Energy Conservation Standards f

Commercial Unitary Air Conditioners and 

ANOPR Public Meeting

Life-Cycle Cost Analysis 

Building Technologies Program

Office of Energy Efficiency and Renewable E

U.S. Department of Energy

September 30, 2004

EE-RM-STD-01-375 COMMENT 25I
ANOPR Analyses Flow Diagra

Market & Technology Assessment

ScreeningAnalysis

EngineeringAnalysis

Energy Use & End-Use LoadCharacterization

ShipmentsAnalysis

Markups forEquipmentPriceDetermination

Life-CycleCost andPayback Period Analyses

EE-RM-STD-01-375 COMMENT 25I
Purpose

 Energy Use & End-Use Load Characterization

• To develop electrical energy use and peak electrical d

for buildings that use commercial unitary air-conditioni

• To provide these characteristics for selected equipmen

across a diverse set of commercial buildings and clima

 Markups for Equipment Price Determination

• To characterize the channels for how equipment is dis

manufacturer to the customer.

• To determine prices paid by customers based on man

case and higher efficiency equipment.

 Life-Cycle Cost and Payback Period Analyses

• To develop the customer life-cycle cost savings and p

efficiency equipment.

EE-RM-STD-01-375 COMMENT 25I
ANOPR Issues for Public Comm

 Building Sample (ANOPR Issue #16a)  Economizer Performance (ANOPR Issue #6) Fan Energy Consumption (ANOPR Issue #7 and I BLAST and CBECS Estimates of Energy Use (AN Equipment Markups (ANOPR Issue #8 and Issue  Exclusion of Light Industrial Buildings (ANOPR Is Hourly Based Electricity Prices (ANOPR Issue #9 Forecasts of Electricity Prices (ANOPR Issue #10 Equipment Lifetime (ANOPR Issue #11) Effect of Income Taxes on LCC (ANOPR Issue #1 Rebound Effect (ANOPR Issue #20)

EE-RM-STD-01-375 COMMENT 25I
Energy Use & End U

The Need for Building Simula

 Lack of an available data source providing a broa

cooling loads and their contribution to electrical l

commercial buildings

 A need to capture diversity of cooling loads acros

types and climate zones

 A need to characterize hourly and peak building e

use in the LCC analysis

EE-RM-STD-01-375 COMMENT 25I
Energy Use & End U

Simulation Overview

Characterization

of Building Stock

Using CBECS1

Data

Development and

Simulation of

Building Prototypes

Using BLAST

2

Energy

E

1 CBECS: Commercial Building Energy Consumption Survey conducted by DOE’s En

Administration (EIA)2 BLAST: Building Loads and System Thermodynamics energy simulation tool

EE-RM-STD-01-375 COMMENT 25I
Energy Use & End U

Simulation Methodology

Size equipment 

with BLAST 

design-day run

Simulate annual 

energy use

with BLAST

Scale re

match 

building g

Adjust 

and fan 

use for le

100% pa

coo

15-zone, 3-story

Prototype

(48,000 sf)

EE-RM-STD-01-375 COMMENT 25I
Energy Use & End U

Data Source for Key Simulation I

Data Source Simulation Inpu

Direct from CBECS Building type, floor area, number of flo

construction, roof type, occupancy de

use, use of temperature setback

Inferred from CBECS Typical Meteorological Year (TMY2) s

dataWindow wall ratio (WWR)*, building ause schedules

Derived from Other Sources

Lighting power density, equipment pooccupancy density (where not availabinfiltration, peak ventilation, Energy Ef

system over-sizing factor*

*Values for WWR, aspect ratio, and system over-sizing factor were c

population distributions developed for these input variables

EE-RM-STD-01-375 COMMENT 25I
Energy Use & End U

Simulation Output

 Each of the 1033 buildings was simulated for eac

levels. The results provided from this analysis ar

• A stream of hourly electrical consumption data for each 

(including cooling)

• The number of 7.5 ton or 15 ton air-conditioning units th

the building to meet the peak loads

EE-RM-STD-01-375 COMMENT 25I
Building Sample 

(ANOPR Issue #16a)

The Department seeks comments on the building saprocess.

A sample of 1033 buildings selected from CBECS was sthe energy use characteristics for this analysis.This sample consists of six building types: assembly, edservices, office, retail and non-refrigerated warehouse.This sample represents approximately 70% of the floor spackaged air-conditioning equipment in CBECS.

EE-RM-STD-01-375 COMMENT 25I
Economizer Performance 

(ANOPR Issue #6)

Where economizer usage was indicated by CBECS in a the simulation assumed economizers were used. Where economizer usage was indicated by CBECS, the assumed that economizers operated flawlessly and with strategy, maximizing benefits.

The Department seeks comments on the economizestrategy, and performance assumptions.

EE-RM-STD-01-375 COMMENT 25I
Fan Energy Consumption 

(ANOPR Issue #7 and Issue #1

The Department seeks comments on the fan power assumptions.

The fans used in unitary air conditioners and heat pump

ventilation during all building operating hours (cooling, hventilating modes). This assumption was used in the simenergy savings from reductions in supply fan power accof building operation. 

EE-RM-STD-01-375 COMMENT 25I
BLAST and CBECS Estimates of Ene

(ANOPR Issue #16b)

The Department seeks comments on the value of coaverage simulated cooling energy use with the CBEresults. The Department seeks comments on the characterizbuilding energy use and end use loads. 

The average simulated cooling energy use from BLAST slightly exceeded the reported CBECS cooling energy fosample (developed through a separate modeling proceshowever, significant variation between the BLAST and Cenergy use for any individual building.

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Markups for Equip

Purpose, Inputs, and Outpu

 Purpose

• To determine customer prices based on manufacturer c• Characterize distribution channels and market segments• Analyze company direct costs, expenses, and profits

 Inputs

• Firm balance sheets

– Wholesalers: ARW 1998 Wholesaler PROFIT Survey Repo

– Mechanical Contractors: ACCA 1995 Financial Analysis for 

Industry

• U.S. Census Bureau data

– General Contractors: 1997 Economic Census of Commercia

Construction

 Output

• Baseline and incremental markups

EE-RM-STD-01-375 COMMENT 25I
Markups for Equip

Distribution Channels

Distribution Channels 1 & 2 Distribution C

represents 82.5% of distribution represents 

Manufacturer

Wholesaler

Large Mech.Contractor

32.5% of distribution

General Contractor

not present for replacement market

Small Mech. Contractor

50% of distribution

Customer Customer

M

General Contractor

not present for replacement market

y Two construction types: Replacement (70%) and New Co

EE-RM-STD-01-375 COMMENT 25I
Markups for Equip

Baseline and Incremental Mark

 Markups relate customer price to cost of goods so

 Baseline markups relate price to cost prior to a ch

• Baseline markups indicate a customer price that covers 

contractor’s expenses plus profit

• Direct labor costs (salaries, payroll, rental and occupanc

 Incremental markups relate the incremental chang

to the incremental change in COGS

• Some costs remain constant with COGS increases• Incremental markups cover only expenses that vary with 

expenses that increase due to an increase in equipment 

• For example, direct labor costs (salaries, payroll, rental a

vary with efficiency-induced changes in COGS Labor Ex

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Markups for Equip

Example of Markup Results

New Construction - Range and Average Markup Values

Baseline 

Range Average 

1.36 1

1

Small Mechanical Contractor 1.34 – 1.61 1.48 1General Contractor 1.10 – 1.38 1.24 1Sales Tax 1.00 – 1.10 1.07 1

1.35

Wholesaler 1.02 – 1.70 Large Mechanical Contractor 1.22 – 1.47 

Replacement Market - Range and Average Markup Values

Small Mechanical Contractor 1.54 – 1.86 1.70 1

111

1.071.551.36

Range Average 

Sales Tax 1.00 – 1.10 Large Mechanical Contractor 1.41 – 1.69 Wholesaler 1.02 – 1.70 

Baseline 

National Account 1.60 

Baseline Average 

OVERALL MARKUPS 2.31 

Baseline Weighted-Average Incr

EE-RM-STD-01-375 COMMENT 25I
Equipment Markups 

(ANOPR Issue #8 and Issue #1

The Department seeks comments on the type of whomechanical contractor, and general contractor expebe covered by the incremental markup.

Baseline and incremental markups were developed for wmechanical contractors, and general contractors to transprices into customer prices.Incremental markups cover only those expenses associa

manufacturer price. For example, because direct labor echange with an increase in the manufacturer price (such they are not covered by incremental markups. 

Because fewer expenses are covered, the incremental mvalue than the baseline markup.

EE-RM-STD-01-375 COMMENT 25I
Life-Cycle 

Baseline

Manufacturer

Price

Std-Level

Manufacturer

Price

Wholesaler

Markup

General

Contractor

Markup

Sales Tax

Mechanical

Contractor

Markup

Installation

Cost

Total Installed

Cost

Equipment

Price

From 

Engineering 

Analysi

s

(Price is a 

function of 

EER)

From Markups 

for Equipment 

Price 

Determination 

Analysi

s

 Energy

Consumption

 Power

Demand

Electricity

Prices

Annual Energy

Expense

Repair Cost

Maintenance

Cost

Annual

Operating

Expense

Lifetime

Discount Rate

Electricity

Price Trend

From Energy 

Use & End Use 

Load 

Characterization 

Analysis 

(Energy Use & 

Load are a 

function of EER)

Payb

Peri

Process Flowchart

EE-RM-STD-01-375 COMMENT 25I
Life-Cycle Cost and 

Tariff-based and Hourly based Electr

 Tariff-based approach

• Primary approach for developing electricity prices• Based on non-residential electric utility tariffs collected i

 Hourly based approach

• Secondary approach for developing electricity prices• Based on a scenario in which customers are directly cha

incurred by an electricity provider to supply energy for a

– Based on wholesale cost and utility system lambda data

• Prices that may exist assuming all electricity markets are 

 Marginal prices are developed from both approac

• Tariffs and hourly costs are applied to building energy u• Electricity bill savings and marginal prices calculated fro

improvement to air-conditioning equipment

• National average marginal commercial prices are 10 ¢/k

EE-RM-STD-01-375 COMMENT 25I
Life-Cycle Cost and 

Electricity Price Results

 National average tariff-based and hourly based ma

virtually the same

• Tariff-based and hourly based prices vary regionally• Large component of marginal price is due to demand

Unit Tariff-based Marginal Price 

No. Subdivision States Weighting Cents/kWh % demand 

1 New England CT,MA,ME,NH,RI,VT 4.7 9.5 53% 

2.1 New York NY 7.4 14.6 53% 

2.2 Mid Atlantic NJ,PA 5.6 10.5 27% 

3 EN Central IL,IN,MI,OH,WI 13.7 10.8 46% 

4.1 W-WN Central KS,ND,NE,SD 0.8 6.2 44% 

4.2 E-WN Central IA,MO,MN 4.7 7.1 30% 

5.1 N-S Atlantic DE,MD,VA,WV 5.6 7.9 41% 5.2 Mid-S Atlantic GA,NC,SC 7.9 7.3 22% 5.3 Florida FL 6.6 8.0 36% 

6.1 N-ES Central KY,TN 5.1 6.5 38% 6.2 S-ES Central AL,MS 5.4 6.1 39% 

7.1 N-WS Central AR,LA,OK 5.3 5.8 26% 

7.2 Texas TX 9.5 10.0 23% 

8.1 N-Mountain ID,MT,WY 0.6 6.1 20% 

8.2 S-Mountain AZ,CO,NM,NV,UT 4.2 8.8 35% 

9.1 N-Pacific OR,WA 1.7 4.5 33% 

9.2 California CA 11.2 18.5 21% 

USA 100.0 10.0 35% 

EE-RM-STD-01-375 COMMENT 25I
Exclusion of Light Industrial Buil

(ANOPR Issue #5)

The Department seeks comments on whether light inhave substantially different electrical loads and electcommercial buildings.If light industrial buildings have substantially differenthe Department seeks comments on whether there arcommercial unitary air conditioner shipments to theswarrant their inclusion into the analysis.

Building simulations were performed on commercial buildunitary air conditioners in order to generate electrical loadwere coupled with electricity prices (either tariff based or generate customer utility bills.Light industrial buildings were not analyzed due to insuffiBy not analyzing industrial buildings, the LCC analysis imthe electrical loads and electricity prices in light industrial substantially different than those in commercial buildings

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Hourly Based Electricity Price

(ANOPR Issue #9)

The Department seeks comments on other price modannual utility bills from hourly cost data.The Department seeks comments on the use of houra secondary approach for developing marginal prices

Hourly based prices were used as a secondary approach 

electricity prices. Tariff-based prices were the primary apExtensive data were used to characterize hourly costs. Hdata were collected from deregulated regions of the counlambda data were collected from regulated regions.Hourly cost data were input into a customer price model utility bills. The price model was based on avoided-cost traditionally used by utilities to characterize demand redu

EE-RM-STD-01-375 COMMENT 25I
Life-Cycle Cost and 

Other Inputs

 Installation Costs

• Based on RS Means data: $1585 for baseline 7.5 ton unit, $214• Costs vary in direct proportion to equipment weight

 Electricity Price Forecasts

• Based upon trends from the 2003 Annual Energy Outlook

 Discount Rates

• Derived from estimates of the cost of capital of companies that p• Cost of capital is calculated from the weighted-average cost of c

obtain equity and debt financing 

• Weighted-average value equals 6.1% real

 Equipment Lifetime

• Median age of 15 years based upon 1999 ASHRAE HVAC Appl• Survival function based upon Weibull probability distribution

 Repair Costs

• Baseline annual repair cost: $158 for 7.5 ton unit, $291 for 15 to• Increases in direct proportion to equipment manufacturing price

 Maintenance Costs

• Based on RS Means data for 3 to 24 ton roof top air conditioners• Annual maintenance cost equals $200 and does not vary with ca

EE-RM-STD-01-375 COMMENT 25I
Forecasts of Electricity Price

(ANOPR Issue #10)

The Department seeks comments on any other credprice forecasts.

Electricity price forecasts from the 2003 Annual Energy 

to estimate future electricity prices.The Department plans on using the most recent Annual available in its analyses for the NOPR.

EE-RM-STD-01-375 COMMENT 25I
Equipment Lifetime 

(ANOPR Issue #11)

The Department seeks comments on the lifetime of unitary air conditioners. 

Based on the 1999 ASHRAE HVAC Applications Handbused a value of 15 years as the median lifetime of commconditioners. A Weibull probability distribution with a median value of to characterize the survival function for commercial unita

EE-RM-STD-01-375 COMMENT 25I
Life-Cycle Cost and 

Example of LCC Results:

7.5 ton (

≥65,000 Btu/h and <135,000 Btu/

Frequency Chart

Certainty is 92.60% from $0 to +Infinity

Mea

.000.011.022.032.043

($1,200) $200 $1,600 $3,000 

10,000 Trials

Forecast: LCC Savings

EE-RM-STD-01-375 COMMENT 25I
Life-Cycle Cost and 

Example of Payback Period Res

7.5 ton (

≥65,000 Btu/h and <135,000 Btu/

Frequency Chart

Years

Mean = 3

.000.010.020.030.041

0.0 5.0 10.0 15.0 

10,000 Trials

Forecast: Payback

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Effect of Income Taxes on LC

(ANOPR Issue #17)

For firms that purchase commercial unitary air condequipment, the Department seeks comments on the which face a net tax liability.For those firms with a net tax liability, the Departmecomments on how equipment is expensed and depr

The Department did not include the effect of income taxanalysis for this ANOPR.The Department believes the net impact of taxes on the depends upon how a firm's accounting procedures expecost of commercial equipment and measure profitability.

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Rebound Effect 

(ANOPR Issue #20)

The Department seeks comments on the presence ofor commercial unitary air conditioner customers.If a rebound effect does exist, the Department seeks the calculation of the rebound effect.

The rebound effect occurs when a piece of equipment thefficient is used more intensively, so that the expected ethe efficiency improvement do not fully materialize.The rebound effect was not taken into account when estsavings from more efficient equipment. 

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Other Issues

The Department seeks comments and recommendastakeholders on any other aspects related to the LifAnalysis.

EE-RM-STD-01-375 COMMENT 25I