### EXECUTIVE SUMMARY

TABLE OF CONTENTS

ES.1 OVERVIEW OF PRELIMINARY ANALYSIS ACTIVITIES

......................................... 1

ES.2 OVERVIEW OF THE PRELIMINARY ANALYSIS AND THE TECHNICAL

SUPPORT DOCUMENT

................................................................................................... 3

ES.3 KEY RESULTS OF THE ANALYSIS

.............................................................................. 4

ES.3.1 Market and Technology Assessment

...................................................................... 4

ES.3.2 Screening Analysis

.................................................................................................. 5

ES.3.3 Engineering Analysis

.............................................................................................. 5

ES.3.3.1 Product Classes Analyzed

................................................................................. 6

ES.3.3.2 Manufacturing Cost Assessment

....................................................................... 6

ES.3.4 Markups to Deter mine Product Price

...................................................................... 9

ES.3.5 Energy Use Characterization

.................................................................................. 9

ES.3.5.1 Residential Energy Use

..................................................................................... 9

ES.3.5.2 Commercial Building Energy Use

.................................................................. 11

ES.3.5.3 Regional Analysis

........................................................................................... 11

ES.3.6 Life-Cycle Cost and Payback Period Analyses

.................................................... 15

ES.3.7 Shipments Analysis

............................................................................................... 18

ES.3.8 National Impact Analysis

...................................................................................... 21

ES.3.8.1 National Energy Savings

................................................................................. 22

ES.3.8.2 Net Present Value

........................................................................................... 23

ES.3.9 Preliminary Manufacturer Impact Analysis

.......................................................... 29

ES.4 ISSUES ON WHICH DOE SEEKS PUBLIC COMMENT

............................................. 29

ES-i

### LIST OF TABLES

Table ES.1 Manufacturer Production Cost Estimates for Three-Ton Split-System Air Conditioners: Coil-Only Systems

........................................................................... 7

Table ES.2 Manufacturer Production Cost Estimates for Three-Ton Split-System Air

Table ES.3 Manufacturer Production Cost Estimates for Three-Ton Split-System Heat Pumps

Table ES.4 Manufacturer Production Cost Estimates for Three-Ton Single-Package Air

Table ES.5 Manufacturer Production Cost Estimates for Three-Ton Single-Package Heat

Table ES.7 Regions Defined for the Central Air Conditioner and Heat Pump Regional

Table ES.8 Split- System Air Conditioners: Average Annual Energy Use by Efficiency

Table ES.9 Split-System Air Conditioners: Average Annual Energy Use by Efficiency

Table ES.11 Single-Package Air Conditioners: Averag e Annual Energy Use by Efficiency

Table ES.13 LCC and PBP Summary: Highest SEER a nd HSPF for Which Mean LCC Savings

Table ES.18 Split-System Air Conditioners: Disc ounted Cumulative NPV Results (3%

Table ES.19 Split-System Air Conditioners: Disc ounted Cumulative NPV Results (7% Conditioners: Blower-Coil Systems

....................................................................... 7

............................................................................................................................... .. 8

Conditioners

............................................................................................................ 8

Pumps

...................................................................................................................... 8

Table ES.6 National Average Markups for Central Air Conditioners and Heat Pumps

........... 9

Analysis

................................................................................................................. 12

Level

⎯ Coil-Only Systems

................................................................................... 13

Level—Blower-Coil Systems

............................................................................... 13 Table ES.10 Split-System Heat Pumps: Average Annual Energy Use by Efficiency Level

.... 14

Level

..................................................................................................................... 14

Table ES.12 Single-Package Heat Pumps: Average Annual Energy Use by Efficiency Level 15

are Positive, and Corresponding Median PBP in Years

....................................... 17

Table ES.14 Split-System Air Conditioners: Cumu lative NES Results (quads)

....................... 22

Table ES.15 Split-System Heat Pumps: Cumu lative NES Results (quads)

.............................. 23

Table ES.16 Single-Package Air Conditioners: Cu mulative NES Results (quads)

................... 23

Table ES.17 Single-Package Heat Pumps: Cumulative NES Results (quads)

.......................... 23

Discount Rate)

...................................................................................................... 25

Discount Rate)

...................................................................................................... 26

Table ES.20 Split-System Heat Pumps: Discounted Cumulative NPV Results

........................ 27

Table ES.21 Single-Package Air Conditioners: Di scounted Cumulative NPV Results

............ 27

Table ES.22 Single-Package Heat Pumps: Discounted Cumulative NPV Results

................... 28

ES-ii

### LIST OF FIGURES

Figure ES.1 Flow Diagram of Analyses for the Resi dential Central Air Conditioner and Heat Pump Rulemaking Process

..................................................................................... 2 Figure ES.2 Forecasted Shipments (Base Case) for Sp lit-System Air Conditioners, Coil-Only

Figure ES.3 Forecasted Shipments (Base Case) for Split-System Air Conditioners, Blower

- ............................................................................................................................... 19

Coil

........................................................................................................................ 19 Figure ES.4 Forecasted Shipments (Base Case) for Split-System Heat Pumps

....................... 20 Figure ES.5 Forecasted Shipments (Base Case) for Single-Package Air Conditioners

............ 20 Figure ES.6 Forecasted Shipments (Base Case) fo r Single-Package Heat Pumps

................... 21

ES-iii

### EXECUTIVE SUMMARY

ES.1 OVERVIEW OF PRELIMINARY ANALYSIS ACTIVITIES

The Energy Policy and Conservation Act, as amended (42 U.S.C. 6291 et seq.; EPCA), directs the U.S. Department of Energy (DOE) to consider amending the energy conservation

standards for residential central air conditioners and heat pumps established under EPCA. (42

U.S.C. 6295(d)(3)(B)) Any amended standard mu st be designed to “achieve the maximum improvement in energy efficiency ... which the Se cretary determines is technologically feasible and economically justified.” (42 U.S.C. 6295(o )(2)(A)). This executive summary provides an overview of DOE’s preliminary analysis in consideration of amended energy conservation

standards for residential central air conditioners and heat pumps. This summary describes key results from DOE’s analyses and delineates issues about which it seeks comment from interested parties. These issues will be highlighted in the public meeting presentation on this preliminary technical support document (preliminary TSD) and discussed in chapter 2 of the preliminary

TSD.

Figure ES.1 presents a summary of the an alytical components of the standards-setting process and illustrates how key results are generated. The focal point of the figure is the center column, labeled “Analyses.” The columns labeled “Key Inputs” and “Key Outputs” show how the analyses fit into the process and how they relate to each other. Key inputs are the types of data and other information that the analyses require. DOE obtains some key information from public databases; it collects othe r inputs from interested parties or persons having special knowledge and expertise. Arrows connecting analyses show the types of information that feed from one analysis to another. Key outputs are anal ytical results that feed directly into the standards-setting process. The issues on which DOE seeks comment derive from the preliminary analysis.

ES-1Framework Document



### Figure ES.1 Flow Diagram of Analyses for the Re sidential Central Air Conditioner and Heat Pump Rulemaking Process Utility Impact

A nalysis

Notice of Proposed Rulemaking (NOPR)

Final Rule Market and Technology

Assessment

Screening Analysis

Engineering Analysis

Markups fo r Product Price
Determination Life

- Cycle Cost and Payback Period Analyses

National Impact Analysis Energy Use

Revise Preliminar y Analysis

Life

- Cycle Cost
Sub

- group Analysis

Manufacturer Impact Analysis Shipments Analysis

Employment Impact
A nalysis

Revise Analyses • Product Classes

• Technology Options

• Industry Cash Flo w

• Subgroup Cash Flow

• Direct Employment Impacts

• Competitive Impacts

• Cumulative Regulatory Burden • Cost

- Efficiency Relationship

• Life

- Cycle Costs

• Payback Periods

• National Energy Savings

• Net Present Values

• National Employment Impacts

• Revised Results • Market Segmentation

• Non

- Regulatory Programs

• Energy Prices

• Installation Costs

• Maintenance & Repair Costs

• Backcast and Forecast

• Market Saturation

• Stakeholder Comments

• Demographics

• Emission Rates

• National Energy Savings

• Stakeholder Comments • Identify Firms/Products

• Historical Shipments

• Manufacturer Prices

• Average Costs

• Manufacturer Financial Data Design Options Product Classes

Retail Prices Design Energy

Preliminary Analysis • Efficiency/Performance • Manufacturing Cost

Candidate Standard

Levels

Environmental
Assessment

Regulatory Impact Analysis Technology Options

• Emission Estimates • Utility Load Factors

• National Energy Savings

• Non

- Regulator y Alternatives • Design Options

• Energy Price Forecasts

• Site

- to

- Source Factors • Energy

- Efficiency Levels

Direct Employment Impacts

• National Energy Savings

• National Product Costs

• National Operating Costs • Utility Impacts • Life

- Cycle Costs

• Payback Periods • Installation Costs

• Maint Costs

• Repair Costs • UEC

• Energy
Prices • Annual Energy Use (UEC)

Preliminar y Manufacturer Impact Analysis • Manufacturer Prices

• Average Costs • Conversion Capital Expenditures

• Direct Employment Impacts

• National Energy Savings

• Net Present Values • Trial Standard Levels ( TSLs )

TSLs • Product Prototypes

Energy Efficiency

Levels

• Department of Justice Review

ES-2

### ES.2 OVERVIEW OF THE PRELIMINARY ANALYSIS AND THE TECHNICAL

SUPPORT DOCUMENT

This preliminary TSD details each preliminary analysis, inputs, sources, methodologies, and results. Chapter 2 of this preliminary TSD provides an overview of each preliminary analysis, the comments received in response to th e analytical approaches DOE described in the framework document, and DOE’s re sponses to those comments.

The following is a brief description of the chapters in the preliminary TSD that address the preliminary analyses performed by DOE:

• The market and technology assessment (MTA) characterizes the relevant product markets and technology options, including prototype designs (chapter 3).

• The screening analysis reviews each technology option to determine whether it is technologically feasible; is practicable to manufacture, install, and service; would adversely affect product utility or product ava ilability; or would ha ve adverse impacts on health and safety (chapter 4).

• The engineering analysis develops cost -efficiency relationships that show a manufacturer’s cost of achieving increased efficiency. DOE uses manufacturer markups to convert manufacturer production cost (M PC) to manufacturer selling price (MSP) (chapter 5).

• The markups analysis converts the MSPs derived from the engineering analysis to consumer product prices (chapter 6).

• The energy use analysis determines the annual energy use in the field of the considered products (chapter 7).

• The life-cycle cost (LCC) and payback period (PBP) analyses calculate, at the consumer level, the discounted savings in operating co sts throughout the estimated average life of the covered products, compared to any increas e in the product’s installed cost likely to result directly from the imposition of a given standard (chapter 8).

• The shipments analysis forecasts product shipments, which then are used to calculate the national impacts of standards on energy cons umption, the net present value (NPV) of consumer costs and savings, and future manufacturer cash flows (chapter 9).

• The national impact analysis (NIA) assesses the cumulative national energy savings (NES) from standards and the NPV of consum er costs and savings associated with

standards at different effici ency levels (chapter 10).

• The preliminary manufacturer impact analysis (MIA) assesses the potential impacts of energy conservation standards on manufacturer s, such as effects on expenditures for

ES-3

### capital conversion, marketing costs, shipment s, and research and development costs (chapter 12).

The remaining chapters of the preliminary TSD address the analyses to be performed for the NOPR stage:

• The life-cycle cost analysis for subgroups ev aluates the effects of energy conservation standards on various national subgroups of the population (chapter 11).

• The utility impact analysis examines impacts of energy conservation standards on the generation capacity of electric utilities (chapter 13).

• The employment impact analysis examines the effects of energy conservation standards on national employme nt (chapter 14).

• The environmental assessment examines the effects of energy conservation standards on various airborne emissions (chapter 15).

• The regulatory impact analysis examines the national impacts of non-regulatory alternatives to mandatory energy conservation standards (chapter 16).

ES.3 KEY RESULTS OF THE ANALYSIS

The following sections describe in detail the analyses DOE performed in support of the preliminary TSD and present the key results.

ES.3.1 Market and Technology Assessment

When initiating an analysis of potential energy efficiency standards for appliances, DOE develops information on the present and past indus try structure and market characteristics for the products concerned. This activ ity assesses industries and pr oducts both quantitatively and qualitatively based on publicly available information.

DOE generally divides covered products into product classes by the type of energy used, or by capacity or other performance-related features that affect efficiency. Different energy conservation standards may apply to different product classes. (42 U.S.C. 6295(q)) The product classes that DOE is considering in this rulemaking are as follows:

• Split-System Air Conditioners

• Split-System Heat Pumps

• Single-Package Air Conditioners

• Single-Package Heat Pumps

• Small-Duct High-Velocity Systems (SDHV)

• Space-Constrained Air Conditioners

• Space-Constrained Heat Pumps

ES-4

### For the residential central air conditioner and heat pump products that are covered by this rulemaking, DOE gathered information on (1) manuf acturer market share and characteristics, (2) existing regulatory and non-regulatory initiatives for improving product efficiency, and (3) trends in product characteri stics and retail markets.

DOE reviewed literature and interviewed manufacturers to develop an overall understanding of the residential central air conditioner and heat pump products industry in the United States. Industry publications, including trade journals, as well as literature from manufacturers, government agencies, and tr ade organizations provided the bulk of the information, including (1) manufacturers and thei r market share, (2) shipments by product type, (3) product information, and (4) industry trends. Chapter 3 of the preliminary TSD describes the market analysis and resulting information.

DOE typically uses information about existing and past technology options and prototype designs to determine which tec hnologies and combinations of t echnologies manufacturers use to improve energy efficiency. In consultation with interested parties, DOE developed a list of technologies to consider, for residential central air conditioner and heat pump products, from trade publications, technical papers, and manufacturer literature, and through consultation with manufacturers of components and systems. Produc t literature and direct examination provided additional information, because existing products contain many technologies for improving product efficiency. Before performing the screening analysis, DOE removed from the list those technologies for which the energy consumption could not be adequately measured using the relevant DOE test procedure.

ES.3.2 Screening Analysis

Next, DOE performed a screening analysis to examine whether the technologies DOE identified (1) are technologically feasible; (2) are practicable to manufacture, install, and service; (3) have an adverse impact on product utility or av ailability; and/or (4) have adverse impacts on health and safety. DOE conducts this analysis in consultation with interest ed parties. In the subsequent engineering analysis, DOE further ex amines the technology options that it did not remove from consideration pursuant to the screening analysis.

ES.3.3 Engineering Analysis

In the engineering analysis (chapter 5), DOE established the relationship between the cost of manufacturing residential cen tral air conditioner and heat pumps and their efficiency. This relationship served as the basis for calculating co sts and benefits of modi fied product designs for consumers, manufacturers, and the nation. Chap ter 5 of the preliminary TSD describes the product classes that DOE analyzed, the representa tive baseline units, the efficiency levels DOE considered, the methodology that DOE used to develop the manufacturing production cost model, and the cost-efficiency results.

ES-5

### ES.3.3.1 Product Classes Analyzed

The engineering analysis directly analyzed the four primary residential central air conditioner and heat pump product classes: (1) split-system air cond itioners; (2) split-system heat pumps; (3) single-package air conditioners; and (4 ) single-package heat pumps. These four product classes represent most of the total shipments of residen tial central air conditioners and heat pumps.

For the other three product classes identif ied in section ES.3.1, DOE found that product offerings and available information were limited. Therefore, in chapter 5 of the preliminary TSD, DOE describes the technical characteristics and potential areas of energy savings for these product classes for the preliminary analysis. DOE intends to fully analyze these product classes for the NOPR if it can obtain enough information to quantify potential areas of energy savings. DOE requests feedback and data on potential areas of energy savings for space-constrained products and SDHV systems. Chapter 5 of the pr eliminary TSD includes additional details on the representative product classes and the cost-efficienc y curves developed as part of the engineering analysis.

ES.3.3.2 Manufacturing Cost Assessment

DOE estimated the manufacturing costs associated with an increase in energy efficiency

for each of the residential central air conditi oner and heat pump product classes analyzed using aggregated manufacturer data. The assessment method involved disassembling particular units, analyzing the materials in each unit and the manufacturing processes used to produce it, analyzing the design approaches manufacturers use, and developing a spreadsheet model to evaluate costs. DOE developed a detailed model to estimate the manufacturers product cost (MPC) at various efficiency levels. Chapter 5 of the preliminary TSD includes information on the inputs DOE used to determine the manuf acturing cost, including material, labor, and overhead costs. Chapter 5 also includes inform ation on the various components and features incorporated into designs for residential central air conditioner and heat pump products.

DOE’s engineering analysis produced cost-efficiency curves for the four primary residential central air conditioner and heat pump product classes. The cost -efficiency curves are described by the efficiency levels and the increa se in MPC above the baseline for each level. The split-system air conditioner and heat pump product classes have two different rating methods for determining their seasonal energy efficiency ra tio (SEER), depending on whether the fan blower is included in the rating. If a system is rated as a “coil-only” system, the SEER is calculated using a default fan power. These systems are ge nerally representative of a condensing unit and evaporator coil installed with an existing furnace. If a system is rated as a “blower-coil” system, the SEER is calculated using a specific fan power. In coil-only systems, only the outdoor condensing unit and evaporator coil can be modified to achieve higher system efficiencies; in blower-coil systems, which are generally representa tive of a condensing unit installed with an air handler, the outdoor condensing unit, evaporator coil, and fan blower can all be modified to achieve higher system efficiencies.

DOE assumed that coil-only systems and blower-coil systems are both prevalent in the split-system air-conditioning market, whereas bl ower-coil systems are believed to be the

ES-6

### overwhelming type of installation in the split-system heat pump market because it is more important to match the indoor a nd outdoor components to obtain proper performance. Therefore, DOE characterized the split-system air conditione r product class by develo ping separate costefficiency curves for coil-only systems and blower-coil systems. DOE characterized the splitsystem heat pump product class using only blowe r-coil systems. DOE requests comment on the market shares of coil-only and blower-coil sy stems for both split-system air conditioners and split-system heat pumps. DOE also requests comment on whether an additional coil-only engineering analysis is necessary to characterize split-system heat pumps. Table ES.1 through Table ES.5 present the key results of the engineering analysis.

Table ES.1 Manufacturer Production Cost Estimates for Three-Ton Split-System Air Conditioners: Coil-Only Systems

Efficiency Level

SEER System Cost (without air handler) $

13.0 580

13.5 615

14.0 651

14.5 692

15.0 739

15.5 797

16.0 871

16.5* 957

* Max-tech efficiency level



### Table ES.2 Manufacturer Production Cost Estimates for Three-Ton Split-System Air Conditioners: Blower-Coil Systems

Efficiency Level SEER System Cost (with air handler) $

13.0 715

13.5 754

14.0 793

14.5 834

15.0 864

15.5 895

16.0 927

17.0 995

18.0 1,068

19.0 1,147

20.0 1,232

21.0 1,324

22.0* 1,422

* Max-tech efficiency level

ES-7

### Table ES.3 Manufacturer Production Cost Estimates for Three-Ton Split-System Heat Pumps

Efficiency Level

SEER HSPF System Cost (with air handler) $

13.0 7.70 861

13.5 7.85 904

14.0 8.00 951

14.5 8.15 986

15.0 8.30 1,020

15.5 8.45 1,057

16.0 8.60 1,105

17.0 9.10 1,188

18.0 9.60 1,276

19.0 10.10 1,372

19.5* 10.30 1,423

* Max-tech efficiency level



### Table ES.4 Manufacturer Production Cost Estimates for Three-Ton Single-Package Air

Conditioners
Efficiency Level

SEER System Cost $

13.0 726

13.5 792

14.0 835

14.5 900

15.0 952

15.5 1,018

16.0 1,097

16.6* 1,209

* Max-tech efficiency level



### Table ES.5 Manufacturer Production Cost Estimates for Three-Ton Single-Package Heat Pumps Efficiency Level

SEER HSPF System Cost $

13.0 7.7 899

13.5 7.9 940

14.0 8.0 994

14.5 8.0 1,073

15.0 8.0 1,142

15.5 8.5 1,222

16.0 9.0 1,318

16.4* 9.0 1,414

* Max-tech efficiency level

ES-8

### ES.3.4 Markups to Determine Product Price

In the markups analysis (chapter 6), DOE developed appropriate markups in the

distribution chain to convert the estimates of ma nufacturer cost derived in the engineering analysis to consumer prices. In developing markups, DOE estimated markups taken by wholesalers, mechanical contractors, and gene ral contractors, along with sales taxes. DOE calculated markups separately fo r installations in new constr uction and for replacements. DOE also developed separate markups for baseline products (baseline markups) and for the cost increase associated with improvements required to produce more efficient products (incremental markups).

Table ES.6 summarizes the markups develope d for central air conditioner and heat pumps. The markups shown in this table reflect national average values for the given markup. In the subsequent LCC analysis, DOE also deve loped regional markup multipliers to capture regional variation in mechanical contractor markups, general cont ractor markups, and sales tax.

Table ES.6 National Average Markups for Central Air Conditioners and Heat Pumps

Baseline Markups Incremental Markups
Replacement

Market New Construction

Market Replacement

Market New Construction

Market

Wholesaler 1.37 1.37 1.11 1.11

Mechanical 1.38 1.28 1.12 1.04

General

- 1.29

- 1.17

Sales Tax 1.07 1.07 1.07 1.07

Overall 2.02 2.42 1.33 1.45



### ES.3.5 Energy Use Char acterization

The energy use characterization provides the basis for developing the energy savings from using higher efficiency central air conditione rs and heat pumps. The energy savings results are incorporated in the LCC and other subseque nt analyses. The DOE test procedure provides

standardized metrics that serve as the basis fo r comparing the energy consumption of different product efficiency levels. It provides a standardiz ed estimate of the seasonal efficiency for each air conditioner design. DOE uses the SEER rating to establish an estimate of seasonal cooling efficiency for different product designs. For heat pumps, DOE used the national HSPF rating to establish an estimate of relative heating efficien cy. Since actual usage of central air conditioners and heat pumps in the field varies significan tly as a function of c limate and household use preferences, DOE used other data sources to estimate actual baseline energy consumption.

ES.3.5.1 Residential Energy Use

Residential households form the largest insta lled base of central ai r conditioners and heat pumps. For the residential energy use analysis, DOE used the SEER and HSPF estimates from the engineering analysis to scale baseline energy consumption estimates to reflect higher SEER and HSPF efficiencies. DOE represented the en ergy consumption of the product at each efficiency level using a distribution that account s for variation in usag e and climate conditions based on a representative sample of households across the nation.

ES-9

### The representative sample of households is a subset of the households from the 2005 Residential Energy Consumption Survey (R ECS) produced by the Energy Information Administration (EIA), the most recent survey available. RECS is a national sample survey that

collects statistical information on the consumption of and expenditures for energy in housing units along with data on energy-related character istics of the housing units and occupants. Out of a total of 4,382 households surveyed in the 2005 RECS, 1,854 qualified for the central air conditioner analysis and 339 qualified for the cen tral heat pump analysis. A small number of households reporting use of central air conditione rs were not used in the DOE sample for specific reasons

─ e.g. , for reported non-use of the central air-conditioning system or for

concurrent use of anothe r air-conditioning product type in the same household.

For each household in the sample, DOE developed a cooling unit energy consumption (UEC) as well as a heating UEC for homes serv ed by heat pumps. The UEC was based on the reported cooling and heating energy use in RE CS for 2005 and is associated with the stock products (UEC res_stock_non-adj 

### ) used in each household. Based on 1987-2007 cooling degree day data from the National Oceanographic and Atmo spheric Administration National Clima tic Data Center (NCDC), DOE then normalized this UEC data to long-term aver age climate conditions through the use of a weather adjustment factor developed for each census division and applied to

all households within the census division. The actual 2005 cooling energy use for each RECS household was multiplied by this weather-adjustme nt factor to generate a weather-normalized

UEC res_stock 

### . For heat pumps, DOE carried out a similar weather normalization using 30-year average heating degree day data.

The weather-adjusted UEC is further adjusted to provide base-case energy consumption for 2016 (the start year for LCC analysis) for new central air conditioner and heat pump purchasers. The underlying assumption for the energy use characterization is the same that is used in the LCC analysis, i.e., that the representative samp le of customers will replace or purchase new air conditioners in 2016, the year th at revised central air-conditioning and heat pump standards go into effect. To model a base -case standards scenario for the energy use analysis, DOE first used central air conditioner an d heat pump vintage data in RECS to establish the year that the stock RECS central air conditioner and heat pump unit was installed. It then used data on the historical average efficiency fo r central air conditioners and heat pumps by year to estimate the SEER and HSPF for the products in the RECS household. This stock efficiency is

associated with the UEC values for the i ndividual RECS household observations. Because customers are presumed to purch ase air conditioners in 2016, DOE used current estimates of the efficiency distribution for shipments (by produc t class) as shipment efficiency weights appropriate to new purchases in 2016 in the base case. DOE then selected efficiencies for new shipments to each household based on the efficiency distributions. DOE then scaled the weathernormalized UEC res_stock 

### cooling and heating electrical energy use by the ratio of selected replacement efficiency to RECS stock efficiency established for each household. Because stock efficiencies are in general lower than curren t shipped efficiencies, adjusting the weathernormalized stock energy use by the replacement-to-stock efficiency ratio reduces the estimate for household cooling and heating energy consumpti on to reflect the 2016 base case used for the LCC analysis.

ES-10

### ES.3.5.2 Commercial Building Energy Use

Central air conditioners and heat pumps are also used in many smaller commercial buildings. DOE has estimated the fraction shipped for commercial building applications at approximately 7 percen t based on industry estimates. For commercial buildings, DOE followed the path outlined in the framework document to estimate the energy savings for shipments of higher efficiency products. The framework docu ment used the EnergyPlus building energy simulation software to simulate the energy c onsumption of central air conditioners and heat pumps used to satisfy the cooling, supply fan—an d in the case of central heat pumps, the heating energy—required in a small office building. DOE used an existing small office building model developed for DOE’s energy benchmarking task fo r this analysis. DOE simulated the building in 237 climates corresponding to each of the Typi cal Meteorological Year (TMY2) weather locations within the 50 states. DOE simulated the same building served either by central air conditioners or heat pumps and simulated the pr oduct for each product type using a 13 SEER, 14 SEER, 16 SEER, and max tech level for either central air conditioners (SEER 22) (based on blower-coil ratings) or central heat pumps (SEER 19.5). Product parameters used in the simulation were adjusted to reflect engineering de signs corresponding to each efficiency level.

The simulated building used five individual central air-conditioning and heat pump units. DOE extracted the annual energy consumption for cooling and fan energy use and central heat pump heating from each unit as well as the product capacity from each unit from each simulation run and aggregated these to the whole buildin g level. Using this whole building data, DOE normalized the central air conditioner and heat pu mp energy consumption for each location and efficiency level to reflect that of an average 3-ton central air-conditioning or heat pump 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.

DOE used population-based weighting factors de veloped for each climate to represent the relative percentage of customers experiencing each climate in each state, at the national level, and in each of three geographic regions being used to assess regional standards (see below). 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 centr al air conditioners a nd heat pumps at each efficiency level.

ES.3.5.3 Regional Analysis

EPCA allows DOE to consider regional stan dards for central air conditioners and heat pumps. DOE defined two separate geographic regi ons to assess proposed regional standards. One is a hot-humid region, consisting of 12 states in the southeastern United States; the second is a hot-dry region, consisting of four states in the So uthwest. The states comp rising the regions are listed in Table ES.7. Chapter 7 de tails the development of these regions. The remainder of the United States, to which only the national standard will be applicable, was labeled “Rest of Country.” The LCC analysis was conducted both at a national level and at a regional level using

residential and commercial custom er populations defined for each region (based on analysis of

RECS data for the residential population and the clima te weighting factors developed for the

ES-11

### commercial analysis). Chapter 7 of the prelimin ary TSD provides more details on the methods, data, and assumptions used for developing the adjusted UECs.

Table ES.7 Regions Defined for the Central Air Conditioner and Heat Pump Regional Analysis

Hot-Humid (Region 1) Hot-Dry (Region 2) Rest-of-Country (Region 0)

Alabama Arizona Alaska Nebraska

Arkansas California Colorado New Hampshire

Florida Nevada Connecticut New Jersey Georgia New Mexico Delaware New York

Hawaii District of Columbia North Dakota

Louisiana Idaho Ohio Mississippi Illinois Oregon

North Carolina Indiana Pennsylvania

Oklahoma Iowa Rhode Island

South Carolina Kansas South Dakota

Tennessee Kentucky Utah

Texas Maine Vermont Maryland Virginia

Massachusetts Washington Michigan West Virginia

Minnesota Wisconsin

Missouri Wyoming

Montana



### Table ES.8 through Table ES.12 present th e average annual energy use for the representative product classes at each energy efficiency level DOE considered.

ES-12

### Table ES.8 Split- System Air Conditioners: Average Annual Energy Use by Efficiency

Level

⎯ Coil-Only Systems

Efficiency Level Annual Energy Consumption kilowatt hours per year (kWh/yr)

National Hot-Humid Hot-Dry Rest of Country

# SEER HSPF * Cooling Heating Cooling Heating Cooling Heating Cooling Heating

1 13.0 N/A 2,407 0 3,564 0 2,176 0 1,378 0

Market

Baseline Market

Baseline N/A 2,291 0 3,393 0 2,071 0 1,310 0

2 13.5 N/A 2,322 0 3,437 0 2,100 0 1,331 0

3 14.0 N/A 2,243 0 3,318 0 2,029 0 1,287 0

4 14.5 N/A 2,168 0 3,205 0 1,960 0 1,244 0

5 15.0 N/A 2,097 0 3,100 0 1,897 0 1,204 0

6 15.5 N/A 2,031 0 3,002 0 1,836 0 1,166 0

7 16.0 N/A 1,968 0 2,909 0 1,780 0 1,130 0

8 16.5 N/A 1,912 0 2,825 0 1,730 0 1,099 0
*N/A means not applicable.



### Table ES.9 Split-System Air Conditioners: Average Annual Energy Use by Efficiency Level—Blower-Coil Systems

Efficiency Level Annual Energy Consumption kWh/yr

National Hot-Humid Hot-Dry Rest of Country

# SEER HSPF* Cooling Heating Cooling Heating Cooling Heating Cooling Heating

1 13.0 N/A 2,433 0 3,584 0 2,172 0 1,365 0

Market

Baseline Market

Baseline N/A 2,315 0 3,410 0 2,067 0 1,302 0

2 13.5 N/A 2,347 0 3,455 0 2,096 0 1,319 0

3 14.0 N/A 2,267 0 3,336 0 2,025 0 1,275 0

4 14.5 N/A 2,190 0 3,223 0 1,957 0 1,233 0

5 15.0 N/A 2,119 0 3,117 0 1,893 0 1,193 0

6 15.5 N/A 2,052 0 3,018 0 1,833 0 1,155 0

7 16.0 N/A 1,988 0 2,925 0 1,777 0 1,120 0

8 16.5 N/A 1,932 0 2,840 0 1,727 0 1,089 0

9 17.0 N/A 1,878 0 2,760 0 1,679 0 1,060 0

10 18.0 N/A 1,780 0 2,613 0 1,592 0 1,007 0

11 19.0 N/A 1,692 0 2,482 0 1,514 0 960 0

12 20.0 N/A 1,613 0 2,363 0 1,444 0 917 0

13 21.0 N/A 1,541 0 2,256 0 1,380 0 878 0

14 22.0 N/A 1,476 0 2,158 0 1,322 0 842 0
*N/A means not applicable.

ES-13

### Table ES.10 Split-System Heat Pumps: Average Annual Energy Use by Efficiency Level

Efficiency Level Annual Energy Consumption kWh/yr

National Hot-Humid Hot-Dry Rest of Country

# SEER HSPF Cooling Heating Cooling Heating Cooling Heating Cooling Heating

1 13.0 7.70 3,487 1,749 4,275 1,275 4,203 924 1,978 2,968

Market

Baseline Market

Baseline Market

Baseline 3,268 1,687 4,006 1,230 3,937 891 1,857 2,862

2 13.5 7.85 3,363 1,716 4,122 1,251 4,053 906 1,909 2,912

3 14.0 8.00 3,248 1,685 3,980 1,228 3,913 890 1,846 2,859

4 14.5 8.15 3,138 1,654 3,845 1,206 3,780 873 1,784 2,808

5 15.0 8.30 3,035 1,625 3,719 1,184 3,656 858 1,726 2,758

6 15.5 8.45 2,939 1,597 3,601 1,163 3,539 843 1,671 2,711

7 16.0 8.60 2,848 1,570 3,490 1,143 3,430 828 1,620 2,665

8 17.0 9.10 2,688 1,485 3,293 1,081 3,235 783 1,531 2,522

9 18.0 9.60 2,545 1,409 3,117 1,026 3,062 743 1,452 2,395

10 19.0 10.10 2,417 1,341 2,959 976 2,907 706 1,381 2,279

11 19.5 10.30 2,358 1,315 2,886 957 2,835 693 1,348 2,236



### Table ES.11 Single-Package Air Conditioners: Average Annual Energy Use by Efficiency

Level

Efficiency Level Annual Energy Consumption kWh/yr

National Hot-Humid Hot-Dry Rest of Country

# SEER HSPF * Cooling Heating Cooling Heating Cooling Heating Cooling Heating

1 13.0 N/A 2,376 0 3,602 0 2,170 0 1,363 0

Market

Baseline Market

Baseline N/A 2,348 0 3,559 0 2,144 0 1,348 0

2 13.5 N/A 2,292 0 3,473 0 2,093 0 1,316 0

3 14.0 N/A 2,214 0 3,353 0 2,022 0 1,273 0

4 14.5 N/A 2,139 0 3,239 0 1,954 0 1,230 0

5 15.0 N/A 2,070 0 3,133 0 1,890 0 1,191 0

6 15.5 N/A 2,004 0 3,033 0 1,831 0 1,153 0

7 16.0 N/A 1,942 0 2,940 0 1,774 0 1,118 0

8 16.6 N/A 1,876 0 2,838 0 1,714 0 1,081 0
*N/A means not applicable.

ES-14

### Table ES.12 Single-Package Heat Pumps: Average Annual Energy Use by Efficiency

Level

Efficiency Level Annual Energy Consumption kWh/yr

National Hot-Humid Hot-Dry Rest of Country

# SEER HSPF Cooling Heating Cooling Heating Cooling Heating Cooling Heating

1 13.0 7.70 3,464 1,720 4,295 1,272 4,211 927 1,964 2,953

Market

Baseline Market

Baseline Market

Baseline 3,372 1,698 4,179 1,256 4,098 915 1,914 2,916

2 13.5 7.85 3,341 1,688 4,141 1,248 4,060 910 1,896 2,898

3 14.0 8.00 3,227 1,657 3,999 1,225 3,920 893 1,833 2,845

4 14.5 8.00 3,117 1,657 3,863 1,225 3,787 893 1,772 2,845

5 15.0 8.00 3,015 1,657 3,737 1,225 3,663 893 1,714 2,845

6 15.5 8.50 2,920 1,561 3,618 1,154 3,546 841 1,660 2,682

7 16.0 9.00 2,829 1,476 3,506 1,091 3,436 795 1,609 2,538

8 16.4 9.00 2,763 1,476 3,424 1,091 3,356 795 1,572 2,537



### ES.3.6 Life-Cycle Cost and Payback Period Analyses

Stipulating new energy conservation sta ndards for products results in changes in consumer operating expenses—usually a decrease— and changes in consumer price—usually an increase. DOE analyzed the net effect of revised standards on consumers by evaluating the LCCs using the cost-efficiency relationships derived in the engineering analysis, as well as the energy costs derived from the energy use characteri zation. Inputs to the LCC calculation included the installed cost to the consumer (purchase price plus installation cost), operating costs (energy expenses, repair, and maintena nce), the lifetime of the appliance, and a discount rate.

The installed cost of a product typically incr eases while operating cost typically decreases in response to new standards. Therefore, there is a point in time for higher efficiency products when the cumulative net operating-cost savings (in dollars) since the time of purchase is equal tothe increase in the purchase price. The length of time required for products to reach this costequivalence point is known as the payback period (PBP).

DOE conducted the LCC and PBP analyses usin g values that reflect energy consumption in the field. DOE identified several inputs fo r estimating the LCC, including retail product prices, energy prices, discount ra tes, and product lifetimes. DOE used EIA’s energy price data to determine prices for electricity in 2007, and used projections of these energy prices from the April 2009 update to EIA’s Annual Energy Outlook 2009 to estimate future energy prices. DOE developed discount rates from estimates of the finance costs for consumers and commercial businesses that purchase central ai r conditioners and heat pumps.

Because the basis for the lifetime estimates in the literature for air-conditioning products is uncertain, DOE used actual data sources to es timate the distribution of central air conditioner and heat pump lifetimes in the field. DOE estimated the fraction of appliances of a given age still in operation by combining survey results from RECS and the U.S. Census’s American Housing Survey with historical appliance shipments. The resulting survival function, which DOE assumed

ES-15

### has the form of a cumulative Weibull distributi on, provides an average and median appliance

lifetime.

There are number of potential complications concerning the configuration of air conditioning equipment sold in the future marketplace that affect how efficiency can be measured and achieved. For example, efficiency ratings for air conditioning units depend on the configuration in which such units are sold. The vast majority of units on the market are condensing units and indoor coil combinations design ed to be used with furnaces that provide the indoor air handling component. For these products , performance ratings can be provided based on a coil-only rating, in which case a default supply fan power assumption is used to calculate the SEER rating. Higher efficiency, coil-only ratings are achieved through more efficient design of the condensing unit and indoor coil. A small fra ction of the split-system air conditioner market

uses dedicated air handlers instead of furnaces. Additional ratin gs of the same condensing unit with specific furnace or air handler blowers can also be provided as blower-coil ratings. Higher efficiency blower-coil ratings can also be obtained by improving the indoor blower or furnace.

Roughly 80 percent of future split-system air conditioner sales are expected to replace failing air-conditioning units (most frequently, th e outdoor condensing unit, while only about 20 percent are expected to be installed in new construction). Most of these systems are integrated with the air-handling system of a natural-gas fi red furnace that provides space heating to the building. Since many of these furnaces were installed at the same time as the failing airconditioning unit, some building owners considering air-conditioning replacement will also replace the aging furnace at the same time, but ot hers will elect to keep the existing furnace and just install a new condens ing unit and indoor coil.

The consumer’s ability to use coil-only systems is also applicable to the new construction market. EPCA does not authorize DOE to require a furnace to be purchased in conjunction with a new split-system air conditioner. In addition, wh ile the Energy Independence and Security Act of 2007 requires DOE to issue furnace fan energy conservation or energy use standards not later than December 31, 2013, DOE does not currently regulate furnace fan performance. In practice, the furnace could be installed prior to the air c onditioner purchase, and a rated efficiency that is the result of a particular furnace fan being used (i.e. the blower-coil efficiency) may be difficult to achieve in the field. Nevertheless, DOE recognizes that a small number of split-system air conditioners are rated using dedicated air handler s only, and a larger fraction are installed in conjunction with a new furnace.

Because of the circumstances described above, DOE has provided an LCC analysis assuming both a coil-only scenario, and a blower-c oil scenario, using the corresponding coil-only and blower-coil engineering curves as appropr iate. DOE developed the life-cycle cost for consumers purchasing coil-only systems and consumers purchasing blower-coil systems assuming that these are independent consumer markets.

To accurately estimate the share of consumers that would be affected by a standard at a particular efficiency level, DOE’s LCC analys is considered the projected distribution of efficiencies for products that consumers would purchase under a base case ( i.e ., absent amended energy efficiency standards). DOE refers to this distribution of product e fficiencies as a base

ES-16

### case efficiency distributi on. Using the projected distribution of base-case product efficiencies for each product class, DOE assigned a specific base-case product efficiency to each sample household as discussed earlier under energy use characterization. If a household was assigned a product efficiency that is greater than or equal to the efficiency of the standard level under consideration, the LCC calculati on would show that this household is not affected by that

standard level.

Table ES.13 summarizes the results for the LCC and PBP analyses, indicating for each product class and region the highest SEER and HSPF level where the average LCC savings is greater than zero and the median PBP in years corresponding to that level.

Table ES.13 LCC and PBP Summary: Highest SEER and HSPF for Which Mean LCC Savings are Positive, and Corresponding Median PBP in Years

Product National Hot-Humid Hot-Dry Rest of Country

Class SEER/

HSPF PBP years SEER/

HSPF PBP

years SEER/

HSPF PBP

years SEER/

HSPF PBP

yearsSplitSystem

AC Coil Only 13.5/NA 27.8 15.0/NA 17.5 14.5/NA 42.6 13.0/NA NA

SplitSystem

AC

BlowerCoil 13.5/NA 27.4 19.0/NA 17.9 17.0/NA 30.1 13.0/NA NA

SplitSystem

HP 19.5/10.3 12.0 19.5/10.3 10.0 19. 5/10.3 8.8 15.5./8.45** 12.6

SinglePackage

AC 13.0/NA NA 13.0/NA NA 13.0/NA NA 13.0/NA NA

Single– Packag

e HP 14.0/8.0 10.5 14.0/8.0 8.2 14.5/8.0 11.4 13.0/7.7 NA

*NA means not applicable. **SEER 15 and 15.5 show very small LCC savings. Savings are negative at SEER13.5-14.5 and at SEER 16.0 and

above.



### Figures presented in chapter 8 of the preliminary TSD show the range of LCC savings and PBPs for all of the efficiency levels DOE considered for each product class. Chapter 8 provides more details on the methods, data, and assumptions used for the LCC and PBP analyses.

ES-17

### ES.3.7 Shipments Analysis

DOE needs shipment forecasts to calculate the national impacts of standards on energy use, NPV, and future manufacturer cash flows for each product being considered. DOE’s shipments model considered ship ments based on sector, market, and region in both residential and commercial sectors. DOE analyzed ship ments to three markets: new construction, replacements, and existing buildings th at do not already contain the product ( i.e ., “new owners”). DOE allocated shipments to the three geographi c regions described in section ES.3.5.3. Rather than simply extrapolating a current shipments tr end, the analysis used driver input variables ( e.g ., new construction forecasts and produc t stock saturations) to forecast sales to each sector, market segment, and region. For units shipped to new construction, annual product shipments are equal to the number of new building units built times th e product purchase rate, which is determined by the market share of the product under c onsideration. To estimate shipments due to replacements, the model used sales in previous years and assumptions about the product lifetime, which determine how long an appliance is likely to remain in use. Shipments to new owners are

based on historical rates of a doption. Chapter 9 of the preliminar y TSD provides additional detail on the shipments analysis.

Figure ES.2 through Figure ES.6 illustrate the forecasted base-case shipments for all product classes included in this rulemaking. Shipments are broken down into each of the three regions and designated by market segment ( i.e. , new construction, replacements, and new owners). Shipments to the commercial building sector are estimated to represent only about 7 percent of all product shipments. For clarity, the figures do not differentiate among units going

to the residential and commercial sectors.

ES-180 1 2 3 4 5 6

1990 199 4

1 998 2002
2 0 0 6 2010 2014 201 8 2022 2026
2 0 3 0 2034 203 8
2 042 2046

YearShipments (million) Hot-Dry: New Construction Hot-Dry: New Ow ner Hot-Dry: Replace

Hot-Humid: New Construction Hot-Humid: New Ow ner Hot-Humid: Replace

Rest of Country: New Construction Rest of Country: New Ow ner Rest of Country: Replace

Rest-of-Country

Hot-Humid

Hot-Dry



### Figure ES.2 Forecasted Shipments (Base Case) for Split-System Air Conditioners, CoilOnly

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7

1990 199 4

1 998 2002
2 0 0 6 2010 2014 201 8 2022 2026
2 0 3 0 2034 203 8
2 042 2046

YearShipments (million) Hot-Dry: New Construction Hot-Dry: New Ow ner Hot-Dry: Replace

Hot-Humid: New Construction Hot-Humid: New Ow ner Hot-Humid: Replace

Rest of Country: New Construction Rest of Country: New Ow ner Rest of Country: Replace

Rest-of-Country

Hot-Humid

Hot-Dry



### Figure ES.3 Forecasted Shipments (Base Case) for Split-System Air Conditioners,

Blower-Coil

ES-190.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

1990 199 4

1 998 2002
2 0 0 6 2010 2014 201 8 2022 2026
2 0 3 0 2034 203 8
2 042 2046

YearShipments (million) Hot-Dry: New Construction Hot-Dry: New Ow ner Hot-Dry: Replace

Hot-Humid: New Construction Hot-Humid: New Ow ner Hot-Humid: Replace
Rest of Country: New Construction Rest of Country: New Ow ner Rest of Country: Replace

Rest-of-Country

Hot-Humid

Hot-Dry



### Figure ES.4 Forecasted Shipments (Base Case) for Split-System Heat Pumps

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7

1990 199 4

1 998 2002
2 0 0 6 2010 2014 201 8 2022 2026
2 0 3 0 2034 203 8
2 042 2046

YearShipments (million) Hot-Dry: New Construction Hot-Dry: New Ow ner Hot-Dry: Replace

Hot-Humid: New Construction Hot-Humid: New Ow ner Hot-Humid: Replace
Rest of Country: New Construction Rest of Country: New Ow ner Rest of Country: Replace

Rest-of-Country

Hot-Humid

Hot-Dry



### Figure ES.5 Forecasted Shipments (Base Case) for Single-Package Air Conditioners

ES-200.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50

1 9 9 0 1994 199 8
2 002 2006
2 0 1 0 2014 2018
2 022 2026
2 0 3 0 2034 2038
2 042 2046

YearShipments (million) Hot-Dry: New Construction Hot-Dry: New Ow ner Hot-Dry: Replace

Hot-Humid: New Construction Hot-Humid: New Ow ner Hot-Humid: Replace
Rest of Country: New Construction Rest of Country: New Ow ner Rest of Country: Replace

Rest-of-Country

Hot-Humid

Hot-Dry



### Figure ES.6 Forecasted Shipments (Base Case) for Single-Package Heat Pumps

ES.3.8 National Impact Analysis

The NIA estimates four national impacts from possible candidate standard levels for residential central air conditioners and heat pumps: (1) national energy savings, (2) monetary value of energy savings to consumers of the cons idered products due to standards, (3) increased

total installed costs to consumers of the considered products due to standards, and (4) the NPV of potential standards (the difference between the energy savings and increased total installed costs). DOE prepared an NES spreadsheet mode l to forecast energy savings and national consumer economic costs and savings resulting from new standards.

A key component of DOE’s estimates of NES an d NPV is the trend in energy efficiency forecasted for the base case (without new standa rds) and for each of the standards cases (with new standards). To forecast the base-case effi ciency distribution for each product class, DOE accounted for changes in the market shares of mo re efficient products base d on historical trends.

For its determination of standards-case efficiency distributi ons, DOE used a “roll-up + efficiency growth” scenario to establish the distribution of efficiencies for the year that revised standards are assumed to become effective ( i.e ., 2016) and subsequent years. DOE assumed that product

efficiencies in the base case that did not meet the standard level under consideration would “roll up” to meet the new standard level in 2016. DOE also assumed that mark et-pull programs (such as ENERGY STAR) would continue to promote efficient applia nces after the introduction of revised standards in 2016, and that this would lead to increased market shares for products with

efficiencies above the standard level. DOE a ssumed the growth in more efficient products for

ES-21

### the base case equaled historical rates of efficiency growth. For the standards cases, DOE developed growth trends for each standard level that maintained the same per-unit average total

installed cost difference between the base case and each standards case for the year 2016 over the entire forecast period (2016–2046). Chapter 10 of the preliminary TSD provides additional detail on the development of the ba se case and standards case efficiency trends as well as all the details regarding the NIA.

ES.3.8.1 National Energy Savings

DOE calculated annual NES as the differenc e between national energy consumption in the base case and in each higher efficiency standard case. DOE estimated energy consumption and savings based on site energy (electrici ty directly consumed by the central air conditioner/heat pump) and converted the electricity consumption and savings to source energy (energy needed to produce the site energy) using factors that account for losses in transmission

and distribution and in electrici ty generation. Cumulative energy savings are the sum of the annual NES, which DOE deter mined over specified periods.

The NES results shown in Table ES.14 th rough Table ES.17 are cumulative to 2046 and are shown as primary energy savings in quads (quadrillion Btus).

Table ES.14 Split-System Air Conditioners: Cumulative NES Results (quads)

SEER National* Hot-Humid Hot-Dry Rest of Country

Total** CoilOnly Blower

Coil Total** CoilOnly Blower

Coil Total** CoilOnly Blower

Coil Total** CoilOnly Blower

Coil

13.5 0.20 0.18 0.02 0.09 0.08 0. 01 0.03 0.03 0.00 0.06 0.05 0.00

14.0 0.82 0.75 0.07 0.37 0.34 0. 03 0.13 0.12 0.01 0.24 0.22 0.02

14.5 1.46 1.33 0.12 0.65 0.59 0. 06 0.24 0.22 0.02 0.43 0.39 0.04

15.0 2.08 1.90 0.18 0.93 0.85 0. 08 0.34 0.31 0.03 0.61 0.56 0.05

15.5 2.69 2.46 0.23 1.20 1.10 0. 10 0.44 0.40 0.04 0.79 0.72 0.07

16.0 3.23 2.95 0.28 1.44 1.32 0. 12 0.52 0.48 0.04 0.95 0.87 0.08

16.5 3.51 3.18 0.33 1.57 1.43 0. 15 0.57 0.52 0.05 1.02 0.93 0.09

17.0 3.56 0.37 1.59 0.17 0.57 0.06 1.04 0.11

18.0 3.65 0.47 1.64 0.21 0.59 0.08 1.06 0.13

19.0 3.75 0.57 1.68 0.25 0.61 0.09 1.09 0.16

20.0 3.84 0.66 1.72 0.30 0.62 0.11 1.12 0.19

21.0 3.92 0.74 1.76 0.33 0.63 0.12 1.14 0.21

22.0 3.96 0.78 1.78 0.35 0.64 0.12 1.15 0.22

* Reflects analysis conducted at national level. Regional values do not necessarily add up to national NES.

** Total NES for 17 through 22 SEER reflects the Coil-Only energy savings at 16.5 SEER.

ES-22

### Table ES.15 Split-System Heat Pumps: Cumulative NES Results (quads)

SEER HSPF National* Hot-Humid Hot-Dry Rest of Country

13.5 7.85 0.11 0.07 0.01 0.03

14.0 8.00 0.56 0.34 0.07 0.15

14.5 8.15 1.03 0.63 0.12 0.28

15.0 8.30 1.53 0.93 0.18 0.42

15.5 8.45 2.09 1.26 0.24 0.58

16.0 8.60 2.78 1.66 0.31 0.79

17.0 9.10 3.93 2.33 0.44 1.15

18.0 9.60 4.98 2.94 0.55 1.47

19.0 10.10 5.68 3.36 0.63 1.68

19.5 10.30 5.78 3.41 0.64 1.71

* Reflects analysis conducted at national level. Regional values do not necessarily add up to national NES.



### Table ES.16 Single-Package Air Conditioners: Cumulative NES Results (quads)

SEER National* Hot-Humid Hot-Dry Rest of Country

13.5 0.08 0.04 0.01 0.02

14.0 0.15 0.07 0.02 0.04

14.5 0.24 0.11 0.04 0.07

15.0 0.30 0.14 0.05 0.09

15.5 0.36 0.17 0.06 0.11

16.0 0.41 0.19 0.07 0.12

16.6 0.43 0.20 0.07 0.13

* Reflects analysis conducted at national level. Regional values do not necessarily add up to national NES.



### Table ES.17 Single-Package Heat Pumps: Cu mulative NES Results (quads)

SEER HSPF National* Hot-Humid Hot-Dry Rest of Country

13.5 7.85 0.04 0.02 0.00 0.01

14.0 8.00 0.10 0.06 0.01 0.03

14.5 8.00 0.19 0.12 0.02 0.05

15.0 8.00 0.28 0.17 0.03 0.08

15.5 8.50 0.36 0.22 0.04 0.11

16.0 9.00 0.41 0.25 0.05 0.12

16.4 9.00 0.43 0.26 0.05 0.12

* Reflects analysis conducted at national level. Regional values do not necessarily add up to national NES.



### ES.3.8.2 Net Present Value

DOE calculated NPV as the difference betwee n the present value of operating cost savings and the present value of increased total installed costs. DOE calculated operating cost savings over the life of the products purchased in the forecast period. DOE used discount rates of 7 percent and 3 percent to discount future costs and savings to the present. The NPV results for

ES-23

### the representative product classes are show n in Table ES.18 through Table ES.22 as the discounted value of the net savings in dollar terms.

ES-24Table ES.18Split-System Air Conditioners: Discounted Cumulative NPV Results (3% Discount Rate)SEERNational*(bill. 2008$)Hot-Humid(bill. 2008$)Hot-Dry(bill. 2008$)Rest of Country(bill. 2008$)Total**CoilOnlyBlowerCoilTotal**Coil-OnlyBlowerCoilTotal**Coil-OnlyBlowerCoilTotal**Coil-OnlyBlowerCoil13.5-0.76-0.760.000.080.060.02-0.04-0.050.01-0.93-0.88-0.0514.0-4.14-4.11-0.030.100.000.10-0.37-0.410.03-4.35-4.14-0.2114.5-9.32-9.25-0.07-0.37-0.530.16-1.07-1.130.06-8.71-8.33-0.3815.0-16.86-16.71-0.15-1.48-1.690.22-2.25-2.330.07-14.27-13.70-0.5715.5-26.88-26.59-0.29-3.28-3.540.26-3.95-4.020.07-21.04-20.25-0.7916.0-38.02-37.53-0.49-5.54-5.810.27-5.89-5.950.06-28.16-27.13-1.0416.5-44.43-43.67-0.76-6.89-7.170.27-7.01-7.050.04-32.18-30.86-1.3217.0-44.77-1.09-6.910.25-7.050.00-32.48-1.6318.0-45.67-1.99-7.010.16-7.17-0.12-33.23-2.3719.0-46.89-3.22-7.19-0.03-7.36-0.31-34.14-3.2820.0-48.41-4.74-7.47-0.30-7.62-0.57-35.19-4.3321.0-50.13-6.46-7.81-0.64-7.92-0.87-36.30-5.4422.0-51.02-7.35-8.00-0.83-8.08-1.03-36.86-6.00*Reflects analysis conducted at national level. Regional values do not necessarily add up to national NES.** Total NPV for 17 through 22 SEER reflects the Coil-Only economic impacts at 16.5 SEER.ES-25Table ES.19Split-System Air Conditioners: Discounted Cumulative NPV Results (7% Discount Rate)SEERNational*(bill. 2008$)Hot-Humid(bill. 2008$)Hot-Dry(bill. 2008$)Rest of Country(bill. 2008$)Total**CoilOnlyBlowerCoilTotal**Coil-OnlyBlowerCoilTotal**Coil-OnlyBlowerCoilTotal**Coil-OnlyBlowerCoil13.5-0.43-0.41-0.02-0.01-0.020.004-0.04-0.040.000-0.42-0.39-0.0314.0-2.20-2.12-0.08-0.17-0.180.01-0.26-0.26-0.001-1.95-1.84-0.1114.5-4.74-4.60-0.14-0.53-0.560.02-0.64-0.64-0.002-3.87-3.67-0.2015.0-8.27-8.06-0.21-1.17-1.200.03-1.22-1.21-0.01-6.29-6.00-0.2915.5-13.06-12.75-0.31-2.16-2.190.03-2.05-2.04-0.01-9.33-8.95-0.3916.0-18.87-18.44-0.43-3.46-3.480.02-3.10-3.07-0.03-12.85-12.35-0.5016.5-22.73-22.14-0.59-4.35-4.360.00-3.80-3.75-0.05-15.13-14.50-0.6317.0-22.91-0.77-4.38-0.02-3.82-0.07-15.27-0.7718.0-23.37-1.24-4.46-0.10-3.89-0.15-15.60-1.1119.0-23.98-1.84-4.57-0.22-4.00-0.25-16.01-1.5120.0-24.71-2.57-4.73-0.37-4.12-0.38-16.47-1.9821.0-25.53-3.40-4.91-0.56-4.27-0.52-16.98-2.4822.0-26.05-3.91-5.03-0.68-4.37-0.62-17.29-2.79*Reflects analysis conducted at national level. Regional values do not necessarily add up to national NES.** Total NPV for 17 through 22 SEER reflects the Coil-Only economic impacts at 16.5 SEER.ES-26Table ES.20Split-System Heat Pumps: Discounted Cumulative NPV ResultsSEERHSPFNational*(bill. 2008$)Hot-Humid(bill. 2008$)Hot-Dry(bill. 2008$)Rest of Country(bill. 008$)3% Disc.Rate7% Disc.Rate3% Disc.Rate7% Disc.Rate3% Disc.Rate7% Disc.Rate3% Disc.Rate7% Disc.Rate13.57.850.340.060.300.080.090.020.01-0.0214.08.001.730.321.550.390.440.130.05-0.0814.58.153.120.572.820.720.810.230.09-0.1615.08.304.310.684.010.971.150.320.06-0.2715.58.455.280.615.141.151.470.38-0.05-0.4516.08.606.270.446.351.301.810.44-0.19-0.6717.09.107.12-0.087.941.412.270.51-0.63-1.0818.09.606.07-1.358.491.122.460.47-1.64-1.7319.010.104.17-2.928.210.592.440.37-2.71-2.4219.510.303.70-3.328.070.432.410.33-2.94-2.59*Reflects analysis conducted at national level. Regional values do not necessarily add up to national NPV.Table ES.21 Single-Package Air Conditioners: Discounted Cumulative NPV ResultsSEERNational*(bill. 2008$)Hot-Humid(bill. 2008$)Hot-Dry(bill. 2008$)Rest of Country(bill. 2008$)3% Disc.Rate7% Disc.Rate3% Disc.Rate7% Disc.Rate3% Disc.Rate7% Disc.Rate3% Disc.Rate7% Disc.Rate13.5-0.62-0.33-0.03-0.04-0.07-0.05-0.54-0.2514.0-1.26-0.65-0.10-0.09-0.16-0.09-1.05-0.4714.5-2.32-1.15-0.25-0.19-0.32-0.18-1.82-0.8215.0-3.31-1.62-0.42-0.28-0.49-0.26-2.49-1.1115.5-4.53-2.21-0.66-0.41-0.70-0.36-3.27-1.4716.0-5.67-2.83-0.91-0.56-0.90-0.47-3.97-1.8316.6-6.37-3.27-1.07-0.66-1.02-0.55-4.39-2.08*Reflects analysis conducted at national level. Regional values do not necessarily add up to national NPV.ES-27Table ES.22Single-Package Heat Pumps: Discounted Cumulative NPV ResultsSEERHSPFNational*(bill. 2008$)Hot-Humid(bill. 2008$)Hot-Dry(bill. 2008$)Rest of Country(bill. 2008$)3% Disc.Rate7% Disc.Rate3% Disc.Rate7% Disc.Rate3% Disc.Rate7% Disc.Rate3% Disc.Rate7% Disc.Rate13.57.85-0.05-0.050.03-0.0060.010.000-0.05-0.0314.08.00-0.22-0.180.03-0.040.01-0.006-0.16-0.0914.58.00-0.58-0.42-0.04-0.120.00-0.02-0.35-0.2015.08.00-0.94-0.63-0.13-0.20-0.018-0.04-0.51-0.2915.58.50-1.35-0.87-0.27-0.30-0.05-0.06-0.67-0.3716.09.00-1.86-1.18-0.47-0.43-0.10-0.09-0.87-0.4816.49.00-2.16-1.38-0.60-0.52-0.13-0.11-0.99-0.56*Reflects analysis conducted at national level. Regional values do not necessarily add up to national NPV.ES-28

### ES.3.9 Preliminary Manufacturer Impact Analysis

The preliminary MIA focused on manufacturers of residential central air conditioners and heat pumps. Potential impacts include financial effects, both quantitative and qualitative, that might result from new energy conservation standards and consequently lead to changes in manufacturing practices for these products. DOE identified potential impacts through interviews with manufacturers and other interested parties. Chapter 12 of the preliminary TSD includes details on the key issues DOE identified during the preliminary MIA.

DOE identified eight key issues from ener gy conservation standa rds for residential central air conditioner and heat pump manufacturers:

• increased conversion costs,

• impact on U.S. production and jobs,

• cumulative regulatory burden,

• impact on product utility,

• current economic conditions,

• product substitution,

• impacts of regional standards, and

• technical difficulty of ac hieving new standards.

DOE conducted the preliminary MIA by fi rst identifying products, methods, and practices used in the residential central ai r conditioner and heat pump industry. Next, DOE examined how energy efficiency improvement s affect cost, production, and various other manufacturing metrics. Finally, DOE interviewed manufacturers and adjusted the analysis as appropriate, based on manuf acturers’ feedback. In the interviews, DOE examined any additional effects on competition, manufacturing capacity, di rect employment, and the cumulative burden of other regulations affecting manufacturers, as well as several issues raised by individual manufacturers. Chapter 12 of the preliminary TSD provides details on this and other aspects of the preliminary MIA.

ES.4 ISSUES ON WHICH DOE SEEKS PUBLIC COMMENT

DOE is particularly interested in receiving comments and views of interested parties concerning:

1. Effective Date of Standards

DOE previously determined that the final rule in this rulemaking must be published by June 30, 2011 and tentatively decided that the rule would apply to products manufactured 5 years later, in June 2016. Several comments from stakehol ders have been received to date expressing

ES-29

### concern regarding this compliance date. Specifically, stakeholders are concerned that the implementation of the standard during peak season could re sult in inconsistencies for distributors. DOE seeks further comment on compliance during the peak season. (Reference Chapter 2 of the preliminary TSD for details.)

2. Heat Pump Cooling Efficiency Requirements

Several stakeholders have commented to da te that the same standard should apply for both central air conditioner and heat pump products . This was the case in previous efficiency standards rulemaking, reflecting concerns that different effici ency requirements would cause consumers to switch to the product type subject to lower standards. Current analyses are treating air conditioners and heat pumps as separate pr oducts in order to determine whether separate standards may be warranted. DOE seeks comment regarding whether to implement standards with equal cooling efficiency requirements for air conditioners and heat pumps. (Reference Chapter 2 of the preliminary TSD for details.)

3. Effects of Expiration of Though-the-Wall (TTW) Product Classes

Stakeholders previously stated strong be liefs that TTW split air conditioners and heat pumps should not be included in the space-cons trained product class fo r new installations. According to these manufacturers, inclusion of the products in this class would give TTW producers a significant cost advantage due to the lower efficiency that would be required, resulting in a market shift for new construction applications. The TTW product class is defined to include products manufactured before January 23, 2010. (10 C.F.R. 430.2). As a result, TTW units meeting the definition of space-constrained products are now subject to the standard for those products, while units meeting the definiti on of conventional centra l air conditioners and heat pumps are now subject to the standard for those products. DOE seeks comment on possible shifts in the market due to the expiration of the TTW product classes. (Reference Chapter 2 of the preliminary TSD for details.)

4. Large-Tonnage Products

Comments have been received from stakeholde rs suggesting that 4- and 5-ton units be placed in a separate product class. Currently, DOE maintains that the differences between these large-tonnage units and 3-ton units are not sufficient to require a separate product class, but would consider modifying its analysis in orde r to incorporate these differences. DOE seeks comment regarding methods to account for discre pancies between typical 3-ton units and other large-tonnage products. (Reference Chapter 2 of the preliminary TSD for details.)

5. Replacement Cost of Components of Higher Efficiency Products

Amended efficiency standards are anticipated to increase the cost of new systems, as these units will require larger a nd/or more sophisticated compon ents to meet the efficiency requirements. Several manufacturer s have previously commented that the increased cost of replacing existing systems with new, higher-SEER units will motivate many users to instead repair their current systems. This could include costly repairs that, under current standards, often provide cause for end users to perform system replacement. The result would be a change in the distribution of product lif etimes as well as the estimated num ber of compressor replacements.

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### DOE requests comment on the impact of increased efficiency standards on end-user decisions of whether to repair or replace existing installed units. (Reference Chapter 2 of the preliminary TSD for details.)

6. Impact of Amended Standards on Domestic Manufacturers

DOE has performed a preliminary manufacturer impact analysis (MIA) in order to preliminarily quantify the financial impact of higher conservation standards on domestic

manufacturers of central air conditioners and heat pumps, as well as the potential impact of these standards on manufacturing capacity and employ ment. The MIA process consists of three phases, incorporating quantitative financial analyses as well as input obtained from manufacturer interviews. MIA information will be reported as part of the preliminary analysis, and DOE seeks comment from involved parties regarding the possi ble impact of increased efficiency standards on domestic manufacturers. (Reference Chapter 2 of the preliminary TSD for details.)

7. Regional Standards

DOE has proposed two regions for establishing regional standards. DOE seeks input on the definition of the regions proposed and the viab ility of regional standards, including likely financial impacts on product dist ribution and manufacturing. (Reference Chapter 2 of the preliminary TSD for details.)

8. Hot-Dry SEER Metric

Based on analysis of climate data, DOE has proposed for consideration a hot-dry SEER metric (SEER hd 

### ) for the hot-dry region to better character ize the seasonal efficiency of products installed in that region, but at this stage has not utilized the metric in the engineering and economic analysis. DOE seeks comment on the development of the SEER hd 

### , on the perceived

value of a SEER hd 

### as defined, and whether this metric should be used in place of SEER in the hot dry region. (Reference Chapter 2 of the preliminary TSD for details.)

9. Split-System Air Conditioner Coil-only a nd Blower-Coil Markets and Analysis

DOE has developed the analysis by consid ering two separate markets for coil-only and blower-coil split-system air conditioners. DOE ha s weighted the relative NPV values for both markets together to define the NPV for higher efficiencies for split-syst em air conditioners. DOE believes that higher efficiencies can be obtained with blower-coil systems and higher efficiencies appear to be justified when considering th at market separately. DOE requests comment on

whether the differences in costs and other market conditions justify estab lishing separate product classes for coil-only and blower-coil products. (Reference Chapter 5 of the preliminary TSD for details.)

10. Market for Coil-only Heat Pumps

DOE believes that the majority of split-system heat pumps are sold as a matched set of

indoor and outdoor units for both the new constr uction and replacement markets and has not provided separate analyses of coil-only and bl ower-coil heat pumps. DOE recognizes, however, that in some instances heat pumps are used in conjunction with gas- or oil-fired furnaces, providing a “dual-fuel” heating capability. DOE requests data on the size of this dual-fuel market

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### as well as whether it is strongly regional in natu re. DOE also seeks input on the characterization of the heat pump replacement market and whethe r installations of matc hed sets of indoor and outdoor products should be the basis for DOE’s analysis for all heat pumps. DOE seeks input on whether it should modify the analysis for split-sy stem heat pumps to define separate coil-only and blower-coil markets. DOE also request co mment on how it might modify its energy use characterization analysis for heat pumps to captu re the impact of a home served by two different heating fuels, if that is a large market. (Reference Chapter 5 of the preliminary TSD for details.)

11. Impacts of a Regional Standard on Product Distributors, Dealers, Contractors, and

Installers.

Section 325(o)(6)(D)(i) authoriz es the Secretary to establish regional standards only if the regional standards will produce significant energy savings in comparison to a single national standard and are economically jus tified. Further, Section 325(o)(6)(D )(ii) of EPCA states that a regional standard can only be es tablished if the Secretary considers the impact of additional regional standards on consumers, manufacturers , and other market participants, including product distributors, dealers, contractors, and installers. DOE received comment on the framework document that suggest distributors of ce ntral air conditioners and heat pumps to more than one region and general contractors coul d bear disproportionate compliance costs (see section 2.10 in chapter 2 of the preliminary TSD) . DOE believes that data publicly available from EIA and other sources will allow DOE to conduct an LCC analysis and a regional “subgroup analysis” to determine the effects on consumers at the regional level. DOE seeks any

additional information on consumer impacts, and in particular se eks information on the potential impacts on distributors, dealers, contractors and installers. DOE specifically seeks quantitative and qualitative information concerning market mechanisms and market circumstances that would be more likely to generate such impacts. DOE is particularly interested in: (1) how common it is

for individual distributors and d ealers of central air conditioners and heat pumps to distribute these products to more than one of the proposed regions; (2) what percent of market sales go through multiregional distributors; (3) what effect regional standards would have on the dollar value of inventory carried and carrying charges for that inventory; (4) what effect regional

standards would have on sa les and operating costs; and (5) what percent of distributors are small

businesses. DOE believes that most contractors and installers are likely to do business in only a few jurisdictions and are unlikely to bear exceptional costs as a result of the central air conditioner and heat pump standards due to operations in more than one region. DOE is interested in information (especially quantitative in formation) that would either support or refute this hypothesis. (Reference Chapter 17 of the preliminary TSD for a preliminary assessment of the impacts of regional standards on market pa rticipants other than manufacturers and consumers.)

12. Enforcement Plan Mechanisms

If regional standards are adopted for this rulemaking, the Energy Independence and Security Act of 2007 (EISA 2007) mandates that an enforcement plan rulemaking be initiated no later than 90 days after the issuance of the sta ndard final rule. (42 U.S.C. 6295(o)(6)(G)) DOE received comment that it should begin to develop the enforcement plan earlier and believes that it is important to do so to understand the impact s of regional standards. DOE requests input on the viability of the enforcement mechanisms disc ussed in section 2.10.3 of chapter 2, as well the

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### extent to which these or other proposed mechanis ms would result in add itional financial burdens to consumers, manufacturers, contractors, distributors, dealers, and installers.

13. Off-Mode Energy Consumption

EISA 2007 mandates that DOE consider ame nded test procedures and standards for standby-mode and off-mode energy consumpti on by covered products (such as central air conditioners and heat pumps) for any amended st andard published after July 1, 2010. (42 U.S.C. 6295(gg)(3)) DOE’s test procedure already accoun ts for standby-mode energy consumption in

the SEER and HSPF metrics for central air c onditioners and heat pumps, but does not account for off-mode energy consumption. DOE request s comment on the energy consuming components during off-mode as well as the potential to reduce the energy consumption of these components. DOE also requests comment on the potential impacts of separate standard for off-mode energy consumption. (Reference section 2.1.2.8 of chapter 2 for more details.)

14. Combination Standards Rulemaking for Cent ral Air Conditioners and Heat Pumps, Gas Furnaces, and Furnace Fans

DOE is currently pursuing separate standard s rulemakings for three interrelated products: (1) central air conditioners and heat pumps; (2) gas furnaces; and (3) furnace fans. DOE is required by consent decree to publish a final rule for central air conditioners and heat pumps by June 30, 2011. A final rule for gas furnaces pub lished in November 2007 was remanded by the Courts to DOE with the requirement that DOE publish a new final rule by May 1, 2011. EISA 2007 requires that DOE publish a final rule for furnace fans by January 1, 2013. Rather than analyze each set of products separately, DOE is contemplating a combined analysis to examine the first cost and energy savings impacts of th e interaction between the products. If DOE conducts such an analysis and the results indicat e that a combined approach yields additional savings beyond what can be achieved by analyzing each product separately, DOE may decide to pursue a combined standards rulemakings that addresses all three sets of products (or two of the three, i.e., central air conditioners and heat pumps and furnaces) simultaneously. If such a combined rulemaking is pursued, DOE would ne ed to publish a final rule by May 1, 2011; the

earliest date for which standards for gas furnaces need to be finalized.

15. Maximum Technologically Feasible Designs

In assessing the viability of maximum technol ogically feasible designs, DOE conducts a screening analysis to determine their viability base d on four criteria: (1) technological feasibility; (2) practicability to manufacture, install, and service; (3) impacts on equipment utility or equipment availability; and (4) adverse impacts on health or safety. The maximum efficiency levels that DOE analyzed for each product cl ass took into account the level’s viability in

consideration of the four above criteria. However, DOE is aware of two additional designs that it may consider in this rulemaking: (1) solar assi st technologies and (2) three-stage heat pumps. Solar assisted products are currently available in the market. These products utilize solar energy to supplement the electrical ener gy required for the product to operate. Three-stage heat pumps are also currently available in the market and operate efficiently at low ambient temperatures through the use of additional compressors and com ponents, thereby precluding the need for back up electric resistance heat. DOE believes the bene fits for this technology result primarily in improved heat pump heating, and not cooling, performance. Because both technologies are

ES-33

### available on the market, DOE requests comment on how the energy conservation standard rulemaking can best address so lar assist and three-stage heat pump technologies. DOE also requests comment on any other technology that is available on the market and could increase maximum technologically feasible efficiency levels.

16. Consensus Agreement

On January 26, 2010, the Air-Conditioning, Heating and Refrigeration Institute (AHRI), American Council for an Energy Efficient Econom y (ACEEE), Alliance to Save Energy (ASE), Appliance Standards Awareness Project (ASAP), Natu ral Resources Defense Council (NRDC), and Northeast Energy Efficiency Partnerships (NEEP) submitted a joint comment to DOE recommending minimum energy conservation standa rds for residential central air conditioners, heat pumps, and furnaces. This consensus agreement is available on DOE’s website, which can

be found at: http://www1.eere.energy.gov/buildings/appliance_standards/residential/furnaces_boilers.html

. DOE specifically requests comment on the consensus agreement. In particular, DOE is interested in comments relating to the proposed SEER, HSPF, and EER requirements, the proposed regional divisions, and the proposed compliance date s for residential central air conditioners and heat pumps.

ES-34