cases. Because per

- unit annual energy consumption is a function of energy efficiency, the values shown in Table 10.3.1 scale with the average SW AEU throughout the analysis period. Figure 10.3.1 and Error! Reference source not found. show the

evolution of the SWAEU for portable ACs in the base case and under each candidate standard

level for residential and com mercial se ttings , respectively

.

Figure 10.3.1 Projected Energy Consumption for the Base Case and

Each Candidate Standard s Case

, Residential Se ttings 350 400 450 500 550 600 650 700 750 SWAEU (kWh/yr)

Base Case CSL 1 CSL 2 CSL 3 CSL 410-7

Figure 10.3.2 Projected Energy Consumption for the Base Case and

Each Candidate Standards Case, Commercial Settings

As Error! Reference source not found. illustrate s
, because the efficiency trend in the

standard s cases does not surpass the max

- tech level

, under CSL 4 the SWAEU stays constant and equal to the max

- tech level

.

10.3.2.2 Shipments and Produc t Stock

The product stock in a given year is the number of products shipped from earlier years

that survive in th at year. The NIA model track s the number of units s hipped each year . DOE

assumes that products have an increasing probability of retiring as they age. The probability of survival as a function of years since purchase is the survival function. Chapter 9 of this preliminary TSD provides additional details on the survival function that DOE used for portable

ACs

.

10.3.2.3 National annual Energy Consumption

The national annual energy consumption (AEC) is the product of the annual energy consumption per unit (UEC) and the number of units of each vintage (V) . This method of calculation accounts for differences in unit energy consumption from year to year. DOE used the equation below ( initially presented in section 10.3.1 ) to calculate annual energy consumption.

1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 SWAEU (kWh/yr)

Base Case CSL 1 CSL 2 CSL 3 CSL 410-8

In determining nati onal annual energy consumption, DOE first calculated annual energy consumption at the site

, then applied a conversion factor, described below, to calculate primary energy consumption.

10.3.2.4 Site

- to

- Power

- Plant Energy Conversion Factors

I n determining annual NES , DOE initially considere d the annual energy consumption at a residence (for electricity, the energy in kWh consumed by a household). DOE then calculated primary (source) energy use from site energy consumption by applying a conversion factor to account for losses associated with the generation, transmission, and distribution of electricity.

The site

- to

- source conversion factor is a multiplicative factor used to convert site energy consumption into primary

, or source
, energy c onsumption, expressed in quadrillion Btu ( quads )

.

DOE used annual site

- to

- power

- plant conversion factors based on the version of the national energy modeling system (NEMS) a that corresponds to the DOE Energy Information Administration’s (EIA’s) Annual E nergy Outlook 201 4 ( AEO 2014 )

. 2 The factors are marginal values, which represent the response of the national power system to an incremental decrease in consumption. For electricity, the conversion factors change over time in response to projected changes in generation sources (the types of power plant s projected to provide electricity).

Error! Ref

erence source not found. shows the site

- to

- power

- plant conversion factors for electricity between 20 19 and 20 40 for portable ACs . The conversion factors were generated by NEMS based on the load shape for portable ACs . NEMS output stop s in 2040 ; DOE assumed

that conversion factors remain constant at 2040 values through the end of the analysis period (2048)

.

a For more information on NEMS, refer to the U.S. Department of Energy, Energy Information Administration documentation. A useful summary is National Energy Modeling System: An Overview 2000 , DOE/EIA

0581(2000), March 2000. EIA approves use of the name NEMS to describe only an official version of the model

with no modification to code or data. Because this analysis entails minor code modificati ons
, and the model is run under policy scenarios that are variations on EIA assumptions, DOE refers to the model as NEMS

- BT (BT is DOE’s Building Technologies Program, under whose aegis this work was performed). NEMS

- BT previously was

called NEMS

- BRS.10-9 Figure 10.3.3 Site

- to

- Power Plant Conversion Factors for Electricity

10.3.2.5 Full

- Fuel

- Cycle Multipliers

The full

- fuel

- cycle (FFC) encompasse s point

- of

- use (site) energy; the energy losses associated with generation, transmission, and distribution of electricity; and the energy consumed in extracting, processing, and transporting or distributing primary fuels . To estimate the FFC by including the energy consumed in extracting, processing, and transporting or distributing primary fuels, refer red to as upstream activities, DOE developed FFC multipliers b
using the data and projections generated for AEO 2014 . The AEO 2014 provides extensive information about the energy system, including projections of future oil, natural gas, and coal supplies; energy use for oil and gas field and refinery operations; and fuel consumption and emissions related to electric power pro duction. Th e information can be used to define a set of parameters that represent the energy intensity of energy production. The method used to calculate FFC energy multipliers is described in appendix 10

- B

.

Table 10.3.2 shows the FFC energy multipliers used for portable ACs for selected years. The 2040 values were used for the years after 2040.

b FF C multipliers discussed in this chapter relate to the upstream part of the FFC process.10-10

Table 10.3.2 Full

- Fuel

- Cycle Energy Multipliers ( b ased on AEO 2014 ) Electricity ( power plant energy use) 2019 2020 2025 2030 2035 2040

Residential 1.04 3 1.04 4 1.04 5 1.04 6 1.04 7 1.04 7

Commercial 1.043 1.044 1.045 1.046 1.047 1.047

10.3.2.6 Rebound Effect

A rebound effect may follow an energy conservation standard, in that consumers m a y increase usage of a product because it costs less to operate than previous models. A rebound

effect reduc es the energy savings attributable to a standard. DOE generally accounts for the

direct rebound effect when estimat ing the NES. F or this preliminary analysis, DOE used a

rebound effect of zero. DOE welcomes data on rebound effects associated with portable ACs

.

10.4 NET PRESENT VALUE

DOE calculated the net present value (NPV) of the increased product cost and reduced operating cost associated wi th the difference between the base case and each candidate standard

level for portable ACs

.

10.4.1 Definition of N et P resent V alue

The NPV is the value in the present of a time

- series of costs and savings. The NPV is described by the equation:

Where:

PVS = present value of operating cost savings, and

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

installation costs).

DOE determined the PVS and PVC according to the following expressions.

Where:10-11

OCS = total annual savings in operating costs each year summed over vintages of the

product stock, STOCK V ;
DF = discount factor in each year;

TIC = total annual increases in installed cost each year summed over vintages of the

product stock, STOCK V ; and

y = year in the forecast.

DOE calculated the total annual consumer savings in operating cost s by multiplying the

number or stock of the product (by vintage) by its per

- unit operating cost savings (also by vintage). DOE calculated the total annual increases in consumer product price by multiplying the

number or shipments of the product (by v intage) by its per

- unit increase in consumer cost (also by vi ntage). Total annual operating cost savings and total annual produc t price increases are

calculated by the following equations.

Where:

STOCK V = stock of product s of vintage V that survive in the year for which DOE

calculated annual energy consumption

, UOCS V = annual operating cost savings per unit of vintage V

, V = year in which the product was purchased as a new unit ; SHIP y = shipments of the product in year y ; and

UTIC y = annual per

- unit increase in installed product price in year y

.

DOE determined the total inc reased product price for each year from 2019 to 2048

. DOE determined the present value of operating cost savings for each year from 2019 to the year when all units purchased in 2048 are estimated to retire ( 20 77 )

. DOE calculated costs and savings as

the difference between a standards case and a base case without new standards.

DOE developed a discount factor from the national discount r ate and the number of years between the “present” (year to which the sum is being discounted) and the year in which the costs and savings occur. The NPV is the sum over time of the discounted net savings.

10.4.2 Inputs to Calculation of N et Present Value

The in puts to the calculation of NPV are:

 t otal i nstalled c ost per u nit

,

 total annual increases in installed cost,

 a nnual savings in o perating c ost per u nit

,10-12

 t otal a nnual o perating c osts

,

 d iscount f

actor

,

 p resent v alue of c osts , and

 present v alue of s avings

.

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

- unit total installed cost (difference between base case and standards case s ) multiplied by the shipments forecasted for the standards case. As when calculati ng the NES, D OE did not use base

- case shipments to calculate total annual installed costs

.

The total annual savings in operating cost s are equal to the change in 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 energy , repair, and

maintenance costs

, as described in chapter 8

.

10.4.2.1 Total Installed Cost per Unit

T he per

- unit total installed cost of portable ACs

, described in chapter 8

, i s a function of product energy effici ency. Because the per

- unit total annual installed cost depends directly on energy effici ency, DOE used the shipment s

- weighted energy efficiencies distribution of the base

and standards case s describ ed in section 10.2

, in combination with the total installed costs developed in chapter 8, to estimate the shipment s

- weighted average annual per

- unit total

installed cost under the base and standards cases. Table 10.4.1 shows the shipment

- weighted

average consumer price for portable ACs in 201 9 based on the efficiency distribution s that correspond to the base case and each standards case

.

Table 10.4.1 Shipment s

- Weighted Average Total Installed Cost in 201 9

Efficiency Level Unit Price 2013$ Market Share %

Base

Case Candidate Standard Level

Residential Commercial 1 2 3 4

Baseline 534 534 90 0 0 0 0

1 540 540 5 95 0 0 0

2 541 541 5 5 100 0 0

3 542 542 0 0 0 100 0

4 605 605 0 0 0 0 100

Total Installed

Cost 2013$ Residential 534 540 541 542 605

Commercial 534 540 541 542 605

As discussed in chapter 8, DOE developed a price trend based on the producer price

index series for “s mall electric household appliances, except fans ” from 1983 to 2013 . DOE used the price trend to project the prices of portable ACs sold in each year of the forecast period (2019

– 2048). The price in each year was estimated as an exponential function of the year, and10-13

DOE applied th e same values to project prices at each CSL

. For portable ACs , the estimated average annual rate of price decline is 1.99 percent. To investigate the effect of different product price projections on the consumer NPV for various efficiency levels, DOE also considered two alternative price trends. Details on how those alternative price trends were developed are

docu mented in appendix 10

- C

, which also presents the results of DOE's analysis of price

sensitivities

.

Figure 10.4.1 and Figure 10.4.2 show the projected trend s in installed cost for portable air

conditioner units in the residential and commercial sector s , respectively.

Figure 10.4.1 Total Installed Cost Projected for the Base Case and

E ach Candidate Standard Case

, Residential Settings $250 $300 $350 $400 $450 $500 $550 $600 $650 Total Installed Price (2013$)

Base Case CSL 1 CSL 2 CSL 3 CSL 410-14

Figure 10.4.2 Total Installed Cost Project ed for the Base Case and

E ach Candidate Standard s Case

, Commercial Settings

10.4.2.2 Increase in Total Annual Installed Cost

The increase in total annual installed cost for any given candidate standard level is the product of the total installed cost increase per unit under that standard and the number of units of each vintage. This approach accounts for differences in total installe d cost from year to year.

DOE used t he following equation (also presented i n section 10.4.1 ) to determine the increase in total annual installed cost for a given CSL

.

10.4.2.1 Annual Savings in Operating Cost s per Unit

Per

- unit annual operating costs encompass th e annual costs for energy, repair, and

maintenance. DOE determined the savings in per

- unit annual energy cost by multiplying the savings in per

- unit annual energy consumption by the appropriate energy price

. Estimates of per

unit annual energy consumption for the base case and each standards case were presented in

section 10.3.2.1 . DOE projected energy p rices based on EIA’s AEO 2014 . The energy prices and price trends are described in chapter 8

.

$250 $300 $350 $400 $450 $500 $550 $600 $650 Total Installed Price (2013$)

Base Case CSL 1 CSL 2 CSL 3 CSL 410-15

10.4.2.2 Total Savings in Annual Operating Cost s

The total savings in annual operating cost s for a CSL is the product of the annual operating cost savings per unit un der that standard and the number of units of each vintage. This approach accounts for differences in savings in annual operating cost s from year to year. DOE used the following equation (also presented in section 10.4.1 ) to determin e the total savings in annual operating cost for a given standards case.

As discussed in section 10.3.1.6, a rebound effect may follow an energy conservation standard, in that consumers m a y increase usage of a product because it costs less to operate than previous models. T he increase in energy consumption associated with the rebound effect

represents increased value to consumers ( e.g ., a more comfortable indo or environment ). The net

effect is the sum of (1) the change in the cost of owning a product ( that is, national consumer expenditures for total installed and operating cost s ) and (2) the increased value of the enhanced service from the product. DOE believes that, if the increased national value ( to consumers ) produced by the rebound effect could be monetized , it would be similar to the monetary value of the foregone energy savings. For this analysis, DOE estimated that th e increased value to

consumers is equivalent to the monetary value of the energy savings that would have occurred

without the rebound effect. The national economic impacts on consumers as measured by the NPV analysis, with or without the rebound effect, therefore are the same.

10.4.2.3 Discount Factors

DOE multiplies monetary values in future years by a discount factor to determine present
value s

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

Where :

r = discount rate,

y = year of the monetary value, and

y P = year in which the present value is being determined.

DOE uses both a 3

- percent and a 7

- percent real discount rate when estimat ing national impacts. Those discount rates were applied to product prices of portable ACs in accordance with the Office of Management and Budget (OMB)’s guidance to Federal agencies on develop ing regulatory analys e s (OMB Circular A

- 4, September 17, 2003, and section E., “Identifying and Measuring Benefits and Costs,” therein )

. DOE defines the present year as 20 1 4

.10-16

10.4.2.4 Present Value of Costs

The present value of increased installed costs is the annual increase in installed cost for each year ( i.e ., the difference between the standards case and base case)

, discounted to the present and summed over the period for which DOE is considering the ins talled products ( 2019

– 2048 ). The increase in total installed cost refers to both product and installation cost s associated with the higher energy efficiency of products purchased under a standards case compared to the

base case. DOE calculated annual incre ases in installed cost as the difference in total cost of new products installed each year, multiplied by the shipments in the standards case

.

10.4.2.5 Present Value of Savings

The present value of savings in operating cost s is the annual savings in operating cost ( i.e. , the difference between the base case and standards case)

, discounted to the present and summed over the perio d that begins with the effective date of standards and ends when the last

installed unit is retired from service. Savings represent decreases in operating cost s (including

costs for energy , repair, and maintenance) associated with the higher energy efficiency of products purchased in a standards case compared to the base case. Total annual savings in operating cost s a re the savings per unit multiplied by the number of units of each vintage that

surviv e in a particular year. Because a product consumes energy throughout its lifetime, the

energy consumption for units installed in a given year includes energy consumed until the unit is

retired from service.

10.5 RESULTS

The NIA model provides estimates of the NES and NPV associated with conservation

standards at different efficiency levels. The inputs to the NIA model were discussed i n sections

Error! Reference source not found. (NES Inputs) and 10.4.2 (NPV Inputs). DOE generated the NES and NPV results using a Microsoft Excel spreadsheet, which is accessible on the Internet at ( www.eere.energy.gov/buildings/appliance_standards/ ). Details and instructions for using the spreadsheet are provided in a ppendix 9

- A, U ser I nstructions f or S hipments and N ational E nergy S avings S preadsheet M odel

, in the section titled, “ NES and NPV Input S ummary .” Table 10.5.1 summarizes inputs to the NIA model

.10-17

Table 10.5.1 Inputs to Calculating N ational E nergy S avings and N et P resent V alue

Input Data Description

Shipments Annual shipments from shipments model ( chapter 9)

. Effective date of standard 201 4.

Energy efficiency in base case SW EER cm determined for 201 9

. Annual growth rate of 0.25

percent assumed for determining SWEER cm between 201 9 and

204 8 ( s ee s ection 10.2)

. Energy efficiency in standards cases “ R oll

- up + shift ” scenario assumed for determining SW EER cm in 201 9 for each standards case ( s ee s ection 10.2 )

. Annual energy consumption per unit Annual weighted

- average values are a function of shipment s

weighted UEC

. Total installed cost per unit Annual weighted

- average values are a function of efficiency

distribution

. Energy cost per unit Annual weighted

- average values are a function of the annual

UEC and energy prices ( s ee c hapter 8 for energy prices)

. Repair and maintenance cost s per unit Ann ual values are a function of efficiency level ( s ee c hapter 8)

. Trend in energy prices Based on EIA 's AEO 2014 projection (to 20 40 ) ( s ee c hapter 8)

. Energy s ite

- to

- power plant c onversion A time

- series conversion factor that includes losses due to electricity generation, transmission, and distribution. Conversion, which changes yearly, is generated by DOE/EIA’s NEMS* program.

Full

- fuel

- cycle multiplier Developed to includ e the energy consumed in extracting, processing, and transporting or distributing primary fuels

. Discount r ate 3 percent and 7 percent real.

Present y ear Future expenses are discounted to 201 4

.

* Section 10.3.2.4 provides more detail on NEMS.

10.5.2 National Energy Savings by Candidate Standard Level

This section provides results of calculating NES for each candidate standard level analyzed for portable ACs . NES results, which are cumulative to 2077 (the year in which products purchased in 2048 would be expected to be retired) , are shown as savings in both primary and full

- fuel

- cycle energy. Because DOE based the inputs to the NIA model on weighted

- averag e values, results are discrete point values, rather than a distribution of values as produced by the life

- cycle cost and payback period analysis (chapter 8)

. Table 10.5.2 and Table

10.5.4 show the primary and full

- fuel

- cycle energy saving s, respectively, for the CSLs analyzed

for portable ACs

.10-18

Table 10.5.2 Cumulative Primary National Energy Savings

CSL Portable ACs in Residential Sites, Primary Quads Portable ACs in

Commercial Sites, Primary Quads Portable ACs in

both S ectors, Primary Quads

1 0.526 0.007 0.534

2 0.675 0.010 0.684

3 0.797 0.011 0.809

4 0.917 0.015 0.932

Table 10.5.3 National Energy Savings for Full

- Fuel

- Cycle

CSL Portable ACs in

Residential Sites Quads Portable ACs in

Commercial Sites Quads Portable ACs in

both S ectors Quads

1 0.551 0.008 0.558

2 0.706 0.010 0.716

3 0.834 0.012 0.846

4 0.959 0.016 0.975

10.5.3 Annual Costs and Savings

Figure 10.5.1 illustrate s the basic inputs to calculati ng the NPV under CSL 1 for the non

discounted annual increases in installe d cost and annual savings in operating cost for portable

ACs

. The annual product cost is the sum of the increase in total installed cost for products purchased each year during the analysis period. The annual savings in operating cost is the savings for products operating in each year. The figure also shows net savings, which is the difference between the savings and costs for each year. The NPV is the difference between the cumulative annual discounted savings and the cumulative annual discounted costs. DOE could create figures like Error! Reference source not found. for each C SL.10-19

Figure 10.5.1 Non

- Discounted Changes in Annual Installed Cost and

Operating Cost s under CSL 1

10.5.4 Consumer Net Present Value by Candidate Standard Level

This section provides results of calculating the net present value (NPV) of consumer

benefit s for each candidate standard level considered for portable ACs . Results, which are

cu mulative, are shown as the discounted value of the net savings in dollar terms. DOE based the inputs to the NIA model on weighted

- average values, yielding results that are discrete point values, rather than a distribution of values as in the life

- cycle cos t and payback period analysis.

Table 10.5.4 show s the results of calculating the NPV for the CSLs analyzed for portable

ACs . The table presents the NPV at both a 3

- percent and a 7

- percent discount rate

.

-0.100 0.000 0.100 0.200 0.300 0.400

Billion 2013$ Operating Cost Savings

Equipment Cost

Net Savings10-20

Table 10.5.4 Cumulative Consumer Net Present Value for Each CSL

CSL NPV at 3% Discount Rate

Billion, 2013$ NPV at 7% Discount Rate Billion, 2013$

Residential Commercial Total Residential Commercial Total

1 3.972 0.060 4.031 1.703 0.026 1.728

2 5.099 0.079 5.178 2.187 0.034 2.221

3 6.022 0.092 6.114 2.581 0.040 2.621

4 6.023 0.113 6.137 2.482 0.048 2.52910-21

REFERENCES

1 U.S. Department of Energy. Implementation Report: Energy Conservation Standards Activities: Submitted Pursuant to Section 141 of the Energy Policy Act of 2005

. A ugust
2006. (Last accessed September 9, 2014.)

< http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/implementation_repor t_0806.pdf

>.

2 Energy Information Administration. Annual Energy Outlook 2014 with Projections to

2040 . April 2014. Washington, D.C. Report No. DOE/EIA

- 0383(2014). (Last accessed September 9, 2014.) < htt p://www.eia.gov/forecasts/aeo/pdf/0383(2014).pdf >