### CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

TABLE OF CONTENTS

8.1 INTRODUCTION

.............................................................................................................. 8-1 8.1.1 General Approach for Life-Cycle Co st and Payback Period Analyses

............... 8-1 8.1.2 Overview of Life-Cycle Cost and Payback Period Analyses Inputs

................... 8-2 8.1.3 Analysis Use of Residential Energy Consumption Survey (RECS) in LCC and PBP

...................................................................................................................... 8-6 8.1.4 Commercial Building Analysis

............................................................................ 8-7 8.2 LIFE-CYCLE COST ANALYSIS INPUTS

....................................................................... 8-9 8.2.1 Definition

............................................................................................................. 8-9 8.2.2 Total Installed Cost Inputs

................................................................................. 8-10 8.2.3 Operating Cost Inputs

........................................................................................ 8-25 8.3 PAYBACK PERIOD INPUTS

......................................................................................... 8-54 8.3.1 Definition

........................................................................................................... 8- 54 8.3.2 Inputs

.................................................................................................................. 8-54 8.4 SEER AND HSPF RESULTS

.......................................................................................... 8-55 8.4.1 Split-system Air Conditioners

............................................................................ 8-56 8.4.2 Split-System Heat Pumps

.................................................................................. 8-68 8.4.3 Single Package Air Conditioners

....................................................................... 8-74 8.4.4 Single Package Heat Pumps

............................................................................... 8-80 8.5 OFF-MODE AND STANDBY POWER CONSUMPTION

............................................ 8-86 REFERENCES

.................................................................................................................... ...... 8-88

LIST OF TABLES

Table 8.1.1 Summary of Inputs and Key A ssumptions used in the LCC and PBP Analyses

............................................................................................................... 8-4 Table 8.2.1 Representative CAC Products Ev aluated for the Life-Cycle Cost and Payback Analyses

.............................................................................................. 8-11 Table 8.2.2 Baseline Manufacturer Selling Prices per Unit

.................................................. 8-11 Table 8.2.3 SEER Standard-C ompliant Manufacturer Sellin g Prices per Unit

.................... 8-12 Table 8.2.4 Shipping Weights of SEER Standard-complia nt Products

................................ 8-13 Table 8.2.5 MSP Including Transportation of SEER Standard-comp liant Products

............ 8-14 Table 8.2.6 Overall National Average Baselin e Markup Factors by Product Type

............. 8-15 Table 8.2.7 Overall National Incrementa l Markup Factors by Product Type

....................... 8-15 Table 8.2.8 Installation Costs for Ba seline CAC Products (SEER 13)

................................. 8-16 Table 8.2.9 Installation Cost Indices (National Average Value = 100.0)

............................. 8-17 Table 8.2.10 Costs and Markups for Deter mination of Weighted-Average Total Installed Costs for a New 3-Ton Split-system AC Coil-Only Unit (Efficiency Level 5 : SEER 15

............................................................................ 8-17 Table 8.2.11 Manufacturer Selling Price (Inc luding Transportation), Product Price,Installation Cost, and Total Installed Costs for Split-system AC (Coilonly), at Average Prices*

................................................................................... 8-19

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### Table 8.2.12 Manufacturer Selling Price (Inc luding Transportation), Product Price,Installation Cost, and Total Installed Costs for Split-system AC (BlowerCoil), at Average Prices*

................................................................................... 8-20 Table 8.2.13 Manufacturer Selling Price (Inc luding Transportation), Product Price, Installation Cost, and Total Installed Costs for Split-system HP, at Average Prices*

................................................................................................. 8-22 Table 8.2.14 Manufacturer Selling Price (Inc luding Transportation), Product Price, Installation Cost, and Total Installe d Costs for Single Package AC, at Average Prices*

................................................................................................. 8-23 Table 8.2.15 Manufacturer Selling Price (Inc luding Transportation), Product Price, Installation Cost, and Total Installe d Costs for Single Package HP, at Average Prices *

................................................................................................ 8-24 Table 8.2.16 Regional Averages of the Annua l Average Prices and January and July Marginal Prices

.................................................................................................. 8-28 Table 8.2.17 Effective Marginal Price by Region for the Commercial Building Sample (¢/kWh).

............................................................................................................. 8-29 Table 8.2.18 Central Air Conditioner and Heat Pump Basic Average Repair Costs by Efficiency Level

................................................................................................. 8-33 Table 8.2.19 Central Air Conditioner and H eat Pump Average Repair Costs by Efficiency Level and Region

............................................................................. 8-33 Table 8.2.20 Central Air Conditioner and Heat Pump Basic Average Maintenance Costs by Efficiency Level

............................................................................................ 8-36 Table 8.2.21 Central Air Conditioner and Heat Pump Basic Average Maintenance Costs by Efficiency Level

............................................................................................ 8-37 Table 8.2.22 Central Air Conditioners: Comp arison of RECS and AHS with Modeled Stock

.................................................................................................................. 8-42 Table 8.2.23 Heat Pumps: Comparison of RE CS and AHS Stock to Stock Calculated from a Weibull Survival Function

..................................................................... 8-45 Table 8.2.24 Types of Household Debt and Equity by Percentage Shares

............................. 8-48 Table 8.2.25 Average Nominal Interest Rates for Household Debt

....................................... 8-48 Table 8.2.26 Average Real Effective Inte rest Rates for Household Debt

.............................. 8-49 Table 8.2.27 Average Nominal and Real Inte rest Rates for Household Equity

..................... 8-49 Table 8.2.28 Average Interest on Ho usehold Debt and Equity

.............................................. 8-50 Table 8.2.29 Data Used to Calculate R eal Effective Mortgage Rates

.................................... 8-51 Table 8.2.30 2008 Market Distribution of Effi ciency Levels by Product Class

..................... 8-53 Table 8.4.1 Mean Market Baseline Inst alled Costs, Total Annual Energy Consumption, and Percentage Change for Split-System Air Conditioners (Coil-Only) by Region by Efficiency Level (SEER Value)

.............................. 8-56 Table 8.4.2 Mean Market Baseline Inst alled Costs, Total Annual Energy Consumption, and Percentage Change for Split-System Air Conditioners (Blower-Coil) by Region by Efficiency Level (SEER Value)

........................... 8-56 Table 8.4.3 Mean LCC Savings for Split-System Air Conditioners (Coil-only) by Region by Efficiency Level (SEER Value)

....................................................... 8-58 Table 8.4.4 Mean LCC Savings for Split-Syst em Air Conditioners (Blower-Coil) by Region by Efficiency Level (SEER Value)

....................................................... 8-59

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### Table 8.4.5 Mean Payback Period for Split-Sy stem Air Conditioners (Coil-Only) by Region

................................................................................................................ 8-61 Table 8.4.6 Mean Payback Period for Split-sy stem Air Conditioners (Blower-Coil) by Region

................................................................................................................ 8-61 Table 8.4.7 Mean Rebuttable Payback Period for Split-System Air Conditioners (CoilOnly) by Region

................................................................................................. 8-62 Table 8.4.8 Mean Rebuttable Payback Pe riod for Split-system Air Conditioners (Blower-Coil) by Region

................................................................................... 8-62 Table 8.4.9 National LCC and PBP Results for Split-System Air Conditioners (CoilOnly) by Efficiency Level (SEER Value): Nation

............................................ 8-64 Table 8.4.10 LCC and PBP Results for Split-Sy stem Air Conditioners (Blower-Coil) by Efficiency Level (SEER Value): Nation

............................................................ 8-64 Table 8.4.11 LCC and PBP Results for Split-Sy stem Air Conditioners (Coil-Only) by Efficiency Level (SEER Value): Hot-Humid Region

........................................ 8-65 Table 8.4.12 LCC and PBP Results for Split-Sy stem Air Conditioners (Blower-Coil) by Efficiency Level (SEER Value): Hot-Humid Region

........................................ 8-65 Table 8.4.13 LCC and PBP Results for Split-Sy stem Air Conditioners (Coil-Only) by Efficiency Level (SEER Value): Hot-Dry Region

............................................. 8-66 Table 8.4.14 LCC and PBP Results for Split-Sy stem Air Conditioners (Blower-Coil) by Efficiency Level (SEER Value): Hot-Dry Region

............................................. 8-66 Table 8.4.15 LCC and PBP Results for Split-Sy stem Air Conditioners (Coil-Only) by Efficiency Level (SEER Valu e): Rest of Country

............................................. 8-67 Table 8.4.16 LCC and PBP Results for Split-Sy stem Air Conditioners (Blower-Coil) by Efficiency Level (SEER Valu e): Rest of Country

............................................. 8-67 Table 8.4.17 Mean Market Baseline Inst alled Costs, Total Annual Energy Consumption, and Percentage Change for Split-System Heat Pumps by Region by Efficiency Level (SEER Value)

....................................................... 8-68 Table 8.4.18 Mean LCC Savings for Split-System Heat Pumps by Region by Efficiency Level (SEER Value and HSPF Value)

............................................................... 8-69 Table 8.4.19 Mean Payback Period for Split-System Heat Pumps by Region (Years)

.......... 8-71 Table 8.4.20 Mean Rebuttable Payback Period for Split-System Heat Pumps by Region (Years)

................................................................................................................ 8-71 Table 8.4.21 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level (SEER Value): Nation

........................................................................................ 8-72 Table 8.4.22 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level (SEER Value): Hot-Humid Region

................................................................... 8-73 Table 8.4.23 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level (SEER Value): Hot-Dry Region

........................................................................ 8-73 Table 8.4.24 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level (SEER Value): Rest of Country

......................................................................... 8-74 Table 8.4.25 Mean Market Baseline Inst alled Costs, Total Annual Energy Consumption, and Percentage Ch ange for Single Package Air Conditioners by Region by Efficiency Level (SEER Value)

............................. 8-75 Table 8.4.26 Mean LCC Savings for Single Package Air Conditioners by Region by Efficiency Level (SEER Value)

......................................................................... 8-76 Table 8.4.27 Mean Payback Period for Single Package Air Conditioners by Region

............ 8-77

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### Table 8.4.28 Mean Rebuttable Payback Period for Single Package Air Conditioners by Region

................................................................................................................ 8-78 Table 8.4.29 LCC and PBP Results for Single Package Air Conditioners by Efficiency Level (SEER Value): Nation

............................................................................. 8-79 Table 8.4.30 LCC and PBP Results for Single Package Air Conditioners by Efficiency Level (SEER Value): Hot-Humid Region

......................................................... 8-79 Table 8.4.31 LCC and PBP Results for Single Package Air Conditioners by Efficiency Level (SEER Value): Hot-Dry Region

.............................................................. 8-79 Table 8.4.32 LCC and PBP Results for Single Package Air Conditioners by Efficiency Level (SEER Value): Rest of Country

............................................................... 8-80 Table 8.4.33 Mean Market Baseline Inst alled Costs, Total Annual Energy Consumption, and Percentage Change for Single Package Heat Pumps by Region by Efficiency Level (SEER Value)

....................................................... 8-81 Table 8.4.34 Mean LCC Savings for Single Package Heat Pumps by Region by Efficiency Level (SEER Value)

......................................................................... 8-82 Table 8.4.35 Mean Payback Period for Single Package Heat Pumps by Region (Years)

...... 8-84 Table 8.4.36 Mean Rebuttable Payback Period for Single Package Heat Pumps by Region (Years)

................................................................................................... 8-84 Table 8.4.37 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level (SEER Value): Nation

........................................................................................ 8-85 Table 8.4.38 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level (SEER Value): Hot-Humid Region

................................................................... 8-85 Table 8.4.39 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level (SEER Value): Hot-Dry Region

........................................................................ 8-86 Table 8.4.40 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level (SEER Value): Rest of Country

......................................................................... 8-86 Table 8.5.1 Details of Regional LCC a nd Payback Period for Off-Mode Power Consumption Measure: Crank Case Heaters (National Only)

........................... 8-87

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### LIST OF FIGURES

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

....................... 8-4 Figure 8.2.1 Electricity Price Trends for Residential Rates to 2047

...................................... 8-31 Figure 8.2.2 Electricity Price Trends for Commercial Rates to 2047

.................................... 8-31 Figure 8.2.3 Comparison of DOE Modeled Air Conditioner Age Distribution with RECS Reported Stock

........................................................................................ 8-43 Figure 8.2.4 Comparison of DOE Modeled To tal Air Conditioner Stock with Adjusted AHS Stock

......................................................................................................... 8-43 Figure 8.2.5 Central AC Survival Functi on, Characterized by Weibull Parameters α = 20.29, β = 1.89, and θ = 1.0.

.............................................................................. 8-44 Figure 8.2.6 Comparison of DOE Modeled Tota l Heat Pump Stock with Adjusted AHS Stock

.................................................................................................................. 8-46 Figure 8.2.7 Heat Pump Survival Functi on, Characterized by Weibull Parameters α= 17.04, β = 1.64, and θ = 1.0.

.............................................................................. 8-46 Figure 8.4.1 Market Baseline Distributions of LCC for Split-System Air Conditioners (Coil-Only) by Region

....................................................................................... 8-57 Figure 8.4.2 Market Baseline Distributions of LCC for Split-System Air Conditioners (Blower-Coil) by Region

................................................................................... 8-58 Figure 8.4.3 Plots of the Distributions of LCC Savings for Split-System Air Conditioners (Coil-Only) by Region

................................................................. 8-60 Figure 8.4.4 Plots of the Distributions of LCC Savings for Split-system Air Conditioners (Blower-Coil) by Region

.............................................................. 8-60 Figure 8.4.5 Plots of the Distributions of PBP for Split-system Air Conditioners (CoilOnly) by Region

................................................................................................. 8-63 Figure 8.4.6 Plots of the Distributions of PBP for Split-system Air Conditioners (Blower-Coil) by Region

................................................................................... 8-63 Figure 8.4.7 Market Baseline Distributions of LCC for Split-System Heat Pumps by Region

................................................................................................................ 8-69 Figure 8.4.8 Plots of the Distributions of LCC Savings for Split-system Heat Pumps by Region

................................................................................................................ 8-70 Figure 8.4.9 Plots of the Distributions of PBP for Split-System Heat Pumps by Region

...... 8-72 Figure 8.4.10 Market Baseline Distributi ons of LCC for Single Package Air Conditioners by Region

..................................................................................... 8-76 Figure 8.4.11 Plots of the Distributions of LCC Savings for Single Package Air Conditioners by Region

..................................................................................... 8-77 Figure 8.4.12 Plots of the Distributions of PBP for Single Package Air Conditioners by Region

................................................................................................................ 8-78 Figure 8.4.13 Market Baseline Distributions of LCC for Single Package Heat Pumps by Region

................................................................................................................ 8-82 Figure 8.4.14 Plots of the Distributions of LCC Savings for Single Package Heat Pumps by Region

........................................................................................................... 8-83 Figure 8.4.15 Plots of the Distributions of PBP for Single Package Heat Pumps by Region

................................................................................................................ 8-84

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### CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

8.1 INTRODUCTION

The effect of amended standards on individua l customers usually includes a reduction in operating cost and an increase in purchase cost. This chapter describes two metrics used in the analysis to determine the economic impact of standards on individual co mmercial customers:

• 

### Life-cycle cost (LCC) is the total customer cost over the life of an appliance or product, including purchase costs and operating costs (whi ch in turn include maintenance, repair, and energy costs). Future operating costs are discounted to the time of purchase, and summed over the lifetime of the appliance or product.

• 

### Payback period (PBP) measures the amount of time it takes customers to recover the assumed higher purchase price of more energy-efficient product through reduced operating costs.

DOE conducted the LCC and PBP analysis us ing a spreadsheet model developed in Microsoft Excel. When combined with Crystal Ball (a commercially available software program), the LCC and PBP model generates a Monte Carlo simulation to perform the analysis by incorporating uncertainty and variability considerations in certain of the key parameters as discussed below.

Inputs to the LCC and PBP analyses of central air conditioning (C AC) and central heat pump (CHP) products are discussed in sections 8.2 and 8.3 respectivel y. Results for each metric are presented in section 8.4. Key variables and ca lculations are presented for each metric. The calculations discussed here were perform ed with a series of Microsoft Excel spreadsheets which are accessible over the Internet ( http://www1.eere.energy.gov/buildings/applianc e_standards/residen tial/central_ac_hp.html ).

Details of, and instructions for, using the spreadsheets are discussed in appendix A. A more complete set of results of the analyses are presented in appendix F.

8.1.1 General Approach for Life-Cycle Co st and Payback Period Analyses

In recognition that each building where air c onditioners or heat pumps are used is unique, variability and uncertainty is analyzed by performing the LCC and PBP calculations detailed here for a representative sample of indivi dual households and commercial buildings. The analysis takes into account product use in comme rcial buildings based on the assumption that seven percent of product applica tions are in commercial buildings . The results are expressed as the number of buildings experiencing economic impacts of different magnitudes. The LCC and PBP model was developed using Microsoft Excel spreadsheets combined with Crystal Ball (a commercially available add-in). The LCC and PBP analyses explicitly model both the uncertainty and the variability in the model’s inputs using Monte Carlo simulation and probability distributions.

The LCC analysis used the estimated energy use for each CAC unit as described in the energy use characterization analysis in Chapter 7 of the TSD. Energy use of CACs is sensitive to climate, so it varies by location within the United States. An important feature of the LCC and

8-1

### PBP analysis is that it has been conducted at both the regional and national level. Aside from energy use, other important factors influencing the LCC and PBP analyses include energy prices, installation costs, product distri bution markups, and sa les tax. At both the National and the regional level, the LCC spreadsheets explicitly modeled both the uncertainty and the variability in the model’s inputs, using probability distribu tions based on the shipme nt of CAC product to different regions of the country.

As mentioned above, DOE gene rated LCC and PBP results as probability distributions using a simulation based on Monte Carlo analysis methods, in which certain key inputs to the analysis consist of probability distributions rather than single-point values. Therefore, the outcomes of the Monte Carlo analysis can also be expressed as probability distributions. As a result, the Monte Carlo analysis produces a range of LCC and PBP results. A distinct advantage of this type of approach is that DOE can id entify the percentage of customers achieving LCC savings or attaining certain PBP va lues due to an increased efficiency level, in addition to the average LCC savings or average PBP for that efficiency level.

The LCC and PBP results are displayed as distributions of impacts compared to a market baseline. As described in Chapter 7, the market baseline efficiency level is for 2016 is defined as a mix of CAC efficiency levels reflecting the curr ent distribution of effici ency levels purchased by product class. Results are presented at the end of this chapter. A variety of graphic displays can be created to illustrate the implications of the analysis. Examples of graphic displays are (1) a cumulative probability distribution showing the percentage of CAC product in U.S. residential and commercial buildings that w ould experience a net LCC savings, and (2) a cumulative frequency chart depicting variation in PBP for each CAC efficiency level considered.

All analyses were performed under the assumption that the current R-22 refrigerant would have been displaced by an alternative re frigerant in 2010 due to provisions in the Clean Air Act. The analysis methodology and results pr esented in this chapter assume that all CAC and CHP products manufactured after 2010 will use R-410A.

8.1.2 Overview of Life-Cycle Cost and Payback Period Analyses Inputs

The LCC is the total customer cost over the life of the product, including purchase price (including retail markups, sales taxes, and installa tion costs), and operating co st (including repair costs, maintenance costs, and energy cost). Future operating costs are discounted to the time of purchase and summed over the lifetime of the product. The PBP is the increase in purchase cost of higher efficiency product divided by the chan ge in annual operating cost (as a result of lower energy consumption) of the product. It repres ents the number of years that it will take the customer to recover the increased purchase cost through decreased operating costs. In the calculation of PBP, future costs are not discounted.

Inputs to the LCC and PBP analyses are categorized as follows: (1) inputs for establishing the purchase cost, otherwise known as the total installed cost, and (2) inputs for calculating the operating cost (i.e., energy, maintenance, and repair costs).

The primary inputs for establishing the total installed cost are:

8-2

### • 

### Baseline manufacturer selling price : The baseline manufacturer selling price (MSP) is the price charged by the manufacturer to e ither a wholesaler or customer for product meeting existing minimum efficiency (or baseline) standards. The manufacturer selling price includes a markup that converts the cost of production (i.e., the manufacturer cost) to a manufacturer selling price.

• 

### Standard-level manufacturer selling price increase : The standard-level MSP is the incremental change in MSP associated with producing product at each of the higher standard levels.

• 

### Markups and sales tax : Markups and sales tax are the w holesaler and contractor margins and state and local retail sales taxes associated with converting the MSP to a customer price. The markups and sales tax are desc ribed in detail in Chapter 6, Markups for Product Price Determination.

• 

### Installation cost : Installation cost is the cost to th e customer of installing the product. The installation cost represents all costs re quired to install the CAC product but does not include the marked-up customer product pric e. The installation cost includes labor, overhead, and any miscellaneous mate rials and parts. Thus, the total installed cost equals the customer product price pl us the installation price.

The primary inputs for calculating the operating cost are:

• 

### Product energy consumption : The product energy consumption is the site energy use associated with the use of the CAC units to provide space-conditioning to the building. Chapter 7, Building Energy Use Characteri zation, provides comple te details on CAC energy use simulations and their results.

• 

### Energy Prices : Electricity prices used in the anal ysis are the price per kilowatt-hour in cents or dollars ($/kWh) paid by each customer for electricity. Electricity prices are determined using marginal residential and commercial prices calculated from electrical tariff information on individual service areas, as determined from utility data on 90 utilities, in 2008 dollars 1



### .

• 

### Electricity, natural gas, and fuel oil price trends : The EIA’s April 2009 update to the Annual Energy Outlook 2009 ( AEO 2009 ) is used to forecast electricity prices into the future 2



### .

• 

### For the results presented in this chapter, DOE used the April 2009 update to the AEO 2009 reference case to forecast future electricity prices.

• 

### Maintenance costs : The labor and material costs associated with maintaining the operation of the product (e.g., cleaning heat ex changer coils and drain pans, changing air filters, etc.).

• 

### Repair costs : The labor and material costs associated with repairing or replacing components that have failed.

• 

### Lifetime : The age at which the CAC product is retired from service.

• 

### Discount rate : The rate at which future costs ar e discounted to establish their present value. Figure 8.1.1 graphically depicts the re lationships between the installed cost and operating cost inputs for the calculation of the LCC and PBP.

8-3Manufacturer Sales Price Standard i 1...n

Manufacturer Sales Price Standard i= 1...n

Installation Costs Installation Costs

Repair Costs

Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity Consumption

Electricity Consumption

Manufacturer Base Price

Total Installed Cost (Std i Base) Manufacturer Base Price

Contractor Markups Wholesaler/ Distributor Markup

Electricity Prices Equipment Prices

Sales Tax

Manufacturer Selling Price (Base)

Installation Costs Manufacturer Selling Price Standard i 1...n

Electricity Consumption Annual Energy Costs

Annual Maintenance

Repair Costs Annual Operating Cost (Std i Base) Payback Period

Discount Rate

Lifetimes Lifetime Operating Cost (Std i – Base) Lifecycle Cost

Annual Maintenance Costs Manufacturer Sales Price Standard i 1...n

Manufacturer Sales Price Standard i= 1...n

Installation Costs Installation Costs

Repair Costs

Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity Consumption

onsumption Manufacturer Base Price

anufacturer Base ice

Annual Maintenance =

–

=

- =

Electricity C Total Installed Cost (Std i –Base) M Pr

Contractor Markups Wholesaler/ Distributor Markup

Electricity Prices Equipment Prices

Sales Tax

Manufacturer Selling Price (Base)

Installation Costs Manufacturer Selling Price Standard i= 1...n

Electricity Consumption Annual Energy Costs

Repair Costs Annual Operating Cost (Std i - Base) Payback Period

Discount Rate

Lifetimes Lifetime Operating Cost (Std i – Base) Lifecycle Cost

Annual Maintenance Costs



### Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

Table 8.1.1 provides descriptions for the various inputs to the calculation of the LCC and PBP. As noted earlier, most of the inputs are characterized by probability distributions that capture variability in the input variables.

Table 8.1.1 Summary of Inputs and Key Assumptions used in the LCC and PBP Analyses Inputs Description Affecting Installed Costs

Product Price Derived by multiplying MSP for 3-ton capacity units (from the engineering analysis) by wholesaler markups and contractor markups plus sales tax (from markups analysis). Used the probability distribution for the different markups to describe their variability.

Installation Cost Includes installation labor derived from RS Means CostWorks 2009 and RS Means Residential Cost Data 2009 . Overhead and materials costs and profits are assumed to be included in the contractor’s markup. 

### Thus, the total installed cost equals the c onsumer product price (manufacturer cost multiplied by the various mar kups plus sales tax) plus the installation cost.

Transportation Cost Shipping cost of units based on weight of the unit, average shipment distance of 1100 miles, and an average cost of $0.20 per pound based on that distance and a range of rates from the FreightCenter.com website. Affecting Operating Costs

Annual Energy Use 

### For central air conditioners, the annual energy consumption is the annual site energy use associated with providing space-cooling. For heat pumps, the annual energy consum ption is the annual site energy

8-4

### use associated with providing bot h space-cooling and space-heating. For households, the annual energy consumption is based on data from the EIA 2005 Residential Energy Consumption Survey (RECS) . For those households surveyed in RE CS with either a central air conditioner or heat pump, the estima ted annual energy consumption corresponds to the household’s air conditioner or heat pump, specifically its capacity and effi ciency. For products used in commercial buildings, the annual ener gy consumption is determined through computer simulations of a representative small commercial building based DOE commercial sm all-office benchmark building developed for use as a baseline benchmark for DOE’s Net Zero Commercial Building Initiative 3



### .

Energy Efficiency 

### The seasonal energy efficiency ratio (SEER) is the efficiency descriptor for central air conditioners. For heat pumps, the cooling efficiency is represented with the SEER while the heating efficiency is represented with the heating seas onal performance factor (HSPF). Central air conditioner and heat pump efficiencies in existing households are primarily based on data from the 2005 RECS . For product used in commercial buildings , all buildings were assumed to have product efficiencies equal to existing minimum efficiency standards (SEER 13). To estimate the annual energy consumption associated with a particular standard-level, the ratio of the building’s stock efficiency to the standard-level efficiency is multiplied by the building’s annual energy consumption.

Table 8.1.1 (contd) Inputs Description

Energy Prices For residential customers, calculated for RECS 2005 households from marginal and average electricity price in each utility service area in each region, as determined from utility tariff data for 2008, escalated by the AEO2009 forecasts to estimate the future electricity prices. For commercial customers, the analysis used commercial marginal and average electricity price in each utility service area in each region, as determined for 2004, escalated to 2008 prices using data from Edison Electric Institute and Regulatory Research Associates.

Maintenance Cost 

### The cost associated with mainta ining the operation of the product (e.g., cleaning heat exchanger co ils, checking refrigerant charge levels). Costs were chosen from an array of services from a variety of published sources. Annual maintenance cost increased as a function of MSP.

Repair Cost Estimated the annualized repair cost for baseline efficiency CAC product, based on costs of major repair (compressor replacement), from a variety of published sources. It is assumed that repair costs would vary in direct proportion with the MSP at higher efficiency levels because it generally costs more to replace components that are more efficient. Affecting Present Value of Annual Operating Cost Savings

Product Lifetime Used the probability distribution of lifetimes, with mean lifetime for each of four product classes assumed to be 19 years for air conditioning units and

8-5

### 16.3 years for heat pumps based on literature reviews and consultation with industry experts.

Discount Rate Mean real discount rates ranging from 0 percent to 10.7 percent for various classes of residential customers based on 

### Federal Reserve Board’s Survey of Consumer Finances . Commercial sector customers are expected to have a mean real discount rate of 7.4 percent based on a sample of 1750 companies on the Damodaran Online website. Probability distributions are assumed for the discount rates of both groups of customers. Date Standards Become Effective June 30, 2016 (five years after the publication of the final rule) Analyzed Efficiency Levels

Analyzed Efficiency Levels Baseline efficiency levels will follow the estimated market distribution of efficiency levels in 2016 based on a minimum SEER of 13 for new units and from seven to fifteen higher efficiency levels available in four principal product classes.



### All of the inputs depicted in Figure 8.1.1 a nd summarized in Table 8.1.1 are discussed in sections 8.2 and 8.3.

8.1.3 Analysis Use of Residential Energy Co nsumption Survey (RECS) in LCC and PBP

The LCC and PBP calculations detailed here ar e for a representative sample of individual households and commercial buildings . Ninety-three percent of product applications are assumed to be in residential buildings (households) 4



### . For products used in households, the 2005 Residential Energy Consumption Survey (RECS) 1 

### serves as the basis for determining the re presentative sample. The 2005 RECS is based on a sample of 4382 households which were surv eyed for information on their housing units, energy consumption and expenditures, stock of energy-consuming appliances, and energyrelated behavior. Information was also coll ected on certain demographic and economic characteristics of household members.

The information collected represents a ll households nationwid e – approximately 111 million. RECS is conducted every three years with da ta collected directly from energy end users. The 2005 RECS is the twelfth survey of re sidential housing units conducted by the U.S Department of Energy’s (DOE) Energy Informat ion Administration (EIA). Previous RECS were conducted annually from 1978 to 1982 and triennially since 1984. The RECS consists of three parts:

• 

### Personal interviews with households for information about energy used, how it is used, energy-using appliances, structural feat ures, energy efficiency measures, and demographic characteristics of the household.

• 

### Telephone interviews with rental agents for hous eholds that have any of their energy use included in their rent. This information au gments information collected from those households that may not be knowledgeable a bout the fuels used for space heating or water heating.

8-6

### • 

### Mail questionnaires sent to energy suppliers (after obtaining permission from households) to collect the actual billing data on energy consumption and expenditures.

Of the 4,382 households surveyed in the 2005 RECS, 1,854 households representing 25.1% of the housing population have a cent ral air conditioner while 339 households representing 7.7% of housing population have an electric heat pump a 

### . Using the households in RECS that utilize a central air conditioner or heat pump, LCC and PBP analyses are performed on a household-by-household basis to determine whether an increa se in the minimum efficiency standard is economically justified. Each RECS household is identified to be within one of the three geographic regions discussed previously in chapter 7 and has a associated household weight representing the number of similar households in the nation..

Of the inputs necessary for the LCC and PBP an alysis, there are four inputs (as depicted in Figure 8.1.1) which are based on data fro m the 2005 RECS; 1) space-conditioning annual energy consumption (RECS-based), 2) product ef ficiency, 3) average electricity price, and 4) marginal electricity price. All four of these inputs are used in determining the operating cost. With the exception of the product efficiency, each household in RECS with a central air conditioner or heat pump has a unique value for the space-conditioning annual energy consumption, the average electricity price, and the marginal elec tricity price. In other words, the annual energy consumption, average electricity pri ce, and marginal electricity price associated with a particular RECS househol d are not uncertain and are, therefore, not expressed with probability distributions. Although the above thr ee input variables are not uncertain, they are extremely variable. Due to the large number of households considered in the LCC and PBP analysis (over 1850 for central air conditioners an d over 300 for heat pumps), the range of annual energy use, average electricity price, and marginal electricity price is quite large (the actual ranges are presented and discusse d later in this chapter). Thus, although the above three input variables are not uncertain for any particular household, their variability across all households contributes significantly to the range of LCCs and PBPs calculated for any particular standard level.

8.1.4 Commercial Building Analysis

Seven percent of residential- type (i.e., single-phase) centr al air conditioner and heat pump applications are assumed to be in commercial buildings. A small commercial office building was simulated at 237 different loca tions around the country corresponding to the Typical Meteorological Year-2 weather stations) 5 

### was used to represent commercial applications for CAC and CHP units. The results from these simulations were used for the LCC and PBP analysis of commercial buildings, allowing for a building-by-building approach to be utilized for determining whether an increase in the standard is economically justified (e.g., similar to the approach described above for households from the 2005 RECS). DOE used population weighting factors to represent the importance of e ach climate in each state, and in each of the

a The number of households actually used in the central air conditioner and heat pump LCC and PBP analyses were 1,854 and 339, respectively. A small number of central air-conditioned households were dropped from the analysis for one or more of the following reasons: 1) the central air conditioner was not used, 2) a room air conditioner was present and used, or 3) marginal energy prices could not be determined for the household. With regard to households with heat pumps, they were dropped from the analysis for one or more of the following reasons: 1) the heat pump was not used or 2) marginal energy prices could not be determined for the household.

8-7

### three regions. These weighting factors, in conjunction with the relative weighting between commercial and residential shipments were used to incorporate the commercial building energy consumption into the overall energy consumption for CAC and CHP equipment at each efficiency level. Seventeen locations in Alaska, representing less than 0.2 percent of the national population, were eventually removed from the LCC an alysis due to lack of data for electrical pricing and uncertainty about comme rcial use in these climates.

As with the analysis of residential buildings , four inputs are necessary (as depicted in Figure 8.1.1) from the commercial building analys is in order to perform the LCC and PBP calculations: 1) space-conditioning annual energy consumption, 2) product efficiency, 3) average electricity price, and 4) marginal electricity price. The space-conditioning energy consumption associated with the commercial building in each of the full set of 237 lo cations simulated were determined through computer modeling perform ed at Pacific Northw est National Laboratory (PNNL) using the Energy Plus simulation tool. The procedure for calculating space-conditioning energy consumption relied on the determination of hourly operating loads for each of the 237 buildings.

DOE performed an analysis in which DOE used the Energy Plus building energy simulation software to simulate the energy consumption of CAC and CHP used to satisfy the cooling, supply fan, and in the case of CHP, th e electrical heating ener gy required in a small office building. DOE used an existing small o ffice building model developed for DOE’s energy benchmarking task for this analysis. The determination of space cooling and space-heating loads assumed that a single type of product, in our case residential-type space-conditioning product, was used to condition the building. DOE simulated the same building as served either by CAC or CHP equipment and for each equipment type, si mulated the equipment using four different efficiency levels. These levels were a 13 S EER, 14 SEER, 16 SEER, and a max tech level for either CAC (SEER 22, based on blower-coil ra tings, or SEER 16.5, based on coil-only ratings) or CHP (SEER 19.5). Equipment pa rameters used in the simulati on were adjusted to reflect engineering designs corresponding to each efficiency level. The simulated building utilized five individual CAC or CHP units. DOE extracted th e annual energy consumption for cooling and fan energy use and CHP heating from each unit as well as the equipment capacity from each unit from each simulation run and aggregated these to the whole building level. Using this whole building data, DOE normalized the CAC and CHP energy consumption for each location and efficiency level to reflect that of an average 3- ton CAC or CHP unit for use in the LCC analysis. To estimate the energy consumption for intermediate efficiency levels between those simulated, DOE linearly interpolated the energy use estimates based on the results for the four simulated efficiencies. A complete descri ption of the commercial energy use calculations is found in Chapter 7.

The baseline commercial CAC and CHP use developed for the 237 TMY locations were associated with relative weighting factors for each TMY location much as the residential analysis uses the representative RECS weights. DOE us ed population-based weight ing factors developed for each TMY climate based on data from the USGS to represent the importance of each TMY2 climate in each state. The development and documentation of these weighting factors is discussed in chapter 7. Because certain TMY locations represent climates that cover more than one state DOE originally developed weigh ting factors for a total of 543 TMY-State combinations. Removal of the se venteen Alaskan locations discussed previously resulted in 526

8-8

### TMY-State combinations, with a ssociated population weights, whic h then formed the basis of the commercial energy use sample.

The average and marginal electricity prices were developed through a procedure of matching building hourly loads for each of th e 526 represented buildings to actual modeled commercial tariffs (including any time-of-use rates) and then calculating customer bills. The methodology for matching commercial building peak demands to modeled tariffs is explained in appendix 8-B. Energy bills are calculated for a market baseline case and standards cases. Average electricity prices are determined by taking the bill for the market baseline case and dividing it by the amount of energy consumed. Ma rginal electricity pri ces are determined by taking the bill difference between the market baseline and standard cases (in dollars) and dividing it by the usage difference (in kWh) to give a “marginal” rate of $/kWh for that increment.

Since several tariffs were applied to each building, both the average and marginal rates calculated from each tariff were weighted by the number of customers covered by the tariff to come up with a weighted-average marginal and average rate for each building in each region. The above procedure was used to develop space- cooling and space-heating average and marginal rates. Since detailed building loads and demands were not available for space-heating, average rather than marginal electricity prices were used to determine the energy costs associated with the operation of heat pumps during the space-heating season.

As with the residential buildings from the RECS sample, the annual energy consumption, average electricity price, and marginal electr icity price associated with each of the 526 commercial buildings observations are not uncerta in and are, therefore, not expressed with probability distributions. Although the above thr ee input variables are not uncertain, they are variable. Due to the number of buildings consider ed in the LCC and PBP analysis, the range of annual energy use, average electricity price, and marginal electricity price is large (the actual ranges are presented and discusse d later in this chapter). Thus, although the above three input variables are not uncertain for any particular building, their variability across all buildings contributes significantly to the range of LCCs and PBPs calculated for any particular standardlevel.

8.2 LIFE-CYCLE COST ANALYSIS INPUTS

8.2.1 Definition

Life-cycle cost is the total customer cost over the life of a piece of product, including purchase cost and operating costs (which are comp rised of energy costs, maintenance costs, and repair costs). Future operating costs are disc ounted to the time of purchase and summed over the lifetime of the product. Life-cycle cost is defined by the following equation:

N 

### LCC = IC + 

# ∑ OC t 

### /(1 + r ) t 

### Eq. 8.2.1

t = 1



### Where:

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### LCC = life-cycle cost ($), IC = total installed cost ($), ∑ = sum over the lifetime, from year 1 to year N, where N = lifetime of product (years), OC = operating cost ($),

r = discount rate, and
t = year for which operating cost is being determined.

Although DOE gathered most of its data fo r the LCC analysis in 2009, DOE expresses all the costs in 2008$. By convention, DOE reports its costs in the years’ dollars preceding the year of the analysis. Total installed cost, operating co st, lifetime, and discount rate are discussed in the following sections. In the LCC analysis, th e year of product purchase is assumed to be 2016, the effective date of the amended en ergy conservation standards for CACs.

8.2.2 Total Installed Cost Inputs

The total installed cost to the customer is defined by the following equation:

IC = EQP + INST 

### Eq. 8.2.2

Where: EQP = product price ($) (i.e., customer price for the product only), INST = installation cost or the customer price to install product ($) (i.e., the cost for labor and materials).

The product price is based on the distribu tion channel through which the customer purchases the product. As discussed in Chap ter 6, Markups for Produc t Price Determination, DOE defined one major distribution channel for new units to describe how the product passes from the manufacturer to the customer: the manufacturer sells the product to a wholesaler/distributor, who sells to a mechanical contractor hired by a general contractor. The general contractor purchases and installs the product on behalf of the customer and adds its markup to the mechanical contr actor’s price. Replacement product s follow the same distribution channel, except that there is no general contract or. Instead, the mechanical contractor takes on the general contractor’s function.

The remainder of this section provides information about the variables DOE used to calculate the total installed cost for CAC products. Inputs to dete rmine total installed cost are shown below:

• 

### Baseline manufacturer selling prices ($) (section 8.2.2.1)

• 

### Standard-level manufacturer sellin g price increases ($) (section 8.2.2.2)

• 

### Transportation costs ($) (section 8.2.2.3)

• 

### Overall markups (section 8.2.2.4)

• 

### Installation costs ($) (section 8.2.2.5)

• 

### Weighted-average total installed costs ($) (section Error! Reference source not found. )

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### 8.2.2.1 Baseline Manufacturer Selling Price

The baseline MSP is the price charged by manuf acturers to either a wholesaler or very large customer for product meeting existing minimum efficiency (or baseline) standards. The MSP includes a markup that converts the cost to manufacture (i.e., the manufacturing cost) to a MSP. DOE developed the baseline MSP through an efficiency level analysis supplemented by certain design-option considera tions. Refer to Chapter 5, Engineering Analysis, for details. DOE developed MSP for product classes identified in market and technology assessment analysis, Chapter 3 of the TSD. The LCC and PBP were calculated ba sed on the same set of representative products as given in Table 8.2.1.

Table 8.2.1 Representative CAC Products E valuated for the Life-Cycle Cost and Payback Analyses

Product Class Representative Products Description SS-AC (Coil- Only) SS-AC-3T (Coil- Only) Split-system air conditioners, inside evaporator coil-only (no blower unit purchased) SS-AC (Blower-Coil) SS-AC-3T (Blower-Coil) Split-system air conditioners, including blower unit (evaporator coil and air handler purchased) SS-HP SS-HP-3T Split-system heat pumps SP-AC SP-AC-3T Single-package air conditioners SP-HP SP-HP-3T Single-package heat pumps SDHV SDHV-3T Small-duct high-velocity (SDHV) systems SC-AC SC-AC-3T Space-constrained products – air conditioners SC-HP SC-HP-3T Space-constrained products – heat pumps


### DOE determined the market baseline with a minimum requirement of 13 SEER 6 

### as the baseline efficiency levels for CACs. The minimum efficiency levels specified are detailed in Chapter 5, Engineering Analysis. In the case of split-system air conditioners, DOE analyzed options with and without a complete air handler unit, since it is not clear whether a furnace or other fan unit would be purchase d at the same time as the insi de evaporator coil and outside condensing unit. DOE developed the MSP for the baseline efficiency product as a part of the engineering analysis (see Chapter 5 of the TSD), which are shown in Table 8.2.2.

Table 8.2.2 Baseline Manufacturer Selling Prices per Unit

Representative Product SEER (Baseline Efficiency) Baseline Manufacturer Selling Price* 2008$ SS-AC-3T (Coil-Only) 13.0 885 SS-AC-3T ( Blower-Coil) 13.0 1,063 SS-HP-3T 13.0 1,255 SP-AC-3T 13.0 959 SP-HP-3T 13.0 1,186 SDHV-3T 13.0 1,191 SC-AC-3T 13.0 1,196 SC-HP-3T 13.0 1,201
* Baseline MSP is based upon the CAC products using R-410A refrigerant.

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### Since air conditioners and heat pumps are commonly sold in situations where heating and cooling equipment are being considered togeth er, there is some uncertainty determination of what assumption should be made concerning any co st and efficiency benefit for a fuel-fired (gas-, oil-, or LPG-fired) furnace. To accountfor this, the manufacturer selling price for splitsystem air conditioner is handled two ways. 1) In coil-only purchases, the air conditioning unit is installed in a situation where a medium-efficiency furnace fan is available to circulate air. This accounts for replacement scenarios in which a furnace fan is already available as well as new systems where the furnace is purchased separately . 2) In blower-coil purchases, it is assumed that there either is no furnace or that its air-handling capacity is not adequate for the air conditioning unit. In this case, the cost include s an air handler with a blower and evaporative coil. Systems using a blower coil can use impr ovements on the indoor air-handler to achieve higher SEER ratings. Systems rated as “co il-only” systems must use improvements on the indoor coil or outdoor condensing unit to achieve higher SEER rating. For simplicity, splitsystem heat pumps were assumed to always be sold with an air handler, due to the need to closely match condensing, evaporative, and air ha ndling capabilities to gain efficiency in a heat pump system. Single package heat pumps and sing le package air conditioners sold as complete packages, including condensing unit, evaporator unit, and blower.

8.2.2.2 Standard-Compliant Manufac turer Selling Price Increases

The standard-compliant MSP increase is the change in MSP associated with producing product at higher efficiency levels. DOE devel oped MSP increases associated with increases in product efficiency levels through a combination of efficiency level and design-option analyses in the engineering analysis (see Chapter 5 of the TSD). MSP increases as a function of product efficiency were developed for each of the re presentative product categories in the engineering analysis as well. Table 8.2.3 summarizes the es timated MSP for CAC and CH P efficiency levels considered in the LCC and PBP analyses.

Table 8.2.3 SEER Standard-Compliant Manufacturer Selling Prices per Unit

Efficiency

Level MSP for Representative Standard-Compliant Products 2008$

SplitsystemAC (CoilOnly) Splitsystem AC(BlowerCoil) Splitsystem HP Single Package AC Single Package HP Level 2 930 1,114 1,313 1,045 1,241 Level 3 979 1,165 1,375 1,103 1,312 Level 4 1,033 1,220 1,421 1,188 1,416. Level 5 1,095 1,259 1,465 1,257 1,507 Level 6 1,171 1,300 1,515 1,344 1,613
Level 7 1,269 1,343 1,578 1,448 1,740 Level 8 1,382 1,387 1,687 1,596. 1,866 Level 9 NA 1,433 1,804 NA NA Level 10 NA 1,529 1,930 NA NA Level 11 NA 1,634 1,998 NA NA Level 12 NA 1,746 NA NA NA Level 13 NA 1,866 NA NA NA

8-12Level 14 NA 1,996 NA NA NA



### 8.2.2.3 Transportation Cost

The MSP cost of CAC and CHP products derived above is considered to be a price that includes freight on board charges at the manufact urer’s shipping dock. The additional cost of transporting a CAC or CHP unit to the local dist ribution point depends mainly on its weight. The estimated shipping weight of these units is shown in Table 8.2.4.

Table 8.2.4 Shipping Weights of SEER Standard-complia nt Products

Efficiency

Level Shipping Weight for Representative Standard-Compliant Products LbsSplitsystem AC(CoilOnly) Splitsystem AC

(BlowerCoil) Splitsystem HP Single Package AC Single Package HP

Level 1 206 288 339 333 379 Level 2 218 303 354 349 395 Level 3 228 316 368 366 411 Level 4 250 329 382 382 427 Level 5 271 344 396 398 443 Level 6 293 357 409 414 460 Level 7 318 370 422 431 476 Level 8 344 382 447 450 489 Level 9 NA 395 468 NA NA Level 10 NA 422 489 NA NA Level 11 NA 446 501 NA NA Level 12 NA 471 NA NA NA Level 13 NA 496 NA NA NA Level 14 NA 520 NA NA NA



### Table 8.2.5 shows the estimated overall MSPs, including transportation. DOE visited a freight transportation website (FreightCenter.com 7 

### ) and obtained quotes for a number of shipment options. FreightCenter.com quotes were obtained for palle tized full truckloads assumed to be 26,880 and 15,000 pounds with varying configurations for a shipment from Fort Smith, AR to Richmond, VA (1,117 miles), which was assumed to be a typical shipment distance. Prices ranged for $0.064 per pound to $0.56 per pound for that route, depending on services offered. Excluding high-priced serv ices, DOE determined that a value of $0.20 per pound adequately represented the middle of the ra nge of shipping costs. The value of $0.20 per pound was used for all transportation cost calculations.

8-13

### Table 8.2.5 MSP Including Transportation of SEER Standard-com pliant Products

Efficiency

Level MSP Including Transportation for Representative Standard-Compliant Products

2008$
Split-systemAC (CoilOnly) Split-system AC(BlowerCoil) Split-system HP Single Package AC Single Package HP

Level 1 926 1,121 1,323 1,025 1,262 Level 2 974 1,175 1,384 1,115 1,320 Level 3 1,024 1,229 1,448 1,176 1,395 Level 4 1,083 1,286 1,497 1,264 1,502 Level 5 1,149 1,328 1,545 1,336 1,596 Level 6 1,230 1,372 1,596 1,427 1,705 Level 7 1,333 1,417 1,663 1,534 1,835 Level 8 1,451 1,463 1,776 1,686 1,964 Level 9 NA 1,512 1,898 NA NA Level 10 NA 1,614 2,028 NA NA Level 11 NA 1,723 2,098 NA NA Level 12 NA 1,840 NA NA NA Level 13 NA 1,965 NA NA NA Level 14 NA 2,100 NA NA NA



### 8.2.2.4 Overall Markup

For a given distribution channel, the overa ll markup is the value determined by multiplying all the associated markups and the appli cable sales tax together to arrive at a single overall distribution chain markup value. The ove rall markup is multiplied times the baseline or standard-compliant manufacturing selling price (including transportation) to arrive at the price paid by the customer. Because there are baselin e and incremental markups associated with the wholesaler and mechanical cont ractor, the overall markup is also divided into a baseline markup (i.e., a markup used to convert the baseline manuf acturer price into a customer price) and an incremental markup (i.e., a markup used to conver t a standard-compliant MSP increase due to an efficiency increase into an incr emental customer price). Mar kups can differ depending whether the product is being purchased for a new constr uction installation or is being purchased to replace an existing product re placement. DOE developed th e overall baseline markups and incremental markups for both the new construction a nd replacement applications as a part of the markups analysis (chapter 6 of the TSD).

Based on the percentages of the market attr ibuted to each distribution channel in chapter 6, Table 8.2.6 and Table 8.2.7 display the weighted-average overa ll markups and their associated components for the baseline and incr emental markups, respectively. The differences between national average incremental markups for standard size and non-st andard size units are small enough that the last columns in Tabl e 8.2.7 are identical. DOE used the appropriate baseline markup times the baseline and incrementa l MSP (including transportation) to obtain estimates of the retail price of the CAC and CHP equipment. The calculations are demonstrated in section Error! Reference source not found.

.

8-14

### Table 8.2.6 Overall National Average Baseline Markup Factors by Product Type

Factor New Construction

Application Replacement Application Wholesale Markup 1.370 1.370 Mechanical Contractor Markup 1.280 1.380

General Contractor Markup 1.290 NA*

Sales Tax 1.071 1.071 Total Markup 2.422 2.025 * General contractors do not appear in the replacements distribution channel


### Table 8.2.7 Overall National Incremental Markup Factors by Product Type

Factor New Construction

Application Replacement Application Wholesale Markup 1.114 1.114 Mechanical Contractor Markup 1.040 1.120

General Contractor Markup 1.170 NA*

Sales Tax 1.071 1.071 Total Markup 1.452 1.336 * General contractors do not appear in the replacements distribution channel



### 8.2.2.5 Installation Cost

The installation cost is the price to the customer of labor and materials (other than the actual product) needed to install the CAC produc t. DOE derived installation cost for CAC product from data in the RS Means Residential Cost Data 2009 8 

### and RS Means CostWorks 2009. 9



### RS Means Residential Cost Data provides estimates on the person-hours required to install CAC and CHP produc ts, labor rates, and costs associated with the type of crew required to install the products. Generally speaking, inst allation involves movement into the building, installation or setting of pr oduct (including sleeve), connecting to power supply, filling/flushing/cleaning/touchup, startup and r unning adjustments, training the owner’s representative, and warranty and call-back service. DOE calculated the installation cost by building up the labor costs for installing the components of the system types discussed in the Engineering Analysis, chapter 5, since materials costs, overheads, and profits were assumed to be captured in the contractor markups. Labor ra tes vary significantly from region to region of the country and the RS Means data provide the necessary inform ation to capture this regional variability. RS Means CostWorks provides cost indices that refl ect the labor rates for 295 cities in the United States. Cities in all 50 States and the District of Columbia are identified in the RS Means data and most states are represented by more than one city. DOE used the city indices to develop population weighted averages for each state and the District of Columbia. DOE

8-15

### incorporated the state indices into the analysis to capture place-to-place variation in installation
cost.
Table 8.2.8 summarizes the nationally represen tative installation costs based on personhours and labor rates associated with the insta llation of CAC and CHP pr oducts as presented in RS Means . DOE assumed that these installation costs remain fixed regardless of efficiency level (a “flat” installation cost scenario). DOE’s LCC spreadsheet initially allowed for an alternative scenario - that the installation cost increases with higher efficiency levels - and this alternative was implemented in the LCC spreadsheet by providing for an installation price that varies in proportion to increased manufacturer cost above th e baseline efficiency level. However, DOE discussed installation costs with a small sample of installers and did not find a basis for installation costs increasing with efficiency. DOE therefore assumed that installation costs varied by region but not by efficiency level.

Table 8.2.8 Installation Costs for Baseline CAC Products (SEER 13) MSP for Representative Standard-Compliant Products 2008$

Split-system AC (Coil- Only) Split-system AC (Blower-Coil) Splitsystem HP Single Package AC Single Package HP 508 648 561 528 403



### Table 8.2.9 summarizes the cost i ndices for installations in each of the 50 states, plus the District of Columbia, used to vary the nationall y representative installation costs in Table 8.2.8.

To arrive at an average index for each state, DOE weighted the city indices in each state by their population within each st ate. Because city-level popula tion estimates were not available for 2008, DOE used estimated city population weights for the year 2007 from the U.S. Census Bureau 10 

### to calculate a weighted-average index for each state from the RS Means CostWorks data. Weighted averages and estimates at the regional and national level were computed using 2008 state population weights from the U.S. Census Bureau 11



### .
8.2.2.6 Weighted-Average Total Installed Cost

As presented in Eq.8.2, the total installed co st is the sum of the product price and the installation cost. DOE derived the customer produ ct price for any given efficiency level by taking the product of the baseline MSP and the baseline markup index (inc luding the sales tax) and adding to it the product of the increm ental MSP and the incr emental markup index (including the sales tax). MSPs, markups, and the sales tax all can take on a variety of values, depending on location, so the resultin g total installed cost for a par ticular efficiency level will not be a single-point value, but ra ther a distribution of values.

The baseline MSP and the standard-compliant MSP increases are the starting points for determining the total in stalled cost (values are taken dir ectly from Table 8.2.5). DOE used the baseline and incremental markups a nd installation costs to convert the MSPs into total installed costs. Both the percentage retail markups and the percentage installation cost may change with the efficiency level. As an example, the weighted average costs for a 3-ton Split-System AC product category are presented for the baselin e level. Table 8.2.10 summarizes the weighted8-16

### average costs and markups necessary for determining the weighted-average baseline and standard-compliant total installed costs for a new Split-System AC Coil-Only unit.

Table 8.2.9 Installation Cost Indices (National Average Value = 100.0)
State Index State Index State Index Alabama 61.8 Kentucky 85.8 North Dakota 62.9 Alaska 112.3 Louisiana 63.1 Ohio 101.2 Arizona 79.6 Maine 74.2 Oklahoma 61.5 Arkansas 60.9 Maryland 96.5 Oregon 111.7 California 133.0 Massachusetts 128.3 Pennsylvania 126.4 Colorado 86.9 Michigan 110.1 Rhode Island 116.9 Connecticut 124.8 Minnesota 122.3 South Carolina 44.5 Delaware 122.6 Mississippi 66.5 South Dakota 51.2 Dist. Of Columbia 102.3 Missouri 105.2 Tennessee 71.4 Florida 67.1 Montana 78.8 Texas 64.7 Georgia 75.2 Nebraska 87.3 Utah 75.8 Hawaii 117.1 Nevada 112.1 Vermont 70.8 Idaho 75.4 New Hampshire 93.0 Virginia 76.3 Illinois 141.3 New Jersey 132.1 Washington 108.6 Indiana 90.2 New Mexico 78.8 West Virginia 93.6 Iowa 79.8 New York 170.7 Wisconsin 102.8 Kansas 71.4 North Carolina 44.6 Wyoming 65.3


### Table 8.2.10 Costs and Markups for Determinat ion of Weighted-Average Total Installed Costs for a New 3-Ton Split-system AC Coil- Only Unit (Efficienc y Level 5: SEER 15

Variable SEER Weighted Average Value National Average HotHumid Hot-Dry Rest of Country Baseline Manufacturer Selling Price, Including Transportation (SEER 13) $926.15 $926.15 $926.15 $926.15

Standard-compliant Manufacturer selling price Increase (Efficiency Level 5—SEER 15) $223.28 $223.28 $223.28 $223.28

Average Overall Baseline Markup (Regional) 2.423 2.435 2.858 2.444

Average Overall Incremental Markup (Regional) 1.452 1.459 1.712 1.464

Installation Cost $508 $508 $508 $508 Installation Cost Factor – Regional 1.000 0.641 1.223 1.145



### To illustrate the derivation of the weighted-average total installed cost shown in Table 8.2.10, DOE presents the calculations for the baseline efficiency (Eq. 8.2.3) and a higher efficiency SS-AC-3T unit at SEER 15 (Level 5) (Eq. 8.2.4). For baseline products, the calculation of the Hot-Humid regional average total installed cost is as follows:

IC BASE SS-AC-3T 

### = EQP B ASE-SS-AC-3T 

### +INST BAS E-SS-AC-3T 

### x INSTNDEX Eq. 8.2.3 = MSP BASE- SS-AC-3T X 

### MU BASE- SS-AC-3T 

### + INST BASE- SS-AC-3T 

### x INSTNDEX = $926.15 x 2.435 + $508 x 0.641

8-17

### = $ 2,255.18 + $325.62 = $2580.80.

Where:

IC = total installed cost ($), EQP = product price ($), MSP = manufacturer selling price ($), MU = overall baseline markup, INST = installation cost or the custom er price to install product ($), INSTINDEX = location dependent installation co st index, approximately 1.0 at a national average.

In this specific example, MSP is the national average baseline MSP for the Split-System Coil-Only CAC product class and MU is the overall baseline markup factor. The calculation of the higher efficiency (efficiency level 5-SEER 15) total installed cost includes the use of a MSP adder. In addition, DOE deri ved an incremental markup.

Based on incremental product price changes, the derivation of the efficiency level 5 total installed cost is based on determining the change in product pr ice over the baseline product price. The manufacturer price increment for higher effi ciency product is multiplied by the incremental markup.

DOE calculated the efficiency level 5 total installed cost ( IC SS-AC-3T Level 5 

### ) as follows:

IC SS-AC-3T Level5 

### = ( EQP BASE-SS-AC-3T 

### + ∆ EQP SS-AC-3T Level 5 

### )

+ INST SS-AC-3T Level 5 

### x INSTINDEX Eq. 8.2.4

= ( MSP BASE-SS-AC-3T X 

### MU BASE-SS-AC-3T 

### ) + ( ∆ MSP SS-AC-3T Level 5

X 

### MU SS-AC-3T Level 5 

### ) + INST SS-AC-3T Level 5 

### x ISTINDEX = $926.15 x 2.435 + $223.28 x 1.459 + $508 x 0.641 = $2906.57

Where:

∆ EQP = increase in product price ($), ∆ MFG = increase in manufacturer price ($)

, MU = markup factor (base or incremental, as shown in Table 8.2.6 and Table 8.2.7, respectively)

Table 8.2.11 presents the average product price, installation costs, and total installed costs for the representative product Split-system AC (Coil-only) at the baseline level and each efficiency level examined. Table 8.2.12 through Table 8.2.15 present these data for the other product classes.

8-18

### Table 8.2.11 Manufacturer Selling Price (Includi ng Transportation), Product Price, Installation Cost, and Total In stalled Costs for Split-system AC (Coil-only), at Average Prices*

Efficiency Level Manufacturer Selling Price 2008$ Product Price (Including Markups) 2008$ Installation Cost 2008$ Total Installed Cost 2008$ National Average Level 1 926 2,244 508 2,752 Level 2 974 2,316 508 2,824 Level 3 1,024 2,391 508 2,899 Level 4 1,083 2,479 508 2,987 Level 5 1,149 2,578 508 3,086 Level 6 1,230 2,699 508 3,207 Level 7 1,333 2,853 508 3,361 Level 8 1,451 3,030 508 3,538 Hot-Humid Region Level 1 926 2,255 325 2,581 Level 2 974 2,325 325 2,651 Level 3 1,024 2,399 325 2,724 Level 4 1,083 2,485 325 2,810 Level 5 1,149 2,581 325 2,907 Level 6 1,230 2,699 325 3,024 Level 7 1,333 2,848 325 3,174 Level 8 1,451 3,021 325 3,347 Hot-Dry Region Level 1 926 2,647 621 3,268 Level 2 974 2,728 621 3,350 Level 3 1,024 2,815 621 3,436 Level 4 1,083 2,915 621 3,537 Level 5 1,149 3,029 621 3,650 Level 6 1,230 3,167 621 3,788 Level 7 1,333 3,343 621 3,964 Level 8 1,451 3,545 621 4,166 Rest of Country Level 1 926 2,263 582 2,845 Level 2 974 2,334 582 2,916 Level 3 1,024 2,409 582 2,991 Level 4 1,083 2,497 582 3,078 Level 5 1,149 2,595 582 3,177 Level 6 1,230 2,715 582 3,296 Level 7 1,333 2,867 582 3,449 Level 8 1,451 3,043 582 3,625 * Details may not add to total due to rounding.

8-19

### Table 8.2.12 Manufacturer Selling Price (Includi ng Transportation), Product Price, Installation Cost, and Total In stalled Costs for Split-system AC (Blower-Coil), at Average Prices*

Efficiency Level Manufacturer Selling Price 2008$ Product Price (Including Markups) 2008$ Installation Cost 2008$ Total Installed Cost 2008$ National Average
Level 1 1,121 2,954 1,102 4,056
Level 2 1,175 3,028 1,102 4,130
Level 3 1,229 3,102 1,102 4,204
Level 4 1,286 3,181 1,102 4,283
Level 5 1,328 3,239 1,102 4,341
Level 6 1,372 3,299 1,102 4,401
Level 7 1,417 3,362 1,102 4,464
Level 8 1,463 3,426 1,102 4,528
Level 9 1,512 3,492 1,102 4,594
Level 10 1,614 3,633 1,102 4,735
Level 11 1,723 3,783 1,102 4,885
Level 12 1,840 3,944 1,102 5,046
Level 13 1,965 4,117 1,102 5,219
Level 14 2,100 4,303 1,102 5,405 Hot-Humid Region
Level 1 1,121 2,968 706 3,675
Level 2 1,175 3,041 706 3,747
Level 3 1,229 3,113 706 3,819
Level 4 1,286 3,190 706 3,896
Level 5 1,328 3,247 706 3,953
Level 6 1,372 3,305 706 4,011
Level 7 1,417 3,366 706 4,072
Level 8 1,463 3,428 706 4,134
Level 9 1,512 3,493 706 4,199
Level 10 1,614 3,630 706 4,336
Level 11 1,723 3,777 706 4,483
Level 12 1,840 3,934 706 4,640
Level 13 1,965 4,103 706 4,809
Level 14 2,100 4,284 706 4,990

8-20

### Table 8.2.12 (contd)

Efficiency Level Manufacturer Selling Price 2008$ Product Price (Including Markups) 2008$ Installation Cost 2008$ Total Installed Cost 2008$ Hot-Dry Region
Level 1 1,121 3,483 1,348 4,831
Level 2 1,175 3,568 1,348 4,916
Level 3 1,229 3,653 1,348 5,001
Level 4 1,286 3,743 1,348 5,091
Level 5 1,328 3,810 1,348 5,158
Level 6 1,372 3,879 1,348 5,227
Level 7 1,417 3,950 1,348 5,298
Level 8 1,463 4,023 1,348 5,371
Level 9 1,512 4,099 1,348 5,447
Level 10 1,614 4,260 1,348 5,608
Level 11 1,723 4,432 1,348 5,780
Level 12 1,840 4,616 1,348 5,964
Level 13 1,965 4,814 1,348 6,162
Level 14 2,100 5,027 1,348 6,375 Rest of Country
Level 1 1,121 2,979 1,262 4,241
Level 2 1,175 3,052 1,262 4,314
Level 3 1,229 3,126 1,262 4,388
Level 4 1,286 3,204 1,262 4,466
Level 5 1,328 3,262 1,262 4,524
Level 6 1,372 3,322 1,262 4,584
Level 7 1,417 3,384 1,262 4,646
Level 8 1,463 3,447 1,262 4,709
Level 9 1,512 3,513 1,262 4,775
Level 10 1,614 3,653 1,262 4,915
Level 11 1,723 3,802 1,262 5,064
Level 12 1,840 3,962 1,262 5,224
Level 13 1,965 4,134 1,262 5,396
Level 14 2,100 4,319 1,262 5,581 * Details may not add to total due to rounding.

8-21

### Table 8.2.13 Manufacturer Selling Price (Includi ng Transportation), Product Price, Installation Cost, and Total Installed Costs for Split-system HP, at Average Prices*

Efficiency Level Manufacturer Selling Price 2008$ Product Price (Including Markups) 2008$ Installation Cost 2008$ Total Installed Cost 2008$
National Average
Level 1 1,323 2,679 561 3,240
Level 2 1,384 2,763 561 3,324
Level 3 1,448 2,852 561 3,412
Level 4 1,497 2,919 561 3,480
Level 5 1,545 2,985 561 3,545
Level 6 1,596 3,056 561 3,616
Level 7 1,663 3,147 561 3,708
Level 8 1,776 3,304 561 3,864
Level 9 1,898 3,471 561 4,031
Level 10 2,028 3,650 561 4,210
Level 11 2,098 3,747 561 4,307 Hot-Humid Region
Level 1 1,323 2,692 359 3,052
Level 2 1,384 2,774 359 3,133
Level 3 1,448 2,861 359 3,220
Level 4 1,497 2,926 359 3,286
Level 5 1,545 2,990 359 3,349
Level 6 1,596 3,060 359 3,419
Level 7 1,663 3,149 359 3,508
Level 8 1,776 3,301 359 3,660
Level 9 1,898 3,464 359 3,823
Level 10 2,028 3,639 359 3,998
Level 11 2,098 3,733 359 4,093 Hot-Dry Region
Level 1 1,323 3,159 686 3,845
Level 2 1,384 3,255 686 3,941
Level 3 1,448 3,357 686 4,042
Level 4 1,497 3,434 686 4,120
Level 5 1,545 3,509 686 4,194
Level 6 1,596 3,590 686 4,276
Level 7 1,663 3,695 686 4,380
Level 8 1,776 3,874 686 4,559
Level 9 1,898 4,065 686 4,751
Level 10 2,028 4,270 686 4,956
Level 11 2,098 4,381 686 5,067

8-22

### Table 8.2.13 (contd)

Efficiency Level Manufacturer Selling Price 2008$ Product Price (Including Markups) 2008$ Installation Cost 2008$ Total Installed Cost 2008$
Rest of Country
Level 1 1,323 2,702 642 3,343
Level 2 1,384 2,785 642 3,427
Level 3 1,448 2,873 642 3,515
Level 4 1,497 2,940 642 3,582
Level 5 1,545 3,005 642 3,647
Level 6 1,596 3,076 642 3,718
Level 7 1,663 3,167 642 3,808
Level 8 1,776 3,322 642 3,964
Level 9 1,898 3,488 642 4,130
Level 10 2,028 3,666 642 4,308
Level 11 2,098 3,762 642 4,404 * Details may not add to total due to rounding.



### Table 8.2.14 Manufacturer Selling Price (Includi ng Transportation), Product Price, Installation Cost, and Total Installed Costs for Single Pa ckage AC, at Average Prices*

Efficiency Level Manufacturer Selling Price 2008$ Product Price (Including Markups) 2008$ Installation Cost 2008$ Total Installed Cost 2008$ National Average
Level 1 1,025 2,077 528 2,604
Level 2 1,115 2,200 528 2,664
Level 3 1,176 2,284 528 2,727
Level 4 1,264 2,405 528 2,811
Level 5 1,336 2,505 528 2,933
Level 6 1,427 2,630 528 3,033
Level 7 1,534 2,778 528 3,158
Level 8 1,686 2,987 528 3,305 Hot-Humid Region
Level 1 1,025 2,087 338 2,425
Level 2 1,115 2,207 338 2,545
Level 3 1,176 2,289 338 2,627
Level 4 1,264 2,407 338 2,745
Level 5 1,336 2,505 338 2,843
Level 6 1,427 2,627 338 2,965
Level 7 1,534 2,771 338 3,109
Level 8 1,686 2,975 338 3,313

8-23

### Table 8.2.14 (contd)

Efficiency Level Manufacturer Selling Price 2008$ Product Price (Including Markups) 2008$ Installation Cost 2008$ Total Installed Cost 2008$ Hot-Dry Region
Level 1 1,025 2,449 645 3,094
Level 2 1,115 2,590 645 3,235
Level 3 1,176 2,686 645 3,331
Level 4 1,264 2,825 645 3,470
Level 5 1,336 2,939 645 3,584
Level 6 1,427 3,082 645 3,728
Level 7 1,534 3,251 645 3,896
Level 8 1,686 3,490 645 4,136 Rest of Country
Level 1 1,025 2,094 604 2,698
Level 2 1,115 2,133 604 2,820
Level 3 1,176 2,216 604 2,904
Level 4 1,264 2,300 604 3,025
Level 5 1,336 2,421 604 3,124
Level 6 1,427 2,520 604 3,248
Level 7 1,534 2,644 604 3,395
Level 8 1,686 2,791 604 3,602 * Details may not add to total due to rounding.


### Table 8.2.15 Manufacturer Selling Price (Includi ng Transportation), Product Price, Installation Cost, and Total In stalled Costs for Single Pack age HP, at Average Prices *

Efficiency Level Manufacturer Selling Price 2008$ Product Price (Including Markups) 2008$ Installation Cost 2008$ Total Installed Cost 2008$ National Average
Level 1 1,262 2,556 403 2,958
Level 2 1,320 2,636 403 3,038
Level 3 1,395 2,739 403 3,141
Level 4 1,502 2,886 403 3,288
Level 5 1,596 3,016 403 3,418
Level 6 1,705 3,166 403 3,569
Level 7 1,835 3,345 403 3,747
Level 8 1,964 3,523 403 3,925 Hot-Humid Region
Level 1 1,262 2,568 258 2,826
Level 2 1,320 2,647 258 2,904
Level 3 1,395 2,747 258 3,005
Level 4 1,502 2,890 258 3,148

8-24Efficiency Level Manufacturer Selling Price 2008$ Product Price (Including Markups) 2008$ Installation Cost 2008$ Total Installed Cost 2008$ Level 5 1,596 3,017 258 3,275
Level 6 1,705 3,164 258 3,422
Level 7 1,835 3,338 258 3,595
Level 8 1,964 3,511 258 3,769 Hot-Dry Region
Level 1 1,262 3,014 492 3,506
Level 2 1,320 3,106 492 3,598
Level 3 1,395 3,223 492 3,715
Level 4 1,502 3,392 492 3,884
Level 5 1,596 3,540 492 4,032
Level 6 1,705 3,712 492 4,205
Level 7 1,835 3,916 492 4,409
Level 8 1,964 4,120 492 4,613 Rest of Country
Level 1 1,262 2,577 461 3,038
Level 2 1,320 2,657 461 3,118
Level 3 1,395 2,759 461 3,220
Level 4 1,502 2,905 461 3,366
Level 5 1,596 3,034 461 3,495
Level 6 1,705 3,184 461 3,645
Level 7 1,835 3,361 461 3,822
Level 8 1,964 3,538 461 3,999
* Details may not add to total due to rounding.



### 8.2.3 Operating Cost Inputs

The operating cost is determined for house holds using data from the 2005 Residential Energy Consumption Survey (RECS) and industry sources on repair cost and maintenance cost. The operating cost for commercial buildings is based on computer modeling of a representative commercial building in 237 climates. For the LCC analysis of central air conditioners (either split or package systems), the LCC of an increased efficiency level is calculated for those residential and commercial buildings that are determined to have a central air conditioner. For heat pumps (either split or package systems), the LCC of an increased efficiency level is calculated for those buildings that are determined to have a central heat pump. The LCC analysis results in a distribution of LCC savings (i.e., the LCC difference between the baseline product and product with a higher efficiency level) for 10,000 individual observations at each higher efficiency level nationally, and in each region. Th e analysis computes th e mean LCC difference at each efficiency level in each region, as well as the percentage of buildings analyzed that have positive LCC savings associated with the more-efficient product.

8-25

### DOE defined the operating cost by the following equation:

OC = EC+ RC+ MC Eq. 8.2.5

Where:

OC = operating cost ($), EC = energy cost associated with operating the product ($), RC = repair cost associated wi th component failure ($), MC = annual maintenance cost for ma intaining product operation ($).

The remainder of this section provides inform ation about the variables that DOE used to calculate the operating cost for CAC and CH P products. Product life time, discount rate, and effective date of the amended energy conserva tion standard are required for determining the operating cost and for establishing the operating co st present value. The annual energy costs of the product are computed from energy consumption per unit for the baseline efficiency and standard-compliant cases (efficiency level 1, 2, etc.), combined with the electricity prices. Chapter 7, Building Energy Use Characterization Analysis, provides complete details on the CAC product energy consumption results for three regions and the nation as a whole. The key inputs for the determination of ope rating costs are shown below:

• 

### Baseline and standard-comp liant annual energy consumption (kWh) (Chapter 7)

• 

### Electricity price (cen ts/kWh) (section 8.2.3.1)

• 

### Electricity price trend (section 8.2.3.2)

• 

### Repair cost ($) (section 8.2.3.3 )

• 

### Maintenance cost ($) (section 8.2.3.4)

• 

### Equipment lifetime (years) (section 8.2.3.5)

• 

### Discount rate (percentage) (section8.2.3.6)

• 

### Effective date of amended energy conservation standard (section 8.2.3.7)

8.2.3.1 Electricity Price Analysis

Electricity price information is required to cal culate the dollar benefits to consumers who purchase and operate a more efficient appliance. The electricity cost savings comprise the benefit side of the cost-benefit analysis used to define the life-cycle cost impacts of a proposed standard. In previous rulemakings, DOE has used estimates of marginal electricity prices to calculate these cost savings. The marginal price for a given c onsumer is the cost of the next increment of electricity use on the consumer’s utility bill, and is the correct estimate of the value of savings that a consumer would see in the real world. In some cases, it may be sufficient to use estimates of average electricity prices, which are less accurate but simpler to calculate. However, if there is reason to believe that marginal prices differ significantly from average prices, the approximation is not justified. For a peak-coincident end us e such as air-conditioning, there is a general expectation that the actual cost of operating the appliance is higher than the average price of electricity. These increased costs are often reflected in utility tariff structures, through block

8-26

### rates, different types of demand charges, or mandatory time-of-use rates. Accurate estimation of marginal prices requires taking rate structures into account explicitly.

In general, several methods a nd data sources can be used to calculate electricity prices. After reviewing the strengths and weaknesses of di fferent approaches and the available data, the Department chose to base the analysis on the utility tariffs comprising the TAP (Tariff Analysis Project) database. 12 

### The TAP database and calculation tool s were first developed at LBNL for use in the Commercial Unitary Air Conditioning (CUAC) rulemaking. 13 

### This approach provides an up-to-date and geographically diverse data set that can accurately capture real prices. Other data sources have various weaknesses that could lead to significant errors in the estimated electricity cost savings, and do not provide sufficient information to allow DOE to respond adequately to stakeholder comment s. A more detailed discussion of electricity price data and calculation methods is presented in appendix 8-B, along with a description of the tariff-based approach, the data used, and va lidation tests. Detailed documentation is also available in published reports. 10, 11, 14 

### Residential electricity cost savings are calculated based on the defaulttariffs collected in the TAP database. Currently, for all utilities the default tariff is not time-ofuse. A large number of utilities offer optional time-of-use (TOU) tariffs, but there are currently very few customers enrolled in these optional rate plans. appendix 8-C provides a quantitative comparison of prices for consumers on TOU vs. default tariffs for utilities that offer both

For the analysis conducted for CAC and HP, electricity prices are required for both residential and commercial cons umers. The LCC is based on a consumer sample derived from RECS and EIA’s Commercial Building Energy Consumption Survey (CBECS), 15 

### and both an average annual price and a seasonal marginal pri ce are required for each household or building in the sample. Following the methodology in the LCC, the consumer sample is also segregated according to product type (i.e., CAC or HP). The basic methodology is to estimate the customer’s monthly elect ricity use, and use the tariff da ta to calculate the corresponding electricity bill. Empirical marginal prices (EMPs) are calculated by taking the difference between the bill for the baseline electricity use and the bill for a candidate standard level, and dividing by the change in energy use. This approach requires estimation of monthly consumer electricity use for the baseline and the energy savings associated with each candidate standard level. As both the rate structures and the required energy data differ significantly for residential vs. commercial consumers, the details of the approach for these two sectors are discussed separately.

Calculation of Residential Prices

The calculation methodology provides, for each household in the building sample, an average annual price and a monthly marginal price. To compute these prices, the monthly baseline energy consumption must first be estima ted. This is done using the monthly billing data from the RECS 2001 dataset becaus e the detailed monthly billing data from the RECS 2005 was considered to be proprietary a nd could not be used; details of the calculation are presented in appendix 8-C. Given the monthly energy use, tw elve monthly bills per household are calculated using the tariffs. To increase the effective size of the sample, within a region each household is paired with each utility in its region. DOE refers to the pairing of a household with a utility as an account. The utilities ar e weighted by the fraction of cust omers they serve within a region. 11, 12 

### Taking the weighted sum over accounts provides a single set of prices for each household.

8-27

### The annual average baseline price is calculat ed as a simple average over the twelve monthly baseline bills. To calculate monthly marginal prices for each account, the monthly energy use is decremented by seven percent and the bill recalculated. The marginal price in each month is defined as the bill savings divided by the energy savings under this test. This will be the valid price under all candidate sta ndard levels. Monthly variability in the marginal price is due primarily to seasonal rates, as season definitions vary by utility. Within the LCC, the annual cost savings are equal to the monthly marginal price times the monthly energy savings, summed across months. A description of how the monthl y energy savings are estimated for each CSL is given in appendix 8-C.

To provide an indication of the prices that result from this analysis, Table 8.2.16 shows the annual average price and marginal prices fo r January and July. The table presents regional averages calculated for the hot -humid, hot-dry and rest-of-country regions defined for this rulemaking. The table also shows the total RECS weight associated with the household sample for each product type. Note that these regional averages are for information only; the LCC uses household-level prices.

Table 8.2.16 Regional Averages of the Annual Average Prices and January and July Marginal Prices

Product and Region RECS Nweight Residential Electricity Prices cents/kWh

Annual Average Price January Marginal Price July Marginal Price
Central Air
Hot-Humid Hot-Dry Rest of Country
Nation 19,045,578 6,164,451 25,769,446 50,979,476 10.04
16.11
10.73
11.12 8.86
19.79

9.11
10.30 9.75
19.97
10.57
11.40 Heat Pump
Hot-Humid Hot-Dry Rest of Country
Nation 5,545,454 837,752 3,608,821 9,992,026 10.01
14.35

9.68
10.26 9.50
16.22

8.52
9.71 10.20
15.80

9.93
10.57



### Calculation of Commercial Prices

Electricity tariffs for commercial consumers can be very complex, incorporating block rates, seasonal rates, demand charges, time-of-use rates, etc. To calculate commercial electricitybills requires both the monthly consumption and demand; for utilities with mandatory time-ofuse (TOU) tariffs, consumption and demand data are required for each TOU period. For the CAC and HP analysis, this data is provided from bu ilding simulations. The simulation approach is described in more detail in Chapter 7. Briefly, in this approach a representative set of small commercial building is simulated at several SEER levels across the full set of weather locations defined in the TMY2 data set. b 

### The simulation output for SEER 13 is taken as the baseline. As

b TMY means typical meteorological year; version 3 of this dataset is the most recent.

8-28

### with the residential data , a set of accounts are created by pairing each building in the simulation set with each utility in its region. For the commercia l analysis the regions are defined as census divisions. Once a building is assigned to a utility, the tariff is assigned automatically based on the annual peak demand and/or energy consumption a nd the tariff rules. For each account and each SEER level, monthly energy and demand values, by TOU period if necessary, are determined from the hourly simulation output. With this data, monthly bills can be calculated using the tariffs.

Given the monthly bills, the bill savings in do llars for each account at each SEER level are determined relative to the baseline bill. The EMP can be calculated by taking the ratio of the bill savings to the energy savings. Note that, as far as the analysis is concerned, the EMP is a derived quantity that is used for information purposes only— the LCC uses the total annual bill savings for each customer directly.

The commercial tariff data we re last updated in 2004. To convert to 2008 dollars, two datasets were used: The report Average Regulated Retail Price of Electricity for the years 2004 through 2007, 16 

### and the EEI Typical Bill reports for 2007 to 2008. 17 

### Based on these data, a weighted-average price escalation factor for each region was calculated using consumer counts as the weights. The consumer counts come from the most recent EIA Form 861 data, which is for 2006. 18 

### EIA data from 2003 through 2006 were used to determine how much the rate of price escalation differs on average between the publicly vs. privately owned utility companies.

To give an indication of the prices obtai ned with this methodology, Table 8.2.17 shows the regional average values of the empirical marginal price at the SEER levels simulated. These regional averages were calculated based on population-weighting of the building simulation sample. The table also shows the scaling fact ors used to convert from 2004 to 2008 nominal dollars. Note that the EMP varies by SEER leve l, and this variation may be non-monotonic. This behavior results from the complex block struct ures for both demand and energy charges that exist in commercial tariffs. 12



### Table 8.2.17 Effective Marginal Price by Re gion for the Commercial Building Sample (¢/kWh).

Census Division Marginal Prices cents/kWh Scaling Factor* Central Air Conditioners SEER 14 SEER 16 SEER 19 SEER 14 Heat Pumps SEER 16 SEER 19
1
2 3
4 5
6
7 8
9 32.7 22.1 25.3 25.0 17.4 19.6 22.2 14.3 16.6

7.4 6.6 6.9 14.6 12.3 13.1 10.7 9.5 10.0 17.5 14.8 16.0 10.9 9.8 10.1
12.7 12.2 12.5 28.5 22.6 19.0

8.0 14.6 10.3 16.3 13.2
13.6 19.5 15.4 12.2

6.5 11.7

9.1 13.5

9.8
11.6 21.9 17.4 14.1

6.9 12.6

9.4 14.5 10.6
11.8 1.44 1.15 1.25 1.07 1.36 1.28 1.34 1.18
1.09
* The scaling factors used to convert from 2004 to 2008 dollars .

8-29

### 8.2.3.2 Electricity Price Trend

The electricity price trend provides the relative change in electricity prices for future years out to the year 2047. Estimating future electricity prices is difficult, especially considering that there are efforts in many states throughout the country to restructur e the electricity supply industry.

DOE applies a projected trend in national average electricity prices to each customer’s energy prices. Of the following four scenarios, the LCC analysis uses the April 2009 update to the AEO 2009 reference price scenario:

1. Constant energy prices at 2008 va lues (Constant index at 2008 = 1.0)

2. AEO 2009 , High Growth (“High Growth” in Figure 8.2.1).

3. AEO 2009 , Reference Case (“Reference” in Figure 8.2.1)

4. AEO 2009 , Low Growth (“Low Growth” in Figure 8.2.1)

Figure 8.2.1 shows the trends for the three AEO 2009 residential price projections where prices are assumed to change. DOE extrapolated the values in later years ( i.e. , after 2030) from their relative sources because AEO 2009 does not forecast beyond 2030. To arrive at values for these later years, DOE used the price trend from 2020 to 2030 of the forecast to establish prices in the years 2030 to 2047. This method of extrapolation is in line with methods currently used by the EIA to forecast fuel prices for the Federal Energy Management Program.

The default electricity price trend scenario used in the LCC analysis is the trend from the April 2009 update to the AEO 2009 Reference Case, which is the middle line in Figure 8.2.1 Spreadsheets used in calculating the LCC have the capability to analyze the other electricity price trend scenarios, namely, the AEO 2009 High Growth and the AEO 2009 Low Growth price trends and constant energy prices. A similar set of trend scenarios for the commercial sector is shown in Figure 8.2.2.

8-30200 7 200 9 201 1 2013 2015 2017 2019 2021 2023 2025 202 7 202 9 203 1 203 3 203 5 203 7 2039 2041 2043 2045 2047

200

7 200 9 201 1 2013 2015 2017 2019 2021 2023 2025 202 7 202 9 203 1 203 3 203 5 203 7 2039 2041 2043 2045 2047 Residential Prices

0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1.30Index 2008=1.00

Low Grow t h

R e f e renc e H i gh G r o w t h

Years 

### Figure 8.2.1 Electricity Price Tre nds for Residential Rates to 2047

Commercial Prices

0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25Index 2008=1.00

Low Grow t h

R e f e renc e H i gh G r o w t h

Years 

### Figure 8.2.2 Electricity Price Tre nds for Commercial Rates to 2047

8-31

### 8.2.3.3 Repair Cost

The repair cost is the cost to the consumer for replacing or repairing components in the BVM equipment that have failed. The assumed an nualized repair cost for baseline efficiency central air-conditioning and heat pump equipment (i.e., the cost th e consumer pays annually for repairing the equipment) and e quipment with efficiencies of 13 SEER and greater are based on the following expression:



### EQP STD 

### RC STD 

### = RC Base 

### • • ( m r 

### ) • ( st
r 

### ) Eq. 8.2.6 EQP BASE



### Where:

RC STD 

### = repair cost at a standard efficiency level (e.g., level 2, 3, etc.) RC BASE 

### = repair cost at the base efficiency level (level 1) EQP STD 

### = equipment price (consumer price for only the equipment) at a standard level, EQP BASE 

### = equipment price (consumer price for only the equipment) at the base efficiency level,

m r 

### = mechanical contractor markup index in region r
st r 

### = state and local tax rate index (factor relative to national average)

Data on average repair costs are scarce in published sources. However, based on information in a few consumer advice websites and discussions with service representatives, it appears that the range of values for parts and labor for major repairs such as replacing a compressor is between $700 and $1500 19 

### . Furthermore, it appears that compressor replacements are rarely needed before about the eighth year and are often covered by warranty, if needed. In addition, if the equipment is older than 15 years, it is usually economically rational to replace the entire system rather than to incur the cost of a major repair for the limited average equipment life remaining. Because this is a range rather than a specific value associated with a particular technology, DOE applied the range to all classe s and assumed that the range included average national values for wholesale markups, mechan ical contractor mar kups, and sales taxes.

Through 14 SEER, system technology genera lly does not incorporate sophisticated electronic components, whic h are believed to incur higher repa ir costs. Increases in SEER are generally achieved through more efficient single-speed compressors or more efficient and/or larger heat exchanger coils. Systems with effi ciencies beyond 14 SEER st art to incorporate twospeed and variable-speed fans, as well as larger coils and more complex electronics, all of which are expected to be more susceptible to failure and cost more to repair.

Table 8.2.18 shows the basic average repair costs by standard level for split-system and single package central air conditioners and heat pumps. Since equipment pr ices are a function of variables that are represented by distributions ra ther than single point values (e.g., manufacturer, distributor, dealer, and builder mar kups, installation costs, and sales tax), repair costs are actually represented by a distribution of values rather than just the average values shown in Table 8.2.18.

8-32

### Table 8.2.18 Central Air Conditioner and Heat Pump Basic Average Repair Costs by Efficiency Level

Efficiency

Level Repair Costs for Representative Standard-Compliant Products 2008$Splitsystem AC(CoilOnly) Splitsystem AC

(BlowerCoil) Splitsystem HP Single Package AC Single Package HP Level 1 63.48 63.48 63.48 63.48 63.48 Level 2 65.44 65.50 65.41 67.13 65.42 Level 3 67.51 67.50 67.45 69.63 67.89 Level 4 69.93 69.64 69.00 73.23 71.44 Level 5 72.65 71.23 70.50 76.19 74.56 Level 6 75.96 72.86 72.14 79.90 78.20 Level 7 80.18 74.54 74.24 84.28 82.50 Level 8 85.03 76.28 77.84 90.48 86.79 Level 9 NA 78.08 81.68 NA NA Level 10 NA 81.90 85.80 NA NA Level 11 NA 85.97 88.03 NA NA Level 12 NA 90.34 NA NA NA Level 13 NA 95.04 NA NA NA Level 14 NA 100.08 NA NA NA


### Because labor rates and sales taxes vary across the country and repair costs also vary for any given efficiency level for each product type, Table 8.2.19 shows the average repair costs by region of the country and product type for the largest product classes.

Table 8.2.19 Central Air Conditioner and Heat Pu mp Average Repair Costs by Efficiency Level and Region

Efficiency

Level Average Repair Costs for Representative StandardCompliant Products 2008$SplitsystemAC (CoilOnly) Splitsystem AC

(BlowerCoil) Splitsystem HP Single Package AC Single Package HP National Average Level 1 69 68 68 69 71 Level 2 71 70 70 73 73 Level 3 73 72 72 75 76 Level 4 76 75 74 79 80 Level 5 79 76 76 82 84 Level 6 82 78 77 86 88 Level 7 87 80 80 91 92 Level 8 92 82 83 98 97 Level 9 NA 84 87 NA NA Level 10 NA 88 92 NA NA Level 11 NA 92 94 NA NA Level 12 NA 97 NA NA NA Level 13 NA 102 NA NA NA Level 14 NA 107 NA NA NA

8-33

### Table 8.2.19 (contd)

Efficiency

Level Average Repair Costs for Representative StandardCompliant Products 2008$SplitsystemAC (CoilOnly) Splitsystem AC

(BlowerCoil) Splitsystem HP Single Package AC Single Package HP Hot-Humid Region Level 1 68 68 68 68 71 Level 2 70 70 70 72 73 Level 3 72 72 72 74 76 Level 4 75 74 74 78 80 Level 5 78 76 75 81 83 Level 6 81 78 77 85 87 Level 7 86 80 79 90 92 Level 8 91 82 83 97 97 Level 9 NA 83 87 NA NA Level 10 NA 88 92 NA NA Level 11 NA 92 94 NA NA Level 12 NA 97 NA NA NA Level 13 NA 102 NA NA NA Level 14 NA 107 NA NA NA Hot-Dry Region Level 1 71 71 71 71 74 Level 2 73 73 73 75 77 Level 3 76 76 75 78 79 Level 4 78 78 77 82 84 Level 5 81 80 79 85 87 Level 6 85 82 81 89 91 Level 7 90 83 83 94 96 Level 8 95 85 87 101 102 Level 9 NA 87 91 NA NA Level 10 NA 92 96 NA NA Level 11 NA 96 98 NA NA Level 12 NA 101 NA NA NA Level 13 NA 106 NA NA NA Level 14 NA 112 NA NA NA Rest of Country Level 1 69 69 69 69 72 Level 2 71 71 71 73 74 Level 3 73 73 73 75 77 Level 4 76 75 75 79 81 Level 5 79 77 76 82 84 Level 6 82 79 78 86 88 Level 7 87 81 80 91 93 Level 8 92 82 84 98 98 Level 9 NA 84 88 NA NA Level 10 NA 89 93 NA NA Level 11 NA 93 95 NA NA Level 12 NA 98 NA NA NA Level 13 NA 103 NA NA NA Level 14 NA 108 NA NA NA

8-34

### 8.2.3.4 Maintenance Cost



### The maintenance cost is the routine annua l cost to the consumer of maintaining equipment operation. The maintenance cost excludes the cost associated with the replacement or repair of components that have fa iled (discussed in section 8.2.3.3). It is the cost associated with general maintenance ( e.g ., checking and maintaining refrigerant charge levels, cleaning heat exchanger coils).

Virtually no published data are available on annual maintenance cost per unit. DOE estimated the annualized maintenance costs for CAC products based on fragmentary data available on the internet. The cost of the basic preventative maintenance for an individual CAC unit his specified as range of values from $20 per year (2008$) for minimal maintenance (homeowner replaces the unit’s air filter two times per year) to an advertised full maintenance service at $120 (2008$) per year. 20 

### The full maintenance service involved the following activities:

For the Indoor Component:

• 

### Inspect refrigerant lines for signs of leakage

• 

### Check and maintain standard air filters

• 

### Check operating temperatures

• 

### Check blower/air handler operati on and lubricate as necessary

• 

### Check blower belt and tension

• 

### Check condensate drain and maintain as necessary

• 

### Check operational controls and thermostat

For the Outdoor Component:

• 

### Inspect refrigerant lines for signs of leakage

• 

### Inspect and clean condenser coil as necessary

• 

### Check condenser fan operation and lubricate as necessary

• 

### Check operation and condition of the compressor contactor

• 

### Check system voltage

• 

### Check operating temperatures

Data were not available to indicate how maintenance costs vary with equipment efficiency, but stakeholder comments on the Framework Document indicated that they likely increase as equipment efficiency increases. DOE decided to use preventative maintenance costs that increase as equipment efficiency increases. The costs were also expected to vary regionally with labor costs. Installation costs vary in the same geographic pattern, so average national costs were multiplied times the installation cost index.

EQP M STD 

### = M Base 

### • STD 

### • ( ic

r 

### ) Eq. 8.2.7 EQP BASE

8-35

### Where:

M STD 

### = repair cost at a standard efficiency level (e.g., level 2, 3, etc.) M BASE 

### = repair cost at the base efficiency level (level 1) EQP STD 

### = equipment price (consumer price for only the equipment) at a standard level, EQP BASE 

### = equipment price (consumer price for only the equipment) at the base efficiency level, ic r 

### = installation cost index in region r (factor relative to national average).

Table 8.2.20 Central Air Conditioner and Heat Pump Basic Average Maintenance Costs by Efficiency Level

Efficiency

Level Maintenance Cost for Representative Standard-Compliant Products 2008$SplitSystem AC(CoilOnly) SplitSystem AC(BlowerCoil) SplitSystem HP Single Package AC Single Package HP Level 1 70.00 70.00 70.00 70.00 70.00 Level 2 72.16 72.22 72.13 74.03 72.13 Level 3 74.44 74.43 74.37 76.78 74.86 Level 4 77.11 76.79 76.09 80.75 78.77 Level 5 80.11 78.54 77.74 84.01 82.22 Level 6 83.76 80.34 79.55 88.10 86.23 Level 7 88.41 82.20 81.86 92.93 90.97 Level 8 93.76 84.11 85.83 99.77 95.71 Level 9 NA 86.10 90.06 NA NA Level 10 NA 90.31 94.61 NA NA Level 11 NA 94.80 97.07 NA NA Level 12 NA 99.62 NA NA NA Level 13 NA 104.80 NA NA NA Level 14 NA 110.36 NA NA NA Level 15 NA NA NA NA NA Level 16 NA NA NA NA NA


### Because labor rates and sales taxes vary ac ross the country and maintenance costs also vary for any given efficiency level for each product type, Table 8.2.21 shows the average repair costs by region of the country and product type for the largest product classes.

8-36

### Table 8.2.21 Central Air Conditioner and Heat Pump Basic Average Maintenance Costs by Efficiency Level

Efficiency

Level Average Maintenance Costs fo r Representative StandardCompliant Products 2008$SplitsystemAC (CoilOnly) Splitsystem AC

(BlowerCoil) Splitsystem HP Single Package AC Single Package HP National Average Level 1 75 75 75 75 75 Level 2 77 77 77 79 77 Level 3 80 80 80 82 80 Level 4 83 82 82 86 84 Level 5 86 84 83 90 88 Level 6 90 86 85 94 92 Level 7 95 88 88 100 97 Level 8 100 90 92 107 103 Level 9 NA 92 96 NA NA Level 10 NA 97 101 NA NA Level 11 NA 102 104 NA NA Level 12 NA 107 NA NA NA Level 13 NA 112 NA NA NA Level 14 NA 118 NA NA NA Hot-Humid Region Level 1 48 48 48 48 48 Level 2 50 50 50 51 50 Level 3 51 51 51 53 52 Level 4 53 53 52 56 54 Level 5 55 54 54 58 57 Level 6 58 55 55 61 59 Level 7 61 57 56 64 63 Level 8 65 58 59 69 66 Level 9 NA 59 62 NA NA Level 10 NA 62 65 NA NA Level 11 NA 65 67 NA NA Level 12 NA 69 NA NA NA Level 13 NA 72 NA NA NA Level 14 NA 76 NA NA NA Hot-Dry Region Level 1 93 93 93 93 93 Level 2 96 96 96 98 96 Level 3 99 99 99 102 99 Level 4 102 102 101 107 105 Level 5 106 104 103 112 109 Level 6 111 107 106 117 115 Level 7 117 109 109 123 121 Level 8 125 112 114 133 127 Level 9 NA 114 120 NA NA Level 10 NA 120 126 NA NA Level 11 NA 126 129 NA NA Level 12 NA 132 NA NA NA Level 13 NA 139 NA NA NA Level 14 NA 147 NA NA NA

8-37

### Table 8.2.21 (contd)

Efficiency

Level Average Maintenance Costs fo r Representative StandardCompliant Products 2008$SplitsystemAC (CoilOnly) Splitsystem AC

(BlowerCoil) Splitsystem HP Single Package AC Single Package HP Rest of Country Level 1 85 85 85 85 85 Level 2 88 88 88 90 88 Level 3 91 91 91 94 91 Level 4 94 94 93 98 96 Level 5 98 96 95 102 100 Level 6 102 98 97 107 105 Level 7 108 100 100 113 111 Level 8 114 103 105 122 117 Level 9 NA 105 110 NA NA Level 10 NA 110 115 NA NA Level 11 NA 116 118 NA NA Level 12 NA 121 NA NA NA Level 13 NA 128 NA NA NA Level 14 NA 135 NA NA NA



### 8.2.3.5 Lifetime



### DOE defined lifetime as the age when a CAC unit is retired from service. DOE used national survey data, along with manufacturer shipment data, to cal culate the distribution of air conditioner and heat pump lifetimes. This analysis concluded that the mean lifetime for central air conditioners is 19.01 years and the mean lifetime for heat pumps is 16.24 years.

EIA’s RECS 21 

### surveys occupied primary housing units and notes the presence of a range of appliances, and places the age of each applia nce into several-year bins. The U.S. Census’s American Housing Survey (AHS) 22 

### surveys all housing, including vacant and second homes, and allowed DOE to adjust the RECS data to re flect some appliance use outside of primary residences. AHS also has a larger sample size, with correspondingly smaller sampling error. By combining these survey results with the known hi story of appliance shipments (collected from manufacturer trade associations) DOE estimated the fraction of appliances of a given age still in operation. This survival function, which DOE assumed has the form of a cumulative Weibull distribution, provides an estimate of the average and median appliance lifetime.

The Weibull distribution is a probability distribution function commonly used to measure failure rates. 23 

### Its form is similar to an exponentia l distribution, which would model a fixed failure rate, except that it allows for a failure rate which changes over time in a particular fashion. The cumulative distribution takes the form:

8-38β ⎛ x

− θ ⎞

− ⎜ ⎟ 

## P ( x ) = 

# e ⎝ α ⎠ 

### for x > θ and P(x) = 1 for x ≤ θ

, Eq. 8.2.8



### Where:

P(x) = probability that the appliance is still in use at age x , x

= appliance age,

α = the scale parameter, which is the decay length in an exponential distribution, β

= the shape parameter, which determines the way in which the failure rate changes in time, and θ

= the delay parameter, which allows for a delay before any failures occur.

When β = 1, the failure rate is constant over time, and this distribution takes the form of a cumulative exponential distribution. For the case of appliances, β is commonly greater than 1, which results from a rising failure rate as the appliance ages. A plot of a Weibull distribution (DOE’s calculated air conditioner survival function) with α = 20.29, β = 1.89, and θ = 1.0 is shown Figure 8.2.5.

The RECS survey is DOE’s primary resource for air conditioner and heat pump ages. For several appliances, including air conditioners, the survey asks respondents to place the appliance’s age into one of these bins:

• 

### Less than 2 years,

• 

### 2 to 4 years,

• 

### 5 to 9 years,

• 

### 10 to19 years, and

• 

### Over 20 years.

The RECS survey has been conducted every th ree or four years for the last several decades. For this analysis, DOE used the surveys conducted in 1990, 1993, 1997, 2001, and 2005. The AHS Survey is conducted every other year, and DOE used the surveys conducted from 1991 to 2007. DOE used the AHS count of hous ing units with air conditioners to scale the RECS data to better ma tch the total installed stock. DOE used the surveys’ household-level micro-data to count households with shared or multiple ai r conditioners or heat pumps. Households which did not know the age of their appliance were allocated among the remaining age bins according to the distribution of re spondents who did report their appliance age.

DOE used RECS appliance age data, AHS tota l installed stock data , and the history of appliance shipments to generate an estimate of the survival function. For example, DOE summed the total shipments from 5 to 9 years prior to the RECS survey, and compared this number with the number of units of those ages still in use, to calculate one approximation of the surviving appliance fraction within that age bin. The AHS total stock acts as an “all ages” bin. By combining the age bins from five RECS surveys and 9 AHS surveys with shipments data, DOE had enough data to build a fit to a Wei bull distribution and find the parameters ( α , β

, θ ) that best approximate the surviving units, using a least-squares method. Because the first two (youngest) RECS bin data tend to have a large scatter relative to the shipments in those years, DOE combined the RECS and shipments data in the fi rst two bins. Generally, appliances do not tend

8-39

### to fail in large numbers during this period, so combining bins does not appreciably lower the accuracy of the shape of the distribution. DOE weighted each bin’s contribution to the sum of squares by the inverse of the variance in the survey results, which controls for the changes in sample size between RECS bi ns, between RECS and AHS, and within each survey over time. 24 

### RECS and AHS have complicated error models; DOE used only the error due to finite sample size to determine the variance used to weight ea ch data point’s contribu tion. The error due to sampling is less than one percent for AHS survey data, and typically about five percent for RECS age bins. The equation for the sum of squares DOE minimized is therefore

2 2 

# ( RECS

− Surv 

# ) 

# ( AHS j 

### − Surv j 

# ) ∑ i i 

### + 

# ∑ Eq. 8.2.9

i 

### σ 2 

### σ 2 i , RECS j j , AHS



### Where:

i = the identifier for a bin from a single RECS, j = the identifier for a single AHS survey RECS i 

### = the number of appliances reported by RECS in bin i
, AHS j 

### = the number of appliances reported by AHS in survey year j
, Surv i 

### = the number of surviving appliances in bin i predicted by the Weibull distribution applied to the num ber of appliances shipped (a function of α , β , and θ ), and

σ

i,RECS 

### = the standard error (square root of the variance) of the RECS data point for bin i.

σ

j,AHS 

### = the standard error (square root of the variance) of the AHS data point for
year j.

DOE adjusted the RECS and AHS survey data in several ways to place it on an even footing with the historical shipment data. In particular, DOE adjusted for the fact that the RECS survey is scaled to July of its reference year and the AHS survey is conducted in the middle portion of the year, while shipment data is provided for each calendar year. Adjustments included:

• 

### DOE modeled the additional retirement of olde r appliances and their replacement by new ones which took place in the latter half of the survey year (after a given respondent had been surveyed), using the survival function. This had the effect of moving households from the older RECS age bins to the youngest age bin.

• 

### For appliances installed directly in new construction, such as central air conditioners, DOE added units to the youngest RECS age bi n and to the AHS total stock to represent half of the new construction for the final year of the survey known to have installed the appliance type in question, us ing data from the U.S. Census.

• 

### DOE assumed that 93 percent of appliances were installed in residences, and 7 percent in commercial or other applications not counted by AHS or RECS.

• 

### Households that shared an air conditioner were counted as owning half of one air conditioner, and households w ho reported owning more than one air conditioner were counted as owning two. (For AHS surveys before 1997, the number of air conditioners

8-40

### was not reported; DOE assumed a linear increase with time in the fraction of homes with 2 air-conditioning units.)

Assumptions



### DOE’s lifetime-calculation technique depends on several assumptions:

• 

### Appliance lifetime can be modeled by a survival function. In particular, a Weibull distribution is an appropr iate survival function.

• 

### The appliance survival function does not change over time.

• 

### The survival function is independent of othe r household factors (such as household size, region, etc.) as well as product class (w ithin air conditioners or heat pumps).

• 

### The age bin for the appliance as reporte d by the RECS respondent is correct.

• 

### The historical shipment data is correct.

• 

### The Weibull delay parameter, θ , is limited to between 1 and 5 years.

Three of these assumptions are of particular importance. The first is the assumption that a Weibull distribution is the correct distribution to use for appliance retirement rates. This distribution is the standard distri bution for use in lifetime analysis, but it is not guaranteed to reflect actual consumer behavior. The second assumption is that c onsumer behavior and mechanical appliance lifetime have not changed over time. This assumption required DOE to treat all data from different RECS surveys on an equal footing. Using only recent surveys (to potentially better reflect recent consumer behavior and appliance lifetime) would result in attempted least-squares fits using a small number of data points, leading to large statistical uncertainty.

DOE limited the delay parameter to between one and five years to reflect the range of common appliance warranties. A delay of less than one would imply that so me appliances fail or are replaced within their initial year of use, when they are commonly covered by parts and labor warranties. A delay of greater than five implies that no appliances are replaced for some length of time after the end of the longest standard warranty. Fits with θ > 5 also commonly show nonsensical behavior with sharp changes in consumer behavior or appliance survival immediately following the “delay” period.

Central Air Conditioners



### Table 8.2.22 shows the RECS and AHS data for air conditioners and the corresponding total shipments and best-fit Weibull calculation of stock by age bin. Figure 8.2.3 plots the data from the RECS portion of the third and fourth columns of Table 8.2.22 against each other to show the quality of the fit. Figure 8.2.4 plots the AHS survey total stock against the Weibullbased calculated stock. DOE a llowed the delay parameter, θ , to vary only between one and five years, which corresponds to common warrant y periods (see discussion below); for air conditioners and heat pumps the best fit within this range is 1 year. This Weibull distribution is characterized by the parameters α = 20.29, β = 1.89, and θ = 1.0, and shown in Figure 8.2.5. This distribution has a mean air conditioner lifetim e of 19.01 years and a median lifetime of 17.70 years.

8-41

### Table 8.2.22 

### Central Air Conditioners: Comparison of RECS and AHS with Modeled Stock

Age bin RECS 2005 Shipments RECS Stock Modeled Stock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 23,384,298 20,606,096 26,252,849 29,643,170 21,121,201 15,568,739 15,840,393

6,611,168 23,202,596 18,628,161 16,908,120

5,434,630

Age bin RECS 2001 Shipments RECS Stock Modeled Stock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 20,833,446 15,707,082 20,982,218 23,056,758 16,179,828 14,511,234 14,367,204

5,583,734 20,669,235 14,252,361 13,670,285

4,771,136

Age bin RECS 1997 Shipments RECS Stock Modeled Stock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 16,822,938 12,555,897 16,825,109 17,112,973 12,213,941 12,441,915 10,799,049

4,046,096 16,697,701 11,311,053 10,843,901

4,137,030

Age bin RECS 1993 Shipments RECS Stock Modeled stock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 12,781,848 10,579,559 14,275,598 11,535,301 11,450,065 9,198,439 9,410,523 3,727,973 12,671,267 9,572,156 8,960,434 3,257,844

Age bin RECS 1990 Shipments RECS Stock Modeled Stock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 11,836,478 7,930,531 15,067,767

6,644,873 10,544,271 7,343,580 10,136,090

3,025,410 11,745,800 7,200,298 9,435,899 1,897,721

Survey year AMERICAN HOUSING SURVEY Adjusted AHS Stock Modeled Stock 2007 2005 2003 2001 1999 1997 1995 1993 1991 66,850,067 63,023,984 56,640,747 54,080,318 48,189,582 41,173,857 38,446,053 35,072,816 32,893,755 67,116,846 64,173,507 58,293,705 53,363,017 48,428,026 42,989,684 38,517,301 31,793,586 31,733,007

8-42Calculated number of households with AC by bin 25000000

20000000

15000000

10000000

5000000

0 Age bins ideal

0 5000000 10000000 15000000 20000000 25000000 RECS reported number of households with AC by bin



### Figure 8.2.3 Comparison of DOE Modeled Ai r Conditioner Age Dist ribution with RECS Reported Stock

70,000,000

60,000,000

AHS surveys
idealCalculated CAC Stock 50,000,000

40,000,000

30,000,000

20,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 Adjusted American Housing Survey CAC Stock



### Figure 8.2.4 Comparison of DOE Modeled To tal Air Conditioner St ock with Adjusted AHS Stock

8-4317.70 19.01

0.0 0.2 0.4 0.6 0.8 1.0 1.2Fraction surviving Survival function Median lifetime Mean lifetime

0 1 0 2 0 3 0 4 0 5 0 Age (years)


### Figure 8.2.5 Central AC Survival Function, Characterized by Weibull Parameters 

### α = 20.29, 

### β = 1.89, and 

### θ = 1.0.



### Heat Pumps



### DOE undertook a very similar calculation for heat pumps as it did for central air conditioners. The only difference between the h eat pump and central air conditioner analyses was in the number of AHS survey years included. DOE found that when the heat pump stock analysis was done with AHS-reported stock from all nine AHS surveys between 1991 and 2007 with manufacturer-reported shipme nts history, an assumed uncha nging heat pump lifetime, and an assumed 95 percent to five percent residential/commercial market split, the results were inconsistent. In the interest of timeliness and consistency, DOE chose to use only the most recent four surveys (2001, 2003, 2005, and 2007). Using only the most recent four AHS surveys, DOE was able to develop a consistent survival func tion. Figure 8.2.6 shows the AHS survey results plotted against the modeled stoc k, and shows the contrast betw een earlier and more recent data.

The best-fit Weibull parameters for heat pump lifetime are α = 17.04, β = 1.64, and θ = 1.0. The resulting calculated mean heat pump lifetime is 16.24 years; the median lifetime is 14.63 years. Table 8.2.23 lists the (adjusted) heat pumps reported in each of the RECS age bins and AHS survey year along with the modeled stock based on the best fit Weibull survival function and the manufacturer-pr ovided shipments history. Figure 8.2.7 shows the survival function used in the life-cycle cost and national impact analyses.

8-44

### Table 8.2.23 Heat Pumps: Comparison of RECS and AHS Stock to Stoc k Calculated from a Weibull Survival Function

Age Bin RECS 2005 Shipments RECS Dtock Modeled Dtock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 7,656,050 5,437,867 7,609,488 5,421,606 5,903,720 4,186,956 4,167,868 1,172,137 7,531,948 4,545,002 3,947,892

947,223

Age Bin RECS 2001 Shipments RECS Stock Modeled Stock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 5,693,105 4,318,866 6,413,059 3,320,977 4,564,988 3,641,519 3,191,956 1,273,838 5,593,500 3,626,504 3,383,920

622,144

Age Bin RECS 1997 Shipments RECS Stock Modeled Stock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 4,615,287 3,500,621 5,271,716 1,671,785 4,550,375 3,871,200 3,828,288

575,473 4,536,486 2,914,225 2,852,397

319,727

Age Bin RECS 1993 Shipments RECS Stock Modeled Stock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 3,582,387 3,514,244 3,308,542

822,935 3,847,273 3,043,034 2,425,988

523,705 3,515,747 2,938,354 1,803,756

139,039

Age Bin RECS 1990 Shipments RECS Stock Modeled Stock 0 to 4 yrs. 5 to 9 yrs. 10 to 19 yrs. 20 or more yrs. 3,637,163 2,494,052 2,327,546

600,009 2,929,208 3,030,644 1,846,344

168,614 3,565,942 2,112,769 1,356,527

111,330

Survey year AMERICAN HOUSING SURVEY Adjusted AHS Stock Modeled Stock 2007 2005 2003 2001 1999 1997 1995 1993 1991 16,718,490 16,130,513 14,318,151 13,653,239 13,331,680 13,658,054 11,460,574 10,412,946 9,349,377 18,037,674 16,123,461 14,017,726 12,564,764 11,290,213 10,091,692

8,980,076 7,977,051 7,165,773

8-45Modeled stock of heat pumps 20,000,000

15,000,000

10,000,000

5,000,000

0 Recent AHS surveys Older AHS surveys
ideal

0 5,000,000 10,000,000 15,000,000 20,000,000 AHS reported stock of heat pumps



### Figure 8.2.6 Comparison of DOE Modeled Tota l Heat Pump Stock with Adjusted AHS Stock

14.63
16.24

0.0 0.2 0.4 0.6 0.8 1.0 1.2Fraction surviving Survival function Median lifetime Mean lifetime

0 5 10 15 20 25 30 35 40 45 50 Age (years)



### Figure 8.2.7 Heat Pump Survival Function, Characterized by Weibull Parameters α = 17.04, β = 1.64, and θ = 1.0.

8-46

### 8.2.3.6 Discount Rate



### The discount rate is the rate at which future expenditures are discounted to establish their present value. DOE derived the discount rates fo r the LCC analysis by estimating the cost of capital for individuals and companies that purchase CAC products.

In the case of individual households, the financing of purchasing products installed in new homes is different than the financing of app liances bought directly by consumers (i.e., as a replacement for a failed unit or as a new purchase for an existing household that does not already own the appliance). Thus, DOE used different di scount rates for these residential purchases.

Residential Discount Rates for Product s Purchased in Existing Households



### Households use various methods to finan ce the purchase of major appliances. In principle, one could estimate the interest rates on the actual financing vehicles used to purchase appliances. However, the frequency with which eac h financing vehicle is used to purchase an appliance is unknown.

DOE’s approach involved identifying all possible debt or asset classes that might be used to purchase the considered appliances, including household assets that might be affected indirectly. c 

### DOE excluded debt from primary mortgage s and the equity of assets considered non-liquid (such as retirement accounts), because those financing methods are unlikely to be used by households in existing housing to pur chase appliances. DOE estimated the average percentage shares of the various types of debt and equity in the average U.S. household using data from the Federal Reserve Board’s Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 2007. 25 

### Table 8.2.24 shows the average percentages of each considered type of debt or equity. DOE derived the mean percentages of each source of financing for the seven years surveyed.

An indirect effect would arise if a household sold assets in order to pay off a loan or credit card debt that might have been used to finance the appliance purchase.

8-47 c

### Table 8.2.24 Types of Household Debt and Equity by Percentage Shares

Debt or Equity Distribution %

1989 1992 1995 1998 2001 2004 2007 Mean Home equity loan 4.3 4.5 2.7 2.8 2.8 4.4 4.6 3.7
Credit card 1.6 2.1 2.6 2.2 1.7 2.0 2.4 2.1
Other installment loan 2.8 1.7 1.4 1.7 1.1 1.3 1.1 1.6
Other residential loan 4.4 6.9 5.2 4.3 3.1 5.8 7.1 5.3
Other line of credit 1.1 0.6 0.4 0.2 0.3 0.5 0.3 0.5 Checking account 5.8 4.7 4.9 3.9 3.6 4.2 3.4 4.4 Savings or money market account 19.2 18.8 14.0 12.8 14.2 15.1 13.0 15.3 Certificate of deposit 14.5 11.7 9.4 7.0 5.4 5.9 6.5 8.6 Savings bond 2.2 1.7 2.2 1.1 1.2 0.9 0.7 1.4
Bonds 13.8 12.3 10.5 7.0 7.9 8.4 6.7 9.5
Stocks 22.4 24.0 25.9 36.9 37.5 28.0 28.6 29.0
Mutual funds 8.0 11.1 20.9 20.1 21.3 23.4 25.5 18.6
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 2007.


### DOE also estimated interest or return rates associated with each type of equity and debt. The source for interest rates for loans, credit ca rds, and lines of credit was the Federal Reserve Board’s SCF for 1989, 1992, 1995, 1998, 2001, 2004, and 2007. Table 8.2.25 shows the average nominal rates in each year and the inflation factors used to calculate real rates. DOE calculated effective interest rates for home equity loans in a similar manner as for mortgage rates, because interest on both such loans is tax deductible. Tabl e 8.2.26 shows the average effective real rates in each year and the mean rate across years. Becau se the interest rates for each type of household debt reflect economic conditions throughout numerous years, they are expected to be representative of rates that may be in effect in 2016.

Table 8.2.25 Average Nominal Interest Rates for Household Debt

Debt Average Nominal Interest Rate %
1989 1992 1995 1998 2001 2004 2007 Mean Home equity loan 11.5 9.6 9.6 9.8 8.7 5.7 6.3 7.9
Credit card*

- - 14.2 14.5 14.2 11.7 7.9 9.0
Other installment loan 9.0 7.8 9.3 7.8 8.7 7.4 12.6 13.4
Other residential loan 8.8 7.6 7.7 7.7 7.5 6.0 10.4 8.6
Other line of credit 14.8 12.7 12.4 11.9 14.7 8.8 6.3 7.4
Inflation rate 4.82 3.01 2.83 1.56 2.85 2.66 2.85 Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 2007. * No data on interest rates available for credit cards in 1989 or 1992.

8-48

### Table 8.2.26 Average Real Effective Interest Rates for Household Debt

Debt Average Real Effective Interest Rate %
1989 1992 1995 1998 2001 2004 2007 Mean Home equity loan 3.8 4.3 4.4 5.8 3.8 1.9 2.1 3.0
Credit card*

- - 11.0 12.7 11.1 9.1 3.3 3.9
Other installment loan 4.9 5.8 7.0 6.6 6.1 5.4 9.7 10.7
Other residential loan 4.0 4.7 4.8 6.0 4.6 3.3 5.8 6.0
Other line of credit 9.6 9.4 9.3 10.2 7.3 6.0 3.4 4.4
Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 2007. * No data on interest rates available for credit cards in 1989 or 1992.



### No similar rate data are available from the SCF for classes of assets , so the Department derived that information from national historical data. The interest rates associated with certificates of deposit, 26 

### savings bonds, 27 

### and bonds (AAA corporate bonds) 28 

### were collected from Federal Reserve Board time-series data for 1977–2008. DOE assumed rates on checking accounts to be zero. Rates on savings and money market accounts came from Cost of Savings Index data covering 1984–2008. 29 

### The rates for stocks are the a nnual returns on the Standard and Poor’s 500 for 1977–2008. 30 

### Rates for mutual funds are a weighted average of the stock rates (two-thirds weight) and the bond rates (one-t hird weight) in each year for 1977–2008. DOE adjusted the nominal rates to real rates using the annual inflation rate for each year. Average nominal and real interest rates for the classes of household assets are listed in Table 8.2.27. Because the interest and return rates for each type of asset reflect economic conditions throughout numerous years, they are expected to be representative of rates that may be in effect in 2016.

Table 8.2.27 Average Nominal and Real Interest Rates for Household Equity

Type of Equity Average Nominal Rate % Average Real Rate % Checking account

- 0.0 Savings and money market accounts 5.4 2.2 Certificate of deposit 6.6 2.3 Savings bond 7.7 3.3
Bonds 8.5 4.1
Stocks 11.6 7.1
Mutual funds 10.3 5.8



### Table 8.2.28 summarizes the mean real effectiv e rates of each type of equity or debt. DOE determined the average percentage of each type of debt and asset using SCF data for 1989, 1992, 1995, 1998, 2001, 2004, and 2007. Each year of SCF data provides the percents of debts and assets for U.S. households. DOE averaged those percentages for the seven years of survey data to arrive at the percenta ges shown in Table 8.2.28. The average rate across all types of household debt and equity, weighted by the pe rcentages of each type, is 4.8 percent.

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### Table 8.2.28 Average Interest on Household Debt and Equity

Type of Debt or Equity Average Percentage of Household Debt plus Equity* Mean Effective Real Rate % ** Home equity loan 3.7 3.9
Credit card 2.1 10.7
Other installment loan 1.6 6.0
Other residential loan 5.3 4.4
Other line of credit 0.5 8.8 Checking account 4.4 0.0 Savings and money market account 15.3 2.2 Certificate of deposit 8.6 2.3 Savings bond 1.4 3.3
Bonds 9.5 4.1
Stocks 29.0 7.1
Mutual funds 18.6 5.8 Total/weighted-average discount rate 100.0 4.8
* Not including primary mortgage or retirement accounts. ** Adjusted for inflation and, for home equity loans, tax deduction of interest.



### DOE developed a normal probability distribution of interest rates for each asset type by using the mean value and standard deviation from the distribution. To account for variation among households, DOE sampled a rate for each household from the distributions for the appropriate asset cl ass. Appendix 8-E presents the probab ility distributions for each class that DOE used in the LCC and PBP analyses.

Residential Discount Ra tes for Products Installed in New Housing



### Appliances installed in new homes (“new-housin g appliances”) are purchased as part of the home, which is almost always financed with a mortgage loan. DOE estimated discount rates for new-housing appliances using the effective real (after-inflation) mortgage rate for homebuyers. This rate corresponds to the interest rate after deduction of mortgage interest for income tax purposes and after adjusting fo r inflation (using the Fisher formula). d 

### For example, a six-percent nominal mortgage rate has an effective nominal rate of 4.5 percent for a household at the 25-percent marginal tax rate. When adjusted for inflation of two percent, the effective real rate becomes 2.45 percent.

The data source DOE used for mortgage interest rates is the SCF in 1989, 1992, 1995, 1998, 2001, 2004, and 2007. Using the appropriate SCF data for each year, DOE adjusted the mortgage interest rate for each relevant household in the SCF for mortgage tax deduction and inflation (see Table 8.2.29). In cases where the effective interest rate is equal to or below the inflation rate (resulting in a negative real interest rate), DOE set the real effective interest rate to

zero.

d Fisher formula is given by: Real Interest Rate = [(1 + Nominal Interest Rate) / (1 + Inflation Rate)] – 1.

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### The average nominal mortgage rate carried by homeowners in these six years was 7.9 percent. Since the mortgage rates carried by households in these ye ars were established over a range of time, DOE believes they are representative of rates that may apply when amended standards take effect. After adjusting for inflation and interest tax deduction, effective real interest rates on mortgages across the six surveys averaged 3.0 percent.

Table 8.2.29 Data Used to Calculat e Real Effective Mortgage Rates

Year Mortgage Interest Rates in Selected Years %

Average Nominal Interest Rate Inflation Rate 58 Marginal Tax Rate Applicable to Mortgage Interest 59 Average Real Effective Interest Rate
1989 9.7 4.82 24.3 2.4
1992 9.1 3.01 23.4 3.8
1995 8.2 2.83 24.1 3.3
1998 7.9 1.56 23.9 4.4
2001 7.6 2.85 22.9 2.9
2004 6.2 2.66 20.6 2.2
2007 6.3 2.85 21.6 2.1 Average 7.9 3.0



### To account for variation among households, DOE sampled a rate for each household in the RECS samples from a distribution of mortgage rates. DOE developed the distribution based on the SCF data. Appendix 8-E presents the probability distribution that DOE used in the LCC and PBP analyses.

Commercial Discount Rate



### The commercial discount rate for central air conditioners is estimated using cost of capital data for firms that might occupy or rent out office space in small office buildings. DOE estimated the cost of equity using the capital asset pricing model (CAPM). The CAPM assumes that the cost of equity (k e 

### ) for a particular company is proportional to the systematic risk faced by that company, where high risk is associated with a high cost of equity and low risk is associated with a low cost of equity. The systematic risk facing a firm is determined by several variables: the risk coefficient of the firm ( β ), the expected return on risk free assets (R f 

### ), and the equity risk premium (ERP). The risk coefficient of the firm indicates the risk associated with that firm relative to the price variability in the stock market. The expected return on risk-free assets is defined by the yield on long-term government bonds. The ERP represents the difference between the expected stock market return and the risk-free rate.

Described below, we estimate the cost of equity for each sector with the CAPM model as follows:

k

e 

### = R f 

### + ( β 

### • ERP) Eq. 8.2.10

Where:



### k

e 

### = the cost of equity,

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### R f 

### = the expected return of the risk-free asset (long term treasury bonds), 

### β = the beta of the sector, and 

### E R P is the expected equity risk premium.



### From data available on β for individual U.S. commercial companies, estimated market ERP from Damodaran Online 31 

### and long term treasury bond rates for R f 

### from the Economic Report of the President 32 

### , we calculate the cost of equity k e 

### for each firm.

The cost of debt financing ( k d 

### ) is the interest rate paid on money borrowed by a company. The cost of debt is estimated by adding a risk adjustment factor ( R a 

### ) to the risk-free rate.

k 

### = R 

### + R


### ,

d f a



### Where:

k

d 

### = the cost of debt fi nancing for each firm, R

f 

### = the expected return on risk-free assets, and R

a 

### = is the risk adjustment factor to risk-free rate for each firm.

The risk adjustment factor depends on the variability of stock returns represented by standard deviations in stock pr ices and was taken from Damodaran Online weighted average cost of capital worksheets for 2001-2008.

Finally, as inflation has already been accounted for in both the cost of debt and the cost of equity, the real weighted average cost of capital WACC r 

### (real discount rate) is calculated as follows:

WACC r 

### = 

### k e 

### • w e 

### + k d 

### • w d 

### Eq. 8.2.11

Where:



### k

e 

### = the cost of equity,



### w

e 

### = the percent of equity financing,
k d 

### = the cost of debt, and

w

d 

### = the percent of debt financing.

The discount rate is estimated for each firm for 2009. The two sources of cost of capital data that are used in our calculations are individual company data from Damodaran Online’s Data Page. DOE used Damodaran Online data fro m the SIC categories with Standard Industrial Classification (SIC) 6000-9975, with the exception of Hotels and Gaming (SIC code 7000). Broadly speaking, this includes all of the commercial subsectors that could occupy small offices that might use a residential-sized central air conditioner. The sample includes 1750 companies with usable data. It includes both large and small companies, since it is not clear that small offices would be occupied or owned by an entit y that was also a small business. The weighted average cost of capital for this sample of U.S. companies was 7.56 percent. Nominal rates for individual firms varied from 2.58 percent to 14.10 percent, which were fitted to a normal distribution truncated at 0 to prevent negative rate s. The standard deviation of the statistical

8-52

### sample was 1.54 percent. Adjusted for the long-term expected inflation rate of 1.8 percent rate from the January, 2009 Economic Report of the Pres ident, the discount rate was 5.66 percent, which is used as the average re al discount rate for central air conditioners purchased for small offices.

8.2.3.7 Effective Date of Standard



### The effective date is the future date when a new standard becomes operative. Pursuant to 42 U.S.C. 6295(m), the effective date of any new energy efficiency standard for CAC equipment will be 5 years after the final ru le is published. DOE calculated the LCC for all customers as if they each would purchase a new air conditioner or heat pump in the year the standard takes effect. Consistent with its published regulatory agenda, DOE assumed that the final rule would be issued in 2011 and that, therefore, the new st andards would take effect in 2016 and used these dates in the NOPR analyses. It based the cost of the equipment on this year; however, all dollar values are expressed in 2008$. Annual energy pric es are included for the life of the central air conditioner or heat pump.

8.2.3.8 Base Case Distribution of Efficiency Levels



### The market mix of efficiency levels in 2008 is shown in Table 8.2.30 for the four largest product classes, the development of which is discussed in chapter 7. This same distribution is assumed to prevail in 2016 in the absence of an energy conservation standard above 13 SEER. The three smaller product classes (Confined Spac e A/C, Confined Space heat Pump, and SmallDiameter High Velocity A/C units) currently have not been analyzed.

Table 8.2.30 2008 Market Distribution of Efficiency Levels by Product Class

Bin Bottom of Bin Top of Bin Assumed Average SEER in Bin Split-System AC % SplitSystem HP % Single Package AC % Single Package

HP %CoilOnly BlowerCoil 1 13 13.25 13.0 24.37% 24.00 50.00 75.00 50.00 2 13.25 13.75 13.5 55.84% 55.00 32.00 20.00 32.00 3 13.75 14.25 14.0 4.06% 4.00 11.00 2.00 11.00 4 14.25 14.75 14.5 5.33% 5.25 5.00 2.00 5.00 5 14.75 15.25 15.0 3.30% 3.25 2.00 1.00 2.00
6 15.25 15.75 15.5 2.03% 2.00 NA NA NA
7 15.75 16.5 16.0 3.55% 3.50 NA NA NA 8 16.5 17.5 17.0 * 1.52% 1.50 NA NA NA 9 17.5 18.5 18.0 NA 0.70 NA NA NA 10 18.5 19.5 19.0 NA 0.30 NA NA NA 11 19.5 20.5 20.0 NA 0.20 NA NA NA 12 20.5 21.5 21.0 NA 0.20 NA NA NA 13 21.5 22.5 22.0 NA 0.10 NA NA NA 14 22.5 23.5 23.0 NA NA NA NA NA 15 23.5 24.5 24.0 NA NA NA NA NA 16 24.5 25.5 25.0 NA NA NA NA NA * The selected corresponding efficiency level for this bin is 16.5 for coil-only split system air conditioners

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### 8.3 PAYBACK PERIOD INPUTS

8.3.1 Definition



### The payback period is the amount of time it ta kes the customer to recover the assumed higher purchase cost of more energy-efficient equipment as a result of lower operating costs. Numerically, the PBP is the ratio of the increase in purchase cost ( i.e ., from a less efficient design to a more efficient design) to the decreas e in annual operating expend itures. This type of calculation is known as a “simple” payback period , because it does not take into account changes in operating cost over time or the time value of money—that is, the calculation is done at an effective discount rate of 0 percent.

The equation for PBP is:

PBP = ∆ 

### IC/ ∆ O 

### C Eq. 8.3.1

Where:

PBC = payback period in years, ∆ IC = difference in the total installed cost between the more efficient standard level equipment (efficiency levels 2,3, etc.) and the baseline efficiency equipment, and ∆ OC = difference in first year annual operating costs.

Payback periods are expressed in years. Payback periods greater than the life of the equipment mean that the increased total installed cost of the more efficient equipment is not recovered fast enough in reduced operating costs.

DOE also calculates a rebuttable payback period, which is the time it takes the consumer to recover the assumed higher purchase cost of more energy-efficient equipment as a result of lower energy costs. Numerically, the rebuttable PBP is the ratio of the increase in purchase cost ( i.e ., from a less efficient design to a more effici ent design) to the decrease in annual energy expenditures; that is, the difference in first year annual energy cost. The calculation excludes repair costs and maintenance costs. This type of calculation also is a “simple” payback period.

8.3.2 Inputs



### The data inputs to PBP are the total installed cost of the equipment to the customer for each efficiency level and the annual (first year) operating costs for each efficiency level. The inputs to the total installed cost are the equipm ent price and the installation cost. The inputs to the operating costs are the annual energy cost, th e annual repair cost, a nd the annual maintenance cost (or in the case of rebuttable PBP, only the annual energy cost). The PBP uses the same inputs as the LCC analysis described in section 8.2, except that electri city price trends and discount rates are not required. Since the PBP is a “simple” (undiscounted ) payback, the required electricity cost is only for the year in which a new efficient standard is to take effect—in this case, the year 2016. The el ectricity price used in the PBP cal culation was the price projected for 2016, expressed in 2008$. Discount rates ar e not used in the PBP calculation.

8-54

### 8.4 SEER AND HSPF RESULTS



### This section presents the LCC and PBP results for residential CACs and CHPs that are used in residential and commercial (small office) applications. As discussed in Section 8.1.1, DOE’s approach for conducting the LCC and PB P analysis relied on de veloping samples of households that use each of the products. DOE also characterized the uncertainty of many of the inputs to the analysis with probability dist ributions. DOE used a Monte Carlo simulation technique to perform the LCC a nd PBP calculations on the households in the sample. For each set of sample households using th e equipment in each product cla ss, DOE calculated the average LCC and LCC savings and the median and average PBP for each of the efficiency levels. These efficiency levels are also referred to as candidate standard levels (CSLs).

DOE calculated LCC savings and PBPs relative to the market baseline equipment that it assigned to the households and commercial consumers. DOE assigned market baseline equipment that is more efficient than some of the CSLs. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specific CSL and the LCC of the market baseline equipment.

LCC and PBP calculations were performed 10,000 times on the sample of households established for each residential product. Each LCC and PBP calculation was performed on a single household that was selected from the sample of the reside ntial observations or alternatively, from one of the commercial build ings commercial building using the CAC or CHP equipment. The first sampling conducted was based on the probability of whether the given observation was a residential or a commercial application. The probability of a residential observation was 93 percent, while that of a co mmercial observation was 7 percent. If the observation was residential, then the selection of a household was based on its weight (i.e., how representative a particular househol d is of other households in th e distribution-either regionally or nationally) in the Energy Information Admi nistration’s 2005 Residential Energy Consumption Survey Public Use Sample, as described in TSD chapter 7. Each LCC and PBP calculation also sampled from the probability distributions that DOE developed to characterize many of the inputs to the analysis. For the commercial a pplications, DOE sample d from commercial small office building simulations using weights repres entative of 526 combinations of TMY weather file and State. . The weights assigned were population weights assigned to each combination as described in chapter 7. The LCC and PBP calcu lations were performed 10,000 times by sampling observations from the total of the Residiential and Commercial samples (reflecting the relative residential and commercial sales weights) and using the probability distributions that DOE developed to characterize many of the inputs.

Based on the Monte Carlo simulations that DOE performed, for each standard-level, DOE calculated the share of households and commer cial consumers receiving a net LCC benefit, with a net LCC cost, and with no impact. DOE considered a household or commercial user to receive no impact at a given if DOE assigned it base case equipment that is the same as or has higher efficiency than the CSL.

8-55

### 8.4.1 Split-system Air Conditioners



### This section presents summary LCC results for the efficiency improvement levelsspecified in the engineering analysis (Chapter 5) and also presented in Section 8.2.2.2, StandardLevel Manufacturer Price Increases. The results presented here are based on annual operating costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance costs developed for each individua l observation. Section 8.2 presen ts the electrici ty price inputs as well as all other LCC inputs.

To provide perspective on the LCC and PBP results, Table 8.4.1 and Table 8.4.4 present the average values for market baseline installed cost of split-system air conditioners for coil-only and blower-coil options, their average energy cons umption at market baseli ne and the percentage changes in these values at the efficiency improvement levels.

Table 8.4.1 Mean Market Baseline Installed Co sts, Total Annual Energy Consumption, and Percentage Change for Split-System Air Conditioners (Coil-Only) by Region by Efficiency Level (SEER Value)

Efficiency

Level (SEER) Nation Hot-Humid Hot-Dry Rest of Country Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Market Baseline 2,647 2,291 2,400 3,393 3,056 2,071 2,626 1,310 Percentage Change from Market Baseline 13.5 (1.8) 1.4 (1.9) 1.3 (1.8) 1.4 (1.8) 1.6 14 0.9 (2.1) 0.9 (2.2) 0.9 (2.0) 0.9 (1.7) 14.5 4.1 (5.4) 4.3 (5.5) 4.0 (5.3) 4.0 (5.0) 15 7.7 (8.5) 8.1 (8.6) 7.4 (8.4) 7.5 (8.1) 15.5 12.0 (11.4) 12.6 (11.5) 11.7 (11.3) 11.7 (11.0) 16 17.6 (14.1) 18.5 (14.3) 17.0 (14.1) 17.1 (13.7) 16.5 24.0 (16.6) 25.2 (16.8) 23.3 (16.5) 23.3 (16.1) *Values in parentheses denote negative values.



### Table 8.4.2 Mean Market Baseline Installed Co sts, Total Annual Energy Consumption, and Percentage Change for Sp lit-System Air Conditioners (B lower-Coil) by Region by Efficiency Level (SEER Value)

Efficiency

Level (SEER) Nation Hot-Humid Hot-Dry Rest of Country Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Market Baseline 4,128 2,315 3,671 3,410 4,782 2,067 4,125 1,302 Percentage Change from Market Baseline 13.5 (0.9) 1.4 (0.9) 1.3 (0.8) 1.4 (0.8) 1.3 14 1.0 (2.1) 1.1 (2.2) 1.0 (2.0) 1.0 (2.0) 14.5 3.0 (5.4) 3.2 (5.5) 2.9 (5.3) 2.9 (5.3) 15 4.5 (8.5) 4.8 (8.6) 4.3 (8.4) 4.3 (8.4) 15.5 6.0 (11.4) 6.4 (11.5) 5.8 (11.3) 5.8 (11.3) 16 7.5 (14.1) 8.1 (14.2) 7.3 (14.1) 7.3 (14.0) 16.5 9.2 (16.6) 9.8 (16.7) 8.8 (16.5) 8.8 (16.3) 17 10.8 (18.9) 11.6 (19.1) 10.5 (18.8) 10.5 (18.5)

8-5618 14.4 (23.1) 15.4 (23.4) 13.9 (23.0) 13.9 (22.6) 19 18.2 (26.9) 19.5 (27.2) 17.5 (26.7) 17.5 (26.3) 20 22.2 (30.3) 23.8 (30.7) 21.5 (30.2) 21.5 (29.6) 21 26.6 (33.4) 28.5 (33.8) 25.7 (33.2) 25.7 (32.6) 22 31.3 (36.3) 33.5 (36.7) 30.2 (36.1) 30.2 (35.3) *Values in parentheses denote negative values.


### As stated earlier, DOE used the Monte Carlo method of analysis relying on Crystal Ball (i.e., random sampling from distributions) to c onduct the LCC analysis. The results presented here are based on 10,000 samples per Monte Carlo run. DOE’s fi rst step in developing LCC results was to establish the market baseline LCC for each of the product classes. The market baseline efficiency level for the preliminary analysis is the market-weighted efficiency level in each region. These distributions are shown in Figure 8.4.1 for coil-only split-system AC units and in Figure 8.4.2 for blower-coil AC units.

National Standard Hot-Humid

Hot-Dry Rest of Country Figure 8.4.1 Market Baseline Distributions of LCC for Split-Sys tem Air Conditioners (Coil-Only) by Region

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### Nation Hot-Humid

Hot-Dry Rest of Country Figure 8.4.2 Market Baseline Distributions of LCC for Split-Sys tem Air Conditioners (Blower-Coil) by Region

8.4.1.1 Mean LCC Savings for Split-syste m Air Conditioners by Region



### Because the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single point-value. Thus, DOE also represents the LCC results as a distribution of values. Before proceeding with the presentation of the distribution of LCC results, DOE presents average values for LCC savings to show how these savings vary with efficiency for each of the split-system CAC produc t classes and by region. Table 8.4.3 presents results for coil-only improvements. LCC savings are positive at the national level standards up to SEER 13.5, and in the Hot-Humid and Hot- Dry regions up to SEER 15 and SEER 14.5, respectively. No SEER level beyond SEER 13 pr oduces LCC savings for a coil-only standard in the rest of the country. Table 8.4.4 shows that LCC savings are positive at national level blowercoil standards up to SEER 13.5, but in the Hot-Humid and Hot-Dry regions savings are positive up to SEER 19 and SEER 18, respectively. No SEER level beyond SEER 13 produces LCC savings for a blower-coil standard in the rest of the country.

Table 8.4.3 Mean LCC Savings for Split-System Air Co nditioners (Coil-only) by Region by Efficiency Level (SEER Value) Efficiency LCC by Region 2008$ Level SEER Nation Hot-Humid Hot-Dry Rest of Country 2 13.5 4 11 8 (15)

8-583 14 (1) 36 20 (75) 4 14.5 (29) 39 4 (157) 5 15 (83) 19 (40) (265) 6 15.5 (180) (39) (134) (414) 7 16 (341) (154) (300) (624) 8 16.5 (565) (324) (537) (902) *Values in parentheses denote negative savings



### . Table 8.4.4 Mean LCC Savings fo r Split-System Air Conditi oners (Blower-Coil) by Region by Efficiency Level (SEER Value) Efficiency Level SEER LCC by Region 2008$ Nation Hot-Humid Hot-Dry Rest of Country 2 13.5 2 11 7 (16) 3 14 0 38 24 (73) 4 14.5 (15) 53 27 (140) 5 15 (5) 90 56 (183) 6 15.5 (5) 118 74 (234) 7 16 (14) 137 81 (291) 8 16.5 (36) 142 73 (361) 9 17 (68) 137 54 (437) 10 18 (159) 100 (19) (611) 11 19 (285) 28 (133) (810) 12 20 (443) (77) (287) (1,036) 13 21 (634) (214) (480) (1,288) 14 22 (859) (384) (713) (1,568) *Values in parentheses denote negative savings.


### It is worth reiterating that the results show n in Table 8.4.3 and Table 8.4.4 are mean values and do not show the distributions of savings. Thus, although observations can be made as to how the various inputs impact life-cycle cost and, in turn, how the resulting life-cycle costs change with efficiency, conclusions should only be drawn from the distribution of life-cycle cost results that are presented in Figure 8.4.3 and Fi gure 8.4.4. Section 8.4.1.3 provides information on the percentages of consumers in each region at each efficiency level that would experience LCC savings benefits, LCC cost increases, and no impact from the standard.

8-59-1500 -1000 -500

0 500 1000 1500 2000Life-cycle Cost Savings($)

2 3 Mean

4 5 Median

6 7 8 -1500 -1000 -500

0 500 1000 1500 2000Life-cycle Cost Savings($)

Mean Median `

Efficiency Level National 2 3 4 5 Efficiency Level 6 7 8 Hot-Humid

-2000 -1500 -1000 -500

0 500 1000 1500 2000Life-cycle Cost Savings($)

Mean Median `

-2000 -1500 -1000 -500

0 500 1000 1500 2000Life-cycle Cost Savings($)

Mean Median

2 3 Efficiency Level 4 5 6 7 Hot-Dry 8 2 3 Efficiency Level 4 5 6 Rest-of-Country 7 8


### Figure 8.4.3 Plots of the Distributions of L CC Savings for Split-Sys tem Air Conditioners (Coil-Only) by Region

-2500 -2000 -1500 -1000 -500

0 500 1000 1500 2000Life‐cycleCostSavings($)

2 3 4 5 Mean

6 7 8 9 Efficiency Level Median `

10 11 12 13 14 National -2000 -1500 -1000 -500

0 500 1000 1500 2000Life‐cycleCostSavings($)

2 3 4 5 Mean

6 7 8 9 Efficiency Level Median `

10 11 12 13 14 Hot

‐ Humid

-2000 -1500 -1000 -500

0 500 1000 1500 2000Life‐cycleCostSavings($)

Mean Median `

-2000 -1500 -1000 -500

0 500 1000 1500 2000Life‐cycleCostSavings($)

Mean Median

2 3 4 5 6 Efficiency Level 7 8 9 10 11 12 13 Hot

‐ Dry

14 2 3 4 5 6 Efficiency Level 7 8 9 10 11 12 Rest-of-Country 13 14


### Figure 8.4.4 Plots of the Distributions of L CC Savings for Split-system Air Conditioners (Blower-Coil) by Region

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### 8.4.1.2 Mean PBP Results for Split-syste m Air Conditioners by Region



### This section presents PBP results for the efficiency improvement levels specified in the engineering analysis (Chapter 5) and also pr esented in section 8.2.2.2, Standard-Level Manufacturer Price Increases. The results pres ented here are based on annual operating costs calculated from residential and commercial electricity tariffs. Section 8.3 describes the PBP inputs.

Similar to LCC, the analysis provides an estimate of the simple payback period at different ranges of energy prices , sales taxes, and inst allation costs that prevail across the country for each efficiency level and each building (build ing) type. Table 8.4.5 and Table 8.4.6 show the effect on payback period as the level of efficiency changes from the market baseline for CAC products in residential and commerc ial buildings for each region’s energy prices, sales taxes, and installation costs.

Similar to the LCC differences, DOE estimated PBP results as a distribution of values. The means of these distributions are shown in Table 8.4.5 and Ta ble 8.4.6 and the distributions of values for PBP are shown in Figure 8.4.5 and Figure 8.4.6. Mean rebuttable PBP for each region and efficiency level is shown in Table 8. 4.7 and Table 8.4.8. In addition, DOE provides data on the median PBP for each efficiency level in each region in section 8.4.1.3.

Table 8.4.5 Mean Payback Period for Split-System Air Cond itioners (Coil-Only) by Region Efficiency Level SEER Payback Period by Region years Nation Hot-Humid Hot-Dry Rest of Country 2 13.5 48.6 27.3 47.6 75.9 3 14 53.5 30.2 50.1 80.8 4 14.5 57.0 33.8 53.5 84.1 5 15 61.0 38.2 57.2 87.3 6 15.5 66.0 44.0 61.8 90.8 7 16 71.6 51.6 67.2 94.1 8 16.5 76.8 59.7 72.0 96.5


### Table 8.4.6 Mean Payback Period for Split-sys tem Air Conditioners (Blower-Coil) by Region Efficiency Level SEER Payback Period by Region years Nation Hot-Humid Hot-Dry Rest of Country 2 13.5 48.8 26.3 46.6 75.3 3 14 50.8 27.9 48.0 77.8 4 14.5 52.1 29.0 49.0 79.2 5 15 49.4 26.7 46.3 76.5 6 15.5 49.0 26.3 45.6 76.1 7 16 49.4 26.8 45.8 76.6 8 16.5 51.5 28.6 48.0 78.4 9 17 53.3 30.2 49.7 80.2 10 18 56.9 33.7 53.0 83.5 11 19 60.2 37.3 55.9 86.5 12 20 63.3 41.0 58.6 89.0 13 21 66.3 44.7 61.3 91.2 14 22 69.1 48.4 63.9 93.1

8-61

### Table 8.4.7 Mean Rebuttable Payback Period for Split-System Air Conditioners (CoilOnly) by Region

Efficiency Level SEER Payback Period by Region
years Nation Hot-Humid Hot-Dry Rest of Country 2 13.5 14.3 8.9 14.5 23.4 3 14 16.5 9.8 15.9 25.6 4 14.5 18.1 10.8 17.3 27.5 5 15 19.9 11.9 19.1 30.2 6 15.5 22.4 13.5 21.4 33.6 7 16 25.7 15.7 24.4 38.0 8 16.5 29.5 18.4 28.0 43.1


### Table 8.4.8 Mean Rebuttable Payback Period fo r Split-system Air Co nditioners (BlowerCoil) by Region

Efficiency Level SEER Payback Period by Region
years Nation Hot-Humid Hot-Dry Rest of Country 2 13.5 16.3 10.0 16.2 26.7 3 14 17.6 10.3 16.9 27.6 4 14.5 18.3 10.8 17.5 28.4 5 15 17.3 10.3 16.6 27.1 6 15.5 17.3 10.2 16.5 26.9 7 16 17.6 10.4 16.8 27.4 8 16.5 18.3 10.8 17.5 28.4 9 17 18.9 11.2 18.1 29.3 10 18 20.5 12.2 19.6 31.4 11 19 22.1 13.2 21.2 33.7 12 20 23.7 14.3 22.8 36.0 13 21 25.4 15.5 24.5 38.5 14 22 27.2 16.7 26.2 41.0

8-6240 60 80

40 60 80 120 120

100 100

80

Mean Median National

2 3 4 5 6 7 8 Efficiency Level Mean Median Hot

‐ Humid 2 3 4 5 6 7 8 Efficiency LevelPaybackPeriod(years)PaybackPeriod(years)PaybackPeriod(years)PaybackPeriod(years)

60

40

20 20

0 0

120 120

100 100

Mean Median Hot

‐ Dry

2 3 4 5 6 7 8 Efficiency Level Mean Median `

Rest

‐ of

‐ Country 2 3 4 5 6 7 8 Efficiency Level 80

60

40

20 20

0 0



### Figure 8.4.5 Plots of the Distributions of PBP for Split-system Ai r Conditioners (CoilOnly) by Region

0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14 Efficiency LevelPaybackPeriod(years)

Mean Median National 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14 Efficiency LevelPaybackPeriod(years)

Mean Median Hot

‐ Humid

0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14 Efficiency LevelPaybackPeriod(years)

Mean Median Hot

‐ Dry 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 12 13 14 Efficiency LevelPaybackPeriod(years)

Mean Median `

Rest

‐ of

‐ Country 

### Figure 8.4.6 Plots of the Distributions of PB P for Split-system Air Conditioners (BlowerCoil) by Region

8-63

### 8.4.1.3 Detailed Regional Results for Split-system Air Conditioners



### This section provides data on the detailed results for split-system CAC life-cycle cost, the components of life-cycle cost, life-cycle cost savi ngs, and payback period. Table 8.4.9 through Table 8.4.16 present these details separately fo r coil-only CAC units and blower-coil CAC units, and for each region by efficiency level

Nation

Table 8.4.9 National LCC and PBP Results for Split-System Air Conditioners (CoilOnly) by Efficiency Level (SEER Value): Nation

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008 $ Average Savings

2008$ Percent of Households with

Median Average Net Cost No Impact Net Benefit Market Baseline 2,647 418 7,915

- - - - - - 13.5 2,598 418 7,875 4 16 76 8 27.8 48.6 14 2,670 414 7,881 (1) 56 20 24 41.9 53.5 14.5 2,755 410 7,916 (29) 62 16 22 59.4 57.0 15 2,850 408 7,977 (83) 69 10 20 100.0 61.0 15.5 2,965 408 8,084 (180) 75 7 17 100.0 66.0 16 3,112 411 8,255 (341) 81 5 14 100.0 71.6 16.5 3,282 416 8,478 (565) 87 2 11 100.0 76.8 *Values in parentheses denote negative values.


### Table 8.4.10 LCC and PBP Results for Split-Sys tem Air Conditioners (Blower-Coil) by Efficiency Level (SEER Value): Nation

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008 $ Average Savings

2008$ Percent of Households with

Median Average Net Cost No Impact Net Benefit Market Baseline 4,128 418 9,382

- - - - - - 13.5 4,092 420 9,366 2 16 76 8 27.4 48.8 14 4,169 415 9,370 0 55 21 24 33.3 50.8 14.5 4,251 410 9,389 (15) 60 17 23 36.2 52.1 15 4,312 405 9,378 (5) 62 12 26 29.9 49.4 15.5 4,374 400 9,378 (5) 64 9 28 29.0 49.0 16 4,439 396 9,388 (14) 66 7 28 29.6 49.4 16.5 4,506 393 9,411 (36) 70 3 27 34.8 51.5 17 4,575 390 9,444 (68) 71 3 26 39.9 53.3 18 4,721 387 9,537 (159) 74 1 24 56.4 56.9 19 4,878 385 9,664 (285) 77 1 22 84.1 60.2 20 5,045 385 9,823 (443) 80 1 19 100.0 63.3 21 5,226 387 10,015 (634) 83 0 17 100.0 66.3 22 5,419 390 10,239 (859) 84 0 15 100.0 69.1 *Values in parentheses denote negative values.

8-64

### Hot-Humid Region

Table 8.4.11 LCC and PBP Results for Split-S ystem Air Conditioners (Coil-Only) by Efficiency Level (SEER Va lue): Hot-Humid Region

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 2,400 456 8,157 ­ - - - - -

13.5 2,354 458 8,139 11 12 76 12 9.9 27.3
14 2,423 450 8,107 36 41 20 39 11.6 30.2
14.5 2,503 444 8,103 39 49 16 36 14.3 33.8
15 2,594 439 8,126 19 57 10 33 17.5 38.2
15.5 2,704 436 8,189 (39) 64 7 29 23.1 44.0
16 2,845 435 8,313 (154) 72 5 23 34.5 51.6
16.5 3,006 437 8,484 (324) 80 2 18 63.5 59.7 *Values in parentheses denote negative values.


### Table 8.4.12 LCC and PBP Results for Split-Sys tem Air Conditioners (Blower-Coil) by Efficiency Level (SEER Va lue): Hot-Humid Region

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 3,671 457 9,428

- - - - - -

13.5 3,637 459 9,428 11 12 76 12 11.7 26.3
14 3,710 451 9,395 38 41 21 38 12.8 27.9
14.5 3,789 444 9,377 53 46 17 37 11.7 29.0
15 3,847 437 9,336 90 46 12 42 11.5 26.7
15.5 3,906 430 9,306 118 48 9 44 11.7 26.3
16 3,968 424 9,287 137 49 7 44 12.6 26.8
16.5 4,031 419 9,281 142 53 3 44 13.5 28.6
17 4,098 414 9,286 137 55 3 42 15.5 30.2
18 4,237 407 9,324 100 60 1 38 17.9 33.7
19 4,386 401 9,396 28 65 1 35 20.9 37.3
20 4,546 397 9,501 (77) 69 1 31 24.7 41.0
21 4,718 395 9,639 (214) 72 0 27 29.7 44.7
22 4,902 395 9,809 (384) 76 0 24 11.7 48.4 *Values in parentheses denote negati 

### ve values.

8-65

### Hot-Dry Region

Table 8.4.13 LCC and PBP Results for Split-S ystem Air Conditioners (Coil-Only) by Efficiency Level (SEER Value): Hot-Dry Region

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 3,056 490 9,205 ­ - - - - -

13.5 3,001 491 9,167 8 15 76 9 22.3 47.6
14 3,082 484 9,153 20 52 20 28 28.4 50.1
14.5 3,177 479 9,172 4 58 16 27 42.6 53.5
15 3,283 475 9,224 (40) 64 10 25 64.3 57.2
15.5 3,412 473 9,327 (134) 71 7 22 100.0 61.8
16 3,577 475 9,504 (300) 77 5 18 100.0 67.2
16.5 3,767 479 9,741 (537) 84 2 15 100.0 72.0 *Values in parentheses denote negative values.


### Table 8.4.14 LCC and PBP Results for Split-Sys tem Air Conditioners (Blower-Coil) by Efficiency Level (SEER Value): Hot-Dry Region

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 4,782 491 10,967

- - - - - -

13.5 4,742 494 10,964 7 15 76 9 21.5 46.6
14 4,828 486 10,943 24 51 21 28 24.3 48.0
14.5 4,920 479 10,941 27 55 17 28 28.2 49.0
15 4,988 471 10,907 56 57 12 31 24.2 46.3
15.5 5,058 465 10,887 74 59 9 33 23.3 45.6
16 5,130 459 10,879 81 61 7 33 23.8 45.8
16.5 5,205 454 10,887 73 64 3 33 26.9 48.0
17 5,283 450 10,908 54 66 3 31 30.1 49.7
18 5,446 443 10,982 (19) 69 1 29 38.6 53.0
19 5,621 439 11,096 (133) 72 1 27 51.9 55.9
20 5,809 438 11,251 (287) 75 1 25 76.4 58.6
21 6,010 438 11,445 (480) 77 0 23 100.0 61.3
22 6,227 440 11,678 (713) 80 0 20 100.0 63.9 *Values in parentheses denote negative values.

8-66

### Rest of Country

Table 8.4.15 LCC and PBP Results for Split-S ystem Air Conditioners (Coil-Only) by Efficiency Level (SEER Va lue): Rest of Country

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 2,626 295 6,287 ­ - - - - -

13.5 2,579 294 6,230 (15) 22 76 2 100.0 75.9
14 2,649 295 6,304 (75) 75 20 5 100.0 80.8
14.5 2,730 297 6,403 (157) 80 16 4 100.0 84.1
15 2,822 299 6,524 (265) 87 10 3 100.0 87.3
15.5 2,933 304 6,687 (414) 91 7 2 100.0 90.8
16 3,075 311 6,912 (624) 94 5 1 100.0 94.1
16.5 3,239 320 7,184 (902) 98 2 1 100.0 96.5 *Values in parentheses denote negative values.


### Table 8.4.16 LCC and PBP Results for Split-Sys tem Air Conditioners (Blower-Coil) by Efficiency Level (SEER Va lue): Rest of Country

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 4,125 293 7,625

- - - - - -

13.5 4,090 292 7,731 (16) 22 76 2 100.0 75.3
14 4,164 292 7,813 (73) 73 21 6 100.0 77.8
14.5 4,244 293 7,892 (140) 78 17 5 100.0 79.2
15 4,302 292 7,939 (183) 81 12 7 100.0 76.5
15.5 4,362 292 7,990 (234) 84 9 7 100.0 76.1
16 4,425 293 8,048 (291) 86 7 7 100.0 76.6
16.5 4,489 293 8,120 (361) 90 3 7 100.0 78.4
17 4,556 295 8,197 (437) 91 3 6 100.0 80.2
18 4,697 298 8,373 (611) 94 1 4 100.0 83.5
19 4,848 303 8,572 (810) 96 1 3 100.0 86.5
20 5,010 308 8,799 (1,036) 97 1 3 100.0 89.0
21 5,183 315 9,053 (1,288) 98 0 2 100.0 91.2
22 5,370 323 9,333 (1,568) 98 0 1 100.0 93.1 *Values in parentheses denote negative values.

8-67

### 8.4.2 Split-System Heat Pumps



### This section presents LCC results for the efficiency improvement levels specified in the engineering analysis for split-system CHPs (Chapter 5) and also presented in Section 8.2.2.2, Standard-Level Manufacturer Price Increases. The results presented here are based on annual operating costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance costs developed for e ach individual observation. Secti on 8.2 presents the electricity price inputs as well as all other LCC inputs.

As stated earlier, the Monte Carlo method of analysis relying on Crystal Ball (i.e., random sampling from distributions) was used to conduct the LCC analysis. The following results presented here are base d on 10,000 samples per Monte Carlo run. DOE’s first step in developing LCC results was to establish the mark et baseline LCC for each of the product classes. The market baseline efficiency level for the preliminary analysis is the market-weighted efficiency level in each region. Figure 8.4.7 s hows the market baseline distribution of life-cycle costs for split-system heat pumps for each region.

To provide perspective on the LCC and PBP results, Table 8.4.17 presents the average values for market baseline installed cost of split-system heat pumps, their average energy consumption at market baseline and the percentage changes in these values at the efficiency improvement levels.

Table 8.4.17 Mean Market Baseline Installed Co sts, Total Annual Energy Consumption, and Percentage Change for Spli t-System Heat Pumps by Region by Efficiency Level (SEER Value)

Efficiency Level (SEER) Nation Hot-Humid Hot-Dry Rest of Country Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Market Baseline 3,682 4,954 3,387 5,236 4,239 4,828 3,634 4,719 Percentage Change from Market Baseline 13.5 (2.0) 2.5 (2.1) 2.6 (2.0) 2.7 (2.0) 2.2 14 0.5 (0.4) 0.5 (0.5) 0.5 (0.5) 0.5 (0.3) 14.5 2.4 (3.3) 2.5 (3.5) 2.3 (3.6) 2.4 (2.7) 15 4.3 (5.9) 4.4 (6.3) 4.2 (6.5) 4.2 (5.0) 15.5 6.3 (8.5) 6.6 (9.0) 6.1 (9.2) 6.2 (7.1) 16 8.9 (10.8) 9.3 (11.5) 8.7 (11.8) 8.7 (9.2) 17 13.4 (15.8) 13.9 (16.5) 13.0 (16.8) 13.1 (14.1) 18 18.2 (20.2) 18.8 (20.9) 17.7 (21.2) 17.8 (18.5) 19 23.3 (24.2) 24.2 (24.9) 22.6 (25.2) 22.8 (22.4) 19.5 26.1 (25.9) 27.0 (26.6) 25.3 (26.9) 25.5 (24.0) *Values in parentheses denote negative values.

8-68

### Nation Hot-Humid

Hot-Dry Rest of Country Figure 8.4.7 Market Baseline Distributions of LCC for Split-System Heat Pumps by Region

8.4.2.1 Mean LCC Savings for Split-Sys tem Heat Pumps by Region



### Because the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single point-value. Thus, DOE also represents the LCC results as a distribution of values. In Table 8. 4.18 DOE presents average values for LCC savings to show how these savings vary with efficiency for the split-system CH P product classes and by region. In contrast to the situation with sp lit-system CAC units, LCC savings for split-system CHPs are positive at the national level standards and in both hot regions up to the max tech level (SEER 19.5). Although SEER 14.5 appears to have positive LCC savings, this is probably a statistical anomaly. It is unlikely that any standard level above SEER13 produces LCC savings in the colder part of the country.

Table 8.4.18 Mean LCC Savings for Split-System Heat Pumps by Region by Efficiency Level (SEER Value and HSPF Value)

Efficiency Level SEER HSPF LCC Savings by Region 2008$

Nation HotHumid Hot-Dry Rest of Country 2 13.5 7.85 8 11 17 0 3 14 8 40 51 81 (10) 4 14.5 8.15 95 113 174 (1) 5 15 8.3 150 176 269 8

8-696 15.5 8.45 194 228 350 3 7 16 8.6 200 245 388 (36) 8 17 9.1 262 312 509 (44) 9 18 9.6 275 333 570 (94) 10 19 10.1 241 311 574 (185) 11 19.5 10.3 196 276 544 (259) *Values in parentheses denote negative values



### . It is worth reiterating that the results show n in Table 8.4.18 are mean values and do not show the distributions of savings. Thus, although observations can be made as to how the various inputs impact life-cycle cost and, in turn, how the resulting life-cycle costs change with efficiency, conclusions should only be drawn from the distribution of life-cycle cost results that are presented in Figure 8.4.8. Section 8.4. 2.3 provides information on the percentages of consumers in each region at each efficiency level that would experience LCC savings benefits, LCC cost increases, and no impact from the standard.

-1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 Efficiency LevelLife-cycle Cost Savings($)

Mean Median `

Hot-Humid -1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 Efficiency LevelLife-cycle Cost Savings($)

Mean Median `

National

-2000 -1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 Efficiency LevelLife-cycle Cost Savings($)

Mean Median `

Hot-Dry -2000 -1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 9 10 11 Efficiency LevelLife-cycle Cost Savings($)

Mean Median

Rest-of-Country 

### Figure 8.4.8 Plots of the Distributions of L CC Savings for Split-system Heat Pumps by Region

8.4.2.2 Mean PBP Results for Split-Sys tem Heat Pumps by Region



### This section presents PBP results for the efficiency improvement levels specified in the engineering analysis (Chapter 5) and also pr esented in section 8.2.2.2, Standard-Level Manufacturer Price Increases. The results pres ented here are based on annual operating costs calculated from residential and commercial electricity tariffs. Section 8.3 describes the PBP inputs.

Similar to LCC, the analysis provides an estimate of the simple payback period at different ranges of energy prices , sales taxes, and inst allation costs that prevail across the country

8-70

### for each efficiency level and each building ( building) type. Table 8.4.19 shows the effect on payback period as the level of efficiency changes from the market baseline for split-system CHP products in residential and commerc ial buildings for each region’s energy prices, sales taxes, and installation costs.

Similar to the LCC differences, DOE depicted PBP results as a distribution of values. The means of these distributions are shown in Table 8.4.19 and th e distributions of values for PBP are shown in Figure 8.4.9. Mean rebuttable PBP for each region and efficiency level is shown in Table 8.4.20. In addition, DOE provides data on the median PBP for each efficiency level in each region in section 8.4.2.3.

Table 8.4.19 Mean Payback Period for Split-S ystem Heat Pumps by Region (Years)

Efficiency Level SEER HSPF Payback Period by Region years

Nation HotHumid Hot-Dry Rest of Country 2 13.5 7.85 22.1 16.1 16.7 28.7 3 14 8 24.2 17.8 18.2 34.5 4 14.5 8.15 20.1 13.5 15.8 29.1 5 15 8.3 18.4 11.8 14.0 27.1 6 15.5 8.45 18.6 11.9 13.8 27.8 7 16 8.6 21.1 13.8 15.4 31.7 8 17 9.1 22.0 15.5 17.4 30.9 9 18 9.6 23.8 17.6 18.9 32.5 10 19 10.1 26.0 19.8 20.6 35.1 11 19.5 10.3 27.5 21.2 21.7 37.2 *Values in parentheses denote negative values.


### Table 8.4.20 Mean Rebuttable Payback Period fo r Split-System Heat Pumps by Region (Years)

Efficiency Level SEER HSPF Payback Period by Region years

Nation HotHumid Hot-Dry Rest of Country 2 13.5 7.85 9.5 7.7 8.3 11.3 3 14 8 10.2 8.5 9.0 12.6 4 14.5 8.15 7.9 6.8 6.6 10.2 5 15 8.3 7.5 6.4 6.2 9.6 6 15.5 8.45 7.6 6.5 6.2 9.8 7 16 8.6 8.3 7.2 6.8 10.7 8 17 9.1 8.6 7.6 7.3 10.6 9 18 9.6 9.2 8.2 7.9 11.1 10 19 10.1 9.9 8.8 8.6 11.9 11 19.5 10.3 10.4 9.3 9.1 12.4 *Values in parentheses denote negative values.

8-710 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 Efficiency LevelPayback Period (years)

Mean Median National 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 Efficiency LevelPayback Period (years)

Mean Median Hot-Humid

0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 Efficiency LevelPayback Period (years)

Mean Median Hot-Dry 0 20 40 60 80 100 120

2 3 4 5 6 7 8 9 10 11 Efficiency LevelPayback Period (years)

Mean Median `

Rest-of-Country 

### Figure 8.4.9 Plots of the Distributions of PBP for Split-System Heat Pumps by Region

8.4.2.3 Detailed Regional Results fo r Split-System Heat Pumps



### This section provides data on the detailed results for split-system CHP life-cycle cost, the components of life-cycle cost, life-cycle cost sa vings, and payback period. These details are shown separately by region and efficiency level. Table 8.4.21 through Table 8.4.24 present these details for each region by efficiency level.

Nation

Table 8.4.21 LCC and PBP Results for Split-Sys tem Heat Pumps by Efficiency Level (SEER Value): Nation

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 3,682 705 11,550

- - - - - -

13.5 3,607 716 11,601 8 6 87 7 8.0 22.1
14 3,700 703 11,551 40 32 35 33 9.0 24.2
14.5 3,771 690 11,477 95 33 25 42 7.8 20.1
15 3,840 679 11,409 150 36 16 48 7.6 18.4
15.5 3,915 668 11,361 194 39 11 50 7.9 18.6
16 4,011 659 11,354 200 46 7 47 9.1 21.1
17 4,176 639 11,289 262 48 4 48 9.3 22.0

8-7218 4,352 623 11,275 275 52 2 46 10.1 23.8
19 4,540 610 11,309 241 56 1 43 11.2 26.0
19.5 4,642 605 11,354 196 59 0 41 12.0 27.5 *Values in parentheses denote negative values.


### Hot-Humid Region

Table 8.4.22 LCC and PBP Results for Split-Sys tem Heat Pumps by Efficiency Level (SEER Value): Hot-Humid Region

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 3,387 647 10,636

- - - - - -

13.5 3,316 658 10,688 11 5 87 8 6.4 16.1
14 3,404 645 10,627 51 27 35 38 7.4 17.8
14.5 3,472 632 10,544 113 28 25 47 6.5 13.5
15 3,538 620 10,469 176 30 16 54 6.3 11.8
15.5 3,609 609 10,413 228 33 11 57 6.6 11.9
16 3,701 599 10,394 245 39 7 54 7.5 13.8
17 3,858 580 10,325 312 42 4 54 7.8 15.5
18 4,026 563 10,303 333 46 2 52 8.5 17.6
19 4,206 550 10,325 311 51 1 49 9.4 19.8
19.5 4,303 545 10,360 276 54 0 46 10.0 21.2 *Values in parentheses denote negative values



### . Hot-Dry Region

Table 8.4.23 LCC and PBP Results for Split-Sys tem Heat Pumps by Efficiency Level (SEER Value): Hot-Dry Region

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 4,239 842 13,642

- - - - - -

13.5 4,155 857 13,733 17 4 87 9 5.2 16.7
14 4,259 839 13,632 81 23 35 42 6.2 18.2
14.5 4,339 822 13,507 174 24 25 51 5.5 15.8
15 4,416 805 13,393 269 26 16 58 5.4 14.0
15.5 4,500 790 13,303 350 29 11 61 5.6 13.8
16 4,607 777 13,261 388 34 7 59 6.4 15.4

8-7317 4,791 750 13,135 509 37 4 59 6.7 17.4
18 4,988 727 13,071 570 42 2 56 7.4 18.9
19 5,199 709 13,067 574 46 1 53 8.3 20.6
19.5 5,313 702 13,097 544 49 0 51 8.8 21.7 *Values in parentheses denote negative values.


### Rest of Country

Table 8.4.24 LCC and PBP Results for Split-Sys tem Heat Pumps by Efficiency Level (SEER Value): Rest of Country

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 3,634 618 10,520

- - - - - -

13.5 3,561 624 10,514 0 8 87 5 12.0 28.7
14 3,651 618 10,530 (10) 44 35 21 15.2 34.5
14.5 3,719 611 10,517 (1) 46 25 29 12.7 29.1
15 3,786 604 10,507 8 50 16 34 12.0 27.1
15.5 3,858 599 10,512 3 55 11 34 12.6 27.8
16 3,951 594 10,554 (36) 63 7 30 15.0 31.7
17 4,110 582 10,562 (44) 63 4 33 13.9 30.9
18 4,279 572 10,613 (94) 66 2 32 14.7 32.5
19 4,461 564 10,704 (185) 71 1 29 16.3 35.1
19.5 4,560 562 10,778 (259) 74 0 26 17.8 37.2 *Values in parentheses denote negative values.



### 8.4.3 Single Package Air Conditioners



### This section presents LCC results for the efficiency improvement levels specified in the engineering analysis for single package CACs (Cha pter 5) and also presented in Section 8.2.2.2, Standard-Level Manufacturer Price Increases. The results presented here are based on annual operating costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance costs developed for e ach individual observation. Secti on 8.2 presents the electricity price inputs as well as all other LCC inputs.

As stated earlier, the Monte Carlo method of analysis relying on Crystal Ball (i.e., random sampling from distributions) was used to conduct the LCC analysis. The following results presented here are base d on 10,000 samples per Monte Carlo run. DOE’s first step in developing LCC results was to establish the mark et baseline LCC for each of the product classes. The market baseline efficiency level for the preliminary analysis is the market-weighted efficiency level. Figure 8.4.10 shows the market baseline distribution of LCC for single package CAC products in each region.

8-74

### To provide perspective on the LCC and PBP results, Table 8.4.25 presents the average values for market baseline installed cost of single package air conditioners, their average energy consumption at market baseline and the percentage changes in these values at the efficiency improvement levels.

Table 8.4.25 Mean Market Baseline Installed Co sts, Total Annual Energy Consumption, and Percentage Change for Sing le Package Air Conditioners by Region by Efficiency Level (SEER Value)

Efficiency Level (SEER) Nation Hot-Humid Hot-Dry Rest of Country Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Market Baseline 2,807 2,348 2,550 3,559 3,241 2,144 2,784 1,348 Percentage Change from Market Baseline 13.5 3.1 (2.4) 3.3 (2.4) 3.0 (2.4) 3.0 (2.3) 14 6.2 (5.7) 6.5 (5.8) 6.0 (5.7) 6.0 (5.5) 14.5 10.7 (8.9) 11.3 (9.0) 10.4 (8.9) 10.4 (8.7) 15 14.4 (11.9) 15.1 (12.0) 14.0 (11.8) 14.0 (11.7) 15.5 19.1 (14.7) 20.0 (14.8) 18.5 (14.6) 18.5 (14.4) 16 24.5 (17.3) 25.8 (17.4) 23.8 (17.3) 23.9 (17.1) 16.6 32.3 (20.1) 33.9 (20.3) 31.3 (20.0) 31.4 (19.8) *Values in parentheses denote negative values.



### Nation Hot-Humid

Hot-Dry Rest of Country

8-75

### Figure 8.4.10 Market Baseline Distributions of LCC for Single Pack age Air Conditioners by Region

8.4.3.1 Mean LCC Savings for Single Package Air Conditioners by Region



### Because the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single point-value. Thus, DOE also represents the LCC results as a distribution of values. In Table 8. 4.26 DOE presents average values for LCC savings to show how these savings vary with efficien cy for each of the single package CAC product classes and by region. The LCC savings for single package CACs are negative at the national level in all regions for a standard at any level beyond SEER 13.

Table 8.4.26 Mean LCC Savings for Single Pack age Air Conditioners by Region by Efficiency Level (SEER Value) Efficiency Level SEER LCC Savings by Region 2008$ Nation Hot-Humid Hot-Dry Rest of country 2 13.5 (68) (29) (57) (123) 3 14 (95) (17) (64) (214) 4 14.5 (195) (71) (155) (375) 5 15 (266) (101) (212) (504) 6 15.5 (391) (180) (332) (683) 7 16 (564) (303) (507) (907) 8 16.6 (842) (517) (799) (1,243) *Values in parentheses denote negative values.



### The results shown in Table 8.4.26 are mean va lues and do not show the distributions of savings. Thus, although observations can be made as to how the various inputs impact life-cycle cost and, in turn, how the resulting life-cycle co sts change with effici ency, conclusions should only be drawn from the distribution of life-cycle cost results that are presented in Figure 8.4.11. Section 8.4.3.3 provides information on the percen tages of consumers in each region at each efficiency level that would experience LCC savings benefits, LCC cost increases, and no impact from the standard.

8-76-1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 Efficiency LevelLife-cycle Cost Savings($)

Mean Median `

Hot-Humid -2000 -1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 Efficiency LevelLife-cycle Cost Savings($)

Mean Median

National

-2000 -1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 Efficiency LevelLife-cycle Cost Savings($)

Mean Median `

Hot-Dry -2000 -1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 Efficiency LevelLife-cycle Cost Savings($)

Mean Median

Rest-of-Country 

### Figure 8.4.11 Plots of the Distributions of LCC Savings for Single Package Air Conditioners by Region

8.4.3.2 Mean PBP Results for Single Package Air Conditioners by Region



### This section presents PBP results for the efficiency improvement levels specified in the engineering analysis (Chapter 5) and also pr esented in section 8.2.2.2, Standard-Level Manufacturer Price Increases. The results pres ented here are based on annual operating costs calculated from residential and commercial electricity tariffs. Section 8.3 describes the PBP inputs.

Similar to LCC, the analysis provides an estimate of the simple payback period at different ranges of energy prices , sales taxes, and inst allation costs that prevail across the country for each efficiency level and each building ( building) type. Table 8.4.27 shows the effect on payback period as the level of efficiency change s from the market baseline for CAC products in residential and commercial buildings for each region’s energy prices, sales taxes, and installation
costs.

Similar to the LCC differences, DOE estimated PBP results as a distribution of values. The means of these distributions are shown in Table 8.4.27 and th e distributions of values for PBP are shown in Figure 8.4.12. Mean rebuttabl e PBP is shown in Table 8.4.28. In addition, DOE provides data on the median PBP for each efficiency level in each region in section 8.4.3.3.

Table 8.4.27 Mean Payback Period for Single Package Air Conditioners by Region Efficiency Payback Period by Region years Level SEER Nation Hot-Humid Hot-Dry Rest of Country 2 13.5 70.6 49.2 65.0 93.7 3 14 64.3 41.7 59.0 89.6

8-7740 60 80 4 14.5 68.6 46.6 63.1 92.6 5 15 68.9 46.8 63.4 92.7 6 15.5 71.5 50.1 65.9 94.0 7 16 74.6 54.6 68.8 95.5 8 16.6 78.6 61.1 72.6 97.2


### Table 8.4.28 Mean Rebuttable Payback Period fo r Single Package Air Conditioners by Region Efficiency Payback Period by Region years Level SEER Nation Hot-Humid Hot-Dry Rest of Country 2 13.5 26.6 16.2 24.9 39.4 3 14 23.0 13.7 21.4 34.4 4 14.5 25.1 15.1 23.3 37.3 5 15 25.2 15.2 23.3 37.4 6 15.5 26.7 16.2 24.7 39.5 7 16 28.7 17.6 26.4 42.2 8 16.6 31.8 19.9 29.2 46.4

120 120

100 100Payback Period (years)

Mean Median National 2 3 4 5 6 7 8 Efficiency LevelPayback Period (years)

Mean Median Hot-Humid 2 3 4 5 6 7 8 Efficiency Level 80

60

40

20 20

0 0

0 20 40 60 80 100 120

2 3 4 5 6 7 8 Efficiency LevelPayback Period (years)

Mean Median Hot-Dry 0 20 40 60 80 100 120

2 3 4 5 6 7 8 Efficiency LevelPayback Period (years)

Mean Median `

Rest-of-Country 

### Figure 8.4.12 Plots of the Distributions of PB P for Single Package Air Conditioners by Region

8.4.3.3 Detailed Regional Results for Si ngle Package Air Conditioners



### This section provides data on the detailed results for single package CAC life-cycle cost, the components of life-cycle cost, life-cycle cost savings, and payback period. through Table 8.4.32 present these details separately for single package CAC units for each region by efficiency level.

8-78

### Nation

Table 8.4.29 LCC and PBP Results for Single Package Air Condition ers by Efficiency Level (SEER Value): Nation

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008 $ Average

Operating Cost 2008$ Average LCC 2008$ Average Savings

2008 $ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 2,807 419 8,087

- - - - - -

13.5 2,894 418 8,148 (68) 64 25 11 100.0 70.6
14 2,982 414 8,178 (95) 77 5 18 100.0 64.3
14.5 3,108 412 8,281 (195) 82 3 15 100.0 68.6
15 3,212 410 8,353 (266) 83 1 16 100.0 68.9
15.5 3,342 411 8,478 (391) 86 0 14 100.0 71.5
16 3,496 413 8,651 (564) 88 0 12 100.0 74.6
16.6 3,714 418 8,929 (842) 91 0 9 100.0 78.6 *Values in parentheses denote negative values.


### Hot-Humid Region

Table 8.4.30 LCC and PBP Results for Single Package Air Condition ers by Efficiency Level (SEER Value): Hot-Humid Region

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008$ Average Operating Cost 2008$ Average LCC 2008$ Average Savings

2008$ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 2,550 468 8,440

- - - - - -

13.5 2,633 464 8,468 (29) 56 25 19 30.0 49.2
14 2,717 457 8,455 (17) 63 5 32 20.4 41.7
14.5 2,837 452 8,511 (71) 71 3 26 26.5 46.6
15 2,936 447 8,540 (101) 72 1 27 27.1 46.8
15.5 3,061 444 8,620 (180) 76 0 24 32.6 50.1
16 3,207 443 8,743 (303) 80 0 20 42.2 54.6
16.6 3,415 444 8,957 (517) 85 0 15 69.5 61.1 *Values in parentheses denote negative values.


### Hot-Dry Region

Table 8.4.31 LCC and PBP Results for Single Package Air Condition ers by Efficiency Level (SEER Value): Hot-Dry Region Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years

8-79Average Installed Cost 2008$ Average Operating Cost 2008$ Average LCC 2008$ Average Savings

2008$ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 3,241 497 9,507

- - - - - -

13.5 3,339 494 9,562 (57) 60 25 15 100.0 65.0
14 3,437 488 9,568 (64) 71 5 24 85.9 59.0
14.5 3,578 485 9,661 (155) 76 3 21 100.0 63.1
15 3,694 481 9,719 (212) 78 1 21 100.0 63.4
15.5 3,840 479 9,839 (332) 81 0 19 100.0 65.9
16 4,012 480 10,014 (507) 84 0 16 100.0 68.8
16.6 4,256 485 10,305 (799) 87 0 13 100.0 72.6 *Values in parentheses denote negative values.


### Rest of Country

Table 8.4.32 LCC and PBP Results for Single Package Air Condition ers by Efficiency Level (SEER Value): Rest of Country

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008$ Average Operating Cost 2008$ Average LCC 2008$ Average Savings

2008$ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 2,784 294 6,424

- - - - - -

13.5 2,868 296 6,535 (123) 74 25 1 100.0 93.7
14 2,952 298 6,631 (214) 93 5 2 100.0 89.6
14.5 3,074 302 6,798 (375) 95 3 2 100.0 92.6
15 3,174 304 6,927 (504) 97 1 2 100.0 92.7
15.5 3,300 309 7,107 (683) 99 0 1 100.0 94.0
16 3,448 316 7,331 (907) 99 0 1 100.0 95.5
16.6 3,658 326 7,667 (1,243) 99 0 1 100.0 97.2 *Values in parentheses denote negative values.



### 8.4.4 Single Package Heat Pumps



### This section presents LCC results for the efficiency improvement levels specified in the engineering analysis for single package CHPs (Cha pter 5) and also presented in Section 8.2.2.2, Standard-Level Manufacturer Price Increases. The results presented here are based on annual operating costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance costs developed for e ach individual observation. Secti on 8.2 presents the electricity price inputs as well as all other LCC inputs.

As stated earlier, the Monte Carlo method of analysis relying on Crystal Ball (i.e., random sampling from distributions) was used to conduct the LCC analysis. The following results presented here are base d on 10,000 samples per Monte Carlo run. DOE’s first step in

8-80

### developing LCC results was to establish the mark et baseline LCC for each of the product classes. The market baseline efficiency level for the preliminary analysis is the market-weighted efficiency level in each region. Figure 8.4.13 sh ows the market baseline distribution of life-cycle costs for single package heat pumps for each region.

To provide perspective on the LCC and PBP results, Table 8.4.33 presents the average values for market baseline installed cost of single-package heat pumps, their average energy consumption at market baseline and the percentage changes in these values at the efficiency improvement levels.

Table 8.4.33 Mean Market Baseline Installed Co sts, Total Annual Energy Consumption, and Percentage Change for Single Package He at Pumps by Region by Efficiency Level (SEER Value)

Efficiency Level (SEER) Nation Hot-Humid Hot-Dry Rest of Country Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Installed Cost 2008$ Total Energy kWh Market Baseline 3,293 5,070 3,064 5,436 3,785 5,013 3,237 4,830 Percentage Change from Market Baseline 13.5 0.3 (0.8) 0.3 (0.8) 0.3 (0.9) 0.3 (0.7) 14 3.6 (3.7) 3.7 (3.9) 3.5 (4.0) 3.5 (3.1) 14.5 8.3 (5.8) 8.5 (6.4) 8.0 (6.6) 8.1 (4.4) 15 12.4 (7.8) 12.7 (8.7) 12.1 (9.1) 12.2 (5.6) 15.5 17.2 (11.6) 17.6 (12.2) 16.8 (12.5) 16.9 (10.1) 16 22.9 (15.1) 23.5 (15.4) 22.3 (15.6) 22.5 (14.1) 16.4 28.6 (16.4) 29.3 (16.9) 27.8 (17.2) 28.1 (14.9) *Values in parentheses denote negative values.

8-81

### Nation Hot-Humid

Hot-Dry Rest of Country Figure 8.4.13 Market Baseline Distributions of LCC for Single Package Heat Pumps by Region

8.4.4.1 Mean LCC Savings for Single Pa ckage Heat Pumps by Region



### Because the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single point-value. Thus, DOE also represents the LCC results as a distribution of values. In Table 8. 4.34 DOE presents average values for LCC savings to show how these savings vary with efficiency for the single package CHP product classes and by region.

Table 8.4.34 Mean LCC Savings for Single Package Heat Pumps by Region by Efficiency Level (SEER Value)

Efficiency Level SEER HSPF LCC Savings by Region 2008$

Nation HotHumid Hot-Dry Rest of Country 2 13.5 7.85 27 34 54 (3) 3 14 8 31 54 96 (44) 4 14.5 8 (65) (10) 30 (199) 5 15 8 (146) (62) (21) (340) 6 15.5 8.5 (169) (88) (21) (379) 7 16 9 (253) (168) (91) (480) 8 16.4 9 (455) (336) (291) (720) *Values in parentheses denote negative values.

8-82

### The results shown in Table 8.4.34 are mean va lues and do not show the distributions of savings. Thus, although observations can be made as to how the various inputs impact life-cycle cost and, in turn, how the resulting life-cycle co sts change with effici ency, conclusions should only be drawn from the distribution of life-cycle cost results that are presented in Figure 8.4.14. Section 8.4.4.3 provides information on the percen tages of consumers in each region at each efficiency level that would experience LCC savings benefits, LCC cost increases, and no impact from the standard.

-1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 Efficiency LevelLife-cycle Cost Savings($)

Mean Median `

Hot-Humid -1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 Efficiency LevelLife-cycle Cost Savings($)

Mean Median

National

-2000 -1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 Efficiency LevelLife-cycle Cost Savings($)

Mean Median `

Hot-Dry -2000 -1500 -1000 -500

0 500 1000 1500 2000

2 3 4 5 6 7 8 Efficiency LevelLife-cycle Cost Savings($)

Mean Median

Rest-of-Country 

### Figure 8.4.14 Plots of the Distributions of LCC Savings for Single Package Heat Pumps by Region

8.4.4.2 Mean PBP Results for Single Pa ckage Heat Pumps by Region



### This section presents PBP results for the efficiency improvement levels specified in the engineering analysis (Chapter 5) and also pr esented in section 8.2.2.2, Standard-Level Manufacturer Price Increases. The results pres ented here are based on annual operating costs calculated from residential and commercial electricity tariffs. Section 8.3 describes the PBP inputs.

Similar to LCC, the analysis provides an estimate of the simple payback period at different ranges of energy prices , sales taxes, and inst allation costs that prevail across the country for each efficiency level and each building ( building) type. Table 8.4.35 shows the effect on payback period as the level of efficiency changes from the market baseline for single package CHP products in residential a nd commercial buildings for each region’s energy prices, sales taxes, and installation costs.

Similar to the LCC differences, DOE depicted PBP results as a distribution of values. The means of these distributions are shown in Table 8.4.35 and th e distributions of values for

8-8340 60 80 

### PBP are shown in Figure 8.4.15. Mean rebuttabl e PBP for each region and efficiency level is shown in Table 8.4.36. In addition, DOE provides data on the median PBP for each efficiency level in each region in section 8.4.4.3.

Table 8.4.35 Mean Payback Period for Single Package Heat Pumps by Region (Years)

Efficiency Level SEER HSPF Payback Period by Region years

Nation HotHumid Hot-Dry Rest of Country 2 13.5 7.85 21.5 15.5 16.3 30.0 3 14 8 27.6 19.9 19.8 39.0 4 14.5 8 42.2 30.3 27.9 64.1 5 15 8 46.5 33.3 30.2 72.3 6 15.5 8.5 39.8 30.5 29.2 56.1 7 16 9 39.8 32.0 31.0 53.0 8 16.4 9 47.0 38.0 36.0 63.6


### Table 8.4.36 Mean Rebuttable Payback Period for Single Package Heat Pumps by Region (Years)

Efficiency Level SEER HSPF Payback Period by Region years

Nation HotHumid Hot-Dry Rest of Country 2 13.5 7.85 8.8 7.3 7.8 11.1 3 14 8 11.1 9.0 9.7 13.6 4 14.5 8 15.0 11.4 11.4 21.1 5 15 8 16.4 12.2 12.1 24.0 6 15.5 8.5 13.1 11.3 10.8 16.6 7 16 9 13.0 11.7 11.1 15.7 8 16.4 9 15.2 13.4 12.8 18.7

120 120

100 100

2 3 4 5 6 7 8 Efficiency Level 2 3 4 5 6 7 8 Efficiency LevelPayback Period (years)Payback Period (years)Payback Period (years)Payback Period (years)

80

60

40

20 20

0 0

Mean Mean Median National Median Hot-Humid

120 120

100 100

2 3 4 5 6 7 8 Efficiency Level `

2 3 4 5 6 7 8 Efficiency Level 80

60

40

20 20

0 0

Mean Mean Median Hot-Dry Median Rest-of-Country 

### Figure 8.4.15 Plots of the Distributions of PBP for Single Package Heat Pumps by Region

8-84 40 60 80

### 8.4.4.3 Detailed Regional Results for Single Package Heat Pumps



### This section provides data on the detailed results for single package CHP life-cycle cost, the components of life-cycle cost, life-cycle cost savings, and payback period. These details are shown separately by region and efficiency level. Table 8.4.37 through Table 8.4.40 present these details for each region by efficiency level.

Nation

Table 8.4.37 LCC and PBP Results for Single Pa ckage Heat Pumps by Efficiency Level (SEER Value): Nation

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008$ Average Operating Cost 2008$ Average LCC 2008$ Average Savings

2008$ Percent of Households with

Median Average Net Cost No Impact Net Benefit Market Baseline 3,293 715 10,440

- - - - - - 13.5 3,303 711 10,408 27 22 50 28 7.5 21.5 14 3,411 700 10,401 31 45 18 37 10.5 27.6 14.5 3,566 695 10,503 (65) 67 7 26 20.2 42.2 15 3,702 690 10,586 (146) 74 2 24 24.9 46.5 15.5 3,861 677 10,609 (169) 74 0 26 19.9 39.8 16 4,048 667 10,693 (253) 76 0 24 20.5 39.8 16.4 4,236 669 10,895 (455) 82 0 18 28.1 47.0 *Values in parentheses denote negative values.


### Hot-Humid Region

Table 8.4.38 LCC and PBP Results for Single Pa ckage Heat Pumps by Efficiency Level (SEER Value): Hot-Humid Region

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008$ Average Operating Cost 2008$ Average LCC 2008$ Average Savings

2008$ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 3,064 666 9,746

- - - - - -

13.5 3,073 662 9,710 34 18 50 32 6.1 15.5
14 3,176 650 9,687 54 38 18 44 8.2 19.9
14.5 3,324 642 9,756 (10) 60 7 33 13.4 30.3
15 3,454 635 9,809 (62) 67 2 31 15.6 33.3
15.5 3,605 623 9,835 (88) 68 0 32 14.3 30.5
16 3,784 614 9,914 (168) 71 0 29 15.4 32.0
16.4 3,963 613 10,083 (336) 78 0 22 19.4 38.0 *Values in parentheses denote negative values.

8-85

### Hot-Dry Region

Table 8.4.39 LCC and PBP Results for Single Pa ckage Heat Pumps by Efficiency Level (SEER Value): Hot-Dry Region

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008$ Average Operating Cost 2008$ Average LCC 2008$ Average Savings

2008$ Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 3,785 865 12,451

- - - - - -

13.5 3,796 859 12,400 54 15 50 35 5.2 16.3
14 3,917 842 12,349 96 33 18 49 7.1 19.8
14.5 4,090 832 12,419 30 55 7 38 11.4 27.9
15 4,242 823 12,471 (21) 62 2 36 13.0 30.2
15.5 4,420 806 12,472 (21) 64 0 36 12.6 29.2
16 4,630 793 12,542 (91) 67 0 33 13.8 31.0
16.4 4,840 792 12,741 (291) 75 0 25 17.3 36.0 *Values in parentheses denote negative values.


### Rest of Country

Table 8.4.40 LCC and PBP Results for Single Pa ckage Heat Pumps by Efficiency Level (SEER Value): Rest of Country

Efficiency Level Life-Cycle Cost Life-Cycle Cost Savings Payback Period
years Average Installed Cost 2008$ Average Operating Cost 2008$ Average LCC 2008$ Average Savings Percent of Households with

Median Average Net Cost No Impact Net Benefit
Market Baseline 3,237 626 9,504

- - - - - -

13.5 3,246 624 9,484 (3) 31 50 19 12.2 30.0
14 3,350 619 9,533 (44) 62 18 20 18.5 39.0
14.5 3,499 621 9,700 (199) 86 7 7 87.1 64.1
15 3,631 622 9,844 (340) 94 2 4 100.0 72.3
15.5 3,784 612 9,883 (379) 91 0 9 43.8 56.1
16 3,965 604 9,984 (480) 90 0 10 36.4 53.0
16.4 4,146 611 10,224 (720) 95 0 5 70.0 63.6 *Values in parentheses denote negative values.



### 8.5 OFF-MODE AND STANDBY POWER CONSUMPTION



### Residential air conditioners and heat pumps use a small amount of electricity during their “off mode” (neither cooling nor heating), especially during periods of mild weather in the spring and fall seasons. The principal sources of th is off-mode power consumption are crank case heaters in the outside unit (approximately 60 watts) and transformers in the inside unit. For this

8-86

### analysis, DOE separately calculated the impact on LCC of thermostatic controls on crank case heaters and replacement of transformers with converter units. This analysis was conducted only at the national level. The impacts are shown in Ta ble 8.5.1. For the analysis in Table 8.5.1, the baseline unit was assumed to have no temperature control, so that the crank case heater is “on” whenever the CAC is in the off mode. The other four levels are as follows:

Level 1 – Temperature controls so that the CCH is only activated below 65°F.

Level 2 – Temperature controls so that the CCH cycles to hold the compressor at a specific temperature.

Level 3 – Modulating CCH to hold the compressor at a specific temperature.

Level 4 – Compressor redesign to go to a modulating compressor, which could potentially eliminate the need for a CCH. The co st is an estimate for the difference in cost between a single-speed compressor and a variable-speed compressor.

Estimated installed cost is shown in the first column of Table 8.5.1. The installed cost is assumed equal the manufacturer’s sales price, plus average na tional retail markup. There is assumed to be no cost for installing the temperature control equipment. There are LCC savings through Level 3, for which the payback period is 3.5 years. The LCC savings turn negative at Level 4, and the payback period exceeds the average life of the equipment.

Table 8.5.1 Details of Regional LCC and Payback Period for Off-Mode Power Consumption Measure: Crank Case Heaters (National Only)

Efficiency Level Life-Cycle Cost 2008$ Savings

Average Installed Cost Average Operating Cost Average LCC Average LCC Savings

2008$ Payback Period

years Baseline 8 13 118

- NA
1 10 6 62 56 0.3
2 11 4 51 68 0.4
3 38 4 73 45 3.5
4 292 0 292 (173) 22.5

8-87

### REFERENCES



### 1. DOE developed residential marginal electricity prices from tariffs collected in 2008 from a representative sample of electric utilities throughout the United States. DOE collected over 150 residential tariffs from a sample of about 90 electric utilities. DOE also developed commercial marginal electricity prices from tariffs for those commercial building applications that use reside ntial CAC and CHP e quipment. DOE used 260 commercial tariffs collected in 2004 and adjusted the values to a 2008 basis using data in Edison Electric Institute, EEI Typical Bills and Average Rates Report http://www.eei.org/products_and_services/de scriptions_and_access/typ_bills_report.htm and in Regulatory Research Associates, Inc., Average Regulated Retail Price of Electricity, 2007 & Comparative Historical Data , 2008. Jersey City, NJ.

2. EIA (Energy Information Administration). 2009. Updated Annual Energy Outlook 2009 Reference Case Servi ce Report, April 2009. EIA, Washington, D.C., DOE/EIA-0383 (2009).

3 . DOE, 2008. DOE to Pursue Zero-Net En ergy Commercial Buildings, Available at http://www1.eere.energy.gov/buildings/commercial_initiative/about.html

4. Letter to Mrs. Rachel Schmeltz, Energy St ar Program Manager, Environmental Protection Agency from Karim Amrane, Vice Presiden t, Regulatory & Research, Air-Conditioning, Heating, and Refrigeration Institute (A HRI), “EPA Proposed Draft Energy Star Specification for Light Commercial HVAC Equipment,” Jan. 30, 2009.

5. NREL, 1995. Typical Meteorological Years Derived from the 1961-1990 National Solar Radiation Database . National Renewable Energy Laboratory. Golden, CO.

6. American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. (ASHRAE). 1999. ASHRAE/IES Standard 90.1-1999, “Ene rgy Efficient Design of New Buildings Except Low-Rise Residential Buildings .” Atlanta, Georgia.

7. FreightCenter.com quotes vary conti nuously. Quotes cited were obtained at http://www.freightcenter.com/QuickQuote.aspx on July 10, 2009.

8. R.S. Means Company, Inc. 2009. RS Means Residential Cost Data. 28th Annual Edition. R.S. Means Company, Inc. Kingston , MA., 725 pp.

9. R.S. Means Company, Inc. 2009. RS Means CostWorks 2009. http://www.meanscostworks.com . Accessed March 19, 2009.

10. U.S. Bureau of the Census. American Factfinder. 2007 Population Estimates, Detailed Tables. http://factfinder.census.gov/servlet/DTGeo SearchByListServle t?ds_name=PEP_2007_EST &_lang=en&_ts=257948836197 . (Accessed April 15, 2009.)

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### 11. U.S. Bureau of the Census. American Factfinder. 2008 Population Estimates, Detailed Tables. http://factfinder.census.gov/servlet/DTGeo SearchByListServle t?ds_name=PEP_2008_EST &_lang=en&_ts=257949675405 . (Accessed April 15, 2009.)

12. Coughlin, Katie, Richard White, Chris Bo lduc, Diane Fisher and Greg Rosenquist. The Tariff Analysis Project: A database and analys is platform for electricity tariffs . 2006. Lawrence Berkeley National Laboratory: Berkeley, CA. Report No. LBNL-55680. For data updates see the website < tariffs.lbl.gov >.

13. U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. Technical Support Document: Energy Efficie ncy Program for Commercial and Industrial Equipment: Commercial Unitary Air Conditioners and Heat Pumps. July, 2004. Washington, D.C. Chapter 8.

< http://www1.eere.energy.gov/buildings/applia nce_standards/commercial/pdfs/cuac_tsd_c hp_8.pdf >

14. Coughlin, K., C. Bolduc, R. Van Busk irk, G. Rosenquist and J. E. McMahon. Tariff-based Analysis of Commercial Building Electricity Prices . 2008. Lawrence Berkeley National Laboratory: Berkeley, CA. Report No. LBNL-55551.

15. U.S. Department of Energy, Energy Info rmation Administration (EIA). 2003 Commercial Building Energy Consumption Survey, Consum ption and Expenditures (CBECS), Public Use Data, 2003. Micro-da ta files on EIA website: ftp://ftp.eia.doe.gov/emeu/cbecs/microdata.html

16. Regulatory Research Associates. Average Regulated Retail Price of Electricity, 2007 & Comparative Historical Data. 2008. Jersey City NJ.

17. Edison Electric Institute, EEI Typical Bills and Average Rates Report (Winter 2007, Summer 2007, Winter 2008 and Summer 2008). Washington, DC.

18. U. S. Department of Energy – Energy Information Administration. Form EIA-861 Annual Electric Power Industry Database.

< http://www.eia.doe.gov/cneaf/e lectricity/page/eia861.html >

19. The sites visited include d: Ask Me Help Desk ( http://www.askmehelpdesk.com/heating

air-conditioning/labor-cost-repl ace-air-compressor-228111.html ), Yahoo! Answers ( http://answers.yahoo.com/question/index?qid=20080809203714AAhtqbk ), All Experts ( http://en.allexperts.com/q /Heating-Air-Conditioning-696/ AC-Compressor-Replacement

Costs.htm ), Home Inspector Locator ( http://www.homeinspectorlocator.c om/resources/Costtorepair.htm ). (All were accessed on April 15, 2009) Also visited were the Harkne ss Repair and Maintenance Cost Guide for Western Pennsylvania http://cost-guide.com/costlst1.html Ingram’s Water and Air Equipment Labor Warranties page http://ingramswaterandair.com/-i-14.html , and Accutex

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### Home Inspection Service Inc. page on Buying and Air Conditioner http://www.accutekhomeinspection.com/library/cooling.html

.
20. Direct Energy, http://www.directenergy.com/EN/Ontario/RE S/Pages/HC/CoolingRepairAndService.aspx (Accessed April 15, 2009).

21. U.S. Department of Energy–E nergy Information Administration. Residential Energy Consumption Survey, Public Use Data Files. . U.S. Department of Energy: Washington, D.C. < www.eia.doe.gov/emeu/recs/recspubuse05/pubuse05.html >

22. U.S. Census Bureau, Housing and H ousehold Economic Statistics Division. American Housing Survey . Washington, DC.

< http://www.census.gov/hhes/www/housing/ahs/ahs.html >

23. For reference on the Weibull distribution, see Section 1.3.6.6.8 and 8.4.1.3 of the NIST/SEMATECH e-Handbook of Statistical Methods

, http://www.itl.nist.gov/div898/handbook /.

24. See sections 4.1.4.3, 4.4.3.2, and 4.4.5.2 of NIST/SEMATECH e-Handbook of Statistical Methods

, http://www.itl.nist.gov/div898/handbook /

.
25. The Federal Reserve Board. Survey of Consumer Finances . 1989, 1992, 1995, 1998, 2001, and 2004. < www.federalreserve.gov/pubs/oss/oss2/scfindex.html >

26. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, Historical Data, Instrument: CDs (secondary market), Maturity: 6-month, Frequency: Annual, Description: Average rate on 6-month negotiable certificates of deposit (secondary market), quoted on an investment basis . 2009. Washington, D.C.

< www.federalreserve.gov/releases/H15/data.htm >

27. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, Historical Data, Instrument: State and lo cal bonds, Maturity: 20-year, Frequency: Monthly, Description: Bond buyer go 20-bond municipal bond index . 2009. Washington, D.C. < www.federalreserve.gov/releases/H15/data.htm >

28. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, Historical Data, Instrument: Corporat e bonds/Moody’s Seasoned AAA, Frequency: Annual, Description: Moody’s yield on se asoned corporate bonds—all industries, AAA

. 2009. Washington, D.C. < www.federalreserve.gov/releases/H15/data.htm >

29. Mortgage-X, Mortgage Information Service. Cost of Savings Index (COSI), Index History

. 2009. < http://mortgage-x.com/general/indexes/default.asp > (Last accessed, February 25, 2009.)

30. Damodaran Online. The Data Page: Historical Returns on Stocks, Bonds, and Bills— United States . 2009. < http://pages.stern.nyu.edu/~adamodar / >

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### 31. Damodaran Online. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.htm (Accessed June 4, 2009).

32. Economic Report of the President, January 2009. http://www.gpoaccess.gov/eop / (Accessed June 4, 2009).

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