CHAPTER 12. LIFE­CYCLE COST SUB­GROUP ANALYSIS

TABLE OF CONTENTS

**12.1 INTRODUCTION** 

**............................................................................................................ 12­1** 

**12.2 SUB­GROUP**  **ANALYSIS**

**............................................................................................... 12­1** 

**12.2.1 PTAC**  **and PTHP**  **Customer Sub­Group** 

**............................................................ 12­1** 

**12.2.2 Life­Cycle**  **Cost and**  **Payback Period**  **Results for**  **Small Business**  **Sub­group**

**... 12­2** 

LIST OF TABLES

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

**Business Sub­Group**  **(Independent Hotels)**  **and All**  **Business Types**  **(2007$)**

**...... 12­3** 

**Table 12.2.2**  **Percentage of**  **Customers Showing**  **Positive Life­Cycle**  **Cost Savings**  **by**

**Equipment Class**  **and Trial**  **Standard Level,**  **Small Business**  **Sub­Group**

**(Independent Hotels)**  **and All**  **Business Types...................................................... 12­5** 

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

**Business Sub­Group**  **(Independent Hotels)**  **and All**  **Business Types**  **(2007$)**

**...... 12­6** 

**Table 12.2.4**  **Percentage of**  **Customers Showing**  **PBP Less**  **Than 3**  **Years, by**  **Equipment**

**Class and**  **Trial Standard**  **Level, Small**  **Business Sub­Group**  **(Independent**

**Hotels) and**  **All Business**  **Types............................................................................ 12­7**

**12­i**CHAPTER 12. LIFE­CYCLE COST SUB­GROUP ANALYSIS

12.1 INTRODUCTION

**The life­cycle**  **cost (LCC)**  **sub­group analysis**  **evaluates impacts**  **on any** 

**identifiable groups**  **of customers**  **of packaged**  **terminal air**  **conditioners (PTACs)**  **and**

**packaged terminal**  **heat pumps**  **(PTHPs) who**  **may be**  **disproportionately affected**  **by**

**amended energy**  **conservation standards.**  **The U.S.**  **Department of**  **Energy (DOE)** 

**accomplished this,**  **in part,**  **by analyzing**  **the LCC**  **and payback**  **period (PBP)**  **for those** 

**PTAC and**  **PTHP customers**  **that fall**  **into any**  **specific sub­groups.** 

**DOE used**  **the LCC**  **spreadsheet model**  **to estimate**  **the impact**  **on PTAC**  **and PTHP** 

**sub­groups. DOE**  **developed this**  **LCC spreadsheet**  **model to**  **conduct the**  **LCC and**  **PBP**

**analyses for**  **both PTAC**  **and PTHP**  **customers, as**  **described in**  **Chapter 8,**  **life­cycle cost** 

**and payback**  **period analyses.**  **The standard**  **LCC and**  **PBP analyses**  **(see Chapter**  **8) for** 

**PTACs and**  **PTHPs includes**  **various types**  **of businesses**  **occupying commercial**  **buildings**

**that use**  **PTAC and**  **PTHP equipment.**  **The LCC**  **spreadsheet model**  **allows for**  **the**

**identification of**  **certain sub­groups**  **of businesses,**  **which can**  **then be**  **analyzed by** 

**sampling only**  **that sub­group.**  **Chapter 8,**  **life­cycle cost**  **and payback**  **period analyses,** 

**explains in**  **detail the**  **inputs to**  **the LCC**  **spreadsheet model**  **used in**  **determining the**  **LCC**

**and PBP.**  **The LCC**  **spreadsheet model**  **is accessible**  **over the**  **internet**

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

**.html).**

12.2 SUB­GROUP ANALYSIS

12.2.1 PTAC and PTHP Customer Sub­Group

**DOE identified**  **small businesses**  **as a**  **sub­group that**  **possibly could**  **be**

**disproportionately affected**  **by the**  **amended energy**  **conservation standard**  **for PTACs**  **and**

**PTHPs. DOE**  **was concerned**  **that increases**  **in the**  **purchase price**  **of PTAC**  **and PTHP** 

**equipment could**  **have negative**  **impacts on**  **small businesses**  **(i.e., those**  **with low**  **annual**

**revenues). To**  **identify small**  **businesses, DOE**  **used size**  **standards from**  **the Small** 

**Business Administration**  **(SBA) to**  **define which**  **business entities**  **are considered**  **to be** 

**small. The**  **SBA established**  **size standards**  **for types**  **of economic**  **activity, or**  **industry,**

**under the**  **North American**  **Industry Classification**  **System (NAICS).**  **1**

**The SBA**  **defines a**  **small business**  **from a**  **customer perspective**  **by either**  **its**

**annual receipts**  **(i.e., revenues)**  **or its**  **number of**  **employees. Assembly,**  **education, food** 

**services, office,**  **and retail**  **businesses are**  **generally defined**  **to be**  **small if**  **annual receipts** 

**are $6**  **million or**  **less. Businesses**  **located in**  **warehouses are**  **considered to**  **be small**  **if they** 

**employ 100**  **or fewer**  **people.**

**In examining**  **the four**  **categories of**  **businesses in**  **the Chapter**  **8 analysis,**  **DOE**

**considered which**  **categories would**  **be likeliest**  **to be**  **adversely affected.**  **Considering that** 

**about 70**  **percent of**  **all applications**  **of PTAC**  **and PTHP**  **units are**  **in chain**  **hotels (mostly** 

**owned by**  **large corporations)**  **and another**  **15 percent**  **are used**  **in assisted**  **living facilities** 

**(also are**  **predominantly owned**  **by large**  **corporations), a**  **maximum of**  **about 15**  **percent of** 

**12­1 the**  **market potentially**  **could be**  **small businesses.**  **2 About**  **five percent**  **of PTACs**  **and**

**PTHPs are**  **used in**  **offices and**  **health care**  **facilities and**  **some portion**  **of these**  **are small** 

**businesses. However,**  **many of**  **these offices**  **are likely**  **to be**  **branch offices**  **of much** 

**larger organizations.**  **It is**  **likelier that**  **the 10**  **percent of**  **the market**  **represented by** 

**independent hotels**  **consists of**  **small businesses**  **that could**  **be adversely**  **affected by**  **the**

**proposed efficiency**  **regulation. DOE**  **does not**  **have sufficient**  **information to**  **correlate**

**annual revenues**  **with the**  **costs of**  **more efficient**  **PTACs and**  **PTHPs to**  **identify the**  **sub**

**group of**  **small businesses**  **in the**  **building sample.**  **However, DOE**  **believes that**  **the**

**results from**  **the LCC**  **sub­group analysis**  **provide an**  **adequate indication**  **of whether**  **the**

**small business**  **sub­group would**  **be disproportionately**  **advantaged or**  **disadvantaged by**  **a**

**proposed standard.** 

**For purposes**  **of this**  **sub­group analysis,**  **independent hotels**  **are assumed**  **to pay** 

**approximately the**  **same electricity**  **prices as**  **their large­chain**  **counterparts, since**  **both**

**types of**  **entities occupy**  **structures having**  **similar sizes**  **and similar**  **construction materials** 

**and use**  **similar amounts**  **of electricity.**  **However, the**  **smaller independent**  **entities may** 

**face somewhat**  **higher costs**  **of capital**  **(i.e., a**  **difference estimated**  **in Chapter**  **8 as**  **250**

**basis points**  **or 2.5**  **percent). With**  **the exception**  **of the**  **cost of**  **capital, all**  **other inputs**  **to**

**the LCC**  **and PBP**  **spreadsheet model**  **for the**  **small business**  **sub­group were**  **the same**  **as**

**for all**  **the business**  **types considered**  **in the**  **rulemaking (e.g.,**  **total installed**  **costs, repair** 

**costs, maintenance**  **costs, and**  **equipment lifetime**  **etc). The**  **lower the**  **cost of**  **electricity**

**and the**  **higher the**  **cost of**  **capital, the**  **more likely**  **it is**  **that an**  **entity would**  **be**

**disadvantaged by**  **the requirement**  **to purchase**  **more efficient**  **PTACs or**  **PTHPs.**

12.2.2 Life­Cycle Cost and Payback Period Results for Small Business Sub­group

**Table 12.2.1**  **summarizes the**  **LCC savings**  **results for**  **the small**  **business sub** 

**group for**  **each of**  **the PTAC**  **and PTHP**  **equipment classes,**  **and compares**  **them to**  **the**

**results for**  **the total**  **sample of**  **business types**  **used in**  **the overall**  **LCC analysis.** 

**12­2**Table 12.2.1 Mean LCC Savings by Equipment Class and Trial Standard Level,

Small Business Sub­Group (Independent Hotels) and All Business

Types (2007$)

Standard Size Standard Standard Standard Non­ NonPTAC 9,000 Size PTAC Size PTHP Size PTHP Standard Standard

TSL Business Type Btu/h CC* 12,000

Btu/h CC* 9,000 Btu/h

CC* 12,000

Btu/h CC* TSL Size

PTAC Size

PTHP

**TSL 1**  **Independent**

**Hotels ($2)**  **($4) $8**  **$10**

**TSL 1**  **$22 $54** 

**All Business** 

**Types ($1)**  **($2) $11**  **$13 $26**  **$62**

**TSL 2**  **Independent**

**Hotels ($2)**  **($4) $16**  **$18**

**TSL 2**  **$22 $56** 

**All Business** 

**Types ($1)**  **($2) $20**  **$24 $26**  **$66**

**TSL 3**  **Independent**

**Hotels ($5)**  **($7) $16**  **$18**

**TSL 3**  **$24 $56** 

**All Business** 

**Types ($3)**  **($5) $20**  **$24 $30**  **$66**

**TSL A**  **Independent**

**Hotels ($5)**  **($4) $22**  **$18**

**TSL 4**  **$22 $68** 

**All Business** 

**Types ($3)**  **($2) $28**  **$24 $26**  **$80**

**TSL 4**  **Independent**

**Hotels ($2)**  **($4) $22**  **$13**

**TSL 5**  **$23 $68** 

**All Business** 

**Types ($1)**  **($2) $28**  **$20 $31**  **$80**

**TSL 5**  **Independent**

**Hotels ($9)**  **($13) $22**  **$13**

**All Business** 

**Types ($6)**  **($10) $28**  **$20**

**TSL 6**  **Independent**

**Hotels ($13)**  **($19) $17**  **$7**

**All Business** 

**Types ($10)**  **($15) $24**  **$14**

***** **CC stands**  **for cooling**  **capacity**

****** **Values in**  **parentheses stand**  **for the**  **negative LCC**  **savings**

**12­3 Table**  **12.2.2 compares**  **the percentages**  **of customers**  **showing LCC**  **savings for**  **the**

**two groups**  **of businesses,**  **namely, the**  **small business**  **sub­group (or**  **independent hotels)** 

**and the**  **total sample**  **of all**  **business types**  **considered for**  **this PTAC**  **and PTHP** 

**rulemaking. Similarly,**  **Table 12.2.3**  **summarizes the**  **mean PBP**  **results for**  **the two**  **groups**

**and Table**  **12.2.4 compares**  **the percentages**  **of the**  **two groups**  **experiencing payback** 

**periods of**  **less than**  **3 years.**  **Results are**  **provided by**  **trial standard**  **level (TSL)**  **for each** 

**of PTAC**  **and PTHP**  **equipment classes.**  **As is**  **evident from**  **the LCC**  **and PBP**  **results,**

**although the**  **LCC savings**  **for small**  **business are**  **slightly smaller**  **than for**  **the full**  **sample**

**of businesses**  **due to**  **their higher**  **financing costs,**  **the overall**  **effect of**  **a potentially**  **higher**

**PTAC and**  **PTHP efficiency**  **level on**  **the small**  **business sub­group**  **is virtually**  **identical to** 

**the effect**  **on the**  **full sample**  **of business**  **types that**  **use PTAC**  **and PTHP**  **equipment.**

**Thus, small**  **businesses are**  **affected no**  **differently by**  **increased PTAC**  **and PTHP** 

**equipment efficiency**  **levels than**  **the full**  **sample of**  **PTAC and**  **PTHP customers** 

**considered in**  **the rulemaking.** 

**12­4**Table12.2.2PercentageofCustomersShowingPositiveLife­CycleCostSavingsbyEquipmentClassandTrialStandardLevel,SmallBusinessSub­Group(IndependentHotels)andAllBusinessTypesTSLBusinessTypeStandardSizePTAC9,000Btu/hCC*StandardSizePTAC12,000Btu/hCC*StandardSizePTHP9,000Btu/hCC*StandardSizePTHP12,000Btu/hCC*TSLNonStandardSizePTACNonStandardSizePTHP**TSL 1** **Independent Hotels** **5% 5%** **13% 13%** **TSL 1** **21% 26%** **All Business** **Types 7%** **7% 16%** **16% 22%** **27% TSL** **2 Independent** **Hotels 5%** **5% 27%** **28% TSL** **2 21%** **49% All** **Business Types** **7% 7%** **33% 33%** **22% 50%** **TSL 3** **Independent Hotels** **9% 8%** **27% 28%** **TSL 3** **36% 49%** **All Business** **Types 14%** **13% 33%** **33% 39%** **50% TSL** **A Independent** **Hotels 9%** **5% 41%** **28% TSL** **4 21%** **71% All** **Business Types** **14% 7%** **50% 33%** **22% 72%** **TSL 4** **Independent Hotels** **5% 5%** **41% 34%** **TSL 5** **49% 71%** **All Business** **Types 7%** **7% 50%** **42% 52%** **72% TSL** **5 Independent** **Hotels 12%** **11% 41%** **34% All** **Business Types** **17% 16%** **50% 42%** **TSL 6** **Independent Hotels** **14% 12%** **47% 37%** **All Business** **Types 21%** **17% 58%** **47%*********CC stands** **for cooling** **capacity. 12­5** Table12.2.3MeanPaybackPeriodbyEquipmentClassandTrialStandardLevel,SmallBusinessSub­Group(IndependentHotels)andAllBusinessTypes(2007$)TSLBusinessTypeStandardSizePTAC9,000Btu/hCC*StandardSizePTAC12,000Btu/hCC*StandardSizePTHP9,000Btu/hCC*StandardSizePTHP12,000Btu/hCC*TSLNonStandardSizePTACNon­StandardSizePTHP**TSL 1** **Independent Hotels** **13.0 13.1** **5.0 5.1** **TSL 1** **4.4 2.0** **All Business** **Types 13.0** **13.1 5.1** **5.1 4.4** **2.2 TSL** **2 Independent** **Hotels 13.0** **13.1 4.5** **4.6 TSL** **2 4.4** **2.8 All** **Business Types** **13.0 131** **4.5 4.6** **4.4 28** **TSL 3** **Independent Hotels** **13.6 13.9** **4.5 4.6** **TSL 3** **5.1 2.8** **All Business** **Types 13.7** **14.0 4.5** **4.6 5.1** **2.8 TSL** **A Independent** **Hotels 13.6** **13.1 4.4** **4.6 TSL** **4 4.4** **2.9 All** **Business Types** **13.7 13.1** **4.4 4.6** **4.4 3.0** **TSL 4** **Independent Hotels** **13.0 13.1** **4.4 5.5** **TSL 5** **5.9 2.9** **All Business** **Types 13.0** **13.1 4.4** **5.5 5.9** **3.0 TSL** **5 Independent** **Hotels 14.4** **14.8 4.4** **5.5 All** **Business Types** **14.5 14.9** **4.4 5.5** **TSL 6** **Independent Hotels** **15.1 15.8** **5.1 6.3** **All Business** **Types 15.2** **15.9 5.1** **6.4 12­6** Table12.2.4PercentageofCustomersShowingPBPLessThan3Years,byEquipmentClassandTrialStandardLevel,SmallBusinessSub­Group(IndependentHotels)andAllBusinessTypesTSLBusinessTypeStandardSizePTAC9,000Btu/hCC*StandardSizePTAC12,000Btu/hCC*StandardSizePTHP9,000Btu/hCC*StandardSizePTHP12,000Btu/hCC*TSLNonStandardSizePTACNonStandardSizePTHP**TSL 1** **Independent Hotels** **1% 1%** **11% 11%** **TSL 1** **37% 87%** **All Business** **Types 1%** **1% 11%** **9% 35%** **87% TSL** **2 Independent** **Hotels 1%** **1% 21%** **17% TSL** **2 37%** **67% All** **Business Types** **1% 1%** **19% 17%** **35% 67%** **TSL 3** **Independent Hotels** **1% 1%** **21% 17%** **TSL 3** **21% 67%** **All Business** **Types 1%** **1% 19%** **17% 21%** **67% TSL** **A Independent** **Hotels 1%** **1% 19%** **17% TSL** **4 37%** **57% All** **Business Types** **1% 1%** **19% 17%** **35% 55%** **TSL 4** **Independent Hotels** **1% 1%** **19% 3%** **TSL 5** **19% 57%** **All Business** **Types 1%** **1% 19%** **3% 19%** **55% TSL** **5 Independent** **Hotels 1%** **1% 19%** **3% All** **Business Types** **1% 1%** **19% 3%** **TSL 6** **Independent Hotels** **1% 1%** **9% 1%** **All Business** **Types 1%** **1% 9%** **1% 12­7** REFERENCES

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

**121­Small Business**  **Administration, Subpart**  **A­Size Eligibility**  **Provisions and** 

**Standards, May**  **4, 2005.** 

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

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

**Report, March**  **2001.**

**12­8**